American Home Shield 2008 Annual Report Download - page 42

Table of Contents
12.8 percent increase in Comparable Operating Performance for the year ended December 31, 2008 compared to the combined periods for the year ended
December 31, 2007. The segment's overall revenue results, excluding the impact of purchase accounting, reflected modest growth in pest control revenues
offset by declines in revenue from termite completions and termite contract renewals. Pest control revenues increased 2.5 percent for the year ended
December 31, 2008 as compared to the combined periods for the year ended December 31, 2007, as the impact of acquisitions and price realization more than
offset a decrease in new unit sales. A 0.2 percent decrease in termite renewal revenues for the year ended December 31, 2008 was due to an 80 basis point
reduction in termite customer retention offset, in part, by improved price realization. Revenue from termite completions declined 4.3 percent for the year
ended December 31, 2008, due to softer consumer demand for services and due to reduced average pricing on new termite treatments.
The growth in operating income and Comparable Operating Performance reflects lower termite materials costs, effective management of seasonal
staffing of production and sales labor, lower vehicle fleet counts and reduced overhead spending, offset, in part, by increased fuel costs.
American Home Shield Segment
The American Home Shield segment, which provides home warranties to consumers that cover heating, ventilation, air conditioning ("HVAC"),
plumbing and other systems and appliances, reported an 8.7 percent increase in revenue for the year ended December 31, 2008 compared to the combined
periods for the year ended December 31, 2007. Revenue for the year ended December 31, 2008 and for the Successor period from July 25, 2007 to
December 31, 2007 was reduced by $30.8 million (non-cash) and $55.3 million (non-cash), respectively, as a result of recording deferred revenue at its fair
value in connection with purchase accounting. Excluding this impact of purchase accounting, revenue increased 3.8 percent for the year ended December 31,
2008 over the combined periods for the year ended December 31, 2007. The annual value of warranty contracts written increased 2.5 percent, which is
comprised of a 3.8 percent increase in average price per contract partially offset by a 1.3 percent decline in total new contract and renewal sales units. New
contract and renewal sales units are reported as earned revenue over the subsequent twelve-month contract period. This decline in sales units is primarily
comprised of a 17.9 percent decrease in sales in the real estate market partially offset by a 4.8 percent increase in renewal sales. American Home Shield's sales
in the real estate market were significantly impacted by the continued softness in the home resale market throughout most of the country.
American Home Shield reported a 60.7 percent increase in operating income and a 15.7 percent decrease in Comparable Operating Performance for the
year ended December 31, 2008 over the combined periods for the year ended December 31, 2007. The decrease in Comparable Operating Performance for the
year ended December 31, 2008 is primarily due to a $25.6 million decrease in interest and investment income from the American Home Shield investment
portfolio (primarily reflecting the unfavorable impact of realized losses on disposals of securities and other than temporary declines in the value of certain
investments) as compared to the combined periods for the year ended December 31, 2007 and increased provisions for certain legal matters.
Other Operations and Headquarters Segment
This segment includes the operations of ServiceMaster Clean and Merry Maids, as well as the Company's headquarters functions. The segment reported
a 2.4 percent increase in revenue, a 33.6 percent decrease in operating loss and a 100.8 percent increase in Comparable Operating Performance for the year
ended December 31, 2008 compared to the combined periods for the year ended December 31, 2007. The ServiceMaster Clean and Merry Maids operations
reported a combined 2.8 percent increase in revenue for the year ended December 31, 2008 over 2007 levels.
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