American Home Shield 2015 Annual Report Download - page 56

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Selling and Administrative Expenses
For the years ended December 31, 2015, 2014 and 2013, we reported selling and administrative expenses of $666 million,
$669 million and $691 million, respectively, which comprised general and administrative expenses of $255 million, $271 million and
$314 million, respectively, and selling and marketing expenses of $411 million, $398 million and $377 million, respectively. The
following table provides a summary of changes in selling and administrative expenses for each of our reportable segments and
Corporate:
American Franchise
Home Services
(In millions) Terminix Shield Group Corporate Total
Year Ended December 31, 2013 $ 331 $ 240 $ 58 $ 62 $ 691
HSA selling and administrative expenses — 18 — — 18
Sales and marketing costs 5 10 — — 15
Legal and tax-related reserves — 4 — — 4
Cost reduction initiatives (3) (7) — (36) (46)
Technology costs — (9) — — (9)
Key executive transition charges (3) (1) — (2) (6)
Management and consulting fees — — — (4) (4)
Stock-based compensation expense — — — 3 3
Other (1) 2 1 — 3
Year Ended December 31, 2014 $ 329 $ 257 $ 59 $ 23 $ 669
Sales and marketin
g
costs 11
(
2
)
(
3
)
—
6
Customer service costs — 5 — — 5
HSA selling and administrative expenses — 4 — — 4
Technology costs — (2) — — (2)
Sale of Merry Maids branches — — (2) — (2)
Incentive compensation (4) (4) — — (8)
Cost reduction initiatives — (1) (3) — (4)
Management and consulting fees — — — (4) (4)
Stock-based compensation expense — — — 3 3
Secondary offering expenses — — — 3 3
Other (1) (1) — (1) (3)
Year Ended December 31, 2015 $ 335 $ 256 $ 51 $ 24 $ 666
Year Ended December 31, 2015 Compared to Year Ended December 31, 2014
The increase in sales costs at Terminix was primarily driven by investments to grow and train our sales force and higher
commissions attributable to the growth in new products and pest control revenue.
The increase in customer service costs at American Home Shield was due to higher labor costs resulting from customer
growth. Additionally, we incurred incremental selling and administrative expenses at American Home Shield as a result of the HSA
acquisition on February, 28, 2014. The decrease in technology costs at American Home Shield was driven by our decision in the first
quarter of 2014 to abandon efforts to deploy a new operating system.
We realized a reduction in selling and administrative expenses of $2 million in the Franchises Services Group as a result of
the branch conversions.
We expect information technology costs to increase in 2016 due to an acceleration in investments to transform our
customers’ experiences through new technology and a reduction in fees received from New TruGreen under the transition services
agreement.
Year Ended December 31, 2014 Compared to Year Ended December 31, 2013
We incurred incremental selling and administrative expenses at American Home Shield as a result of the HSA acquisition on
February 28, 2014. The increase in marketing costs at American Home Shield was driven by incremental investments in our direct-to-
consumer channel. The increase in legal expense at American Home Shield was driven by increased provisions for certain legal
matters. The decrease in technology costs at American Home Shield was driven by our decision in the first quarter of 2014 to abandon
our efforts to deploy a new operating system. Additionally, $1 million and $3 million reductions in tax-related reserves were recorded
in 2014 and 2013, respectively.
The cost reduction initiatives at Corporate were primarily driven by the transition of certain costs to New TruGreen.
54 2015 Annual Report