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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2001. Commission File number
1-14762.
THE SERVICEMASTER COMPANY
(Exact Name of Registrant as Specified in its Charter)
Delaware 36-3858106
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(State or Other Jurisdiction of (I.R.S.Employer Identification No.)
Incorporation or Organization)
One ServiceMaster Way, Downers Grove, Illinois 60515-1700
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (630) 271-1300
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class On Which Registered
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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
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K ((ss.) 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of the Registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. X
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The aggregate market value of shares of common stock held by
non-affiliates of the Registrant as of March 6, 2002 was $4,150,253,496. The
number of shares outstanding of the Registrant's common stock as of March 6,
2002 was 301,524,967.
DOCUMENTS INCORPORATED BY REFERENCE
Certain parts of the Registrant's Annual Report to Shareholders for the
year ended December 31, 2001 are incorporated into Part I, Part II and Part IV
of this Form 10-K.
Certain parts of the Registrant's Proxy Statement for the 2002 Annual
Meeting of Shareholders are incorporated into Part III of this Form 10-K.
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TABLE OF CONTENTS
PART I
1. Business................................................................................... 1
2. Properties................................................................................. 7
3. Legal Proceedings.......................................................................... 8
4. Submission of Matters to a Vote of Security Holders........................................ 9
PART II
5. Market for Registrant's Common Equity and Related Stockholder Matters...................... 10
6. Selected Financial Data.................................................................... 10
7. Management's Discussion and Analysis of Financial Condition and Results of Operations...... 10
7A. Quantitative and Qualitative Disclosures About Market Risk................................ 10
8. Financial Statements and Supplementary Data................................................ 10
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure....... 10
PART III
10. Directors and Executive Officers of the Registrant......................................... 11
11. Executive Compensation..................................................................... 12
12. Security Ownership of Certain Beneficial Owners and Management............................. 12
13. Certain Relationships and Related Transactions............................................. 12
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K........................... 13
Signatures...................................................................................... 18
Exhibit Index................................................................................... 20
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PART I
Item 1. Business
This Annual Report on Form 10-K is filed by The ServiceMaster Company,
a Delaware corporation ("ServiceMaster"). The ServiceMaster Company is the
successor to ServiceMaster Limited Partnership, a Delaware limited partnership.
On December 26, 1997, by means of a statutory merger, The ServiceMaster Company
succeeded to ServiceMaster Limited Partnership as the publicly traded parent
entity in the ServiceMaster enterprise.
Forward-Looking Statements
This Annual Report contains or incorporates by reference certain
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. ServiceMaster intends that such forward-looking
statements be subject to the safe harbors created by such legislation.
ServiceMaster notes that statements that look forward in time, which include
everything other than historical information, involve risks and uncertainties
that affect results of operations of ServiceMaster. Factors which could cause
actual results to differ materially from those expressed or implied in a
forward-looking statement include the following (among others): weather
conditions adverse to certain of consumer and commercial services businesses of
ServiceMaster; the entry of additional competitors in any of the markets served
by ServiceMaster; labor shortages; unexpected changes in operating costs; the
condition of the U.S. economy; the cost and length of time associated with
integrating and winding down businesses; and other factors listed from time to
time in filings by ServiceMaster with the Securities and Exchange Commission.
Principal Operating Segments
ServiceMaster is a holding company whose shares of common stock are
traded on the New York Stock Exchange. Through its subsidiaries, ServiceMaster
is engaged in providing a variety of specialty services to homeowners and
commercial facilities.
ServiceMaster is organized into three principal operating segments--the
TruGreen segment, the Terminix segment, and the Home Maintenance and Improvement
segment--each of which is headquartered in Memphis, Tennessee. All subsidiaries
of ServiceMaster are wholly owned, except for (1) American Residential Services
L.L.C., in which senior management have purchased nominal equity interests which
are subject to certain put and call rights and (2) The Terminix International
Company L.P., in which Allied Bruce-Terminix Companies, Inc., is a Class B
limited partner. Financial information for each operating segment for 1999,
2000, and 2001 is contained in the Notes to the Consolidated Financial
Statements of our Annual Report to Shareholders for 2001 and is incorporated by
reference.
The services provided by our TruGreen, Terminix, and Home Maintenance
and Improvement segments are accessible via a single toll-free telephone number
(1-800-WESERVE) or the internet at www.svm.com. ServiceMaster focuses on
establishing relationships to provide one or more services on a repetitive basis
to customers. Since 1986, the number of customers served by ServiceMaster has
increased from fewer than one million domestic customers to more than 11 million
worldwide customers.
TruGreen Segment
We provide lawn care, tree and shrub services through TruGreen Limited
Partnership ("TruGreen ChemLawn") under the "TruGreen", "ChemLawn" and
"Barefoot" service marks. We provide landscaping and tree services through
TruGreen LandCare L.L.C. under the "TruGreen" and "LandCare" service marks.
Customers
include both homeowners and commercial facilities. Revenues derived
from the TruGreen segment constituted 39%, 39%, and 38% in 1999, 2000, and 2001
of the operating revenue of the consolidated ServiceMaster enterprise. The
TruGreen ChemLawn and TruGreen LandCare business is seasonal in nature.
TruGreen ChemLawn. With over 3.5 million residential and commercial
customers, TruGreen ChemLawn is the leading provider of lawn care services in
the United States. As of December 31, 2001, TruGreen ChemLawn had 207
company-owned branches and 70 franchised branches in the United States. TruGreen
ChemLawn provides lawn, tree and shrub care services in eight countries through
licensing arrangements and through a subsidiary in one country.
TruGreen LandCare. TruGreen LandCare, a leading provider of commercial
landscaping maintenance and tree services, was acquired by ServiceMaster in
March 1999. As of December 31, 2001, TruGreen LandCare had 110 company-owned
branches with approximately 15,000 customers in the United States. TruGreen
LandCare has no international operations. As discussed in the "Dispositions and
Wind Downs" section, in the fourth quarter of 2001, ServiceMaster discontinued
its landscaping construction operations.
By January 2, 2002, a subsidiary of ServiceMaster repurchased the
equity interest belonging to senior management, making TruGreen Companies L.L.C.
(formerly known as TruGreen Holding L.L.C.) a wholly-owned subsidiary of the
ServiceMaster enterprise.
Terminix Segment
We provide termite and pest control services through The Terminix
International Company L.P. under the "Terminix" service mark. Customers include
both homeowners and commercial facilities. Revenues derived from the Terminix
segment constituted 21%, 21%, and 23% in 1999, 2000, and 2001 of the operating
revenue of the consolidated ServiceMaster enterprise. The Terminix business is
seasonal in nature.
