Page 1 of 100
Index to Exhibits on Page 15
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, 1996 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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Based upon the closing price as quoted on the New York Stock Exchange October
31, 1996 the aggregate market of the voting stock held by nonaffiliates of the
registrant was $1,576,711,893.00.
The number of shares outstanding of the registrant's common stock, $1.00 par
value, was 45,701,794 shares as of October 31, 1996.
DOCUMENTS INCORPORATED BY REFERENCE
Location in Form 10-K Incorporated Document
Part I, Item 1 1996 Annual Report
Part II, Items 5, 6, 7, and 8 1996 Annual Report
Part III, Items 10, 11, 12, and 13 1996 Proxy Statement
Part IV, Item 14 1996 Annual Report
<PAGE>
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 ............ 7
Part IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K ....................................... 8-11
Signatures ............................................................. 12
Financial Statement Schedules .......................................... 13-14
Index to Exhibits ...................................................... 15
<PAGE>
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:
<TABLE>
Divisions Principal Products or Services Marketing Area
<S> <C> <C>
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 Europe sanitation, and water Puerto Rico, and
Selig Chemical Industries treatment, including soaps, western Europe.
National Chemical detergents, waxes, and
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
Precision Foam Fabricators industrial and institutional southeastern United
insulation products, accessories States.
and contracting services.
</TABLE>
<PAGE>
Page 4
<TABLE>
Divisions Principal Products or Services Marketing Area
<S> <C> <C>
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.
</TABLE>
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 segment is the largest manufacturer of lighting fixtures in
the world and its Textile Rental segment 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, 1996, 1995, and 1994. No one commodity or supplier provided a
significant portion of the company's material requirements.
Total Employment
The registrant employs approximately 20,600 people.
Financial Information about Industry Segments
The financial information required by this item is included on page 29 of the
company's annual report for the year ended August 31, 1996, under the caption
"Business Segment Information" and is incorporated herein by reference.
<PAGE>
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 7 4 Manufacturing plants
1 2 Distribution centers
- 17 Field warehouses
Textile Rental 63 16 Linen plants
17 47 Linen service centers
- 1 Distribution centers
Chemical 9 4 Manufacturing plants
22 45 Distribution centers
- 2 Sales offices
Envelope 6 4 Manufacturing plants
- 2 Warehouses
- 1 Sales office
Insulation Service 1 - Fabrication plants
22 11 Warehouses
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, 1996.
<PAGE>
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, 1996, under the
captions "Listing," "Shareholders of Record," and "Common Share Prices and
Dividends per Share" and is incorporated here 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, 1996, 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 31 through 33 of the
company's annual report for the year ended August 31, 1996, under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and is incorporated herein by reference.
From time to time, the company may publish forward-looking statements relating
to such matters as anticipated financial performance, business prospects,
technological developments, new products, research and development activities
and similar matters. The Private Securities Litigation Reform Act of 1995
provides a safe harbor for forward-looking statements. In order to comply with
the terms of the safe harbor, the company notes that a variety of factors could
cause the company's actual results and experience to differ materially from the
anticipated results or other expectations expressed in the company's
forward-looking statements. The risks and uncertainties that may affect the
operations, performance, development and results of the company's business
include without limitation the following: (a) the uncertainty of general
business and economic conditions, particularly the potential for a slow down in
nonresidential construction awards; (b) the ability to achieve strategic
initiatives, including but not limited to the ability to achieve sales growth
across the business segments through a combination of increased pricing, sales
force, and new products and improved customer service.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is included on pages 18 through 30 of the
company's annual report for the year ended August 31, 1996, 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 Public
Accountants" and is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
<PAGE>
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 and 3 under the caption "Information Concerning Nominees" of the
company's proxy statement for the annual meeting of stockholders to be held
January 8, 1997, 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.
<TABLE>
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, 1996 and term in office
<S> <C>
James S. Balloun, age 58 Mr. Balloun was elected Chairman and Chief Executive
Chairman, President, and Officer effective February, 1996 and assumed the role
Chief Executive Officer of President in October, 1996. Previously, he served
and Director McKinsey & Company as a Director.
David Levy, age 59 Mr. Levy was elected Executive Vice President,
Executive Vice President, Administration in October, 1992. He served as Senior
Administration and Counsel Vice President, Secretary and Counsel from 1982 through
and Director September, 1992.
Brock A. Hattox, age 48 Mr. Hattox was elected Executive Vice President and
Executive Vice President and Chief Financial Officer effective September, 1996.
Chief Financial Officer Previously, he served McDermott International, Inc., as
Chief Financial Officer since 1991, and President of the
Engineering and Construction Group since 1995.
Stewart A. Searle III, age 45 Mr. Searle was elected Senior Vice President, Planning
Senior Vice President, and Development effective June, 1996. Previously, he served
Planning and Development four years with Equifax as Senior Vice President of
Development. Prior to that, he served as a Principal at
McKinsey & Company.
</TABLE>
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is included on pages 4 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,"
"Employment Contracts, Severance Arrangements, and Other Agreements," and
"Pension and Supplemental Retirement Benefits" of the company's proxy statement
for the annual meeting of stockholders to be held January 8, 1997, 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 5 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 8, 1997,
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 4 under the caption
"Certain Transactions" of the company's proxy statement for the annual meeting
of stockholders to be held January 8, 1997, filed with the Commission pursuant
to Regulation 14A, and is incorporated herein by reference.
<PAGE>
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 1996 Annual Report contains the consolidated balance
sheets as of August 31, 1996 and 1995, the related consolidated
statements of income, stockholders' equity, and cash flows for each of
the three years in the period ended August 31, 1996, and the related
report of Arthur Andersen LLP. The financial statements, incorporated
herein by reference, include the following:
Consolidated Balance Sheets - August 31, 1996 and 1995
Consolidated Statements of Income for the years ended August 31, 1996,
1995, and 1994
Consolidated Statements of Stockholders' Equity for the years ended
August 31, 1996, 1995, and 1994
Consolidated Statements of Cash Flows for the years ended August 31,
1996, 1995, and 1994
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:
(1) Directors' Deferred Compensation Plan
(2) Executives' Deferred Compensation Plan and
Amendments
(3) Restated and Amended Supplemental Retirement
Plan for Executives of National Service
Industries, Inc., Amendments and Appendices
(4) The National Service Industries, Inc. Senior
Management Benefit Plan and Amendments
<PAGE>
Page 9
ITEM 14. (Continued)
(3) Exhibits filed with this report (Continued)
Reference No. from
Reg. 229.601
Item 601 Description of Exhibit
(5) Severance Protection Agreement between National
Service Industries, Inc. and David Levy and
Amendment
(6) Severance Protection Agreements between
National Service Industries, Inc. and
(a) James S. Balloun
(b) Stewart A. Searle III
and Amendment
(7) Bonus Letter Agreements between National
Service Industries, Inc. and
(a) James S. Balloun
(b) David Levy
(c) Stewart A. Searle III
and Supplemental Letter Agreement
(8) Long-Term Incentive Program and Amendment
(9) Incentive Stock Option Agreements between
National Service Industries, Inc. and
(a) D. Raymond Riddle
(b) Don W. Hubble
(c) David Levy
(d) J. Robert Hipps
(e) Stewart A. Searle III
(10)Nonqualified Stock Option Agreement for
Corporate Officers between National Service
Industries, Inc. and
(a) James S. Balloun
(b) D. Raymond Riddle
(c) Don W. Hubble
(d) David Levy
(e) J. Robert Hipps
(11)Nonqualified Stock Option Agreement for
Corporate Officers Effective Beginning
September 21, 1994 between National Service
Industries, Inc. and
(a) D. Raymond Riddle
(b) Don W. Hubble
(c) David Levy
(12)Benefits Protection Trust Agreement and
Amendments
(13)Executive Benefits Trust Agreement and
Amendment
(14)Consulting Agreement between National Service
Industries, Inc. and Erwin Zaban and Amendment
(15)1992 Nonemployee Directors' Stock Option Plan
Effective September 16, 1992
(16)Nonemployee Directors' Stock Option Agreement
between National Service Industries, Inc. and
(a) John L. Clendenin
(b) Robert M. Holder, Jr.
(c) F. Ross Johnson
(d) James C. Kennedy
(e) Donald R. Keough
(f) Bryan D. Langton
(g) Bernard Marcus
(h) John G. Medlin, Jr.
(i) Dr. Betty L. Siegel
(j) Erwin Zaban
<PAGE>
Page 10
ITEM 14. (Continued)
(3) Exhibits filed with this report (Continued)
Reference No. from
Reg. 229.601
Item 601 Description of Exhibit
(17)National Service Industries, Inc. Executive
Savings Plan Effective September 1, 1994 and
Amendment
(18)National Service Industries, Inc. Management
Compensation and Incentive Plan Effective
September 1, 1994
(19)Split-Dollar Agreement among National Service
Industries, Inc., D. Raymond Riddle, and
Wachovia Bank of Georgia N.A. Dated January 4,
1993 and Amendment
(20)Letter Agreement between National Service
Industries, Inc. and D. Raymond Riddle Dated
March 28, 1995
(21)Consulting Agreement between National Service
Industries, Inc. and D. Raymond Riddle
(22)Letter Agreement between National Service
Industries, Inc. and D. Raymond Riddle, Dated
April 10, 1995
(23)Employment Letter Agreement between National
Service Industries, Inc. and James S. Balloun,
Dated February 1, 1996
(24)Severance Agreement between National Service
Industries, Inc. and J. Robert Hipps, Dated May
14, 1996
(25)Letter Agreement between National Service
Industries, Inc. and J. Robert Hipps, Dated May
24, 1996
(26)National Service Industries, Inc. Nonemployee
Director Deferred Stock Unit Plan, Effective
June 1, 1996
(27)Severance Agreement between National Service
Industries, Inc. and Don W. Hubble, Dated July
22, 1996
(28)Employment Letter Agreement between National
Service Industries, Inc. and Brock A. Hattox,
Dated August 26, 1996
11 Computations of Net Income per Share of Common
Stock
13 Information Incorporated by Reference from Annual
Report for the Year Ended August 31, 1996
21 List of Subsidiaries
23 Consent of Independent Public Accountants
24 Powers of Attorney
<PAGE>
Page 11
ITEM 14. (Continued)
(3) Exhibits filed with this report (Continued)
Reference No. from
Reg. 229.601
Item 601 Description of Exhibit
27 (1) Financial Data Schedule for the Year Ended
August 31, 1996
(2) Restated Financial Data Schedule for the
Quarter Ended May 31, 1996
(3) Restated Financial Data Schedule for the
Quarter Ended February 29, 1996
(4) Restated Financial Data Schedule for the
Quarter Ended November 30, 1995
(5) Restated Financial Data Schedule for the Year
Ended August 31, 1995
(6) Restated Financial Data Schedule for the
Quarter Ended May 31, 1995
(7) Restated Financial Data Schedule for the
Quarter Ended February 28, 1995
(8) Restated Financial Data Schedule for the
Quarter Ended November 30, 1994
(9) Restated Financial Data Schedule for the Year
Ended August 31, 1994
(b) No reports on Form 8-K were filed for the three months ended August 31,
1996.
(c) Exhibits 2, 12, 18, 22, and 28 have been omitted because they are not
applicable.
(d) Not applicable.
<PAGE>
Page 12
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 26, 1996 By: /s/ Kenyon W. Murphy
Vice President, Secretary, and
Associate 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
James S. Balloun* Chairman, President and
Chief Executive Officer
Brock A. Hattox* Executive Vice President and
Chief Financial Officer
Mark R. Bachmann* Vice President and Controller
John L. Clendenin* Director
Robert M. Holder, Jr.* Director
F. Ross Johnson* Director
James C. Kennedy* Director - November 20, 1996
Donald R. Keough* Director
Bryan D. Langton* Director
David Levy* Director
Bernard Marcus* Director
John G. Medlin, Jr.* Director
D. Raymond Riddle* Director
Herman J. Russell* Director
Dr. Betty L. Siegel* Director
Erwin Zaban* Director
*By: /s/ David Levy Attorney-in-Fact
David Levy
<PAGE>
Page 13
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 21, 1996. Our
audit was made for the purpose of forming an opinion on those statements taken
as a whole. The schedule listed in Item 14 in this Form 10-K is the
responsibility of the company's management and is presented for the purpose of
complying with the Securities and Exchange Commission's rules and is not part
of the basic consolidated financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of the basic
consolidated financial statements and, in our opinion, fairly states 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
Atlanta, Georgia
October 21, 1996
<PAGE>
Page 14
SCHEDULE II
NATIONAL SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED AUGUST 31, 1996, 1995, AND 1994
(In thousands)
<TABLE>
Balance at Additions Charged to Balance at
Beginning Costs and Other End
Description of Period Expenses Accounts(1) Deductions(2) of Period
<S> <C> <C> <C> <C> <C>
YEAR ENDED AUGUST 31, 1996:
Deducted in the balance sheet
from the asset to which it applies-
Reserve for doubtful accounts.... $6,467 $2,708 $(964) $2,404 $5,807
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
</TABLE>
(1) Recoveries credited to reserve, reserves recorded in acquisitions, and
reserves removed in sale of businesses.
(2) Uncollectible accounts written off.
<PAGE>
Page 15
<TABLE>
INDEX TO EXHIBITS
Page No.
<S> <C> <C>
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, 1989 Reference is made to Exhibit 3 of registrant's
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:
(1)-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.
(2)- (a)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.
(b)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)Second Amendment to Executives' Reference is made to Exhibit 10(iii)A (a) of
Deferred Compensation Plan, registrant's Form 10-Q for the quarter ended
Effective as of September 1, 1994. November 30, 1994, which is incorporated
herein by reference.
(d)Amendment No. 3 to Executives'
Deferred Compensation Plan dated
August 31, 1996 21
(3)- (a)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.
(b)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.
(c)Appendix B to Restated and Amended Reference is made to Exhibit 10iii)A(e) of
Supplemental Retirement Plan for Executives of registrant's Form 10-Q for the quarter ended
National Service Industries, Inc. (Supplemental February 29, 1996, which is incorporated herein
Pension Plan), Effective February 1, 1996 by reference.
<PAGE>
Page 16
INDEX TO EXHIBITS
Page No.
(d)Appendix C to Restated and Amended Reference is made to Exhibit 10iii)A(d) of
Supplemental Retirement Plan for Executives of registrant's Form 10-Q for the quarter ended
National Service Industries, Inc. (Supplemental May 31, 1996, which is incorporated herein
Pension Plan), Effective May 31, 1996 by reference.
(e) Amendment No. 2 to Restated and Amended
Supplemental Retirement Plan for Executives of
Naitonal Service Industries, Inc. (Supplemental
Pension Plan) Dated August 31, 1996 24
(4)- (a) 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.
(b)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.
(c)Amendment No. 2 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.
(d)Amendment No. 3 to National Service
Industries, Inc. Senior Management Benefit
Plan, Dated August 31, 1996 27
(5)- (a)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.
(b)Amendment to Severance Protection
Agreement between National Service Industries,
Inc. and David Levy, Dated August 31, 1996 30
(6)- (a)Severance Protection Agreements between Reference is made to Exhibit 10(iii)A (c) of
National Service Industries, Inc. and registrant's Form 10-Q for the quarter
(i) James S. Balloun (February 1, 1996) ended February 29, 1996, which is incorporated
(ii) Stewart A. Searle III (June 19, 1996) herein by reference.
(b)Amendment to Severance Protection
Agreements, Dated August 31, 1996 30
(7)- (a)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) James S. Balloun (February 1, 1996) ended August 31, 1989 and to Exhibit 10(iii)A(d)
(ii) David Levy (October 1, 1989) of the registrant's Form 10-Q for the quarter
(iii) Stewart A. Searle III (June 19, 1996) ended February 29, 1996, which are incorporated
herein by reference.
(b)Supplemental Letter Agreement, Dated
August 31, 1996 35
<PAGE>
Page 17
INDEX TO EXHIBITS
Page No.
(8)- (a)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.
(b)Amendment No. 1 to Long-Term Reference is made to Exhibit 10(iii)A (h)(ii) of
Incentive Program, Dated September 21, registrant's Form 10-K for the fiscal year
1994 ended August 31, 1994, which is incorporated
herein by reference.
(9)- 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
(a) D. Raymond Riddle ended August 31, 1989, which is incorporated
(b) Don W. Hubble herein by reference.
(c) David Levy
(d) J. Robert Hipps
(e) Stewart A. Searle III
(10)-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
(a) James S. Balloun herein by reference.
(b) D. Raymond Riddle
(c) Don W. Hubble
(d) David Levy
(e) J. Robert Hipps
(11)-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.
