"We’ve talked a lot over the past few months about the TruGreen turnaround, and it has now become clear that while we’re making progress," said Rob Gillette, ServiceMaster’s chief executive officer. "TruGreen is on a different earnings growth timeline than the rest of ServiceMaster."
Gillette said the company plans to separate the TruGreen business from the ServiceMaster portfolio on or about Dec. 31, 2013. "This separation should enable ServiceMaster to concentrate on growth while providing TruGreen the time and focus it needs to make the changes necessary to complete the turnaround of its business. Separating TruGreen from ServiceMaster should allow both companies to realize their full potential faster," said Gillette.
The separation of the TruGreen business from ServiceMaster is being planned as a tax-free spin-off of TruGreen through a pro rata dividend to the stockholders of ServiceMaster Global Holdings, Inc., the ultimate parent company of ServiceMaster.
The separation is subject to a number of important closing conditions, which once completed will result in TruGreen being an independent, private company. J.P. Morgan Securities LLC, Credit Suisse Securities (USA) LLC, Goldman, Sachs & Co. and Natixis are acting as financial advisors to ServiceMaster in connection with the proposed separation.
"We believe the most effective way to realize TruGreen’s long-term value is to have it operate as a standalone company," said TruGreen President David Alexander. "We have the right team and the right plan, and we’re excited about the opportunity ahead of us. What we need to do now is stay focused, execute well and deliver more consistent, reliable performance over the long haul."
Alexander pointed out that TruGreen has made steady progress over the past several months implementing process and technology improvements that should stabilize its operations and deliver better results.
The company reported third-quarter 2013 net income of $46 million. This compares to a net loss of $704 million one year ago, which included goodwill and trade name impairment charges at TruGreen totaling $845 million. The company reported third-quarter 2013 Operating Performanceof $169 million, which was comparable to the same period in 2012. The impact of higher revenue on gross profit in third-quarter 2013 was offset by higher selling expenses, primarily at TruGreen. A reconciliation of Operating Performance to net income is set forth below in this press release.
"Our third-quarter 2013 financial results met our expectations," said ServiceMaster CEO Gillette. "While the increase in revenue compared to the third quarter of 2012 was primarily attributable to the strong performance at Terminix, all of our business segments produced revenue growth versus prior year."