American Home Shield 2010 Annual Report Download - page 47

Table of Contents
to 2008. The segment's overall revenue results, excluding the impact of purchase accounting, reflected modest growth in pest control revenues offset by a
decline in termite revenues. Pest control revenues increased 1.6 percent for the year ended December 31, 2009 compared to 2008, reflecting improved price
realization, offset, in part, by a decline in customer counts. The decline in customer counts was driven by a decline in new unit sales and a 30 basis point
decline in customer retention. A 3.5 percent decrease in termite revenues for the year ended December 31, 2009 compared to 2008 was due to a 110 basis
point decline in the customer retention rate and reduced average pricing on new termite treatments. Trends in retention and new unit sales were adversely
impacted by soft consumer demand.
Terminix's Comparable Operating Performance increased $19.1 million for the year ended December 31, 2009 compared to 2008, which includes the
impact of $3.3 million of restructuring charges in 2009 related to a branch optimization program. Terminix's Comparable Operating Performance also reflects
favorable termite damage claims trends, effective management of seasonal staffing of production and sales labor, reduced fuel costs and overhead spending
and a $5.9 million reduction in vehicle lease expense driven by lower vehicle fleet counts and the favorable impact of acquiring assets in connection with
exiting certain fleet leases in 2008. The factors were offset, in part, by unfavorable trending in health care costs.
American Home Shield Segment
The American Home Shield segment reported a 7.2 percent increase in revenue for the year ended December 31, 2009 compared to 2008. Revenue for
the year ended December 31, 2008 was reduced by $30.8 million (non-cash) as a result of recording deferred revenue at its fair value in connection with
purchase accounting. Excluding this impact of purchase accounting, revenue for the year ended December 31, 2009 reflected a 1.8 percent increase as
compared to 2008. American Home Shield reported a 130.5 percent increase in operating income and a 19.6 percent increase in Comparable Operating
Performance for the year ended December 31, 2009 compared to 2008. Trends in revenue reflect improved price realization. Customer counts are comparable
to 2008, reflecting a 2.1 percent decline in new unit sales, offset by a 200 basis point improvement in customer retention. American Home Shield's sales in the
real estate market in the first and second quarter were significantly impacted by the continued softness in the home resale market throughout most of the
country; however, this was offset, in part, by increased sales in the real estate market in the third and fourth quarters.
American Home Shield's Comparable Operating Performance increased $18.6 million for the year ended December 31, 2009 compared to 2008, which
includes a $10.2 million increase in interest and net investment income from the American Home Shield investment portfolio (primarily reflecting reductions
in impairments of securities). American Home Shield's Comparable Operating Performance also reflects a decline in sales and marketing costs, offset, in part,
by unfavorable trending in health care costs.
ServiceMaster Clean Segment
The ServiceMaster Clean segment reported a 3.2 percent decrease in revenue, an 8.9 percent increase in operating income and a 5.2 percent increase in
Comparable Operating Performance for the year ended December 31, 2009 compared to 2008. Trends in revenue reflect a decline in product sales, primarily
to franchisees, offset, in part, by increases in disaster restoration services and other franchise revenues.
ServiceMaster Clean's Comparable Operating Performance increased $3.0 million for the year ended December 31, 2009 compared to 2008, which
includes a $1.5 million decrease in restructuring charges compared to 2008. ServiceMaster Clean's Comparable Operating Performance also reflects reduced
corporate overhead spending.
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