(a) D. Raymond Riddle
(b) Don W. Hubble
(c) David Levy
(12)-(a)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.
(b)Amended Schedule 1 of Benefits Reference is made to Exhibit 10(iii)A (k)-(ii) of
Protection Trust Agreement between 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
(c)Amendment to Benefits Protection Trust
Agreement between National Service Industries,
Inc. and Wachovia Bank and Trust Company
and Adoption, Dated August 31, 1996 36
(13)-(a)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.
<PAGE>
Page 18
INDEX TO EXHIBITS
Page No.
(13)-(b)Amendment to Executive Benefits Trust
Agreement between National Service Industries,
Inc. and Wachovia Bank and Trust Company
and Adoption. Dated August 31, 1996 39
(14)-(a)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.
(b)Letter Agreement Dated March 21, 1996 Reference is made to Exhibit 10iii)A(a) of
amending the Consulting Agreement between registrant's Form 10-Q for the quarter ended
National Service Industries, Inc. and Erwin May 31, 1996, which is incorporated herein
Zaban, Dated December 31, 1991 by reference.
(15)-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.
(16)-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
(a) John L. Clendenin herein by reference.
(b) Robert M. Holder, Jr.
(c) F. Ross Johnson
(d) James C. Kennedy
(e) Donald R. Keough
(f) Bryan D. Langton
(g) Bernard Marcus
(h) John G. Medlin, Jr.
(i) Dr. Betty L. Siegel
(j) Erwin Zaban
(17)-(a)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.
(b)Amendment No. 1 to National Service
Industries, Inc. Executive Savings Plan, Dated
August 31, 1996. 42
(18)-(a)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.
(19)-(a)Split-Dollar Agreement among National Reference is made to Exhibit 10(iii)A (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.
(b)First Amendment to Split-Dollar Agreement Reference is made to Exhibit 10(iii)A (a)(ii) of
among National Service Industries, Inc., registrant's Form 10-Q for the quarter ended
D. Raymond Riddle, and Wachovia Bank February 28, 1995, which is incorporated
of Georgia, N.A. effective March 30, 1995 herein by reference.
<PAGE>
Page 19
INDEX TO EXHIBITS
Page No.
(20)-(a)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
(21)-(a)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.
(22)-(a)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 the February 28, 1995, which is incorporated
Incentive Stock Option Agreement dated January herein by reference.
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 Services Industries, Inc. and
D. Raymond Riddle
(23)-(a)Employment Letter Agreement between Reference is made to Exhibit 10iii)A(a) of
National Service Industries, Inc. and James S. registrant's Form 10-Q for the quarter ended
Balloun, Dated February 1, 1996 (a confidential February 29, 1996, which is incorporated herein
portion of which has been omitted and filed by reference.
separately with the Securities and Exchange
Commission)
(24)-(a)Severance Agreement between National Reference is made to Exhibit 10iii)A(b) of
Service Industries, Inc. and J. Robert Hipps, registrant's Form 10-Q for the quarter ended
Dated May 14, 1996 May 31, 1996, which is incorporated herein
by reference.
(25)-(a)Letter Agreement between National Service Reference is made to Exhibit 10iii)A(c) of
Industries, Inc. and J. Robert Hipps Dated May registrant's Form 10-Q for the quarter ended
24, 1996, amending as of that date the Incentive May 31, 1996, which is incorporated herein
Stock Option Agreement Dated September 19, by reference.
1990; the Incentive Stock Option Agreement
Dated December 18, 1991; the Incentive Stock
Option Agreement Dated September 16, 1992:
the Nonqualified Stock Option Agreement Dated
September 16, 1992; the Incentive Stock Option
Agreement Dated September 15, 1993; the
Nonqualified Stock Option Agreement Dated
September 15, 1993; the Nonqualified Stock
Option Agreement Dated September 21, 1994;
and the Nonqualified Stock Option Agreement
Dated September 20, 1995
<PAGE>
Page 20
INDEX TO EXHIBITS
Page No.
(26)-(a)National Service Industries, Inc.
Nonemployee Director Deferred Stock Unit Plan,
Effective June 1, 1996 45
(27)-(a)Severance Agreement between National
Service Industries, Inc. and Don W. Hubble,
Dated July 22, 1996 50
(28)-(a)Employment Letter Agreement between
National Service Industries, Inc. and Brock A.
Hattox, Dated August 26, 1996 53
EXHIBIT 11 - Computations of Net Income per Share of 57
Common Stock
EXHIBIT 13 - Information Incorporated by Reference from
Annual Report for the Year Ended August 31,
1996 58
EXHIBIT 21 - List of Subsidiaries 77
EXHIBIT 23 - Consent of Independent Public Accountants 78
EXHIBIT 24 - Powers of Attorney 79
EXHIBIT 27 - (1) Financial Data Schedule for the Year
Ended August 31, 1996 92
(2) Restated Financial Data Schedule for the
Quarter Ended May 31, 1996 93
(3) Restated Financial Data Schedule for the
Quarter Ended February 29, 1996 94
(4) Restated Financial Data Schedule for the
Quarter Ended November 30, 1995 95
(5) Restated Financial Data Schedule for the
Year Ended August 31, 1995 96
(6) Restated Financial Data Schedule for the
Quarter Ended May 31, 1995 97
(7) Restated Financial Data Schedule for the
Quarter Ended February 28, 1995 98
(8) Restated Financial Data Schedule for the
Quarter Ended November 30, 1994 99
(9) Restated Financial Data Schedule for the
Year Ended August 31, 1994 100
</TABLE>
Page 21
Exhibit 10(iii)A(2)(d)
AMENDMENT NO. 3
TO THE
EXECUTIVES' DEFERRED COMPENSATION PLAN OF
NATIONAL SERVICE INDUSTRIES, INC.
THIS AMENDMENT made as of this _____ day of _______________, 1996, by
National Service Industries, Inc. ("NSI");
W I T N E S S E T H:
WHEREAS, NSI has previously established the Executives' Deferred
Compensation Plan of National Service Industries, Inc. (the "Plan") for the
exclusive benefit of its eligible employees and their beneficiaries; and
WHEREAS, effective as of August 31, 1996, NSI will reorganize its
operations into several newly-formed corporations and limited partnerships; and
WHEREAS, NSI desires to amend the Plan in connection with the
reorganization; and
WHEREAS, pursuant to the power of amendment contained in Section 8.02 of
the Plan, the Plan is hereby amended as follows:
1.
Section 1.04 of the Plan is hereby amended by deleting such section in its
entirety and substituting the following:
"1.04 'Company' means National Service Industries, Inc. (or its
successor or successors). Affiliated or related employers are
permitted to adopt the Plan and shall be known as "Adopting
Employers." To the extent required by certain provisions (e.g.,
Compensation and Continuous Service), references to the Company shall
include the Adopting Employer of the Participant. Adopting Employers
are listed on Appendix A."
2.
Section 1.10 of the Plan is hereby amended by deleting such section in its
entirety and substituting the following:
"1.10'Executive or Eligible Executive' means a senior Officer of the
Company or an Adopting Employer or a President of one of the Operating
Divisions of an Adopting Employer. Any dispute regarding any individual's
classification shall be resolved solely by the Committee in its sole
discretion."
<PAGE>
Page 22
Exhibit 10(iii)A(2)(d)
3.
Section 7.05 of the Plan is hereby amended by deleting such section in its
entirety and substituting the following:
"7.05The benefits provided by this Plan shall be unfunded. All amounts
payable under this Plan to any Participant shall be paid from the general
assets of the employer which principally employs the Participant (the
"Obligated Employer"), and nothing contained in this Plan shall require the
Obligated Employer to set aside or hold in trust any amounts or assets for
the purpose of paying benefits to Participants. This Plan shall create only
a contractual obligation on the part of the Obligated Employer and
Participants shall have the status of general unsecured creditors of the
Obligated Employer under the Plan with respect to amounts of Compensation
they defer hereunder or any other obligation of the Obligated Employer to
pay benefits pursuant hereto. Any funds of the Obligated Employer available
to pay benefits pursuant to the Plan shall be subject to the claims of
general creditors of the Obligated Employer, and may be used for any
purpose by the Obligated Employer.
Notwithstanding the preceding paragraph, the Obligated Employer may at
any time transfer assets to a trust for purposes of paying all or any part
of its obligations under this Plan. However, to the extent provided in the
trust only, such transferred amounts shall remain subject to the claims of
general creditors of the Obligated Employer. To the extent that assets are
held in a trust when a Participant's benefits under the Plan become
payable, the Committee shall direct the trustee to pay such benefits to the
Participant from the assets of the trust."
4.
Article VII of the Plan is hereby amended by adding the following
new section 7.06:
"7.06 In consideration of each Participant's performance of valuable
services that inure to the financial benefit of the Company, the Company
does hereby agree to perform all of the obligations and responsibilities
and pay any benefits due and owing to a Participant under the Plan if the
Obligated Employer (as defined in Section 7.05) designated to perform such
obligations and responsibilities or pay such benefits fails or is unable to
do so."
<PAGE>
Page 23
Exhibit 10(iii)A(2)(d)
5.
The Plan is hereby amended by incorporating the following as Appendix A:
"Appendix A
Adopting Employers
North Bros., Inc.
National Service Industries, Inc. of Georgia
NSI Enterprises, Inc.
Zep Manufacturing Company
NSI Services, L.P."
6.
This Amendment shall be effective August 31, 1996.
7.
Except as provided herein, the provisions of the Plan shall remain in full
force and effect.
IN WITNESS WHEREOF, NSI has caused this Amendment No. 3 to be executed by
its duly authorized corporate officer and is hereby accepted the same as of the
date and year first written above.
ATTEST: NATIONAL SERVICE INDUSTRIES, INC.
By: _____________________________ By: _________________________________
Page 24
Exhibit 10(iii)A(3)(e)
AMENDMENT NO. 2
TO THE
SUPPLEMENTAL RETIREMENT PLAN FOR EXECUTIVES OF
NATIONAL SERVICE INDUSTRIES, INC.
THIS AMENDMENT made as of this _____ day of _______________, 1996, by
National Service Industries, Inc. ("NSI");
W I T N E S S E T H:
WHEREAS, NSI has previously established the Supplemental Retirement Plan
for Executives of National Service Industries, Inc. (the "Plan") for the
exclusive benefit of its eligible employees and their beneficiaries; and
WHEREAS, effective as of August 31, 1996, NSI will reorganize its
operations into several newly-formed corporations and limited partnerships; and
WHEREAS, NSI desires to amend the Plan in connection with the
reorganization; and
WHEREAS, pursuant to the power of amendment contained in Section 11.1 of
the Plan, the Plan is hereby amended as follows:
1.
Section 1.1(o) of the Plan is hereby amended by deleting such section in
its entirety and substituting the following:
"1.1(o) Company: Company shall mean National Service Industries, Inc.
(or its successor or successors). Affiliated or related employers are
permitted to adopt the Plan and shall be known as "Adopting Employers." To
the extent required by certain provisions (e.g., determining Average
Monthly Compensation, Credited Service and Service Date), references to the
Company shall include the Adopting Employer of the Participant. Adopting
Employers are listed on Schedule 1."
2.
Section 1.1(w) of the Plan is hereby amended by deleting such section in
its entirety and substituting the following:
"(w) Executive: Any person who, on or after the Effective Date, is
classified as an executive officer of the Company covered by a bonus
arrangement and who is receiving remuneration for personal services
rendered to the Company (or would be receiving such remuneration except for
an Authorized Leave of Absence), and any other officer of the Company (or
an Adopting Employer) designated by the Chief Executive Officer of the
<PAGE>
Page 25
Exhibit 10(iii)A(3)(e)
Company as eligible to participate in the Plan and who is listed on an
Appendix attached hereto."
3.
Section 5.1 of the Plan is hereby amended by deleting such section in its
entirety and substituting the following:
"5.1 Payment of Costs and Expenses: All costs of providing the
benefits under the Plan and the expenses thereof, including the cost of the
Committee and the Administrator and any Actuary, shall be paid from the
general assets of the Company (or with respect to Participants employed by
an Adopting Employer, from the general assets of such Adopting Employer)."
4.
Article X of the Plan is hereby amended by deleting such article in its
entirety and substituting the following:
"Article X
Trust
"The benefits provided by this Plan shall be unfunded. All amounts payable
under this Plan to a Participant shall be paid from the general assets of
the employer which principally employs the Participant (the "Obligated
Employer"), and nothing contained in this Plan shall require the Obligated
Employer to set aside or hold in trust any amounts or assets for the
purpose of paying benefits to Participants. This Plan shall create only a
contractual obligation on the part of the Obligated Employer and
Participants shall have the status of general unsecured creditors of the
Obligated Employer under the Plan with respect to amounts of Compensation
they defer hereunder or any other obligation of the Obligated Employer to
pay benefits pursuant hereto. Any funds of the Obligated Employer available
to pay benefits pursuant to the Plan shall be subject to the claims of
general creditors of the Obligated Employer, and may be used for any
purpose by the Obligated Employer.
Notwithstanding the preceding paragraph, the Obligated Employer may at
any time transfer assets to a trust for purposes of paying all or any part
of its obligations under this Plan. However, to the extent provided in the
trust only, such transferred amounts shall remain subject to the claims of
general creditors of the Obligated Employer. To the extent that assets are
held in a trust when a Participant's benefits under the Plan become
payable, the Plan Administrator shall direct the trustee to pay such
benefits to the Participant from the assets of the trust."
<PAGE>
Page 26
Exhibit 10(iii)A(3)(e)
5.
Article XII of the Plan is hereby amended by adding the following new
section 12.8:
"12.8 Guarantee of Performance: In consideration of each Participant's
performance of valuable services that inure to the financial benefit of the
Company, the Company does hereby agree to perform all of the obligations
and responsibilities and pay any benefits due and owing to a Participant
under the Plan if the Obligated Employer (as defined in Article X)
designated to perform such obligations and responsibilities or pay such
benefits fails or is unable to do so."
6.
The Plan is hereby amended by incorporating the following as Schedule 1:
"Schedule 1
Adopting Employers
North Bros, Inc.
National Service Industries, Inc. of Georgia
NSI Enterprises, Inc.
Zep Manufacturing Company
NSI Services, L.P."
7.
This Amendment shall be effective August 31, 1996.
8.
Except as provided herein, the provisions of the Plan shall remain in full
force and effect.
IN WITNESS WHEREOF, NSI has caused this Amendment No. 2 to be executed by
its duly authorized corporate officer and is hereby accepted the same as of the
date and year first written above.
ATTEST: NATIONAL SERVICE INDUSTRIES, INC.
By: _____________________________ By: _________________________________
Page 27
Exhibit 10(iii)A(4)(d)
AMENDMENT NO. 3
TO THE
NATIONAL SERVICE INDUSTRIES, INC.
SENIOR MANAGEMENT BENEFIT PLAN
THIS AMENDMENT made as of this _____ day of _______________, 1996, by
National Service Industries, Inc. ("NSI");
W I T N E S S E T H:
WHEREAS, NSI has previously established the National Service Industries,
Inc. Senior Management Benefit Plan (the "Plan") for the exclusive benefit of
its eligible employees and their beneficiaries; and
WHEREAS, effective as of August 31, 1996, NSI will reorganize its
operations into several newly-formed corporations and limited partnerships; and
WHEREAS, NSI desires to amend the Plan in connection with the
reorganization; and
WHEREAS, pursuant to the power of amendment contained in Section 11.4 of
the Plan, the Plan is hereby amended as follows:
1.
Section 1.9 of the Plan is hereby amended by deleting such section in its
entirety and substituting the following:
"1.9 Employer. For purposes of this Plan, Employer means National
Service Industries, Inc. (or its successor or successors). Affiliated or
related employers are permitted to adopt the Plan and shall be known as
'Adopting Employers.' To the extent required by certain provisions (e.g.,
Compensation and service), references to the Employer shall include the
Adopting Employer of the Participant. Adopting Employers are listed on
Appendix 1."
2.
Section 1.11 of the Plan is hereby amended by deleting such section in its
entirety and substituting the following:
"1.11 Participant: An employee of Employer or Adopting Employer who is
eligible to participate in the Plan according to standards adopted by Board
of Directors of Employer and who elects to participate in this Plan."
<PAGE>
Page 28
Exhibit 10(iii)A(4)(d)
3.
