UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
Annual Report Pursuant to Section 15(j)
Of the Securities Exchange Act of 1934
X Annual Report Pursuant to Section 15(d)
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Of the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 2004
or
Transition Report Pursuant to Section 15(d)
-------
Of the Securities Exchange Act of 1934
For the Transition Period from _____________ to _____________
Commission File Number 1-14762
SERVICEMASTER PROFIT SHARING AND RETIREMENT PLAN
(Full Title of Plan)
THE SERVICEMASTER COMPANY
3250 Lacey Road
Downers Grove, Illinois 60515
(Name of Issuer of the
Securities Held Pursuant to the Plan
And the Address of the Principal Executive Office)
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: /s/ Deborah A. O'Connor
------------------------------------
Deborah A. O'Connor
Senior Vice President and Controller
By: /s/ Eric R. Zarnikow
------------------------------------
Eric R. Zarnikow
Senior Vice President and Treasurer
Date: June 29, 2005
ServiceMaster
Profit Sharing and Retirement Plan
Financial Statements
as of December 31, 2004 and 2003,
and for the Year Ended December 31, 2004,
and Supplemental Schedule as of
December 31, 2004, and Report of
Independent Registered Public Accounting Firm
SERVICEMASTER PROFIT SHARING AND RETIREMENT PLAN
TABLE OF CONTENTS
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Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 1
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Benefits as of December 31, 2004 and 2003 2
Statement of Changes in Net Assets Available for Benefits for the
Year Ended December 31, 2004 3
Notes to Financial Statements 4
SUPPLEMENTAL SCHEDULE:
Form 5500, Schedule H, Part IV, Line 4i--Schedule of Assets (Held at End of Year)
as of December 31, 2004 11
EXHIBITS:
23.1 Consent of Independent Registered Public Accounting Firm 12
NOTE: All other schedules required by Section 2520.103-10 of the Department
of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974 have been omitted
because they are not applicable.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Equity Plans Administrative Committee
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 (the "Plan") as of
December 31, 2004 and 2003, and the related statement of changes in net assets
available for benefits for the year ended December 31, 2004. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Plan is not required to have,
nor were we engaged to perform, an audit of its internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Plan's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, 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, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan as of December 31,
2004 and 2003, and the changes in net assets available for benefits for the year
ended December 31, 2004 in conformity with accounting principles generally
accepted in the United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets (held
at end of year) as of December 31, 2004, is presented for the purpose of
additional analysis and is not a required part of the basic financial
statements, but is 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. This supplemental schedule is the
responsibility of the Plan's management. Such supplemental schedule has been
subjected to the auditing procedures applied in our audits of the basic 2004
financial statements and, in our opinion, is fairly stated in all material
respects when considered in relation to the basic financial statements taken as
a whole.
/s/ Deloitte & Touche LLP
Memphis, Tennessee
June 27, 2005
SERVICEMASTER PROFIT SHARING AND RETIREMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2004 AND 2003
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2004 2003
ASSETS:
Non-interest-bearing cash $ 75,188 $ 14,511
Investments:
Participant-directed investments (Note 3) 259,377,688 231,761,624
The ServiceMaster Company Common Stock Fund (Note 4) 56,674,648 51,438,841
------------- -------------
Total investments 316,052,336 283,200,465
------------- -------------
Receivables:
Employer contribution receivable 8,427,132 4,284,128
Employee contribution receivable 133,267 702,936
------------- -------------
Total receivables 8,560,399 4,987,064
------------- -------------
NET ASSETS AVAILABLE FOR BENEFITS $ 324,687,923 $ 288,202,040
============= =============
See notes to financial statements.
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SERVICEMASTER PROFIT SHARING AND RETIREMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 2004
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ADDITIONS:
Contributions:
Employee contributions $ 22,330,850
Rollover contributions 1,123,382
Employer contributions (Note 1) 8,133,352
-------------
Total contributions 31,587,584
-------------
Investment income:
Net appreciation in fair value of investments 29,904,052
Dividends from The ServiceMaster Company Common Stock Fund 1,876,244
Interest from participant loans 519,736
-------------
Net investment income 32,300,032
-------------
Total additions 63,887,616
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DEDUCTIONS:
Benefits paid to participants 26,988,409
Deemed distributions of loans to participants 368,514
Administrative expenses 44,810
-------------
Total deductions 27,401,733
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INCREASE IN NET ASSETS 36,485,883
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 288,202,040
-------------
End of year $ 324,687,923
=============
See notes to financial statements.
