Page 1 of 48
Exhibit Index on Page 12
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For quarter ended February 28, 1998 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)
None
(Former Name,Former Address and Former Fiscal Year,if Changed Since Last Report)
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock - $1.00 Par Value - 42,438,799 shares as of March 31, 1998.
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NATIONAL SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
Page No.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS -
FEBRUARY 28, 1998 AND AUGUST 31, 1997 3
CONSOLIDATED STATEMENTS OF INCOME -
THREE MONTHS AND SIX MONTHS ENDED
FEBRUARY 28, 1998 AND 1997 5
CONSOLIDATED STATEMENTS OF CASH FLOWS -
SIX MONTHS ENDED FEBRUARY 28, 1998 AND 1997 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6-7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8-9
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 10
SIGNATURES 11
EXHIBIT INDEX 12
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NATIONAL SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands, except per-share data)
February 28, August 31,
1998 1997
ASSETS (Unaudited)
Current Assets:
Cash and cash equivalents $ 69,030 $ 57,123
Short-term investments 58 205,302
Receivables, less reserves for doubtful
accounts of $6,054 at February 28, 1998 268,988 258,689
and $4,302 at August 31, 1997
Inventories, at the lower of cost 193,136 179,046
(on a first-in, first-out basis) or market
Linens in service, net of amortization 59,553 60,805
Deferred income taxes 21,684 13,077
Prepayments 9,986 6,716
Total Current Assets 622,435 780,758
Property, Plant, and Equipment, at cost:
Land 20,442 19,911
Buildings and leasehold improvements 143,744 138,933
Machinery and equipment 463,928 434,194
Total Property, Plant, and Equipment 628,114 593,038
Less-Accumulated depreciation and amortization 374,416 356,308
Property, Plant, and Equipment-net 253,698 236,730
Other Assets:
Goodwill and other intangibles 54,024 50,166
Other 38,122 38,698
Total Other Assets 92,146 88,864
Total Assets $ 968,279 $1,106,352
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $ 93 $ 116
Notes payable 6,534 5,773
Accounts payable 85,197 101,512
Accrued salaries, commissions, and bonuses 24,908 34,776
Current portion of self-insurance reserves 12,616 12,540
Accrued taxes payable -- 38,351
Other accrued liabilities 74,514 88,932
Total Current Liabilities 203,862 282,000
Long-Term Debt, less current maturities 26,157 26,197
Deferred Income Taxes 45,759 34,093
Self-Insurance Reserves, less current portion 49,201 57,056
Other Long-Term Liabilities 41,553 35,193
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 57,919 57,919
Paid-in capital 25,934 25,521
Retained earnings 864,209 841,045
948,062 924,485
Less-Treasury stock, at cost (15,645,861 shares
at February 28, 1998 and 13,719,834 shares
at August 31, 1997) 346,315 252,672
Total Stockholders' Equity 601,747 671,813
Total Liabilities and Stockholders' Equity $ 968,279 $1,106,352
The accompanying notes to consolidated financial statements are an integral part
of these balance sheets.
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NATIONAL SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollar amounts in thousands, except per-share data)
THREE MONTHS ENDED
FEBRUARY 28
(In thousands, except per-share data) 1998 1997
Sales and Service Revenues:
Net sales of products $ 401,867 $ 371,384
Service revenues 77,544 127,852
Total Revenues 479,411 499,236
Costs and Expenses:
Cost of products sold 247,415 235,313
Cost of services 45,947 75,197
Selling and administrative expenses 150,851 155,148
Interest (income) expense, net (402) 950
Other (income) expense, net (1,712) 441
Total Costs and Expenses 442,099 467,049
Income before Provision for Income Taxes 37,312 32,187
Provision for Income Taxes 13,824 11,842
Net Income $ 23,488 $ 20,345
Per Share:
Basic earnings per share $ .55 $ .45
Weighted Average Number of Shares
Outstanding (thousands) 42,765 44,994
Diluted earnings per share $ .54 $ .45
Adjusted Weighted Average Number of Shares
Outstanding (thousands) 43,318 45,296
Cash dividends $ .31 $ .30
The accompanying notes to consolidated financial statements are an integral part
of these statements.
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NATIONAL SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollar amounts in thousands, except per-share data)
SIX MONTHS ENDED
FEBRUARY 28
(In thousands, except per-share data) 1998 1997
Sales and Service Revenues:
Net sales of products $ 811,385 $ 753,147
Service revenues 155,610 257,982
Total Revenues 966,995 1,011,129
Costs and Expenses:
Cost of products sold 496,506 471,917
Cost of services 91,095 150,775
Selling and administrative expenses 303,479 313,530
Interest (income) expense, net (2,404) 1,600
Other (income)expense, net (1,348) 1,780
Total Costs and Expenses 887,328 939,602
Income before Provision for Income Taxes 79,667 71,527
Provision for Income Taxes 29,511 26,348
Net Income $ 50,156 $ 45,179
Per Share:
Basic earnings per share $ 1.16 $ .99
Weighted Average Number of Shares
Outstanding (thousands) 43,260 45,468
Diluted earnings per share $ 1.15 $ .99
Adjusted Weighted Average Number of Shares
Outstanding (thousands) 43,752 45,749
Cash dividends $ .61 $ .59
The accompanying notes to consolidated financial statements are an integral part
of these statements.
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NATIONAL SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollar amounts in thousands)
SIX MONTHS ENDED
FEBRUARY 28
1998 1997
Cash Provided by (Used for) Operating Activities
Net income $ 50,156 $ 45,179
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 23,817 29,507
Provision for losses on accounts receivable 1,904 2,283
Gain on the sale of property, plant, and equipment (2,691) (243)
Gain on the sale of businesses (1,961) (924)
Change in noncurrent deferred income taxes 11,666 1,383
Change in assets and liabilities net of effect of
acquisitions and divestitures-
Receivables (11,292) 12,220
Inventories and linens in service, net (13,103) 321
Deferred income taxes (8,525) (7,879)
Prepayments and other (3,215) (5,370)
Accounts payable and accrued liabilities (79,154) (17,426)
Self-insurance reserves and other
long-term liabilities (1,495) (2,280)
Net Cash Provided by (Used for)
Operating Activities (33,893) 56,771
Cash Provided by (Used for) Investing Activities
Change in short-term investments 205,244 --
Purchases of property, plant, and equipment (38,418) (20,190)
Sale of property, plant, and equipment 1,907 2,833
Sale of businesses 2,464 31,259
Acquisitions (6,077) (3,609)
Change in other assets 1,755 729
Net Cash Provided by Investing Activities 166,875 11,022
Cash Provided by (Used for) Financing Activities
Change in notes payable (544) (1,039)
Change in long-term debt (309) 6,862
Recovery of investment in tax benefits -- 661
Deferred income taxes from investment in tax benefits -- (1,972)
Purchase of treasury stock, net (93,230) (71,090)
Cash dividends paid (26,684) (27,079)
Net Cash Used for Financing Activities (120,767) (93,657)
Effect of Exchange Rate Changes on Cash (308) (2,150)
Net Change in Cash and Cash Equivalents 11,907 (28,014)
Cash and Cash Equivalents at Beginning of Period 57,123 58,662
Cash and Cash Equivalents at End of Period $ 69,030 $ 30,648
Supplemental Cash Flow Information:
Income taxes paid during the period $ 62,762 $ 38,296
Interest paid during the period 3,502 2,862
Noncash Investing and Financing Activities:
Noncash aspects of sale of businesses--
Receivables incurred $ -- $ 347
Liabilities assumed 178 507
Noncash aspects of acquisitions--
Liabilities assumed or incurred $ 2,061 $ 886
The accompanying notes to consolidated financial statements are an integral part
of these statements.
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NATIONAL SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. BASIS OF PRESENTATION:
The interim consolidated financial statements included herein have been prepared
by the company without audit and the condensed consolidated balance sheet as of
August 31, 1997 has been derived from audited statements. These statements
reflect all adjustments, all of which are of a normal, recurring nature, which
are, in the opinion of management, necessary to present fairly the consolidated
financial position as of February 28, 1998, the consolidated results of
operations for the three months and six months ended February 28, 1998 and 1997,
and the consolidated cash flows for the six months ended February 28, 1998 and
1997. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. The company believes that the
disclosures are adequate to make the information presented not misleading. It is
suggested that these financial statements be read in conjunction with the
financial statements and notes thereto included in the company's Annual Report
on Form 10-K for the fiscal year ended August 31, 1997. The results of
operations for the three months and six months ended February 28, 1998 are not
necessarily indicative of the results to be expected for the full fiscal year
because the company's revenues and income are generally higher in the second
half of its fiscal year and because of the uncertainty of general business
conditions.
