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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
X ANNUAL REPORT PURSUANT TO SECTION 15 (D) OF THE SECURITIES EXCHANGE
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ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
___ TRANSITION REPORT PURSUANT TO SECTION 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ____________ to _______________
Commission file number 1-14762
SERVICEMASTER PROFIT SHARING AND RETIREMENT PLAN
The ServiceMaster Company
One ServiceMaster Way
Downers Grove, Illinois 60515
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Committee and Plan administrators have duly caused this annual report to be
signed by the undersigned thereunto duly authorized.
SERVICEMASTER PROFIT SHARING AND RETIREMENT PLAN
By:_____________________________________________________
DEBORAH A. O'CONNOR
SENIOR VICE PRESIDENT AND CONTROLLER
By:_____________________________________________________
ERIC R. ZARNIKOW
SENIOR VICE PRESIDENT AND TREASURER
Date: June 22, 2000
2
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SERVICEMASTER PROFIT SHARING AND RETIREMENT PLAN
Financial Statements and Schedules
As of December 31, 1999 and 1998
Together With Auditors' Report
Employer Identification Number 36-3858106
Plan Number 001
3
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SERVICEMASTER PROFIT SHARING AND RETIREMENT PLAN
DECEMBER 31, 1999 AND 1998
(EMPLOYER IDENTIFICATION NUMBER 36-3858106, PLAN NUMBER 001)
TABLE OF CONTENTS
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Benefits as of
December 31, 1999 and 1998 Exhibit I
Statement of Changes in Net Assets Available for Benefits
for the Year Ended December 31, 1999 Exhibit II
NOTES TO FINANCIAL STATEMENTS AND SCHEDULES
SCHEDULES:
Schedule of Assets Held for Investment Purposes as of
December 31, 1999 Schedule I
Schedule of Reportable Transactions for the Year Ended
December 31, 1999 Schedule II
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Administrative Committee of the
ServiceMaster Profit Sharing and Retirement Plan
We have audited the accompanying statements of net assets available for benefits
of the ServiceMaster Profit Sharing and Retirement Plan as of December 31, 1999
and 1998, and the related statement of changes in net assets available for
benefits for the year ended December 31, 1999. These financial statements are
the responsibility of the Plan's Administrative Committee. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the
ServiceMaster Profit Sharing and Retirement Plan as of December 31, 1999 and
1998, and the changes in net assets available for benefits for the year ended
December 31, 1999, in conformity with generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of Assets Held
for Investment Purposes and Reportable Transactions are presented for the
purpose of additional analysis and are not a required part of the basic
financial statements but are supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. These supplemental
schedules are the responsibility of the Plan's Administrative Committee. The
supplemental schedules have been subjected to the auditing procedures applied in
the audits of the basic financial statements and, in our opinion, are fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
Arthur Andersen LLP
Chicago, Illinois
June 22, 2000
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EXHIBIT I
SERVICEMASTER PROFIT SHARING AND RETIREMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 1999 AND 1998
(EMPLOYER IDENTIFICATION NUMBER 36-3858106, PLAN NUMBER 001)
1999 1998
ASSETS: ------------ ------------
Investments (Note 3) ................... $341,971,365 $274,998,811
Non-interest bearing cash .............. 32,675 --
Receivables-
Employer contribution ............. 10,689,819 2,870,786
Participant contributions ......... 568,587 872,966
Other ............................... -- 926,898
----------- -----------
Total receivables .............. 11,258,406 4,670,650
----------- -----------
Total Assets .......................... 353,262,446 279,669,461
LIABILITIES:
Accounts Payable ...................... -- 384,206
----------- ------------
NET ASSETS AVAILABLE FOR BENEFITS .......... $353,262,446 $279,285,255
============ ============
The accompanying Notes to Financial Statements and Schedules
are an integral part of these statements.
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EXHIBIT II
SERVICEMASTER PROFIT SHARING AND RETIREMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1999
(EMPLOYER IDENTIFICATION NUMBER 36-3858106, PLAN NUMBER 001)
ADDITIONS:
Additions to net assets attributed to-
Investment income-
Net depreciation in fair value of investments $(80,388,386)
Interest 10,036,394
Dividends 2,691,002
---------
Total investment income (67,660,990)
-----------
Contributions-
Participant 19,207,212
Employer 10,689,819
----------
Total contributions 29,897,031
----------
Total net additions (reductions) (37,763,959)
-----------
DEDUCTIONS:
Deductions from net assets attributed to-
Benefits paid to participants 39,354,083
----------
TRANSFERS TO THE PLAN (NOTE 1) 151,095,233
-----------
Net increase 73,977,191
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 279,285,255
-----------
End of year $353,262,446
============
The accompanying Notes to Financial Statements and Schedules are an integral
part of this statement.
