American Home Shield 2006 Annual Report Download - page 12

ITEM 1A. RISK FACTORS
This Form 10-K contains or incorporates by reference statements concerning future results and other matters that may be deemed to
be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. ServiceMaster intends
that these forward-looking statements, which look forward in time and include everything other than historical information, be
subject to the safe harbors created by that legislation. ServiceMaster notes that these forward-looking statements involve risks and
uncertainties that could affect its results of operations, financial condition or cash flows. Factors that could cause actual results to
differ materially from those expressed or implied in a forward-looking statement include the following, among others:
Weather conditions and seasonality affect the demand for ServiceMaster's services.
The demand for ServiceMaster's services is affected by weather conditions. The business of ServiceMaster is also affected by the
seasonal nature of its lawn care and landscape maintenance services; termite and pest control services; home warranty and home
inspection services; plumbing, drain cleaning, heating, ventilation, air conditioning and electrical services; and disaster restoration
services. For example, droughts can affect the demand for lawn care and landscape maintenance services; extreme weather
conditions could result in increased service calls in the home warranty business; cooler temperatures could impede the development
of the termite swarm and lead to lower termite swarm activity; and mild weather conditions could result in lower demand for
plumbing, heating and air conditioning services.
Competition could reduce ServiceMaster's market share and hurt its financial performance.
ServiceMaster operates in highly competitive markets. Changes in the source and intensity of competition in the markets served by
ServiceMaster impact the demand for its services and may result in additional pricing pressures. For example, the entry of national
home-improvement retailers into ServiceMaster's service lines may impact its financial performance. The principal methods of
competition in ServiceMaster's businesses include quality of service, name recognition, pricing, customer satisfaction and
reputation. No assurance can be given that ServiceMaster will be able to compete successfully against current or future competitors
and that the competitive pressures that ServiceMaster faces will not result in reduced market share and negatively impact its
financial performance.
ServiceMaster's future success depends on its ability to attract and retain trained workers.
ServiceMaster's future success and financial performance depends substantially on its ability to attract and retain trained workers.
ServiceMaster's ability to expand its operations is in part impacted by its ability to increase its labor force. In the event of a labor
shortage, ServiceMaster could experience difficulty in delivering its services in a high-quality or timely manner and could be forced
to increase wages in order to attract and retain trained employees, which would result in higher operating costs.
Increases in operating costs affect ServiceMaster's financial performance.
ServiceMaster's financial performance is affected by factor costs, such as labor, health care, vehicle, fuel, self-insurance, and
insurance premiums. In particular, ServiceMaster's financial performance is affected by increases in operating costs, such as the
increased fuel costs experienced in 2005.
Changes in the types or mix of service offerings affect ServiceMaster's financial performance.
ServiceMaster's financial performance is affected by changes in the types or mix of service offerings. For example, offering both
liquid and bait termite services requires additional equipment and training and results in different pricing and post-sale monitoring
activities.
Changes in laws and regulations applicable to ServiceMaster's businesses affect ServiceMaster's financial performance.
ServiceMaster's businesses are subject to various federal, state and local laws and regulations. These federal and state laws include
laws relating to consumer protection, wage and hour restrictions, permit and licensing requirements, workers' safety, environmental
regulations, employee benefits and telemarketing. It is difficult to predict the future impact of the broad and expanding legislative
and regulatory requirements affecting ServiceMaster's businesses. The laws and regulations applicable to ServiceMaster's
businesses will likely change in the future and affect ServiceMaster's operations and financial performance. In addition, if
ServiceMaster were to fail to comply with any applicable law or regulation, ServiceMaster could be subject to fines or penalties that
may affect how a business is operated.
Future acquisitions affect ServiceMaster's financial performance.
ServiceMaster plans to continue to pursue opportunities to expand through acquisitions. Acquisition activity includes small "roll-
up" acquisitions in existing service lines and may include new business acquisitions. ServiceMaster's ability to continue to make
acquisitions at reasonable prices and to integrate the acquired businesses are important factors in ServiceMaster's future growth.
ServiceMaster cannot assure that it will be able to manage or integrate acquired businesses successfully. Any inability on
ServiceMaster's part to consolidate and manage growth from acquired businesses could have an adverse effect on ServiceMaster's
financial performance.
Changes in general economic conditions affect the demand for ServiceMaster's services.