American Home Shield 2010 Annual Report Download - page 76

Table of Contents
Notes to the Consolidated Financial Statements (Continued)
Note 1. Significant Accounting Policies (Continued)
in 2009 and 2008, respectively. The impairment charges by business segment for the years ended December 31, 2010, 2009 and 2008, 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 allocation of purchase price pursuant to the Merger. The terminal growth rates used in the analyses for both
the allocation of purchase price pursuant to the Merger and the October 1, 2010, 2009 and 2008 impairment tests were the same and in line with historical
U.S. gross domestic product growth rates. Had the Company used a discount rate in assessing the impairment of its trade names that was one percent higher
across all business segments (holding all other assumptions unchanged), the Company would have recorded an additional impairment charge of approximately
$267.0 million in 2010.
As a result of the trade name impairment taken in 2009, the carrying values of the Company's impaired trade names were adjusted to their estimated fair
values as of October 1, 2009. Further, the October 1, 2010 estimated fair value of the trade names at the TruGreen LawnCare, TruGreen LandCare, and Other
Operations and Headquarters (in particular the Merry Maids trade name) business segments were not significantly in excess of their carrying values.
Consequently, any further decline in the estimated fair values of these trade names will result in additional trade name impairments. It is possible that such
impairments, if required, could be material and may need to be recorded prior to the fourth quarter of 2011 (i.e., during an interim period) if the Company's
results of operations or other factors require such assets to be tested for impairment at an interim date.
Fair Value of Financial Instruments and Credit Risk: See Note 19 for information relating to the fair value of financial instruments.
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