Section 10.2 of the Plan is hereby amended by deleting such section in its
entirety and substituting the following:
"10.2 Benefits Unfunded: The benefits provided by this Plan shall be
unfunded. All amounts payable under this Plan to a Participant shall be
paid from the general assets of the employer which principally employs the
Participant (the "Obligated Employer"), and nothing contained in this Plan
shall require the Obligated Employer to set aside or hold in trust any
amounts or assets for the purpose of paying benefits to Participants. This
Plan shall create only a contractual obligation on the part of the
Obligated Employer and Participants shall have the status of general
unsecured creditors of the Obligated Employer under the Plan with respect
to amounts of Compensation they defer hereunder or any other obligation of
the Obligated Employer to pay benefits pursuant hereto. Any funds of the
Obligated Employer available to pay benefits pursuant to the Plan shall be
subject to the claims of general creditors of the Obligated Employer, and
may be used for any purpose by the Obligated Employer. Any insurance policy
or other asset acquired or held by the Obligated Employer shall not be
deemed to be held under any trust for the benefit of Participant or to be
security for the performance of the Obligated Employer's obligations
pursuant hereto.
Notwithstanding the preceding paragraph, the Obligated Employer may at
any time transfer assets to a trust for purposes of paying all or any part
of its obligations under this Plan. However, to the extent provided in the
trust only, such transferred amounts shall remain subject to the claims of
general creditors of the Obligated Employer. To the extent that assets are
held in a trust when a Participant's benefits under the Plan become
payable, the Plan Administrator shall direct the trustee to pay such
benefits to the Participant from the assets of the trust."
4.
Article X of the Plan is hereby amended by adding the following new section
10.7:
"10.7 Guarantee of Performance: In consideration of each Participant's
performance of valuable services that inure to the financial benefit of the
Company, the Company does hereby agree to perform all of the obligations
and responsibilities and pay any benefits due and owing to the Participant
under the Plan if the Obligated Employer (as defined in Section 10.2)
designated to perform such obligations and responsibilities or pay such
benefits fails or is unable to do so."
<PAGE>
Page 29
Exhibit 10(iii)A(4)(d)
5.
The Plan is hereby amended by incorporating the following as Appendix 1:
"Appendix 1
Adopting Employers
North Bros., Inc.
National Service Industries, Inc. of Georgia
NSI Enterprises, Inc.
Zep Manufacturing Company
NSI Services, L.P."
6.
This Amendment shall be effective August 31, 1996.
7.
Except as provided herein, the provisions of the Plan shall remain in full
force and effect.
IN WITNESS WHEREOF, NSI has caused this Amendment No. 3 to be executed by
its duly authorized corporate officer and is hereby accepted the same as of the
date and year first written above.
ATTEST: NATIONAL SERVICE INDUSTRIES, INC.
By: _____________________________ By: _________________________________
Page 30
Exhibit 10(iii)A(5)(b)
Exhibit 10(iii)A(6)(b)
AMENDMENT
TO
SEVERANCE PROTECTION AGREEMENT
THIS AMENDMENT made as of this ____ day of _____________, 1996, by and
between National Service Industries, Inc., a Delaware corporation (the
"Company"), and ____________________ (the "Executive");
WITNESSETH
WHEREAS, the Company entered into an agreement ("Agreement") with the
Executive, dated _________________, providing for the payment of certain
compensation and benefits to the Executive in the event his employment is
terminated as a result of, or in connection with, a Change in Control of the
Company; and
WHEREAS, effective as of August 31, 1996, the Company is reorganizing (the
"Restructuring") its operations into several newly-formed subsidiary
corporations and limited partnerships (individually, a "Subsidiary" and
together, the "Subsidiaries"); and
WHEREAS, the Company and the Executive desire to amend the Agreement to
reflect the fact that Executive may be primarily employed by, and/or primarily
perform services for, a Subsidiary (or several Subsidiaries); and
WHEREAS, the Executive will continue to perform valuable services that
inure to the financial benefit of the Company and its shareholders;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, the parties agree to amend the Agreement as
follows:
1.
Each place in the Agreement where a reference to the "Company" appears that
relates to the Executive's employment, termination of employment or performing
services, including the definitions of "Cause" and "Good Reason," shall now mean
and include the Subsidiary which is the primary employer of the Executive.
Further, in each place where the Agreement now refers to a benefit plan or
program, payment of compensation, compensation arrangement or other similar plan
or program maintained by the Company, such reference shall now include any plan,
program or arrangement maintained or established by the Subsidiary.
2.
Notwithstanding the provisions of Paragraph 1 above, the references in the
definitions of "Change in Control," "Threatened Change in Control," "Threatened
Change in Control Period" and similar references to changes in ownership and
<PAGE>
Page 31
Exhibit 10(iii)A(5)(b)
Exhibit 10(iii)A(6)(b)
control of the Company shall continue to mean and refer to National Service
Industries, Inc., a Delaware corporation.
3.
In consideration of the Executive's performing valuable services for the
Subsidiary, the Subsidiary does hereby guarantee the payment and performance by
the Company of all of the Company's obligations and responsibilities under the
Agreement.
4.
The Executive hereby agrees that under the Agreement the Restructuring (i)
shall not be deemed to constitute a Change in Control, and (ii) shall not result
in a termination of the Executive's employment.
5.
The Appendix to the Agreement shall be replaced by the Appendix attached
hereto.
6.
Except as hereby modified, the terms and conditions of the Agreement shall
remain in full force and effect. This Amendment shall be effective as of August
31, 1996.
<PAGE>
Page 32
Exhibit 10(iii)A(5)(b)
Exhibit 10(iii)A(6)(b)
IN WITNESS WHEREOF, the parties have executed this Amendment as of the day
and year first above written.
EXECUTIVE:
NATIONAL SERVICE INDUSTRIES, INC.
By:
The undersigned Subsidiary does hereby agree to the terms and conditions of
the Agreement and to pay and perform the obligations described in Paragraph 3 of
this Amendment.
This ____ day of __________________, 1996.
SUBSIDIARY:
By:
<PAGE>
Page 33
Exhibit 10(iii)A(5)(b)
Exhibit 10(iii)A(6)(b)
APPENDIX
(As of 8/31/96)
Executives' Deferred Compensation Plan
Supplemental Retirement Plan for Executives (or similar
supplemental retirement plan covering the Executive)
Senior Management Benefit Plan
Executive Savings Plan
Long-Term Incentive Program
Management Compensation and Incentive Plan
Pension Plan C (or similar retirement plan covering the Executive)
Retirement and 401(k) Plan (or similar deferred compensation plan covering the
Executive)
<PAGE>
Page 34
Exhibit 10(iii)A(5)(b)
Exhibit 10(iii)A(6)(b)
Dear
You currently have a letter agreement with the Company relating to the
payment of a bonus in the event of a Change in Control of the Company. In
connection with the restructuring of the Company that will be effective August
31, 1996, this will confirm that the the references in the letter to your being
in the "employ of the Company' includes your being in the employ of a direct or
indirect subsidiary corporation or subsidiary partnership of the Company.
Sincerely,
NATIONAL SERVICE INDUSTRIES, INC.
By:
Page 35
Exhibit 10(iii)A(7)(b)
Dear Mr. Balloun:
The terms of your employment with the Company are currently covered by a
letter agreement ("Agreement"), dated February 1, 1996, between you and the
Company. In connection with the restructuring of the Company that will be
effective August 31, 1996, this will confirm that you may be employed by, and
perform services for, subsidiary corporations or subsidiary partnerships of the
Company and that you may receive compensation and benefits from such entities.
This will also confirm that you will continue to be entitled to the aggregate
amount of compensation, benefits and other amounts provided in the Agreement.
Your rights to benefits upon termination of employment with the Company and its
subsidiaries will continue to be as provided in Paragraph 7 of the Agreement.
Sincerely,
NATIONAL SERVICE INDUSTRIES, INC.
By:_________________________________
Page 36
Exhibit 10(iii)A(12)(c)
AMENDMENT AND ADOPTION OF
NATIONAL SERVICE INDUSTRIES, INC.
BENEFITS PROTECTION TRUST
This Agreement made and entered into as of this ____ day of __________,
1996, by and among National Service Industries, Inc. (the "Corporation),
Wachovia Bank and Trust Company (the "Trustee") and the following affiliates of
the Corporation - North Bros., Inc., National Service Industries, Inc. of
Georgia, NSI Enterprises, Inc., ZEP Manufacturing Company, and NSI Services,
L.P.:
W I T N E S S E T H:
WHEREAS, the Corporation previously established a trust arrangement known
as the National Service Industries, Inc. Benefits Protection Trust (the "Trust")
in order to ensure that participants and their beneficiaries receive the
benefits which the Corporation is obligated to provide pursuant to various
executive compensation arrangements (collectively, the "Plans"); and
WHEREAS, effective as of August 31, 1996, the Corporation will reorganize
its operations into several newly-formed subsidiary corporations and limited
partnerships including North Bros., Inc., National Service Industries, Inc. of
Georgia, NSI Enterprises , Inc., ZEP Manufacturing Company, and NSI Services,
L.P. (collectively, referred to as the "Affiliates"); and
WHEREAS, each Affiliate has assumed the obligation, with respect to certain
eligible employees employed by such Affiliate, to provide benefits under one or
more of the Plans; and
WHEREAS, each Affiliate now desires to adopt and become a party to the
Trust on the terms contained herein; and
WHEREAS, the Corporation desires to amend the Trust in certain respects to
clarify each Affiliate's financial obligation to provide benefits to the
Affiliate's eligible employees under any Plan adopted by such Affiliate;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants contained herein, the parties hereto agree as follows:
1.
The Corporation authorizes each of the Affiliates to adopt and become a
party to the Trust in accordance with the terms and provisions thereof.
2.
<PAGE>
Page 37
Exhibit 10(iii)A(12)(c)
Effective as of August 31, 1996, each of the Affiliates hereby adopts and
becomes a party to the Trust and agrees to be bound by all the terms and
provisions thereof.
3.
Section 4.2 of the Trust is hereby amended by adding "and any Affiliate"
after "Company" wherever it appears therein and by adding the following to the
end of the section:
"; provided, however, any Affiliate shall be required to make contributions
hereunder only to the extent of such Affiliate's obligation under any Plan
it has adopted."
4.
Section 4.3 of the Trust is hereby amended by adding "or Affiliate, as
applicable" after "Company" wherever it appears therein and by adding the
following to the end of the section:
"In the event that any Affiliate fails to transfer funds following written
demand as provided herein, the Company shall assume the Affiliate's
obligation to transfer such funds."
5.
Section 9.5 of the Trust is hereby amended by adding the following to the
end of the section:
"To the extent any Affiliate has failed to transfer funds required under
Section 4.3, the Trustee may join such Affiliate in any legal action
against the Company to compel payment."
6.
This Agreement shall be effective as of August 31, 1996. Except as provided
herein, the provisions of the Trust shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment and
Adoption Agreement as of the day and year first written above.
ATTEST: NATIONAL SERVICE INDUSTRIES, INC.
____________________________ By: _______________________________
ATTEST: NORTH BROS., INC.
____________________________ By: _______________________________
<PAGE>
Page 38
Exhibit 10(iii)A(12)(c)
ATTEST: NATIONAL SERVICE INDUSTRIES, INC. OF
GEORGIA
____________________________ By: _______________________________
ATTEST: NSI ENTERPRISES, INC.
____________________________ By: _______________________________
ATTEST: ZEP MANUFACTURING COMPANY
____________________________ By: _______________________________
ATTEST: NSI SERVICES, L.P.
____________________________ By: _______________________________
ATTEST: WACHOVIA BANK AND TRUST COMPANY,
AS TRUSTEE
____________________________ By: _______________________________
Page 39
Exhibit 10(iii)A(13)(b)
AMENDMENT AND ADOPTION OF
NATIONAL SERVICE INDUSTRIES, INC.
EXECUTIVE BENEFITS TRUST
This Agreement made and entered into as of this ____ day of ___________,
1996, by and among National Service Industries, Inc. (the "Corporation),
Wachovia Bank and Trust Company (the "Trustee") and the following affiliates of
the Corporation - North Bros., Inc., National Service Industries, Inc. of
Georgia, NSI Enterprises, Inc., ZEP Manufacturing Company, and NSI Services,
L.P.:
W I T N E S S E T H:
WHEREAS, the Corporation previously established a trust arrangement known
as the National Service Industries, Inc. Executive Benefits Trust (the "Trust")
in order to ensure that participants and their beneficiaries receive the
benefits which the Corporation and its affiliates are obligated to provide
pursuant to various executive compensation arrangements (collectively, the
"Plans") and to provide for additional funding of the Trust upon a Change in
Control of the Corporation; and
WHEREAS, effective as of August 31, 1996, the Corporation will reorganize
its operations into several newly-formed subsidiary corporations and limited
partnerships including North Bros., Inc., National Service Industries, Inc. of
Georgia, NSI Enterprises , Inc., ZEP Manufacturing Company, and NSI Services,
L.P. (collectively, referred to as the "Affiliates"); and
WHEREAS, each Affiliate has assumed the obligation, with respect to certain
eligible employees employed by such Affiliate, to provide benefits under one or
more of the Plans; and
WHEREAS, each of the Affiliates now desires to adopt and become a party to
the Trust upon the terms set forth herein; and
WHEREAS, the Corporation desires to amend the Trust in certain respects to
clarify each Affiliate's financial obligation to provide benefits to the
Affiliate's eligible employees under any Plan adopted by such Affiliate;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants contained herein, the parties hereto agree as follows:
1.
The Corporation authorizes each of the Affiliates to adopt and become a
party to the Trust in accordance with the terms and provisions thereof.
<PAGE>
Page 40
Exhibit 10(iii)A(13)(b)
2.
Effective as of August 31, 1996, each of the Affiliates hereby adopts and
becomes a party to the Trust and agrees to be bound by all the terms and
provisions thereof.
3.
Section 4.1 of the Trust is hereby amended by deleting the first sentence
thereof in its entirety and substituting the following:
"Immediately upon the occurrence of a Change in Control, the Company
and each Affiliate shall contribute sufficient cash or marketable
securities to their respective Benefit Accounts in an amount equal to the
difference between the assets transferred to this Trust pursuant to the
Transfer and the amount necessary to pay all benefits payable (whether
payable currently or on a deferred basis) under all Transferred Plans as
the Trustee, in its discretion, determines; provided, however, any
Affiliate shall be required to make contributions hereunder only to the
extent of such Affiliate's obligation under each Plan it has adopted."
4.
Section 4.2 of the Trust is hereby amended by adding "and any Affiliate"
after "Company" wherever it appears therein.
5.
Section 4.3 of the Trust is hereby amended by adding "or Affiliate, as
applicable" after "Company" wherever it appears therein and by adding the
following to the end of the section:
"In the event that any Affiliate fails to transfer funds following written
demand as provided herein, the Company shall assume the Affiliate's
obligation to transfer such funds."
6.
Section 9.4 of the Trust is hereby amended by adding the following to the
end of the section:
"To the extent any Affiliate has failed to transfer funds required under
Section 4.3, the Trustee may join such Affiliate in any legal action
against the Company to compel payment."
7.
<PAGE>
Page 41
Exhibit 10(iii)A(13)(b)
This Agreement shall be effective as of August 31, 1996. Except as provided
herein, the remaining provisions of the Trust shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment and
Adoption Agreement as of the day and year first written above.
ATTEST: NATIONAL SERVICE INDUSTRIES, INC.
____________________________ By: _______________________________
ATTEST: NORTH BROS., INC.
____________________________ By: _______________________________
ATTEST: NATIONAL SERVICE INDUSTRIES, INC. OF
GEORGIA
____________________________ By: _______________________________
ATTEST: NSI ENTERPRISES, INC.
____________________________ By: _______________________________
ATTEST: ZEP MANUFACTURING COMPANY
____________________________ By: _______________________________
ATTEST: NSI SERVICES, L.P.
____________________________ By: _______________________________
ATTEST: WACHOVIA BANK AND TRUST COMPANY,
AS TRUSTEE
____________________________ By: _______________________________
Page 42
Exhibit 10(iii)A(17)(b)
AMENDMENT NO. 1
TO THE
NATIONAL SERVICE INDUSTRIES, INC.
EXECUTIVE SAVINGS PLAN
THIS AMENDMENT made as of this _____ day of _______________, 1996, by
National Service Industries, Inc. ("NSI");
W I T N E S S E T H:
WHEREAS, NSI has previously established the National Service Industries,
Inc. Executive Savings Plan (the "Plan") for the exclusive benefit of its
eligible employees and their beneficiaries; and
WHEREAS, effective as of August 31, 1996, NSI will reorganize its
operations into several newly-formed corporations and limited partnerships; and
WHEREAS, NSI desires to amend the Plan in connection with the
reorganization; and
WHEREAS, pursuant to the power of amendment contained in Section 7.1 of the
Plan, the Plan is hereby amended as follows:
1.
