SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
__X__ Annual Report Pursuant to Section 15(d)
Of the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 2000
or
_____Transition Report Pursuant to Section 15(d)
Of the Securities Exchange Act of 1934
For the Transition Period from _____________ to _____________
Commission File Number 1-14762
SERVICEMASTER PROFIT SHARING AND RETIREMENT PLAN
Full Title of Plan
THE SERVICEMASTER COMPANY
One ServiceMaster Way
DOWNERS GROVE, ILLINOIS 60515
Name of Issuer of the
Securities Held Pursuant to the Plan
And the Address of the Principal Executive Office
1
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Committee and Plan administrators have duly caused this annual report to be
signed by the undersigned thereunto duly authorized.
SERVICEMASTER PROFIT SHARING AND RETIREMENT PLAN
By: ___________________________________________
DEBORAH A. O'CONNOR
SENIOR VICE PRESIDENT AND CONTROLLER
By: ____________________________________________
ERIC R. ZARNIKOW
SENIOR VICE PRESIDENT AND TREASURER
Date: June 25, 2001
2
SERVICEMASTER PROFIT SHARING AND RETIREMENT PLAN
Financial Statements and Schedules
As of December 31, 2000 and 1999
Together With Auditors' Report
Employer Identification Number 36-3858106
Plan Number 001
3
SERVICEMASTER PROFIT SHARING AND RETIREMENT PLAN
DECEMBER 31, 2000 AND 1999
(EMPLOYER IDENTIFICATION NUMBER 36-3858106, PLAN NUMBER 001)
TABLE OF CONTENTS
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Benefits as of December 31, 2000
and 1999 Exhibit I
Statement of Changes in Net Assets Available for Benefits for the Year
Ended December 31, 2000 Exhibit II
NOTES TO FINANCIAL STATEMENTS AND SCHEDULES
SCHEDULES:
Schedule of Assets Held for Investment Purposes at End of
Year--December 31, 2000 Schedule I
Schedule of Reportable Transactions for the Year Ended December 31, 2000
Schedule II
4
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Benefits Administration Committee of the
ServiceMaster Profit Sharing and Retirement Plan
We have audited the accompanying statements of net assets available for benefits
of the ServiceMaster Profit Sharing and Retirement Plan as of December 31, 2000
and 1999, and the related statement of changes in net assets available for
benefits for the year ended December 31, 2000. These financial statements are
the responsibility of the Plan's Benefits Administration Committee. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the
ServiceMaster Profit Sharing and Retirement Plan as of December 31, 2000 and
1999, and the changes in net assets available for benefits for the year ended
December 31, 2000, in conformity with accounting principles generally accepted
in the United States.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental Schedule of Assets Held
for Investment Purposes at End of Year and Schedule of Reportable Transactions
are presented for the purpose of additional analysis and are not a required part
of the basic financial statements, but are supplementary information required by
the Department of Labor's Rules and Regulations for Reporting and Disclosure
under the Employee Retirement Income Security Act of 1974. These supplemental
schedules are the responsibility of the Plan's Benefits Administration
Committee. The supplemental schedules have been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, are fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
Chicago, Illinois
June 25, 2001
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EXHIBIT I
SERVICEMASTER PROFIT SHARING AND RETIREMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 2000 AND 1999
(EMPLOYER IDENTIFICATION NUMBER 36-3858106, PLAN NUMBER 001)
2000 1999
ASSETS: ------------- ------------
Investments (Note 3) $358,759,484 $341,971,365
------------- ------------
Non-interest-bearing cash 49,311 32,675
------------- ------------
Receivables-
Employer contribution 11,164,390 10,689,819
Participant contributions - 568,587
-------------- ------------
Total receivables 11,164,390 11,258,406
-------------- ------------
NET ASSETS AVAILABLE FOR BENEFITS $369,973,185 $353,262,446
============== ============
The accompanying Notes to Financial Statements and Schedules
are an integral part of these statements.
