-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NBtiiTnCaFMyyFCaW+K27Uk2rF2WWBd5hhRR0ayMyC+KNMesSqwtAEr5+XHrwzad wV9ZGI6f4D7/SWBl+w8CTw== 0000070538-96-000002.txt : 19960116 0000070538-96-000002.hdr.sgml : 19960116 ACCESSION NUMBER: 0000070538-96-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19951130 FILED AS OF DATE: 19960112 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: 96503061 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 13 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, 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 - 48,391,636 shares as of January 9, 1996. Page 2 NATIONAL SERVICE INDUSTRIES, INC. AND SUBSIDIARIES INDEX Page No. PART I. FINANCIAL INFORMATION CONSOLIDATED BALANCE SHEETS - NOVEMBER 30, 1995 AND AUGUST 31, 1995 ....... 3 CONSOLIDATED STATEMENTS OF INCOME - THREE MONTHS ENDED NOVEMBER 30, 1995 AND 1994 4 CONSOLIDATED STATEMENTS OF CASH FLOWS - ........... 5 THREE MONTHS ENDED NOVEMBER 30, 1995 AND 1994 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 6. EXHIBITS AND REPORTS ON FORM 8-K ......... 9 SIGNATURES .............................................. 10 EXHIBIT INDEX ........................................... 11 Page 3 NATIONAL SERVICE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollar amounts in thousands) November 30, August 31, 1995 1995 (Unaudited) ASSETS Current Assets: Cash and cash equivalents ........................... $ 92,569 $ 79,402 Short-term investments .............................. 2,550 3,598 Receivables, less reserves for doubtful accounts of $7,643 at November 30, 1995 and $6,467 at August 31, 1995 ..................... 255,372 266,056 Inventories, at the lower of cost (on a first-in, first-out basis) or market .............. 188,581 185,789 Linens in service, net of amortization .............. 91,618 88,605 Deferred income taxes ............................... 9,325 10,221 Prepayments ......................................... 10,833 6,739 Total Current Assets .............................. 650,848 640,410 Property, Plant, and Equipment, at cost: Land ................................................ 30,469 31,016 Buildings and leasehold improvements ................ 193,442 192,023 Machinery and equipment ............................. 514,498 503,868 Total Property, Plant, and Equipment .............. 738,409 726,907 Less - Accumulated depreciation and amortization ...................................... 386,309 377,003 Property, Plant, and Equipment - net ............ 352,100 349,904 Other Assets: Goodwill and other intangibles ...................... 98,834 101,410 Other ............................................... 38,015 39,622 Total Other Assets ................................ 136,849 141,032 Total Assets .................................... $1,139,797 $1,131,346 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current maturities of long-term debt ................ $ 83 $ 87 Notes payable ....................................... 6,592 6,399 Accounts payable .................................... 75,121 81,524 Accrued salaries, commissions, and bonuses .......... 37,519 43,944 Current portion of self insurance reserves .......... 16,825 16,276 Other accrued liabilities ........................... 63,729 54,340 Total Current Liabilities ......................... 199,869 202,570 Long-Term Debt, less current maturities ............... 26,745 26,776 Deferred Income Taxes ................................. 64,287 65,756 Self Insurance Reserves, less current portion ......... 66,870 67,830 Other Long-Term Liabilities ........................... 25,454 24,010 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 November 30, 1995 and August 31, 1995 ...................... 57,919 57,919 Paid-in capital ..................................... 9,379 8,065 Retained earnings ................................... 756,834 746,256 824,132 812,240 Less - Treasury stock, at cost (9,540,932 shares at November 30, 1995 and 9,609,261 shares at August 31, 1995) ......................................... 67,560 67,836 Total Stockholders' Equity .................... 756,572 744,404 Total Liabilities and Stockholders $ 1,139,797 $1,131,346 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 NOVEMBER 30 1995 1994 Sales and Service Revenues: Net sales of products .......................... $ 359,842 $ 344,882 Service revenues ............................... 132,708 136,102 Total Revenues ............................... 492,550 480,984 Costs and Expenses: Cost of products sold .......................... 227,439 219,187 Cost of services ............................... 74,364 75,846 Selling and administrative expenses ............ 152,383 149,695 Interest expense ............................... 1,079 830 Other expense, net ............................. 190 1,691 Total Costs and Expenses ..................... 455,455 447,249 Income before Provision for Income Taxes.......... 37,095 33,735 Provision for (Benefit from) Income Taxes: Current ........................................ 14,227 12,646 Deferred ....................................... (401) (25) 13,826 12,621 Net Income ....................................... $ 23,269 $ 21,114 Per Share: Net income ..................................... $ .48 $ .43 Cash dividends ................................. $ .28 $ .27 Weighted Average Number of Shares Outstanding (thousands) ........................ 48,343 49,244 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) THREE MONTHS ENDED NOVEMBER 30 1995 1994 Cash Provided by (Used for) Operating Activities: Net income .................................................. $ 23,269 $ 21,114 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ........................... 14,394 14,500 Provision for losses on accounts receivable ............. 