2. BUSINESS SEGMENT INFORMATION:
Three Months Ended February 28
Sales and Service
Revenues Operating Profit
1998 1997 1998 1997
(In thousands)
Lighting Equipment $ 260,079 $ 223,721 $ 22,889 $ 20,645
Chemical 107,085 87,695 8,531 6,624
Textile Rental 77,544 127,852 6,687 7,301
Envelope 34,703 33,410 1,935 2,638
Other -- 26,558 -- (632)
$ 479,411 $ 499,236 40,042 36,576
Corporate (3,132) (3,439)
Interest income (expense), net 402 (950)
Total $ 37,312 $ 32,187
Six Months Ended February 28
Sales and Service
Revenues Operating Profit
1998 1997 1998 1997
(In thousands)
Lighting Equipment $ 528,737 $ 451,168 $ 50,526 $ 42,017
Chemical 212,944 183,177 17,145 17,547
Textile Rental 155,610 257,982 12,818 15,438
Envelope 69,704 64,761 4,469 4,751
Other -- 54,041 -- 947
$ 966,995 $ 1,011,129 84,958 80,700
Corporate (7,695) (7,573)
Interest income (expense), net 2,404 (1,600)
Total $ 79,667 $ 71,527
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3. INVENTORIES:
Major classes of inventory as of February 28, 1998 and August 31, 1997 were as
follows:
February 28, August 31,
1998 1997
(In thousands)
Raw Materials and Supplies $ 73,875 $ 71,266
Work-in-Process 10,542 10,572
Finished Goods 108,719 97,208
Total $ 193,136 $ 179,046
4. NEW ACCOUNTING STANDARD
During the quarter ending February 28, 1998, the company adopted Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per Share." SFAS No.
128 supersedes Accounting Principles Board Opinion No. 15, "Earnings per Share,"
and promulgates new accounting standards for the computation and manner of
presentation of the company's earnings per share. The adoption of SFAS No. 128
did not have a material impact on the computation or manner of presentation of
the company's earnings per share as previously presented under APB 15. Exhibit
11 represents a reconciliation of basic and diluted weighted average shares and
a calculation of earnings per share using the guidelines of SFAS No. 128.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the consolidated
financial statements and related notes.
Financial Condition
National Service Industries maintained a strong financial position at February
28, 1998. Net working capital was $418.6 million, compared with $498.8 million
at August 31, 1997, and the current ratio was 3.1 versus 2.8 as of year end.
Cash and short-term investments were $69.1 million, compared with $262.4 million
at August 31. For the six months ended February 28, the company invested $44.5
million in capital expenditures and acquisitions. The company also spent $93.2
to repurchase 2.0 million shares of its common stock. Operating activities used
$33.9 million in cash due largely to investment in inventories to support
increased sales, the payment of taxes associated with the gain on the 1997
disposal of linen plants, and funding of restructuring activities. Cash provided
by operating activities was $56.8 million for the first half last year. The
percent of debt to total capitalization was 5.2 percent, up from 4.6 percent at
August 31.
Capital expenditures, exclusive of acquisition spending, were $38.4 million for
the first half this year and $20.2 million for the same period a year ago.
Current-year spending consisted primarily of facility expansions and
manufacturing process improvements in the lighting equipment segment, efficiency
improvements and replacements of processing equipment and information systems in
the textile rental segment, and facility and machinery replacements in the
envelope segment. In the prior-year first half, the lighting equipment segment
invested in facilities improvements, equipment replacements, process
improvements, and tooling for new products while textile rental segment spending
consisted primarily of improvement of facilities and replacement of equipment.
Current year acquisition spending of $6.1 million was due to the chemical
segment's purchase of Pure Corporation, a specialty chemical company with its
core businesses in Indiana, Pennsylvania, and New York. Acquisition spending of
$3.6 million in the prior year was primarily the result of the chemical
segment's purchase of chemical products companies in Ohio and Canada and the
lighting equipment segment's acquisition of Lumaid, Inc., a small emergency
lighting products manufacturer in Canada.
During the first half of fiscal 1998, year-end restructuring reserves were
reduced by $4.3 million primarily for exit costs associated with the disposal of
facilities and consolidation of operations and severance-related costs.
Dividend payments for the six months totaled $26.7 million, or 61 cents per
share, compared with $27.1 million, or 59 cents per share, for the prior-year
period. Effective January, 1998, the regular quarterly dividend rate was
increased 3.3 percent to 31 cents per share, or an annual calendar year rate of
$1.24 per share. During the first half of fiscal 1998, the company repurchased
2.0 million of its common shares.
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. Contractual commitments for capital and
acquisition spending during the coming twelve months total $25 million. The
company expects actual capital expenditures in 1998 to be somewhat higher than
the 1997 level. Capital expenditures, excluding acquisition spending, were $49
million in 1997, $66 million in 1996, and $59 million in 1995. Late in fiscal
1996, the company negotiated a $250 million multi-currency committed credit
facility with eleven domestic and international banks. The company has
complimentary lines of credit totaling $62 million, of which $40 million is
available domestically and $22 million is available on a multi-currency basis
primarily from a European bank. Current liquid assets, internally generated
funds, and credit, either through the existing facility or the capital debt
markets, are expected to meet anticipated general operating cash requirements
for the next twelve months.
Over the past year, the company has devoted significant internal resources in
addressing the expected impact of the Year 2000 issue on its information
technology infrastructure. At this point in time, the company does not believe
that its expenditures relating to the Year 2000 issue will have a material
impact on its financial position, results of operations, liquidity, or future
business strategy.
Results of Operations
National Service Industries' basic earnings per share for the second quarter
ended February 28, 1998 increased 22.2 percent to .55 cents compared with the
second quarter a year ago. Diluted earnings per share of .54 cents increased 20
percent over the prior year period. Second quarter sales, excluding divested
businesses, increased 10.8 percent while reported sales of $479.4 million
decreased 4.0 percent from the second quarter a year ago. Net income of $23.5
million was 15.4 percent higher than last year's reported earnings of $20.3
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million. Included in net income were pretax gains from the sale of uniform
rental contracts of $1.8 million in 1998 and assets of $0.5 million in 1997.
Higher net income and a 2.2 million reduction in average shares outstanding
increased earnings per share 22.2 percent over the prior year's second quarter.
For the first half of fiscal year 1998, sales grew by 11.0 percent excluding
divested operations. Reported sales decreased 4.4 percent to $967.0 million. Net
income increased $5.0 million, or 11.0 percent, to $50.2 million. The 1998 first
half pretax earnings included gains of $1.8 million from the sale of additional
uniform rental contracts compared with $1.0 million from asset sales during the
first half of 1997. Basic earnings per share for the first six months increased
17.2 percent to $1.16 per share, while diluted earnings per share increased 16.2
percent to $1.15.
The lighting equipment segment once again led the company in performance with
reported sales of $260.1 million for the second quarter and $528.7 million for
the first half, increases of 16.3 percent and 17.2 percent, respectively.
Operating income advanced 10.9 percent to $22.9 million for the quarter and 20.3
percent to $50.5 million for the first half. Sales growth continued to reflect
strong demand in nonresidential construction and market acceptance of new
products. Margins as a percent of sales decreased as a result of increased
product development spending, marketing program expenses, and the ramping up of
manufacturing resources necessary to meet anticipated summer shipment
requirements. It is expected that margin rates will improve in the second half
of the year.
Chemical segment sales increased 22.1 percent to $107.1 million for the second
quarter and 16.3 percent to $212.9 million for the first half due largely to the
Enforcer acquisition in last year's third quarter. As a result of increased
retail channel volume, operating income increased to $8.5 million from last
year's $6.6 million for the second quarter, in spite of lower margin rates in
the remaining operations; and operating income decreased to $17.1 million from
$17.5 for the first half. This decline in margins resulted from higher
manufacturing costs and continued initiatives underway to increase the
effectiveness of the direct sales force. During the quarter, Enforcer
successfully introduced Zep maintenance products to 600 home center stores
throughout the United States.
