Pest industry 2013

Pest Control Industry

2013

what we are learning from our industry

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How will the upturn in the US Economy help our industry?

❖ As the US economy continues to recover, the housing market is recovering as well. This alone should increase demand from homeowners for regular inspections and treatments of termites and other pests.

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What events are increasing the demand for our services?

❖ Hotel and restaurant industry standards and regulations are creating increased demand for pest control services. The recent uptick in bed bug outbreaks has further propelled the demand for professional services.

81 bed bug services in 2011 vs. 225 bed bug services in 2012 -source: Pest Pac

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What trends could require more visit from pest control companies?

❖ The trend toward organic and environmentally friendly products means more opportunity for the pest control industry. Less toxic pest control products stay in the environment for shorter periods when compared to toxic products and require more frequent application. The shift to these newer products will require commercial and residential customers to request more visits from pest control companies.

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WHAT ARE THE TOP FACTORS PEOPLE CONSIDER WHEN CHOOSING PEST CONTROL?

• Professionalism• Eco-friendly methods/products services offered• Location• Prices

There is also projected high demand for professionals who can manage pests without using harmful pesticides.

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❖ The HACCP, or Hazard Analysis and Critical Control Point, is a program put forth by the FDA to reduce food contamination. As a result of this and similar programs (AIB, etc.), clients in the food industry will require increased services from pest control companies.

We already are seeing this:

Keystone Foods

Del Monte

Hurst Produce

Horizon

and more

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Foreign ants have no natural predators. Fire ants are adapting to colder weather and becoming problems for crops, wildlife, and people in the northern region of the US.

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K-9 DETECTION HEAT GENERATORSMONITORING BAITSTHERMAL IMAGERS

What technological development s will help our industry grow?

❖ Sophisticated technological developments have increased the accuracy of finding termites, pests, or rodents and are becoming more and more common in the pest control industry. Through the utilization of technology, operators work more efficiently, thereby increasing operating margins.

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What will make it possible for more operators to bid on federal contracts?

❖ The US Small Business Administration (SBA) increased the small business size standard for the pest control service industry from $7 million to $10 million. Small business size standards determine eligibility for small business assistance and for federal contracts set aside for small business Therefore, more operators will have the ability to bid for federal contracts.

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2012 AND 2013 YEAR TO DATE

Mergers & Acquisitions in the Pest Management Industry

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MANY STRONG COMPANIES ARE GROWING THROUGH ACQUISITIONS .

Closed Date Buyer Target

12/10/12 Rentokil Initial plc Eden Advanced Pest Technologies, Inc..(Wa)

Consolidation is occurring at all levels: national & regional (this is a small sampling)

Many strong companies are growing through acquisitions.

10/05/12 Rentokil Initial plc Maykar Pest Control(India)

09/25/12 Rentokil Initial plc Western Exterminators(Ca)

08/06/12 Rentokil Initial plc Modus FM (London)

10/23/12 Rollins, Inc.. (Orkin Brand)

Partner's Pest Control of the Valley(Ca)

10/03/12 Rollins, Inc. (Orkin Brand)

Hulett Environnemental Services (Central FL)

09/25/12 Rollins, Inc. (Orkin Brand)

Tri-County Pest Control South

11/29/12 Arrow Exterminators, Inc..

Terminator Pest Control


Can Eliminate Pest Control(Fl)


Norton Exterminating

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KEY THEMES

•Recession Resistant Industry

•Acquisitions fuel growth

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KEY THEMES Continued Interest from Industry “Neophytes”* Venture capitalists are seeing the potential value in

our industry.

Could they develop into serious players? It remains to be seen.

(buyers that are new to the pest control industry. Approximately sixteen percent of transactions completed between 2009 and 2012 involved buyers that were new to the pest control industry.)

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Market Forecasts

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THE OUTLOOK FOR THE EXTERMINATING & PEST CONTROL SERVICES INDUSTRY IS POSITIVE. THE FOLLOWING FIVE-YEAR FORECAST TAKES INTO ACCOUNT BOTH SHORT-TERM AND LONG-TERM INDUSTRY TRENDS.Year 2013 2014 2015 2016 2017

Market Size ($ millions)

10310 10670 11030 11380 11670

Growth Rate

4.20% 3.50% 3.30% 3.20% 2.60%

Source: Anything researchEMWIIIRPS2013

CONTINUING TRENDS

• Bed bugs and stinkbugs

• Recovering housing market will create a need for pretreatment termite services and regular inspections.

• Consumers will spend on hotels and restaurants again, driving demand from this market.

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CONTINUING TRENDS

• Heightened demand for bed bug extermination has also caused competition from new specialty companies.

