American Home Shield 2015 Annual Report Download - page 37

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could be material. Any future impairment charges that we are required to record could have a material adverse impact on our results of
operations.
We are subject to various restrictive covenants that could adversely impact our business, financial position, results of operations
and cash flows.
From time to time, we enter into noncompetition agreements or other restrictive covenants (e.g., exclusivity, take or pay and
non-solicitation), including in connection with business dispositions or strategic contracts, that restrict us from entering into lines of
business or operating in certain geographic areas into which we may desire to expand our business. We also are subject to various
non-solicitation and no-hire covenants that may restrict our ability to solicit potential customers or associates. If we do not comply
with such restrictive covenants, or if a dispute arises regarding the scope and interpretation thereof, litigation could ensue, which could
have an adverse impact on our business, financial position, results of operations and cash flows. Further, to the extent that such
restrictive covenants prevent us from taking advantage of business opportunities, our business, financial position, results of operations
and cash flows may be adversely impacted.
Our business process outsourcing initiatives have increased our reliance on third-party contractors and may expose our business
to harm upon the termination or disruption of our third-party contractor relationships.
Our strategy to increase profitability, in part, by reducing our costs of operations includes the implementation of certain
business process outsourcing initiatives. Any disruption, termination or substandard performance of these outsourced services,
including possible breaches by third-party vendors of their agreements with us, could adversely affect our brands, reputation, customer
relationships, financial position, results of operations and cash flows. Also, to the extent a third-party outsourcing provider
relationship is terminated, there is a risk that we may not be able to enter into a similar agreement with an alternate provider in a
timely manner or on terms that we consider favorable, and even if we find an alternate provider, or choose to insource such services,
there are significant risks associated with any transitioning activities. In addition, to the extent we decide to terminate outsourcing
services and insource such services, there is a risk that we may not have the capabilities to perform these services internally, resulting
in a disruption to our business, which could adversely impact our reputation, business, financial position, results of operations and
cash flows. We could incur costs, including personnel and equipment costs, to insource previously outsourced services like these, and
these costs could adversely affect our results of operations and cash flows.
In addition, when a third-party provider relationship is terminated, there is a risk of disputes or litigation and that we may not
be able to enter into a similar agreement with an alternate provider in a timely manner or on terms that we consider favorable, and
even if we find an alternate provider, there are significant risks associated with any transitioning activities.
Our future success depends on our ability to attract, retain and maintain positive relations with trained workers and third-party
contractors.
Our future success and financial performance depend substantially on our ability to attract, train and retain workers, attract
and retain third-party contractors and ensure third-party contractor compliance with our policies and standards. Our ability to conduct
our operations is in part impacted by our reliance on a network of third-party contractors. When a contractor relationship is terminated,
there is a risk that we may not be able to enter into a similar agreement with an alternate contractor in a timely manner or on terms that
we consider favorable. We could incur costs to transition to other contractors, and these costs could adversely affect our results of
operations and cash flows.
Our ability to conduct our operations is in part impacted by our ability to increase our labor force, including on a seasonal
basis, which may be adversely impacted by a number of factors. In the event of a labor shortage, we could experience difficulty in
delivering our services in a high-quality or timely manner and could be forced to increase wages in order to attract and retain
associates, which would result in higher operating costs and reduced profitability. New decisions and rules by the National Labor
Relations Board, including “expedited elections” and restrictions on appeals, could lead to increased organizing activities at our
subsidiaries or franchisees. If these labor organizing activities were successful, it could further increase labor costs, decrease operating
efficiency and productivity in the future, or otherwise disrupt or negatively impact our operations. In addition, potential competition
from key associates who leave ServiceMaster could impact our ability to maintain our market segment share in certain geographic
areas.
Risks Related to Our Substantial Indebtedness
We have substantial indebtedness and may incur substantial additional indebtedness, which could adversely affect our financial
health and our ability to obtain financing in the future, react to changes in our business and satisfy our obligations.
As of December 31, 2015, we had approximately $2.8 billion of total long-term consolidated indebtedness outstanding.
As of December 31, 2015, there was $133 million of letters of credit outstanding and $167 million of available borrowing
capacity under the Revolving Credit Facility. In addition, we are able to incur additional indebtedness in the future, subject to the
limitations contained in the agreements governing our indebtedness. Our substantial indebtedness could have important consequences
to you. Because of our substantial indebtedness:
our ability to engage in acquisitions without raising additional equity or obtaining additional debt financing is limited;
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