American Home Shield 2010 Annual Report Download - page 43

Table of Contents
expensed over the remainder of the lease term. The Company recorded a charge of $5.5 million in 2009 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.
Represents a net increase 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
trade name impairment, gain on extinguishment of debt, management and consulting fees, residual value guarantee
charge and long-term incentive plan adjustments supported by the improved results at Terminix, American Home
Shield, TruGreen LandCare and ServiceMaster Clean, offset, in part, by a decline in results at TruGreen LawnCare and
Other Operations and Headquarters as described in our "Segment Review (Year ended December 31, 2009 compared
with the year ended December 31, 2008)."
(9)
(10)
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 impacts of year over year changes in the number of gallons used, increased $0.9 million for the year ended
December 31, 2009 compared to 2008.
The Company experienced significant increases in its health care costs in 2009. In total, health care and related costs increased $13.6 million for the year
ended December 31, 2009 compared to 2008.
Changes in short term interest rates had a beneficial impact on the Company's business on both operating income (loss) and non-operating expense
(income) by virtue of the effect on variable rate-based fleet and occupancy leases, offset, in part, by the negative effect on investment income. Short term
interest rates improved the Company's results of operations by approximately $46.2 million for the year ended December 31, 2009 compared to 2008.
Operating and Non-Operating Expenses
The Company reported cost of services rendered and products sold of $1,913.3 million for the year ended December 31, 2009 compared to
$2,024.2 million for the year ended December 31, 2008. Excluding the unfavorable non-cash reduction of revenue of $34.1 million for the year ended
December 31, 2008 resulting from recording deferred revenue at its fair value in conjunction with purchase accounting, as a percentage of revenue, these costs
decreased to 59.1 percent for the year ended December 31, 2009 from 60.5 percent for the year ended December 31, 2008. This primarily reflects the impact
of improved labor efficiency, lower vehicle fleet counts, reduced fuel costs, reduced fertilizer costs at TruGreen LawnCare, favorable termite damage claim
trends at Terminix and the favorable impact of exiting certain fleet leases in 2008, offset, in part, by unfavorable trending in healthcare costs and a residual
value guarantee charge.
The Company reported selling and administrative expenses of $852.8 million for the year ended December 31, 2009 compared to $843.3 million for the
year ended December 31, 2008. The year ended December 31, 2008 includes a $14.1 million (non-cash) decrease in selling and administrative expenses
resulting from recording deferred customer acquisition costs at their fair value in connection with purchase accounting. Excluding the impact of purchase
accounting, these costs increased, as a percentage of revenue, to 26.3 percent for the year ended December 31, 2009 from 25.6 percent for the year ended
December 31, 2008. This primarily reflects increased compensation charges for the Company resulting from a change in the market value of investments
within an employee deferred compensation trust (for which there is a corresponding and offsetting change within interest and net investment (income) loss)
and increased management fees, offset, in
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