For further information contact:
Ernie Mrozek (CFO) 901.766.1268
Bruce Byots (INV) 630.663.2906
Steven Bono (COM) 630.663.2150
FOR IMMEDIATE RELEASE
February 18, 2004
SERVICEMASTER ISSUES INFORMATION CONCERNING TAX
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TREATMENT OF DIVIDEND IN CURRENT AND PRIOR YEARS
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DOWNERS GROVE, IL, FEBRUARY 18, 2004 - The ServiceMaster Company (NYSE:
SVM) today announced that it currently expects that approximately 70% of its
2004 dividends on common stock will be taxable as dividend income for federal
income tax purposes. The Company currently expects that the taxable portion of
its dividend income will grow to be fully taxable by the year 2007 and will
provide updated guidance if and when necessary. Any portion that is not taxable
as dividend income would be treated as a non-taxable return of capital and would
generally be applied to reduce the cost basis of the shares.
The Company also announced that, based upon a further analysis of the
Company's earnings and profits, the dividends paid in 2000 are taxable as
dividend income for tax purposes, as originally reported. Therefore it will not
be necessary for the Company to issue amended forms 1099-DIV for the year 2000
or for shareholders to file amended returns for that year.
ServiceMaster is continuing to review the proper tax treatment of
dividends paid to shareholders in 2001 and 2002 and expects to provide
additional information for those years by December, 2004.
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It should be noted that this outcome is the result of the Company's
favorable tax position and does not affect the Company's reported financial
statements. Cash provided from operations in 2003 and in prior years has
significantly exceeded dividends paid to shareholders and is expected to
continue to do so. As previously reported, dividends are considered taxable only
when paid out of current or accumulated earnings and profits as defined under
federal tax laws. As a result of its December 1997 reincorporation, the Company
only began generating corporate earnings and profits for tax purposes in 1998.
Since 1998, earnings and profits for tax purposes, have been reduced by dividend
payments, amortization of intangibles for tax reporting purposes, deductions
relating to business closures and the timing of certain other tax-related items.
As a result and as previously announced, dividends paid in 2003 on the Company's
common stock are being treated as a non-taxable return of capital.
Company Overview
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ServiceMaster provides outsourcing services for more than 10.5 million
residential and commercial customers. As America's Service Brands for Home and
Business, the core service capabilities of ServiceMaster include lawn care and
landscape maintenance, termite and pest control, home warranty, plumbing,
heating and air conditioning services (HVAC), cleaning and disaster restoration,
furniture repair and home inspection.
These services are provided through a network of over 5,400
company-owned and franchised service centers and business units operating under
leading brands which include Terminix, TruGreen ChemLawn, TruGreen LandCare,
American Residential Services, Rescue Rooter, American Mechanical Services,
American Home Shield, ServiceMaster Clean, AmeriSpec, Merry Maids and Furniture
Medic.
Business Segments
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The Company is primarily comprised of five business segments: The
TruGreen segment includes the lawn care operations performed under the TruGreen
ChemLawn brand name and landscaping services provided under the TruGreen
LandCare brand
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name. The Terminix segment includes domestic termite and pest
control services. The American Residential Services and American Mechanical
Services segment includes heating, ventilation, air conditioning (HVAC) and
plumbing services provided under the ARS Service Express, Rescue Rooter and AMS
brand names.
The American Home Shield segment offers warranty contracts on home
systems and appliances and home inspection services through AmeriSpec. The Other
Operations segment includes the Company's franchised operations, which include
ServiceMaster Clean, Merry Maids, Furniture Medic, the Company's international
operations and headquarters.
Forward-Looking Statements
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This press release contains statements concerning the future tax
treatment of dividends that may be deemed to be "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. The
Company intends that these forward-looking statements, which look forward in
time and include everything other than historical information, be subject to the
safe harbors created by such legislation. The Company notes that these
forward-looking statements involve risks and uncertainties that could affect its
results of operations, financial condition or cash flows. Factors that could
cause actual results to differ materially from those expressed or implied in a
forward-looking statement include the following (among others): extreme weather
conditions that affect the demand for the Company's services; competition in the
markets served by the Company; labor shortages or increases in wage rates;
unexpected increases in operating costs, such as higher insurance, health care
or fuel prices; increased governmental regulation of telemarketing; general
economic conditions in the United States, especially as they may affect home
sales or consumer spending levels; time and expenses associated with integrating
and winding down businesses; and other factors described from time to time in
documents filed by the Company with the Securities and Exchange Commission.
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