1,161 1,382 Loss (gain) on the sale of property, plant, and equipment (932) 40 Loss (gain) on the sale of business ..................... 63 (1,117) Change in noncurrent deferred income taxes .............. (401) (28) Change in assets and liabilities net of effect of acquisitions- Receivables ......................................... 9,518 9,027 Inventories and linens in service, net .............. (5,824) (10,153) Current deferred income taxes ....................... 896 11,835 Prepayments and other ............................... (4,127) (3,876) Accounts payable and accrued liabilities ............ (2,887) 1,356 Net Cash Provided by Operating Activities ......... 35,130 44,080 Cash Provided by (Used for) Investing Activities: Change in short-term investments ............................ 1,049 339 Purchase of property, plant, and equipment .................. (14,338) (11,774) Sale of property, plant, and equipment ...................... 1,548 409 Sale of business ............................................ -- 3,533 Acquisitions, net of cash acquired .......................... (278) (304) Change in other assets ...................................... 1,154 1,219 Net Cash Used for Investing Activities .................... (10,865) (6,578) Cash Provided by (Used for) Financing Activities: Change in notes payable ..................................... 193 84 Repayment of long-term debt ................................. (35) (168) Recovery of investment in tax benefits ...................... 430 458 Deferred income taxes from investment in tax benefits ....... (1,068) (975) Issuance (purchase) of treasury stock ....................... 1,590 176 Change in other long-term liabilities ....................... 484 57 Cash dividends paid ......................................... (13,538) (13,296) Net Cash Used for Financing Activities .................... (11,944) (13,664) Effect of Exchange Rate Changes on Cash ....................... 846 (27) Net Change in Cash and Cash Equivalents ....................... 13,167 23,811 Cash and Cash Equivalents at Beginning of Year ................ 79,402 58,619 Cash and Cash Equivalents at End of Period .................... $ 92,569 $ 82,430 Supplemental Cash Flow Information: Income taxes paid during the period ......................... $ 12,330 $ 1,171 Interest paid during the period ............................. 1,031 739 Noncash Investing and Financing Activities: Noncash aspects of sale of business - Receivables incurred ..................................... $ -- $ (624) Noncash Aspects of Acquisitions: Liabilities assumed or incurred ............................. $ -- $ -- Treasury stock issued (returned)
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, 1995 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, 1995, the consolidated results of operations for the three months ended November 30, 1995 and 1994, and the consolidated cash flows for the three months ended November 30, 1995 and 1994. 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, 1995. The results of operations for the three months ended November 30, 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 November 30 Sales and Service Revenues Operating Profit 1995 1994 1995 1994 (In thousands) Lighting Equipment ....... $ 208,278 $ 203,806 $ 16,378 $ 13,690 Textile Rental ........... 132,708 136,102 9,753 11,316 Chemical ................. 92,107 87,952 9,705 9,301 Other .................... 59,457 53,124 3,090 3,069 $ 492,550 $ 480,984 38,926 37,376 Corporate ................ (752) (2,811) Interest Expense ......... (1,079) (830) Total .................... $ 37,095 $ 33,735 3. INVENTORIES: Major classes of inventory as of November 30, 1995 and August 31, 1995 were as follows: November 30, August 31, 1995 1995 (In thousands) Raw Materials and Supplies ................... $ 83,123 $ 87,470 Work-in-Process .............................. 9,348 9,879 Finished Goods ............................... 96,110 88,440 Total ................................... $188,581 $185,789 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 remained strong at November 30, 1995, with net working capital of $451.0 million, up from $437.8 million at August 31, 1995, and a current ratio of 3.3, compared with 3.2 at year end. Cash and short-term investments increased to $95.1 million from $83.0 million at August 31. During the quarter just ended, the company invested $14.6 million in capital expenditures and acquisitions. Long-term debt and other long-term liabilities were 13.6 percent of total capitalization, down slightly from 13.7 percent at August 31. Cash provided by operating activities was $35.1 million, compared with $44.1 million for the first quarter last year. Capital expenditures, exclusive of acquisition spending, were $14.3 million for the first quarter this year and $11.8 million for the same period a year ago. The lighting equipment division invested in equipment replacement and process improvements and tooling for new products. Textile rental division spending consisted of information systems enhancements and replacement and improvement of facilities, equipment and vehicles. Prior-year spending included the lighting equipment division's manufacturing equipment replacements and improvements and construction of the Mexican production facility and the textile rental division's fleet upgrades and facility improvements. Acquisition spending was minimal in both periods. Dividend payments totaled $13.5 million, or 28 cents per share, during the quarter ended November 30, 1995, compared with $13.3 million, or 27 cents per share, for the prior-year period. Effective January, 1996, the regular quarterly dividend rate was increased 3.6 percent to 29 cents per share, or an annual rate of $1.16 per share. For the periods presented, capital expenditures, working capital needs, dividends, acquisitions, and share repurchases were financed primarily with internally generated funds, supplemented by short-term borrowings in the European market. Contractual commitments for capital and acquisition spending during the coming twelve months total $16 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 $59 million in 1995, $43 million in 1994, and $36 million in 1993. 