6
EXHIBIT II
SERVICEMASTER PROFIT SHARING AND RETIREMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 2000
(EMPLOYER IDENTIFICATION NUMBER 36-3858106, PLAN NUMBER 001)
ADDITIONS:
Additions to net assets attributed to-
Investment income-
Net depreciation in fair value of investments $ (1,073,539)
Interest 757,346
Dividends 3,602,402
---------------
Total investment income 3,286,209
---------------
Contributions-
Participant 29,737,045
Employer 11,157,173
Rollover 2,738,859
---------------
Total contributions 43,633,077
---------------
Total additions 46,919,286
---------------
DEDUCTIONS:
Deductions from net assets attributed to-
Benefits paid to participants (38,322,943)
Other expenses (18,427)
---------------
Total deductions (38,341,370)
---------------
TRANSFERS TO THE PLAN (Note 1) 8,736,326
---------------
TRANSFER FROM THE PLAN (Note 1) (603,503)
---------------
Net increase 16,710,739
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 353,262,446
---------------
End of year $369,973,185
===============
The accompanying Notes to Financial Statements and Schedules
are an integral part of this statement.
7
SERVICEMASTER PROFIT SHARING AND RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS AND SCHEDULES
DECEMBER 31, 2000 AND 1999
1. DESCRIPTION OF PLAN
The ServiceMaster Profit Sharing and Retirement Plan (the "Plan") is a
defined contribution plan established by The ServiceMaster Company (the
"Company") and its affiliates and subsidiaries to whom the Plan has been
extended to provide eligible employees with a program to save for
retirement. The Plan was amended and restated effective as of July 1,
1999. It is subject to the provisions of the Employee Retirement Income
Security Act of 1974 ("ERISA"), as amended. The following description of
the Plan provides only general information. Participants should refer to
the Plan agreement for a more complete description of the Plan's
provisions.
2000 PLAN CHANGES
During 2000, the Benefits Administration Committee (the "Committee")
resolved to merge the following plans into the Plan effective between May
1, 2000, through November 1, 2000:
Hutchinson Technology Incorporated 401-K Plan $3,280,516
Southwest Lawn Maintenance, Inc. Profit Sharing Plan 10,947
Landscape Techniques, Inc. 401(k) Profit Sharing Plan 407,734
Servicescape Profit Sharing Plan 303,311
E/G Management, Inc. 401(k) Plan 172,641
Four Seasons, Inc. 401(k) Retirement Plan 1,029,877
Schumacher Landscaping, Inc. 401(k) Retirement Plan 379,985
Albuquerque Grounds Maintenance, Inc. 401(k) Profit Sharing Plan 127,886
Trees, Inc. 401(k) Retirement and Savings Plan 886,914
Greentree 401(k) Savings Plan 102,580
Corporate & Commercial Services, Inc. 401(k) Plan 39,753
Landscape Resources, Inc. 401(k) Profit Sharing Plan 522,112
Arteka Corporation Profit Sharing Plan and Trust 428,293
Pennink Arrimour, Inc. 401(k) Plan 1,043,777
-----------
Total transfers to the Plan $8,736,326
===========
In addition, Diversified Health Systems ("DHS"), a subsidiary of the
Company was sold. Accordingly, balances of participating DHS employees
were transferred from the Plan.
ELIGIBILITY
Full and part-time nonunion employees who have completed one year of
service and are at least 18 years of age are eligible to participate in
the Plan. Subsequent to December 31, 2000, the Plan was amended to reduce
the service period requirement from one year to 90 days. Leased employees
and employees who are or who become covered by a collective
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bargaining agreement, which do not allow for Plan participation, are not
eligible to participate in the Plan.
PARTICIPANT CONTRIBUTIONS
Participants may elect to contribute a minimum of 1% up to a maximum of
15% of pretax annual compensation, as defined in the Plan, subject to
certain limitations. The first 4% of pretax compensation (base
contribution) contributed to the Plan is eligible for an employer matching
contribution. Participants may also contribute amounts representing
distributions from other qualified plans. Participants direct the
investment of their contributions into various investment options offered
by the Plan, which currently consist of a ServiceMaster Company stock
fund, six mutual funds and three common/collective trust funds.
