American Home Shield 2008 Annual Report Download - page 27
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Table of Contents
Memphis, Tennessee.
In accordance with Statement of Financial Accounting Standards ("SFAS") 142, the Company's 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. In the fourth quarter of 2008, the Company recorded a non-
cash impairment charge associated with certain of its trade names that are not amortized in the amount of $60.1 million. This charge is included in the
results of continuing operations for 2008. In the fourth quarter of 2007, the Company recorded a non-cash impairment charge associated with the
goodwill at its InStar business in the amount of $12.9 million. This charge is classified within the financial statement caption "(loss) income from
discontinued operations, net of income taxes." In the first quarter of 2006, the Company recorded a $42 million impairment charge for expected losses
on the disposition of American Residential Services and American Mechanical Services. This charge is classified within the financial statement caption
"(loss) income from discontinued operations net of income taxes".
In addition to the impairment charges noted above, the Company also recorded impairment charges of $6.3 million and $18.1 million for the year ended
December 31, 2008 and the Successor period from July 25, 2007 to December 31, 2008 related to the long-lived assets (other than goodwill) at its InStar
business in connection with the decision to sell the InStar business. This charge is classified within the financial statement caption "(loss) income from
discontinued operations, net of income taxes."
In the fourth quarter of 2008, the Company recorded a reduction in income tax benefit of $8.3 million resulting from the establishment of a valuation
allowance related to certain deferred tax assets for which the realization in future years is not more likely than not. In the fourth quarter of 2006, the
Company recorded a reduction in income tax expense of $7 million resulting from the favorable resolution of state tax items related to a prior non-
recurring transaction.
Related to a comprehensive agreement with the Internal Revenue Service regarding its examination of the Company's federal income taxes through the
year 2002, the Company recorded a non-cash reduction in its 2004 tax provision related to deferred taxes on intangible assets, which had not
previously been recorded, thereby increasing net income by approximately $159 million. Approximately $150 million related to continuing operations
and $9 million related to discontinued operations.
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