American Home Shield 2009 Annual Report Download - page 45

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accounting. Excluding this impact of purchase accounting, revenue for the year ended December 31, 2008 decreased $71.8 million, or 2.1 percent, from 2007
levels, driven by the results of our business units as described in our "Segment Review (Year ended December 31, 2008 compared with the Successor period
from July 25, 2007 to December 31, 2007 and the Predecessor period from January 1, 2007 to July 24, 2007)".
Operating income was $197.8 million for the year ended December 31, 2008 compared to $33.2 million for the Successor period from July 25, 2007 to
December 31, 2007 and $143.9 million for the Predecessor period from January 1, 2007 to July 24, 2007. (Loss) income from continuing operations before
income taxes was ($160.2) million for the year ended December 31, 2008 compared to ($148.5) million and $140.8 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 in loss from continuing
operations before income taxes of $152.5 million primarily reflects the net effect of:
(In millions)
Non-cash purchase accounting adjustments(1) $ (49.0)
Increased interest expense(2) (137.7)
Decreased interest and net investment income(3) (35.1)
Decreased Merger related charges(4) 41.0
Decreased restructuring charges(5) 31.7
Non-cash trade name impairment(6) (60.1)
Improved segment results(7) 56.7
$ (152.5)
The net unfavorable impact of non-cash purchase accounting adjustments for the year ended December 31, 2008 of
$49.0 million consists primarily of increased amortization of intangible assets of $36.0 million and increased customer
acquisition expense of $39.5 million, offset, in part, by a $26.5 million increase in revenue.
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.
Represents a decrease in charges related to the Merger which cannot be capitalized as part of the purchase cost for
financial reporting purposes.
Represents a decrease in restructuring charges primarily resulting from completion of the consolidation of the
Company's corporate headquarters into its operations support center in Memphis, Tennessee and completion of
significant aspects of TruGreen LandCare's organizational changes.
Represents a non-cash impairment charge of $60.1 million recorded in the year ended December 31, 2008 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 a net increase in income from continuing operations before income taxes, non-cash purchase accounting
adjustments, interest expense, interest and net investment income, Merger related charges, restructuring charges and
non-cash trade name impairment supported by the improved results at Terminix, TruGreen LandCare,
(1)
(2)
(3)
(4)
(5)
(6)
(7)
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