American Home Shield 2010 Annual Report Download - page 29

Table of Contents
facilities at the end of the lease term. The Company's estimate of this shortfall was $15.9 million, which was expensed
over the remainder of the lease term. The Company recorded charges of $10.4 million and $5.5 million in the years
ended December 31, 2010 and 2009, respectively, related to this shortfall.
Represents the reversal, in 2009, of a reserve for cash awards related to a long-term incentive plan as certain
performance measures under the plan were not achieved. There was no similar reversal in 2010.
Represents key executive separation charges recorded in the year ended December 31, 2010 related to the retirement of
our CEO on March 31, 2011 and the resignation of the President of TruGreen LandCare in 2010.
Represents a net decrease in income from continuing operations before income taxes, non-cash purchase accounting
adjustments, interest expense, interest and net investment income, restructuring and Merger related charges, non-cash
goodwill trade name impairment, gain on extinguishment of debt, residual value guarantee charge, long-term incentive
plan adjustments and key executive separation charges, reflecting the decline in results at TruGreen LandCare,
American Home Shield and Other Operations and Headquarters, offset, in part, by the improvement in results at
TruGreen LawnCare, Terminix and ServiceMaster Clean as described in our "Segment Review (Year ended
December 31, 2010 compared with the year ended December 31, 2009)."
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The Company has historically hedged a significant portion of its annual fuel consumption of approximately 25 million gallons. Fuel costs, after the
impacts of the hedges and after adjusting for the impact of year over year changes in the number of gallons used, decreased $22.3 million for the year ended
December 31, 2010 compared to 2009. 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 for 2011 compared to 2010.
The Company experienced a reduction in its health care costs in 2010. After adjusting for the impact of year over year changes in the number of covered
employees, health care and related costs decreased $14.1 million for the year ended December 31, 2010 compared to 2009. We expect to incur incremental
aggregate health care costs in 2011 as compared to 2010 as a result of continued inflation in the cost of health care services and due to certain provisions of
the Patient Protection and Affordable Care Act.
The Company has entered into multiple interest rate swap agreements as further discussed in Note 12 to the Consolidated Financial Statements. Changes
in interest rates, after the impacts of the interest rate swap agreements, have improved the Company's non-operating expenses by approximately $3.3 million
pre-tax for the year ended December 31, 2010 compared to 2009 by virtue of the effect on floating rate debt, offset, in part, by the negative effect on
investment income.
Operating and Non-Operating Expenses
The Company reported cost of services rendered and products sold of $1,991.1 million for the year ended December 31, 2010 compared to
$1,913.3 million for the year ended December 31, 2009. As a percentage of revenue, these costs increased to 59.2 percent for the year ended December 31,
2010 from 59.1 percent for the year ended December 31, 2009. This percentage increase primarily reflects residual value guarantee charges, provisions for
incentive compensation and costs related to ongoing initiatives at TruGreen LawnCare; decreased labor and materials efficiencies at TruGreen LandCare;
increases in lower margin product distribution revenue at
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