<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, 1994
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 LP Master Trust
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 Plan administrators have duly caused this annual report to be
signed by the undersigned thereunto duly authorized.
SERVICEMASTER LP MASTER TRUST
By: s/Laine E. Malmquist
-------------------------------
Laine E. Malmquist
Vice President, Benefits &
Manager General Accounting
By: s/Deborah A. O'Connor
-------------------------------
Deborah A. O'Connor,
Administrative Committee Member
By: s/Barbara Schram
-------------------------------
Barbara Schram, Plan Manager
Date: March 28, 1995.
1
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Administrative Committee and Trustee of the
ServiceMaster LP Master Trust:
We have audited the accompanying statements of net assets available
for Plan benefits of the ServiceMaster LP Master Trust as of December 31,
1994 and 1993, the related statements of changes in net assets available for
Plan benefits for each of the three years in the period ended December 31,
1994, and the related schedules of reportable transactions and assets held for
investment as of December 31, 1994. 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 Master Trust as of December 31, 1994 and 1993 and the
changes in its net assets available for Plan benefits, for each of the three
years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles.
Our audits were made 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 purposes of complying with the Department of Labor Rules and
Regulations for Reporting and Disclosure under the Employee Retirement
Income Security Act of 1974 and are not a required part of the basic
financial statements. Such 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,
March 28, 1995.
2
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SERVICEMASTER LP MASTER TRUST
FEIN: #36-3497008
PLAN NUMBER: 001
FINANCIAL STATEMENTS AND SCHEDULES
AS OF DECEMBER 31, 1994 AND 1993
I N D E X
-----------
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
AS OF DECEMBER 31, 1994 AND 1993
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR
PLAN BENEFITS FOR THE YEARS ENDED DECEMBER 31, 1994,
1993, AND 1992
NOTES TO FINANCIAL STATEMENTS
SCHEDULE A, ITEM 27d - SCHEDULE OF 5% REPORTABLE
TRANSACTIONS FOR THE YEAR ENDED DECEMBER 31, 1994
SCHEDULE B - ITEM 27a - SCHEDULE OF ASSETS HELD FOR
INVESTMENT PURPOSES FOR THE YEAR ENDED DECEMBER 31,
1994
3
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<TABLE>
<CAPTION>
SERVICEMASTER LP MASTER TRUST
FEIN: #36-3497008
PLAN NUMBER: 001
STATEMENTS OF NET ASSETS AVAILABLE
FOR PLAN BENEFITS
As of December 31,
-------------------------------
1994 1993
-------- --------
<S> <C> <C>
ASSETS:
Investments:
Bank of America Money Market
Funds, at market . . . . . . . . . . . . . $ 111,693 $ 682,778
ServiceMaster Limited Partnership
Shares, at market . . . . . . . . . . . . 43,475,786 51,052,102
Liberty Life Group Pension Contract,
at market (net) . . . . . . . . . . . . . 79,492,239 80,124,621
------------ -------------
Total Investments . . . . . . . . . . . . . 123,079,718 131,859,501
Receivables:
Due from employers . . . . . . . . . . . . . 2,955,116 2,120,222
Participant contributions . . . . . . . . . 223,220 179,836
Other. . . . . . . . . . . . . . . . . . . . 4,964 50,006
------------ -------------
Total Assets . . . . . . . . . . . . . . . . 126,263,018 134,209,565
------------ -------------
LIABILITIES:
Accounts payable . . . . . . . . . . . . . . 374,398 163,177
------------ -------------
Total Liabilities. . . . . . . . . . . . . . 374,398 163,177
------------ -------------
NET ASSETS AVAILABLE
FOR PLAN BENEFITS. . . . . . . . . . . . . . $ 125,888,620 $ 134,046,388
============= =============
</TABLE>
The accompanying Notes to Financial Statements
are an integral part of these statements.