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' earnings per share for the first quarter of its new fiscal year increased 12.1 percent to 48 cents. Sales for the quarter, which ended November 30, 1995, increased 2.4 percent to $493 million. Net income of $23.3 million was 10.2 percent higher than the $21.1 million reported in last year's first quarter. Since there were, on average, 901,000 fewer shares outstanding during this year's quarter, earnings per share increased at the greater rate of 12.1 percent. The lighting equipment division continued its growth with first quarter sales advancing 2.2 percent to $208 million from $204 million last year. Pricing improvements were offset somewhat by lower unit volumes. Operating income advanced 19.6 percent to 7.9 percent of revenues, compared with 6.7 percent the year earlier, as the improved pricing and a more favorable product mix increased profit margins. The textile rental sector posted a 2.5 percent decrease in sales, from $136 million to $133 million, largely because of branches divested last year. However, operating income declined to 7.3 percent of revenues from 8.3 percent the prior-year first quarter. The decline was due to continued structural changes in the healthcare market and to somewhat higher processing costs resulting in part from this year's extended hurricane season. Chemical segment sales, benefiting from both improved pricing and unit volume gains, advanced 4.7 percent to $92 million from $88 million the year earlier. Operating income was 10.5 percent of revenues, just under the 10.6 percent posted in the first quarter last year. Page 8 Sales of the Other segment (insulation service and envelopes) rose 11.9 percent overall. However, the excellent first quarter results of Atlantic Envelope, bolstered by pricing gains, were offset by softness in North Bros.' insulation service income. Corporate expense was greater 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," and the resulting accrual related primarily to severance agreements and the liability for life insurance coverage for certain eligible disabled employees. Interest expense on European loans was higher than in the prior-year period due to increased borrowings at somewhat higher average interest rates. The provision for income taxes in the first quarter was 37.3 percent of pretax income, compared with 37.4 percent for the same period last year. Changes in the year-to-year effective rates resulted from variations in the relative amounts of tax exempt income. 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 3, 1996, 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. Item 5. Other Information The board of directors at its regular meeting held December 20, 1995 elected Chester J. Popkowski as Vice President, Treasurer. On January 3, 1996 the board of directors named James S. Balloun as chairman and chief executive officer effective February 1, replacing current chairman and chief executive D. Raymond Riddle, who is retiring. Mr. Balloun, 57, has spent his business career with McKinsey and Company, serving most recently as a director and member of the Shareholders, Principals and MGM Election Committees. At the January meeting, the board of directors also elected Kenyon W. Murphy as Vice President, Secretary and Assistant Counsel. 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, 1995. 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, 1996 /s/ DAVID LEVY DAVID LEVY EXECUTIVE VICE PRESIDENT, ADMINISTRATION AND COUNSEL DATE January 12, 1996 /S/ J. ROBERT HIPPS J. ROBERT HIPPS SENIOR VICE PRESIDENT, FINANCE Page 11 INDEX TO EXHIBITS Page No. EXHIBIT 11 ............. - Computation of Net Income per Share of 12 Common Stock EXHIBIT 27 ............. - Financial Data Schedules 13 EX-11 2 COMPUTATION OF NET INCOME PER SHARE Page 12 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 1995 1994 Primary: Weighted Average Number of Shares (determined on a monthly basis) ................ 48,343 49,244 Net Income ....................................... $ 23,269 $ 21,114 Primary Earnings per Share ....................... $ .48 $ .43 Fully Diluted: Weighted Average Number of Shares Outstanding .................................... 48,343 49,244 Additional Shares Assuming Exercise of Options: Options exercised ............................ 1,233 978 Treasury stock purchased with proceeds ....... (979) (902) Average Common Shares Outstanding (as adjusted) ................................. 48,597 49,320 Net Income ....................................... $ 23,269 $ 21,114 Fully Diluted Earnings per Share ................. $ .48 $ .43 EX-27 3 FDS --
5 Page 13 Exhibit 27 Financial Data Schedules Quarter Ended November 30, 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 November 30, 1995 and the consolidated statement of income for the three months ended November 30, 1995, and is qualified in its entirety by reference to such financial statements. 3-MOS AUG-31-1996 SEP-01-1996 NOV-30-1995 92,569 2,550 263,015 7,643 188,581 650,848 738,409 386,309 1,139,797 199,869 26,745 57,919 0 0 766,213 1,139,797 359,842 492,550 227,439 301,803 152,573 0 1,079 37,095 13,826 23,269 0 0 0 23,269 0.48 0.48
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