<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
__x__ ANNUAL REPORT PURSUANT TO SECTION
15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1993
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 ______________________
ServiceMaster Profit Sharing, Savings and Retirement Plan
ServiceMaster Limited Partnership
One ServiceMaster Way
Downers Grove, Illinois 60515
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Committee and the Trustee have duly caused this annual report to be
signed by the undersigned thereunto duly authorized.
SERVICEMASTER PROFIT SHARING, SAVINGS
AND RETIREMENT PLAN
By: /s/ Laine E. Malmquist
---------------------------------------------
Laine E. Malmquist,
Vice President, Benefits
By: /s/ Deborah A. O'Connor
-----------------------------------------------
Deborah A. O'Connor,
Administrative Committee Member
By: /s/ Barbara A. Schram
-----------------------------------------------
Barbara A. Schram, Plan Manager
FIRST CHICAGO BANK, TRUSTEE
By: /s/ Frank D. Szymanek
-----------------------------------------------
Frank D. Szymanek, Vice President
Date: March 29, 1994.
1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Administrative Committee and Trustee of the
ServiceMaster Profit Sharing, Savings and Retirement Plan:
We have audited the accompanying statements of net assets
available for Plan benefits of the ServiceMaster Profit Sharing, Savings
and Retirement Plan as of December 31, 1993 and 1992, the related
statements of changes in net assets available for Plan benefits for each of
the three years in the period ended December 31, 1993, and the related
schedules of reportable transactions and assets held for investment as of
December 31, 1993. These financial statements and schedules are the
responsibility of the Plan's Administrative Committee. Our responsibility
is to express an opinion on these financial statements and schedules 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 and schedules are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and schedules. 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 and schedules referred to
above present fairly, in all material respects, the net assets available for
Plan benefits of the Plan as of December 31, 1993 and 1992 and the
changes in its net assets available for Plan benefits, for each of the three
years in the period ended December 31, 1993, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN & CO.
Chicago, Illinois,
March 25, 1994.
2
<PAGE>
<TABLE>
<CAPTION>
SERVICEMASTER PROFIT SHARING, SAVINGS AND RETIREMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
As of December 31,
1993 1992
---------------- -----------------
<S> <C> <C>
ASSETS:
Investments:
First Chicago Money Market
Funds, at market. . . . . . . . . . . . . . . . . . . . . . . . $ 682,778 $ 235,767
ServiceMaster Limited Partnership
Shares, at market - Note 2. . . . . . . . . . . . . . . . . . . 51,052,102 39,682,139
Liberty Life Group Pension Contract,
at market (net) - Note 2. . . . . . . . . . . . . . . . . . . . 80,124,621 51,907,843
Mortgage loan receivable, at cost which
approximates market - Note 2. . . . . . . . . . . . . . . . . . -- 2,000,000
----------- -----------
Total Investments . . . . . . . . . . . . . . . . . . . . . . . 131,859,501 93,825,749
Receivables:
Due from employers. . . . . . . . . . . . . . . . . . . . . . . . 2,120,222 3,391,481
Participant contributions . . . . . . . . . . . . . . . . . . . . 179,836 --
Income tax refund . . . . . . . . . .. . . . . . . . . . . . . . 48,038 54,874
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,968 16,355
----------- -----------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . 134,209,565 97,288,459
=========== ===========
LIABILITIES:
Payable to participants . . . . . . . . . . . . . . . . . . . . . 4,096,929 4,172,141
Due to ServiceMaster . . . . . . . . . . . . . . . . . . . . . . -- 116,435
Accounts payable - other . . . . . . . . . . . . . . . . . . . . 163,177 --
----------- -----------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . 4,260,106 4,288,576
----------- -----------
NET ASSETS AVAILABLE
FOR PLAN BENEFITS . . . . . . . . . . . . . . . . . . . . . . . $ 129,949,459 $ 92,999,883
============= ============
The accompanying Notes to Financial Statements
are an integral part of these statements.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
SERVICEMASTER PROFIT SHARING, SAVINGS AND RETIREMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
Years Ended December 31,
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . $ 92,999,883 $ 80,762,486 $ 53,780,973
----------- ----------- -----------
Additions:
Contributions:
Participant voluntary and rollover. . . . . . . . . . . . 4,860,582 3,742,280 2,807,164
Participant mandatory . . . . . . . . . . . . . . . . . . 1,109,594 1,148,002 1,034,507
Employer. . . . . . . . . . . . . . . . . . . . . . . . . 3,485,000 3,391,481 2,896,700
Interest income. . . . . . . . . . . . . . . . . . . . . . 145,215 302,954 1,078,921
