American Home Shield 2010 Annual Report Download - page 59

Table of Contents
The Company's 2010, 2009 and 2008 annual impairment analyses, which were performed as of October 1 of each year, did not result in any goodwill
impairments. However, as of the 2010 annual impairment analysis, the following reporting unit had an estimated fair value that the Company has determined,
from both a quantitative and a qualitative perspective, was not significantly in excess of its carrying value:
(In millions) Goodwill Balance
Fair Value as a Percent
of Carrying Value
TruGreen LawnCare $ 1,191.1 103%
For the TruGreen LawnCare reporting unit, the revenue growth assumption and the margin expansion assumption had the most significant influence on
the estimation of fair value. The revenue growth assumption was based on expected sales growth to commercial and residential customers along with
improved retention of existing customers. The key uncertainties in the revenue growth assumption include the impact of the various marketing and selling
initiatives being undertaken by TruGreen LawnCare to increase demand for its services, along with the continuation of the economic recovery and whether
such recovery drives an increase in consumer demand for the reporting unit's services back to historical levels. The margin expansion assumption was based
primarily on the achievement of cost efficiencies as a result of projected revenue growth. The key uncertainty in the margin expansion assumption is
TruGreen LawnCare's ability to achieve the forecasted revenue growth while controlling growth in costs and expenses.
The Company's 2010 annual trade name impairment analysis, which was performed as of October 1, 2010, did not result in any impairment. The 2009
and 2008 trade name impairment analyses, which were performed as of October 1 of each year, resulted in non-cash pre-tax impairments of $28.0 million and
$60.1 million in 2009 and 2008, respectively. The Company did record a $3.9 million trade name impairment in the second quarter of 2010 in its TruGreen
LandCare business segment as discussed above. The impairment charges by business segment, as well as the remaining value of the trade names not subject to
amortization by business segment as of December 31, 2010 and 2009, are as follows:
(In thousands)
TruGreen
LawnCare
TruGreen
LandCare Terminix
American
Home
Shield
ServiceMaster
Clean
Other
Operations &
Headquarters(1) Total
Balance at Dec. 31,
2007 $ 783,600 $ 12,700 $891,600 $ 140,400 $ 153,600 $ 486,300 $2,468,200
2008 Impairment — (1,400) (16,500) — (1,000) (41,200) (60,100)
Balance at Dec. 31,
2008 783,600 11,300 875,100 140,400 152,600 445,100 2,408,100
2009 Impairment (21,400) (1,400) — — — (5,200) (28,000)
Balance at Dec. 31,
2009 762,200 9,900 875,100 140,400 152,600 439,900 2,380,100
2010 Impairment — (3,900) — — — — (3,900)
Other(2) — (990) — — — — (990)
Balance at Dec. 31,
2010 $ 762,200 $ 5,010 $875,100 $ 140,400 $ 152,600 $ 439,900 $2,375,210
The Other Operations and Headquarters segment includes Merry Maids.
Reflects the impact of the amortization of tax deductible goodwill at TruGreen LandCare, which is applied to the trade name balance beginning July 1, 2010.
(1)
(2)
The aggregate impairment charge in 2009 was primarily attributable to the use of lower projected future cash flows related to the hypothetical royalty
rates utilized in the DCF valuation analyses as compared to the projected future cash flows used in the 2008 impairment analysis. Although the Company
continues to project future growth in cash flows, such growth is lower than that estimated at the time the trade names were tested for impairment in 2008. The
aggregate impairment charge in 2008 was primarily attributable to the use of lower projected future cash flows related to the hypothetical royalty rates utilized
in the DCF valuation analyses as compared to the
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