American Home Shield 2011 Annual Report Download - page 65

Table of Contents
were tested for impairment in 2008. The terminal growth rates used in the analyses for the October 1, 2011, 2010 and 2009 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 $114.8 million in 2011.
As a result of the trade name impairment taken in 2011, the carrying value of the TruGreen trade name was adjusted to its estimated fair value as of
October 1, 2011. Further, the October 1, 2011 estimated fair value of the trade name at the ServiceMaster Clean business segment was not significantly in
excess of its carrying value. 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 2012 (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.
The Company does not hold or issue derivative financial instruments for trading or speculative purposes. The Company has entered into specific
financial arrangements in the normal course of business to manage certain market risks, with a policy of matching positions and limiting the terms of contracts
to relatively short durations.
The Company has historically hedged a significant portion of its annual fuel consumption of approximately 21 million gallons. The Company has also
hedged the interest payments on a portion of its variable rate debt through the use of interest rate swap agreements. All of the Company's fuel swap contracts
and interest rate swap contracts are classified as cash flow hedges, and, as such, the hedging instruments are recorded on the Consolidated Statements of
Financial Position as either an asset or liability at fair value, with the effective portion of changes in the fair value attributable to the hedged risks recorded in
accumulated other comprehensive loss.
See Note 1 of the Consolidated Financial Statements for a summary of newly issued accounting statements and positions applicable to the Company.
Information Regarding Forward-Looking Statements
This report contains forward-looking statements and cautionary statements. Some of the forward-looking statements can be identified by the use of
forward-looking terms such as "believes," "expects," "may," "will," "shall," "should," "would," "could," "seeks," "aims," "projects," "is optimistic," "intends,"
"plans," "estimates," "anticipates" or other comparable terms. Forward-looking statements include, without limitation, all matters that are not historical facts.
They appear in a number of places throughout this report and include, without limitation, statements regarding our intentions, beliefs, assumptions or current
expectations concerning, among other things, financial position; results of operations; cash flows; prospects; the sharing of best practices and talent across our
businesses; growth strategies and/or expectations; expanding our commercial services; expansion opportunities in domestic and international territories; our
estimates of market segment size and segment share; expectations for enhancing American Home Shield's ability to interact with customers through its new
CRM system; projections for increases in existing home re-sales in 2012; capital expenditures and requirements; estimates for phasing out certain IT Services
from IBM and projections for expenditures to IBM in 2012 and 2013; customer retention; the continuation of acquisitions; fuel prices; impairment charges
related to goodwill and intangible assets; estimates of future amortization expense for intangible assets; attraction and retention of key personnel; the impact
of interest rate hedges and fuel swaps; the cost savings from restructurings and reorganizations and expected charges related to such restructurings and
reorganizations; the impact on the amount of unrecognized tax benefits resulting from pending tax
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