ServiceMaster share
distributions. . . . . . . . . . . . . . . . . . . . . 1,763,726 2,182,094 3,046,629
Liberty Life Contract
income . . . . . . . . . . . . . . . . . . . . . . . . 2,296,446 1,632,612 --
Unrealized gains on investments. . . . . . . . . . . . . . 33,864,601 7,982,234 21,847,538
----------- ----------- -----------
Total Additions. . . . . . . . . . . . . . . . . . . . . . 47,525,164 20,381,657 32,711,459
----------- ----------- -----------
Deductions:
Equity applicable to former participants
(net of forfeitures of $162,629,
$161,803 and $129,108 in 1993,
1992, and 1991, respectively). . . . . . . . . . . . . 10,034,894 7,584,794 5,304,496
Provision for income taxes - Note 1 . . . . . . . . . . . . 336,836 426,126 61,500
Administrative expenses . . . . . . . . . . . . . . . . . . 203,858 133,340 363,950
----------- ----------- -----------
Total Deductions. . . . . . . . . . . . . . . . . . . . . . 10,575,588 8,144,260 5,729,946
----------- ----------- -----------
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . $129,949,459 $ 92,999,883 $ 80,762,486
=========== =========== ===========
The accompanying Notes to Financial Statements
are an integral part of these statements.
</TABLE>
4
<PAGE>
SERVICEMASTER PROFIT SHARING, SAVINGS
AND RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Asset Valuation - The investments of the ServiceMaster Profit Sharing,
Savings and Retirement Plan (the "Plan") are valued in the financial
statements at their respective year-end market values.
Basis of Accounting - The transactions of the Plan are accounted for
on the accrual basis.
Expenses of the Plan - Certain administrative expenses of the Plan
(including investment management fees and other plan expenses) were
paid from Plan assets.
Income Taxes - The Plan is required to pay federal income taxes
related to its share of taxable income from its direct holding of
ServiceMaster Limited Partnership shares.
Participating Employers - Employers participating in the Plan are
various subsidiaries and affiliates of ServiceMaster, including
ServiceMaster Management Services and ServiceMaster International and
New Business Development. Prior to 1993, participating subsidiaries and
affiliates also included ServiceMaster Residential/Commercial Services
Limited Partnership, Merry Maids Limited Partnership and American
Home Shield Corporation (see Note 2).
2. The Plan
Purpose - The purpose of the Plan emphasizes ownership and
opportunity as presented below:
(a) to stimulate interest, ownership and committed participation in
building the service foundation of the Company;
(b) to share with Plan participants the economic benefits produced
by their efforts;
(c) to assist in providing Plan participants with retirement benefits.
5
<PAGE>
SERVICEMASTER PROFIT SHARING, SAVINGS
AND RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
2. The Plan (Continued)
Participation - The Plan was established as of January 1, 1976. As of
December 31, 1993, the distribution of participants by class is as follows:
<TABLE>
<CAPTION>
Number of
Number of Years of Service Class Participants
-------------------------- ----- ------------
<S> <C> <C>
At least one, but less than 5 years. . . . . . . . . . . . . . . 1 1,485
5, but less than 10 years. . . . . . . . . . . . . . . . . . . . 2 1,189
10 or more years, if not
qualified under Class 4. . . . . . . . . . . . . . . . . . . 3 864
15 or more years and has attained age 50 . . . . . . . . . . . . 4 130
3,668
</TABLE>
All employees (other than employees covered by a collective
bargaining agreement which does not provide for Plan participation or
whose compensation is regulated under the Register of Wage
Determinations maintained by the United States Department of Labor
Standards Administration) of a participating employer which has adopted
the Plan who have completed one year of service (defined as at least
1,000 hours of employment during the first 12 months of employment or
any plan year thereafter), attained age 18 years and elected in writing to
make contributions to the Plan are eligible to participate in the Plan.
Participant Contributions - Mandatory contributions to the Plan are
made by participants at a rate prescribed by the Plan, which is presently
$75 per calendar quarter for each participant. Participants may also elect
to contribute 1% to 15% of their compensation during the year. An
election may be made to roll over account balances from previous
qualified employer benefit plans.
Employer Contributions - Participating employers contribute to the
Plan depending on the profitability of ServiceMaster for the year. The
Board of Directors of ServiceMaster determines the amount of the profits
to be shared each year. The employers' discretionary profit sharing
contribution was $3,485,000, $3,391,481, and $2,895,700 in 1993, 1992 and
1991, respectively. In 1993, the Company chose to reimburse the Plan for
$1.3 million of expenses paid by the Plan in prior years. This
reimbursement is included in the Company's 1993 contribution.
