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SERVICEMASTER 2005 ANNUAL REPORT P.50
Quarterly Operating Results (Unaudited)
Quarterly operating results and related growth for the last
three years in revenue, gross profit, income from continuing
operations, income from businesses held pending sale and
discontinued operations and earnings per share are shown
in the table below. As discussed in the “Interim Reporting”
section in the Significant Accounting Policies, for interim
(In thousands, except per share data) 2005 Chg 2004 Chg 2003
Continuing Operations:
Operating Revenue:
First Quarter $ 623,760 3% $ 602,907 7% $ 560,910
Second Quarter 970,627 7 909,019 6 858,493
Third Quarter 925,492 6 872,770 4 836,725
Fourth Quarter 719,599 5 683,372 7 638,900
$ 3,239,478 6% $ 3,068,068 6% $ 2,895,028
Gross Profit:
First Quarter $ 209,889 6% $ 197,547 10% $ 180,261
Second Quarter 400,303 9 367,430 5 350,058
Third Quarter 362,573 6 342,071 6 323,416
Fourth Quarter 254,735 5 241,800 19 203,701
$ 1,227,500 7% $ 1,148,848 9% $ 1,057,436
Income (Loss) from Continuing Operations: (1)
First Quarter $ 11,036 (14%) $ 12,761 178% $ 4,592
Second Quarter 75,391 9 69,267 8 63,842
Third Quarter(3) 70,172 9 64,267 N/M (93,719)
Fourth Quarter (2) 23,962 N/M 170,328 N/M 22,830
$ 180,561 N/M $ 316,623 N/M $ (2,455)
Basic Earnings (Loss) Per Share: (1)
First Quarter $ 0.04 —% $ 0.04 100% $ 0.02
Second Quarter 0.26 8 0.24 9 0.22
Third Quarter (3) 0.24 9 0.22 N/M (0.32)
Fourth Quarter (2) 0.08 N/M 0.59 N/M 0.08
$ 0.62 N/M $ 1.09 N/M $ (0.01)
Diluted Earnings (Loss) Per Share: (1)
First Quarter $ 0.04 —% $ 0.04 100% $ 0.02
Second Quarter 0.25 9 0.23 10 0.21
Third Quarter (3) 0.23 5 0.22 N/M (0.32)
Fourth Quarter (2) 0.08 N/M 0.56 N/M 0.08
$ 0.61 N/M $ 1.06 N/M $ (0.01)
Businesses Held Pending Sale and
Discontinued Operations: (1)
Income (Loss) from Businesses Held Pending Sale and
Discontinued Operations:
First Quarter $ (464) 70% $ (1,562) N/M $ 83
Second Quarter 4,410 291 1,129 (34%) 1,708
Third Quarter (3) 11,415 230 3,457 N/M (224,247)
Fourth Quarter (2) 3,003 N/M 11,580 N/M 224
$ 18,364 N/M $ 14,604 N/M $ (222,232)
Diluted Earnings (Loss) Per Share:
First Quarter $—100% $ (0.01) N/M $ —
Second Quarter 0.01 N/M — 100% 0.01
Third Quarter (3) 0.04 300 0.01 N/M (0.76)
Fourth Quarter (2) 0.01 N/M 0.04 N/M —
$ 0.06 N/M $ 0.05 N/M $ (0.75)
N/M = Not meaningful
(1) The Company intends to sell its American Residential Services (ARS) and American Mechanical Services (AMS) companies so that 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 state-
ment 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 pending sale and discontinued operations.
(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 fourth quarter and full year 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) 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 $.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 as “businesses
held pending sale and discontinued operations” for all periods. See the “Goodwill and Intangible Assets” note in the Notes to Consolidated Financial Statements.
accounting purposes, TruGreen ChemLawn and other busi-
ness segments of the Company incur pre-season advertising
costs. In addition, TruGreen ChemLawn incurs costs related
to annual repairs and maintenance procedures that are
performed in the first quarter. These costs are deferred and
recognized as expense in proportion to revenue over the
balance of the year. Full year results are not affected.
Quarterly Operating Results