American Home Shield 2002 Annual Report Download - page 52

Acquisitions
Acquisitions have been accounted for using the purchase
method and, accordingly, the results of operations of
the acquired businesses have been included in the
Company’s consolidated financial statements since
their dates of acquisition. The assets and liabilities of
these businesses were recorded in the financial statements
at their estimated fair values as of the acquisition dates.
Current Year
During 2002, the Company acquired several small
companies, primarily in the pest control and lawn care
businesses. The net purchase price of these acquisitions
was $18 million. The Company recorded goodwill of $12
million and other intangible assets of $4 million related
to these acquisitions.
Prior Years
In January 2001, the Company acquired the Allied
Bruce Terminix Companies, the largest Terminix fran-
chise and the fourth largest pest control company in the
United States. The total consideration consisted of an
equity interest in the Terminix subsidiary valued at
$100 million, which is convertible into eight million
ServiceMaster common shares, and longer-term cash
payments due over nine years totaling $25 million.
Approximately $122 million of goodwill was recorded
related to this acquisition.
During 2001, the Company acquired several small
companies, primarily in the pest control and
heating/air conditioning and plumbing businesses. The
net purchase price of these acquisitions was $64 million.
All of these companies were acquired before June 30,
2001 (the date that SFAS 141 became effective).
Approximately $56 million of goodwill was recorded
relating to these acquisitions.
In October 2001, the Company acquired certain assets
of Sears Termite and Pest Control, Inc., a company that
provides pest control services and protection against
termite damage to residential customers located
primarily in the Southeast. The cash paid after assuming
the liabilities to remediate the premises owned by current
customers was not material. Approximately $54 million
was recorded as goodwill and $6 million assigned to
other intangible assets which will be amortized over
three to seven years.
During 2000, the Company acquired many small
companies, primarily in the lawn care, HVAC and
plumbing, pest control and landscaping businesses.
The net purchase price was $207 million, of which
approximately $162 million was recorded as goodwill.
Supplemental cash flow information regarding the
Company’s acquisitions is as follows:
(In thousands) 2002 2001 2000
Purchase price $ 18,850 $ 245,646 $246,886
Less liabilities
assumed (1,207) (54,790) (39,588)
Net purchase price $ 17,643 $ 190,856 $ 207,298
Net cash paid
for acquisitions $ 13,003 $ 55,842 $ 144,834
Shares issued -- 15,030
Seller financed debt 4,640 35,014 47,434
Minority ownership
in Terminix -100,000 -
Payment for
acquisitions $ 17,643 $ 190,856 $ 207,298
Dispositions
During the second quarter of 2002, the Company com-
pleted the sale of its ownership interest in five assisted
living facilities. These properties were financed
through an operating lease arrangement, whereby, the
Company guaranteed a portion of the residual value of
the properties. In the fourth quarter of 2001, a $13.5
million reserve was established representing the
amount by which the residual value guarantees exceed-
ed the value of bids to purchase the facilities at that
time. The final sales price was significantly greater
than these bid levels and the Company realized a gain of
$3.6 million from the sale on the assisted living properties
in 2002, which is included in operating income.
During the third quarter of 2002, the Company sold
its remaining Terminix operations in the United Kingdom.
The sale was not material to the Company’s operating
results. Related to this sale, the Company entered into a
two year licensing agreement with the buyer for the use
of Terminix trade name in the United Kingdom. This
agreement was valued at $6 million and accordingly, a
like amount was allocated from the purchase price.
48 ServiceMaster
Notes to Consolidated Financial Statements