-----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, T0go/gatzsqCBPG+X9dfha6wLYZpi4nwzWxhzmb0CSaKCgKRClpTalbWqY1PRVXm Aba6TB1IXRqX6AJhOQQ/sw== 0000070538-98-000017.txt : 19980701 0000070538-98-000017.hdr.sgml : 19980701 ACCESSION NUMBER: 0000070538-98-000017 CONFORMED SUBMISSION TYPE: 11-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980630 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: 11-K SEC ACT: SEC FILE NUMBER: 001-03208 FILM NUMBER: 98658418 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 11-K 1 NSI RETIREMENT AND 401(K) PLAN Page 1 of 12 Exhibit Index on Page 2 FORM 11-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Annual Report Pursuant to Section 15(d) of the Securities Exchange Act of 1934 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the fiscal year ended: December 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to Commission file number 1- 3208 A. Full title of the plan and the address of the plan, if different from that of the issuer named below: National Service Industries Retirement and 401(k) Plan B. Name of issuer of the securities held pursuant to the plan and the address of the principal executive office: National Service Industries, Inc. 1420 Peachtree Street, NE Atlanta, Georgia 30309 Page 2 REQUIRED INFORMATION The following documents are filed as a part of this report: 1. Financial Statements Plan financial statements prepared in accordance with the financial reporting requirements of ERISA include the following: Report of Independent Public Accountants Statements of Net Assets Available for Benefits, with Fund Information, as of December 31, 1997 and 1996 Statement of Changes in Net Assets Available for Benefits for the Year Ended December 31, 1997 Notes to Financial Statements 2. Exhibits Sequentially Numbered The following exhibit is filed with this report: Page 23 Consent of Arthur Andersen LLP 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. National Service Industires Retirement and 401(k) Plan Date: June 30, 1998 By: National Service Industries, Inc. Plan Administrator By: /s/ James S. Balloun Name: James S. Balloun Title: Chairman and Chief Executive Officer Page 3 National Service Industries Retirement and 401(k) Plan Financial Statements as of December 31, 1997 and 1996 Together With Auditors' Report REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Plan Administrator of National Service Industries Retirement and 401(k) Plan: We have audited the accompanying statements of net assets available for benefits of NATIONAL SERVICE INDUSTRIES RETIREMENT AND 401(k) PLAN as of December 31, 1997 and 1996, and the related statement of changes in net assets available for benefits, with fund information, for the year ended December 31, 1997. These financial statements are the responsibility of the Plan'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 net assets available for benefits of the Plan as of December 31, 1997 and 1996, and the changes in net assets available for benefits for the year ended December 31, 1997, in conformity with generally accepted accounting principles. Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The fund information in the statement of changes in net assets available for benefits is presented for the purpose of additional analysis rather than to present the changes in net assets available for benefits of each fund. The fund information has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. Atlanta, Georgia May 15, 1998 Page 4 NATIONAL SERVICE INDUSTRIES RETIREMENT AND 401(k) PLAN STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS DECEMBER 31, 1997 AND 1996 1997 1996 INVESTMENT IN NSI DC TRUST, at fair value (Note 2): Balanced Fund .........................................$ 209,107 $ 151,080 Diversified Equity Fund ............................... 442,215 373,961 Stable Value Fund ..................................... 74,174 51,777 NSI Stock Fund--participant-directed .................. 169,757 74,366 Loan Fund ............................................. 45,319 18,230 International Fund .................................... 36,299 25,350 Index Fund ............................................ 45,951 0 Small Company Fund .................................... 24,290 0 NSI Stock Fund--nonparticipant-directed ............... 225,092 142,568 Total investment ............................ 1,272,204 837,332 CONTRIBUTIONS RECEIVABLE: Employer .............................................. 3,436 2,076 Participant ........................................... 0 11,997 Total contributions receivable .............. 3,436 14,073 REFUNDS PAYABLE TO PARTICIPANTS ........................... 0 (8,250) NET ASSETS AVAILABLE FOR BENEFITS .........................$1,275,640 $ 843,155 The accompanying notes are an integral part of these statements. Page 5 NATIONAL SERVICE INDUSTRIES RETIREMENT AND 401(k) PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION, FOR THE YEAR ENDED DECEMBER 31, 1997 Participant-Directed Nonparticipant- Diversified Stable NSI Small Directed Balance Equity Value Stock Loan International Index Company NSI Stock Other Fund Fund Fund Fund Fund Fund Fund Fund Fund Total CONTRIBUTIONS: Employer ............ $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 42,267 $ 1,360 $ 43,627 Participant ......... 46,824 108,256 40,565 41,380 0 10,276 9,983 4,457 0 (3,747) 257,994 Total contributions 46,824 108,256 40,565 41,380 0 10,276 9,983 4,457 42,267 (2,387) 301,621 NET GAIN (LOSS) FROM INVESTMENT IN NSI DC TRUST ...... 40,655 116,479 3,666 33,161 0 (1,042) 2,807 22 56,388 0 252,136 BENEFITS PAID TO PARTICIPANTS ... (4,332) (70,172) (19,680) (4,458) (1,000) (5,410) (44) (45) (16,131) 0 (121,272) INTRAPLAN TRANSFERS .... (25,120) (86,309) (2,154) 25,308 28,089 7,125 33,205 19,856 0 0 0 NET INCREASE (DECREASE) 58,027 68,254 22,397 95,391 27,089 10,949 45,951 24,290 82,524 (2,387) 432,485 NET ASSETS AVAILABLE FOR BENEFITS, December 31, 1996 . 151,080 373,961 51,777 74,366 18,230 25,350 0 0 142,568 5,823 843,155 NET ASSETS AVAILABLE FOR BENEFITS, December 31, 1997 . $209,107 $442,215 $ 74,174 $169,757 $45,319 $ 36,299 $45,951 $24,290 $225,092 $ 3,436 $1,275,640
The accompanying notes are an integral part of this statement. Page 6 NATIONAL SERVICE INDUSTRIES RETIREMENT AND 401(k) PLAN NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1996 1. PLAN DESCRIPTION The following is a brief description of the National Service Industries Retirement and 401(k) Plan (the "Plan") of National Service Industries, Inc. of Georgia and NSI Enterprises, Inc. (together, the "Employer"). Both National Service Industries, Inc. of Georgia and NSI Enterprises, Inc. are wholly owned subsidiaries of National Service Industries, Inc. ("NSI"). This description is provided for informational purposes only. Participants should refer to the plan agreement for more complete information. General The Plan is a defined contribution plan established under the provisions of Section 401(a) of the Internal Revenue Code ("IRC"). The Plan covers all nonunion, full-time, salaried employees of the Employer who have attained the age of 20.5 with at least six months of service. Effective August 31, 1996, the Plan covers only full-time salaried employees who are classified by the Employer as corporate office personnel or treasury function personnel. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended. Contributions Participants may elect to contribute between 1% and 10% of before-tax compensation, as defined in the Plan, subject to certain limitations under the IRC. Matching contributions are made by the Employer in an amount equal to 50% of the participant's contribution up to the lesser of 4% of compensation or $1,000 in a plan year. Effective January 1, 1998, matching contributions are made by the Employer in an amount equal to 50% of the participant's contribution up to 6% of compensation. Additional discretionary amounts, as determined by the board of directors of NSI, may be contributed by the Employer and are allocated to participants at the discretion of the Employer. No discretionary contributions were made for the year ended December 31, 1997. Vesting Participants are always fully vested in their individual contributions. Vesting of employer contributions occurs on an increasing scale, ranging from 10% vesting after two years of service, as defined, to 100% vesting after seven years of service. Effective January 1, 1998, vesting occurs at 20% for each year of service, with 100% vesting after five years of service. Nonvested employer contributions are forfeited upon a participant's withdrawal from the Plan and are used to reduce future employer contributions. Page 7 Administration All administrative expenses of the Plan were paid by the Employer during the year ended December 31, 1997. Participants' Accounts Individual accounts are maintained for each of the Plan's participants to reflect that particular participant's contributions and related employer contributions as well as the participant's share of the Plan's income and any related investment management fees and expenses. The Plan's investment fund balances are expressed in units. At December 31, 1997 and 1996, 119,436 and 79,302 units, respectively, were assigned to plan participants. Unit values for each investment fund were as follows at December 31, 1997 and 1996: 1997 1996 Balanced Fund............................... $33.18 $26.40 Diversified Equity Fund..................... 14.04 12.05 Stable Value Fund........................... 12.07 11.31 NSI Stock Fund.............................. 19.61 14.52 International Fund.......................... 4.82 5.01 Index Fund.................................. 89.56 N/A Small Company Fund.......................... 11.21 N/A Investment in Master Trust Under a trust agreement dated September 1, 1993, as amended, Wachovia Bank of Georgia, N.A. was appointed trustee of the NSI Defined Contribution Plan's Master Trust (the "NSI DC Trust"). Effective January 1, 1998, INVESCO