American Home Shield 2005 Annual Report Download - page 32

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SERVICEMASTER 2005 ANNUAL REPORT P.30
(In thousands, except per share data)
For years ended December 31, 2005 2004 2003
Operating Revenue $ 3,239,478 $ 3,068,068 $ 2,895,028
Operating Costs and Expenses:
Cost of services rendered and products sold 2,011,978 1,919,220 1,837,592
Selling and administrative expenses 881,963 818,534 752,036
Amortization expense 5,454 6,006 5,875
Charge for impaired assets and other items (1) —— 188,870
Total operating costs and expenses 2,899,395 2,743,760 2,784,373
Operating Income 340,083 324,308 110,655
Non-operating Expense (Income)
Interest expense 56,999 60,708 65,255
Interest and investment income (19,832) (15,469) (15,012)
Minority interest and other expense, net 8,218 8,225 8,151
Income from Continuing Operations before Income Taxes 294,698 270,844 52,261
Provision (benefit) for income taxes(2) 114,137 (45,779) 54,716
Income (Loss) from Continuing Operations (2) 180,561 316,623 (2,455)
Income (loss) from businesses held pending sale and discontinued
operations, net of income taxes (1, 2, 3) 18,364 14,604 (222,232)
Net Income (Loss) $ 198,925 $ 331,227 $ (224,687)
Basic Earnings (Loss) Per Share:
Income (loss) from continuing operations $ 0.62 $ 1.09 $ (0.01)
Income (loss) from businesses held pending sale and discontinued operations (3) 0.06 0.05 (0.75)
Basic Earnings (Loss) Per Share $ 0.68 $ 1.14 $ (0.76)
Diluted Earnings (Loss) Per Share: (1, 2, 3)
Income (loss) from continuing operations $ 0.61 $ 1.06 $ (0.01)
Income (loss) from businesses held pending sale and discontinued operations 0.06 0.05 (0.75)
Diluted Earnings (Loss) Per Share $ 0.67 $ 1.11 $ (0.76)
(1) In accordance with SFAS 142, the Company’s goodwill and intangible assets that are not amortized are subject to at least an annual assessment for impairment by applying a fair-value
based test. In the third quarter of 2003, the Company recorded a non-cash impairment charge associated with the goodwill and intangible assets at its TruGreen LandCare business unit.
This charge, which is included in the results of continuing operations for 2003, totaled $189 million pre-tax, $156 million after-tax, and $0.53 per diluted share. Also in the third quarter of
2003, the Company recorded a non-cash impairment charge associated with the goodwill and intangible assets at its American Residential Services (ARS) and American Mechanical
Services (AMS) operations. The Company is currently holding these operations for sale. Accordingly, the financial results for the ARS and AMS operations, as well as the impairment
charge related to these operations ($292 million pre-tax, $227 million after-tax), are classified with the financial statement caption “businesses held pending sale and discontinued oper-
ations” for all periods. See the “Goodwill and Intangible Assets” note in the Notes to Consolidated Financial Statements.
(2) In January 2005, the Company announced that it had reached a comprehensive agreement with the Internal Revenue Service regarding its examination of the Company’s federal income
taxes through the year 2002. As a result of this agreement, the Company recorded a non-cash reduction in its 2004 tax provision, thereby increasing net income by approximately
$159 million. Approximately $150 million related to continuing operations ($.49 per diluted share) and $9 million related to businesses held pending sale and discontinued operations
($.03 per diluted share). See the “Income Taxes” note in the Notes to the Consolidated Financial Statements.
(3) The Company intends to sell its American Residential Services (ARS) and American Mechanical Services (AMS) companies so it can concentrate resources on its main growth businesses.
These operations were previously disclosed as the Company’s ARS/AMS segment. Because the Company intends to sell these companies, the results of these operations are classified
within the financial statement caption “businesses held pending sale and discontinued operations” in all periods. See the Management Discussion and Analysis of Financial Position and
Results of Operations for a discussion of the components of businesses held for sale and discontinued operations.
See accompanying Notes to the Consolidated Financial Statements.
Consolidated Statements of Operations