American Home Shield 2008 Annual Report Download - page 32

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Table of Contents
to a decrease in the market value of investments within an employee deferred compensation trust (for which there is a corresponding and offsetting decrease
within interest and net investment loss (income)).
Amortization expense was $173.6 million for the year ended December 31, 2008 compared to $132.7 million and $5.2 million for the Successor period
from July 25, 2007 to December 31, 2007 and the Predecessor period from January 1, 2007 to July 24, 2007, respectively. The increase reflects $164.5 million
and $128.5 million of amortization for the year ended December 31, 2008 and for the Successor period from July 25, 2007 to December 31, 2007 related to
recording amortizable intangible assets of $844.0 million in purchase accounting in connection with the Merger.
Non-operating expense totaled $357.9 million for the year ended December 31, 2008 compared to $181.7 million and $6.6 million for the Successor
period from July 25, 2007 to December 31, 2007 and the Predecessor period from January 1, 2007 to July 24, 2007, respectively. This change includes a
$137.7 million increase in interest expense for the year ended December 31, 2008, primarily resulting from the increased debt levels related to the Merger,
and a $35.1 million decrease in interest and investment income for the year ended December 31, 2008. Interest and net investment income was comprised of
the following for the year ended December 31, 2008, the Successor period from July 25, 2007 to December 31, 2007 and the Predecessor period from
January 1, 2007 to July 24, 2007:
Successor
Predecessor
(In millions)
Year Ended
Dec. 31, 2008
Jul. 25, 2007 to
Dec. 31, 2007
Jan. 1, 2007 to
Jul. 24, 2007
Realized gains(1) $ 8,277 $ 4,187 $ 25,091
Impairments(2) (16,478) (10,936) (928)
Deferred compensation trust(3) (6,435) (2,402) 2,880
Other(4) 4,584 5,588 1,581
Interest and net investment (loss) income $ (10,052) $ (3,563) $ 28,624
•
Represents the realized net investment gains and the interest and dividend income realized on the American Home Shield investment
portfolio.
Represents other than temporary declines in the value of certain investments in the American Home Shield investment portfolio.
Represents investment income (loss) resulting from a change in the market value of investments within an employee deferred compensation
trust (for which there is an offsetting adjustment in compensation expense within operating loss (income)).
Represents a portion of the earnings generated by SMAC, our financing subsidiary exclusively dedicated to providing financing to our
franchisees and retail customers of our operating units, and interest income on other cash balances.
The effective tax rate on income (loss) from continuing operations was (23.9) percent for the year ended December 31, 2008 compared to (35.1) percent
for the Successor period from July 25, 2007 to December 31, 2007 and 37.6 percent for the Predecessor period from January 1, 2007 to July 24, 2007. The
effective tax rate for the year ended December 31, 2008 includes a reduction in income tax benefit 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 as well as unfavorable adjustments to liabilities related
to federal and state uncertain tax positions recorded in prior years.
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