UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM 10-K
X Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 2003
OR
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from __________ to __________.
Commission File Number 1-14762
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THE SERVICEMASTER COMPANY
(Exact name of registrant as specified in its charter)
Delaware 36-3858106
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3250 Lacey Road, Suite 600, Downers Grove, Illinois, 60515-1700
(Address of Principal Executive Offices, Zip Code)
(630) 663-2000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- ----------------------
Common Stock New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
-----------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in the definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
----
Indicate by check whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes X No
--- ---
The aggregate market value of shares of common stock held by non-affiliates
of the registrant as of June 30, 2003 was $3,118,875,708.
The number of shares of the registrant's common stock outstanding as of
March 5, 2004 was 293,981,651.
DOCUMENTS INCORPORATED BY REFERENCE
Certain parts of the registrant's Annual Report to Shareholders for the
year ended December 31, 2003 are incorporated into Part I and Part II of this
Form 10-K.
Certain parts of the registrant's Proxy Statement for the 2004 Annual
Meeting of Shareholders are incorporated into Part III of this Form 10-K.
TABLE OF CONTENTS
PART I
Item 1. Business.............................................................................. 4
Item 2. Properties............................................................................ 10
Item 3. Legal Proceedings..................................................................... 11
Item 4. Submission of Matters to a Vote of Security Holders................................... 11
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters................. 12
Item 6. Selected Financial Data............................................................... 12
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 12
Item 7A. Quantitative and Qualitative Disclosures About Market Risk........................... 12
Item 8. Financial Statements and Supplementary Data........................................... 12
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 12
Item 9A. Controls and Procedures.............................................................. 13
PART III
Item 10. Directors and Executive Officers of the Registrant.................................... 14
Item 11. Executive Compensation................................................................ 16
Item 12. Security Ownership of Certain Beneficial Owners and Management........................ 16
Item 13. Certain Relationships and Related Transactions........................................ 16
Item 14. Principal Accounting Fees and Services................................................ 16
PART IV
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K...................... 17
Signatures...................................................................................... 21
Exhibit Index................................................................................... 23
FORWARD-LOOKING STATEMENTS
This Form 10-K contains or incorporates by reference statements concerning
future results and other matters that may be deemed to be "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. The ServiceMaster Company ("ServiceMaster") intends that these
forward-looking statements, which look forward in time and include everything
other than historical information, be subject to the safe harbors created by
that legislation. ServiceMaster notes that these forward-looking statements
involve risks and uncertainties that could affect its results of operations,
financial condition or cash flows. Factors that could cause actual results to
differ materially from those expressed or implied in a forward-looking statement
include the following, among others:
o weather conditions that affect the demand for ServiceMaster's services;
o competition in the markets served by ServiceMaster;
o labor shortages or increases in wage rates;
o unexpected increases in operating costs, such as higher insurance, self-insurance and healthcare costs;
o higher fuel prices;
o increased governmental regulation including telemarketing;
o general economic conditions in the United States, especially as they may affect home sales or consumer
spending levels;
o time and expenses associated with integrating and winding down businesses; and
o other factors described from time to time in documents filed by ServiceMaster with the Securities and
Exchange Commission.
PART I
ITEM 1. BUSINESS
ServiceMaster is a national service company serving both residential and
commercial customers. ServiceMaster's services include lawn care and landscape
maintenance; termite and pest control; home warranty and home inspection
services; plumbing, drain cleaning, heating, ventilation, air conditioning and
electrical services; and cleaning, disaster restoration and furniture repair.
These services are provided through a network of over 5,400 company-owned and
franchised locations operating under the following leading brands: TruGreen
ChemLawn, TruGreen LandCare, Terminix, American Home Shield, AmeriSpec, ARS
Service Express, Rescue Rooter, American Mechanical Services, Merry Maids,
ServiceMaster Clean and Furniture Medic. Incorporated in Delaware in 1991,
ServiceMaster is the successor to various entities dating back to 1947.
ServiceMaster is organized into five principal operating segments:
TruGreen; Terminix; American Home Shield; American Residential Services and
American Mechanical Services; and Other Operations. All ServiceMaster
subsidiaries are wholly owned, except for The Terminix International Company
L.P., in which Allied Bruce-Terminix Companies, Inc. is a Class B limited
partner. The financial information for each operating segment for 2001, 2002 and
2003 contained in the Notes to the Consolidated Financial Statements included in
ServiceMaster's Annual Report to Shareholders for the year ended December 31,
2003 ("Annual Report to Shareholders for 2003") is incorporated by reference in
this Form 10-K.
SERVICES
TruGreen Segment
The TruGreen segment provides lawn care services primarily under the
TruGreen ChemLawn brand name and landscape maintenance services primarily under
the TruGreen LandCare brand name, in each case, to residential and commercial
customers. Revenues derived from the TruGreen segment constituted 38%, 37% and
37% in 2003, 2002 and 2001, respectively, of the revenue from continuing
operations of the consolidated ServiceMaster enterprise. The TruGreen ChemLawn
and TruGreen LandCare businesses are seasonal in nature. Weather conditions,
such as a
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drought, affect the demand for lawn care and landscape maintenance
services and may result in a decrease in revenues or an increase in costs.
TruGreen ChemLawn. TruGreen ChemLawn is a leading provider of lawn care
services in the United States with approximately 3.5 million residential and
commercial customers. As of December 31, 2003, TruGreen ChemLawn provided these
services in 46 states and the District of Columbia through 205 company-owned
locations and 52 franchised locations. TruGreen ChemLawn also provides lawn care
services through a subsidiary in Canada and has entered into licensing
arrangements to provide these services in 10 other countries, primarily in the
Middle East.
TruGreen LandCare. TruGreen LandCare is a leading provider of landscape
maintenance services in the United States with approximately 13,000 residential
and commercial customers. As of December 31, 2003, TruGreen LandCare provided
these services in 39 states and the District of Columbia through 102
company-owned locations. TruGreen LandCare has no international operations.
Terminix Segment
The Terminix segment provides termite and pest control services primarily
under the Terminix brand name to residential and commercial customers. Revenues
derived from the Terminix segment constituted 26%, 26% and 24% in 2003, 2002 and
2001, respectively, of the revenue from continuing operations of the
consolidated ServiceMaster enterprise. The Terminix business is seasonal in
nature. The termite swarm season, which generally occurs in early spring but
varies by region depending on climate, has the highest demand for termite
control services and therefore the highest level of revenues. Similarly,
increased pest activity in the warmer months has the highest demand for pest
control services and therefore the highest level of revenues.
Terminix is a leading provider of termite and pest control services in the
United States with over 2.9 million residential and commercial customers. As of
December 31, 2003, Terminix provided these services in 45 states and the
District of Columbia through 332 company-owned locations and 138 franchised
locations. Terminix also provides termite and pest control services through a
subsidiary in Mexico and has entered into licensing arrangements to provide
these services in 27 other countries, primarily in the Caribbean and the Middle
East.
American Home Shield Segment
The American Home Shield segment provides home warranty contracts for
systems and appliances primarily under the American Home Shield brand name and
home inspection services primarily under the AmeriSpec brand name, in each case,
to residential customers. Revenues derived from the American Home Shield segment
constituted 13%, 12% and 11% in 2003, 2002 and 2001, respectively, of the
revenue from continuing operations of the consolidated ServiceMaster enterprise.
