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TABLE OF CONTENTS
PART IV

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

FORM 10-K

ý		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2012
For the fiscal year ended December 31, 2013
OR
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-14762

THE SERVICEMASTER COMPANY, LLC (Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization) 3690-~~3858106~~1036521 (I.R.S. Employer Identification No.)

860 Ridge Lake Boulevard, Memphis, Tennessee 38120
(Address of principal executive offices, including zip code)

(901) 597-1400
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ý

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 ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ý No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No ý

The registrant is a privately held ~~corporation~~limited liability company and its ~~equity~~membership ~~shares~~interests are not publicly traded. At March 45, ~~2013~~2014, ~~1,000~~all ~~shares~~ of the registrant's ~~common stock~~membership ~~were~~interests ~~outstanding, all of which~~ were owned by CDRSVM Holding, ~~Inc~~LLC.

~~THE SERVICEMASTER COMPANY~~ ~~ANNUAL~~Table ~~REPORT~~of ONContents ~~FORM 10-K~~

THE SERVICEMASTER COMPANY, LLC
ANNUAL REPORT ON FORM 10-K

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PART I
Item 1.	Business	3
Item 1A.	Risk Factors	1510
Item 1B.	Unresolved Staff Comments	3024
Item 2.	Properties	3025
Item 3.	Legal Proceedings	3125
Item 4.	Mine Safety Disclosures	3125
PART II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	3226
Item 6.	Selected Financial Data	3226
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	3427
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	7259
Item 8.	Financial Statements and Supplementary Data	7661
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	~~132~~118
Item 9A.	Controls and Procedures	~~132~~118
Item 9B.	Other Information	~~133~~119
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	~~134~~120
Item 11.	Executive Compensation	~~137~~123
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	~~161~~148
Item 13.	Certain Relationships and Related Transactions, and Director Independence	~~164~~151
Item 14.	Principal Accounting Fees and Services	~~167~~154
PART IV
Item 15.	Exhibits and Financial Statement Schedules	~~168~~156
Signatures		~~169~~157
Exhibit Index		~~177~~165

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PART I

ITEM 1. BUSINESS

The following discussion of our business contains "forward-looking statements," as discussed in Part II, Item 7 below. Our business, operations and financial condition are subject to various risks as set forth in Part I, Item 1A below. The following information should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations, the Consolidated Financial Statements and related notes and the Risk Factors included elsewhere in this Annual Report on Form 10-K.

OUR COMPANY

The ServiceMaster Company, LLC ("ServiceMaster," the "Company," "we," "us" or "our") is a global company serving both residential and commercial customers, with a network of approximately 7,~~300~~400 company-owned, franchised and licensed locations as of December 31, 2013. As of December 31, 2013, ServiceMaster's services ~~include~~included termite and pest control, lawn care, home warranties and preventative maintenance contracts, janitorial, cleaning and disaster restoration, ~~house~~home cleaning, wood furniture repair and home inspection. WeAs ~~provide~~of December 31, 2013, we provided these services primarily under the following leading brands: Terminix, TruGreen, American Home Shield, ServiceMaster Clean, Merry Maids, Furniture Medic and AmeriSpec.

WeAs ~~are~~of December 31, 2013, we were organized into five principal reportable segments: Terminix, TruGreen, American Home Shield, ServiceMaster Clean, and Other Operations and Headquarters. ~~The~~Financial ~~financial~~ information for each operating segment for ~~2012~~2013, ~~2011~~2012 and ~~2010~~2011 is contained in Note 3 to the Consolidated Financial Statements in this Annual Report on Form 10-K. During ~~2012~~2013, we employed an average of approximately 2022,000 company associates, and we estimate that our franchise network independently employed over 3133,000 additional people. Approximately 98 percent of our ~~2012~~ 2013 operating revenue was generated by sales in the United States. A significant portion of our assets is located in the United States, and the consolidated value of all assets located outside of the United States is not material. ~~Incorporated~~Organized in Delaware in ~~1991~~2013, ServiceMaster is the successor to various entities dating back to 1947.

On January 14, 2014, ServiceMaster Global Holdings, Inc. ("Holdings"), the ultimate parent company of ServiceMaster, completed the previously announced separation transaction (the "TruGreen Separation Transaction") 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 the Company primarily under the TruGreen brand name (collectively, the "TruGreen Business") through a tax-free, pro rata dividend to the stockholders of Holdings. As a result of the completion of the TruGreen Separation Transaction, TruGreen Holding Corporation ("New TruGreen") operates the TruGreen Business as a private independent company.

The TruGreen Business is reported in this Annual Report on Form 10-K in continuing operations. Beginning with the Company's quarterly report on Form 10-Q for the quarter ended March 31, 2014, the TruGreen Business will be reported in discontinued operations.

Pursuant to an agreement and plan of merger entered into by ServiceMaster in connection with the TruGreen Separation Transaction, on January 14, 2014, the company formerly known as The ServiceMaster Company ("Old ServiceMaster") was merged with and into ServiceMaster, with ServiceMaster continuing as the surviving entity in such merger. Pursuant to the terms of the merger agreement, all of the capital stock of Old ServiceMaster issued and outstanding immediately prior to the effective time of the merger was cancelled, and the sole stockholder of Old ServiceMaster immediately prior to the effective time of the merger (CDRSVM Holding, Inc., now known as CDRSVM Holding, LLC) was admitted as the sole member of ServiceMaster.

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OUR SERVICES

The following table shows the percentage of ServiceMaster's consolidated revenue from continuing operations derived from each of ServiceMaster's reportable segments in the years indicated:

Segment
Terminix	4041	%	3740	%	37	%
TruGreen	3128	%	3431	%	3534	%
American Home Shield	2223	%	22	%	2122	%
ServiceMaster Clean	45	%	4	%	4	%
Other Operations and Headquarters	3	%	3	%	3	%

Terminix Segment

The Terminix segment provides termite and pest control services primarily under the Terminix brand name and also distributes pest control products. Terminix is a leading provider of termite and pest control services in the United States, serving both residential and commercial customers. Of Terminix's ~~2012~~2013 operating revenue, 39 percent and 17 percent were generated from residential and commercial pest control services, respectively, and 36 percent and 3 percent were generated from residential and commercial termite control services, respectively (with the remainder from other services and distribution of pest control products).

3 As of December 31, 2013, Terminix provided these services in 47 states and the District of Columbia through approximately 285 company-owned locations and 100 franchised locations. As of December 31, 2013, Terminix also provided termite and pest control services through subsidiaries in Canada, Mexico, the Caribbean and Central America and a joint venture in India and had licensing arrangements whereby licensees provided these services in Japan, China, South Korea, Southeast Asia, Central America, the Caribbean and the Middle East.

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residential and commercial termite control services, respectively (with the remainder from other services).

As of December 31, 2012, Terminix provided these services in 47 states and the District of Columbia through approximately 285 company-owned locations and 100 franchised locations. As of December 31, 2012, Terminix also provided termite and pest control services through subsidiaries in Mexico, the Caribbean and Central America and a joint venture in India and had licensing arrangements whereby licensees provided these services in Japan, China, South Korea, Southeast Asia, Central America, the Caribbean and the Middle East.

The Terminix business is seasonal in nature. The termite swarm season, which typically occurs in early spring, but varies in timing and intensity by region depending on climate and other factors, leads to the highest demand for termite control services and, therefore, the highest level of revenues. Similarly, increased pest activity in the warmer months generally leads to the highest demand for pest control services and, therefore, the highest level of revenues.

TruGreen Segment

~~The~~As ~~TruGreen~~described ~~segment~~above, ~~provides~~on ~~lawn~~January 14, ~~tree~~2014, ~~and~~Holdings ~~shrub~~completed ~~care services primarily under~~ the TruGreen ~~brand~~Separation ~~name.~~Transaction, ~~TruGreen~~resulting isin athe ~~leading provider~~spin-off of the ~~lawn,~~assets ~~tree~~ and ~~shrub~~certain ~~care~~liabilities ~~services~~of in the ~~United~~TruGreen ~~States, serving both residential and commercial customers~~Business. OfThe TruGreen's ~~2012~~Business ~~operating~~is ~~revenue,~~reported ~~53 percent~~in ~~was~~this ~~generated~~Annual ~~from residential~~Report ~~weed~~on ~~control~~Form 10-K ~~and~~in ~~fertilization~~continuing ~~services,~~operations. ~~while~~Beginning ~~expanded~~with ~~lawn~~the ~~services~~Company's quarterly ~~(such~~report ason ~~aeration and grub control) (18~~Form ~~percent),~~10-Q ~~commercial~~for ~~weed~~the ~~control~~quarter ~~and~~ended ~~fertilization services (18~~March ~~percent)~~31, ~~and~~2014, ~~tree~~the ~~and~~TruGreen ~~shrub~~Business ~~services~~will ~~(11 percent)~~be ~~accounted~~reported ~~for~~in ~~the~~discontinued ~~remainder~~operations.

AsDuring ~~of December 31~~2013, ~~2012,~~the TruGreen segment provided ~~these~~lawn, ~~services~~tree inand 48shrub ~~states~~care ~~and~~services primarily under the ~~District~~TruGreen ofbrand ~~Columbia~~name. ~~through~~TruGreen ~~approximately~~is ~~200~~a ~~company-owned~~leading ~~locations~~provider of lawn, tree and ~~35 franchised~~shrub care ~~locations.~~services Asin ofthe ~~December 31,~~United ~~2012~~States, serving both residential and commercial customers. Of TruGreen's ~~also~~2013 ~~provided~~operating ~~lawn~~revenue, ~~care~~55 percent ~~services~~was ~~through~~generated afrom ~~subsidiary~~residential inweed ~~Canada~~control and fertilization ~~had~~services, ~~licensing~~while ~~arrangements~~expanded ~~whereby~~lawn ~~licensees~~services ~~provided~~(such ~~these~~as ~~services~~aeration inand ~~Japan~~grub control) (16 percent), ~~the~~commercial ~~United~~weed ~~Kingdom~~control and ~~Canada~~fertilization services (18 percent), and tree and shrub services (11 percent) accounted for the remainder.

~~The~~As ~~TruGreen~~of ~~business is seasonal in nature. In the winter and spring~~December 31, ~~this business sells to customers a series of lawn applications~~2013, ~~which~~TruGreen ~~are~~provided ~~rendered~~these ~~primarily~~services in ~~March~~48 ~~through October.~~states ~~Weather conditions such as droughts, severe winter storms~~ and ~~snowfall, whether created by climate change factors or otherwise, can adversely impact~~ the ~~timing~~District of ~~product~~Columbia orthrough ~~service~~approximately ~~delivery or~~195 ~~demand~~company-owned ~~for~~locations ~~lawn care services~~ and ~~may~~35 franchised locations. ~~result~~As inof ~~a decrease in revenues or an increase in costs.~~

American Home Shield Segment

The American Home Shield segment provides home warranties and preventative maintenance contracts for household systems and appliances primarily under the American Home Shield brand name. American Home Shield is a leading provider of home warranties for household systems and appliances in the United States and also offers preventative maintenance contracts. It provides residential customers with contracts to repair or replace electrical, plumbing, central heating and central air conditioning systems, water heaters and other covered household systems and appliances and services those contracts through independent repair contractors. In 2012, 70 percent of the home warranties written by American Home Shield were derived from existing contract renewals, while 17 percent and 13 percent were derived from sales made in conjunction with existing home resale transactions and direct-to-consumer sales, respectively. As of December 31, 2012, American Home Shield issued and administered home warranties in 49 states and the District of Columbia and had no international operations.

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December 31, 2013, TruGreen also provided lawn care services through a subsidiary in Canada and had licensing arrangements whereby licensees provided these services in Japan, the United Kingdom and Canada.

The TruGreen business is seasonal in nature. In the winter and spring, this business sells to customers a series of lawn applications, which are rendered primarily in March through October. Weather conditions such as droughts, severe winter storms and snowfall, whether created by climate change factors or otherwise, can adversely impact the timing of product or service delivery or demand for lawn care services and may result in a decrease in revenues or an increase in costs.

American Home Shield Segment

The American Home Shield segment provides home warranties and preventative maintenance contracts for household systems and appliances primarily under the American Home Shield brand name. American Home Shield is a leading provider of home warranties for household systems and appliances in the United States and also offers preventative maintenance contracts. It provides residential customers with contracts to repair or replace electrical, plumbing, central heating and central air conditioning systems, water heaters and other covered household systems and appliances and services those contracts through independent repair contractors. In 2013, 69 percent of the home warranties written by American Home Shield were derived from existing contract renewals, while 18 percent and 13 percent were derived from sales made in conjunction with existing home resale transactions and direct-to-consumer sales, respectively. As of December 31, 2013, American Home Shield issued and administered home warranties in 49 states and the District of Columbia and had no international operations.

Weather conditions such as extreme temperatures can lead to an increase in service requests related to household systems and appliances, resulting in a more expensive mix of claims or higher claim costs and lower profitability, thereby adversely impacting results of operations and cash flows.

ServiceMaster Clean Segment

The ServiceMaster Clean segment provides residential and commercial disaster restoration, janitorial and cleaning services through franchises primarily under the ServiceMaster, ServiceMaster Restore, and ServiceMaster Clean brand names, on-site wood furniture repair and restoration services primarily under the Furniture Medic brand name and home inspection services primarily under the AmeriSpec brand name. Of ServiceMaster Clean's ~~2012~~2013 operating revenue, 5048 percent was generated from domestic royalty fees from residential and commercial disaster restoration and cleaning services, while international (19 percent), national janitorial accounts (14 percent), product sales (109 percent), ~~national~~new ~~janitorial~~license ~~accounts~~sales (124 percent), lead generation fees (3 percent), on-site wood furniture repair and restoration (2 percent), and home inspection services (21 percent) ~~and new license sales (2 percent)~~ accounted for the remainder.

ServiceMaster Clean. ServiceMaster Clean is a leading franchisor in the residential and commercial disaster restoration and cleaning fields in the United States. As of December 31, ~~2012~~2013, ServiceMaster Clean provided these services in 50 states and the District of Columbia through approximately 23,~~980~~040 franchised locations. ServiceMaster Clean also has company locations in Canada, Honduras and the United Kingdom ~~and Honduras~~. As of December 31, ~~2012~~2013, ServiceMaster Clean had licensing arrangements whereby licensees provided disaster restoration, janitorial and cleaning services in Japan, Russia, the United Kingdom, Canada, India, the Middle East, Southeast Asia and Central America.

Furniture Medic. Furniture Medic is a leading provider of on-site wood furniture repair and restoration services serving residential customers in the United States. As of December 31, ~~2012~~2013, Furniture Medic provided these services in 42 states and the District of Columbia through approximately 240 franchised locations. As of December 31, 2012, Furniture Medic also had licensing arrangements whereby licensees provided on-site wood furniture repair and restoration services in the United Kingdom, Canada and Turkey.

AmeriSpec. AmeriSpec is a leading provider of home inspection services serving residential customers in the United States. As of December 31, 2012, AmeriSpec provided these services in 38 states and the District of Columbia through approximately 210 franchised locations. AmeriSpec also had licensing arrangements whereby licensees provided home inspection services in Canada.

Other Operations and Headquarters Segment

The Other Operations and Headquarters segment includes the Merry Maids business unit, The ServiceMaster Acceptance Company Limited Partnership ("SMAC") and ServiceMaster's corporate headquarters functions.

Merry Maids. Merry Maids is a leading provider of home cleaning services in the United States. As of December 31, 2012, these services were provided in 49 states and the District of Columbia through approximately 75 company-owned locations and 390 franchised locations. As of December 31, 2012, Merry Maids also had licensing arrangements whereby licensees provided home cleaning services in Japan, the United Kingdom, Canada, South Korea, Hong Kong, Australia and Southeast Asia.

SMAC. SMAC provides financing to our franchisees through commercial loans for franchise fees and royalties, equipment and vehicle purchases, and working capital needs. Commercial loans are typically for a term of one to seven years and are generally secured by the assets of the

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~~franchisee~~approximately ~~and~~245 franchised ~~other collateral~~locations. As of December 31, ~~2012~~2013, ~~the~~Furniture ~~outstanding~~Medic ~~balance~~also ofhad ~~commercial~~licensing ~~loans~~arrangements ~~was~~whereby ~~$35.9 million~~licensees ~~with~~provided aon-site ~~bad~~wood ~~debt~~furniture ~~reserve~~repair ~~for~~and ~~commercial loans of~~restoration ~~$2.8 million.~~services ~~SMAC wrote off $0.7 million~~ in ~~commercial loans in~~ the ~~year~~United ~~ended December 31~~Kingdom, ~~2012.~~Canada ~~SMAC also provides financing to consumer customers of Terminix~~ and ~~TruGreen through retail installment sales contracts~~Turkey. Retail installment sales contracts are typically for a term of 12 months and are unsecured. As of December 31, 2012, the outstanding balance of retail installment sales contracts was $21.6 million. In the event a customer fails to make payments under a retail installment sales contract for 120 days after the due date, Terminix and TruGreen purchase the installment contract from SMAC.

~~Headquarters functions~~AmeriSpec. ~~The~~AmeriSpec ~~Business~~is ~~Support~~a ~~Center,~~leading ~~headquartered~~provider inof ~~Memphis,~~home ~~Tennessee,~~inspection ~~includes~~services ~~company-wide~~serving ~~administrative functions that~~residential wecustomers ~~refer~~in tothe asUnited ~~"centers~~States. ofAs ~~excellence~~of December 31,~~" which administer payroll~~ 2013, ~~benefits,~~AmeriSpec ~~risk~~provided ~~management~~these ~~and certain procurement~~ services ~~for~~ ~~our~~in ~~operations.~~38 states Weand ~~have~~the ~~various~~District ~~other centers~~ of ~~excellence~~Columbia ~~which~~through ~~provide~~approximately ~~communications,~~285 franchised ~~marketing,~~locations. ~~government~~AmeriSpec ~~and~~also ~~public~~had ~~relations,~~licensing ~~administrative,~~arrangements ~~accounting, financial, tax, certain~~whereby ~~information~~licensees ~~technology,~~provided ~~human~~home ~~resources~~inspection ~~and legal~~ services ~~for~~in ~~our businesses~~Canada.

Other Operations and Headquarters Segment

The Other Operations and Headquarters segment includes the Merry Maids business unit, The ServiceMaster Acceptance Company Limited Partnership ("SMAC"), and ServiceMaster's corporate headquarters functions.

Merry Maids. Merry Maids is a leading provider of home cleaning services in the United States. As of December 31, 2013, Merry Maids provided these services in 49 states and the District of Columbia through approximately 75 company-owned locations and 395 franchised locations. As of December 31, 2013, Merry Maids also had licensing arrangements whereby licensees provided home cleaning services in Japan, the United Kingdom, Canada, South Korea, Hong Kong, Australia and Southeast Asia.

SMAC. SMAC provides financing to our franchisees through commercial loans for franchise fees and royalties, equipment and vehicle purchases, and working capital needs. Commercial loans are typically for a term of one to seven years and are generally secured by the assets of the franchisee and other collateral. As of December 31, 2013, the outstanding balance of commercial loans was $32.5 million with a bad debt reserve for commercial loans of $3.6 million. SMAC wrote off $0.6 million in commercial loans in the year ended December 31, 2013. SMAC also provides financing to consumer customers of Terminix and TruGreen through retail installment sales contracts. Retail installment sales contracts are typically for a term of 12 months and are unsecured. As of December 31, 2013, the outstanding balance of retail installment sales contracts was $26.4 million. In the event a customer fails to make payments under a retail installment sales contract for 120 days after the due date, Terminix and TruGreen purchase the installment contract from SMAC.

Headquarters functions. The Business Support Center, headquartered in Memphis, Tennessee, includes company-wide administrative functions that we refer to as "centers of excellence," which administer payroll, benefits, risk management and certain procurement services for our operations. We have various other centers of excellence that provide communications, marketing, government and public relations, administrative, accounting, financial, tax, certain information technology, human resources and legal services for our businesses.

OWNERSHIP AND ORGANIZATIONAL STRUCTURE

InOn July 24, 2007 (the "2007 Closing Date"), ServiceMaster was acquired pursuant to a merger transaction (the "2007 Merger"), and, immediately following the completion of the 2007 Merger, all of the outstanding common stock of ~~ServiceMaster Global~~ Holdings~~, Inc.~~ ~~("Holdings"), the ultimate parent company of ServiceMaster,~~ 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 ("Citigroup"), ~~and~~ BAS Capital Funding Corporation ("BAS") and by JPMorgan Chase Funding Inc. ("JPMorgan"). On September 30, 2010, Citigroup transferred the management responsibility for certain investment funds that owned shares of ~~Holdings'~~ common stock of Holdings to StepStone Group ~~LLC~~LP ("StepStone" or such investment funds as managed by StepStone Group, the "StepStone Funds") and its proprietary interests in such investment funds to Lexington Partners Advisors LP. As of December 22, 2011, ServiceMaster purchased from BAS 7.5 million shares of Holdings' common stock. On March 30, 2012, an affiliate of BAS sold 7.5 million shares of Holdings' common stock to Ridgemont Partners Secondary Fund I, L.P. ("Ridgemont"). On July 24, 2012, BACSVM-A, L.P., an affiliate of BAS, distributed 2.5 million shares of Holdings' common stock to Conversus 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 Ridgemont, the "Equity Sponsors").

OUR STRENGTHS

We believe our company has the following competitive strengths:

Leading market segment positions and iconic brands. We believe that Terminix, TruGreen and American Home Shield, which collectively contributed 93 percent of our operating revenue for the year ended December 31, 2012, each holds a leading position in its respective business segment. As measured by operating revenue, Terminix is approximately 1.2 times larger, TruGreen is approximately 4.0 times larger and American Home Shield is approximately 5.1 times larger than their nearest respective competitors, based on third-party studies and publicly available data. We believe that the size and scale of our businesses improve our purchasing power, route density, marketing and operating efficiencies compared to smaller local and regional competitors. We believe that, based on our understanding of our competitors and their operations, American Home Shield is one of the few nationwide providers of home service, home protection, residential service and similar service contracts (which we collectively refer to in this Annual Report on Form 10-K as "home warranties") and preventative maintenance contracts in the United States with both national sales and technical services networks. We believe this provides a significant competitive advantage

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byAdvisors LP. ~~enabling~~As ~~American~~of ~~Home~~December 22, ~~Shield~~2011, ServiceMaster purchased from BAS 7.5 million shares of Holdings' common stock. On March 30, 2012, an affiliate of BAS sold 7.5 million shares of Holdings' common stock to ~~educate~~Ridgemont ~~real~~Partners ~~estate~~Secondary ~~professionals~~Fund I, L.P. ~~financial~~("Ridgemont"). ~~institutions~~On ~~and~~July 24, ~~insurance~~2012, ~~agencies~~BACSVM-A, L.P., ~~about~~an ~~the~~affiliate ~~benefits~~of BAS, distributed 2.5 million shares of ~~home~~Holdings' ~~warranties~~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 ~~preventative~~Ridgemont, ~~maintenance~~the ~~contracts~~"Equity Sponsors").

~~Committed~~ and experienced senior leadership. Our senior management team has a long track record of producing profitable growth in a wide variety of industries and economic conditions. Most of our executive officers and our senior managers own equity in Holdings, and their incentive compensation is tied to key performance metrics. Our compensation structure is designed to incentivize our senior management team to drive the long-term success of our business. COMPETITION

We ~~Proven~~compete in residential and ~~consistent~~commercial ~~business~~services ~~model:~~ industries, focusing on termite and pest control, home warranties and preventative maintenance contracts, janitorial, cleaning and disaster restoration, home cleaning, wood furniture repair and home inspection. ServiceMaster competes with many other companies in the sale of its services, franchises and products. The principal methods of competition in ServiceMaster's businesses include quality and speed of service, name recognition and reputation, pricing and promotions, customer satisfaction, brand awareness, professional sales forces and referrals. We target market segments that meet our criteria for size, growth and profit potential. While we compete with a broad range of competitors in each discrete segment, we do not believe that any of our competitors provides all of the services we provide in all of the market segments we serve. We believe that our widely recognized brands, size, geographic footprint and reputation for service quality provide us with significant competitive advantages in reaching both residential and commercial customers. All of the primary segments in which we operate are highly fragmented, and we believe they are characterized by attractive industry conditions.

Strong Operating Performance and cash flow profile. Our company has historically generated significant Operating Performance and operating cash flow. Our Operating Performance in 2012, 2011 and 2010 was $563 million, $610 million and $551 million, respectively. Because of our strong cash flow, we have been able to continue to invest in our businesses, with capital expenditures in 2012, 2011 and 2010 totalling $73 million, $97 million and $134 million, respectively. We have been able to manage our working capital needs principally through lower inventory requirements, improved vendor payment terms and increased customer prepayment programs in several of our businesses.

OUR STRATEGY

Our overall strategy is to leverage our competitive advantages across all of our businesses. Each of our businesses has action plans to execute our strategy based on their current capabilities,

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competitive position and evolving customer needs. Each of our businesses benefits from ServiceMaster's focus on the following strategic priorities:

Rapid, profitable growth:

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Best practice transfer and execution excellence. In recent years, we have employed a strategy of accelerating the transfer of best practices across our businesses, investing in technology and mobility solutions, centralizing support functions and reducing layers of management, along with other business unit specific initiatives. We believe there are significant opportunities for further improvement across and within each of our businesses, including further utilizing the competitive advantages of our centralized support center to take advantage of combined capabilities and scale. This strategy is illustrated by the following initiatives:

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Talent Management. We intend to continue our focus on developing and retaining key associates to best align our business to the needs of our customer base. Talent drives customer experience, continuous improvement and the success of our growth initiatives. We are implementing this strategy through four key initiatives:

OUR INDUSTRIES

We compete in residential and commercial services industries, focusing on termite and pest control, lawn care, home warranties and preventative maintenance contracts, janitorial, cleaning and disaster restoration, house cleaning, wood furniture repair and home inspection. ServiceMaster competes with many other companies in the sale of its services, franchises and products. The principal methods of competition in ServiceMaster's businesses include quality and speed of service, name recognition and reputation, pricing and promotions, customer satisfaction, brand awareness, professional sales forces and referrals. We target market segments that meet our criteria for size, growth and profit potential. While we compete with a broad range of competitors in each discrete segment, we do not believe that any of our competitors provides all of the services we provide in all of the market segments we serve. We believe that our widely recognized brands, size, geographic footprint and reputation for service quality provide us with significant competitive advantages in reaching both residential and commercial customers. All of the primary segments in which we operate are highly fragmented, and we believe they are characterized by attractive industry conditions.

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Termite and pest control

ACompetition ~~2012~~in ~~study on~~ the ~~U.S.~~segment ~~pest~~for ~~control industry conducted by Specialty Products Consultants, LLC estimates that the U.S.~~ professional termite and pest control services ~~segment generated $6.5 billion~~ in ~~revenue~~the inUnited ~~2011.~~States ~~The~~comes ~~termite~~primarily ~~and~~from ~~pest~~regional ~~control services segment is generally characterized by high customer~~and ~~retention~~local, ~~rates.~~independently ~~According~~operated tofirms, ~~the~~as ~~Professional~~well ~~Pest~~as ~~Management~~from ~~Alliance's 2012 survey~~Orkin, ~~approximately 30~~ ~~percent of U~~Inc.S., ~~households currently use~~ a ~~professional~~subsidiary ~~exterminator~~of ~~in their homes~~Rollins, Inc., ~~We estimate that the U.S. market segment share for the termite~~ and ~~pest control services provided under the Terminix brand is approximately 21~~Ecolab, ~~percent~~Inc., ~~based~~both ~~on total operating revenue for services provided by us and our franchisees~~ of ~~approximately $1.5 billion in 2012, of~~ which ~~$1.3 billion~~compete ~~in operating revenue was reported by Terminix for services we provided in 2012~~nationally.

Competition in the segment for professional termite and pest control services in the United States comes primarily from regional and local, independently operated firms, as well as from Orkin, Inc., a subsidiary of Rollins, Inc., and Ecolab, Inc., both of which compete nationally. We estimate that the top three providers (including Terminix) comprised approximately 45 percent of the U.S. professional termite and pest control services segment in 2012. The remaining portion of the U.S. professional termite and pest control services segment is highly fragmented with numerous privately-held, regional and local termite and pest control service providers.

Lawn care

According to a study by NorthStar Partners released in 2012, the U.S. professional lawn services segment specializing in lawn treatments was estimated at $6.8 billion in revenue in 2012. Based on the study conducted by NorthStar Partners, we estimate that our share of the U.S. lawn care services segment is approximately 17 percent based upon TruGreen's operating revenue of $979.1 million in 2012. Competition in the segment for outsourced professional lawn care services comes mainly from local and independently owned firms. Scotts LawnService, a segment of The Scotts Miracle-Gro Company, which we believe is our next largest competitor in the outsourced professional lawn care services segment, generated approximately $246 million of revenues in their fiscal 2012. Based on TruGreen's 2012 operating revenue and publicly available information, we estimate TruGreen is approximately 4.0 times larger than this competitor.

Home warranties

~~According~~Competition tofor ~~an industry market research report published by IBISWorld in 2012, the U.S.~~ home ~~warranty segment (including structural home~~ warranties, ~~which~~and ispreventative amaintenance ~~business~~contracts inthat ~~which~~cover wehousehold dosystems ~~not~~and ~~compete)~~appliances ~~was~~comes ~~expected~~mainly ~~to be approximately $1.7 billion in 2012, as measured by reported revenue~~ from regional ~~third-party studies~~providers. ~~One~~Our oflargest ~~the primary~~national ~~drivers~~competitor ~~of home warranties~~ is ~~the~~First 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 transaction. According to the National Association of Realtors, existing home re-sales in units increased by approximately 9.2 percent in 2012 and are currently projected to increase by approximately 9.1 percent in 2013 and approximately 5.9 percent in 2014. Approximately 17 percent of the operating revenue of American ~~Home~~Financial ~~Shield in 2012 was tied directly to existing home resales~~Corporation.

Competition for home warranties and preventative maintenance contracts that cover household systems and appliances comes mainly from regional providers. Several competitors are expected to initiate expansion efforts into additional states. According to IBISWorld data, American Home Shield and First American Financial Corporation are the two largest participants in the U.S. home warranty segment, based on 2011 revenue, with American Home Shield having a 42 percent market segment

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share and First American Financial Corporation having an 8 percent market segment share. Based on this information, American Home Shield is approximately 5.1 times larger than this competitor.

Disaster restoration and reconstruction, emergency response and other services

~~Most~~Competition ~~emergency response work results from extreme weather events and natural disasters such as hurricanes, floods, mudslides, tornadoes and earthquakes. Firms~~ in ~~this~~the market segment ~~also respond to non-weather related emergency situations~~ for ~~residential~~disaster ~~and~~restoration ~~commercial customers, such as fires~~ and ~~flooding.~~cleaning ~~Critical~~services ~~factors~~comes ~~in the~~mainly ~~selection~~from ~~of an emergency response firm are the firm's reputation~~local, ~~relationships~~independently-owned ~~with~~firms ~~insurers, available resources, proper insurance~~ and ~~credentials, quality, timeliness, and responsiveness. We~~ ~~also~~a ~~offer~~few ~~commercial~~national ~~janitorial~~professional ~~services.~~cleaning ~~The~~companies ~~segment~~such isas ~~highly fragmented, and key competitors of our ServiceMaster Clean business include~~ Servpro Industries, Inc., Belfor, a subsidiary of Belfor Europe GmbH, BMS CAT, Inc., in disaster restoration and reconstruction; Stanley Steemer International, Inc., and Sears, in floor care; and ABM Industries Incorporated and Jani-King International, Inc. in janitorial.

Home cleaning services

Competition in the market segment for home cleaning services comes mainly from local, independently owned firms, from homeowners and tenants who clean their own homes and from a few national companies such as The Maids International, Inc., Molly Maid, Inc. and The Cleaning Authority, LLC.

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MARKETING AND DISTRIBUTION

ServiceMaster markets its services primarily through national sales teams, the internet, direct mail, television and radio advertising, print advertisements, door-to-door solicitation, telemarketing and yellow pages advertisements. Additionally, American Home Shield and Terminix, in certain jurisdictions, market their services ~~through~~ through various participants in the residential real estate market place, such as real estate brokerages, financial institutions and insurance agencies and, for American Home Shield, an internal sales organization that supports these distribution channels.

SERVICE MARKS, TRADEMARKS AND TRADE NAMES

As of December 31, 2013, ServiceMaster ~~holds~~held various service marks, trademarks and trade names, such as ServiceMaster, Terminix, TruGreen, American Home Shield, ServiceMaster Clean, Merry Maids, Furniture Medic and AmeriSpec, that it deems particularly important to the advertising activities conducted by each of its reportable segments as well as the franchising activities conducted by certain reportable segments. As of December 31, ~~2012~~2013, ServiceMaster had marks that were protected by registration (either by direct registration or by treaty) in the United States and approximately 90 other countries. In connection with the TruGreen Separation Transaction, on January 14, 2014, all of the service marks, trade marks and trade names related to the TruGreen Business were transferred to New TruGreen and its subsidiaries.

FRANCHISES

Franchises are important to the Terminix, TruGreen, ServiceMaster Clean, Merry Maids, Furniture Medic and AmeriSpec businesses. For the years ended December 31, 2013, 2012, ~~2011~~ and ~~2010~~2011, total franchise fees (initial and recurring) were $~~127~~138.8 million, $127.18 million and $~~120~~127.9 1 million, respectively, related franchise operating expenses were $5459.87 million, $5354.08 million and $5053.0 million, respectively, and total profits from the franchised operations were $7379.01 million, $7473.10 million and $7074.91 million, respectively. We evaluate the performance of our franchise businesses based primarily on operating profit before corporate general and administrative expenses, interest expense and amortization of intangible assets. Franchise agreements entered into in the course of these businesses are generally for a term of five to ten years. The majority of these franchise agreements are renewed prior to expiration. The majority of international licenses are for ten-year terms.

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MAJOR CUSTOMERS

ServiceMaster has no single customer that accounts for more than ten percent of its consolidated operating revenue. Additionally, no operating segment has a single customer that accounts for more than ten percent of its operating revenue. None of ServiceMaster's operating segments is dependent on a single customer or a few customers, the loss of which would have a material adverse effect on the segment.

REGULATORY COMPLIANCE

Government Regulations

ServiceMaster's ~~operating~~businesses ~~segments~~ are subject to various international, federal, state, provincial and local laws and regulations, ~~compliance~~ compliance with which increases ServiceMaster's operating costs, limits or restricts the services provided by ServiceMaster's operating segments or the methods by which ServiceMaster's operating segments offer, sell and fulfill those services or conduct their respective businesses, or subjects ServiceMaster and its ~~operating~~businesses ~~segments~~ to the possibility of regulatory actions or proceedings. Noncompliance with these laws and regulations can subject ServiceMaster to fines or ~~various forms of civil or criminal prosecution and lawsuits, any of which could have a material adverse effect on its reputation, business, financial condition, results of operations and cash flows.~~

These international, federal, state, provincial and local laws and regulations include laws relating to consumer protection, wage and hour, deceptive trade practices, permitting and licensing, real estate settlements, workers' safety, tax, healthcare reforms, franchise-related issues, collective bargaining and other labor matters, environmental and employee benefits. The Terminix and TruGreen businesses must also meet certain Department of Transportation and Federal Motor Carrier Safety Administration requirements with respect to some types of vehicles in their fleets. American Home Shield is regulated in certain states by the applicable state insurance regulatory authority and by the Real Estate Commission in Texas. Terminix and TruGreen are regulated by federal, state and local laws, ordinances and regulations which are enforced by Departments of Agriculture, Pest Control Boards, Departments of Environmental Conservation and similar government entities. ServiceMaster Clean uses products containing ingredients regulated by the U.S. Environmental Protection Agency ("EPA") and is subject to licensing and certification requirements for applying disinfectants, sanitizers and other EPA registered products in certain states. AmeriSpec is regulated by various state and local home inspection laws and regulations. 8

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various forms of civil or criminal prosecution and lawsuits, any of which could have a material adverse effect on its reputation, business, financial condition, results of operations and cash flows.

These international, federal, state, provincial and local laws and regulations include laws relating to consumer protection, wage and hour, deceptive trade practices, permitting and licensing, state contractor laws, real estate settlements, workers' safety, tax, healthcare reforms, franchise related issues, collective bargaining and other labor matters, environmental and employee benefits. The Terminix business must also meet certain Department of Transportation and Federal Motor Carrier Safety Administration requirements with respect to certain vehicles in its fleet. American Home Shield is regulated in certain states by the applicable state insurance regulatory authority and by the Real Estate Commission in Texas. Terminix is regulated by federal, state and local laws, ordinances and regulations which are enforced by Pest Control Boards, Departments of Environmental Conservation and similar government entities. ServiceMaster Clean and Merry Maids use products containing ingredients regulated by the U.S. Environmental Protection Agency ("EPA") and ServiceMaster Clean is subject to licensing and certification requirements for applying disinfectants, sanitizers and other EPA registered products in certain states. AmeriSpec is regulated by various state and local home inspection laws and regulations.

Consumer Protection and Solicitation Matters

ServiceMaster is subject to international, federal, state, provincial and local laws and regulations designed to protect consumers, including laws governing consumer privacy and fraud, the collection and use of consumer data, telemarketing and other forms of solicitation.

The telemarketing rules adopted by the Federal Communications Commission pursuant to the Federal Telephone Consumer Protection Act and the Federal Telemarketing Sales Rule issued by the Federal Trade Commission govern ServiceMaster's telephone sales practices. In addition, some states and local governing bodies have adopted laws and regulations targeted at direct telephone sales and "do-not-knock," "do-not-mail" and "do-not-leave" activities. The implementation of these marketing regulations requires ~~TruGreen, and, to a lesser extent,~~ ServiceMaster's ~~other operating segments,~~ to rely more extensively on other marketing methods and channels. In addition, if ServiceMaster were to fail to comply with any applicable law or regulation, ServiceMaster could be subject to substantial fines or damages, be involved in litigation, suffer losses to its reputation and its business or suffer the loss of licenses or penalties that may affect how the business is operated, which, in turn, could have a material adverse effect on its financial position, results of operations and cash flows.

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which, in turn, could have a material adverse effect on its financial position, results of operations and cash flows.

Franchise Matters

Terminix, ~~TruGreen,~~ ServiceMaster Clean, Merry Maids, Furniture Medic and AmeriSpec are subject to various international, federal, state, provincial and local laws and regulations governing franchise sales, marketing and licensing and franchise trade practices generally, including applicable rules and regulations of the Federal ~~Trade~~ Trade Commission. These laws and regulations generally require disclosure of business information in connection with the sale and licensing of franchises. Certain state regulations also affect the ~~ability~~ ability of the franchisor to revoke or refuse to renew a franchise. ServiceMaster seeks to comply with regulatory requirements and deal with franchisees and licensees in good faith. From time to time, ServiceMaster and one or more franchisees may become involved in a dispute regarding the franchise relationship, including payment of royalties or fees, location of branches, advertising, purchase of products by franchisees, non-competition covenants, compliance with ServiceMaster standards and franchise renewal criteria. There can be no assurance that compliance problems will not be ~~encountered~~ encountered from time to time or that ~~material~~significant disputes with one or more franchisees will not arise.

~~Environmental Matters~~ 9

~~ServiceMaster's~~ ~~operating segments are subject to various international, federal, state, provincial and local laws and regulations~~ ~~regarding environmental, health and safety matters. Compliance with such laws increases ServiceMaster's operating costs, limits or restricts the services provided by ServiceMaster's operating segments~~ ~~or the methods by which they offer, sell and fulfill those services or conduct their respective businesses, or subjects ServiceMaster and its operating segments to the possibility of regulatory or~~ ~~private actions or proceedings. Terminix and TruGreen are regulated under many federal and state environmental~~ ~~laws, including the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA" or "Superfund"), the Superfund Amendments and Reauthorization Act of 1986, the Federal~~ ~~Environmental Pesticide Control Act of 1972, the Federal Insecticide, Fungicide and Rodenticide Act of 1947, the Resource Conservation and Recovery Act of 1976, the Clean Air Act, the Emergency~~ ~~Planning and Community Right-to-Know Act of 1986, the Oil Pollution Act of 1990 and the Clean Water Act of 1977, each as amended. ServiceMaster cannot predict the effect of~~ ~~possible~~ ~~future environmental laws on its operations. During 2012, there were no material capital expenditures for environmental control facilities, and there are no material expenditures anticipated~~ ~~for~~Table ~~2013~~of orContents ~~2014 related to such facilities.~~

Environmental, Health and Safety Matters

ServiceMaster's businesses are subject to various international, federal, state, provincial and local laws and regulations regarding environmental, health and safety matters. Compliance with such laws increases ServiceMaster's operating costs, limits or restricts the services provided by ServiceMaster's businesses or the methods by which they offer, sell and fulfill those services or conduct their respective businesses, or subjects ServiceMaster and its businesses to the possibility of regulatory or private actions or proceedings. Terminix is regulated under many federal and state environmental laws, including the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA" or "Superfund"), the Superfund Amendments and Reauthorization Act of 1986, the Federal Environmental Pesticide Control Act of 1972, the Federal Insecticide, Fungicide and Rodenticide Act of 1947, the Resource Conservation and Recovery Act of 1976, the Clean Air Act, the Emergency Planning and Community Right-to-Know Act of 1986, the Oil Pollution Act of 1990 and the Clean Water Act of 1977, each as amended. ServiceMaster cannot predict the effect of possible future environmental laws on its operations. Changes in, or new interpretations of, existing laws, regulations or enforcement policies, the discovery of previously unknown contamination, or the imposition of other environmental liabilities or obligations in the future, may lead to additional compliance or other costs. During 2013, there were no material capital expenditures for environmental control facilities, and there are no material expenditures anticipated for 2014 or 2015 related to such facilities.

INSURANCE

We maintain insurance coverage that we believe is appropriate for our business, including workers' compensation, auto liability, general liability, umbrella and property insurance. In addition, we provide various insurance coverages, including deductible reimbursement policies, to our business units through our wholly owned captive insurance company, which is domiciled in Vermont.

EMPLOYEES

The average number of persons employed by ServiceMaster during ~~2012~~2013 was approximately 2022,000. Due to the seasonal nature of some of the Company's businesses, employee headcount can fluctuate during the course of a year, reaching approximately 2224,000 during peak service periods.

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AVAILABLE INFORMATION

ServiceMaster maintains a website at http://www.servicemaster.com that includes a hyperlink to a website maintained by a third party where ServiceMaster's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports are available without charge as soon as reasonably practicable following the time that they are filed with or furnished to the Securities and Exchange Commission (the "SEC"). The information found on the Company's website is not a part of this or any other report filed with or furnished to the SEC.

ITEM 1A. RISK FACTORS

The following discussion of risk factors contains "forward-looking statements," as discussed in Part II, Item 7 below. These risk factors are important to understanding the contents of this Annual Report on Form 10-K and of other reports. Our reputation, business, financial position, results of operations and cash flows are subject to various risks. The risks and uncertainties described below are not the only ones relevant to us. Additional risks and uncertainties not currently known to us or that we currently believe are immaterial may also adversely impact our reputation, business, financial position, results of operations and cash flows. The following information should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and related notes included elsewhere in this Annual Report on Form 10-K.

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position, results of operations and cash flows. The following information should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and related notes included elsewhere in this Annual Report on Form 10-K.

Risks Related to Our Business and Our Industry

~~Adverse~~Weakening ~~credit~~in ~~and~~general ~~financial~~economic ~~market events and~~ conditions ~~could~~, ~~among~~especially ~~other~~as ~~things,~~they ~~impede~~may ~~access~~affect tohome orsales, ~~increase~~unemployment ~~the cost of financing~~ or ~~cause~~consumer ~~our~~confidence ~~commercial and governmental customers to incur liquidity issues that could lead to some of our services not being purchased~~ or ~~being~~spending ~~cancelled~~levels, ormay ~~result~~adversely ~~in reduced operating revenue and lower operating income, any of which could have an adverse~~ impact on our business, financial position, results of operations and cash flows.

~~Adverse~~A ~~developments~~substantial inportion ~~the~~of ~~credit~~our ~~and~~results ~~financial~~of ~~markets,~~operations ~~including~~is ~~due~~dependent toupon ~~the~~spending ~~ongoing~~by ~~European~~consumers. ~~financial~~Deterioration ~~and~~in ~~economic~~general ~~crisis and~~economic ~~concerns~~conditions ~~over U.S. debt ceiling, deficit~~ and ~~budget issues, as well as unstable~~ consumer ~~sentiment~~confidence ~~and~~could ~~high~~affect ~~unemployment,~~the ~~continue~~demand tofor ~~challenge~~our ~~the U~~services.S. ~~and~~Consumer ~~global~~spending ~~financial~~ and ~~credit~~confidence ~~markets~~tend ~~and overall~~to ~~economies.~~decline ~~These~~during ~~developments~~times ~~have had a significant material adverse impact on a number~~ of ~~financial~~declining ~~institutions~~economic ~~and~~conditions. ~~have~~A ~~limited~~worsening ~~access to capital and credit for many companies. Disruptions~~of inmacroeconomic ~~credit or financial markets could~~indicators, ~~among~~including ~~other~~weak ~~things~~home sales, ~~lead~~higher tohome ~~impairment charges~~foreclosures, ~~make~~declining itconsumer ~~more~~confidence ~~difficult~~or ~~for~~rising usunemployment ~~to obtain~~rates, orcould ~~increase~~adversely ~~our~~affect ~~cost~~consumer ofspending ~~obtaining~~levels, ~~financing~~reduce ~~for our operations or investments or~~the todemand ~~refinance~~for our ~~indebtedness,~~services ~~cause our lenders to depart from prior credit industry practice~~ and ~~not~~adversely ~~give~~impact ~~technical or other waivers under~~ our ~~financing agreements~~business, tofinancial ~~the extent we may seek them in the future~~position, ~~thereby~~results ~~causing us to be in default under one or more~~ of ~~the~~operations ~~financing~~and ~~agreements~~cash flows. These ~~disruptions~~factors ~~also~~ could ~~cause~~also ~~our~~negatively ~~commercial~~impact ~~customers~~the totiming ~~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~~ultimate itcollection ~~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~~which ~~other~~would ~~things,~~adversely ~~and, in turn, 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~~business, ~~adverse~~financial ~~developments at federal~~position, ~~state~~results ~~and local levels associated with budget deficits resulting from economic conditions could result in federal, state and local governments decreasing their purchasing~~ of ~~our~~operations ~~products or services~~ and~~/or~~ ~~increasing~~cash ~~taxes~~flows. ~~or other fees on businesses,~~

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

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.

