American Home Shield 2011 Annual Report Download - page 48

Table of Contents
Terminix's Comparable Operating Performance as a percentage of revenue increased to 24.8 percent for the year ended December 31, 2011 compared to
23.1 percent for the year ended December 31, 2010. Terminix's Comparable Operating Performance included restructuring charges of $3.6 million and
$3.5 million in 2011 and 2010, respectively. The 170 basis point increase in Comparable Operating Performance as a percentage of revenue primarily reflects
a reduction in incentive compensation expense, legal related expense, termite damage claims expense, the favorable impact of acquiring assets in connection
with exiting certain fleet leases and other cost reductions realized through ongoing initiatives, offset, in part by an increase in sales and marketing expense and
fuel prices.
The Terminix segment reported a 6.3 percent increase in operating 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. Pest control revenue, which was 54 percent of the segment's
operating revenue in 2010, increased 5.2 percent in 2010 compared to 2009, reflecting a 3.6 percent increase in customer counts, a 0.3 percent increase in the
average annual account value and a $10.4 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 140 bps improvement in the customer retention rate. Termite revenue, including new
unit sales and renewals, was 41.5 percent of the segment's operating revenue in 2010 and increased 3.1 percent in 2010 compared to 2009, primarily reflecting
a 2.0 percent increase in average price of new units and renewals, a 7.9 percent increase in new unit sales and a 0.3 percent increase in renewal customer
counts. For 2010, termite renewal revenue comprised 55 percent of total termite revenue, while the remainder consisted of termite completion new unit sales.
The increase in termite renewal customer counts was driven by an increase in new units and acquisitions and a 30 bps 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 operating
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 as a percentage of revenue increased to 23.1 percent for the year ended December 31, 2010 compared to
22.7 percent for the year ended December 31, 2009. Terminix's Comparable Operating performance included restructuring charges of $3.5 million and
$3.4 million in 2010 and 2009, respectively. The 40 bps increase in Comparable Operating Performance as a percentage of revenue primarily reflects a
reduction in fuel prices, health care costs, termite damage claims expense and sales and marketing expense, the favorable impact of acquiring assets in
connection with exiting certain fleet leases and other cost reductions realized through ongoing initiatives, offset, in part, by an increase in incentive
compensation expense, legal related expense and increases in product distribution revenue, which has lower margins than pest or termite revenue.
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 4.6 percent increase in operating revenue, a 38.7 percent increase in operating income and a 13.1 percent increase in
Comparable Operating Performance for the year ended December 31, 2011 compared to 2010. The revenue results reflect a 4.0 percent increase in average
price on home service contracts written and a 1.6 percent increase in customer counts. The increase in average price was driven, in part, by the introduction of
new product options in our direct-to-consumer channel. The increase in customer counts was driven by a 210 bps increase in the customer retention rate,
offset, in part, by a decrease in new unit sales. American Home
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