American Home Shield 2004 Annual Report Download - page 52

50 ServiceMaster 2004 annual report
notes to the consolidated financial statements
Reported “Discontinued operations” for all periods presented
include the operating results of the sold and discontinued busi-
nesses noted above. The operating results and financial position
of discontinued operations are as follows:
(In thousands,
except per share data)
Operating Results: 2004 2003 2002
Operating revenue $ 1,052 $ 65,057 $ 129,060
Income (loss) from
discontinued operations
before income taxes (3,793) (3,482) 7,543
Provision (benefit) for
income taxes (1) (10,963) (1,375) 3,012
Income (loss) from
discontinued operations 7, 170 (2,107) 4,531
(Loss) on sale of
businesses, net of
income taxes (2) — (605) (4,840)
Income (loss) from
discontinued operations $7,170$ (2,712) $ (309)
Diluted income (loss)
per share from
discontinued operations $ 0.02 $ (0.01) $ —
(1) 2004 includes a $9 million non-cash reduction in the tax provision of
discontinued operations related to a comprehensive agreement with the
IRS regarding its examination of the Company’s federal income taxes
through the year 2002.
(2) Includes a tax benefit of $.4 million and $3 million in 2003 and 2002,
respectively.
Financial Position: 2004 2003
Current assets $ 4,952 $ 5,273
Total assets $ 4,952 $ 5,273
Current liabilities $ 21,536 $ 14,380
Long-term liabilities 9,057 34,396
Total liabilities $ 30,593 $ 48,776
The table below summarizes the activity during the twelve
months ended December 31, 2004 for the remaining liabilities
from the discontinued operations. The Company believes that
the remaining reserves continue to be adequate and reasonable.
Balance at Cash Balance at
Dec. 31, Payments Income/ Dec. 31,
(In thousands) 2003 or Other (Expense) 2004
Remaining liabilities from
discontinued operations:
LandCare Construction $ 7,152 $ 4,681 $ (2,021) $ 4,492
LandCare utility line
clearing business 9,011 3,678 (1,283) 6,616
Certified Systems, Inc. 11,024 2,302 303 8,419
Management Services 283 696 (479) 66
International businesses 21,306 1,155 9,151 11,000
Commitments and Contingencies
The Company leases certain property and equipment under
various operating lease arrangements. Most of the property
leases provide that the Company pay taxes, insurance and main-
tenance applicable to the leased premises. As leases for existing
locations expire, the Company expects to renew the leases or
substitute another location and lease.
Rental expense for 2004, 2003 and 2002 was $169 million, $160
million and $153 million, respectively. Future long-term
non-cancelable operating lease payments are approximately $79
million in 2005, $69 million in 2006, $53 million in 2007, $38
million in 2008, $28 million in 2009, and $35 million in 2010
and thereafter.
The majority of the Company’s fleet and some equipment are
leased through operating leases. Lease terms are non-cancelable for
the first twelve month term and then are month-to-month leases,
cancelable at the Company’s option. There are residual value
guarantees (ranging from 70 percent to 87 percent depending on
the agreement) on these vehicles and equipment, which historically
have not resulted in significant net payments to the lessors.
There are no net payments reflected in the future minimum
lease obligation as the leases are cancelable and there are no
expected net payments due under the guarantees. At December
31, 2004 there was approximately $260 million of residual value
guarantee relating to the Company’s fleet and equipment leases.
The fair value of the assets under the leases is expected to fully
mitigate the Company’s obligations under the agreements.
Accordingly, no liabilities have been recorded with respect to
the guarantees.
The Company maintains operating lease facilities with banks
totaling $68 million which provide for the financing of branch
properties to be leased by the Company. At December 31, 2004,
approximately $68 million was funded under these facilities.
Approximately $15 million of these leases have been included
on the balance sheet as assets with related debt as of December
31, 2004 (the comparable balances were $20 million as of
December 31, 2003). The balance of the funded amount is
treated as operating leases. Approximately $15 million of the
total facility expires in January 2008 and $53 million expires in