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Exhibit Index on Page 2
FORM 11-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Annual Report Pursuant to Section 15(d) of the Securities Exchange Act
of 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED].
For the fiscal year ended: December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED].
For the transition period from to
Commission file number 1- 3208
A. Full title of the plan and the address of the plan, if
different from that of the issuer named below:
AECO Employees' 401(k) Retirement and Savings Plan
B. Name of issuer of the securities held pursuant to the plan and
the address of the principal executive office:
National Service Industries, Inc.
1420 Peachtree Street, NE
Atlanta, Georgia 30309
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REQUIRED INFORMATION
The following documents are filed as a part of this report:
1. Financial Statements
Plan financial statements prepared in accordance with the financial
reporting requirements of ERISA include the following:
Report of Independent Public Accountants
Statement of Net Assets Available for Benefits as of December
31, 1996
Statement of Changes in Net Assets Available for Benefits, with Fund
Information, for the Year Ended December 31, 1996
Notes to Financial Statements
2. Exhibits
Sequentially
Numbered
The following exhibit is filed with this report: Page
23 Consent of Arthur Andersen LLP 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned hereunto
duly authorized.
AECO Employees' 401(k) Retirement and
Savings Plan
Date: June 18, 1997 By: National Service Industries, Inc.
Plan Administrator
By: /s/ James S. Balloun
Name: James S. Balloun
Title: Chairman and Chief Executive Officer
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Plan Administrator of
AECO Employees' 401(k) Retirement
and Savings Plan:
We have audited the accompanying statements of net assets available for benefits
of AECO EMPLOYEES' 401(k) RETIREMENT AND SAVINGS PLAN as of December 31, 1996
and 1995 and the related statement of changes in net assets available for
benefits, with fund information, for the year ended December 31, 1996. These
financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 1996 and 1995 and the changes in net assets available for benefits
for the year ended December 31, 1996 in conformity with generally accepted
accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The fund information in the statement of
changes in net assets available for benefits is presented for the purpose of
additional analysis rather than to present the changes in net assets available
for benefits of each fund. The fund information has been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
Atlanta, Georgia
June 12, 1997
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AECO EMPLOYEES'
401(k) RETIREMENT AND SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1996 AND 1995
<TABLE>
1996 1995
<S> <C> <C>
INVESTMENT IN NSI DC TRUST, at fair value (Note 2):
Balanced Fund $ 530,430 $160,740
Diversified Equity Fund 799,807 248,246
Stable Value Fund 188,216 64,679
NSI Stock Fund--participant-directed 183,397 56,892
Loan Fund 26,633 814
International Fund 159,931 50,451
NSI Stock Fund--nonparticipant-directed 310,704 96,675
Total investment 2,199,118 678,497
CONTRIBUTIONS RECEIVABLE--PARTICIPANT 13,182 20,901
REFUNDS PAYABLE TO PARTICIPANTS (54,377) (42,753)
NET ASSETS AVAILABLE FOR BENEFITS $2,157,923 $656,645
</TABLE>
The accompanying notes are an integral part of these statements.
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AECO EMPLOYEES'
401(k) RETIREMENT AND SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS,
WITH FUND INFORMATION,
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
Participant-Directed Nonparticipant-
Diversified Stable NSI Directed
Balanced Equity Value Stock Loan International NSI Stock
Fund Fund Fund Fund Fund Fund Fund Other Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONTRIBUTIONS:
Employer ................. $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 193,849 $ 0 $ 193,849
Participant .............. 365,270 540,326 136,766 103,845 0 106,715 0 (41,195) 1,211,727
Total contributions 365,270 540,326 136,766 103,845 0 106,715 193,849 (41,195) 1,405,576
NET GAIN FROM INVESTMENT
IN NSI DC TRUST .............. 47,771 95,293 8,835 15,423 0 8,352 27,272 0 202,946
BENEFITS PAID TO PARTICIPANTS (24,972) (46,529) (9,301) (5,605) (2,000) (12,666) (6,171) 0 (107,244)
INTRAPLAN TRANSFERS .......... (12,981) (21,878) (11,629) 9,461 27,819 10,129 (921) 0 0
OTHER ........................ 0 (6) 0 6 0 0 0 0 0
NET INCREASE (DECREASE)....... 375,088 567,206 124,671 123,130 25,819 112,530 214,029 (41,195) 1,501,278
NET ASSETS AVAILABLE FOR
BENEFITS, December 31, 1995 .. 155,342 232,601 63,545 60,267 814 47,401 96,675 0 656,645
NET ASSETS AVAILABLE FOR
BENEFITS, December 31, 1996 .. $ 530,430 $ 799,807 $ 188,216 $ 183,397 $ 26,633 $ 159,931 $ 310,704 $(41,195) $ 2,157,923
</TABLE>
The accompanying notes are an integral part of this statement.
