-----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, szpb/RSLeCP6vpZ+j1Z5vuNVMEVCijz8J9jLv5drVvBC/Cavg626QNrtiFL2NqKV //yJbpHaEu/h75t/GfLd/A== 0000070538-95-000028.txt : 199507170000070538-95-000028.hdr.sgml : 19950717 ACCESSION NUMBER: 0000070538-95-000028 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950531 FILED AS OF DATE: 19950714 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: 95554046 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 Page 1 of 14 Exhibit Index on Page 12 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 May 31, 1995 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 - 48,303,564 shares as of June 26, 1995. Page 2 NATIONAL SERVICE INDUSTRIES, INC. AND SUBSIDIARIES INDEX Page No. PART I. FINANCIAL INFORMATION CONSOLIDATED BALANCE SHEETS MAY 31, 1995 AND AUGUST 31, 1994 3 CONSOLIDATED STATEMENTS OF INCOME - THREE MONTHS AND NINE MONTHS ENDED MAY 31, 4 1995 AND 1994 CONSOLIDATED STATEMENTS OF CASH FLOWS - 5 NINE MONTHS ENDED MAY 31, 1995 AND 1994 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6-7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8-9 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 10 SIGNATURES 11 EXHIBIT INDEX 12 Page 3 NATIONAL SERVICE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollar amounts in thousands) May 31, August 31, 1995 1994 * ASSETS (Unaudited) Current Assets: Cash and cash equivalents $ 58,818 $ 58,619 Short-term investments 9,386 2,579 Receivables, less reserves for doubtful accounts of $9,394,000 at May 31, 1995 and $7,385,000 at August 31, 1994 254,448 256,051 Inventories, at the lower of cost (on a first-in, first-out basis) or market 198,548 178,590 Linens in service, net of amortization 88,456 90,037 Prepaid income taxes 1,321 7,978 Prepayments 10,691 8,933 Total Current Assets 621,668 602,787 Property, Plant, and Equipment, at cost: Land 31,830 32,237 Buildings and leasehold improvements 192,862 186,929 Machinery and equipment 499,045 507,408 Total Property, Plant, and Equipment 723,737 726,574 Less - Accumulated depreciation and amortization 377,043 378,262 Property, Plant, and Equipment - net 346,694 348,312 Other Assets: Goodwill and other intangibles 104,247 112,286 Other 38,328 37,876 Total Other Assets 142,575 150,162 Total Assets $1,110,937 $1,101,261 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current maturities of long-term debt $ 85 $ 667 Notes payable 6,523 5,098 Accounts payable 85,773 81,969 Accrued salaries, commissions, and bonuses 43,234 42,624 Current portion of self insurance reserves 19,465 16,727 Other accrued li 45,075 42,588 Total Current Liabilities 200,155 189,673 Long-Term Debt, less current maturities 26,807 26,863 Deferred Income Taxes 66,932 73,319 Self Insurance Reserves, less current portion 65,406 61,081 Other Long-Term Liabilities 23,736 22,940 Stockholders' Equity: 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 stock, $1 par value, 80,000,000 shares authorized, 57,918,978 shares issued at May 31, 1995 and August 31, 1994 57,919 57,919 Paid-in capital 7,951 7,684 Retained earnings 729,912 705,504 795,782 771,107 Less - Treasury stock, at cost (9,615,464 shares at May 31, 1995 and 8,678,666 shares at August 31, 1994) 67,881 43,722 Total Stockholders' Equity 727,901 727,385 Total Liabilities and Stockholders Equity $1,110,937 $1,101,261 * Certain amounts have been reclassified to conform to current-year presentation. The accompanying notes to consolidated financial statements are an integral part of these balance sheets Page 4 NATIONAL SERVICE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (Dollar amounts in thousands, except per-share data) THREE MONTHS ENDED NINE MONTHS ENDED MAY 31 MAY 31 1995 1994 1995 1994 Sales and Service Revenues: Net sales of products $363,765 $340,562 $1,042,706 $974,179 Service revenues 142,033 140,439 409,886 406,059 Total Revenues 505,798 481,001 1,452,592 1,380,238 Costs and Expenses: Cost of products sold 233,668 221,069 669,891 639,181 Cost of services 75,227 72,901 225,054 212,360 Selling and administrative expenses 153,085 146,835 447,001 426,260 Interest expense 1,002 867 2,792 3,037 Other expense, net 1,752 2,480 5,024 5,599 Total Costs and Expenses 464,734 444,152 1,349,762 1,286,437 Income before Provision for Income Taxes 41,064 36,849 102,830 93,801 Provision