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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 ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
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 001-09378
ServiceMaster LP Master Trust
ServiceMaster Limited Partnership
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 LP MASTER TRUST
By: /s/Laine E. Malmquist
----------------------------------------------
Laine E. Malmquist,
Vice President & 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 27, 1997
2
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Administrative Committee of the ServiceMaster LP Profit Sharing, Savings
and Retirement Plans and the 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, 1996 and
1995, and the related statements of changes in net assets available for Plan
benefits for each of the three years in the period ended December 31, 1996.
These financial statements and the schedules referred to below are the
responsibility of the Plans' 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 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 Plan benefits of
the Master Trust as of December 31, 1996 and 1995, and the changes in its net
assets available for Plan benefits, for each of the three years in the period
ended December 31, 1996, 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 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. 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,
March 27, 1997
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SERVICEMASTER LP MASTER TRUST
FEIN: #36-3497008
FINANCIAL STATEMENTS AND SCHEDULES
AS OF DECEMBER 31, 1996 AND 1995
I N D E X
---------
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS AS OF DECEMBER 31, 1996 AND
1995
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS FOR THE YEARS
ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTES TO FINANCIAL STATEMENTS
SCHEDULE A - ITEM 27d - SCHEDULE OF 5% REPORTABLE TRANSACTIONS FOR THE YEAR
ENDED DECEMBER 31, 1996
SCHEDULE B - ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES AS OF
DECEMBER 31, 1996
4
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<TABLE>
<CAPTION>
SERVICEMASTER LP MASTER TRUST
FEIN: #36-3497008
STATEMENTS OF NET ASSETS AVAILABLE
FOR PLAN BENEFITS
As of December 31,
1996 1995
---- ----
<S> <C> <C>
ASSETS:
Investments:
Money market fund...................... $ 1,725,601 $ 167,027
ServiceMaster Limited Partnership
Shares, at market.................... 70,751,462 56,145,361
Liberty Life Group Pension Contract,
at market............................ 99,582,772 88,580,287
Loans to participants.................. 4,358,806 -
----------- -----------
Total Investments...................... 176,418,641 144,892,675
Receivables:
Due from employer...................... 2,709,317 2,534,338
Participant contributions.............. 337,449 162,801
Other.................................. 258,254 5,415
----------- -----------
Total Assets........................... 179,723,661 147,595,229
------------ -----------
LIABILITIES:
Accounts payable......................... 201,669 252,832
Refundable employee contributions........ - 785,622
------------ -----------
Total Liabilities........................ 201,669 1,038,454
-------------- --------------
NET ASSETS AVAILABLE
FOR PLAN BENEFITS........................ $ 179,521,992 $ 146,556,775
============== ==============
The accompanying Notes to Financial Statements
are an integral part of these statements.
</TABLE>
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<TABLE>
<CAPTION>
SERVICEMASTER LP MASTER TRUST
FEIN: #36-3497008
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
Years Ended December 31,
-----------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Additions:
Contributions:
Participant...................... $ 8,201,701 $ 6,994,834 $ 8,464,954
Employer......................... 3,003,006 2,513,522 2,955,116
Loan interest...................... 79,222 - -
Loan fees.......................... 12,775 - -
Interest income.................... 95,082 108,580 64,276
ServiceMaster share distributions.. 1,816,487 1,668,424 1,703,467
Liberty Life Contract income....... 4,212,320 4,360,287 3,560,393
Realized/unrealized gains (losses)
on investments................... 30,203,547 23,713,262 (13,072,194)
----------- ---------- ------------
Total Additions....................... 47,624,140 39,358,909 3,676,012
----------- ---------- -----------
Deductions:
Equity applicable to
former participants.............. 13,755,216 17,850,022 10,906,520
Provision for income taxes......... 470,000 442,609 551,527
Administrative/investment expenses. 433,707 398,123 375,733
----------- ---------- ----------
Total Deductions...................... 14,658,923 18,690,754 11,833,780
----------- ---------- ----------
Net increase (decrease)................ 32,965,217 20,668,155 (8,157,768)
Net assets available for Plan benefits:
Beginning of year................... 146,556,775 125,888,620 134,046,388
------------ ------------ ------------
End of year.........................$179,521,992 $146,556,775 $125,888,620
============ ============ ============
The accompanying Notes to Financial Statements
are an integral part of these statements.
</TABLE>
6
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SERVICEMASTER LP MASTER TRUST
FEIN: #36-3497008
NOTES TO FINANCIAL STATEMENTS
1. Master Trust
Effective January 1, 1994, the account balances of the ServiceMaster
Limited Partnership ("ServiceMaster" or the "Company") 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 Education Company Profit Sharing, Savings
and Retirement Plan (formerly Service Partners East Company
Profit Sharing, Savings and Retirement Plan)
2. Service Partners Aviation Company Profit Sharing, Savings
and Retirement Plan (formerly Service Partners West Company
Profit Sharing, Savings and Retirement Plan)
3. Service Partners Health Care Company Profit Sharing, Savings
and Retirement Plan (formerly Service Partners Mid-America
Profit Sharing, Savings and Retirement Plan)
4. Service Partners Long Term Care Company Profit Sharing,
Savings and Retirement Plan (formerly 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 Diversified Health Services 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.
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NOTES TO FINANCIAL STATEMENTS (Continued)
Expenses of the Plan - Certain administrative expenses of the Plan
(including investment management fees and other plan expenses) were paid from
the 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.
3. The Plan
Purpose - The purpose of the Plan is to emphasize ownership and provide
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, 1996, there were 4,104 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.
Participant Contributions - 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.
