-----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, QWIa1YzJSBhFPn7gAQ33kWzngf6KDrgH+DMQvgx5bMOamuXDNzPssh62CC6K9Qao ZmLfyPIuXlpKweEsfBXFRQ== 0000070538-95-000034.txt : 19951121 0000070538-95-000034.hdr.sgml : 19951121 ACCESSION NUMBER: 0000070538-95-000034 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19950831 FILED AS OF DATE: 19951117 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-03208 FILM NUMBER: 95594510 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-K 1 NATIONAL SERVICE INDUSTRIES, INC. 10-K Page 1 of 51 Index to Exhibits on Page 14 FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Annual Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the fiscal year ended August 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) Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange on Title of Each Class Which Registered Common Stock ($1.00 Par Value) New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None (Title of Class) 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 Based upon the closing price as quoted on the New York Stock Exchange November 10, 1995 the aggregate market value of the voting stock held by nonaffiliates of the registrant was $1,498,970,683.00. The number of shares outstanding of the registrant's common stock, $1.00 par value, was 48,353,893 shares as of November 10, 1995. DOCUMENTS INCORPORATED BY REFERENCE Location in Form 10-K Incorporated Document Part I, Item 1 1995 Annual Report Part II, Items 5, 6, 7, and 8 1995 Annual Report Part III, Items 10, 11, 12, and 13 1995 Proxy Statement Part IV, Item 14 1995 Annual Report Page 2 NATIONAL SERVICE INDUSTRIES, INC. AND SUBSIDIARIES Table of Contents Page No. Part I Item 1. Business 3-4 Item 2. Properties 5 Item 3. Legal Proceedings 5 Item 4. Submission of Matters to a Vote of Security Holders 5 Part II Item 5. Market for Registrant's Common Equity and Related Stockholders Matters 6 Item 6. Selected Financial Data 6 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 6 Item 8. Financial Statements and Supplementary Data 6 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 6 Part III Item 10. Directors and Executive Officers of the Registrant 7 Item 11. Executive Compensation 7 Item 12. Security Ownership of Certain Beneficial Owners and Management 7 Item 13. Certain Relationships and Related Transactions 8 Part IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 8-10 Signatures 11 Financial Statement Schedules 12-13 Index to Exhibits 14 Page 3 PART I ITEM 1. BUSINESS The registrant, incorporated in Delaware in 1928, provides a wide variety of products and services through its operating divisions, as follows: Divisions Principal Products or Services Marketing Area Products and services for industrial, commercial, institutional, and healthcare customers TEXTILE RENTAL National Linen Service Rented napkins and table Principally the southern, National Uniform Service linens, bed linens, towels, southwestern, central, National Healthcare Linen Service uniforms, specialized and northeastern National Dust Control Service garments, sterilized United States National Direct Source products, restroom products, mats and mops, and complimentary direct sale products. CHEMICAL Zep Manufacturing Company Chemical products, Throughout the United Zep Manufacturing Company of Canada primarily for maintenance, States, Canada, Zep Alcare sanitation, and water Puerto Rico, and Zep Europe treatment, including soaps, western Europe. Selig Chemical Industries detergents, waxes, and National Chemical disinfectants. ENVELOPE Atlantic Envelope Company Business and specialty South and Southwest. ATENCO Filing Systems envelopes and records Lyon Folder Company storage and filing systems. Techno-Aide/Stumb Metal Products Company Products for the construction industry LIGHTING EQUIPMENT Lithonia Lighting Fluorescent fixtures for Throughout the United Lithonia Fluorescent commercial, industrial, and States, Canada, Lithonia Hi-Tek Lighting institutional applications; Mexico and overseas. Lithonia Downlighting high-intensity discharge Major Reflector Products fixtures for industrial and RELOC Wiring Systems commercial use; architectural Lithonia Controls Systems outdoor lighting; downlighting; Lithonia Emergency Lighting sportslighting; track lighting; vandal-resistant fixtures; emergency lighting; lighting and dimming controls; and manufactured wiring systems. INSULATION SERVICE North Bros. Co. Commercial, mechanical Principally in the South Insulation Company industrial and institutional southeastern United Western State Insulation Company insulation products, accessories States. Merit Insulation Company and contracting services. Precision Foam Fabricators Mid-State Insulation Co.
Page 4 Divisions Principal Products or Services Marketing Area Products and services for the consumer LIGHTING EQUIPMENT Home-Vue Lighting Fluorescent work lamps, recessed Throughout the United Light Concepts and track lighting, and other States. decorative fluorescent fixtures.
Competition While each of the registrant's businesses is highly competitive, the competitive conditions and the registrant's relative position and market share vary widely from business to business. A limited number of the competitors of each division are large diversified companies, but most of the competitors of the principal divisions are smaller companies than the registrant. Such smaller companies frequently specialize in one industry or one geographic area, which in many instances increases the intensity of competition. Management believes that its Lighting Equipment division is the largest manufacturer of lighting fixtures in the world and its Textile Rental division is one of the largest such companies in the United States. Raw Materials There were no significant shortages of materials or components during the years ended August 31, 1995, 1994, and 1993. No one commodity or supplier provided a significant portion of the company's material requirements. Total Employment The registrant employs approximately 21,100 people. Financial Information about Industry Segments The financial information required by this item is included on page 30 of the company's annual report for the year ended August 31, 1995, under the caption "Business Segment Information" and is incorporated herein by reference. Page 5 ITEM 2. PROPERTIES The general offices of the company are located in Atlanta, Georgia. Because of the diverse nature of the operations and the large number of individual locations, it is neither practical nor significant to describe all of the operating facilities owned or leased by the company. The following listing summarizes the significant facility categories by division: Number of Facilities Division Owned Leased Nature of Facilities Lighting Equipment 9 4 Manufacturing plants 1 2 Distribution centers - 27 Field warehouses Textile Rental 68 18 Linen plants 20 49 Linen service centers - 1 Distribution centers Chemical 9 4 Manufacturing plants 22 46 Distribution centers - 2 Sales offices Insulation Service 1 - Fabrication plants 24 11 Warehouses Envelope 7 3 Manufacturing plants - 3 Warehouses - 1 Sales office Corporate Office 1 - Corporate headquarters ITEM 3. LEGAL PROCEEDINGS The Registrant is neither a party to nor is its property subject to any material pending legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the three months ended August 31, 1995 Page 6 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information required by this item is included on the inside back cover of the company's annual report for the year ended August 31, 1995, under the captions "Listing," "Shareholders of Record," and "Common Share Prices and Dividends per Share" and is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA The information required by this item is included on pages 34 and 35 of the company's annual report for the year ended August 31, 1995, under the caption "Ten-Year Financial Summary" and is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this item is included on pages 32 and 33 of the company's annual report for the year ended August 31, 1995, under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" and is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this item is included on pages 20 through 31 of the company's annual report for the year ended August 31, 1995, under the captions "Consolidated Balance Sheets," "Consolidated Statements of Income," Consolidated Statements of Stockholders' Equity," "Consolidated Statements of Cash Flows," "Notes to Consolidated Financial Statements," and "Report of Independent Accountants" and is incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. Page 7 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this item, with respect to directors, is included on pages 2 through 4 under the caption "Information Concerning Nominees" of the company's proxy statement for the annual meeting of stockholders to be held January 3, 1996, filed with the Commission pursuant to Regulation 14A, and is incorporated herein by reference. EXECUTIVE OFFICERS OF THE REGISTRANT Executive officers of the company are elected at the organizational meeting of the Board of Directors in January. Name and age of each executive officer Business experience of executive officers during the five and positions held with the company years ended August 31, 1995 and term in office D. Raymond Riddle, age 62 Mr. Riddle served as President and Chief Executive Chairman and Chief Executive Officer, Officer from January, 1993 to September, 1994 when he Director, and Chairman of the Executive was elected Chairman and Chief Executive Office. He Committee and a member of the served from 1985 until 1993 as an Executive Vice Strategic Planning and Finance President of Wachovia Corporation and from 1987 until Committee of the Board 1993 as President and Chief Executive Officer and as a director of Wachovia Corporation of Georgia and its lead bank, Wachovia Bank of Georgia, N.A. Don W. Hubble, age 56 Mr. Hubble was elected President effective September, President and Chief Operating Officer 1994 and was designated Chief Operating Officer in and Director September, 1993. He served as a Group Vice President from 1980 until 1988, when he was elected Executive Vice President. David Levy, age 58 Mr. Levy was elected Executive Vice President, Executive Vice President, Administration Administration in October, 1992. He served as Senior and Counsel and Director Vice President, Secretary and Counsel from 1982 through September, 1992. J. Robert Hipps, age 55 Mr. Hipps was elected Senior Vice President, Finance in Senior Vice President, Finance March, 1990 and also served as Treasurer until June, 1992. Previously, he served General Signal Corporation as Vice President and Treasurer and, from 1987, as Vice President and Controller.
