ServiceMaster Predicts Flat Revenue for ‘04

Downers Grove, IL — The ServiceMaster Company, parent of TruGreen ChemLawn and TruGreen LandCare, announced second quarter 2003 revenue was up 2 percent, and TruGreen revenues were up 5 percent compared to the same period last year.

However, the company recorded a $.03 loss per share resulting from the early extinguishment of debt.

“Our performance this year has been achieved against a backdrop of difficult economic and weather conditions that have affected our industries,” said Jonathan Ward, chairman and CEO. “During the quarter we regained some of the momentum lost early in the year through strong production in TruGreen ChemLawn and a significant increase in profitability from American Home Shield. We also continue to take action to improve our under-performing units – TruGreen LandCare and ARS.”

For the second quarter of 2003, the TruGreen segment reported revenues of $455 million, up 5 percent compared with the prior year. For the six months of 2003, the segment reported revenues of $681 million, up 3 percent compared to 2002.

TruGreen Chemlawn revenue increased by 8 percent and 3 percent in the quarter and six months, respectively, primarily reflecting growth in customer counts and increased production in the second quarter in order to make up for weather-related operating delays experienced in the first quarter.

TruGreen Landcare revenues decreased by 1 percent and increased by 2 percent in the quarter and six months, respectively, reflecting a reduced level of enhancement sales, offset by an increase in first quarter snow removal revenues.

Operating income for the quarter was $68 million, consistent with the prior year, and for the six months was $59 million compared with $74 million in the prior year.

Margins in the first half declined due to higher sales and labor related costs resulting from increased production in TruGreen Chemlawn, partly due to under utilization of labor in the first quarter, a decline in profitability in its utility line clearing operations and a decreased level of landscaping enhancement business.

In 2002, ServiceMaster's lawn care segment had revenue of $1.37 billion and operating income of $171 million. For the second quarter, the segment had revenue of $455 million and operating income of $68 million. Looking forward, the company predicted TruGreen ChemLawn should have unchanged operating margins in 2004 and then improve by 0.2 to 0.5 of a percentage point after 2004.