American Home Shield 2011 Annual Report Download - page 60

Table of Contents
Debt issue costs decreased from prior year levels due to amortization expense being recorded.
The increase in accounts payable reflects a change in the timing of payments to vendors.
Accrued self-insurance claims and related expenses decreased from prior year levels, reflecting a reduction in required reserve levels under certain of our
self-insurance programs and a decrease in accruals for home service contract claims in the American Home Shield business.
Other accrued liabilities decreased from prior year levels, reflecting a reduction in reserve levels for unrecognized tax benefits.
Deferred revenue increased from prior year levels, reflecting an increase in home service contracts written at American Home Shield.
Long-term debt decreased from prior year levels, reflecting the purchase from Holdings of $65.0 million face value of 2015 Notes, as discussed in
"Liquidity", and scheduled principal payments.
Non-current deferred tax liabilities increased from prior year levels, reflecting the reclassification of certain net operating losses from long-term to
current, the loss for tax purposes on the sale of TruGreen LandCare exceeding the loss on the sale and impairment for financial reporting purposes and tax
deductible depreciation and amortization exceeding depreciation and amortization expense for financial reporting purposes, offset, in part, by the
nondeductible trade name impairment.
Other long-term obligations, primarily self-insured claims, decreased from prior year levels, reflecting decreases in the fair value liability recorded for
interest rate swap contracts and reductions in required reserve levels under certain of our self-insurance programs.
Total shareholder's equity was $1.248 billion as of December 31, 2011 compared to $1.188 billion as of December 31, 2010.
Financial Position—Discontinued Operations
The assets and liabilities related to discontinued operations have been classified in a separate caption on the Consolidated Statements of Financial
Position.
As part of the TruGreen LandCare sale agreement, the Company guaranteed obligations to third parties with respect to bonds (primarily performance
type). At the present time, the Company does not believe it is probable that the buyers will default on their obligations subject to guarantee. The fair value of
the Company's obligations related to these guarantees is not significant and no liability has been recorded. See Note 10 of the Consolidated Financial
Statements for more information on the Company's guarantees.
Off-Balance Sheet Arrangements
The Company has off-balance sheet arrangements in the form of guarantees as discussed in Note 9 of the Consolidated Financial Statements.
Critical Accounting Policies and Estimates
The preparation of the Consolidated Financial Statements requires management to make certain estimates and assumptions required under GAAP which
may differ from actual results. The more significant areas requiring the use of management estimates relate to revenue recognition; the allowance for
uncollectible receivables; accruals for self-insured retention limits related to medical, workers' compensation, auto and general liability insurance claims;
accruals for home service contracts and termite damage claims; the possible outcome of outstanding litigation and other disputes; accruals for income tax
liabilities as well as deferred tax accounts; the deferral and amortization of customer acquisition costs; useful lives for depreciation and amortization expense;
the valuation of marketable securities; and the valuation of tangible and intangible assets. In 2011, there have been no changes in the significant areas that
require estimates or in the underlying methodologies used in determining the amounts of these associated estimates.
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