-----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, qOGquwJFpuaeEib2AVjRoNOiKFvIqgIGFxQF+5G6rH3WmCoKbmyBs6UJ3hnaCBdw j8BNIL1hCBkH6YrU0XWfDg== 0000070538-94-000007.txt : 19940114 0000070538-94-000007.hdr.sgml : 19940114 ACCESSION NUMBER: 0000070538-94-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19931130 FILED AS OF DATE: 19940113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONAL SERVICE INDUSTRIES INC CENTRAL INDEX KEY: 0000070538 STANDARD INDUSTRIAL CLASSIFICATION: 3640 IRS NUMBER: 580364900 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 34 SEC FILE NUMBER: 001-03208 FILM NUMBER: 94501257 BUSINESS ADDRESS: STREET 1: 1420 PEACHTREE ST NE CITY: ATLANTA STATE: GA ZIP: 30309 BUSINESS PHONE: 4048531000 10-Q 1 NATIONAL SERVICE INDUSTRIES, INC. 10-Q 1 Page 1 of 12 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, 1993 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 Incorporation or Organization) Number) 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 - 49,569,355 shares as of January 4, 1994 2 Page 2 NATIONAL SERVICE INDUSTRIES, INC. AND SUBSIDIARIES INDEX Page No. PART I. FINANCIAL INFORMATION CONSOLIDATED BALANCE SHEETS - NOVEMBER 30, 1993 AND AUGUST 31, 1993 3 CONSOLIDATED STATEMENTS OF INCOME - THREE MONTHS ENDED NOVEMBER 30, 1993 AND 1992 4 CONSOLIDATED STATEMENTS OF CASH FLOWS - THREE MONTHS ENDED NOVEMBER 30, 1993 AND 1992 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 1993 1993 (Unaudited) Current Assets: Cash and cash equivalents $ 24,946 $ 15,853 Short-term investments 3,597 4,776 Receivables, less reserves for doubtful accounts of $8,295 at November 30, 1993 and $7,170 at August 31, 1993 244,116 249,958 Inventories, at the lower of cost (on a first-in, first-out basis) or market 173,168 171,545 Linens in service, net of amortization 83,070 77,931 Prepaid income taxes, net 13,875 25,340 Prepayments, etc. 12,451 11,513 Total Current Assets 555,223 556,916 Property, Plant, and Equipment, at cost: Land 32,991 33,303 Buildings and leasehold improvements 190,360 190,276 Machinery and equipment 502,332 500,459 Total Property, Plant and Equipment 725,683 724,038 Less - Accumulated depreciation and amortization 363,043 358,853 Property, Plant, and Equipment - net 362,640 365,185 Other Assets: Goodwill and other intangibles 124,795 127,387 Other 39,459 38,025 Total Other Assets 164,254 165,412 Total Assets $ 1,082,117 $1,087,513 November 30, August 31, LIABILITIES AND STOCKHOLDERS' EQUITY 1993 1993 (Unaudited) Current Liabilities: Current maturities of long-term debt $ 1,460 $ 1,792 Notes payable 3,811 4,404 Accounts payable 74,515 85,505 Accrued salaries, commissions, and bonuses 35,390 37,103 Self insurance reserves 70,656 71,888 Other accrued liabilities 48,059 42,981 Total Current Liabilities 233,891 243,673 Long-Term Debt, less current maturities 28,221 28,418 Deferred Income Taxes 82,151 84,289 Other Long-Term Liabilities 27,503 27,110 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, 1993 and August 31, 1993 57,919 57,919 Paid-in capital 7,355 7,299 Retained earnings 679,658 673,399 744,932 738,617 Less - Treasury stock, at cost (8,354,386 shares at November 30, 1993 and 8,357,539 shares at August 31, 1993) 34,581 34,594 Total Stockholders' Equity 710,351 704,023 Total Liabilities and Stockholders' Equity $ 1,082,117 $1,087,513 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 1993 1992 Sales and Service Revenues: Net sales of products $325,213 $297,891 Service revenues 134,687 136,450 Total Revenues 459,900 434,341 Costs and Expenses: Cost of products sold 213,579 194,911 Cost of services 70,737 70,484 Selling and administrative expenses 141,583 135,937 Interest expense 1,146 1,171 Other expense (income), net 2,052 2,480 Total Costs and Expenses 429,097 404,983 Income before Provision for Income Taxes 30,803 29,358 Provision for Income Taxes: Current 12,591 9,694 Deferred (960) 1,078 11,631 10,772 Net Income $ 19,172 $ 18,586 Per Share: Net income $.39 $.38 Cash dividends $.26 $.25 Weighted Average Number of Shares Outstanding (thousands) 49,562 49,547 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 1993 1992 Cash Provided by (Used for) Operations: Net income $ 19,172 $ 18,586 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 15,365 14,543 Provision for losses on accounts receivable 1,381 1,122 Gain on sale of property, plant, and equipment (25) (70) Gain on the sale of business (467) - Provision for deferred income taxes (960) 1,078 Change in assets and liabilities net of effect of acquisitions- Receivables, net 4,742 9,645 