Section 2.10 of the Plan is hereby amended by deleting such section in its
entirety and substituting the following:
"2.10 'Employer' means the Company and any affiliated or related employer
designated by the Company to adopt and participate in the Plan. Affiliated
or related employers permitted to adopt the Plan shall be known as
"Adopting Employers" and are listed on Appendix A."
2.
Section 2.12 of the Plan is hereby amended by deleting such section in its
entirety and substituting the following:
"2.12 'Executive" means an officer of the Company, an officer of an
Adopting Employer or one of its Operating Divisions, and other designated
employees. Any dispute regarding any individual's classification shall be
determined by the Plan Administrator in its sole discretion.
<PAGE>
Page 43
Exhibit 10(iii)A(17)(b)
3.
Section 8.2 of the Plan is hereby amended by deleting such section in its
entirety and substituting the following:
"8.2 Benefits Unfunded. The benefits provided by this Plan shall be
unfunded. All amounts payable under this Plan to Participants shall be paid
from the general assets of the Employer which principally employs the
Participant (the "Obligated Employer"), and nothing contained in this Plan
shall require the Obligated Employer to set aside or hold in trust any
amounts or assets for the purpose of paying benefits to Participants. This
Plan shall create only a contractual obligation on the part of the
Obligated Employer and Participants shall have the status of general
unsecured creditors of the Obligated Employer under the Plan with respect
to amounts of Compensation they defer hereunder or any other obligation of
the Obligated Employer to pay benefits pursuant hereto. Any funds of the
Obligated Employer available to pay benefits pursuant to the Plan shall be
subject to the claims of general creditors of the Obligated Employer, and
may be used for any purpose by the Obligated Employer.
Notwithstanding the preceding paragraph, the Obligated Employer may at
any time transfer assets to a trust for purposes of paying all or any part
of its obligations under this Plan. However, to the extent provided in the
trust only, such transferred amounts shall remain subject to the claims of
general creditors of the Obligated Employer. To the extent that assets are
held in a trust when a Participant's benefits under the Plan become
payable, the Plan Administrator shall direct the trustee to pay such
benefits to the Participant from the assets of the trust."
4.
Article VIII of the Plan is hereby amended by adding the following new
section 8.8:
"8.8 Guarantee of Performance. In consideration of each Participant's
performance of valuable services that inure to the financial benefit of the
Company, the Company does hereby agree to perform all of the obligations
and responsibilities and pay any benefits due and owing to Participants
under the Plan if the Obligated Employer (as defined in Section 8.2)
designated to perform such obligations and responsibilities or pay such
benefits fails or is unable to do so."
<PAGE>
Page 44
Exhibit 10(iii)A(17)(b)
5.
The Plan is hereby amended by incorporating the following as Appendix A:
"Appendix A
Adopting Employers
North Bros, Inc.
National Service Industries, Inc. of Georgia
NSI Enterprises, Inc.
Zep Manufacturing Company
NSI Services, L.P."
6.
This Amendment shall be effective August 31, 1996.
7.
Except as provided herein, the provisions of the Plan shall remain in full
force and effect.
IN WITNESS WHEREOF, NSI has caused this Amendment No. 1 to be executed by
its duly authorized corporate officer and is hereby accepted the same as of the
date and year first written above.
ATTEST: NATIONAL SERVICE INDUSTRIES, INC.
By: _____________________________ By: _________________________________
Title: ____________________________ Title: ________________________________
Page 45
Exhibit 10(iii)A(26)(a)
NATIONAL SERVICE INDUSTRIES, INC.
NONEMPLOYEE DIRECTOR DEFERRED STOCK UNIT PLAN
1. Purpose
1.1 The National Service Industries, Inc. Nonemployee Director Deferred
Stock Unit Plan is intended to increase the alignment of the interests of
eligible members of the Board with the interests of stockholders of the
Corporation by increasing their incentive to contribute to the success of the
Corporation's business through the grant of Deferred Stock Units, on the terms
and conditions set forth herein.
2. Definitions
2.1 When used in this Plan, unless the context otherwise requires:
(a) "Annual Fee" shall mean the annual fee payable, in cash or under
this Plan, to an Eligible Director for service on the Board.
(b) "Board" shall mean the Board of Directors of the Corporation.
(c) "Chairman Fee" shall mean the fee, if any, payable in cash or
under this Plan to an Eligible Director for service as the
Chairman of a committee of the Board.
(d) "Change of Control" shall mean:
The acquisition (other than from the Corporation) by any
"Person" (as the term person is used for purposes of Sections
13(d) or 14(d) of the Exchange Act) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of twenty percent (20%) or more of the combined voting power
of the Corporation's then outstanding voting securities; or
The individuals who, as of the Effective Date, are members
of the Board (the "Incumbent Board") cease for any reason to
constitute at least two-thirds of the Board; provided, however,
that if the election, or nomination for election by the
Corporation's stockholders, of any new director was approved by a
vote of at least two-thirds of the Incumbent Board, such new
director shall, for purposes of this Plan, be considered as a
member of the Incumbent Board; or
<PAGE>
Page 46
Exhibit 10(iii)A(26)(a)
Approval by stockholders of the Corporation of (1) a merger
or consolidation involving the Corporation if the stockholders of
the Corporation, immediately before such merger or consolidation
do not, as a result of such merger or consolidation, own,
directly or indirectly, more than seventy percent (70%) of the
combined voting power of the then outstanding voting securities
of the corporation resulting from such merger or consolidation in
substantially the same proportion as their ownership of the
combined voting power of the voting securities of the Corporation
outstanding immediately before such merger or consolidation, or
(2) a complete liquidation or dissolution of the Corporation or
an agreement for the sale or other disposition of all or
substantially all of the assets of the Corporation.
Notwithstanding the foregoing, a Change in Control shall not
be deemed to occur pursuant to paragraph (i) solely because
twenty percent (20%) or more of the combined voting power of the
Corporation's then outstanding securities is acquired by (i) a
trustee or other fiduciary holding securities under one or more
employee benefit plans maintained by the Corporation or any of
its subsidiaries, or (ii) any corporation which, immediately
prior to such acquisition, is owned directly or indirectly by the
stockholders of the Corporation in the same proportion as their
ownership of stock in the Corporation immediately prior to such
acquisition.
(e) "Committee" shall mean the Executive Resource and Nominating
Committee of the Board or such other committee as may be
designated by the Board.
(f) "Corporation" shall mean National Service Industries, Inc.
(g) "Date of Grant" shall mean the date on which Deferred Stock Units
are granted pursuant to Section 5.1.
(h) "Deferred Stock Units" shall mean the units issued pursuant to
Section 5.1 hereof.
(i) "Effective Date" shall mean June 1, 1996, the date when this Plan
shall go into effect.
(j) "Eligible Director" shall mean each member of the Board who is
not at the time of reference an employee of the Corporation or
any Subsidiary.
<PAGE>
Page 47
Exhibit 10(iii)A(26)(a)
(k) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
(l) "Fair Market Value" shall mean the average of the high and low
sales prices of a share of Stock as reported on the New York
Stock Exchange Composite Tape on the five (5) trading dates
immediately preceding the date for which such value is being
determined.
(m) "Optional Amount" shall mean the amount elected by an Eligible
Director for any year during the term hereof pursuant to Section
5.2 hereof.
(n) "Plan" shall mean the National Service Industries, Inc.
Nonemployee Director Deferred Stock Unit Plan, as such Plan may
be amended from time to time.
(o) "Required Amount" shall mean one-fourth of the Annual Fee.
(p) "Stock" shall mean the Common Stock of the Corporation.
(q) "Subsidiary" shall mean any corporation more than 50% of whose
stock having general voting power is owned by the Corporation or
by a Subsidiary of the Corporation.
3. Administration
3.1 The Plan shall be administered by the Committee.
3.2 The Committee may take such rules and establish such procedures for the
administration of the Plan as it deems appropriate to carry out the purpose of
the Plan, provided that the Committee shall have no discretion with respect to
the grantee, amount, price or timing of any Deferred Stock Unit. The
interpretation and application of the Plan or of any rule or procedure, any
other matter relating to or necessary to the administration of the Plan, shall
be determined by the Committee, and any such determination shall be final and
binding on all persons. Deferred Stock Units shall be evidenced by agreements in
such form as shall be determined from time to time by the Committee, provided
that the terms and conditions of each such agreement are not inconsistent with
this Plan.
4. Capital Adjustments
4.1 In the event of a reorganization, recapitalization, stock split, stock
dividend, combination of shares, merger, consolidation or a similar corporate
transaction, the number or class of shares of Stock represented by Deferred
Stock Units granted hereunder shall be proportionately adjusted to reflect any
such transaction.
<PAGE>
Page 48
Exhibit 10(iii)A(26)(a)
5. Deferred Stock Units
5.1 Quarterly Grant. The Corporation shall establish a bookkeeping account
for each Eligible Director. On the first of each September, December, March, and
June on or after the Effective Date and prior to the termination of this Plan
(subject to Section 6.1 below), the bookkeeping account of each Eligible
Director shall automatically be credited with the number of Deferred Stock Units
(rounded to the nearest hundredth) equal to the sum of (a) one-fourth of the
Required Amount plus (b) one-fourth of the Optional Amount, if any, divided by
(c) the Fair Market Value.
5.2 Election of Optional Amount. Each Eligible Director shall be entitled
to elect, with respect to each year during the term of this Plan (subject to
Section 6.1 below), such portion of the Annual Fee in excess of the Required
Amount and such portion of the Chairman Fee, if applicable, which the Eligible
Director desires to be credited in Deferred Stock Units under Section 5.1 above
rather than paid in cash. Such election shall be made and submitted prior to
each such year on such form as shall be determined from time to time by the
Committee; provided, however, that the election for the portion of the 1996
calendar year that this Plan is in effect shall be made prior to September 1,
1996 and shall be effective for the remainder of the calendar year commencing on
that date.
5.3 Terms and Conditions of Deferred Stock Units.
(a) The Deferred Stock Units shall become nonforfeitable on the
earliest to occur of (i) the first anniversary of the Date of Grant, (ii) the
Eligible Director's death, disability or termination of service as a director
upon completion of the last term of office to which such director was elected or
(iii) the occurrence of a Change of Control. If an Eligible Director otherwise
terminates service as a director of the Corporation, any Deferred Stock Units
that are forfeitable shall be forfeited as of the date of such termination of
service.
(b) As of each dividend payment date declared with respect to the
Stock, the Corporation shall credit to each bookkeeping account a number of
additional Deferred Stock Units equal to (i) the product of (x) the dividend per
share of Stock payable on such dividend payment date and (y) the number of
Deferred Stock Units credited to such account as of the applicable dividend
record date divided by (ii) the Fair Market Value of a share of Stock on such
dividend payment date.
(c) Upon the termination of service of an Eligible Director the
Eligible Director shall receive a lump sum cash payment equal to the product of
(i) the Fair Market Value of a share of Stock on the date of such termination of
service and (ii) the number of nonforfeitable Deferred Stock Units then credited
to such Eligible Director's account. Notwithstanding the foregoing, an Eligible
Director may elect to receive the distribution with respect to his or her
account in five annual installments commencing as soon as practicable following
the Eligible Director's termination of service, in which event the amount of
each installment shall be determined based upon the Fair Market Value of a share
of Stock as of the date preceding the date such installment payment is made. Any
<PAGE>
Page 49
Exhibit 10(iii)A(26)(a)
such election may be made or changed at any time without limitation, provided,
however, that any election (and any modification or revocation of any election)
shall not be given effect unless made at least two years prior to the Eligible
Director's termination of service.
(d) The holder of Deferred Stock Units shall have none of the rights
of a stockholder of the Corporation. The Corporation's obligation hereunder with
respect to Deferred Stock Units shall be an unsecured promise to pay the amount
described in paragraph (c) above at the times described therein.
6. Term of Plan
6.1 The Plan shall remain in effect until all Deferred Stock Units have
been paid under the terms of the Plan, provided that no Deferred Stock Units may
be granted on or after the tenth anniversary of the Effective Date.
7. Amendment; Termination
7.1 The Board may at any time and from time to time alter, amend, suspend,
or terminate the Plan in whole or in part; provided, however, that the
provisions of Article 5 shall not be amended more than every six months, other
than to comport with changes in the Internal Revenue Code of 1986, as amended,
the Employee Retirement Income Security Act, as amended, or the rules
thereunder. The termination or any modification or amendment of the Plan shall
not, without the consent of a director, affect his or her rights under a grant
of Deferred Stock Units.
8. Miscellaneous
8.1 Deferred Stock Units granted hereunder shall not be assignable or
transferable by the director except by will or by the laws of descent and
distribution.
8.2 Nothing in the Plan shall be construed as conferring any right upon any
director to continue as a member of the Board.
8.3 The Plan and all rights hereunder shall be construed in accordance with
and governed by the laws of the State of Delaware.
8.4 The Corporation shall have the right to require, prior to any payment
hereunder, payment by the recipient of any federal, state, local or other taxes
which may be required to be withheld or paid in connection with such payment
hereunder.
Page 50
Exhibit 10(iii)A(27)(a)
July 22, 1996
Mr. Don W. Hubble
2621 Winslow Drive
Atlanta, Georgia 30305
Dear Don:
This letter will confirm our agreement with respect to your termination of
employment with National Service Industries, Inc. ("NSI").
1. Effective Date. Your termination of employment will be effective on
October 18, 1996 (the "Effective Date"). Our expectation is that you will
continue to work until the Effective Date, unless I advise you otherwise, in
which case you will be placed on a paid leave of absence until the Effective
Date.
2. Severance Pay. NSI will pay you as severance pay an amount equal to
$50,000 per month plus one-twelfth of any increase in the amount of bonus paid
to you for fiscal 1996 over the bonus paid to you for fiscal 1995. Payment of
your severance pay will be made in semi-monthly installments commencing on
November 10, 1996, for the greater of (a) nine months or (b) twelve months minus
one-half of any period remaining between the date you commence any employment,
consulting work, or other arrangement for which you receive compensation and
October 18, 1997.
3. Additional Benefits. If you elect COBRA coverage following your
termination of employment, you will continue to pay the portion of the health
insurance premium cost which you currently pay to NSI, and NSI will pay the
remaining amount of your monthly premiums for COBRA coverage (including coverage
for your wife) until the sooner of (a) your qualification under a medical plan
offered by your employer, or (b) October 18, 1997. NSI will amend your Stock
Option Agreements in two respects: (1) all employee stock options you presently
hold will vest on or before September 18 1996; and (2) the time for exercising
all vested stock options will be extended until October 31, 1998. NSI will add
an appendix to the Supplemental Retirement Plan for Executives of NSI on the
Effective Date to add additional years of credited service to the credited
service you have in the plan on the Effective Date so that your total credited
service will equal twenty years.
4. Other Terms of Payment. You acknowledge that the foregoing severance pay
and benefits exceed those which you would otherwise receive upon your
termination of employment. Your severance pay and benefits will be subject to
appropriate tax withholdings and will satisfy all sums which might otherwise be
due you from NSI, including, without limitation, vacation pay and bonuses, but
excluding any payments due you under the Executive Deferred Compensation Plan
for Senior Officers, the Senior Management Benefit Plan, the Executive Savings
<PAGE>
Page 51
Exhibit 10(iii)A(27)(a)
Plan, NSI's Pension Plan C, the Supplemental Retirement Plan for Executives of
NSI (effective as of January 1, 1994), and NSI's 401(k) Plan, which payments
will be made in accordance with the terms of such plans. You will not be
eligible to participate in any employee benefit plans following your termination
on the Effective Date, except as provided above and as provided for under the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"), as amended.
5. Conditions to Payment. You understand that the severance pay and
benefits provided for hereunder are conditioned upon (a) your not disparaging
NSI or any officer, director of employee of NSI in any material respect; (b)
your not disclosing to any person or using for your own benefit, directly or
indirectly, any trade secrets or confidential information of NSI, unless
directed to do so by court order; (c) your not soliciting, either directly or
indirectly, any current employees of NSI to terminate their employment with NSI
and become employed by you or any person or entity with whom you are associated;
(d) your compliance with the provisions of paragraph 6 below, and (e) the
approval of the Executive Resource and Nominating Committee of the Board of
Directors of NSI.