for (Benefit from) Income Taxes: Current 18,842 15,108 41,973 38,590 Deferred (3,405) (1,187) (3,462) (3,162) 15,437 13,921 38,511 35,428 Net Income $ 25,627 $ 22,928 $ 64,319 $ 58,373 Per Share: Net income $.53 $.46 $1.32 $1.18 Cash dividends $.28 $.27 $.83 $.80 Weighted Average Number of Shares Outstanding (thousands) 48,382 49,578 48,813 49,571 The accompanying notes to consolidated financial statements are an integral part of these statements. Page 5 NATIONAL SERVICE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollar amounts in thousands) NINE MONTHS ENDED MAY 31 1995 1994 * Cash Provided by (Used for) Operating Activities: Net income $ 64,319 $ 58,373 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 43,467 45,582 Provision for losses on accounts receivable 3,698 3,442 Gain on the sale of property, plant, and equipment 137 (710) Gain on the sale of business (1,161) (467) Provision for deferred income taxes (3,462) (3,162) Change in assets and liabilities net of effect of acquisitions- Receivables (1,547) 12,213 Inventories and linens in service, net (19,178) (22,297) Prepaid income taxes 6,657 10,820 Prepayments and other (1,970) 221 Accounts payable and accrued liabilities 9,132 (4,213) Net Cash Provided by Operating Activities 100,092 99,802 Cash Provided by (Used for) Investing Activities: Change in short-term investments (6,807) 2,405 Purchase of property, plant, and equipment (39,180) (30,117) Sale of property, plant, and equipment 6,435 2,078 Sale of business 4,626 682 Acquisitions, net of cash acquired (2,668) (375) Change in other assets (2,487) (7,710) Net Cash Used for Investing Activities (40,081) (33,037) Cash Provided by (Used for) Financing Activities: Change in notes payable 1,425 437 Repayment of long-term debt (638) (2,167) Recovery of investment in tax benefits 872 1,601 Deferred income taxes from investment in tax benefits (2,925) (2,976) Issuance (purchase) of treasury stock (23,758) 349 Change in other long-term liabilities 5,121 4,196 Cash dividends paid (40,630) (39,655) Net Cash Used for Financing Activities (60,533) (38,215) Effect of Exchange Rate Changes on Cash 721 1,787 Net Change in Cash and Cash Equivalents 199 30,337 Cash and Cash Equivalents at Beginning of Year 58,619 15,853 Cash and Cash Equivalents at End of Period $ 58,818 $ 46,190 Supplemental Cash Flow Information: Income taxes paid during the period $ 34,620 $ 28,687 Interest paid during the period 2,681 3,023 Noncash Investing and Financing Activities: Noncash aspects of sale of business - Receivables incurred $ (893) $ (336) Noncash Aspects of Acquisitions: Liabilities assumed or incurred $ 468 $ - Treasury stock issued (returned) * Certain amounts have been reclassified to conform to current-year balance sheet presentation. The accompanying notes to consolidated financial statements are an integral part of these statements. 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 May 31, 1995, the consolidated results of operations for the three months and nine months ended May 31, 1995 and 1994, and the consolidated cash flows for the nine months ended May 31, 1995 and 1994. Certain prior-year amounts have been reclassified to conform with current-year presentation. 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 and nine months ended May 31, 1995 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 May 31 Sales and Service Revenues Operating Profit 1995 1994 1995 1994 (In thousands) Lighting Equipment $ 215,987 $ 192,129 $ 16,155 $ 13,200 Textile Rental 142,033 140,439 16,005 15,127 Chemical 91,129 85,767 7,407 8,079 Other 56,649 62,666 3,837 3,334 $ 505,798 $ 481,001 43,404 39,740 Corporate (1,338) (1,870) Interest Expense (1,002) (1,021) Total $ 41,064 $ 36,849 Nine Months Ended May 31 Sales and Service Revenues Operating Profit 1995 1994 1995 1994 (In thousands) Lighting Equipment $ 620,546 $ 548,033 $ 42,425 $ 34,559 Textile Rental 409,886 406,059 34,806 37,411 Chemical 259,273 243,648 23,019 23,559 Other 162,887 182,498 10,597 6,619 $1,452,592 $1,380,238 110,847 102,148 Corporate (5,225) (5,318) Interest Expense (2,792) (3,029) Total $ 102,830 $ 93,801 3. INVENTORIES: Major classes of inventory as of May 31, 1995 and August 31, 1994 were as follows: May 31, August 31, 1995 1994 (In thousands) Raw Materials and Supplies $ 78,240 $ 72,677 