American Home Shield 2003 Annual Report Download - page 52

50    ServiceMaster
final sales price was significantly greater than these bid levels
and the Company realized a gain of $3.6 million from the sale
of 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 licensing
agreement with the buyer for the use of the 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. The entire amount was recognized as
income in the third quarter of 2002.
Portfolio Review and
Dispositions in 2001
In October 2001,the Company’s Board of Directors approved
a series of strategic actions which were the culmination of an
extensive portfolio review process that was initiated earlier in
2001. In the fourth quarter of 2001, the Company sold its
Management Services business to ARAMARK Corporation
for approximately $800 million and recorded an after-tax
gain of $404 million. (A division of Management Services
was not sold as part of this transaction and the Company
recorded a $15 million loss upon disposition of this unit.)
Also in the fourth quarter of 2001, the Company’s Board of
Directors approved the exit of non-strategic and under-
performing businesses including TruGreen LandCare Con-
struction, Certified Systems Inc. (CSI), and certain Terminix
operations in Europe. The Company sold its TruGreen
LandCare Construction operations in certain markets to
Environmental Industries, Inc. (EII) and EII managed the
wind-down of commercial landscaping construction con-
tracts in the remaining markets. In addition, the Company
sold all of its customer contracts relating to the exit of CSI
(the Company’s professional employer organization) to
AMS Staff Leasing, N.A., Inc. In the fourth quarter of 2001,
the Company sold certain subsidiaries of its European pest
control and property services operations.
In the fourth quarter of 2002,the purchaser of the Company’s
European pest control and property services operations
made a claim for a purchase price adjustment (relating to the
2001 sale), relating to an alleged breach of certain conditions
in the purchase agreement. In the course of responding to
that claim, the Company discovered that personnel of the
former operations had made unsupported monthly adjust-
ments to certain accounts. The Company subsequently agreed
to an adjustment to the purchase price consisting of an $8
million cash payment and the cancellation of a previously
reserved note receivable of $7 million. An $8 million charge
was recorded in 2002.
Reported “Discontinued operations”for all periods presented
include the operating results of the sold and discontinued
businesses noted above and the 2001 results include the gain
from the sale of Management Services, net of losses from the
disposition of other entities. The operating results and
financial position of discontinued operations are as follows:
(In thousands, except per share data)
Operating Results: 2003 2002 2001
Operating revenue $ 65,057 $ 129,060 $2,356,010
Income (loss) from
discontinued operations
before income taxes (3,482) 7,543 (20,009)
Provision (benefit) for
income taxes (1,375) 3,012 14,601
Income (loss) from
discontinued operations (2,107) 4,531 (34,610)
Gain (loss) on sale of
businesses,net(1) (605) (4,840) 323,213
Income (loss) from
discontinued
operations $ (2,712) $ (309) $ 288,603
Diluted earnings
per share from
discontinued
operations $ (0.01) $ – $ 0.97
(1) Net of income tax expense (benefit) of ($.4) million, ($3) million, and $218 million
in 2003, 2002 and 2001,respectively.
Financial Position: 2003 2002
Current assets $ 5,273 $ 15,883
Property,plant and equipment –6,703
Total assets $ 5,273 $ 22,586
Current liabilities $ 14,380 $ 36,624
Long-term liabilities 34,396 30,682
Total liabilities $ 48,776 $ 67,306
Notes to Consolidated Financial Statements