EMPLOYER CONTRIBUTIONS
The Company's contribution is discretionary and the amount of contribution
from Company profits is determined each year by the Board of Directors
after a review of the overall financial performance of ServiceMaster and
the key business units. The matching contribution may differ for different
employee groups. One-half of the Company matching contribution is invested
directly in the ServiceMaster Company common stock fund and the other
one-half is invested according to the participants' direction.
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's contribution
and allocations of (a) the Company's contribution, (b) Plan earnings (c)
and forfeitures. The participant's accounts are charged with
administrative fees, where applicable. Allocations are based on
participant contributions or account balances, as defined. The benefit to
which a participant is entitled is the benefit that can be provided from
the participant's vested account.
VESTING
Participants are vested immediately in their contributions plus actual
earnings thereon. Vesting in the Company's contribution is based on the
following schedule, except for in the event of death or permanent
disability, in which case the participant becomes immediately vested:
COMPLETED YEARS PERCENT
OF SERVICE VESTED
---------------------------------- ----------
Less than 2 years of service 0%
2 years of service but less than 3 25
3 years of service but less than 4 50
4 years of service but less than 5 75
5 years of service or more 100
==========
FORFEITURES
Forfeitures are used first to reinstate all rehired participants'
forfeitures and then are allocated to eligible participants in the same
manner as employer profit sharing contributions.
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PARTICIPANT LOANS
Participants may borrow from their fund accounts a minimum of $500 up to a
maximum of the lesser of: (a) $50,000 or (b) 50% of their vested account
balance (limited to the value of the participant's contributions and
earnings thereon), minus their highest outstanding loan balance in the
previous 12 months. A participant's loan is secured by the balance in the
participant's account and bears interest at the prime interest rate as
listed in THE WALL STREET JOURNAL on the first business day of the month
in which the loan is issued, plus 1%.
BENEFIT PAYMENTS
A participant may elect to have the value of their vested account (minus
any outstanding loan balance) distributed to them upon permanent
disability, upon reaching normal retirement age (65), or upon termination
of employment. A participant may elect to receive either a lump-sum amount
equal to the value of the participant's vested interest in their account,
or monthly, quarterly, or annual installments for a specified number of
years not to exceed the participant's life expectancy and that of their
beneficiary. At the time of distribution, shares of ServiceMaster stock in
the participant's account can be taken in kind or in cash.
TERMINATION OF THE PLAN
The Company currently intends to continue the Plan indefinitely. However,
the Company has the right under the Plan to discontinue contributions and
terminate the Plan at any time, subject to the provisions of ERISA. If the
Plan is terminated, participants will become fully vested in their Company
contributions account balances.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements of the Plan are prepared under the accrual method
of accounting.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires the Plan's
Benefits Administration Committee to make estimates and assumptions that
affect the reported amounts of assets and liabilities, and changes
therein, and disclosure of contingent assets and liabilities. These
estimates could differ from actual results.
INVESTMENT VALUATION AND INCOME RECOGNITION
The Plan's investments, other than the Putnam Stable Value Fund, are
stated at fair value based on quoted market prices or estimated fair value
as reported by the Plan's trustee. Shares of mutual funds are valued at
the net asset value of shares held by the Plan at year-end.
The Putnam Stable Value Fund invests primarily in guaranteed investment
contracts or funding agreements and security-backed investment contracts
or separate accounts issued or wrapped by insurance companies, banks, or
other financial institutions (collectively referred to herein as
"Investment Contracts"). Investment Contracts are carried at cost plus
accrued
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interest ("Book Value"). Investment Contracts will normally be held to
maturity, and meet the fully benefit responsive requirements of the AICPA
Statement of Position 94-4, "Reporting of Investment Contracts Held by
Health and Welfare Benefit Plans and Defined Contribution Pension Plans."