ITEM 11. EXECUTIVE COMPENSATION The information required by this item is included on pages 5 through 13 under the captions "Compensation of Directors," "Other Information Concerning the Board and its Committees," "Compensation Committee Interlocks and Insider Participation," "Summary Compensation Table," "Option Grants in Last Fiscal Year," "Aggregated Option Exercises and Fiscal Year-End Option Values," "Other Agreements," and "Pension and Supplemental Retirement Benefits" of the company's proxy statement for the annual meeting of stockholders to be held January 3, 1996, filed with the Commission pursuant to Regulation 14A, and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item is included on page 6 under the caption "Beneficial Ownership of the Corporation's Securities" of the company's proxy statement for the annual meeting of stockholders to be held January 3, 1996, filed with the Commission pursuant to Regulation 14A, and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item is included on page 6 under the caption "Certain Transactions" of the company's proxy statement for the annual meeting of stockholders to be held January 3, 1996, filed with the Commission pursuant to Regulation 14A, and is incorporated herein by reference. Page 8 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) The following documents are filed as a part of this report: (1) Financial Statements The company's 1995 Annual Report contains the consolidated balance sheets as of August 31, 1995 and 1994, the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended August 31, 1995, and the related report of Arthur Andersen LLP. The financial statements, incorporated herein by reference, include the following: Consolidated Balance Sheets - August 31, 1995 and 1994 Consolidated Statements of Income for the years ended August 31, 1995, 1994, and 1993 Consolidated Statements of Stockholders' Equity for the years ended August 31, 1995, 1994, and 1993 Consolidated Statements of Cash Flows for the years ended August 31, 1995, 1994, and 1993 Notes to Consolidated Financial Statements (2) Financial Statement Schedules: Report of Independent Public Accountants on Schedule Schedule Number II Valuation and Qualifying Accounts Any of schedules I through V not listed above have been omitted because they are not applicable or the required information is included in the consolidated financial statements or notes thereto. (3) Exhibits filed with this report Reference No. from Reg. 229.601 Item 601 Description of Exhibit 3 Restated Certificate of Incorporation and By-Laws 4 Shareholder Rights Plan Adopted May 9, 1988 10(i) Section 168 Agreement and Election dated as of April 9, 1982, between National Service Industries, Inc. and Oglethorpe Power Corporation 10(iii)A Management Contracts and Compensatory Arrangements: (a) Directors' Deferred Compensation Plan (b) Executives' Deferred Compensation Plan and Amendment (c) Restated and Amended Supplemental Retirement Plan for Executives of National Service Industries, Inc. and Amendment (d) The National Service Industries, Inc. Senior Management Benefit Plan and Amendments Page 9 ITEM 14. (Continued) (3) Exhibits filed with this report (Continued) Reference No. from Reg. 229.601 Item 601 Description of Exhibit (e) Severance Protection Agreement between National Service Industries, Inc. and David Levy (f) Severance Protection Agreements between National Service Industries, Inc. and (i) D. Raymond Riddle (ii) Don W. Hubble (iii) J. Robert Hipps (g) Bonus Letter Agreements between National Service Industries, Inc. and (i) D. Raymond Riddle (ii) Don W. Hubble (iii) David Levy (iv) J. Robert Hipps (h) Long-Term Incentive Program and Amendment (i) Incentive Stock Option Agreements between National Service Industries, Inc. and (i) D. Raymond Riddle (ii) Don W. Hubble (iii) David Levy (iv) J. Robert Hipps (j) Nonqualified Stock Option Agreement for Corporate Officers between National Service Industries, Inc. and (i) D. Raymond Riddle (ii) Don W. Hubble (iii) David Levy (iv) J. Robert Hipps (k) Nonqualified Stock Option Agreement for Corporate Officers Effective Beginning September 21, 1994 between National Service Industries, Inc. and (i) D. Raymond Riddle (ii) Don W. Hubble (iii) David Levy (l) Benefits Protection Trust Agreement and Amendment (m) Executive Benefits Trust Agreement (n) Consulting Agreement between National Service Industries, Inc. and Erwin Zaban (o) 1992 Nonemployee Directors' Stock Option Plan Effective September 16, 1992 (p) Nonemployee Directors' Stock Option Agreement between National Service Industries, Inc. and (i) John L. Clendenin (ii) Jesse Hill, Jr. (iii) Robert M. Holder, Jr. (iv) F. Ross Johnson (v) James C. Kennedy (vi) Donald R. Keough (vii) Bryan D. Langton (viii)Bernard Marcus (ix) John G. Medlin, Jr. (x) Dr. Betty L. Siegel (xi) Erwin Zaban Page 10 ITEM 14. (Continued) (3) Exhibits filed with this report (Continued) Reference No. from Reg. 229.601 Item 601 Description of Exhibit (q) National Service Industries, Inc. Executive Savings Plan Effective September 1, 1994 (r) National Service Industries, Inc. Management Compensation and Incentive Plan Effective September 1, 1994. (s) Split-Dollar Agreement among National Service Industries, Inc., D. Raymond Riddle, and Wachovia Bank of Georgia N.A. dated January 4, 1993 and Amendment (t) Letter Agreement between National Service Industries, Inc. and D. Raymond Riddle dated March 28, 1995 (u) Consulting Agreement between National Service Industries, Inc. and D. Raymond Riddle (v) Letter Agreement between National Service Industries, Inc. and D. Raymond Riddle dated April 10, 1995 11 Computations of Net Income per Share of Common Stock 13 Information Incorporated by Reference from Annual Report for the Year Ended August 31, 1994 21 List of Subsidiaries 23 Consent of Independent Public Accountants 24 Powers of Attorney 27 (a) Financial Data Schedule for the Year Ended August 31, 1995 (b) Restated Financial Data Schedule for the Year Ended August 31, 1994 (c) Restated Financial Data Schedule for the Quarter Ended November 30, 1994 (b) No reports on Form 8-K were filed for the three months ended August 31, 1995. (c) Exhibits 2, 9, 12, 18, 22, and 28 have been omitted because they are not applicable. (d) Not applicable. Page 11 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. Date: November 17, 1995 By: /s/ Kenyon W. Murphy Kenyon W. Murphy Secretary and Assistant Counsel Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title D. Raymond Riddle* Chairman and Chief Executive Officer J. Robert Hipps* Senior Vice President, Finance (Principal Financial Officer) John A. Bostater* Vice President and Controller Jesse Hill, Jr.* Director Robert M. Holder, Jr.* Director Don W. Hubble* Director F. Ross Johnson* Director - November 17, 1995 James C. Kennedy* Director Donald R. Keough* Director Bryan D. Langton* Director David Levy* Director Bernard Marcus* Director John G. Medlin, Jr.* Director Betty L. Siegel* Director Erwin Zaban* Director *By /s/ David Levy Attorney-in-Fact David Levy Page 12 Arthur Andersen LLP Atlanta, Georgia REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE To National Service Industries, Inc.: We have audited, in accordance with generally accepted auditing standards, the consolidated financial statements included in NATIONAL SERVICE INDUSTRIES, INC. and subsidiaries' annual report to stockholders incorporated by reference in this Form 10-K and have issued our report thereon dated October 20, 1995. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedules listed in Item 14 in this Form 10-K are the responsibility of the company's management and are presented for the purpose of complying with the Securities and Exchange Commission's rules and are not part of the basic consolidated financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. /s/ Arthur Andersen LLP ARTHUR ANDERSEN LLP October 20, 1995 Page 13 SCHEDULE II NATIONAL SERVICE INDUSTRIES, INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED AUGUST 31, 1995, 1994, AND 1993 (In thousands) Balance at Additions Charged to Balance at Beginning Costs and Other End Description of Period Expenses Accounts (1) Deductions (2) of Period YEAR ENDED AUGUST 31, 1995: Deducted in the balance sheet from the asset to which it applies- Reserve for doubtful accounts $7,385 $3,170 $ (384) $3,704 $6,467 YEAR ENDED AUGUST 31, 1994: Deducted in the balance sheet from the asset to which it applies- Reserve for doubtful accounts $7,170 $2,804 $ 923 $3,512 $7,385 YEAR ENDED AUGUST 31, 1993: Deducted in the balance sheet from the asset to which it applies- Reserve for doubtful accounts $3,696 $3,300 $3,462 $3,288 $7,170
(1) Recoveries credited to reserve and reserves recorded in acquisitions. (2) Uncollectible accounts written off. Page 14 INDEX TO EXHIBITS Page No. EXHIBIT 3 - Restated Certificate of Incorporation Reference is made to Exhibit 3 of registrant's Form 10-Q for the quarter ended May 31, 1992, which is incorporated herein by reference. - By-Laws as Amended and Restated June 21, Reference is made to Exhibit 3 of registrant's 1989 Form 10-K for the fiscal year ended August 31, 1989, which is incorporated herein by reference. EXHIBIT 4 - Shareholder Rights Plan Adopted May 9, 1988 Reference is made to Exhibit 1 of registrant's Form 8-A as filed with the Commission on May 11, 1988, which is incorporated herein by reference. EXHIBIT 10(i) - Section 168 Agreement and Election Dated Reference is made to Exhibit 10(i) of April 9, 1982 between National Service registrant's Form 10-K for the fiscal year Industries, Inc. and Oglethorpe Power ended August 31, 1982, which is incorporated Corporation herein by reference. EXHIBIT 10(iii)A Management Contracts and Compensatory Arrangements: (a)-Director's Deferred Compensation Plan Reference is made to Exhibit 10(iii)A (b) of registrant's Form 10-K for the fiscal year ended August 31, 1982, which is incorporated herein by reference. (b)-(i) Executives' Deferred Compensation Plan Reference is made to Exhibit 19 of registrant's Form 10-K for the fiscal year ended August 31, 1982, which incorporated herein by reference. (ii) First Amendment To Executives' Reference is made to Exhibit 10(iii)A (b)-(ii) Deferred Compensation Plan, Dated of registrant's Form 10-K for the fiscal year September 21, 1989 ended August 31, 1989, which is incorporated herein by reference. (c)-(i)Restated and Amended Supplemental Reference is made to Exhibit 10(iii)A (c)-(i) Retirement Plan for Executives of National of registrant's Form 10-K for the fiscal year Service Industries, Inc. (Supplemental ended August 31, 1993, which is incorporated Pension Plan) herein by reference. (ii) Amendment to Restated and Amended Reference is made to Exhibit 10(iii)A (a) of Supplemental Retirement Plan for Executives registrant's Form 10-Q for the quarter ended of National Service Industries, Inc. February 28, 1994, which is incorporated (Supplemental Pension Plan) herein by reference. (d)-(i) The National Service Industries, Inc. Reference is made to Exhibit 10(iii)A (f) of Senior Management Benefit Plan, Dated registrant's Form 10-K for the fiscal year August 15, 1985 ended August 31, 1985, which is incorporated herein by reference. (ii) First Amendment to National Service Reference is made to Exhibit 10(iii)A (e)-(ii) Industries, Inc. Senior Management Benefit of registrant's Form 10-K for the fiscal year Plan, Dated September 21, 1989 ended August 31, 1989, which is incorporated herein by reference.
Page 15 INDEX TO EXHIBITS Page No. (d) (iii) Second Amendment to National Service Reference is made to Exhibit 10(iii)A (d)(iii) of Industries, Inc. Senior Management Benefit registrant's Form 10-K for the fiscal year Plan, Dated September 16, 1994 ended August 31, 1994, which is incorporated herein by reference. (e)-Severance Protection Agreement between Reference is made to Exhibit 10(iii)A (h) of National Service Industries, Inc. and David registrant's Form 10-K for the fiscal year Levy ended August 31, 1989, which is incorporated herein by reference. (f)-Severance Protection Agreements between Reference is made to Exhibit 10(iii)A (i) of National Service Indus tries, Inc. and registrant's Form 10-K for the fiscal year (i) D. Raymond Riddle ended August 31, 1989, which is incorporated (ii)Don W. Hubble herein by reference. (iiiJ. Robert Hipps (g)-Bonus Letter Agreements between Reference is made to Exhibit 10(iii)A (j) of National Service Industries, Inc. and registrant's Form 10-K for the fiscal year (i) D. Raymond Riddle ended August 31, 1989, which is incorporated (ii)Don W. Hubble herein by reference. (iiiDavid Levy (iv)J. Robert Hipps (h)-(i)Long-Term Incentive Program, Dated Reference is made to Exhibit 10(iii)A (k) of September 20, 1989 registrant's Form 10-K for the fiscal year ended August 31, 1989, which is incorporated herein by reference. -(ii)First Amendment to Long-Term Reference is made to Exhibit 10(iii)A (h)(ii) of Incentive Program, Dated September 20, registrant's Form 10-K for the fiscal year 1989 ended August 31, 1994, which is incorporated herein by reference. (i)-Incentive Stock Option Agreements between Reference is made to Exhibit 10(iii)A (l) of National Service Industries, Inc., and registrant's Form 10-K for the fiscal year (i) D. Raymond Riddle ended August 31, 1989, which is incorporated (ii)Don W. Hubble herein by reference. (iiiDavid Levy (iv)J. Robert Hipps (j)-Nonqualified Stock Option Agreement for Reference is made to Exhibit 10(iii)A (j) of Corporate Officers between National Service registrant's Form 10-K for the fiscal year Industries, Inc. and ended August 31, 1992, which is incorporated (i) D. Raymond Riddle herein by reference. (ii)Don W. Hubble (iiiDavid Levy (iv)J. Robert Hipps (k)-Nonqualified Stock Option Agreement for Reference is made to Exhibit 10(iii)A (k) of Corporate Officers Effective Beginning registrant's Form 10-K for the fiscal year September 21, 1994 between National ended August 31, 1994, which is incorporated Service Industries, Inc. and herein by reference. (i) D. Raymond Riddle (ii)Don W. Hubble (iiiDavid Levy (l)-(i)Benefits Protection Trust Agreement Dated Reference is made to Exhibit 10(iii)A (n) of July 5, 1990, between National Service Indus- registrant's Form 10-K for the fiscal year tries, Inc. and Wachovia Bank and Trust ended August 31, 1990, which is incorporated Company herein by reference.