With over 2.9 million domestic residential and commercial customers,
Terminix, through its company-owned branches and franchisees, is the leading
provider of termite and pest control services in the United States. As of
December 31, 2001, Terminix was providing these services in 44 states through
306 company-owned branches and 150 franchised branches. Terminix provides
termite and pest control services through licensing arrangements with local
service providers in 29 countries and through subsidiaries in three countries.
Effective January 1, 2001, Terminix acquired substantially all of the
assets and certain liabilities of the termite and pest control business of
Allied Bruce-Terminix Companies, Inc., the largest franchisee of Terminix. As
part of the acquisition, Allied Bruce became a Class B limited partner of
Terminix, entitling Allied Bruce to quarterly cash distributions upon a
determination that a distribution of cash is to be made. The Class B partnership
interest belonging to Allied Bruce is subject to reciprocal put and call rights
under which the Class B partnership interest is exchangeable for eight million
shares of ServiceMaster common stock. The put right is exercisable immediately;
the call right will become exercisable on January 1, 2006.
Home Maintenance and Improvement Segment
We provide other specialty services to homeowners and commercial
facilities principally through the following companies: American Residential
Services L.L.C.; American Mechanical Services Company L.L.C.; American Home
Shield Corporation; ServiceMaster Residential/Commercial Services L.P.
("ServiceMaster Clean"); Merry Maids L.P.; AmeriSpec, Inc.; and Furniture Medic
L.P. The services provided by these companies include: electrical, plumbing,
heating, ventilation and air conditioning services under the "ARS" and "AMS"
service marks; plumbing and drain cleaning services under the "Rescue Rooter"
service mark; warranty contracts for home systems and appliances under the
"American Home Shield" service mark; residential and commercial cleaning and
disaster restoration services under the "ServiceMaster" and "ServiceMaster
Clean" service marks; domestic housekeeping services under the "Merry Maids"
service mark; home inspection services under the "AmeriSpec"
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service mark; and on-site furniture repair and restoration under the "Furniture
Medic" and "Rx" service marks. Revenues derived from the Home Maintenance and
Improvement segment constituted 29%, 35%, and 37% in 1999, 2000, and 2001 of the
operating revenue of the consolidated ServiceMaster enterprise.
American Residential Services. American Residential Services, a leading
provider of electrical, plumbing, heating, ventilation and air conditioning
services, was acquired by ServiceMaster in April 1999. As of December 31, 2001,
American Residential Services performed services for approximately 1.6 million
customers in 26 states through 79 company-owned branches. American Residential
Services has no international operations. The American Residential Services
business is seasonal in nature.
American Residential Services includes the assets and business of
Rescue Rooter, which provides plumbing and drain cleaning services, originally
acquired by ServiceMaster in January 1998. Under the Rescue Rooter brand,
American Residential Services also provides plumbing and drain cleaning services
through a licensing arrangement with a local service provider in two countries.
American Mechanical Services, a subsidiary of American Residential
Services, is a leading provider of heating, ventilation, and air conditioning
services to commercial customers. As of December 31, 2001, American Mechanical
Services provided services through 15 company-owned branches. American
Mechanical Services has no international operations.
In 1999, ServiceMaster established a capital structure for American
Residential Services whereby 90% of the invested capital was in the form of
intercompany debt and 10% in the form of equity. The intercompany debt has been
eliminated in ServiceMaster's consolidated financial statements. In 1999,
members of senior management purchased 8.5% of that equity interest,
representing 0.85% of the total investment in American Residential Services.
Management's equity interest is subject to reciprocal put and call rights which
will become exercisable on July 1, 2004 and which will be consummated on the
basis of the then fair market value of the interest.
American Home Shield. American Home Shield is a leading provider of
home systems and appliance warranty contracts in the United States, providing
homeowners with contracts covering the repair or replacement of built-in
appliances, hot water heaters and electrical, plumbing, central heating and
central air conditioning systems. Warranty contracts are sold through
participating real estate brokerage offices in conjunction with resales of
single-family residences to homeowners. American Home Shield also sells warranty
contracts directly to non-moving homeowners by renewing existing contracts and
through various other distribution channels. As of December 31, 2001, American
Home Shield warranty contracts provided services to approximately 980,000 homes
through independent repair maintenance contractors in 50 states and the District
of Columbia. American Home Shield also provides home service warranty contracts
through a licensing arrangement with a local service provider in one country.
ServiceMaster Clean. ServiceMaster Clean is the leading franchisor in
the United States in the residential and commercial cleaning field, with 978,000
customers served through over 2,900 franchise locations. ServiceMaster Clean
provides carpet and upholstery cleaning and janitorial services, disaster
restoration services, and window cleaning services. As of December 31, 2001,
these services were provided to approximately 1.3 million residential and
commercial customers worldwide through a network of over 4,500 independent
franchisees. ServiceMaster Clean provides its services through licensing
arrangements with local service providers in 16 countries and through
subsidiaries in three countries.
Merry Maids. With approximately 308,000 worldwide customers, including
276,000 customers in the United States, Merry Maids is the leading provider of
domestic house cleaning services in the United States. As of December 31, 2001,
these services were provided through 46 company-owned branches and 759 licensees
operating in 49 states. Merry Maids provides domestic house cleaning services
through licensing arrangements with local service providers in nine countries
and through subsidiaries in three countries.
3
AmeriSpec. AmeriSpec is a wholly-owned subsidiary of American Home
Shield. AmeriSpec is a leading provider of home inspection services in the
United States, providing services through three company-owned branches and 290
franchised branches. During 2001, AmeriSpec conducted approximately 160,000 home
inspections in 48 states and Canada. AmeriSpec has no international licensees or
company-owned operations except for Canada.
Furniture Medic. Furniture Medic provides on-site furniture repair and
restoration services in 46 states to 137,000 domestic customers through 459
licensees. As of December 31, 2001, Furniture Medic provided services to
approximately 157,000 residential and commercial worldwide customers through a
network of 530 licensees. Furniture Medic also provides its services through a
licensing arrangement with a local service provider in two countries and through
subsidiaries in two countries.
Other Operations
Business Support Center. The Business Support Center is headquartered
in Downers Grove, Illinois, with personnel also located in Memphis, Tennessee.
It coordinates administration of payroll, benefits, risk management, and travel
services for ServiceMaster's internal operations. Various administrative support
departments provide personnel, communications, government and public relations,
administrative, education, accounting, financial, information technology, and
legal services.
