American Home Shield 2009 Annual Report Download - page 29

Table of Contents
Operating income was $257.2 million for the year ended December 31, 2009 compared to $197.8 million for the year ended December 31, 2008. Income
from continuing operations before income taxes was $10.2 million for the year ended December 31, 2009 compared to a loss from continuing operations
before income taxes of $160.2 million for the year ended December 31, 2008. The increase in income from continuing operations before income taxes of
$170.4 million primarily reflects the net effect of:
(In millions)
Non-cash purchase accounting adjustments(1) $ 33.7
Decreased interest expense(2) 47.9
Increased interest and net investment income(3) 17.1
Increased restructuring and Merger related charges(4) (14.4)
Decreased non-cash trade name impairment(5) 32.1
Gain on extinguishment of debt(6) 46.1
Management fee(7) (5.5)
Residual value guarantee charge(8) (5.5)
Improved segment results(9) 18.9
$ 170.4
The net favorable impact of non-cash purchase accounting adjustments for the year ended December 31, 2009
compared to 2008 of $33.7 million consists primarily of decreased amortization of intangible assets of $13.3 million
and a $34.1 million increase in revenue resulting from recording deferred revenue at its fair value in conjunction with
purchase accounting, offset, in part, by increased deferred customer acquisition expense of $14.1 million.
Represents a decrease in interest expense as a result of decreases in our weighted average interest rates and decreases in
our average long-term debt balances as compared to 2008.
As further described in "Operating and Non-Operating Expenses", represents an increase in interest and net investment
income.
Represents an increase in restructuring charges related to (i) a reorganization of field leadership and a restructuring of
branch operations at TruGreen LawnCare, (ii) a branch optimization project at Terminix and (iii) Fast Forward and an
increase in Merger related charges primarily related to certain legal matters and change in control severance.
Represents the difference between non-cash impairment charges of $28.0 million and $60.1 million recorded in the
years ended December 31, 2009 and 2008, respectively, to reduce the carrying value of trade names as a result of the
Company's annual impairment testing of goodwill and indefinite-lived intangible assets. See "Critical Accounting
Policies and Estimates" for further details.
Represents the gain on extinguishment of debt recorded in the year ended December 31, 2009 related to the completion
of open market purchases of $89.0 million in face value of the Company's Permanent Notes.
Represents the increase in management and consulting fees payable to certain related parties. A management fee is
payable to CD&R pursuant to a consulting agreement under which CD&R provides the Company with on-going
consulting and management advisory services in exchange for an annual management fee of $6.25 million, which is
(1)
(2)
(3)
(4)
(5)
(6)
(7)
27