Page 16 INDEX TO EXHIBITS Page No. (l)-(ii)Amended Schedule 1 of Benefits Reference is made to Exhibit 10(iii)A (k)-(ii) Protection Trust Agreement between of registrant's Form 10-K for the fiscal year National Service Industries, Inc. and ended August 31, 1993, which is incorporated Wachovia Bank and Trust Company herein by reference. Dated September 15, 1993 (m)-Executive Benefits Trust Agreement Dated Reference is made to Exhibit 10(iii)A (o) of July 5, 1990, between National Service Indus- registrant's Form 10-K for the fiscal year tries, Inc. and Wachovia Bank and Trust ended August 31, 1990, which is incorporated Company herein by reference. (n)-Consulting Agreement between National Reference is made to Exhibit 10(iii)A of Service Industries, Inc. and Erwin Zaban, registrant's Form 10-Q for the quarter ended Dated December 30, 1991 November 30, 1991, which is incorporated herein by reference. (o)-1992 Nonemployee Directors' Stock Option Reference is made to Exhibit 10(iii)A (o) of Plan Effective September 16, 1992 registrant's Form 10-K for the fiscal year ended August 31, 1992, which is incorporated herein by reference. (p)-Nonemployee Directors' Stock Option Reference is made to Exhibit 10(iii)A (q) of Agreement between National Service registrant's Form 10-K for the fiscal year Industries, Inc. and ended August 31, 1994, which is incorporated (i) John L. Clendenin herein by reference. (ii)Jesse Hill, Jr. (iiiRobert M. Holder, Jr. (iv)F. Ross Johnson (v) James C. Kennedy (vi)Donald R. Keough (viiBryan D. Langton (viiBernard Marcus (ix)John G. Medlin, Jr. (x) Dr. Betty L. Siegel (xi)Erwin Zaban (q)-National Service Industries, Inc. Executive Reference is made to Exhibit 10(iii)A (s) of Savings Plan Effective September 1, 1994 registrant's Form 10-K for the fiscal year ended August 31, 1994, which is incorporated herein by reference. (r)-National Service Industries, Inc. Management Reference is made to Exhibit 10(iii)A (t) of Compensation and Incentive Plan Effective registrant's Form 10-K for the fiscal year September 1, 1994. ended August 31, 1994, which is incorporated herein by reference. (s)-(i) Split Dollar Agreement among National Reference is made to Exhibit 10(iii)A (i) of Service Industries, Inc., D. Raymond Riddle, registrant's Form 10-Q for the quarter ended and Wachovia Bank of Georgia, N.A. dated February 28, 1995, which is incorporated January 4, 1993. herein by reference. (s)-(ii) First Amendment to Split Dollar Agreement Reference is made to Exhibit 10(iii)A (ii) of among National Service Industries, Inc., registrant's Form 10-Q for the quarter ended D. Raymond Riddle, and Wachovia Bank of February 28, 1995, which is incorporated Georgia, N.A. dated March 30, 1995 herein by reference.
Page 17 INDEX TO EXHIBITS Page No. (t)-Letter Agreement between National Service Reference is made to Exhibit 10(iii)A (b) of Industries, Inc. and D. Raymond Riddle dated registrant's Form 10-Q for the quarter ended March 28, 1995, amending as of September 21, February 28, 1995, which is incorporated 1994 the Incentive Stock Option Agreement herein by reference. dated January 6, 1993, the Nonqualified Stock Option Agreement dated January 6, 1993, and the Nonqualified Stock Option Agreement dated September 15, 1993 between National Service Industries, Inc. and D. Raymond Riddle (u)-Consulting Agreement between National Service Reference is made to Exhibit 10(iii)A (c) of Industries, Inc. and D. Raymond Riddle dated registrant's Form 10-Q for the quarter ended March 30, 1995 February 28, 1995, which is incorporated herein by reference. (v)-Letter Agreement between National Service Reference is made to Exhibit 10(iii)A (d) of Industries, Inc. and D. Raymond Riddle dated registrant's Form 10-Q for the quarter ended April 10, 1995, amending as of March 15, 1995, February 28, 1995, which is incorporated the Incentive Stock Option Agreement dated herein by reference. Janury 6, 1993, the Nonqualified Stock Option Agreement dated January 6, 1993, the Nonqualified Stock Option Agreement dated September 15, 1993, and the Nonqualified Stock Option Agreement dated September 21, 1994 between National Service Industries, Inc. and D. Raymond Riddle EXHIBIT 11 - Computations of Net Income per Share of 18 Common Stock EXHIBIT 13 - Information Incorporated by Reference from 19 Annual Report for the Year Ended August 31, 1993 EXHIBIT 21 - List of Subsidiaries 36 EXHIBIT 23 - Consent of Independent Public Accountants 37 EXHIBIT 24 - Powers of Attorney 38 EXHIBIT 27 - (a) Financial Data Schedule for the Year 49 Ended August 31, 1995 (b) Restated Financial Data Schedule for the 50 Year Ended August 31, 1994 (c) Restated Financial Data Schedule for the 51 Quarter Ended November 30, 1994
EX-11 2 COMPUTATION OF NET INCOME PER SHARE Page 18 Exhibit 11 NATIONAL SERVICE INDUSTRIES, INC. AND SUBSIDIARIES COMPUTATIONS OF NET INCOME PER SHARE OF COMMON STOCK Years Ended August 31 1995 1994 1993 (In thousands, except per-share data) Primary: Weighted Average Number of Shares (determined on a monthly basis) ........ 48,696 49,547 49,556 Net Income ............................... $ 94,097 $ 82,698 $ 75,116 Primary Earnings per Share ............... $ 1.93 $ 1.67 $ 1.52 Fully Diluted: Weighted Average Number of Shares Outstanding ............................ 48,696 49,547 49,556 Additional Shares Assuming Exercise of Options: Options exercised .................... 989 707 545 Treasury stock purchased with proceeds (835) (619) (478) Average Common Shares Outstanding (as adjusted) ......................... 48,850 49,635 49,623 Net Income ............................... $ 94,097 $ 82,698 $ 75,116 Fully Diluted Earnings per Share ......... $ 1.93 $ 1.67 $ 1.51 EX-13 3 1995 ANNUAL REPORT INCORPORATED BY REFERENCE Page 19 Exhibit 13 Consolidated Balance Sheets August 31 (In thousands, except share data) 1995 1994 Assets Current Assets: Cash and cash equivalents ......................................................................... $ 79,402 $ 58,619 Short-term investments ............................................................................ 3,598 2,579 Receivables, less reserves for doubtful accounts of $6,467 in 1995 and $7,385 in 1994 ............ 266,056 256,051 Inventories, at the lower of cost (on a first-in, first-out basis) or market ...................... 185,789 178,590 Linens in service, net of amortization ............................................................ 88,605 90,037 Deferred income taxes ............................................................................. 10,221 7,978 Prepayments ....................................................................................... 6,739 8,933 Total Current Assets ............................................................................. 640,410 602,787 Property, Plant, and Equipment, at cost: Land .............................................................................................. 31,016 32,237 Buildings and leasehold improvements .............................................................. 192,023 186,929 Machinery and equipment ........................................................................... 503,868 507,408 Total Property, Plant, and Equipment ............................................................. 726,907 726,574 Less-Accumulated depreciation and amortization .................................................... 377,003 378,262 Property, Plant, and Equipment-net ............................................................... 349,904 348,312 Other Assets: Goodwill and other intangibles .................................................................... 101,410 112,286 Other ............................................................................................. 39,622 37,876 Total Other Assets ............................................................................... 141,032 150,162 Total Assets .................................................................................... $1,131,346 $1,101,261
20/National Service Industries, Inc. Page 20 Exhibit 13 Consolidated Balance Sheets (Continued) August 31 (In thousands, except share data) 1995 1994 Liabilities and Stockholders' Equity Current Liabilities: Current maturities of long-term debt .............................................................. $ 87 $ 667 Notes payable ..................................................................................... 6,399 5,098 Accounts payable .................................................................................. 81,524 81,969 Accrued salaries, commissions, and bonuses ........................................................ 43,944 42,624 Current portion of self-insurance reserves ........................................................ 16,276 16,727 Other accrued liabilities ......................................................................... 54,340 42,588 Total Current Liabilities ........................................................................ 202,570 189,673 Long-Term Debt, less current maturities ............................................................ 26,776 26,863 Deferred Income Taxes .............................................................................. 65,756 73,319 Self-Insurance Reserves, less current portion ...................................................... 67,830 61,081 Other Long-Term Liabilities ........................................................................ 24,010 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 in 1995 and 1994 57,919 57,919 Paid-in capital ................................................................................... 8,065 7,684 Retained earnings ................................................................................. 746,256 705,504 812,240 771,107 Less-Treasury stock, at cost (9,609,261 shares in 1995 and 8,678,666 shares in 1994) .............. 67,836 43,722 Total Stockholders' Equity ....................................................................... 744,404 727,385 Total Liabilities and Stockholders' Equity ...................................................... $1,131,346 $1,101,261 The accompanying notes to consolidated financial statements are an integral part of these balance sheets.
National Service Industries, Inc./21 Page 21 Exhibit 13 Consolidated Statements of Income Years Ended August 31 (In thousands) 1995 1994 1993 Sales and Service Revenues: Net sales of products .................................................... $1,424,180 $1,337,410 $1,257,906 Service revenues ......................................................... 546,447 544,454 546,916 Total Revenues .......................................................... 1,970,627 1,881,864 1,804,822 Costs and Expenses: Cost of products sold .................................................... 908,869 875,055 832,264 Cost of services ......................................................... 299,687 286,519 281,551 Selling and administrative expenses ...................................... 601,754 577,291 557,011 Interest expense ......................................................... 3,820 3,668 4,961 Other expense, net ....................................................... 6,000 7,133 9,519 Total Costs and Expenses ................................................ 1,820,130 1,749,666 1,685,306 Income before Provision for Income Taxes .................................. 150,497 132,198 119,516 Provision for Income Taxes ................................................ 56,400 49,500 44,400 Net Income ................................................................ $ 94,097 $ 82,698 $ 75,116 Earnings per Share (in dollars) ........................................... $ 1.93 $ 1.67 $ 1.52 Weighted Average Number of Shares Outstanding ............................. 48,696 49,547 49,556 The accompanying notes to consolidated financial statements are an integral part of these statements.