ServiceMaster Home Service Center. In January 2000, ServiceMaster, in
conjunction with Kleiner, Perkins, Caufield & Byers, a leading venture capital
firm, announced the formation and initial funding of WeServeHomes.com, Inc., as
the Internet company which would provide comprehensive on-line solutions for
home services, products, and information. In May 2000, equity interests in
WeServeHomes were purchased by certain senior managers in the ServiceMaster
enterprise. In December 2001 and January 2002, ServiceMaster, through a stock
purchase and subsequent merger transaction, acquired all of the equity of
WeServeHomes and transferred substantially all of the assets and liabilities of
WeServeHomes to The ServiceMaster Home Service Center L.L.C., a wholly owned
subsidiary of ServiceMaster. The integration and restructuring of the
ServiceMaster Home Service Center creates a new distribution channel within
ServiceMaster. ServiceMaster Home Service Center is the single-source solution
that allows busy homeowners to select, schedule and purchase home services both
online (through the www.servicemaster.com website) and off-line through its call
centers at 1-888-WESERVE.
International Operations. ServiceMaster provides services in
international markets either through licensing arrangements with local entities
or ownership of foreign operating companies acquired by ServiceMaster. The
TruGreen, Terminix, and Home Maintenance and Improvement segments are
responsible for overseeing these activities. ServiceMaster manages the
operations of Terminix Ltd., a leading pest control and wood preservation
company, in the United Kingdom and Ireland.
Intellectual Property
ServiceMaster holds various service marks, trademarks, trade names,
patents, and copyrights, none of which, other than certain service marks and
trademarks, are considered by ServiceMaster to be material to its financial
condition and results of operations. ServiceMaster's service marks and
trademarks are particularly important in the advertising and franchising
activities conducted by each of the TruGreen, Terminix, and Home Maintenance and
Improvement segments. These marks are registered in over 95 countries and the
United States and are renewed at each registration expiration date.
ServiceMaster also owns certain trade secrets, including training manuals,
pricing models, customer information, and software source code.
4
Franchises
Franchises are important for the TruGreen ChemLawn, Terminix,
ServiceMaster Clean, Merry Maids, AmeriSpec, and Furniture Medic businesses.
Nevertheless, revenues and profits derived from franchise-related activities
constitute approximately 3% of the revenue and profits of the consolidated
ServiceMaster enterprise. Franchise agreements made in the course of these
businesses are generally for a term of five years. Most of ServiceMaster's
franchise agreements which expire in any given year are renewed.
Dispositions and Wind Downs
Sale of ServiceMaster Management Services. In November 2001,
ServiceMaster sold its Management Services business and other businesses, which
served institutional customers in their healthcare, education, and industrial
facilities, to ARAMARK Corporation for approximately $800 million. Under a
licensing arrangement, the Management Services business is permitted to use the
ServiceMaster brand for two years in the business and industry market and for
three years in the healthcare and education markets in its domestic and Canadian
operations and up to the end of the term of each Management Services license
already granted in international markets. The business now operates under the
tradename ARAMARK ServiceMaster Facility Services.
As part of the sale of the Management Services business, ServiceMaster
sold the manufacturing division of ServiceMaster Management Services. The
division formulates, combines, and distributes supplies, products, and equipment
used by the Management Services business and which are sold to ServiceMaster
licensees for use in the operation of their businesses. Under a manufacturing
arrangement, the division is committed to produce and sell to ServiceMaster, its
affiliates, and licensees, or to secure alternate sources for, such products.
The term of the arrangement extends through 2002, with an option for
ServiceMaster to extend the term through 2003.
Sale of Certain European Pest Control Operations. In October 2001,
ServiceMaster sold certain subsidiaries of its European pest control and
property services operations to Nordic Capital, a Stockholm-headquartered
private equity investment firm, for $101 million. The consideration consisted of
$94 million of cash and the transfer of certain liabilities to the acquirer and
$7 million in seller financing.
TruGreen LandCare Construction. In October 2001, ServiceMaster sold its
TruGreen LandCare Construction operations to Environmental Industries, Inc.
(EII) in certain markets and entered into an agreement with EII to manage the
wind-down of TruGreen LandCare Construction contracts in the remaining markets.
ServiceMaster expects to complete the wind-down of TruGreen LandCare
Construction's operations in 2002.
ServiceMaster Employer Services. In October 2001, ServiceMaster sold all of
its customer contracts in its professional employer organization, Certified
Systems, Inc., to AMS Staff Leasing, N.A., Inc. ServiceMaster expects to
complete the wind-down of Certified Systems, Inc.'s remaining operations in
2002.
Industry Position, Competition and Customers
We base the following information on estimates, which cannot be
verified, made by our management. In considering ServiceMaster's industry and
competitive positions, you should recognize that ServiceMaster competes with
many other companies in the sale of its services, franchises, and products and
that some of these competitors are larger or have greater financial and
marketing strength than ServiceMaster.
The TruGreen, Terminix, and Home Maintenance and Improvement segments
provide a variety of residential and commercial services under their respective
brands on the basis of their and ServiceMaster's reputation, the strength of
their service marks, their size and financial capability, and their training and
technical
5
support services. They employ the following principal methods of
competition: name recognition, price, assurance of customer satisfaction, and a
history of providing quality services to homeowners.
TruGreen Segment
Lawn Care Services. TruGreen ChemLawn, both directly and through
independently owned franchisees, provides lawn care services to residential and
commercial customers. Competition within the lawn care market is strong, coming
mainly from local, independently-owned firms and from homeowners who care for
their lawns personally. TruGreen ChemLawn is the leading national lawn care
company within the lawn care market.
Landscaping and Tree Services. TruGreen LandCare provides landscape
maintenance services and tree care services to commercial and residential
customers. Competition in the landscape and tree care service industry is
strong. Most competitors of TruGreen LandCare's landscape and tree care services
are small, owner-operated companies operating in a limited geographic market,
but there are a few large companies operating in multiple markets. Competition
in the power line brush and tree clearing market is characterized by a small
number of large companies.
Terminix Segment
Termite and Pest Control Services. The market for termite and pest
control services to commercial and residential customers includes many
competitors. Terminix is the leading national termite and pest control company
within this market. Competition within the termite and pest control market is
strong, coming mainly from regional and local, independently-owned firms
throughout the United States, from homeowners who treat their termite and pest
control problems personally and from one other large company which operates on a
national basis.
