SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20547
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): April 14, 1998
THE SERVICEMASTER COMPANY
(Exact name of registrant as specified in its certificate)
Commission File Number: 1-14762
Delaware One ServiceMaster Way 36-3858106
Downers Grove, IL 60515
(State or other jurisdiction (Address of (I.R.S. Employer
of incorporation or executive office) Identification No.)
organization)
Registrant's telephone number, including area code: (630) 271-1300
Page 1
<PAGE>
Item 2. Acquisition of Quantum Resources Corporation
On April 14, 1998, The ServiceMaster Company, a Delaware corporation (the
"Company") announced the acquisition of Quantum Resources Corporation , a
temporary staffing company headquartered in Richmond, Virginia. The details of
this acquisition are set forth in the Company's news release dated April 14,
1998, a copy which is annexed to this Form 8-K as Exhibit 1. The acquisition did
not involve a significant amount of the Company's assets.
Item 5. Other Events
Issuance of News Release Regarding Results of First Quarter 1998 Operations
The Company announced the results of operations for the first three months of
1998 through a news release dated April 21, 1998, a copy of which is annexed to
this Form 8-K as Exhibit 2.
Item 7. Financial Statements and Exhibits
Financial Statements:
1. Condensed Consolidated Balance Sheets of The ServiceMaster
Company at March 31, 1998 and 1997 (annexed to the News
Release, Ex. 2).
2. Condensed Consolidated Statements of Cash Flows of The
ServiceMaster Company for the three months ended March 31,
1998 and 1997 (annexed to the News Release, Ex. 2).
3. Consolidated Statements of Income of The ServiceMaster
Company for the three months ended March 31, 1998 and 1997
(annexed to the News Release, Ex. 2).
Exhibits:
1. News Release dated April 14, 1998.
2. News Release dated April 21, 1998.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE SERVICEMASTER COMPANY
(Registrant)
By: /s/ Vernon T. Squires
Sr. Vice President and General Counsel
Dated: April 21, 1998
Page 2
Exhibit 1 of 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
April 14, 1998
SERVICEMASTER ANNOUNCES ACQUISITION
OF QUANTUM RESOURCES CORPORATION
DOWNERS GROVE, Illinois -- ServiceMaster (NYSE:SVM) today announced the
acquisition of Quantum Resources Corporation, a temporary staffing company
headquartered in Richmond, Virginia.
Quantum provides temporary staffing services to customers primarily in
technical areas, such as engineering and information technology. The company
serves a number of prominent Fortune 500 companies with staffing assignments
which average six months to one year. Quantum had 1997 revenues of approximately
$73 million and has eight branches located primarily in the southeastern United
States.
"The rapidly growing staffing industry offers strategic growth
opportunities for ServiceMaster," said Carlos Cantu, ServiceMaster President and
Chief Executive Officer. "Expansion into this industry capitalizes on our
strength in people development, provides us with the ability to offer another
valuable service to our Management Services customers, and increases our
flexibility in recruiting and placing service workers in some of our seasonal
Consumer Services businesses."
The staffing industry is estimated at $57 billion and is both highly
fragmented and rapidly growing. The technical and information technology sector
of the staffing industry has grown at a compounded annual growth rate of 18
percent over the last five years and 14 percent over the last year.
ServiceMaster serves more than 9 million customers in the United States
and in 38 countries around the world, with annual customer level revenue of $5.6
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. This segment
includes ServiceMaster Diversified Health Services, which provides development
and management services for subacute, rehabilitation, home health, long-term
care, senior living and pharmacy programs.
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, and other factors listed from time to
time in the Company's filings with the Securities and Exchange Commission.
Exhibit 2 of Form 8-K
FOR IMMEDIATE RELEASE
April 21, 1998
SERVICEMASTER ACHIEVES 15 PERCENT EPS GROWTH FOR
FIRST QUARTER
DOWNERS GROVE, Illinois -- ServiceMaster (NYSE:SVM) today reported record first
quarter revenues of $982 million, up 20 percent over first quarter 1997,
reflecting solid growth from base operations and acquisitions. Net income of $29
million was up slightly compared with pro forma 1997 results, with diluted
earnings per share increasing 15 percent to $.15 and basic earnings per share
increasing 23 percent to $.16.
Revenue growth for the quarter reflects the addition of ServiceMaster Employer
Services, which the Company formed through an acquisition of a professional
employer organization in August 1997. This had a significant impact on revenues,
but did not affect profits materially. While reported operating margins were 7.1
percent, operating margins excluding Employer Services increased 60 basis points
to 7.8 percent. Results also reflect the April 1997 repurchase by ServiceMaster
of Waste Management's 19 percent ownership interest (40.7 million shares on a
post-split basis) in ServiceMaster. This transaction increased interest expense
and reduced shares outstanding.
"We are pleased with the overall strength of our first quarter performance.
Positive response to marketing initiatives, favorable demographic trends and
high levels of customer satisfaction create exciting growth opportunities and
ongoing momentum for ServiceMaster. Our enterprise's consistent growth for 109
straight quarters reflects the value of our diverse network of services and
commitment to quality." said ServiceMaster President and Chief Executive Officer
Carlos H. Cantu.
ServiceMaster Consumer Services, which accounted for 68 percent of the Company's
1997 operating income, achieved excellent double-digit growth in both revenues
and profits. Each company in the segment posted double-digit profit increases
and the segment as a whole benefited from improving margins, controlled overhead
spending, and favorable weather conditions. TruGreen-ChemLawn reported
outstanding results. Positive preseason marketing results, early-Spring
production, and greater operating efficiencies created strong momentum for this
unit. Terminix had very strong revenue and profit growth, reflecting solid
increases in termite completions and renewals, improved efficiencies, strong
pest control results, and successful integration of tuck-in acquisitions.