4
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<TABLE>
<CAPTION>
SERVICEMASTER LP MASTER TRUST
FEIN: #36-3497008
PLAN NUMBER: 001
STATEMENTS OF CHANGES NET ASSETS AVAILABLE FOR PLAN BENEFITS
Years Ended December 31,
-------------------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Additions:
Contributions:
Participant basic/mandatory - Note 3 . $ 5,526,815 $ 1,109,594 $ 1,148,002
Participant voluntary. . . . . . . . . 2,938,139 4,860,582 3,742,280
Employer . . . . . . . . . . . . . . . 2,955,116 3,485,000 3,391,481
Interest income . . . . . . . . . . . . 64,276 145,215 302,954
ServiceMaster share distributions . . . 1,703,467 1,763,726 2,182,094
Liberty Life Contract income. . . . . . 3,560,393 2,296,446 1,632,612
Realized/Unrealized gains (losses)
on investments . . . . . . . . . . . . (13,072,194) 33,864,601 7,982,234
------------ ------------ -----------
Total Additions. . . . . . . . . . . . . 3,676,012 47,525,164 20,381,657
------------ ------------ -----------
Deductions:
Equity applicable to
former participants. . . . . . . . . . 10,906,520 10,110,106 6,741,811
Provision for income taxes . . . . . . . 551,527 336,836 426,126
Administrative/investment expenses . . . 375,733 203,858 133,340
------------ ------------ -----------
Total Deductions . . . . . . . . . . . . 11,833,780 10,650,800 7,301,277
------------ ------------ -----------
Net increase (decrease). . . . . . . . . (8,157,768) 36,874,364 13,080,380
Net assets available for benefits:
Beginning of year. . . . . . . . . . . 134,046,388 97,172,024 84,091,644
------------ ------------ -----------
End of year. . . . . . . . . . . . . . $ 125,888,620 $ 134,046,388 $ 97,172,024
============ ============ ===========
</TABLE>
The accompanying Notes to Financial Statements
are an integral part of these statements.
5
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SERVICEMASTER LP MASTER TRUST
FEIN: #36-3497008 PLAN NUMBER: 001
NOTES TO FINANCIAL STATEMENTS
1. Master Trust
Effective January 1, 1994, the account balances of the ServiceMaster
service partner plans were transferred to newly established plans. All of the
plans contain identical provisions. The financial statements of the Trust
include all of the assets of the following plans, collectively referred to as
"The Plan".
1. Service Partners East Company Profit Sharing,
Savings and Retirement Plan
2. Service Partners West Company Profit Sharing,
Savings and Retirement Plan
3. Service Partners Mid-America Company Profit
Sharing, Savings and Retirement Plan
4. Service Partners Southeast Company Profit Sharing,
Savings and Retirement Plan
5. Service Partners Food Service Company Profit
Sharing, Savings and Retirement Plan
6. Service Partners ICMS Company Profit Sharing,
Savings and Retirement Plan
7. Service Partner Company Profit Sharing,
Savings and Retirement Plan
8. ServiceMaster Profit Sharing, Savings and Retirement Plan
2. Summary of Significant Accounting Policies
Asset Valuation - The investments of 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.
6
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NOTES TO FINANCIAL STATEMENTS (Continued)
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, Diversified Health 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).
Certain 1993 amounts have been reclassified to conform with the 1994
presentation. For each year presented, amounts payable to withdrawing
participants have been reclassified from liabilities and presented in net assets
available for Plan benefits.
3. 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.
Participation - The Plan was established as of January 1, 1976. As of
December 31, 1994, there were 3,795 participants in the plan.
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 to make contributions to the
Plan are eligible to participate in the Plan.
7
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NOTES TO FINANCIAL STATEMENTS (Continued)
Participant Contributions - Starting in 1994, participants may elect to
contribute a minimum of 1% of pay and up to 15% of pay. Pretax
contributions (basic contributions) up to the first 4% of pay (or $1,000,
whichever is greater) are eligible for an Employer matching contribution.
Prior to 1994, participants were required to make mandatory
contributions of $75 per quarter (or $300 per year). These contributions
were eligible for an Employer matching contribution. In addition,
participants could elect to contribute 1% to 15% of their compensation on a
voluntary basis, but these contributions were not eligible for an Employer
matching contribution. The increase in employee contributions in 1994 was
due to the change described above as a larger portion of participant
contributions was eligible for the matching Employer contribution.
Employer Contributions - 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. The employer's
discretionary profit sharing contribution was $2,955,116, $3,485,000, and
$3,391,481 for 1994, 1993 and 1992, 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 was included in the Company's 1993
contribution.
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, they will receive, in addition to the balance of
their 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 - Starting in 1994, Employer profit
sharing contributions are allocated to each participant on the basis of their
basic contributions, that is pretax contributions up to the first 4% of pay (or
$1,000 which ever is greater). Prior to 1994, Employer contributions were
allocated to each participant on the basis of their mandatory contributions and
years of service as of the beginning of each year.
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Forfeitures - Forfeitures represent amounts forfeited by participants upon
termination and are allocable to eligible participants in the same manner as
employer profit sharing contributions.
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.