Home Maintenance and Improvement Segment
Heating, Ventilation and Air Conditioning Services. Competition in the
market for heating, ventilation and air conditioning services is strong in both
the residential and commercial sectors. American Residential Services and
American Mechanical Services believe that its share of the total market for such
services is small and that there is significant potential for future expansion
and penetration.
Plumbing and Drain Cleaning Services. Competition in the market for
plumbing and drain cleaning services is strong in both the residential and
commercial sectors. Rescue Rooter believes that its share of the total market
for such services is small and that there is significant potential for future
expansion and penetration.
Home Systems and Appliance Warranty Contracts. Competition in the
market for home systems and appliance warranty contracts is strong, coming
mainly from regional competitors in the real estate distribution channel,
marketed and sold through real estate professionals in connection with an
underlying residential real estate transaction. Some competition also derives
from insurance affiliated entities in the consumer segment. ServiceMaster
believes that American Home Shield maintains a favorable position in its
industry due to the system developed and used by American Home Shield for
accepting, dispatching, and fulfilling service calls from homeowners through a
nationwide network of independent contractors. American Home Shield also has a
computerized information system developed and owned by American Home Shield, and
an electronic digital voice communication system through which American Home
Shield handles requests for service.
Residential and Commercial Cleaning Services. Competition in the market
for domestic house cleaning services is very strong. In urban areas, the market
involves numerous local companies and a few national companies. ServiceMaster
believes that its share of the total market for such services is small and that
there is significant potential for further expansion of its housecleaning
business through continued internal expansion and greater penetration of the
housecleaning market. Through company-owned branches and franchisees,
6
ServiceMaster Clean and Merry Maids have a small share of the market for the
cleaning of residential and commercial buildings.
Home Inspection Services. Competition within the home inspection
market is strong, coming mainly from regional and local, independently-owned
firms.
Furniture Repair Services. Competition in the market for furniture
repair services is strong, coming mainly from independent contractors.
ServiceMaster believes that Furniture Medic maintains a favorable position in
its industry due to its on-site delivery of services and its patented,
environmentally sensitive procedure for repairing furniture in the customer's
home.
Major Customers
ServiceMaster has no 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 operation.
Revenues from governmental sources are immaterial.
Regulatory Compliance
Government Regulations. The operations of the TruGreen, Terminix, and
Home Maintenance and Improvement segments are subject to various federal, state
and local laws and regulations. The pest management industry and pesticide
products used in the lawn care industry are regulated at the federal level under
the Federal Insecticide, Fungicide and Rodenticide Act. Pesticide applicators
(such as Terminix) are regulated under the Federal Environmental Pesticide
Control Act of 1972. A large number of state and local regulations govern permit
and license requirements, consumer protection matters and telemarketing.
Franchise Matters. TruGreen ChemLawn, Terminix, ServiceMaster Clean,
Merry Maids, AmeriSpec, and Furniture Medic are subject to various federal and
state franchising laws and regulations, including the rules and regulations of
the Federal Trade Commission regarding the offering and sale of franchises. The
rules and regulations of the Federal Trade Commission require that franchisors
provide all prospective franchisees with specific information regarding the
franchise program in the form of a detailed franchise offering circular. Various
state laws also provide for certain rights in favor of franchisees.
Environmental Matters. The operations of the TruGreen, Terminix, and
Home Maintenance and Improvement segments are subject to various federal, state,
and local laws and regulations regarding environmental matters. ServiceMaster is
not aware of any federal, state or local environmental laws or regulations that
will materially affect its earnings or competitive position, or result in
material capital expenditures; however, ServiceMaster cannot predict the effect
on its operations of possible future environmental legislation or regulations.
During 2001, there were no material capital expenditures for environmental
control facilities and no such material expenditures are anticipated.
Employees
On December 31, 2001, ServiceMaster had a total of approximately 37,000
employees.
Item 2. Properties
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Business Support Center and ServiceMaster Home Service Center
As part of the disposition of ServiceMaster Management Services,
ServiceMaster sold to a subsidiary of ARAMARK Corporation the Downers Grove
headquarters campus, which serves as headquarters for the Business Support
Center and ServiceMaster Home Service Center. ServiceMaster also sold a 50,000
square foot warehouse and distribution facility near Aurora, Illinois, and
manufacturing facilities located in Cairo, Illinois.
Under a lease arrangement covering both office buildings on the Downers
Grove campus, ServiceMaster leases approximately 85,000 square feet of office
space to accommodate personnel from the Business Support Center and
ServiceMaster Home Service Center. The lease runs through 2002, with an option
for the landlord to terminate the lease upon six month notice in the event of a
sale of the premises. We believe that these office facilities are suitable and
adequate to support ServiceMaster's current needs for office space in the
Chicago area for the short term. In the meantime, ServiceMaster has commenced a
search for suitable office space in the Chicago area for personnel from its
headquarters operations and from ServiceMaster Home Service Center.
ServiceMaster expects to occupy new headquarters office space no later than
December 2002.
TruGreen, Terminix, and Home Maintenance and Improvement Segments
The headquarters for TruGreen ChemLawn, TruGreen LandCare, Terminix,
American Residential Services, Rescue Rooter, and American Mechanical Services
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. Besides these two headquarters facilities in
Memphis, ServiceMaster leases space for a call center located at 6399 Shelby
View Drive, Memphis, Tennessee. The call center contains approximately 60,000
square feet of office space from which telephone sales, scheduling services, and
other business functions are conducted. Additionally, ServiceMaster leases space
for a training facility located at 3839 Forest Hill Irene Road, Memphis,
Tennessee. We believe that these headquarters, call center facility and training
facility are suitable and adequate to support the current office needs of the
TruGreen, Terminix, and Home Maintenance and Improvement segments in the Memphis
area.
The operating companies within these three segments 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. We believe that these facilities, when added to the
headquarters and call center facilities, are suitable and adequate to support
the current needs of the TruGreen, Terminix, and Home Maintenance and
Improvement segments.
Operating Owned Leased No. of
Company Facilities Facilities States
TruGreen ChemLawn 8 286 45
TruGreen LandCare 1 168 27
Terminix 27 378 42
American Residential Services 5 59 19
American Mechanical Services 1 5 4
American Home Shield 1 9 6
ServiceMaster Clean 0 8 8
Merry Maids 0 50 24
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Item 3. Legal Proceedings
In the ordinary course of conducting its business activities,
ServiceMaster becomes involved in judicial, administrative and regulatory
proceedings which involve both private parties and governmental authorities. As
of March 1, 2002, these proceedings included general and commercial liability
actions and a small number of environmental proceedings.