7
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SERVICEMASTER PROFIT SHARING AND RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS AND SCHEDULES
DECEMBER 31, 1999 AND 1998
1. DESCRIPTION OF PLAN
The ServiceMaster Profit Sharing and Retirement Plan (the "Plan") is a
defined contribution plan established by ServiceMaster Company (the
"Company") and its affiliates and subsidiaries to whom the Plan has been
extended to provide eligible employees with a program to save for retirement.
The Plan was amended and restated effective as of July 1, 1999. It is subject
to the provisions of the Employee Retirement Income Security Act of 1974
("ERISA"), as amended. The following description of the Plan provides only
general information. Participants should refer to the Plan agreement for a
more complete description of the Plan's provisions.
1999 PLAN CHANGES
During 1999, the Plan transitioned from the direction of the investment of
assets in the Plan by ServiceMaster to a "Participant-Directed" plan where
the participants direct the investment of assets in their accounts, except
that one-half of Company contributions to the Plan is invested in the
ServiceMaster common stock fund (See Note 4). Putnam Fiduciary Trust Company
("Trustee") has been appointed to hold, invest, and administer the assets of
the Plan in accordance with the service agreement and trust agreement.
Additionally, in connection with the Plan change, the service partner plans
No. 002, No. 003, No. 004, No. 005, No. 006, No. 007, and No. 008 were merged
into the Plan effective July 1, 1999. The Consumer Services Profit Sharing
Plan was also merged into the Plan effective July 1, 1999. The balances
transferred from the aforementioned plans to the Plan were as follows:
o Service Partners Education Company Profit
Sharing, Savings and Retirement Plan - Plan No. 002 $ 1,593,007
o Service Partners Aviation Company Profit
Sharing, Savings and Retirement Plan - Plan No. 003 36,392
o Service Partners Health Care Company Profit
Sharing, Savings and Retirement Plan - Plan No. 004 1,047,962
o Service Partners Long Term Care Company Profit
Sharing, Savings and Retirement Plan - Plan No. 005 449,796
o Service Partners Food Service Company Profit
Sharing, Savings and Retirement Plan - Plan No. 006 596,714
o Service Partners ICMS Company Profit
Sharing, Savings and Retirement Plan - Plan No. 007 284,036
o Service Partners Diversified Health Services Company
Profit Sharing, Savings and Retirement Plan - Plan No. 008 522,434
o Consumer Services Profit Sharing Plan 146,564,892
-----------
Total transfers to the Plan $ 151,095,233
=============
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ELIGIBILITY
Full and part-time employees who have completed one year of service and are
at least 18 years of age are eligible to participate in the Plan. Leased
employees and employees who are or who become covered by a collective
bargaining agreement, which does not allow for Plan participation, are not
eligible to participate in the Plan.
PARTICIPANT CONTRIBUTIONS
Participants may elect to contribute a minimum of 1% up to a maximum of
15% of pretax annual compensation, as defined in the Plan, subject to
certain limitations. The first 4% of pretax compensation (base
contribution) contributed to the Plan is eligible for an employer matching
contribution. Participants may also contribute amounts representing
distributions from other qualified plans. Participants direct the
investment of their contributions into various investment options offered
by the Plan, which currently consist of a ServiceMaster Company stock
fund, six mutual funds and three common/collective trust funds.
EMPLOYER CONTRIBUTIONS
The Company's contribution is discretionary and the amount of contribution
from Company profits is determined each year by the Board of Directors
after a review of the overall financial performance of ServiceMaster and
the key business units. The matching contribution may differ for different
employee groups. One-half of the Company matching contribution is invested
directly in the ServiceMaster Company common stock fund and the other
one-half is invested per the participants' direction.
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's contribution
and allocations of (a) the Company's contribution, (b) Plan earnings (c)
and forfeitures. The participant's accounts are charged with
administrative fees, where applicable. Allocations are based on
participant contributions or account balances, as defined. The benefit to
which a participant is entitled is the benefit that can be provided from
the participant's vested account.
VESTING
Participants are vested immediately in their contributions plus actual
earnings thereon. Participants become immediately vested upon permanent
disability or death. Vesting in the Company's contribution is based on the
following schedule:
COMPLETED YEARS PERCENT
OF SERVICE VESTED
Less than 2 years of service 0%
2 years of service but less than 3 25
3 years of service but less than 4 50
4 years of service but less than 5 75
5 years of service or more 100
=====
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FORFEITURES
Forfeitures are used first to reinstate all rehired participants'
forfeitures and then are allocated to eligible participants in the same
manner as employer profit sharing contributions.
