American Home Shield 2015 Annual Report Download - page 64

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Discontinued Operations
TruGreen Spin-off
On January 14, 2014, we completed the TruGreen Spin-Off, resulting in the spin-off of the TruGreen Business through a
tax-free, pro rata dividend to our stockholders. As a result of the completion of the TruGreen Spin-Off, New TruGreen operates the
TruGreen Business as a private independent company.
In connection with the TruGreen Spin-off, we entered into a transition services agreement with New TruGreen pursuant to
which we provide New TruGreen with specified communications, public relations, finance and accounting, tax, treasury, internal
audit, human resources operations and benefits, risk management and insurance, supply management, real estate management,
marketing, facilities, information technology and other support services. The charges for the transition services are designed to allow
us to fully recover the direct costs of providing the services, plus specified margins and any out-of-pocket costs and expenses. The
services provided under the transition services agreement terminated at various specified times on or prior to January 14, 2016 (except
for certain information technology, human resources and accounts payable services, which we expect to provide to New TruGreen
beyond January 14, 2016). New TruGreen may terminate the transition services agreement (or certain services under the transition
services agreement) for convenience upon 90 days written notice, in which case New TruGreen will be required to reimburse us for
early termination costs. As a result of the transfer of employees to New TruGreen, in combination with the fees we received under the
transition services agreement, we achieved an approximate $25 million reduction in annual costs in 2014. We did not have any
incremental change in our annual costs in 2015 related to fees under the transition services agreement or the transfer of employees to
New TruGreen. We expect an increase in our annual costs in 2016 related to a reduction in fees received under the transition services
agreement but do not expect such increase to be material.
Under this transition services agreement, in the years ended December 31, 2015 and 2014, we recorded $25 million and $36
million, respectively, of fees due from New TruGreen, which is included, net of costs incurred, in Selling and administrative expenses
in the consolidated statement of operations and comprehensive income (loss). As of December 31, 2015, all amounts owed by New
TruGreen under this agreement have been paid. We expect to receive fees under the transition services agreement of approximately $9
million in 2016.
During the year ended December 31, 2014, we processed certain of New TruGreen’s accounts payable transactions. Through
this process, in the year ended December 31, 2014, $97 million was paid on New TruGreen’s behalf, all of which was repaid by New
TruGreen.
In addition, we, New TruGreen and TruGreen Limited Partnership entered into (1) a separation and distribution agreement
containing key provisions relating to the separation of the TruGreen Business and the distribution of New TruGreen common stock to
our stockholders (including relating to specified TruGreen legal matters with respect to which we have agreed to retain liability, as
well as insurance coverage, non-competition, indemnification and other matters), (2) an employee matters agreement allocating
liabilities and responsibilities relating to employee benefit plans and programs and other related matters and (3) a tax matters
agreement governing the respective rights, responsibilities and obligations of the parties thereto with respect to taxes, including
allocating liabilities for income taxes attributable to New TruGreen and its subsidiaries generally to us for tax periods (or portions
thereof) ending on or before January 14, 2014 and generally to New TruGreen for tax periods (or portions thereof) beginning after that
date.
Financial Information of Discontinued Operations
Loss income from discontinued operations, net of income taxes, for all periods presented includes the operating results of the
previously sold businesses.
The operating results of discontinued operations are as follows:
Year Ended December 31,
(In millions) 2015 2014 2013
Revenue $ — $ 6 $ 896
Cost of services rendered and products sold — 12 686
Selling and administrative expenses 3 14 232
Amortization — — 5
Goodwill and trade name impairment(1) — 139 673
Restructuring charges — 3 15
Interest expense — — 2
Interest income — — (1)
Loss before income taxes(1) (3) (161) (716)
Benefit for income taxes(1) (1) (61) (167)
Loss from discontinued operations, net of income taxes(1) $ (2) $ (100) $ (549)
62 2015 Annual Report