American Home Shield 2015 Annual Report Download - page 55

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37
(3) Incudes growth from acquisitions of approximately $26 million and $4 million in pest control and termite and other services,
respectively, of which approximately $8 million is a result of the acquisition of Alterra Pest Control, LLC (“Alterra”) on
November 10, 2015.
(4) Includes a $17 million reduction in revenue from company-owned branches, offset, in part, by a $1 million increase in
royalty fees as result of the branch conversions.
Cost of Services Rendered and Products Sold
We reported cost of services rendered and products sold of $1,375 million, $1,298 million and $1,220 million for the years
ended December 31, 2105, 2014 and 2013, respectively. The following table provides a summary of changes in cost of services
rendered and products sold for each of our reportable segments and Corporate:
American Franchise
Home Services
(In millions) Terminix Shield Group Corporate Total
Year Ended December 31, 2013 $ 743 $ 367 $ 101 $ 9 $ 1,220
Impact of change in revenue(1) 22 42 14 — 78
Damage claims 5 — — — 5
Legal (5) — — — (5)
Contract claims — (6) — — (6)
Insurance program — — — 9 9
Other (2) 1 3 (4) (3)
Year Ended December 31, 2014 $ 763 $ 404 $ 118 $ 14 $ 1,298
Im
p
act of chan
g
e in revenue(1) 36 32
—
—
68
Fuel prices (5) — — — (5)
Contract claims — 33 — — 33
Sale of Merry Maids branches — — (12) — (12)
Insurance program — — — (4) (4)
Cost reduction initiatives (3) — — — (3)
Other 1 (1) — — —
Year Ended December 31, 2015 $ 792 $ 468 $ 106 $ 10 $ 1,375
___________________________________
(1) For American Home Shield, includes approximately $5 million and $23 million for the years ended December 31, 2015 and
2014, respectively, as a result of the acquisition of HSA on February 28, 2014.
Year Ended December 31, 2015 Compared to Year Ended December 31, 2014
We realized lower fuel costs at Terminix as a result of lower fuel prices in 2015.
The increase in contract claims cost at American Home Shield was driven by an increase in the average cost per service
request associated with appliance repairs due to greater use of more expensive out-of-network contractors, largely in the fourth
quarter, and, to a lesser extent, by warmer summer temperatures in 2015 and general inflation.
We realized a reduction in cost of sales of $12 million in the Franchises Services Group as a result of the branch conversions.
The decrease in expense related to our automobile, general liability and workers’ compensation insurance program was
driven by the impact of increased reserves of $9 million and $13 million recorded in 2015 and 2014, respectively, driven by
unfavorable claims trends.
Year Ended December 31, 2014 Compared to Year Ended December 31, 2013
The increase in damage claims at Terminix was primarily driven by higher claim payments. The decrease in legal expense at
Terminix was driven by reduced provisions for certain legal matters.
The decrease in contract claims at American Home Shield was primarily driven by lower claims costs due, in part, to an
increase in the service fee charged to our customers for service visits and, to a lesser extent, mild weather conditions, offset, in part, by
the impact of favorable adjustments to reserves for prior year contract claims of $1 million and $5 million in 2014 and 2013,
respectively.
The increase in expense related to our automobile, general liability and workers’ compensation insurance program was driven
by adverse claims trends.
2015 Annual Report 53