American Home Shield 2009 Annual Report Download - page 30

Table of Contents
payable quarterly. On July 30, 2009, the annual management fee payable under the consulting agreement with CD&R
was increased from $2.0 million to $6.25 million in order to align the fee structure with current market rates. The full
year management fee was applied in 2009.
In addition, in August 2009, the Company entered into consulting agreements with Citigroup, BAS and JPMorgan, each
of which is an Equity Sponsor or an affiliate of an Equity Sponsor. Under the consulting agreements, Citigroup, BAS
and JPMorgan each will provide the Company with on-going consulting and management advisory services until
June 30, 2016 or the termination of the existing consulting agreement between the Company and CD&R, if earlier. The
Company will pay annual management fees of $0.5 million, $0.5 million and $0.25 million, to Citigroup, BAS and
JPMorgan, respectively. The Company recorded consulting fees related to these agreements of $1.25 million for the year
ended December 31, 2009.
Represents residual value guarantee charges related to a synthetic lease for operating properties that do not result in
additional cash payments to exit the facility at the end of the lease term. In the third quarter of 2009, the Company
determined that it was probable that the fair value of certain properties under operating leases would be below the
guaranteed residual value at the end of the lease term. The Company's current estimate of this shortfall is $11.8 million,
which will be expensed over the remainder of the lease term (expires July 24, 2010).
Represents a net increase in income from continuing operations before income taxes, non-cash purchase accounting
adjustments, interest expense, interest and net investment income, gain on extinguishment of debt, restructuring and
Merger related charges, non-cash trade name impairment, residual value guarantee charge and management fee
supported by the improved results at Terminix, American Home Shield, TruGreen LandCare and ServiceMaster Clean,
offset, in part, by a decline in results at TruGreen LawnCare and Other Operations and Headquarters as described in
our "Segment Review (Year ended December 31, 2009 compared with the year ended December 31, 2008)".
(8)
(9)
The Company has historically hedged a significant portion of its annual fuel consumption of approximately 25 million gallons. Fuel costs, after the
impacts of the hedges, decreased $7.7 million for the year ended December 31, 2009 compared to the year ended December 31, 2008. Based upon the hedges
the Company has executed to date for 2010, as well as current Department of Energy fuel price forecasts, the Company would again expect an incremental
favorable impact in 2010, currently projected at $15 million to $20 million.
The Company experienced significant increases in its health care costs in 2009. In total, health care and related costs increased $13.6 million for the year
ended December 31, 2009 as compared to the year ended December 31, 2008. We expect to incur incremental aggregate health care costs in 2010 as
compared to 2009 as a result of certain provisions of the Patient Protection and Affordable Care Act; however, as more details and guidance under this new
law are communicated, the Company will assess the impact of this new law on its projected results of operations for 2010.
Changes in short term interest rates have had a beneficial impact on the Company's business on both operating income (loss) and non-operating expense
(income) by virtue of the effect on variable rate-based fleet and occupancy leases, offset, in part, by the negative effect on investment income. Short term
interest rates have improved the Company's results of operations by approximately $46.2 million pre-tax for the year ended December 31, 2009 compared to
the year ended December 31, 2008.
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