Sales of the textile rental segment declined 39.3 percent from $127.9 million
for the second quarter and 39.7 percent from $451.2 million for the six months
as a result of the divestiture of the segment's uniform plants late in fiscal
1997. Excluding the divested units, sales were slightly above last year.
Operating income declined to $6.7 million from last year's $7.3 million for the
second quarter and to $12.8 million from $15.4 million for the first half.
Included in operating income were gains on additional sales of uniform rental
contracts of $1.8 million in 1998 and asset sales of $0.5 million in 1997.
Excluding the divested plants, year-to-year operating margins improved due to a
number of cost reduction, sales, and pricing initiatives. Since the 1997
divestiture, the segment is operating more efficiently and is delivering
positive economic profit.
Envelope segment sales increased 3.9 percent to $34.7 million for the second
quarter and 7.6 percent to $69.7 million for the six months. Operating profits
decreased 26.6 percent to $1.9 million for the quarter and 5.9 percent to $4.5
million for the first half. The decline in profits was due partially to
increased manufacturing costs resulting form the relocation of Atlanta
operations into a new facility and costs of increasing production to meet
forecasted sales demand. Margin rates are anticipated to recover in the last
half of the year. Early in March, the company completed the purchase of
Pennsylvania-based Allen Envelope Corporation, an action that increased
geographical coverage and accelerated growth of the segment.
Proceeds of approximately $300 million derived from the 1997 sale of the textile
rental and insulation assets contributed to higher interest income and funded
the repurchase of 2.0 million shares of company stock during the first half of
the fiscal year.
The provision for income taxes was 37.0 percent of pretax income for the quarter
and the half, compared with 36.8 percent for each of the prior-year periods.
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 compan'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,
enhanced sales force, new products, and improved customer service; (c) share
repurchases; and (d) acquisitions.
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PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the annual meeting of stockholders held January 7, 1998, all nominees for
director were elected to the board without opposition and Arthur Andersen LLP
was appointed as independent auditor for the current fiscal year. In addition,
stockholders voted on the following:
Votes Cast
Affirmative Negative Abstentions
Proposal to approve the National Service
Industries, Inc. Employee Stock Purchase Plan 35,425,815 1,006,827 467,912
There were 1,500,000 treasury shares reserved for issuance under the plan.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits are listed on the Index to Exhibits (page 13).
(b) There were no reports on Form 8-K for the three months ended February 28,
1998.
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SIGNATURES
Pursuant to the requirements 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.
REGISTRANT
DATE April 14, 1998 /s/David Levy
DAVID LEVY
EXECUTIVE VICE PRESIDENT, ADMINISTRATION
AND COUNSEL
DATE April 14, 1998 /s/Brock Hattox
BROCK HATTOX
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
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INDEX TO EXHIBITS
Page No.
EXHIBIT 3 Certification of Amendment and
Restated Certificate of Incorporation 13
EXHIBIT 11 Computation of Net Income per Share of Common Stock 37
EXHIBIT 27 Financial Data Schedules
(1) Financial Data Schedule for the Quarter Ended
February 28, 1998 38
(2) Restated Financial Data Schedule
for the Quarter Ended November 30, 1997 39
(3) Restated Financial Data Schedule
for the Year Ended August 31, 1997 40
(4) Restated Financial Data Schedule
for the Quarter Ended May 31, 1997 41
(5) Restated Financial Data Schedule
for the Quarter Ended February 28, 1997 42
(6) Restated Financial Data Schedule
for the Quarter Ended November 30, 1996 43
(7) Restated Financial Data Schedule
for the Year Ended August 31, 1996 44
(8) Restated Financial Data Schedule
for the Quarter Ended May 31, 1996 45
(9) Restated Financial Data Schedule
for the Quarter Ended February 29, 1996 46
(10) Restated Financial Data Schedule
for the Quarter Ended November 30, 1995 47
(11) Restated Financial Data Schedule
for the Year Ended August 31, 1995 48
Page 13
Exhibit 3
State of Delaware
Office of the Secretary of State
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED CERTIFICATE OF
"NATIONAL SERVICE INDUSTRIES, INC.", FILED IN THIS OFFICE ON THE SEVENTEENTH DAY
OF DECEMBER, A.D. 1997, AT 2:01 O'CLOCK P.M.
/s/ Edward J. Freel
Edward J. Freel, Secretary of State
0241713 8100 AUTHENTICATION: 8821062
971434194 DATE: 12-18-97
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Exhibit 3
RESTATED CERTIFICATE OF INCORPORATION
OF
NATIONAL SERVICE INDUSTRIES, INC.
This Restated Certificate of Incorporation of National Service Industries,
Inc. (the "Corporation") was duly approved by the Board of Directors of the
Corporation and only restates and integrates but does not further amend the
provisions of the Corporation's Certificate of Incorporation as theretofore
amended or supplemented; and there is no discrepancy between these amended and
supplemented provisions and the provisions of the Restated Certificate of
Incorporation set forth below except as permitted by Section 245 of the General
Corporation Law. The Corporation was incorporated under the name National Linen
Service Corporation. The original Certificate of Incorporation of the
Corporation was filed with the Secretary of State of the State of Delaware on
August 20, 1928.
FIRST:
The name of the Corporation is and shall be
NATIONAL SERVICE INDUSTRIES, INC.
SECOND:
The registered office of the Corporation in the State of Delaware is and
shall be located at 1209 Orange Street, Wilmington, New Castle County, Delaware
19801. The Corporation's registered agent at that location is The Corporation
Trust Company.
THIRD:
The nature of the business, or objects, or purposes to be transacted,
promoted, or carried on, are:
To operate at wholesale or retail a linen supply and to provide the rental
service for users of towels, aprons, jackets, overalls, sheets, napkins, table
cloths, and linens of all kind; to carry on the business of a steam and general
laundry for the purpose of washing, cleaning, purifying, scouring, bleaching,
wringing, drying, ironing, dyeing, coloring, disinfecting, renovating, and
preparing for use linens of all kinds and other articles to be rented to users;
to buy, sell, hire, manufacture, repair, let, alter, improve, treat, and deal in
all apparatus, machines, materials, and articles of all kinds which are capable
of being used for any such purpose.
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Exhibit 3
To manufacture, purchase, or otherwise acquire, own, mortgage, pledge,
sell, assign, and transfer, or otherwise dispose of, and to invest, trade, deal
in and deal with, goods, wares and merchandise, and real and personal property
of every class and description.
To acquire, and pay for in cash, stocks, or bonds of the Corporation, or
otherwise, the good-will, rights, assets, and property, and to undertake to
assume the whole or any part of the obligations or liabilities of any person,
firm, association, or corporation.
To acquire, hold, use, sell, assign, lease, grant licenses in respect of,
mortgage, or otherwise dispose of letters patent of the United States or any
foreign country, patent rights, licenses and privileges, inventions,
improvements and processes, copyrights, trademarks and trade names, relating to
or useful in connection with any business of the Corporation.
To guarantee, purchase, hold, sell, assign, transfer, mortgage, pledge, or
otherwise dispose of shares of the capital stock of, or any bonds, securities,
or evidence of indebtedness created by, any other corporation or corporations
organized under the laws of this state or any other state, country, nation, or
government, and while the owner thereof to exercise all the rights, powers, and
privileges of ownership.
To issue bonds, debentures, or obligations of the Corporation, from time to
time, for any of the objects or purposes of the Corporation, and to secure the
same by mortgage, pledge, deed of trust, or otherwise.
To purchase, hold, sell, and transfer the shares of its own capital stock;
provided it shall not use its funds or property for the purchase of its own
shares of capital stock when such use would cause any impairment of its capital;
and provided further that shares of its own capital stock belonging to it shall
not be voted upon, directly or indirectly.
To have one or more offices, to carry on all or any of its operations and
business without restriction or limit as to amount, and to purchase or otherwise
acquire, hold, own, mortgage, sell, convey, or otherwise dispose of real and
personal property of every class and description in any of the States,
Districts, Territories, or Colonies of the United States and in any and all
foreign countries, subject to the laws of such State, District, Territory,
Colony, or Country.
<PAGE>
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Exhibit 3
In general, to carry on any other business in connection with the
foregoing, whether manufacturing or otherwise, and to have and exercise all the
powers conferred by the laws of Delaware upon corporations formed under the act
hereinafter referred to, and to do any or all of the things hereinbefore set
forth to the same extent as natural persons might or could do.