22/National Service Industries, Inc. Page 22 Exhibit 13 Consolidated Statements of Stockholders' Equity Common Paid-in Retained Treasury (In thousands, except per-share data) Stock Capital Earnings Stock Total Balance, August 31, 1992 .......................................................... $57,919 $ 6,313 $ 652,717 $(33,995) $ 682,954 Treasury stock purchased(1) ...................................................... -- -- -- (837) (837) Stock options exercised(2) ....................................................... -- 1,003 -- 241 1,244 Adjustment of treasury stock issued in connection with acquisition(3) ............ -- (17) -- (3) (20) Net income ....................................................................... -- -- 75,116 -- 75,116 Cash dividends of $1.03 per share paid on common stock ........................... -- -- (51,041) -- (51,041) Adjustment to recognize net increase in pension liability ........................ -- -- (411) -- (411) Foreign currency translation adjustment .......................................... -- -- (2,982) -- (2,982) Balance, August 31, 1993 .......................................................... 57,919 7,299 673,399 (34,594) 704,023 Treasury stock purchased(4) ...................................................... -- -- -- (27) (27) Stock options exercised(5) ....................................................... -- 385 -- 90 475 Treasury stock acquired in connection with divestiture(6) ........................ -- -- -- (9,191) (9,191) Net income ....................................................................... -- -- 82,698 -- 82,698 Cash dividends of $1.07 per share paid on common stock ........................... -- -- (53,042) -- (53,042) Adjustment to recognize net decrease in pension liability ........................ -- -- 2,203 -- 2,203 Foreign currency translation adjustment .......................................... -- -- 246 -- 246 Balance, August 31, 1994 .......................................................... 57,919 7,684 705,504 (43,722) 727,385 Treasury stock purchased(7) ...................................................... -- -- -- (24,127) (24,127) Stock options exercised(8) ....................................................... -- 380 -- 148 528 Adjustment of treasury stock issued in connection with acquisition(9) ............ -- 1 -- (1) -- Adjustment of treasury stock acquired in connection with divestiture(10) ......... -- -- -- (134) (134) Net income ....................................................................... -- -- 94,097 -- 94,097 Cash dividends of $1.11 per share paid on common stock ........................... -- -- (54,156) -- (54,156) Adjustment to recognize net increase in pension liability ........................ -- -- (3) -- (3) Foreign currency translation adjustment .......................................... -- -- 814 -- 814 Balance, August 31, 1995 .......................................................... $57,919 $ 8,065 $ 746,256 $(67,836) $ 744,404 (1)34,100 shares. (2)58,359 shares. (3)723 shares. (4)992 shares. (5)21,705 shares. (6)341,840 shares. (7)949,178 shares. (8)23,598 shares. (9)39 shares. (10)4,976 shares. The accompanying notes to consolidated financial statements are an integral part of these statements.
National Service Industries, Inc./23 Page 23 Exhibit 13 Consolidated Statements of Cash Flows Years Ended August 31 (In thousands) 1995 1994 1993 Cash Provided by (Used for) Operating Activities Net income .............................................................................. $ 94,097 $ 82,698 $ 75,116 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization .......................................................... 57,130 60,548 62,097 Provision for losses on accounts receivable ............................................ 3,170 2,804 3,300 Loss (gain) on the sale of property, plant, and equipment .............................. 1,138 (76) (1,153) Gain on the sale of business ........................................................... (5,726) (2,249) (1,379) Change in noncurrent deferred income taxes ............................................. (3,663) (1,092) (5,794) Change in assets and liabilities net of effect of acquisitions- Receivables ........................................................................... (11,367) (8,425) (17,544) Inventories and linens in service, net ................................................ (8,522) (23,095) (22,722) Current deferred income taxes ......................................................... (2,243) 11,359 10,197 Prepayments ........................................................................... 2,086 4,635 (4,076) Accounts payable and accrued liabilities .............................................. 11,945 5,796 (4,774) Net Cash Provided by Operating Activities ............................................ 138,045 132,903 93,268 Cash Provided by (Used for) Investing Activities Change in short-term investments ........................................................ (1,019) 2,197 3,736 Purchases of property, plant, and equipment ............................................. (58,768) (42,517) (35,513) Sale of property, plant, and equipment .................................................. 8,491 4,552 4,399 Sale of business ........................................................................ 14,044 2,395 2,558 Acquisitions ............................................................................ (2,668) (569) (97,267) Change in other assets ................................................................. (4,848) 52 (7,140) Net Cash Used for Investing Activities ................................................. $ (44,768) $ (33,890) $(129,227)
24/National Service Industries, Inc. Page 24 Exhibit 13 Consolidated Statements of Cash Flows (Continued) Years Ended August 31 (In thousands) 1995 1994 1993 Cash Provided by (Used for) Financing Activities Repayment of long-term debt ............................................................. $ (667) $ (2,680) $ (2,521) Recovery of investment in tax benefits .................................................. 1,329 2,080 1,820 Deferred income taxes from investment in tax benefits ................................... (3,900) (3,875) (3,070) Issuance (purchase) of treasury stock, net .............................................. (23,733) 448 407 Change in self-insurance reserves and other long-term liabilities ....................... 7,819 576 8,062 Cash dividends paid ..................................................................... (54,156) (53,042) (51,041) Net Cash Used for Financing Activities ................................................. (73,308) (56,493) (46,343) Effect of Exchange Rate Changes on Cash .................................................. 814 246 (2,982) Net Change in Cash and Cash Equivalents .................................................. 20,783 42,766 (85,284) Cash and Cash Equivalents at Beginning of Year ........................................... 58,619 15,853 101,137 Cash and Cash Equivalents at End of Year ................................................. $ 79,402 $ 58,619 $ 15,853 Supplemental Cash Flow Information: Income taxes paid during the year ....................................................... $ 34,614 $ 41,584 $ 35,620 Interest paid during the year ........................................................... 3,671 4,030 5,925 Noncash Investing and Financing Activities: Noncash aspects of sale of business- Receivables assumed or incurred ........................................................ $ (3,003) $ -- $ -- Liabilities assumed (removed) .......................................................... 1,064 (2,442) -- Treasury stock acquired ................................................................ -- (9,191) -- Noncash aspects of acquisitions- Liabilities assumed or incurred ........................................................ $ 468 $ -- $ 31,594 Treasury stock returned ................................................................ (1) -- (20) The accompanying notes to consolidated financial statements are an integral part of these statements.
National Service Industries, Inc./25 Page 25 Exhibit 13 Notes to Consolidated Financial Statements NOTE 1: Summary of Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of the company and all subsidiaries after elimination of significant intercompany transactions and accounts. Cash, Cash Equivalents, and Short-Term Investments Cash in excess of daily requirements is invested in time deposits and marketable securities, consisting primarily of tax exempt variable rate demand notes, included in the balance sheets at market value. The company considers time deposits and marketable securities purchased with an original maturity of three months or less to be cash equivalents. Investments purchased with a maturity of more than three months are considered short-term investments. The carrying amounts of short-term investments at August 31, 1995 and 1994 approximate fair value. At August 31, 1995, short-term investments consisted of preferred stocks. In accordance with the criteria specified by Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity Securities," these investments were classified as "available for sale." Concentrations of Credit Risk Concentrations of credit risk with respect to receivables are limited due to the wide variety of customers and markets into which the company's products and services are provided, as well as their dispersion across many different geographic areas. As a result, as of August 31, 1995, the company does not consider itself to have any significant concentrations of credit risk. Inventories and Linens in Service Inventories are valued at the lower of cost (on a first-in, first-out basis) or market and consisted of the following at August 31, 1995 and 1994: (In thousands) 1995 1994 Raw materials and supplies ................... $ 87,470 $ 72,677 Work in progress ............................. 9,879 9,918 Finished goods ............................... 88,440 95,995 $185,789 $178,590 Linens in service are recorded at cost and are amortized over their estimated useful lives of 15 to 60 months. Goodwill and Other Intangibles Goodwill of $3,460,000 was recognized in connection with a 1969 acquisition and is not being amortized. Remaining amounts of goodwill ($47,853,000 in 1995 and $47,102,000 in 1994) and other intangible assets are being amortized on a straight-line basis over various periods up to 40 years. The company periodically evaluates whether events and circumstances have occurred that may warrant revision of the estimated useful life of goodwill and other long-lived assets or whether the remaining balance of goodwill should be evaluated for possible impairment. The company uses an estimate of related undiscounted net income over the remaining life of goodwill in measuring whether the goodwill is recoverable. Depreciation For financial reporting purposes, depreciation is determined principally on a straight-line basis using estimated useful lives of plant and equipment (20 to 45 years for buildings and 3 to 16 years for machinery and equipment) while accelerated depreciation methods are used for income tax purposes. Leasehold improvements are amortized over the life of the lease or the useful life of the improvement, whichever is shorter. Foreign Currency Translation The functional currency for the company's foreign operations is the local currency. The translation of foreign currencies into U.S. dollars is performed for balance sheet accounts using exchange rates in effect at the balance sheet date and for revenue and expense accounts using a weighted average exchange rate during the period. The gains or losses, net of applicable income taxes, resulting from the translation are included in retained earnings and are excluded from net income. Gains or losses resulting from foreign currency transactions are included in "Other expense, net" in the consolidated statements of income and amounted to a gain of $201,000 in 1995 and losses of $379,000 in 1994 and $863,000 in 1993. Pension and Profit Sharing Plans The company has several pension plans covering hourly and salaried employees. Benefits paid under these plans are based generally on employees' years of service and/or compensation during the final years of employment. The company makes annual contributions to the plans to the extent indicated by actuarial valuations. Plan assets are invested primarily in equity and fixed income securities. 26/National Service Industries, Inc. Page 26 Exhibit 13 Notes to Consolidated Financial Statements (Continued) Net pension expense (income) for 1995, 1994, and 1993 included the following components: (In thousands) 1995 1994 1993 Service cost of benefits earned during the period .. $ 2,648 $ 2,466 $ 2,652 Interest cost on projected benefit obligation ...... 7,277 7,262 7,165 Return on plan assets .............................. (12,178) (1,929) (8,198) Net amortization of transition amounts ............. 2,257 (8,215) (1,217) Net pension expense (income) ....................... $ 4 $ (416) $ 402 The following schedule reconciles the funded status of the plans as of June 1, 1995 and 1994, with amounts reported in the company's balance sheets at August 31, 1995 and 1994: 1995 1994 Plan Assets Accumulated Plan Assets Accumulated Exceed Benefit Exceed Benefit Accumulated Obligation Accumulated Obligation Benefit Exceeds Benefit Exceeds (In thousands) Obligation Plan Assets Obligation Plan Assets Actuarial present value of benefit obligations as of June 1: Vested .......................................... $ (77,505) $(3,879) $ (76,845) $(3,861) Nonvested ....................................... (6,585) (90) (6,036) (77) Accumulated benefit obligation ................... (84,090) (3,969) (82,881) (3,938) Effect of projected salary increases ............. (6,295) (1,731) (5,787) (1,523) Total projected benefit obligation ............... (90,385) (5,700) (88,668) (5,461) Fair value of plan assets ........................ 113,510 -- 106,031 -- Plan assets greater (less) than projected benefit obligation ............................... 23,125 (5,700) 17,363 (5,461) Unrecognized transition (asset) liability ........ (10,777) 86 (12,087) 98 Unrecognized prior service cost obligation ....... 2,847 2,262 3,058 2,514 Unrecognized net loss (gain) ..................... 13,549 (755) 16,814 (744) Adjustment required to recognize minimum liability -- (426) -- (515) Prepaid(accrued) pension expense at August 31 .... $ 28,744 $(4,533) $ 25,148 $(4,108)
