Downers Grove, IL, Feb. 12--The ServiceMaster Company today announced fourth quarter 2003 revenues of $807 million, a 2% increase compared to 2002. Fourth quarter 2003 earnings per share from continuing operations were up 33% to $.08 compared with $.06 in 2002.
For the full year, revenues of $3.6 billion were up 2% over 2002. Earnings (loss) per share from continuing operations were $(.75) compared with $.51 in 2002. Earnings per share from continuing operations excluding the non-cash impairment charge reported in the third quarter of 2003 were $.54.
"Our improved performance and growth in the second half of 2003 were the result of hard-working service people staying focused on the customer, combined with strong cost reductions and controls across the enterprise," said Jonathan Ward, Chairman and Chief Executive Officer. "Earnings moved up as we started to see improved revenue in the quarter, reflecting the business momentum that we all have been working hard to achieve.
"Going forward, the process of repositioning our brands will help us to unleash the power of thousands of dedicated service people by focusing their efforts on delivering the experience that our customers want and value," continued Ward.
During the fourth quarter, the company recorded a reduction in revenue and operating income as a result of a correction in its historical method of recognizing renewal revenues from certain Terminix and American Home Shield customers who have prepaid. The effects of the adjustment were not material to prior years. It also recorded a favorable adjustment as a result of positive trending in certain termite damage claim costs. Combined, these items reduced revenues for the fourth quarter by $14 million and reduced operating and pre-tax income for that period by approximately $5 million. In addition, the company incurred severance and shut down costs primarily associated with branch closures and also had lower variable compensation expense; the net effect of these latter two items was immaterial.
Net cash flow provided from operations for the full year was $284 million, again substantially exceeding net income, but was below the $374 million reported in the previous year. The majority of the reduction was experienced in the first quarter and was largely due to nonrecurring benefits experienced in 2002 (including the timing and amount of customer prepayments) as well as the timing of certain payments and accruals. Total debt on December 31, 2003 was $819 million, slightly below the prior year-end levels.
"Throughout 2004 we will maintain a strong focus on top-line sales, increased retention, pricing discipline, and improving margins in TruGreen LandCare and the ARS/AMS segment," said Ward. "We believe we will build on the progress we made in 2003 and continue to grow new customers and retention rates through the year, demonstrating the fundamental strength of our strategies.
"We expect our growth to be partially offset by higher insurance costs and a return to a more normal level of variable compensation," continued Ward. "These factors, combined with the current economic and employment outlook, lead us to expect revenue growth to be in the mid-single digits in 2004 and that earnings per share will grow somewhat faster than revenues. In addition, we expect cash from operations to increase with earnings and to continue to substantially exceed net income," concluded Ward.
The Other Operations segment reported fourth quarter revenues of $39 million, up 2% compared with the prior year. For the full year, the segment reported revenues of $152 million, up 2%, compared with 2002. The combined ServiceMaster Clean and Merry Maids franchise operations reported an increase in earned revenue of 4% and 8% in the quarter and full year.