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
The foregoing clauses shall be construed both as objects and powers; and it
is hereby expressly provided that the foregoing enumeration of specific powers
shall not be held to limit or restrict in any manner the powers of the
Corporation.
FOURTH:
(A) The total number of shares of stock which the Corporation shall have
authority to issue is 81,000,000.
(B) Of such stock, 80,000,000 shares shall be Common Stock of the par value
of $1.00 each, amounting in the aggregate to $80,000,000.
(C) Of such stock, 1,000,000 shares shall be No Par Preferred Stock which
may be issued from time to time, by the Board of Directors, in one or more
series. All shares of a series shall be of equal rank and shall be identical,
but the shares of different series need not be of equal rank and need not be
identical. The Board of Directors hereby is authorized to cause shares of Serial
Preferred Stock to be issued in one or more series and with respect to each such
series prior to issuance to fix:
(1) voting rights.
(2) The designation of the series, which may be distinguished by number,
letter, or title.
(3) The number of shares, which number the Board of Directors may increase
or decrease.
(4) The annual dividend rate.
(5) The dates at which dividends, if declared, shall be payable, and the
dates from which such dividends shall be cumulative, if at all.
<PAGE>
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Exhibit 3
(6) The terms and amount of the sinking fund, if any, provided for the
purchase or redemption of shares.
(7) The redemption rights and price or prices, if any, for shares.
(8) The amounts payable and priorities of shares in the event of any
voluntary or involuntary liquidation, dissolution, or winding up of the affairs
of the Corporation.
(9) The number of shares of Common Stock into which such Preferred Stock is
convertible, if any, the conversion price or prices, and all other terms and
conditions upon which such conversion may be made, if at all.
Designation, Preferences, and Rights of Series A Participating Preferred Stock
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Participating Preferred Stock," which shall have a
stated value of $0.05 per share, and the number of shares constituting such
series shall be 500,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, that no decrease shall reduce
the number of shares of Series A Participating Preferred Stock to a number less
than that of the shares then outstanding plus the number of shares issuable upon
exercise of outstanding rights, options or warrants or upon conversion of
outstanding securities issued by the Corporation.
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of any shares
of any series of Preferred Stock ranking prior and superior to the shares of
Series A Participating Preferred Stock with respect to dividends, the holders of
shares of Series A Participating Preferred Stock in preference to the holders of
shares of Common Stock, par value $1.00 per share (the "Common Stock"), of the
Corporation and any other junior stock, shall be entitled to receive, when, as
and if declared by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the first day of October,
January, April and July in each year (each such date being referred to herein as
a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series A Participating Preferred Stock in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $10.00, or (b) subject to the
provision for adjustment hereinafter set forth, 1,000 times the aggregate per
share amount of all cash dividends, and 1,000 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other distributions other
than a dividend payable in shares of Common Stock or a subdivision of the
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Exhibit 3
outstanding shares of Common Stock (by reclassification or otherwise), declared
on the Common Stock, since the immediately preceding Quarterly Dividend Payment
Date, or, with respect to the first Quarterly Dividend Payment Date, since the
first issuance of any share or fraction of a share of Series A Participating
Preferred Stock. In the event the Corporation shall at any time after May 1,
1988 (the "Rights Declaration Date") (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock,
or (iii) combine the outstanding Common Stock into a smaller number of shares,
then in each such case the amount to which holders of shares of Series A
Participating Preferred Stock were entitled immediately prior to such event
under clause (b) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) The Corporation shall declare a dividend or distribution on the Series
A Participating Preferred Stock as provided in paragraph (A) above immediately
after it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided that, in the event no
dividend or distribution shall have been declared on the Common Stock during the
period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $10.00 per share on the Series A
Participating Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series A Participating Preferred Stock from the Quarterly Dividend Payment
Date next preceding the date of issue of such shares of Series A Participating
Preferred Stock unless the date of issue of such shares is prior to the record
date for the first Quarterly Dividend Payment Date, in which case dividends on
such shares shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date or is a date after
the record date for the determination of holders of shares of Series A
Participating Preferred Stock entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series A Participating Preferred Stock in an amount less
than the total amount of such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of Series A Participating Preferred Stock
entitled to receive payment of a dividend or distribution declared thereon,
which record date shall be no more than 30 days prior to the date fixed for the
payment thereof.
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Exhibit 3
Section 3. Voting Rights. The holders of shares of Series A Participating
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Participating Preferred Stock shall entitle the holder thereof
to 1,000 votes on all matters submitted to a vote of the shareholders of the
Corporation; provided, however, that with regard to any election for the
Corporation's Board of Directors (except as provided for in paragraph (C) of
this Section 3), the maximum number of votes for the election of directors
exercised by shares of Preferred Stock (including the Series A Participating
Preferred Stock) shall not exceed the number of votes for the election of
directors represented by authorized and issued shares of Common Stock entitled
to vote less one, and the number of votes for the election of directors
exercised by shares of Preferred Stock (including the Series A Participating
Preferred Stock) shall be reduced as necessary on a pro-rata basis to effectuate
this result.
(B) Except as otherwise provided herein or by law, the holders of shares of
Series A Participating Preferred Stock and the holders of shares of Common Stock
shall vote together as one class on all matters submitted to a vote of
shareholders of the Corporation.
(C) (i) If at any time dividends on any Series A Participating Preferred
Stock shall be in arrears in an amount equal to six (6) quarterly dividends
thereon, the occurrence of such contingency shall mark the beginning of a period
(herein called a "default period") which shall extend until such time when all
accrued and unpaid dividends for all previous quarterly dividend periods and for
the current quarterly dividend period on all shares of Series A Participating
Preferred Stock then outstanding shall have been declared and paid or set apart
for payment. During each default period, all holders of Preferred Stock
(including holders of the Series A Participating Preferred Stock) with dividends
in arrears in an amount equal to six (6) quarterly dividends thereon, voting as
a class, irrespective of series, shall have the right to elect two (2)
Directors.
(ii) During any default period, such voting right of the holders
of Series A Participating Preferred Stock may be exercised initially at a
special meeting called pursuant to subparagraph (iii) of this Section 3(C)or at
any annual meeting of shareholders, and thereafter at annual meetings of
shareholders, provided that neither such voting right nor the right of the
holders of any other series of Preferred Stock, if, any, to increase, in certain
cases, the authorized number of Directors shall be exercised unless the holders
<PAGE>
Page 20
Exhibit 3
of ten percent (10%) in number of shares of Preferred Stock outstanding shall be
present in person or by proxy. The absence of a quorum of the holders of Common
Stock shall not affect the exercise by the holders of Preferred Stock of such
voting right. At any meeting at which the holders of Preferred Stock shall
exercise such voting right initially during an existing default period, they
shall have the right, voting as a class, to elect Directors to fill such
vacancies, if any, in the Board of Directors as may then exist up to two (2)
Directors or, if such right is exercised at an annual meeting, to elect two (2)
Directors. If the number which may be so elected at any special meeting does not
amount to the required number, the holders of the Preferred Stock shall have the
right to make such increase in the number of Directors as shall be necessary to
permit the election by them of the required number. After the holders of the
Preferred Stock shall have exercised their right to elect Directors in any
default period and during the continuance of such period, the number of
Directors shall not be increased or decreased except by vote of the holders of
Preferred Stock as herein provided or pursuant to the rights of any equity
securities ranking senior to or pari passu with the Series A Participating
Preferred Stock.
(iii) Unless the holders of Preferred Stock shall, during an
existing default period, have previously exercised their right to elect
Directors, the Board of Directors may order, or any shareholder or shareholders
owning in the aggregate not less than ten percent (10%) of the total number of
shares of Preferred Stock outstanding, irrespective of series, may request, the
calling of a special meeting of the holders of Preferred Stock, which meeting
shall thereupon be called by the President, a Vice-President or the Corporate
Secretary of the Corporation. Notice of such meeting and of any annual meeting
at which holders of Preferred Stock are entitled to vote pursuant to this
paragraph (C)(iii) shall be given to each holder of record of Preferred Stock by
mailing a copy of such notice to him at his last address as the same appears on
the books of the Corporation. Such meeting shall be called for a time not
earlier than 10 days and not later than 60 days after such order or request or
in default of the calling of such meeting within 60 days after such order or
request, such meeting may be called on similar notice by any shareholder or
shareholders owning in the aggregate not less than ten percent (10%) of the
total number of shares of Preferred Stock outstanding. Notwithstanding the
provisions of this paragraph (C)(iii), no such special meeting shall be called
during the period within 60 days immediately preceding the date fixed for the
next annual meeting of the shareholders.