The American Home Shield and AmeriSpec businesses are seasonal in nature. Sales
volume in the American Home Shield segment depends, in part, on the number of
home resale closings which historically has been highest in the spring and
summer months. American Home Shield's costs related to service call volume is
highest in the summer months, especially during periods of unseasonably warm
temperatures.
American Home Shield. American Home Shield is a leading provider of home
warranty contracts for systems and appliances in the United States with over 1.1
million residential customers. It provides residential customers with contracts
to repair or replace electrical, plumbing, central heating and central air
conditioning systems, hot water heaters and appliances that breakdown due to
normal wear and tear and administers those contracts through independent repair
contractors. As of December 31, 2003, American Home Shield issued and
administered home warranty contracts in 49 states and the District of Columbia.
American Home Shield has entered into a licensing arrangement to provide these
services in Saudi Arabia.
AmeriSpec. AmeriSpec is a leading provider of home inspection services in
the United States with approximately 130,000 residential customers. As of
December 31, 2003, AmeriSpec provided these services in 46 states and the
District of Columbia through two company-owned locations and 228 franchised
locations. AmeriSpec has no international operations.
5
American Residential Services and American Mechanical Services Segment
The American Residential Services and American Mechanical Services segment
provides plumbing, drain cleaning, heating, ventilation, air conditioning and
electrical services primarily under the ARS Service Express, American Mechanical
Services and Rescue Rooter brand names to residential and commercial customers.
Revenues derived from the American Residential Services and American Mechanical
Services segment constituted 19%, 21% and 24% in 2003, 2002 and 2001,
respectively, of the revenue from continuing operations of the consolidated
ServiceMaster enterprise. The American Residential Services and American
Mechanical Services businesses are seasonal in nature, with the greatest
activity occurring in May through August during the peak air conditioning
season.
American Residential Services. American Residential Services, which
includes the businesses of ARS Service Express and Rescue Rooter, is a leading
provider of plumbing, drain cleaning, heating, ventilation, air conditioning and
electrical services in the United States with approximately 1.4 million
residential customers. As of December 31, 2003, American Residential Services
provided these services in 24 states and the District of Columbia through 65
company-owned locations. American Residential Services has entered into a
licensing arrangement to provide plumbing and drain cleaning services under the
Rescue Rooter brand name in Saudi Arabia.
American Mechanical Services. American Mechanical Services, a subsidiary of
American Residential Services, is a leading provider of heating, ventilation,
air conditioning and electrical services in the United States with approximately
4,000 commercial customers. As of December 31, 2003, American Mechanical
Services provided these services in seven states and the District of Columbia
through 17 company-owned locations. American Mechanical Services has no
international operations.
Other Operations Segment
The Other Operations segment provides residential and commercial disaster
restoration and cleaning services primarily under the ServiceMaster and
ServiceMaster Clean brand names, domestic house cleaning services primarily
under the Merry Maids brand name and on-site furniture repair and restoration
services primarily under the Furniture Medic brand name. The Other Operations
segment also includes ServiceMaster's international operations and its
headquarters functions. Revenues derived from the Other Operations segment
constituted 4%, 4% and 5% in 2003, 2002 and 2001, respectively, of the revenue
from continuing operations of the consolidated ServiceMaster enterprise.
ServiceMaster Clean. ServiceMaster Clean is a leading franchisor in the
residential and commercial cleaning field in the United States with over 1
million customers. As of December 31, 2003, ServiceMaster Clean provided these
services in all 50 states and the District of Columbia through 3,040 franchised
locations. ServiceMaster Clean also provides disaster restoration and cleaning
services through subsidiaries in Ireland, the United Kingdom and Spain and has
entered into licensing arrangements to provide these services in 17 other
countries, primarily in Asia and the Middle East.
Merry Maids. Merry Maids is a leading provider of domestic house cleaning
services in the United States with approximately 300,000 customers. As of
December 31, 2003, these services were provided in 48 states and the District of
Columbia through 61 company-owned locations and 760 franchised locations. Merry
Maids also provides domestic house cleaning services through subsidiaries in
Denmark, Ireland and the United Kingdom and has entered into licensing
arrangements to provide these services in 10 other countries, primarily in Asia.
Furniture Medic. Furniture Medic is a leading provider of on-site furniture
repair and restoration services in the United States with approximately 130,000
residential customers. As of December 31, 2003, Furniture Medic provided these
services in 47 states and the District of Columbia through 425 franchised
locations. Furniture Medic also provides on-site furniture repair and
restoration services through a subsidiary in the United Kingdom and has entered
into licensing arrangements to provide these services in Canada, France and
Saudi Arabia.
6
MARKETING AND DISTRIBUTION
ServiceMaster markets its services primarily through yellow pages
advertisements, telemarketing, television and radio advertising, print
advertisements, direct mail and door-to-door solicitation. Additionally,
American Home Shield markets its home service contracts through participating
real estate brokerage offices in conjunction with the resale of single-family
residences and through financial institutions and insurance agencies.
HEADQUARTER FUNCTIONS
The Business Support Center coordinates administration of payroll,
benefits, risk management, travel and certain procurement services for
ServiceMaster's internal operations. Various administrative support departments
also provide personnel, communications, marketing, government and public
relations, administrative, accounting, financial, tax, human resources,
information technology and legal services. The Business Support Center is
headquartered in Downers Grove, Illinois, and has additional personnel located
in Memphis, Tennessee.
PATENTS, TRADEMARKS AND LICENSES
ServiceMaster holds various service marks, trademarks and trade names that
it deems particularly important to the advertising and franchising activities
conducted by each of its operating segments. These marks are registered in the
United States and over 88 other countries and are renewed at each registration
expiration date.
FRANCHISES
Franchises are important to TruGreen ChemLawn, Terminix, ServiceMaster
Clean, Merry Maids, AmeriSpec and Furniture Medic businesses. Total franchise
fees (initial and recurring) represented 2.6% of consolidated revenue in both
2003 and 2002, respectively, and 2.5% of consolidated revenue in 2001. Related
franchise operating expenses were 1.6%, 1.7% and 1.7% of consolidated operating
expenses in 2003, 2002 and 2001, respectively. Total franchise fee income
comprised 13%, 11% and 10% of consolidated operating income before
impairment charges in 2003, 2002 and 2001, respectively. Franchise agreements
made in the course of these businesses are generally for a term of five years.
ServiceMaster renews the majority of its franchise agreements prior to their
expiration.
SALE OF TREES, INC.
In September 2003, ServiceMaster sold the assets and related operational
obligations of Trees, Inc., the utility line clearing business of TruGreen
LandCare, to an independent subsidiary of Asplundh Subsidiary Holdings, Inc.,
for approximately $20 million in cash.
COMPETITION
The following information is based on estimates, which cannot be verified,
made by ServiceMaster's management. ServiceMaster competes with many other
companies in the sale of its services, franchises and products. The principal
methods of competition in ServiceMaster's businesses include quality of service,
name recognition, pricing, assurance of customer satisfaction and reputation.
Lawn Care Services. Competition in the market for lawn care services is
strong, coming mainly from local, independently owned firms and from homeowners
who care for their own lawns.
Landscape Maintenance Services. Competition in the market for landscape
maintenance services is strong, coming mainly from small, owner-operated
companies operating in a limited geographic market and, to a lesser degree, from
a few large companies operating in multiple markets, and from property owners
who perform their own landscaping services.