6
<PAGE>
SERVICEMASTER PROFIT SHARING, SAVINGS
AND RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
2. The Plan (Continued)
Vesting Policy and Payment of Benefits - Upon termination of
employment after completion of seven years of service or in the event of
disability or death, the participant or his beneficiary is entitled to receive
the full amount allocated to his account. If a participant's employment is
terminated prior to the completion of seven years of service for any
reason, other than death or disability, he will receive, in addition to the
balance of his participant contribution accounts, including any rollovers or
tax deductible voluntary contributions, that portion of the employer
contribution account equal to 20% after the completion of three years of
service and 20% for each additional full year of service (as defined in the
Plan document), up to 100% after seven years of service.
Benefits are distributed to participants in cash (in a lump sum or
periodic payments) or ServiceMaster partnership shares, as provided by
the Plan.
Allocation of Employer Contributions - Employer profit sharing
contributions are allocated to each participant on the basis of his
mandatory contributions and years of service as of the beginning of each
year.
Forfeitures - Forfeitures represent amounts forfeited by participants
upon termination and are allocable to eligible participants in the same
manner as employer profit sharing contributions.
Plan Assets - The Plan invests in ServiceMaster Limited Partnership
shares. As of December 31, 1993 and 1992, the plan was holding
1,864,917 and 2,144,980 shares (post 1993 split), respectively. The year-
end share price as of December 31, 1993 and 1992 was 273/8 and 181/2,
respectively.
In February 1992, assets (ServiceMaster Partnership shares and cash)
were transferred from the First Chicago Bank to a Group Pension
Contract at Liberty Life Assurance Company. In April 1992 and June
1993, additional assets were transferred to the Liberty Life Group
Contract. At December 31, 1993, the market value of assets in this
Contract consisted of ServiceMaster Limited Partnership shares
($48,248,438), S&P 500 Composite Price Index Fund ($12,227,542),
SteinRoe Limited Maturity Income Fund ($4,648,641) and Fidelity
Institutional Money Market Fund ($15,000,000).
7
<PAGE>
SERVICEMASTER PROFIT SHARING, SAVINGS
AND RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
2. The Plan (Continued)
In August 1989, the Plan diversified its investment portfolio by
agreeing to provide up to $2,000,000 in secured-mortgage-financing to an
independent construction company that built a warehouse facility that it
subsequently leased to ServiceMaster. At December 31, 1992, $2,000,000
was outstanding under this arrangement. The loan had a 9.35% interest
rate and was secured by a first mortgage on the warehouse facility.
Following discussions with the Department of Labor (see below), this loan
was sold to ServiceMaster for $2,000,000 in May 1993.
Effective January 1, 1993, three companies -- American Home Shield
Limited Partnership, Merry Maids Limited Partnership and
Residential/Commercial Services Limited Partnership -- and their
respective participating employees, were transferred from the Plan to the
Consumer Services Profit Sharing Plan. As of December 31, 1992, the
value of these participants' assets was $2,267,425. These assets were
transferred from the Plan to the Consumer Services Profit Sharing Plan
in the form of 122,563 (post-split) ServiceMaster shares based on a year
end 1992 per share price of $18.50. At the time of transfer (May 1993),
the Plan also paid the Consumer Services Profit Sharing Plan $54,184 in
cash, representing dividends and interest.
Department of Labor Audit - In 1993, the Department of Labor
(DOL) completed an audit of the plan which covered the years 1987
through 1990. The DOL raised several issues with which ServiceMaster
did not agree, but after discussions with representatives of the DOL,
ServiceMaster determined to address the DOL's concerns by a voluntary
payment to the Plan, and by purchasing from the Plan the $2,000,000
promissory note and related first mortgage of an independent construction
company that is described above.
Participants' Equity - The aggregate value of each participant's Plan
account is expressed in cash.
Amendment or Termination - The Plan may be amended or
discontinued by the Company (with respect to all participating Employers)
or by a participating Employer (with respect to its eligible employees) at
any time. If the Plan is discontinued, participants with respect to whom
the Plan is terminated become fully vested in their allocated account
balances.