Trust Company has been appointed trustee of the NSI DC Trust. The Plan's assets are commingled in the NSI DC Trust together with the assets of certain defined contribution plans of other NSI divisions. The investments of the NSI DC Trust are subject to certain administrative guidelines and limitations as to type and amount of securities held. Certain fund assets are allocated to selected independent investment managers to invest under these general guidelines. Investment Options The separate investment options made available under the Plan may be changed, eliminated, or modified from time to time by the investment committee of the NSI DC Trust. Participants make their investment elections in 5% increments, with changes allowed on a daily basis. Participants may not direct the investment of employer matching or discretionary contributions. These are invested in the NSI Stock Fund discussed below. Page 8 The separate investment options offered by the Plan are as follows: o Diversified Equity Fund. This fund is a diversified stock fund designed to invest in a broad range of common stocks providing capital growth. o Stable Value Fund. This is a fixed income fund designed to provide a steady level of current income while focusing on preservation of principal. o Balanced Fund. This fund is invested in a changing mix of high-quality stocks and bonds. The fund is designed to provide capital growth and current income while limiting the risk of principal loss. o NSI Stock Fund. This fund is invested in NSI common stock, although it may hold other short-term investments from time to time. A participant may not direct more than 50% of his/her account balance to be invested in this fund. o International Fund. This fund is invested in the stock of non-U.S. companies and is designed to provide long-term growth. o Index Fund. This fund (offered beginning June 1997) is invested in all of the stocks in the Standard & Poor's 500 Composite Stock Price Index. o Small Company Fund. This fund (offered beginning June 1997) is invested in small or emerging companies that show potential for increased size and profitability. The fund seeks little or no current income. Loans to Participants The Plan permits loans to participants up to the lesser of 50% of the participant's vested account balance or $50,000. A participant has up to five years to repay the principal and interest, unless the loan is for the purchase of a primary residence, in which case the repayment period will be established at the time the loan is approved. Loan processing fees are charged directly to the participant's account. Interest rates on loans to participants are based on market rates, as determined by the plan administrator. The interest rate as of December 31, 1997 was 9.5%. Loan issuances and repayments are included in intraplan transfers in the accompanying statement of changes in net assets available for benefits. Interest on loans is included in the net gain from investment in the NSI DC Trust and is allocated to each investment fund based on participants' investment elections. Benefits A participant is entitled to receive the distribution of his/her vested account balance upon death, disability, or retirement (age 65). These benefits are payable in a lump-sum amount or can be paid in installments at the participant's election if his/her vested balance is greater than $3,500 and he/she is age 55 or older. A participant who terminates employment with the Employer for reasons other than these is entitled to receive his/her contributions in a lump sum as soon as administratively feasible. Benefits are payable in cash, except that any portion of a participant's account balance which is invested in the NSI Stock Fund may be distributed in the form of shares of NSI common stock, with fractional shares paid in cash. Hardship withdrawals may be made upon proven financial hardship of a participant, as defined in the plan agreement and as approved by the Plan's retirement committee. Plan Termination Although the Employer intends for the Plan to be permanent, the Plan provides that the Employer has the right to discontinue contributions or to terminate the Plan at any time. In the event of plan termination, each participant shall be vested in the balance of his/her account and his/her proportionate share of any future adjustments. Page 9 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting The accounts of the Plan are maintained by the trustee on the cash basis of accounting. The accompanying financial statements have been prepared using the accrual method of accounting by application of memorandum entries. The preparation of financial statements in conformity with generally accepted accounting principles requires the Plan's management to use estimates and assumptions that affect the accompanying financial statements and disclosures. Actual results could differ from these estimates. Investment Valuation Investments of the NSI DC Trust, except for the guaranteed investment