7
Termite and Pest Control Services. Competition in the market for termite
and pest control services is strong, coming mainly from thousands of regional
and local, independently owned firms, from homeowners who treat their own
termite and pest control problems and from one other large company which
operates on a national basis.
Home Warranty Contracts for Systems and Appliances. Competition in the
market for home warranty contracts for systems and appliances is strong, coming
mainly from regional providers of home warranties. Several competitors are
initiating expansion efforts into additional states. American Home Shield
competes with these companies for access to real estate brokers, financial
institutions and insurance agents that distribute its home warranty contracts.
Home Inspection Services. Competition in the market for home inspection
services is strong, coming mainly from regional and local, independently owned
firms.
Electrical, Heating, Ventilation and Air Conditioning Services. Competition
in the market for electrical, heating, ventilation and air conditioning services
is strong, coming mainly from local, independently owned firms throughout the
United States and a few national companies.
Plumbing and Drain Cleaning Services. Competition in the market for
plumbing and drain cleaning services is strong, coming mainly from local,
independently owned firms throughout the United States and a few national
companies.
Disaster Restoration and Cleaning Services. Competition in the market for
disaster restoration and cleaning services is strong, coming mainly from local,
independently owned firms and a few national companies.
House Cleaning Services. Competition in the market for house cleaning
services is strong, coming mainly from local, independently owned firms and a
few national companies.
Furniture Repair Services. Competition in the market for furniture repair
services is strong, coming mainly from local, independent contractors.
MAJOR CUSTOMERS
ServiceMaster has no single customer that accounts for more than 10% of its
operating revenue. Additionally, no operating segment has a single customer that
accounts for more than 10% of its operating revenue. No part of ServiceMaster's
business is dependent on a single customer or a few customers, the loss of which
would have a material adverse effect on ServiceMaster's financial condition or
results of operations.
REGULATORY COMPLIANCE
Government Regulations. ServiceMaster's operating segments are subject to
various federal, state and local laws and regulations, compliance with which
increases ServiceMaster's operating costs, limits or restricts the services
provided by ServiceMaster's operating segments or the methods by which
ServiceMaster's operating segments sell those services or conduct their
respective businesses, or subjects ServiceMaster and its operating segments to
the possibility of regulatory actions or proceedings.
These federal and state laws include laws relating to consumer protection,
wage and hour regulations, permit and license requirements, workers' safety (the
Occupational Safety and Health Act), environmental regulations and employee
benefits (the Consolidated Omnibus Budget Reconciliation Act of 1985 and the
Employee Retirement Income Security Act of 1974). The TruGreen, Terminix and
American Residential Services and American Mechanical Services segments must
also meet the Department of Transportation and Federal Motor
8
Carrier Safety Administration requirements with respect to its fleet of
vehicles. American Home Shield is regulated by the Department of Insurance
in certain states and the Real Estate Commission in Texas.
Consumer Protection and Telemarketing Matters. ServiceMaster is subject to
numerous federal and state laws and regulations designed to protect consumers,
including laws governing consumer privacy and fraud, the collection and use of
consumer data, telemarketing and other forms of solicitation. Noncompliance with
these laws and regulations can subject ServiceMaster to fines or various forms
of civil or criminal prosecution, any of which could have an adverse effect on
its financial condition and results of operations.
The telemarketing rules adopted by the Federal Communications Commission
pursuant to the Federal Telephone Consumer Protection Act and the Federal
Telemarketing Sales Rule issued by the Federal Trade Commission (both of which
were amended in 2003 to establish a National Do Not Call Registry) govern
ServiceMaster's telephone sales practices. In addition, many states have adopted
statutes and regulations targeted at direct telephone sales activities. The
implementation of do-not-call lists requires TruGreen ChemLawn, and, to a lesser
extent, ServiceMaster's other operating segments, to seek additional marketing
methods and channels.
Franchise Matters. TruGreen ChemLawn, Terminix, ServiceMaster Clean, Merry
Maids, AmeriSpec, and Furniture Medic are subject to various federal and state
laws and regulations governing franchise sales and marketing and franchise trade
practices generally, including applicable rules and regulations of the Federal
Trade Commission. These laws and regulations generally require disclosure of
business information in connection with the sale of franchises. Certain state
regulations also affect the ability of the franchisor to revoke or refuse to
renew a franchise. ServiceMaster deals with franchisees in good faith and seeks
to comply with regulatory requirements. From time to time, ServiceMaster and one
or more franchisees may become involved in a dispute regarding the franchise
relationship, including, among other things, payment of royalties, location of
branches, advertising, purchase of products by franchisees, compliance with
ServiceMaster standards and franchise renewal criteria. There can be no
assurance that compliance problems will not be encountered from time to time, or
that material disputes with one or more franchisees will not arise.
Environmental Matters. ServiceMaster's businesses are subject to various
federal, state and local laws and regulations regarding environmental matters.
Terminix, TruGreen ChemLawn and TruGreen LandCare are regulated under many
federal and state environmental laws, including the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Federal Environmental Pesticide Control Act of
1972 and the Federal Insecticide, Fungicide and Rodenticide Act of 1947, the
Resource Conservation and Recovery Act of 1976, the Emergency Planning and
Community Right-to-Know Act of 1986, the Oil Pollution Act of 1990 and the Clean
Water Act of 1977. American Residential Services and American Mechanical
Services are also regulated under many federal and state environmental laws,
including the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, the Superfund Amendments and Reauthorization Act of 1986, the
Resource Conservation and Recovery Act of 1976, the Emergency Planning and
Community Right-to-Know Act of 1986 and the Clean Water Act of 1977.
ServiceMaster cannot predict the effect on its operations of possible future
environmental legislation or regulations. During 2003, there were no material
capital expenditures for environmental control facilities, and no such material
expenditures are anticipated in 2004.
9
EMPLOYEES
On December 31, 2003, ServiceMaster had a total of approximately 40,000
employees.
AVAILABLE INFORMATION
ServiceMaster maintains a website at http://www.svm.com that includes a
hyperlink to a website maintained by a third-party where ServiceMaster's Annual
Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K
and all amendments to those reports are available without charge as soon as
reasonably practicable following the time that they are filed with or furnished
to the Securities and Exchange Commission. A copy of each of ServiceMaster's
Corporate Governance Principles, Audit and Finance Committee Charter,
Compensation and Leadership Development Committee Charter, Governance and
Nominating Committee Charter, Financial Code of Ethics and Code of Conduct is
filed as an exhibit to this Form 10-K, is posted on ServiceMaster's website at
http://www.svm.com under "Corporate Governance" and is available in print to any
shareholder who requests it by writing to the Corporate Secretary at the
following address: The ServiceMaster Company, 3250 Lacey Road, Suite 600,
Downers Grove, Illinois 60515.
ITEM 2. PROPERTIES
BUSINESS SUPPORT CENTER
ServiceMaster leases approximately 66,000 square feet of office space to
accommodate personnel from the Business Support Center in Downers Grove,
Illinois. The lease expires at the end of 2012, but ServiceMaster has an option
to terminate the lease as of December 31, 2007 by giving written notice to the
lessor as of June 30, 2006. Additionally, ServiceMaster leases warehouse space
in Naperville, Illinois. ServiceMaster also leases additional office space in
Memphis, Tennessee as described below to accommodate Memphis-based personnel
from the Business Support Center. ServiceMaster believes that these office
facilities and warehouse are suitable and adequate to support the Business
Support Center's current needs in the Chicagoland and Memphis areas.
