American Home Shield 2010 Annual Report Download - page 65

Table of Contents
in interest rates would result in approximately an $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 had 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. Additionally, we are 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 $0.5 million change in annual rent expense with respect to such operating leases.
The impact of increases in interest rates could be more significant for us than it would be for some other companies because of our substantial debt and
floating rate operating leases.
The following table summarizes information about the Company's debt as of December 31, 2010 (after considering the effect of the interest rate swap
agreements), including the principal cash payments and related weighted-average interest rates by expected maturity dates based on applicable rates at
December 31, 2010.
Expected Year of Maturity
Fair
Value
As of December 31, 2010 2011 2012 2013 2014 2015 Thereafter Total
($ in millions)
Debt:
Fixed rate $ 12.8 $ 8.2 $ 5.3 $1,434.2 $1,063.3 $ 357.8 $2,881.6 $2,866.8
Average interest rate 7.7% 8.4% 8.9% 5.6% 10.7% 7.3% 7.8%
Variable rate $ 36.5 $ 36.5 $26.5 $1,047.8 $ — $ — $1,147.3 $1,090.9
Average interest rate 2.5% 2.7% 2.8% 2.8% N/A N/A 2.8%
Interest Rate Swaps(1):
Receive variable/pay fixed $450.0 $980.0
Average pay rate 3.5% 3.0%
Average receive rate 0.3% 0.3%
The table does not include the $250.0 million and $200.0 million swaps entered into in June 2010 as those swaps are not effective until
March 2011 and September 2011, respectively.
(1)
Fuel Price Risk
The Company is exposed to market risk for changes in fuel prices through the consumption of fuel by its vehicle fleet in the delivery of services to its
customers. The Company uses approximately 25 million gallons of fuel on an annual basis. A ten percent change in fuel prices would result in a change of
approximately $6.4 million in the Company's annual fuel costs before considering the impact of fuel swap contracts.
The Company uses fuel swap contracts to mitigate the financial impact of fluctuations in fuel prices. As of December 31, 2010, the Company had fuel
swap contracts to pay fixed prices for fuel with an aggregate notional amount of $66.1 million, maturing through 2012. The estimated fair value of these
contracts at December 31, 2010 was a net asset of $6.6 million. These fuel swap contracts provide a fixed price for approximately 72.3 percent and
10.9 percent of the Company's estimated fuel usage for 2011 and 2012, respectively.
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