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VOL. 127 | NO. 154 | Wednesday, August 8, 2012

ServiceMaster Q2 Revenue Drops Slightly

By Bill Dries

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Memphis-based The ServiceMaster Co. saw a half a percentage point drop in its operating revenue for the second quarter compared to a year ago – a flattening of its revenue attributed in part to a continuing shift in the strategy of its TruGreen lawn care division.

The company posted operating revenue of $962 million for the quarter ended June 30, a half percent drop from Q2 2011’s $967.4 million. ServiceMaster’s operating income for Q2 dropped 40 percent to $97 million, including a $67.7 million trade name impairment charge, from Q2 2011’s $161.1 million.

“We saw slower growth for the second quarter … with revenues and earnings essentially flat,” said ServiceMaster CEO Hank Mullany.

Some of the flattening was attributed to an earlier acceleration of revenue growth across The ServiceMaster Co. in the first quarter that is usually seen in the second quarter.

TruGreen showed its fourth consecutive quarter of improved operating performance by the numbers but the lawn care business’ revenues were “dialed back” as TruGreen moved away from offering partial service programs to emphasize full-year treatment plans.

“When we sold less than full programs in the past, it provided a short-term revenue lift,” Mullany said, adding that those customers often weren’t retained. “The economics didn’t make sense for us.”

But the shift comes with a drop in the number of TruGreen customer accounts that chief financial officer Roger A. Cregg put at 13.8 percent.

The second quarter included the one-year mark for Mullany’s decision to bring in new leadership for TruGreen in the form of moving Tom Brackett of Terminix into the president’s position. What was an interim move of Brackett in May 2011 became a permanent move in December.

The shakeup at TruGreen and shift in its sales and service philosophies was the first major move Mullany made shortly after becoming the new ServiceMaster CEO in March 2011.

“We’re just starting to see the full-year effect,” Mullany said of the shift that also saw TruGreen move away from a sales force that put a lot of emphasis on neighborhood sales. “We intend to stay committed to our strategy. We feel good about the direction strategically that we’re going.”

The earnings results come just days after ServiceMaster announced its acquisition of Schendel Pest Services of Topeka, Kan., as part of its Terminix division. Schendel operates in the Midwest as well as Arkansas, Texas and Arizona.

Schendel’s value to Terminix was its emphasis on commercial pest services and the Midwest region where Schendel, founded in 1947, will continue to operate under its brand name.

Mullany also announced Tuesday, Aug. 7, that he has appointed Mark J. Barry as the new president of American Home Shield, the home and commercial HVAC and appliance maintenance and warranty division of ServiceMaster.

Barry replaces David Crawford, who is retiring effective Aug. 20, after more than 25 years with AHS. Crawford started with AHS in 1987, two years before ServiceMaster acquired the company.

Barry was most recently president of United Technologies Automation and Control Solutions of Hartford, Conn. The unit of United Technologies oversees 50 companies that build and sell automated security, fire and HVAC systems as well as other automated building control systems. Before that, Barry was president of GE Security Americas.

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