6. Release. In consideration of enhanced severance pay and benefits, and
subject to the fulfillment of the condition provided in subparagraph 5(e)
hereof, as described above, you hereby release and forever discharge NSI and its
divisions, subsidiaries, and affiliates and their respective shareholders,
officers, directors, employees, agents or others acting on their behalf, and
each of them, from any and all claims, losses or expenses (including attorneys'
fees) which you now have or have had or may later claim to have had as of the
date hereof against them arising out of your employment with NSI or the
termination of your employment. You understand and agree that as a result of
this release and discharge, you will not, for example, be entitled to pursue any
claims arising out of any alleged violation of your rights while employed by
NSI, including, but not limited to, (a) claims for back pay, reinstatement or
recovery of any losses or compensatory, punitive, or other damages to you or
your property resulting from any alleged violation of state or federal law, such
as (but not limited to), claims arising under Title VII of the Civil Rights Act
of 1964, 42 U.S.C. SS621, et. seq. (prohibiting discrimination on account of
age); the Americans with Disabilities Act of 1990, 42 U.S.C. SS12101, et. seq.
(prohibiting discrimination on account of disability); the Family and Medical
Leave Act of 1993 (relating to leaves of absence for family and medical
reasons); and any similar federal or state law claim relating to your
employment; and (b) claims resulting or arising from or in connection with any
alleged tortuous conduct or other wrongdoing by NSI.
7. Acceptance Period. You have a period of twenty-one (21) days from the
date hereof to consider whether or not you will accept the terms and conditions
set forth herein. You are advised to consult with an attorney and anyone else of
your choosing to obtain advice and information concerning such terms and
conditions. In order to receive the severance pay and benefits, it will be
necessary for you to accept such terms and conditions by signing both copies of
this letter agreement and returning one (1) copy to me within twenty-one (21)
days from the date hereof.
<PAGE>
Page 52
Exhibit 10(iii)A(27)(a)
8. Revocation Period. You understand that for a period of up to and
including seven (7) days after the date you sign this letter agreement, you may
revoke it entirely. No rights or obligations contained in this agreement shall
become enforceable before the end of this seven (7) day revocation period. If
you decide to revoke this letter agreement, you will deliver a signed notice of
revocation to me on or before the end of this seven (7) day period. Upon
delivery of a timely notice of revocation, this letter agreement shall be
canceled and void, and neither party to this letter agreement shall have any
rights or obligations arising under it.
9. Nondisclosure Covenant. You agree to hold this agreement and the
contents hereof in strict confidence and not to disclose such contents to any
third party, other than your family members and financial and legal advisors,
without the prior written approval of NSI.
10. Nondisparagement by NSI. NSI agrees to take appropriate steps to ensure
that the officers of NSI will not disparage you.
11. Miscellaneous. This letter agreement constitutes the entire agreement
of the parties and supersedes any prior agreements, whether oral or written,
between the parties, including any prior employment agreements. This letter
agreement shall be binding upon and inure to the benefit of the successors and
assigns of NSI and your heirs, administrators, executors and personal
representatives. If any provision of this letter agreement is determined to be
unenforceable by a court of appropriate jurisdiction, the remaining provisions
of this letter will continue in effect at the discretion of NSI.
12. Statement of Understanding. YOU STATE THAT YOU HAVE CAREFULLY READ THIS
LETTER AGREEMENT, UNDERSTAND ITS MEANING AND INTENT, AND VOLUNTARILY AGREE TO
ABIDE BY ITS TERMS. YOU FURTHER STATE THAT THE ONLY PROMISES MADE TO YOU TO SIGN
THIS LETTER AGREEMENT ARE SET FORTH HEREIN.
Sincerely,
/s/ James S. Balloun
James S. Balloun
AGREED TO AND ACCEPTED THIS
____ DAY OF JULY, 1996
/s/ Don W. Hubble
Don W. Hubble
Page 53
Exhibit 10(iii)A(28)(a)
B.A. Hattox
August 26, 1996
August 26, 1996
Mr. Brock A. Hattox
19206 Hanston Court
Houston, Texas 77094
Dear Brock:
This letter will confirm the terms of your employment by National Service
Industries, Inc. ("NSI") and NSI Services, L.P., effective September 9, 1996
(the "Effective Date"). We are enthusiastic about your decision to join NSI and
look forward to working with you to enhance NSI's future growth.
The terms of your employment, which are subject, of course, to approval by
our Executive Resource and Nominating Committee and the Board of Directors, will
be as follows:
1. Duties - You will be nominated for election as Executive Vice President
and Chief Financial Officer at the meeting of our Board of Directors on
September 18, 1996. You will also serve in the same capacity for NSI Services,
L.P. (the "Partnership"). You will assume the duties and responsibilities
commensurate with those positions, which will include service to NSI, the
Partnership, and other subsidiaries and partnerships of NSI and may receive
compensation, benefits, and other amounts from such entities, the aggregate
amount of which will equal the sums and benefits specified herein. Between
September 9 and September 18, 1996, you will perform substantially the same
duties as outlined above as assistant to the Chairman of the Board for the
salary set forth in paragraph 2 below. You will devote substantially all of your
working time and attention to the business and affairs of NSI.
2. Base Salary - Your base salary for the fiscal year ending August 31,
1997 ("fiscal 1997"), will be at the annual rate of Three Hundred Fifty Thousand
Dollars ($350,000). Thereafter, your base salary will be subject to review for
increases at such time as NSI conducts salary reviews for executive officers
generally.
<PAGE>
Page 54
Exhibit 10(iii)A(28)(a)
3. Annual Incentive Compensation - You will participate in the NSI
Management Compensation and Incentive Plan (the "AIP") for fiscal 1997 and will
receive a bonus under the AIP of at least One Hundred Fifty Thousand Dollars
($150,000) for fiscal 1997.
4. Stock Options - You will receive a grant of employee stock options for
twenty thousand (20,000) shares of stock under our current long-term incentive
plan upon your arrival at NSI. In addition, you will receive a grant of options
for at least twenty thousand (20,000) shares at the September 1996 board meeting
under either our current long-term incentive plan or a new plan to be presented
to the Board at the meeting.
5. Retirement Plans - Upon satisfying the eligibility requirements, you
will be eligible to participate in NSI's tax-qualified retirement plans, NSI
Pension Plan C, and the NSI 401(k) Plan for Corporate Office Employees. In
addition, on September 18, 1996, you will become a participant in the
Supplemental Retirement Plan for Executives of NSI (the "SERP"). Your benefits
under the SERP will be determined in the same manner as for other executive
officers of NSI participating in the plan (other than the Chief Executive
Officer), except that you will be credited with service under the SERP for each
year of actual service. You will become vested in your SERP benefit after
completing five (5) years of employment with NSI and will be eligible for early
retirement at age sixty (60).
6. Medical, Life Insurance, and Other Employee Benefits - You will be
covered by, or eligible to participate in, the medical, dental, life insurance,
disability, deferred compensation, and other benefit programs generally made
available by NSI to its executive officers and their families, including a car
allowance of Four Hundred Dollars ($400) per month.
7. Relocation Expenses - We will pay the following relocation expenses:
(a) your expenses for moving your household effects to Atlanta;
(b) three (3) months rent for an apartment and storage of your personal
effects in Atlanta, pending your move into your new home; and
<PAGE>
Page 55
Exhibit 10(iii)A(28)(a)
(c) brokerage and closing costs you incur in connection with the sale
of your home in Houston and the purchase of a home in Atlanta.
8. Severance Payment/Change in Control - Except in the event of termination
in connection with a Change in Control of NSI (as defined in the Severance
Protection Agreement that will cover you), you will be entitled to the following
severance payment:
* If your employment is terminated on or before August 31, 1999, except
for voluntary termination, termination upon death or Disability (as
defined below), or termination by NSI for Cause (as defined below),
you will receive (a) a severance payment (payable in twenty-four (24)
semi-monthly installments) equal to your then current salary plus any
annual incentive received for the preceding fiscal year, and (b) a pro
rata bonus for the fiscal year during which you are terminated. In
addition to the foregoing, any employee options you hold at the date
of termination will be vested and you will be given two (2) years
following termination to exercise them.
* For purposes of entitlement to a severance benefit, "Cause" shall mean
any act(s) on your part that constitutes fraud, a felony involving
dishonesty, a breach of fiduciary duty, or gross malfeasance or
habitual neglect of your duties for NSI, and "Disability" shall mean a
physical or mental infirmity which impairs your ability to
substantially perform your duties as Chief Financial Officer of NSI
for a period of one hundred eighty (180) consecutive days. The NSI
Board, based upon the information provided to it, shall determine
whether an act constituting Cause has occurred and whether you have
suffered a Disability. In the case of termination for Cause, (i) you
will be given written notice of the actions constituting Cause at
least fifteen (15) days prior to any meeting of the Board of Directors
of NSI at which your termination is to be considered; (ii) you will be
given the opportunity to be heard by the Board; and (iii) your
termination for Cause must be evidenced by a resolution adopted by a
majority of the Board.
With respect to Change in Control situations, you will be covered by a Severance
Protection Agreement with the same provisions as are applicable to NSI's other
<PAGE>
Page 56
Exhibit 10(iii)A(28)(a)
executive officers. In the event of your termination in connection with a Change
in Control that entitles you to benefits under the Severance Protection
Agreement, you will receive the greater of the payments and benefits provided
under the Severance Protection Agreement (after consideration of any tax
penalties) or the severance payments described above.
The base salary, annual incentive, option grants, nonqualified retirement
benefits, and any severance payments will be structured to ensure the tax
deductibility to NSI of the payments and benefits under the Internal Revenue
Code of 1986, including Code Section 162(m). We can provide additional
information on these issues if you so desire.
We will prepare a SERP provision and Severance Protection Agreement to
evidence the arrangements set forth in this letter.
Again, we are delighted you are joining NSI and we look forward to a long
and mutually satisfactory relationship. This letter outlines your employment
relationship with NSI; if you agree with the employment terms as outlined above,
please sign and date both copies of this letter agreement and return one copy to
me at your earliest convenience.
Sincerely,
/s/ James S. Balloun
James S. Balloun
ACCEPTED AND AGREED TO THIS
_____ DAY OF _____________, 1996
/s/ Brock A. Hattox
Brock A. Hattox
Page 57
Exhibit 11
NATIONAL SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
COMPUTATIONS OF NET INCOME PER SHARE OF COMMON STOCK
(In thousands, except per-share data)
Years Ended August 31
1996 1995 1994
Primary:
Weighted Average Number of Shares Outstanding
(determined on a monthly basis) ........... 47,941 48,696 49,547
Net Income ..................................$101,148 $ 94,097 $ 82,698
Primary Earnings per Share ..................$ 2.11 $ 1.93 $ 1.67
Fully Diluted:
Weighted Average Number of Shares
Outstanding ............................... 47,941 48,696 49,547
Additional Shares Assuming Exercise of
Options:
Options exercised ....................... 1,260 989 707
Treasury stock purchased with ........... (919) (835) (619)
Average Common Shares Outstanding
(as adjusted) ............................ 48,282 48,850 49,635
Net Income ..................................$101,148 $ 94,097 $ 82,698
Fully Diluted Earnings per Share ............$ 2.09 $ 1.93 $ 1.67
Page 58
Exhibit 13
<TABLE>
Consolidated Balance Sheets
National Service Industries, Inc.
<S> <C> <C>
August 31
(In thousands, except share data) 1996 1995
Assets
Current Assets:
Cash and cash equivalents ........................................................................ $ 58,662 $ 79,402
Short-term investments ........................................................................... 551 3,598
Receivables, less reserves for doubtful accounts of $5,807 in 1996 and $6,467 in 1995 ............ 269,971 266,056
Inventories, at the lower of cost (on a first-in, first-out basis) or market ..................... 169,813 185,789
Linens in service, net of amortization ........................................................... 97,710 88,605
Deferred income taxes ............................................................................ 2,152 10,221
Prepayments ...................................................................................... 7,522 6,739
Total Current Assets ..................................................................... 606,381 640,410
Property, Plant, and Equipment, at cost:
Land ............................................................................................. 29,062 31,016
Buildings and leasehold improvements ............................................................. 194,219 192,023
Machinery and equipment .......................................................................... 542,056 503,868
Total Property, Plant, and Equipment ..................................................... 765,337 726,907
Less-Accumulated depreciation and amortization ................................................... 407,941 377,003
Property, Plant, and Equipment-net ....................................................... 357,396 349,904
Other Assets:
Goodwill and other intangibles ................................................................... 89,427 101,410
Other ............................................................................................ 41,442 39,622
Total Other Assets ....................................................................... 130,869 141,032
Total Assets ..................................................................... $1,094,646 $1,131,346
</TABLE>
18
<PAGE>
Page 59
Exhibit 13
<TABLE>
Consolidated Balance Sheets (continued)
National Service Industries, Inc.
<S> <C> <C>
August 31
(In thousands, except share data) 1996 1995
Liabilities and Stockholders' Equity
Current Liabilities:
Current maturities of long-term debt ............................................................. $ 46 $ 87
Notes payable .................................................................................... 6,696 6,399
Accounts payable ................................................................................. 79,851 81,524
Accrued salaries, commissions, and bonuses ....................................................... 42,788 43,944
Current portion of self-insurance reserves ....................................................... 15,396 16,276
Other accrued liabilities ........................................................................ 52,649 54,340
Total Current Liabilities ................................................................ 197,426 202,570
Long-Term Debt, less current maturities .................................................................. 24,920 26,776
Deferred Income Taxes .................................................................................... 63,347 65,756
Self-Insurance Reserves, less current portion ............................................................ 63,369 67,830
Other Long-Term Liabilities .............................................................................. 27,576 24,010
Commitments and Contingencies (Note 4)
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 1996 and 1995 57,919 57,919
Paid-in capital .................................................................................. 11,021 8,065
Retained earnings ................................................................................ 791,367 746,256
860,307 812,240
Less-Treasury stock, at cost (11,447,036 shares in 1996 and 9,609,261 shares in 1995)..................... 142,299 67,836
Total Stockholders' Equity ............................................................... 718,008 744,404
Total Liabilities and Stockholders' Equity ....................................... $1,094,646 $1,131,346
The accompanying notes to consolidated financial statements are an integral part of these balance sheets.
</TABLE>
19
<PAGE>
Page 60
Exhibit 13
<TABLE>
Consolidated Statements of Income
National Service Industries, Inc.
Years Ended August 31
(In thousands, except per-share data) 1996 1995 1994
<S> <C> <C> <C>
Sales and Service Revenues:
Net sales of products ..................................... $ 1,482,937 $1,424,180 $1,337,410
Service revenues .......................................... 530,625 546,447 544,454
Total Revenues .................................... 2,013,562 1,970,627 1,881,864
Costs and Expenses:
Cost of products sold ..................................... 933,405 908,869 875,055
Cost of services .......................................... 304,381 299,687 286,519
Selling and administrative expenses ....................... 616,513 601,143 576,463
Interest expense, net ..................................... 1,565 1,648 2,788
Other (income) expense, net ............................... (4,150) 8,783 8,841
Total Costs and Expenses .......................... 1,851,714 1,820,130 1,749,666
Income before Provision for Income Taxes .......................... 161,848 150,497 132,198
Provision for Income Taxes ........................................ 60,700 56,400 49,500
Net Income ........................................................ $ 101,148 $ 94,097 $ 82,698
Earnings per Share ................................................ $ 2.11 $ 1.93 $ 1.67
Weighted Average Number of Shares Outstanding ..................... 47,941 48,696 49,547
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
20
<PAGE>
Page 61
Exhibit 13
<TABLE>
Consolidated Statements of Stockholders' Equity
National Service Industries, Inc.
Common Paid-in Retained Treasury
(In thousands, except per-share data) Stock Capital Earnings Stock Total
<S> <C> <C> <C> <C> <C>
Balance August 31, 1993 .......................................... $57,919 $ 7,299 $ 673,399 $ (34,594) $ 704,023
Treasury stock purchased(1) .................................. -- -- -- (27) (27)
Stock options exercised(2) ................................... -- 385 -- 90 475
Treasury stock acquired in connection with divestiture(3) .... -- -- -- (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(4) .................................. -- -- -- (24,127) (24,127)
Stock options exercised(5) ................................... -- 380 -- 148 528
Adjustment of treasury stock issued in connection with acquisition(6) -- 1 -- (1) --
Adjustment of treasury stock acquired in connection with divestiture(7) -- -- -- (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
Treasury stock purchased(8) .................................. -- -- -- (75,223) (75,223)
Stock options exercised(9) ................................... -- 2,956 -- 760 3,716
Net income ................................................... -- -- 101,148 -- 101,148
Cash dividends of $1.15 per share paid on common stock ....... -- -- (55,272) -- (55,272)
Adjustment to recognize net increase in pension liability .... -- -- (23) -- (23)
Foreign currency translation adjustment . .................... -- -- (742) -- (742)
Balance August 31, 1996 .......................................... $57,919 $ 11,021 $ 791,367 $(142,299) $ 718,008
(1)992 shares. (2)21,705 shares. (3) 341,840 shares. (4)949,178 shares. (5)23,598 shares.