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SERVICEMASTER PROFIT SHARING AND RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND 2003 AND FOR THE YEAR ENDED DECEMBER 31, 2004
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1. DESCRIPTION OF THE PLAN
General--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. The ServiceMaster Profit
Sharing and Retirement Plan (the "Plan") is a defined contribution plan
covering substantially all nonunion employees of The ServiceMaster Company
and its subsidiaries (the "Company") who have completed 90 days of service
and are at least 18 years of age. 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.
The Plan is administered by the Equity Plans Administrative Committee. T.
Rowe Price Trust Company serves as the trustee of the Plan. The Plan is
subject to the provisions of the Employee Retirement Income Security Act
of 1974 ("ERISA"), as amended.
Contributions--Participants may elect to contribute a minimum of 1% up to
a maximum of 75% of pretax annual compensation, as defined in the Plan,
subject to certain Internal Revenue Code ("IRC") limitations. The first 4%
of pretax compensation (base contribution) contributed to the Plan is
eligible for a discretionary employer matching contribution. The Company
matching contribution is determined each year by the Board of Directors.
The matching contribution may differ among employee groups. In 2004, half
of the Company's matching contribution was made in shares of The
ServiceMaster Company common stock and is invested directly in The
ServiceMaster Company Common Stock Fund, and the other half was made in
cash and was invested according to the participants' direction. In 2005,
the Company remitted to the Plan 346,560 shares of The ServiceMaster
Company common stock at a fair value of $4,571,128 and the remainder of
the employer matching contribution for the 2004 plan year was made in
cash. After the Company matching contribution is made, participants have
complete investment discretion over all Company contributions. The Board
of Directors approved a Company matching contribution of 65% and 32.5% of
participants' base contribution across all employee groups for the year
ended December 31, 2004 and 2003, respectively. Participants may also
contribute amounts representing distributions from other qualified plans.
Participant Accounts--Individual accounts are maintained for each Plan
participant. Each participant's account is credited with the participant's
contribution and an allocation of the Company's discretionary contribution
and Plan earnings, and charged with withdrawals and an allocation of Plan
losses and administrative expenses, 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.
Investments--Participants direct the investment of their contributions
into various investment options offered by the Plan, which currently
consist of The ServiceMaster Company Common Stock Fund, 16 mutual funds,
and 3 common/collective trust funds.
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Vesting--Participants are vested immediately in their contributions plus
actual earnings thereon. Vesting in the Company's contributions, and
earnings thereon, is based on the following schedule, except in the event
of death or permanent disability, in which case the participant
immediately becomes 100% vested:
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
Participant Loans--Participants may borrow from their fund accounts a
minimum of $500 up to a maximum of the lesser of: (a) $50,000 or (b) 50%
of their vested account balance (limited to the value of the participant's
contributions and earnings thereon), minus their highest outstanding loan
balance in the previous 12 months. A participant's loan is secured by the
balance in the participant's account and bears 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%. Principal and
interest are paid ratably through payroll deductions.
Benefit Payments--A participant may elect to have the value of his or her
vested account (minus any outstanding loan balance) distributed to him or
her 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 his or her account, or monthly, quarterly, or annual
installments for a specified number of years not to exceed the
participant's life expectancy and that of his or her beneficiary. At the
time of distribution, shares of The ServiceMaster Company common stock in
the participant's account can be taken in kind or in cash.
Forfeitures--Forfeitures are first used to reinstate all rehired
participants' forfeitures, and then they are used to offset a portion of
the employer's matching contribution and/or used to pay certain plan
expenses normally paid by the Company. Unallocated forfeitures were
$273,261 and $288,297 at December 31, 2004 and 2003, respectively.
Forfeitures in the amount of $217,348 were used to offset a portion of the
employer's matching contribution for the plan year ended December 31,
2004.
Change in Service Providers--During 2004, the Plan changed the record
keeper and trustee of the Plan from Putnam Fiduciary Trust Company
("Putnam") to T. Rowe Price Trust Company ("T. Rowe Price"). Total assets
converted from Putnam on September 30, 2004 were $296,572,255, while the
total assets converted into T. Rowe Price on October 1, 2004 were
$296,571,347. The slight variance between the conversion out and
conversion in numbers is attributable to several factors including, but
not limited to, market experience.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting--The accompanying financial statements have been
prepared in accordance with accounting principles generally accepted in
the United States of America.
Use of Estimates--The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of
America requires the Plan to make estimates and assumptions that affect
the reported amounts of net assets available for benefits and changes
therein. Actual results
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could differ from those estimates. The Plan utilizes various investment
securities, including The ServiceMaster Company Common Stock Fund, mutual
funds, common/collective trust funds, and investment contracts. Investment
securities, in general, are exposed to various risks, such as interest
rate, credit, and overall market volatility. Due to the level of risk
associated with certain investment securities, it is reasonably possible
that changes in the values of investment securities will occur in the near
term and that such changes could materially affect the amounts reported in
the financial statements.