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AECO EMPLOYEES'
401(k) RETIREMENT AND SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
1. PLAN DESCRIPTION
The following is a brief description of the AECO Employees' 401(k)
Retirement and Savings Plan (the "Plan") of the AECO Products Division (the
"Company") of National Service Industries, Inc. of Georgia, a wholly owned
subsidiary of National Service Industries, Inc. ("NSI"). This descripton
is provided for informational purposes only. Participants should refer to
the plan agreement for more complete information.
General
The Plan is a defined contribution plan established effective July 1, 1995
under the provisions of Section 401(a) of the Internal Revenue Code
("IRC"). The Plan covers all nonunion employees of the Company who have
attained the age of 21 and who were hired prior to April 1, 1995 or have
completed one year of service, as defined. The Plan is subject to the
provisions of the Employee Retirement Income Security Act of 1974, as
amended.
Contributions
Participants may elect to contribute between 1% and 10% of before-tax
compensation, as defined in the Plan, subject to certain limitations under
the IRC. Contributions are made by the Company in an amount equal to 25%
(50% effective September 1, 1996) of the participant's contribution up to
the lesser of 4% of the participant's annual compensation or $500.
Additional discretionary amounts, as determined by the board of directors
of NSI, may be contributed by the Company.
Vesting
Participants are always fully vested in their individual contributions.
Vesting of employer contributions occurs on an increasing scale, ranging
from 10% vesting after two years of service, as defined, to 100% vesting
after seven years of service. Nonvested employer contributions are
forfeited upon a participant's withdrawal from the Plan and are used to
reduce future employer contributions.
Administration
The responsibility for administration of the Plan rests with the Plan's
retirement committee, which is appointed by the board of directors of NSI.
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All administrative expenses of the Plan were paid by the Company during
the year ended December 31, 1996.
Participants' Accounts
Individual accounts are maintained for each of the Plan's participants to
reflect the particular participant's contributions and related employer
contributions as well as the participant's share of the Plan's income and
any related administrative expenses.
The Plan assigns units to its participants. At December 31, 1996 and 1995,
195,721 and 60,886 units, respectively, were assigned to plan
participants. Unit values for each investment fund were as follows at
December 31, 1996 and 1995:
1996 1995
Balanced Fund .............................. $ 26.40 $ 22.95
Diversified Equity Fund .................... 12.05 10.57
Stable Value Fund .......................... 11.31 10.59
NSI Stock Fund ............................. 14.52 12.39
International Fund ......................... 5.01 4.59
Investment in Master Trust
Under a trust agreement dated September 1, 1993, as amended, Wachovia Bank
of Georgia, N.A. was appointed trustee of the NSI Defined Contribution
Plans Master Trust (the "NSI DC Trust").
The Plan's assets are commingled in the NSI DC Trust together with the
assets of certain defined contribution plans of other NSI divisions. The
investments of the NSI DC Trust are subject to certain administrative
guidelines and limitations as to type and amount of securities held.
Certain fund assets are allocated to selected independent investment
managers to invest under these general guidelines.
Investment Options
The separate investment options made available under the Plan may be
changed, eliminated, or modified from time to time by the investment
committee of the NSI DC Trust. Participants make their investment
elections in 5% increments, with changes allowed on a daily basis.
Participants may not direct the investment of company matching or
discretionary contributions. These are invested in the NSI Stock Fund
discussed below.
The separate investment options offered by the Plan are as follows:
o Diversified Equity Fund. This fund is a diversified stock fund
designed to invest in a broad range of common stocks providing
capital growth.
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o Stable Value Fund. This is a fixed income fund designed to
provide a steady level of current income while focusing on
preservation of principal.
o Balanced Fund. This fund is invested in a changing mix of
high-quality stocks and bonds. The fund is designed to provide
capital growth and current income while limiting the risk of
principal loss.
o NSI Stock Fund. This fund is invested in NSI common stock,
although it may hold other short-term investments from time to
time. A participant may not direct more than 50% of his/her
account balance to be invested in this fund.
o International Fund. This fund is invested in the stock of
non-U.S. companies and is designed to provide long-term growth.
Loans to Participants
The Plan permits loans to participants up to the lesser of 50% of the
participant's vested account balance or $50,000. A participant has up to
five years to repay the principal and interest, unless the loan is for the
purchase of a primary residence, in which case the repayment period will
be established at the time the loan is approved. Loan processing fees are
charged directly to the participant's account. Interest rates on loans to
participants are based on market rates as determined by the plan
administrator.
Benefits
A participant is entitled to receive the distribution of his/her vested
account balance upon death, disability, or retirement (age 65). These
benefits are payable in a lump-sum amount or can be paid in installments
at the participant's election if his/her vested balance is greater than
$3,500 and he/she is age 55 or older. A participant who terminated
employment with the Company for reasons other than these is entitled to
receive his/her contributions in a lump sum as soon as administratively
feasible.