OPERATING SEGMENTS
The headquarters for TruGreen ChemLawn, TruGreen LandCare, Terminix,
American Residential Services and Rescue Rooter are located in leased premises
at 860 Ridge Lake Boulevard, Memphis, Tennessee. The headquarters for
ServiceMaster Clean, Merry Maids, Furniture Medic, American Home Shield and
AmeriSpec are located in leased premises at 889 Ridge Lake Boulevard, Memphis,
Tennessee. The headquarters for American Mechanical Services are located in
leased premises at 8039 Laurel Lake Court, Laurel, Maryland. In addition,
ServiceMaster leases space for a call center located at 6399 ShelbyView Drive,
Memphis, Tennessee, offices located at 850 and 855 Ridge Lake Boulevard,
Memphis, Tennessee, training facilities located at 1650 Shelby Oaks Drive North,
Memphis, Tennessee and 3839 Forest Hill Irene Road, Memphis, Tennessee and a
warehouse located at 1575 Two Place, Memphis, Tennessee. ServiceMaster believes
that these headquarters, call center facility, offices, training facilities and
warehouse are suitable and adequate to support the current needs of its
operating segments in the Memphis and Laurel areas.
ServiceMaster's operating companies own and lease a variety of facilities
throughout the United States for branch operations and for office, storage, call
center and data processing space. The following chart identifies for each
operating company the number of owned facilities, the number of leased
facilities, and the number of states represented by those owned and leased
facilities. ServiceMaster believes that these facilities, when considered with
the headquarters, call center facility, offices, training facilities and
warehouses described above are suitable and adequate to support the current
needs of its business.
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Operating Owned Leased No. of
Company Facilities Facilities States
TruGreen ChemLawn 4 299 42
TruGreen LandCare 2 169 25
Terminix 17 401 42
American Residential Services 5 85 25
American Mechanical Services 1 16 7
American Home Shield 1 7 4
ServiceMaster Clean 0 9 7
Merry Maids 0 63 26
ITEM 3. LEGAL PROCEEDINGS
In the ordinary course of conducting its business activities, ServiceMaster
becomes involved in judicial, administrative and regulatory proceedings
involving both private parties and governmental authorities. As of March 12,
2004, these proceedings included general and commercial liability actions and a
small number of environmental proceedings. ServiceMaster does not expect any of
these proceedings to have a material adverse effect on its Consolidated
Financial Statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year covered by this Form 10-K, no
matters were submitted to a vote of security holders.
11
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
ServiceMaster's common stock is traded on the New York Stock Exchange under
the symbol "SVM." At March 12, 2004, ServiceMaster's common stock was held of
record by approximately 65,000 persons. ServiceMaster estimates that
approximately 44,000 persons held shares of its common stock in the names of
nominees.
The information contained in ServiceMaster's Annual Report to Shareholders
for 2003 under the headings "Consolidated Statements of Shareholders' Equity"
and "Quarterly Cash Dividends and Per Share Data" is incorporated by reference
in this Form 10-K.
ITEM 6. SELECTED FINANCIAL DATA
The information contained in ServiceMaster's Annual Report to Shareholders
for 2003 under the heading "Five Year Financial Summary" in the Financial
Statements section is incorporated by reference in this Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information contained in ServiceMaster's Annual Report to Shareholders
for 2003 under the heading "Management's Discussion and Analysis of Financial
Condition and Results of Operations" is incorporated by reference in this Form
10-K.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information contained in ServiceMaster's Annual Report to Shareholders
for 2003 under the heading "Quantitative and Qualitative Disclosures about
Market Risk" is incorporated by reference in this Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Statements of Financial Position as of December 31, 2003
and 2002, the Consolidated Statements of Operations, Consolidated Statements of
Cash Flows and Consolidated Statements of Shareholders' Equity for the years
ended December 31, 2003, 2002 and 2001 and the Notes to the Consolidated
Financial Statements contained in ServiceMaster's Annual Report to Shareholders
for 2003 are incorporated by reference in this Form 10-K. The report of Deloitte
& Touche LLP dated March 15, 2004 on the Consolidated Financial Statements
contained in ServiceMaster's Annual Report to Shareholders for 2003 are also
incorporated by reference in this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On May 20, 2002, ServiceMaster, with the approval of the Board of Directors
and the Audit and Finance Committee, dismissed Arthur Andersen LLP as its
independent auditors and engaged Deloitte & Touche LLP as its new independent
auditors. The appointment of Deloitte & Touche became effective on May 22, 2002.
During the two years ended December 31, 2001 and 2000, and the interim period
subsequent to December 31, 2001, and through May 20, 2002, there were no
disagreements between ServiceMaster and Arthur Andersen on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure, which, if not resolved to Arthur Andersen's satisfaction,
would have caused Arthur Andersen to make reference to the subject
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matter in connection with its reports on ServiceMaster's consolidated financial
statements for such periods. Arthur Andersen's report on ServiceMaster's
consolidated financial statements for the years ended December 31, 2001 and
2000 did not contain an adverse opinion or a disclaimer of opinion, nor was it
qualified or modified as to uncertainty, audit scope or accounting principles.
During the years ended December 31, 2001 and 2000, and the interim period from
January 1, 2002 through May 20, 2002, there were no reportable events as
described under Item 304(a)(1)(v) of Regulation S-K. During the years ended
December 31, 2001 and 2000, and through May 20, 2002, ServiceMaster did not
consult with Deloitte & Touche with respect to the application of accounting
principles to a specified transaction, either completed or proposed, the type
of audit opinion that might be rendered on ServiceMaster's consolidated
financial statements, or any matter that was the subject of a disagreement or a
reportable event, as described in Items 304(a)(2)(i)and (ii)of Regulation S-K.
ITEM 9A. CONTROLS AND PROCEDURES
ServiceMaster's Chairman and Chief Executive Officer, Jonathan P. Ward, and
ServiceMaster's President and Chief Financial Officer, Ernest J. Mrozek, have
evaluated ServiceMaster's disclosure controls and procedures as of the end of
the period covered by this Form 10-K.
ServiceMaster's disclosure controls and procedures include a roll-up of
financial and non-financial reporting that is consolidated in the principal
executive office of ServiceMaster in Downers Grove, Illinois. The reporting
process is designed to ensure that information required to be disclosed by
ServiceMaster in the reports that it files with or submits to the Securities and
Exchange Commission is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission's rules and
forms. Messrs. Ward and Mrozek have concluded that both the design and operation
of ServiceMaster's disclosure controls and procedures are effective.
There were no changes in ServiceMaster's internal control over financial
reporting that occurred during ServiceMaster's most recent fiscal quarter that
have materially affected, or are reasonably likely to materially affect,
ServiceMaster's internal control over financial reporting.
13
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
The information contained in ServiceMaster's Proxy Statement for the 2004
Annual Meeting of Shareholders under the heading "Item 1 - Election of
Directors" is incorporated by reference in this Form 10-K.
EXECUTIVE OFFICERS OF SERVICEMASTER
The following table shows (i) the names and ages (as of March 12, 2004) of
ServiceMaster's executive officers, (ii) all positions presently held by each
executive officer, and (iii) the year each person became an officer of
ServiceMaster. Each person has served as an officer continuously since the year
shown.