Investment Valuation and Income Recognition--The Plan's investments, other
than the ServiceMaster Stable Value Fund, 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. Participant loans are valued at the
outstanding loan balances.
Purchases and sales of securities are recorded on a trade-date basis.
Interest income is recorded on the accrual basis. Dividends are recorded
on the ex-dividend date.
The ServiceMaster Stable Value Fund invests in the T. Rowe Price Stable
Value Fund and can invest in guaranteed investment contracts, funding
agreements and security-backed investment contracts, and separate accounts
issued or wrapped by insurance companies, banks, or other financial
institutions (collectively referred to herein as "Investment Contracts").
Investment Contracts are carried at cost plus accrued interest ("Book
Value"). Investment Contracts are normally held to maturity, and meet the
fully benefit responsive requirements of AICPA Statement of Position 94-4,
"Reporting of Investment Contracts Held by Health and Welfare Benefit
Plans and Defined Contribution Pension Plans". At December 31, 2004, The
ServiceMaster Stable Value Fund was 100% invested in the T. Rowe Price
Stable Value Fund, with no additional types of investments. At December
31, 2003, The ServiceMaster Stable Value Fund was 100% invested in the
Putnam Stable Value Fund, with no additional types of investments.
Administrative Expenses--Administrative expenses are paid by the Plan to
the extent not paid by the Company. Expenses paid by the Company include
payments to third-party service providers for trust, investment, and legal
services, among others. Expenses paid by the Plan include participant loan
initiation and maintenance fees.
Payment of Benefits--Benefit payments to participants are recorded upon
distribution. There were no amounts, exclusive of distributions for which
participants have elected to be paid on an installment basis, allocated to
accounts of persons who had elected to withdraw from the Plan but had not
yet been paid at December 31, 2004.
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3. INVESTMENTS
The Plan's investments that represented 5% or more of the Plan's net
assets available for benefits as of December 31, 2004 and 2003 are as
follows:
2004 2003
Putnam Investors Fund, 0 and 1,966,629 shares,
respectively $ - $22,242,569
The George Putnam Fund of Boston CL Y,
0 and 3,807,533 shares, respectively 64,804,219
The Putnam Fund for Growth & Income CL Y,
0 and 1,165,867 shares, respectively 20,670,826
Putnam Bond Index Fund, 0 and 2,926,408 shares,
respectively 39,506,507
Putnam S&P 500 Index Fund, 0 and 767,076
shares, respectively 21,309,375
ServiceMaster Stable Value Fund, 23,139,511 and
23,238,464 shares, respectively 23,139,511 23,238,464
The ServiceMaster Company Common Stock Fund,
4,109,837 and 4,415,351 shares, respectively 56,674,648* 51,438,841*
T. Rowe Price Retirement 2020 Fund,
1,287,948 and 0 shares, respectively 19,177,541
T. Rowe Price Retirement 2025 Fund,
1,900,514 and 0 shares, respectively 20,696,602
T. Rowe Price Equity Index Fund, 1,299,266 and
0 shares, respectively 44,395,923
T. Rowe Price Bond Index Fund, 1,725,684 and
0 shares, respectively 37,913,283
T. Rowe Price Equity Income Fund, 845,510 and
0 shares, respectively 22,482,113
* Includes both participant-directed and nonparticipant-directed amounts.
During 2004, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year) appreciated
as follows:
Mutual funds* $ 14,696,602
Common/collective trust funds* 6,005,090
The ServiceMaster Company Common Stock Fund 9,202,360
------------
Net appreciation of investments $ 29,904,052
============
* The appreciation on mutual funds and common/collective trust funds
includes dividends, interest, and miscellaneous cash earnings on those
investments.
