American Home Shield 2010 Annual Report Download - page 13

Table of Contents
Further weakening in general economic conditions, especially as they may affect home sales, unemployment or consumer confidence or spending
levels, may adversely impact our business, financial position, results of operations and cash flows.
A substantial portion of our results of operations is dependent upon spending by consumers. Deterioration in general economic conditions and consumer
confidence could affect the demand for our services. Consumer spending and confidence tend to decline during times of declining economic conditions, and
there can be no assurance that consumer spending or confidence will materially improve. A worsening of macroeconomic indicators, including weak home
sales, higher home foreclosures, declining consumer confidence or rising unemployment rates, could adversely affect consumer spending levels, reduce the
demand for our services and adversely impact our business, financial position, results of operations and cash flows. These factors could also negatively impact
the timing or the ultimate collection of accounts receivable, which would adversely impact our business, financial position, results of operations and cash
flows.
Weather conditions and seasonality affect the demand for our services and our results of operations and cash flows.
The demand for our services and our results of operations are affected by weather conditions and by the seasonal nature of our lawn care and landscape
maintenance services, termite and pest control services, home inspection services and disaster restoration services. For example, in our geographies that do not
have a year-round growing season, the demand for our lawn care and landscape maintenance services decreases during the winter months. Adverse weather
conditions (e.g., droughts, severe storms and significant rain or snow fall), whether created by climate change factors or otherwise, can adversely impact the
timing of product or service delivery and/or demand for lawn care and landscape maintenance services, and cooler temperatures can impede the development
of the termite swarm and lead to lower demand for our termite control services. Severe winter storms can also impact our home cleaning business if we cannot
travel to service locations due to hazardous road conditions. In addition, extreme temperatures can lead to an increase in service requests related to household
systems and appliances in our home service contract business, resulting in higher claim costs and lower profitability thereby adversely impacting our results of
operations and cash flows.
Availability of our raw materials and increases in raw material prices, fuel prices and other operating costs could adversely impact our business,
financial position, results of operations and cash flows.
Our financial performance is affected by the level of our operating expenses, such as fuel, fertilizer, chemicals, raw materials, wages and salaries,
employee benefits, health care, vehicle, self-insurance costs and other insurance premiums as well as various regulatory compliance costs, all of which may be
subject to inflationary pressures. In particular, our financial performance is adversely affected by increases in these operating costs. In recent years, fuel prices
have fluctuated widely, and previous increases in fuel prices increased our costs of operating vehicles and equipment. We cannot predict what effect the recent
events in North Africa and the Middle East could have on fuel prices in the future, but it is possible that such events could result in reduced fuel supplies,
resulting in higher fuel prices. With respect to fuel, our fleet, which consumes approximately 25 million gallons annually, has been negatively impacted by
significant increases in fuel prices in the past and could be negatively impacted in the future. Although we hedge a significant portion of our fuel costs, we do
not hedge all of those costs. A ten percent change in fuel prices would result in a change of approximately $6.4 million in the Company's annual fuel cost
before considering the impact of fuel swap contracts. Based upon current Department of Energy fuel price forecasts, as well as the hedges the Company has
executed to date for 2011, the Company has projected that fuel prices will increase our fuel costs by $15.0 million to $20.0 million
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