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Exhibit Index on Page 2
FORM 11-K
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 [FEE REQUIRED].
For the fiscal year ended: December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED].
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:
AECO Employees' 401(k) Retirement and Savings 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
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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
Statement of Net Assets Available for Benefits as of December
31, 1995
Statement of Changes in Net Assets Available for Benefits, with Fund
Information, for the Six Months Ended December 31, 1995
Notes to Financial Statements
2. Exhibits
Sequentially
Numbered
The following exhibit is filed with this report: Page
23 Consent of Arthur Andersen LLP 11
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.
AECO Employees' 401(k) Retirement and
Savings Plan
Date: June 28, 1996 By: National Service Industries, Inc.
Plan Administrator
By: /s/ James S. Balloun
Name: James S. Balloun
Title: Chairman and Chief Executive Officer
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Plan Administrator of
AECO Employees' 401(k) Retirement
and Savings Plan:
We have audited the accompanying statement of net assets available for benefits
of the AECO EMPLOYEES' 401(k) RETIREMENT AND SAVINGS PLAN as of December 31,
1995 and the related statement of changes in net assets available for benefits,
with fund information, for the six months then ended. 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 audit.
We conducted our audit 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 audit provides 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, 1995 and the changes in net assets available for benefits for the
six months then ended in conformity with generally accepted accounting
principles.
Our audit was 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 audit 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 31, 1996
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AECO EMPLOYEES
401(k) RETIREMENT AND SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1995
CONTRIBUTIONS RECEIVABLE - Participant ........................... $ 20,901
INVESTMENT IN NSI DC TRUST, at fair value (Note 2):
Diversified Equity Fund ...................................... 248,246
NSI Stock Fund ............................................... 153,567
Balanced Fund ................................................ 160,740
Stable Value Fund ............................................ 64,679
International Fund ........................................... 50,451
Loan Fund .................................................... 814
Total investments ............................ 678,497
REFUNDS PAYABLE TO PARTICIPANTS................................... (42,753)
NET ASSETS AVAILABLE FOR BENEFITS ................................ $656,645
The accompanying notes are an integral part of this statement.
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AECO EMPLOYEES'
401(k) RETIREMENT AND SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS,
WITH FUND INFORMATION,
FOR THE SIX MONTHS ENDED DECEMBER 31, 1995
<TABLE>
Nonparticipant
-----------------------Participant-Directed---------------------- Directed
Stable Diversified NSI NSI
Balanced Value Equity Stock Loan Internat'l Stock
Fund Fund Fund Fund Fund Fund Fund Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONTRIBUTIONS:
Employer .............................. $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 85,500 $ 85,500
Participant ........................... 147,695 63,236 213,244 48,978 0 47,048 0 520,201
Total contributions ............. 147,695 63,236 213,244 48,978 0 47,048 85,500 605,701
NET GAIN FROM INVESTMENT IN
NSI DC TRUST ............................. 8,374 956 13,658 4,553 17 851 7,734 36,143
BENEFITS PAID TO PARTICIPANTS ............ (875) (2,068) (2,515) (114) 0 (375) (769) (6,716)
INTRAPLAN TRANSFERS ...................... 148 (307) 445 40 (203) (123) 0 0
OTHER .................................... 0 1,728 7,769 6,810 1,000 0 4,210 21,517
NET INCREASE ............................. 155,342 63,545 232,601 60,267 814 47,401 96,675 656,645
NET ASSETS AVAILABLE FOR BENEFITS,
July 1, 1995 ............................. 0 0 0 0 0 0 0 0
NET ASSETS AVAILABLE FOR BENEFITS,
December 31, 1995 ........................ $ 155,342 $ 63,545 $ 232,601 $ 60,267 $ 814 $ 47,401 $ 96,675 $ 656,645
</TABLE>
The accompanying notes are an integral part of this statement.
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AECO Employees'
401(k) Retirement and Savings Plan
Financial Statements as of December 31, 1995
Together With
Auditors' Report
1. PLAN DESCRIPTION
The following brief description of the AECO Employees' 401(k) Retirement
and Savings Plan (the "Plan") of the AECO Products Division (the "Company")
of National Service Industries, Inc. ("NSI") 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 effective July 1, 1995
under the provisions of Section 401(a) of the Internal Revenue Code ("IRC")
which covers all nonunion employees of the Company who have attained the
age of 21 and either were hired prior to April 1, 1995 or have completed
one year of service, as defined. 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. Contributions are made by the Company in an amount equal to 25% of
the participant's contribution up to the lesser of 4% of the participant's
annual compensation or $500. Additional discretionary amounts, as
determined by the board of directors of NSI, may be contributed by the
Company.
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. Nonvested employer contributions are
forfeited upon withdrawal or termination, as defined, from the Plan and are
used to reduce future employer contributions.
