American Home Shield 2010 Annual Report Download - page 24

Table of Contents
when significant portions of our debt is scheduled to mature. There is no assurance that the debt markets will be able to absorb all of the potential refinancing
during that time period. Moreover, in 2008 and 2009, the global credit markets suffered a significant contraction, including the failure of some large financial
institutions. This resulted in a significant decline in the credit markets and the overall availability of credit. Market disruptions, such as those experienced in
2008 and 2009, as well as our significant debt levels, may increase our cost of borrowing or adversely affect our ability to refinance our obligations as they
become due. If we are unable to refinance our indebtedness or access additional credit, or if short-term or long-term borrowing costs dramatically increase,
our ability to finance current operations and meet our short-term and long-term obligations could be adversely affected. If we cannot refinance our debt, we
could face substantial liquidity problems, causing us to become bankrupt or insolvent, and we might be required to dispose of material assets or operations to
meet our debt service and other obligations. We cannot assure you we will be able to consummate those sales, or if we do, what the timing of the sales will be,
whether the proceeds that we realize will be adequate to meet our debt service obligations when due or whether we would receive fair value for such assets.
Increases in interest rates would increase the cost of servicing our debt and could reduce our profitability.
A significant portion of our outstanding debt, including debt under the Credit Facilities, bears interest at variable rates. As a result, increases in interest
rates would increase the cost of servicing our debt and could materially reduce our profitability and cash flows. As of December 31, 2010, each one
percentage point change in interest rates would result in approximately a $11.3 million change in the annual interest expense on our Term Facilities after
considering the impact of the interest rate swaps into which we have entered. Assuming all revolving loans were fully drawn, each one percentage point
change in interest rates would result in approximately a $5.0 million change in annual interest expense on our Revolving Credit Facility. We are also exposed
to increases in interest rates with respect to our arrangement enabling us to transfer an interest in certain receivables to unrelated third parties. Assuming all
available amounts were transferred under this arrangement, each one percentage point change in interest rates would result in approximately a $0.5 million
change in annual interest expense with respect to this arrangement. We are also exposed to increases in interest rates with respect to our floating rate operating
leases, and a one percentage point change in interest rates would result in approximately a $0.5 million change in annual rent expense with respect to such
operating leases. The impact of increases in interest rates could be more significant for us than it would be for some other companies because of our
substantial debt and floating rate operating leases.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
The headquarters for TruGreen LawnCare, Terminix and TruGreen LandCare, along with the corporate headquarters, are located in leased premises at
860 Ridge Lake Boulevard, Memphis, Tennessee. The headquarters for American Home Shield are located in leased premises at 889 Ridge Lake Boulevard,
Memphis, Tennessee. The headquarters for ServiceMaster Clean, AmeriSpec, Furniture Medic, Merry Maids and a training facility are located in owned
premises at 3839 Forest Hill Irene Road, Memphis, Tennessee. In addition, ServiceMaster leases space for a call center located at 6399 Shelby View Drive,
Memphis, Tennessee; offices located at 850 and 855 Ridge Lake Boulevard, Memphis, Tennessee; a training facility located at 1650 Shelby Oaks Drive
North, Memphis, Tennessee; and a warehouse located at 1575 Two Place, Memphis, Tennessee.
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