• Housing sales and residential construction are also expected to rise, increasing demand for termite services.

• Increased pest populations across the United States will characterize the next five years, as the bed bug population continues rising.

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CONTINUING TRENDS

• Green practices are growing more common in the industry, driven in part by LEED (Leadership in Energy and Environmental Design.)

• Hospitality and food service industries have growing needs for pest management.

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Pest Income Statement & Profit Margin

(Industry Average)

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INCOME STATEMENT (INDUSTRY AVERAGE)

THE DATA COLLECTED IS INDUSTRY-WIDE, COVERING BOTH PUBLIC AND PRIVATE COMPANIES IN THE INDUSTRY. Industry Average Percent of Sales

•Total Revenue $899,592 100%•Operating Revenue $873,301 97%•Cost of Goods Sold $406,348 45%•Gross Profit $466,952 52%Operating Expenses•Pension, profit sharing plans, stock, annuity $3,215 0%

•Repairs $4,456 0%•Rent paid on business property $16,118 2%•Charitable Contributions $210 0%•Depletion $30 0%•Domestic production activities deduction $26 0%

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• Advertising $7,723 1%

• Compensation of officers $24,849 3%

• Salaries and wages $184,021 20%

• Employee benefit programs $19,180 2%

• Taxes and Licenses $40,976 5%

• Bad Debts $1,075 0%

• Depreciation $9,648 1%

• Amortization $3,536 0%

• Other Operating Expenses $112,345 12%

• Total Operating Expenses $427,409 48%

• Operating Income $39,543 4%

• Non-Operating Income $26,055 3%

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• EBIT (Earnings Before Interest and Taxes) $65,598 7%

• Interest Expense $8,469 1%

• Earnings Before Taxes $57,129 6%

• Income Tax $5,729 1%

• Net Profit $51,400 6%


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PEST CONTROL SERVICES ACROSS THE UNITED STATES2008 – 2012

Income Statement (figures in 1000's) YEAR 2008 2009 2010 2011 2012Revenue

Sales 1796 1806 1796 1801 1800Cost of Sales

Cost of Goods Sold 967.924 970.73 965.101 968.794 967.791Gross Margin

Gross Margin 828.076 835.27 830.899 832.206 832.209Expenses

Advertising 8.748 8.573 8.527 8.564 8.555Salaries and Wages 303.756 306.359 305.756 305.803 305.849Employee Benefit Program 37.491 37.552 37.209 37.422 37.37Pension and Annuity Plans 3.844 3.833 3.8 3.816 3.814Compensation of Officers 56.811 55.626 55.084 55.449 55.375Bad Debt 2.989 3.005 2.977 2.994 2.991Rent Paid 33.32 33.249 33.2 33.247 33.233Repairs 7.952 7.887 7.806 7.846 7.842Depreciation Depletion Amortization 21.474 21.304 21.114 21.237 21.209Interest Paid 10.999 11.057 11.043 11.056 11.051Miscellaneous Expenses 183.245 183.387 183.026 183.208 183.176Total Expenses 670.629 671.832 669.542 670.642 670.465

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PEST CONTROL SERVICES ACROSS THE UNITED STATES 2008 – 2012 continued

EBITDA 189.92 195.799 193.514 193.857 194.004

Net IncomeOperating Profit 157.447 163.438 161.357 161.564 161.744

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OPERATING PROFIT MARGIN 2008-2012

2008 2009 2010 2011 20128.6

8.658.7

8.758.8

8.858.9

8.959

9.059.1

Industry Average

Bed Bugs

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SALARY FOR SALES

Sales Salary Statistics

Sales Salaries (national 2012):

Quartile Average (Median) Upper Quartile

$29,520 $39,110 $50,980

Source: Anythingresearch.com

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Average Orkin Pest Control Salesperson Salaries

$44k

Average Clark Pest Control Commercial Sales Associate Salaries

$43k

Average Truly Nolen Pest Control Specialist Salaries

$33k

Source: CareerBliss.com

SALARY FOR SALES

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Average Ehrlich Commercial B2B sales

Base Pay: $40,000 - $45,000 /Year

Source: Ehrlich/Rentokil web site under Careers

Average Pest Control Sales in De:

$36,000

Source: Simplyhired.com

Average Pest Control Sales in Philadelphia:

$40,000

Source: Indeed.com

SALARY FOR SALES

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Questions?

Conclusions?

How can this information helpful to you?

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• Anything research

• Rkj pest control M/A review

• Heart pest management

• Ad-ology report

• Prime Industries reports

• Pest PAC

• IBISWorld

• eHow.com

SOURCES

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