Inventories and linens in service, net (6,834) (2,617) Prepaid income taxes 11,465 2,546 Prepayments and other (819) 3,850 Accounts payable and accrued liabilities (8,873) (19,300) Net Cash Provided by Operations 34,147 29,383 Cash Provided by (Used for) Investing Activities: Change in short-term investments 1,179 68 Purchase of property, plant, and equipment (10,977) (11,376) Sale of property, plant, and equipment 1,176 687 Sale of business 682 - Acquisitions (375) (95,109) Change in other assets (2,632) (3,546) Net Cash Used for Investing Activities (10,947) (109,276) Cash Provided by (Used for) Financing Activities: Change in notes payable (593) 36,548 - - Repayment of long-term debt (529) (448) Recovery of investment in tax benefits 644 496 Deferred income taxes from investment in tax benefits (1,178) (838) Issuance of treasury stock 68 261 Change in other long-term liabilities 393 (2,417) Cash dividends paid (12,886) (12,384) Net Cash Used for Financing Activities (14,081) 21,218 Effect of Exchange Rate Changes on Cash (26) 996 Net Change in Cash and Cash Equivalents 9,093 (57,679) Cash and Cash Equivalents at Beginning of Year 15,853 101,137 Cash and Cash Equivalents at End of Period $ 24,946 $ 43,458 Supplemental Cash Flow Information: Income taxes paid during the period $ 1,510 $ 1,378 Interest paid during the period 604 1,717 Noncash Investing and Financing Activities: Noncash aspects of sale of business - Receivables incurred $ (336) $ - Noncash aspects of acquisitions- Liabilities assumed $ - $ 29,957 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, 1993 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, 1993, the consolidated results of operations for the three months ended November 30, l993 and 1992, and the consolidated cash flows for the three months ended November 30, 1993 and 1992. 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, 1993. The results of operations for the three months ended November 30, 1993 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 1993 1992 1993 1992 (In thousands) Lighting Equipment $182,105 $163,039 $11,899 $ 9,824 Textile Rental 134,687 136,450 11,238 10,994 Chemical 82,282 76,378 9,026 9,130 Other 60,826 58,474 1,513 2,454 459,900 434,341 33,676 32,402 Corporate (1,727) (1,873) Interest Expense (1,146) (1,171) Total $459,900 $434,341 $30,803 $ 29,358 3. INVENTORIES: Major classes of inventory as of November 30, 1993 and August 31, 1993 were as follows: November 30, August 31, 1993 1993 (In thousands) Raw Materials and Supplies $ 74,820 $ 77,911 Work-in-Process 11,291 11,269 Finished Goods 87,057 82,365 Total $173,168 $171,545 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 completed the first quarter of fiscal 1994 in a strong financial position. Net working capital was $312.3 million, compared with $313.2 million at August 31, 1993, and the current ratio increased slightly to 2.4, compared with 2.3 at year end. Cash and short-term investments were $28.5 miillion, up from $20.6 million at August 31. For the quarter ended November 30, 1993, the company invested $11.4 million in capital expenditures and acquisitions. Long-term debt and other long-term liabilities were 7.3 percent of total capitalization, unchanged from year end. Cash provided by operations was $34.1 million, compared with $29.4 million for the first quarter last year. Capital expenditures, exclusive of acquisition spending, were $11.0 million for the first quarter this year and $11.4 million for the same period last year. Current-quarter spending was primarily the result of facilities and manufacturing process improvements in the lighting equipment division and wastewater compliance projects and fleet upgrading in the textile rental division. Prior-year spending was attributable to capacity expansion in the chemical division, information systems enhancements in the lighting equipment division, and cost reduction expenditures in each of these and the textile rental division. Acquisition spending of $95.1 million in the first quarter last year resulted from the chemical division's acquisitions of Kleen Canada, Inc., a Canadian manufacturer of specialty chemicals, and Graham International, a privately held, European specialty chemical business, and the textile rental division's acquisition of Initial Services Investments, Inc., an industrial uniform and dust control business. The effect of the acquisitions on the consolidated income statements is further discussed under "Results of Operations." Dividend payments totaled $12.9 million, or 26 cents per share, during the first quarter this year, compared with $12.4 million, or 25 cents per share, for the same period last year. The quarterly dividend rate has been increased 3.8 percent to 27 cents per share effective January, 1994. 