American Home Shield 2015 Annual Report Download - page 67

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The terms of the agreements governing the Credit Facilities restrict the ability of our subsidiaries to pay dividends, make
loans or otherwise transfer assets to us. Further, our subsidiaries are permitted under the terms of the Credit Facilities and other
indebtedness to incur additional indebtedness that may restrict or prohibit the making of distributions, the payment of dividends or the
making of loans by such subsidiaries to us.
Furthermore, there are third-party restrictions on the ability of certain of our subsidiaries to transfer funds to us. These
restrictions are related to regulatory requirements at American Home Shield and to a subsidiary borrowing arrangement at SMAC. The
payments of ordinary and extraordinary dividends by our home warranty and similar subsidiaries (through which we conduct our
American Home Shield business) are subject to significant regulatory restrictions under the laws and regulations of the states in which
they operate. Among other things, such laws and regulations require certain such subsidiaries to maintain minimum capital and net
worth requirements and may limit the amount of ordinary and extraordinary dividends and other payments that these subsidiaries can
pay to us. As of December 31, 2015, the total net assets subject to these third-party restrictions was $169 million. We expect that such
limitations will be in effect in 2016. None of our subsidiaries are obligated to make funds available to us through the payment of
dividends.
We consider undistributed earnings of our foreign subsidiaries as of December 31, 2015 to be indefinitely reinvested and,
accordingly, no U.S. income taxes have been provided thereon. Cumulative undistributed earnings of our foreign subsidiaries
amounted to $56 million and $53 million as of December 31, 2015 and 2014, respectively. Should these earnings become taxable, we
could be subject to U.S. income taxes (subject to an adjustment for foreign tax credits) and withholding taxes in various jurisdictions.
The amount of cash associated with indefinitely reinvested foreign earnings was approximately $17 million and $20 million as of
December 31, 2015 and December 31, 2014, respectively. We have not repatriated, nor do we anticipate the need to repatriate, funds
to the United States to satisfy domestic liquidity needs arising in the ordinary course of business, including liquidity needs associated
with our domestic debt service requirements.
Cash Flows
Cash flows from operating, investing and financing activities, as reflected in the accompanying consolidated statements of
cash flows, are summarized in the following table.
Year Ended December 31,
(In millions) 2015 2014 2013
N
et cash provided from (used for):
Operating activities $ 336 $ 253 $ 208
Investing activities (98) (56) (70)
Financing activities (319) (277) (78)
Discontinued operations (11) (15) 6
Effect of exchange rate changes on cash (2) — —
Cash (decrease) increase during the period $ (92) $ (95) $ 66
Operating Activities
Net cash provided from operating activities from continuing operations increased $83 million to $336 million for the year
ended December 31, 2015 compared to $253 million for the year ended December 31, 2014 and $208 million for the year ended
December 31, 2013.
Net cash provided from operating activities in 2015 comprised $405 million in earnings adjusted for non-cash charges, offset,
in part, by a $7 million increase in cash required for working capital (an $18 million decrease excluding the working capital impact of
accrued interest, restructuring and taxes), $49 million in payments for the call premium paid on the retirement of debt and $13 million
in excess tax benefits from stock-based compensation expense. For the year ended December 31, 2015, working capital requirements
were negatively impacted by the timing of interest payments driven by the redemption of the 2020 Notes, offset, in part, by favorable
changes in the payment terms with certain of our vendors.
Our federal cash tax obligations have benefitted in recent years from the usage of federal net operating loss carryforwards
(“NOLs”). In the third quarter of 2015, we exhausted such NOLs and began making federal cash tax payments. For the year ended
December 31, 2015, we have made federal cash tax payments of $34 million.
Net cash provided from operating activities in 2014 comprised $303 million in earnings adjusted for non-cash charges, offset,
in part, by $35 million in payments for the call premium paid on the retirement of debt and a $14 million increase in cash required for
working capital (a $3 million decrease excluding the working capital impact of accrued interest, restructuring and taxes). Accrued
interest balances were reduced in 2014 as a result of the reduction in long-term debt.
Net cash provided from operating activities in 2013 comprised $191 million in earnings adjusted for non-cash charges and a
$17 million decrease in cash required for working capital (an $18 million decrease excluding the working capital impact of accrued
interest, restructuring and taxes). For the year ended December 31, 2013, working capital requirements were favorably impacted by a
change in the timing of customer prepayments.
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