The Book Value of Investment Contracts will be adjusted to reflect any
issuer defaults or other evidence of impairment under an investment
contract should they occur. The aggregate average crediting interest rate
of the Investment Contracts as of December 31, 2000 and 1999, was 6.42%
and 6.45%, respectively. The aggregate average yield for the year ended
December 31, 2000, was 5.95%. As of December 31, 2000 and 1999, 87.1% and
84.6%, respectively, of the Putnam Stable Value Fund's assets were
invested in Investment Contracts, with the remainder of the assets
invested in high-quality money market instruments. As of December 31, 2000
and 1999, the fair value of the Investment Contracts was $36,559,822 and
$44,099,119, respectively.
Purchases and sales of securities are recorded on a trade-date basis.
Interest income is recorded on the accrual basis. Dividends are recorded
on the ex-dividend date.
PAYMENT OF BENEFITS
Benefit payments are recorded when paid.
ADMINISTRATIVE EXPENSES
Administrative expenses are paid by the Plan to the extent not paid by the
Company.
3. INVESTMENTS
The following presents investments that represent 5% or more of the Plan's
net assets as of December 31, 2000 and 1999:
2000 1999
------------- -------------
Putnam Bond Index Fund, 5,287,916 and 7,089,941 shares,
respectively $ 58,219,959 $ 69,906,821
Putnam Investors Fund, 1,834,597 and 1,078,134 shares,
respectively 28,381,220 20,754,072
The George Putnam Fund of Boston CL Y, 2,859,395 and
1,865,626 shares, respectively 49,210,193 30,428,353
The Putnam Fund for Growth & Income CL Y, 1,151,131 and
1,106,475 shares, respectively 22,516,115 20,768,541
Putnam S&P 500 Index Fund, 771,205 and 543,528 shares,
respectively 24,431,774 18,990,873
Putnam Stable Value Fund, 41,580,768 and 53,092,315 shares,
respectively 41,580,768 53,092,315
ServiceMaster Company common stock, 9,475,214 and 9,090,898
shares, respectively 108,964,963* 111,931,680*
*Includes both participant and nonparticipant-directed amounts.
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During 2000, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year) depreciated
in value by $(1,073,539) as follows:
Mutual funds $ 6,805,067
Common collective trust funds (266,521)
Common stock (7,612,085)
------------
$(1,073,539)
============
The Plan provides for various investments that, in general, are exposed to
various risks such as interest rate, credit and overall market volatility
risks. Due to the level of risk associated with certain investment
securities, it is reasonably possible that changes in the values of
securities will occur in the near term and that such changes could
materially affect the amounts reported in the statements of net assets
available for benefits.
4. NONPARTICIPANT-DIRECTED INVESTMENT
Investment in the Plan is participant-directed, except that one-half of
the Company's matching contribution is invested directly in The
ServiceMaster Company common stock. Participants, at their discretion, may
also direct their investment to The ServiceMaster Company common stock.
The following information includes both participant and
nonparticipant-directed investment balances. Information about the net
assets of The ServiceMaster Company common stock fund as of December 31,
2000 and 1999, and the significant components of the changes in the net
assets for the year ended December 31, 2000, is as follows:
DECEMBER 31
---------------------------------
2000 1999
-------------- ------------
Net assets-
The ServiceMaster Company common stock $108,964,963 $111,931,680
============ ============
YEAR ENDED
DEC.31,2000
------------
Changes in net assets-
Additions-
Contributions $ 8,535,682
Dividends 3,602,402
Net transfers from participant-directed investments
1,605,846
Deductions-
Benefits paid to participants (8,956,792)
Transfers from the Plan (141,770)
Net depreciation (7,612,085)
------------
Net change in net assets $(2,966,717)
============
5. TAX STATUS OF THE PLAN
The Plan received a favorable determination letter from the Internal
Revenue Service dated February 26, 1996. The Plan was amended and restated
effective July 1, 1999. However, the plan administrator believes that the
Plan is currently designed and being operated in compliance with the
applicable requirements of the Internal Revenue Code. Therefore, the
12
plan administrator believes that the Plan was qualified and the related
trust was tax-exempt as of the financial statement dates.
6. RELATED-PARTY TRANSACTIONS
The Plan invests in shares of mutual funds and interests in common
collective trust funds managed by Putnam Fiduciary Trust Company ("PFTC").