First Became
Name Age Present Positions an Officer
---- --- ----------------- -----------
Jonathan P. Ward 49 Chairman and Chief Executive Officer 2001
Ernest J. Mrozek 50 President and Chief Financial Officer 1987
Steven C. Preston 43 Executive Vice President 1997
Steven B. Bono 51 Senior Vice President, Corporate Communications 2001
Albert T. Cantu 42 President and Chief Operating Officer, Terminix 1991
Scott J. Cromie 47 President and Chief Operating Officer, American Home Shield 1990
Mitchell T. Engel 51 Chief Marketing Officer 2002
James A. Goetz 46 Senior Vice President and Chief Information Officer 2000
Jim L. Kaput 43 Senior Vice President and General Counsel 2000
Elizabeth L. Reeves 50 Senior Vice President for Human Resources 2002
David M. Slott 45 President and Chief Operating Officer, TruGreen ChemLawn 1992
Mr. Ward is also a director of ServiceMaster. For biographical information
with respect to Mr. Ward, see "Item 1 - Election of Directors" in
ServiceMaster's Proxy Statement for the 2004 Annual Meeting of Shareholders.
Ernest J. Mrozek, age 50, is President and Chief Financial Officer. He
served as President and Chief Operating Officer from April 2002 to January 2004.
He served as President of ServiceMaster Consumer and Commercial Services from
November 1998 to April 2002.
Steven C. Preston, age 43, is Executive Vice President. He served as
Executive Vice President and Chief Financial Officer from July 1998 to January
2004. He served as Senior Vice President and Chief Financial Officer from April
1997 through June 1998.
14
Steven B. Bono, age 51, has served as Senior Vice President, Corporate
Communications since July 2001. He was on sabbatical from May 2000 to July 2001.
Mr. Bono served as Vice President, Communications Strategy of Jack Morton
Worldwide in Chicago, Illinois from September 1997 to May 2000.
Albert T. Cantu, age 42, has served as President and Chief Operating
Officer, Terminix since January 1999. From October 1994 to December 1998, he was
Vice President of Operations, Terminix.
Scott J. Cromie, age 47, has served as President and Chief Operating
Officer, American Home Shield since October 1996.
Mitchell T. Engel, age 51, is Chief Marketing Officer. He served as
Principal of Engel Marketing Services from April 1998 to April 2002.
James A. Goetz, age 46, is Senior Vice President and Chief Information
Officer. He served as Chief Information Officer of The ServiceMaster Home
Service Center L.L.C. from September 2000 to January 2002. From January 1999 to
August 2000, he was Director of Internet Services at IBM Global Services. From
May 1996 to December 1998, he was Director of Internet Partnering at IBM Global
Network.
Jim L. Kaput, age 43, is Senior Vice President and General Counsel of
ServiceMaster. From June 1994 until he joined ServiceMaster in April 2000, Mr.
Kaput was a partner at the law firm of Sidley & Austin in Chicago, Illinois.
Elizabeth L. Reeves, age 50, is Senior Vice President for Human Resources.
She served as Executive Vice President of Global Human Resources for Bcom3 from
October 2000 to September 2002. From March 1997 to September 2000 she was Group
Vice President, Human Resources for CNA.
David M. Slott, age 45, is President and Chief Operating Officer, TruGreen
ChemLawn. He served as Chief Operating Officer of The TruGreen Companies from
January 2001 to October 2003. From January 1996 to January 2001, he served as
President and Chief Operating Officer, TruGreen ChemLawn.
FINANCIAL CODE OF ETHICS
ServiceMaster has a Financial Code of Ethics which applies to
ServiceMaster's Chief Executive Officer, Chief Financial Officer, Controller,
Treasurer, Business Unit Chief Financial Officers or persons performing similar
functions and other designated officers and employees. A copy of the Financial
Code of Ethics is filed as an exhibit to this Form 10-K and is posted on
ServiceMaster's website at http://www.svm.com under "Corporate Governance".
AUDIT AND FINANCE COMMITTEE FINANCIAL EXPERT
The information contained in ServiceMaster's Proxy Statement for the 2004
Annual Meeting of Shareholders under the heading "Board and Committees of the
Board" is incorporated by reference in this Form 10-K.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
The information contained in ServiceMaster's Proxy Statement for the 2004
Annual Meeting of Shareholders under the heading "Section 16(a) Beneficial
Ownership Reporting Compliance" is incorporated by reference in this Form 10-K.
15
ITEM 11. EXECUTIVE COMPENSATION
The information contained in ServiceMaster's Proxy Statement for the 2004
Annual Meeting of Shareholders under the headings "Compensation of Directors,"
"Executive Compensation" and "Agreements with Officers and Directors" is
incorporated by reference in this Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained in ServiceMaster's Proxy Statement for the 2004
Annual Meeting of Shareholders under the headings "Ownership of Our Common
Stock" and "Equity Compensation Plan Information" is incorporated by reference
in this Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained in ServiceMaster's Proxy Statement for the 2004
Annual Meeting of Shareholders under the heading "Certain Transactions and
Relationships" is incorporated by reference in this Form 10-K.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information contained in ServiceMaster's Proxy Statement for the 2004
Annual Meeting of Shareholders under the heading "Item 4 - Ratification of
Selection of Independent Auditors" is incorporated by reference in this Form
10-K.
16
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements, Schedules, and Exhibits.
1. Financial Statements
The documents shown below are contained in ServiceMaster's Annual Report
to Shareholders for 2003 and are incorporated by reference in Part II,
Item 8 of this Form 10-K:
Report of Independent Auditors
Consolidated Statements of Operations for the three years
ended December 31, 2003, 2002 and 2001
Consolidated Statements of Financial Position as of
December 31, 2003 and 2002
Consolidated Statements of Cash Flows for the three years
ended December 31, 2003, 2002 and 2001
Consolidated Statements of Shareholders' Equity for the three
years ended December 31, 2003, 2002 and 2001
Notes to the Consolidated Financial Statements
2. Financial Statements Schedules
Schedule IV-Amounts Receivable from Related Parties and Underwriters,
Promoters, and Employees other than Related Parties:
None
Included in Part IV of this Form 10-K:
Schedule II-Valuation and Qualifying Accounts
Independent Auditors' Report on Schedule
Exhibit 23-Independent Auditors' Consent
Other schedules are omitted because of the absence of conditions
under which they are required or because the required information is
given in the consolidated financial statements or notes thereto.
3. Exhibits
The exhibits filed with this report are listed on pages 23-27 (the
"Exhibits Index"). Entries marked by an asterisk next to the exhibit's number
identify management contracts or compensatory plans, contracts or arrangements
in which a director or any of ServiceMaster's executive officers to be
identified in the summary compensation table included in ServiceMaster's Proxy
Statement for the 2004 Annual Meeting of Shareholders participates or
compensatory plans, contracts or arrangements adopted without approval of
security holders pursuant to which ServiceMaster may award equity and in which
any ServiceMaster employee currently participates.
17
(b) Reports on Form 8-K.
ServiceMaster filed with or furnished to the Securities and Exchange
Commission the following reports on Form 8-K during the last quarter
of 2003:
A report on Form 8-K was furnished on November 5, 2003. The purpose of
the report was to provide under Item 12, the press release issued by
ServiceMaster on November 5, 2003 announcing the preliminary financial
results for the third quarter of 2003.
