American Home Shield 2006 Annual Report Download - page 4

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PART I
ITEM 1. BUSINESS
The ServiceMaster Company ("ServiceMaster") is a national company serving both residential and commercial customers. Its
services include lawn care, landscape maintenance, termite and pest control, home warranty, home inspection, disaster restoration,
cleaning, furniture repair, plumbing, drain cleaning, electrical, heating, and air conditioning. As of December 31, 2005,
ServiceMaster provided these services through a network of over 5,500 company-owned locations and franchise licenses operating
under the following leading brands: TruGreen ChemLawn, TruGreen LandCare, Terminix, ARS Service Express, Rescue Rooter,
American Mechanical Services, American Home Shield, AmeriSpec, Merry Maids, ServiceMaster Clean and Furniture Medic.
Incorporated in Delaware in 1991, ServiceMaster is the successor to various entities dating back to 1947.
ServiceMaster is organized into five principal operating segments: TruGreen ChemLawn, TruGreen LandCare; Terminix; American
Home Shield; and Other Operations. All ServiceMaster subsidiaries are wholly owned, except for The Terminix International
Company L.P., in which Allied Bruce-Terminix Companies, Inc. is a Class B limited partner. The financial information for each
operating segment for 2005, 2004 and 2003 is contained in Part II, Item 8 of this Form 10-K.
CHANGE IN SEGMENT REPORTING
The Company intends to sell its American Residential Services (ARS) and American Mechanical Services (AMS) companies so it
can concentrate resources on its main growth businesses. The Company has retained an investment banking firm to serve as its
financial advisor in this process. The ARS/AMS operations provide heating, ventilation, air conditioning (HVAC), plumbing and
electrical installation and repair services and were previously disclosed as the Company's ARS/AMS segment. Because the
Company intends to sell these companies, the results of these operations are reported within the financial statement caption
"businesses held pending sale and discontinued operations" for all periods.
The Company has expanded its business segment reporting to allow for better ongoing visibility into the components of the
business. The operations that previously were reported in the TruGreen segment have been further broken out into the TruGreen
ChemLawn segment and the TruGreen LandCare segment. TruGreen LandCare is an important part of the Company's continuing
operations and separately presenting the segment results for the TruGreen LandCare operations recognizes the importance of this
business to the future growth of the enterprise while also enhancing overall disclosure. All previously reported segment financial
information reflects the aforementioned changes in segment reporting.
SERVICES
The following table shows the percentage of ServiceMaster's consolidated revenue from continuing operations derived from each of
ServiceMaster's operating segments in the years indicated:
Segment 2005 2004 2003
TruGreen ChemLawn 32% 32% 31%
TruGreen LandCare 14% 14% 15%
Terminix 33% 33% 33%
American Home Shield 16% 16% 16%
Other Operations 5% 5% 5%
TruGreen ChemLawn Segment
The TruGreen ChemLawn segment provides lawn care services primarily under the TruGreen ChemLawn brand name. Revenues
derived from the TruGreen ChemLawn segment constituted 32%, 32% and 31% of the revenue from continuing operations of the
consolidated ServiceMaster enterprise in 2005, 2004 and 2003, respectively. The TruGreen ChemLawn business is seasonal in
nature. Weather conditions, such as a drought, affect the demand for lawn care services and may result in a decrease in revenues or
an increase in costs.
TruGreen ChemLawn is a leading provider of lawn care services in the United States serving both residential and commercial
customers. As of December 31, 2005, TruGreen ChemLawn provided these services in 46 states and the District of Columbia
through 208 company-owned locations and 52 franchised locations. As of December 31, 2005, TruGreen ChemLawn also provided
lawn care services through a subsidiary in Canada and had entered into licensing arrangements to provide these services in eight
other countries, primarily in the Middle East.
TruGreen LandCare Segment
The TruGreen LandCare segment provides landscape maintenance services primarily under the TruGreen LandCare brand name.
Revenues derived from the TruGreen LandCare segment constituted 14%, 14% and 15% of the revenue from continuing operations
of the consolidated ServiceMaster enterprise in 2005, 2004 and 2003, respectively. The TruGreen LandCare business is seasonal in
nature. Weather conditions, such as a drought, affect the demand for landscape maintenance services and may result in a decrease in
revenues or an increase in costs.
TruGreen LandCare is a leading provider of landscape maintenance services in the United States serving primarily commercial
customers. As of December 31, 2005, TruGreen LandCare provided these services in 42 states and the District of Columbia through
102 company-owned locations and had no international operations.
Terminix Segment