(iv) In any default period, the holders of Common Stock,
and other classes of stock of the Corporation if applicable, shall continue to
be entitled to elect the whole number of Directors until the holders of
Preferred Stock shall have exercised their right to elect two (2) Directors
voting as a class, after the exercise of which right (x) the Directors so
elected by the holders of Preferred Stock shall continue in office until their
<PAGE>
Page 21
Exhibit 3
successors shall have been elected by such holders or until the expiration of
the default period, and (y) any vacancy in the Board of Directors may (except as
provided in paragraph (C)(ii) of this Section 3) be filled by vote of a majority
of the remaining Directors theretofore elected by the holders of the class of
stock which elected the Director whose office shall have become vacant.
References in this paragraph (C) to Directors elected by the holders of a
particular class of stock shall include Directors elected by such Directors to
fill vacancies as provided in clause (y) of the foregoing sentence.
(v) In any default period, the total number of Directors on the
Board of Directors shall not be less than five (5) Directors.
(vi) Immediately upon the expiration of a default period, (x)
the right of the holders of Preferred
Stock as a class to elect Directors shall cease, (y) the term of any Directors
elected by the holders of Preferred Stock as a class shall terminate, and (z)
the number of Directors shall be such number as may be provided for in, or
pursuant to, the Restated Certificate of Incorporation or By-Laws irrespective
of any increase made pursuant to the provisions of paragraph (C)(ii) of this
Section 3 (such number being subject, however to change thereafter in any manner
provided by law or in the Restated Certificate of Incorporation or By-Laws). Any
vacancies in the Board of Directors effected by the provisions of clauses (y)
and (z) in the preceding sentence may be filled by a majority of the remaining
Directors, even though less than a quorum.
(D) Except as set forth herein, holders of Series A Participating Preferred
Stock shall have no special voting rights and their consent shall not be
required (except to the extent they are entitled to vote with holders of Common
Stock as set forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Participating Preferred Stock as provided in Section 2
are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Participating
Preferred Stock outstanding shall have been paid in full, the Corporation shall
not:
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for consideration
any shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Participating Preferred Stock;
<PAGE>
Page 22
Exhibit 3
(ii) declare or pay dividends on or make any other distributions
on any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Participating
Preferred Stock except dividends paid ratably on the Series A Participating
Preferred Stock and all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of all such
shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Participating
Preferred Stock provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such parity stock in exchange for shares of
any stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Participating Preferred
Stock; or
(iv) purchase or otherwise acquire for consideration any shares
of Series A Participating Preferred Stock or any shares of stock ranking on a
parity with the Series A Participating Preferred Stock except in accordance with
a purchase offer made in writing or by publication (as determined by the Board
of Directors) to all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among the
respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Conversion Rights.
(A) Subject to the provision for adjustment hereinafter set forth, each one
one-thousandth of a share of Series A Participating Preferred Stock shall, for a
period of 90 days after issuance, be convertible at the option of the respective
holders thereof, at the office of the Corporation and at such other place or
places, if any, as the Board of Directors may determine, without the payment of
further consideration, into one (1) share of Common Stock of the Corporation.
(B) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding common Stock into a smaller number of shares, then in each such case
the one (1) share of Common Stock into which each one one-thousandth of a share
<PAGE>
Page 23
Exhibit 3
of Series A Participating Preferred Stock shall be convertible shall be adjusted
by multiplying such share by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(C) At such times as the conversion rights are exercised for Series A
Participating Preferred Stock, the Corporation shall, to the extent that
unreserved authorized and unissued or treasury shares of Common Stock are
available, reserve sufficient shares of Common Stock to permit the conversion of
such Series A Participating Preferred Stock into Common Stock. In the event that
sufficient unreserved authorized and unissued or treasury shares of Common Stock
are not available to permit such reservation and conversion, the Corporation
shall use reasonable efforts to obtain shareholder approval of an increase in
the number of authorized shares of Common Stock to permit the aforementioned
reservation and conversion of Series A Participating Preferred Stock into Common
Stock.
Section 6. Reacquired Shares. Any shares of Series A Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
Section 7. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation (voluntary or otherwise), dissolution or winding
up of the Corporation, no distribution shall be made to the holders of shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Participating Preferred Stock unless, prior thereto,
the holders of shares of Series A Participating Preferred Stock shall have
received, per share, the greater of 1,000 times the exercise price per Right or
1,000 times the payment made per share of Common Stock, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment (the "Series A Liquidation Preference"). Following
the payment of the full amount of the Series A Liquidation Preference, no
additional distributions shall be made to the holders of shares of Series A
Participating Preferred Stock unless, prior thereto, the holders of shares of
Common Stock shall have received an amount per share (the "Common Adjustment")
equal to the quotient obtained by dividing (i) the Series A Liquidation
Preference by (ii) 1,000 (as appropriately adjusted as set forth in subparagraph
(C) below to reflect such events as stock splits, stock dividends and
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Page 24
Exhibit 3
recapitalizations with respect to the Common Stock) (such number in clause (ii),
the "Adjustment Number"). Following the payment of the full amount of the Series
A Liquidation Preference and the Common Adjustment in respect of all outstanding
shares of Series A Participating Preferred Stock and Common Stock, respectively,
holders of Series A Participating Preferred Stock and holders of shares of
Common Stock shall receive their ratable and proportionate share of the
remaining assets to be distributed in the ratio of the Adjustment Number to 1
with respect to such Preferred Stock and Common Stock, on a per share basis,
respectively.
(B) In the event there are not sufficient assets available to permit
payment in full of the Series A Liquidation Preference and the liquidation
preferences of all other series of Preferred Stock, if any, which rank on a
parity with the Series A Participating Preferred Stock, then such remaining
assets shall be distributed ratably to the holders of such parity shares in
proportion to their respective liquidation preferences. In the event there are
not sufficient assets available to permit payment in full of the Common
Adjustment, then such remaining assets shall be distributed ratably to the
holders of Common Stock.
(C) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the Adjustment Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 8. Consolidation, Merger, etc. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Participating Preferred Stock shall at the same time be similarly
exchanged or changed in an amount per share (subject to the provision for
adjustment hereinafter set forth) equal to l,000 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the case
may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series A Participating Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that are
outstanding immediately prior to such event.
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Exhibit 3
Section 9. Redemption. The shares of Series A Participating Preferred Stock
shall not be redeemable.
Section 10. Ranking. The Series A Participating Preferred Stock shall rank
junior to all other series of the Corporation's Preferred Stock as to the
payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise.
Section 11. Amendment. The Restated Certificate of Incorporation of the
Corporation shall not be further amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series A
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of at least two-thirds (66 2/3%) of the
outstanding shares of Series A Participating Preferred Stock voting separately
as a class.
Section 12. Fractional-Shares. Series A Participating Preferred Stock may
be issued in fractions of a share which shall entitle the holder, in proportion
to such holders fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Participating Preferred Stock.
FIFTH:
The amount of capital with which the Corporation will commence business is
ten (10) shares of common stock which shares are without nominal or par value.
SIXTH:
The Corporation is to have perpetual existence.
SEVENTH:
The private property of the stockholders shall not be subject to the
payment of corporate debts to any extent whatever.
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Exhibit 3
EIGHTH:
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized:
To make and alter the by-laws of the Corporation, to fix the amount to be
reserved as working capital over and above its capital stock paid in, to
authorize and cause to be executed mortgages and liens upon the real and
personal property of the Corporation.
From time to time to determine whether and to what extent, and at what
times and places, and under what conditions and regulations, the accounts and
books of the Corporation, (other than the stock ledger) or any of them, shall be
open to inspection of stockholders; and no stockholder shall have any right of
inspecting any account, book, or document of the Corporation except as conferred
by statute, unless authorized by a resolution of the stockholders or Directors.
By resolution or resolutions, passed by a majority of the whole Board, to
designate one or more committees, each committee to consist of two or more of
the Directors of the Corporation, which, to the extent provided in said
resolution or resolutions or in the by-laws of the Corporation, shall have and
may exercise the powers of the Board of Directors in the management of the
business and affairs of the Corporation, and may have power to authorize the
seal of the Corporation to be affixed to all papers which may require it. Such
Committee or Committees shall have such name or names as may be stated in the
by-laws of the Corporation or as may be determined from time to time by
resolution adopted by the Board of Directors.
