American Home Shield 2011 Annual Report Download - page 47

Table of Contents
17.1 percent for the year ended December 31, 2010. TruGreen's Comparable Operating Performance included restructuring charges of $1.1 million and
$6.9 million in 2011 and 2010, respectively. Additionally, key executive transition charges of $1.0 million were incurred in 2011, which included separation
charges related to the resignation of the former President of TruGreen in the second quarter of 2011. The net reduction in these charges contributed 44 bps to
the increase in the segment's Comparable Operating Performance as a percentage of revenue. The remaining 136 bps increase primarily reflects a reduction in
sales and marketing expense driven by the reduced focus on the neighborhood sales channel and cost reductions realized through ongoing initiatives, offset, in
part, by an increase in fuel and fertilizer prices.
The TruGreen segment reported a 4.6 percent increase in revenue, a 73.1 percent increase in operating income and a 5.0 percent increase in Comparable
Operating Performance for the year ended December 31, 2010 compared to 2009. Revenue from core lawn service customers, which was 55 percent of the
segment's operating revenue in 2010 increased 3.5 percent compared to 2010, reflecting a 1.8 percent increase in the average application price and a
1.6 percent increase in average customer counts. Absolute customer counts as of December 31, 2010 compared to 2009 declined 1.7 percent, which was
driven by a 210 bps reduction in the customer retention rate, offset, in part, by an increase in new unit sales generated in the neighborhood selling channel.
The segment's revenue results also reflect a $27.5 million increase in other expanded services.
TruGreen's operating income for the year ended December 31, 2009 included a pre-tax non-cash impairment charge of $21.4 million to reduce the
carrying value of trade names to their estimated fair value as further discussed in Note 1 to the Consolidated Financial Statements. There were no similar
charges in 2010. TruGreen's Comparable Operating Performance as a percentage of revenue increased to 17.1 percent for the year ended December 31, 2010
compared to 17.0 percent for the year ended December 31, 2009. TruGreen's Comparable Operating Performance included restructuring charges of
$6.9 million and $8.7 million in 2010 and 2009, respectively. The net reduction in these charges contributed 20 bps to the increase in the segment's
Comparable Operating Performance as a percentage of revenue. The remaining 10 bps decline primarily reflects an increase in sales and marketing expense,
incentive compensation expense and costs related to our ongoing initiatives to transform our branch operations and to improve customer service, offset, in
part, by a reduction in fuel and fertilizer prices and health care costs.
Terminix Segment
The Terminix segment, which provides termite and pest control services and distributes pest control products, reported a 3.1 percent increase in operating
revenue, a 10.4 percent increase in operating income and a 10.7 percent increase in Comparable Operating Performance for the year ended December 31,
2011 compared to 2010. Pest control revenue, which was 55 percent of the segment's operating revenue in 2011, increased 5.3 percent in 2011 compared to
2010, reflecting a 6.4 percent increase in customer counts, a 1.1 percent increase in the average annual account value, and a $6.0 million increase in other
services, including bed bug and other pest services. The increase in pest control customer counts was driven by an increase in new unit sales and acquisitions
and a 70 bps increase in the customer retention rate. Termite revenue, including new unit sales and renewals, was 40.5 percent of the segment's operating
revenue in 2011 and increased 0.5 percent in 2011 compared to 2010, primarily reflecting a 2.2 percent increase in average price of new units and renewals,
offset, in part, by a 2.6 percent decline in new unit sales and a 1.0 percent decline in renewal customer counts. For 2011, termite renewal revenue comprised
55 percent of total termite revenue, while the remainder consisted of termite completion new unit sales. The decline in termite renewal customer counts was
driven by a decrease in new units, offset, in part, by a 10 bps increase in the customer retention rate.
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