8
<PAGE>
SERVICEMASTER PROFIT SHARING, SAVINGS
AND RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
Effective January 1, 1994, certain provisions of the Plan were
amended which revise the participant contribution requirement and the
company contribution allocation. Participants may elect to contribute a
minimum of 1% of pay and up to 15% of pay. Pretax contributions up to
the first 4% of pay (or $1,000 whichever is greater) will be eligible for the
Company matching contribution. All participants will receive the same
percentage match based upon their actual dollar contribution. The
company contribution will continue to be discretionary. The amount of
contribution from profits will be determined each year by the Board of
Directors after a review of the overall financial performance of
ServiceMaster and the key business units.
3. Federal Income Taxes
Tax Status of the Plan - The Plan obtained its latest determination
letter on June 14, 1990, in which the IRS stated that the Plan, as written,
was in compliance with the requirements of the Internal Revenue Code.
The Plan has been amended since that date. The Plan administrator
believes that the Plan is currently designed and being operated in
compliance with the requirements of the Internal Revenue Code and that
the trust is tax-exempt as of the financial statement dates. Although the
Plan is a tax-exempt entity, it is required to pay federal income taxes
related to its share of taxable income from its direct holding of
ServiceMaster Limited Partnership shares.
Tax Status of Each Participant - Participant contributions made on or
after April 1, 1988 are deductible for federal income tax purposes when
made to the Plan. Participants will be subject to tax on the participant
contributions, employer contributions and income credited to their plan
accounts when an actual distribution from the Plan is received. However,
participant contributions made prior to April 1, 1988 were not deductible
for federal income tax purposes when made to the Plan. Therefore,
participants will be subject to tax on the employer contributions and
income related to pre-April 1, 1988 participant contributions upon
distribution from the Plan.
9
<PAGE>
<TABLE>
<CAPTION>
SERVICEMASTER PROFIT SHARING, SAVINGS
AND RETIREMENT PLAN
SCHEDULE A-REPORTABLE TRANSACTIONS
ITEM 30 A - Schedule of 5% Reportable Transactions
EIN# 38-2873710 Plan # 001
FOR THE YEAR ENDED DECEMBER 31, 1993
Purchases Sales
---------------------------- -------------------------------------------
No. of Aggregate No. of Aggregate Gain
Transactions Cost Transactions Proceeds (Loss)
------------ ----------- ------------ ---------- ------
<S> <C> <C> <C> <C> <C>
First Chicago Money
Market Funds . . . . . . . . . . . . . 63 $16,026,937 86 $15,344,160 $ --
Franklin U.S. Government
Securities Fund. . . . . . . . . . . . 4 7,930,000 6 7,935,743 5,743
Liberty Life Group
Pension Contract . . . . . . . . . . . 1 7,000,000 -- -- --
-- ----------- -- ----------- -------
68 $30,956,937 92 $23,279,903 $ 5,743
== =========== == ========== ======
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
SERVICEMASTER PROFIT SHARING, SAVINGS
AND RETIREMENT PLAN
SCHEDULE B-ASSETS HELD FOR INVESTMENT
ITEM 30 A - Schedule of Assets Held for Investment Purposes
EIN# 36-2873710 Plan # 001
FOR THE YEAR ENDED DECEMBER 31, 1993
COST OR MARKET
DESCRIPTION BOOK VALUE VALUE
- ------------ ----------------- ----------------
<S> <C> <C>
First Chicago Money
Market Funds . . . . . . . . . . . . . . . . . . . . . . . . . . $ 682,778 $ 682,778
ServiceMaster Limited Partnership
shares (1,864,917) . . . . . . . . . . . . . . . . . . . . . . . 18,602,769 51,052,102
Liberty Life Group Pension Contract . . . . . . . . . . . . . . . . . 56,474,988 (a) 80,124,621 (b)
---------- ----------
TOTAL INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . $ 75,760,535 $ 131,859,501
========== ===========
(a) Assets transferred into Liberty account included ServiceMaster Limited Partnership
shares ($30,974,988) and cash ($25,500,000, net of withdrawals).
(b) Contract assets as of December 31, 1993 included ServiceMaster Limited Partnership
shares ($48,248,438) S&P 500 Composite Price Index Fund ($12,227,542), SteinRoe
Limited Maturity Income Fund ($4,648,641) and Fidelity Institutional Money Market
Fund ($15,000,000).
</TABLE>
11
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants we hereby consent to the
incorporation by reference of our report, dated March 25, 1994, appearing
in the ServiceMaster Profit Sharing, Savings and Retirement Plan Annual
Report on Form 11-K for the year ended December 31, 1993, to the
Company's previously filed Registration Statement Number 2-75851 on
Form S-8.
ARTHUR ANDERSEN & CO.
Chicago, Illinois,
March 29, 1994.
12