8
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NOTES TO FINANCIAL STATEMENTS (Continued)
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 its key business units. The employer's
discretionary profit sharing contribution was $3,003,006, $2,513,522 and
$2,955,116 for 1996, 1995 and 1994, respectively.
Vesting Policy and Payment of Benefits - Upon termination of employment
and 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 - 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).
Forfeitures - Forfeitures represent amounts forfeited by participants upon
termination and are allocable to eligible participants in the same manner as
employer profit sharing contributions.
Participant Loans - In 1996, the Plan was amended to include a loan
program available to all participants who are not former employees. Each loan is
secured by the participant's vested account balance and must be greater than
$500 but may not exceed the lesser of $50,000 or 50% of the participant's vested
account balance. Loan terms may not exceed a period of five years.
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.
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NOTES TO FINANCIAL STATEMENTS (Continued)
4. Plan Assets
The Plan invests in ServiceMaster Limited Partnership shares. As of
December 31, 1996 and 1995, the Plan was holding 2,708,190 and 2,784,068 shares,
respectively. The year-end share price as of December 31, 1996 and 1995 was
$26.13 and $20.17, respectively. The number of shares and share price as of
December 31, 1995 reflect the three-for-two share split in June 1996.
The Plan also invests in a Group Contract at Liberty Life Assurance
Company. As of December 31, 1996 and 1995, the market value of assets in this
contract consisted of ServiceMaster Limited Partnership shares ($65,051,250 and
$50,215,000 in 1996 and 1995, respectively) and fixed income investments managed
by the Wellington Management Company ($34,531,522 and $38,365,287 in 1996 and
1995, respectively).
5. Federal Income Taxes
Tax Status of the Plan - One of the Plans obtained its latest
determination letter on August 4, 1995, in which the Internal Revenue Service
(the "IRS") stated that the Plan, as written, was in compliance with the
requirements of the Internal Revenue Code (the "Code"). This Plan has been
amended since August 4, 1995. The Plans have filed a request for a determination
letter with the IRS. The Plan administrator believes that the Plans are
currently designed and being operated in compliance with the requirements of the
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.
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NOTES TO FINANCIAL STATEMENTS (Continued)
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 year-end).
<TABLE>
<CAPTION>
The following is a reconciliation of net assets available for benefits per
the financial statements to the Form 5500:
December 31,
----------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net assets available for benefits
per the financial statements.... $179,521,992 $146,556,775 $125,888,620
Amounts allocated to
withdrawing participants........ (2,141,506) (3,155,616) (5,357,049)
----------- ----------- -----------
Net assets available for benefits
per the Form 5500............... $177,380,486 $143,401,159 $120,531,571
============ ============ ============
</TABLE>
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.
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NOTES TO FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500:
Year Ended December 31,
---------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Benefits paid to participants per
the financial statements............ $ 13,755,216 $ 17,850,022 $10,906,520
Add: Amounts allocated to withdrawing
participants in current year........ 2,141,506 3,155,616 5,357,049
Less: Amounts allocated to withdrawing
participants from prior year........ (3,155,616) (5,357,049) (1,796,299)
------------- ------------- ------------
Benefits paid to participants per
the Form 5500....................... $ 12,741,106 $ 15,648,589 $ 14,467,270
============ ============= ============
</TABLE>
12
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<TABLE>
<CAPTION>
SERVICEMASTER LP MASTER TRUST
SCHEDULE A-REPORTABLE TRANSACTIONS
ITEM 27d - Schedule of 5% Reportable Transactions
FEIN: #36-3497008
FOR THE YEAR ENDED DECEMBER 31, 1996
Current
Value of
Asset on
No. of Purchase Sales Transaction Gain
Transactions Price Proceeds Cost Date (Loss)
------------ -------- -------- ---------- ----------- ------
<S> <C> <C> <C> <C> <C> <C>
Money market fund -
EB STIF Fund
Purchases.... 107 $19,903,333 -- $19,903,333 $19,903,333 --
Sales........ 53 -- $18,344,759 $18,344,759 $18,344,759 --
</TABLE>
13
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<TABLE>
<CAPTION>
SERVICEMASTER LP MASTER TRUST
SCHEDULE B-ASSETS HELD FOR INVESTMENT PURPOSES
ITEM 27a - Schedule of Assets for Investment Purposes
FEIN: #36-3497008
AS OF DECEMBER 31, 1996
COST OR MARKET
DESCRIPTION BOOK VALUE VALUE
----------- ---------- -----
<S> <C> <C>
Money market fund -
EB STIF Fund...............$ 1,725,601 $ 1,725,601
ServiceMaster Limited
Partnership shares(a)
(2,708,190)................ 20,733,357 70,751,462
Liberty Life Group
Pension Contract(b)........ 53,264,470 99,582,772
Loans to participants........ 4,358,806 4,358,806
---------------- -------------
TOTAL INVESTMENTS............. $ 80,082,234 $ 176,418,641
============== =============
(a) Represents a party-in-interest.
(b) Contract assets as of December 31, 1996 include ServiceMaster Limited
Partnership shares (cost of $29,786,133 and market value of $65,051,250) and
fixed income investments managed by the Wellington Management Company (cost of
$23,478,337 and market value of $34,531,522).
</TABLE>
14
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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 27, 1997, appearing in the ServiceMaster
LP Master Trust Annual Report on Form 11-K for the year ended December 31, 1996,
to the Company's previously filed Registration Statement Number 2-75851 on Form
S-8.
ARTHUR ANDERSEN LLP
Chicago, Illinois,
March 27, 1997
15
