American Home Shield 2011 Annual Report Download - page 12

Table of Contents
operate are highly fragmented, and we believe they are characterized by attractive industry conditions.
Lawn care
According to a study by NorthStar Partners, the U.S. professional lawn services segment specializing in lawn treatments was estimated at $6.7 billion in
revenue in 2011. According to the Bureau of Labor Statistics and Consumer Expenditures' 2010 consumer expenditure interview survey, approximately
14 percent of survey respondents outsourced lawn or gardening services. According to Packaged Facts, the lawn care segment has decreased at a 1.8 percent
CAGR over the 2007-2011 period but is projected to grow at a 2.2 percent CAGR over the 2011-2016 period.
Based on the study conducted by NorthStar Partners, we estimate that our share of the U.S. lawn care services segment is approximately 16 percent based
upon TruGreen's operating revenue (including royalties and franchise fees from franchisees) of $1.1 billion in 2010. Competition in the segment for
outsourced professional lawn care services comes mainly from local and independently owned firms. Scotts LawnService, a segment of The Scotts Miracle-
Gro Company, which we believe is our next largest competitor in the outsourced professional lawn care services segment, generated approximately
$224 million of revenues in their fiscal 2010. Based on publicly available information for 2010, we estimate TruGreen is approximately 4.9 times larger than
this competitor.
Termite and pest control
A 2010 study on the U.S. pest control industry conducted by Specialty Products Consultants, LLC estimates that the U.S. professional termite and pest
control services segment generated $6.3 billion in revenue. The termite and pest control services segment is generally characterized by high customer
retention rates and, according to the National Pest Management Association's 2010 survey, 60 percent of U.S. households currently use or have used a
professional exterminator in their homes. We estimate that Terminix's U.S. market segment share for the termite and pest control services we provide is
approximately 22 percent, based on total operating revenue for Terminix's services (including revenue generated by our franchisees) of approximately $1.4
billion in 2010, of which $1.2 billion in operating revenue was reported by Terminix for services we provided in 2010.
Competition in the segment for professional termite and pest control services comes primarily from regional and local, independently operated firms,
Orkin, Inc., a subsidiary of Rollins, Inc., and Ecolab, Inc., both of which compete nationally. We estimate that the top three providers (including Terminix)
comprised approximately 45 percent of the professional termite and pest control services segment in 2010. The remaining portion of the professional termite
and pest control services segment is highly fragmented with numerous privately-held, local termite and pest control service providers.
Home service contracts
According to Warranty Week, a newsletter for warranty management professionals, the U.S. home warranty segment (including structural home
warranties, which is a business in which we do not compete) was approximately $1.5 billion in 2009, as measured by the annual value of premiums paid by
consumers. One of the primary drivers of new home service contracts is the number of existing homes sold in the United States, since a home service product
is often recommended by a real estate sales professional or offered by the seller of a home in conjunction with a real estate transaction. According to the
National Association of Realtors, existing home re-sales in units increased by 1.7 percent in 2011 and are currently projected to increase by 4.7 percent in
2012 and 5.2 percent in 2013. Approximately 22 percent of the operating revenue of American Home Shield in 2011 was tied directly to existing home
resales.
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