Benefits are payable in cash, except that any portion of a participant's
account balance which is invested in the NSI Stock Fund is distributed in
the form of shares of NSI common stock, with fractional shares paid in
cash. If the equivalent number of shares to be distributed to a
participant is less than 100, then the participant may elect to receive
cash instead of shares as his/her distribution.
Hardship withdrawals may be made upon proven financial hardship of a
participant, as defined in the plan agreement and as approved by the
Plan's retirement committee.
Plan Termination
Although the Company intends for the Plan to be permanent, the Plan
provides that the Company has the right to discontinue contributions or to
terminate the Plan at any time. In the event of plan termination, each
participant shall be vested in the balance of his/her account and his/her
proportionate share of any future adjustments.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The accounts of the Plan are maintained by the trustee on the cash basis
of accounting. The accompanying financial statements have been prepared
using the accrual method of accounting by application of memorandum
entries. The preparation of financial statements in conformity with
generally accepted accounting principles requires the Plan's management to
use estimates and assumptions that affect the accompanying financial
statements and disclosures. Actual results could differ from these
estimates.
Investment Valuation
Investments of the NSI DC Trust, except for the guaranteed investment
contracts ("GICs"), are stated at fair value as determined by the trustee
from quoted market prices. Securities traded on a national exchange are
valued at the last reported sales price on the last business day of the
plan year; investments traded in the over-the-counter market and listed
securities for which no sale was reported on the last day of the plan year
are valued at the last reported bid price.
GICs included in the NSI DC Trust are fully benefit-responsive and are
therefore carried at contract value (cost plus accrued interest) in the
accompanying financial statements in accordance with Statement of Position
94-4. At December 31, 1996 and 1995, contract value approximates fair
value. At December 31, 1996, the weighted average crediting interest rate
was 6.74%. For the year ended December 31, 1996, the annual yield on the
GICs held by the NSI DC Trust was 6.9%. For certain of the GICs held by
the NSI DC Trust, crediting interest rates may be changed if certain
events occur, such as early retirements, plant closings, etc., but in no
case are adjusted to a rate less than 0%. GICs are subject to credit risk
based on the ability of the insurance company to meet interest or
principal payment, or both as they become due.
3. NSI DC TRUST
Investment Income
Investment income of the NSI DC Trust for the year ended December 31, 1996
is summarized as follows:
Dividends on common stock $ 360,166
Interest income 4,320,463
Net appreciation in fair value of common stock 1,031,354
Net income from mutual fund 10,129,284
Net income from common/collective trust 7,315,993
Net income from pooled separate account 160,826
Total investment income $23,318,086
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The investment income of the NSI DC Trust for the year ended December 31,
1996 is allocated among participating plans as follows:
AECO Employees' 401(k)
Retirement and Savings Plan $ 202,946
All other NSI plans 23,115,140
Total $23,318,086
Net Assets
The net assets of the NSI DC Trust are as follows at December 31, 1996 and
1995:
1996 1995
Mutual fund $ 63,411,122 $ 47,636,487
Common/collective trust 57,558,795 48,146,903
Guaranteed investment contracts 55,187,898 55,129,605
Loans receivable from participants 6,828,607 6,104,302
NSI common stock 11,279,289 7,637,554
Money market fund 3,704,985 1,377,443
Pooled separate account 2,723,094 871,467
200,693,790 166,903,761
Cash 13,342 127,031
200,707,132 167,030,792
Accrued investment income 100,534 76,779
Adjustments for pending trades (223,542) (211,964)
Other (54,239) 49,961
Net assets $200,529,885 $166,945,568
The allocation of the net assets of the NSI DC Trust to participating
plans is based on participant units and is as follows as of December 31,
1996 and 1995:
1996 1995
Amount Percent Amount Percent
AECO Employees' 401(k)
Retirement and Savings Plan $ 2,199,118 1.1% $ 678,497 0.4%
All other plans 198,330,767 98.9 166,267,071 99.6
Total $200,529,885 100.0% $166,945,568 100.0%
Investment in NSI Common Stock
As of December 31, 1996 and 1995, approximately 5.6% and 4.6%,
respectively, of the NSI DC Trust's net assets were invested in the common
stock of NSI, a party in interest to the Plan.
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4. TAX STATUS
The Plan has received a favorable determination letter from the Internal
Revenue Service dated September 5, 1996 stating that the Plan was designed
in accordance with plan design requirements as of that date. The Plan has
been amended since receiving the determination letter. However, the plan
administrator believes that the Plan is currently designed and is being
operated in compliance with the applicable requirements of the IRC.
Therefore, the plan administrator believes that the Plan was qualified and
that the related trust was tax-exempt as of December 31, 1996 and 1995.
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CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 11-K into National Service Industries, Inc.'s
previously filed Registration Statement covering the AECO Employees' 401(k)
Retirement and Savings Plan.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Atlanta, Georgia
June 12, 1997
