Exhibit 1 to Form 8-K
- ---------------------
For further information contact:
Claire Buchan, VP Comm, (630)271-2150
Bruce Duncan, VP IR, (630)271-2187
Steve Preston, CFO, (630)271-2637
FOR IMMEDIATE RELEASE
January 26, 1999
SERVICEMASTER ACHIEVES 28TH CONSECUTIVE
YEAR OF REVENUE AND PROFIT GROWTH
DOWNERS GROVE, Illinois -- ServiceMaster (NYSE:SVM) today
reported its 28th consecutive year of growth in revenue and profits.
Customer level revenue, which includes revenues earned by
ServiceMaster franchisees and international partners, increased 15
percent to $6.3 billion. Operating revenue for 1998 rose 19
percent to $4.7 billion. Net income of $190 million was up 16
percent over comparable 1997 income. Diluted earnings per share
also rose 16 percent to $.64. For the fourth quarter, revenue was
up 17 percent to $1.2 billion, net income rose 17 percent to $48
million and earnings per share increased 14 percent to $.16.
"Our results for 1998 reflect the continued strong revenue and
profit growth of our Consumer Services network," said
ServiceMaster President and Chief Executive Officer Carlos Cantu.
"In the future, we will continue to build on the strength of this
growing customer base by adding new service lines and expanding
our market share for existing service units. In addition to achieving
this record revenue and profit growth, 1998 was another year of
strong growth in cash flows."
ServiceMaster Consumer Services revenue for the year increased
23 percent and exceeded $2 billion for the first time. After-tax
profits were up 27 percent to $157 million, representing more than
three-quarters of ServiceMaster profits for the year. TruGreen-
ChemLawn posted strong revenue and profit growth, reflecting
increased customer counts, improved branch efficiencies and the
successful launch of the commercial landscape initiative. Terminix
reported excellent increases in revenue and profits, demonstrating
strong growth in both termite and pest control markets, positive
reception to new service initiatives, and improved customer
retention. American Home Shield posted exceptionally strong
revenue and profit growth as a result of accelerated sales of
warranty contracts sold through each of its distribution channels.
ServiceMaster Residential and Commercial Services and Merry
Maids achieved solid gains in revenue and profits, demonstrating
greater operational efficiencies and successful initiatives to bolster
sales and profitability in company-owned operations. Rescue
Rooter reported solid growth as it began expansion programs in
1998.
1
ServiceMaster Management Services revenue grew seven percent
to $2 billion. After-tax profits of $46 million from ongoing core
operations were down one percent from 1997. Healthcare
experienced success in offering bundled services to customers
through vertical sales and Integrated Service. This was offset,
however, by declining margins and ongoing challenges throughout
the healthcare market. Education posted very solid revenue and
profit increases, demonstrating record level customer retention and
good overhead controls. Business & Industry achieved gains in
revenues and profits, reflecting excellent sales, improved customer
retention and successful integration of acquisitions.
Earlier this month, ServiceMaster announced that it had formed a
strategic venture with Texas Utilities (TU) for the ownership and
operation of its energy management business. The venture
acquired the assets of ServiceMaster Energy Management and will
be owned 85 percent by TU and 15 percent by ServiceMaster. The
Company also announced it is exiting the third party management
and direct operation of home health care agencies, although it will
continue to provide consulting services to this market. The Energy
Management transaction resulted in a pre-tax gain of $38 million,
which was offset by charges relating primarily to home health care.
ServiceMaster serves more than 9 million customers in the United
States and in 38 countries around the world, with annual customer
level revenue exceeding $6.3 billion. ServiceMaster is a network
of quality service companies
with two major operating segments, ServiceMaster Consumer
Services and ServiceMaster Management Services.
ServiceMaster Consumer Services now includes eight market-
leading companies-- TruGreen-ChemLawn, Terminix, American
Home Shield, Rescue Rooter, ServiceMaster Residential and
Commercial Services, Merry Maids, AmeriSpec and Furniture Medic-
- - which operate through the ServiceMaster Quality Service Network
of approximately 5,800 U.S. Company-owned locations and
franchised businesses.
ServiceMaster Management Services is the leading facilities
management company serving health care, education, and business
and industrial facilities with management of plant operations and
maintenance, housekeeping, clinical equipment maintenance, food
service, laundry, grounds and energy.
In accordance with the Private Securities Litigation Reform Act of
1995, the Company notes that statements that look forward in
time, which include everything other than historical information,
involve risks and uncertainties that may affect the Company's
actual results of operations. Factors which could cause actual
results to differ materially include the following (among others):
weather conditions adverse to certain of the Company's Consumer
Services businesses, the entry of additional competitors in any of
the markets served by the Company, labor shortages, consolidation
of hospitals in the healthcare market, the condition of the
U.S. economy, the inability of key suppliers to achieve timely Y2K
compliance in their delivery systems or the inability of the Company
to make its own systems Y2K compliant, and other factors listed
from time to time in the Company's filings with the Securities and
Exchange Commission.