Pursuant to the affirmative vote of the holders of at least a majority of
the stock issued and outstanding, having voting power, given at a stockholders'
meeting duly called for that purpose, the Board of Directors shall have power
and authority at any meeting to sell, lease, or exchange all of the property and
assets of the Corporation, including its good will and its corporate franchises,
upon such terms and conditions as its Board of Directors deem expedient and for
the best interest of the Corporation.
The Corporation may in its by-laws confer powers upon its Directors in
addition to the foregoing, and in addition to the powers and authorities
expressly conferred upon them by statute.
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Page 27
Exhibit 3
Both stockholders and Directors shall have power, if the by-laws so
provide, to hold their meetings, and to have one or more offices within or
without the State of Delaware, and to keep the books of the Corporation (subject
to the provisions of the statutes) outside of the State of Delaware, at such
places as may be, from time to time, designated by the Board of Directors.
Except as otherwise provided in this Restated Certificate of Incorporation, no
action may be taken by the stockholders, including, without limitation,
amendment of this Restated Certificate or of the by-laws, except at a meeting
duly called in accordance with the by-laws.
NINTH:
The Corporation reserves the right to amend, alter, change, or repeal any
provision contained in this Certificate of Incorporation, in any manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
TENTH:
This Restated Certificate of Incorporation only restates and integrates but
does not further amend the provisions of the Corporation's Certificate of
Incorporation, as heretofore amended, and there are no discrepancies between the
provisions of the Certificate of Incorporation as heretofore amended and the
provisions hereof.
ELEVENTH:
This Restated Certificate of Incorporation was duly adopted by the Board of
Directors of the Corporation on December 17, 1997 pursuant to the provisions of
Chapter I, Subchapter VIII, Section 245, of the General Corporation Law of
Delaware, as amended.
TWELFTH:
(A) In addition to any approval of the Board of Directors or any
stockholder vote or consent required by the laws of the State of Delaware or any
other provision of this Restated Certificate of Incorporation or otherwise, the
affirmative vote or consent of the holders of two-thirds of the shares of the
stock of the Corporation entitled to vote in elections of directors shall be
required to authorize, adopt, or approve a Covered Transaction; however, the
provisions of this Article Twelfth shall not apply to any Covered Transaction
referred to in this Article Twelfth with any Interested Person if (1) the Board
of Directors of the Corporation has approved a memorandum of understanding with
<PAGE>
Page 28
Exhibit 3
such other Interested Person with respect to such transaction prior to the time
that such Interested Person shall have become a beneficial owner of five percent
(5%) or more of the shares of stock entitled to vote in elections of directors,
or thereafter (2) if such Covered Transaction is otherwise approved by the Board
of Directors of the Corporation, provided that a majority of the members of the
Board of Directors voting for the approval of such transaction were duly elected
and acting members of the Board of Directors prior to the time that such
Interested Person shall have become a beneficial owner of five percent (5%) or
more of the shares of stock of the Corporation entitled to vote in elections of
directors.
(B) For the purposes of this Article Twelfth:
(1) "Affiliate" and "associate" shall have the respective
meanings given those terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended, as in effect
on November 1, 1977.
(2) A person shall be the "beneficial owner" and "beneficially
owns" shares of stock of the Corporation (other than shares of the Corporation's
stock held in its treasury) (a) which such person and its affiliates and
associates beneficially own, directly or indirectly, whether of record or not,
(b) which such person or any of its affiliates or associates has the right to
acquire, pursuant to any agreement upon the exercise of conversion rights,
warrants or options, or otherwise, (c) which such person or any of its
affiliates or associates has the right to sell or vote pursuant to any
agreement, or (d) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of its affiliates or
associates has any agreement, arrangement, or understanding for the purposes of
acquiring, holding, voting, or disposing of securities of the Corporation.
(3) "Covered Transaction" is
(a) any merger or consolidation of the Corporation
or any subsidiary of the Corporation with or into any Interested Person
(regardless of the identity of the surviving corporation);
(b) any sale, lease, or other disposition of all or any
substantial part of the assets of the Corporation or any subsidiary of the
Corporation to any Interested Person for cash or securities or both;
(c) any issuance or delivery of securities of the
Corporation or a subsidiary of the Corporation (which the beneficial owner shall
have the right to vote, or to vote upon exercise, conversion, or by contract) to
an Interested Person in consideration for or in exchange of any securities or
other property (including cash); or
(d) the liquidation of the Corporation.
<PAGE>
Page 29
Exhibit 3
(4) "Interested Person" is any person which, as of the record date for
the determination of stockholders entitled to notice of any Covered Transaction
and to vote thereon or consent thereon, or as of the date of any such vote or
consent, or immediately prior to the consummation of any Covered Transaction,
beneficially owns, directly or indirectly, five percent (5%) or more of the
shares of stock of the Corporation entitled to vote in elections of directors.
(5) "Person" is any individual, partnership, or corporation or
other entity.
(6) "Subsidiary of the Corporation" is any corporation of which
fifty percent (50%) or more of any class of stock is beneficially owned,
directly or indirectly, by the Corporation.
(C) No amendment to this Restated Certificate of Incorporation shall amend,
alter, change, or repeal any of the provisions of this Article Twelfth unless
such amendment, in addition to receiving any stockholder vote or consent
required by the laws of the State of Delaware in effect at the time, shall
receive the affirmative vote or consent of the holders of two-thirds of the
shares of stock of the Corporation entitled to vote in elections of directors.
THIRTEENTH:
(A) In addition to any approval of the Board of Directors or any
stockholder vote or consent required by the laws of the State of Delaware or any
other provision of this Restated Certificate of Incorporation or otherwise,
there shall be required for the approval, adoption, or authorization of a
Business Combination with an Interested Person the affirmative vote or consent
of the holders of a majority of the shares of stock of the Corporation entitled
to vote in elections of directors considered separately for the purposes of this
Article Thirteenth, which are not beneficially owned, directly or indirectly, by
such Interested Person; provided, however, that said majority voting
requirements shall not be applicable if all of the conditions specified in
subparagraphs (1) and (2) below are met or if all of the conditions specified in
subparagraph (3) are met:
(1) The consideration to be received per share in such Business
Combination by holders of the stock of the Corporation is payable in cash or
Acceptable Securities, or a combination of both, and the Acceptable Securities
(plus the cash, if any) have a fair market value per share of the Corporation's
stock of not less than either:
<PAGE>
Page 30
Exhibit 3
(a) the highest price (including the highest per
share brokerage commissions, transfer tax, and soliciting dealers fees) paid by
said Interested Person in acquiring any of the Corporation's stock; or
(b) a price per share obtained by multiplying the
aggregate earnings per share of stock of the Corporation (appropriately adjusted
for any subdivision of shares, stock dividend, or combination of shares during
the period) for the four full consecutive fiscal quarters immediately preceding
the record date for solicitation of votes or consents on such Business
Combination by the figure obtained by dividing the highest per share price
(including the highest per share brokerage commissions, transfer tax, and
soliciting dealers fees) paid by such Interested Person acquiring any of the
Corporation's stock by the aggregate earnings per share of the Corporation for
the four full consecutive fiscal quarters immediately preceding the time when
the Interested Person shall have become the beneficial owner of five percent
(5%) or more of the stock of the Corporation entitled to vote in elections of
directors.
If any securities were issued by an Interested
Person in exchange for stock of the Corporation prior to the proposed Business
Combination, the fair market value of said securities at the time of issue shall
be used in determining the per share price paid for said stock.
(2) After the Interested Person has become the beneficial
owner of five percent (5%) or more of the stock of the Corporation entitled to
vote in the election of directors and prior to the consummation of such Business
Combination, there shall have been no reduction in the rate of dividends payable
on the Corporation's stock which would result in a quarterly dividend rate per
share which is less than the average quarterly dividend rate per share for the
four full consecutive fiscal quarters immediately preceding the time when the
Interested Person shall have become the beneficial owner of five percent (5%) or
more of the stock of the Corporation unless such reduction in the rate of
dividends has been approved by the Board of Directors of the Corporation and a
majority of the members of the Board of Directors approving such reduction were
duly elected and acting members of the Board of Directors prior to the time that
such Interested Person shall have become a beneficial owner of five percent (5%)
or more of the shares of the Corporation. For the purposes of this paragraph,
"quarterly dividend rate per share" for any quarterly dividend shall be equal to
the percentage said quarterly dividend per share bears to the earnings per share
for the four full fiscal quarters immediately preceding the declaration of said
quarterly dividend.