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 expect to record an impairment charge of approximately $50 million in the first quarter of 2014 relating to this decision.

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. We have 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;

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•: adverse actions or assessments by regulators;
•: unanticipated competition;
•: loss of key personnel; and
•: a current expectation that more-likely-than-not (e.g., a likelihood that is more than 50%) a reporting unit or intangible asset will be sold or otherwise disposed of.

~~including~~ In ~~ServiceMaster~~2013, tobased ~~generate~~on ~~more~~lower ~~tax~~projected ~~revenues~~revenue and operating results for TruGreen, ~~which~~we ~~could~~recorded ~~negatively~~pre-tax ~~impact~~non-cash ~~spending~~impairment bycharges ~~commercial~~of ~~customers~~$417.5 million and ~~municipalities~~$255.8 million onto reduce the carrying value of TruGreen's goodwill and the TruGreen trade name, respectively, as a result of our ~~services~~interim impairment testing of indefinite-lived intangibles assets as of June 30, 2013.

In 2012, based on lower projected revenue and operating results for TruGreen, we recorded pre-tax non-cash impairment charges of $790.2 million and $118.7 million to reduce the carrying value of TruGreen's goodwill and the TruGreen trade name, respectively, as a result of our interim impairment testing of indefinite-lived intangible assets as of September 30, 2012 and June 30, 2012.

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 expect to record an impairment charge of approximately $50 million in the first quarter of 2014 relating to this decision.

As a result of the TruGreen Separation Transaction, the Company will be required to perform an interim impairment analysis as of January 14, 2014 on the TruGreen trade name. The assumptions used in this analysis will be developed with the view of the TruGreen business as a standalone company, resulting in an expected impairment charge of approximately $150 million in the first quarter of 2014.

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 operating 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 our financing agreements, to the extent we may seek them in the future, thereby causing us to be in default under one or more of the financing agreements. 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, 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

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federal, state and local governments decreasing their purchasing of our products or services and/or increasing taxes or other fees on businesses, including ServiceMaster, to generate more tax revenues, which could negatively impact spending by commercial customers and municipalities on our services.

Adverse developments in the credit and financial markets could adversely affect our ability to borrow under our senior secured revolving credit facility (the "Revolving Credit Facility"), senior secured term loan facility (the "Term Loan Facility") or letter of credit facility (together with the Term Loan Facility, the "Term Facilities" and, together with the Revolving Credit Facility, the "Credit Facilities") in the future or to refinance our debt. Liquidity or capital problems at one or more of the Revolving Credit Facility lenders could reduce or eliminate the amount available for us to draw under such facility. We may not be able to access additional capital on terms acceptable to us or at all.

Adverse developments in the credit and financial markets, along with other economic uncertainties, could also ~~get~~worsen ~~worse~~ over time. Adverse developments in the credit and financial ~~markets~~ markets and economic uncertainties make it difficult for us to accurately forecast and plan future business activities. The continuance of the current uncertain economic conditions or further deterioration of such conditions could have a material adverse impact on our business, financial position, results of operations and cash flows.

~~Further~~Our ~~weakening~~market insegments ~~general~~are ~~economic~~highly ~~conditions,~~competitive. ~~especially~~Competition ascould ~~they~~reduce ~~may~~our ~~affect~~share ~~home~~of ~~sales,~~the ~~unemployment~~market orsegments ~~consumer~~served ~~confidence~~by orus ~~spending~~and ~~levels, may~~ adversely impact our reputation, business, financial position, results of operations and cash flows.

AWe ~~substantial~~operate ~~portion~~in ofhighly ~~our~~competitive ~~results~~market ofsegments. ~~operations~~Changes isin ~~dependent~~the ~~upon~~source ~~spending~~and byintensity ~~consumers.~~of ~~Deterioration~~competition in ~~general~~the ~~economic conditions~~market ~~and~~segments ~~consumer~~served ~~confidence~~by us ~~could~~impact ~~affect~~ the demand for our services. ~~Consumer~~and ~~spending~~may ~~and~~also ~~confidence~~result ~~tend~~in toadditional ~~decline~~pricing ~~during~~pressures. ~~times~~The ofrelatively ~~declining~~low ~~economic~~capital ~~conditions,~~cost ~~and~~of ~~consumer~~entry ~~spending~~into ~~and confidence~~certain ~~may~~of ~~not~~our ~~materially~~business ~~improve.~~categories Ahas ~~worsening~~led ofto ~~macroeconomic~~strong competitive ~~indicators~~market segments, including ~~weak~~competition ~~home~~from ~~sales,~~regional ~~higher~~and ~~home~~local ~~foreclosures,~~owner-operated ~~declining~~companies. ~~consumer~~Regional ~~confidence~~and orlocal ~~rising~~competitors ~~unemployment~~operating ~~rates,~~in ~~could adversely~~a ~~affect~~limited ~~consumer~~geographic ~~spending~~area ~~levels~~may have lower labor, benefits ~~reduce~~and ~~the~~overhead ~~demand~~costs. ~~for~~The ~~our~~principal ~~services~~methods ~~and~~of ~~adversely~~competition ~~impact~~in our ~~business,~~businesses ~~financial~~include ~~position~~name recognition, ~~results~~quality and speed of ~~operations~~service, ~~and~~pricing, ~~cash~~customer ~~flows.~~satisfaction ~~These~~and ~~factors~~reputation. ~~could~~We ~~also~~may be ~~negatively~~unable ~~impact~~to ~~the~~compete ~~timing~~successfully against current or future competitors, and the ~~ultimate~~competitive ~~collection~~pressures ofthat ~~accounts~~we ~~receivable~~face may result in reduced market segment share, ~~which~~reduced ~~would~~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, ~~lawn~~home ~~care~~inspection services, home ~~inspection~~warranties ~~services~~ and disaster restoration services. ~~For example, in geographies that do not have a year-round growing season, the demand for our lawn care services decreases during the winter months.~~ Adverse weather conditions (e.g., droughts, severe storms and significant rain or snow fall), whether created by climate change factors or otherwise, can adversely impact the timing of product or service delivery ~~or demand for lawn care services~~, and cooler temperatures or droughts can impede the development of the termite swarm and lead to lower demand for our termite control services. Severe winter storms can also impact our home cleaning business if wepersonnel 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 thereby adversely impacting our business, financial position, results of operations and cash flows.

1613

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Availability of our raw materials and 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, ~~fertilizer,~~ chemicals, refrigerants, ~~parts,~~ 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~~ 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 prices. With respect to fuel, our Terminix fleet, which consumes approximately 2011 million ~~gallons~~ 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, the Company expects to use approximately 11 million gallons. A ten percent change in fuel prices would result in a change of approximately $74.01 million in our ~~annual~~2014 fuel cost before considering the impact of fuel swap contracts. Based upon Department of Energy fuel price forecasts, as well as the hedges we have executed to date for ~~2013~~ 2014, we have projected that fuel prices will not significantly increase our fuel costs for ~~2013~~2014 compared to ~~2012~~2013. Fuel price increases can also result in increases in the cost of ~~fertilizer,~~ chemicals and other materials used in our business. We cannot predict the extent to which we may experience future increases in costs of fuel, ~~fertilizer~~chemicals, refrigerants, ~~chemicals~~appliances and equipment, parts, raw materials, wages and salaries, employee benefits, health care, ~~vehicles~~vehicle maintenance, 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 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 our growth, productivity and customer retention, cost reduction and management initiatives are subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. For example, we recently embarked on a shift in strategy at TruGreen that includes redesigning our product offerings, transforming the customer experience through new technology, new processes and stricter branch standards, and rebalancing our sales and marketing mix towards channels with higher retention and profitability. In 2012, we experienced significant decreases in operating revenue and Operating Performance at TruGreen for full-year 2012 as compared to 2011 as we pursued this new strategy. There can be no assurance that our new strategy will succeed in positioning TruGreen for future operating revenue and Operating Performance growth. In addition, delays, higher than expected costs or unsuccessful implementation of new information technology systems, including the new operating systems at American Home Shield and Merry Maids, which are currently under development, and TruGreen's new operating system, which is in the process of being deployed, could adversely impact our operations. 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. We have already experienced unexpected delays and other issues associated with the development of the operating system at American Home Shield which have resulted in a delay in the projected start of the first phase of our implementation. We expect to continue to incur capitalizable and non-capitalizable technology

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charges through implementation of the operating system, which is expected to occur in various phases over a period of time. 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. In addition, our strategies to enhance talent management and adopt and transfer best practices across our businesses may not produce the growth, efficiencies and productivity levels we seek and may present unforeseen challenges. 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. As a result, we may not be able to achieve our expected results of operations and cash flows.

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 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, pricing, customer satisfaction and reputation. 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.

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 ~~many of~~ our senior management ~~positions~~team, including through the hiring of ~~Thomas~~ Robert J. ~~Coba~~Gillette as ~~President,~~Chief ~~ServiceMaster~~Executive ~~Clean,~~Officer ~~Merry~~("CEO") ~~Maids, Furniture Medic & AmeriSpec; Charles M. Fallon as President, Terminix; Linda A. Goodspeed as Senior Vice President~~ and ~~Chief Information Officer; Mark~~ Alan J. ~~Barry as President, American Home Shield; and R~~ M. ~~David~~Haughie ~~Alexander~~ as President, TruGreen. Our future success depends in large part on our success in utilizing current, experienced senior leadership and transitioning responsibilities to, and implementing the goals and objectives of, our new business unit executives. Effective November 27, 2012, Roger A. Cregg, the former Chief Financial Officer ("CFO") ~~of the Company, resigned from the Company~~. ~~The Company's Controller, David W. Martin, is serving as Interim CFO of the Company until a new CFO is hired.~~ 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.

~~Public~~Our ~~perceptions~~franchisees ~~that~~and ~~the~~third ~~products~~party wedistributors ~~use~~ and ~~the~~vendors ~~services~~could wetake ~~deliver~~actions ~~are~~that ~~not~~could ~~environmentally~~harm ~~friendly or safe may adversely impact the demand for~~ our ~~services~~business.

InOur ~~providing~~franchisees, third party distributors and vendors are contractually obligated to operate their businesses in accordance with the standards set forth in our ~~services,~~agreements wewith ~~use,~~them. ~~among~~Each ~~other~~franchising ~~things~~brand also provides training and support to franchisees. However, ~~fertilizers~~franchisees, ~~herbicides~~third party distributors and ~~pesticides.~~vendors ~~Public~~are ~~perception~~independent third parties that ~~the~~we ~~products~~do ~~we use~~not control, and the ~~services~~franchisees, wethird ~~deliver~~party ~~are~~distributors ~~not~~and ~~environmentally~~vendors own, operate and oversee the daily operations of

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~~friendly~~their orbusinesses. ~~safe~~As ora ~~are~~result, ~~harmful~~the toultimate ~~humans~~success orof ~~animals,~~any ~~whether~~franchise ~~justified~~operation orrests with the franchisee. If franchisees do not, orsuccessfully ~~our~~operate ~~improper~~their ~~application~~businesses ofin ~~these~~a ~~chemicals~~manner consistent with required standards, royalty payments to us will be adversely affected and a brand's image and reputation could ~~reduce~~be ~~demand~~harmed, ~~for~~which in turn could adversely impact our ~~services~~business, ~~increase~~financial ~~regulation~~position, orresults ~~government restrictions~~of oroperations ~~actions~~and cash flows. Similarly, ~~result~~if third party distributors and vendors do not successfully operate their businesses in ~~fines~~a manner consistent with required laws, standards and regulations, we could be subject to claims from regulators or ~~penalties~~legal claims for the actions or omissions of such third party distributors and vendors. In addition, ~~impair~~our relationship with our ~~reputation~~franchisees, ~~involve~~third usparty distributors and vendors could become strained (including resulting in litigation,) ~~damage~~as we impose new standards or assert more rigorous enforcement practices of the existing required standards. These strains in our ~~brand~~relationships ~~names~~or ~~and~~claims ~~otherwise~~could have a material adverse impact on our reputation, business, financial position, results of operations and cash flows.

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 expect to record an impairment charge of approximately $50 million in the first quarter of 2014 relating to this decision.

Any disruption in, capacity limitations, stability 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, American Home Shield recently initiated the offering of preventative maintenance contracts and other new products. In addition, TruGreen recently embarked on a shift in strategy that includes redesigning its product offerings, transforming the customer experience through new technology, new processes and stricter branch standards, and rebalancing its sales and marketing mix towards channels with higher retention and profitability. There can be no assurance that our new ~~strategy~~strategies or product offerings will succeed in ~~positioning TruGreen for future~~ increasing operating revenue and ~~Operating~~growing ~~Performance growth~~profitability. An unsuccessful execution of ~~this strategy~~new strategies, including the rollout or adjustment of our new services or products or ~~TruGreen's~~ 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.

~~Laws and government regulations applicable to our businesses could increase our legal and regulatory expenses, and impact our business, financial position, results of operations and cash flows.~~ 15

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 or green marketing) and advertising, the application and use of fertilizers, herbicides, pesticides and other chemicals, noise and air pollution from power equipment and water management techniques. In particular, we anticipate that various 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 water quality, water use, chemical use, climate change, equipment efficiency standards, refrigerant production and use and other environmental matters; other consumer protection laws or regulations; 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 litigation, suffer losses to our reputation or 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.

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The enactment of new federal or state legislation or the promulgation of new regulations or interpretations at any level of government may also expose us to potential new liabilities or costs, or may require us to modify our business model or business practices. In March 2010, comprehensive health care reform legislation was enacted in the United States which, among other things, includes guaranteed coverage requirements, including for dependents up to age 26; eliminates pre-existing condition exclusions and annual and lifetime maximum limits; restricts the extent to which policies can be rescinded; and requires employers to provide employees with insurance coverage that meets minimum eligibility and coverage requirements. The legislation imposes implementation effective dates that began in 2010. Due to the breadth and complexity of the health reform legislation and uncertainties surrounding the issuance of final regulations, it is difficult to predict the overall impact of the health reform legislation on our business over the coming years. However, new requirements to provide additional health insurance benefits to our associates would likely increase our expenses, and any such increases could be significant enough to materially impact our business, financial position, results of operations and cash flows. Additional or new regulations, or changes in current regulations, promulgated by the U.S. Consumer Financial Protection Bureau may also require us to modify our business model or business practices.

Compliance with environmental, health and safety laws and regulations, including laws pertaining to the use of pesticides, herbicides and fertilizers, 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 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.

In addition, the use of certain pesticides, herbicides and fertilizer products is regulated by various international, federal, state, provincial and local environmental and public health agencies. These regulations may ban or restrict applications or use or require that only certified or professional users apply the product or that certain products only be used on certain types of locations. These laws may also require users to post notices on properties at which products have been or will be applied, may require notification to individuals in the vicinity that products will be applied in the future or may restrict or ban the use of certain products. 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, herbicides, fertilizers or other products we apply, or the manner in which we apply 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 apply to third party vendors who are hired to repair or remediate property and who may fail to comply with environmental laws and 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

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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. If there is a significant change in the facts or circumstances surrounding the assumptions upon which we operate, or if we are found to violate applicable environmental and public health laws and regulations, it could have a material adverse impact on future environmental capital expenditures and other environmental expenses and on our reputation, financial position, results of operations and cash flows. In addition, potentially significant expenditures could be required to comply with environmental laws and regulations, including requirements that may be adopted or imposed in the future.

International, federal, state, provincial and local agencies that regulate environmental matters may change environmental laws, regulations or standards, including imposing new regulations with respect to climate change matters. Changes in any of these or other laws, regulations or standards could materially adversely impact our business, financial position, results of operations and cash flows.

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 ("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 application 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 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.

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.

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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 expect to phase out a significant portion of our use of information technology services provided by International Business Machines Corporations ("IBM") by the end of 2013. 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.

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, ~~TruGreen,~~ Merry Maids, ServiceMaster Clean, American Home Shield, AmeriSpec and Furniture Medic. 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~~ 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.

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. Any litigation or claims brought by or against us could result in substantial costs and diversion of our resources. A successful claim of trademark, patent or other intellectual property infringement against us, or any other successful challenge to the use of our intellectual property, could subject us to damages or prevent us from operating our business in the manner in which we have in the past, including preventing us from providing certain services under our recognized brand names, all of which could have a material adverse impact on 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. For example, delays, higher than expected costs or unsuccessful development and implementation of new operating systems at American Home Shield and Merry Maids, which are currently under development, and at TruGreen, which is in the process of being deployed, could adversely impact our operations. We have already experienced unexpected delays and other issues associated with the development of the operating system at American Home Shield which has resulted in a delay in the projected start of the first phase of our implementation. We expect to continue to incur capitalizable and non-capitalizable technology charges through implementation of the operating system, which is expected to occur in various phases over a period of time. We are relying on third party providers to develop and implement our operating systems, and disruption, termination or substandard performance by these providers could negatively impact

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the development and implementation of these systems. 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 2012 we incurred a $4.2 million charge related to the abandonment of certain internally developed software for Merry Maids. 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.

In addition, any disruption in, capacity limitations, stability or failure to operate as expected of our information technology systems, including our new operating systems at American Home Shield, TruGreen and Merry Maids and our information technology initiative for our human resources function, 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, or could have a negative impact on the services provided by our human resources center of excellence. 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.

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.

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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 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 or green marketing) and advertising, the application and use of pesticides and other chemicals, noise and air pollution from power equipment. In particular, we anticipate that various 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; 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 litigation, suffer losses to our reputation or 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.

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.

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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.

In addition, the use of certain pesticides 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 the manner in which we apply 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 apply to third party vendors who are hired to repair or remediate property and who may fail to comply with environmental laws and 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.

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 (including our former business TruGreen LandCare, as to commercial landscaping) 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.

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~~strategic contracts,~~ ~~that~~Our ~~restrict us from entering into lines of~~ business orprocess ~~operating~~outsourcing ininitiatives ~~certain~~have ~~geographic~~increased ~~areas into which we may desire to expand~~ our ~~business.~~reliance Weon ~~also~~third ~~are~~party ~~subject~~contractors ~~to various non-solicitation~~ and ~~no-hire covenants that~~ may ~~restrict~~expose our ~~ability~~business to ~~solicit~~harm ~~potential~~upon ~~customers~~the ortermination ~~associates. If we do not comply with such restrictive covenants,~~ or ifdisruption ~~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,~~third ~~financial~~party ~~position,~~contractor ~~results of operations and cash flows may be adversely impacted~~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.

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.

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 2012 and earlier periods with respect to goodwill and intangible assets. We have 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:

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carrying value of the TruGreen trade name as a result of our annual impairment testing of goodwill and intangible assets. Additionally, as a result of the decision to sell TruGreen LandCare, we recorded a $34.2 million impairment charge in the first quarter of 2011 to reduce the carrying value of TruGreen LandCare's assets to their estimated fair value less cost to sell in accordance with applicable accounting standards. Upon completion of the sale, a $6.2 million loss on sale was recorded in loss from discontinued operations, net of tax. In the second quarter of 2010, we recorded a pre-tax non-cash impairment charge of $46.9 million, of which $43.0 million was related to the remaining goodwill at TruGreen LandCare and $3.9 million related to TruGreen LandCare's trade name. All impairments related to TruGreen LandCare are recorded in loss from discontinued operations, net of income taxes.

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. In particular, any further decline in the estimated fair value of the TruGreen trade name will result in additional trade name impairment. 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.

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

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 the franchisees, third party distributors and vendors 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 a brand's 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. It is also possible that creditors, or other claimants, of a franchisee, third party distributor or vendor could attempt to make claims against us under various legal theories, such as in the event such creditors and claimants cannot collect from our franchisee. 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.

Changes in accounting, securities and other rules or interpretations could adversely impact our financial position and results of operations.

Changes in accounting, securities and other rules applicable to our business, including proposed revisions to the rules related to accounting for leases and reserves for, and disclosures relating to, legal contingencies, could affect our reported results of operations and financial position, potentially decrease the comparability of our financial statements to others within our industry and increase our liability exposure.

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Risks Related to Our Capital Structure and Our Debt

We are indirectly owned and controlled by the equity owners, and their interests as equity holders may conflict with the interests of our other stakeholders.

We are indirectly owned and controlled by the equity owners, who have the ability to control our policies and operations. The directors appointed by the equity owners are able to make decisions affecting our capital structure, including decisions to issue or repurchase capital stock, pay dividends and incur or repurchase debt. The interests of the equity owners may not in all cases be aligned with the interests of our other stakeholders. For example, if we encounter financial difficulties or are unable to pay our debts as they mature, the interests of our equity owners might conflict with the interests of holders of our debt. In addition, our equity owners may have an interest in pursuing acquisitions, divestitures, financings or other transactions that, in their judgment, could enhance their equity investments, even though such transactions might involve risks to our business or the holders of our debt. Furthermore, the equity owners may in the future own businesses that directly or indirectly compete with us. One or more of the equity owners also may pursue acquisition opportunities that may be complementary to our business, and as a result, those acquisition opportunities may not be available to us.

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 December 31, ~~2012~~2013, we had $3.~~961~~956 billion of total long-term debt outstanding. WeOn ~~have~~November 27, ~~available borrowing~~2013, ~~capacity under~~ the Company ~~Revolving~~entered ~~Credit~~into ~~Facility~~Amendment ~~of $447~~No.7 ~~million~~3 ~~through~~(the ~~July 24,~~ "2013, ~~$324.2 million~~Revolver ~~from~~Amendment") ~~July 25,~~to ~~2013~~the ~~through~~Revolving ~~July 24,~~Credit ~~2014 and $265~~Facility.~~2 million~~ ~~from~~Pursuant ~~July 25,~~to ~~2014~~the ~~through~~2013 ~~January 31~~Revolver Amendment, ~~2017.~~and ~~Our~~after ~~substantial~~completion ~~debt could have important consequences to holders~~ of ~~our~~the ~~debt~~TruGreen ~~and~~Separation Transaction, ~~other stakeholders in~~ the Company has $241. ~~Because~~7 million of ~~our~~available ~~substantial indebtedness:~~

2619

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borrowing capacity ~~Despite~~through ~~our~~July 23, ~~indebtedness~~2014 ~~levels~~and $182.7 million from July 24, we2014 ~~and~~through ~~our~~January 31, ~~subsidiaries~~2017. ~~may~~Our besubstantial ~~able~~debt tocould ~~incur~~have ~~substantially~~important ~~more~~consequences ~~indebtedness.~~to ~~This~~holders of ~~could~~our ~~further~~debt ~~exacerbate~~and other stakeholders in the ~~risks~~Company. ~~associated~~Because ~~with~~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;
•: we are exposed to the risk of increased interest rates because a portion of our borrowings, including under the Credit Facilities, and certain floating rate operating and capital leases are 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.

We ~~and~~Increases ~~our subsidiaries may be able to incur substantial additional indebtedness~~ in ~~the~~interest ~~future.~~rates ~~The~~would ~~terms~~increase of the ~~instruments~~cost ~~governing our indebtedness do not prohibit us or fully prohibit our subsidiaries from doing so. We have available borrowing capacity under the Revolving Credit Facility~~ of ~~$447.7 million~~servicing through July 24, 2013, $324.2 million from July 25, 2013 through July 24, 2014 and $265.2 million from July 25, 2014 through January 31, 2017. The Credit Facilities permit additional borrowings beyond those commitments under certain circumstances. If new indebtedness is added to our ~~current~~ indebtedness ~~levels, the related risks we face would increase,~~ and wecould ~~may~~reduce ~~not be able to meet all of~~ our ~~debt obligations~~profitability.

A significant portion of our outstanding indebtedness, including indebtedness under the Credit Facilities, bears 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 December 31, 2013, each one percentage point change in interest rates would result in an approximately $22.0 million change in the annual interest expense on our Term Loan Facility. Assuming all revolving loans were fully drawn as of December 31, 2013, each one percentage point change in interest rates would result in an approximately $3.2 million change in annual interest expense on our 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 and floating rate leases.

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

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as adverse changes to our business, so warrant. Based on the financial performance of our businesses and the outlook for future years, our credit ratings, outlook or watch could be negatively impacted. 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 Credit Facilities and the indenture governing our 8% senior notes and 7% senior notes (collectively, the "2020 Notes") contain covenants that, among other things, restrict our ability and the ability of our restricted subsidiaries to:

•: incur additional indebtedness (including guarantees of other indebtedness);
•: pay dividends, redeem stock or make other restricted payments, including investments and in the case of the Revolving Credit Facility, make acquisitions;
•: prepay, repurchase or amend the terms of certain outstanding indebtedness;
•: 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 ServiceMaster.

The restrictions in the indenture governing the 2020 Notes, the Credit Facilities and the instruments governing our 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.

Our ability to comply with the covenants and restrictions contained in the Credit Facilities, 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 Credit Facilities, could proceed against the collateral securing the indebtedness. In any such case, we may be unable to borrow under the Credit Facilities and may not be able to repay the amounts due under the Credit 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.

As a holding company, we have no independent operations or material assets other than our ownership of equity interests in our subsidiaries, and we depend on our subsidiaries to distribute funds to us so that we may pay our obligations and expenses, including satisfying our obligations under our 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, and as described under "—Risks Related to Our Business and Our Industry" above.

The payment of ordinary and extraordinary dividends by our subsidiaries that are regulated as insurance, home warranty, or similar companies is subject to applicable state law limitations. 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. Our insurance subsidiaries and 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. For example, certain states prohibit payment by these subsidiaries to the Company of dividends in excess of ten percent of their capital as of the most recent year end, as determined in accordance with prescribed insurance accounting practices in those states. Of the $243.7 million as of December 31, 2012, which we identify as being potentially unavailable to be paid to the Company by its subsidiaries, approximately $188.7 million is held by our home warranty and insurance subsidiaries and is subject to these regulatory limitations on the payment of funds to us. We expect that such limitations will be in effect through the end of 2013, at which time new limitations will be calculated based on regulatory capital levels as of December 31, 2013. The remainder of the $243.7 million, or $55.0 million, is related to amounts that our management does not consider readily available to be used to service our indebtedness due, among other reasons, to our cash management practices and working capital needs at various subsidiaries. 21

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funds to us so that we may pay our obligations and expenses, including satisfying our obligations under our 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, and as described under "—Risks Related to Our Business and Our Industry" above.

There are third party restrictions on the ability of certain of the Company's subsidiaries to transfer funds to the Company. 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 SMAC. The payment of ordinary and extraordinary dividends by the Company's home warranty and similar subsidiaries (through which ServiceMaster conducts its 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 ServiceMaster. As of December 31, 2013, the total net assets subject to these third party restrictions was $160.2 million. We expect that such limitations will be in effect in 2014.

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 ~~maturity date for approximately~~ $2.2 billion of outstanding borrowings under the Term Facilities will have a maturity date of January 31, 2017. The Revolving Credit Facility is also scheduled to mature on January 31, 2017. Our 8% senior notes ~~maturing in 2020, sold in February 2012,~~ will mature on February 15, 2020, and our 7% senior notes ~~maturing in 2020, sold in August 2012,~~ will mature on August 15, 2020 ~~(collectively, the "2020 Notes")~~. 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 we cannot make scheduled payments on our indebtedness, we will be in default and holders of the 2020 Notes could declare all outstanding principal and interest to be due and payable, the lenders under the Credit Facilities could terminate their commitments to loan money, our secured lenders could foreclose against the assets securing their borrowings and we could be forced into bankruptcy or liquidation.

We may from time to time take steps to reduce or refinance outstanding debt or otherwise to reduce interest expense and other debt service obligations. These steps may include open market repurchases, debt repricings, maturity extensions, and other retirements, purchases or refinancings of outstanding debt in whole or in part, in addition to making any required scheduled installment payments. The timing of any such step and the amount of debt that would be repurchased, refinanced or otherwise retired will depend on market conditions, our cash requirements and other considerations. The implementation of any such steps or other capital structure changes could adversely affect debtholders, including by reducing the size of or yield on an applicable debt issue held by them.

~~Increases in interest rates would increase the cost of servicing our indebtedness and could reduce our profitability.~~ 22

A significant portion of our outstanding indebtedness, including indebtedness under the Credit Facilities, bears 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 December 31, 2012, each one percentage point change in interest rates would result in an approximate $12.4 million change in the annual interest expense on our Term Loan Facility after considering the impact of the interest rate swaps into which we have entered. Assuming all revolving loans were fully drawn as of December 31, 2012, each one percentage point change in interest rates would result in an approximate $4.5 million change in annual interest expense on our Revolving Credit Facility.

We are also exposed to increases in interest rates with respect to our arrangement enabling us to transfer an interest in certain receivables to unrelated third parties. Assuming all available amounts were transferred under this arrangement, each one percentage point change in interest

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~~rates~~refinanced ~~would~~or ~~result~~otherwise inretired anwill ~~approximate~~depend ~~$0.5 million~~on ~~change~~market inconditions, ~~annual interest expense with respect to this arrangement. We are also exposed to increases in interest rates with respect to~~ our ~~floating~~ ~~rate~~cash ~~operating~~requirements and ~~capital~~other ~~leases, and a one percentage point change in interest rates would result in an approximate $0~~considerations.~~7 million~~ ~~change~~The inimplementation ~~annual~~of ~~expenses~~any ~~with respect to~~ such ~~leases.~~ ~~The~~steps ~~impact~~or ~~of increases~~other incapital ~~interest~~structure ~~rates~~changes could adversely beaffect ~~more~~debtholders, ~~significant~~including ~~for~~by usreducing ~~than~~the itsize ~~would~~of beor ~~for~~yield ~~some~~on ~~other~~an ~~companies~~applicable ~~because~~debt ofissue ~~our~~held ~~substantial~~by ~~indebtedness and floating rate leases~~them.

~~The~~Despite ~~agreements~~our ~~and~~indebtedness ~~instruments~~levels, ~~governing~~we and our ~~indebtedness~~subsidiaries ~~contain~~may ~~restrictions~~be ~~and~~able ~~limitations~~to ~~that~~incur substantially more indebtedness. This could ~~significantly~~further ~~impact~~exacerbate ~~our~~the ~~ability~~risks toassociated ~~operate~~with our substantial ~~business~~indebtedness.

We and our subsidiaries may be able to incur substantial additional indebtedness in the future. The terms of the instruments governing our indebtedness do not prohibit us or fully prohibit our subsidiaries from doing so. The Credit Facilities ~~contain~~permit ~~covenants~~additional ~~that~~borrowings beyond the committed amounts under certain circumstances. If new indebtedness is added to our current indebtedness levels, ~~among~~the ~~other~~related ~~things~~risks we face would increase, ~~restrict~~and ~~our~~we ~~ability~~ may not be able to: meet all of our debt obligations.

~~The indenture~~ ~~governing~~We ~~the~~are ~~2020~~indirectly ~~Notes~~owned ~~also~~and ~~contains~~controlled ~~restrictive~~by ~~covenants~~the ~~that~~Equity Sponsors, ~~among~~and ~~other~~their ~~things,~~interests ~~limit~~as ~~our~~equity ~~ability~~holders ~~and~~may conflict with the ~~ability~~interests of our ~~restricted~~other ~~subsidiaries to:~~stakeholders.

~~The restrictions~~We inare ~~the~~indirectly ~~indenture~~owned ~~governing~~and controlled by the ~~2020~~Equity ~~Notes~~Sponsors, who have the ~~Credit~~ability ~~Facilities~~to control our policies and operations. The directors appointed by the ~~instruments~~Equity ~~governing~~Sponsors are able to make decisions affecting our ~~other~~capital ~~indebtedness~~structure, ~~may~~including ~~prevent~~decisions usto ~~from~~issue ~~taking~~or ~~actions~~repurchase ~~that~~capital westock, ~~believe~~pay dividends and incur or repurchase ~~would~~debt. beThe ininterests of the ~~best~~Equity ~~interest~~Sponsors may not in all cases be aligned with the interests of our ~~business~~other ~~and~~stakeholders. ~~may~~For ~~make~~example, itif ~~difficult~~we ~~for~~encounter usfinancial difficulties or are unable to ~~execute~~pay our debts ~~business~~as ~~strategy~~they ~~successfully~~mature, orthe ~~effectively~~interests ~~compete~~of the Equity Sponsors might conflict with ~~companies~~the ~~that~~interests ~~are~~of ~~not~~holders ~~similarly~~of ~~restricted~~our debt. WeIn addition, the Equity Sponsors may have an interest in pursuing acquisitions, divestitures, financings or other transactions that, in their judgment, could enhance their equity investments, even though such transactions might involve risks to our business or the holders of our debt. Furthermore, the Equity Sponsors may ~~also~~in ~~incur~~the future ~~debt~~own ~~obligations~~businesses that ~~might~~directly ~~subject~~or indirectly compete with us. One or more of the Equity Sponsors also may pursue acquisition opportunities that may be complementary to ~~additional~~our ~~restrictive~~business, and as a result, those acquisition opportunities may not be available to us.

29 Risks related to the TruGreen Separation Transaction

If the TruGreen Separation Transaction 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 Separation Transaction we received an opinion of tax counsel with respect to the tax-free nature of the TruGreen Separation Transaction to Holdings, TruGreen and Holdings' stockholders under Section 355 and related provisions of the Internal Revenue Code of 1986, as amended. The opinion relied on an Internal Revenue Service ("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 Separation Transaction were ultimately determined not to be tax-free, we could be liable for the U.S. federal income taxes in the event such liability is incurred. Furthermore, events subsequent to the TruGreen Separation Transaction could cause us to recognize a 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 ServiceMaster.

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~~covenants that~~ ~~could~~Federal ~~affect~~and ~~our~~state ~~financial~~fraudulent transfer laws and ~~operational~~Delaware ~~flexibility.~~corporate Welaw may bepermit ~~unable~~a court to ~~refinance~~void ~~our~~the ~~indebtedness,~~TruGreen atSeparation ~~maturity~~Transaction, orwhich ~~otherwise,~~would onadversely ~~terms~~affect ~~acceptable~~our financial tocondition ~~us,~~and orour atresults ~~all.~~of operations.

~~Our ability~~In toconnection ~~comply~~ with the ~~covenants~~TruGreen ~~and~~Separation ~~restrictions contained in the Credit Facilities~~Transaction, ~~the~~we ~~indenture~~undertook ~~governing~~several ~~the~~corporate ~~2020~~restructuring ~~Notes~~transactions ~~and~~which, ~~the~~along ~~instruments~~with ~~governing our other indebtedness~~the ~~may~~contributions ~~be affected by economic, financial~~ and ~~industry~~distributions 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~~made ~~and payable, together with accrued and unpaid interest. If we are unable to repay indebtedness, lenders having secured obligations, such~~ as ~~the~~part ~~lenders~~of ~~under~~ the ~~Credit Facilities~~spin-off, ~~could proceed against the collateral securing the indebtedness. In any such case, we~~ may be ~~unable~~subject to ~~borrow~~challenge under ~~the~~federal ~~Credit Facilities~~ and ~~may~~state ~~not~~fraudulent beconveyance ~~able~~and totransfer ~~repay~~laws ~~the~~as ~~amounts~~well ~~due~~as under ~~the~~Delaware ~~Credit~~corporate ~~Facilities or our other outstanding indebtedness~~law. ~~This could have serious consequences to our financial position and results of operations and could cause us to become bankrupt or insolvent.~~

Under applicable Alaws, ~~lowering~~any transaction, contribution or ~~withdrawal~~distribution completed as part of the ~~ratings,~~spin-off ~~outlook~~could be voided as a fraudulent transfer or ~~watch~~conveyance ~~assigned~~if, toamong ~~our~~other ~~debt~~things, ~~securities~~the transferor byreceived ~~rating~~less ~~agencies~~than ~~may~~reasonably ~~increase~~equivalent ~~our~~value ~~future~~or ~~borrowing~~fair ~~costs~~consideration in return and ~~reduce~~was ~~our~~insolvent ~~access~~or ~~to capital~~rendered insolvent by reason of the transfer.

~~Our~~We cannot ~~indebtedness~~be ~~currently~~certain ~~has~~as ato ~~non-investment~~the ~~grade~~standards ~~rating,~~a ~~and~~court ~~any~~would ~~rating,~~use ~~outlook~~to ordetermine ~~watch~~whether ~~assigned could be lowered~~ or ~~withdrawn~~ ~~entirely~~not byany aentity ~~rating~~involved ~~agency if,~~ in ~~that~~the ~~rating~~spin-off ~~agency's~~was ~~judgment,~~insolvent ~~current~~at ~~or future circumstances relating to~~ the ~~basis~~relevant oftime. ~~the~~In ~~rating~~general, ~~outlook or watch~~however, ~~such as adverse changes to our~~a ~~business,~~court sowould ~~warrant.~~look ~~Based~~at onvarious ~~the~~facts ~~financial performance of our businesses, including the 2012 revenue~~ and ~~operating~~circumstances ~~results~~related ofto ~~TruGreen, and~~ the ~~outlook~~entity ~~for~~in ~~future years~~question, ~~our~~including ~~credit~~evaluation ~~ratings, outlook or watch could be negatively impacted. Any future lowering~~ of ~~our~~whether ~~ratings, outlook~~ or ~~watch likely would make it more difficult or more expensive for us to obtain additional debt financing.~~ 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 is not a legal dividend under Delaware corporate law. The resulting complications, costs and expenses of either finding would materially adversely affect our 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 ServiceMaster and New TruGreen. In connection with the TruGreen Separation Transaction, we entered into a transition services agreement and other separation support services agreements 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 ServiceMaster and New TruGreen regarding the terms of the transition services agreement or other agreements governing the TruGreen Separation Transaction and the relationship thereafter between the companies.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

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ITEM 2. PROPERTIES

The headquarters for Terminix and TruGreen, along with the corporate headquarters, are located in leased premises at 860 Ridge Lake Boulevard, Memphis, Tennessee. The headquarters for American Home Shield are located in leased premises at 889 Ridge Lake Boulevard, Memphis, Tennessee. The headquarters for ServiceMaster Clean, AmeriSpec, Furniture Medic, Merry Maids and a training facility are located in owned premises at 3839 Forest Hill Irene Road, Memphis, Tennessee. In addition, ServiceMaster leases space for a call center located at 6399 Shelby View Drive, Memphis, Tennessee; offices located at 850 and 855 Ridge Lake Boulevard, Memphis, Tennessee; a training facility located at 1650 Shelby Oaks Drive North, Memphis, Tennessee; and a warehouse located at 1575 Two Place, Memphis, Tennessee.

ServiceMaster and its operating companies own and lease a variety of facilities, principally in the United States, for branch and service center operations and for office, storage, call center and data processing space. The following chart identifies the number of owned and leased facilities used by each of its operating segments and Merry Maids as of December 31, ~~2012~~2013. ServiceMaster believes that these facilities, when considered with the corporate headquarters, call center facility, offices, training facilities and warehouse described above, are suitable and adequate to support the current needs of its business.

Operating Company

Terminix	21	398
TruGreen	37	232
American Home Shield	1	4
ServiceMaster Clean	—	7
Merry Maids	—	77

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offices, training facilities and warehouse described above, are suitable and adequate to support the current needs of its business.

Operating Company
Terminix	20	410
TruGreen	36	249
American Home Shield	1	4
ServiceMaster Clean	—	7
Merry Maids	—	77

ITEM 3. LEGAL PROCEEDINGS

In the ordinary course of conducting business activities, the Company and its subsidiaries become involved in judicial, administrative and regulatory proceedings involving both private parties and governmental authorities. These proceedings include insured and uninsured matters that are brought on an individual, collective, representative and class action basis, or other proceedings involving regulatory, employment, general and commercial liability, automobile liability, wage and hour, environmental and other matters. The Company has entered into settlement agreements in certain cases, including with respect to putative collective and class actions, which are subject to court or other approvals. If one or more of the Company's settlements are not finally approved, the Company could have additional or different exposure, which could be material. At this time, the Company does not expect any of these proceedings to have a material effect on its reputation, business, financial position, results of operations or cash flows; however, the Company can give no assurance that the results of any such proceedings will not materially affect its reputation, business, financial position, results of operations and cash flows.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The Company's sole class of ~~issued~~ equity is ~~common~~membership ~~stock. As of March 4~~interests, ~~2013,~~ all of ~~the~~which ~~Company's~~were ~~common stock was~~ owned by CDRSVM Holding, ~~Inc~~LLC, as of March 5, 2014.

On July 24, 2007, the Company completed the 2007 Merger pursuant to which the Company's publicly traded securities were cancelled in exchange for cash. As a result of the ~~Merger~~2007 Merger transaction, the Company became a privately held ~~corporation~~entity, and its equity ~~shares~~interests were no longer publicly traded. The Company has not paid any cash dividends since the 2007 Merger. The TruGreen Separation Transaction was accomplished through a tax-free, stock dividend. There are restrictions on the Company's, and its subsidiaries', ability to pay dividends in the future. For further discussion see "Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Annual Report on Form 10-K.

ITEM 6. SELECTED FINANCIAL DATA

Five-Year Financial Summary

	Year Ended December 31,
(In thousands, except per share data)	~~2012~~2013			~~2011~~2012			~~2010~~2011			~~2009~~2010			~~2008~~2009
Operating Results:
Operating revenue	$	3,~~193~~188,~~281~~835		$	3,~~205~~193,~~872~~281		$	3,~~127~~205,~~394~~872		$	23,~~977~~127,~~885~~394		$	2,~~995~~977,~~126~~885
Operating (loss) income(1)		(532,762	)		375,460			306,692			243,834			187,562
Cost of services rendered and products sold		1,906,054			1,861,669			1,813,706			1,777,304			1,691,251
Percentage of operating revenue		(16.7	)%		11.7	%		9.8	%		8.2	%		6.3	%
Selling and administrative expenses		920,478			872,026			880,492			895,950			830,747
Non-operating expense(2)		294,615			263,711			278,308			246,896			357,796
Goodwill and trade name impairment(1)		673,253			908,873			36,700			—			26,600
(Benefit) provision for income taxes(1)(3)		(114,260	)		43,912			10,945			(9,204	)		(50,753	)
Interest expense		249,033			246,906			273,823			287,666			300,081
Equity in losses of joint venture		(226	)		—			—			—			—
(Loss) Income from continuing operations(1)(2)		(504,804	)		(713,343	)		67,837			17,439			6,142
(Loss) Income from continuing operations(1)(2)(3)		(713,343	)		67,837			17,439			6,142			(119,481	)
Adjusted EBITDA(3)	$	475,989		$	571,234		$	610,475		$	551,052		$	539,497
(Loss) income from discontinued operations, net of income taxes(4)		(200	)		(27,016	)		(31,998	)		7,353			(6,918	)
Adjusted EBITDA Margin(4)		14.9	%		17.9	%		19.0	%		17.6	%		18.1	%
Net (loss) income(1)(2)(3)(4)	$	(713,543	)	$	40,821		$	(14,559	)	$	13,495		$	(126,399	)
Financial Position:
Total assets	$	65,~~410~~911,~~914~~526		$	76,~~146~~410,~~823~~914		$	7,~~098~~146,~~090~~823		$	7,~~146~~098,~~389~~090		$	7,~~493~~146,~~627~~389
Total liabilities	$	5,~~856~~859,~~264~~101		$	5,~~898~~856,~~904~~264		$	5,~~910~~898,~~563~~904		$	5,~~960~~910,~~058~~563		$	65,~~361~~960,~~268~~058
Total long-term debt outstanding	$	3,~~961~~955,~~253~~529		$	3,~~875~~961,~~870~~253		$	3,~~948~~875,~~487~~870		$	3,~~974~~948,~~944~~487		$	43,~~266~~974,~~092~~944
Total shareholder's equity(1)(2)(3)(4)	$	554,650		$	1,247,919		$	1,187,527		$	1,186,331		$	1,132,359
Total shareholder's equity(1)(2)	$	52,425		$	554,650		$	1,247,919		$	1,187,527		$	1,186,331

(1)InThe ~~2012, the~~ Company recorded pre-tax non-cash impairment charges of $~~790~~673.23 million and $~~118~~908.7 9 million in 2013 and 2012, respectively, to reduce the ~~carrying~~ carrying value of TruGreen's goodwill and the TruGreen trade name, ~~respectively,~~and as$36.7 million ain ~~result~~2011 ofto reduce the ~~Company's~~carrying ~~interim~~value ~~impairment testing~~ of ~~goodwill~~the ~~and~~TruGreen ~~indefinite-lived~~trade ~~intangible assets~~name. See Note 1 to the Consolidated Financial Statements for further details. In ~~2011,~~ 2009 ~~and 2008~~, the Company recorded a pre-tax non-cash impairment ~~charges~~charge of $~~36.7 million, $~~26.6 million ~~and $58.7 million, respectively,~~ to reduce the carrying value of trade names as a result of the Company's annual impairment testing of goodwill and indefinite-lived intangible assets. ~~These~~There ~~charges~~were ~~are~~no ~~included~~similar inimpairment ~~the~~charges ~~results~~included ofin continuing operations. ~~There~~in 2010.

