American Home Shield 2008 Annual Report Download - page 48

Table of Contents
TruGreen LawnCare Segment
The TruGreen LawnCare segment, which includes lawn, tree and shrub care services, reported a 4.4 percent increase in revenue, a 25.3 percent decrease
in operating income and an 8.3 percent increase in Comparable Operating Performance for the combined periods for the year ended December 31, 2007
compared to the year ended December 31, 2006. The growth in revenue and Comparable Operating Performance was supported by improved price realization
and continued improvements in customer retention. Customer counts at December 31, 2007 were comparable to last year's level. Improved customer retention
helped offset a 0.3 percent decline in new sales, which were adversely impacted by poor April weather. The rolling twelve-month retention rate improved 200
basis points over last year, driven by improvements in overall quality of service delivery and enhanced customer communication, including the LQA visits
initiated during the second half of 2006. Additionally, the lawn care operations realized improvements in average pricing as compared to 2006.
The 8.3 percent increase in Comparable Operating Performance for the combined periods for the year ended December 31, 2007 compared to the year
ended December 31, 2006 was supported by lower sales costs, the favorable leveraging of overhead costs and improved labor productivity, due to a reduction
in route manager turnover and a reduced level of service calls relative to last year.
TruGreen LandCare Segment
The TruGreen LandCare segment, which includes landscape maintenance services, reported a 7.3 percent decrease in revenue, a 1,357.8 percent decrease
in operating income and a 56.5 percent decrease in Comparable Operating Performance for the combined periods for the year ended December 31, 2007
compared to the year ended December 31, 2006. The decline in revenue included a 7.5 percent decline in base contract maintenance revenue and an
11.6 percent decrease in enhancement revenue. These factors were offset, in part, by a $6 million increase in 2007 snow removal service revenue. The revenue
comparison was adversely impacted by branch closures completed during the third and fourth quarters of 2007, as well as the near-term impacts of the
Company's efforts to improve the quality of its customer base with a better customer mix by pruning less profitable jobs, implementing stricter pricing on new
sales, and increasing the average size of new proposals and sales.
TruGreen LandCare's Comparable Operating Performance includes the impact of $7.9 million of restructuring charges for the Successor period from
July 25, 2007 to December 31, 2007. Excluding the impact of the restructuring charges Comparable Operating Performance improved 84.4 percent for the
combined periods for the year ended December 31,2007, over 2006 levels, primarily due to the increase in high margin snow removal work and improved
materials and labor management on the base contract maintenance portfolio. These factors were offset, in part, by increased sales labor resulting from
investments made to increase the size, caliber and training of the sales team and reductions in higher margin enhancement revenue.
Terminix Segment
The Terminix segment, which includes termite and pest control services, reported a 1.5 percent increase in revenue for the combined periods for the year
ended December 31, 2007 compared to the year ended December 31, 2006. Revenue for the Successor period from July 25, 2007 to December 31, 2007 has
been reduced by $5.3 million (non-cash) as a result of recording deferred revenue at its fair value in connection with purchase accounting. This only impacts
revenue and operating income as the non-cash effects attributable to purchase accounting are excluded from Comparable Operating Performance. Excluding
purchase accounting, revenue increased
44