Settlement of Ray D. Martin V. ServiceMaster. In June 1996, Ray D. Martin, a
former salesman employed by ServiceMaster Management Services, filed a lawsuit
in the State Court of Fulton County, Georgia (Civ. Action File No. 96VS114677J).
The complaint, as originally filed, contended that ServiceMaster had not paid
Mr. Martin the full amount of commission due to him on a sale in which he was
involved. In the course of the pre-trial proceedings, the trial court entered a
default judgment against ServiceMaster, thereby leaving only the question of
damages to be considered at the trial. At trial in September 1999, a jury
awarded the plaintiff compensatory damages and fees of approximately $1 million
and punitive damages of $135 million. In October 1999, ServiceMaster filed a
motion for judgment notwithstanding the verdict or, in the alternative, for a
new trial. On June 1, 2000 the trial court entered a new judgment in the amount
of $461,440 in compensatory damages and $45 million in punitive damages, as well
as amounts for attorneys fees and interest. On November 15, 2001, the Georgia
Court of Appeals held that Mr. Martin's claim for unpaid commissions should have
been limited to breach of his employment contract. The Court of Appeals remanded
the case back to the trial court for a new trial, noting that Mr. Martin was not
entitled to punitive damages and that ServiceMaster's motion to dismiss the tort
claims should have been granted. On January 21, 2002, the parties settled out of
court. The total compensatory damages and fees paid by ServiceMaster in the
settlement were under $1 million.
Item 4. Submission of Matters to a Vote of Security Holders
During the fourth quarter of the fiscal year covered by this report, we
submitted no matters to a vote of security holders.
9
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The portions of our Annual Report to Shareholders for 2001 under the
captions "Statements of Shareholders' Equity" (pages 36-37) and "Cash Dividends
Per Share" and "Price Per Share" in the Quarterly Operating Results table (page
46) supply information required by this item, and these portions are
incorporated by reference. In addition, our common stock is listed and traded on
the New York Stock Exchange under the symbol "SVM". At March 6, 2002, our common
stock was held of record by approximately 50,000 persons. We estimate that
approximately 39,000 persons held shares of our common stock in the names of
nominees. The information contained under the heading "Equity Compensation Plan
Information" in the proxy statement for our 2002 Annual Meeting of Shareholders
is incorporated by reference.
Item 6. Selected Financial Data
The portion of our Annual Report to Shareholders for 2001 in the
Financial Statements section under the caption "Eleven Year Financial Summary"
on pages 30-31 supplies information required by this item, and that portion is
incorporated by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Management's discussion and analysis of financial condition and results
of operations is contained in the Management Discussion and Analysis of
Financial Condition and Results of Operations section of our Annual Report to
Shareholders for 2001 on pages 24-29 and is incorporated by reference.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
ServiceMaster is exposed to market risk from changes in interest rates.
However, ServiceMaster generally maintains the majority of its debt at fixed
rates (over 95% at December 31, 2001), and therefore its exposure to short-term
interest rate fluctuations is immaterial to the consolidated financial
statements of ServiceMaster as a whole. ServiceMaster has from time to time,
entered into interest rate swap or similar arrangements to mitigate its exposure
to interest rate fluctuations, and does not, as a matter of policy, enter into
hedging contracts for trading or speculative purposes. As of December 31, 2001,
no interest rate swaps were outstanding. Further disclosure is included in the
Long-Term Debt note in the Financial Statements of our Annual Report to
Shareholders for 2001 on pages 42-43 and is incorporated by reference.
Item 8. Financial Statements and Supplementary Data
The consolidated statements of financial position of ServiceMaster as
of December 31, 2001 and 2000, and the consolidated statements of income, cash
flows, and shareholders' equity for the years ended December 31, 2001, 2000, and
1999 and notes to the consolidated financial statements are contained in the
Annual Report to Shareholders for 2001 on pages 32-46 and are incorporated by
reference. The report of Arthur Andersen LLP thereon dated January 24, 2002, and
the summary of significant accounting policies are contained in our Annual
Report to Shareholders for 2001 on pages 32-33 and are incorporated by
reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
10
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Directors
The information contained under the heading "Election of Directors" in
the proxy statement for our 2002 Annual Meeting of Shareholders is incorporated
by reference.
Executive Officers of ServiceMaster
The following table shows (i) the names and ages (as of March 1, 2002)
of our 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. There are no
arrangements or understandings between any executive officer and any other
person pursuant to which the officer was or is to be selected as an officer.
First Became
Name Age Present Positions An Officer
C. William Pollard 63 Chairman and Director 1977
Jonathan P. Ward 47 President, Chief Executive Officer, and Director 2001
Robert D. Erickson 58 Executive Vice President 1976
Steven C. Preston 41 Executive Vice President and Chief Financial Officer 1997
Phillip B. Rooney 57 Executive Vice President 1997
Donald K. Karnes 51 President, TruGreen Segment 1992
Ernest J. Mrozek 48 President, Consumer and Commercial Services 1987
Steven B. Bono 49 Senior Vice President, Corporate Communications 2001
Jim L. Kaput 41 Senior Vice President and General Counsel 2000
Messrs. Pollard and Ward are also directors of ServiceMaster.
For biographical information with respect to these persons, see "Election of
Directors" in the proxy statement for our 2002 Annual Meeting of Shareholders.
Robert D. Erickson, age 58, is an Executive Vice President. Mr.
Erickson was a director of ServiceMaster from May 1987 to May 1993. He
previously served as a director of ServiceMaster from May 1981 to June 1984.
He served as the President and Chief Operating Officer of ServiceMaster's
International business unit from October 1993 to December 1997. Mr.
Erickson is retiring from ServiceMaster on June 30, 2002.
Steven C. Preston, age 41, has served as Executive Vice President and
Chief Financial Officer since July 1, 1998. He served as Senior Vice President
and Chief Financial Officer from April 1997 through June 1998. From August 1993
to March 1997, he was Senior Vice President and Corporate Treasurer for First
Data Corporation, Atlanta, Georgia.
12
Phillip B. Rooney, age 57, is Executive Vice President. He
served as President, ServiceMaster Management Services, from January 2001 to
November 2001. He served as President of Business Services Group from April
2000 to December 2000. From April 1997 to April 2000 he served as Vice
Chairman. From May 1996 to February 1997 he was President and Chief Executive
Officer of Waste Management, Inc., Oak Brook, Illinois. Mr. Rooney is a
director of Van Kampen Fund, Oak Brook, Illinois, an investment management
company, and Illinois Tool Works, Inc., Glenview, Illinois, a diversified
manufacturing company.
