-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, MYQps16yKaLgnAFsZ4cNnEwMtUX4KBnQNxPvvFq7QIY+RJgKNsQCJcPjhqgnmUCf 2/Kzyem9LE/6d3VErdlFHg== 0000070538-95-000003.txt : 19950509 0000070538-95-000003.hdr.sgml : 19950508 ACCESSION NUMBER: 0000070538-95-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19941130 FILED AS OF DATE: 19950112 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONAL SERVICE INDUSTRIES INC CENTRAL INDEX KEY: 0000070538 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC LIGHTING & WIRING EQUIPMENT [3640] IRS NUMBER: 580364900 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03208 FILM NUMBER: 95501121 BUSINESS ADDRESS: STREET 1: 1420 PEACHTREE ST NE CITY: ATLANTA STATE: GA ZIP: 30309 BUSINESS PHONE: 4048531000 MAIL ADDRESS: STREET 1: 1420 PEACHTREE ST NE CITY: ATLANTA STATE: GA ZIP: 30309 10-Q 1 NATIONAL SERVICE INDUSTRIES, INC. 10-Q 1 Page 1 of 15 Exhibit Index on Page 11 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Quarterly Report Under Section 13 or 15 (d) of the Securities Exchange Act of 1934 For quarter ended November 30, 1994 Commission file number 1-3208 NATIONAL SERVICE INDUSTRIES, INC. (Exact Name of Registrant as Specified in its Charter) Delaware 58-0364900 (State or Other Jurisdiction of (I.R.S. Employer Identification Number) Incorporation or Organization) 1420 Peachtree Street, N. E., Atlanta, Georgia 30309-3002 (Address of Principal Executive Offices) (Zip Code) (404) 853-1000 (Registrant's Telephone Number, Including Area Code) None (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date (applicable only to corporate issuers). Common Stock - $1.00 Par Value - 49,051,587 shares as of December 29, 1994. 2 Page 2 NATIONAL SERVICE INDUSTRIES, INC. AND SUBSIDIARIES INDEX Page No. PART I. FINANCIAL INFORMATION CONSOLIDATED BALANCE SHEETS - NOVEMBER 30, 1994 AND AUGUST 31, 1994 3 CONSOLIDATED STATEMENTS OF INCOME - THREE MONTHS ENDED NOVEMBER 30, 1994 AND 1993 4 CONSOLIDATED STATEMENTS OF CASH FLOWS - THREE MONTHS ENDED NOVEMBER 30, 1994 AND 1993 5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 7-8 PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 9 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 9 SIGNATURES 10 EXHIBIT INDEX 11 3 Page 3 PART I. FINANCIAL INFORMATION NATIONAL SERVICE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollar amounts in thousands) November 30, August 31, ASSETS 1994 1994 (Unaudited) Current Assets: Cash and cash equivalents $ 82,430 $ 58,619 Short-term investments 2,240 2,579 Receivables, less reserves for doubtful accounts of $8,705 at November 30, 1994 and $7,385 at August 31, 1994 245,974 256,051 Inventories, at the lower of cost (on a first-in, first-out basis) or market 188,769 178,590 Linens in service, net of amortization 89,279 90,037 Prepaid income taxes, net 1,638 13,473 Prepayments, etc. 12,648 8,933 Total Current Assets 622,978 608,282 Property, Plant, and Equipment, at cost: Land 32,210 32,237 Buildings and leasehold improvements 188,867 186,929 Machinery and equipment 512,400 507,408 Total Property, Plant and Equipment 733,477 726,574 Less - Accumulated depreciation and amortization 386,270 378,262 Property, Plant, and Equipment - net 347,207 348,312 Other Assets: Goodwill and other intangibles 108,652 112,286 Other 36,078 37,876 Total Other Assets 144,730 150,162 Total Assets $1,114,915 $1,106,756 November 30, August 31, LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1994 (Unaudited) Current Liabilities: Current maturities of long-term debt $ 544 $ 667 Notes payable 5,182 5,098 Accounts payable 77,240 81,969 Accrued salaries, commissions, and bonuses 38,371 42,624 Self insurance reserves 81,727 77,680 Other accrued liabilities 49,007 42,716 Total Current Liabilities 252,071 250,754 Long-Term Debt, less current maturities 26,818 26,863 Deferred Income Taxes 77,811 78,814 Other Long-Term Liabilities 22,997 22,940 Convertible Preferred Stock: Series A participating preferred stock, $.05 stated value, 500,000 shares authorized, none issued Preferred stock, no par value, 500,000 shares authorized, none issued Common Stockholders' Equity: Common stock, $1 par value, authorized 80,000,000 shares, issued 57,918,978 shares at November 30, 1994 and August 31, 1994 57,919 57,919 Paid-in capital 7,822 7,684 Retained earnings 713,295 705,504 779,036 771,107 Less - Treasury stock, at cost (8,675,986 shares at November 30, 1994 and 8,678,666 shares at August 31, 1994) 43,818 43,722 Total Stockholders' Equity 735,218 727,385 Total Liabilities and Stockholders' Equity $1,114,915 $1,106,756 The accompanying notes to consolidated financial statements are an integral part of these balance sheets. 