The discount rate used to determine the projected benefit obligation is 8 percent. The assumed growth rate of compensation is 5.5 percent. The expected long-term rate of return on plan assets is 9.5 percent. The company also has profit sharing and 401(k) plans to which both employees and the company contribute. At August 31, 1995, assets of the 401(k) plans included shares of the company's common stock with a market value of approximately $6,303,000. The company's cost of these plans was $3,810,000 in 1995, $3,133,000 in 1994, and $3,031,000 in 1993. Postretirement Healthcare and Life Insurance Benefits The company's retiree medical plans are financed entirely by retiree contributions; therefore, the company has no liability in connection with them. Several programs provide limited retiree life insurance benefits. The liability for these plans is not significant. Postemployment Benefits During fiscal 1995, the company adopted 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, which is not material, relates primarily to severance agreements and the liability for life insurance coverage for certain eligible employees. Self Insurance It is the policy of the company to self insure for certain insurable risks consisting primarily of physical loss to property; business interruptions resulting from such loss; and workers' compensation, comprehensive general, and auto liability. Insurance coverage is obtained for catastrophic property and casualty exposures as well as those risks required to be insured by law or contract. A provision for claims under the self-insured program is recorded based on the company's estimate of the aggregate liability for claims incurred. Reclassifications Certain amounts in the 1994 and 1993 financial statements and notes have been reclassified to conform with the 1995 presentation. NOTE 2: Long-Term Debt and Lines of Credit Long-term debt at August 31, 1995 and 1994, consisted of the following: (In thousands) 1995 1994 7.0% to 13.0% mortgage notes, payable in installments through 2000 (secured in part by property, plant, and equipment having a net book value of $1,169,000 at August 31, 1995) ........................... $ 244 $ 671 2.55% to 6.625% other notes, payable in installments to 2021 ........ 26,619 26,859 26,863 27,530 Less-Amounts payable within one year included in current liabilities 87 667 $26,776 $26,863
National Service Industries, Inc/27 Page 27 Exhibit 13 Notes to Consolidated Financial Statements (Continued) The annual maturities of long-term debt are as follows: (In thousands) Amount Year Ending August 31 1996 ................................................... $ 87 1997 ................................................... 54 1998 ................................................... 5,501 1999 ................................................... 25 2000 ................................................... 28 Later years ............................................ 21,168 $26,863 The company has complimentary lines of credit totaling $152,000,000, of which $110,000,000 has been provided domestically and $42,000,000 is available on a multi-currency basis primarily from a European bank. At August 31, 1995, the company had foreign currency short-term bank borrowings equivalent to $6,399,000 at an average interest rate of 6.8%. Under one of the domestic lines of credit, up to $40,000,000 may be used for letters of credit. At August 31, 1995, $17,966,000 in letters of credit associated with the company's insurance program (Note 1) were outstanding and $22,034,000 was available under the line of credit. Long-term debt recorded in the accompanying balance sheets approximates fair value based on the borrowing rates currently available to the company for bank loans with similar terms and average maturities. NOTE 3: Common Stock and Related Matters The company has a shareholder rights plan under which one preferred stock purchase right is presently attached to and trades with each outstanding share of the company's common stock. The rights become exercisable and transferable apart from the common stock ten days after a person or group, without the company's consent, acquires beneficial ownership of, or the right to obtain beneficial ownership of, 20 percent or more of the company's common stock or announces or commences a tender offer or exchange offer that could result in 20 percent ownership (unless such date is extended by the Board of Directors). Once exercisable, each right entitles the holder to purchase one one-hundredth share of Series A Participating Preferred Stock at an exercise price of $80, subject to adjustment to prevent dilution. The rights have no voting power and, until exercised, no dilutive effect on net income per common share. The rights expire on May 19, 1998, and are redeemable under certain circumstances. If a person acquires 20 percent ownership, except in an offer approved by the company under the plan, each right not owned by the acquirer or related parties will entitle its holder to purchase, at the right's exercise price, common stock or common stock equivalents having a market value immediately prior to the triggering of the right of twice that exercise price. In addition, after an acquirer obtains 20 percent ownership, if the company is involved in certain mergers, business combinations, or asset sales, each right not owned by the acquirer or related persons will entitle its holder to purchase, at the right's exercise price, shares of common stock of the other party to the transaction having a market value immediately prior to the triggering of the right of twice that exercise price. The company has 1,000,000 shares of preferred stock authorized, 500,000 of which have been reserved for issuance under the shareholder rights plan. No shares of preferred stock had been issued at August 31, 1995. In 1990, the stockholders approved the National Service Industries, Inc. Long-Term Incentive Program for the benefit of officers and other key employees. There were 1,750,000 treasury shares reserved for issuance under the program. The employee stock options granted under the program become exercisable in four equal annual installments beginning one year from the date of the grant. In 1993, the stockholders approved the National Service Industries, Inc. 1992 Nonemployee Directors' Stock Option Plan under which a maximum of 100,000 shares were reserved for issuance. The shares become exercisable one year from the date of the grant. Under both plans, the options outstanding at August 31, 1995, expire ten years from the date of the grant and have an exercise price equal to the fair market value on the date of the grant. Stock option transactions for the stock option plans and stock option agreements during the years ended August 31, 1995, 1994, and 1993 were as follows: 1995 1994 1993 Options outstanding at September 1 ..... 820,752 680,139 473,415 Granted ................................ 325,400 214,700 365,900 Exercised .............................. 23,598 21,705 58,359 Canceled ............................... 33,781 52,382 100,817 Options outstanding at August 31 ....... 1,088,773 820,752 680,139 Option price range at August 31 ........ $19.75-$29.00 $19.75-$29.00 $19.75-$29.00 Options exercisable at August 31 ....... 513,665 316,024 176,625 Options available for grant at August 31 657,565 949,184 1,111,502
Potential dilution of earnings per share applicable to these stock options is not significant. 28/National Service Industries, Inc. Page 28 Exhibit 13 Notes to Consolidated Financial Statements (Continued) NOTE 4: Leases The company leases certain of its buildings and equipment under noncancelable lease agreements. Minimum lease payments under noncancelable leases for years subsequent to August 31, 1995, are as follows: (In thousands) Amount Year Ending August 31 1996 ................................................... $9,298 1997 ................................................... 7,290 1998 ................................................... 5,376 1999 ................................................... 3,946 2000 ................................................... 2,538 Later years ............................................ 6,826 Total minimum lease payments ........................... $35,274 Total rent expense was $11,607,000 in 1995, $10,585,000 in 1994, and $11,230,000 in 1993. NOTE 5: Quarterly Financial Data (Unaudited) Sales and Income (In thousands, except Service Gross before Net Earnings earnings per share) Revenues Profit Taxes Income per Share 1995 1st Quarter ................. $480,984 $185,951 $ 33,735 $ 21,114 $ .43 2nd Quarter ................. 465,810 174,793 28,031 17,578 .36 3rd Quarter ................. 505,798 196,903 41,064 25,627 .53 4th Quarter ................. 518,035 204,424 47,667 29,778 .62 1994 1st Quarter ................. $459,900 $175,584 $ 30,803 $ 19,172 $ .39 2nd Quarter ................. 439,337 166,082 26,149 16,273 .33 3rd Quarter ................. 481,001 187,031 36,849 22,928 .46 4th Quarter ................. 501,626 191,593 38,397 24,325 .49
NOTE 6: Income Taxes Income taxes are reconciled with the Federal statutory rate as follows: (In thousands) 1995 1994 1993 Federal income tax computed at statutory rate $ 52,674 $ 46,269 $ 41,433 Increase (decrease) in taxes: State income tax, net of Federal income tax benefit ....................... 4,308 4,693 4,230 Other, net ................................ (582) (1,462) (1,263) $ 56,400 $ 49,500 $ 44,400 Provisions for income taxes include state income and franchise taxes of $6,628,000 in 1995, $7,220,000 in 1994, and $6,478,000 in 1993. The following summarizes the components of income tax expense: (In thousands) 1995 1994 1993 Provision for current taxes ................ $ 62,549 $ 47,473 $ 41,710 Provision (credit) for deferred taxes: Current- Tax effect of linen book amortization less than tax amortization ............. 6,996 3,339 9,877 Insurance costs .......................... (5,386) (1,745) (3,452) Other temporary differences .............. (4,096) 1,525 2,059 Noncurrent- Other (primarily tax effect of differences between book depreciation and tax depreciation on fixed assets) ...... (3,663) (1,092) (5,794) $ 56,400 $ 49,500 $ 44,400 National Service Industries, Inc./29 Page 29 Exhibit 13 Notes to Consolidated Financial Statements (Continued) Components of net deferred income tax liability at August 31, 1995 and 1994 include: (In thousands) 1995 1994 Deferred income taxes: Noncurrent- Depreciation ............................. $ 45,125 $ 43,443 Safe harbor lease ........................ 43,303 47,203 Self insurance ........................... (26,623) (22,804) Foreign loss carryforwards ............... (4,414) (4,292) Pension .................................. 7,522 7,614 Deferred compensation .................... (3,706) (3,876) Other liabilities ........................ 4,549 6,031 65,756 73,319 Current- Amortization of linens ................... 11,933 4,937 Self insurance ........................... (7,928) (6,044) Bonuses .................................. (5,145) (5,701) Other assets ............................. (13,729) (9,123) Other liabilities ........................ 4,648 7,953 (10,221) (7,978) Net deferred tax liability ................. $ 55,535 $ 65,341 At August 31, 1995, the company had foreign net operating loss carryforwards of $14,942,000 expiring in fiscal years 1996 through 2001. Current income taxes payable were $11,257,000 and $7,370,000 at August 31, 1995 and 1994, respectively. NOTE 7: Divestitures and Acquisitions During 1995, the company divested several unprofitable businesses, primarily in the Textile Rental division, generating cash of $14,044,000. In May, 1995, the company acquired the assets of Infranor Canada Inc., a Canadian lighting products manufacturer based in Saint-Hyacinthe, Quebec. The operating results of this acquisition were included in the Lighting Equipment segment for the fourth quarter of fiscal 1995. Full-year acquisition spending of $2.7 million also included several small purchases for the Textile Rental segment. Effective August 31, 1994, the company sold its Marketing Services division. A small gain resulted from the transaction as the company received approximately 342,000 of its common shares in return for those assets transferred to the purchasers. The division had sales of approximately $32,000,000 in 1994 and an immaterial operating loss. Effective September 1, 1992, the company acquired Initial Services Investments, Inc., an industrial uniform and dust control business known as Initial USA. Initial was included in the results of operations of the Textile Rental division for the entire 1993 fiscal year. Effective September 30, 1992, the company acquired Graham International, a privately held European specialty chemical business. Graham manufactures in the Netherlands for industrial and institutional specialty chemical markets in France, Italy, Belgium, the Netherlands, and Switzerland. Graham became a part of Zep Manufacturing Company and the Chemical segment. Also in September, 1992, the Chemical division acquired Kleen Canada, Inc., a Canadian manufacturer of specialty chemicals. The operating results of Graham and Kleen were included in the Chemical segment beginning in October, 1992. These and several small acquisitions, all of which were accounted for by the purchase method, brought total 1993 acquisition spending to $97 million. NOTE 8: Business Segment Information Depreciation Capital Sales and and Expenditures Service Operating Identifiable Amortization Including (In thousands) Revenues Profit(Loss) Assets Expense Acquisitions 1995 Lighting Equipment $ 851,363 $ 61,313 $ 340,187 $ 14,205 $ 23,098 Textile Rental ... 546,447 51,016 422,108 30,787 28,144 Chemical ......... 352,670 35,227 169,376 6,711 4,527 Other ............ 220,147 14,351 83,400 3,827 4,120 1,970,627 161,907 1,015,071 55,530 59,889 Corporate(1) ..... (7,590) 116,275 1,600 21 Interest Expense . (3,820) Total ............ $ 1,970,627 $ 150,497 $ 1,131,346 $ 57,130 $ 59,910 1994 Lighting Equipment $ 763,592 $ 50,092 $ 323,335 $ 15,460 $ 13,183 Textile Rental ... 544,454 48,840 432,994 31,656 20,986 Chemical ......... 332,298 35,368 168,956 6,392 5,315 Other ............ 241,520 8,822 75,580 5,792 2,695 1,881,864 143,122 1,000,865 59,300 42,179 Corporate(1) ..... (7,256) 100,396 1,248 339 Interest Expense . (3,668) Total ............ $ 1,881,864 $ 132,198 $ 1,101,261 $ 60,548 $ 42,518 1993 Lighting Equipment $ 691,946 $ 38,623 $ 298,575 $ 16,823 $ 10,193 Textile Rental ... 546,916 49,096 433,408 31,134 55,015 Chemical ......... 318,098 33,280 173,354 6,499 12,743 Other ............ 247,862 10,275 104,892 6,357 4,048 1,804,822 131,274 1,010,229 60,813 81,999 Corporate(1) ..... (6,797) 71,281 1,284 172 Interest Expense . (4,961) Total ............ $ 1,804,822 $ 119,516 $ 1,081,510 $ 62,097 $ 82,171 (1)Operating profit (loss) includes income on short-term investments.
