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VOL. 128 | NO. 39 | Tuesday, February 26, 2013

ServiceMaster Posts Operating Loss in 2012

By Bill Dries

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The ServiceMaster Co. reported an unaudited operating loss of $532.8 million in 2012 on operating revenue of $3.1 billion.

The year-end preliminary numbers for the Memphis-based provider of home and commercial services and franchises released Tuesday, Feb. 26, compare to an operating income of $375.5 million in 2011.

Meanwhile, fourth quarter numbers for ServiceMaster showed operating revenue of $676 million, which was down 2.5 percent from the last three months of 2011. And the company’s fourth quarter operating income also dropped 12.4 percent to $39 million from a year ago.

ServiceMaster CEO Hank Mullany described the company-wide results as not “up to our expectations.”

In the earnings conference call with analysts Tuesday, Mullany again talked about the company’s drive to improve performance in its TruGreen lawn care division as he noted the company’s results showed growth, excluding the TruGreen results.

ServiceMaster includes the TruGreen, Terminix, American Home Shield, ServiceMaster Clean and Merry Maids brands.

The ServiceMaster Co. reported an operating loss of $532.8 million in 2012 on operating revenue of $3.1 billion, compared to an operating income of $375.5 million in 2011.

Excluding TruGreen, Mullany pointed to a growth in operating revenue for ServiceMaster of 5.2 percent for the year over 2011.

TruGreen operating revenues in the fourth quarter dropped 14.3 percent to $183.6 million compared to the fourth quarter of 2011. The company attributes that to a decline in customer counts, a key metric Mullany has been trying to turn around since he became ServiceMaster CEO nearly two years ago.

One of Mullany’s first actions as CEO in April 2011 was to change the leadership of TruGreen, bringing in Terminix president Tom Brackett, on what was supposed to be a temporary basis to apply some of the Terminix operations and branch standardization practices to TruGreen. Brackett’s position at TruGreen became permanent.

Brackett resigned in October and David Alexander, the former CEO of urban retailer Citi Trends and chief operating officer of Family Dollar Stores and a retail consultant, was named in December as TruGreen’s new president.

The change in methods has included de-emphasizing the lawn care service’s door-to-door neighborhood marketing, which also led to some of the revenue drop in previous quarters. But the division has also had some surprises including an adverse customer reaction to its Healthy Lawn program offered to residential customers at a premium price for year-round treatment.

Mullany said in November the company would move toward offering customers more choices in 2013 in what continues to be a “redesign” of TruGreen offerings.

By company segment in the fourth quarter, Terminix posted operating revenues of $289.3 million, a 5.6 percent increase from the fourth quarter of 2011.

ServiceMaster Clean reported operating revenues of $40.5 million for the quarter, up 10.6 percent from a year ago.

American Home Shield fourth quarter operating revenue of $140.2 million was down 3.9 percent from a year ago.

Merry Maids had $20.5 million in operating revenues in the fourth quarter, which was the same as the last three months of 2011.

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