Donald K. Karnes, age 51, is President of the TruGreen segment. He
served as Group President of ServiceMaster Consumer and Commercial Services from
January 1996 to December 2000.
Ernest J. Mrozek, age 48, is President of ServiceMaster Consumer and
Commercial Services. He served as President and Chief Operating Officer,
ServiceMaster Consumer Services from January 1997 to October 1998.
Steven B. Bono, age 49, 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. From January
1997 to August 1997, he served as Vice President, Strategic Executive Engagement
of American Telephone & Telegraph Company in Basking Ridge, New Jersey.
Jim L. Kaput, age 41, 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 Brown & Wood in Chicago,
Illinois.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
The information contained under the heading "Section 16(a) Beneficial
Ownership Reporting Compliance" in the proxy statement for our 2002 Annual
Meeting of Shareholders is incorporated by reference.
Item 11. Executive Compensation
The information contained under the headings "Compensation of
Directors", "Executive Compensation", and "Agreements with Officers and
Directors" in the proxy statement for our 2002 Annual Meeting of Shareholders is
incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
The information contained under the heading "Ownership of Our Common
Stock" in the proxy statement for our 2002 Annual Meeting of Shareholders is
incorporated by reference.
Item 13. Certain Relationships and Related Transactions
The information contained under the heading "Certain Transactions" in
the proxy statement for our 2002 Annual Meeting of Shareholders is incorporated
by reference.
13
PART IV
Item 14. 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 the Financial
Statements and Management Discussion and Analysis section of
our Annual Report to Shareholders for 2001 on pages 32-46 and
are incorporated by reference:
Summary of Significant Accounting Policies
Report of Independent Public Accountants
Consolidated Statements of Income for the three years ended
December 31, 2001, 2000 and 1999
Consolidated Statements of Financial Position as of December
31, 2001 and 2000
Consolidated Statements of Cash Flows for the three
years ended December 31, 2001, 2000 and 1999
Consolidated Statements of Shareholders' Equity for
the three years ended December 31, 2001, 2000, and 1999
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 Report:
Schedule II--Valuation and Qualifying Accounts
Report of Independent Public Accountants on Schedules
Exhibit 23--Consent of Independent Public Accountants
Other schedules are omitted because of the absence of conditions under
which they are required or because the required information is given in the
financial statements or notes thereto.
14
3. Exhibits
The exhibits filed with this report are listed on pages 20-23
(the "Exhibits Index"). Certain entries in the Exhibits Index are management
contracts or compensatory plans in which a director or any of our named
executive officers does or may participate and compensatory plans, contracts or
arrangements, which ServiceMaster adopted without approval of security holders,
pursuant to which ServiceMaster may award equity, and in which any ServiceMaster
employee currently participates. Such entries are indicated by an asterisk next
to the exhibit's number. Reference is made to the Exhibits Index for the filing
with the Commission that contains such contract or plan.
(b) Reports on Form 8-K.
ServiceMaster filed the following reports on Form 8-K during the last
quarter of 2001 and the first quarter of 2002:
Date Items Reported
October 5, 2001 Item 5. ServiceMaster announced that it had
entered into a Purchase Agreement with ARAMARK
Corporation, a Delaware corporation
("ARAMARK"), pursuant to which ServiceMaster
agreed to sell to ARAMARK the Management
Services business and certain other related
businesses for a purchase price of $800
million in cash. No financial statements were
filed.
November 26, 2001 Item 5. ServiceMaster announced that the Court
of Appeals of Georgia reversed the trial court's
decision in the case of Ray D. Martin v.
ServiceMaster. The Court of Appeals held that
Mr. Martin's claim should have been limited to
breach of his employment contract. The Court
remanded the case back to the trial court for a
new trial, noting that Mr. Martin was not
entitled to punitive damages and that
ServiceMaster's motion to dismiss the tort claims
should have been granted. No financial
statements were filed.
December 17, 2001 Items 2 and 5. On November 30, 2001,
ServiceMaster issued a press release announcing
the completion of the sale of its Management
Services business to ARAMARK Corporation, a
Delaware corporation ("ARAMARK"), for
approximately $800 million in cash, subject to
adjustment. As further discussed in Item 5 of
the filing, the sale of the Management Services
business was one part of a series of strategic
actions being taken by ServiceMaster as a result
of an extensive portfolio review process
initiated earlier in the year. The pro forma
financial information provided in Item 7 of the
filing presents the pro forma impact of the sale
of the Management Services business as well as
the impact of the other strategic actions
resulting from the portfolio review.
Item 7(b). A table set forth ServiceMaster's pro
forma consolidated summaries of operations for
the nine month periods ended September 30, 2001
and 2000 and the year ended December 31, 2000 and
the pro forma condensed consolidated balance
sheet as of September 30, 2001. Other tables
presented the pro forma impact of the sale of the
Management
15
Services business and the other
strategic actions resulting from the
restructuring of ServiceMaster described in Item
5 of the filing. The pro forma financial
information gave effect to these transactions as
if they had occurred at September 30, 2001, for
purposes of the pro forma condensed consolidated
balance sheet, and, for purposes of the
consolidated summaries of operations, on January
1, 2001 and 2000, respectively.
March 19, 2002 Item 5. ServiceMaster announced that it
completed its strategic portfolio review in the
fourth quarter of 2001, which resulted in
ServiceMaster selling and exiting certain
businesses, including the Management Services
business, TruGreen LandCare Construction,
Certified Systems Inc., certain subsidiaries of
its European pest and property services
operations as well as certain other small
operations. In connection with the strategic
portfolio review, ServiceMaster recorded a
charge of $397 million for asset impairment and
other items. ServiceMaster used a portion of the
cash proceeds from the sale of Management
Services to pay down debt balances and recorded
an extraordinary loss of $.03 per diluted share
($9 million after-tax) resulting from the
early extinguishment of debt. The financial
information provided in Item 7 of the filing
presents previously reported quarterly
consolidated income statement information for
2001 and 2000 separated between results of
continuing operations and the results of
discontinued operations. In addition, Item 7
includes quarterly business segment reporting for
2001.
Item 7(c). A table set forth ServiceMaster's
quarterly consolidated statements of income for
the years ended December 31, 2001 and December
31, 2000 restated to present continuing and
discontinued operations. An additional table
presented ServiceMaster's 2001 quarterly business
segment disclosures for continuing operations for
the year ended December 31, 2001.