A report on Form 8-K was furnished on November 5, 2003. The purpose of
the report was to restate previously reported quarterly consolidated
statements of income and quarterly business segment disclosures to
reflect the reclassification to discontinued operations of
ServiceMaster's sold utility line clearing business that was sold
during the fourth quarter of 2003.
18
INDEPENDENT AUDITORS REPORT
To Shareholders of The ServiceMaster Company Downers Grove, IL
We have audited the financial statements of The ServiceMaster Company and
subsidiaries (the "Company") as of December 31, 2003 and 2002, and for each of
the three years in the period ended December 31, 2003, and have issued our
report thereon dated March 15, 2004 (which expresses an unqualified opinion and
includes an explanatory paragraph relating to the adoption of Statement of
Financial Accounting Standards ("SFAS") No. 145, Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13 and Technical Corrections
and the adoption of SFAS No. 142, Goodwill and Other Intangible Assets), such
financial statements and report are included in your 2003 Annual Report to
Shareholders and are incorporated herein by reference. Our audits also included
the financial statement schedule of the Company, listed in Item 15. This
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion based on our audits. In our opinion,
such financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
/s/ DELOITTE & TOUCHE LLP
Chicago, IL
March 15, 2004
19
SCHEDULE II
THE SERVICEMASTER COMPANY
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Additions
Balance at Charged to
Beginning of Costs and Balance at
Period Expenses Deductions (1) End of Period
----------- ----------- --------------- --------------
AS OF AND FOR THE YEAR ENDING DECEMBER 31, 2003
Continuing Operations -
Allowance for doubtful accounts
Accounts receivable $ 24,344 $ 35,166 $ 36,439 $ 23,071
Notes receivable 3,140 1,759 1,750 3,149
Reserves related to strategic actions in the fourth
quarter of 2001 (2) 15,494 (1,300) 3,408 10,786
Remaining liabilities from discontinued operations
LandCare Construction 13,974 - 6,822 7,152
LandCare utility line clearing business (3) 6,393 2,803 185 9,011
Certified Systems, Inc. 13,586 - 2,562 11,024
Management Services 1,569 - 1,286 283
International businesses 21,348 1,000 10,331 12,017
Other 10,436 - 1,147 9,289
AS OF AND FOR THE YEAR ENDING DECEMBER 31, 2002
Continuing Operations -
Allowance for doubtful accounts
Accounts receivable $ 26,151 $ 40,590 $ 42,397 $ 24,344
Notes receivable 2,084 1,056 - 3,140
Reserves related to strategic actions in the fourth
quarter of 2001 (2) 35,959 (5,600) 14,865 15,494
Remaining liabilities from discontinued operations
LandCare Construction 34,229 2,634 22,889 13,974
Certified Systems, Inc. 23,762 3,500 13,676 13,586
Management Services 7,400 (4,500) 1,331 1,569
International businesses (4) 19,604 21,900 20,156 21,348
Other 16,054 615 6,233 10,436
AS OF AND FOR THE YEAR ENDING DECEMBER 31, 2001
Continuing Operations -
Allowance for doubtful accounts
Accounts receivable $ 29,219 $ 32,491 $ 35,559 $ 26,151
Notes receivable 1,691 516 123 2,084
Reserves related to strategic actions in the fourth
quarter of 2001 (2) - 40,000 4,041 35,959
Remaining liabilities from discontinued operations
LandCare Construction 5,243 32,200 3,214 34,229
Certified Systems, Inc. 12,595 12,995 1,828 23,762
Management Services - 22,687 15,287 7,400
Other 754 15,300 - 16,054
(1) Deductions in the allowance for doubtful accounts and notes receivable
reflect write-offs of uncollectible accounts Deductions for the
remaining items reflect cash payments, except for the items noted in
(3) and (4).
(2) Includes accruals for residual value guarentees on leased properties,
severance for former executives and terminated employees, and
transaction and other costs.
(3) The Company sold the assets and related operational obligations of
Trees, Inc, the utility line clearing operations of TruGreen LandCare.
The Company retained certain liabilities and recorded accruals in
connection with the sold operations. The beginning balance represents
the liabilities of the discontinued operations that existed prior to
their disposition. Additions reflect costs recorded related to exiting
the operations.
(4) The liabilites of this business assumed by the buyer of the sold
operations totaled $19.6 million. The Company recorded accruals in
connection with the 2002 sold operations and a cash adjustment to the
purchase price of the 2001 disposition. The beginning balance
represents the liabilities of the discontinued operations that existed
prior to their disposition. Additions reflect costs recorded related
to exiting the operations.
20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
THE SERVICEMASTER COMPANY
Date: March 15, 2004 By /s/ JONATHAN P. WARD
-------------------------------
Jonathan P. Ward
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ JONATHAN P. WARD Chairman and Chief Executive March 15, 2004
---------------------- Officer and Director
Jonathan P. Ward
/s/ ERNEST J. MROZEK President and March 15, 2004
---------------------- Chief Financial Officer (Principal
Ernest J. Mrozek Financial Officer and Principal
Accounting Officer)
/s/ PAUL W. BEREZNY, JR. Director March 5, 2004
---------------------------
Paul W. Berezny, Jr.
__________________________ Director
John L. Carl
__________________________ Director
Brian Griffiths
/s/ SIDNEY E. HARRIS Director March 5, 2004
---------------------------
Sidney E. Harris
/s/ ROBERTO R. HERENCIA Director March 5, 2004
---------------------------
Roberto R. Herencia
__________________________ Director
Herbert P. Hess
21
/s/ JAMES D. McLENNAN Director March 5, 2004
----------------------
James D. McLennan
/s/ DALLEN W. PETERSON Director March 5, 2004
---------------------------
Dallen W. Peterson
/s/ BETTY JANE SCHEIHING Director March 5, 2004
------------------------
Betty Jane Scheihing
/s/ DAVID K. WESSNER Director March 5, 2004
---------------------------
David K. Wessner
22
Exhibits Index
Exhibit No. Description of Exhibit
-----------------------------------------------------------------------------
3(i) Amended and Restated Certificate of Incorporation of The ServiceMaster
Company, a Delaware corporation, as filed with the Secretary of State,
State of Delaware, on November 6, 1997 is incorporated by reference to
Exhibit 1 to the registrant's Current Report on Form 8-K, No. 2 dated
February 26, 1998 (File No. 1-14762) (the "1998 8-K, No. 2").
3(ii) Bylaws of The ServiceMaster Company, as amended through April 26, 2002,
are incorporated by reference to Exhibit 3(ii) to the registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2002
(File No. 1-14762) (the "2002 10-Q").
4.1 Shareholder Rights Agreement between The ServiceMaster Company and the
Harris Trust and Savings Bank, as adopted on December 12, 1997, is
incorporated by reference to Exhibit 3 to the 1998 8-K, No.2.
4.2 Certificate of Designation, Preferences and Rights of Junior
Participating Preferred Stock, Series A, is incorporated by reference
to Exhibit 4 to the 1998 8-K, No. 2.
4.3 Indenture dated as of August 15, 1997 between The ServiceMaster Company
and the Harris Trust and Savings Bank, as trustee, is incorporated by
reference to Exhibit 4.1 to the registrant's Registration Statement on
Form S-3 (File No. 333-32167) (the "1997 S-3").