<PAGE>
Page 31
Exhibit 3
(3) The Board of Directors of the Corporation has approved a
memorandum of understanding with such other Interested Person with respect to
such Business Combination prior to the time that such Interested Person shall
have become a beneficial owner of five percent (5%) or more of the shares of
stock entitled to vote in elections of directors, or thereafter if such Business
Combination is otherwise approved by the Board of Directors of the Corporation,
provided that a majority of the members of the Board of Directors voting for the
approval of such transaction were duly elected and acting members of the Board
of Directors prior to the time that such Interested Person shall have become a
beneficial owner of five percent (5%) or more of the shares of stock of the
Corporation entitled to vote in elections of directors.
(B) For the purposes of this Article Thirteenth:
(1) "Affiliate" and "associate" shall have the respective
meanings given those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended, as in effect on November
1, 1977.
(2) A person shall be the "beneficial owner" and "beneficially
owns" shares of stock of the Corporation (other than shares of the Corporation's
stock held in its treasury) (a) which such person and its affiliates and
associates beneficially own, directly or indirectly, whether of record or not,
(b) which such person or any of its affiliates or associates has the right to
acquire, pursuant to any agreement upon the exercise of conversion rights,
warrants, or options, or otherwise, (c) which such person or any of its
affiliates or associates has the right to sell or vote pursuant to any
agreement, or (d) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of its affiliates or
associates has any agreement, arrangement, or understanding for the purpose of
acquiring, holding, voting, or disposing of securities of the Corporation.
(3) "Business Combination" is
(a) any merger or consolidation of the Corporation
or any subsidiary of the Corporation with or into any Interested Person
(regardless of the identity of the surviving corporation);
<PAGE>
Page 32
Exhibit 3
(b) any sale, lease, or other disposition of all or any
substantial part of the assets of the Corporation or any subsidiary of the
Corporation to any Interested Person for cash or securities or both;
(c) any issuance or delivery of securities of the
Corporation or a subsidiary of the Corporation (which the beneficial owner shall
have the right to vote, or to vote upon exercise, conversion, or by contract) to
an Interested Person in consideration for or in exchange of any securities or
other property (including cash);
(4) "Acceptable Securities" shall mean (a) securities of the
same class or series, with the same rights, powers, and benefits and of the same
denomination, term, and interest, or dividend, if any, as the securities issued
and delivered by the Interested Person in exchange for the majority of the stock
of the Corporation acquired by the Interested Person or (b) the class of common
stock of the Interested Person which is beneficially owned by the most persons.
(5) "Interested Person" is any person which, as of the record
date for the determination of stockholders entitled to notice of any Business
Combination and to vote thereon or consent thereto, or as of the date of any
such vote or consent, or immediately prior to the consummation of any Business
Combination, beneficially owns, directly or indirectly, five percent (5%) or
more of the shares of stock of the Corporation entitled to vote in elections of
directors.
(6) "Person" is an individual, partnership, corporation, or other
entity.
(7) "Subsidiary of the Corporation" is any corporation of
which fifty percent (50%) or more of any class of stock is beneficially owned,
directly or indirectly, by the Corporation.
(C) No amendment to this Restated Certificate of Incorporation shall amend,
alter, change, or repeal any of the provisions of this Article Thirteenth unless
such amendment, in addition to receiving any stockholder vote or consent
required by the laws of the State of Delaware in effect at the time, shall
receive the affirmative vote or consent of the holders of a majority of the
shares of stock of the Corporation entitled to vote in elections of directors
which are not beneficially owned, directly or indirectly, by any person which
would be an Interested Person if the vote or consent on such amendment were a
vote or consent on a Business Combination.
<PAGE>
Page 33
Exhibit 3
FOURTEENTH:
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived any improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by the stockholders of this Article to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the stockholders
of the Corporation shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or modification.
FIFTEENTH:
(A) Each person who was or is made a party to or is threatened to be made a
party to or is involved in any action, suit, or proceeding, whether civil,
criminal, administrative, or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she, or a person of whom he or she is the legal
representative, is or was a director or officer of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee, or
agent of another corporation or of a partnership, joint venture, trust, or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee, or agent or in any other capacity while serving as
a director, officer, employee, or agent, shall be indemnified and held harmless
by the Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law permitted
the Corporation to provide prior to such amendment), against all expense,
liability, and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes, or penalties and amounts to be paid in settlement) reasonably incurred or
suffered by such person in connection therewith, and such indemnification shall
continue as to a person who has ceased to be a director, officer, employee, or
agent and shall inure to the benefit of his or her heirs, executors, and
administrators; provided, however, that except as provided in paragraph (B)
hereof with respect to proceedings seeking to enforce rights to indemnification,
the Corporation shall indemnify any such person seeking indemnification in
<PAGE>
Page 34
Exhibit 3
connection with a proceeding (or part thereof) initiated by such person only if
such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation. The right to indemnification conferred in this Article shall be
a contract right and shall include the right to be paid by the Corporation the
expenses incurred in defending any such proceeding in advance of its final
disposition; provided, however, that, if the Delaware General Corporation Law
requires, the payment of such expenses incurred by a director or officer in his
or her capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of a proceeding, shall be made only upon delivery to
the Corporation of an undertaking, by or on behalf of such director or officer,
to repay all amounts so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under this Article or
otherwise. The right to indemnification conferred in this Article shall arise
only with respect to conduct subsequent to the date this Article becomes
effective.
(B) If a claim under paragraph (A) of this Article is not paid in full by
the Corporation within sixty days after a written claim has been received by the
Corporation, except in the case of a claim for expenses incurred in defending a
proceeding in advance of its final disposition, in which case the applicable
period shall be twenty days, the claimant may at any time thereafter bring suit
against the Corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall also be entitled to be paid
the expense of prosecuting such claim. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition where the required
undertaking, if any is required, has been tendered to the Corporation) that the
claimant has not met the standards of conduct which make it permissible under
the Delaware General Corporation Law for the Corporation to indemnify the
claimant for the amount claimed, but the burden of proving such defense shall be
on the Corporation. Neither the failure of the Corporation (including its Board
of Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.
(C) The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
Article shall not be exclusive of any other right which any person may have or
<PAGE>
Page 35
Exhibit 3
hereafter acquire under any statute, provision of the Restated Certificate of
Incorporation, by-law, agreement, vote of stockholders, or disinterested
directors, or otherwise.
(D) The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee, or agent of the Corporation or
another corporation, Partnership, joint venture, trust, or other enterprise
against any expense, liability, or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability, or loss
under the Delaware General Corporation Law.
(E) The Corporation may, to the extent authorized from time to time by the
Board of Directors, grant rights to indemnification and to be paid by the
Corporation the expenses incurred in defending any proceeding in advance of its
final disposition, to any employee or agent of the Corporation to the fullest
extent of the provisions of this Article with respect to the indemnification and
advancement of expenses of directors and officers of the Corporation.
<PAGE>
Page 36
Exhibit 3
IN WITNESS WHEREOF, this Restated Certificate of Incorporation, which
restates, integrates but does not further amend the provisions of the
Corporation's Certificate of Incorporation, as theretofore amended or
supplemented, having been duly adopted by the Board of Directors of the
Corporation in accordance with the provisions of Section 245 of the General
Corporation Law of the State of Delaware, has been executed this 17th day of
December, 1997.
NATIONAL SERVICE INDUSTRIES, INC.
By: /s/ James S. Balloun
Name: James S. Balloun
Title: Chairman of the Board
President & Chief Executive Officer
Page 37
Exhibit 11
NATIONAL SERVICE INDUSTRIES, INC.
COMPUTATIONS OF NET INCOME PER SHARE OF COMMON STOCK
(In thousands, except per-share data)
THREE MONTHS ENDED
FEBRUARY 28
1998 1997
Basic:
Net Income $23,488 $20,345
Basic Weighted Average Number of Shares Outstanding
(determined on a monthly basis), including Shares
Contingently Issuable 42,765 44,994
$.55 $.45
Diluted:
Net Income $23,488 $20,345
Basic Weighted Average Number
of Shares Outstanding 42,765 44,994
Add: Shares of common stock assumed issued upon
exercise of stock options using the "Treasury
Stock" method as it applies to the computation
of diluted earnings per share 553 302
Average Common Shares Outstanding (as adjusted) 43,318 45,296
Diluted Earnings per Share $.54 $.45
Page 37
Exhibit 11
NATIONAL SERVICE INDUSTRIES, INC.
