American Home Shield 2010 Annual Report Download - page 20

Table of Contents
loss of key personnel; and
a current expectation that more-likely-than-not (e.g., a likelihood that is more than 50%) a reporting unit or intangible asset will be sold or
otherwise disposed of.
For example, in the second quarter of 2010, we recorded a non-cash impairment charge of $46.9 million, of which $43.0 million was related to the
remaining goodwill at our TruGreen LandCare segment. Based upon future economic conditions, as well as the operating performance of our reporting units,
future impairment charges could be incurred.
Our franchisees could take actions that could harm our business.
Our franchisees are contractually obligated to operate their businesses in accordance with the standards set forth in our agreements with them. Each
franchising brand also provides training and support to franchisees. However, franchisees are independent third parties that we do not control, and the
franchisees own, operate and oversee the daily operations of their businesses. As a result, the ultimate success of any franchise operation rests with the
franchisee. If franchisees do not successfully operate their businesses in a manner consistent with required standards, royalty payments to us will be adversely
affected and a brand's image and reputation could be harmed, which in turn could adversely impact our business, financial position, results of operations and
cash flows. In addition, it is possible that creditors, or other claimants, of a franchisee, could, in the event such creditors and claimants cannot collect from our
franchisee or otherwise, attempt to make claims against us under various legal theories. If successful, these claims could have a material adverse impact on
our reputation, business, financial position, results of operation and cash flows.
Changes in accounting rules or interpretations could adversely impact our financial position and results of operations.
Changes in rules applicable to our business, including proposed revisions to the rules related to accounting for leases and reserves for and disclosures
relating to legal contingencies, could (i) affect our reported results of operations and financial position, (ii) potentially decrease the comparability of our
financial statements to others within our industry and (iii) increase our liability exposure.
Risks Related to Our Capital Structure and Our Debt
We are indirectly owned and controlled by the Equity Sponsors, and their interests as equity holders may conflict with the interests of holders of our
debt.
We are indirectly owned and controlled by the Equity Sponsors, who have the ability to control our policies and operations. The directors elected by
certain of the Equity Sponsors are able to make decisions affecting our capital structure, including decisions to issue or repurchase capital stock, pay dividends
and incur, repurchase or refinance our debt. The interests of the Equity Sponsors may not in all cases be aligned with the interests of the holders of our debt.
For example, if we encounter financial difficulties or are unable to pay our debts as they mature, the interests of our Equity Sponsors might conflict with the
interests of holders of our debt. In addition, our Equity Sponsors may have an interest in pursuing acquisitions, divestitures, financings or other transactions
that, in their judgment, could enhance their equity investments, even though such transaction might involve risks to our business or the holders of our then
existing debt. Furthermore, the Equity Sponsors may in the future own businesses that directly or indirectly compete with us. One or more of the Equity
Sponsors also may pursue acquisition opportunities that may be complementary to our business, and as a result, those acquisition opportunities may not be
available to us.
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