4 Page 4 NATIONAL SERVICE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (Dollar amounts in thousands, except per-share data) THREE MONTHS ENDED NOVEMBER 30 1994 1993 Sales and Service Revenues: Net sales of products $ 344,882 $ 325,213 Service revenues 136,102 134,687 Total Revenues 480,984 459,900 Costs and Expenses: Cost of products sold 219,187 213,579 Cost of services 75,846 70,737 Selling and administrative expenses 149,695 141,583 Interest expense 830 1,146 Other expense (income), net 1,691 2,052 Total Costs and Expenses 447,249 429,097 Income before Provision for Income Taxes 33,735 30,803 Provision for Income Taxes: Current 12,649 12,591 Deferred (28) (960) 12,621 11,631 Net Income $ 21,114 $ 19,172 Per Share: Net income $.43 $.39 Cash dividends $.27 $.26 Weighted Average Number of Shares Outstanding (thousands) 49,244 49,562 The accompanying notes to consolidated financial statements are an integral part of these statements. 5 Page 5 NATIONAL SERVICE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollar amounts in thousands) THREE MONTHS ENDED NOVEMBER 30 1994 1993 Cash Provided by (Used for) Operating Activities: Net income $ 21,114 $ 19,172 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 14,500 15,365 Provision for losses on accounts receivable 1,382 1,381 Loss (gain) on sale of property, plant, and 40 (25) equipment Gain on the sale of business (1,117) (467) Provision for deferred income taxes (28) (960) Change in assets and liabilities net of effect of acquisitions and sale of business- Receivables, net 9,027 4,742 Inventories and linens in service, net (10,153) (6,834) Prepaid income taxes 11,835 11,465 Prepayments and other (3,876) (819) Accounts payable and accrued liabilities 1,356 (8,873) Net Cash Provided by Operating Activities 44,080 34,147 Cash Provided by (Used for) Investing Activities: Change in short-term investments 339 1,179 Purchase of property, plant, and equipment (11,774) (10,977) Sale of property, plant, and equipment 409 1,176 Sale of business 3,533 682 Acquisitions (304) (375) Change in other assets 1,219 (2,632) Net Cash Used for Investing Activities (6,578) (10,947) Cash Provided by (Used for) Financing Activities: Change in notes payable 84 (593) - - Repayment of long-term debt (168) (529) Recovery of investment in tax benefits 458 644 Deferred income taxes from investment in tax benefits (975) (1,178) Issuance of treasury stock 176 68 Change in other long-term liabilities 57 393 Cash dividends paid (13,296) (12,886) Net Cash Used for Financing Activities (13,664) (14,081) Effect of Exchange Rate Changes on Cash (27) (26) Net Change in Cash and Cash Equivalents 23,811 9,093 Cash and Cash Equivalents at Beginning of Year 58,619 15,853 Cash and Cash Equivalents at End of Period $ 82,430 $ 24,946 Supplemental Cash Flow Information: Income taxes paid during the period $ 1,171 $ 1,510 Interest paid during the period 739 604 Noncash Investing and Financing Activities: Noncash aspects of sale of business - Accounts and notes receivable $ (624) $ (336) The accompanying notes to consolidated financial statements are an integral part of these statements. 6 Page 6 NATIONAL SERVICE INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. BASIS OF PRESENTATION: The interim consolidated financial statements included herein have been prepared by the company without audit, and the condensed consolidated balance sheet as of August 31, 1994 has been derived from audited statements. These statements reflect all adjustments, all of which are of a normal, recurring nature, which are, in the opinion of management, necessary to present fairly the consolidated financial position as of November 30, 1994, the consolidated results of operations for the three months ended November 30, l994 and 1993, and the consolidated cash flows for the three months ended November 30, 1994 and 1993. