American Home Shield 2010 Annual Report Download - page 39

Table of Contents
TruGreen LandCare Segment
The TruGreen LandCare segment, which provides landscape maintenance services, reported a 9.0 percent decrease in revenue, a $62.0 million decrease
in operating income and a 68.2 percent decrease in Comparable Operating Performance for the year ended December 31, 2010 compared to 2009. The decline
in revenue included a 9.7 percent decrease in base contract maintenance revenue and a 10.0 percent decrease in enhancement revenue. Revenue trends were
primarily impacted by contract cancellations and pricing concessions in 2009 and 2010 in response to the impacts of a difficult economic environment.
TruGreen LandCare's $62.0 million decrease in operating income includes a non-cash impairment charge of $46.9 million to reduce the carrying value of
goodwill and trade names to their estimated fair value as further described in Note 1 to the Consolidated Financial Statements. TruGreen LandCare's
Comparable Operating Performance declined $16.5 million for the year ended December 31, 2010 compared to 2009. In addition to the impact of revenue,
TruGreen LandCare's Comparable Operating Performance reflects labor inefficiencies created by labor shortages in certain markets and key executive
separation charges, offset, in part, by reduced fuel and health care costs and the favorable impact of acquiring assets in connection with exiting certain fleet
leases. The Company announced in November 2010 that it was exploring strategic options relating to TruGreen LandCare, including the potential sale of the
business. In the first quarter of 2011, the Company concluded that TruGreen LandCare did not fit within the long-term strategic plans of the Company and
finalized development of a plan to sell the business. The Company expects this sale to occur in 2011.
Terminix Segment
The Terminix segment, which provides termite and pest control services and distributes pest control products, reported a 6.3 percent increase in revenue,
an 8.5 percent increase in operating income and an 8.2 percent increase in Comparable Operating Performance for the year ended December 31, 2010
compared to 2009. The segment's overall revenue results reflected growth in termite and pest control revenues, as well as increased product distribution
revenue. Termite revenue increased 3.1 percent for the year ended December 31, 2010 compared to 2009 due to an increase in new unit sales, the contribution
of acquisitions, improved price realization and a 30 basis point improvement in the customer retention rate. Pest control revenues increased 5.2 percent for the
year ended December 31, 2010 compared to 2009, reflecting a 3.6 percent increase in customer counts due to an increase in new unit sales, the contribution of
acquisitions and a 140 basis point improvement in the customer retention rate. Product distribution revenue, which has lower margins than termite or pest
revenue and accounted for less than five percent of total segment revenue, increased $23.2 million. In August 2010, Terminix acquired the assets of Antimite
Termite and Pest Control, a company with annual revenues of approximately $30 million.
Terminix's Comparable Operating Performance increased $20.2 million for the year ended December 31, 2010 compared to 2009. In addition to the
favorable impact of increased revenue, Terminix's Comparable Operating Performance reflects reduced fuel and health care costs and the favorable impact of
acquiring assets in connection with exiting certain fleet leases, offset, in part, by increased investments in sales and marketing and increased provisions for
incentive compensation.
American Home Shield Segment
The American Home Shield segment, which provides home service contracts to consumers that cover heating, ventilation, air conditioning, plumbing and
other systems and appliances, reported a 4.2 percent increase in revenue, a 2.7 percent decrease in operating income and a 2.6 percent increase in Comparable
Operating Performance for the year ended December 31, 2010
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