Administration
Under a trust agreement dated September 1, 1993, as amended, Wachovia Bank
of Georgia, N.A. was appointed trustee of the NSI Defined Contribution
Plans Master Trust (the "NSI DC Trust").
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The responsibility for administration of the Plan rests with the Plan's
retirement committee, which is appointed by the board of directors of NSI.
All administrative expenses of the Plan were paid by the Company during the
six months ended 1995.
Participants' Accounts
Individual accounts are maintained for each of the Plan's participants to
reflect the particular participant's contributions and related employer
contributions, as well as the participant's share of the Plan's income and
any related administrative expenses.
Effective with the change in 1995 from monthly to daily valuation of
participant accounts, the Plan assigns units to its participants. At
December 31, 1995, 60,886 units were assigned to plan participants. Unit
values for each investment fund were as follows at December 31, 1995:
Stable Value Fund $10.59
Diversified Equity Fund 10.57
Balanced Fund 22.95
NSI Stock Fund 12.39
International Fund 4.59
Investment in 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 company matching or discretionary
contributions. These are invested in the NSI Stock Fund discussed below.
The separate investment options offered by the Plan are as follows:
* Diversified Equity Fund. This fund is a diversified stock fund
designed to invest in a broad range of common stocks providing
capital growth.
* Stable Value Fund. This is a fixed income fund designed to provide a
steady level of current income while focusing on preservation of
principal.
* 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.
* 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.
* International Fund. This fund is invested in the stock of non-U.S.
companies and is designed to provide long-term growth.
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Loans to Participants
The Plan permits loans to participants up to the lower of 50% of the
participant's vested account balance or $50,000. Participants have up to
five years to pay back 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.
Benefits
A participant is entitled to receive the distribution of his/her vested
account balance on death, disability, or retirement (age 65). These
benefits are payable in a lump-sum amount or in installment payments at the
election of the participant if he/she is age 55 or older and his/her
account balance is greater than $3,500. A participant who terminated
employment with the Company for other than these reasons 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 is generally
distributed in the form of shares of NSI common stock, with fractional
shares paid in cash. If the equivalent number of shares to be distributed
to a participant is less than 100, then the participant may elect to
receive cash instead of shares as his/her distribution.
Hardship withdrawals may be made upon proven financial hardship of a
participant as defined in the plan agreement and approved by the Plan's
retirement committee.
Plan Termination
Although the Company intends for the Plan to be permanent, the Plan
provides that the Company 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.
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 the 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.
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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 master 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, 1995, contract value approximates fair
value. At December 31, 1995, the weighted average crediting interest rate
was 6.77%. For the year ended December 31, 1995, the annual yield on the
GICS held by the NSI DC Trust was 6.9%. For certain contracts held by the
trust, crediting interest rates may be changed in the event of certain
events 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.
3. NSI DC TRUST
Investment Income
Investment income of the NSI DC Trust for the year ended December 31, 1995
is summarized as follows:
Dividends on common stock ................................... $ 245,288
Interest income ............................................. 4,597,435
Net appreciation in fair value of common stock .............. 1,408,275
Net income from mutual fund ................................. 11,982,057
Net income from common/collective trust ..................... 10,492,727
Net income from pooled separate account ..................... 21,986
Investment expenses ......................................... (274,795)
Net investment income ....................................... $ 28,472,973
The investment income of the NSI DC Trust for the year ended December 31,
1995 is allocated to participating plans is as follows:
AECO Employees' 401(k) Retirement
and Savings Plan .......................................... $ 36,143
All other NSI plans ....................................... 28,436,830
Total ....................................... $28,472,973
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Net Assets
Net assets of the NSI DC Trust are as follows at December 31, 1995:
Mutual fund ............................................. $ 47,636,487
Common/collective trust ................................. 48,146,903
Guaranteed investment contracts ......................... 55,129,605
Loans receivable from participants ...................... 6,104,302
NSI common stock ........................................ 7,637,554
Money market fund ....................................... 1,377,443
Pooled separate account ................................. 871,467
166,903,761
Cash .................................................... 127,031
167,030,792
Accrued investment income ............................... 76,779
Adjustments for pending trades .......................... (211,964)
Other ................................................... 49,961
Net assets ................................ $ 166,945,568
The allocation of the net assets of the NSI DC Trust to participating plans
is based on participant balances and is as follows as of December 31, 1995:
AECO Employees' 401(k) Retirement
and Savings Plan ......................................... $ 678,497
All other plans .......................................... 166,267,071
Total ...................................... $166,945,568
Investment in NSI Common Stock
As of December 31, 1995, approximately 4.6% 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 not received a determination letter from the Internal Revenue
Service. 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, 1995.
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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 AECO Employees' 401(k)
Retirement and Savings Plan.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Atlanta, Georgia
June 21, 1996