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the company's Annual Report on Form 10-K for the fiscal year ended August 31, 1994. The results of operations for the three months ended November 30, 1994 are not necessarily indicative of the results to be expected for the full fiscal year because the company's revenues and income are generally higher in the second half of its fiscal year and because of the uncertainty of general business conditions. 2. BUSINESS SEGMENT INFORMATION: Three Months Ended November 30 Sales and Service Revenues Operating Profit 1994 1993 1994 1993 (In thousands) Lighting Equipment $203,806 $182,105 $13,690 $ 11,899 Textile Rental 136,102 134,687 11,316 11,238 Chemical 87,952 82,282 9,301 9,026 Other 53,124 60,826 3,069 1,513 480,984 459,900 37,376 33,676 Corporate (2,811) (1,727) Interest Expense (830) (1,146) Total $480,984 $459,900 $33,735 $ 30,803 3. INVENTORIES: Major classes of inventory as of November 30, 1994 and August 31, 1994 were as follows: November 30, August 31, 1994 1994 (In thousands) Raw Materials and Supplies $ 78,510 $ 72,677 Work-in-Process 10,350 9,918 Finished Goods 99,909 95,995 Total $188,769 $178,590 4. POSTEMPLOYMENT BENEFITS During the quarter ended November 30, 1994, the company adopted Statement of Financial Accounting Standards (SFAS) No. 112, "Employers' Accounting for Postemployment Benefits," which requires employers to accrue the expected cost of benefits to be provided to former or inactive employees after employment but before retirement. The company's liability relates primarily to severance agreements and to life insurance coverage for certain eligible disabled employees. The amount is not material to the consolidated financial statements. 7 Page 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the consolidated financial statements and related notes. Financial Condition National Service Industries' balance sheet strengthened during the quarter ended November 30, 1994. Net working capital increased to $370.9 million from $357.5 million at August 31, 1994, and the current ratio increased to 2.5, compared with 2.4 at year end. Cash and short-term investments climbed to $84.7 million from $61.2 million at August 31. For the quarter ended November 30, 1994, the company invested $12.1 million in capital expenditures and acquisitions. Long-term debt and other long-term liabilities were 6.3 percent of total capitalization, down from 6.4 percent at year end. Cash provided by operating activities was $44.1 million, compared with $34.1 million for the first quarter last year. Capital expenditures, exclusive of acquisition spending, were $11.8 million for the first quarter this year and $11.0 million for the same period last year. In the current period, the lighting equipment division invested in manufacturing equipment replacements and improvements and began construction of a production facility in Monterrey, Nuevo Leon, Mexico, as part of its North America manufacturing and distribution strategy. The textile rental division invested in fleet upgrades and facility improvements to support volume growth. Prior-year spending was primarily the result of facilities and manufacturing process improvements in the lighting equipment division and wastewater compliance projects and fleet upgrades in the textile rental division. Acquisition spending was minimal in both periods. Dividend payments totaled $13.3 million, or 27 cents per share, during the first quarter this year, compared with $12.9 million, or 26 cents per share, for the prior-year period. Effective January, 1995, the regular quarterly dividend rate was increased 3.7 percent to 28 cents per share, which is an annual rate of $1.12 per share. For the periods presented, capital expenditures, working capital needs, dividends, and acquisitions were financed primarily with internally generated funds, supplemented by short-term borrowings in the European market. Contractual commitments for capital spending during the coming twelve months total $15 million. For the current fiscal year, the company expects actual capital expenditures to be somewhat higher than levels of recent years, which, excluding acquisition spending, were $43 million in 1994, $36 million in 1993, and $43 million in 1992. Current liquid assets and internally generated funds are expected to be more