American Home Shield 2011 Annual Report Download - page 118

Table of Contents
Notes to the Consolidated Financial Statements (Continued)
Note 19. Fair Value of Financial Instruments (Continued)
Ineffective portions of derivative instruments designated in accordance with accounting standards as cash flow hedge relationships were insignificant
during the year ended December 31, 2011. As of December 31, 2011, the Company had fuel swap contracts to pay fixed prices for fuel with an aggregate
notional amount of $45.5 million, maturing through 2012. Under the terms of its fuel swap contracts, the Company is required to post collateral in the event
that the fair value of the contracts exceeds a certain agreed upon liability level and in other circumstances required by the counterparty. As of December 31,
2011, the Company had posted $3.8 million in letters of credit as collateral under its fuel hedging program, none of which were posted under the Company's
Revolving Credit Facility. As of December 31, 2011, the Company had interest rate swap contracts to pay fixed rates for interest on long-term debt with an
aggregate notional amount of $1.430 billion, maturing through 2013.
The effective portion of the gain or loss on derivative instruments designated and qualifying as cash flow hedging instruments is recorded in other
comprehensive loss. These amounts are reclassified into earnings in the same period or periods during which the hedged forecasted debt interest settlement or
the fuel settlement affects earnings. The amount expected to be reclassified into earnings during the next 12 months includes unrealized gains and losses
related to open fuel hedges and interest rate swaps. Specifically, as the underlying forecasted transactions occur during the next 12 months, the hedging gains
and losses in accumulated other comprehensive loss expected to be recognized in earnings is a loss of $14.1 million, net of tax, as of December 31, 2011. The
amounts that are ultimately reclassified into earnings will be based on actual interest rates and fuel prices at the time the positions are settled and may differ
materially from the amount noted above.
Note 20. Condensed Consolidating Financial Statements of The ServiceMaster Company and Subsidiaries
The following condensed consolidating financial statements of the Company and its subsidiaries have been prepared pursuant to Rule 3-10 of
Regulation S-X. These condensed consolidating financial statements have been prepared from the Company's financial information on the same basis of
accounting as the Consolidated Financial Statements. Goodwill and other intangible assets have been allocated to all of the subsidiaries of the Company based
on management's estimates.
The payment obligations of the Company under the 2015 Notes and the 2020 Notes are jointly and severally guaranteed on a senior unsecured basis by
the Guarantors. Each of the Guarantors is wholly owned, directly or indirectly, by the Company, and all guarantees are full and unconditional. All other
subsidiaries of the Company, either directly or indirectly owned, do not guarantee the 2015 Notes or the 2020 Notes ("Non-Guarantors"). A Guarantor will be
released from its obligations under its guarantee under certain customary circumstances, including, (i) the sale or disposition of the Guarantor, (ii) the release
of the Guarantor from all of its obligations under all guarantees related to any indebtedness of the Company, (iii) the merger or consolidation of the Guarantor
as specified in the indenture governing the 2015 Notes or the 2020 Notes, as the case may be, (iv) the Guarantor becomes an unrestricted subsidiary under the
indenture governing the 2015 Notes or the 2020 Notes, as the case may be, (v) the defeasance of the Company's obligations under the indenture governing the
2015 Notes or the 2020 Notes, as the case may be, or (vi) the payment in full of the principal amount of the 2015 Notes or the 2020 Notes, as the case may be.
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