ServiceMaster Announces Third Quarter Growth

DOWNERS GROVE, Ill. — The ServiceMaster Company, parent company of Terminix, announced third quarter 2005 revenues of $1.1 billion, an eight percent increase compared to the prior year.

Third quarter earnings per share from continuing operations were $.25, nine percent above the $.23 reported in 2004. For the nine months, revenues of $3.1 billion were up seven percent, and earnings per share from continuing operations were $.56, a 10 percent increase.

Here’s a look at Terminix’s third quarter. Performance.

Terminix reported third quarter revenues of $267 million, a five percent increase. For the nine months, segment revenues grew by six percent to $820 million. In both periods, solid growth was achieved in revenues from initial termite applications as an expanded sales force and geographic presence generated increased unit sales despite a relatively weak termite swarm. Termite renewal revenues experienced strong growth, reflecting improved pricing, partially offset by a slight decrease in customer retention. Terminix realized solid growth in pest control revenues, reflecting the impact of acquisitions, partially offset by a decline in customer retention. Pest unit sales decreased modestly during the quarter but remain up for the nine months.

Operating income for the quarter was $34 million compared to $27 million in the prior year, a 28 percent increase. For the nine months, operating income rose 10 percent to $122 million. In addition to higher revenues, third quarter results also benefited from improved labor and material cost efficiencies resulting from the new termite liquid application technique and the new termite bait product. Terminix also experienced reduced safety related costs and lower bad debt expenses. Collectively, these factors more than offset the effects of higher fuel costs and a $4 million increase to prior years' termite damage claim reserves. New termite damage claims are trending favorably.

For the nine months, the growth in operating income was supported by the factors described above, partially offset by incremental pre-season investments made to expand the sales force and reorganize the field operations, as well as a $6 million favorable but non-recurring adjustment recorded in the second quarter of last year. In addition, since more of the total first year costs associated with the new bait product are incurred at the time of installation, less revenue and gross profit is required to be deferred to future quarters. This factor benefited second quarter results but did not have a significant net impact during the third quarter.