16
SCHEDULE II
THE SERVICEMASTER COMPANY
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Additions
Balance at Charged to
Beginning of Costs and Balance at
Description Period Expenses Deductions (1) End of Period
----------- ------ -------- -------------- -------------
AS OF DECEMBER 31, 2001:
Continuing Operations --
Allowance for doubtful accounts
Accounts receivable (current) $28,340 37,917 40,390 $25,867
------- ------- ------- -------
Notes receivable (current) $ 1,691 516 123 $ 2,084
------- ------- ------- -------
Reserves related to strategic actions in the fourth
quarter of 2001 (2) $ 0 $40,000 $ 4,000 $36,000
------- ------- ------- -------
Remaining Liabilities from Discontinued Operations (3) --
LandCare Construction $ 5,200 32,200 3,700 $33,700
------- ------- ------- -------
Certified Systems, Inc. $12,600 13,000 1,800 $23,800
------- ------- ------- -------
Management Services $ 0 26,700 15,300 $11,400
------- ------- ------- -------
Other $ 800 5,500 0 $ 6,300
------- ------- ------- -------
AS OF DECEMBER 31, 2000:
Continuing Operations --
Allowance for doubtful accounts
Accounts receivable (current) $32,967 37,366 41,993 $28,340
------- ------- ------- -------
Notes receivable (current) $ 1,417 755 481 $ 1,691
------- ------- ------- -------
AS OF DECEMBER 31, 1999:
Continuing Operations --
Allowance for doubtful accounts
Accounts receivable (current) $28,559 27,487 23,079 $32,967
------- ------- ------- -------
Notes receivable (current) $ 3,764 688 3,035 $ 1,417
------- ------- ------- -------
(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.
(2) Includes accruals for residual value guarantees on leased properties,
severance for former executives and terminated employees, and transaction and
other costs.
(3) The beginning balance represents the liabilities of the discontinued
operations that existed prior to the recording in the fourth quarter of 2001 of
the costs related to exiting these operations. Additions reflect the costs
recorded in the fourth quarter of 2001 related to exiting these operations.
17
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of The ServiceMaster Company:
We have audited in accordance with auditing standards generally accepted in the
United States, the financial statements included in The ServiceMaster Company's
annual report to shareholders incorporated by reference in this Form 10-K, and
have issued our report thereon dated January 24, 2002. Our audit was made for
the purpose of forming an opinion on those statements taken as a whole. The
schedules included in Part IV in the Form 10-K are the responsibility of
ServiceMaster's management and are presented for purposes of complying with the
Securities and Exchange Commission's rules and are not part of the basic
financial statements. These supporting schedules have been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, fairly state in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
Arthur Andersen LLP
Chicago, Illinois
January 24, 2002
18
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
Registrant
Date: March 25, 2002 By /s/ JONATHAN P. WARD
-------------------------------
Jonathan P. Ward
President 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/ C. WILLIAM POLLARD Chairman and Director March 27, 2002
- ---------------------------
C. William Pollard
/s/ JONATHAN P. WARD President, Chief Executive March 25, 2002
- ---------------------- Officer and Director
Jonathan P. Ward
/s/ STEVEN C. PRESTON Executive Vice President and March 27, 2002
- ---------------------- Chief Financial Officer (Principal
Steven C. Preston Financial Officer and Principal
Accounting Officer)
/s/ PAUL W. BEREZNY, JR. Director March 8, 2002
- ---------------------------
Paul W. Berezny, Jr.
/s/ CARLOS H. CANTU Director March 20, 2002
- ---------------------------
Carlos H. Cantu
/s/ BRIAN GRIFFITHS Director March 20, 2002
- ---------------------------
Brian Griffiths
/s/ SIDNEY E. HARRIS Director March 8, 2002
- ---------------------------
Sidney E. Harris
/s/ HERBERT P. HESS Director March 8, 2002
- ---------------------------
19
Herbert P. Hess
/s/ MICHELE M. HUNT Director March 17, 2002
- ---------------------------
Michele M. Hunt
/s/ JAMES D. McLENNAN Director March 8, 2002
- ----------------------
James D. McLennan
/s/ VINCENT C. NELSON Director March 8, 2002
- ----------------------
Vincent C. Nelson
/s/ DALLEN W. PETERSON Director March 17, 2002
- ---------------------------
Dallen W. Peterson
/s/ DONALD G. SODERQUIST Director March 22, 2002
- ------------------------
Donald G. Soderquist
/s/ CHARLES W. STAIR Director March 8, 2002
- ---------------------------
Charles W. Stair
/s/ DAVID K. WESSNER Director March 8, 2002
- ---------------------------
David K. Wessner
20
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 Current Report on Form 8-K, No. 2 dated February 26,
1998 (File No. 1-4762) (the "1998 8-K, No. 2").
3(ii) Bylaws of The ServiceMaster Company as amended through September 29,
2000 are incorporated by reference to Exhibit 1.4 to Amendment No. 1
to Form 8-A/A dated October 6, 2000 (File No. 1-14762).
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 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 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 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 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 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 Registration
Statement on Form S-3 (File No. 333-91381) (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 Quarterly Report on
Form 10-Q dated May 15, 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.
21
4.13 Form of 7.875% Note due August 15, 2009 is incorporated by reference
to Exhibit 4 to the 1999 8-K.
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 among The ServiceMaster Company, the
Lenders, JPMorgan Chase Bank, Bank of America, Bank One N.A., First
Union National Bank and SunTrust Bank dated as of December 12, 2001.
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 1999 10-K.
10.2* Form of Directors Deferred Fees Plan is incorporated by reference to
Exhibit 10.18 to the ServiceMaster Limited Partnership Annual Report
on Form 10-K for the year ended December 31, 1990 (File No. 1-09378)
(the "1990 10-K").
10.3* Form of Directors Deferred Fees Agreement is incorporated by reference
to Exhibit 10.19 of the 1990 10-K.
10.4* Form of Deferred Fees Plan Trust is incorporated by reference to
Exhibit 10.20 to the 1990 10-K.
10.5* 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").
10.6* 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.
10.7* 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) (the "1994
S-8").
10.8* 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.
10.9* 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").
10.10* Form of Option Agreement for the 1997 Share Option Plan is
incorporated by reference to Exhibit 10.29 to the 1996 10-K.
10.11* 1998 Equity Incentive Plan is incorporated by reference to Exhibit
10.15 to the 1997 10-K.
10.12* 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.
10.13* 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.
22
10.14* 1998 Non-Employee Directors Discounted Stock Option Plan is
incorporated by reference to Exhibit 10.21 to the 1997 10-K.