-7-
4. THE SERVICEMASTER COMPANY COMMON STOCK FUND
Investments in the Plan are participant-directed, except for half of the
Company's matching contribution, which is invested directly in The
ServiceMaster Company Common Stock Fund. After the Company matching
contribution is made, participants have complete investment discretion
over all Company contributions. Participants, at their discretion, may
also direct their investment to The ServiceMaster Company Common Stock
Fund. Information about the net assets as of December 31, 2004 and 2003
and the significant components of the changes in net assets relating to
The ServiceMaster Company Common Stock Fund for the year ended December
31, 2004 is as follows:
As of December 31
--------------------------------------
2004 2003
Net assets:
The ServiceMaster Company Common Stock Fund $ 56,674,648 $ 51,438,841
Changes in net assets:
Contributions 4,096,115
Dividends from The ServiceMaster Company Common
Stock Fund 1,876,244
Net investment appreciation 9,202,360
Benefits paid to participants (5,470,688)
Net transfers into other investments (4,465,501)
Administrative expenses (2,723)
-------------
Net change 5,235,807
The ServiceMaster Company Common Stock Fund
Beginning of year 51,438,841
The ServiceMaster Company Common Stock Fund -------------
End of year $ 56,674,648
=============
5. RELATED PARTY TRANSACTIONS
Certain Plan investments are shares of mutual funds and interests in
common/collective trust funds managed by T. Rowe Price. T. Rowe Price acts
as trustee, as defined by the Plan, and recordkeeper for the Plan. The
Plan also allows participants to invest in Company stock and allows loans
to participants. In addition, one-half of the Company matching
contribution is invested directly in The ServiceMaster Company Common
Stock Fund. After the Company matching contribution is made, participants
have complete investment direction over all Company matching
contributions. These transactions qualify as party-in-interest
transactions. Fees paid by the Plan for investment management services
were included as a reduction of the return earned on each fund.
At December 31, 2004 and 2003, the Plan held 4,109,837 and 4,415,351
shares, respectively, of common stock of The ServiceMaster Company, the
sponsoring employer, with a cost basis of $43,326,610 and $46,145,904,
respectively. During the year ended December 31, 2004, the Plan recorded
dividend income of $1,876,244 from its investment in The ServiceMaster
Company Common Stock Fund.
-8-
6. PLAN TERMINATION
Although it has not expressed any intention to do so, the Company has the
right under the Plan to discontinue its contributions at any time and
terminate the Plan, subject to the provisions of ERISA. In the event the
Plan is terminated, participants would become 100% vested in their
accounts.
7. FEDERAL INCOME TAX STATUS
The Internal Revenue Service had determined and informed the Company by a
letter dated August 27, 2002, that the Plan and related trust were
designed in accordance with the applicable regulations of the IRC. The
Plan has been amended since receiving the determination letter; however,
the Company and the plan administrator believe that the Plan is currently
designed and being operated in compliance with the applicable requirements
of the IRC and the Plan and related trust continue to be tax-exempt.
Therefore, no provision for income tax has been included in the financial
statements.
******
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SUPPLEMENTAL SCHEDULE
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SERVICEMASTER PROFIT SHARING AND RETIREMENT PLAN
FORM 5500, SCHEDULE H, PART IV, LINE 4i--
SCHEDULE OF ASSETS (HELD AT END OF YEAR)
AS OF DECEMBER 31, 2004
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(b) Identity of Issue/ (e) Current
(a) (c) Description of Investment (d) Cost Value
MUTUAL FUNDS:
* T. Rowe Price Retirement 2005 Fund N/A $ 4,396,521
* T. Rowe Price Retirement 2010 Fund N/A 10,134,968
* T. Rowe Price Retirement 2015 Fund N/A 15,260,835
* T. Rowe Price Retirement 2020 Fund N/A 19,177,541
* T. Rowe Price Retirement 2025 Fund N/A 20,696,602
* T. Rowe Price Retirement 2030 Fund N/A 14,940,735
* T. Rowe Price Retirement 2035 Fund N/A 9,194,497
* T. Rowe Price Retirement 2040 Fund N/A 4,431,773
* T. Rowe Price Retirement Income Fund N/A 1,682,602
* T. Rowe Price International Growth & Income Fund N/A 3,207,441
* T. Rowe Price Mid-Cap Value Fund N/A 2,279,232
* T. Rowe Price Growth Stock Fund N/A 2,652,648
* T. Rowe Price New Horizons Fund N/A 629,257
* T. Rowe Price Equity Income Fund N/A 22,482,113
Vanguard Mid-Cap Growth Fund N/A 3,990,981
Vanguard Small Cap Value Index Fund N/A 8,077,232
COMMON/COLLECTIVE TRUST FUNDS:
* T. Rowe Price Bond Index N/A 37,913,283
* ServiceMaster Stable Value Fund N/A 23,139,511
* T. Rowe Price Equity Index N/A 44,395,923
EMPLOYER SECURITIES Common shares:
* The ServiceMaster Company Common Stock Fund $ 43,326,610 56,674,648
* PARTICIPANT LOANS (Interest rates generally from 5.00% to
10.50% maturing 2005 to 2011) N/A 10,693,993
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Total $ 316,052,336
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* Party-in-interest.
N/A: Cost information is not required for participant-directed investments
and, therefore, is not included. The ServiceMaster Company Common
Stock Fund includes both participant-directed and
nonparticipant-directed investments.
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