4.4 First Supplemental Indenture dated as of August 15, 1997 between The
ServiceMaster Company and the Harris Trust and Savings Bank, as
trustee, is incorporated by reference to Exhibit 4.4 to the
registrant's Annual Report on Form 10-K for the year ended December 31,
1997 (File No. 1-14762) (the "1997 10-K").
4.5 Second Supplemental Indenture dated as of January 1, 1998 between The
ServiceMaster Company and the Harris Trust and Savings Bank, as
trustee, is incorporated by reference to Exhibit 2 to the registrant's
Current Report on Form 8-K, No. 1 dated February 26, 1998 (File No.
1-14762).
4.6 Third Supplemental Indenture dated as of March 2, 1998 between The
ServiceMaster Company and the Harris Trust and Savings Bank, as
trustee, is incorporated by reference to Exhibit 4.3 to the
registrant's Current Report on Form 8-K, No. 3 dated February 27, 1998
(File No. 1-14762) (the "1998 8-K, No. 3").
4.7 Fourth Supplemental Indenture dated as of August 10, 1999 between The
ServiceMaster Company and the Harris Trust and Savings Bank, as
trustee, is incorporated by reference to Exhibit 3 to the registrant's
Current Report on Form 8-K dated August 16, 1999 (File No. 1-14762)
(the "1999 8-K").
4.8 Indenture dated as of November 18, 1999 between The ServiceMaster
Company and the Harris Trust and Savings Bank, as trustee, is
incorporated by reference to Exhibit 4.16 to the registrant's
Registration Statement on Form S-3 (File No. 333-91381), filed on
November 19, 1999 (the "1999 S-3").
4.9 First Supplemental Indenture dated as of April 4, 2000 between The
ServiceMaster Company and Harris Trust and Savings Bank, as trustee, is
incorporated by reference to Exhibit 4.2 to the registrant's Quarterly
Report on Form 10-Q for the quarter ended March 31, 2000 (File No.
1-14762) (the "2000 10-Q").
4.10 Forms of 6.95% Note due August 14, 2007 and 7.45% Note due August 14,
2027 are incorporated by reference to Exhibit 4.2 to the 1997 S-3.
4.11 Form of 7.10% Note due March 1, 2018 is incorporated by reference to
Exhibit 4.1 the 1998 8-K, No. 3.
4.12 Form of 7.25% Note due March 1, 2038 is incorporated by reference to
Exhibit 4.2 to the 1998 8-K, No. 3.
4.13 Form of 7.875% Note due August 15, 2009 is incorporated by reference to
Exhibit 4 to the 1999 8-K.
23
Exhibits Index
Exhibit No. Description of Exhibit
-----------------------------------------------------------------------------
4.14 Form of 7.875% Note due August 15, 2009 is incorporated by reference to
Exhibit 5 to the 1999 8-K.
4.15 Form of 8.45% Note due April 15, 2005 is incorporated by reference to
Exhibit 4.1 to the 2000 10-Q.
4.16 $490,000,000 Credit Agreement dated as of December 12, 2001 among The
ServiceMaster Company, the Lenders, JPMorgan Chase Bank, Bank of
America, Bank One N.A., First Union National Bank and SunTrust Bank is
incorporated by reference to Exhibit 4.16 to the registrant's Annual
Report on Form 10-K for the year ended December 31, 2001 (File No.
1-14762) (the "2001 10-K").
10.1* Senior Executive Ownership Election Plan, as approved by the Board of
Directors on December 10, 1999, is incorporated by reference to Exhibit
10.5 to the Annual Report on Form 10-K for the year ended December 31,
1999 (File No. 1-14762).
10.2* 10-Plus Plan, as amended September 3, 1991, is incorporated by
reference to Exhibit 10.21 to the ServiceMaster Limited Partnership
Annual Report on Form 10-K for the year ended December 31, 1991 (File
No. 1-09378) (the "1991 10-K").
10.3* Form of Option Agreement for the 10-Plus Plan, as amended September 3,
1991, is incorporated by reference to Exhibit 10.22 to the 1991 10-K.
10.4* 1994 Non-Employee Directors Share Option Plan is incorporated by
reference to Exhibit 4.2 to the ServiceMaster Limited Partnership
Registration Statement on Form S-8 (File No. 33-55761), filed on
October 4, 1994 (the "1994 S-8").
10.5* Form of Option Agreement for the 1994 Non-Employee Director Share
Option Plan is incorporated by reference to Exhibit 4.3 to the 1994
S-8.
10.6* 1997 Share Option Plan is incorporated by reference to Exhibit 10.28 to
the ServiceMaster Limited Partnership Annual Report on Form 10-K for
the year ended December 31, 1996 (File No. 1-09378) (the "1996 10-K").
10.7* Form of Option Agreement for the 1997 Share Option Plan is incorporated
by reference to Exhibit 10.29 to the 1996 10-K.
10.8* 1998 Equity Incentive Plan is incorporated by reference to Exhibit
10.15 to the 1997 10-K.
10.9* Form of Option Agreement for the 1998 Equity Incentive Plan
(Non-Qualifying Stock Options) is incorporated by reference to Exhibit
10.20 to the 1997 10-K.
10.10* Form of Option Agreement for the 1998 Equity Incentive Plan (Incentive
Stock Options) is incorporated by reference to Exhibit 10.21 to the
1997 10-K.
10.11* 1998 Non-Employee Directors Discounted Stock Option Plan is
incorporated by reference to Exhibit 10.21 to the 1997 10-K.
10.12* 1998 Long-Term Performance Award Plan is incorporated by reference to
Exhibit 10.22 to the 1997 10-K.
10.13* 2000 Equity Incentive Plan is incorporated by reference to Exhibit 4.4
to the registrant's Registration Statement on Form S-8 (File No.
333-42680), filed on July 31, 2000 (the "2000 S-8").
24
Exhibits Index
Exhibit No. Description of Exhibit
-----------------------------------------------------------------------------
10.14* Form of Option Agreement for the 2000 Equity Incentive Plan is
incorporated by reference to Exhibit 10.17 to the 2001 10-K.
10.15* Form of Restricted Stock Award Agreement for the 2000 Equity Incentive
Plan is incorporated by reference to Exhibit 10.31 to the 2001 10-K.
10.16* WeServeHomes.com 2000 Stock Option/Stock Issuance Plan is incorporated
by reference to Exhibit 10.21 to the Annual Report on Form 10-K for the
year ended December 31, 2000 (File No. 1-14762) (the "2000 10-K").
10.17* Form of Stock Option Agreement for the WeServeHomes.com 2000 Stock
Option/Stock Issuance Plan is incorporated by reference to Exhibit
10.22 to the 2000 10-K.
10.18* Form of Stock Purchase Agreement for the WeServeHomes.com 2000 Stock
Option/Stock Issuance Plan is incorporated by reference to Exhibit
10.23 to the 2000 10-K.
10.19* 2001 Directors Stock Plan, as amended and restated effective January
24, 2003, is incorporated by reference to Exhibit 10.20 to the Annual
Report on Form 10-K for the year ended December 31, 2002 (the "2002
10-K").
10.20* Form of Option Agreement for the 2001 Directors Stock Plan is
incorporated by reference to Exhibit 4.4 to the registrant's
Registration Statement on Form S-8 (File No. 333-65520), filed on July
20, 2001.
10.21* Corporate Performance Plan, formerly known as the 2001 Long-Term
Performance Award Plan, as amended March 16, 2001, is incorporated by
reference to Exhibit 10.2 to the registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 2001 (File No. 1-14762).