PFTC acts as trustee and recordkeeper for the Plan. The Plan also invests
in Company stock and allows loans to participants. These transactions
qualify as party-in-interest transactions, which are exempt from the
prohibited transaction rules.
7. SUBSEQUENT EVENTS
The Committee resolved to merge the following plans into the Plan
effective between February 15, 2001, and June 1, 2001:
Pennington Lawn Service, Inc. Profit Sharing and 401(k) Plan
Tenet Healthcare Corporation Retirement Savings Plan
The Southern Tree & Landscape Companies 401(k) Profit Sharing Plan
R.L. Company, Inc. Employee Retirement Plan
ABASH, Inc. 401(k) Plan
Showcase Landscape Inc. Employee Savings & Investment Plan
L. Care USA Inc. 401(k) Profit Sharing Plan and Trust
The Landscape West 401(k) Savings and Investment Plan
MDI/RPM 401(k) Plan
13
SCHEDULE I
SERVICEMASTER PROFIT SHARING AND RETIREMENT PLAN
SCHEDULE OF ASSETS HELD FOR INVESTMENT
PURPOSES AT END OF YEAR
DECEMBER 31, 2000
(EMPLOYER IDENTIFICATION NUMBER 36-3858106, PLAN NUMBER 001)
(B) IDENTITY OF ISSUE/ (E) CURRENT
(A) (C) DESCRIPTION OF INVESTMENT (D) COST VALUE
----- ---------------------------------------------------------- --------- ---------------
MUTUAL FUNDS:
* Putnam Investors Fund N/A $ 28,381,220
* The George Putnam Fund of Boston CL Y N/A 49,210,193
* The Putnam Fund for Growth & Income CL Y N/A 22,516,115
Vanguard Life Strategy Income Fund N/A 1,701,431
Vanguard Life Strategy Conservative Growth Fund N/A 3,929,448
Vanguard Life Strategy Growth Fund N/A 10,451,538
COMMON COLLECTIVE TRUST FUNDS:
* Putnam Bond Index Fund N/A 58,219,959
* Putnam S&P 500 Index Fund N/A 24,431,774
* Putnam Stable Value Fund N/A 41,580,768
EMPLOYER SECURITIES--common shares:
* The ServiceMaster Company common stock $103,958,346 108,964,963
GUARANTEED INVESTMENT CONTRACT:
Massachusetts Mutual Life Insurance Company, 4.9%
401,324 401,324
* PARTICIPANT LOANS, 7.75% to 10.5% N/A 8,970,751
============= ------------
$358,759,484
============
*Represents a party-in-interest.
The accompanying Notes to Financial Statements and Schedules
are an integral part of this schedule.
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SCHEDULE II
SERVICEMASTER PROFIT SHARING AND RETIREMENT PLAN
SCHEDULE OF REPORTABLE TRANSACTIONS (A)
FOR THE YEAR ENDED DECEMBER 31, 2000
(EMPLOYER IDENTIFICATION NUMBER 36-3858106, PLAN NUMBER 001)
(B) DESCRIPTION
(A) IDENTITY OF PARTY INVOLVED OF ASSET
------------------------------ ----------------------------
The ServiceMaster Company Employer securities--
common shares
(a) Represents transactions or a series of transactions related to
nonparticipant-directed investments in excess of 5% of the fair value of
Plan assets at the beginning of the year.
SALES
--------------------------------------------------------------------------
(H) CURRENT VALUE
OF ASSET ON
(C) PURCHASE (D) SELLING (G) COST OF TRANSACTION (I) REALIZED
PRICE PRICE ASSET DATE GAIN
---------------- ----------- ----------- ------------- ---------
$21,309,239 $16,651,396 $16,620,320 $16,651,396 $31,076
================ =========== =========== ============= ==========
The accompanying Notes to Financial Statements and Schedules are an
integral part of this schedule.
15
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report, dated June 25, 2001, included in this Form 11-K, into the ServiceMaster
Profit Sharing and Retirement Plan's previously filed Registration Statement
File No. 333-89037.
Chicago, Illinois
June 25, 2001
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