ServiceMaster released its second-quarter 2012 results, including operating revenue of $962 million, a decline of 0.5 percent compared to second-quarter 2011 results. The company’s second-quarter operating income, which included a $67.7 million non-cash trade name impairment charge, decreased 40 percent to $97 million. The company’s operating performance increased 0.3 percent to $212 million compared to the same period in 2011.
ServiceMaster’s overall operating revenue for the first six months of the year increased 2.2 percent, to $1.6 billion. The company’s operating performance for the first six months increased 8.8 percent, to $313 million.
The company's remarks about TruGreen are below:
"TruGreen has embarked on a strategy to redesign its product offerings based on the latest agronomic science, transform the customer experience through a combination of new technology, new processes and stricter branch standards, and rebalance its marketing mix toward channels with higher retention and profitability.
In 2011, we made the decision to rebalance our sales mix toward channels with higher retention and profitability. Specifically, we have reduced our spending in the neighborhood sales channel and increased spending in sales channels, such as digital, which we believe will yield more attractive returns in the long-term. We also recently introduced our new Healthy Lawn Plan, which provides a customized, full-year treatment plan that better matches the growing conditions in each part of the country. At the same time, we decided to de-emphasize selling one-time services and partial programs, which we do not believe foster long-term customer relationships or deliver the predictable, consistent outcomes our customers expect. We continue to transform our customers’ experience through a combination of new technology, improved processes and stricter branch standards, including technology upgrades in our call center operations, improved pre- and post-service communication and more consistent adherence to resource planning models in our branches.
We believe the changes we are making at TruGreen will position the business for future revenue growth and continued growth in profitability by transforming our customers’ experience and improving the efficiency of our operations.
TruGreen reported second-quarter operating revenue of $351 million, a decrease of 8.3 percent compared to second-quarter 2011 results. The decline in operating revenue was due to a 12.1 percent decline in average residential full-program customer counts. This decrease was partially offset by improved price realization and a 20 basis-point increase in the customer retention rate. Additionally, revenue from commercial customers increased $4.6 million.
Second quarter operating income was $8.8 million, with the decrease compared to second-quarter 2011 results primarily driven by a $67.7 million pre-tax non-cash impairment charge to reduce the carrying value of the TruGreen trade name to its estimated fair value. There were no similar charges in the second quarter of 2011.
Operating performance for the second quarter was $88 million, which represents an increase of 11.5 percent compared to second-quarter 2011 results. The improvement primarily reflects lower sales staffing, driven by our decision to reduce our focus on the neighborhood sales channel, other cost reductions realized through ongoing productivity and standardization initiatives, including more consistent adherence to resource planning models in our branches, and a reduction in key executive separation charges."