10.15* 1998 Long-Term Performance Award Plan is incorporated by reference to
Exhibit 10.22 to the 1997 10-K.
10.16* 2000 Equity Incentive Plan is incorporated by reference to Exhibit 4.4
to the Registration Statement on Form S-8 (File No. 333-42680) (the
"2000 S-8").
10.17* Form of Option Agreement for the 2000 Equity Incentive Plan.
10.18* Employment Agreement of Jonathan P. Ward dated as of January 9, 2001
is incorporated by reference to Exhibit 10.19 to the 2000 10-K.
10.19* Stock Option Agreement of Jonathan P. Ward dated as of January 9, 2001
is incorporated by reference to Exhibit 10.20 to the 2000 10-K.
10.20* WeServeHomes.com 2000 Stock Option/Stock Issuance Plan is incorporated
by reference to Exhibit 10.21 to the 2000 10-K.
10.21* 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.
10.22* 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.
10.23* 2001 Directors Stock Plan is incorporated by reference to Exhibit B to
the Proxy Statement dated March 23, 2001 (File No. 1-14762).
10.24* Form of Option Agreement for the 2001 Directors Stock Plan is
incorporated by reference to Exhibit 4.4 to the Registration Statement
on Form S-8 (File No. 333-65520).
10.25* Letter Agreement with Carlos Cantu dated as of June 1, 2001 is
incorporated by reference to Exhibit 10.1 to the Quarterly Report on
Form 10-Q dated August 14, 2001 (File No. 1-14762) (the "2001 2nd
Quarter 10-Q").
10.26* Letter Agreement with Charles Stair dated as of July 1, 2001 is
incorporated by reference to Exhibit 10.2 to the 2001 2nd Quarter
10-Q.
10.27* Letter Agreement with C. William Pollard dated as of March 21, 2002.
10.28* Employment Agreement of Phillip B. Rooney dated as of November 30,
2001.
10.29* 2001 Long-Term Performance Award Plan, as amended March 16, 2001 is
incorporated by reference to Exhibit 10.2 to the Quarterly Report on
Form 10-Q dated May 15, 2001 (File No. 1-14762) (the "2001 1st Quarter
10-Q").
10.30* Form of Change in Control Severance Agreement.
10.31* Form of Restricted Stock Award Agreement for the 2000 Equity Incentive
Plan.
23
10.32* ServiceMaster Deferred Compensation Plan, as amended and restated
effective March 16, 2001, is incorporated by reference to Exhibit 10.3
to the 2001 1st Quarter 10-Q.
10.33* Form of 5.50% Convertible Debenture due January 9, 2011 issued to
Jonathan P. Ward.
10.34* Form of 5.50% Note due January 9, 2011 issued to Jonathan P. Ward.
10.35* Form of 5.50% Convertible Debenture due May 10, 2011 issued to
Jonathan P. Ward.
10.36* Form of 5.50% Note due May 10, 2011 issued to Jonathan P. Ward.
10.37* ServiceMaster Employee Share Purchase Plan, as amended and restated
effective October 4, 2001.
11 Exhibit regarding detail of income per share computation for each of
the three years ended December 31, 2001, 2000 and 1999 is incorporated
by reference to the footnote on page 34 of the 2001 Annual Report
(defined in Exhibit 13).
13 Annual Report to Shareholders for the year ended December 31, 2001
(the "2001 Annual Report"). The parts of the 2001 Annual Report which
are expressly incorporated into this report by reference shall be
deemed filed with this report. All other parts of the 2001 Annual
Report are furnished for the information of the Commission and are not
filed with this report.
21 Subsidiaries of ServiceMaster.
23 Consent of Arthur Andersen LLP.
- ----------------
* Indicates compensatory plan, contract, or arrangement.
24
EXHIBIT 21
SUBSIDIARIES OF THE SERVICEMASTER COMPANY
As of March 1, 2002, 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
ServiceMaster Residential/Commercial Services Management Corporation.......................................Delaware
Merry Maids Limited Partnership............................................................................Delaware
Merry Maids, Inc. ........................................................................................Delaware
American Home Shield Corporation 2.........................................................................Delaware
AmeriSpec, Inc. ..........................................................................................Delaware
Furniture Medic Limited Partnership........................................................................Delaware
Furniture Medic, Inc. ....................................................................................Delaware
American Residential Services L.L.C. 3.....................................................................Delaware
ServiceMaster Aviation L.L.C...............................................................................Illinois
ServiceMaster Employer Services, Inc. 4....................................................................Delaware
The ServiceMaster Acceptance Company Limited Partnership...................................................Delaware
ServiceMaster AM Limited Partnership.......................................................................Delaware
ServiceMaster Acceptance Corporation.......................................................................Delaware
ServiceMaster Holding Corporation..........................................................................Delaware
ServiceMaster BSC L.L.C....................................................................................Delaware
ServiceMaster Funding Company L.L.C........................................................................Delaware
The ServiceMaster Company Limited Partnership..............................................................Delaware
ServiceMaster Management Corporation.......................................................................Delaware
Steward Insurance Company...................................................................................Vermont
ServiceMaster Limited................................................................................United Kingdom
ServiceMaster Japan, Inc. ...................................................................................Japan
- --------
1 .......TruGreen LandCare L.L.C. has 15 subsidiaries.
2 .......American Home Shield Corporation has 13 subsidiaries through which it
carries on its business in the various states in which it markets its
products.
3 .......American Residential Services L.L.C. has 23 subsidiaries.
4........ServiceMaster Employer Services has 4 subsidiaries.
1
Terminix Ltd.........................................................................................United Kingdom
LTCS Investment Limited Partnership........................................................................Delaware
We Serve America, Inc. ...................................................................................Delaware
The ServiceMaster Home Service Center L.L.C................................................................Delaware
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EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this Form 10-K and in The ServiceMaster Company's
previously filed Registration Statement File Nos. 333-81670, 333-73764,
333-65520, 333-53142, 333-50886, 333-42680, 333-33580, 333-78239, 333-74781 and
033-55761 on Form S-8, No. 333-91381 on Form S-3, and 333-75069 on Form S-4 of
our report dated January 24, 2002 of The ServiceMaster Company's Annual Report
to Shareholders for the year ended December 31, 2001. It should be noted that we
have not audited any financial statements of ServiceMaster subsequent to
December 31, 2001, or performed any audit procedures subsequent to the date of
our report.
Arthur Andersen LLP
Chicago, Illinois
March 28, 2002