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ServiceMaster Reports First Quarter Financials

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The parent company of Terminix reported operating revenue of $608 million, a decline of 7.1 percent compared to the same period in 2012.

| May 14, 2013

MEMPHIS, Tenn. — The ServiceMaster Company announced preliminary unaudited first-quarter 2013 results, including operating revenue of $608 million, a decline of 7.1 percent compared to the same period in 2012. The company reported first-quarter 2013 operating income of $20 million, a decline of 63.2 percent compared to the same period for 2012. The company’s first-quarter 2013 operating performance decreased 35 percent to $65 million compared to the same period for 2012. A reconciliation of operating income (loss) to operating performance is set forth in this press release.

“Our first-quarter 2013 results were disappointing,” said John Krenicki, Jr., ServiceMaster’s interim chief executive officer. “The path forward for us starts with putting our customers first, executing well and implementing the turnaround agenda at TruGreen.” Krenicki assumed the CEO position following the departure of former CEO Hank Mullany, who resigned from the company effective April 12.

Krenicki noted that the decline in revenue and earnings compared to the first quarter of 2012 was largely attributable to TruGreen’s performance and the effects of the cool, wet start to the spring season in many parts of the country for both TruGreen and Terminix. The unseasonably late spring delayed production and compared unfavorably to the unusually warm weather that accelerated production into the first quarter last year. Excluding TruGreen, the other ServiceMaster businesses performed about as expected, he said.

“We’re confident about the future of ServiceMaster,” said Krenicki. “We have leading brands, talented and passionate associates committed to serving customers and a lot of untapped opportunity to improve results. But we need to make progress at TruGreen while continuing to run the rest of our businesses well.”

TERMINIX’S PERFORMANCE. Terminix reported a 0.6 percent increase in operating revenue, a 0.5 percent decrease in operating income and a 2.9 percent decrease in operating performance. Pest control revenue increased 5.0 percent over first-quarter 2012 results, primarily reflecting improved price realization. Termite revenue decreased 3.7 percent over first-quarter 2012 results, reflecting a decrease in new unit sales, a 1.9 percent decline in customer counts and the unfavorable timing of renewal revenue, offset, in part, by improved price realization.

Terminix’s operating performance decreased $2.6 million for the first quarter of 2013 compared to the first quarter of 2012. This decrease primarily reflects lower labor efficiency, investments in sales labor and higher bad debt expense, offset, in part, by the impact of higher operating revenue, lower provisions for certain legal matters and lower product distribution revenue, which has lower margins than pest control or termite revenue.

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