MEMPHIS, Tenn.- ServiceMaster announced unaudited fourth-quarter and full year 2016 results. For the fourth-quarter, the company reported a year-over-year revenue increase of 5 percent, and, for the full year, the company reported a year-over-year revenue increase of 6 percent. Both the fourth quarter and full year increases in revenue were driven primarily by organic growth at American Home Shield (“AHS”), the impacts of acquiring Alterra Pest Control, LLC (“Alterra”) in November 2015, OneGuard Home Warranties (“OneGuard”) in June 2016 and Landmark Home Warranty (“Landmark”) in November 2016.
Fourth-quarter 2016 net income was $31 million, or $0.23 per share, versus $17 million, or $0.12 per share, in the same period in 2015. Full year 2016 net income was $155 million, or $1.13 per share, versus full year 2015 net income of $160 million, or $1.17 per share. Pre-tax income includes charges for fumigation related matters of $93 million in the full year 2016 and $9 million in the fourth-quarter and full year 2015, an insurance reserve adjustment of $23 million in the full year 2016 and a loss on extinguishment of debt of $32 million in the fourth-quarter and full year 2016 and $58 million in the full year 2015. Additionally, fourth-quarter and full year 2015 include an estimated charge relating to our voluntary correction proposal to our 401(k) plan for $23 million.
Fourth-quarter 2016 Adjusted EBITDA was $144 million, a year-over-year increase of $20 million, or 16 percent, primarily driven by an increase in Adjusted EBITDA of $18 million at AHS. Full year 2016 Adjusted EBITDA was $667 million, a year-over-year increase of $45 million, or 7 percent, driven largely by increases at Terminix and AHS of $24 million and $15 million, respectively.
Fourth-quarter 2016 adjusted net income was $60 million, or $0.44 per share, versus $45 million, or $0.33 per share, for the same period in 2015. Full year 2016 adjusted net income was $281 million, or $2.04 per share, versus full year 2015 adjusted net income of $245 million, or $1.80 per share.
Rob Gillette, ServiceMaster’s chief executive officer, noted: “This was another solid quarter. At American Home Shield, both revenue and Adjusted EBITDA growth increased as we continue to focus on streamlining operations, growing organically and capitalizing on recent acquisitions. At Terminix, our investment in our termite business continues to show progress as year-over-year sales and revenue continue to grow. Challenges remain in our pest control business but we are confident the operational changes we are making will improve customer service and retention and result in solid growth in the future.”
Terminix
Terminix reported a 3 percent year-over-year revenue increase in the fourth-quarter of 2016, driven by the impact of the Alterra acquisition in November 2015 and organic growth, primarily driven by improved pricing. Adjusted EBITDA decreased 4 percent, or $3 million, versus prior year, primarily reflecting a $4 million increase in production labor costs associated with the company’s effort to improve customer service, $2 million increase in technology costs and $2 million increase in other costs, offset, in part, by $4 million from the conversion of higher revenue and $1 million decrease in fuel costs.
For the year, Terminix reported a 6 percent year-over-year revenue increase, driven by the impact of the Alterra acquisition in November 2015 and organic growth, primarily driven by improved pricing. Adjusted EBITDA increased 7 percent, or $24 million, versus prior year, primarily reflecting $36 million from the conversion of higher revenue, $5 million decrease in fuel costs, and $1 million decrease in other costs, offset, in part, by $12 million increase in technology costs and $6 million increase in production labor costs associated with the company’s effort to improve customer service.
Fumigation Related Matters
As previously disclosed, on January 20, 2017, the company entered into a new plea agreement in connection with the investigation initiated by the United States Department of Justice (DOJ) related to the U.S. Virgin Islands matter. Under the terms of the new plea agreement we have agreed to pay fines, community service and government costs totaling up to $10 million, which is equivalent in total amount to the financial terms under the superseding plea agreement that was previously rejected by the court. Unlike the superseding plea agreement, however, the new plea agreement is non-binding on the court. It is possible that the court could use its discretion to impose fines or other terms different than those in the new plea agreement. The new plea agreement is subject to the approval of the court and, if approved, will resolve the federal criminal consequences associated with the DOJ investigation.