American Home Shield 2011 Annual Report Download - page 68

Table of Contents
regulations imposed by several states related to our home service and insurance subsidiaries, including those limiting the amount of funds that
can be paid to the Company by its subsidiaries;
changes in claims trends in our medical plan and our automobile, general liability and workers' compensation program;
significant disruptions, terminations or substandard performance of our outsourced services, including possible breaches by third party vendors of
their agreements with us;
the cost, timing, structuring or results of our business process outsourcing, including, without limitation, any current or future outsourcing (or
insourcing) or restructuring of all or portions of our information technology, call center, certain human resource functions and other corporate
functions, and risks associated with such outsourcing (or insourcing) or restructuring or transitioning from outsourcing providers to insourcing;
successful implementation of upgrades to our information technology systems that are being undertaken, among other reasons, to enhance
customer service; protect against theft of customer and corporate sensitive information; compliance with industry standards; and minimize
disruptions in the Company's operations; and
other factors described from time to time in documents that we file with the SEC.
You should read this report completely and with the understanding that actual future results may be materially different from expectations. All forward-
looking statements made in this report are qualified by these cautionary statements. These forward-looking statements are made only as of the date of this
report, and we do not undertake any obligation, other than as may be required by law, to update or revise any forward-looking or cautionary statements to
reflect changes in assumptions, the occurrence of events, unanticipated or otherwise, changes in future operating results over time or otherwise.
Comparisons of results between current and prior periods are not intended to express any future trends, or indications of future performance, unless
expressed as such, and should only be viewed as historical data.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
The economy and its impact on discretionary consumer spending, labor wages, fuel prices, fertilizer and other material costs, home re-sales,
unemployment rates, insurance costs and medical costs could have a material adverse impact on future results of operations.
The Company does not hold or issue derivative financial instruments for trading or speculative purposes. The Company has entered into specific
financial arrangements, primarily interest rate swaps and fuel hedges, 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 effect of derivative financial instrument transactions could have a
material impact on the Company's financial statements.
The Company has entered into various interest rate swap agreements. Under the terms of these agreements, the Company pays a fixed rate of interest on
the stated notional amount and the Company receives a floating rate of interest (based on one month or three month LIBOR) on the stated notional amount.
Therefore, during the term of the swap agreements, the effective interest rate on the portion of the term loans under the Term Facilities equal to the stated
notional amount is fixed at the stated rate in the interest rate swap agreements plus the incremental borrowing margin
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