American Home Shield 2015 Annual Report Download - page 32

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Risks Related to Our Business and Our Industry
Weakening in general economic conditions, especially as they may affect home sales, unemployment or consumer confidence or
spending levels, may adversely impact our business, financial position, results of operations and cash flows.
A substantial portion of our results of operations is dependent upon spending by consumers. Deterioration in general
economic conditions and consumer confidence, particularly in California, Texas and Florida, which collectively represented
approximately one-third of our revenue in 2015 in our Terminix and American Home Shield segments, could affect the demand for
our services. Consumer spending and confidence tend to decline during times of declining economic conditions. A worsening of
macroeconomic indicators, including weak home sales, higher home foreclosures, declining consumer confidence or rising
unemployment rates, could adversely affect consumer spending levels, reduce the demand for our services and adversely impact our
business, financial position, results of operations and cash flows. These factors could also negatively impact the timing or the ultimate
collection of accounts receivable, which would adversely impact our business, financial position, results of operations and cash flows.
We may not successfully implement our business strategies, including achieving our growth objectives.
We may not be able to fully implement our business strategies or realize, in whole or in part within the expected time frames,
the anticipated benefits of our various growth or other initiatives. Our various business strategies and initiatives, including growth of
our customer base, introduction of new service offerings, geographic expansion, growth of our commercial business and enhancement
of profitability, are subject to significant business, economic and competitive uncertainties and contingencies, many of which are
beyond our control.
In addition, we may incur certain costs to achieve efficiency improvements and growth in our business and we may not meet
anticipated implementation timetables or stay within budgeted costs. As these efficiency improvement and growth initiatives are
undertaken, we may not fully achieve our expected cost savings and efficiency improvements or growth rates, or these initiatives
could adversely impact our customer retention or our operations. Also, our business strategies may change from time to time in light
of our ability to implement our new business initiatives, competitive pressures, economic uncertainties or developments, or other
factors.
Adverse credit and financial market events and conditions could, among other things, impede access to or increase the cost of
financing or cause our commercial and governmental customers to incur liquidity issues that could lead to some of our services
not being purchased or being cancelled, or result in reduced revenue and lower Adjusted EBITDA, any of which could have an
adverse impact on our business, financial position, results of operations and cash flows.
Disruptions in credit or financial markets could, among other things, lead to impairment charges, make it more difficult for us
to obtain, or increase our cost of obtaining, financing for our operations or investments or to refinance our indebtedness, cause our
lenders to depart from prior credit industry practice and not give technical or other waivers under the $2,374 million Term Loan
Facility and the $300 million Revolving Credit Facility to the extent we may seek them in the future, thereby causing us to be in
default under the Credit Facilities. These disruptions also could cause our commercial customers to encounter liquidity issues that
could lead to some of our services being cancelled or reduced, or that could result in an increase in the time it takes our customers to
pay us, or that could lead to a decrease in pricing for our services and products, any of which could adversely affect our accounts
receivable, among other things, and, in turn, increase our working capital needs. Volatile swings in the commercial real estate segment
could also impact the demand for our services as landlords cut back on services provided to their tenants. In addition, adverse
developments at federal, state and local levels associated with budget deficits resulting from economic conditions could result in
federal, state and local governments decreasing their purchasing of our products or services and/or increasing taxes or other fees on
businesses, including us, to generate more tax revenues, which could negatively impact spending by commercial customers and
municipalities on our services.
Our market segments are highly competitive. Competition could reduce our share of the market segments served by us and
adversely impact our reputation, business, financial position, results of operations and cash flows.
We operate in highly competitive market segments. Changes in the source and intensity of competition in the market
segments served by us impact the demand for our services and may also result in additional pricing pressures. The relatively low
capital cost of entry into certain of our business categories has led to strong competitive market segments, including competition from
smaller regional and local owner-operated companies. Regional and local competitors operating in a limited geographic area may have
lower labor, employee benefits and overhead costs. The principal methods of competition in our businesses include name recognition,
quality and speed of service, customer satisfaction, reputation and pricing. We may be unable to compete successfully against current
or future competitors, and the competitive pressures that we face may result in reduced market segment share, reduced pricing or
adversely impact our reputation, business, financial position, results of operations and cash flows.
Weather conditions and seasonality affect the demand for our services and our results of operations and cash flows.
The demand for our services and our results of operations are affected by weather conditions, including, without limitation,
potential impacts, if any, from climate change, known and unknown, and by the seasonal nature of our termite and pest control
services, home inspection services, home warranties and disaster restoration services. Adverse weather conditions (e.g., cooler
temperatures or droughts), whether created by climate change factors or otherwise, can impede the development of the termite swarm
and lead to lower demand for our termite remediation services. Severe winter storms can also impact our home cleaning business if
30 2015 Annual Report