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~~were no similar impairment charges included in continuing operations in 2010. See Note 1 to the Consolidated Financial Statements for further details.~~ (2)The ~~2012~~2013, ~~2011~~2012 and ~~2010~~2011 results include restructuring charges of $1820.28 million, $818.2 million and $118.42 million, respectively, as described in Note 8 to the Consolidated Financial Statements. The 2010 and 2009 results include restructuring charges of $11.4 million and $26.7 million, respectively. ~~These~~For 2010 and 2009, these charges included lease termination and severance costs related to a branch optimization project at Terminix; consulting ~~fees~~, ~~severance,~~ lease termination, severance and other costs related to the reorganization of field leadership and aof restructuring of branch operations at TruGreen; ~~transition~~reserve ~~fees~~adjustments, ~~employee retention and~~ severance ~~costs and consulting and other costs related to the information technology outsourcing initiative; adjustments to lease termination reserves~~, employee retention, ~~and severance costs and~~ consulting and other costs ~~related~~associated towith ~~prior~~previous restructuring initiatives; ~~and~~ severance, employee retention, legal fees and other costs associated with the 2007 Merger.; ~~The 2008~~and, ~~results~~for ~~include~~2009, ~~restructuring charges of $12.2 million. These charges included~~ transition fees, employee ~~severance~~retention and ~~retention~~severance costs, and consulting and other costs related to the information technology outsourcing initiative;. ~~adjustments to lease termination reserves, employee retention and severance costs, consulting and other costs related to prior restructuring initiatives;~~ ~~and severance, retention, legal fees and other costs associated with the Merger.~~ ~~(2)~~The 2012 results include a $55.6 million ($35.4 million, net of tax) loss on extinguishment of debt related to the redemption of the remaining $996 million aggregate principal amount of the Company's 10.75% senior notes maturing in 2015 (the "2015 Notes") and repayment of $276 million of outstanding borrowings under the Term Facilities. The 2009 results include a $46.1 million ($29.6 million, net of tax) gain on extinguishment of debt related to the completion of open market purchases of $89.0 million in face value of the Company's 2015 Notes. (3)InFor ~~2009,~~our ~~the~~definition ~~Company recorded a reduction in income tax expense~~ of ~~$15.2 million~~Adjusted ~~related~~EBITDA toand ~~changes~~a inreconciliation ~~state~~thereof ~~tax rates used~~ to ~~measure~~net ~~deferred taxes.~~(loss) ~~In 2008~~income, ~~the~~see ~~Company recorded a reduction in income tax benefit of $8.3~~Note ~~million~~3 ~~resulting from the establishment of a valuation allowance related~~ to ~~certain deferred tax assets for which~~ the ~~realization~~Consolidated inFinancial ~~future years was not more likely than not~~Statements. (4)InAdjusted ~~2011,~~EBITDA inmargin ~~conjunction~~is ~~with~~defined ~~the~~as ~~decision~~Adjusted toEBITDA ~~dispose~~as ~~of TruGreen LandCare,~~ a ~~pre-tax~~percentage ~~non-cash impairment charge~~ of ~~$34.2 million~~ ~~was~~operating ~~recorded to reduce the carrying value of TruGreen LandCare's assets to their estimated fair value less cost to sell in accordance with applicable accounting standards~~revenue. ~~Upon~~ ~~completion~~ of the sale of TruGreen LandCare in 2011, the Company recorded a pre-tax loss on sale of $6.2 million. In 2012, upon finalization of certain post-closing adjustments and disputes, the Company recorded an additional $1.3 million loss. In 2010, 2009 and 2008, the Company recorded pre-tax non-cash impairment charges associated with the goodwill and trade name at its TruGreen LandCare business in the amount of $46.9 million, $1.4 million and $1.4 million, respectively. These charges are classified within the financial statement caption "(loss) income from discontinued operations, net of income taxes." In 2008, the Company recorded pre-tax non-cash impairment charges of $6.3 million related to the long-lived assets (other than goodwill) at its InStar business in connection with the decision to sell the InStar business. These charges are classified within the financial statement caption "(loss) income from discontinued operations, net of income taxes."

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Recent Developments

On January 14, 2014, Holdings completed the TruGreen Separation Transaction resulting in the spin-off of the assets and certain liabilities of the TruGreen Business through a tax-free, pro rata dividend to the stockholders of Holdings. As a result of the completion of the TruGreen Separation Transaction, New TruGreen will operate the TruGreen Business as a private independent company. The TruGreen Business is reported in this Annual Report on Form 10-K in continuing operations. Beginning with the Company's quarterly report on Form 10-Q for the quarter ended March 31, 2014, the TruGreen Business will be reported in discontinued operations.

Results of Operations

The Company reported operating revenue of $3.~~193~~189 billion for the year ended December 31, ~~2012~~2013, $3.~~206~~193 billion for the year ended December 31, ~~2011~~2012 and $3.~~127~~206 billion for the year ended December 31, ~~2010~~2011. The operating revenue changes from year to year were driven by the results of our business units as described in our "Segment Review."

~~Operating~~Loss ~~loss~~from ~~was~~continuing ~~$532.8 million~~operations ~~for~~before ~~the year ended December 31, 2012. Operating~~ income taxes was $~~375~~627.52 million for the year ended December 31, ~~2011~~2013 and ~~$306.7 million~~ ~~for the year ended December 31, 2010. Loss from continuing operations before income taxes was~~ $827.4 million for the year ended December 31, 2012. Income from continuing operations before income taxes was $111.7 million for the year ended December 31, 2011 ~~and $28~~.~~4 million~~ for the year ended December 31, 2010. The decrease in income from continuing operations before income taxes for 2012 compared to 2011 of $939.1 million and increase in income from continuing operations before income taxes for 2011 compared to 2010 of $83.4 million primarily reflect the net effect of year over year changes in the following items:

(In thousands)	2012 Compared to 2011			2011 Compared to 2010
Non-cash goodwill and trade name impairment(1)	$	(872,173	)	$	(36,700	)
Loss on extinguishment of debt(2)		(54,780	)		(774	)
Segment results(3)		(47,747	)		59,423
Restructuring charges(4)		(10,015	)		3,286
Interest expense(5)		26,839			13,810
Depreciation and amortization expense(6)		17,194			33,189
Residual value guarantee charges(7)		—			10,449
Other		1,556			682
	$	(939,126	)	$	83,365

The improvement in loss from continuing operation before income taxes for 2013 compared to 2012 of $200.1 million and decrease in income from continuing operations before income taxes for

(1)Represents, as a result of the Company's impairment testing of indefinite-lived intangible assets, pre-tax non-cash impairment charges of $908.9 million recorded in the year ended December 31, 2012 to reduce the carrying value of TruGreen's goodwill and the TruGreen trade name and $36.7 million recorded in the year ended December 31, 2011 to reduce the carrying value of the TruGreen trade name. There were no similar impairment charges included in continuing operations in 2010. (2)Represents the loss on extinguishment of debt recorded in the year ended December 31, 2012 related to the redemption of the remaining $996 million aggregate principal amount of the Company's 2015 Notes and repayment of $276 million of outstanding borrowings under the Term Facilities and the loss on extinguishment of debt recorded in the year ended December 31, 2011 related to the purchase of $65.0 million in face value of the 2015 Notes from Holdings. There were no debt extinguishments by the Company in the year ended December 31, 2010. (3)Represents the year over year change in (loss) income from continuing operations before income taxes, as adjusted for the specific items included in the table above. Includes key executive transition charges of $4.8 million, $6.6 million and $5.5 million recorded in the years ended December 31, 2012, 2011 and 2010, respectively, as described in our "Segment Review." For the year ended December 31, 2012, also 27

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2012 compared ~~includes a~~to ~~$3.3 million~~2011of ~~impairment of licensed intellectual property and a~~ $1939.21 million impairment of abandoned real estate at Terminix, a $5.4 million increase in tax related reserves at American Home Shield and technology costs of $4.2 million, which related to the abandonment of certain internally developed software, at Merry Maids. (4)For 2012 compared to 2011, represents the net increase in restructuring charges related primarily toreflect the impact of a branch optimization project at Terminix, a reorganization of field leadership and a restructuring of branch operations at TruGreen, a reorganization of leadership at American Home Shield and ServiceMaster Clean, and an initiative to enhance capabilities and reduce costs in our centers of excellence at Other Operations and Headquarters. See Note 8 to the Consolidated Financial Statements for further details. For 2011 compared to 2010, represents the net ~~decrease~~effect ~~in restructuring charges related to a branch optimization project at Terminix, a reorganization~~ of ~~field~~year ~~leadership~~over and a restructuring of branch operations at TruGreen, an initiative to enhance capabilities and reduce costs in our centers of excellence at Other Operations and Headquarters, Merger related charges and other restructuring costs. See Note 8 to the Consolidated Financial Statements for further details. (5)For 2012 compared to 2011, represents a decrease in interest expense as a result of decreases in our weighted average interest rate and average long-term debt balance and, for 2011 compared to 2010, represents a decrease in interest expense as a result of decreases in our weighted average interest rate. (6)Consists primarily of decreased amortization of intangible assets as a result of certain finite lived intangible assets recorded in connection with the Merger being fully amortized, offset, in part, by increased depreciation of property and equipment as a result of property additions. (7)Represents non-cash residual value guarantee charges of $10.4 million recorded in the year ~~ended~~changes ~~December 31, 2010, related to a synthetic lease for operating properties, which expired~~ in ~~July 2010. There were no similar charges in~~ the ~~years~~following ~~ended~~items: ~~December 31, 2012 and 2011.~~

The Company has historically hedged a significant portion of its annual fuel consumption of approximately 20 million gallons. Fuel costs, after the impacts of the hedges and after adjusting for the impact of year over year changes in the number of gallons used, increased $8.9 million for 2012 compared to 2011 and $11.6 million for 2011 compared to 2010. Based upon current Department of Energy fuel price forecasts, as well as the hedges the Company has executed to date for 2013, the Company projects that fuel prices will not significantly increase our fuel costs for 2013 compared to 2012.

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

Non-cash goodwill and trade name impairment(1)	$	235,620		$	(872,173	)
Loss on extinguishment of debt(2)		55,554			(54,780	)
Segment results(3)		(95,245	)		(39,241	)
Restructuring charges(4)		(2,663	)		(10,015	)
Non-cash asset impairment(5)		8,567			(8,732	)
Interest expense(6)		(2,127	)		26,917
Depreciation and amortization expense(7)		(2,870	)		17,194
Other		3,299			1,704


	$	200,135		$	(939,126	)

~~After~~ ~~adjusting~~ ~~for~~ (1)Represents pre-tax ~~the~~non-cash ~~impact~~impairment charges of ~~year~~$673.3 million ~~over~~and ~~year~~$908.9 million ~~changes~~recorded in 2013 and 2012, respectively, to reduce the carrying ~~number~~value of ~~covered~~TruGreen's ~~employees,~~goodwill ~~health~~and ~~care~~the ~~and~~TruGreen ~~related~~trade ~~costs~~name ~~increased~~and $636.67 million recorded in 2011 to reduce the carrying value of the TruGreen trade name. See Note 1 to the Consolidated Financial Statements for further details. (2)Represents the loss on extinguishment of debt recorded in 2012 ~~compared~~related to ~~2011~~the ~~and~~redemption of $996 million aggregate principal amount of the 2015 Notes and repayment of $~~2.5~~276 million ~~for~~of outstanding borrowings under the Term Facilities and the loss on extinguishment of debt recorded in 2011 ~~compared~~related to ~~2010~~the purchase of $65.0 million Wein ~~expect~~face value toof ~~incur~~the ~~incremental~~2015 ~~aggregate~~Notes ~~health~~from ~~care~~Holdings. ~~costs~~There were no debt extinguishments by the Company in 2013. (3)Represents the net change in Adjusted EBITDA as ~~compared~~described toin our "Segment Review." Includes key executive transition charges of $9.8 million, $4.8 million and $6.6 million recorded in 2013, 2012 and 2011, respectively, as described in our "Segment Review." Additionally, at American Home Shield, a ~~result~~$3.3 million ofreduction in ~~continued~~tax ~~inflation~~related reserves was recorded in 2013, and a $5.4 million increase in tax related reserves was recorded in 2012. (4)Represents the ~~cost~~net change in restructuring charges related primarily to the impact of ~~health~~a ~~care~~branch optimization project at Terminix, a reorganization of field ~~services~~leadership and ~~due~~a restructuring of branch operations at TruGreen, a reorganization of leadership at American Home Shield and ServiceMaster Clean, the transaction to ~~certain~~separate ~~provisions~~TruGreen from the Company and an initiative to enhance capabilities and reduce costs in our centers of excellence at Other Operations and Headquarters. See Note 8 to the ~~Patient~~Consolidated ~~Protection~~Financial Statements for further details. (5)Primarily represents a $3.3 million impairment of licensed intellectual property and ~~Affordable~~a ~~Care~~$1.2 million ~~Act~~impairment of abandoned real estate at Terminix, and a $4.2 million impairment of certain internally developed software at Merry Maids recorded in 2012 for which there were no similar impairments recorded in 2013. (6)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.

The Company has entered into multiple interest rate swap agreements as further discussed in Note 12 to the Consolidated Financial Statements. Changes in interest rates, including the impact of the interest rate swap agreements, improved the Company's non-operating expenses by approximately $5.1 million for 2012 compared to 2011 and $13.7 million for 2011 compared to 2010 by virtue of the effect on floating rate debt, offset, in part, by the negative effect on investment income. 28

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~~Operating~~ (7)The increase in 2013 compared to 2012 is primarily driven by increased depreciation of property and ~~Non-Operating~~equipment ~~Expenses~~as a result of property additions, offset, in part, by decreased amortization of intangible assets as a result of certain finite lived intangible assets recorded in connection with the 2007 Merger. The decrease in 2012 compared to 2011 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.

The Company has historically hedged a significant portion of its annual fuel consumption. The Company has historically used approximately 20 million gallons of fuel on an annual basis, with Terminix using approximately 11 million gallons. Fuel costs, after the impacts of the hedges and after adjusting for the impact of year over year changes in the number of gallons used, decreased $1.8 million for 2013 compared to 2012 and increased $8.9 million for 2012 compared to 2011. Based upon current Department of Energy fuel price forecasts, as well as the hedges the Company has executed to date for 2014, the Company projects 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 while costs in 2012 were $6.6 million higher than 2011. 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.

The Company has historically entered into multiple interest rate swap agreements as further discussed in Note 12 to the Consolidated Financial Statements. Changes in interest rates, including the impact of the interest rate swap agreements, increased the Company's net interest costs by approximately $21 million for 2013 compared to 2012 by virtue of the unfavorable effect on floating rate debt and investment income. The corresponding impact of changes in interest rates for 2012 compared to 2011 was an approximately $5 million decrease in the Company's net interest cost.

Cost of Services Rendered and Products Sold

The Company reported cost of services rendered and products sold of $1.~~862~~906 billion for the year ended December 31, ~~2012~~2013 compared to $1.~~814~~862 billion for the year ended December 31, ~~2011~~2012. As a percentage of revenue, these costs increased to 5859.38 percent for the year ended December 31, ~~2012~~2013 from 5658.63 percent infor ~~2011~~the year ended December 31, 2012. This percentage increase primarily reflects ~~higher~~reduced ~~fuel~~leverage ~~and~~due ~~fertilizer~~to ~~prices,~~the adecline ~~reduction~~ in operating revenue; labor, ~~productivity~~chemical and anvehicle inefficiency ~~increase~~and inhigher ~~fertilizer~~bad ~~usage~~debt ~~rates~~expense at TruGreen,; ~~a $3.3 million~~higher ~~impairment~~bad ofdebt ~~licensed~~expense ~~intellectual property, a $1.2 impairment of abandoned real estate and an increase in product distribution revenue~~ at Terminix,; ~~which has lower margins than termite or pest revenue, a $4.2 million impairment of certain internally developed software at Merry Maids~~ and anhigher ~~increase in~~ expenses in our automobile, general liability and workers' compensation insurance ~~programs~~program. ~~due~~These items ~~primarily~~were ~~to the reversal~~offset, in ~~2011~~part, ~~of claims reserves driven~~ by ~~favorable~~lower claims ~~experience.~~costs ~~The~~at ~~items~~American ~~were~~Home ~~offset~~Shield, inincluding ~~part,~~a byfavorable ~~improved~~adjustment ~~labor~~to ~~efficiencies~~reserves ~~and~~for ~~the~~prior ~~favorable~~year ~~impact~~contract ofclaims. ~~acquiring~~Additionally, ~~assets~~ in ~~connection~~2012 ~~with~~we ~~exiting~~recorded ~~certain fleet~~a ~~leases~~$3.3 million atimpairment ~~Terminix,~~of alicensed ~~reduction~~intellectual inproperty ~~ice~~and ~~melt~~a ~~sales~~$1.2 million atimpairment ~~TruGreen,~~of ~~which~~abandoned ~~has~~real ~~lower~~estate ~~margins~~at ~~than core lawn services~~Terminix, and a ~~reduction~~$4.2 million inimpairment ~~home~~of ~~warranty~~certain ~~claims~~internally developed ~~costs~~software at ~~American~~Merry ~~Home~~Maids ~~Shield~~for ~~and~~which ~~other~~there ~~cost reductions~~were ~~realized~~no ~~through~~similar ~~ongoing~~impairments ~~initiatives~~recorded in 2013.

The Company reported cost of services rendered and products sold of $1.~~814~~862 billion for the year ended December 31, ~~2011~~2012 compared to $1.~~777~~814 billion for the year ended December 31, ~~2010~~2011. As a percentage of revenue, these costs ~~decreased~~increased to 5658.63 percent for the year ended December 31, ~~2011~~2012 from 56.86 percent in ~~2010. Residual value guarantee charges of $9.2 million related to synthetic leases were recorded in 2010 at TruGreen for which there was no similar charge in~~ 2011. ~~The~~This ~~remaining~~ percentage increase primarily reflects anhigher ~~increase in~~ fuel and fertilizer prices; ~~and~~a anreduction ~~increase~~ in ~~home~~labor ~~warranty~~productivity ~~claims~~and ~~costs~~higher atfertilizer ~~American~~usage ~~Home~~rates ~~Shield,~~at ~~offset,~~TruGreen; ina ~~part,~~$3.3 million byimpairment ~~the favorable impact~~ of ~~acquiring assets in connection~~licensed ~~with~~intellectual ~~exiting certain fleet leases~~property, a ~~reduction~~$1.2 inimpairment ~~termite~~of ~~damage~~abandoned ~~claims~~real ~~expense~~estate atand ~~Terminix~~higher ~~and~~product ~~other~~distribution ~~cost~~revenue ~~reductions~~at ~~realized~~Terminix, ~~through~~which ~~ongoing~~has ~~initiatives.~~lower

~~Selling and Administrative Expenses~~ 29

The Company reported selling and administrative expenses of $872.0 million for the year ended December 31, 2012 compared to $880.5 million for the year ended December 31, 2011. As a percentage of revenue, these costs decreased to 27.3 percent for the year ended December 31, 2012 from 27.5 percent in 2011. This percentage decrease primarily reflects a reduction in sales and marketing expense and a $1.9 million reduction in key executive transition charges, offset, in part, by increased investments in ongoing productivity and standardization initiatives and an increase in technology costs related to a new operating system at TruGreen, which is in the process of being deployed, a $5.4 million increase in tax related reserves, an increase in provisions for certain legal matters and increased investments to drive improvements in service delivery at American Home Shield, and an increase in technology costs related to PCI standards compliance purposes at Other Operations and Headquarters.

The Company reported selling and administrative expenses of $880.5 million for the year ended December 31, 2011 compared to $896.0 million for the year ended December 31, 2010. As a percentage of revenue, these costs decreased to 27.5 percent for the year ended December 31, 2011 from 28.6 percent in 2010. This percentage decrease primarily reflects a reduction in sales and marketing expense, a reduction in spending in the Company's centers of excellence, a reduction in provisions for certain legal matters and other cost reductions realized through ongoing initiatives, offset, in part, by an increase in technology costs related to a new operating system at American Home Shield, an increase in technology costs related to PCI standards compliance

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~~purposes~~margins atthan ~~Other~~termite ~~Operations~~or ~~and~~pest ~~Headquarters~~revenue; ~~and~~ a $14.12 million ~~increase~~impairment of certain internally developed software at Merry Maids; and higher expenses in ~~key~~our ~~executive~~automobile, ~~transition~~general ~~charges~~liability and workers' compensation insurance program due primarily to the reversal, in 2011, of claims reserves driven by favorable claims experience. These items were offset, in part, by improved labor efficiencies and the favorable impact of acquiring assets in connection with exiting certain fleet leases at Terminix; a reduction in ice melt sales at TruGreen, which has lower margins than core lawn services; lower claims costs at American Home Shield; and other cost reductions realized through ongoing initiatives.

Selling and Administrative Expenses

The Company reported selling and administrative expenses of $920.5 million for the year ended December 31, 2013 compared to $872.0 million for the year ended December 31, 2012. As a percentage of revenue, these costs increased to 28.9 percent for the year ended December 31, 2013 from 27.3 percent for the year ended December 31, 2012. This percentage increase primarily reflects reduced leverage due to the decline in operating revenue; higher sales staffing levels, increased investments in sales tools and higher costs related to telephone and information technology systems at TruGreen; increased investments in sales and marketing and higher technology costs at American Home Shield; and a $5.0 million increase in key executive transition charges. These items were offset, in part, by an $8.7 million reduction in tax related reserves and lower provisions for certain legal matters at American Home Shield; lower incentive compensation expense at Terminix; and lower costs in our centers of excellence.

The Company reported selling and administrative expenses of $872.0 million for the year ended December 31, 2012 compared to $880.5 million for the year ended December 31, 2011. As a percentage of revenue, these costs decreased to 27.3 percent for the year ended December 31, 2012 from 27.5 percent in 2011. This percentage decrease primarily reflects lower sales and marketing expense and a $1.9 million reduction in key executive transition charges. These items were offset, in part, by increased investments in productivity and standardization initiatives and higher technology costs related to a new operating system at TruGreen; a $5.4 million increase in tax related reserves, higher provisions for certain legal matters and increased investments to drive improvements in service delivery at American Home Shield; and higher technology costs related to PCI standards compliance purposes at Other Operations and Headquarters.

Amortization Expense

Amortization expense was $6555.35 million, $9165.43 million and $~~136~~91.04 million for the years ended December 31, ~~2012~~2013, ~~2011~~2012 and ~~2010~~2011, respectively. The ~~decrease~~decreases ~~for~~are ~~2012 compared to 2011 and 2011 compared to 2010 is~~ a result of certain finite lived intangible assets recorded in connection with the 2007 Merger being fully amortized.

Goodwill and Trade Name ~~Impairments~~Impairment

The Company recorded a non-cash goodwill impairment ~~charge~~charges of $417.5 million and $790.2 million for the ~~year~~years ended December 31, 2013 and 2012, torespectively, to reduce the carrying value of TruGreen's goodwill to its then estimated fair value ~~as of December 31, 2012~~. The Company also recorded a non-cash trade name impairment ~~charge~~charges of $255.8 million, $118.7 million ~~for the year ended December 31, 2012~~ and $36.7 million for the ~~year~~years ended December 31, 2013, 2012 and 2011, respectively, to reduce the carrying value of the TruGreen trade name to its fair value. asSee a"Critical ~~result~~Accounting Policies ofand ~~the~~Estimates" ~~Company's~~below ~~impairment~~and ~~testing~~Note 1 into ~~each~~the ~~year.~~Consolidated ~~There~~Financial ~~were~~Statements nofor ~~similar~~further ~~goodwill~~discussion orof ~~trade~~the ~~name~~Company's ~~impairment~~goodwill ~~charges~~and ~~included~~indefinite-lived inintangible ~~continuing~~asset ~~operations~~impairment ~~for the year ended December 31, 2010~~testing.

~~Goodwill Impairment~~ 30

Based on the revenue and operating results of TruGreen in 2012 and the outlook for future years, the Company concluded there was an impairment indicator requiring a goodwill impairment assessment for TruGreen as of September 30, 2012. The Company estimated that the implied fair value of goodwill as of such date was less than the carrying value for TruGreen by $790.2 million, which was recorded as a goodwill impairment charge in 2012. As of December 31, 2012, there was a $417.1 million balance of goodwill remaining at TruGreen.

The goodwill impairment charge recorded in 2012 was primarily attributable to a decline in forecasted 2012 cash flows and a decrease in projected future growth in cash flows at TruGreen over a defined projection period as of September 30, 2012 compared to the projections used in the previous annual impairment assessment performed on October 1, 2011. The changes in projected cash flows at TruGreen were in part a consequence of the shift in strategy for TruGreen described in "Segment Review—TruGreen Segment" below. Although the Company projected future growth in cash flows at TruGreen as a part of its September 30, 2012 impairment analysis, total cash flows and projected growth in those cash flows were lower than that projected at the time TruGreen was tested for impairment in 2011. The long-term growth rates used in the impairment tests at September 30, 2012 and October 1, 2011 were the same and in line with historical U.S. gross domestic product growth rates. The discount rate used in the September 30, 2012 impairment test was 50 bps lower than the discount rate used in the October 1, 2011 impairment test for TruGreen. The decrease in the discount rate is primarily attributable to changes in market conditions which indicated an improved outlook for the U.S. financial markets since the 2011 analysis.

Trade Name Impairment

Based on the revenue results at TruGreen in the first six months of 2012 and a then lower revenue outlook for the remainder of 2012 and future years, the Company concluded that there was an impairment indicator requiring the performance of an interim indefinite-lived intangible asset impairment test for the TruGreen trade name as of June 30, 2012. That impairment analysis resulted in a $67.7 million impairment charge recorded in the second quarter of 2012. Based on the revenue results of TruGreen in the third quarter of 2012 and the revised outlook for the remainder of the

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~~year and~~ As ~~future~~a ~~years,~~result of the ~~Company~~TruGreen ~~performed~~Separation ~~another~~Transaction, ~~impairment~~the ~~analysis~~Company onwill ~~its~~be ~~TruGreen~~required ~~trade name~~ to ~~determine~~perform ~~its~~an ~~fair~~interim ~~value~~impairment analysis as of ~~September~~January 3014, ~~2012.~~2014 ~~Based~~ on the ~~revised projected revenue~~ ~~for~~ TruGreen astrade ~~compared~~name. toThe ~~the~~assumptions ~~projections~~ used in ~~the~~this ~~second~~analysis ~~quarter~~will ~~2012~~be ~~impairment~~developed ~~test,~~with the ~~Company~~view ~~determined~~of the ~~fair~~TruGreen ~~value~~Business ~~attributable~~as toa ~~the~~standalone ~~TruGreen~~company, ~~trade~~resulting ~~name~~in ~~was~~an ~~less~~expected ~~than~~impairment ~~its~~charge ~~carrying value~~of by approximately $~~51.0~~150 million, ~~which was recorded as a trade name impairment~~ in the ~~third~~first quarter of ~~2012~~2014. ~~Total non-cash trade name impairments recorded in 2012 related to the TruGreen trade name were $118.7 million.~~

The impairment charge recorded in the second quarter of 2012 was primarily attributable to a decrease in projected future growth in revenue at TruGreen over a defined projection period as of June 30, 2012 compared to the projections used in the previous annual impairment assessment performed on October 1, 2011. The third quarter impairment charge was primarily attributable to a further reduction in projected revenue growth as compared to expectations in the second quarter of 2012. The changes in projected future revenue growth at TruGreen were in part a consequence of the shift in strategy for TruGreen described in "Segment Review—TruGreen Segment" below. Although the Company projected future growth in revenue at TruGreen over a defined projection period as a part of its September 30, 2012 impairment analysis, such growth was lower than the revenue growth projected at the time the trade name was tested for impairment in the second quarter of 2012. The long-term revenue growth rates used for periods after the defined projection period in the impairment tests at September 30, 2012, June 30, 2012 and October 1, 2011 were the same and in line with historical U.S. gross domestic product growth rates. The discount rates used in the September 30, 2012 and June 30, 2012 impairment tests were the same, but were 50 bps lower than the discount rate used in the October 1, 2011 impairment test for the TruGreen trade name. The decrease in the discount rate from 2011 is primarily attributable to changes in market conditions which indicated an improved outlook for the U.S. financial markets since the last analysis.

The impairment charge in 2011 was primarily attributable to the use of higher discount rates in the discounted cash flow ("DCF") valuation analyses as compared to the discount rates used in the 2010 impairment analyses. Although the projected future growth in cash flows in 2011 were slightly higher than in the 2010 valuation, the increase in the discount rates more than offset the improved cash flows. The increase in the discount rates is primarily attributable to changes in market conditions which indicated a lower risk tolerance in 2011 as compared to 2010. This lower risk tolerance is exhibited through the marketplace's desire for higher returns in order to accept market risk.

See "Critical Accounting Policies and Estimates" below and Note 1 to the Consolidated Financial Statements for further discussion of the Company's goodwill and indefinite-lived intangible asset impairment testing.

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Restructuring Charges

The Company incurred restructuring charges of $1820.28 million, $818.2 million and $118.42 million for the years ended December 31, ~~2012~~2013, ~~2011~~2012 and ~~2010~~2011, respectively. Restructuring charges were comprised of the following:

	Year Ended December 31,
(In thousands)	~~2012~~2013			~~2011~~2012		~~2010~~2011
Terminix branch optimization(1)	$	3,652		$	3,560	$	2,352
TruGreen Separation Transaction(1)	$	13,398		$	—	$	—
TruGreen reorganization and restructuring(2)		3,241			1,115		6,922
Terminix branch optimization(2)		2,099			3,652		3,560
American Home Shield reorganization(3)		647			—		—
TruGreen reorganization and restructuring(3)		1,362			3,241		1,115
ServiceMaster Clean reorganization(3)		1,370			—		—
American Home Shield reorganization(4)		—			647		—
Centers of excellence initiative(4)		9,267			3,416		—
ServiceMaster Clean reorganization(4)		360			1,370		—
Other(5)		—			71		2,174
Centers of excellence initiative(5)		3,629			9,267		3,416
Total restructuring charges	$	18,177		$	8,162	$	11,448
Other(6)		(8	)		—		71

Total restructuring charges	$	20,840		$	18,177	$	8,162

(1)~~For~~Represents ~~the~~expenses ~~years~~incurred ~~ended~~by ~~December 31,~~the ~~2012~~Company ~~and~~directly ~~2011,~~related ~~these~~to ~~charges~~the ~~included~~TruGreen ~~severance~~Separation ~~costs of $0~~Transaction.~~4 million~~ ~~and~~These ~~$0.1 million, respectively. For the years ended December 31, 2012, 2011 and 2010, these~~ charges included ~~lease~~professional ~~termination~~fees ~~costs~~ of $312.38 million, ~~$3.5 million~~ and severance of $20.46 million~~, respectively~~. (2)For the years ended December 31, ~~2012~~2013, ~~2011~~2012 and ~~2010~~2011, these charges included severance costs of $20.79 million, $0.84 million and $10.81 million, respectively, and lease termination costs of $01.52 million, $03.3 million and $03.25 million, respectively. (3)For the year ended December 31, ~~2010~~2013, these charges ~~also~~ included ~~consulting~~severance ~~fees~~costs. For the years ended December 31, 2012 and ~~other~~2011, these charges included severance costs of $42.7 million and $0.28 million, respectively, and lease termination costs of $0.5 million and $0.3 million, respectively. (34)For the ~~year~~years ended December 31, 2013 and 2012, these charges included severance costs. (45)Represents restructuring charges related to an initiative to enhance capabilities and reduce costs in the Company's 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~~ and other costs of $0.9 million, $4.6 million and $1.9 million, respectively~~. For the years ended December 31~~, ~~2012~~ and ~~2011,~~professional ~~these charges included consulting~~ fees of $2.7 million, $4.7 million and $1.5 million, respectively. (56)~~For~~These ~~the year ended December 31, 2011, these~~ charges included reserve adjustments associated with previous restructuring initiatives. ~~For the year~~ ~~ended~~ December 31, 2010, these charges included reserve adjustments, severance and retention associated with previous restructuring initiatives of $1.0 million and severance, retention, legal fees and other costs associated with the Merger of $1.2 million.

~~Non-Operating~~Interest Expense

~~Non-operating~~Interest expense totaled $~~294~~249.60 million, $~~263~~246.79 million and $~~278~~273.38 million for the years ended December 31, 2013, 2012, ~~2011~~ and ~~2010~~2011, respectively. The increase in ~~2012~~2013 compared to ~~2011 is primarily due to a $55.6 million 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 $276 million of outstanding borrowings under the Term Facilities, offset, in part, by a $26.8 million decrease in interest expense as a result of a decrease in our weighted-average interest rate and average long-term debt balance. The decrease in 2011 compared to 2010 is ~~primarily due to a $13.8 million decrease in interest expense as a result of a decrease in our weighted-average~~

3931

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~~interest~~primarily ~~rate~~due to an increase in our average long-term debt balance. ~~Interest~~The ~~and~~decrease ~~net~~in ~~investment~~2012 ~~income~~compared ~~was~~to ~~comprised~~2011 ofis ~~the~~primarily ~~following~~due ~~for~~to ~~the~~decreases ~~years~~in ~~ended~~our ~~December 31,~~weighted ~~2012,~~average ~~2011~~interest rate and ~~2010:~~average long-term debt balance.

	Year Ended December 31,
(In thousands)	2012		2011			2010
Realized gains(1)	$	6,191	$	9,972		$	6,418
Impairments of securities(2)		—		(195	)		(174	)
Deferred compensation trust(3)		1,417		(49	)		1,200
Other(4)		237		1,158			1,914
Interest and net investment income	$	7,845	$	10,886		$	9,358

Interest and Net Investment Income

Interest and net investment income totaled $9.1 million, $7.8 million and $10.9 million for the years ended December 31, 2013, 2012 and 2011, respectively, and was comprised of the following:

	Year Ended December 31,

(In thousands)	2013		2012		2011
Realized gains(1)	$	5,056	$	6,191	$	9,972
Impairments of securities(2)		—		—		(195	)
Deferred compensation trust(3)		2,271		1,417		(49	)
Other(4)		1,786		237		1,158


Interest and net investment income	$	9,113	$	7,845	$	10,886

(1): Represents the net investment gains and the interest and dividend income realized on the American Home Shield investment portfolio.
(2): Represents other than temporary declines in the value of certain investments in the American Home Shield investment portfolio.
(3): 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).
(4): Includes interest income on other cash balances and, in 2012, a $2.5 million charge for the impairment of a loan related to a prior business disposition.

~~Income~~Loss ~~Taxes~~on Extinguishment of Debt

~~The~~Loss ~~effective tax rate~~ on ~~(loss)~~extinguishment ~~income~~of ~~from~~debt ~~continuing~~totaled ~~operations~~$55.6 million ~~was~~and ~~a benefit of 13~~$0.8 ~~percent~~million for the ~~year~~years ended December 31, 2012 and 2011, ~~a provision of 39~~respectively.~~3 percent~~ ~~for~~The ~~the~~increase ~~year~~in ~~ended~~2012 ~~December 31,~~compared to 2011 ~~and~~is aprimarily ~~provision~~due ofto ~~38.6 percent for~~ the ~~year~~redemption ~~ended~~of ~~December~~$996 ~~31,~~million ~~2010.~~aggregate ~~The effective~~principal ~~tax~~amount ~~rate~~of ~~for~~ the ~~year~~2015 ~~ended~~Notes ~~December 31,~~and ~~2012~~repayment ~~was~~of ~~impacted~~$276 million byof outstanding borrowings under the ~~impairment~~Term ofFacilities. ~~nondeductible~~There ~~goodwill~~was atno ~~TruGreen~~similar inloss ~~the~~on ~~amount~~extinguishment of ~~$529~~debt in 2013.~~4 million.~~

~~Net~~(Benefit) Provision for Income Taxes

~~Net~~The ~~loss~~effective ~~for~~tax ~~the~~rate ~~year~~on ~~ended~~(loss) ~~December 31,~~income ~~2012~~from ~~was~~continuing ~~$713.5 million~~operations ~~compared~~was toa ~~net~~benefit ~~income~~ of ~~$40~~19.6 percent and 13.8 ~~million~~percent for the year ended December 31, ~~2011~~2013 and a2012, ~~net~~respectively, ~~loss~~and a provision of ~~$14~~39.63 ~~million~~percent for the year ended December 31, ~~2010~~2011. The ~~$754.4 million~~effective ~~decrease~~tax rates for ~~2012~~the ~~compared to~~years ~~2011 was primarily driven by a $939.1~~ended December ~~million reduction in (loss) income from continuing operations before income taxes~~31, ~~offset,~~2013 ~~in part, by a $158.2 million reduction in (benefit) provision for income taxes~~ and a2012 ~~$26.8 million~~were ~~improvement~~impacted inby ~~loss~~the ~~from~~impairment ~~discontinued operations, net~~ of ~~income~~permanently ~~taxes.~~nondeductible ~~The~~goodwill ~~$55.4 million~~at ~~increase~~TruGreen ~~for~~that ~~2011~~did ~~compared~~not toproduce ~~2010~~a ~~was~~tax ~~primarily driven by an $83~~benefit.~~4 million~~ ~~improvement~~For ~~in (loss) income from continuing operations before income taxes and~~ a ~~$5.0 million~~reconciliation ~~improvement~~of inour ~~loss~~effective ~~from~~tax ~~discontinued operations, net of income~~rates ~~taxes,~~to ~~offset,~~the instatutory ~~part,~~rate bysee ~~a $33.0~~Note ~~million~~5 ~~increase~~to inthe ~~(benefit)~~Consolidated ~~provision~~Financial ~~for income taxes~~Statements.

40 Net (Loss) Income

Net loss for the year ended December 31, 2013 was $505.9 million compared to a net loss of $713.5 million for the year ended December 31, 2012 and net income of $40.8 million for the year ended December 31, 2011. The $207.6 million improvement for 2013 compared to 2012 was

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primarily driven by a $200.1 million improvement in (loss) income from continuing operations before income taxes and a $8.6 million increase in (benefit) provision for income taxes, offset, in part, by a $0.9 million increase in loss from discontinued operations, net of tax. The $754.4 million decrease for 2012 compared to 2011 was primarily driven by a $939.1 million reduction in (loss) income from continuing operations before income taxes, offset, in part, by a $158.2 million reduction in (benefit) provision for income taxes and a $26.8 million improvement in loss from discontinued operations, net of income taxes.

Key Performance Indicators

The table below presents selected operating metrics related to customer counts and customer retention for our three largest revenue generating businesses. These measures are presented on a rolling, twelve-month basis in order to avoid seasonal anomalies. The impact of changes in our key performance indicators on the operating results of our business units is described in "—Segment Review."

	Key Performance Indicators as of December 31,
	2012			2011			2010
	2013			2012			2011
Terminix—
Growth in Pest Control Customers		0.8	%		6.4	%		3.6	%
(Reduction) Growth in Pest Control Customers		(1.6	)%		0.8	%		6.4	%
Pest Control Customer Retention Rate		79.3	%		8079.63	%		7980.96	%
(Reduction) Growth in Termite Customers		(1.4	)%		(1.0	)%		0.3	%
Reduction in Termite Customers		(2.3	)%		(1.4	)%		(1.0	)%
Termite Customer Retention Rate		85.61	%		8685.16	%		86.01	%
TruGreen—
Reduction in Full Program Accounts		(11.3	)%		(5.3	)%		(1.7	)%
Reduction in Full Program Accounts(1)		(7.9	)%		(12.2	)%		(5.3	)%
Customer Retention Rate		68.6	%		66.7	%		66.0	%
Customer Retention Rate(1)		65.4	%		67.9	%		66.7	%
American Home Shield—
Growth in Home Warranties		—1.0	%		~~1.6~~—	%		0.1.6	%
Customer Retention Rate		7372.78	%		7573.17	%		7375.01	%

(1): During 2013, the Company refined its customer count data, which impacted the above metrics as of December 31, 2012 and subsequent periods. As of December 31, 2012, the adjusted Reduction in Full Program Accounts is 12.2 percent compared to the previously reported reduction of 11.3 percent. As of December 31, 2012, the adjusted Customer Retention Rate is 67.9 percent compared to the previously reported rate of 68.6 percent.

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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 the Consolidated Financial Statements.

~~The~~Operating ~~Company~~Revenues ~~uses Adjusted EBITDA~~ and ~~Operating Performance to facilitate operating performance comparisons from period to period.~~ Adjusted EBITDA ~~and Operating Performance are supplemental measures of the Company's performance that are not required~~ by, oroperating ~~presented~~segment ~~in accordance with, accounting principles generally accepted in the United States of America ("GAAP"). Adjusted EBITDA and Operating Performance~~ are ~~not measurements of the Company's financial performance under GAAP and should not be considered~~ as alternatives to net income or any other performance measures derived in accordance with GAAP or as alternatives to net cash provided by operating activities or any other measures of the Company's cash flow or liquidity. "Adjusted EBITDA" means net income (loss) beforefollows: income (loss) from discontinued operations; provision (benefit) for income taxes; other expense; gain (loss) on extinguishment of debt; interest expense; interest and net investment income; and depreciation and amortization expense; as well as adding back interest and net investment income; residual value guarantee charge and non-cash goodwill and trade name impairment. "Operating Performance" is calculated by adding back to Adjusted EBITDA an amount equal to the non-cash stock-based compensation expense; non-cash effects on Adjusted EBITDA attributable to the application of purchase accounting in connection with the Merger; restructuring charges and management and consulting fees.

The Company believes 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, the Company excludes residual value guarantee charges that do not result in additional cash payments to exit the facility at the end of the lease term. The Company uses Operating Performance as a supplemental measure

	Year Ended December 31,

(In thousands)	2013			2012			2011
Operating Revenue:
Terminix	$	1,309,469		$	1,265,417		$	1,193,075
TruGreen		895,943			979,081			1,100,741
American Home Shield		740,062			720,860			686,737
ServiceMaster Clean		150,929			139,441			138,691
Other Operations and Headquarters		92,432			88,482			86,628


Total Operating Revenue	$	3,188,835		$	3,193,281		$	3,205,872




Adjusted EBITDA(1):
Terminix	$	318,903		$	319,838		$	299,485
TruGreen		25,999			152,813			209,031
American Home Shield		170,866			141,542			131,977
ServiceMaster Clean		67,942			61,041			64,018
Other Operations and Headquarters		(107,721	)		(104,000	)		(94,036	)


Total Adjusted EBITDA	$	475,989		$	571,234		$	610,475

41 (1)For our definition of Adjusted EBITDA and a reconciliation thereof to net (loss) income, see Note 3 to the Consolidated Financial Statements.

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to assess the Company's performance because it excludes non-cash stock-based compensation expense, non-cash effects on Adjusted EBITDA attributable to the application of purchase accounting in connection with the Merger, restructuring charges and management and consulting fees. The Company presents Operating Performance because it believes that it is useful for investors, analysts and other interested parties in their analysis of the Company's operating results.

Charges relating to stock-based compensation expense and the impact of purchase accounting are non-cash and the exclusion of the impact of these items from Operating Performance allows investors to understand the current period results of operations of the business on a comparable basis with previous periods and, secondarily, gives the investors added insight into cash earnings available to service the Company's debt. We believe this to be of particular importance to the Company's public investors, which are debt holders. The Company also believes that the exclusion of purchase accounting, non-cash stock-based compensation expense, restructuring charges and management and consulting fees may provide an additional means for comparing the Company's performance to the performance of other companies by eliminating the impact of differently structured equity-based, long-term incentive plans, restructuring initiatives and consulting agreements (although care must be taken in making any such comparison, as there may be inconsistencies among companies in the manner of computing similarly titled financial measures).

Adjusted EBITDA and Operating Performance have limitations as analytical tools, and should not be considered in isolation or as substitutes for analyzing the Company's results as reported under GAAP. Some of these limitations are:

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Operating Revenues and Operating Performance by operating segment are as follows:

	Year Ended December 31,
(In thousands)	2012			2011			2010
Operating Revenue:
Terminix	$	1,265,417		$	1,193,075		$	1,157,346
TruGreen		979,081			1,100,741			1,096,667
American Home Shield		720,860			686,737			656,572
ServiceMaster Clean		139,441			138,691			132,132
Other Operations and Headquarters		88,482			86,628			84,677
Total Operating Revenue	$	3,193,281		$	3,205,872		$	3,127,394
Operating Performance:
Terminix	$	315,517		$	299,485		$	270,829
TruGreen		152,813			209,031			194,472
American Home Shield		141,542			131,977			116,609
ServiceMaster Clean		61,041			64,018			63,762
Other Operations and Headquarters		(108,185	)		(94,036	)		(94,620	)
Total Operating Performance	$	562,728		$	610,475		$	551,052
Memo: Items excluded from Operating Performance Operating Performance of discontinued operations	$	(1,138	)	$	(3,267	)	$	8,640

The following table presents reconciliations of operating income (loss) to Adjusted EBITDA and Operating Performance for the periods presented.