10.22* Form of Change in Control Severance Agreement is incorporated by
reference to Exhibit 10.30 to the 2001 10-K.
10.23* ServiceMaster 2003 Equity Incentive Plan is incorporated by reference
to Exhibit 4.6 to the registrant's Registration Statement on Form S-8
(File No. 333-106356), filed on June 23, 2003.
10.24*+ Form of Stock Option Agreement for the ServiceMaster 2003 Equity
Incentive Plan.
10.25*+ Form of Restricted Stock Award Agreement for the ServiceMaster 2003
Equity Incentive Plan.
10.26*+ Form of Stock Appreciation Right Agreement for the ServiceMaster 2003
Equity Incentive Plan.
10.27* 2002 Directors Deferred Fees Plan, effective October 25, 2002, is
incorporated by reference to Exhibit 10.35 to the 2002 10-K.
10.28* ServiceMaster Employee Share Purchase Plan, as amended and restated
effective October 4, 2001, is incorporated by reference to Exhibit
10.37 to the 2001 10-K.
10.29* ServiceMaster Deferred Compensation Plan, as amended and restated
effective October 24, 2002, is incorporated by reference to Exhibit
10.29 to the 2002 10-K.
10.30* Employment Agreement dated as of January 9, 2001 between The
ServiceMaster Company and Jonathan P. Ward is incorporated by reference
to Exhibit 10.19 to the 2000 10-K.
25
Exhibits Index
Exhibit No. Description of Exhibit
-----------------------------------------------------------------------------
10.31* Stock Option Agreement dated as of January 9, 2001 between The
ServiceMaster Company and Jonathan P. Ward is incorporated by reference
to Exhibit 10.20 to the 2000 10-K.
10.32*+ Stock Option Agreement dated as of February 8, 2002 between The
ServiceMaster Company and Jonathan P. Ward.
10.33*+ Restricted Stock Unit Award Agreement dated as of December 18, 2003
between The ServiceMaster Company and Jonathan P. Ward.
10.34* Letter Agreement dated as of June 1, 2001 between The ServiceMaster
Company and Carlos Cantu is incorporated by reference to Exhibit 10.1
to the registrant's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2001 (File No. 1-14762).
10.35* Employment Agreement dated as of April 1, 2002 between The
ServiceMaster Company and Mitchell T. Engel is incorporated by
reference to Exhibit 10.25 to the 2002 10-K.
10.36*+ Letter Agreement dated as of January 1, 2004 between The ServiceMaster
Company and C. William Pollard.
10.37*+ Stock Option Agreement dated as of March 16, 2001 between The
ServiceMaster Company and C. William
Pollard.
10.38*+ Employment Agreement dated as of January 1, 2004 between The
ServiceMaster Company and Ernest J. Mrozek.
13+ Annual Report to Shareholders for the year ended December 31, 2003 (the
"2003 Annual Report"). The parts of the 2003 Annual Report which are
expressly incorporated into this report by reference shall be deemed
filed with this report. All other parts of the 2003 Annual Report are
furnished for the information of the Securities and Exchange Commission
and are not filed with this report.
14+ Financial Code of Ethics pursuant to Section 406 of the Sarbanes-Oxley
Act of 2002.
21+ Subsidiaries of ServiceMaster.
23+ Consent of Deloitte & Touche LLP.
31.1+ Certification of Chief Executive Officer pursuant to Rule 13a - 14
(a) or 15d - 14 (a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2+ Certification of Chief Financial Officer pursuant to Rule 13a - 14 (a)
or 15d - 14 (a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32.1+ Certification of Chief Executive Officer pursuant to Section 1350 of
Chapter 63 of Title 18 of the United States Code, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2+ Certification of Chief Financial Officer pursuant to Section 1350 of
Chapter 63 of Title 18 of the United States Code, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1+ Corporate Governance Principles dated as of January 30, 2004.
99.2+ Audit and Finance Committee Charter dated as of January 30, 2004.
26
99.3+ Compensation and Leadership Development Committee Charter dated as of
January 30, 2004.
99.4+ Governance and Nominating Committee Charter dated as of October 24,
2003.
----------------
* Indicates compensatory plan, contract, or arrangement.
+ Filed herewith.
27
EXHIBIT 21
SUBSIDIARIES OF THE SERVICEMASTER COMPANY
As of March 12, 2004, ServiceMaster had the following subsidiaries:
State or Country
of
Incorporation
Subsidiary or Organization
---------- -----------------
ServiceMaster Consumer Services Limited Partnership........................................................Delaware
ServiceMaster Consumer Services, Inc..................................................................... Delaware
TruGreen Limited Partnership...............................................................................Delaware
TruGreen, Inc............................................................................................ Delaware
Barefoot Grass Canada, Inc................................................................................ Delaware
TruGreen LandCare L.L.C. 1.................................................................................Delaware
TruGreen Companies L.L.C...................................................................................Delaware
The Terminix International Company Limited Partnership.....................................................Delaware
Terminix International, Inc.............................................................................. Delaware
ServiceMaster Residential/Commercial Services Limited Partnership..........................................Delaware
SM Clean L.L.C.............................................................................................Delaware
Merry Maids Limited Partnership............................................................................Delaware
MM Maids L.L.C.............................................................................................Delaware
American Home Shield Corporation 2.........................................................................Delaware
AmeriSpec, Inc........................................................................................... Delaware
Furniture Medic Limited Partnership........................................................................Delaware
FM Medic L.L.C.............................................................................................Delaware
American Residential Services Holding L.L.C. 3.............................................................Delaware
ServiceMaster Aviation L.L.C...............................................................................Illinois
The ServiceMaster Acceptance Company Limited Partnership...................................................Delaware
ServiceMaster Acceptance Corporation.......................................................................Delaware
ServiceMaster Holding Corporation..........................................................................Delaware
ServiceMaster BSC L.L.C....................................................................................Delaware
ServiceMaster Funding Company L.L.C........................................................................Delaware
ServiceMaster Management Corporation.......................................................................Delaware
Steward Insurance Company...................................................................................Vermont
--------
1 .......TruGreen LandCare L.L.C. has 12 subsidiaries.
2 .......American Home Shield Corporation has 14 subsidiaries, including
AmeriSpec, Inc.
3 .......American Residential Services Holding L.L.C. has 24 subsidiaries.
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EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
333-113322, 333-106365, 333-110672, 333-81670, 333-73764, 333-65520, 333-53142,
333-50886, 333-42680, 333-78239, 333-74781, 333-55761 on Form S-8, Registration
Statement No. 333-91381 on Form S-3, and Registration Statements No. 333-75069
on Form S-4 of The ServiceMaster Company and subsidiaries of our report dated
March 15, 2004 (which expresses an unqualified opinion and includes an
explanatory paragraph relating to the adoption of Statement of Financial
Accounting Standards ("SFAS") No. 145, Rescission of FASB Statements No. 4, 44,
and 64, Amendment of FASB Statement No. 13 and Technical Corrections and the
adoption of SFAS No. 142, Goodwill and Other Intangible Assets), appearing in
and incorporated by reference in this Annual Report on Form 10-K of The
ServiceMaster Company and subsidiaries for the year ended December 31, 2003.
/s/ DELOITTE & TOUCHE LLP
Chicago, IL
March 15, 2004
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