than adequate to meet anticipated cash requirements for the next twelve months, although some interim borrowings might be incurred to meet short-term needs. The company has complimentary lines of credit totaling $152 million, of which $110 million has been provided domestically and $42 million is available on a multi-currency basis primarily from a European bank. Results of Operations National Service Industries, Inc. earnings per share for the first quarter of fiscal 1995 increased 10.8 percent to 43 cents per share. Sales for the quarter increased 4.6 percent to $481 million. Net income of $21.1 million was 10.1 percent higher than the $19.2 million reported in last year's first quarter. Since an average of 318,000 fewer shares were outstanding during the quarter, earnings per share increased at the slightly higher rate of 10.8 percent. The lighting equipment division continued its excellent progress with sales gains of 11.9 percent to $204 million from $182 million for the first quarter last year. The improvement was primarily attributable to higher unit volumes. Operating profit rose 15.1 percent to 6.7 percent of revenues, compared with 6.5 percent the prior-year period, largely as a result of the volume gains and a small boost from improved product pricing. The textile rental segment posted a modest revenue gain of 1.1 percent to $136 million, as activity in the hospitality sector showed improvement. Operating profits were 8.3 percent of related revenues for both periods. Labor and utility cost improvements were offset by the costs of an increased sales force. 8 Page 8 Chemical segment sales, led by U.S. markets, increased 6.9 percent to $88 million from $82 million the year earlier, primarily due to unit volume gains. Operating income was 10.6 percent of revenues, down from 11.0 percent in the first quarter last year. European and Canadian cost structures continued to dampen overall segment results. As of the beginning of the fiscal year, those businesses included in NSI's other segment no longer include Marketing Services. On a comparable-business basis, sales were relatively flat because volume gains in the envelope business were offset by declines in the insulation service sector. Significant cost improvements in the insulation service business and margins on volume gains in the envelope business led to a doubling of operating income. Corporate expense was greater than in the first quarter last year due in large part to the company's adoption of Statement of Financial Accounting Standards (SFAS) No. 112, "Employers' Accounting for Postemployment Benefits," requiring the accrual of the estimated cost of benefits provided by an employer to former or inactive employees after employment but before retirement. The accrual relates primarily to severance agreements and the liability for life insurance coverage for certain eligible disabled employees. Interest expense on European loans was lower than in the prior-year period. The provision for income taxes in the first quarter was 37.4 percent of pretax income, compared with 37.8 percent for the same period last year. The change in the year-to-year effective rate resulted from an increase in the amount of tax exempt income compared with last year's first quarter. 9 Page 9 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders At the annual meeting of stockholders held January 4, 1995, all nominees for director were elected to the board without opposition and Arthur Andersen LLP was appointed as independent auditor for the current fiscal year. In addition, stockholders voted on the following: Votes Cast Affirmative Negative Abstentions Proposal to approve the National Service Industries, Inc. Management Compensation and Incentive Plan 38,634,254 2,539,031 392,093 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits are listed on the Index to Exhibits (page 11). (b) There were no reports on Form 8-K for the three months ended November 30, 1994. 