(in thousands)	Terminix			TruGreen			American Home Shield		ServiceMaster Clean		Other Operations and Headquarters			Total
Year Ended December 31, 2012
Operating income (loss)(1)	$	236,160		$	(805,022	)	$	126,098	$	54,435	$	(144,433	)	$	(532,762	)
Depreciation and amortization expense		75,713			45,729			8,606		5,071		11,123			146,242
EBITDA		311,873			(759,293	)		134,704		59,506		(133,310	)		(386,520	)
Interest and net investment income(2)		—			—			6,191		165		1,489			7,845
Non-cash goodwill and trade name impairment(3)		—			908,873			—		—		—			908,873
Adjusted EBITDA		311,873			149,580			140,895		59,671		(131,821	)		530,198
Non-cash stock-based compensation expense		—			—			—		—		7,119			7,119
Non-cash credits attributable to purchase accounting(4)		(8	)		(8	)		—		—		—			(16	)
Restructuring charges(5)		3,652			3,241			647		1,370		9,267			18,177
Management and consulting fees(6)		—			—			—		—		7,250			7,250
Operating Performance	$	315,517		$	152,813		$	141,542	$	61,041	$	(108,185	)	$	562,728
Memo: Items excluded from Operating Performance:
Operating Performance of discontinued operations(7)	$	—		$	—		$	—	$	—	$	(1,138	)	$	(1,138	)

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(in thousands)	Terminix			TruGreen			American Home Shield		ServiceMaster Clean		Other Operations and Headquarters			Total
Year Ended December 31, 2011
Operating income (loss)(1)	$	220,622		$	129,324		$	94,869	$	57,674	$	(127,029	)	$	375,460
Depreciation and amortization expense		75,347			41,929			27,331		6,150		12,679			163,436
EBITDA		295,969			171,253			122,200		63,824		(114,350	)		538,896
Interest and net investment income(2)		—			—			9,777		158		951			10,886
Non-cash trade name impairment(3)		—			36,700			—		—		—			36,700
Adjusted EBITDA		295,969			207,953			131,977		63,982		(113,399	)		586,482
Non-cash stock-based compensation expense		—			—			—		—		8,412			8,412
Non-cash credits attributable to purchase accounting(4)		(44	)		(37	)		—		—		—			(81	)
Restructuring charges(5)		3,560			1,115			—		36		3,451			8,162
Management and consulting fees(6)		—			—			—		—		7,500			7,500
Operating Performance	$	299,485		$	209,031		$	131,977	$	64,018	$	(94,036	)	$	610,475
Memo: Items excluded from Operating Performance:
Operating Performance of discontinued operations(7)	$	—		$	—		$	—	$	—	$	(3,267	)	$	(3,267	)

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(in thousands)	Terminix			TruGreen			American Home Shield			ServiceMaster Clean		Other Operations and Headquarters			Total
Year Ended December 31, 2010
Operating income (loss)(1)	$	199,750		$	112,312		$	68,380		$	55,450	$	(129,200	)	$	306,692
Depreciation and amortization expense		67,761			66,069			42,259			7,106		13,430			196,625
EBITDA		267,511			178,381			110,639			62,556		(115,770	)		503,317
Interest and net investment income(2)		—			—			6,243			153		2,962			9,358
Residual value guarantee charge(8)		—			9,222			—			982		245			10,449
Adjusted EBITDA		267,511			187,603			116,882			63,691		(112,563	)		523,124
Non-cash stock-based compensation expense		—			—			—			—		9,352			9,352
Non-cash credits attributable to purchase accounting(4)		(173	)		(53	)		(146	)		—		—			(372	)
Restructuring charges (credits)(5)		3,491			6,922			(127	)		71		1,091			11,448
Management and consulting fees(6)		—			—			—			—		7,500			7,500
Operating Performance	$	270,829		$	194,472		$	116,609		$	63,762	$	(94,620	)	$	551,052
Memo: Items excluded from Operating Performance:
Operating Performance of discontinued operations(7)	$	—		$	—		$	—		$	—	$	8,640		$	8,640

(1)Presented below is a reconciliation of total segment operating income to net (loss) income.

	Year Ended December 31,
(In thousands)	2012			2011			2010
Total Segment Operating (Loss) Income	$	(532,762	)	$	375,460		$	306,692
Non-operating Expense (Income):
Interest expense		246,284			273,123			286,933
Interest and net investment income		(7,845	)		(10,886	)		(9,358	)
Loss on extinguishment of debt		55,554			774			—
Other expense		622			700			733
(Loss) Income from Continuing Operations before Income Taxes		(827,377	)		111,749			28,384
(Benefit) provision for income taxes		(114,260	)		43,912			10,945
Equity in losses of joint venture		(226	)		—			—
(Loss) Income from Continuing Operations		(713,343	)		67,837			17,439
Loss from discontinued operations, net of income taxes		(200	)		(27,016	)		(31,998	)
Net (Loss) Income	$	(713,543	)	$	40,821		$	(14,559	)

(2)Interest and net investment income is primarily comprised of investment income and realized gain (loss) on our American Home Shield segment investment portfolio. Cash, short-term and long-term marketable securities associated with regulatory requirements in connection with American Home Shield and for other purposes totaled $243.7 million as of December 31, 2012. American Home Shield interest and net investment income was $6.2 million, $9.8 million and $6.2 million for the years ended December 31, 2012, 2011 and 2010, respectively. The balance of interest and net investment income primarily relates to (i) investment income (loss) from our employee deferred compensation trust (for which there is a corresponding and offsetting change in compensation expense within (loss) income from continuing operations before income taxes) and (ii) interest income on other cash balances.

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(3)Represents, as a result of the Company's impairment testing of indefinite-lived intangible assets, pre-tax non-cash impairment charges of $908.9 million recorded in the year ended December 31, 2012 to reduce the carrying value of TruGreen's goodwill and the TruGreen trade name and $36.7 million recorded in the year ended December 31, 2011 to reduce the carrying value of the TruGreen trade name. There were no similar impairment charges included in continuing operations in 2010. (4)The Merger was accounted for using purchase accounting. This adjustment represents the aggregate, non-cash adjustments (other than amortization and depreciation) attributable to the application of purchase accounting. (5)Represents restructuring charges primarily related to a branch optimization project at Terminix, a reorganization of field leadership and a restructuring of branch operations at TruGreen, a reorganization of leadership at American Home Shield and ServiceMaster Clean, an initiative to enhance capabilities and reduce costs in our centers of excellence at Other Operations and Headquarters, Merger related charges and other restructuring costs. (6)Represents management and consulting fees payable to certain related parties. See Note 10 to the Consolidated Financial Statements for further information on management and consulting fees. (7)The table included in "Discontinued Operations" below presents reconciliations of operating loss, the most directly comparable financial measure under GAAP, to Adjusted EBITDA and Operating Performance for the periods presented. (8)Represents non-cash residual value guarantee charges recorded in 2010 related to a synthetic lease for operating properties, which expired in July 2010. There were no similar charges in 2011.

Terminix Segment

Year ended December 31, ~~2012~~2013

The Terminix segment, which provides termite and pest control services to residential and commercial customers and distributes pest control products, reported a 63.15 percent increase in operating revenue, ~~a 7.0 percent increase in operating income~~ and a 50.43 percent ~~increase~~decrease in ~~Operating~~Adjusted ~~Performance~~EBITDA for the year ended December 31, ~~2012~~2013 compared to ~~2011~~2012. Pest control revenue, which was ~~55.5~~56 percent of the segment's operating revenue in ~~2012~~2013, increased 74.13 percent compared to ~~2011~~2012, reflecting aimproved ~~4.2 percent~~price ~~increase~~realization, offset, in ~~average customer counts~~part, aby ~~$12~~a 0.24 ~~million~~percent ~~increase~~decrease in ~~other~~average pest ~~revenue,~~control ~~primarily~~customer ~~bed bug services, and improved price realization~~counts. Absolute pest control customer counts as of December 31, ~~2012~~2013 compared to ~~2011~~2012 ~~increased~~decreased 01.86 percent, driven by a decrease in new unit sales and acquisitions,. ~~offset,~~The inpest ~~part,~~control bycustomer aretention ~~130~~rate ~~basis~~for ~~points~~the ~~("bps")~~year ~~decrease in~~ended ~~the~~December 31, ~~customer~~2013 ~~retention~~was ~~rate~~comparable to 2012. Termite revenue, which was 39.5 percent of the segment's operating revenue in ~~2012~~2013, increased 31.58 percent compared to ~~2011~~2012. Termite renewal revenue comprised ~~55.2~~52 percent of total termite revenue, while the remainder consisted of termite new unit ~~sales~~revenue. The increase in termite revenue ~~reflected~~reflects ~~improved~~an ~~price~~increase ~~realization~~in ~~and~~non-renewable ~~a 0.6 percent~~sales ~~increase~~and inimproved ~~new~~price ~~unit sales~~realization, offset, in part, by a 12.1 percent decrease in average ~~renewal~~ customer counts. Absolute termite ~~renewal~~ customer counts as of December 31, ~~2012~~ 2013 compared to ~~2011~~2012 declined 12.43 percent driven by a ~~50 bps~~ decrease in ~~the~~new ~~customer~~unit ~~retention~~sales ~~rate,~~and ~~offset,~~a in50 basis ~~part,~~points ("bps") bydecrease ~~new~~in ~~unit~~the ~~sales~~customer ~~and~~retention ~~acquisitions~~rate. Product distribution revenue, which has lower margins than pest or termite revenue and accounted for approximately five percent of the segment's operating revenue in ~~2012~~2013, increased $103.18 million compared to ~~2011~~2012.

Terminix's ~~Operating~~Adjusted ~~Performance~~EBITDA ~~increased~~decreased $~~16.~~0.9 million for the year ended December 31, ~~2012~~2013 compared to ~~2011~~2012. AKey ~~$3.3 million~~executive ~~impairment~~transition charges of ~~licensed intellectual property and a~~ $10.29 million ~~impairment of abandoned real estate~~ were recorded in ~~2012. The remaining $20.5 million increase primarily reflects the impact of higher operating revenue~~2013, ~~a reduction~~which in sales and marketing expense, as a percent of revenue, cost efficiencies realized through ongoing initiatives, including the benefits of sales mobility and routing and scheduling tools, the favorable impact of acquiring assets in connection with exiting certain fleet leases, and improved production

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~~labor~~included ~~efficiencies,~~recruiting ~~offset~~costs and a signing bonus related to the hiring of the new President of Terminix. Excluding the impact of key executive transition charges, inTerminix's ~~part~~Adjusted EBITDA for 2013 was comparable to 2012, byreflecting the impact of higher ~~fuel~~operating ~~prices~~revenue and ~~product~~lower ~~distribution~~incentive ~~revenue,~~compensation ~~which~~expense ~~has~~offset ~~lower~~by ~~margins~~higher ~~than~~bad ~~pest~~debt orexpense ~~termite~~and ~~revenue~~increased provisions for certain legal matters.

Year ended December 31, ~~2011~~2012

The Terminix segment reported a 36.1 percent increase in operating revenue, ~~a 10.4 percent increase in operating income~~ and a ~~10.~~6.8 percent increase in ~~Operating~~Adjusted ~~Performance~~ EBITDA for the year ended December 31, ~~2011~~2012 compared to ~~2010~~2011. Pest control revenue, which was ~~55.0~~56 percent of the segment's operating revenue in ~~2011~~2012, increased 57.31 percent compared to ~~2010~~ 2011, reflecting a 4.32 percent increase in average customer counts, a $612.02 million increase in other pest revenue, primarily bed bug services, and improved price realization. Absolute pest control customer counts as of December 31, ~~2011~~2012 compared to ~~2010~~2011 increased 60.48 percent, driven by ~~an increase in~~ new unit sales and acquisitions, ~~and~~offset, in part, by a 70130 bps ~~increase~~decrease in the customer retention rate. Termite revenue, which was ~~40.4~~39 percent of the segment's operating revenue in ~~2011~~2012, increased 03.5 percent compared to ~~2010~~2011. Termite renewal revenue comprised 55.3 percent of total termite revenue, while the remainder consisted of termite new unit ~~sales~~revenue. The increase in termite revenue reflected improved price realization, ~~offset,~~and ~~in part, by~~ a 20.6 percent increase ~~decrease~~ in new unit sales, ~~and~~offset, in part, by a 01.41 percent ~~decline~~decrease in average ~~renewal~~ customer counts. Absolute termite ~~renewal~~ customer counts as of December 31, ~~2011~~2012 compared to ~~2010~~2011 declined 1.04 percent driven by a 50 bps decrease in ~~new~~the ~~units~~customer retention rate, offset, in part, by anew 10unit ~~bps~~sales ~~increase~~and inacquisitions. Product distribution revenue, which has lower margins than pest or termite revenue and accounted for approximately five percent of the ~~customer~~segment's ~~retention~~operating ~~rate~~revenue in 2012, increased $10.1 million compared to 2011.

Terminix's ~~Operating~~Adjusted ~~Performance~~EBITDA increased $2820.74 million for the year ended December 31, ~~2011~~2012 compared to ~~2010,~~2011. ~~which~~This increase primarily reflects the impact of higher operating revenue, ~~cost~~a ~~efficiencies~~reduction ~~realized~~in ~~through~~sales ~~ongoing~~and ~~initiatives~~marketing expense, as a ~~reduction~~percent inof ~~incentive~~revenue, ~~compensation~~cost ~~expense~~efficiencies realized through ongoing initiatives, ~~termite~~including ~~damage~~the ~~claims~~benefits ~~expense~~of ~~and~~sales ~~legal~~mobility ~~related~~and ~~expense,~~routing and scheduling tools, the favorable impact of acquiring assets in connection with exiting certain fleet leases, and improved production labor efficiencies, offset, in part, by higher ~~sales~~fuel prices and product ~~marketing~~distribution ~~expense~~revenue, ~~and~~which ~~fuel~~has ~~prices~~lower margins than pest or termite revenue.

TruGreen Segment

~~TruGreen~~As described in "Recent Developments", ~~which~~on ~~provides~~January 14, ~~residential~~2014, ~~and~~Holdings ~~commercial~~completed ~~lawn~~the TruGreen Separation Transaction, ~~tree~~resulting in the spin-off of the assets and ~~shrub~~certain ~~care~~liabilities ~~services,~~of ~~has~~the ~~embarked~~TruGreen onBusiness. aThe ~~strategy~~TruGreen toBusiness ~~redesign~~is ~~its product~~reported ~~offerings~~in ~~based~~this Annual Report on ~~the~~Form 10-K ~~latest~~in ~~agronomic~~continuing ~~science,~~operations. ~~transform~~Beginning with the Company's ~~customer~~quarterly ~~experience~~report ~~through~~on Form 10-Q for the ~~initatives~~quarter ~~described~~ended ~~below~~March 31, ~~and~~2014, ~~rebalance~~the ~~its~~TruGreen ~~sales~~Business ~~and~~will ~~marketing~~be ~~mix~~reported ~~toward~~in ~~channels~~discontinued ~~with higher retention and profitability~~operations.

~~In 2011,~~ ~~the~~Year ~~Company~~ended ~~made the decision to rebalance TruGreen's sales and marketing mix toward channels with higher retention and profitability. Specifically~~December 31, in 2011, TruGreen reduced its spending in the neighborhood sales channel and increased marketing spending in other sales channels which it believes will yield more attractive returns in the long-term, such as digital marketing. TruGreen also introduced its new Healthy Lawn Plan in early 2012, which provides a customized, full-year treatment plan that better matches the growing conditions in each part of the country. At the same time, TruGreen decided to de-emphasize selling less than full programs, which it believes do not foster long-term customer relationships or deliver predictable, consistent outcomes for its customers. 2013

The TruGreen ~~continues~~ tosegment, ~~rebalance~~which itduring ~~sales~~2013 provided residential and ~~marketing~~commercial ~~mix~~lawn, ~~across~~tree ~~all~~and ofshrub ~~its~~care ~~sales~~services, ~~and~~reported ~~marketing~~an 8.5 percent ~~channels,~~decrease ~~including~~in ~~returning~~operating torevenue ~~higher~~and ~~spending~~an 83.0 percent decrease in ~~the~~Adjusted ~~neighborhood~~EBITDA ~~marketing~~for ~~channel. TruGreen~~the ~~will~~year ~~also~~ended ~~introduce~~December 31, ~~new~~2013 ~~product~~compared ~~offerings~~to ~~and~~2012. ~~transform~~Revenue ~~its~~from ~~customers'~~residential ~~experience~~lawn service ~~through~~customers, awhich ~~combination~~was 82 percent of ~~new~~the ~~technology,~~segment's ~~including~~operating ~~investments~~revenue in a2013, ~~new~~decreased ~~operating~~8.8 percent ~~system~~compared ~~and telecommunications~~to ~~infrastructure~~2012, ~~improved~~reflecting ~~processes~~an ~~and~~8.9 percent ~~stricter~~decline ~~branch~~in ~~standards,~~average residential ~~improved~~full ~~pre-~~program customer counts and ~~post-~~inefficiencies in service ~~communication~~delivery ~~and~~caused, ~~more~~in ~~consistent~~part, ~~adherence~~by tointegration ~~resource planning~~issues ~~models~~with newly implemented technology, offset, in ~~its~~part, ~~branches~~by improved price realization. ~~The~~Absolute ~~Company~~customer ~~believes~~counts ~~the~~as ~~changes~~of itDecember 31, is2013 ~~making~~compared atto ~~TruGreen~~2012 ~~will~~declined ~~position~~7.9 percent, ~~the~~driven ~~business~~by ~~for~~a ~~future~~250 ~~long-term~~bps ~~growth~~decrease in ~~operating~~the ~~revenue~~residential ~~and~~full ~~Operating~~program customer retention rate, ~~Performance~~offset, in part, by new

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~~transforming~~unit ~~TruGreen~~sales. For the year ended December 31, 2013 compared to 2012, the segment's ~~relationships~~operating ~~with~~revenue ~~its~~also ~~customers~~reflects ~~and~~a ~~improving~~$14.4 million ~~the~~decrease ~~efficiency~~in ofrevenue ~~its~~from ~~operations~~commercial customers.

TruGreen's Adjusted EBITDA decreased $126.8 million for the year ended December 31, 2013 compared to 2012. Key executive transition charges of $0.5 million and $1.4 million were recorded in 2013 and 2012, respectively, which included recruiting costs and a signing bonus related to the hiring of David Alexander, the President of TruGreen, and separation charges related to the resignation in 2012 of Thomas Brackett, a former President of TruGreen. The remaining decrease of $127.7 million primarily reflects the impact of lower operating revenue; labor, chemical and vehicle inefficiency driven, in part, by integration issues with newly implemented technology; higher bad debt expense; higher sales staffing levels; higher costs related to telephone and information technology systems; and increased investments in sales tools.

Year ended December 31, 2012

The TruGreen segment reported an 11.1 percent decrease in operating revenue and a 26.9 percent decrease in ~~Operating~~Adjusted ~~Performance~~EBITDA for the year ended December 31, 2012 compared to 2011. ~~TruGreen's operating loss for the year ended December 31, 2012 was $805.0 million, compared to operating income of $129.3 million for the year ended December 31, 2011.~~ Revenue from residential lawn service customers, which was ~~82.5~~83 percent of the segment's operating revenue in 2012, ~~decreased~~ decreased 13.0 percent compared to 2011, reflecting an 11.93 percent decline in average residential full program customer counts and a steep decline in less than full program sales, offset, in part, by improved price realization. Absolute customer counts as of December 31, 2012 compared to 2011 declined 1112.32 percent, driven by a decrease in new unit sales and acquisitions, offset, in part, by a ~~190~~120 bps increase in the residential full program customer retention rate. The decrease in new unit sales was significantly impacted by changes in our product offerings and the rebalancing of our sales channel mix. For the year ended December 31, 2012 compared to 2011, the segment's operating revenue also reflected a $13.5 million increase in revenue from commercial customers, offset, in part, by a $14.4 million decrease in third party revenue, primarily sales of ice melt products.

TruGreen's ~~operating~~Adjusted ~~income~~EBITDA for the year ended December 31, 2012 and 2011 included pre-tax non-cash impairment charges of $908.9 million and $36.7 million, respectively, to reduce the carrying value of TruGreen's goodwill and the TruGreen trade name to their estimated fair values as further discussed in Note 1 to the Consolidated Financial Statements. TruGreen's Operating Performance decreased $56.2 million for the year ended December 31, 2012 compared to 2011. Key executive transition charges of $1.4 million and $1.0 million were recorded in 2012 and 2011, respectively, which included recruiting costs related to the hiring of David Alexander, the President of TruGreen, and separation charges related to the resignation in 2012 of Thomas ~~Bracket~~Brackett, a former President of TruGreen, and the resignation in 2011 of Stephen Donly, also a former President of TruGreen. The remaining decrease of $55.8 million ~~decrease~~ primarily reflects the impact of lower operating revenue, a reduction in labor productivity, higher fertilizer prices and usage rates, higher technology costs related to a new operating system, ~~which is in the process of being deployed,~~ higher fuel prices and increased investments in productivity and standardization initiatives, offset, in part, by lower sales staffing, driven by our decision to reduce our focus on the neighborhood sales channel, and a reduction in ice melt sales, which has lower margins than core lawn services.

Year ended December 31, 2011

The TruGreen segment reported a 0.4 percent increase in operating revenue, a 15.1 percent increase in operating income and a 7.5 percent increase in Operating Performance for the year ended December 31, 2011 compared to 2010. Revenue from residential lawn service customers, which was 84.3 percent of the segment's operating revenue in 2011, was comparable to 2010, reflecting improved price realization and a $5.7 million increase in other expanded services, offset by a 4.8 percent decline in average residential full program customer counts. Absolute customer counts as of December 31, 2011 compared to 2010 declined 5.3 percent, driven by a decrease in new unit sales, primarily in our neighborhood selling channel, offset, in part, by a 70 bps increase in the residential full program customer retention rate.

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TruGreen's operating income for the year ended December 31, 2011 included pre-tax non-cash impairment charges of $36.7 million to reduce the carrying value of the TruGreen trade name to its estimated fair value as further discussed in Note 1 to the Consolidated Financial Statements. There were no similar charges in 2010. TruGreen's Operating Performance increased $14.6 million for the year ended December 31, 2011 compared to 2010. Key executive transition charges of $1.0 million were recorded in 2011, which included separation charges related to the resignation in 2011 of Stephen Donly, a former President of TruGreen. The remaining $15.6 million increase primarily reflects a reduction in sales and marketing expense driven by the reduced focus on the neighborhood sales channel and cost reductions realized through ongoing initiatives, offset, in part, by higher fuel and fertilizer prices.

American Home Shield Segment

Year ended December 31, 2013

The American Home Shield segment, which provides home warranties and preventative maintenance contracts for household systems and appliances, reported a 2.7 percent increase in operating revenue and a 20.7 percent increase in Adjusted EBITDA for the year ended

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December 31, 2013 compared to 2012. The operating revenue results reflect improved price realization and a 1.1 percent increase in average customer counts. Absolute customer counts as of December 31, 2013 increased 1.0 percent compared to 2012, driven by an increase in new unit sales, offset, in part, by a 90 bps decrease in the customer retention rate.

American Home Shield's Adjusted EBITDA increased $29.3 million for the year ended December 31, 2013 compared to 2012. The segment's Adjusted EBITDA included interest and net investment income from the American Home Shield investment portfolio of $5.1 million and $6.2 million recorded in 2013 and 2012, respectively, and key executive transition charges of $1.2 million recorded in 2012, which included recruiting costs and a signing bonus related to the hiring of the new President of American Home Shield and separation charges related to the retirement of the former President of American Home Shield. Additionally, a $3.3 million reduction in tax related reserves was recorded in 2013, and a $5.4 million increase in tax related reserves was recorded in 2012. The remaining increase of $20.5 million primarily reflects the impact of higher operating revenue, lower claims costs, including a favorable adjustment to reserves for prior year contract claims, and lower provisions for certain legal matters, offset, in part, by increased investments in sales and marketing and higher technology costs.

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. This decision will allow us to more effectively focus our energy and resources on driving growth and serving our customers. Important factors that led to this decision include:

•: the ongoing operational costs of the new operating system are high;
•: plans to achieve economies of scale by expanding the technology beyond American Home Shield to other business units were adversely impacted by the TruGreen Separation Transaction;
•: enhancements to our existing operating system enabled it to support our needs;
•: certain planned benefits of the new operating system can be achieved through other means; and
•: we will now be able to invest our resources in areas that will allow us to focus on growing our business.

We expect to record an impairment charge of approximately $50 million in the first quarter of 2014 relating to this decision.

Year ended December 31, 2012

The American Home Shield segment, ~~which provides home warranties and preventative maintenance contracts for household systems and appliances,~~ reported a 5.0 percent increase in operating revenue, ~~a 32.9 percent increase in operating income~~ and a 7.2 percent increase in Adjusted ~~Operating~~EBITDA ~~Performance~~ for the year ended December 31, 2012 compared to 2011. The operating revenue results reflect improved price realization and a 0.3 percent increase in average customer counts. Absolute customer counts as of December 31, 2012 were comparable to 2011 driven by an increase in new unit sales, offset by a 140 bps decrease in the customer retention rate.

American Home Shield's ~~Operating~~Adjusted ~~Performance~~EBITDA increased $9.6 million for the year ended December 31, 2012 compared to 2011. ~~American~~The ~~Home Shield~~segment's ~~Operating~~Adjusted ~~Performance~~ EBITDA included interest and net investment income from the American Home Shield investment portfolio of $6.2 million and $9.8 million ~~for~~recorded ~~the~~in ~~years ended December 31,~~ 2012 and 2011, respectively. Additionally, a $5.4 million increase in tax related reserves and key executive transition charges of $1.2 million, which included recruiting ~~and relocation~~ costs and a signing bonus related to the hiring of the new President of American Home Shield and separation charges related to the retirement of the former President of American Home Shield, were recorded in 2012. The remaining $19.8 million increase primarily reflects the impact of higher operating revenue and a reduction, as a percent of revenue, in home warranty claims costs and sales and marketing expense, offset, in part, by higher provisions for certain legal matters and increased investments to drive improvements in service delivery.

American Home Shield is investing in a new operating system that is designed to improve customer relationship management capabilities and enhance our operations. The development has taken longer than anticipated, which has resulted in a delay in the projected start of the first phase of our implementation. We expect to continue to incur capitalizable and non-capitalizable technology charges through the final implementation date but do not expect these charges to have a material impact on our financial position, results of operations or cash flows. 37

Year ended December 31, 2011

The American Home Shield segment reported a 4.6 percent increase in operating revenue, a 38.7 percent increase in operating income and a 13.2 percent increase in Operating Performance for the year ended December 31, 2011 compared to 2010. The operating revenue results reflect improved price realization, driven, in part, by the introduction of new product options in our direct-to-consumer channel, and a 0.1 percent increase in average customer counts. Absolute customer counts as of December 31, 2011 compared to 2010 increased 1.6 percent driven by a 210 bps increase in the customer retention rate, offset, in part, by a decrease in new unit sales. American Home Shield's sales in the real estate channel were negatively impacted by softness in

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~~the~~recorded ~~home~~in ~~resale~~2012. ~~market~~The ~~and~~remaining ~~elimination~~increase of $19.8 million primarily reflects the ~~government~~impact ~~housing~~of ~~incentive~~higher ~~program,~~operating ~~which~~revenue ~~was~~and ~~extended~~a ~~through~~reduction, ~~the~~as ~~first~~a ~~quarter~~percent of ~~2011.~~revenue, ~~This~~in ~~decline~~home ~~was~~warranty claims costs and sales and marketing costs, offset, in part, by ~~growth~~higher provisions for certain legal matters and increased investments to drive improvements in ~~consumer~~service ~~sales~~delivery.

American Home Shield's Operating Performance increased $15.4 million for the year ended December 31, 2011 compared to 2010. American Home Shield's Operating Performance included interest and net investment income from the American Home Shield investment portfolio of $9.8 million and $6.2 million for the years ended December 31, 2011 and 2010, respectively. The remaining $11.8 million increase primarily reflects the impact of higher operating revenue, lower provisions for certain legal matters and cost reductions realized through ongoing initiatives, offset, in part, by higher technology costs related to a new operating system and, as a percent of revenue, higher home warranty claims costs.

ServiceMaster Clean Segment

Year ended December 31, 2013

The ServiceMaster Clean segment, which provides residential and commercial disaster restoration, janitorial and cleaning services through franchises primarily under the ServiceMaster, ServiceMaster Restore, and ServiceMaster Clean brand names, on-site wood furniture repair and restoration services primarily under the Furniture Medic brand name and home inspection services primarily under the AmeriSpec brand name, reported an 8.2 percent increase in operating revenue and an 11.3 percent increase in Adjusted EBITDA for the year ended December 31, 2013 compared to 2012. Domestic royalty fees, which were 51 percent of the segment's operating revenue in 2013, increased 3.4 percent compared to 2012, primarily driven by increases in disaster restoration services. Revenue from janitorial national accounts, which was 14 percent of the segment's operating revenue in 2013, increased 32.4 percent compared to 2012, driven by strong sales activity. Sales of products to franchisees, which were 10 percent of the segment's operating revenue in 2013, were comparable to 2012.

ServiceMaster Clean's Adjusted EBITDA increased $6.9 million for the year ended December 31, 2013 compared to 2012. Key executive transition charges of $1.0 million recorded in 2012, which included relocation costs related to the hiring of the new President of ServiceMaster Clean and Merry Maids and separation charges related to the retirement of the former President of ServiceMaster Clean. The remaining increase of $5.9 million primarily reflects the impact of higher operating revenue.

Year ended December 31, 2012

The ServiceMaster Clean segment, which provides residential and commercial disaster restoration, janitorial and cleaning services through franchises primarily under the ServiceMaster and ServiceMaster Clean brand names, on-site wood furniture repair and restoration services primarily under the Furniture Medic brand name and home inspection services primarily under the AmeriSpec brand name, reported a 0.5 percent increase in operating revenue, ~~a 5.6 percent decrease in operating income~~ and a 4.7 percent decrease in Adjusted ~~Operating~~EBITDA ~~Performance~~ for the year ended December 31, 2012 compared to 2011. Domestic royalty fees, which were ~~51.7~~52 percent of the segment's operating revenue in 2012, decreased 3.1 percent compared to 2011, primarily driven by decreases in disaster restoration services. Revenue from janitorial national accounts, which was ~~11.8~~12 percent of the segment's operating revenue in 2012, increased 36.1 percent compared to 2011, driven by strong sales activity. Sales of products to franchisees, which were 10.3 percent of the segment's operating revenue in 2012, decreased 12.9 percent compared to 2011, driven by lower franchisee demand for equipment.

ServiceMaster Clean's ~~Operating~~Adjusted ~~Performance~~EBITDA decreased $3.0 million for the year ended December 31, 2012 compared to 2011. Key executive transition charges of $1.0 million and $0.4 million were recorded in 2012 and 2011, respectively, which included recruiting, relocation costs and a signing bonus related to the hiring of the new President of ServiceMaster Clean and Merry Maids and ~~separations~~separation charges related to the retirement of the former President of ServiceMaster Clean. The remaining decrease of $2.4 million ~~decrease~~ primarily reflects the impact of lower domestic royalty fees, which have higher margins than janitorial national accounts, and lower sales of products to franchisees.

~~Year ended December 31, 2011~~ 38

The ServiceMaster Clean segment reported a 5.0 percent increase in operating revenue, a 4.0 percent increase in operating income and a 0.4 percent increase in Operating Performance for the year ended December 31, 2011 compared to 2010. Domestic royalty fees, which were 53.6 percent of the segment's operating revenue in 2011, increased 6.4 percent compared to 2010, driven by increases in disaster restoration services. Revenue from janitorial national accounts, which was 8.7 percent of the segment's operating revenue in 2011, increased 32.4 percent compared to 2010, driven by strong sales activity. Sales of products to franchisees, which were 11.9 percent of the segment's operating revenue in 2011, decreased 8.4 percent compared to 2010.

ServiceMaster Clean's Operating Performance increased $0.3 million for the year ended December 31, 2011 compared to 2010. Key executive transition charges of $0.4 million were recorded in 2011, which included a signing bonus related to the hiring of the new President of

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ServiceMaster Clean and Merry Maids. The remaining $0.7 million increase primarily reflects the impact of higher operating revenue, offset, in part, by higher support services costs, sales and marketing expense and technology and other costs, all driven by ongoing initiatives to increase share primarily in the commercial, fire remediation and janitorial market segments.

Other Operations and Headquarters Segment

Year ended December 31, 2013

This segment includes the franchised and Company-owned operations of Merry Maids, SMAC and the Company's headquarters functions. The segment reported a 4.5 percent increase in operating revenue and a 3.6 percent decrease in Adjusted EBITDA for the year ended December 31, 2013 compared to 2012.

Merry Maids, which accounted for 91.5 percent of the segment's operating revenue in 2013, reported a 3.1 percent increase in operating revenue and a 2.4 percent decrease in Adjusted EBITDA for the year ended December 31, 2013 compared to 2012. Revenue from company-owned branches, which was 75 percent of Merry Maids' operating revenue in 2013, increased 4.3 percent compared to 2012, reflecting a 5.3 percent increase in average customer counts, primarily driven by acquisitions, and improved price realization, offset, in part, by a decline in non-recurring services. Absolute customer counts as of December 31, 2013 were comparable to 2012. Royalty fees, which were 18 percent of Merry Maids' operating revenue in 2013, and sales of products to franchisees, which were 7 percent of Merry Maids' operating revenue in 2013, were comparable to 2012.

Merry Maids' Adjusted EBITDA decreased $0.5 million for the year ended December 31, 2013 compared to 2012. This decrease primarily reflects higher technology costs, offset, in part, by the impact of higher operating revenue.

The Adjusted EBITDA of the Company's headquarters functions and SMAC decreased $3.2 million for the year ended December 31, 2013 compared to 2012. The segment's Adjusted EBITDA included interest and net investment income of $1.6 million and $0.1 million in 2013 and 2012, respectively. Additionally, key executive transition charges of $8.3 million and $1.2 million were recorded in 2013 and 2012, respectively, which included recruiting costs and signing bonuses for Robert J. Gillette, our new CEO, Alan J. M. Haughie, our new CFO, and other key executives and separation charges related to the resignation of Harry J. Mullany III, our former CEO, and other key executives. The remaining change in Adjusted EBITDA of the Company's headquarters functions and SMAC is an increase of $2.4 million. This increase primarily reflects lower costs in our centers of excellence, offset, in part, by higher expenses in our automobile, general liability and workers' compensation insurance program.

Year ended December 31, 2012

~~This~~The segment ~~includes the franchised and Company-owned operations of Merry Maids, SMAC and the Company's headquarters functions. The segment~~ reported a 2.1 percent increase in operating revenue, ~~a 13.7 percent increase in operating loss~~ and a 1510.06 percent decrease in ~~Operating~~Adjusted ~~Performance~~EBITDA for the year ended December 31, 2012 compared to 2011.

Merry Maids, which accounted for ~~92.7~~93 percent of the segment's operating revenue in 2012, reported a 1.3 percent increase in operating revenue, ~~a 20.5 percent decrease in operating income~~ and a 190.18 percent increase ~~decrease~~ in ~~Operating~~Adjusted ~~Performance~~EBITDA for the year ended December 31, 2012 compared to 2011. Revenue from company-owned branches, which was ~~73.9~~ 74 percent of Merry Maids' operating revenue in 2012, decreased 0.8 percent compared to 2011, reflecting a $4.6 million reduction in operating revenue driven by the sale of ten company-owned branches to existing and new ~~franchises~~franchisees in the fourth quarter of 2011, offset, in part, by improved price realization. As adjusted for branch dispositions in 2011, operating revenue reflected a 7.3 percent increase in average customer counts at company-owned branches. Absolute customer counts as of December 31, 2012 compared to 2011 increased 10.5 percent driven by a 420 bps increase in the customer retention rate and an increase in acquisitions, offset, in part, by a decrease in new unit sales. Royalty fees, which were 20.5 percent of Merry Maids' operating revenue in 2012, increased 7.7 percent compared to 2011, driven by organic franchise growth, franchise license sales and the sale of the company-owned branches to existing and new ~~franchises~~franchisees. Sales ~~of products to franchisees, which were 5.7 percent of Merry Maids' operating revenue in 2012, increased 7.7 percent compared to 2011, driven by higher equipment sales.~~

Merry Maids' Operating Performance decreased $4.0 million for the year ended December 31, 2012 compared to 2011. Technology costs of $4.2 million were recorded in 2012, which related to the abandonment of certain internally developed software. Additionally, key executive transition charges of $0.6 million, which included separation charges related to the resignation of the former President of Merry Maids, and a gain of $1.3 million, resulting from the sale of the company-owned branches, were recorded in 2011. The remaining $0.9 million increase reflects the impact of higher operating revenue and improved labor efficiencies. 39

The Operating Performance of SMAC and the Company's headquarters functions decreased $10.1 million for the year ended December 31, 2012 compared to 2011. The segment's Operating Performance included interest and net investment income of $0.1 million and $1.0 million for the years ended December 31, 2012 and 2011, respectively. Additionally, key executive transition charges of $1.2 million and $4.7 million were recorded for the years ended December 31, 2012 and 2011, respectively, which included recruiting costs and signing bonuses related to the hiring of Hank Mullany, our new Chief Executive Officer, ("CEO"), Roger Cregg, a now former CFO, and other key executives and separation charges related to the resignation of Steve Martin, also a former CFO. The remaining $12.7 million decrease in Operating Performance primarily reflects higher expenses in our automobile, general liability and workers' compensation insurance programs due primarily to the reversal, in 2011, of claims reserves driven by favorable claims experience, and higher technology costs related to PCI standards compliance purposes.

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of products ~~Year~~to ~~ended~~franchisees, ~~December~~which were 6 31percent of Merry Maids' operating revenue in 2012, increased 7.7 percent compared to 2011 , driven by higher equipment sales.

~~The~~Merry Maids' ~~segment~~Adjusted ~~reported~~EBITDA aincreased 2$0.32 ~~percent~~million ~~increase~~for inthe ~~operating~~year ~~revenue~~ended December 31, a2012 1compared to 2011.~~7 percent~~ ~~improvement~~Key inexecutive ~~operating~~transition ~~loss~~charges ~~and~~of a $0.6 ~~percent~~million, ~~improvement~~which included inseparation ~~Operating~~charges ~~Performance~~related ~~for~~to the ~~year~~resignation ~~ended~~of ~~December~~the former President of Merry Maids, and a gain of $1.3 31million, resulting from the sale of the company-owned branches, were recorded in 2011. ~~compared~~The toremaining ~~2010~~increase of $0.9 million reflects the impact of higher operating revenue and improved labor efficiencies.

~~Merry~~The ~~Maids,~~Adjusted ~~which~~EBITDA ~~accounted for 93.5 percent~~ of the ~~segment~~Company's ~~operating~~headquarters ~~revenue~~functions inand ~~2011,~~SMAC ~~reported~~decreased ~~a 3~~$10.~~0 percent increase in operating revenue, a 7.0 percent increase in operating income and a~~ 1.9 ~~percent~~million ~~increase in Operating Performance~~ for the year ended December 31, ~~2011~~2012 compared to ~~2010~~2011. ~~Revenue~~The ~~from~~segment's ~~company-owned branches, which was~~Adjusted ~~75.4 percent~~EBITDA ofincluded ~~Merry~~interest ~~Maids'~~and ~~operating~~net ~~revenue~~investment inincome ~~2011,~~of ~~increased~~ $0.71 ~~percent~~million ~~compared~~and to$1.0 million ~~2010,~~in ~~driven~~2012 byand ~~improved~~2011, ~~price~~respectively. ~~realization~~Additionally, ~~offset,~~key inexecutive ~~part,~~transition bycharges aof 0$1.32 ~~percent decline in~~million ~~average~~and ~~customer counts~~$4.7 million ~~Absolute~~were ~~customer~~recorded ~~counts~~in as2012 ofand ~~December 31~~2011, ~~2011~~respectively. ~~compared~~The toremaining ~~2010~~decrease ~~declined~~of 3$12.67 ~~percent~~million ~~driven~~primarily byreflects ~~the~~higher ~~sale~~expenses ofin ~~ten~~our ~~company-owned~~automobile, ~~branches~~general toliability ~~existing~~ and ~~new~~ ~~franchisees~~workers' incompensation ~~the~~insurance ~~fourth~~program ~~quarter~~due ofprimarily ~~2011,~~to ~~offset~~the reversal, in ~~part~~2011, byof aclaims ~~630~~reserves ~~bps~~driven ~~increase~~by infavorable ~~the~~claims ~~customer retention rate. Royalty fees~~experience, ~~which~~and ~~were~~higher ~~19.3 percent~~technology ofcosts ~~Merry~~related ~~Maids'~~to ~~operating~~PCI ~~revenue in~~standards ~~2011,~~compliance ~~increased 6~~purposes.~~3 percent~~ ~~compared to 2010, primarily driven by market expansion.~~

~~Merry Maids'~~ ~~Operating~~Pro ~~Performance~~Forma ~~increased~~Financial $0.4 million for the year ended December 31, 2011 compared to 2010. Key executive transition charges of $0.6 million were recorded in 2011, which included separation charges related to the resignation of the former President of Merry Maids. Additionally, a gain of $1.3 million was recorded in 2011, resulting from the sale of the company-owned branches. The remaining $0.3 million decrease reflects an increase in sales and marketing expense, fuel costs and incentive compensation expense, offset, in part, by the impact of higher operating revenue. Information

~~The Operating~~On ~~Performance of SMAC and the Company's headquarters functions increased $0.2~~January ~~million~~14, ~~for the year ended December 31~~2014, ~~2011~~Holdings ~~compared~~completed to the ~~year~~TruGreen ~~ended December 31,~~Separation ~~2010.~~Transaction ~~The~~resulting ~~segment's~~in ~~Operating Performance included interest and net investment income of $1.0 million and $1.8 million for~~ the ~~years~~spin-off ~~ended December 31, 2011 and 2010, respectively. Additionally, key executive transition charges~~ of ~~$4.7 million and $5.0 million were recorded for~~ the ~~years~~assets ~~ended December 31, 2011~~ and ~~2010, respectively,~~certain ~~which~~liabilities ~~included~~of ~~recruiting costs and signing bonuses related to~~ the ~~hiring~~TruGreen ofBusiness ~~Hank~~through ~~Mullany, our new CEO, and Roger Cregg,~~ a ~~now former CFO~~tax-free, ~~and~~pro ~~separation~~rata ~~charges~~dividend ~~related~~ to the ~~resignation~~stockholders of ~~Steve Martin, also a former CFO, and the retirement of Pat Spainhour, our former CEO~~Holdings. The remaining $0.7 million increase in Operating Performance primarily reflects lower spending in the Company's centers of excellence, as well as favorable claims trends in our automobile, general liability and workers' compensation program, offset, in part, by higher technology costs related to PCI standards compliance purposes and higher incentive compensation expense.

The unaudited ~~Discontinued~~pro ~~Operations~~ forma operating revenue and Adjusted EBITDA presented below for the years ended December 31, 2013, 2012 and 2011 give effect to the TruGreen Separation Transaction and have been derived from the Consolidated Financial Statements and notes thereto. The unaudited pro forma operating revenue and Adjusted EBITDA are based upon available information and assumptions that ServiceMaster believes are reasonable, are provided for informational purposes only, and do not purport to project the future operating results of ServiceMaster. The unaudited pro forma operating revenue and Adjusted EBITDA have been prepared as if the TruGreen Separation Transaction occurred on January 1, 2011. The unaudited pro forma operating revenue and Adjusted EBITDA should be read in conjunction with ServiceMaster's Consolidated Financial Statements and notes thereto.

InServiceMaster historically incurred the ~~first~~cost ~~quarter~~ of ~~2011,~~certain ~~ServiceMaster~~corporate-level ~~concluded~~activities ~~that~~which ~~TruGreen~~it ~~LandCare~~performed ~~did~~on ~~not~~behalf ~~fit within the long-term strategic plans~~ of the ~~Company~~TruGreen ~~and~~Business. ~~committed~~Such tocorporate acosts ~~plan~~include: toaccounting ~~sell the business. On April 21~~and finance, ~~2011~~legal, ~~the~~human ~~Company~~resources, ~~entered~~information ~~into~~technology, ainsurance, ~~purchase~~operations, ~~agreement~~real toestate, ~~sell~~tax ~~TruGreen~~services ~~LandCare,~~ and ~~the~~other ~~disposition was effective as of April 30, 2011~~costs. AsThese acosts ~~result~~will ofbe ~~the~~transitioned ~~decision~~ to ~~sell~~New ~~this~~TruGreen ~~business,~~through a ~~$34.2 million~~combination ~~impairment charge~~ of (~~$21.0~~1) ~~million,~~transfers ~~net~~ of ~~tax)~~certain ~~was~~activities ~~recorded~~to inNew ~~loss~~TruGreen ~~from~~at ~~discontinued operations,~~the ~~net~~time of ~~income taxes, in~~ the ~~first~~spin-off ~~quarter~~transaction ofand ~~2011~~(2) payments to ~~reduce~~ServiceMaster ~~the~~by ~~carrying~~New ~~value of~~ TruGreen ~~LandCare's~~under ~~assets~~transition toservices ~~their estimated fair value less cost to sell in accordance with applicable~~agreements. ~~accounting~~ServiceMaster ~~standards.~~expects ~~Upon~~an ~~completion~~approximate ~~of the sale, a~~ $~~6.2~~25 million ~~loss~~reduction onin ~~sale~~annual ~~($1.9 million,~~costs ~~net~~associated ofwith ~~tax) was recorded. During~~ the ~~year~~transition ~~ended December 31, 2012, upon finalization~~ of ~~certain~~these ~~post-closing~~activities ~~adjustments~~to ~~and~~New ~~disputes,~~TruGreen. ~~the~~This ~~Company~~amount ~~recorded~~is annot ~~additional~~reflected ~~$1.3 million~~in ~~loss~~pro onforma ~~sale~~Adjusted EBITDA ~~($0.5 million~~as ~~gain,~~presented ~~net of tax)~~below.