COMPUTATIONS OF NET INCOME PER SHARE OF COMMON STOCK
(In thousands, except per-share data)
SIX MONTHS ENDED
FEBRUARY 28
1998 1997
Basic:
Net Income $50,156 $45,179
Basic Weighted Average Number of Shares Outstanding
(determined on a monthly basis), including Shares
Contingently Issuable 43,260 45,468
$1.16 $.99
Diluted:
Net Income $50,156 $45,179
Basic Weighted Average Number
of Shares Outstanding 43,260 45,468
Add: Shares of common stock assumed issued upon
exercise of stock options using the "Treasury
Stock" method as it applies to the computation
of diluted earnings per share 492 281
Average Common Shares Outstanding (as adjusted) 43,752 45,749
Diluted Earnings per Share $1.15 $.99
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Page 38
Exhibit 27
Financial Data Schedule
Quarter Ended February 28, 1998
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 February 28, 1998 and
the consolidated statement of income for the six months ended February 28, 1998,
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> FEB-28-1998
<CASH> 69,030
<SECURITIES> 58
<RECEIVABLES> 275,042
<ALLOWANCES> 6,054
<INVENTORY> 193,136
<CURRENT-ASSETS> 622,435
<PP&E> 628,114
<DEPRECIATION> 374,416
<TOTAL-ASSETS> 968,279
<CURRENT-LIABILITIES> 203,862
<BONDS> 26,157
0
0
<COMMON> 57,919
<OTHER-SE> 543,828
<TOTAL-LIABILITY-AND-EQUITY> 968,279
<SALES> 811,385
<TOTAL-REVENUES> 966,995
<CGS> 406,506
<TOTAL-COSTS> 587,601
<OTHER-EXPENSES> 296,763
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,964
<INCOME-PRETAX> 79,667
<INCOME-TAX> 29,511
<INCOME-CONTINUING> 50,156
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 50,156
<EPS-PRIMARY> 1.16
<EPS-DILUTED> 1.15
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Page 39
Exhibit 27
Financial Data Schedule
Quarter Ended November 30, 1997
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,
1997 and the consolidated statement of income for the three months ended
November 30, 1997, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> NOV-30-1997
<CASH> 8,001
<SECURITIES> 152,086
<RECEIVABLES> 267,737
<ALLOWANCES> 5,593
<INVENTORY> 198,284
<CURRENT-ASSETS> 710,848
<PP&E> 608,130
<DEPRECIATION> 366,971
<TOTAL-ASSETS> 1,044,081
<CURRENT-LIABILITIES> 252,792
<BONDS> 26,442
0
0
<COMMON> 57,919
<OTHER-SE> 574,238
<TOTAL-LIABILITY-AND-EQUITY> 1,044,081
<SALES> 409,518
<TOTAL-REVENUES> 487,584
<CGS> 249,091
<TOTAL-COSTS> 294,239
<OTHER-EXPENSES> 149,661
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,329
<INCOME-PRETAX> 42,355
<INCOME-TAX> 15,687
<INCOME-CONTINUING> 26,668
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,668
<EPS-PRIMARY> 0.61
<EPS-DILUTED> 0.60
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Page 40
Exhibit 27
Financial Data Schedule
Year Ended August 31, 1997
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,
1997 and the consolidated statement of income for the year ended August 31,
1997, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1997
<PERIOD-END> AUG-31-1997
<CASH> 57,123
<SECURITIES> 205,302
<RECEIVABLES> 262,991
<ALLOWANCES> 4,302
<INVENTORY> 179,046
<CURRENT-ASSETS> 780,758
<PP&E> 593,038
<DEPRECIATION> 356,308
<TOTAL-ASSETS> 1,106,352
<CURRENT-LIABILITIES> 282,000
<BONDS> 26,197
0
0
<COMMON> 57,919
<OTHER-SE> 613,894
<TOTAL-LIABILITY-AND-EQUITY> 1,106,352
<SALES> 1,542,644
<TOTAL-REVENUES> 2,036,179
<CGS> 945,794
<TOTAL-COSTS> 1,228,818
<OTHER-EXPENSES> 622,159
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,124
<INCOME-PRETAX> 179,078
<INCOME-TAX> 71,800
<INCOME-CONTINUING> 107,278
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 107,278
<EPS-PRIMARY> 2.37
<EPS-DILUTED> 2.36
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Page 41
Exhibit 27
Financial Data Schedule
Quarter Ended May 31, 1997
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, 1997
and the consolidated statement of income for the nine months ended May 31, 1997,
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> MAY-31-1997
<CASH> 39,431
<SECURITIES> 553
<RECEIVABLES> 269,333
<ALLOWANCES> 7,343
<INVENTORY> 166,722
<CURRENT-ASSETS> 579,886
<PP&E> 752,294
<DEPRECIATION> 401,730
<TOTAL-ASSETS> 1,069,702
<CURRENT-LIABILITIES> 192,490
<BONDS> 26,236
0
0
<COMMON> 57,919
<OTHER-SE> 645,420
<TOTAL-LIABILITY-AND-EQUITY> 1,069,702
<SALES> 1,136,640
<TOTAL-REVENUES> 1,526,408
<CGS> 703,518
<TOTAL-COSTS> 927,107
<OTHER-EXPENSES> 476,320
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,646
<INCOME-PRETAX> 118,335
<INCOME-TAX> 43,722
<INCOME-CONTINUING> 74,613
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 74,613
<EPS-PRIMARY> 1.64
<EPS-DILUTED> 1.63
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Page 42
Exhibit 27
Financial Data Schedule
Quarter Ended February 28, 1997
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,
1997 and the consolidated statement of income for the six months ended February
28, 1997, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> FEB-28-1997
<CASH> 30,648
<SECURITIES> 551
<RECEIVABLES> 246,376
<ALLOWANCES> 6,587
<INVENTORY> 164,903
<CURRENT-ASSETS> 553,629
<PP&E> 735,407
<DEPRECIATION> 391,020
<TOTAL-ASSETS> 1,019,287
<CURRENT-LIABILITIES> 184,862
<BONDS> 26,262
0
0
<COMMON> 57,919
<OTHER-SE> 604,950
<TOTAL-LIABILITY-AND-EQUITY> 1,019,287
<SALES> 753,147
<TOTAL-REVENUES> 1,011,129
<CGS> 471,917
<TOTAL-COSTS> 622,692
<OTHER-EXPENSES> 313,969
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,941
<INCOME-PRETAX> 71,527
<INCOME-TAX> 26,348
<INCOME-CONTINUING> 45,179
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 45,179
<EPS-PRIMARY> 0.99
<EPS-DILUTED> 0.99
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Page 43
Exhibit 27
Financial Data Schedule
Quarter Ended November 30, 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 November 30,
1996 and the consolidated statement of income for the three months ended
November 30, 1996, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> NOV-30-1996
<CASH> 50,850
<SECURITIES> 551
<RECEIVABLES> 275,219
<ALLOWANCES> 6,891
<INVENTORY> 171,662
<CURRENT-ASSETS> 603,849
<PP&E> 754,228
<DEPRECIATION> 400,701
<TOTAL-ASSETS> 1,085,726
<CURRENT-LIABILITIES> 210,581
<BONDS> 24,889
0
0
<COMMON> 57,919
<OTHER-SE> 638,396
<TOTAL-LIABILITY-AND-EQUITY> 1,085,726
<SALES> 381,763
<TOTAL-REVENUES> 511,893
<CGS> 236,604
<TOTAL-COSTS> 312,182
<OTHER-EXPENSES> 159,030
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,341
<INCOME-PRETAX> 39,340
<INCOME-TAX> 14,506
<INCOME-CONTINUING> 24,834
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,834
<EPS-PRIMARY> 0.54
<EPS-DILUTED> 0.54
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Page 44
Exhibit 27
Financial Data Schedule
Year Ended August 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 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> 2.10
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Page 45
Exhibit 27
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> 1.45
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Page 46
Exhibit 27
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> 0.88
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Page 47
Exhibit 27
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
<COMMON> 57,919
0
0
<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 48
Exhibit 27
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
<COMMON> 57,919
0
0
<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>