American Home Shield achieved strong revenue increases and superb profit growth,
with solid continued gains in all aspects of the business. The performance of
the Company's franchise operations was also strong.
ServiceMaster Management Services reported modest revenue growth, with profits
below the prior year. The Healthcare unit achieved modest increases in revenue,
with lower profits partially attributable to investments in the business and
transitional factors in the industry. Profitability in the Education sector
increased as a result of operating efficiencies and improved customer retention,
with revenues unchanged from 1997. The Business & Industry Group posted modest
revenue increases.
ServiceMaster serves more than 9 million customers in the United States and in
38 countries around the world, with annual customer level revenue of $5.6
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 marketleading 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. This segment includes
ServiceMaster Diversified Health Services, which provides development and
management services for subacute, rehabilitation, home health, long-term care,
senior living and pharmacy programs.
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, and other factors listed from time to
time in the Company's filings with the Securities and Exchange Commission.
THE SERVICEMASTER COMPANY
Consolidated Statements of Income
(In thousands, except per share data)
Three Months Ended
Mar. 31,
1998 1997
---------- ----------
Operating Revenue $ 981,788 $ 817,136
Operating Costs and Expenses:
Cost of services rendered and products sold 794,797 657,145
Selling and administrative expenses 117,218 101,391
---------- ----------
Total operating costs and expenses 912,015 758,536
---------- ----------
Operating Income 69,773 58,600
Non-operating Expense (Income):
Interest expense 24,095 10,392
Interest and investment income (3,435) (2,567)
Minority interest - 2,148
---------- ----------
Income before Income Taxes 49,113 48,627
Provision for income taxes
(pro forma in 1997, see note 1) 19,843 19,645
---------- ----------
Net Income (pro forma in 1997, see note 1) $ 29,270 $ 28,982
========== ==========
Per share (1 and 2):
Basic (pro forma in 1997, see note 1) $0.16 $0.13
========== ==========
Diluted (pro forma in 1997, see note 1) $0.15 $0.13
========== ==========
Cash Distributions Per Share $0.12 $0.11
========== ==========
Price Range Per Share:
High Price $29.44 $18.50
Low Price $24.75 $16.38
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Notes:
1. The Company converted from partnership to corporate form on December 26,
1997. However, the results shown above for the period ended March 31, 1997
have been restated to adjust the actual historical information for that
period to a basis that assumes that reincorporation had occurred as of the
beginning of that year. Actual net income, as previously reported (i.e.
excluding the effects of pro forma federal and state income taxes), was
$46,860 (basic and diluted net income per share was $.22 and $.21,
respectively).
2. The Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" which requires the dual presentation of basic and
diluted earnings per share. Basic earnings per share replaces the previously
required presentation of primary earnings per share. All share and per share
data reflect the three-for-two share split in June 1997.
- ----------------------------------------------------------------------
THE SERVICEMASTER COMPANY
Condensed Consolidated Balance Sheets
(In thousands)
As Of
Mar. 31, Dec. 31,
Assets 1998 1997
Current Assets: ---------- ----------
Cash and marketable securities, including
cash and cash equivalents
of $32,860 and $64,876, respectively $ 97,319 $ 124,124
Receivables, net of allowances 315,371 299,138
Inventories and other current assets 249,572 170,822
---------- ----------
Total current assets 662,262 594,084
---------- ----------
Intangible assets, primarily trade names and
goodwill, net of accumulated amortization 1,692,702 1,563,309
Property and equipment, net of accum. deprec. 182,769 158,270
Notes receivable, l-t securities, and other 160,498 159,561
---------- ----------
Total assets $2,698,231 $2,475,224
========== ==========
Liabilities and Equity
Current liabilities $ 627,132 $ 558,177
Long-term debt 1,379,936 1,247,845
Other long-term obligations 142,296 144,764
Shareholders' equity 548,867 524,438
---------- ----------
Total liab. and shareholders' equity $2,698,231 $2,475,224
========== ==========
Condensed Consolidated Statements of Cash Flows
(In thousands) Three Months Ended
March 31,
1998 1997
---------- ----------
Cash and Cash Equivalents at January 1 $ 64,876 $ 72,009
Cash Flows from Operations:
Net Income 29,270 46,860
Adjustments to reconcile net income to net
cash flows from operations:
Depreciation 11,639 10,972
Amortization 9,598 7,428
Change in working capital, net of acquisitions (40,425) (36,152)
Other, net 2,503 1,320
---------- ----------
Net Cash Provided from Operations 12,585 30,428
---------- ----------
Cash Flows from Investing Activities:
Business acquisitions, net of cash acquired (106,481) (96,405)
Property additions (23,354) (12,970)
Payments to sellers of acquired businesses (3,757) (1,062)
Notes receivable and financial investments (1,012) (1,558)
Sale of equipment and other assets 748 553
Net purchases of investment securities (639) (763)
---------- ----------
Net Cash Used for Investing Activities (134,495) (112,205)
---------- ----------
Cash Flows from Financing Activities:
Long-term borrowings, net 123,242 100,785
Payment of borrowings and other obligations (10,586) (14,618)
Distributions to shareholders
and shareholders' trust (22,124) (24,815)
Purchase of ServiceMaster shares (4,018) (10,151)
Proceeds from employee share option plans 1,990 1,957
Distributions to holders of minority interests - (208)
Other 1,390 -
---------- ----------
Net Cash Provided from Financing Activities 89,894 52,950
---------- ----------
Cash Decrease during the Period (32,016) (28,827)
---------- ----------
Cash and Cash Equivalents at March 31 $ 32,860 $ 43,182
========== ==========