contracts ("GICs"), are stated at fair value, as determined by the trustee from quoted market prices. Securities traded on a national exchange are valued at the last reported sales price on the last business day of the plan year; investments traded in the over-the-counter market and listed securities for which no sale was reported on the last day of the plan year are valued at the last reported bid price. GICs included in the NSI DC Trust are fully benefit-responsive and are therefore carried at contract value (cost plus accrued interest) in the accompanying financial statements in accordance with Statement of Position 94-4. At December 31, 1997 and 1996, contract value approximates fair value. At December 31, 1997, the weighted average crediting interest rate was 7%. For the year ended December 31, 1997, the annual yield on the GICs held by the NSI DC Trust was 6.9%. For certain of the GICs held by the NSI DC Trust, crediting interest rates may be changed if certain events occur, such as early retirements, plant closings, etc., but in no case are adjusted to a rate less than 0%. GICs are subject to credit risk based on the ability of the insurance company to meet interest or principal payments, or both, as they become due. Certain GICs included in the NSI DC Trust are synthetic; that is, the NSI DC Trust owns certain fixed income securities, and the contract issuer provides a "wrapper" that guarantees a fixed rate of return and provides benefit responsiveness. At December 31, 1997, the fair value of the underlying assets of the synthetic GICs (determined from quoted market prices) and the value of the related wrapper contracts were $42,945,334 and $(825,875), respectively. Page 10 3. NSI DC TRUST Investment Income Investment income of the NSI DC Trust for the year ended December 31, 1997 is summarized as follows: Dividends on common stock......................... $ 454,559 Interest income................................... 4,303,571 Net appreciation in fair value of NSI common stock 4,046,711 Net income from common/collective trust........... 18,537,212 Net income from mutual funds...................... 14,708,000 Net loss from pooled separate account............. (104,200) Total investment income............. $41,945,853 The investment income of the NSI DC Trust for the year ended December 31, 1997 is allocated among participating plans as follows: National Service Industries Retirement and 401(k) Plan..................... $ 252,136 All other NSI plans................................ 41,693,717 Total................................ $41,945,853 Net Assets The net assets of the NSI DC Trust are as follows at December 31, 1997 and 1996: 1997 1996 Mutual funds...................... $ 79,312,170 $ 63,411,122 Common/collective trust........... 79,112,333 57,558,795 Guaranteed investment contracts... 52,443,357 55,187,898 NSI common stock.................. 18,045,789 11,279,289 Loans receivable from participants 7,564,684 6,828,607 Money market fund................. 1,740,602 3,704,985 Pooled separate account........... 2,385,857 2,723,094 240,604,792 200,693,790 Cash.............................. 9,476 13,342 240,614,268 200,707,132 Accrued investment income......... 112,870 100,534 Adjustments for pending trades.... (199,191) (223,542) Other............................. (47,759) (54,239) Net assets........................ $240,480,188 $200,529,885 Page 11 The allocation of the net assets of the NSI DC Trust to participating plans is based on participant units and is as follows as of December 31, 1997 and 1996: 1997 1996 Amount Percent Amount Percent National Service Industries Retirement and 401(k) Plan $ 1,272,204 0.53% $ 837,332 0.42% All other plans 239,207,984 99.47 199,692,553 99.58 Total $240,480,188 100.00% $200,529,885 100.00% Investment in NSI Common Stock As of December 31, 1997 and 1996, approximately 7.5% and 5.6%, respectively, of the NSI DC Trust's net assets were invested in the common stock of NSI, a party in interest to the Plan. 4. TAX STATUS The Plan has received a determination letter from the Internal Revenue Service dated October 25, 1995 stating that the Plan was designed in accordance with plan design requirements as of that date. The Plan has been amended since receiving the determination letter. However, the plan administrator believes that the Plan is currently designed and is being operated in compliance with the applicable requirements of the IRC. Therefore, the plan administrator believes that the Plan was qualified and that the related trust was tax-exempt as of December 31, 1997 and 1996. EX-23 2 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS Page 12 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report included in this Form 11-K into National Service Industries, Inc.'s previously filed Registration Statement covering the National Service Industries Retirement and 401(k) Plan. /s/ Arthur Andersen LLP Arthur Andersen LLP Atlanta, Georgia June 25, 1998 -----END PRIVACY-ENHANCED MESSAGE-----