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~~During~~Operating ~~the~~revenue ~~year ended December 31, 2010, the Company recorded pre-tax non-cash impairment charges of $46.9 million ($28.7 million, net of tax) associated with the goodwill~~ and ~~trade~~Adjusted ~~name~~EBITDA atby ~~TruGreen~~operating ~~LandCare~~segment inon ~~loss~~a ~~from~~pro ~~discontinued~~forma ~~operations,~~basis ~~net~~are ofas ~~income~~follows: ~~taxes.~~

The components of loss from discontinued operations, net of income taxes, and the reconciliation of operating loss to Adjusted EBITDA and Operating Performance for the years ended December 31, 2012, 2011 and 2010 are as follows:

(In thousands)	As Reported			Adjustments(1)		Pro Forma

*Year Ended December 31, 2013*
Operating Revenue:
Terminix	$	1,309,469		$	—	$	1,309,469
TruGreen		895,943			895,943		—
American Home Shield		740,062			—		740,062
ServiceMaster Clean		150,929			—		150,929
Other Operations and Headquarters		92,432			—		92,432


Total Operating Revenue	$	3,188,835		$	895,943	$	2,292,892




Adjusted EBITDA:
Terminix	$	318,903		$	—	$	318,903
TruGreen		25,999			25,999		—
American Home Shield		170,866			—		170,866
ServiceMaster Clean		67,942			—		67,942
Other Operations and Headquarters		(107,721	)		58		(107,779	)


Total Adjusted EBITDA	$	475,989		$	26,057	$	449,932




*Year Ended December 31, 2012*
Operating Revenue:
Terminix	$	1,265,417		$	—	$	1,265,417
TruGreen		979,081			979,081		—
American Home Shield		720,860			—		720,860
ServiceMaster Clean		139,441			—		139,441
Other Operations and Headquarters		88,482			—		88,482


Total Operating Revenue	$	3,193,281		$	979,081	$	2,214,200




Adjusted EBITDA:
Terminix	$	319,838		$	—	$	319,838
TruGreen		152,813			152,813		—
American Home Shield		141,542			—		141,542
ServiceMaster Clean		61,041			—		61,041
Other Operations and Headquarters		(104,000	)		5,443		(109,443	)


Total Adjusted EBITDA	$	571,234		$	158,256	$	412,978




*Year Ended December 31, 2011*
Operating Revenue:
Terminix	$	1,193,075		$	—	$	1,193,075
TruGreen		1,100,741			1,100,741		—
American Home Shield		686,737			—		686,737
ServiceMaster Clean		138,691			—		138,691
Other Operations and Headquarters		86,628			—		86,628


Total Operating Revenue	$	3,205,872		$	1,100,741	$	2,105,131




Adjusted EBITDA:
Terminix	$	299,485		$	—	$	299,485
TruGreen		209,031			209,031		—
American Home Shield		131,977			—		131,977
ServiceMaster Clean		64,018			—		64,018
Other Operations and Headquarters		(94,036	)		4,550		(98,586	)


Total Adjusted EBITDA	$	610,475		$	213,581	$	396,894

	Year Ended Dec. 31,
(In thousands)	2012			2011			2010
Operating loss(1)	$	(1,138	)	$	(40,620	)	$	(49,971	)
Benefit for income taxes(1)		(453	)		(15,461	)		(17,973	)
Operating loss, net of income taxes(1)		(685	)		(25,159	)		(31,998	)
Gain (loss) on sale, net of income taxes		485			(1,857	)		—
Loss from discontinued operations, net of income taxes(1)	$	(200	)	$	(27,016	)	$	(31,998	)
Operating loss(1)	$	(1,138	)	$	(40,620	)	$	(49,971	)
Interest expense		—			16			46
Depreciation and amortization expense		—			3,509			11,524
EBITDA		(1,138	)		(37,095	)		(38,401	)
Non-cash goodwill and trade name impairment(1)		—			34,185			46,884
Adjusted EBITDA		—			(2,910	)		8,483
Non-cash credits attributable to purchase accounting		—			(154	)		(621	)
Restructuring (credits) charges		—			(203	)		778
Operating Performance	$	(1,138	)	$	(3,267	)	$	8,640

(1): Adjustments reflect results of operations of the TruGreen Business and, for the year ended December 31, 2013, the elimination of non-recurring costs of $3.6 million, which were directly related to the TruGreen Separation Transaction.

(1)During 2011, a pre-tax non-cash impairment charge of $34.2 million ($21.0 million, net of tax) was recorded to reduce the carrying value of TruGreen LandCare's assets to their estimated fair value less cost to sell in accordance with applicable accounting standards. Also includes goodwill and trade name impairments of $46.9 million ($28.7 million, net of tax) in 2010. 41

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Discontinued Operations

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

In the first quarter of 2011, ServiceMaster concluded that TruGreen LandCare did not fit within the long-term strategic plans of the Company and committed to a plan to sell the business. On April 21, 2011, the Company entered into a purchase agreement to sell the TruGreen LandCare business, and the disposition was effective as of April 30, 2011. As a result of the decision to sell this business, a $34.2 million impairment charge ($21.0 million, net of tax) was recorded in loss from discontinued operations, net of income taxes, in the first quarter of 2011 to reduce the carrying value of TruGreen LandCare's assets to their estimated fair value less cost to sell in accordance with applicable accounting standards. Upon completion of the sale, a $6.2 million loss on sale ($1.9 million, net of tax) was recorded. During the year ended December 31, 2012, upon finalization of certain post-closing adjustments and disputes, the Company recorded an additional $1.3 million loss on sale ($0.5 million gain, net of tax).

FINANCIAL POSITION AND LIQUIDITY

Cash Flows from Operating Activities from Continuing Operations

Net cash provided from operating activities from continuing operations ~~decreased~~increased $6017.4 million to $~~234~~252.60 million for the year ended December 31, ~~2012~~2013 compared to $~~295~~234.06 million for the year ended December 31, ~~2011~~2012 and $~~222~~295.50 million for the year ended December 31, ~~2010~~2011.

Net cash provided from operating activities in ~~2012~~2013 was comprised of $~~312~~220.49 million in earnings adjusted for non-cash charges and ~~$3.0 million in premiums received on issuance of the 2020 Notes, offset, in part, by~~ a $2049.50 million ~~increase~~decrease in cash required for working capital, ~~$42.9 million~~offset, in ~~cash~~part, ~~payments~~by ~~for the call premium paid on the redemption of~~ $~~996 million aggregate principal amount of the 2015 Notes and $~~17.38 million in cash payments related to restructuring charges. ~~Working~~For the year ended December 31, 2013, working capital requirements were ~~adversely~~ favorably impacted by ~~the~~a ~~timing~~change ofin ~~interest payments on~~ the ~~Senior~~timing ~~Notes~~of ~~and~~customer ~~decreased accruals for incentive compensation~~prepayments.

Net cash provided from operating activities in 2012 was comprised of $312.4 million in earnings adjusted for non-cash charges and $3.0 million in premiums received on issuance of the 2020 Notes, offset, in part, by a $20.5 million increase in cash required for working capital, $42.9 million in cash payments for the call premium paid on the redemption of $996 million aggregate principal amount of the 2015 Notes and $17.3 million in cash payments related to restructuring charges. For the year ended December 31, 2012, working capital requirements were adversely impacted by the timing of interest payments on the Senior Notes and decreased accruals for incentive compensation.

Net cash provided from operating activities in 2011 was comprised of $334.4 million in earnings adjusted for non-cash charges, offset, in part, by $7.5 million in cash payments related to restructuring charges and a $31.9 million increase in cash required for working capital. For the year ended December 31, 2011, working capital requirements were adversely impacted by a reduction in reserve levels under certain self-insurance programs and unrecognized tax benefits.

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Net cash provided from operating activities in 2010 was comprised of $253.8 million in earnings adjusted for non-cash charges, offset, in part, by $10.8 in cash payments related to restructuring charges and a $20.5 million increase in cash required for working capital. For the year ended December 31, 2010 working capital requirements were adversely impacted by growth in accounts receivable balances, due in part to unfavorable collection trends partially attributable to increases in revenue in service lines with longer than average collection terms. Also adversely impacting working capital requirements was a reduction in reserve levels under certain self-insurance programs. Working capital requirements were favorably impacted by a change in the timing of payments to our vendors and increased accruals for incentive compensation.

Cash Flows from Investing Activities from Continuing Operations

Net cash used for investing activities from continuing operations was $~~118~~105.35 million for the year ended December 31, ~~2012~~2013 compared to $~~135~~118.23 million for the year ended December 31, ~~2011~~2012 and $~~175~~135.12 million for the year ended December 31, ~~2010~~2011.

Capital expenditures decreased to $7360.24 million in ~~2012~~2013 from $9673.52 million in ~~2011~~2012 and $~~134~~96.25 million in ~~2010~~2011 and included recurring capital needs, including vehicle fleet purchases in ~~2010 and~~ 2011, and information technology projects, including a new operating system and telecommunications infrastructure at TruGreen and atechnology ~~new~~costs ~~operating system~~ at American Home Shield. The Company anticipates that capital expenditures for the full year ~~2013~~2014 will range from $~~85.0~~55 million to $~~95.0~~65 million, reflecting recurring needs and the continuation of investments in information systems and productivity enhancing technology ~~including new operating systems at TruGreen, American Home Shield and Merry Maids~~. The Company fulfilled ~~our~~its vehicle fleet needs through vehicle capital leases in 2012 and 2013 and expects to fulfill ~~our~~its ongoing vehicle fleet needs in the same manner. The Company has no additional material capital commitments at this time.

Cash payments for acquisitions in ~~2012~~2013 totaled $4632.1 million, compared with $4446.41 million in ~~2011~~2012 and $5744.94 million in ~~2010~~2011. Consideration paid for tuck-in acquisitions consisted of cash payments and debt payable to sellers. The Company expects to continue its tuck-in acquisition program at levels consistent with prior periods. Additionally, the Company announced that as of February 28, 2014, it has acquired HSA Home Warranty, based in Madison, Wisconsin. This acquisition will result in a cash outlay of approximately $32 million, net of cash acquired, in the first quarter of 2014.

Cash flows used for notes receivable, financial investments and securities, net, in ~~2012~~2013 were $10.24 million and were primarily driven by ~~increased investments in marketable securities at American Home Shield and~~ growth in customer financing through SMAC. Cash flows ~~provided~~used ~~from~~for notes receivable, financial investments and securities, net, in 2012 were $31.02 million ~~for~~and ~~the year~~were ~~ended~~primarily ~~December 31,~~driven ~~2011~~by ~~compared~~increased toinvestments ~~$20.4 million~~in ~~for~~marketable ~~the~~securities ~~year~~at American ~~ended~~Home ~~December 31,~~Shield ~~2010~~and growth in customer financing through SMAC. Cash flows provided from notes receivable, financial ~~instruments~~investments and securities, net in, ~~2010~~were ~~included~~$3.0 million ~~the~~for ~~return of~~ the ~~Company's~~year ~~investment~~ended December 31, ~~in previously leased real estate facilities of $22~~2011.~~0 million.~~

Cash flows used for notes receivable from affiliate reflect the amount outstanding under the revolving promissory note with Holdings. See Note 10 to the Consolidated Financial Statements for further details.

Cash Flows from Financing Activities from Continuing Operations

Net cash used for financing activities from continuing operations was $1881.06 million for the year ended December 31, ~~2012~~2013 compared to $~~102~~18.20 million for the year ended December 31, ~~2011~~2012 and $46102.42 million for the year ended December 31, 2010. During 2012, the Company sold $1.350 billion aggregate principal amount of the 2020 Notes and used a majority of the proceeds to redeem $996.0 million aggregate principal amount of the 2015 Notes and to repay $276.3 million of outstanding borrowings under the Term Facilities. During 2012, the Company made scheduled principal payments on long-term debt of $55.7 million, made payments on other long-term financing obligations of $6.9 million and paid debt issuance costs of $33.1 million related to the sale of the 2020 Notes. During 2011~~, the Company borrowed $4~~.~~0 million~~ under other financing arrangements, purchased from Holdings $65.0 million face value of 2015 Notes and made scheduled principal payments of long-term debt of $40.9 million. During the year ended December 31, 2010, the

54 During 2013, the Company made scheduled principal payments on long-term debt of $60.6 million, including the payment of the amounts outstanding under the former accounts receivable securitization facility, and made payments on other long-term financing obligations of $4.1 million. Additionally, the Company borrowed an incremental $0.9 million, paid $12.2 million in original issue discount and paid debt issuance costs of $5.6 million as part of the 2013 Term Loan Facility Amendment.

During 2012, the Company sold $1.350 billion aggregate principal amount of the 2020 Notes and used a majority of the proceeds to redeem $996.0 million aggregate principal amount of the 2015 Notes and to repay $276.3 million of outstanding borrowings under the Term Facilities. During 2012, the Company made scheduled principal payments on long-term debt of $55.7 million, made payments on other long-term financing obligations of $6.9 million and paid debt issuance costs of $33.1 million related to the sale of the 2020 Notes.

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~~Company~~ During ~~borrowed~~2011, ~~and~~the ~~repaid~~Company borrowed $54.0 million under ~~the~~other ~~Revolving~~financing ~~Credit Facility~~arrangements, ~~borrowed~~purchased from Holdings $1065.0 million ~~under~~face ~~other~~value ~~financing~~of ~~arrangements,~~2015 Notes and made scheduled principal payments of long-term debt of $4340.89 million ~~and made repayments of $12~~.~~5 million~~ ~~in connection with purchases of properties previously under lease.~~

Liquidity

The Company is highly leveraged, and a substantial portion of the Company's liquidity needs are due to service requirements on indebtedness ~~incurred in connection with the Merger, some of which has been refinanced,~~ and from funding the Company's operations, seasonal working capital needs and capital expenditures. The agreements governing the Term Facilities, the 2020 Notes ~~(which were issued in February 2012~~ and ~~August 2012 as discussed further below) and~~ the Revolving Credit Facility contain covenants that limit or restrict the ability of the Company to incur additional indebtedness, repurchase debt, incur liens, sell assets, make certain payments (including dividends) and enter into transactions with affiliates. As of December 31, ~~2012~~2013, the Company was in compliance with the covenants under these agreements that were in effect on such date.

The Company's ongoing liquidity needs are expected to be funded by cash on hand, net cash provided by operating activities and, as required, borrowings under the Revolving Credit Facility. We expect that cash provided from operations and available capacity under the Revolving Credit Facility will provide sufficient funds to operate our business, make expected capital expenditures and meet our liquidity requirements ~~through~~for ~~December~~the following 12 31months, ~~2013,~~ including payment of interest and principal on our debt. As of December 31, ~~2012~~2013, the Company had $~~447~~324.72 million of remaining capacity available under the Revolving Credit Facility. On November 27, 2013, the Company entered into the 2013 Revolver Amendment. Pursuant to the 2013 Revolver Amendment, after completion of the TruGreen Separation Transaction, the Company has $241.7 million of available borrowing capacity through July 23, 2014 and $182.7 million from July 24, 2014 through January 31, 2017.

Cash and Marketable Securities

Cash and short- and long-term marketable securities totaled $~~568~~634.58 million as of December 31, ~~2012~~2013, compared ~~with~~ with $~~471~~568.45 million as of December 31, ~~2011. As of December 31,~~ 2012 ~~and 2011, $243~~.~~7 million~~ ~~and~~Cash ~~$226.2 million, respectively, of the cash~~ and short- and long-term marketable securities include balances ~~were~~ associated with regulatory requirements at American Home Shield ~~and for other purposes~~. ~~Such amounts are identified as being potentially~~See ~~unavailable~~"—Limitations toon beDistributions ~~paid~~and toDividends ~~the Company~~ by ~~its subsidiaries~~Subsidiaries." American Home Shield's investment portfolio has been invested in a combination of high -quality, short -duration fixed -income securities and equities. The Company closely monitors the performance of the investments. From time to time, the Company reviews the statutory reserve requirements to which its regulated entities are subject and any changes to such requirements. These reviews may result in identifying current reserve levels above or below minimum statutory reserve requirements, in which case the Company may adjust its reserves. The reviews may also identify opportunities to satisfy certain regulatory reserve requirements through alternate financial vehicles.

Fleet and Equipment Financing Arrangements

A portion of the Company's vehicle fleet and some equipment are leased through ~~month~~operating leases. The lease terms are non-tocancelable for the first twelve-month ~~operating~~term, ~~leases~~and then are month-to-month, cancelable at the Company's option. There are residual value guarantees by the Company (which approximate 84 percent of the estimated terminal value at the inception of the lease) relative to these vehicles and equipment, which historically have not resulted in significant net payments to the lessors. The fair value of the assets under all of the fleet and equipment leases is expected to substantially mitigate the Company's guarantee obligations under the agreements. As of December 31, ~~2012~~2013, the Company's residual value guarantees related to the leased assets totaled $2011.24 million for which the Company has recorded as a liability the estimated fair value of these guarantees of $0.31 million in the Consolidated Statements of Financial Position.

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The Company has entered into a fleet management services agreement (the "Fleet Agreement") which, among other things, allows the Company to obtain fleet vehicles through a leasing program. The Company fulfilled substantially all of its vehicle fleet needs in 2012 and 2013 through the leasing program under the Fleet Agreement. AsFor ofthe year ended December 31, ~~2012~~2013, the ~~Company~~ ~~had~~Company acquired $4150.9 million of vehicles under the Fleet Agreement 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%. The Company has no minimum ~~commitment~~ commitment for the number of vehicles to be obtained under the Fleet Agreement. ~~The~~As a result of the TruGreen Separation Transaction, the Company anticipates that new lease financings under the Fleet Agreement for the full year ~~2013~~2014 will range from $4515 million to $5525 million.

Under the terms of its fuel swap contracts, the Company is required to post collateral in the event that the fair value of the contracts exceeds a certain agreed upon liability level and in other circumstances required by the counterparty. As of December 31, ~~2012~~2013, the estimated fair value of the Company's fuel swap contracts was a net asset of $1.80 million, and the Company had posted $42.05 million in letters of credit as collateral under its fuel hedging program, none of which were issued under the Company's Revolving Credit Facility. The continued use of letters of credit for this purpose could limit the Company's ability to post letters of credit for other purposes and could limit the Company's borrowing availability under the Revolving Credit Facility. However, the Company does not expect the fair value of its outstanding fuel swap contracts to materially impact its financial position or liquidity.

Revolving Credit Facility

On January 30, 2012, ServiceMaster entered into the Extension Amendment and the Increase Supplement to its Revolving Credit Facility. After effectiveness on February 13, 2012 of the Extension Amendment and the Increase Supplement, we have available borrowing capacity under the Revolving Credit Facility of $447.7 million through July 24, 2013, $324.2 million from July 25, 2013 through July 24, 2014 and $265.2 million from July 25, 2014 through January 31, 2017. The Company will continue to have access to letters of credit up to $75.0 million through January 31, 2017.

Senior Notes

During the fourth quarter of 2011, the Company purchased $65.0 million in face value of the 2015 Notes from Holdings for a cost of $68.0 million, which included payment of accrued interest of $3.0 million. The debt acquired by the Company has been retired, and the Company has discontinued the payment of interest. The Company recorded a loss on extinguishment of debt of $0.8 million in its Consolidated Statements of Operations and Comprehensive (Loss) Income for the year ended December 31, 2011 for the write-off of unamortized debt issuance costs related to the extinguished debt.

In February 2012, the Company sold in transactions exempt from registration under the Securities Act of 1933, as amended, $600 million aggregate principal amount of 2020 Notes. In connection with the 2020 Notes, sold in February 2012, the Company entered into a registration rights agreement, pursuant to which the Company filed with the SEC a registration statement with respect to the exchange of the 2020 Notes for similar notes that are publicly registered, which was declared effective on April 27, 2012. The 2020 Notes, sold in February 2012, will mature on February 15, 2020 and bear interest at a rate of 8 percent per annum. The proceeds from the 2020 Notes, sold in February 2012, together with available cash, were used to redeem $600 million in aggregate principal amount of the Company's outstanding 2015 Notes in the first quarter of 2012.

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Following this redemption, $396 million aggregate principal amount of the 2015 Notes remained outstanding.

In August 2012, the Company sold in transactions exempt from registration under the Securities Act of 1933, as amended, $750 million aggregate principal amount of 2020 Notes. In connection with the 2020 Notes, sold in August 2012, the Company entered into a registration rights agreement, pursuant to which the Company agreed to file with the SEC a registration statement with respect to the exchange of the 2020 Notes for similar notes that are publicly registered and to cause the registration statement to become effective before August 21, 2013. The 2020 Notes, sold in August 2012, will mature on August 15, 2020 and bear interest at a rate of 7 percent per annum. The Company used a majority of the proceeds from the 2020 Notes, sold in August 2012, to redeem the remaining $396 million aggregate principal amount of its 2015 Notes and to repay $276 million of outstanding borrowings under its Term Facilities during the third quarter of 2012. The Company recorded a loss on extinguishment of debt of $55.6 million in its Consolidated Statements of Operations and Comprehensive (Loss) Income for the year ended December 31, 2012 related to these transactions and the redemption of the 2015 Notes in the first quarter of 2012 discussed above. The 2020 Notes are jointly and severally guaranteed on a senior unsecured basis by the Company's domestic subsidiaries that guarantee our indebtedness under the Credit Facilities (the "Guarantors"). The 2020 Notes are not guaranteed by any of our non-U.S. subsidiaries, any subsidiaries subject to regulation as an insurance, home warranty or similar company, or certain other subsidiaries (the "Non-Guarantors").

Term Facilities

In August 2012, the Company entered into an amendment (the "2012 Term Loan Facility Amendment") to its Term Loan Facility to amend the credit agreement governing the Term Loan Facility (the "Credit Agreement") primarily to extend the maturity date of a portion of the borrowings under the Term Loan Facility. ~~Prior~~Pursuant to the 2012 Term Loan Facility Amendment, the ~~Term Loan Facility had a maturity date of July~~Tranche ~~24,~~B ~~2014.~~loans ~~Pursuant to the 2012 Term Loan Facility Amendment, $1.001 billion of outstanding borrowings under the Term Loan Facility will~~ have a maturity date of January 31, 2017. The ~~remaining portion of $1.219 billion of outstanding borrowings continued to have a maturity date of July 24, 2014. The~~ interest rates applicable to the Tranche B loans under the Term Loan Facility are based on a fluctuating rate of interest measured by reference to either, at ServiceMaster's option, (i) an adjusted London inter-bank offered rate (adjusted for maximum reserves), plus a borrowing margin or (ii) an alternate base rate, plus a borrowing margin. As of December 31, ~~2012~~2013, the borrowing margin for the outstanding ~~loans with a maturity date of July~~Tranche ~~24,~~B ~~2014 was 2.50 percent, while the borrowing margin for the outstanding~~ loans ~~with a maturity date of January 31, 2017~~ was 4.25 percent. The borrowing margin for outstanding loans with a maturity date of July 24, 2014 will be adjusted from time to time based on the Consolidated Secured Leverage Ratio (as defined in the Credit Agreement) for the previous fiscal quarter. The 2012 Term Loan Facility Amendment also includes mechanics for future extension amendments, permits borrower buy-backs of term loans, increases the size of certain baskets and makes certain other changes to the Credit Agreement, including the reduction of the availability under the synthetic letter of credit facility from $150.0 million to $137.6 million.

On February 22, 2013, the Company entered into Amendment No. 2 to its Term Loan Facility (the "2013 Term Loan Facility Amendment") to amend the ~~credit~~Credit ~~agreement~~Agreement ~~governing the Term Loan Facility~~ primarily to extend the maturity date of a portion of the borrowings under the Term Loan Facility. ~~Prior~~Pursuant to the 2013 Term Loan Facility Amendment, ~~approximately~~the ~~$1.219 billion~~maturity of the outstanding ~~borrowings~~Tranche A ~~under~~loans ~~the~~was extended, ~~Term~~and ~~Loan~~such ~~Facility~~loans were converted into a new tranche of term loans in an aggregate principal amount, along with new loans extended by certain new lenders, of $1.220 billion (the "Tranche AC loans"). ~~had~~The a maturity date ~~of July~~for the Tranche 24C loans is January 31, ~~2014~~2017. ~~Pursuant~~The interest rates applicable to the ~~2013~~Tranche C loans under the Term Loan Facility ~~Amendment,~~are based ~~the~~on ~~maturity~~a fluctuating rate of interest measured by reference to either, at the ~~outstanding~~Company's ~~Tranche~~option, (i) Aan ~~loans~~adjusted ~~was~~London ~~extended,~~inter-bank ~~and~~offered ~~such~~rate ~~loans~~(adjusted ~~were~~for ~~converted~~maximum ~~into~~reserves) plus 3.25 percent, with a ~~new~~minimum ~~tranche~~adjusted London inter-bank offered rate of ~~term~~1.00 percent or (ii) an alternate base rate plus 2.25 percent, with a minimum alternate base rate of ~~loans~~2.00 percent. inAs part of the 2013 Term Loan Facility Amendment, the

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an aggregate principal amount, along with new loans extended by certain new lenders, of $1.220 billion ("Tranche C loans"). The maturity date for the new Tranche C loans is January 31, 2017. The interest rates applicable to the Tranche C loans under the Term Loan Facility are based on a fluctuating rate of interest measured by reference to either, at the Company~~'s option, (i) an adjusted London inter-bank offered rate (adjusted for maximum reserves) plus 3.25 percent, with a minimum adjusted London inter-bank~~ ~~offered rate of 1.00 percent or (ii) an alternate base rate plus 2.25 percent, with a minimum alternate base rate of 2.00 percent. As part of the 2013 Term Loan Facility Amendment, the Company~~ paid an original issue discount equal to 1.00 percent of the outstanding borrowings, or $12.2 million. Voluntary prepayments of borrowings under the Tranche C Loans are permitted at any time, in minimum principal amounts, without premium or penalty~~, subject to a 1~~.~~00 percent~~ premium payable in connection with certain repricing transactions within the first year. As a result of the 2012 Term Loan Facility Amendment and the 2013 Term Loan Facility Amendment, the Company will have approximately $2.2 billion of outstanding borrowings maturing January 31, 2017.

As a ~~Accounts~~result ~~Receivable~~of ~~Securitization~~ the 2012 Term Loan Facility Amendment and the 2013 Term Loan Facility Amendment, the Company has, as of December 31, 2013, approximately $2.2 billion of outstanding borrowings maturing January 31, 2017, after including the unamortized portion of the original issue discount paid. Additionally, following the 2012 Term Loan Facility Amendment and the 2013 Term Loan Facility Amendment, the availability under the synthetic letter of credit facility will be reduced from the current availability of $137.6 million to $77.9 million as of July 24, 2014. The remaining $77.9 million of availability under the synthetic letter of credit facility will mature January 31, 2017.

~~The~~ ~~Company~~Senior has an accounts receivable securitization arrangement under which Terminix and TruGreen may sell certain eligible trade accounts receivable to ServiceMaster Funding Company LLC ("Funding"), the Company's wholly owned, bankruptcy-remote subsidiary, which is consolidated for financial reporting purposes. Funding, in turn, may transfer, on a revolving basis, an undivided percentage ownership interest of up to $50.0 million in the pool of accounts receivable to one or both of the unrelated purchasers who are parties to the accounts receivable securitization arrangement ("Purchasers"). The amount of the eligible receivables varies during the year based on seasonality of the businesses and could, at times, limit the amount available to the Company from the sale of these interests. As of December 31, 2012, the amount of eligible receivables was approximately $39.2 million. Notes

During the ~~years~~fourth ~~ended~~quarter ~~December 31~~of 2011, ~~2012~~the ~~and~~Company ~~2011,~~purchased ~~there~~$65.0 million ~~were~~in noface ~~transfers~~value of ~~interests~~the in2015 ~~the~~Notes ~~pool~~from Holdings for a cost of ~~trade~~$68.0 million, ~~accounts~~which ~~receivable~~included topayment ~~Purchasers~~of ~~under~~accrued ~~this~~interest ~~arrangement~~of $3.0 million. AsThe ofdebt acquired by the Company has been ~~December 31~~retired, ~~2012~~ and ~~2011,~~the Company has discontinued the payment of interest. The Company ~~had~~recorded a loss on extinguishment of debt of $~~10.~~0.8 million ~~outstanding~~in ~~under~~its ~~the~~Consolidated ~~arrangement~~Statements of Operations and, Comprehensive as(Loss) ofIncome for the year ended December 31, ~~2012~~2011 ~~had~~for ~~$29.2 million~~the write-off of ~~remaining~~unamortized ~~capacity~~debt ~~available under~~issuance ~~the~~costs ~~accounts~~related ~~receivable~~to ~~securitization~~the ~~arrangement~~extinguished debt.

The ~~accounts~~2020 ~~receivable~~Notes, ~~securitization~~sold ~~arrangement~~in isFebruary 2012, will mature on February 15, 2020 and bear interest at a ~~364-day~~rate ~~facility~~of ~~scheduled~~8 percent per annum. The proceeds from the 2020 Notes, sold in February 2012, together with available cash, were used to redeem $600 million in aggregate principal amount of the Company's outstanding 2015 Notes in the first quarter of 2012. The 2020 Notes, sold in August 2012, will mature on ~~October~~August 2315, ~~2013~~2020 and bear interest at a rate of 7 percent per annum. ~~Unless~~The Company used a majority of the ~~arrangement~~proceeds isfrom ~~renegotiated~~the or2020 ~~extended~~Notes, sold in August ~~prior~~2012, to redeem the remaining $396 million aggregate principal amount of its ~~expiration~~2015 Notes and to repay $276 million of outstanding borrowings under its Term Facilities during the third quarter of 2012. The Company recorded a loss on extinguishment of debt of $55.6 million in its Consolidated Statements of Operations and Comprehensive (Loss) Income for the year ended December 31, ~~all~~2012 ~~obligations~~related to these transactions and the redemption of the 2015 Notes in the first quarter of 2012 discussed above. The 2020 Notes are jointly and severally guaranteed on a senior unsecured basis by the Company's domestic subsidiaries that guarantee our indebtedness under the ~~accounts~~Credit ~~receivable~~Facilities ~~securitization~~(the ~~arrangement~~"Guarantors"). ~~must~~The be2020 ~~repaid~~Notes are not guaranteed by ~~October 23~~any of our non-U.S. subsidiaries, ~~2013~~any subsidiaries subject to regulation as an insurance, home warranty or similar company, or certain other subsidiaries (the "Non-Guarantors").

Limitations on Distributions and Dividends by Subsidiaries

As a holding company, we depend on our subsidiaries to distribute funds to us so that we may pay our obligations and expenses, including our debt service obligations. The ability of our subsidiaries to make distributions and dividends to us depends on their operating results, cash requirements and financial condition and general business conditions, as well as restrictions under the laws of its subsidiaries' jurisdictions.

The payment of ordinary and extraordinary dividends by the Company's subsidiaries that are regulated as insurance, home warranty or similar companies is subject to applicable state law limitations. Insurance subsidiaries and home warranty and similar subsidiaries (through which ServiceMaster conducts its 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 46

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~~worth requirements~~ There ~~and~~are ~~may~~third ~~limit~~party restrictions on the ~~amount~~ability of ~~ordinary~~certain ~~and~~of ~~extraordinary~~the ~~dividends~~Company's ~~and~~subsidiaries ~~other~~to ~~payments~~transfer ~~that~~funds ~~these~~to ~~subsidiaries~~the ~~can~~Company. ~~pay~~These torestrictions ~~ServiceMaster.~~are ~~For~~related ~~example,~~to regulatory ~~certain~~requirements ~~states~~at ~~prohibit~~American ~~payment~~Home ~~by these~~Shield ~~subsidiaries~~and to ~~ServiceMaster~~a ofsubsidiary ~~dividends~~borrowing inarrangement ~~excess~~at ofSMAC. ~~10%~~The ofpayment ~~their capital as~~ of ~~the~~ordinary ~~most~~and ~~recent~~extraordinary ~~year~~dividends ~~end,~~by asthe ~~determined~~Company's inhome ~~accordance~~warranty ~~with~~and ~~prescribed~~similar subsidiaries ~~insurance~~(through ~~accounting~~which ~~practices~~ServiceMaster inconducts ~~those states.~~its OfAmerican ~~the~~Home ~~$243.7 million~~Shield asbusiness) ofare ~~December 31,~~subject ~~2012,~~to ~~which~~significant weregulatory ~~identify~~restrictions asunder ~~being~~the ~~potentially~~laws ~~unavailable~~and toregulations beof ~~paid to~~ the ~~Company~~states byin ~~its~~which ~~subsidiaries, approximately~~they ~~$188~~operate.~~7 million~~ isAmong ~~held~~other bythings, ~~our~~such ~~home~~laws ~~warranty~~ and ~~insurance~~regulations ~~subsidiaries~~require ~~and~~certain issuch ~~subject~~subsidiaries to ~~these~~maintain ~~regulatory~~minimum ~~limitations~~capital onand ~~the~~net ~~payment~~worth ofrequirements ~~funds~~and tomay ~~us.~~limit Wethe ~~expect~~amount ~~that~~of ~~such~~ordinary ~~limitations~~and ~~are expected~~extraordinary todividends beand inother ~~effect~~payments inthat ~~2013.~~these ~~The~~subsidiaries ~~remainder~~can ofpay ~~the~~to ~~$243~~ServiceMaster.~~7 million,~~ orAs ~~$55.0~~of December ~~million~~31, is2013, ~~related to amounts that~~ the ~~Company's~~total ~~management~~net ~~does~~assets ~~not~~subject ~~consider~~to ~~readily~~these ~~available~~third toparty berestrictions ~~used~~was to$160.2 million. ~~service~~We ~~indebtedness~~expect ~~due,~~that ~~among~~such ~~other~~limitations ~~reasons,~~will tobe ~~the~~in ~~Company's~~effect ~~cash~~in ~~management practices and working capital needs at various subsidiaries~~2014. None of the subsidiaries of ServiceMaster are obligated to make funds available to ServiceMaster through the payment of dividends.

We consider undistributed earnings of our foreign subsidiaries as of December 31, ~~2012~~2013 to be indefinitely reinvested and, accordingly, no U.S. income taxes have been provided thereon. The amount of cash associated with indefinitely reinvested foreign earnings was approximately $2819.70 million and ~~$24~~28.17 million as of December 31, ~~2012~~2013 and ~~2011~~2012, respectively. We have not repatriated, nor do we anticipate the need to repatriate, funds to the United States to satisfy domestic liquidity needs arising in the ordinary course of business, including liquidity needs associated with our domestic debt service requirements.

Contractual Obligations

The following table presents the Company's contractual obligations and commitments as of December 31, ~~2012~~2013. ~~See~~The ~~discussion above~~amounts inpresented ~~Liquidity~~do ~~for information on the 2013 Term Loan Facility Amendment entered into in February 2013, which is~~ not ~~reflected~~give ineffect to the ~~table~~TruGreen ~~below~~Separation Transaction.

(In millions)	Total		Less than 1 Yr		1 - 3 Yrs		3 - 5 Yrs		More than 5 Yrs
Principal repayments*	$	3,~~981~~948.69	$	4132.67	$	~~1,256~~72.28	$	~~976~~2,215.67	$	1,~~707~~627.27
Capital leases		4678.50		1018.6		2133.04		1423.86		02.14
Estimated interest payments(1)		1,~~425~~351.82		~~214~~224.89		~~362~~442.19		~~300~~258.58		~~548~~424.46
Non-cancelable operating leases(2)		~~140~~125.63		4238.07		5352.91		27.41		177.34
Purchase obligations:
Supply agreements and other(3)		9772.20		5038.60		2724.23		179.47		~~2.0~~—
Outsourcing agreements(4)		7657.39		2315.94		20.17		21.38		~~11.0~~—
Other long-term liabilities:*
Insurance claims		~~168~~222.95		8380.03		3451.52		1119.94		3971.56
Discontinued Operations		01.93		01.93		—		—		—
Other, including deferred compensation trust(2)		15.21		1.53		2.13		2.0		9.65
Total Amount	$	5,953.0	$	468.9	$	1,777.1	$	1,371.9	$	2,335.1

Total Amount	$	5,872.2	$	451.2	$	699.7	$	2,578.1	$	2,143.2

*These items are reported in the Consolidated Statements of Financial Position. (1)These amounts represent future interest payments related to the Company's existing debt obligations based on fixed and variable interest rates and principal maturities specified in the associated debt agreements. Payments related to variable debt are based on applicable rates at December 31, ~~2012~~2013 plus the specified margin in the associated debt agreements for each period presented as of December 31, ~~2012~~2013. The estimated debt balance (including capital leases) as of each fiscal year end from ~~2013~~2014 through ~~2017~~2018 is $3~~,975~~.9976 billion, $23.913 billion,~~725~~ $3.6869 billion, $1.721 billion and $1.630 billion, respectively. The weighted average interest rate

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~~$2,698.7 billion, $2,676.1 million and $1,707.3 million, respectively. The weighted average interest rate (including interest rate swaps)~~ on the estimated debt balances at each fiscal year end from ~~2013~~2014 through ~~2017~~2018 is expected to be 5.6 percent, 65.37 percent, 65.37 percent, 67.34 percent and 7.4 percent, respectively. See Note 12 of the Consolidated Financial Statements for the terms and maturities of existing debt obligations. (2)A portion of the Company's vehicle fleet and some equipment are leased through operating leases. ~~The~~For ~~lease~~further ~~terms~~discussion ~~are~~see ~~non-cancelable~~"Liquidity—Fleet ~~for the~~and ~~first~~Equipment ~~twelve-month~~Financing ~~term, and then are month-to-month, cancelable at the Company's option~~Arrangements". The amounts in non-cancelable operating leases exclude all prospective cancelable payments under these agreements. ~~There~~The ~~are~~liability ~~residual~~for ~~value guarantees by~~ the ~~Company (which approximate 84 percent of the~~ estimated ~~terminal value at the inception of the lease) relative to these vehicles and equipment, which historically have not resulted in significant net payments to the lessors. The~~ fair value of the ~~assets under all of the fleet and equipment leases is~~ ~~expected to substantially mitigate the Company's guarantee obligations under the agreements. As of December 31, 2012, the Company's~~ residual value guarantees related to the leased assets ~~totaled~~ ~~$20.2 million for which the Company~~ has ~~recorded as a liability the estimated fair value of these guarantees of $0.3 million in the Consolidated Statements of Financial Position. This liability has~~ been included in other long-term liabilities above. (3)These obligations include commitments for various products and services including, among other things, inventory purchases, telecommunications services, marketing and advertising services and other professional services. Arrangements are considered purchase obligations if a contract specifies all significant terms, including fixed or minimum quantities to be purchased, a pricing structure and approximate timing of the transactions. Most arrangements are cancelable without a significant penalty and with short notice (usually 30-120 days) and amounts reflected above include the minimum contractual obligation of the Company (inclusive of applicable cancellation penalties). For obligations with significant ~~penalties~~ penalties associated with termination, the minimum required expenditures over the term of the agreement have been included in the table above. (4)Outsourcing agreements include commitments for the purchase of certain outsourced services from third party vendors ~~(see further discussion of the Company's agreement with IBM below)~~. Because the services provided through these agreements are integral to the operations of the Company, the Company has concluded that it is appropriate to include the total anticipated costs for services under these agreements in the table ~~above.~~ On December 11, 2008, the Company entered into an agreement with IBM pursuant to which IBM provides information technology operations and applications development services (collectively, the "IT Services") to the Company. ServiceMaster pays IBM for the IT Services under the agreement through a combination of fixed and variable charges, with variable charges fluctuating based on the Company's actual need for IT Services. For the year ended December 31, 2012, the Company paid IBM $22.4 million for the IT Services. The Company expects to phase out a significant portion of its use of IT Services from IBM by the end of 2013, but does not expect its costs for IT Services to increase materially. The figures in the table above ~~reflect expected spend with IBM of $7~~.~~5 million for 2013 as the IT Services are reduced.~~ ~~In March~~ 2012, the Company and IBM entered into an amendment (the "IBM Amendment") to the information technology outsourcing services agreement, modifying the terms pursuant to which IBM provides IT services to the Company and its subsidiaries. The IBM Amendment facilitates the expected phase-out through 2013 of a significant portion of the services provided to the Company by IBM as of December 31, 2011. The terms and provisions of the IBM

60 Due to the uncertainty with respect to the timing of future cash flows associated with unrecognized tax benefits at December 31, 2013, the Company is unable to reasonably estimate the period of cash settlement with the respective taxing authority. Accordingly, $7.8 million of unrecognized tax benefits have been excluded from the contractual obligations table above. See the discussion of income taxes in Note 5 of the Consolidated Financial Statements.

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Amendment: (i) remove the Company's existing minimum revenue commitment to IBM; (ii) extend from 24 months to 36 months the availability of termination assistance from IBM for application development and maintenance services; (iii) allow ServiceMaster to terminate the Agreement related to network, infrastructure and end-user services for convenience upon 60 days' notice with no termination fees; (iv) significantly reduce termination fees for disaster recovery services; and (v) eliminate termination fees for application development services if the Company terminates such services after September 2013. In August 2012, the Company and IBM entered into a separate amendment to the information technology outsourcing services agreement, further modifying the terms pursuant to which IBM provides IT services to the Company and its subsidiaries. The amendment deletes the service levels associated with the information technology infrastructure services that have been eliminated through August 1, 2012 and amends provisions of the agreement relating to the service levels for the remaining application maintenance services. The terms of the two IBM amendments accelerate the phase out of a significant portion of the information technology services provided by IBM.

Due to the uncertainty with respect to the timing of future cash flows associated with unrecognized tax benefits at December 31, 2012, the Company is unable to reasonably estimate the period of cash settlement with the respective taxing authority. Accordingly, $8.3 million of unrecognized tax benefits have been excluded from the contractual obligations table above. See the discussion of income taxes in Note 5 of the Consolidated Financial Statements.

As further described above in Liquidity, the Company entered into the 2013 Term Loan Facility Amendment in February 2013. The following table presents the Company's contractual obligations and commitments as of December 31, 2012 as if the 2013 Term Loan Facility Amendment had occurred on December 31, 2012. This pro forma presentation impacts the Principal repayments, Estimated interest payments and Total Amount rows only. No other changes have been made from the information presented in the contractual obligations table above.

(In millions)	Total		Less than 1 Yr		1 - 3 Yrs		3 - 5 Yrs		More than 5 Yrs
Principal repayments	$	3,982.5	$	41.6	$	73.7	$	2,160.0	$	1,707.2
Capital leases		46.5		10.6		21.0		14.8		0.1
Estimated interest payments		1,582.2		233.5		445.5		354.8		548.4
Non-cancelable operating leases		140.6		42.0		53.9		27.4		17.3
Purchase obligations:
Supply agreements and other		97.2		50.6		27.2		17.4		2.0
Outsourcing agreements		76.3		23.9		20.1		21.3		11.0
Other long-term liabilities:
Insurance claims		168.9		83.0		34.5		11.9		39.5
Discontinued Operations		0.9		0.9		—		—		—
Other, including deferred compensation trust		15.2		1.5		2.1		2.0		9.6
Total Amount	$	6,110.3	$	487.6	$	678.0	$	2,609.6	$	2,335.1

Financial Position—Continuing Operations

~~Receivables~~Prepaid expenses and other assets increased from prior year levels, primarily reflecting ~~accounts~~the ~~receivable~~inclusion, ~~growth~~in at2013, ~~American~~of ~~Home~~the ~~Shield~~current ~~and~~portion of ~~product~~insurance ~~sales~~recoverables ~~and termite~~related ~~completions~~to atinsured ~~Terminix~~claims, which has historically been netted with loss reserves within Accrued liabilities—Self-insured claims and related expenses.

~~Prepaid~~Property ~~expenses~~ and ~~other~~equipment ~~assets~~increased ~~decreased~~ from prior year levels, primarily reflecting apurchases ~~reduction~~for inrecurring ~~prepaid~~capital ~~marketing~~needs ~~expense~~and atinformation ~~Terminix~~technology projects and the acquisition of vehicles under the Fleet Agreement.

~~Current~~Goodwill ~~deferred~~decreased ~~tax assets increased~~ from prior year levels, ~~reflecting~~as ~~the~~a ~~reclassification~~result of ~~certain~~the ~~net~~goodwill ~~operating~~impairment ~~losses~~in ~~from~~2013 ~~long-term~~in the TruGreen business. See Note 1 to ~~current~~the Consolidated Financial Statements for further information.

~~Property~~Intangible assets, primarily trade names, service marks and ~~equipment~~trademarks, ~~increased~~net, decreased from prior year levels, ~~reflecting~~due ~~purchases~~to ~~for~~amortization ~~recurring~~expense ~~capital~~and ~~needs,~~the ~~information~~trade ~~technology~~name ~~projects~~impairment ~~and~~in ~~vehicles~~2013 in the TruGreen business. See Note 1 to the Consolidated Financial Statements for further information.

61 Other assets increased from prior year levels, primarily reflecting the inclusion, in 2013, of the non-current portion of insurance recoverables related to insured claims, which has historically been netted with loss reserves within Other long-term obligations, primarily self-insured claims.

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~~Goodwill~~Accounts payable ~~decreased~~increased from prior year levels, asprimarily areflecting ~~result of~~ a ~~goodwill~~change ~~impairment~~ in ~~2012 in~~ the ~~TruGreen~~timing ~~business.~~of ~~See~~payments ~~Note 1~~ to ~~the Consolidated Financial Statements for further information~~vendors.