Work-in-Process 10,772 9,918 Finished Goods 109,536 95,995 Total $ 198,548 $ 178,590 Page 7 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. Page 8 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' financial position remained strong at May 31, 1995. Net working capital was $421.5 million, compared with $413.1 million at August 31, 1994, and the current ratio was 3.1, compared with 3.2 at year end. Cash and short-term investments grew to $68.2 million, up from $61.2 million at August 31. For the nine months ended May 31, 1995, the company invested $41.8 million in capital expenditures and acquisitions. Long-term debt and other long-term liabilities were 13.7 percent of total capitalization, compared with 13.2 percent at year end. Cash provided by operations was $100.1 million, up slightly from $99.8 million for the nine months last year. Capital expenditures, exclusive of acquisition spending, were $39.2 million for the nine months this year and $30.1 million for the same period last year. During the third quarter, the Lighting Equipment division continued to invest in manufacturing equipment replacements and improvements and the construction of its production facility in Monterrey, Mexico. The facility has begun production since the end of the third quarter. Textile Rental division expenditures included fleet upgrades, facility improvements, and information systems enhancements. Prior-year spending was primarily the result of facilities and manufacturing process improvements in the Lighting Equipment division, facilities additions and information systems improvements in the Chemical division, and wastewater compliance projects and fleet upgrades in the Textile Rental division. Acquisition spending of $2.7 million in the current year was mainly due to the Lighting Equipment division's acquisition of the assets of Infranor Canada, Inc., a small high-performance outdoor lighting products company. Acquisition spending in the prior year was minimal. Dividend payments for the nine months totaled $40.6 million, or 83 cents per share, compared with $39.7 million, or 80 cents per share, for the same period last year. 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. During the three months ended May 31, 1995, the company purchased 272,000 shares of its common stock for $7.1 million. For the year-to-date period, approximately 947,000 shares have been purchased at a cost of $24.1 million. The board of directors, at its regular meeting in March, 1995, increased the company's standing authority to purchase shares from the previous two million shares per year to four million shares for the current fiscal year. 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 $10 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' net income for the fiscal third quarter ended May 31, 1995, increased 11.8 percent to $25.6 million. Earnings per share increased to 53 cents from 46 cents, or 14.7 percent. Approximately 1.2 million fewer shares were outstanding on average in the latest third quarter. Sales for the quarter totaled $505.8 million, an increase of $24.8 million or 5.2 percent. Adjusted for the divestiture of the Marketing Services division, which contributed $8.6 million to third quarter sales a year earlier, the sales gain was 7.1 percent. Page 9 Sales for the nine months ended May 31 increased 5.2 percent to $1.45 billion. Net income was $64.3 million, up $5.9 million or 10.2 percent from the same period a year ago. Earnings per share increased 14 cents or 11.9 percent to $1.32. An average of 758,000 fewer shares were outstanding for the nine months. The Lighting Equipment division again led NSI's quarterly results as sales increased 12.4 percent to $216.0 million. For the nine-month period, sales rose 13.2 percent to $620.5 million. Increases in both periods resulted largely from higher unit sales than in the prior year. Operating profit grew 22.4 percent for the quarter to 7.5 percent of revenues compared with 6.9 percent the prior third quarter. For the nine months, operating income was 6.8 percent of revenues, up from 6.3 percent the prior year-to-date. Both fluorescent and non-fluorescent product segments achieved gains as higher unit volumes more than compensated for higher product costs. Textile Rental division revenues reached $142.0 million for