(6) 39 shares. (7) 4,976 shares. (8)2,000,000 shares. (9)185,044 shares.
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
21
<PAGE>
Page 62
Exhibit 13
<TABLE>
Consolidated Statements of Cash Flows
National Service Industries, Inc.
Years Ended August 31
(In thousands) 1996 1995 1994
<S> <C> <C> <C>
Cash Provided by (Used for) Operating Activities
Net income .......................................................................... $ 101,148 $ 94,097 $ 82,698
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization ............................................... 58,428 57,130 60,548
Provision for losses on accounts receivable ................................. 2,708 3,170 2,804
(Gain) loss on the sale of property, plant, and equipment ................... (1,652) 1,138 (76)
Gain on the sale of businesses .............................................. (7,579) (5,726) (2,249)
Change in non-current deferred income taxes ................................. 1,864 (3,663) (1,092)
Change in assets and liabilities net of effect of acquisitions-
Receivables ......................................................... (7,343) (11,367) (8,425)
Inventories and linens in service, net .............................. 5,308 (8,522) (23,095)
Current deferred income taxes ....................................... 8,069 (2,243) 11,359
Prepayments ......................................................... (940) 2,086 4,635
Accounts payable and accrued liabilities ............................ (6,117) 11,945 5,796
Changes in self-insurance reserves and other long-term liabilities .. (895) 7,819 576
Net Cash Provided by Operating Activities ................... 152,999 145,864 133,479
Cash Provided by (Used for) Investing Activities
Change in short-term investments .................................................... 3,047 (1,019) 2,197
Purchases of property, plant, and equipment ......................................... (65,499) (58,768) (42,517)
Sale of property, plant, and equipment .............................................. 9,105 8,491 4,552
Sale of businesses .................................................................. 15,250 14,044 2,395
Acquisitions ........................................................................ (600) (2,668) (569)
Change in other assets .............................................................. (3,071) (4,848) 52
Net Cash Used for Investing Activities ...................................... $ (41,768) $ (44,768) $ (33,890)
</TABLE>
22
<PAGE>
Page 63
Exhibit 13
<TABLE>
Consolidated Statements of Cash Flows (continued)
National Service Industries, Inc.
Years Ended August 31
(In thousands) 1996 1995 1994
<S> <C> <C> <C>
Cash Provided by (Used for) Financing Activities
Repayment of long-term debt ......................................................... $ (1,897) $ (667) $ (2,680)
Recovery of investment in tax benefits .............................................. 1,720 1,329 2,080
Deferred income taxes from investment in tax benefits ............................... (4,273) (3,900) (3,875)
(Purchase) issuance of treasury stock, net .......................................... (71,507) (23,733) 448
Cash dividends paid ................................................................. (55,272) (54,156) (53,042)
Net Cash Used for Financing Activities ...................................... (131,229) (81,127) (57,069)
Effect of Exchange Rate Changes on Cash ..................................................... (742) 814 246
Net Change in Cash and Cash Equivalents ..................................................... (20,740) 20,783 42,766
Cash and Cash Equivalents at Beginning of Year .............................................. 79,402 58,619 15,853
Cash and Cash Equivalents at End of Year .................................................... $ 58,662 $ 79,402 $ 58,619
Supplemental Cash Flow Information:
Income taxes paid during the year ................................................... $ 58,974 $ 50,630 $ 41,584
Interest paid during the year ....................................................... 4,994 3,671 4,030
Noncash Investing and Financing Activities:
Noncash aspects of sale of businesses-
Receivables incurred ........................................................ $ (234) $ (3,003) $ --
Liabilities assumed (removed) ............................................... 1,009 1,064 (2,442)
Treasury stock acquired ..................................................... -- -- (9,191)
Noncash aspects of acquisitions-
Liabilities assumed or incurred ............................................. $ 6 $ 468 $ --
Treasury stock returned ..................................................... -- (1) --
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
23
<PAGE>
Page 64
Exhibit 13
Notes to Consolidated Financial Statements
National Service Industries, Inc.
NOTE 1. Summary of Accounting Policies
Description of Business
The company has leadership positions in four business segments-Lighting
Equipment, Textile Rental, Chemicals, and Envelopes. The Lighting Equipment
segment produces a variety of fluorescent and non-fluorescent fixtures for
markets throughout the United States, Canada, Mexico, and overseas. The Textile
Rental segment provides linens, garments, and dust control products to
healthcare, linen supply, and industrial customers principally in the United
States. The Chemical segment produces maintenance, sanitation, and water
treatment products for customers throughout the United States, Canada, Puerto
Rico, and Western Europe. The Envelope segment produces business and specialty
envelopes in the South and Southwest. The company's other business, which is
being divested (Note 5), provides insulation products and services principally
in the southeastern United States.
Principles of Consolidation
The consolidated financial statements include the accounts of the company and
all subsidiaries after elimination of significant intercompany transactions and
accounts.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash, Cash Equivalents, and Short-Term Investments
Cash in excess of daily requirements is invested in time deposits and marketable
securities, consisting of taxable and tax exempt variable rate demand notes,
included in the balance sheet 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, 1996 and 1995 approximate fair
value. At August 31, 1996, 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, 1996, 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, 1996 and 1995:
(In thousands) 1996 1995
Raw materials and supplies ............................... $ 73,236 $ 87,470
Work in progress ......................................... 9,679 9,879
Finished goods ........................................... 86,898 88,440
$169,813 $185,789
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 ($45,029,000 in 1996 and
$47,853,000 in 1995) 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 lives 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 the 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.
24
<PAGE>
Page 65
Exhibit 13
Notes to Consolidated Financial Statements (continued)
National Service Industries, Inc.
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 (income) expense, net" in the consolidated statements of income and
amounted to gains of $249,000 in 1996 and $201,000 in 1995 and a loss of
$379,000 in 1994.
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.
Net pension (income) expense for 1996, 1995, and 1994 included the
following components:
(In thousands) 1996 1995 1994
Service cost of benefits earned during the period $ 2,719 $ 2,648 $ 2,466
Interest cost on projected benefit obligation ... 7,438 7,277 7,262
Return on plan assets ........................... (28,255) (12,178) (1,929)
Net amortization and deferral ................... 17,383 2,257 (8,215)
Net pension (income) expense .................... $ (715) $ 4 $ (416)
The following schedule reconciles the funded status of the plans as of June
1, 1996 and 1995, with amounts reported in the company's balance sheets at
August 31, 1996 and 1995:
<TABLE>
1996 1995
Plan Accumulated Plan Accumulated
Assets Benefit Assets Benefit
Exceed Obligation Exceed Obligation
Accumulated Exceeds Accumulated Exceeds
Benefit Plan Benefit Plan
(In thousands) Obligation Assets Obligation Assets
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations as of June 1:
Vested ..................................................... $ (91,127) $(3,784) $ (77,505) $(3,879)
Nonvested .................................................. (4,281) (1,407) (6,585) (90)
Accumulated benefit obligation ..................................... (95,408) (5,191) (84,090) (3,969)
Effect of projected salary increases ............................... (7,431) (1,640) (6,295) (1,731)
Total projected benefit obligation ................................. (102,839) (6,831) (90,385) (5,700)
Fair value of plan assets .......................................... 134,426 -- 113,510 --
Plan assets greater (less) than projected benefit obligation ....... 31,587 (6,831) 23,125 (5,700)
Unrecognized transition (asset) liability .......................... (9,475) 74 (10,777) 86
Unrecognized prior service cost obligation ......................... 3,056 2,528 2,847 2,262
Unrecognized net loss (gain) ....................................... 6,471 (371) 13,549 (755)
Adjustment required to recognize minimum liability ................. -- (918) -- (426)
Prepaid (accrued) pension expense at August 31 ..................... $ 31,639 $(5,518) $ 28,744 $(4,533)
</TABLE>
For all periods presented, the discount rate used to determine the
projected benefit obligation is 8 percent, the assumed growth rate of
compensation is 5.5 percent, and the expected long-term rate of return on plan
assets is 9.5 percent. During 1996, the company implemented the widely used,
more conservative GA83 mortality table.
The company also has profit sharing and 401(k) plans to which both
employees and the company contribute. At August 31, 1996, assets of the 401(k)
plans included shares of the company's common stock with a market value of
approximately $11,412,000. The company's cost of these plans was $4,595,000 in
1996, $3,810,000 in 1995, and $3,133,000 in 1994.
25
<PAGE>
Page 66
Exhibit 13
Notes to Consolidated Financial Statements (continued)
National Service Industries, Inc.
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.
Interest Expense, Net
Interest expense, net is comprised primarily of interest expense on long-term
debt and short-term line of credit borrowings and interest income on cash, cash
equivalents, and short-term investments.
Other (Income) Expense, Net
Other (income) expense, net is comprised primarily of amortization of intangible
assets net of gains resulting from the sale of fixed assets and businesses and
casualty loss insurance proceeds.
Accounting Standards Yet to Be Adopted
During fiscal 1997, the company is required to adopt Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed of." SFAS No. 121
requires that long-lived assets and certain intangibles be reviewed whenever
events or changes in circumstances indicate that the carrying value of an asset
may not be recoverable. In the opinion of management, the adoption of SFAS No.
121 is not expected to have a material impact on the company's financial
position or results of operations.
Reclassifications
Certain amounts in the 1995 and 1994 financial statements and notes have been
reclassified to conform with the 1996 presentation.
NOTE 2. Long-Term Debt and Lines of Credit
Long-term debt at August 31, 1996 and 1995, consisted of the following:
(In thousands) 1996 1995
6.5% to 9.25% mortgage notes, payable in installments
through 2000 (secured in part by property, plant,
and equipment having a net book value of $632,000
at August 31, 1996) $ 148 $ 244
3.55% to 8.5% other notes, payable in installments to 2021 24,818 26,619
24,966 26,863
Less-Amounts payable within one year included in
current liabilities 46 87
$24,920 $26,776
The annual maturities of long-term debt are as follows:
(In thousands) Amounts
Year Ending August 31
1997 $ 46
1998 5,500
1999 25
2000 28
2001 16
Later years 19,351
$24,966
Late in fiscal 1996, the company negotiated a $250,000,000 multi-currency
committed credit facility, of which $187,500,000 has been provided through
domestic banks and $62,500,000 through foreign banks. The company had no
outstanding borrowings under the facility at August 31, 1996.
The company has complimentary lines of credit totaling $132,000,000, of
which $110,000,000 has been provided domestically and $22,000,000 is available
on a multi-currency basis primarily from a European bank. At August 31, 1996 the
company had foreign currency short-term bank borrowings equivalent to $6,696,000
at an average interest rate of 4.0%.
Under one of the domestic lines of credit, up to $40,000,000 may be used
for letters of credit. At August 31, 1996, $16,683,000 in letters of credit
associated with the company's self-insurance program (Note 4) was outstanding
and $23,317,000 was available under the line of credit.
26
<PAGE>
Page 67
Exhibit 13
Notes to Consolidated Financial Statements (continued)
National Service Industries, Inc.
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, 1996.
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 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, 1996, 1995, and 1994 were as
follows:
1996 1995 1994
Options outstanding at September 1 1,088,773 820,752 680,139
Granted 513,200 325,400 214,700
Exercised 185,044 23,598 21,705
Canceled 150,886 33,781 52,382
Options outstanding at August 31 1,266,043 1,088,773 820,752
Option price range at August 31 $19.75-$39.75 $19.75-$29.00 $19.75-$29.00
Options exercisable at August 31 466,377 513,665 316,024
Options available for grant at
August 31 300,408 657,565 949,184
Potential dilution of earnings per share applicable to these stock options
is not significant.
In 1996, the Board of Directors adopted the National Service Industries,
Inc. Nonemployee Director Deferred Stock Unit Plan under which eligible
directors are required to defer into the plan a portion of their annual
directors fees and may defer an additional optional amount. At quarterly
intervals, participants are granted stock units equal to one-fourth of the
annual deferred amount divided by the fair market value at the date of the
grant. At each dividend payment date, the deferred stock units are further
increased based on the dividend rate and the fair market value of the company's
common stock at the dividend payment date. The deferred stock units have no
voting rights and vest one year from the date of grant. Upon termination,
participants receive a cash payment for vested deferred stock units at the fair
market value at that date. At August 31, 1996, participants had been credited
with 708 deferred stock units. During fiscal 1996, there was no related
compensation expense.
27
<PAGE>
Page 68
Exhibit 13
Notes to Consolidated Financial Statements (continued)
National Service Industries, Inc.
NOTE 4. Commitments and Contingencies
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. Based on an independent actuary's estimate of the aggregate liability
for claims incurred, a provision for claims under the self-insured program is
recorded and revised annually. Based on the 1996 actuarial review, reserves
relating to prior years were reduced by $14,100,000 as a result of improved
claims experience. Expense associated with the program was $13,677,000 in 1996,
$22,800,000 in 1995, and $25,588,000 in 1994.
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, 1996, are as follows:
(In thousands) Amount
Year Ending August 31
1997 $ 9,524
1998 7,389
1999 5,769
2000 4,246
2001 3,462
Later years 9,015
Total minimum lease payments $39,405
Total rent expense was $10,907,000 in 1996, $11,607,000 in 1995, and
$10,585,000 in 1994.
Litigation
The company is involved in various legal matters primarily arising in the
normal course of business. In the opinion of management, the company's liability
in any of these matters will not have a material adverse effect on its financial
condition or results of operations.
NOTE 5. Divestitures and Acquisitions
In September 1996, the company announced its intention to divest the North Bros.
insulation business. The company does not expect the sale to have a material
impact on earnings.
Acquisitions during 1996 related to the Textile Rental segment and were not
material. During 1996 and 1995, the company divested several non-strategic or
unprofitable businesses, primarily in the Textile Rental segment, generating
cash of $15,250,000 and $14,044,000, respectively.
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 Infranor 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.
NOTE 6. Income Taxes
Income taxes are reconciled with the Federal statutory rate as follows:
(In thousands) 1996 1995 1994
Federal income tax computed at statutory rate $56,647 $52,674 $46,269
Increase (decrease) in taxes:
State income tax, net of Federal income
tax benefit 5,368 4,308 4,693
Other, net (1,315) (582) (1,462)
$60,700 $56,400 $49,500
The following summarizes the components of income tax expense:
(In thousands) 1996 1995 1994
Provision for current Federal taxes $50,899 $55,921 $40,253
Provision for current state taxes 8,258 6,628 7,220
Provision (credit) for deferred taxes 1,543 (6,149) 2,027
$60,700 $56,400 $49,500
28
<PAGE>
Page 69
Exhibit 13
Notes to Consolidated Financial Statements (continued)
National Service Industries, Inc.
Components of the net deferred income tax liability at August 31, 1996 and
1995 include:
(In thousands) 1996 1995
Deferred tax liabilities:
Depreciation $ 43,790 $ 45,125
Safe harbor lease 39,030 43,303
Amortization of linens 19,116 11,933
Pension 10,906 7,522
Total deferred tax liabilities 112,842 107,883
Deferred tax assets:
Self insurance (30,249) (34,551)
Deferred compensation (7,966) (3,706)
Bonuses (2,816) (5,145)
Foreign tax losses (2,483) (4,414)
Other assets (8,133) (4,532)
Total deferred tax assets (51,647) (52,348)
Net deferred tax liability $ 61,195 $ 55,535
At August 31, 1996, the company had foreign net operating loss
carryforwards of $12,974,000 expiring in fiscal years 1997 through 2004.
Current income taxes payable were $5,374,000 and $11,257,000 at August 31,
1996 and 1995, respectively.
NOTE 7. Quarterly Financial Data (Unaudited)
Sales and Income
(In thousands, except Service Gross before Net Earnings
earnings per share) Revenues Profit Taxes Income per Share
1996
1st Quarter $492,550 $190,747 $37,095 $23,269 $ .48
2nd Quarter 482,206 180,258 30,720 19,250 .40
3rd Quarter(1) 516,870 202,378 44,336 27,677 .58
4th Quarter(1) 521,936 202,393 49,697 30,952 .66
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(2) 518,035 204,424 47,667 29,778 .62
(1) Results for the third and fourth quarters include favorable self-insurance
reserve adjustments of $6,302,000 and $7,644,000, respectively.