~~Intangible~~Deferred ~~assets~~revenue ~~decreased~~increased from prior year levels, ~~due~~primarily toreflecting ~~amortization~~higher ~~expense~~customer ~~and~~prepayments aat ~~trade~~Terminix, ~~name impairment in 2012 in the~~ TruGreen ~~business.~~and ~~See~~American ~~Note 1~~Home ~~to the Consolidated Financial Statements for further information~~Shield.

~~Debt~~Deferred ~~issuance~~taxes ~~costs~~decreased ~~increased~~ from prior year levels ~~due to debt issuance costs paid related to the sale of the 2020 Notes~~, ~~partially~~primarily ~~offset~~reflecting ~~by write-offs of debt issuance costs related to~~ the ~~redemption~~goodwill ~~of the 2015 Notes~~ and antrade ~~early~~name ~~principal payment on the Term Loan Facilities and amortization expense being recorded~~impairment.

~~Accounts~~Other ~~payable~~long-term obligations, primarily self-insured claims, increased from prior year levels, primarily reflecting athe ~~change~~exclusion, in 2013, of the ~~timing~~non-current portion of ~~payments~~insurance recoverables related to ~~vendors~~insured claims, which is now reported within Other assets.

~~Accrued~~Total ~~payroll~~shareholder's ~~and~~equity ~~related~~was ~~expense~~$52.4 million ~~decreased~~as ~~from~~of ~~prior year levels~~December 31, ~~reflecting~~2013 acompared ~~reduction~~to in$554.7 million ~~accrued~~as ~~incentive~~of ~~compensation~~December 31, ~~expense~~2012.

Accrued self-insurance claims and related expenses increased from prior year levels, reflecting an increase in accruals for home warranty claims in the American Home Shield business.

Accrued interest payable decreased from prior year levels, reflecting interest payments made in conjunction with the redemption of the 2015 Notes.

Deferred revenue increased from prior year levels, primarily reflecting higher revenue deferrals at American Home Shield.

Long-term debt increased from prior year levels, reflecting the issuance of the 2020 Notes, offset, in part, by the redemption of the 2015 Notes and payments made on the Term Loan Facilities, as discussed in "Liquidity", and scheduled principal payments.

Non-current deferred tax liabilities decreased from prior year levels, reflecting the goodwill and trade name impairment, offset, in part, by the reclassification of certain net operating losses from long-term to current.

Other long-term obligations, primarily self-insured claims, decreased from prior year levels, reflecting decreases in the fair value liability recorded for interest rate swap contracts and reductions in required reserve levels under certain of our self-insurance programs.

Total shareholder's equity was $554.7 million as of December 31, 2012 compared to $1.248 billion as of December 31, 2011.

Financial Position—Discontinued Operations

The assets and liabilities related to discontinued operations have been classified in a separate caption on the Consolidated Statements of Financial Position.

Off-Balance Sheet Arrangements

The Company has off-balance sheet arrangements in the form of guarantees as discussed in Note 9 of the Consolidated Financial Statements.

Critical Accounting Policies and Estimates

The preparation of the Consolidated Financial Statements requires management to make certain estimates and assumptions required under GAAP which may differ from actual results. The more significant areas requiring the use of management estimates relate to revenue recognition; the allowance for uncollectible receivables; accruals for self-insured retention limits related to medical, workers' compensation, auto and general liability insurance claims; accruals for home warranties and termite damage claims; the possible outcome of outstanding litigation; accruals for income tax liabilities as well as deferred tax accounts; the deferral and amortization of customer acquisition costs; useful lives for depreciation and amortization expense; the valuation of marketable securities; and the valuation of tangible and intangible assets. In 2013, there have been no changes in the significant areas that require estimates or in the underlying methodologies used in determining the amounts of these associated estimates.

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workers' compensation, auto and general liability insurance claims; accruals for home warranties and termite damage claims; the possible outcome of outstanding litigation; accruals for income tax liabilities as well as deferred tax accounts; the deferral and amortization of customer acquisition costs; useful lives for depreciation and amortization expense; the valuation of marketable securities; and the valuation of tangible and intangible assets. In 2012, there have been no changes in the significant areas that require estimates or in the underlying methodologies used in determining the amounts of these associated estimates.

The allowance for receivables is developed based on several factors including overall customer credit quality, historical write-off experience and specific account analyses that project the ultimate collectability of the outstanding balances. As such, these factors may change over time causing the reserve level to vary.

The Company carries insurance policies on insurable risks at levels which it believes to be appropriate, including workers' compensation, auto and general liability risks. The Company purchases insurance from third-party insurance carriers. These policies typically incorporate significant deductibles or self-insured retentions. The Company is responsible for all claims that fall within the retention limits. In determining the Company's accrual for self-insured claims, the Company uses historical claims experience to establish both the current year accrual and the underlying provision for future losses. This actuarially determined provision and related accrual include both known claims, as well as incurred but not reported claims. The Company adjusts its estimate of accrued self-insured claims when required to reflect changes based on factors such as changes in health care costs, accident frequency and claim severity.

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Accruals for home warranty claims in the American Home Shield business are made based on the Company's claims experience and actuarial projections. Termite damage claim accruals in the Terminix business are recorded based on both the historical rates of claims incurred within a contract year and the cost per claim. Current activity could differ causing a change in estimates. The Company has certain liabilities with respect to existing or potential claims, lawsuits, and other proceedings. The Company accrues for these liabilities when it is probable that future costs will be incurred and such costs can be reasonably estimated. Any resulting adjustments, which could be material, are recorded in the period identified.

The Company records deferred income tax balances based on the net tax effects of temporary differences between the carrying value of assets and liabilities for financial reporting purposes and income tax purposes. The Company records its deferred tax items based on the estimated value of the tax basis. The Company adjusts tax estimates when required to reflect changes based on factors such as changes in tax laws, relevant court decisions, results of tax authority reviews and statutes of limitations. The Company records a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. The Company recognizes potential interest and penalties related to its uncertain tax positions in income tax expense.

Revenue: Revenues from lawn care and pest control services, as well as liquid and fumigation termite applications, are recognized as the services are provided. The Company eradicates termites through the use of non-baiting methods (e.g., fumigation or liquid treatments) and baiting systems. Termite services using baiting systems, termite inspection and protection contracts, as well as home warranties, are frequently sold through annual contracts for a one-time, upfront payment. Direct costs of these contracts (service costs for termite contracts and claim costs for home warranties) are expensed as incurred. The Company recognizes revenue over the life of these contracts in proportion to the expected direct costs. Those costs bear a direct relationship to the fulfillment of the Company's obligations under the contracts and are representative of the relative value provided to the customer (proportional performance method). The Company regularly reviews its estimates of direct costs for its termite bait contracts and home warranties and adjusts the estimates when appropriate.

63 The Company has franchise agreements in its Terminix, TruGreen, ServiceMaster Clean, Merry Maids, Furniture Medic and AmeriSpec businesses. Franchise revenue (which in the aggregate represents approximately four percent of annual consolidated operating revenue from continuing operations) consists principally of continuing monthly fees based upon the franchisee's customer level revenue. Monthly fee revenue is recognized when the related customer level revenue generating activity is performed by the franchisee and collectability is reasonably assured. Franchise revenue also includes initial fees resulting from the sale of a franchise or a license. These initial franchise or license fees are pre-established fixed amounts and are recognized as revenue when collectability is reasonably assured and all material services or conditions relating to the sale have been substantially performed.

Deferred customer acquisition costs: Customer acquisition costs, which are incremental and direct costs of obtaining a customer, are deferred and amortized over the life of the related contract in proportion to revenue recognized. These costs include sales commissions and direct selling costs which can be shown to have resulted in a successful sale.

Property and equipment, intangible assets and goodwill: Fixed assets and intangible assets with finite lives are depreciated and amortized on a straight-line basis over their estimated useful lives. These lives are based on the Company's previous experience for similar assets, potential market obsolescence and other industry and business data. As required by accounting standards for the impairment or disposal of long-lived assets, the Company's long-lived assets, including fixed assets and intangible assets (other than goodwill), are tested for recoverability

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~~direct~~whenever ~~costs~~events ~~for~~or ~~its~~changes ~~termite~~in ~~bait~~circumstances ~~contracts~~indicate ~~and~~that ~~home~~their ~~warranties~~carrying amounts may not be recoverable. If the carrying value is no longer recoverable based upon the undiscounted future cash flows of the asset, an impairment loss would be recognized equal to the difference between the carrying amount and ~~adjusts~~the fair value of the ~~estimates~~asset. ~~when~~Changes ~~appropriate~~in the estimated useful lives or in the asset values could cause the Company to adjust its book value or future expense accordingly.

~~The~~As ~~Company~~required ~~has~~under ~~franchise~~accounting ~~agreements~~standards infor ~~its~~goodwill ~~Terminix,~~and ~~TruGreen~~other intangibles, ~~ServiceMaster~~goodwill ~~Clean,~~is ~~Merry~~not ~~Maids,~~subject ~~Furniture~~to ~~Medic~~amortization, and ~~AmeriSpec~~intangible ~~businesses~~assets with indefinite useful lives are not amortized until their useful lives are determined to no longer be indefinite. ~~Franchise~~Goodwill ~~revenue~~and ~~(which~~intangible inassets ~~the~~that ~~aggregate~~are not subject to amortization are subject to assessment for impairment by applying a ~~represents~~fair-value ~~approximately~~based ~~four~~test ~~percent~~on ofan annual ~~consolidated~~basis ~~operating~~or ~~revenue~~more ~~from~~frequently ~~continuing~~if ~~operations)~~circumstances ~~consists~~indicate ~~principally~~a potential impairment. The Company adopted the provisions of ~~continuing~~ASU ~~monthly~~2011-08, ~~fees~~"Testing ~~based~~Goodwill ~~upon~~for Impairment," in the ~~franchisee's~~fourth ~~customer~~quarter ~~level~~of ~~revenue~~2011. ~~Monthly~~This ~~fee~~Accounting ~~revenue~~Standards isUpdate ~~recognized~~("ASU") ~~when~~gives entities the ~~related~~option ~~customer~~of ~~level~~performing ~~revenue~~a isqualitative ~~reported~~assessment bybefore calculating the ~~franchisee~~fair ~~and~~value ~~collectability~~of isa ~~reasonably~~reporting ~~assured.~~unit ~~Franchise~~in ~~revenue~~Step ~~also~~1 ~~includes~~of ~~initial~~the ~~fees~~goodwill ~~resulting~~impairment ~~from~~test. If entities determine, on the ~~sale~~basis of aqualitative ~~franchise~~factors, orthat the fair value of a ~~license.~~reporting ~~These~~unit ~~initial~~is ~~franchise~~more orlikely ~~license~~than ~~fees~~not ~~are~~greater ~~pre~~than its carrying amount, the two-~~established~~step ~~fixed~~impairment test ~~amounts~~would not be required. For the 2013 and ~~are~~2012 ~~recognized~~annual goodwill impairment review performed as ~~revenue~~of ~~when~~October 1, ~~collectability~~2013 isand October 1, 2012, respectively, the Company did not perform ~~reasonably~~qualitative ~~assured~~assessments ~~and~~on any reporting unit, but instead completed Step 1 of the goodwill impairment test for all ~~material~~reporting ~~services~~units. orFor ~~conditions~~the ~~relating~~2011 toannual goodwill impairment review performed as of October 1, 2011, the ~~sale~~Company ~~have~~performed ~~been~~qualitative ~~substantially~~assessments on the Terminix, American Home Shield and ServiceMaster Clean reporting units. Based on these assessments, the Company determined that, more likely than not, the fair values of Terminix, American Home Shield and ServiceMaster Clean were greater than their respective carrying amounts. As a result, the two-step goodwill impairment test was not performed for Terminix, American Home Shield and ServiceMaster Clean in 2011.

~~Customer~~Goodwill ~~acquisition~~impairment ~~costs~~is determined using a two-step process. The first step involves a comparison of the estimated fair value of a reporting unit to its carrying amount, ~~which~~including goodwill. ~~are~~In ~~incremental~~performing ~~and~~the ~~direct~~first ~~costs~~step, the Company determines the fair value of ~~obtaining~~a reporting unit using a ~~customer~~combination of a discounted cash flow ("DCF") analysis, ~~are~~a ~~deferred~~market-based comparable approach and a ~~amortized~~market-based ~~over~~transaction approach. Determining fair value requires the ~~life~~exercise of significant judgment, including judgment about appropriate discount rates, terminal growth rates, the ~~related~~amount ~~contract~~and timing of expected future cash flows, as well as relevant comparable company earnings multiples for the market-based comparable approach and relevant transaction multiples for the market-based transaction approach. The cash flows employed in ~~proportion~~the DCF analyses are based on the Company's most recent budget and, for years beyond the budget, the Company's estimates, which are based on estimated growth rates. The discount rates used in the DCF analyses are intended to ~~revenue~~reflect the risks inherent in the future cash flows of the respective reporting units. In addition, the market-based ~~recognized~~comparable and transaction approaches utilize comparable company public trading values, comparable company historical results, research analyst estimates and, where available, values observed in private market transactions. ~~These~~If ~~costs~~the ~~include~~estimated ~~sales~~fair ~~commissions~~value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired and ~~direct~~the ~~selling~~second ~~costs~~step ~~which~~of ~~can~~the impairment test is not necessary. If the carrying amount of a reporting unit exceeds its estimated fair value, then the second step of the goodwill impairment test must be ~~shown~~performed. The second step of the goodwill impairment test compares the implied fair value of the reporting unit's goodwill with its goodwill carrying amount to ~~have~~measure ~~resulted~~the amount of impairment, if any. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a ~~successful~~business ~~sale~~combination. In other words, the estimated fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid. If the carrying amount of the reporting unit's

Fixed assets and intangible assets with finite lives are depreciated and amortized on a straight-line basis over their estimated useful lives. These lives are based on the Company's previous experience for similar assets, potential market obsolescence and other industry and business data. As required by accounting standards for the impairment or disposal of long-lived assets, the Company's long-lived assets, including fixed assets and intangible assets (other than goodwill), are tested for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. If the carrying value is no longer recoverable based upon the undiscounted future cash flows of the asset, an impairment loss would be recognized equal to the difference between the carrying amount and the fair value of the asset. Changes in the estimated useful lives or in the asset values could cause the Company to adjust its book value or future expense accordingly. 51

As required under accounting standards for goodwill and other intangibles, goodwill is not subject to amortization, and intangible assets with indefinite useful lives are not amortized until their useful lives are determined to no longer be indefinite. Goodwill and intangible assets that are not subject to amortization are subject to assessment for impairment by applying a fair-value based test on an annual basis or more frequently if circumstances indicate a potential impairment. The Company adopted the provisions of ASU 2011-08, "Testing Goodwill for Impairment," in the fourth quarter of 2011. This Accounting Standards Update ("ASU") gives entities the option of performing a qualitative assessment before calculating the fair value of a reporting unit in Step 1 of the goodwill impairment test. If entities determine, on the basis of qualitative factors, that the fair value of a reporting unit is more likely than not greater than its carrying amount, the two-step impairment test would not be required. For the 2012 annual goodwill impairment review performed as October 1, 2012, the Company did not perform qualitative assessments on any reporting units, but instead completed Step 1 of the goodwill impairment test for all reporting units. For the 2011 annual goodwill impairment review performed as of October 1, 2011, the Company performed qualitative assessments on the Terminix, American Home Shield and ServiceMaster Clean reporting units. Based on these assessments, the Company determined that, more likely than not, the fair values of Terminix, American Home Shield and ServiceMaster Clean were greater than their respective carrying amounts. As a result, the two-step goodwill impairment test was not performed for Terminix, American Home Shield and ServiceMaster Clean in 2011.

As permitted under accounting standards for goodwill and other intangibles prior to the adoption of ASU 2011-08, the Company carried forward a reporting unit's valuation from the most

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~~recent~~goodwill ~~valuation~~exceeds ~~under~~ the ~~following~~implied ~~conditions: the assets and liabilities of the reporting unit have not changed significantly since the most recent~~ fair value ~~calculation, the most recent fair value calculation resulted in an amount that exceeded the carrying amount~~ of ~~the reporting unit by a substantial margin and, based on the facts and circumstances of events~~ that ~~have occurred since the last fair value determination~~goodwill, ~~the~~an ~~likelihood~~impairment ~~that~~is arecognized ~~current fair value calculation would result~~ in an ~~impairment~~amount ~~would~~equal beto ~~remote.~~that For the 2010 annual goodwill impairment review performed as of October 1, 2010, the Company carried forward the valuations of the Terminix and ServiceMaster Clean reporting units completed as of October 1, 2009excess. ~~The Company did not carry forward the valuations for any trade names for the 2010 annual trade name impairment review.~~

Goodwill impairment is determined using a two-step process. The first step involves a comparison of the estimated fair value of a reporting unit to its carrying amount, including goodwill. In performing the first step, the Company determines the fair value of a reporting unit using a combination of a DCF analysis, a market-based comparable approach and a market-based transaction approach. Determining fair value requires the exercise of significant judgment, including judgment about appropriate discount rates, terminal growth rates, the amount and timing of expected future cash flows, as well as relevant comparable company earnings multiples for the market-based comparable approach and relevant transaction multiples for the market-based transaction approach. The cash flows employed in the DCF analyses are based on the Company's most recent budget and, for years beyond the budget, the Company's estimates, which are based on estimated growth rates. The discount rates used in the DCF analyses are intended to reflect the risks inherent in the future cash flows of the respective reporting units. In addition, the market-based comparable and transaction approaches utilize comparable company public trading values, comparable company historical results, research analyst estimates and, where available, values observed in private market transactions. If the estimated fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired and the second step of the impairment test is not necessary. If the carrying amount of a reporting unit exceeds its estimated fair value, then the second step of the goodwill impairment test must be performed. The second step of the goodwill impairment test compares the implied fair value of the reporting unit's goodwill with its goodwill carrying amount to measure the amount of impairment, if any. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. In other words, the estimated fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment is recognized in an amount equal to that excess.

The impairment test for other intangible assets not subject to amortization involves a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. The estimates of fair value of intangible assets not subject to amortization are determined using a DCF valuation analysis. The DCF methodology used to value trade names is known as the relief from royalty method and entails identifying the hypothetical cash flows generated by an assumed royalty rate that a third party would pay to license the trade names and discounting them back to the valuation date. Significant judgments inherent in this analysis include the selection of appropriate discount rates and hypothetical royalty rates, estimating the amount and timing of estimated future cash flows attributable to the hypothetical royalty rates and identification of appropriate terminal growth rate assumptions. The discount rates used in the DCF analyses are intended to reflect the risk inherent in the projected future cash flows generated by the respective intangible assets.

65 Goodwill and indefinite-lived intangible assets, primarily the Company's trade names, are assessed annually for impairment during the fourth quarter or earlier upon the occurrence of certain events or substantive changes in circumstances. The Company performed an interim goodwill impairment analysis at TruGreen as of June 30, 2013 that resulted in a pre-tax non-cash goodwill impairment of $417.5 million. After this impairment charge, there was no goodwill remaining at TruGreen. The Company performed an interim goodwill impairment analysis at TruGreen as of September 30, 2012 that resulted in a pre-tax non-cash goodwill impairment of $794.2 million. During the fourth quarter of 2012, the Company finalized its September 30, 2012 TruGreen valuation resulting in a $4.0 million adjustment to goodwill decreasing the 2012 goodwill impairment charge to $790.2 million. The Company's 2013, 2012, and 2011 annual impairment analyses, which were performed as of October 1 of each year, did not result in any goodwill impairments.

The Company performed an interim trade name impairment analysis at TruGreen as of June 30, 2013 resulting in a pre-tax non-cash trade name impairment charge of $255.8 million recorded in the second quarter of 2013. The Company performed an interim trade name impairment analysis at TruGreen as of June 30, 2012 resulting in a pre-tax non-cash trade name impairment charge of $67.7 million recorded in the second quarter of 2012. Further, the Company performed an interim trade name impairment analysis at TruGreen as of September 30, 2012 resulting in a pre-tax non-cash trade name impairment charge of $51.0 million recorded in the third quarter of 2012. The Company's annual trade name impairment analyses, which were performed as of October 1 of each year, resulted in pre-tax non-cash impairment of $36.7 million in 2011 related to the TruGreen trade name. The Company's October 1, 2013 and 2012 trade name impairment analyses did not result in any trade name impairments. The impairment charges by business segment for the years ended December 31, 2013, 2012 and 2011, as well as the remaining value of

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~~Goodwill and indefinite-lived intangible assets, primarily~~ the ~~Company's~~ trade names, ~~are~~not ~~assessed~~subject ~~annually~~to ~~for~~amortization ~~impairment~~by ~~during~~business ~~the~~segment ~~fourth quarter or earlier upon the occurrence of certain events or substantive changes in circumstances. The Company performed an interim goodwill impairment analysis at TruGreen~~ as of ~~September~~December 3031, ~~2012~~2013 ~~that~~and ~~resulted in a pre-tax non-cash goodwill impairment of $794.2 million. During the fourth quarter of~~ 2012, ~~the~~are Company finalized its September 30, 2012 TruGreen valuation resulting in a $4.0 million adjustment to goodwill decreasing the 2012 goodwill impairment charge to $790.2 million. The Company's 2012, 2011, and 2010 annual impairment analyses, which were performed as offollows: ~~October 1 of each year, did not result in any goodwill impairments.~~

The Company performed an interim trade name impairment analysis at TruGreen as of June 30, 2012 resulting in a pre-tax non-cash trade name impairment charge of $67.7 million recorded in the second quarter of 2012. Further, the Company performed an interim trade name impairment analysis at TruGreen as of September 30, 2012 resulting in a pre-tax non-cash trade name impairment charge of $51.0 million recorded in the third quarter of 2012.

(In thousands)	Terminix		TruGreen			American Home Shield		ServiceMaster Clean		Other Operations & Headquarters(1)		Total

Balance at December 31, 2010	$	875,100	$	762,200		$	140,400	$	152,600	$	439,900	$	2,370,200
2011 Impairment		—		(36,700	)		—		—		—		(36,700	)


Balance at December 31, 2011		875,100		725,500			140,400		152,600		439,900		2,333,500
2012 Impairment		—		(118,700	)		—		—		—		(118,700	)


Balance at December 31, 2012		875,100		606,800			140,400		152,600		439,900		2,214,800
2013 Impairment		—		(255,800	)		—		—		—		(255,800	)


Balance at December 31, 2013	$	875,100	$	351,000		$	140,400	$	152,600	$	439,900	$	1,959,000

The Company's annual trade name impairment analyses, which were performed as of October 1 of each year, resulted in pre-tax non-cash impairment of $36.7 million in 2011 related to the TruGreen trade name. The Company's October 1, 2012 and 2010 trade name impairment analyses did not result in any trade name impairments. The impairment charges by business segment for the years ended December 31, 2012 and 2011, as well as the remaining value of the trade names not subject to amortization by business segment as of December 31, 2012 and 2011 are as follows:

(In thousands)	Terminix		TruGreen			American Home Shield		ServiceMaster Clean		Other Operations & Headquarters(1)		Total
Balance at December 31, 2009 and 2010	$	875,100	$	762,200		$	140,400	$	152,600	$	439,900	$	2,370,200
2011 Impairment		—		(36,700	)		—		—		—		(36,700	)
Balance at December 31, 2011		875,100		725,500			140,400		152,600		439,900		2,333,500
2012 Impairment		—		(118,700	)		—		—		—		(118,700	)
Balance at December 31, 2012	$	875,100	$	606,800		$	140,400	$	152,600	$	439,900	$	2,214,800

(1): The Other Operations and Headquarters segment includes Merry Maids.

The goodwill impairment charge recorded in ~~2012~~2013 was primarily attributable to a decline in forecasted ~~2012~~2013 ~~cash flows~~ and ~~a decrease in projected~~ future ~~growth in~~ cash flows at TruGreen over a defined projection period as of ~~September~~ June 30, ~~2012~~2013 compared to the projections used in the ~~previous~~last annual impairment assessment performed on October 1, ~~2011~~2012. The changes in projected cash flows at TruGreen ~~were~~arose in part a ~~consequence of~~ from the ~~shift~~business inchallenges ~~strategy~~at ~~for~~ TruGreen described in "Segment Review—TruGreen Segment" in Management's Discussion and Analysis ~~in Item 7 of this Form 10-K~~above. Although the Company projected future ~~growth~~improvement in cash flows at TruGreen as a part of its ~~September~~June 30, ~~2012~~2013 impairment analysis, total cash flows and projected growth in those cash flows were lower than ~~that~~those projected at the time TruGreen was last tested for impairment in ~~2011~~2012. The long-term growth rates used in the impairment tests at ~~September~~June 30, ~~2012~~2013 and October 1, ~~2011~~2012 were the same and were in line with historical U.S. gross domestic product growth rates. The discount rate used in the ~~September~~ June 30, ~~2012~~2013 impairment test was 50100 bps lower than the discount rate used in the October 1, ~~2011~~2012 impairment test for TruGreen. The decrease in the discount rate is primarily attributable to changes in market conditions which indicated an improved outlook for the U.S. financial markets and a higher risk tolerance for investors since the 2012 analysis.

66 The goodwill impairment charge recorded in 2012 was primarily attributable to a decline in forecasted 2012 cash flows and a decrease in projected future growth in cash flows at TruGreen over a defined projection period as of September 30, 2012 compared to the projections used in the previous annual impairment assessment performed on October 1, 2011. Although the Company projected future growth in cash flows at TruGreen as a part of its September 30, 2012 impairment analysis, total cash flows and projected growth in those cash flows were lower than that projected at the time TruGreen was tested for impairment in 2011. The long-term growth rates used in the impairment tests at September 30, 2012 and October 1, 2011 were the same and in line with historical U.S. gross domestic product growth rates. The discount rate used in the September 30, 2012 impairment test was 50 bps lower than the discount rate used in the October 1, 2011 impairment test for TruGreen. The decrease in the discount rate is primarily attributable to changes in market conditions which indicated an improved outlook for the U.S. financial markets since the 2011 analysis.

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~~attributable to~~ Based ~~changes~~on the revenue results at TruGreen in ~~market~~the ~~conditions~~first ~~which~~six ~~indicated~~months anof ~~improved~~2013 and a lower revenue outlook for the ~~U.S.~~remainder ~~financial~~of ~~markets~~2013 ~~since~~and future years, the ~~last~~Company concluded that there was an impairment indicator requiring the performance of an interim indefinite-lived intangible asset impairment test for the TruGreen trade name as of June 30, 2013. The impairment analysis resulted in ~~2011~~a $255.8 million impairment charge recorded in the second quarter 2013.

~~Based~~The onimpairment charge recorded in the ~~revenue~~second ~~results~~quarter atof ~~TruGreen~~2013 inwas ~~the~~primarily ~~first~~attributable ~~six~~to ~~months~~a ofdecrease ~~2012~~in the assumed royalty rate and a ~~then~~decrease ~~lower~~in projected future growth in revenue ~~outlook~~at TruGreen ~~for~~over ~~the~~a ~~remainder~~defined ofprojection ~~2012~~period ~~and~~as ~~future~~of ~~years~~June 30, 2013 compared to the ~~Company~~royalty ~~concluded~~rate ~~that~~and ~~there~~projections ~~was an~~used in the last annual impairment ~~indicator~~assessment ~~requiring~~performed on October 1, 2012. The decrease in the ~~performance~~assumed royalty rate was due to lower current and projected earnings as a percent of anrevenue ~~interim~~as ~~indefinite-lived~~compared ~~intangible~~to ~~asset~~the last annual impairment test. ~~for~~Although the ~~TruGreen~~Company ~~trade~~projected ~~name~~future growth in revenue at TruGreen as part of its June 30, ~~2012.~~2013 ~~That~~ impairment analysis ~~resulted~~, intotal aprojected ~~$67.7 million~~revenue ~~impairment~~was ~~charge~~lower ~~recorded~~than inthe revenue projected at the ~~second~~time ~~quarter~~the oftrade name was last tested for impairment in October 2012. ~~Based~~The onchanges ~~the~~in projected future revenue ~~results~~growth ofat TruGreen arose in part from the ~~third~~business ~~quarter~~challenges ofat ~~2012~~TruGreen described in "Segment Review—TruGreen Segment" in Management's Discussion and ~~the~~Analysis ~~revised~~above. ~~outlook~~The ~~for~~long-term ~~the remainder~~revenue ofgrowth rates used in the ~~year~~impairment ~~and~~tests ~~future~~at ~~years~~October 1, 2013, June 30, 2013 and October 1, 2012 were the ~~Company~~same and ~~performed~~in ~~another~~line ~~impairment~~with ~~analysis~~historical onU.S. ~~its~~gross ~~TruGreen~~domestic ~~trade~~product ~~name~~growth torates. ~~determine~~The ~~its~~discount ~~fair~~rates ~~value~~used asin ofthe ~~September~~October 1, 2013 and June 30, ~~2012.~~2013 ~~Based~~impairment ontests were the ~~revised projected~~same, ~~revenue~~but ~~for~~were ~~TruGreen~~100 asbps lower ~~compared~~than to the ~~projections~~discount rate used in the ~~second~~October 1, ~~quarter~~ 2012 impairment test, for the ~~Company~~TruGreen ~~determined~~trade name. The decrease in the ~~fair~~discount ~~value~~rate from 2012 is primarily attributable to changes ~~the~~in ~~TruGreen~~market ~~trade~~conditions ~~name~~which ~~was~~indicated ~~less than~~an ~~its~~improved ~~carrying~~outlook ~~value~~for bythe ~~$51~~U.~~0 million,~~S. ~~which~~financial ~~was~~markets ~~recorded~~and as a ~~trade~~higher ~~name~~risk ~~impairment~~tolerance infor ~~the~~investors ~~third~~since ~~quarter~~the oflast ~~2012~~analysis.

~~The~~Based ~~impairment~~on ~~charge~~the ~~recorded~~revenue results at TruGreen in the ~~second~~first ~~quarter~~six months of 2012 ~~was~~and ~~primarily~~a ~~attributable~~then tolower arevenue ~~decrease~~outlook infor ~~projected~~the ~~future~~remainder ~~growth~~of in2012 ~~revenue~~and atfuture ~~TruGreen~~years, ~~over~~the aCompany ~~defined~~concluded ~~projection~~that ~~period~~there was asan impairment indicator requiring the performance of ~~June 30,~~an ~~2012~~interim ~~compared~~indefinite-lived tointangible ~~the~~asset ~~projections~~impairment ~~used~~test infor the ~~previous~~TruGreen ~~annual~~trade ~~impairment~~name ~~assessment~~as ~~performed~~of ~~on October~~June 130, ~~2011~~2012. ~~The~~That ~~third quarter~~ impairment ~~charge was primarily~~analysis ~~attributable~~resulted toin a ~~further~~$67.7 million ~~reduction~~impairment incharge ~~projected~~recorded ~~revenue growth as compared to expectations~~ in the second quarter of 2012. ~~The~~Based ~~changes~~on inthe ~~projected future~~ revenue ~~growth~~results atof TruGreen ~~were~~ in ~~part a~~ ~~consequence of~~ the ~~shift~~third inquarter ~~strategy~~of ~~for~~2012 ~~TruGreen~~and ~~described~~the inrevised ~~"Segment~~outlook ~~Review—TruGreen~~for ~~Segment"~~the remainder inof ~~Management's~~the ~~Discussion~~year and ~~Analysis~~future inyears, ~~Item 7 of this Form 10-K. Although~~ the Company ~~projected~~performed ~~future~~another ~~growth~~impairment inanalysis ~~revenue~~on atits TruGreen ~~over~~trade aname ~~defined~~to ~~projection~~determine ~~period~~its asfair avalue ~~part~~as of ~~its~~ September 30, 2012. ~~impairment~~Based ~~analysis,~~on ~~such growth was lower than~~ the revised projected revenue ~~growth~~for ~~projected~~TruGreen atas ~~the~~compared ~~time~~to the ~~trade~~projections ~~name~~used ~~was tested for impairment~~ in the second quarter of 2012. ~~The~~impairment ~~long-term~~test, ~~revenue growth rates used for periods after~~ the ~~defined~~Company ~~projection~~determined ~~period in~~ the ~~impairment~~fair ~~tests~~value atattributable ~~September 30,~~to ~~2012, June 30, 2012 and October 1, 2011 were~~ the ~~same~~TruGreen ~~and~~trade inname ~~line~~was ~~with historical U.S. gross domestic~~less ~~product~~than ~~growth~~its ~~rates.~~carrying ~~The~~value ~~discount~~by ~~rates used in the September~~$51.0 30million, ~~2012~~which ~~and~~was ~~June 30,~~recorded ~~2012~~as ~~impairment~~a ~~tests~~trade ~~were~~name ~~the~~impairment ~~same, but were 50 bps lower than the discount rate used~~ in the ~~October 1,~~ ~~2011~~third ~~impairment~~quarter ~~test~~of ~~for~~2012. ~~the~~Total ~~TruGreen~~non-cash trade name. ~~The~~impairments ~~decrease~~recorded in ~~the~~2012 ~~discount~~related ~~rate from 2011 is primarily attributable~~ to ~~changes in market conditions which indicated an improved~~the ~~outlook~~TruGreen ~~for~~trade ~~the~~name Uwere $118.S7 million. ~~financial markets since the last analysis.~~

The impairment charge recorded in ~~2011~~the second quarter of 2012 was primarily attributable to ~~the~~a ~~use~~decrease ofin ~~higher~~projected ~~discount~~future ~~rates~~growth in ~~the~~revenue ~~DCF~~at ~~valuation~~TruGreen ~~analyses~~over a defined projection period as of June 30, 2012 compared to the ~~discount~~projections ~~rates~~ used in the ~~2010~~previous annual impairment ~~analyses. Although~~ ~~the~~assessment ~~projected~~performed ~~future~~on ~~growth~~October 1, in2011. ~~cash~~The ~~flows~~third inquarter ~~2011~~impairment ~~were~~charge ~~slightly~~was ~~higher~~primarily attributable ~~than~~to ina ~~the~~further ~~2010~~reduction ~~valuation,~~in ~~the~~projected ~~increase~~revenue ingrowth ~~the~~as ~~discount~~compared ~~rates~~to ~~more~~expectations ~~than~~in ~~offset~~ the ~~improved~~second ~~cash~~quarter ~~flows~~of 2012. ~~The~~Although ~~increase in~~ the ~~discount~~Company ~~rates~~projected isfuture ~~primarily~~growth ~~attributable~~in torevenue ~~changes~~at inTruGreen ~~market~~over ~~conditions~~a defined ~~which~~projection ~~indicated~~period as a ~~lower~~part ~~risk~~of ~~tolerance~~its inSeptember 30, ~~2011~~2012 asimpairment ~~compared~~analysis, tosuch ~~2010.~~growth ~~This~~was lower ~~risk~~than ~~tolerance~~the isrevenue ~~exhibited~~growth ~~through~~projected at the ~~marketplace's~~ ~~desire~~time ~~for~~the ~~higher~~trade ~~returns~~name was tested for impairment in ~~order~~the tosecond ~~accept~~quarter ~~market~~of ~~risk~~2012. The long-term revenue growth rates used infor periods after the ~~analyses~~defined ~~for~~projection period in the ~~October~~impairment tests at September 130, ~~2011~~2012, ~~and~~June 30, ~~2010~~2012 ~~impairment tests~~and October 1, 2011 were the same and in line with historical U.S. gross domestic product growth rates. The discount rates used in the September 30, 2012 and June 30, 2012 impairment tests were the same, but were 50 bps lower than the discount rate used in the October 1, 2011 impairment test for the

Had the Company used a discount rate in assessing the impairment of its trade names as of October 1, 2012 that was one percent higher across all business segments (holding all other assumptions unchanged), the Company would have recorded an additional trade name impairment charge of approximately $50.9 million in 2012. 54

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~~As a result of the trade name impairment recorded in 2012, the carrying value of the~~ TruGreen trade name ~~was adjusted to its estimated fair value as of September 30, 2012~~. ~~Any~~The ~~further~~decrease ~~decline~~ in the ~~estimated~~discount ~~fair~~rate ~~value~~from of2011 ~~this~~is ~~trade~~primarily ~~name~~attributable ~~will~~to ~~result~~changes in ~~additional~~market ~~trade~~conditions ~~name~~which ~~impairment.~~indicated Itan isimproved ~~possible~~outlook ~~that~~for ~~such impairment, if required, could be material and may need to be recorded prior to~~ the ~~fourth quarter of 2013 (i~~U.eS.~~, during~~ anfinancial ~~interim~~markets ~~period)~~since if the ~~Company's results of operations or other factors require an impairment test~~ atlast ~~an interim date~~analysis.

The impairment charge in 2011 was primarily attributable to the use of higher discount rates in the DCF valuation analyses as compared to the discount rates used in the 2010 impairment analyses. Although the projected future growth in cash flows in 2011 were slightly higher than in the 2010 valuation, the increase in the discount rates more than offset the improved cash flows. The increase in the discount rates is primarily attributable to changes in market conditions which indicated a lower risk tolerance in 2011 as compared to 2010. This lower risk tolerance is exhibited through the marketplace's desire for higher returns in order to accept market risk. The long-term revenue growth rates used in the analyses for the October 1, 2011 and 2010 impairment tests were the same and in line with historical U.S. gross domestic product growth rates.

Had the Company used a discount rate in assessing the impairment of its trade names as of October 1, 2013 that was one percent higher across all business segments (holding all other assumptions unchanged), the Company would have recorded an additional trade name impairment charge of approximately $55.3 million in 2013.

The Company does not hold or issue derivative financial instruments for trading or speculative purposes. The Company has entered into specific financial arrangements in the normal course of business to manage certain market risks, with a policy of matching positions and limiting the terms of contracts to relatively short durations.

The Company has historically hedged a significant portion of its annual fuel consumption. ofThe Company has historically used approximately 20 million gallons of fuel on an annual basis, with Terminix using approximately 11 million gallons. The Company has also historically hedged the interest payments on a portion of its variable rate debt through the use of interest rate swap agreements, although the Company has no interest rate swap agreements outstanding as of December 31, 2013. All of the Company's fuel swap contracts and interest rate swap contracts are classified as cash flow hedges, and, as such, the hedging instruments are recorded on the Consolidated Statements of Financial Position as either an asset or liability at fair value, with the effective portion of changes in the fair value attributable to the hedged risks recorded in accumulated other comprehensive income (loss).

See Note 1 of the Consolidated Financial Statements for a summary of newly issued accounting statements and positions applicable to the Company.

Disclosure under Section 13(r) of the Exchange Act

Under Section 13(r) of the Exchange Act as added by the Iran Threat Reduction and Syrian Human Rights Act of 2012, we are required to include certain disclosures in our periodic reports if we or any of our "affiliates" (as defined in Rule 12b-2 thereunder) knowingly engage in certain activities specified in Section 13(r) during the period covered by the report. Because the SEC defines the term "affiliate" broadly, it includes any entity that controls us or is under common control with us us ("control" is also construed broadly by the SEC). Our affiliate, CD&R, has informed us that an indirect subsidiary of SPIE S.A. ("SPIE"), an affiliate of CD&R based in France, maintained ~~bank~~ ~~accounts during 2012 at Bank Melli, an Iranian~~ bank ~~designated under Executive Order No. 13382. We have no knowledge of or control over the activities of SPIE or its subsidiaries. CD&R has~~ ~~informed us that in 2012, an indirect subsidiary of SPIE received payments into the Bank Melli~~ accounts ~~for~~during €2,497,732.83 from PetroIran Development Company ("PEDCO") and €11,062.58 from Iran Oil Pipelines & Telecommunication Group ("IOPTC"), in partial payment of amounts that were owed to certain indirect subsidiaries of SPIE for goods and services delivered in prior years, indirectly transferred approximately €430,000 from the ~~accounts~~period tocovered France through the use of an intermediary, indirectly transferred approximately €360,000 from the accounts to the U.A.E. through other intermediaries (part of which we understand has not yet been received), and used the accounts to pay office rent, the salary of one employee and other administrative expenses. SPIE understands that PEDCO and IOPTC are companies owned or controlled by ~~the~~this ~~Government~~report ofat Iran. CD&R has informed us that the relevant SPIE entities received authorization from the French Ministry of the Economy, Finances and Industry for the receipt of the funds and the transfer to France, that SPIE and its subsidiaries obtained no revenue or profit from these transactions, apart from payment of the two receivables described above, that CD&R and SPIE have disclosed these matters to the Office of Foreign Assets Control in the U.S. Treasury Department ("OFAC"), and that SPIE and its subsidiaries do not intend to conduct any transaction or dealing with Bank Melli, ~~PEDCO~~with ~~or IOPTC in~~ the ~~future~~approval ~~other than any transactions that may be authorized by the applicable French governmental authority and OFAC.~~

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of the French financial regulator (applying European Union law) and, since May 21, 2013, with the approval of the Office of Foreign Assets Control in the U.S. Treasury Department ("OFAC"). Bank Melli is an Iranian bank designated under Executive Order No. 13382. We had no knowledge of, or control over, the activities of SPIE or its subsidiaries. CD&R has informed us that during the period covered by this report (specifically, in January and February of 2013), the SPIE subsidiary used the accounts to make two tax payments to the Government of Iran, withdrew cash to pay various administrative expenses, and received a transfer of funds from a vendor. The total volume of these transactions in the SPIE subsidiary's accounts at Bank Melli, excluding transfers between those accounts, during the period covered by this report was the equivalent of less than $200,000 at the Iranian Central Bank's official exchange rate. CD&R has informed us that there has been no further activity in the accounts after February 2013, that SPIE and its subsidiaries obtained no revenue or profit from the maintenance of these accounts, that CD&R and SPIE have disclosed past transactions in the accounts to OFAC, that SPIE and its subsidiaries intended to comply with all applicable laws, and that SPIE and its subsidiaries intend to conduct only such transactions and dealings with Bank Melli in the future as are authorized by the applicable French governmental authority and OFAC.

Information Regarding Forward-Looking Statements

This report 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 report 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; ~~expanding~~issues ~~our~~related ~~commercial~~to ~~services; expectations for American Home Shield's and Merry Maids' new operating systems, which are currently under development, and TruGreen's new operating system, which is in~~ the ~~process of being deployed; capital expenditures and requirements, including for American Home Shield's,~~ TruGreen's ~~and Merry~~Separation ~~Maids' new operating systems~~Transaction; estimates for phasing out certain IT services from IBM and projections for expenditures to IBM in 2013; plans for equiping TruGreen's sales associates with handheld technology to make the sales process more efficient and effective; human resources, finance and other outsourcing and insourcing arrangements; customer retention; ~~the~~an ~~continuation~~expected ofimpairment ~~acquisitions; fuel~~charge ~~prices;~~of ~~impairment~~$50 million ~~charges~~at ~~related~~American toHome ~~goodwill~~Shield and ~~intangible~~an ~~assets~~expected $150 million ~~and~~TruGreen ~~assumptions~~trade ~~and~~name ~~estimates~~impairment ~~used~~charge; inthe ~~performing~~continuation ~~impairment~~of ~~analyses~~acquisitions, including ~~discount~~the ~~rates~~integration ~~and~~of ~~revenue~~any acquired company and ~~cash~~risks ~~flow~~relating to any such acquired company; fuel ~~projections~~prices; estimates of future amortization expense for intangible assets; attraction and retention of key personnel; the impact of interest rate hedges and fuel swaps; the cost savings from restructurings and reorganizations and expected charges related to such restructurings and reorganizations; the impact on the amount of unrecognized tax benefits resulting from pending tax settlements and expiration of statutes of limitations; 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~~ administrative proceedings, including, without limitation, collective, representative or class action litigation; ~~continuation of tuck-in acquisitions; potential indemnification claims associated with the TruGreen LandCare disposition;~~ 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 report. 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 report, 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" in this report and the company's annual and quarterly reports filed with the SEC, 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:

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70subsequent periods. A number of important factors, including, without limitation, the risks and uncertainties discussed in "Risk Factors" in this report and the Company's annual and quarterly reports filed with the SEC, 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:

•: the effects of our substantial indebtedness and the limitations contained in the agreements governing such indebtedness;
•: our ability to generate the significant amount of cash needed to fund our operations and service our debt obligations, among other things;
•: changes in interest rates, because a significant portion of our indebtedness bears interest at variable rates;
•: changes in the discount rates, revenue growth, cash flow growth rates or other assumptions used by the Company in its assessment for impairment of goodwill and intangible assets and adverse economic conditions or other factors that would result in significant impairment charges to our goodwill and/or intangible assets;
•: our ability to secure sources of financing or other funding to allow for leasing of commercial vehicles, primarily for Terminix;
•: changes in the source and intensity of competition in our market segments;
•: our ability to attract and retain key personnel;
•: weather conditions, including, without limitation, potential impacts, if any, from climate change, known and unknown, and seasonality factors that affect the demand for, or our ability to provide, our services and the cost and quantity of our claims and services;
•: higher commodity prices and lack of availability thereof, including, without limitation, fuel and chemicals (primarily at Terminix), which could impact our ability to provide our services and the profitability of our brands;
•: increases in operating costs, such as higher insurance premiums, self-insurance costs, labor expense and compensation and benefits costs, including, without limitation, costs related to the comprehensive health care reform law enacted in 2010;
•: associate retention and labor shortages, changes in employment and wage and hour laws and regulations, such as equal pay initiatives, additional anti-discrimination rules or tests and different interpretations of exemptions from overtime laws;
•: a continuation or change in general economic, financial and credit conditions in the United States and elsewhere (for example, any adverse developments in the global credit and financial markets due to the ongoing European financial and economic crisis and the United States debt ceiling, deficit and budget issues), especially as such may affect home sales, consumer or business liquidity, bank failures, consumer or commercial confidence or spending levels including as a result of inflation or deflation, unemployment, interest rate fluctuations, changes in discount rates, mortgage foreclosures and subprime credit dislocations;
•: non-payment by, or failure of, any insurance company that provides insurance or reinsurance to us or of third-party contract partners, including counterparties to our fuel swaps;
•: changes in our services or products;

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•: existing and future governmental regulation and the enforcement thereof, including, without limitation, regulation relating to the environment, including the Federal Trade Commission rules on green marketing; restricting or banning of telemarketing, including sales calls to cellular phones; door-to-door solicitation; direct mail or other marketing activities; Terminix's termite inspection and protection plan; chemicals used in our businesses; regulations impacting contractual provisions requiring arbitration or automatic renewals of contracts; or other legislation, regulation or interpretations impacting our business;
•: laws and regulations relating to financial reform and the use of derivative instruments and any new regulations or changes in existing regulations promulgated by the U.S. Consumer Financial Protection Bureau;
•: the success of, and costs associated with, restructuring initiatives;
•: the number, type, outcomes (by judgment or settlement) and costs of legal, regulatory or administrative proceedings, including, without limitation, collective, representative or class action litigation, and changes in the law regarding arbitration and conduct of collective, representative and class action litigation;
•: labor organizing activities at our subsidiaries or our franchisees and new regulations or changes in existing regulations and procedures by the National Labor Relations Board, including those that may affect our associates, such as our arbitration and other policies;
•: risk of liabilities being passed through from our franchisees and licensees;
•: risks associated with acquisitions or other strategic transactions, including, without limitation, acquired liabilities, retaining customers from businesses acquired, achieving expected synergies from acquired businesses and difficulties in integrating acquired businesses or implementing strategic transactions generally, in addition to risks associated with international acquisition transactions or joint ventures;
•: risks associated with dispositions, for example, post-closing claims being made against us, post-closing purchase price adjustments (including, without limitation, items related to working capital), disruption to our other businesses during the disposition process or thereafter; credit risks associated with any buyer of such disposed businesses and our ability to collect funds due from any such buyer related to seller financings, licensing arrangements, transition services arrangements or surety bond guarantees;
•: constraints associated with non-compete agreements or other restrictive covenants entered into by the Company, including, without limitation, in connection with business dispositions or strategic contracts, some or all of which may restrict our ability to conduct business in particular market segments or compete in particular geographic regions;
•: risks associated with budget deficits at federal, state and local levels resulting from economic conditions, which 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 ServiceMaster, to generate more tax revenues, which could negatively impact spending by commercial customers and municipalities on our services;
•: regulations imposed by several states related to our home warranty and insurance subsidiaries, including those limiting the amount of funds that can be paid to the Company by its subsidiaries;
•: changes in claims trends in our medical plan and our automobile, general liability and workers' compensation program;

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•: significant disruptions, terminations or substandard performance of our outsourced services, including possible breaches by third-party vendors of their agreements with us;
•: the cost, timing, structuring or results of our business process outsourcing (and insourcing), including, without limitation, any current or future outsourcing (or insourcing) or restructuring of all or portions of our information technology, call center, certain human resource functions and other corporate functions, and risks associated with such outsourcing (or insourcing) or restructuring or transitioning from outsourcing providers to insourcing;
•: costs of maintaining and enhancing our information technology systems to: enhance customer service; protect against theft of customer and corporate sensitive information; comply with industry standards; and minimize disruptions in the Company's operations and centers of excellence; and
•: other factors described in this report and from time to time in documents that we file with the SEC.