PARTICIPANT LOANS
Participants may borrow from their fund accounts a minimum of $500 up to a
maximum of $50,000 or 50 percent of their account balance (excluding
employer matching contributions), whichever is less, minus your highest
outstanding loan balance in the previous 12 months. The loan is secured by
the balance in the participant's account and bear interest at the prime
interest rate as listed in The Wall Street Journal on the first business
day of the month in which the loan is issued, plus 1%.
BENEFIT PAYMENTS
A participant may elect to have the value of their vested account (minus
any outstanding loan balance) distributed to them upon permanent
disability, upon reaching normal retirement age (65), or upon termination
of employment. A participant may elect to receive either a lump-sum amount
equal to the value of the participant's vested interest in their account,
or monthly, quarterly, or annual installments for a specified number of
years not to exceed the participant's life expectancy and that of their
beneficiary. At the time of distribution, shares of ServiceMaster stock in
the participant's account can be taken in kind or in cash.
TERMINATION OF THE PLAN
The Company currently intends to continue the Plan indefinitely. However,
the Company has the right under the Plan to discontinue contributions and
terminate the Plan at any time, subject to the provisions of ERISA. If the
Plan is terminated, Plan participants will be fully vested in their
participant account balances.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements of the Plan are prepared under the accrual method
of accounting.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Plan's Administrative
Committee to make estimates and assumptions that affect the reported
amounts of assets and liabilities. These estimates could differ from
actual results.
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INVESTMENT VALUATION AND INCOME RECOGNITION
The Plan's investments are stated at fair value based on quoted market
prices or estimated fair value as reported by the Plan's Trustee. Shares
of mutual funds are valued at the net asset value of shares held by the
Plan at year-end.
Purchases and sales of securities are recorded on a trade-date basis.
Dividends are recorded on the ex-dividend date.
PAYMENT OF BENEFITS
Benefit payments are recorded when paid.
RECLASSIFICATION
Certain amounts in the 1998 statement of net assets have been reclassified
to conform to the 1999 presentation.
3. INVESTMENTS
The following presents investments that represent 5% or more of the Plan's
net assets as of December 31, 1999 and 1998. As discussed in Note 1,
during 1999 the Company transitioned from a plan in which the Company
directed the investment of the Plan's assets to a participant-directed
plan. With this change, the Plan's net assets were transferred from a
Master Trust to individual investment funds administered by Putnam
Fiduciary Trust Company.
<TABLE>
<CAPTION>
1999 1998
--------------- -----------------
<S> <C> <C>
Putnam Bond Index Fund, 7,089,941 shares $ 69,906,821 $ -
Putnam Investors Fund, 1,078,134 shares 20,754,072 -
The George Putnam Fund of Boston CL Y, 1,865,626 shares -
30,428,353
The Putnam Fund for Growth & Income CL Y, 1,106,475 shares -
20,768,541
Putnam S&P 500 Index Fund, 543,528 shares 18,990,873 -
Putnam Stable Value Fund, 53,092,315 53,092,315 -
ServiceMaster Company Common Stock, 9,090,898 shares -
111,931,680*
Plan interest in ServiceMaster Master Trust - 274, 998, 811**
=============== ====================
</TABLE>
*Includes both participant and nonparticipant-directed amounts.
**Nonparticipant-directed.
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During 1999, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year) depreciated in
value by $(80,388,386) as follows:
Mutual funds $ (4,660,898)
Common collective trust funds 1,734,730
Common stock (76,303,915)
Government/corporate bond (1,158,303)
----------
$ (80,388,386)
===============
Included in other receivables as of December 31, 1998 was accrued interest
and dividend income. The accounts payable amount at December 31, 1998
relates to management and trust fees owed by the plan. In 1999, there are
no comparable balances because the Plan values its investments on a daily
basis with all investment income and expenses included in the investment
balance.
4. NONPARTICIPANT-DIRECTED INVESTMENT
Prior to July 1, 1999, the Company directed the Plan's investments.
