American Home Shield 2011 Annual Report Download - page 64

Table of Contents
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 $ 1,202.0 110%
For the TruGreen 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 primarily on expected sales growth to commercial customers along with improved
retention of existing commercial and residential customers. The key uncertainties in the revenue growth assumption include the impact of the various
marketing and selling initiatives being undertaken by TruGreen to increase its presence in the commercial lawn care sector. The margin expansion assumption
was based primarily on the achievement of improved operational efficiencies through standardization and centralization of selected operating activities and
cost efficiencies as a result of projected revenue growth. The key uncertainty in the margin expansion assumption is TruGreen's ability to achieve the
forecasted revenue growth while also improving operational efficiencies around costs and expenses.
The Company's annual trade name impairment analyses, which were performed as of October 1 of each year, resulted in pre-tax non-cash impairments of
$36.7 million and $26.6 million in 2011 and 2009, respectively. The Company's 2010 trade name impairment analysis did not result in any impairment. The
impairment charges by business segment for the years ended December 31, 2011, 2010 and 2009, as well as the remaining value of the trade names not
subject to amortization by business segment as of December 31, 2011 and 2010 are as follows:
(In thousands) TruGreen Terminix
American
Home
Shield
ServiceMaster
Clean
Other
Operations &
Headquarters(1) Total
Balance at
Dec. 31,
2008 $783,600 $875,100 $140,400 $ 152,600 $ 445,100 $2,396,800
2009
Impairment (21,400) — — — (5,200) (26,600)
Balance at
Dec. 31,
2009 and
2010 762,200 875,100 140,400 152,600 439,900 2,370,200
2011
Impairment (36,700) — — — — (36,700)
Balance at
Dec. 31,
2011 $725,500 $875,100 $140,400 $ 152,600 $ 439,900 $2,333,500
The Other Operations and Headquarters segment includes Merry Maids.(1)
The impairment charge in 2011 was primarily attributable to the use of higher discount rates in the DCF valuation analyses as compared to the discount
rates used in the 2010 impairment analyses. Although the projected future growth in cash flows in 2011 were slightly higher than in the 2010 valuation, the
increase in the discount rates more than offset the improved cash flows. The increase in the discount rates is primarily attributable to changes in market
conditions which indicated a lower risk tolerance in 2011 as compared to 2010. This lower risk tolerance is exhibited through the marketplace's desire for
higher returns in order to accept market risk. 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 projected future growth in cash flows, such growth was lower than that estimated at the time the trade names
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