You should read this report completely and with the understanding that actual future results may be materially different from expectations. All forward-looking statements made in this report are qualified by these cautionary statements. These forward-looking statements are made only as of the date of this report, 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, 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.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The economy and its impact on discretionary consumer spending, labor wages, fuel prices, fertilizer and other material costs, home re-sales, unemployment rates, insurance costs and medical costs could have a material adverse impact on future results of operations.

The Company does not hold or issue derivative financial instruments for trading or speculative purposes. The Company has entered into specific financial arrangements, primarily ~~interest~~fuel swap ~~rate~~agreements, and ~~fuel~~in the past interest rate swap agreements, in the normal course of business to manage certain market risks, with a policy of matching positions and limiting the terms of contracts to relatively short durations. The effect of derivative financial instrument transactions could have a material impact on the Company's financial statements.

Interest Rate Risk

The Company has historically entered into various interest rate swap agreements., ~~Under~~although the ~~terms of these agreements, the~~ Company ~~pays~~has ano ~~fixed rate of~~ interest ~~on the stated notional amount, and the Company receives a floating~~ rate ~~of interest (based on one month LIBOR) on the stated notional amount. Therefore, during the term of the~~ swap agreements, ~~the~~outstanding effective interest rate on the portion of the term loans under the Term Facilities equal to the stated notional amount is fixed at the stated rate in the interest rate swap agreements plus the incremental borrowing margin (2.50 percent as of December 3113, ~~2012 for term loans maturing in July 2014 and 4~~2013.~~25 percent~~ ~~as of December 31, 2012 for term loans maturing in January 2017). The changes in interest rate swap~~

72 The Company believes its exposure to interest rate fluctuations, when viewed on both a gross and net basis, is material to its overall results of operations. A significant portion of our outstanding debt, including debt under the Credit Facilities, bears interest at variable rates. As a result, increases in interest rates would increase the cost of servicing our debt and could materially reduce our profitability and cash flows. As of December 31, 2013, each one percentage point change in interest rates would result in an approximate $22.0 million change in the annual interest expense on our Term Facilities. Assuming all revolving loans were fully drawn as of December 31, 2013, each one percentage point change in interest rates would result in an approximate $3.2 million change in

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~~agreements~~annual ininterest ~~effect~~expense ~~for~~on ~~the~~our ~~years~~Revolving ~~ended~~Credit Facility. The Company's exposure to interest rate fluctuations has not changed significantly since December 31, 2012,. ~~2011~~The ~~and~~impact ~~2010,~~of asincreases ~~well~~in interest asrates ~~the~~could ~~cumulative~~be ~~interest~~more ~~rate~~significant ~~swaps~~for ~~outstanding~~us asthan it would be for some other companies because of ~~December 31,~~our ~~2012~~substantial debt and ~~2011~~floating ~~are~~rate asleases. ~~follows:~~

(In thousands)	Notional Amount
Interest rate swap agreements in effect as of December 31, 2009	$	1,430,000		3.89	%
Entered into effect		530,000
Expired		(530,000	)
Interest rate swap agreements in effect as of December 31, 2010		1,430,000		3.68	%
Entered into effect		450,000
Expired		(450,000	)
Interest rate swap agreements in effect as of December 31, 2011		1,430,000		2.84	%
Expired		(450,000	)
Interest rate swap agreements in effect as of December 31, 2012	$	980,000		1.70	%

The following table summarizes information about the Company's debt as of December 31, 2013, including the principal cash payments and related weighted-average interest rates by expected maturity dates based on applicable rates at December 31, 2013.

(1)Before the application of the applicable borrowing margin.

	Expected Year of Maturity

	Expected Year of Maturity																					Fair Value
As of December 31, 2013	2014			2015			2016			2017			2018			Thereafter			Total			Fair Value
	($ in millions)
Debt:
Fixed rate	$	13.1		$	10.7		$	6.5		$	3.4		$	80.6		$	1,627.7		$	1,742.0		$	1,691.5
Average interest rate		8.3	%		8.1	%		7.6	%		7.0	%		7.1	%		7.4	%		7.4	%
Variable rate	$	38.2		$	51.5		$	37.5		$	2,145.4		$	9.9		$	2.4		$	2,284.9		$	2,264.2
Average interest rate		3.5	%		3.3	%		3.6	%		4.3	%		2.5	%		2.5	%		4.3	%

Interest rate swap agreements in effect as of December 31, 2012 are as follows:

		Expiration Date				Floating Rate
June 10, 2010	March 3, 2011	March 1, 2013	100,000	1.77	%	One month LIBOR
June 10, 2010	September 1, 2011	September 1, 2013	50,000	2.25	%	One month LIBOR
June 15, 2010	March 3, 2011	March 1, 2013	150,000	1.66	%	One month LIBOR
June 15, 2010	September 1, 2011	September 1, 2013	150,000	2.21	%	One month LIBOR
August 18, 2011	September 1, 2011	August 1, 2013	530,000	1.51	%	One month LIBOR

(1)Before the application of the applicable borrowing margin.

In accordance with accounting standards for derivative instruments and hedging activities, these interest rate swap agreements are classified as cash flow hedges, and, as such, the hedging instruments are recorded on the Consolidated Statements of Financial Position as either an asset or liability at fair value, with the effective portion of the changes in fair value attributable to the hedged risks recorded in accumulated other comprehensive income (loss).

The Company believes its exposure to interest rate fluctuations, when viewed on both a gross and net basis, is material to its overall results of operations. A significant portion of our outstanding debt, including debt under the Credit Facilities, bears interest at variable rates. As a result, increases in interest rates would increase the cost of servicing our debt and could materially reduce our profitability and cash flows. As of December 31, 2012, each one percentage point change in interest rates would result in an approximate $12.4 million change in the annual interest expense on our Term Facilities after considering the impact of the interest rate swaps into which we had entered. Assuming all revolving loans were fully drawn as of December 31, 2012, each one percentage point change in interest rates would result in an approximate $4.5 million change in annual interest expense on our Revolving Credit Facility.

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this arrangement. We are also exposed to increases in interest rates with respect to our floating rate operating and capital leases, and a one percentage point change in interest rates would result in an approximate $0.7 million change in annual expenses with respect to such leases. The Company's exposure to interest rate fluctuations has not changed significantly since December 31, 2011. 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 debt and floating rate leases.

The following table summarizes information about the Company's debt as of December 31, 2012 (after considering the effect of the interest rate swap agreements), including the principal cash payments and related weighted-average interest rates by expected maturity dates based on applicable rates at December 31, 2012.

	Expected Year of Maturity
																						Fair Value
As of December 31, 2012	2013			2014			2015			2016			2017			Thereafter			Total
	($ in millions)
Debt:
Fixed rate	$	12.0		$	991.5		$	9.0		$	4.7		$	2.0		$	1,707.2		$	2,726.4		$	2,711.5
Average interest rate		8.8	%		4.3	%		8.7	%		8.4	%		8.5	%		7.4	%		6.3	%
Variable rate	$	40.2		$	258.8		$	17.9		$	17.9		$	966.8		$	0.1		$	1,301.7		$	1,306.7
Average interest rate		2.8	%		2.8	%		3.6	%		3.6	%		4.4	%		2.5	%		4.0	%
Interest Rate Swaps:
Receive variable/pay fixed	$	980.0
Average pay rate(1)		1.7	%
Average receive rate(1)		0.2	%

(1)Before the application of the applicable borrowing margin.

In February 2013, the Company entered into the 2013 Term Loan Facility Amendment, which is not reflected in the table above. The following table summarizes information about the Company's debt as of December 31, 2012 as if the 2013 Term Loan Facility Amendment had occurred on December 31, 2012 (after considering the effect of the interest rate swap agreements), including the principal payments and related weighted average interest rates by expected maturity dates based on applicable rates at December 31, 2012.

	Expected Year of Maturity
																						Fair Value
As of December 31, 2012	2013			2014			2015			2016			2017			Thereafter			Total
	($ in millions)
Debt:
Fixed rate	$	12.0		$	11.5		$	9.0		$	4.7		$	982.0		$	1,707.2		$	2,726.4		$	2,711.5
Average interest rate		8.8	%		8.8	%		8.7	%		8.4	%		4.2	%		7.4	%		6.3	%
Variable rate	$	40.2		$	44.1		$	30.1		$	30.1		$	1,158.0		$	0.1		$	1,302.6		$	1,307.6
Average interest rate		3.3	%		3.4	%		3.9	%		3.8	%		4.4	%		2.5	%		4.3	%
Interest Rate Swaps:
Receive variable/pay fixed	$	980.0
Average pay rate(1)		1.7	%
Average receive rate(1)		0.2	%

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Fuel Price Risk

The Company is exposed to market risk for changes in fuel prices through the consumption of fuel by its vehicle fleet in the delivery of services to its customers. The Company ~~uses~~has historically used approximately 20 million gallons of fuel on an annual basis, with Terminix using approximately 11 million gallons. In 2014, the Company expects to use approximately 11 million gallons. A ten percent change in fuel prices would result in a change of approximately $74.01 million in the Company's ~~annual~~2014 fuel cost before considering the impact of fuel swap contracts. The Company's exposure to changes in fuel prices has not changed significantly since December 31, ~~2011~~2012.

The Company uses fuel swap contracts to mitigate the financial impact of fluctuations in fuel prices. As of December 31, ~~2012~~2013, the Company had fuel swap contracts to pay fixed prices for fuel with an aggregate notional amount of $4026.20 million, maturing through ~~2013~~2014. The estimated fair value of these contracts as of December 31, ~~2012~~2013 was a net asset of $1.80 million. These fuel swap contracts provide a fixed price for approximately 5866 percent of the Company's estimated fuel usage for ~~2013~~2014.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of The ServiceMaster Company, LLC Memphis, Tennessee

We have audited the accompanying consolidated statements of financial position of The ServiceMaster Company, LLC and subsidiaries (the "Company") as of December 31, ~~2012~~ 2013 and ~~2011~~2012, and the related consolidated statements of operations and comprehensive ~~income~~ (loss) income, shareholder's equity and cash flows for each of the three years in the period ended December 31, ~~2012~~ 2013. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of The ServiceMaster Company, LLC and subsidiaries as of December 31, ~~2012~~2013 and ~~2011~~2012, and the results of their operations and their cash flows for each of the three years in the period ended December 31, ~~2012~~2013, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, ~~2012~~2013, based on the criteria established in Internal Control—Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 4, ~~2013~~2014, expressed an unqualified opinion on the Company's internal control over financial reporting.

/s/ Deloitte & Touche LLP Memphis, Tennessee March 4, ~~2013~~2014

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Consolidated Statements of Operations and Comprehensive (Loss) Income

(In thousands)

	Year Ended December 31,
	2012			2011			2010
	2013			2012			2011
Operating Revenue	$	3,~~193~~188,~~281~~835		$	3,~~205~~193,~~872~~281		$	3,~~127~~205,~~394~~872
Operating Costs and Expenses:
Cost of services rendered and products sold		1,906,054			1,861,669			1,813,706
Cost of services rendered and products sold		1,861,669			1,813,706			1,777,304
Selling and administrative expenses		920,478			872,026			880,492
Selling and administrative expenses		872,026			880,492			895,950
Amortization expense		55,532			65,298			91,352
Amortization expense		65,298			91,352			136,000
Goodwill and trade name impairment		673,253			908,873			36,700
Goodwill and trade name impairment		908,873			36,700			—
Restructuring charges		20,840			18,177			8,162
Restructuring charges		18,177			8,162			11,448
Interest expense		249,033			246,906			273,823
Total operating costs and expenses		3,726,043			2,830,412			2,820,702
Interest and net investment income		(9,113	)		(7,845	)		(10,886	)
Operating (Loss) Income		(532,762	)		375,460			306,692
Loss on extinguishment of debt		—			55,554			774
Non-operating Expense (Income)

Interest expense		246,284			273,123			286,933
(Loss) Income from Continuing Operations before Income Taxes		(627,242	)		(827,377	)		111,749
Interest and net investment income		(7,845	)		(10,886	)		(9,358	)
(Benefit) provision for income taxes		(122,906	)		(114,260	)		43,912
Loss on extinguishment of debt		55,554			774			—
Equity in losses of joint venture		(468	)		(226	)		—
Other expense		622			700			733

(Loss) Income from Continuing Operations before Income Taxes		(827,377	)		111,749			28,384
(Loss) Income from Continuing Operations		(504,804	)		(713,343	)		67,837
(Benefit) provision for income taxes		(114,260	)		43,912			10,945
Loss from discontinued operations, net of income taxes		(1,135	)		(200	)		(27,016	)
Equity in losses of joint venture		(226	)		—			—

(Loss) Income from Continuing Operations		(713,343	)		67,837			17,439
Net (Loss) Income		(505,939	)		(713,543	)		40,821
Loss from discontinued operations, net of income taxes		(200	)		(27,016	)		(31,998	)

Net (Loss) Income		(713,543	)		40,821			(14,559	)
Other Comprehensive Income, Net of Income Taxes:
Net unrealized gains (losses) on securities:
Net unrealized gains (losses) on securities		1,384			965			(695	)
Unrealized (losses) gains		(692	)		3,092			2,808
Net unrealized gains on derivative instruments		2,635			12,239			13,314
Reclassification adjustment for net losses (gains) realized		1,657			(3,787	)		(1,225	)
Foreign currency translation		(3,974	)		(426	)		(1,460	)
Net unrealized gains (losses) on securities		965			(695	)		1,583

Net unrealized gains on derivative instruments:
Other Comprehensive Income, Net of Income Taxes		45			12,778			11,159
Unrealized losses		(571	)		(3,419	)		(24,901	)

Reclassification adjustment for net losses realized		12,810			16,733			27,535
Total Comprehensive (Loss) Income	$	(505,894	)	$	(700,765	)	$	51,980
Net unrealized gains on derivative instruments		12,239			13,314			2,634

Foreign currency translation		(426	)		(1,460	)		2,186

Other Comprehensive Income, Net of Income Taxes		12,778			11,159			6,403
Total Comprehensive (Loss) Income	$	(700,765	)	$	51,980		$	(8,156	)

See accompanying Notes to the Consolidated Financial Statements.

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Consolidated Statements of Financial Position

(In thousands, except share data)

	As of December 31,
	2012			2011
	2013			2012
Assets:
Current Assets:
Cash and cash equivalents	$	~~422~~486,~~745~~188		$	~~328~~422,~~930~~745
Marketable securities		1927,~~347~~060			1219,~~026~~347
Receivables, less allowances of $21,347 and $20,362, respectively		403,705			374,200
Receivables, less allowances of $35,076 and $21,347, respectively		421,346			403,705
Inventories		56,~~562~~323			5956,~~643~~562
Prepaid expenses and other assets		3764,~~344~~234			3837,~~295~~344
Deferred customer acquisition costs		3339,~~921~~130			3033,~~403~~921
Deferred taxes		~~107~~111,~~499~~073			90107,~~609~~499
Assets of discontinued operations		—			17

Total Current Assets		1,~~081~~205,~~123~~354			~~934~~1,081,123

Property and Equipment:
At cost		~~633~~732,~~582~~426			~~541~~633,~~817~~582
Less: accumulated depreciation		(~~293~~374,~~534~~315	)		(~~235~~293,~~058~~534	)
Net Property and Equipment		340,048			306,759

Net Property and Equipment		358,111			340,048

Other Assets:
Goodwill		2,~~412~~018,~~251~~340			32,~~161~~412,~~980~~251
Intangible assets, primarily trade names, service marks and trademarks, net		2,~~373~~075,~~469~~706			2,~~543~~373,~~539~~469
Notes receivable		2236,~~419~~815			2322,~~322~~419
Long-term marketable securities		~~126~~121,~~456~~572			~~130~~126,456
Other assets		1055,~~197~~072			810,~~846~~197
Debt issuance costs		4440,~~951~~556			3744,~~798~~951
Total Assets	$	6,410,914		$	7,146,823

Total Assets	$	5,911,526		$	6,410,914


Liabilities and Shareholder's Equity:
Current Liabilities:
Accounts payable	$	86111,~~710~~466		$	8186,~~641~~710
Accrued liabilities:
Payroll and related expenses		7875,~~188~~494			8578,~~346~~188
Self-insured claims and related expenses		8380,~~035~~257			7383,~~071~~035
Accrued interest payable		5451,~~156~~118			6754,~~011~~156
Other		5861,~~994~~728			7058,~~103~~994
Deferred revenue		~~483~~539,~~897~~338			~~473~~483,~~242~~897
Liabilities of discontinued operations		~~905~~1,320			~~805~~905
Current portion of long-term debt		5251,~~214~~399			5152,~~838~~214
Total Current Liabilities		898,099			903,057

Long-Term Debt		3,909,039			3,824,032
Total Current Liabilities		972,120			898,099

Long-Term Debt		3,904,130			3,909,039
Other Long-Term Liabilities:
Deferred taxes		~~934~~811,~~271~~406			1934,~~036,693~~271
Liabilities of discontinued operations		—			2,070
Other long-term obligations, primarily self-insured claims		171,445			114,855
Other long-term obligations, primarily self-insured claims		114,855			133,052

Total Other Long-Term Liabilities		1982,~~049,126~~851			1,~~171~~049,~~815~~126

Commitments and Contingencies (See Note 9)
Shareholder's Equity:
Common stock $0.01 par value, authorized 1,000 shares; issued 1,000 shares		—			—
Additional paid-in capital		1,~~471~~475,~~789~~458			1,~~464~~471,~~293~~789
Retained deficit		(~~923~~1,~~705~~429,644	)		(~~210~~923,~~162~~705	)
Accumulated other comprehensive income (loss)		6,566			(6,212	)
Accumulated other comprehensive income		6,611			6,566
Total Shareholder's Equity		554,650			1,247,919

Total Liabilities and Shareholder's Equity	$	6,410,914		$	7,146,823
Total Shareholder's Equity		52,425			554,650

Total Liabilities and Shareholder's Equity	$	5,911,526		$	6,410,914

See accompanying Notes to the Consolidated Financial Statements.

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Consolidated Statements of Shareholder's Equity

(In thousands)

	Common Stock		Additional Paid-in Capital			Retained Earnings (Deficit)			Accumulated Other Comprehensive Income (Loss)			Total Equity
Balance December 31, 2009	$	—	$	1,446,529		$	(236,424	)	$	(23,774	)	$	1,186,331
Net loss							(14,559	)					(14,559	)
Other comprehensive income, net of tax:
Net unrealized gain on securities										1,583			1,583
Net unrealized gain on derivative instruments										2,634			2,634
Foreign currency translation										2,186			2,186
Total comprehensive (loss) income							(14,559	)		6,403			(8,156	)
Stock-based employee compensation—contribution from Holdings				9,352									9,352
Balance December 31, 2010	$	—	$	1,455,881		$	(250,983	)	$	(17,371	)	$	1,187,527

Net income							40,821						40,821
Other comprehensive income, net of tax:
Other comprehensive income, net of tax										11,159			11,159
Net unrealized loss on securities										(695	)		(695	)

Net unrealized gain on derivative instruments										13,314			13,314
Foreign currency translation										(1,460	)		(1,460	)
Total comprehensive income							40,821			11,159			51,980
Stock-based employee compensation—contribution from Holdings				8,412									8,412

Balance December 31, 2011	$	—	$	1,464,293		$	(210,162	)	$	(6,212	)	$	1,247,919

Net loss							(713,543	)					(713,543	)
Other comprehensive income, net of tax:
Other comprehensive income, net of tax										12,778			12,778
Net unrealized gain on securities										965			965

Net unrealized gain on derivative instruments										12,239			12,239
Foreign currency translation										(426	)		(426	)
Total comprehensive (loss) income							(713,543	)		12,778			(700,765	)
Stock-based employee compensation—contribution from Holdings				7,119									7,119
Other				377									377

Balance December 31, 2012	$	—	$	1,471,789		$	(923,705	)	$	6,566		$	554,650

Net loss							(505,939	)					(505,939	)
Other comprehensive income, net of tax										45			45

Total comprehensive (loss) income							(505,939	)		45			(505,894	)
Stock-based employee compensation—contribution from Holdings				4,046									4,046
Other				(377	)								(377	)

Balance December 31, 2013	$	—	$	1,475,458		$	(1,429,644	)	$	6,611		$	52,425

See accompanying Notes to the Consolidated Financial Statements.

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Consolidated Statements of Cash Flows

(In thousands)

	Year Ended December 31,
	2012			2011			2010
	2013			2012			2011
Cash and Cash Equivalents at Beginning of Period	$	~~328~~422,~~930~~745		$	~~252~~328,~~698~~930		$	~~255~~252,~~356~~698
Cash Flows from Operating Activities from Continuing Operations:
Net (Loss) Income		(~~713~~505,~~543~~939	)		40(713,~~821~~543	)		~~(14~~40,~~559~~821	)
Adjustments to reconcile net (loss) income to net cash provided from operating activities:
Loss from discontinued operations, net of income taxes		~~200~~1,135			~~27,016~~200			3127,~~998~~016
Equity in losses of joint venture		~~226~~468			—226			—
Depreciation expense		8093,~~944~~580			7280,~~084~~944			6072,~~625~~084
Amortization expense		6555,~~298~~532			9165,~~352~~298			~~136~~91,~~000~~352
Amortization of debt issuance costs		139,~~275~~970			1413,~~061~~275			14,~~503~~061
Loss on extinguishment of debt		~~55,554~~—			~~774~~55,554			—774
Call premium paid on retirement of debt		~~(42,893~~—	)		—(42,893	)		—
Premium received on issuance of debt		~~3,000~~—			—3,000			—
Deferred income tax (benefit) provision		(~~123~~131,~~759~~987	)		35(123,~~048~~759	)		435,~~455~~048
Stock-based compensation expense		74,~~119~~046			87,~~412~~119			98,~~352~~412
Goodwill and trade name impairment		~~908~~673,~~873~~253			36908,~~700~~873			—36,700
Restructuring charges		1820,~~177~~840			818,~~162~~177			118,~~448~~162
Cash payments related to restructuring charges		(17,~~342~~847	)		(717,~~530~~342	)		(107,~~789~~530	)
Change in working capital, net of acquisitions:
Current income taxes		~~657~~(795	)		~~(2,856~~657	)		(62,~~757~~856	)
Receivables		(2517,~~734~~090	)		(2225,~~992~~734	)		(3222,~~914~~992	)
Inventories and other current assets		7(6,~~898~~905	)		17,~~538~~898			~~(238~~1,538	)
Accounts payable		617,~~495~~267			26,~~581~~495			112,~~899~~581
Deferred revenue		955,~~173~~329			229,~~134~~173			(122,~~928~~134	)
Accrued liabilities		(~~41,218~~521	)		(3341,~~642~~218	)		2(33,~~427~~642	)
Other, net		221,~~209~~711			122,~~338~~209			71,~~022~~338
Net Cash Provided from Operating Activities from Continuing Operations		234,609			295,001			222,544

Net Cash Provided from Operating Activities from Continuing Operations		252,047			234,609			295,001

Cash Flows from Investing Activities from Continuing Operations:
Property additions		(7360,~~228~~404	)		(9673,~~540~~228	)		(~~134~~96,~~234~~540	)
Sale of equipment and other assets		21,~~197~~421			42,~~605~~197			14,~~355~~605
Acquisition of The ServiceMaster Company		—			~~(35~~—	)		(~~2,245~~35	)
Other business acquisitions, net of cash acquired		(4632,~~138~~085	)		(4446,~~365~~138	)		(5744,~~941~~365	)
Purchase of other intangibles		—			~~(1,900~~—	)		(21,~~500~~900	)
Notes receivable, financial investments and securities, net		(~~1,176~~444	)		3(1,~~009~~176	)		203,~~427~~009
Net Cash Used for Investing Activities from Continuing Operations		(118,345	)		(135,226	)		(175,138	)
Notes receivable from affiliate		(13,958	)		—			—

Net Cash Used for Investing Activities from Continuing Operations		(105,470	)		(118,345	)		(135,226	)

Cash Flows from Financing Activities from Continuing Operations:
Borrowings of debt		~~1,350,000~~855			41,350,000			154,000
Payments of debt		(164,~~334,947~~717	)		(~~105~~1,~~905~~334,947	)		(61105,~~333~~905	)
Debt issuance costs paid		(33,089	)		(267	)		(30	)
Discount paid on issuance of debt		(12,200	)		—			—
Net Cash Used for Financing Activities from Continuing Operations		(18,036	)		(102,172	)		(46,363	)
Debt issuance costs paid		(5,575	)		(33,089	)		(267	)

Net Cash Used for Financing Activities from Continuing Operations		(81,637	)		(18,036	)		(102,172	)

Cash Flows from Discontinued Operations:
Cash (used for) provided from operating activities		(802	)		(5,888	)		6,776
Cash used for operating activities		(1,497	)		(802	)		(5,888	)
Cash (used for) provided from investing activities:
Proceeds from sale of businesses		~~(3,611~~—	)		26(3,~~134~~611	)		—26,134
Other investing activities		—			~~(1,617~~—	)		(101,~~477~~617	)
Net Cash (Used for) Provided from Discontinued Operations		(4,413	)		18,629			(3,701	)

Cash Increase (Decrease) During the Period		93,815			76,232			(2,658	)
Net Cash (Used for) Provided from Discontinued Operations		(1,497	)		(4,413	)		18,629
Cash and Cash Equivalents at End of Period	$	422,745		$	328,930		$	252,698

Cash Increase During the Period		63,443			93,815			76,232

Cash and Cash Equivalents at End of Period	$	486,188		$	422,745		$	328,930

See accompanying Notes to the Consolidated Financial Statements.

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Notes to the Consolidated Financial Statements

Note 1. Significant Accounting Policies

The Consolidated Financial Statements include the accounts of ServiceMaster and its majority-owned subsidiary partnerships, limited liability companies and corporations. All consolidated ServiceMaster subsidiaries are wholly owned. Intercompany transactions and balances have been eliminated.

Summary: The preparation of the Consolidated Financial Statements requires management to make certain estimates and assumptions required under GAAP which may differ from actual results. The more significant areas requiring the use of management estimates relate to revenue recognition; the allowance for uncollectible receivables; accruals for self-insured retention limits related to medical, workers' compensation, auto and general liability insurance claims; accruals for home warranties and termite damage claims; the possible outcome of outstanding litigation; accruals for income tax liabilities as well as deferred tax accounts; the deferral and amortization of customer acquisition costs; useful lives for depreciation and amortization expense; the valuation of marketable securities; and the valuation of tangible and intangible assets. In ~~2012~~2013, there have been no changes in the significant areas that require estimates or in the underlying methodologies used in determining the amounts of these associated estimates.

The Company seeks to reduce the potential amount of loss arising from self-insured claims by insuring certain levels of risk. While insurance agreements are designed to limit the Company's losses from large exposure and permit recovery of a portion of direct unpaid losses, insurance does not relieve the Company of its ultimate liability. Accordingly, the accruals for insured claims represent the Company's total unpaid gross losses. Insurance recoverables, which are reported within Prepaid expenses and other assets and Other assets, relate to estimated insurance recoveries on the insured claims reserves.

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Notes to the Consolidated Financial Statements (Continued)

Note 1. Significant Accounting Policies (Continued)

~~uncertain~~ The Company records deferred income tax balances based on the net tax effects of temporary differences between the carrying value of assets and liabilities for financial reporting purposes and income tax purposes. The Company records its deferred tax items based on the estimated value of the tax basis. The Company adjusts tax estimates when required to reflect changes based on factors such as changes in tax laws, relevant court decisions, results of tax authority reviews and statutes of limitations. The Company records a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. The Company recognizes potential interest and penalties related to its uncertain tax positions in income tax expense.

Revenue: Revenues from lawn care and pest control services, as well as liquid and fumigation termite applications, are recognized as the services are provided. The Company eradicates termites through the use of non-baiting methods (e.g., fumigation or liquid treatments) and baiting systems. Termite services using baiting systems, termite inspection and protection contracts, as well as home warranties, are frequently sold through annual contracts for a one-time, upfront payment. Direct costs of these contracts (service costs for termite contracts and claim costs for home warranties) are expensed as incurred. The Company recognizes revenue over the life of these contracts in proportion to the expected direct costs. Those costs bear a direct relationship to the fulfillment of the Company's obligations under the contracts and are representative of the relative value provided to the customer (proportional performance method). The Company regularly reviews its estimates of direct costs for its termite bait contracts and home warranties and adjusts the estimates when appropriate.

The Company has franchise agreements in its Terminix, TruGreen, ServiceMaster Clean, ~~AmeriSpec~~Merry Maids, ~~Furniture~~AmeriSpec ~~Medic~~ and ~~Merry~~Furniture ~~Maids~~Medic businesses. Franchise revenue (which in the aggregate represents approximately four percent of annual consolidated operating revenue from continuing operations) consists principally of continuing monthly fees based upon the franchisee's customer level revenue. Monthly fee revenue is recognized when the related customer level revenue generating activity is ~~reported~~performed by the franchisee and collectability is reasonably assured. Franchise revenue also includes initial fees resulting from the sale of a franchise or a license. These initial franchise or license fees are pre-established fixed amounts and are recognized as revenue when collectability is reasonably assured and all material services or conditions relating to the sale have been substantially performed. Total profits from the franchised operations were $7379.01 million, $7473.10 million and $7074.91 million for the years ended December 31, ~~2012~~2013, ~~2011 and 2010, respectively. Consolidated operating loss from continuing operations was $532.8 million for the year ended December 31,~~ 2012 and ~~consolidated operating income was $375.5 million and $306.7 million for the years ended December 31,~~ 2011 ~~and 2010~~, respectively. The Company evaluates the performance of its franchise businesses based primarily on operating profit before corporate general and administrative expenses, interest expense and amortization of intangible assets. The portion of total franchise fee income related to initial fees received from the sale of franchises was immaterial to the Company's Consolidated Financial Statements for all periods.

Revenues are presented net of sales taxes collected and remitted to government taxing authorities in the accompanying Consolidated Statements of Operations and Comprehensive (Loss) Income.

The Company had $~~483~~539.93 million and $~~473~~483.29 million of deferred revenue as of December 31, ~~2012~~2013 and ~~2011~~2012, respectively. Deferred revenue consists primarily of payments received for annual contracts relating to home warranties, termite baiting, termite inspection, pest control and lawn care services.

Deferred Customer Acquisition Costs: Customer acquisition costs, which are incremental and direct costs of obtaining a customer, are deferred and amortized over the life of the related contract in proportion to revenue recognized. These costs include sales commissions and direct selling costs which can be shown to have resulted in a successful sale. Deferred customer 67

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Notes to the Consolidated Financial Statements (Continued)

Note 1. Significant Accounting Policies (Continued)

~~Interim Reporting~~Advertising: TruGreen has significant seasonality in its business. In the winter and spring, this business sells a series of lawn applications to customers which are rendered primarily in March through October (the production season). This business incurs incremental selling expenses at the beginning of the year that directly relate to successful sales for which the revenues are recognized in later quarters. On an interim basis, ~~TruGreen~~certain ~~defers these incremental selling expenses,~~ pre-season advertising costs ~~and annual repairs and maintenance costs that~~ are ~~incurred primarily in the first quarter. These costs are~~ deferred and recognized approximately in proportion to the revenue ~~generated~~ over the ~~production~~year ~~season~~ and are not deferred beyond the calendar year-end. ~~Other~~Certain ~~business~~other ~~segments~~advertising ofcosts ~~the~~are ~~Company~~expensed ~~also~~when ~~defer,~~the onadvertising anoccurs. ~~interim~~The ~~basis,~~cost ~~advertising~~of ~~costs~~direct-response ~~incurred~~advertising ~~early~~at inTerminix, ~~the~~consisting primarily ~~year.~~of ~~These pre~~direct-~~season costs~~mail ~~are~~promotions, ~~deferred~~is capitalized and ~~recognized~~amortized ~~approximately~~over inits ~~proportion~~expected toperiod ~~revenue~~of ~~over~~future ~~the~~benefits. ~~balance~~Advertising ofexpense for the ~~year~~years ~~and~~ended ~~are~~December 31, ~~not~~2013, ~~deferred~~2012 ~~beyond~~and ~~the~~2011 ~~calendar~~was $166.9 million, ~~year-end~~$163.9 million and $161.0 million, respectively.

Advertising: As discussed in the "Interim Reporting" note above, certain pre-season advertising costs are deferred and recognized approximately in proportion to the revenue over the year. Certain other advertising costs are expensed when the advertising occurs. The cost of direct-response advertising at Terminix, consisting primarily of direct-mail promotions, is capitalized and amortized over its expected period of future benefits. Advertising expense for the years ended December 31, 2012, 2011 and 2010 was $163.9 million, $161.0 million and $159.2 million, respectively.

Inventory: Inventories are recorded at the lower of cost (primarily on a weighted average cost basis) or market. The Company's inventory primarily consists of finished goods to be used on the customers' premises or sold to franchisees.

Property and Equipment, Intangible Assets and Goodwill:

Property and equipment consist of the following:

	Balance as of December 31,
							Estimated Useful Lives (Years)
(In millions)	~~2012~~2013			~~2011~~2012
Land	$	21.76		$	2221.97		N/A
Buildings and improvements		7780.41			7677.04		10 - 40
Technology and communications		~~259~~307.02			~~207~~259.0		3 - 7
Machinery, production equipment and vehicles		~~255~~303.79			~~216~~255.7		3 - 9
Office equipment, furniture and fixtures		19.76			19.27		5 - 7
		633.5			541.8

Less accumulated depreciation		(293.5	)		(235.0	)
		732.4			633.5
Net property and equipment	$	340.0		$	306.8
Less accumulated depreciation		(374.3	)		(293.5	)

Net property and equipment	$	358.1		$	340.0

Depreciation of property and equipment, including depreciation of assets held under capital leases, was $8093.96 million, $7280.19 million and $6072.61 million for the years ended December 31, ~~2012~~2013, ~~2011~~2012 and ~~2010~~2011, respectively.

83 Intangible assets consisted primarily of goodwill in the amount of $2.018 billion and $2.412 billion, indefinite-lived trade names in the amount of $1.959 billion and $2.215 billion, and other intangible assets in the amount of $116.7 million and $158.7 million as of December 31, 2013 and 2012, respectively.

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Notes to the Consolidated Financial Statements (Continued)

Note 1. Significant Accounting Policies (Continued)

~~Intangible~~assets, the Company's long-lived assets, ~~consisted~~including ~~primarily~~fixed ofassets and intangible assets (other than goodwill), are tested for recoverability whenever events or changes in ~~the~~circumstances ~~amount~~indicate ofthat their ~~$2.412 billion~~carrying ~~and~~amounts $3may not be recoverable.~~162 billion,~~ ~~indefinite-lived~~If ~~trade~~the ~~names~~carrying invalue is no longer recoverable based upon the ~~amount~~undiscounted future cash flows of ~~$2.215 billion and~~the ~~$2.334 billion~~asset, ~~and~~an ~~other~~impairment ~~intangible~~loss ~~assets~~would inbe recognized equal to the difference between the carrying amount and the fair value of ~~$158~~the asset.~~7 million~~ ~~and~~Changes ~~$210.0 million~~in asthe ofestimated ~~December 31,~~useful ~~2012~~lives ~~and~~or ~~2011,~~in ~~respectively~~the asset values could cause the Company to adjust its book value or future expense accordingly.

~~Fixed~~As ~~assets~~required under accounting standards for goodwill and other intangibles, goodwill is not subject to amortization, and intangible assets with ~~finite~~indefinite useful lives are ~~depreciated~~not ~~and~~ amortized until ontheir auseful ~~straight-line~~lives ~~basis~~are ~~over~~determined ~~their~~to ~~estimated~~no ~~useful~~longer ~~lives~~be indefinite. ~~These~~Goodwill ~~lives~~and intangible assets that are not subject to amortization are subject to assessment for impairment by applying a fair-value based test on ~~the~~ an annual basis or more frequently if circumstances indicate a potential impairment. The Company's ~~previous~~adopted ~~experience~~the ~~for~~provisions ~~similar~~of ~~assets~~ASU 2011-08, ~~potential~~"Testing ~~market~~Goodwill ~~obsolescence~~for ~~and~~Impairment," ~~other~~in the ~~industry~~fourth ~~and~~quarter ~~business~~of ~~data~~2011. AsThis ~~required~~ASU bygives ~~accounting~~entities ~~standards~~the ~~for~~option of performing a qualitative assessment before calculating the ~~impairment~~fair orvalue ~~disposal~~of a reporting unit in Step 1 of the goodwill impairment test. ~~long-lived~~If ~~assets~~entities determine, on the ~~Company's~~basis ~~long-lived~~of ~~assets~~qualitative factors, ~~including~~that ~~fixed~~the ~~assets~~fair ~~and~~value ~~intangible~~of ~~assets~~a ~~(other~~reporting ~~than~~unit ~~goodwill),~~is ~~are~~more ~~tested~~likely ~~for~~than ~~recoverability~~not ~~whenever~~greater ~~events~~than orits ~~changes in~~carrying ~~circumstances~~amount, ~~indicate~~the ~~that~~two-step ~~their~~impairment ~~carrying~~test ~~amounts~~would ~~may~~ not be ~~recoverable~~ required. IfFor the ~~carrying~~2013 ~~value~~and is2012 noannual ~~longer~~goodwill ~~recoverable~~impairment ~~based~~review ~~upon~~performed ~~the~~as ~~undiscounted~~of ~~future~~October 1, ~~cash~~2013 ~~flows~~and ofOctober 1, ~~the~~2012, ~~asset~~respectively, anthe ~~impairment~~Company did not perform qualitative assessments ~~loss~~on ~~would~~any bereporting ~~recognized~~unit, ~~equal~~but toinstead ~~the~~completed ~~difference~~Step ~~between~~1 of the ~~carrying~~goodwill ~~amount~~impairment ~~and~~test for all reporting units. For the ~~fair~~2011 ~~value~~annual goodwill impairment review performed as of October 1, 2011, the Company ~~asset~~performed qualitative assessments on the Terminix, American Home Shield and ServiceMaster Clean reporting units. ~~Changes~~Based inon these assessments, the ~~estimated~~Company ~~useful~~determined ~~lives~~that, ormore inlikely than not, the ~~asset~~fair values ~~could~~of ~~cause~~Terminix, American Home Shield and ServiceMaster Clean were greater than their respective carrying amounts. As a result, the ~~Company~~two-step togoodwill impairment test was not performed for ~~adjust~~Terminix, ~~its~~American ~~book~~Home ~~value~~Shield orand ~~future~~ServiceMaster ~~expense~~Clean ~~accordingly~~in 2011.