Effective July 1, 1999, the Plan transitioned to a participant-directed
Plan, except that one-half of the Company's matching contribution is
invested directly in ServiceMaster Company common stock. Participants, at
their discretion, may also direct their investment to ServiceMaster
Company common stock. Information about the net assets as of December 31,
1999 and 1998, and the significant components of the changes in the net
assets for the year ended December 31, 1999, of the ServiceMaster Company
common stock fund, which is the only fund that includes
nonparticipant-directed investment, is as follows:
1999 1998
------------- ------------
NET ASSETS:
ServiceMaster Company Common Stock $ 111,931,680 $ 150,509,704
CHANGES IN NET ASSETS:
Additions:
Contributions $ 506,461
Dividends 2,691,002
Net transfer from participant-directed 13,036,622
investments
Transfers to the Plan (see Note 1) 29,346,671
Deductions:
Benefits paid to participants 7,854,865
Net depreciation 76,303,915
--------------
Net Change in net assets $ (38,578,024)
==============
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5. TAX STATUS OF THE PLAN
The Plan received a favorable determination letter from the Internal
Revenue Service dated February 26, 1996. The Plan was amended and restated
effective July 1, 1999. However, the plan administrator believes that the
Plan is currently designed and being operated in compliance with the
applicable requirements of the Internal Revenue Code. Therefore, the plan
administrator believes that the Plan was qualified and the related trust
was tax-exempt as of the financial statement dates.
6. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of net assets available for benefits per
the financial statements to the Form 5500 as of December 31, 1999 and
1998:
1999 1998
------------ ------------
Net assets available for benefits per the
financial statements $353,262,446 $279,285,255
Amounts allocated to withdrawing
participants - (5,960,804)
------------- -------------
Net assets available for benefits per the
Form 5500 $353,262,446 $273,324,451
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500 for the year ended December 31,
1999:
Benefits paid to participants per the financial
statements $ 39,354,083
Add: Amounts allocated to withdrawing participants
as of December 31, 1999 -
Less: Amounts allocated to withdrawing
participants as of December 31, 1998 (5,960,804)
Benefits paid to participants per the
Form 5500 $ 33,393,279
=============
Amounts allocated to withdrawing participants are recorded on the Form
5500 for benefit claims that have been processed and approved for payment
prior to December 31, but not yet paid as of that date.
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SCHEDULE I
SERVICEMASTER PROFIT SHARING AND RETIREMENT PLAN
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AS OF DECEMBER 31, 1999
(EMPLOYER IDENTIFICATION NUMBER 36-3858106, PLAN NUMBER 001)
CURRENT
IDENTITY OF ISSUE/ DESCRIPTION OF INVESTMENT COST VALUE
-------------------------------------------- ------- ------------
MUTUAL FUNDS:
*Putnam Investors Fund N/A $ 20,754,072
*The George Putnam Fund of Boston CL Y N/A 30,428,353
*The Putnam Fund for Growth & Income CL Y N/A 20,768,541
Vanguard Income Fund N/A 708,948
Vanguard Conservative Fund N/A 2,060,967
Vanguard Growth Fund N/A 5,267,037
COMMON COLLECTIVE TRUST FUNDS:
*Putnam Bond Index Fund N/A 69,906,821
*Putnam S&P 500 Index Fund N/A 18,990,873
*Putnam Stable Value Fund N/A 53,092,315
COMMON STOCK:
*ServiceMaster Company Common Stock $ 99,264,368 111,931,680
*PARTICIPANT LOANS N/A 8,061,758
============= -------------
$341,971,365
============
*Represents a party-in-interest.
The accompanying Notes to Financial Statements and Schedules are an integral
part of this schedule.
14
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<TABLE>
<CAPTION>
SCHEDULE II
SERVICEMASTER PROFIT SHARING AND RETIREMENT PLAN
SCHEDULE OF REPORTABLE TRANSACTIONS (A)
FOR THE YEAR ENDED DECEMBER 31, 1999
(EMPLOYER IDENTIFICATION NUMBER 36-3858106, PLAN NUMBER 001)
<S> <C> <C> <C> <C> <C> <C>
CURRENT VALUE
OF ASSET ON REALIZED
NUMBER OF PURCHASE SELLING COST OF TRANSACTION GAIN
IDENTITY OF PARTY INVOLVED TRANSACTIONS PRICE PRICE ASSET DATE (LOSS)
---------------------------------- ------------- --------- ---------- -------- ------------- ---------
(a) Represents transactions or a series of transactions related to
nonparticipant-directed investments in excess of 5% of the fair value of
Plan assets at the beginning of the year. There were no transactions that
qualified for this schedule.
The accompanying Notes to Financial Statements and Schedules are an integralpart of this schedule.
</TABLE>
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CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report, dated June 22, 2000, included in this Form 11-K, into the
ServiceMaster Profit Sharing and Retirement Plan's previously filed
Registration Statement File No. 333-89037.
Arthur Andersen LLP
Chicago, Illinois
June 22, 2000
16
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