American Home Shield 2002 Annual Report Download - page 50

(In thousands, except per share data) 2002 2001 2000
Reported operating income $ 341,336 $ (23,177) $ 320,851
Add back: Goodwill and trade name amortization -60,453 58,233
Operating income as adjusted under SFAS 142 $ 341,336 $ 37,276 $ 379,084
Reported income from continuing operations before extraordinary
loss and cumulative effect of accounting change $ 170,098 $ (164,464) $ 124,274
Add back: Goodwill and trade name amortization, net of tax - 41,590 40,244
Income from continuing operations before extraordinary loss and
cumulative effect of accounting change as adjusted under SFAS 142 170,098 (122,874) 164,518
Discontinued operations, net of taxes (3,875) 284,270 40,568
Extraordinary loss, net of taxes (9,229) (3,422) -
Cumulative effect of accounting change, net of taxes - - (11,161)
Net income as adjusted under SFAS 142 $ 156,994 $ 157,974 $ 193,925
Reported basic earnings per share from continuing operations before
extraordinary loss and cumulative effect of accounting change $ 0.57 $ (0.55) $ 0.41
Add back: Goodwill and trade name amortization, net of tax - 0.14 0.13
Basic earnings per share from continuing operations before extraordinary loss
and cumulative effect of accounting change as adjusted under SFAS 142 0.57 (0.41) 0.54
Discontinued operations, net (0.01) 0.95 0.13
Extraordinary loss, net (0.03) (0.01) -
Cumulative effect of accounting change, net -- (0.04)
Basic earnings per share as adjusted under SFAS 142 $ 0.52 $ 0.53 $ 0.64
Reported diluted earnings per share from continuing operations before
extraordinary loss and cumulative effect of accounting change $ 0.56 $ (0.55) $ 0.41
Add back: Goodwill and trade name amortization, net of tax -0.14 0.13
Diluted earnings per share from continuing operations before
extraordinary loss and cumulative effect of accounting change
as adjusted under SFAS 142 0.56 (0.41) 0.54
Discontinued operations, net (0.01) 0.95 0.13
Extraordinary loss, net (0.03) (0.01) -
Cumulative effect of accounting change, net - - (0.04)
Diluted earnings per share as adjusted under SFAS 142 $ 0.52 $ 0.53 $ 0.63
The following table summarizes goodwill and intangible assets as of December 31:
(In thousands) 2002 2001 2000
Goodwill (1) $ 1,919,780 $1,904,178 $2,043,179
Trade names (1) 238,550 238,550 246,289
Other intangible assets 78,284 74,197 61,517
Accumulated amortization (2) (59,053) (51,611) (44,014)
Net other intangibles 19,231 22,586 17,503
Total $ 2,177,561 $2,165,314 $2,306,971
(1) Not subject to amortization
(2) Amortization expense of $7 million, $10 million and $9 million was recorded in 2002, 2001 and 2000, respectively. Annual amortization expense
of approximately $6 - $8 million is expected over the next five years.
Goodwill and Intangible Assets
In June 2001, the Financial Accounting Standards
Board issued SFAS 142, “Goodwill and Other Intangible
Assets”. SFAS 142 requires that after December 31,
2001, existing goodwill will no longer be amortized and
intangible assets with indefinite useful lives will not be
amortized until their useful lives are determined to be
no longer indefinite. In accordance with SFAS 142, the
Company discontinued the amortization of goodwill
and indefinite lived intangible assets effective January
1, 2002. Goodwill and intangible assets that are not
amortized are subject to at least an annual assessment
for impairment by applying a fair-value-based test. The
Company completed its initial assessment of goodwill
impairment in the second quarter of 2002. The Company
has also completed its annual assessment of impairment
as of October 1. These assessments concluded that there
were no impairment issues. In accordance with SFAS
142, the following table provides summarized transitional
information for the years ended December 31, 2002,
2001 and 2000, with the 2001 and 2000 information
presented on an adjusted basis to reflect the elimination
of amortization expense required under SFAS 142:
46 ServiceMaster
Notes to Consolidated Financial Statements