2
EXHIBIT 1
- ---------
THE SERVICEMASTER COMPANY
Consolidated Statements of Income
(In thousands, except per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
1998 1997 1998 1997
----------- ----------- ----------- -----------
Operating Revenue $ 1,224,611 $ 1,043,458 $ 4,724,119 $ 3,961,502
Operating Costs and Expenses:
Cost of services rendered
and products sold 977,074 814,816 3,679,612 3,058,160
Selling and administra-
tive expenses 148,531 139,761 648,085 559,409
----------- ----------- ----------- -----------
Total operating costs
and expenses 1,125,605 954,577 4,327,697 3,617,569
----------- ----------- ----------- -----------
Operating Income 99,006 88,881 396,422 343,933
Non-operating Expense (Income):
Interest expense 21,901 22,689 92,945 76,447
Interest and
investment income (3,385) (3,895) (15,301) (14,304)
Minority interest --- 1,315 --- 7,511
----------- ----------- ----------- -----------
Income before
Income Taxes 80,490 68,772 318,778 274,279
Provision for income taxes
(pro forma corporate form
in 1997, see note 1) 32,524 27,784 128,786 110,809
----------- ----------- ----------- -----------
Net Income (pro forma
corporate form in
1997, see note 1) $ 47,966 $ 40,988 $ 189,992 $ 163,470
=========== =========== =========== ===========
Per Share :
Basic (pro forma
corporate form in
1997, see note 1) $ 0.16 $ 0.15 $ 0.66 $ 0.57
======= ======= ======= =======
Diluted (pro forma
corporate form in
1997, see note 1) $ 0.16 $ 0.14 $ 0.64 $ 0.55
======= ======= ======= =======
Number of Shares -
Basic 296,368 274,338 289,315 285,944
Number of Shares -
Diluted 305,663 288,593 298,887 299,640
Cash Distributions
Per Share $ 0.09 $ 0.08 $ 0.33 $ 0.31
======= ======= ======= =======
Price Range Per Share:
High Price $23.81 $19.50 $25.50 $19.63
Low Price 16.00 14.00 16.00 10.88
- --------------------------------------------------------------------------------
Notes:
1.The company converted from partnership to corporate form on
December 26, 1997. The results shown above for the periods
ended December 31, 1997 have been restated to adjust the
actual historical information to a basis that assumes that
reincorporation had occurred as of the beginning of that year.
2.All share and per share data reflect the three-for-two share split
effective August 26, 1998.
3
EXHIBIT 2
- ---------
THE SERVICEMASTER COMPANY
Condensed Consolidated Balance Sheets
(In thousands) As Of
Dec. 31, Dec. 31,
Assets 1998 1997
Current Assets: ----------- -----------
Cash and cash equivalents $ 66,400 $ 64,876
Marketable securities 54,022 59,248
Receivables, net of allowances 372,375 299,138
Inventories and other current assets 177,405 170,822
----------- -----------
Total current assets 670,202 594,084
----------- -----------
Intangible assets, primarily trade names and
goodwill, net of accumulated amortization 1,884,002 1,563,309
Property and equipment, net of accum. deprec. 212,160 158,270
Notes receivable, l-t securities, and other 148,487 159,561
----------- -----------
Total assets $ 2,914,851 $ 2,475,224
=========== ===========
Liabilities and Equity
Current liabilities $ 753,697 $ 558,177
Long-term debt 1,076,167 1,247,845
Other long-term obligations 128,501 144,764
Shareholders' equity 956,486 524,438
----------- -----------
Total liab. and shareholders' equity $ 2,914,851 $ 2,475,224
=========== ===========
4
EXHIBIT 3
- ---------
Twelve Months Ended
Condensed Consolidated Statements of Cash Flows December 31,
(In thousands) 1998 1997
----------- -----------
Cash and Cash Equivalents at January 1 $ 64,876 $ 72,009
Cash Flows from Operations:
Net Income 189,992 329,076
Adjustments to reconcile net income to net
cash flows from operations:
Depreciation 50,644 45,392
Amortization 53,961 47,670
Tax asset recorded upon reincorporation --- (65,000)
Deferred 1998 tax payment 83,000 ---
Change in working capital, net of acquisition 26,315 14,470
Other, net 1,627 281
----------- -----------
Net Cash Provided from Operations 405,539 371,889
----------- -----------
Cash Flows from Investing Activities:
Property additions (75,297) (46,232)
Sale of equipment and other assets 6,941 4,134
Business acquisitions, net of cash acquired (222,452) (233,689)
Proceeds from sale of Energy Management 45,893 ---
Net purchases of investment securities (11,011) (16,753)
Notes receivable and financial investments (10,645) (3,593)
Payments to sellers of acquired businesses (10,271) (4,723)
----------- -----------
Net Cash Used for Investing Activities (276,842) (300,856)
----------- -----------
Cash Flows from Financing Activities:
Borrowings, net 310,190 888,528
Payment of borrowings and other obligations (564,448) (160,155)
Proceeds from stock offering 208,561 ---
Distributions to shareholders
and shareholders' trust (75,152) (155,883)
Purchase of ServiceMaster stock (18,310) (657,191)
Proceeds from employee share plans 12,638 6,526
Other (652) 9
----------- -----------
Net Cash Used for Financing Activities (127,173) (78,166)
----------- -----------
Cash Increase (Decrease) during the Period 1,524 (7,133)
----------- -----------
Cash and Cash Equivalents at December 31 $ 66,400 $ 64,876
=========== ===========
~
5