30/National Service Industries, Inc. Page 30 Exhibit 13 Report of Management The management of National Service Industries, Inc. is responsible for the integrity and objectivity of the financial information in this annual report. These financial statements are prepared in conformity with generally accepted accounting principles, using informed judgements and estimates where appropriate. The information in other sections of this report is consistent with the financial statements. The company maintains a system of internal controls and accounting policies and procedures designed to provide reasonable assurance that assets are safeguarded and transactions are executed and recorded in accordance with management's authorization. The audit committee of the Board of Directors, composed entirely of outside directors, is responsible for monitoring the company's accounting and reporting practices. The audit committee meets regularly with management, the internal auditors, and the independent accountants to review the work of each and to assure that each performs its responsibilities. Both the internal auditors and Arthur Andersen LLP have unrestricted access to the audit committee allowing open discussion, without management's presence, on the quality of financial reporting and the adequacy of internal accounting controls. /s/ D. Raymond Riddle D. Raymond Riddle Chairman and Chief Executive Officer /s/ J. Robert Hipps J. Robert Hipps Senior Vice President, Finance /s/ John A. Bostater John A. Bostater Vice President and Controller Report of Independent Accountants To the Stockholders of National Service Industries, Inc.: We have audited the accompanying consolidated balance sheets of National Service Industries, Inc. (a Delaware corporation) and subsidiaries as of August 31, 1995 and 1994 and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended August 31, 1995. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of National Service Industries, Inc. and subsidiaries as of August 31, 1995 and 1994 and the results of their operations and their cash flows for each of the three years in the period ended August 31, 1995 in conformity with generally accepted accounting principles. /s/Arthur Andersen LLP Arthur Andersen LLP Atlanta, Georgia October 20, 1995 National Service Industries, Inc./31 Page 31 Exhibit 13 Management's Discussion and Analysis of Financial Condition and Results of Operations Financial Condition National Service Industries' balance sheet strengthened during the year ended August 31, 1995. Net working capital increased to $437.8 million from $413.1 million at August 31, 1994, and the current ratio was 3.2, the same as at last year end. Cash and short-term investments climbed to $83.0 million from $61.2 million at the prior year end. During 1995, the company invested $61.4 million in capital expenditures and acquisitions. Long-term liabilities were 13.7 percent of total capitalization at August 31, 1995 and 1994. Cash provided by operating activities increased to $138.0 million from $132.9 million in 1994 and $93.3 million in 1993. The improvement in 1995 resulted primarily from a lower rate of investment in inventories and linens in service and a decrease in prepayments. The improvement in 1994 was largely due to a reduced rate of investment in accounts receivable, a reduction of prepayments, and lower charges against insurance reserves due to improved claims experience. Capital expenditures, exclusive of acquisition spending, were $58.8 million in 1995, $42.5 million in 1994, and $35.5 million in 1993. During 1995, the Lighting Equipment division invested in manufacturing equipment replacements and improvements and the construction of its production facility in Monterrey, Mexico, which began production in the fourth quarter. Textile Rental division current-year expenditures included fleet upgrades, facility improvements, and information system enhancements. Prior-year spending was primarily the result of facilities and manufacturing process improvements in the Lighting Equipment division, facilities additions and information systems enhancements in the Chemical division, and wastewater compliance projects and fleet upgrades in the Textile Rental division. Cash payments in connection with acquisitions totaled $2.7 million in 1995, $.6 million in 1994, and $97.3 million in 1993. In May, 1995 the company acquired the assets of Infranor Canada Inc., a Canadian lighting products manufacturer based in Saint-Hyacinthe, Quebec. The operating results of this acquisition were included in the Lighting Equipment segment for the fourth quarter of fiscal 1995. Full-year acquisition spending also included several small additions to the Textile Rental segment. Effective September 1, 1992 the company acquired Initial Services Investments, Inc., an industrial uniform and dust control business known as Initial USA. Initial was included in the results of operations of National Uniform Service, a business unit of the Textile Rental division, for the entire 1993 fiscal year. Effective September 30, 1992 the company acquired Graham International, a privately held European specialty chemical business. Graham manufactures in the Netherlands for industrial and institutional specialty chemical markets in France, Italy, Belgium, the Netherlands, and Switzerland. Graham became part of Zep Manufacturing Company and the Chemical segment. Also in September, 1992, the Chemical division acquired Kleen Canada, Inc., a Canadian manufacturer of specialty chemicals. The operating results of Graham and Kleen were included in the Chemical segment beginning in October, 1992. In June, 1993 the Textile Rental division acquired the linen supply business of Heritage Linen Service, Inc. in Hickory, North Carolina. In the current year, the company divested several unprofitable businesses, primarily in the Textile Rental division, generating cash of $14.0 million. During 1995, the company spent $24.1 million on the repurchase of approximately 949,000 shares of its common stock. Dividend payments totaled $54.2 million, or $1.11 per share, in 1995, $53.0 million, or $1.07 per share, in 1994, and $51.0 million, or $1.03 per share, in 1993. The fiscal 1995 dividend of $1.11 per share was a 3.7 percent increase. 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. The Infranor and Initial acquisitions were cash transactions. 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 and acquisition spending for fiscal 1996 total $12.9 million. The company expects actual capital expenditures in 1996 to be somewhat higher than the 1995 level. 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. 32/National Service Industries, Inc. Page 32 Exhibit 13 Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Results Of Operations Revenues for the fiscal year ended August 31, 1995 totaled a record $1.97 billion, an increase of 4.7 percent from 1994's $1.88 billion, as a result of volume gains in the Lighting Equipment and Chemical divisions and pricing improvements in the Envelope division. Adjusted for the divestiture of the Marketing Services division, which contributed $32 million to 1994 sales, the sales gain was 6.5 percent. Fiscal 1994 revenues rose 4.3 percent from 1993's $1.80 billion due primarily to volume gains in the Lighting Equipment and Chemical segments. Net income for fiscal 1995 grew 13.8 percent to $94.1 million, or $1.93 per share. An average of 850,000 fewer shares was outstanding for the year. Fiscal 1994 net income advanced 10.1 percent to $82.7 million, or $1.67 per share. The Lighting Equipment division achieved all-time record fiscal year sales of $851 million, an 11.5 percent increase from 1994. Both the fluorescent and nonfluorescent operations benefited from increased U.S. construction activity. Revenues for 1994 grew 10.4 percent to $764 million from $692 million in 1993. Unit sales increases that began late in fiscal 1993 continued through 1994 and 1995 and accounted for the improvement in both years. Higher unit volumes more than compensated for higher product and selling costs, resulting in a 22.4 percent increase in operating profit to 7.2 percent of revenues, compared with 6.6 percent in 1994 and 5.6 percent in 1993. For 1994, profit improvements were largely the result of higher unit volumes and cost savings. Textile Rental division revenues were $546 million in 1995, compared with $544 million in 1994 and $547 million in 1993. In both years pricing gains were offset by declining volumes, particularly in the hospital market. Operating income increased 4.5 percent to 9.3 percent of revenues, compared with 9.0 percent in both 1994 and 1993. The improvement was due to reduced labor and workers' compensation costs and expenses eliminated through plant divestitures. Merchandise costs as a percentage of revenues grew slightly in 1994, while administrative expenses declined. The Chemical division achieved a 1995 revenue increase of 6.1 percent to $353 million from $332 million in 1994. Revenues for 1994 rose 4.5 percent from $318 million in 1993. Gains in both years resulted from higher unit volumes, predominantly in domestic operations. Operating profit was 10.0 percent of revenues in 1995, down from 10.6 percent in 1994 and 10.5 percent in 1993. The decline in 1995 resulted from the division's increased investment in recruiting and training sales representatives and because of increases in some raw material costs. In 1994, European and Canadian operating margins, although improved, fell short of those achieved in the U.S. The Insulation Service and Envelope businesses combined for a 5.1 percent sales increase. Revenues were $220 million in 1995, down from $242 million in 1994 and $248 million in 1993 as a result of the divestiture of Marketing Services. Operating profit increased to $14.4 million from $8.8 million in 1994 and $10.3 million in 1993. The 1995 profit gain was due primarily to margin improvements on pricing gains. In both prior years, reduced volumes and pricing pressures experienced by the Insulation and Marketing Services divisions more than offset improvements in the Envelope division. Effective August 31, 1994, the company sold its Marketing Services division. A small gain resulted from the transaction as the company received approximately 342,000 of its common shares in return for those assets transferred to the purchasers. The division had sales of $32 million in 1994 and an immaterial operating loss. Corporate income declined in 1995 mainly because of accruals for higher business taxes. During 1995, the company benefited from higher levels of short-term investments at improved interest rates. Income in 1994 was influenced primarily by lower short-term investment levels and lower interest rates. Foreign currency exchange rate fluctuations were favorable in 1995, compared with unfavorable results in 1994 and 1993. Interest expense increased only slightly in 1995. For 1994 interest expense was less than in 1993 due to reductions in acquisition-related debt. Consolidated income before taxes grew 13.8 percent in 1995 compared with 10.6 percent in 1994. Net income for 1995 also increased 13.8 percent. The improvement in 1994 net income was reduced to 10.1 percent due to a higher tax rate. The provision for income taxes was 37.5 percent of pretax income in 1995, compared with 37.4 percent in 1994 and 37.1 percent in 1993. Changes in the year-to-year effective rates also result from variations in the relative amounts of tax exempt income. Outlook Fiscal 1995 brought strong operating results as NSI benefited from sales gains in its three core businesses. The 15 percent increase in earnings per share exceeded expectations. The company enters 1996 confident in posting its first $2 billion year in sales and achieving all-time record earnings. National Service Industries, Inc./33 Page 33 Exhibit 13 Ten-Year Financial Summary (Dollar amounts in thousands, except per-share data) 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 Operating Results Net sales of products $1,424,180 $1,337,410 $1,257,906 $1,189,684 $1,164,181 $1,250,833 $1,183,666 $1,093,163 $1,032,145 $ 968,308 Service revenues ..... 