American Home Shield 2015 Annual Report Download - page 36

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If we fail to protect the security of personal information about our customers, associates and third parties, we could be subject to
interruption of our business operations, private litigation, reputational damage and costly penalties.
We rely on, among other things, commercially available systems, software, tools and monitoring to provide security for
processing, transmission and storage of confidential information of customers, associates and third parties, such as payment card and
personal information. The systems currently used for transmission and approval of payment card transactions, and the technology
utilized in payment cards themselves, all of which can put payment card data at risk, are central to meeting standards set by the
payment card industry (“PCI”). We continue to evaluate and modify our systems and protocols for PCI compliance purposes, and such
PCI standards may change from time to time. Activities by third parties, advances in computer and software capabilities and
encryption technology, new tools and discoveries and other events or developments may facilitate or result in a compromise or breach
of our systems. Any compromises, breaches or errors in applications related to our systems or failures to comply with standards set by
the PCI could cause damage to our reputation and interruptions in our operations, including our customers’ ability to pay for our
services and products by credit card or their willingness to purchase our services and products and could result in a violation of
applicable laws, regulations, orders, industry standards or agreements and subject us to costs, penalties and liabilities which could
have a material adverse impact on our reputation, business, financial position, results of operations and cash flows.
We may not be able to adequately protect our intellectual property and other proprietary rights that are material to our business.
Our ability to compete effectively depends in part on our rights to service marks, trademarks, trade names and other
intellectual property rights we own or license, particularly our registered brand names, ServiceMaster, Terminix, American Home
Shield, ServiceMaster Restore, ServiceMaster Clean, Merry Maids, Furniture Medic and AmeriSpec. We have not sought to register
or protect every one of our marks either in the United States or in every country in which they are or may be used. Furthermore,
because of the differences in foreign trademark, patent and other intellectual property or proprietary rights laws, we may not receive
the same protection in other countries as we would in the United States. If we are unable to protect our proprietary information and
brand names, we could suffer a material adverse impact on our reputation, business, financial position, results of operations and cash
flows. Litigation may be necessary to enforce our intellectual property rights and protect our proprietary information, or to defend
against claims by third parties that our products, services or activities infringe their intellectual property rights.
Future acquisitions or other strategic transactions could negatively impact our reputation, business, financial position, results of
operations and cash flows.
We may pursue strategic transactions in the future, which could involve acquisitions or dispositions of businesses or assets.
Any future strategic transaction could involve integration or implementation challenges, business disruption or other risks, or change
our business profile significantly. Any inability on our part to consolidate and manage growth from acquired businesses or
successfully implement other strategic transactions could have an adverse impact on our reputation, business, financial position,
results of operations and cash flows. Any acquisition that we make may not provide us with the benefits that were anticipated when
entering into such acquisition. The process of integrating an acquired business may create unforeseen difficulties and expenses,
including the diversion of resources needed to integrate new businesses, technologies, products, personnel or systems; the inability to
retain associates, customers and suppliers; the assumption of actual or contingent liabilities (including those relating to the
environment); failure to effectively and timely adopt and adhere to our internal control processes and other policies; write-offs or
impairment charges relating to goodwill and other intangible assets; unanticipated liabilities relating to acquired businesses; and
potential expense associated with litigation with sellers of such businesses. Any future disposition transactions could also impact our
business and may subject us to various risks, including failure to obtain appropriate value for the disposed businesses, post-closing
claims being levied against us and disruption to our other businesses during the sale process or thereafter.
We may be required to recognize additional impairment charges.
In the first quarter of 2014, we incurred impairment charges with respect to fixed assets, and we have also incurred
impairment charges in the past in connection with our disposition activities. We have significant amounts of goodwill and intangible
assets, such as trade names. In accordance with applicable accounting standards, goodwill and indefinite-lived intangible assets are not
amortized and are subject to assessment for impairment by applying a fair-value based test annually, or more frequently if there are
indicators of impairment, including:
significant adverse changes in the business climate, including economic or financial conditions;
significant adverse changes in expected operating results;
adverse actions or assessments by regulators;
unanticipated competition;
loss of key personnel; and
a current expectation that it is more likely than not that a reporting unit or intangible asset will be sold or otherwise
disposed of.
In February 2014, American Home Shield ceased efforts to deploy a new operating system that had been intended to improve
customer relationship management capabilities and enhance its operations. We recorded an impairment charge of $47 million in the
year ended December 31, 2014 relating to this decision.
Based upon future economic and financial market conditions, the operating performance of our reporting units and other
factors, including those listed above, we may incur impairment charges in the future. It is possible that such impairment, if required,
34 2015 Annual Report