American Home Shield 2009 Annual Report Download - page 56

Table of Contents
capital needs. On July 22, 2009, the Company liquidated its investments in these money market funds and used the proceeds to make a repayment of
$125.0 million under the Revolving Credit Facility. Additionally, on December 21, 2009, the Company repaid the outstanding amount of $40.0 million.
The Company has entered into an accounts receivable securitization arrangement under which TruGreen LawnCare and Terminix may sell certain
eligible trade accounts receivable to ServiceMaster Funding Company LLC ("Funding"), the Company's wholly owned, bankruptcy-remote subsidiary which
is consolidated for financial reporting purposes. Funding, in turn, may transfer, on a revolving basis, an undivided percentage ownership interest of up to
$50.0 million in the pool of accounts receivable to one or both of the unrelated purchasers who are parties to the accounts receivable securitization
arrangement ("Purchasers"). The amount of the eligible receivables varies during the year based on seasonality of the businesses and could, at times, limit the
amount available to the Company from the sale of these interests. As of December 31, 2009, the amount of eligible receivables was approximately
$36.0 million.
The accounts receivable securitization arrangement is a 364-day facility that is renewable annually at the option of Funding, with a final termination date
of July 17, 2012. Only one of the Purchasers is required to purchase interests under the arrangement. If this Purchaser were to exercise its right to terminate its
participation in the arrangement, which it may do in the third quarter of each year, the amount of cash available to the Company may be reduced or
eliminated. As part of the annual renewal of the facility, which occurred on July 21, 2009, this Purchaser agreed to continue its participation in the
arrangement at least through July 20, 2010.
During the year ended December 31, 2009, there were no transfers of interests in the pool of accounts receivable to Purchasers under this arrangement.
During the third quarter of 2008, an interest in the pool of accounts receivable was transferred to a third party in exchange for $10.0 million. As of
December 31, 2009 and 2008, the Company had $10.0 million outstanding under the arrangement and had $26.0 million of remaining capacity available
under the accounts receivable securitization arrangement at December 31, 2009.
As a holding company, we depend on our subsidiaries to distribute funds to us so that we may pay our obligations and expenses, including our debt
service obligations. The ability of our subsidiaries to make distributions and dividends to us depends on their operating results, cash requirements and
financial condition and general business conditions. Our insurance subsidiaries and home service and similar subsidiaries (through which we conduct our
American Home Shield business) are subject to significant regulatory restrictions under the laws and regulations of the states in which they operate. Among
other things, such laws and regulations require certain such subsidiaries to maintain minimum capital and net worth requirements and may limit the amount of
ordinary and extraordinary dividends and other payments that these subsidiaries can pay to us. For example, certain states prohibit payment by these
subsidiaries to the Company of dividends in excess of 10 percent of their capital as of the most recent year end, as determined in accordance with prescribed
insurance accounting practices in those states. Of the $256.5 million as of December 31, 2009, which we identify as being potentially unavailable to be paid to
the Company by its subsidiaries, $204.2 million is held by our home service and insurance subsidiaries and is subject to these regulatory limitations on the
payment of funds to us. Such limitations were in effect throughout 2009 and similar limitations will be in effect in 2010. The remainder of the $256.5 million,
or $52.3 million, is related to amounts that the Company's management does not consider readily available to be used to service the Company's indebtedness
due, among other reasons, to the Company's cash management practices and working capital needs at various subsidiaries.
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