American Home Shield 2008 Annual Report Download - page 44

Table of Contents
in the fourth quarter of 2007 to reduce the carrying value of InStar's long-lived assets to their fair value less cost to sell in accordance with the provisions of
SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." This charge was in addition to a $12.9 million ($8.8 million, net of tax)
goodwill impairment charge.
The Successor period from July 25, 2007 to December 31, 2007 and the Predecessor period from January 1, 2007 to July 24, 2007 compared with the
year ended December 31, 2006
The Company reported revenue of $1,934.4 million in the Predecessor period from January 1, 2007 to July 24, 2007 and $1,422.4 million in the
Successor period from July 25, 2007 to December 31, 2007 compared to $3,332.7 million in the year ended December 31, 2006. The revenue for the
Successor period from July 25, 2007 to December 31, 2007 has been reduced by $60.6 million (non-cash) resulting from recording deferred revenue at its fair
value in connection with purchase accounting. Excluding purchase accounting, revenue for the combined periods for the year ended December 31, 2007
increased $84.6 million, or 2.5 percent, over 2006 levels, driven by the results of our business units as described in our "Segment Review (The Successor
period from July 25, 2007 to December 31, 2007 and the Predecessor period from January 1, 2007 to July 24, 2007 compared with the year ended
December 31, 2006)".
Operating income was $143.9 million in the Predecessor period from January 1, 2007 to July 24, 2007 and $33.2 million in the Successor period from
July 25, 2007 to December 31, 2007 compared to $324.1 million in the year ended December 31, 2006. (Loss) income from continuing operations before
income taxes was $137.4 million in the Predecessor period from January 1, 2007 to July 24, 2007 and ($148.5) million in the Successor period from July 25,
2007 to December 31, 2007 compared to income from continuing operations before income taxes of $280.5 million in the year ended December 31, 2006. The
decrease in (loss) income from continuing operations before income taxes as compared to the year ended December 31, 2006 of $291.6 million primarily
reflects the net effect of:
(In millions)
Non-cash purchase accounting adjustments(1) $(134.8)
Increased interest expense(2) (148.2)
Decreased interest and net investment income(3) (0.9)
Increased merger related charges(4) (41.2)
Increased restructuring charges(5) (21.3)
Improved segment results(6) 54.8
$(291.6)
•
The net unfavorable impact of non-cash purchase accounting adjustments for the Successor period from July 25, 2007 to December 31,
2007 of $134.8 million consists primarily of increased amortization of intangible assets of $128.5 million and a $60.6 million decrease in
revenue partially offset by decreased customer acquisition expense of $54.3 million.
Represents an increase in interest expense as a result of the new debt structure entered into upon the completion of the Transactions.
As further described in "Operating and Non-Operating Expenses", represents a decrease in interest and net investment income, which
includes (1) the unfavorable impact to investment gains and income realized on the American Home Shield investment portfolio due to
realized losses on disposals of securities and other than temporary declines in the value of certain investments of $2.9 million and (2) lower
investment income of $3.0 million resulting from a decrease in the market value of investments within an employee deferred compensation
trust (for which there is a
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(1)
(2)
(3)