10 Page 10 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NATIONAL SERVICE INDUSTRIES, INC. REGISTRANT DATE January 12, 1995 /s/ David Levy DAVID LEVY EXECUTIVE VICE PRESIDENT, ADMINISTRATION AND COUNSEL DATE January 12, 1995 /s/ J. Robert Hipps J. ROBERT HIPPS SENIOR VICE PRESIDENT, FINANCE 11 Page 11 INDEX TO EXHIBITS Page No. EXHIBIT 10(iii)A Management Contracts and Compensatory Arrangements: (a)-Second Amendment to Executives' 12 Deferred Compensation Plan, Effective as of September 1, 1994 EXHIBIT 11 - Computation of Net Income per Share of 14 Common Stock EXHIBIT 27 - Financial Data Schedules 15 EX-10 2 EXECUTIVE DEFERRED COMPENSATION PLAN 1 Page 12 Exhibit 10(iii)A SECOND AMENDMENT TO EXECUTIVES' DEFERRED COMPENSATION PLAN WHEREAS, National Service Industries, Inc. ("NSI") established the Executives' Deferred Compensation Plan ("Plan"), on August 24, 1981, to assist key employees in accumulating capital and supplementing their retirement income; and WHEREAS, the Board of Directors of NSI now desires to amend the Plan in the manner hereinafter provided; 1. Section 6.03 of the Plan is hereby amended by adding the following to the end of the present section: "A Participant retiring on or after age 55 may elect at least one (1) year prior to the date of his retirement to make the deferral election in this section with respect to all Class Year Accounts which have not yet become distributable because five (5) full Fiscal Years have not elapsed." 2. Article VI of the Plan is hereby amended by adding the following new Section 6.04: "6.04 Hardship. A Participant who is suffering an unforeseen and severe financial hardship as a result of (i) an illness or accident of the Participant or his immediate family, (ii) loss of Participant's property due to casualty, or (iii) for such other reasons as the Committee may establish, may file a written request with the Committee for distribution of all or a portion 2 Page 13 Exhibit 10(iii)A of the amount credited to his Account. The Committee shall have the sole discretion to determine whether to grant a Participant's hardship request and the amount to distribute to the Participant. The Committee shall have authority in connection with such hardship request to accelerate the payment of any Class Year Accounts which have been deferred pursuant to Section 6.03." 3. Section 8.04 of the Plan is hereby amended by deleting the first sentence of the present provision and substituting the following in lieu thereof: "The Committee shall have the exclusive discretionary authority to construe and to interpret the Plan, to decide all questions of eligibility for benefits and to determine the amount of such benefits, and its decisions on such matters shall be final and conclusive on all parties." 4. This Amendment No. 2 to the Plan shall be effective as of September 1, 1994. Except as hereby amended, the Plan shall remain in full force and effect. IN WITNESS WHEREOF, NSI has caused this amendment to be executed by its duly authorized officers this 29th day of December, 1994. NATIONAL SERVICE INDUSTRIES, INC. ATTEST: /s/ Kenyon W. Murphy By: /s/ D. Raymond Riddle EX-11 3 COMPUTATION OF NET INCOME PER SHARE 1 Page 14 Exhibit 11 NATIONAL SERVICE INDUSTRIES, INC. AND SUBSIDIARIES COMPUTATIONS OF NET INCOME PER SHARE OF COMMON STOCK (In thousands, except per-share data) THREE MONTHS ENDED NOVEMBER 30 1994 1993 Primary: Weighted Average Number of Shares (determined on a monthly basis) 49,244 49,562 Net Income $21,114 $19,172 Primary Earnings per Share $ .43 $ .39 Fully Diluted: Weighted Average Number of Shares Outstanding 49,244 49,562 Additional Shares Assuming Exercise of Options: Options exercised 978 746 Treasury stock purchased with proceeds (902) (689) Average Common Shares Outstanding (as adjusted) 49,320 49,619 Net Income $21,114 $19,172 Fully Diluted Earnings per Share $ .43 $ .39 EX-27 4 FINANCIAL DATA SCHEDULES
5 1 Page 15 Exhibit 27 Financial Data Schedules Quarter Ended November 30, 1994 Pursuant to Section 601(c) of Regulation S-K This schedule contains summary financial information extracted from National Service Industries, Inc. consolidated balance sheet as of November 30, 1994 and the consolidated statement of income for the three months ended November 30, 1994, and is qualified in its entirety by reference to such financial statements. 3-MOS AUG-31-1995 NOV-30-1994 82,430 2,240 254,679 8,705 188,769 622,978 733,477 386,270 1,114,915 252,071 26,818 57,919 0 0 721,117 1,114,915 344,882 480,984 219,187 295,033 151,386 0 830 33,735 12,621 21,114 0 0 0 21,114 0.43 0.43
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