(2) Results include favorable self-insurance reserve adjustment of $4,592,000.
NOTE 8. Business Segment Information
<TABLE>
Depreciation Capital
Sales and and Expenditures
Service Operating Identifiable Amortization Including
(In thousands) Revenues Profit(Loss) Assets Expense Acquisitions
<S> <C> <C> <C> <C> <C>
1996
Lighting Equipment $ 867,771 $ 76,085 $ 332,006 $15,224 $20,800
Textile Rental(1) 530,625 42,198 420,169 29,753 28,418
Chemical 367,682 38,611 170,327 8,127 5,744
Other 247,484 15,283 80,694 4,151 6,980
2,013,562 172,177 1,003,196 57,255 61,942
Corporate (8,764) 91,450 1,173 3,624
Interest Expense, net (1,565)
$ 2,013,562 $ 161,848 $1,094,646 $58,428 $65,566
1995
Lighting Equipment $ 851,363 $ 61,313 $ 340,187 $14,205 $23,098
Textile Rental(1) 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 (9,762) 116,275 1,600 21
Interest Expense, net (1,648)
$ 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(1) 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 (8,964) 100,396 1,248 339
Interest Expense, net (1,960)
$ 1,881,864 $ 132,198 $1,101,261 $60,548 $42,518
</TABLE>
(1) Textile Rental segment operating profit includes one-time gains, primarily
resulting from the sale of fixed assets and businesses, of $7,800,000 in 1996,
$6,300,000 in 1995, and $1,250,000 in 1994.
29
<PAGE>
Page 70
Exhibit 13
Report of Management
National Service Industries, Inc.
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 public
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/ James S. Balloun
James S. Balloun
Chairman, President, and Chief Executive Officer
/s/ Brock Hattox
Brock Hattox
Executive Vice President and Chief Financial Officer
/s/ Mark R. Bachmann
Mark R. Bachmann
Vice President and Controller
Report of Independent Public 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, 1996
and 1995 and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended August 31, 1996.
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, 1996 and 1995 and the results of their
operations and their cash flows for each of the three years in the period ended
August 31, 1996 in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Atlanta, Georgia
October 21, 1996
30
<PAGE>
Page 71
Exhibit 13
Management's Discussion and Analysis of
Financial Condition and Results of Operations
National Service Industries, Inc.
Financial Condition
National Service Industries' financial condition remained sound at August 31,
1996. Net working capital was $409.0 million, down from $437.8 million at August
31, 1995, and the current ratio was 3.1, compared with 3.2 at last year end.
Cash and short-term investments were reduced to $59.2 million, from $83.0
million at the prior year end, as the company accelerated its share repurchases.
During 1996, the company invested $66.1 million in capital expenditures and
acquisitions. The percent of short-term and long-term debt to total
capitalization was 4.2 percent at August 31, 1996 and 4.3 percent at the prior
year end. Cash provided by operating activities rose to $153.0 million from
$145.9 million in 1995 and $133.5 million in 1994. The 1996 improvement was due
in large part to better management of inventories and higher net income. The
improvement in 1995 resulted primarily from a lower rate of investment in
inventories and linens in service and a decrease in prepayments.
Capital expenditures, exclusive of acquisition spending, were $65.5 million
in 1996, $58.8 million in 1995, and $42.5 million in 1994. During 1996, Lighting
Equipment segment spending included expansion of its production facility in
Monterrey, Mexico, as well as continued investment in equipment replacements,
process improvements, and tooling for new products. The Textile Rental segment
invested substantially in facility improvements and replacement of equipment and
vehicles. In the prior year, the Lighting Equipment segment invested in
manufacturing equipment replacements and improvements and the construction of
its Mexican production facility, which began production in the fourth quarter of
1995. Textile Rental segment expenditures for 1995 included fleet upgrades,
facility improvements, and information system enhancements.
Cash payments in connection with acquisitions totaled $.6 million in 1996,
$2.7 million in 1995, and $.6 million in 1994. All three years included spending
for small acquisitions in the Textile Rental segment. In 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 beginning with the
fourth quarter of fiscal 1995.
During 1996 and 1995, the company divested several non-strategic
businesses, primarily in the Textile Rental segment, generating cash of $15.3
million and $14.0 million, respectively.
During 1996, the company distributed 129 percent of net income to
shareholders through dividends and share repurchases. The company accelerated
its share repurchase program, spending $75.2 million for the full 2,000,000
shares authorized annually. Last year, the company spent $24.1 million on the
repurchase of approximately 949,000 shares of its common stock. Dividend
payments totaled $55.3 million, or $1.15 per share, in 1996, $54.2 million, or
$1.11 per share, in 1995, and $53.0 million, or $1.07 per share, in 1994. The
fiscal 1996 dividend of $1.15 per share was a 3.6 percent increase. For the
periods presented, capital expenditures, working capital needs, dividends,
acquisitions, and share repurchases were financed primarily with internally
generated funds. European operations were supplemented by short-term borrowings
in the European market. The Infranor acquisition was a cash transaction.
Contractual commitments for capital and acquisition spending for fiscal 1997
total $17.3 million. The company expects actual capital expenditures in 1997 to
be somewhat higher than the 1996 level. Late in fiscal 1996, the company
negotiated a $250 million multi-currency committed credit facility, of which
31
<PAGE>
Page 72
Exhibit 13
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
National Service Industries, Inc.
$187.5 million has been provided through domestic banks and $62.5 million
through foreign banks. The company has complimentary lines of credit totaling
$132 million, of which $110 million has been provided domestically and $22
million is available on a multi-currency basis primarily from a European bank.
Current liquid assets, internally generated funds, and the available credit are
expected to meet most of the anticipated general operating cash requirements for
the next twelve months.
Results of Operations
National Service Industries posted a record $2.01 billion in revenues for the
fiscal year ended August 31, 1996. Total year revenues increased $42.9 million,
or 2.2 percent, from $1.97 billion in 1995, primarily as a result of higher
pricing in the Lighting Equipment segment and volume gains across the Chemical
and Envelope segments. Fiscal 1995 revenues rose 4.7 percent from 1994's $1.88
billion, as a result of volume gains in the Lighting Equipment and Chemical
segments and pricing improvements in the Envelope segment. Adjusted for the
divestiture of the Marketing Services division, which contributed $32 million to
1994 sales, the 1995 sales gain was 6.5 percent.
Net income for fiscal 1996 increased $7.1 million, or 7.5 percent, to a
record $101.1 million, or $2.11 per share. Earnings per share grew at the
greater rate of 9.2 percent, benefiting from an average of 755,000 fewer shares
outstanding for the year. The performance of all segments was enhanced by
improved workers' compensation claims experience, which resulted in a $14.1
million reduction in expense. For fiscal 1995, net income grew 13.8 percent to
$94.1 million, or $1.93 per share.
Lighting Equipment segment sales grew 1.9 percent to a record $868 million
from $851 million in 1995. Pricing gains were offset somewhat by lower unit
volumes. Sales for 1995 increased 11.5 percent from 1994 on the strength of
volume gains. For 1996, operating profit advanced 24.1 percent to 8.8 percent of
revenues, compared with 7.2 percent of revenues in 1995 and 6.6 percent in 1994.
Current-year margin improvements resulted from a more favorable product mix and
lower manufacturing costs. In 1995, higher unit volumes more than compensated
for higher product and selling costs.
Textile Rental segment revenues declined 2.9 percent to $531 million
largely due to lost sales from previously divested branches and continued price
pressure. Revenues for 1995 were $546 million, compared with $544 million in
1994, and reflected pricing gains offset by declining volumes, particularly in
the hospital market. For 1996, operating income decreased 17.3 percent to 8.0
percent of revenues, compared with 9.3 percent of revenues in 1995 and 9.0
percent in 1994. The decline resulted from lower selling prices and cost
increases for labor and merchandise, which were partially offset by lower
workers' compensation costs and one-time gains on asset sales. The improvement
in 1995 was due to reduced labor and workers' compensation costs and gains
related to plant divestitures.
Chemical segment
revenues advanced 4.3 percent to $368 million, from $353 million in 1995, which
was a 6.1 percent increase from 1994's $332 million. The gains in both periods
resulted from higher unit volumes, predominantly in domestic operations.
Operating income grew 9.6 percent to 10.5 percent of revenues, from 10.0 percent
of revenues in 1995 and 10.6 percent in 1994. Margins benefited from the volume
32
<PAGE>
Page 73
Exhibit 13
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
National Service Industries, Inc.
increases and lower material and operating costs. The margin decline in 1995
resulted from the segment's increased investment in recruiting and training
sales representatives and because of increases in certain raw material costs.
The Envelope and Insulation Service businesses combined for a 12.4 percent
sales increase. Revenues were $247 million in 1996, $220 million in 1995, and
$242 million in 1994. The decline in 1995 resulted from the divestiture of
Marketing Services. Operating profit increased to $15.3 million in 1996, largely
as a result of volume increases in the Envelope business. Operating profit was
$14.4 million in 1995 and $8.8 million in 1994. The 1995 profit gain was due
primarily to margin improvements on pricing gains.
The company recently announced that it is in the process of selling the
North Bros. insulation service business. The company does not expect the sale to
have a material impact on earnings.
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 increased in 1996 and declined in 1995 mainly because of
1995 accruals for higher business taxes. During both 1996 and 1995, the company
benefited from higher average levels of short-term investments although interest
rates declined somewhat in 1996. Interest expense increased only slightly in
1996 and 1995 compared with 1994.
Consolidated income before taxes and net income grew 7.5 percent in 1996
compared with 13.8 percent for both measures in 1995. The year-to-year decline
was due primarily to a lower rate of growth in segment operating profits. The
provision for income taxes was 37.5 percent of pretax income in 1996 and 1995,
compared with 37.4 percent in 1994.
During fiscal 1997, the company is required to adopt Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed of." SFAS No. 121
requires that long-lived assets and certain intangibles be reviewed whenever
events or changes in circumstances indicate that the carrying value of an asset
may not be recoverable. In the opinion of management, the adoption of SFAS No.
121 is not expected to have a material impact on the company's financial
position or results of operations.
Outlook
With a new management team, NSI has implemented an economic profit-based
compensation program, a financial strategy geared toward leverage, and in-depth
strategic reviews to establish an environment that fosters profitable growth.
The company has begun to measure and reward its operating units on economic
profit to better align their actions with the interests of shareholders. With
1997 operating plan reviews completed, continued growth is anticipated in the
Lighting Equipment, Chemical, and Envelope segments, while the Textile Rental
segment's profit forecast is flat as the improving operating rate of the segment
is not expected to offset 1996's favorable one-time events. These factors are
expected to result in modest 1997 earnings per share growth and continued growth
in economic profit.
33
<PAGE>
Page 74
Exhibit 13
<TABLE>
Ten-Year Financial Summary
National Service Industries, Inc.
(Dollar amounts in thousands, except per-share data)
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Results
Net sales of products $1,482,937 $1,424,180 $1,337,410 $1,257,906 $1,189,684 $1,164,181 $1,250,833 $1,183,666 $1,093,163 $1,032,145
Service revenues ..... 530,625 546,447 544,454 546,916 444,127 437,534 396,981 355,845 321,025 294,713
Total revenues 2,013,562 1,970,627 1,881,864 1,804,822 1,633,811 1,601,715 1,647,814 1,539,511 1,414,188 1,326,858
Cost of products sold 933,405 908,869 875,055 832,264 810,552 791,355 832,867 800,385 741,383 690,689
Cost of services ..... 304,381 299,687 286,519 281,551 236,474 240,376 219,673 198,262 179,793 159,019
Selling and administrative
expenses(2) ......... 616,513 601,143 576,463 556,162 462,240 456,622 438,949 397,160 361,845 350,466
Interest expense
(income),net (2)..... 1,565 1,648 2,788 3,645 (837) (4,332) (3,712) (3,805) (2,429) (1,315)
Restructuring expense -- -- -- -- -- 63,467 -- -- -- --
Other (income)
expense,net(2)....... (4,150) 8,783 8,841 11,684 8,474 5,591 4,322 (509) 374 (4,391)
Income before taxes .. 161,848 150,497 132,198 119,516 116,908 48,636 155,715 148,018 133,222 132,390
Income taxes ......... 60,700 56,400 49,500 44,400 42,800 16,400 56,000 53,300 47,100 56,700
Net income ...........$ 101,148 $ 94,097 $ 82,698 $ 75,116 $ 74,108 $ 32,236 $ 99,715 $ 94,718 $ 86,122 $ 75,690
Per-Share Data(1)
Net income ...........$ 2.11 $ 1.93 $ 1.67 $ 1.52 $ 1.50 $ .65 $ 2.02 $ 1.92 $ 1.75 $ 1.54
Cash dividends ....... 1.15 1.11 1.07 1.03 .99 .95 .90 .82 .73 .62
Stockholders' equity . 15.45 15.41 14.77 14.21 13.79 13.33 13.68 12.44 11.33 10.31
Financial Ratios
Current ratio ........ 3.1 3.2 3.2 2.9 3.5 3.4 4.5 4.8 5.0 5.1
Net income as a
percent of sales ..... 5.0% 4.8% 4.4% 4.2% 4.5% 2.0% 6.1% 6.2% 6.1% 5.7%
Return on average
stockholders' equity .. 13.6% 13.0% 11.6% 10.9% 11.1% 4.8% 15.6% 16.3% 16.3% 15.7%
Dividends as a percent of
current-year earnings 54.6% 57.6% 64.1% 67.9% 66.3% 146.2% 44.6% 42.6% 41.8% 40.2%
Percent of debt to
total capitalization . 4.2% 4.3% 4.3% 4.7% 4.2% 5.0% 4.2% 3.5% 3.9% 4.3%
</TABLE>
34
<PAGE>
Page 75
Exhibit 13
<TABLE>
Ten-Year Financial Summary (continued)
National Service Industries, Inc.
(Dollar amounts in thousands, except per-share data)
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Financial Position
Increase (decrease) in:
Cash and
cash equivalents ....$ (20,740)$ 20,783 $ 42,766 $ (85,284)$ 27,617 $ (50,437)$ 23,433 $ 14,612 $ (24,786)$ 16,318
Short-term investments (3,047) 1,019 (2,197) (3,736) (5,551) 12,813 (27,247) (19,633) 35,971 5,160
Net working capital ... 408,955 437,840 413,114 363,575 399,893 386,306 447,800 450,185 439,990 416,801
Short-term debt ......$ 6,742 $ 6,486 $ 5,765 $ 6,196 $ 1,434 $ 3,254 $ 2,253 $ 1,372 $ 1,237 $ 1,443
Long-term debt ....... 24,920 26,776 26,863 28,418 28,359 31,373 27,465 20,765 21,391 21,466
Total debt ........... 31,662 33,262 32,628 34,614 29,793 34,627 29,718 22,137 22,628 22,909
Stockholders' equity . 718,008 744,404 727,385 704,023 682,954 660,567 675,444 612,668 558,160 508,219
Capitalization .......$ 749,670 $ 777,666 $ 760,013 $ 738,637 $ 712,747 $ 695,194 $ 705,162 $ 634,805 $ 580,788 $ 531,128
Other Data
Capital expenditures (including
acquisitions)........$ 65,566 $ 59,910 $ 42,508 $ 82,171 $ 49,789 $ 90,229 $ 82,932 $ 66,491 $ 55,394 $ 45,258
Depreciation and
amortization.......... 58,428 57,130 60,548 62,097 53,816 50,249 42,821 36,260 31,037 27,333
Total assets ..........1,094,646 1,131,346 1,101,261 1,081,510 1,036,908 1,008,319 960,622 886,358 823,906 758,659
Deferred income taxes . 63,347 65,756 73,319 78,286 87,150 96,627 99,277 101,320 103,021 102,374
Self-insurance reserves 63,369 67,830 61,081 56,335 47,638 38,428 15,222 15,213 15,016 13,574
Other long-term
liabilities .......... 27,576 24,010 22,940 27,110 28,677 22,015 16,067 17,964 15,330 12,042
Weighted average number of
shares outstanding
(in thousands)(1)..... 47,941 48,696 49,547 49,556 49,539 49,540 49,389 49,255 49,258 49,278
Shareholders .......... 6,281 6,655 7,034 7,262 7,554 7,996 8,248 8,459 8,851 9,164
Employees ............. 20,600 21,100 22,000 22,200 20,100 20,900 21,800 20,800 20,400 19,400
Use of Total Revenues
Salaries and wages ...$ 580,571 $ 568,616 $ 565,859 $ 572,163 $ 502,709 $ 501,502 $ 491,334 $ 465,522 $ 428,325 $ 399,968
Materials and supplies 875,658 832,668 783,610 760,551 700,338 683,871 713,310 668,655 616,223 574,179
Other operating expenses 340,563 364,849 347,600 299,977 273,330 258,919 246,288 219,270 201,478 188,414
Restructuring expense . -- -- -- -- -- 63,467 -- -- -- --
Taxes and licenses .... 115,621 110,397 102,097 97,015 83,326 59,889 97,167 91,346 82,040 88,607
Dividends paid ........ 55,272 54,156 53,042 51,041 49,105 47,124 44,506 40,389 35,960 30,428
Retained earnings ..... 45,877 39,941 29,656 24,075 25,003 (13,057) 55,209 54,329 50,162 45,262
$2,013,562 $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)Restated to reflect stock splits of 3 for 2 effective January 13, 1987
(2)Prior-year amounts have been restated to conform to current-year presentation.