4. Plan Assets
The Plan invests in ServiceMaster Limited Partnership shares. As of
December 31, 1994 and 1993, the Plan was holding 1,783,622 and
1,864,917 shares (post 1993 split), respectively. The year-end share price
as of December 31, 1994, and 1993 was 243/8 and 273/8, respectively.
In February 1992, assets (ServiceMaster Partnership shares and cash)
were transferred from the First Chicago Bank to a Group Contract at Liberty
Life Assurance Company. In April 1992, June 1993 and December 1994,
additional assets were transferred to the Liberty Life Group Contract. At
December 31, 1994, the market value of assets in this Contract consisted of
ServiceMaster Limited Partnership shares ($44,240,625) and fixed income
investments managed by the Wellington Management Company
($35,251,614).
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.
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.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
5. 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 only on the Employer contributions and income related
to pre-April 1, 1988 participant contributions upon distribution from the
Plan.
6. Reconciliation of Financial Statements to Form 5500
The Form 5500 requires that net assets available for benefits exclude
amounts allocated to withdrawing participants. (These are participants that
have benefit claims which have not been paid, but have been processed and
approved for payment prior to yearend).
<TABLE>
<CAPTION>
The following is a reconciliation of net assets available for benefits
per the financial statements to the Form 5500:
December 31,
------------------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Net assets available for benefits
per the financial statements$ 125,888,620 $134,046,388 $ 97,172,024
Amounts allocated to
withdrawing participants. . (5,357,049) (1,796,299) (1,871,511)
------------ ----------- ------------
Net assets available for benefits
per the Form 5500 . . . . . $ 120,531,571 $132,250,089 $ 95,300,513
============ =========== ============
</TABLE>
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Amounts allocated to withdrawing participants for benefit claims that have been
processed and approved for payment prior to December 31 but not yet paid as
of that date, are recorded as benefits paid for that year on the Form 5500.
<TABLE>
<CAPTION>
The following is a reconciliation of benefits paid to participants per the financial
statements to the Form 5500:
Year Ended December 31,
--------------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Benefits paid to participants per
the financial statements. . . . $10,906,520 $10,110,106 $6,741,811
Add: Amounts allocated to withdrawing
participants in current year. . 5,357,049 1,796,299 1,871,511
Less: Amounts allocated to withdrawing
participants from prior year. . (1,796,299) (1,871,511) (1,028,528)
---------- ---------- ---------
Benefits paid to participants per
the Form 5500 . . . . . . . . . $14,467,270 $10,034,894 $7,584,794
========== ========== =========
</TABLE>
11
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<TABLE>
<CAPTION>
SERVICEMASTER LP MASTER TRUST
SCHEDULE A-REPORTABLE TRANSACTIONS
ITEM 27d - Schedule of 5% Reportable Transactions
EIN#36-3497008 Plan #001
FOR THE YEAR ENDED DECEMBER 31, 1994
Purchases Sales
----------------------- ------------------------------
No. of Aggregate No. of Aggregate Gain
Transactions Cost Transactions Proceeds (Loss)
---------- ----------- ------- ----------- ----
<S> <C> <C> <C> <C> <C>
Bank of America Money
Market Funds . . . . 71 $12,292,778 44 $12,181,086 $--
</TABLE>
12
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<TABLE>
<CAPTION>
SERVICEMASTER LP MASTER TRUST
SCHEDULE B-ASSETS HELD FOR INVESTMENT
ITEM 27a - Schedule of Assets Held for Investment Purposes
EIN#36-3497008 Plan #001
FOR THE YEAR ENDED DECEMBER 31, 1994
COST OR MARKET
DESCRIPTION BOOK VALUE VALUE
----------- ---------- ------
<S> <C> <C>
Bank of America Money
Market Funds . . . . . . . . $ 111,693 $ 111,693
Servicemaster Limited
Partnership shares
(1,783,622) . . . . . . . . 17,810,671 43,475,786
Liberty Life Group
Pension Contract(a) . . . . . 68,839,287 79,492,239
------------ --------------
TOTAL INVESTMENTS. . . . . . . $ 86,761,651 $ 123,079,718
(a) Contract assets as of December 31, 1994 include ServiceMaster Limited Partnership
shares and fixed income investments managed by the Wellington Management Company (cost
- $32,162,800, market value - $44,240,625).
</TABLE>
13
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CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants we hereby consent to the incorporation
by reference of our report, dated March 28, 1995, appearing in the
ServiceMaster LP Master Trust Annual Report on Form 11-K for the year
ended December 31, 1994, to the Company's previously filed Registration
Statement Number 2-75851 on Form S-8.
ARTHUR ANDERSEN LLP
Chicago, Illinois,
March 28, 1995.
14