AsGoodwill ~~required~~impairment ~~under~~is ~~accounting~~determined ~~standards~~using ~~for~~a ~~goodwill~~two-step ~~and~~process. ~~other~~The ~~intangibles,~~first ~~goodwill~~step isinvolves ~~not~~a ~~subject~~comparison toof ~~amortization,~~the ~~and~~estimated ~~intangible~~fair ~~assets~~value ~~with~~of ~~indefinite~~a ~~useful~~reporting ~~lives~~unit ~~are~~to ~~not~~its ~~amortized until~~carrying ~~their~~amount, ~~useful~~including goodwill. ~~lives~~In ~~are~~performing ~~determined~~the tofirst nostep, ~~longer~~the beCompany ~~indefinite.~~determines ~~Goodwill~~the ~~and~~fair ~~intangible~~value ~~assets~~of ~~that~~a ~~are~~reporting ~~not~~unit ~~subject~~using toa ~~amortization~~combination ~~are~~of ~~subject~~a toDCF ~~assessment~~analysis, ~~for~~a ~~impairment~~market-based bycomparable ~~applying~~approach and a ~~fair-value~~ market-based transaction ~~test~~approach. onDetermining anfair ~~annual~~value ~~basis~~requires orthe ~~more~~exercise ~~frequently~~of ifsignificant ~~circumstances~~judgment, ~~indicate~~including ajudgment ~~potential~~about ~~impairment.~~appropriate ~~The~~discount ~~Company~~rates, ~~adopted~~terminal ~~the~~growth ~~provisions~~rates, ofthe ~~ASU~~amount ~~2011-08,~~and ~~"Testing~~timing of ~~Goodwill~~expected ~~for~~future ~~Impairment~~cash flows," inas ~~the~~well ~~fourth~~as ~~quarter~~relevant ofcomparable ~~2011.~~company ~~This~~earnings ~~ASU~~multiples ~~gives~~for ~~entities~~ the ~~option~~market-based ofcomparable ~~performing~~approach aand ~~qualitative~~relevant ~~assessment~~transaction ~~before~~multiples ~~calculating~~for the ~~fair~~market-based ~~value~~transaction approach. ofThe acash ~~reporting~~flows ~~unit~~employed in ~~Step 1 of~~ the ~~goodwill~~DCF ~~impairment~~analyses ~~test.~~are Ifbased ~~entities determine,~~ on the ~~basis~~Company's ofmost ~~qualitative~~recent ~~factors~~budget and, ~~that~~for ~~the~~years ~~fair~~beyond ~~value~~the ofbudget, athe ~~reporting~~Company's ~~unit~~estimates, iswhich ~~more~~are ~~likely~~based ~~than~~on ~~not~~estimated ~~greater~~growth rates. ~~than~~The ~~its~~discount ~~carrying~~rates ~~amount,~~used in the ~~two-step~~ ~~impairment~~DCF ~~test~~analyses ~~would~~are ~~not~~intended beto ~~required.~~reflect ~~For~~the risks inherent in the ~~2012~~future ~~annual~~cash ~~goodwill~~flows ~~impairment~~of ~~review~~the ~~performed~~respective asreporting ~~October 1,~~units. ~~2012~~In addition, the ~~Company~~market-based ~~did~~comparable ~~not~~and transaction ~~perform~~approaches ~~qualitative~~utilize ~~assessments~~comparable ~~on any~~company ~~reporting~~public ~~units~~trading values, ~~but~~comparable ~~instead~~company ~~completed~~historical ~~Step~~results, 1research ofanalyst ~~the~~estimates ~~goodwill~~and, ~~impairment~~where ~~test~~available, ~~for~~values ~~all~~observed ~~reporting~~in ~~units~~private market transactions. ~~For~~If the ~~2011~~estimated ~~annual~~fair ~~goodwill~~value ~~impairment~~of ~~review~~a ~~performed~~reporting asunit ofexceeds ~~October 1,~~its ~~2011~~carrying amount, ~~the Company~~goodwill ~~performed~~of ~~qualitative~~the ~~assessments~~reporting onunit ~~the~~is ~~Terminix,~~not ~~American~~impaired ~~Home~~and ~~Shield~~the ~~and~~second ~~ServiceMaster~~step ~~Clean~~of ~~reporting~~the ~~units.~~impairment ~~Based~~test onis ~~these~~not ~~assessments,~~necessary. If the ~~Company~~carrying ~~determined~~amount ~~that,~~of ~~more~~a ~~likely~~reporting ~~than~~unit ~~not, the~~exceeds ~~fair~~its ~~values~~estimated offair ~~Terminix~~value, ~~American~~then ~~Home~~the ~~Shield~~second ~~and~~step ~~ServiceMaster~~of ~~Clean~~the ~~were~~goodwill ~~greater~~impairment ~~than~~test ~~their~~must ~~respective~~be ~~carrying amounts~~performed. AsThe asecond ~~result,~~step of the ~~two-step~~ goodwill impairment test ~~was not~~ ~~performed~~compares ~~for~~the ~~Terminix,~~implied ~~American~~fair ~~Home~~value ~~Shield~~of ~~and~~the ~~ServiceMaster~~reporting ~~Clean~~unit's ingoodwill ~~2011.~~

As permitted under accounting standards for goodwill and other intangibles prior to the adoption of ASU 2011-08, the Company carried forward a reporting unit's valuation from the most recent valuation under the following conditions: the assets and liabilities of the reporting unit have not changed significantly since the most recent fair value calculation, the most recent fair value calculation resulted in an amount that exceeded the carrying amount of the reporting unit by a substantial margin and, based on the facts and circumstances of events that have occurred since the last fair value determination, the likelihood that a current fair value calculation would result in an impairment would be remote. For the 2010 annual goodwill impairment review performed as of October 1, 2010, the Company carried forward the valuations of the Terminix and ServiceMaster Clean reporting units completed as of October 1, 2009. The Company did not carry forward the valuations for any trade names for the 2010 annual trade name impairment review. 69

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Notes to the Consolidated Financial Statements (Continued)

Note 1. Significant Accounting Policies (Continued)

~~Goodwill~~with ~~impairment is determined using a two-step process. The first step involves a comparison of the estimated fair value of a reporting unit to~~ its ~~carrying amount, including~~ goodwill. In performing the first step, the Company determines the fair value of a reporting unit using a combination of a DCF analysis, a market-based comparable approach and a market-based transaction approach. Determining fair value requires the exercise of significant judgment, including judgment about appropriate discount rates, terminal growth rates, the amount and timing of expected future cash flows, as well as relevant comparable company earnings multiples for the market-based comparable approach and relevant transaction multiples for the market-based transaction approach. The cash flows employed in the DCF analyses are based on the Company's most recent budget and, for years beyond the budget, the Company's estimates, which are based on estimated growth rates. The discount rates used in the DCF analyses are intended to reflect the risks inherent in the future cash flows of the respective reporting units. In addition, the market-based comparable and transaction approaches utilize comparable company public trading values, comparable company historical results, research analyst estimates and, where available, values observed in private market transactions. If the estimated fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired and the second step of the impairment test is not necessary. If the carrying amount of a reporting unit exceeds its estimated fair value, then the second step of the goodwill impairment test must be performed. The second step of the goodwill impairment test compares the implied fair value of the reporting unit's goodwill with its goodwill carrying amount to measure the amount of impairment, if any. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. In other words, the estimated fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment is recognized in an amount equal to that excess.

Goodwill and indefinite-lived intangible assets, primarily the Company's trade names, are assessed annually for impairment during the fourth quarter or earlier upon the occurrence of certain events or substantive changes in circumstances. The Company performed an interim goodwill impairment analysis at TruGreen as of June 30, 2013 that resulted in a pre-tax non-cash goodwill impairment of $417.5 million. After this impairment charge, there was no goodwill remaining at TruGreen. The Company performed an interim goodwill impairment analysis at TruGreen as of September 30, 2012 that resulted in a pre-tax non-cash goodwill impairment of $794.2 million. During the fourth quarter of 2012, the Company finalized its September 30, 2012 TruGreen valuation resulting in a $4.0 million adjustment to goodwill decreasing the 2012 goodwill impairment charge to $790.2 million. The Company's 2013, 2012, and 2011 annual impairment analyses, which were performed as of October 1 of each year, did not result in any goodwill impairments.

85 The Company performed an interim trade name impairment analysis at TruGreen as of June 30, 2013 resulting in a pre-tax non-cash trade name impairment charge of $255.8 million recorded in the second quarter of 2013. The Company performed an interim trade name impairment analysis at TruGreen as of June 30, 2012 resulting in a pre-tax non-cash trade name impairment charge of $67.7 million recorded in the second quarter of 2012. Further, the Company performed an interim trade name impairment analysis at TruGreen as of September 30, 2012 resulting in a pre-tax non-cash trade name impairment charge of $51.0 million recorded in the third quarter of 2012. The Company's annual trade name impairment analyses, which were performed as of October 1 of each year, resulted in pre-tax non-cash impairment of $36.7 million in 2011 related to the TruGreen trade name. The Company's October 1, 2013 and 2012 trade name impairment analyses did not result in any trade name impairments. The impairment charges by business segment for the years ended December 31, 2013, 2012 and 2011, as well as the remaining value of

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Notes to the Consolidated Financial Statements (Continued)

Note 1. Significant Accounting Policies (Continued)

~~decreasing~~ the trade ~~2012~~names ~~goodwill~~not ~~impairment~~subject ~~charge~~ to ~~$790.2 million.~~amortization ~~The~~by ~~Company's~~business ~~2012,~~segment ~~2011, and 2010 annual impairment analyses, which were performed~~ as of ~~October~~December ~~1 of each year~~31, ~~did not~~2013 ~~result~~and in2012 ~~any~~are ~~goodwill~~as ~~impairments.~~follows:

(In thousands)	Terminix		TruGreen			American Home Shield		ServiceMaster Clean		Other Operations & Headquarters(1)		Total

Balance at December 31, 2010	$	875,100	$	762,200		$	140,400	$	152,600	$	439,900	$	2,370,200
2011 Impairment		—		(36,700	)		—		—		—		(36,700	)


Balance at December 31, 2011		875,100		725,500			140,400		152,600		439,900		2,333,500
2012 Impairment		—		(118,700	)		—		—		—		(118,700	)


Balance at December 31, 2012		875,100		606,800			140,400		152,600		439,900		2,214,800
2013 Impairment		—		(255,800	)		—		—		—		(255,800	)


Balance at December 31, 2013	$	875,100	$	351,000		$	140,400	$	152,600	$	439,900	$	1,959,000

(In thousands)	Terminix		TruGreen			American Home Shield		ServiceMaster Clean		Other Operations & Headquarters(1)		Total
Balance at December 31, 2009 and 2010	$	875,100	$	762,200		$	140,400	$	152,600	$	439,900	$	2,370,200
2011 Impairment		—		(36,700	)		—		—		—		(36,700	)
Balance at December 31, 2011		875,100		725,500			140,400		152,600		439,900		2,333,500
2012 Impairment		—		(118,700	)		—		—		—		(118,700	)
Balance at December 31, 2012	$	875,100	$	606,800		$	140,400	$	152,600	$	439,900	$	2,214,800

(1): The Other Operations and Headquarters segment includes Merry Maids.

The goodwill impairment charge recorded in ~~2012~~2013 was primarily attributable to a decline in forecasted ~~2012~~2013 ~~cash flows~~ and ~~a decrease in projected~~ future ~~growth in~~ cash flows at TruGreen over a defined projection period as of ~~September~~ June 30, ~~2012~~2013 compared to the projections used in the ~~previous~~last annual impairment assessment performed on October 1, ~~2011~~2012. The changes in projected cash flows at TruGreen ~~were~~arose in part a ~~consequence of~~ from the ~~shift~~business inchallenges ~~strategy~~at ~~for~~ TruGreen described in "Segment Review—TruGreen Segment" in Management's Discussion and Analysis ~~in Item 7 of this Form 10-K~~above. Although the Company projected future ~~growth~~improvement in cash flows at TruGreen as a part of its ~~September~~ June 30, ~~2012~~2013 impairment analysis, total cash flows and projected growth in those cash flows were lower than ~~that~~those projected at the time TruGreen was last tested for impairment in ~~2011~~2012. The long-term growth rates used in the impairment tests at ~~September~~June 30, ~~2012~~2013 and October 1, ~~2011~~2012 were the same and were in line with historical U.S. gross domestic product growth rates. The discount rate used in the ~~September~~June 30, ~~2012~~2013 impairment test was 50100 bps lower than the discount rate used in the October 1, ~~2011~~2012 impairment test for TruGreen. The decrease in the discount rate is primarily attributable to changes in market conditions which indicated an improved outlook for the U.S. financial markets and a higher risk tolerance for investors since the ~~last~~2012 analysis ~~in 2011~~.

86 The goodwill impairment charge recorded in 2012 was primarily attributable to a decline in forecasted 2012 cash flows and a decrease in projected future growth in cash flows at TruGreen over a defined projection period as of September 30, 2012 compared to the projections used in the previous annual impairment assessment performed on October 1, 2011. Although the Company projected future growth in cash flows at TruGreen as a part of its September 30, 2012 impairment analysis, total cash flows and projected growth in those cash flows were lower than that projected at the time TruGreen was tested for impairment in 2011. The long-term growth rates used in the impairment tests at September 30, 2012 and October 1, 2011 were the same and in line with historical U.S. gross domestic product growth rates. The discount rate used in the September 30, 2012 impairment test was 50 bps lower than the discount rate used in the October 1, 2011 impairment test for TruGreen. The decrease in the discount rate is primarily attributable to changes

Table of Contents

Notes to the Consolidated Financial Statements (Continued)

Note 1. Significant Accounting Policies (Continued)

~~Based on the revenue results at TruGreen~~ in ~~the first six months of 2012 and a then lower revenue outlook for the remainder of 2012 and future years, the Company concluded that there was~~ anmarket ~~impairment~~conditions ~~indicator~~which ~~requiring~~indicated ~~the performance of~~ an ~~interim~~improved ~~indefinite-lived~~outlook ~~intangible asset impairment test~~ for the ~~TruGreen trade name as of June 30, 2012~~U. ~~That impairment analysis resulted in a $67~~S.~~7 million~~ ~~impairment~~financial ~~charge~~markets ~~recorded~~since in the ~~second~~2011 ~~quarter of 2012. Based on the revenue results of TruGreen in the third quarter of 2012 and the revised outlook for the remainder of the year and future years, the Company performed another impairment~~ analysis ~~on its TruGreen trade name to determine its fair value as of September 30, 2012~~. Based on the revised projected revenue for TruGreen as compared to the projections used in the second quarter 2012 impairment test, the Company determined the fair value attributable to the TruGreen trade name was less than its carrying value by $51.0 million, which was recorded as a trade name impairment in the third quarter of 2012.

~~The~~Based ~~impairment~~on ~~charge recorded in~~ the ~~second quarter of 2012 was primarily attributable to a decrease in projected future growth in~~ revenue results at TruGreen ~~over a defined projection period as of June 30, 2012 compared to the projections used~~ in the ~~previous~~first ~~annual~~six ~~impairment~~months ~~assessment~~of ~~performed~~2013 onand ~~October 1, 2011. The third quarter impairment charge was primarily attributable to~~ a ~~further~~lower ~~reduction in projected~~ revenue ~~growth~~outlook asfor ~~compared to expectations in~~ the ~~second~~remainder ~~quarter~~ of ~~2012.~~2013 ~~Although~~and ~~the Company projected~~ future ~~growth in revenue at TruGreen over a defined projection period as a part of its September 30~~years, ~~2012 impairment analysis, such growth was lower than~~ the ~~revenue~~Company ~~growth~~concluded ~~projected~~that atthere ~~the time the trade name~~ was ~~tested~~an impairment ~~for~~indicator ~~impairment in~~requiring the ~~second~~performance ~~quarter~~ of ~~2012.~~an ~~The~~interim ~~long~~indefinite-~~term~~lived ~~revenue~~intangible ~~growth~~asset ~~rates~~impairment ~~used~~test for ~~periods after~~ the ~~defined~~TruGreen ~~projection~~trade ~~period~~name inas ~~the~~of ~~impairment tests at September 30, 2012,~~ June 30, ~~2012~~ ~~and October 1, 2011 were the same and in line with historical U~~2013.S. ~~gross domestic product growth rates.~~ The ~~discount rates used in the September 30, 2012 and June 30, 2012~~ impairment ~~tests~~analysis ~~were the same, but were 50 bps lower than the discount rate used~~ resulted in ~~the~~a ~~October~~$255.8 1,million ~~2011~~ impairment ~~test~~charge ~~for~~recorded ~~the TruGreen trade name. The decrease~~ in the ~~discount~~second ~~rate~~quarter ~~from~~of ~~2011 is primarily attributable to changes in market conditions which indicated an improved outlook for the U~~2013.S. ~~financial markets since the last analysis.~~

The impairment charge recorded in ~~2011~~the second quarter of 2013 was primarily attributable to a decrease in the ~~use~~assumed ofroyalty ~~higher~~rate ~~discount~~and ~~rates~~a decrease in ~~the~~projected ~~DCF~~future ~~valuation~~growth ~~analyses~~in revenue at TruGreen over a defined projection period as of June 30, 2013 compared to the ~~discount~~royalty ~~rates~~rate and projections used in the ~~2010~~last annual impairment ~~analyses~~ assessment performed on October 1, 2012. ~~Although~~The decrease in the ~~projected~~assumed ~~future~~royalty ~~growth~~rate inwas ~~cash~~due ~~flows~~to inlower ~~2011~~current ~~were~~and ~~slightly~~projected ~~higher~~earnings ~~than~~as ina ~~the~~percent ~~2010~~of ~~valuation,~~revenue ~~the~~as ~~increase~~compared into the ~~discount~~last ~~rates~~annual ~~more~~impairment ~~than~~test. ~~offset~~Although the ~~improved~~Company ~~cash~~projected ~~flows. The~~future ~~increase~~growth in ~~the~~revenue ~~discount~~at ~~rates~~TruGreen isas ~~primarily~~part ~~attributable~~of toits ~~changes~~June 30, in2013 ~~market~~impairment ~~conditions~~analysis, ~~which~~total ~~indicated~~projected arevenue was lower ~~risk~~than ~~tolerance~~the inrevenue ~~2011~~projected asat ~~compared~~the totime ~~2010.~~the ~~This~~trade ~~lower~~name ~~risk~~was ~~tolerance~~last istested ~~exhibited~~for ~~through~~impairment in October 2012. The changes in projected future revenue growth at TruGreen arose in part from the ~~marketplace's~~business ~~desire~~challenges ~~for~~at ~~higher~~TruGreen ~~returns~~described in ~~order~~"Segment toReview—TruGreen ~~accept~~Segment" in ~~market~~Management's ~~risk~~Discussion and Analysis above. The long-term revenue growth rates used in the ~~analyses~~impairment ~~for~~tests ~~the~~at October 1, ~~2011~~2013, June 30, 2013 and ~~2010 impairment~~October 1, ~~tests~~2012 were the same and in line with historical U.S. gross domestic product growth rates. The discount rates used in the October 1, 2013 and June 30, 2013 impairment tests were the same, but were 100 bps lower than the discount rate used in the October 1, 2012 impairment test for the TruGreen trade name. The decrease in the discount rate from 2012 is primarily attributable to changes in market conditions which indicated an improved outlook for the U.S. financial markets and a higher risk tolerance for investors since the last analysis.

AsBased on the revenue results at TruGreen in the first six months of 2012 and a ~~result~~then lower revenue outlook for the remainder of 2012 and future years, the Company concluded that there was an impairment indicator requiring the performance of an interim indefinite-lived intangible asset impairment test for the TruGreen trade name as of June 30, 2012. That impairment analysis resulted in a $67.7 million impairment charge recorded in the second quarter of 2012,. Based on the ~~carrying~~revenue ~~value~~results of TruGreen in the third quarter of 2012 and the revised outlook for the remainder of the year and future years, the Company performed another impairment analysis on its TruGreen trade name ~~was adjusted~~ to determine its ~~estimated~~ fair value as of September 30, 2012. ~~Any further~~Based ~~decline~~on in the ~~estimated~~revised projected ~~fair~~revenue ~~value~~for ofTruGreen ~~this~~as ~~trade~~compared ~~name~~to ~~will~~the ~~result~~projections used in ~~additional~~the ~~trade~~second ~~name~~quarter 2012 impairment. Ittest, isthe ~~possible~~Company ~~that~~determined ~~such~~the ~~impairment,~~fair ifvalue ~~required,~~attributable ~~could~~to bethe ~~material~~TruGreen ~~and~~trade ~~may~~name ~~need~~was ~~to be~~less ~~recorded~~than ~~prior~~its tocarrying ~~the~~value ~~fourth~~by ~~quarter~~$51.0 million, ofwhich ~~2013~~was ~~(i.e., during~~recorded anas ~~interim~~a ~~period)~~trade ifname impairment in the ~~Company's~~third ~~results~~quarter of ~~operations~~2012. orTotal ~~other~~non-cash ~~factors~~trade ~~require~~name animpairments ~~impairment~~recorded ~~test~~in at2012 anrelated ~~interim~~to ~~date~~the TruGreen trade name were $118.7 million.

87 The impairment charge recorded in the second quarter of 2012 was primarily attributable to a decrease in projected future growth in revenue at TruGreen over a defined projection period as of June 30, 2012 compared to the projections used in the previous annual impairment assessment performed on October 1, 2011. The third quarter impairment charge was primarily attributable to a further reduction in projected revenue growth as compared to expectations in the second quarter of 2012. Although the Company projected future growth in revenue at TruGreen over a defined

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Notes to the Consolidated Financial Statements (Continued)

Note 1. Significant Accounting Policies (Continued)

projection period as a part of its September 30, 2012 impairment analysis, such growth was lower than the revenue growth projected at the time the trade name was tested for impairment in the second quarter of 2012. The long-term revenue growth rates used for periods after the defined projection period in the impairment tests at September 30, 2012, June 30, 2012 and October 1, 2011 were the same and in line with historical U.S. gross domestic product growth rates. The discount rates used in the September 30, 2012 and June 30, 2012 impairment tests were the same, but were 50 bps lower than the discount rate used in the October 1, 2011 impairment test for the TruGreen trade name. The decrease in the discount rate from 2011 is primarily attributable to changes in market conditions which indicated an improved outlook for the U.S. financial markets since the last analysis.

Restricted Net Assets: There are third party restrictions on the ability of certain of the Company's subsidiaries to transfer funds to the Company. These 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 the Company's home warranty and similar subsidiaries (through which ServiceMaster conducts its 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 ServiceMaster. As of December 31, 2013, the total net assets subject to these third party restrictions was $160.2 million. None of the subsidiaries of ServiceMaster are obligated to make funds available to ServiceMaster through the payment of dividends.

Fair Value of Financial Instruments and Credit Risk: See Note 19 for information relating to the fair value of financial instruments.

Financial instruments, which potentially subject the Company to financial and credit risk, consist principally of investments and receivables. Investments consist primarily of publicly traded debt and common equity securities. The Company periodically reviews its portfolio of investments to determine whether there has been an other than temporary decline in the value of the investments from factors such as deterioration in the financial condition of the issuer or the market(s) in which it competes. The majority of the Company's receivables have little concentration of credit risk due to the large number of customers with relatively small balances and their dispersion across geographical areas. The Company maintains an allowance for losses based upon the expected collectability of receivables.

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Notes to the Consolidated Financial Statements (Continued)

Note 1. Significant Accounting Policies (Continued)

Income Taxes: The Company is included in the consolidated U.S. federal income tax return of Holdings. State and local returns are filed both on a separate company basis and on a combined unitary basis with Holdings. Current and deferred income taxes are provided for on a separate company basis. The Company accounts for income taxes using an asset and liability approach for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns. Deferred income taxes are provided to reflect the differences between the tax bases of assets and liabilities and their reported amounts in the financial statements. Valuation allowances are established when necessary to reduce deferred income tax assets to the amounts expected to be realized.

The Company records a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in its tax return. The Company recognizes potential interest and penalties related to its uncertain tax positions in income tax expense.

Stock-Based Compensation: The Company accounts for stock-based compensation under accounting standards for share based payments, which require that stock options, restricted stock units and share grants be measured at fair value and this value is recognized as compensation expense over the vesting period.

Newly Issued Accounting Statements and Positions: In July 2012, the Financial Accounting Standards Board ("FASB") issued ASU 2012-02, "Intangibles—Goodwill and Other: Testing Indefinite-Lived Intangible Assets for Impairment," which amends the guidance on testing indefinite-lived intangible assets, other than goodwill, for impairment. This standard allows an entity testing an indefinite-lived intangible asset for impairment the option of performing a qualitative assessment before calculating the fair value of the asset. If entities determine, on the basis of the qualitative assessment, that the fair value of the indefinite-lived intangible asset is more likely than not greater than its carrying amount, the quantitative impairment test would not be required. Otherwise, further testing would be needed. This standard revises the examples of events and circumstances that an entity should consider in interim periods, but it does not revise the requirements to test indefinite-lived intangible assets (1) annually for impairment and (2) between annual tests if there is a change in events or circumstances. The amendments in this standard are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. The Company adopted the required provisions of this standard during the first quarter of 2013. The adoption of this standard did not have a material impact on the Company's Consolidated Financial Statements.

In February ~~May 2011~~2013, the ~~Financial Accounting Standards Board ("~~FASB") issued ASU ~~2011~~2013-0402, "~~Amendments~~Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income" to ~~Achieve~~improve ~~Common~~the ~~Fair~~reporting ~~Value Measurement~~of ~~and~~reclassifications ~~Disclosure~~out ~~Requirements~~of accumulated inother ~~U.S. GAAP~~comprehensive ~~and~~income ~~International~~by ~~Financial~~requiring ~~Reporting~~an ~~Standards~~entity ~~("IFRS")."~~to ~~This~~provide ~~ASU~~information isabout the ~~result~~amounts reclassified out of ~~joint~~accumulated ~~efforts~~other comprehensive income by ~~the~~component. ~~FASB~~In ~~and~~addition, ~~the~~an ~~International~~entity ~~Accounting~~is ~~Standards~~required ~~Board~~ to ~~develop~~present, ~~converged~~either ~~guidance~~ on ~~how~~the toface ~~measure~~of ~~fair~~the ~~value~~statement ~~and~~where ~~what~~net ~~disclosures~~income tois ~~provide~~presented ~~about~~or ~~fair~~in ~~value~~the ~~measurements.~~notes, ~~The~~significant ~~ASU~~amounts isreclassified ~~largely~~out ~~consistent~~of ~~with~~accumulated ~~existing~~other ~~fair~~comprehensive income by the ~~value~~respective ~~measurement~~line ~~principles~~items inof ~~U.S. GAAP;~~net ~~however,~~income itbut ~~expands~~only ~~existing~~if ~~disclosure~~the ~~requirements~~amount ~~for~~reclassified ~~fair~~is ~~value~~required ~~measurements~~under ~~and~~GAAP ~~makes~~to ~~other~~be ~~amendments,~~reclassified ~~many~~to ofnet ~~which~~income ~~eliminate~~in ~~unnecessary wording~~its ~~differences~~entirety ~~between~~in ~~U.S. GAAP~~the ~~and~~same ~~IFRS~~reporting period. ~~This~~For ~~ASU~~other isamounts ~~effective~~that ~~for~~are not ~~interim~~required ~~and~~under ~~annual~~GAAP ~~periods~~to ~~beginning~~be ~~after~~reclassified ~~December 15,~~in ~~2011~~their ~~(calendar~~entirety ~~year~~to ~~2012).~~net ~~The~~income, ~~Company~~an ~~adopted~~entity ~~the~~ is required ~~provisions~~to ofcross-reference ~~this~~to ~~standard~~other ~~during~~disclosures ~~the~~required ~~first~~under ~~quarter~~GAAP ofthat ~~2012~~provide additional detail about those amounts. The ~~adoption~~amendments ofin this standard ~~did~~do not ~~have~~change athe ~~material~~current ~~impact~~requirements onfor ~~the~~reporting ~~Company's~~net ~~consolidated~~income or other comprehensive income in financial statements and are effective prospectively for reporting periods beginning after December 15, 2012. The Company adopted the

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Notes to the Consolidated Financial Statements (Continued)

Note 1. Significant Accounting Policies (Continued)

In June 2011, the FASB issued ASU 2011-05, "Presentation of Comprehensive Income," to eliminate the option to present components of other comprehensive income as part of the statement of changes in stockholders' equity and require that all non-owner changes in stockholders' equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both options, an entity is required ~~to present each component of net income along with total net income, each component of other comprehensive income~~ along with a total for other comprehensive income, and a total amount for comprehensive income. In December 2011, the FASB issued ASU 2011-12, "Comprehensive Income," to effectively defer the changes from ASU 2011-05 that relate to the presentation of reclassification adjustments out of accumulated other comprehensive income. The amendments will be temporary to allow the Board time to redeliberate the presentation requirements for reclassifications out of accumulated other comprehensive income for annual and interim financial statements. This standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011 (calendar year 2012) and must be applied retrospectively to all periods upon adoption. The Company adopted the required provisions of this standard during the first quarter of ~~2012~~2013. The ~~adoption~~disclosures ofrequired by this standard ~~changed~~are ~~the~~presented ~~presentation~~in Note 14 of the Company's ~~consolidated~~Consolidated ~~financial~~Financial ~~statements~~Statements.

In July ~~2012~~2013, the FASB issued ASU ~~2012~~2013-0211, "~~Intangibles—Goodwill~~Presentation ~~and~~of ~~Other:~~an ~~Testing~~Unrecognized ~~Indefinite-Lived~~Tax ~~Intangible~~Benefit ~~Assets~~When ~~for~~a ~~Impairment,"~~Net ~~which~~Operating ~~amends~~Loss ~~the~~Carryforward, ~~guidance on~~a ~~testing~~Similar ~~indefinite-lived~~Tax ~~intangible assets~~Loss, ~~other~~or ~~than~~Tax ~~goodwill,~~Credit ~~for~~Carryforward ~~impairment.~~Exists" ~~This~~to eliminate ~~standard~~the ~~allows~~diversity anin ~~entity~~practice ~~testing~~associated anwith ~~indefinite-lived intangible asset for impairment~~ the ~~option~~presentation of ~~performing a~~unrecognized ~~qualitative~~tax ~~assessment~~benefits ~~before~~in ~~calculating~~instances ~~the~~where ~~fair~~a ~~value~~net ofoperating ~~the~~loss ~~asset. If entities determine~~carryforward, ona ~~the~~similar ~~basis~~tax ~~of the qualitative assessment~~loss, ~~that~~or ~~the~~a ~~fair~~tax ~~value~~credit ofcarryforward exists. ~~the~~ASU ~~indefinite~~2013-~~lived~~11 ~~intangible~~generally ~~asset is~~requires ~~more~~an ~~likely~~unrecognized ~~than~~tax ~~not greater than its carrying amount~~benefit, ~~the~~or ~~quantitative~~a ~~impairment~~portion ~~test~~of ~~would~~an ~~not~~unrecognized betax ~~required. Otherwise~~benefit, ~~further~~to ~~testing would~~ be ~~needed.~~presented ~~This~~in ~~standard revises~~ the ~~examples~~financial ~~of events~~statements ~~and~~as ~~circumstances~~a ~~that~~reduction anto ~~entity~~a ~~should~~deferred ~~consider~~tax inasset ~~interim~~for a ~~periods,~~net ~~but~~operating itloss ~~does~~carryforward, ~~not~~a ~~revise~~similar ~~the~~tax ~~requirements~~loss, toor ~~test~~a ~~(1) indefinite-lived~~tax ~~intangible~~credit ~~assets~~carryforward, ~~annually~~except ~~for impairment and (2) between annual tests if there is a change~~ in ~~events~~certain or circumstances. The amendments in ~~this~~ASU ~~standard~~2013-11 are effective for ~~annual~~fiscal years, and interim ~~impairment~~periods within ~~tests~~those ~~performed for fiscal~~ years , beginning after ~~September~~December 15, ~~2012~~2013. The adoption of this standard is not expected to have a material impact on the Company's ~~consolidated~~Consolidated ~~financial~~Financial ~~statements~~Statements.

Note 2. Acquisition of ServiceMaster

On the 2007 Closing Date, ServiceMaster was acquired pursuant to the 2007 Merger, and, immediately following the completion of the 2007 Merger, all of the outstanding common stock of Holdings, the ultimate parent company of ServiceMaster, was owned by investment funds sponsored by, or affiliated with, ~~the~~certain Equity Sponsors.

Equity contributions totaling $1.431 billion, together with (i) borrowings under a then new $1.150 billion senior unsecured interim loan facility, (the "Interim Loan Facility"), (ii) borrowings under a then new $2.650 billion Term Loan Facility, and (iii) cash on hand at ServiceMaster, were used, among other things, to finance the aggregate 2007 Merger consideration, to make payments in satisfaction of other equity-based interests in ServiceMaster under the 2007 Merger agreement, to settle existing interest rate swaps, to redeem or provide for the repayment of certain of the Company's existing indebtedness and to pay related transaction fees and expenses. In addition, letters of credit issued under a new $150.0 million pre-funded letter of credit facility were used to replace and/or secure letters of credit previously issued under a ServiceMaster credit facility that was terminated as of the 2007 Closing Date. On the 2007 Closing Date, the Company also entered into, but did not then draw under, the Revolving Credit Facility.

89 In connection with the 2007 Merger and the related transactions, ServiceMaster retired certain of its existing indebtedness, including ServiceMaster's $179.0 million, 7.875 percent notes due August 15, 2009 (the "2009 Notes"). On the 2007 Closing Date, the 2009 Notes were called for redemption, and they were redeemed on August 29, 2007. Additionally, the Company utilized a portion of the proceeds from the Term Facilities to repay at maturity ServiceMaster's $49.2 million, 6.95 percent notes due August 15, 2007. The Interim Loan Facility matured on July 24, 2008. On the maturity date, outstanding amounts under the Interim Loan Facility were converted on a one-to-one basis into the 2015 Notes.

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Notes to the Consolidated Financial Statements (Continued)

Note 2. Acquisition of ServiceMaster (Continued)

secure letters of credit previously issued under a ServiceMaster credit facility that was terminated as of the Closing Date. On the Closing Date, the Company also entered into, but did not then draw under, the Revolving Credit Facility.

In connection with the Merger and the related transactions (the "Transactions"), ServiceMaster retired certain of its existing indebtedness, including ServiceMaster's $179.0 million, 7.875 percent notes due August 15, 2009 (the "2009 Notes"). On the Closing Date, the 2009 Notes were called for redemption, and they were redeemed on August 29, 2007. Additionally, the Company utilized a portion of the proceeds from the Term Facilities to repay at maturity ServiceMaster's $49.2 million, 6.95 percent notes due August 15, 2007.

The Interim Loan Facility matured on July 24, 2008. On the maturity date, outstanding amounts under the Interim Loan Facility were converted on a one-to-one basis into the 2015 Notes. The 2015 Notes were issued pursuant to a refinancing indenture. In connection with the issuance of the 2015 Notes, ServiceMaster entered into the Registration Rights Agreement, pursuant to which ServiceMaster filed with the SEC a registration statement with respect to the resale of the 2015 Notes, which was declared effective on January 16, 2009. ServiceMaster deregistered the 2015 Notes in accordance with the terms of the Registration Rights Agreement, and the effectiveness of the registration statement was terminated on November 19, 2009. See Note 12 for a description of the Company's indebtedness.

Upon consummation of the Merger, ServiceMaster de-listed its shares of common stock from the New York Stock Exchange (the "NYSE") and deregistered under Section 12 of the Securities Exchange Act of 1934. The last day of trading of ServiceMaster common stock on the NYSE was July 24, 2007.

Note 3. Business Segment Reporting

~~The~~As of December 31, 2013, the business of the Company iswas conducted through five reportable segments: Terminix, TruGreen, American Home Shield, ServiceMaster Clean and Other Operations and Headquarters.

In accordance with accounting standards for segments, the Company's reportable segments are strategic business units that offer different services. The Terminix segment provides termite and pest control services to residential and commercial customers and distributes pest control products. The TruGreen segment provides residential and commercial lawn, tree and shrub care services. The American Home Shield segment provides home warranties and preventative maintenance contracts for household systems and appliances. The ServiceMaster Clean segment provides residential and commercial disaster restoration, janitorial and cleaning services through franchises primarily under the ServiceMaster and ServiceMaster Clean brand names, on-site wood furniture repair and restoration services primarily under the Furniture Medic brand name and home inspection services primarily under the AmeriSpec brand name. The Other Operations and Headquarters segment includes the franchised and Company-owned operations of Merry Maids, which provide home cleaning services. The Other Operations and Headquarters segment also includes SMAC, our financing subsidiary exclusively dedicated to providing financing to our franchisees and retail customers of our operating units, and the Company's headquarters operations, which provide various technology, marketing, finance, legal and other support services to the business units. The composition of our reportable segments is consistent with that used by our chief operating decision maker to evaluate performance and allocate resources. 75

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Notes to the Consolidated Financial Statements (Continued)

Note 3. Business Segment Reporting (Continued)

In accordance with accounting standards for segments, the Company's reportable segments are strategic business units that offer different services. The Terminix segment provides termite and pest control services to residential and commercial customers and distributes pest control products. The TruGreen segment provides residential and commercial lawn, tree and shrub care services. The American Home Shield segment provides home warranties and preventative maintenance contracts for household systems and appliances. The ServiceMaster Clean segment provides residential and commercial disaster restoration, janitorial and cleaning services through franchises primarily under the ServiceMaster, ServiceMaster Restore and ServiceMaster Clean brand names, on-site wood furniture repair and restoration services primarily under the Furniture Medic brand name and home inspection services primarily under the AmeriSpec brand name. The Other Operations and Headquarters segment includes the franchised and Company-owned operations of Merry Maids, which provides home cleaning services. The Other Operations and Headquarters segment also includes SMAC, our financing subsidiary exclusively dedicated to providing financing to our franchisees and retail customers of our operating units, and the Company's headquarters operations, which provide various technology, marketing, finance, legal and other support services to the business units. The composition of our reportable segments is consistent with that used by our chief operating decision maker (the "CODM") to evaluate performance and allocate resources.

Information regarding the accounting policies used by the Company is described in Note 1. The Company derives substantially all of its revenue from customers and franchisees in the United States with less than two percent generated in foreign markets. Operating expenses of the business units consist primarily of direct costs. Identifiable assets are those used in carrying out the operations of the business unit and include intangible assets directly related to its operations.

During the fourth quarter of 2013, the Company determined that Adjusted EBITDA would be its measure of segment profitability. Accordingly, the CODM evaluates performance and allocates resources based primarily on Adjusted EBITDA. Adjusted EBITDA is defined 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 asset impairments; non-cash stock-based compensation expense; restructuring charges; management and consulting fees; and non-cash effects attributable to the application of purchase accounting. The Company's definition of Adjusted EBITDA may not be calculated or comparable to similarly titled measures of other companies.

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Notes to the Consolidated Financial Statements (Continued)

Note 3. Business Segment Reporting (Continued)

Segment information for continuing operations is presented below:

	Year Ended December 31,
(In thousands)	~~2012~~2013			~~2011~~2012			~~2010~~2011
Operating Revenue:
Terminix	$	1,~~265~~309,~~417~~469		$	1,~~193~~265,~~075~~417		$	1,~~157~~193,~~346~~075
TruGreen		~~979~~895,~~081~~943			1979,~~100,741~~081			1,~~096~~100,~~667~~741
American Home Shield		~~720~~740,~~860~~062			~~686~~720,~~737~~860			~~656~~686,~~572~~737
ServiceMaster Clean		~~139~~150,~~441~~929			~~138~~139,~~691~~441			~~132~~138,~~132~~691
Other Operations and Headquarters		8892,~~482~~432			8688,~~628~~482			8486,~~677~~628
Total Operating Revenue	$	3,193,281		$	3,205,872		$	3,127,394

Operating Income (Loss):(1)(2)(3)
Total Operating Revenue	$	3,188,835		$	3,193,281		$	3,205,872
Terminix	$	236,160		$	220,622		$	199,750

TruGreen		(805,022	)		129,324			112,312

American Home Shield		126,098			94,869			68,380
Adjusted EBITDA:(1)
ServiceMaster Clean		54,435			57,674			55,450
Terminix	$	318,903		$	319,838		$	299,485
Other Operations and Headquarters		(144,433	)		(127,029	)		(129,200	)
TruGreen		25,999			152,813			209,031
Total Operating (Loss) Income	$	(532,762	)	$	375,460		$	306,692
American Home Shield		170,866			141,542			131,977
ServiceMaster Clean		67,942			61,041			64,018
Other Operations and Headquarters		(107,721	)		(104,000	)		(94,036	)

Total Adjusted EBITDA	$	475,989		$	571,234		$	610,475


Identifiable Assets:
Terminix	$	2,~~591~~694,~~967~~448		$	2,~~601~~591,~~869~~967		$	2,~~615~~601,~~388~~869
TruGreen		1598,~~200,063~~257			21,~~087~~200,~~055~~063			2,~~103~~087,~~341~~055
American Home Shield		~~976~~999,~~280~~541			~~954~~976,~~599~~280			~~956~~954,~~089~~599
ServiceMaster Clean		373,~~314~~650			~~370~~373,~~526~~314			~~385~~370,~~287~~526
Other Operations and Headquarters		1,~~269~~245,~~290~~630			1,~~132~~269,~~757~~290			~~954~~1,~~583~~132,757
Total Identifiable Assets(4)	$	6,410,914		$	7,146,806		$	7,014,688

Total Identifiable Assets(2)	$	5,911,526		$	6,410,914		$	7,146,806


Depreciation & Amortization Expense:
Terminix	$	7573,~~713~~014		$	75,~~347~~713		$	6775,~~761~~347
TruGreen		4549,~~729~~721			4145,~~929~~729			6641,~~069~~929
American Home Shield		8,~~606~~037			278,~~331~~606			4227,~~259~~331
ServiceMaster Clean		54,~~071~~914			65,~~150~~071			76,~~106~~150
Other Operations and Headquarters		1113,~~123~~426			1211,~~679~~123			1312,~~430~~679
Total Depreciation & Amortization Expense(5)	$	146,242		$	163,436		$	196,625

Total Depreciation & Amortization Expense(3)	$	149,112		$	146,242		$	163,436

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Notes to the Consolidated Financial Statements (Continued)

Note 3. Business Segment Reporting (Continued)

	Year Ended December 31,
(In thousands)	~~2012~~2013		~~2011~~2012		~~2010~~2011
Capital Expenditures:
Terminix	$	1310,~~623~~701	$	2313,~~457~~623	$	3223,~~380~~457
TruGreen		2921,~~079~~391		4429,~~714~~079		4944,~~014~~714
American Home Shield		1513,~~087~~013		1715,~~529~~087		817,~~031~~529
ServiceMaster Clean		~~454~~811		~~935~~454		~~435~~935
Other Operations and Headquarters		14,~~985~~488		914,~~905~~985		449,~~374~~905
Total Capital Expenditures	$	73,228	$	96,540	$	134,234

Total Capital Expenditures	$	60,404	$	73,228	$	96,540

(1)Presented below is a reconciliation of ~~segment~~Adjusted ~~operating~~EBITDA ~~(loss) income~~ to Net (~~loss~~Loss) ~~income from continuing operations before income taxes~~Income:

	Year Ended December 31,
(In thousands)	~~2012~~2013			~~2011~~2012			~~2010~~2011
Total Segment Operating (Loss) Income	$	(532,762	)	$	375,460		$	306,692
Adjusted EBITDA:
Non-operating Expense (Income):
Terminix	$	318,903		$	319,838		$	299,485
Interest expense		246,284			273,123			286,933
TruGreen		25,999			152,813			209,031
Interest and net investment income		(7,845	)		(10,886	)		(9,358	)
American Home Shield		170,866			141,542			131,977
Loss on extinguishment of debt		55,554			774			—
ServiceMaster Clean		67,942			61,041			64,018
Other expense		622			700			733
Other Operations and Headquarters		(107,721	)		(104,000	)		(94,036	)
(Loss) Income from Continuing Operations before Income Taxes	$	(827,377	)	$	111,749		$	28,384

Total Adjusted EBITDA		475,989			571,234			610,475
Depreciation and amortization expense		(149,112	)		(146,242	)		(163,436	)
Non-cash goodwill and trade name impairment		(673,253	)		(908,873	)		(36,700	)
Non-cash asset impairment		(165	)		(8,732	)		—
Non-cash stock-based compensation expense		(4,046	)		(7,119	)		(8,412	)
Restructuring charges		(20,840	)		(18,177	)		(8,162	)
Management and consulting fees		(7,250	)		(7,250	)		(7,500	)
Loss from discontinued operations, net of income taxes		(1,135	)		(200	)		(27,016	)
Benefit (provision) for income taxes		122,906			114,260			(43,912	)
Loss on extinguishment of debt		—			(55,554	)		(774	)
Interest expense		(249,033	)		(246,906	)		(273,823	)
Non-cash credits attributable to purchase accounting		—			16			81

Net (Loss) Income	$	(505,939	)	$	(713,543	)	$	40,821

(2)AsAssets ~~described~~of indiscontinued ~~Note 1,~~operations ~~includes,~~are asnot aincluded ~~result~~in of the ~~Company's~~business ~~impairment~~segment ~~testing of indefinite-lived intangible assets, pre-tax~~table. ~~non-cash~~(3)There are ~~impairment~~no ~~charges~~adjustments ofnecessary ~~$908.9 million recorded in the year ended December 31, 2012~~ to ~~reduce~~reconcile ~~the~~total ~~carrying~~depreciation ~~value of TruGreen's goodwill~~ and ~~the~~amortization ~~TruGreen~~as ~~trade~~presented ~~name and $36.7 million recorded~~ in the ~~year~~business ~~ended~~segment ~~December 31,~~table ~~2011~~ to ~~reduce~~ the ~~carrying~~consolidated ~~value of the TruGreen trade name~~totals. ~~There were no similar impairment charges included in continuing~~ ~~operations~~Amortization ~~in 2010. (3)Includes restructuring charges (credits) primarily related to a branch optimization project at Terminix, a reorganization~~ of ~~field~~debt ~~leadership~~issue ~~and~~costs ~~a restructuring~~is ofnot ~~branch~~included ~~operations at TruGreen, a reorganization of leadership at American Home Shield and ServiceMaster Clean, an initiative to enhance capabilities and reduce costs~~ in ~~our~~the ~~centers~~business ~~of excellence~~segment ~~at Other~~ table.

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Table of Contents

Notes to the Consolidated Financial Statements (Continued)

Note 3. Business Segment Reporting (Continued)

The Other Operations and Headquarters ~~and~~segment ~~other~~includes ~~restructuring~~the ~~costs~~operations of Merry Maids, as well as the Company's headquarters function. ~~Presented~~The ~~below~~Merry isMaids aoperations ~~summary~~reported operating revenue of ~~restructuring~~$84.6 million, ~~charges~~$82.0 million ~~(credits)~~and by$81.0 million ~~segment:~~for the years ended December 31, 2013, 2012 and 2011, respectively, and Adjusted EBITDA of $20.7 million, $21.2 million and $21.0 million for the years ended December 31, 2013, 2012 and 2011, respectively.

	Year Ended December 31,
(In thousands)	2012		2011		2010
Restructuring charges (credits):
Terminix	$	3,652	$	3,560	$	3,491
TruGreen		3,241		1,115		6,922
American Home Shield		647		—		(127	)
ServiceMaster Clean		1,370		36		71
Other Operations and Headquarters		9,267		3,451		1,091
Total restructuring charges	$	18,177	$	8,162	$	11,448

(4)Assets of discontinued operations are not included in the business segment table. (5)There are no adjustments necessary to reconcile total depreciation and amortization as presented in the business segment table to the consolidated totals. Amortization of debt issue costs is not included in the business segment table.

The Other Operations and Headquarters segment includes the operations of Merry Maids, as well as the Company's headquarters function. The Merry Maids operations reported revenue of $82.0 million, $81.0 million and $78.6 million for the years ended December 31, 2012, 2011 and 2010, respectively, and operating income of $14.3 million, $18.0 million and $16.9 million for the years ended December 31, 2012, 2011 and 2010, respectively.

See Note 4 for information relating to segment goodwill.

Note 4. Goodwill and Intangible Assets

InGoodwill ~~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 on an annual basis or more frequently if circumstances indicate a potential impairment. As described in Note 1, the 2013, 2012 and 2011 results include pre-tax non-cash impairment charges of $673.3 million and $908.9 million and $36.7 million, respectively, to reduce the carrying value of goodwill and trade names as a result of the Company's annual and interim impairment testing of goodwill and indefinite-lived intangible assets. ~~There were no similar impairment charges included in continuing operations in 2010.~~

During the years ended December 31, ~~2012~~2013 and ~~2011~~2012, the increase in goodwill and other intangible assets related primarily to tuck-in acquisitions completed throughout the period by Terminix, TruGreen and Merry Maids.

93 The table below summarizes the goodwill balances by segment for continuing operations:

(In thousands)		Terminix			TruGreen

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