546,447 544,454 546,916 444,127 437,534 396,981 355,845 321,025 294,713 314,614 Total revenues ...... 1,970,627 1,881,864 1,804,822 1,633,811 1,601,715 1,647,814 1,539,511 1,414,188 1,326,858 1,282,922 Cost of products sold. 908,869 875,055 832,264 810,552 791,355 832,867 800,385 741,383 690,689 643,936 Cost of services ..... 299,687 286,519 281,551 236,474 240,376 219,673 198,262 179,793 159,019 170,571 Selling and administrative expenses 601,754 577,291 557,011 462,653 456,903 439,076 397,283 361,970 350,641 340,582 Interest expense ..... 3,820 3,668 4,961 2,690 3,834 3,864 4,963 4,234 4,149 3,999 Restructuring expense -- -- -- -- 63,467 -- -- -- -- -- Other income, net .... 6,000 7,133 9,519 4,534 (2,856) (3,381) (9,400) (6,414) (10,030) (3,507) Income before taxes .. 150,497 132,198 119,516 116,908 48,636 155,715 148,018 133,222 132,390 127,341 Income taxes ......... 56,400 49,500 44,400 42,800 16,400 56,000 53,300 47,100 56,700 56,000 Net income ........... 94,097 82,698 75,116 74,108 32,236 99,715 94,718 86,122 75,690 71,341 Per-Share Data(1) Net income ........... $ 1.93 $ 1.67 $ 1.52 $ 1.50 $ .65 $ 2.02 $ 1.92 $ 1.75 $ 1.54 $ 1.45 Cash dividends ....... 1.11 1.07 1.03 .99 .95 .90 .82 .73 .62 .54 Stockholders' equity . 15.41 14.77 14.21 13.79 13.33 13.68 12.44 11.33 10.31 9.39 Financial Ratios Current ratio(2) ..... 3.2 3.2 2.9 3.5 3.4 4.5 4.8 5.0 5.1 4.6 Net income as a percent of sales .... 4.8% 4.4% 4.2% 4.5% 2.0% 6.1% 6.2% 6.1% 5.7% 5.6% Return on average stockholders' equity(2) 13.0% 11.6% 10.9% 11.1% 4.8% 15.6% 16.3% 16.3% 15.7% 16.3% Dividends as a percent of current-year earnings 57.6% 64.1% 67.9% 66.3% 146.2% 44.6% 42.6% 41.8% 40.2% 37.0% Long-term debt and other long-term liabilities as a percent of total capitalization(2).... 13.7% 13.7% 13.7% 13.3% 12.2% 8.0% 8.1% 8.5% 8.5% 9.3%
34/National Service Industries, Inc. Page 34 Exhibit 13 Ten-Year Financial Summary (Continued) (Dollar amounts in thousands, except per-share data) 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 Other Data Net working capital(2) $ 437,840 $ 413,114 $ 363,575 $ 399,893 $ 386,306 $ 447,800 $ 450,185 $ 439,990 $ 416,801 $ 369,111 Increase (decrease) in: Cash and cash equivalents 20,783 42,766 (85,284) 27,617 (50,437) 23,433 14,612 (24,786) 16,318 63,315 Short-term investments 1,019 (2,197) (3,736) (5,551 12,813 (27,247) (19,633) 35,971 5,160 -- Capital expenditures (including acquisitions) 59,910 42,508 82,171 49,789 90,229 82,932 66,491 55,394 45,258 53,968 Depreciation and amortization ......... 57,130 60,548 62,097 53,816 50,249 42,821 36,260 31,037 27,333 26,707 Total assets(2) ...... 1,131,346 1,101,261 1,081,510 1,036,908 1,008,319 960,622 886,358 823,906 758,659 708,367 Long-term debt ....... 26,776 26,863 28,418 28,359 31,373 27,465 20,765 21,391 21,466 21,857 Deferred income taxes(2) 65,756 73,319 78,286 87,150 96,627 99,277 101,320 103,021 102,374 95,774 Self-insurance reserves(2) 67,830 61,081 56,335 47,638 38,428 15,222 15,213 15,016 13,574 15,945 Other long-term liabilities .......... 24,010 22,940 27,110 28,677 22,015 16,067 17,964 15,330 12,042 9,794 Stockholders' equity .. 744,404 727,385 704,023 682,954 660,567 675,444 612,668 558,160 508,219 462,907 Weighted average number of shares outstanding (in thousands)(1)..... 48,696 49,547 49,556 49,539 49,540 49,389 49,255 49,258 49,278 49,280 Shareholders .......... 6,655 7,034 7,262 7,554 7,996 8,248 8,459 8,851 9,164 9,326 Employees ............. 21,100 22,000 22,200 20,100 0,900 21,800 20,800 20,400 19,400 19,300 Use of Total Revenues Salaries and wages ....$ 568,616 $ 565,859 $ 572,163 $ 502,709 $ 501,502 $ 491,334 $ 465,522 $ 428,325 $ 399,968 $ 378,993 Materials and supplies 832,668 783,610 760,551 700,338 683,871 713,310 668,655 616,223 574,179 551,550 Other operating expenses 364,849 347,600 299,977 273,330 258,919 246,288 219,270 201,478 188,414 194,215 Restructuring expense . -- -- -- -- 63,467 -- -- -- -- -- Taxes and licenses .... 110,397 102,097 97,015 83,326 59,889 97,167 91,346 82,040 88,607 86,823 Dividends paid ........ 54,156 53,042 51,041 49,105 47,124 44,506 40,389 35,960 30,428 26,410 Retained earnings ..... 39,941 29,656 24,075 25,003 (13,057) 5,209 54,329 50,162 45,262 44,931 $1,970,627 $1,881,864 $1,804,822 $1,633,811 $1,601,715 $1,647,814 $1,539,511 $1,414,188 $1,326,858$1,282,922 (1) Restated to reflect stock splits of 3 for 2 effective January 13, 1987, and 4 for 3 effective January 13, 1986. (2) Prior-year amounts have been restated to conform to current-year presentation.
National Service Industries, Inc./35 Page 35 Exhibit 13 Shareholder Information Executive Offices NSI Center 1420 Peachtree Street, N.E. Atlanta, Georgia 30309 (404) 853-1000 Transfer Agent and Registrar Wachovia Bank of North Carolina, N.A. Corporate Trust Department P.O. Box 3001 Winston-Salem, North Carolina 27102 (800) 633-4236 Independent Accountants Arthur Andersen LLP 133 Peachtree Street, N.E. Atlanta, Georgia 30303 (404) 658-1776 Annual Meeting 10:00 a.m., Wednesday, January 3, 1996 High Museum of Art 1280 Peachtree Street, N.E. Atlanta, Georgia 30309 Listing New York Stock Exchange. Ticker Symbol: NSI. Shareholders of Record The number of shareholders of record holding NSI common stock was 6,655 as of September 29, 1995. Reports Available to Stockholders Copies of the following company reports may be obtained, without charge: 1995 Annual Report to the Securities and Exchange Commission, filed on Form 10-K; and Quarterly Reports to the Securities and Exchange Commission, filed on Form 10-Q. Requests should be directed to: National Service Industries, Inc. Attention: Investor Relations 1420 Peachtree Street, N.E. Atlanta, Georgia 30309 (404) 853-1216 Dividend Reinvestment Plan An automatic dividend reinvestment plan is available to all stockholders of record. Common dividends can be automatically reinvested in NSI common stock. Participants also may add cash for the purchase of additional shares. Any stockholder who would like to enroll in the plan should contact NSI's Stock Transfer and Recordkeeping Agent. Participants who have questions regarding their dividend reinvestment accounts should contact: Wachovia Bank of North Carolina, N.A. Corporate Trust Department P.O. Box 3001 Winston-Salem, North Carolina 27102 (800) 633-4236 Common Share Prices and Dividends per Share Price per Share Dividends Paid per High Low Share 1995 First Quarter ..................... $27-3/8 $25-3/8 $ .27 Second Quarter .................... 27-3/8 24-7/8 .28 Third Quarter ..................... 29-1/8 26 .28 Fourth Quarter .................... 30-5/8 28-1/8 .28 1994 First Quarter ..................... $26-1/8 $23-1/8 $ .26 Second Quarter .................... 28-3/8 23-1/8 .27 Third Quarter ..................... 28-1/4 24-3/4 .27 Fourth Quarter .................... 27-1/2 25-3/8 .27 The above common share prices are as quoted on the New York Stock Exchange. Uretek Method(R) (p. 18) is a registered trademark of Uretek USA, Inc. All other trademarks and service marks referenced in the text of this annual report are owned by National Service Industries, Inc., or its subsidiaries. EX-21 4 LIST OF SUBSIDIARIES Page 36 Exhibit 21 LIST OF SUBSIDIARIES Registrant - National Service Industries, Inc. Registrant owns all of the common stock of the following subsidiaries: State or Other Jurisdiction of Incorporation Subsidiary Principal Location or Organization Lithonia Lighting Mexico, S.A. de C.V. Monterrey, Nuevo Leon Mexico Lithonia Lighting Products Co. of Arizona Conyers, Georgia Arizona Lithonia Lighting Products Co. of Georgia Conyers, Georgia Georgia Lithonia Lighting Products Co. of Nevada Conyers, Georgia Nevada NSI Holdings, Inc. Montreal,Quebec,Canada Canada NSI Insurance (Bermuda) Ltd. Hamilton, Bermuda Bermuda NSI Leasing, Inc. Atlanta, Georgia Delaware Productos Lithonia Lighting de Mexico,S.A.de C.V. Monterrey, Nuevo Leon Mexico Lithonia Lighting Servicios, S.A. de C.V. Monterrey, Nuevo Leon Mexico Selig Company of Puerto Rico, Inc. Atlanta, Georgia Puerto Rico South Insulation Co., Inc. Atlanta, Georgia Texas I.A. Enterprises, Inc.which owns the stock of- Santa Clara, California California Keplime B.V. Bergen op Zoom, Holland Netherlands ZEP Europe B.V. which owns the stock of- Bergen op Zoom, Holland Netherlands ZEP FRANCE Nogent-le-Roi, France France Zep Industries S.A. Nogent-le-Roi, France France Resolve S.A. Nogent-le-Roi, France France Research Development Industries S.A. Nogent-le-Roi, France France Chemical Continental Industries S.A.R.L Nogent-le-Roi, France France Zep Italia S.r.l. Aprilia, Italy Italy ZEP Belgium S.A. Brussels, Belgium Belgium Research Development Industries S.A. Bern, Switzerland Switzerland Graham International B.V. Bergen op Zoom, Holland Netherlands Kem Europa B.V. Bergen op Zoom, Holland Netherlands Cerfact Europa B.V. Bergen op Zoom, Holland Netherlands Chemical Specialties B.V. Bergen op Zoom, Holland Netherlands The consolidated financial statements include the accounts of all subsidiaries.