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. The Initial acquisition was a cash transaction. The Graham acquisition in Europe was funded primarily through short-term debt financing, which was repaid during the remainder of the 1993 fiscal year. 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 consistent with levels of recent years, which were $36 million in 1993, $43 million in 1992, and $58 million in 1991. 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 $124 million, of which $82 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 first fiscal quarter increased 3.2 percent to $19.2 million. Sales for the quarter, which ended November 30, 1993, increased 5.9 percent to $460 million. Earnings per share of 39 cents were 3.1 percent higher than the 38 cents per share reported in the first quarter last year. Income before taxes advanced 4.9 percent, but an increase in the effective tax rate reduced the net income advance to 3.2 percent. The lighting equipment division reported an excellent quarter as sales improved 11.7 percent to $182 million from $163 million the prior year. The improvement was entirely the result of volume gains. Operating profit advanced 21 percent to 6.5 percent of revenues, up from 6.0 percent last year, due largely to divisional cost containment measures. 8 Page 8 Results of the textile rental division were relatively flat. Revenues of $135 million were slightly behind the prior-year quarter due to lost volume. Operating profit was 8.3 percent of revenues, up slightly from 8.1 percent the same period last year, as a result of lower general and administrative expenses. Sales of the chemical segment rose 7.7 percent to $82 million from $76 million the prior year. The improvement came primarily from domestic markets. The European operation contributed $1.7 million of the increase on a full quarter's sales versus two months last year. Operating profit was 11.0 percent of revenues, down from 12.0 percent a year ago. European and Canadian results continued to be soft with operating margins lower than those in the U.S. The European operation improved due to cost reduction programs. Sales of the divisions included in NSI's other sector advanced 4.0 percent. The envelope division reported an excellent quarter resulting from pricing gains and a reduction in operating costs. The insulation and marketing services sectors contributed only marginally to earnings due to reduced volume and higher personnel-related expenses. Corporate income did not change materially from the first quarter last year as a reduction in interest income due to lower short-term investments was virtually offset by less unfavorable foreign currency exchange rate fluctuations. Interest expense was about even with the prior-year period. The first quarter provision for income taxes was 37.8 percent of pretax income, compared with 36.7 percent for the same period last year. The 1994 rate was increased as a result of the Omnibus Budget Act of 1993. Changes in the year-to-year percentages also result from variation in the relative amount of tax exempt income. 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 5, 1994, all nominees for director were elected to the board without opposition and Arthur Andersen & Co. was appointed as independent auditor for the current fiscal year. 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, 1993. 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 13, 1994 /S/ DAVID LEVY DAVID LEVY EXECUTIVE VICE PRESIDENT, ADMINISTRATION AND COUNSEL DATE January 13, 1994 /S/ J. ROBERT HIPPS J. ROBERT HIPPS SENIOR VICE PRESIDENT, FINANCE 11 Page 11 INDEX TO EXHIBITS Page No. EXHIBIT 11 - Computations of Net Income per Share 12 of Common Stock EX-11 2 COMPUTATION OF NET INCOME PER SHARE 1 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 1993 1992 Primary: Weighted Average Number of Shares (determined on a monthly basis) 49,562 49,547 Net Income $19,172 $18,586 Primary Earnings per Share $ .39 $ .38 Fully Diluted: Weighted Average Number of Shares Outstanding 49,562 49,547 Additional Shares Assuming Exercise of Options: Options exercised 746 282 Treasury stock purchased with proceeds (689) (237) Average Common Shares Outstanding (as adjusted) 49,619 49,592 Net Income $19,172 $18,586 Fully Diluted Earnings per Share $ .39 $ .37 -----END PRIVACY-ENHANCED MESSAGE-----