</TABLE>
35
<PAGE>
Page 76
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.
P.O. Box 8217
Boston, Massachusetts 02266-8217
(800) 633-4236
Independent Public Accountants
Arthur Andersen LLP
133 Peachtree Street, N.E.
Atlanta, Georgia 30303
(404) 658-1776
Annual Meeting
10:00 a.m., Wednesday, January 8, 1997
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 6,281 as of
September 27, 1996.
Reports Available to Stockholders
Copies of the following company reports may be obtained, without charge: 1996
Annual Report to the Securities and Exchange Commission, filed on Form 10-K;
andQuarterly 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. Dividends can be automatically reinvested in NSI common stock.
Participants also may add cash for the purchase of additional shares. For more
information, contact the Transfer Agent at (800) 633-4236.
Cash Dividends
NSI now offers direct deposit of dividends to your bank, savings, or money
market account. For more information, contact the Transfer Agent at (800)
633-4236.
Common Share Prices and Dividends per Share
Dividends
Price per Share Paid per
High Low Share
1996
First Quarter .................... $32 3/4 $28 5/8 $ .28
Second Quarter ................... 35 1/4 30 3/4 .29
Third Quarter .................... 39 7/8 32 1/2 .29
Fourth Quarter ................... 40 1/4 37 1/2 .29
1995
First Quarter .................... $27 3/8 $25 3/8 $ .27
Second Quarter ................... 27 1/2 24 7/8 .28
Third Quarter .................... 29 1/8 26 1/2 .28
Fourth Quarter ................... 30 5/8 28 1/8 .28
The above common share prices are as quoted on the New York Stock Exchange.
Page 77
Exhibit 21
LIST OF SUBSIDIARIES
Registrant - National Service Industries, Inc.
<TABLE>
State or Other
Jurisdiction
of Incorporation
Subsidiary Principal Location or Organization
<S> <C> <C>
Lithonia Lighting Mexico, S.A. de C.V. Monterrey, Nuevo Leon Mexico
Lithonia Lighting Servicios, S.A. de C.V. Monterrey, Nuevo Leon Mexico
National Service Industries, Inc. Atlanta, Georgia Georgia
North Bros., Inc. Atlanta, Georgia Delaware
NSI Enterprises, Inc. which owns the stock of- Atlanta, Georgia Georgia
CORISMA Group, Inc. Atlanta, Georgia Georgia
Keplime B.V. Bergen op Zoom, Holland Netherlands
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
Selig Company of Puerto Rico, Inc. Atlanta, Georgia Puerto Rico
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
Zep S.A. Bern, Switzerland Switzerland
Graham International B.V. Bergen op Zoom, Holland Netherlands
Kem Europa B.V. Bergen op Zoom, Holland Netherlands
Zep Manufacturing B.V. Bergen op Zoom, Holland Netherlands
Chemical Specialties B.V. Bergen op Zoom, Holland Netherlands
Zep Manufacturing Company Santa Clara, California Delaware
The consolidated financial statements include the accounts of all subsidiaries.
</TABLE>
Page 78
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 report dated October 20, 1996, included or incorporated by
reference in National Service Industries, Inc. 10-K for the year ended August
31, 1996, into the Company's previously filed Registration Statemen Nos.
33-36980, 33-51339, 33-51341, 33-51343, 33-51345, 33-51351, 33-51355, 33-51357,
31-60715, 33-63041, and 33-63043.
ARTHUR ANDERSEN LLP
November 17, 1996
Page 79
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned hereby
constitutes and appoints David Levy and Brock Hattox, 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, 1996, 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 S. Balloun
James S. Balloun, Chairman of the Board,
President and Chief Executive Officer, and Director
/s/ Brock Hattox
Brock Hattox, Executive Vice President and
Chief Financial Officer
/s/ Mark R. Bachmann
Mark R. Bachmann, Vice President and Controller
(Principal Accounting Officer)
/s/ David Levy
David Levy, Executive Vice President,
Administration and Counsel, and Director
Dated: November 20, 1996
<PAGE>
Page 80
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints David Levy and Brock Hattox, 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,
1996, 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 L. Clendenin
John L. Clendenin
Dated: November 20, 1996
<PAGE>
Page 81
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints David Levy and Brock Hattox, 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,
1996, 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 20, 1996
<PAGE>
Page 82
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints David Levy and Brock Hattox, 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,
1996, 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 20, 1996
<PAGE>
Page 83
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints David Levy and Brock Hattox, 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,
1996, 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 20, 1996
<PAGE>
Page 84
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints David Levy and Brock Hattox, 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,
1996, 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 20, 1996
<PAGE>
Page 85
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints David Levy and Brock Hattox, 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,
1996, 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 20, 1996
<PAGE>
Page 86
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints David Levy and Brock Hattox, 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,
1996, 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 20, 1996
<PAGE>
Page 87
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints David Levy and Brock Hattox, 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,
1996, 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 20, 1996
<PAGE>
Page 88
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints David Levy and Brock Hattox, 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,
1996, 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
Dated: November 20, 1996
<PAGE>
Page 89
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints David Levy and Brock Hattox, 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,
1996, 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/ Herman J. Russell
Herman J. Russell
Dated: November 20, 1996
<PAGE>
Page 90
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints David Levy and Brock Hattox, 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,
1996, 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 20, 1996
<PAGE>
Page 91
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints David Levy and Brock Hattox, 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,
1996, 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 20, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Page 92
Exhibit 27
Financial Data Schedule
Year Ended August 31, 1996
Pursuant to Section 601(c) of Regulation S-K
This schedule contains summary financial information extracted from National
Service Industries, Inc. consolidated balance sheet as of August 31, 1996 and
the consolidated statement of income for the year ended August 31, 1996 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> AUG-31-1996
<CASH> 58,663
<SECURITIES> 551
<RECEIVABLES> 275,779
<ALLOWANCES> 5,807
<INVENTORY> 169,813
<CURRENT-ASSETS> 606,381
<PP&E> 765,337
<DEPRECIATION> 407,941
<TOTAL-ASSETS> 1,094,646
<CURRENT-LIABILITIES> 197,426
<BONDS> 24,920
0
0
<COMMON> 57,919
<OTHER-SE> 660,089
<TOTAL-LIABILITY-AND-EQUITY> 1,094,646
<SALES> 1,482,937
<TOTAL-REVENUES> 2,013,562
<CGS> 933,405
<TOTAL-COSTS> 1,237,786
<OTHER-EXPENSES> 609,025
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,903
<INCOME-PRETAX> 161,848
<INCOME-TAX> 60,700
<INCOME-CONTINUING> 101,148
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 101,148
<EPS-PRIMARY> 2.11
<EPS-DILUTED> 2.09
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Page 93
Exhibit 27
Restated Financial Data Schedule
Quarter Ended May 31, 1996
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 May 31, 1996
and the consolidated statement of income for the nine months ended May 31, 1996,
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> MAY-31-1996
<CASH> 79,307
<SECURITIES> 2,551
<RECEIVABLES> 264,545
<ALLOWANCES> 8,981
<INVENTORY> 177,503
<CURRENT-ASSETS> 625,900
<PP&E> 759,855
<DEPRECIATION> 403,873
<TOTAL-ASSETS> 1,111,111
<CURRENT-LIABILITIES> 179,595
<BONDS> 26,737
0
0
<COMMON> 57,919
<OTHER-SE> 784,700
<TOTAL-LIABILITY-AND-EQUITY> 748,756
<SALES> 1,093,359
<TOTAL-REVENUES> 1,491,626
<CGS> 691,951
<TOTAL-COSTS> 918,243
<OTHER-EXPENSES> 457,601
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,631
<INCOME-PRETAX> 112,151
<INCOME-TAX> 41,955
<INCOME-CONTINUING> 70,196
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 70,196
<EPS-PRIMARY> 1.46
<EPS-DILUTED> 1.44
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Page 94
Exhibit 27
Restated Financial Data Schedule
Quarter Ended February 29, 1996
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 February 29,
1996 and the consolidated statement of income for the six months ended February
29, 1996, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> FEB-29-1996
<CASH> 73,431
<SECURITIES> 2,550
<RECEIVABLES> 260,353
<ALLOWANCES> 8,256
<INVENTORY> 182,428
<CURRENT-ASSETS> 627,958
<PP&E> 746,904
<DEPRECIATION> 394,620
<TOTAL-ASSETS> 1,111,347
<CURRENT-LIABILITIES> 176,795
<BONDS> 26,741
0
0
<COMMON> 57,919
<OTHER-SE> 771,295
<TOTAL-LIABILITY-AND-EQUITY> 757,470
<SALES> 712,245
<TOTAL-REVENUES> 974,756
<CGS> 454,537
<TOTAL-COSTS> 603,751
<OTHER-EXPENSES> 300,783
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,407
<INCOME-PRETAX> 67,815
<INCOME-TAX> 25,296
<INCOME-CONTINUING> 42,519
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42,519
<EPS-PRIMARY> 0.88
<EPS-DILUTED> 0.87
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Page 95
Exhibit 27
Restated Financial Data Schedule
Quarter Ended November 30, 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 November 30,
1995 and the consolidated statement of income for the three months ended
November 30, 1995, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> NOV-30-1995
<CASH> 92,569
<SECURITIES> 2,550
<RECEIVABLES> 263,015
<ALLOWANCES> 7,643
<INVENTORY> 188,581
<CURRENT-ASSETS> 650,848
<PP&E> 738,409
<DEPRECIATION> 386,309
<TOTAL-ASSETS> 1,139,797
<CURRENT-LIABILITIES> 199,869
<BONDS> 26,745
0
0
<COMMON> 57,919
<OTHER-SE> 766,213
<TOTAL-LIABILITY-AND-EQUITY> 1,139,797
<SALES> 359,842
<TOTAL-REVENUES> 492,550
<CGS> 227,439
<TOTAL-COSTS> 301,803
<OTHER-EXPENSES> 152,410
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,242
<INCOME-PRETAX> 37,095
<INCOME-TAX> 13,826
<INCOME-CONTINUING> 23,269
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,269
<EPS-PRIMARY> 0.48
<EPS-DILUTED> 0.48
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Page 96
Exhibit 27
Restated 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.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> SEP-01-1994
<PERIOD-END> AUG-31-1995
<CASH> 79,402
<SECURITIES> 3,598
<RECEIVABLES> 272,523
<ALLOWANCES> 6,467
<INVENTORY> 185,789
<CURRENT-ASSETS> 640,410
<PP&E> 726,907
<DEPRECIATION> 377,003
<TOTAL-ASSETS> 1,131,346
<CURRENT-LIABILITIES> 202,570
<BONDS> 26,776
0
0
<COMMON> 57,919
<OTHER-SE> 686,485
<TOTAL-LIABILITY-AND-EQUITY> 1,131,346
<SALES> 1,424,180
<TOTAL-REVENUES> 1,970,627
<CGS> 908,869
<TOTAL-COSTS> 1,208,556
<OTHER-EXPENSES> 601,143
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,431
<INCOME-PRETAX> 150,497
<INCOME-TAX> 56,400
<INCOME-CONTINUING> 94,097
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 94,097
<EPS-PRIMARY> 1.93
<EPS-DILUTED> 1.93
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Page 97
Exhibit 27
Restated Financial Data Schedule
Quarter Ended May 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 May 31, 1995
and the consolidated statement of income for the nine months ended May 31, 1995,
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> SEP-01-1994
<PERIOD-END> MAY-31-1995
<CASH> 58,818
<SECURITIES> 9,386
<RECEIVABLES> 263,842
<ALLOWANCES> 9,394
<INVENTORY> 198,548
<CURRENT-ASSETS> 621,668
<PP&E> 723,737
<DEPRECIATION> 377,043
<TOTAL-ASSETS> 1,110,937
<CURRENT-LIABILITIES> 200,155
<BONDS> 26,807
0
0
<COMMON> 57,919
<OTHER-SE> 737,863
<TOTAL-LIABILITY-AND-EQUITY> 1,110,937
<SALES> 1,042,706
<TOTAL-REVENUES> 1,452,592
<CGS> 669,891
<TOTAL-COSTS> 894,945
<OTHER-EXPENSES> 451,541
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,276
<INCOME-PRETAX> 102,830
<INCOME-TAX> 38,511
<INCOME-CONTINUING> 64,319
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 64,319
<EPS-PRIMARY> 1.32
<EPS-DILUTED> 1.31
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Page 98
Exhibit 27
Restated Financial Data Schedule
Quarter Ended February 28, 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 February 28,
1995 and the consolidated statement of income for the six months ended February
28, 1995, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> SEP-01-1994
<PERIOD-END> FEB-28-1995
<CASH> 52,092
<SECURITIES> 5,179
<RECEIVABLES> 251,033
<ALLOWANCES> 8,992
<INVENTORY> 191,126
<CURRENT-ASSETS> 599,312
<PP&E> 704,420
<DEPRECIATION> 363,194
<TOTAL-ASSETS> 1,083,648
<CURRENT-LIABILITIES> 172,998
<BONDS> 26,802
0
0
<COMMON> 57,919
<OTHER-SE> 725,389
<TOTAL-LIABILITY-AND-EQUITY> 1,083,648
<SALES> 678,941
<TOTAL-REVENUES> 946,794
<CGS> 436,223
<TOTAL-COSTS> 586,050
<OTHER-EXPENSES> 296,879
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,099
<INCOME-PRETAX> 61,766
<INCOME-TAX> 23,074
<INCOME-CONTINUING> 38,692
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 38,692
<EPS-PRIMARY> 0.79
<EPS-DILUTED> 0.79
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Page 99
Exhibit 27
Restated 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.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> SEP-01-1994
<PERIOD-END> NOV-30-1994
<CASH> 82,430
<SECURITIES> 2,240
<RECEIVABLES> 254,679
<ALLOWANCES> 8,705
<INVENTORY> 188,769
<CURRENT-ASSETS> 622,978
<PP&E> 733,477
<DEPRECIATION> 386,270
<TOTAL-ASSETS> 1,114,915
<CURRENT-LIABILITIES> 252,071
<BONDS> 26,818
0
0
<COMMON> 57,919
<OTHER-SE> 721,117
<TOTAL-LIABILITY-AND-EQUITY> 1,114,915
<SALES> 344,882
<TOTAL-REVENUES> 480,984
<CGS> 219,187
<TOTAL-COSTS> 295,033
<OTHER-EXPENSES> 151,230
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 986
<INCOME-PRETAX> 33,735
<INCOME-TAX> 12,621
<INCOME-CONTINUING> 21,114
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,114
<EPS-PRIMARY> 0.43
<EPS-DILUTED> 0.43
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Page 100
Exhibit 27
Restated 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.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1994
<PERIOD-START> SEP-01-1993
<PERIOD-END> AUG-31-1994
<CASH> 58,619
<SECURITIES> 2,579
<RECEIVABLES> 263,436
<ALLOWANCES> 7,385
<INVENTORY> 178,590
<CURRENT-ASSETS> 602,787
<PP&E> 726,574
<DEPRECIATION> 378,262
<TOTAL-ASSETS> 1,101,261
<CURRENT-LIABILITIES> 189,673
<BONDS> 26,863
0
0
<COMMON> 57,919
<OTHER-SE> 669,466
<TOTAL-LIABILITY-AND-EQUITY> 1,101,261
<SALES> 1,337,410
<TOTAL-REVENUES> 1,881,864
<CGS> 875,055
<TOTAL-COSTS> 1,161,574
<OTHER-EXPENSES> 576,463
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,496
<INCOME-PRETAX> 132,198
<INCOME-TAX> 49,500
<INCOME-CONTINUING> 82,698
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 82,698
<EPS-PRIMARY> 1.67
<EPS-DILUTED> 1.67
</TABLE>