EX-23 5 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS Page 37 Exhibit 23 Arthur Andersen LLP Atlanta, Georgia CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference of our reports dated October 20, 1995, included or incorporated by reference in National Service Industries, Inc. Form 10-K for the year ended August 31, 1995, into the Company's previously filed Registration Statement File Nos. 33-36980, 33-51339, 33-51341, 33-51343, 33-51345, 33-51351, 33-51355, 33-51357, 31-60715, 33-63041, and 33-63043. /s/ Arthur Andersen LLP ARTHUR ANDERSEN LLP November 17, 1995 EX-24 6 POWERS OF ATTORNEY Page 38 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned hereby constitutes and appoints David Levy and J. Robert Hipps, and each of them individually, his true and lawful attorneys-in-fact (with full power of substitution and resubstitution) to act for him in his name, place, and stead in his capacity as a director or officer of National Service Industries, Inc., to file a registrant's annual report on Form 10-K for the fiscal year ended August 31, 1995, and any and all amendments thereto, with any exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact, and each of them individually, full power and authority to do and perform each and every act and thing requisite and necessary to be done in the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or either of them, or their substitutes, may lawfully do or cause to be done by virtue hereof. /s/ D. Raymond Riddle D. Raymond Riddle, Chairman of the Board and Chief Executive Officer, and Director /s/ Don W. Hubble Don W. Hubble, President and Chief Operating Officer, and Director /s/ J. Robert Hipps J. Robert Hipps, Senior Vice President, Finance (Principal Financial and Accounting Officer) /s/ John A. Bostater John A. Bostater, Vice President and Controller /s/ David Levy David Levy, Executive Vice President, Administration and Counsel, and Director Dated: November 17, 1995 Page 39 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints David Levy and J. Robert Hipps, and each of them individually, his true and lawful attorneys-in-fact (with full power of substitution and resubstitution) to act for him in his name, place, and stead in his capacity as a director or officer of National Service Industries, Inc., to file a registrant's annual report on Form 10-K for the fiscal year ended August 31, 1995, and any and all amendments thereto, with any exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact, and each of them individually, full power and authority to do and perform each and every act and thing requisite and necessary to be done in the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or either of them, or their substitutes, may lawfully do or cause to be done by virtue hereof. /s/ Jesse Hill, Jr. Jesse Hill, Jr. Dated: November 17, 1995 Page 40 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints David Levy and J. Robert Hipps, and each of them individually, his true and lawful attorneys-in-fact (with full power of substitution and resubstitution) to act for him in his name, place, and stead in his capacity as a director or officer of National Service Industries, Inc., to file a registrant's annual report on Form 10-K for the fiscal year ended August 31, 1995, and any and all amendments thereto, with any exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact, and each of them individually, full power and authority to do and perform each and every act and thing requisite and necessary to be done in the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or either of them, or their substitutes, may lawfully do or cause to be done by virtue hereof. /s/ Robert M. Holder, Jr. Robert M. Holder, Jr. Dated: November 17, 1995 Page 41 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints David Levy and J. Robert Hipps, and each of them individually, his true and lawful attorneys-in-fact (with full power of substitution and resubstitution) to act for him in his name, place, and stead in his capacity as a director or officer of National Service Industries, Inc., to file a registrant's annual report on Form 10-K for the fiscal year ended August 31, 1995, and any and all amendments thereto, with any exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact, and each of them individually, full power and authority to do and perform each and every act and thing requisite and necessary to be done in the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or either of them, or their substitutes, may lawfully do or cause to be done by virtue hereof. /s/ F. Ross Johnson F. Ross Johnson Dated: November 17, 1995 Page 42 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints David Levy and J. Robert Hipps, and each of them individually, his true and lawful attorneys-in-fact (with full power of substitution and resubstitution) to act for him in his name, place, and stead in his capacity as a director or officer of National Service Industries, Inc., to file a registrant's annual report on Form 10-K for the fiscal year ended August 31, 1995, and any and all amendments thereto, with any exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact, and each of them individually, full power and authority to do and perform each and every act and thing requisite and necessary to be done in the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or either of them, or their substitutes, may lawfully do or cause to be done by virtue hereof. /s/ James C. Kennedy James C. Kennedy Dated: November 17, 1995 Page 43 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints David Levy and J. Robert Hipps, and each of them individually, his true and lawful attorneys-in-fact (with full power of substitution and resubstitution) to act for him in his name, place, and stead in his capacity as a director or officer of National Service Industries, Inc., to file a registrant's annual report on Form 10-K for the fiscal year ended August 31, 1995, and any and all amendments thereto, with any exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact, and each of them individually, full power and authority to do and perform each and every act and thing requisite and necessary to be done in the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or either of them, or their substitutes, may lawfully do or cause to be done by virtue hereof. /s/Donald R. Keough Donald R. Keough Dated: November 17, 1995 Page 44 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints David Levy and J. Robert Hipps, and each of them individually, his true and lawful attorneys-in-fact (with full power of substitution and resubstitution) to act for him in his name, place, and stead in his capacity as a director or officer of National Service Industries, Inc., to file a registrant's annual report on Form 10-K for the fiscal year ended August 31, 1995, and any and all amendments thereto, with any exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact, and each of them individually, full power and authority to do and perform each and every act and thing requisite and necessary to be done in the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or either of them, or their substitutes, may lawfully do or cause to be done by virtue hereof. /s/ Bryan D. Langton Bryan D. Langton Dated: November 17, 1995 Page 45 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints David Levy and J. Robert Hipps, and each of them individually, his true and lawful attorneys-in-fact (with full power of substitution and resubstitution) to act for him in his name, place, and stead in his capacity as a director or officer of National Service Industries, Inc., to file a registrant's annual report on Form 10-K for the fiscal year ended August 31, 1995, and any and all amendments thereto, with any exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact, and each of them individually, full power and authority to do and perform each and every act and thing requisite and necessary to be done in the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or either of them, or their substitutes, may lawfully do or cause to be done by virtue hereof. /s/ Bernard Marcus Bernard Marcus Dated: November 17, 1995 Page 46 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints David Levy and J. Robert Hipps, and each of them individually, his true and lawful attorneys-in-fact (with full power of substitution and resubstitution) to act for him in his name, place, and stead in his capacity as a director or officer of National Service Industries, Inc., to file a registrant's annual report on Form 10-K for the fiscal year ended August 31, 1995, and any and all amendments thereto, with any exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact, and each of them individually, full power and authority to do and perform each and every act and thing requisite and necessary to be done in the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or either of them, or their substitutes, may lawfully do or cause to be done by virtue hereof. /s/ John G. Medlin, Jr. John G. Medlin, Jr. Dated: November 17, 1995 Page 47 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints David Levy and J. Robert Hipps, and each of them individually, her true and lawful attorneys-in-fact (with full power of substitution and resubstitution) to act for her in her name, place, and stead in her capacity as a director or officer of National Service Industries, Inc., to file a registrant's annual report on Form 10-K for the fiscal year ended August 31, 1995, and any and all amendments thereto, with any exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact, and each of them individually, full power and authority to do and perform each and every act and thing requisite and necessary to be done in the premises, as fully to all intents and purposes as she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or either of them, or their substitutes, may lawfully do or cause to be done by virtue hereof. /S/ Betty L. Siegel Betty L. Siegel Dated: November 17, 1995 Page 48 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints David Levy and J. Robert Hipps, and each of them individually, his true and lawful attorneys-in-fact (with full power of substitution and resubstitution) to act for him in his name, place, and stead in his capacity as a director or officer of National Service Industries, Inc., to file a registrant's annual report on Form 10-K for the fiscal year ended August 31, 1995, and any and all amendments thereto, with any exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact, and each of them individually, full power and authority to do and perform each and every act and thing requisite and necessary to be done in the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or either of them, or their substitutes, may lawfully do or cause to be done by virtue hereof. /s/ Erwin Zaban Erwin Zaban Dated: November 17, 1995 EX-27 7 FDS --
5 Page 49 Exhibit 27(a) Financial Data Schedule Year Ended August 31, 1995 Pursuant to Section 601(c) of Regulation S-K This schedule contains restated summary financial information extracted from National Service Industries, Inc. consolidated balance sheet as of August 31, 1995 and the consolidated statement of income for the year ended August 31, 1995, and is qualified in its entirety by reference to such financial statements. 12-MOS Aug-31-1995 Sep-01-1994 Aug-31-1995 79,402 3,598 272,523 6,467 185,789 640,410 726,907 377,003 1,131,346 202,570 26,776 57,919 0 0 686,485 1,131,346 1,424,180 1,970,627 908,869 1,208,556 607,754 0 3,820 150,497 56,400 94,097 0 0 0 94,097 1.93 1.93
EX-27 8 FDS --
5 Page 50 Exhibit 27(b) Financial Data Schedule Year Ended August 31, 1994 Pursuant to Section 601(c) of Regulation S-K This schedule contains restated summary financial information extracted from National Service Industries, Inc. consolidated balance sheet as of August 31, 1994 and the consolidated statement of income for the year ended August 31, 1994, and is qualified in its entirety by reference to such financial statements. 12-MOS Aug-31-1994 Sep-01-1993 Aug-31-1994 58,619 2,579 263,436 7,385 178,590 602,787 726,574 378,262 1,101,261 189,673 26,863 57,919 0 0 669,466 1,101,261 1,337,410 1,881,864 875,055 1,161,574 584,424 0 3,668 132,198 49,500 82,698 0 0 0 82,698 1.67 1.67
EX-27 9 FDS --
5 Page 51 Exhibit 27(c) Financial Data Schedule Quarter Ended November 30, 1994 Pursuant to Section 601(c) of Regulation S-K This schedule contains restated 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 Sep-01-1994 Nov-30-1994 82,430 2,240 254,679 8,705 188,769 617,483 733,477 386,270 1,109,420 190,990 26,818 57,919 0 0 677,299 1,109,420 334,882 480,984 219,187 295,033 151,386 0 830 33,735 12,621 21,114 0 0 0 21,114 0.43 0.43
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