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Terminix (Photo: Terminix)
Terminix Global Holdings Inc. has reached an agreement with Alabama’s attorney general to resolve a dispute over the treatment of formosan termites.
Memphis-based Terminix announced the agreement Thursday, reporting that the settlement would result in a loss of $ 7 million in the third quarter.
The deal calls for the company to set up a $ 25 million fund to manage customer remediation efforts and resolve future disputes over termite damage claims and to pay the Alabama attorney general’s office $ 19 million.
The Alabama Department of Agriculture and Industry investigated more than 416 consumer complaints with various pest control companies last year, mobile television broadcaster WPMI reported. Complaints increased after Terminix increased its prices. In December, Terminix lost a $ 2 million lawsuit filed by a mobile homeowner who cracked down on Terminix and did not treat the home for termites despite a pest control deal.
On Thursday, Terminix Global announced that the future cost of termite damage would be “above historical norms” between $ 20 million and $ 150 million.
“A government-sponsored, non-litigation road resolves claims disputes faster, providing immediate benefits to our affected customers and reducing future litigation claims,” said Tony DiLucente, chief financial officer of Terminix Global, in a statement released by the company.
In Alabama, officials on Thursday praised the deal as a relief for consumers betrayed by Terminix. Capital newspaper Montgomery Advertiser quoted Attorney General Steve Marshall as saying, “This is a historic day. An historic deal, not just in terms of recovery, but most of all in terms of the extent of the fraud we’ve found with Terminix and what it’s done for consumers across the state. “
In Mobile, county attorney Ashley Rich said that Terminix approached customers on lifetime contracts but sometimes prices doubled, tripled, and quadrupled over time, the Montgomery newspaper reported, adding that “customers who were the subject of those price increases did one Get a refund. ” and anyone who left the company due to the change will receive $ 650 or the difference. ”
The third quarter earnings report was the first Terminix Global released since the former ServiceMaster Global Holdings Inc. was split into two separate companies in October – ServiceMaster Brands and Terminix Global.
Terminix Global revenue increased 10% to $ 512 million for the quarter compared to $ 465 million a year ago, while after-tax income decreased by $ 7 million on a loss of $ 25 million a year ago. The loss was caused by the costs associated with Mobile Bay’s settlement agreement. The company reported a $ 49 million fee and “a $ 3 million reduction in termite renewal income in connection with the execution of the settlement agreement.”
Brett Pontoon (Photo: AP)
Brett Ponton, recently hired as Terminix Global’s chief executive officer, made a positive statement on Thursday, saying that future sales and profits are expected to exceed projections made earlier in the year at the start of the pandemic.
“After an eventful first 50 days,” said Ponton in a statement released by the company, “I am encouraged by the momentum we will have as we continue our strides toward steady, sustainable growth and profit. Strong growth and profitability in residential real estate income . ” The improvement in margins continues to give the underlying Terminix business considerable operational dynamism.
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“Advances in initiatives to improve team and customer loyalty result in productivity improvements that increase bottom line,” said Ponton. “Trading business improved sequentially in the third quarter, but remains below last year due to the ongoing economic uncertainty caused by the pandemic. We were also able to negotiate a cheap Formosan termite settlement in the Mobile Bay area which will improve the predictability of our results by reducing it our future risk of termite damage. “
Following the announcement of the Alabama Settlement Agreement, traders propelled Terminix Global’s share price up Thursday morning. The shares were trading at $ 48.90 early this morning, up 69 cents from Wednesday’s close of trading.
Terminix Global announced that its services have 10,500 employees serving 2.8 million customers in 24 countries and territories.
Kirsten Fiscus of the Montgomery Advertiser contributed to this report.
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