American Home Shield 2007 Annual Report Download - page 75

Notes to the Consolidated Financial Statements
was $284 million and $246 million at December 31, 2006 and 2005, respectively.
Interest and dividend income received on cash and marketable securities was $26 million, $20 million, and $15 million, in 2006,
2005, and 2004, respectively. Gains and losses on sales of investments, as determined on a specific identification basis, are included
in investment income in the period they are realized. The Company periodically reviews its portfolio of investments to determine
whether there has been an other than temporary decline in the value of the investments from factors such as deterioration in the
financial condition of the issuer or the market(s) in which it competes. The unrealized gains in the investment portfolio were
approximately $18 million and $13 million as of December 31, 2006 and 2005, respectively. Unrealized losses were approximately
$3 million and $7 million as of December 31, 2006 and 2005, respectively. The portion of these unrealized losses older than one
year at December 31 was less than $2 million for both 2006 and 2005. The aggregate fair value of the investments with unrealized
losses totaled $109 million and $133 million at December 31, 2006 and 2005, respectively, and consist primarily of corporate bonds
and common equity securities.
Receivable Sales
The Company has an agreement to provide for the ongoing revolving sale of a designated pool of accounts receivable of TruGreen
LawnCare and Terminix to a wholly-owned, bankruptcy-remote subsidiary, ServiceMaster Funding LLC. ServiceMaster Funding
LLC has entered into an agreement to transfer, on a revolving basis, an undivided percentage ownership interest in a pool of
accounts receivable to unrelated third party purchasers. ServiceMaster Funding LLC retains an undivided percentage interest in the
pool of accounts receivable and bad debt losses for the entire pool are allocated first to this retained interest. During 2006, 2005 and
2004, there were no receivables sold to third parties under this agreement. However, the Company may sell its receivables in the
future which would provide an alternative funding source. The agreement is a 364-day facility that is renewable at the option of the
purchasers. The Company may sell up to $70 million of its receivables to these purchasers and therefore has immediate access to
cash proceeds from these sales. The amount of the eligible receivables varies during the year based on seasonality of the business
and will at times limit the amount available to the Company.
Comprehensive Income
Comprehensive income, which encompasses net income, unrealized gains on marketable securities, and the effect of foreign
currency translation is disclosed in the Statements of Shareholders' Equity.
Other Comprehensive Income
(In thousands) 2006 2005 2004
Net unrealized holding gains arising in period $ 14,562 $ 4,582 $ 7,745
Tax expense 5,825 1,833 3,098
Net of tax amount $ 8,737 $ 2,749 $ 4,647
Net gains realized $ 10,937 $ 8,228 $ 6,370
Tax expense 4,375 3,291 2,549
Net of tax amount $ 6,562 $ 4,937 $ 3,821
Accumulated comprehensive income included the following components as of December 31:
(In thousands) 2006 2005 2004
Net unrealized gains on securities, net of tax $ 6,799 $ 4,624 $ 6,812
Foreign currency Translation 3,319 2,573 3,992
Total $ 10,118 $ 7,197 $ 10,804
Shareholders' Equity
The Company has authorized one billion shares of common stock with par value of $.01. In January 2007, the Company announced
the declaration of a cash dividend of $.12 per share payable on February 27, 2007 to shareholders of record on February 16, 2007.
The Company has an effective shelf registration statement to issue shares of common stock in connection with future, unidentified
acquisitions. This registration statement allows the Company to issue registered shares much more efficiently when acquiring
privately held companies. The Company plans to use the shares over time in connection with purchases of small acquisitions. There
were approximately 3.6 million shares available for issuance under this registration statement at December 31, 2006.
The Company maintains a shareholder approved incentive plan that allows for the issuance of equity-based compensation awards,
including stock options, stock appreciation rights, share grants and restricted stock awards. The Company uses treasury stock and
newly issued stock to satisfy equity-based compensation awards. As of December 31, 2006, there were approximately 27 million
Company shares available for issuance upon the exercise of outstanding employee stock options and stock appreciation rights and
for future grants. Also, as of December 31, 2006, there was approximately $16 million of total unrecognized compensation expense