the quarter and $409.9 million year-to-date, ahead about one percent for both periods. Modest sales increases were recorded in each of the division's market segments with the exception of healthcare, which continues to be very competitive. For the quarter, operating income advanced to 11.3 percent of revenues from 10.8 percent the prior third quarter. For the nine months, operating income declined to 8.5 percent of revenues from 9.2 percent the prior year-to-date. Labor and delivery cost improvements benefited both current-year periods but were not sufficient to offset higher merchandise amortization for the year-to-date. The Chemical sector reported a third quarter sales increase of 6.3 percent to $91.1 million and a year-to-date increase of 6.4 percent to $259.3 million. Gains were predominantly the result of higher unit volumes. Operating earnings declined to 8.1 percent of revenues for the quarter and 8.9 percent year-to-date from 9.4 percent and 9.7 percent in the comparable periods last year. The declines resulted from the sector's increased investment in recruiting and training sales representatives and because of increases in some raw material costs. The remaining businesses comprising NSI's other segment, Insulation Service and Envelopes, combined for revenue increases of 4.9 percent for the quarter and 2.7 percent for the nine months. Operating income, absent the results of the divested Marketing Services division, rose approximately 27.0 percent for the quarter to 6.8 percent of revenues, from 5.6 percent the year earlier quarter, and almost 53 percent year-to-date to 6.5 percent of revenues, from 4.4 percent a year ago. The Insulation business is benefiting from job tracking improvements, and the Envelope division gains are resulting from higher unit volumes. Corporate expense benefited in both the third quarter and year-to-date from increased interest income and reduced administrative expenses. Year-to-date corporate expense reflects the company's adoption in the first quarter 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. The provision for income taxes was 37.6 percent of pretax income for the third quarter and 37.5 percent for the nine months, down from 37.8 for the respective prior-year periods. The slight reduction in the effective tax rate was the result of the increase in interest income, which is largely nontaxable. Page 10 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits are listed on the Index to Exhibits (page 12). (b) There were no reports on Form 8-K for the three months ended May 31, 1995. Page 11 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 July 12, 1995 /s/ DAVID LEVY DAVID LEVY EXECUTIVE VICE PRESIDENT, ADMINISTRATION AND COUNSEL DATE July 12, 1995 /S/ J. ROBERT HIPPS J. ROBERT HIPPS SENIOR VICE PRESIDENT, FINANCE Page 12 INDEX TO EXHIBITS Page No. EXHIBIT 11 Computations of Net Income per Share of Common Stock 13 EXHIBIT 27 Financial Data Schedules 14 EX-11 2 COMPUTATION OF NET INCOME PER SHARE Page 13 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 NINE MONTHS ENDED MAY 31 MAY 31 1995 1994 1995 1994 Primary: Weighted Average Number of Shares (determined on a monthly basis) 48,382 49,578 48,813 49,571 Net Income $ 25,627 $ 22,928 $ 64,319 $ 58,373 Primary Earnings per Share $.53 $.46 $1.32 $1.18 Fully Diluted: Weighted Average Number of Shares Outstanding 48,382 49,578 48,813 49,571 Additional Shares Assuming Exercise of Options: Options exercised 1,031 717 1,037 716 Treasury stock purchased with proceeds (874) (636) (878) (656) Average Common Shares Outstanding (as adjusted) 48,539 49,659 48,972 49,631 Net Income $ 25,627 $ 22,928 $ 64,319 $ 58,373 Fully Diluted Earnings per Sha $.53 $.46 $1.31 $1.18 EX-27 3 FDS --
5 Page 34 Exhibit 27 Financial Data Schedules Quarter Ended May 31, 1995 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 May 31, 1995 and the consolidated statement of income for the nine months ended May 31, 1995, and is qualified in its entirety by reference to such financial statements. 9-MOS AUG-31-1995 MAY-31-1995 58,818 9,386 263,842 9,394 198,548 621,668 723,737 377,043 1,110,937 200,155 26,807 57,919 0 0 737,863 1,110,937 1,042,706 1,452,592 669,891 894,945 452,025 0 2,792 102,830 38,511 64,319 0 0 0 64,319 1.32 1.31
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