<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
-- SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
x
-- For the fiscal year ended December 31, 1994
or
-- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
-- THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the Transition period from _____________ to ____________
Commission File Number: 0-14-827
____________________________
NATIONAL SANITARY SUPPLY COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 31-1079482
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2900 Chemed Center 45202-4729
255 East Fifth Street (Zip Code)
Cincinnati, Ohio
(Registrant's telephone number, including area code): (513) 762-6500
_____________________________
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
TITLE OF EACH CLASS
-------------------
Common Stock, $1.00 par value
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. Yes No X .
--- ---
Aggregate market value of the Registrant's voting stock held by
non-affiliates, based upon the closing price of said stock on the NASDAQ Stock
Market on February 28, 1995 ($12.00 per share): $70,880,772.
As of March 18, 1995, 6,061,348 shares of the Common Stock, $1.00 par value,
of the Registrant were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Annual Report to Shareholders for the year ended December 31,
1994, are incorporated by reference in Parts I, II and IV of this Report.
Portions of the Proxy Statement relating to the Annual Meeting of Shareholders
to be held May 15, 1995, are incorporated by reference into Part III of this
Report.
Exhibit Index at Page E-1
Page 1 of 13 Pages
<PAGE> 2
<TABLE>
NATIONAL SANITARY SUPPLY COMPANY
1994 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
<CAPTION>
PAGE
<S> <C> <C>
PART I
Item 1. Business............................................. 3
Item 2. Properties........................................... 5
Item 3. Legal Proceedings.................................... 6
Item 4. Submission of Matters to a Vote of Security Holders.. 6
---- Executive Officers of the Company.................... 7
PART II
Item 5. Market for the Company's Common Stock and Related
Stockholder Matters.................................. 9
Item 6. Selected Financial Data.............................. 9
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................. 9
Item 8. Financial Statements and Supplementary Data.......... 9
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.................. 9
PART III
Item 10. Directors and Executive Officers of the Company...... 10
Item 11. Executive Compensation............................... 10
Item 12. Security Ownership of Certain Beneficial Owners
and Management....................................... 10
Item 13. Certain Relationships and Related Transactions....... 10
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K.................................. 11
</TABLE>
Page 2 of 13 Pages
<PAGE> 3
PART I
ITEM 1. BUSINESS
General
- -------
From its founding in 1929 until November 15, 1983, the business of
National Sanitary Supply Company (the "Company") was privately owned and
operated by three separate companies: National Sanitary Supply Company,
Sanichem Manufacturing Company, and La-Ru Truck Rental Company, Inc. In
September 1983 the Company was incorporated in Delaware as a wholly-owned
subsidiary of Chemed Corporation for the purpose of acquiring these three
companies. (As used herein, "Predecessor Companies" refers collectively to the
three predecessor companies; "Company" refers to National Sanitary Supply
Company, its wholly-owned subsidiaries and its predecessors; and "Chemed"
refers to Chemed Corporation.)
In June 1986 the Company sold in a public offering 1,000,000 shares
of its common stock, par value $1 per share (the "Common Stock"). As of
December 31, 1994 Chemed owned 85 percent of the outstanding shares of Common
Stock, or 5,144,151 of the 6,022,973 shares outstanding.
In September 1988 the Company acquired by merger Century Papers, Inc.,
which is now a wholly-owned subsidiary ("Century"). Century is a regional
distributor engaged in purchasing, warehousing, selling and delivering to its
customers a variety of industrial paper, food service, and plastic products,
sanitary maintenance and specialty chemicals and equipment, and packaging
supplies and equipment.
On June 17, 1992 the Company formed National Sanitary Supply
Development, Inc. ("NSSD"), a Delaware corporation, to aid its expansion
program in the Midwest.
The Company conducts its business in one segment.
Description of Business
- -----------------------
The Company is the nation's largest specialized distributor of sanitary
maintenance supplies. The Company's products are sold primarily through
approximately 730 field sales personnel employed by the Company to a wide
variety of commercial, institutional, and industrial customers. In 1994, the
Company serviced approximately 120,000 customers located principally in
Arizona, California, Colorado, Indiana, Louisiana, Michigan, Mississippi,
Missouri, Nevada, New Mexico, Ohio, Oklahoma, Oregon, Tennessee, Texas, Utah
and Washington. Federal, state and local governmental agencies accounted for
approximately 6 percent of the Company's total sales for 1994. These sales are
attributable to over 4,000 different agencies whose purchasing decisions
generally are made separately. The Company also had one customer, Sonic, Inc.,
a fast-food restaurant chain, which accounted for approximately 14 percent of
1994 sales. This chain consists of over 1,250 franchised and 150 company-owned
restaurants. Mr. Edward L. Hutton, Chairman of the Company, is a director of
Sonic, Inc. Sales to this customer primarily consisted of low margin food
service products such as paper napkins, plates and cups. Other than sales to
the aforementioned entities, no one customer accounts for more than 2 percent
of net sales.
Other information called for by this item is included within Notes 1
and 2 of the Notes to Consolidated Financial Statements appearing on pages 14
and 15 of the 1994 Annual Report to Stockholders and is incorporated herein by
reference.
Products and Supplies
- ---------------------
The Company's product line consists primarily of a wide variety of
sanitary maintenance supplies used by commercial, institutional, and industrial
facilities. In addition, the Company also distributes, primarily through
Century, food service disposable products, packaging materials, and business
paper for use in institutional and industrial establishments. Except for the
various chemical
Page 3 of 13 Pages
<PAGE> 4
products that are manufactured by and for the Company, the products sold by the
Company are purchased from outside suppliers.
Approximately 25 percent of the Company's total sales in 1994 were of
chemical and equipment products, including specialty and general purpose
cleaners, floor finishes, hand soaps, deodorants, disinfectants, floor
machines, vacuums and carpet extractors. A portion of these products is
marketed under the "National Sanitary Supply Co." proprietary label. Most of
the proprietary-label chemical products are manufactured by the Company.
Approximately 15 percent of the Company's total 1994 sales were of a
wide variety of general maintenance products needed in the housekeeping
function such as mops, buckets, brooms, brushes, trash can liners, floor mats
and pads.
Approximately 27 percent of the Company's total 1994 sales were of
paper products, such as towels and tissues used in public restrooms.
The remaining 33 percent of the Company's total 1994 sales included
food service products such as paper napkins, plates and cups; packaging and
business paper products such as tapes, boxes, computer paper, copier paper and
stationery; and special order and non-stock items.
The Company purchases products from many different manufacturers. In
certain product lines, such as paper products, a significant portion of
purchases is made from one supplier. Although the Company has no long-term
supply contracts, it expects to continue relationships with its existing
suppliers. Because there are numerous sources of similar products, management
does not believe that the loss of any one supplier would have a material
adverse effect on the business.
Distribution System
- -------------------
The Company maintains over 70 distribution center and sales branch
locations throughout the western, southwestern and midwestern United States.
From the distribution centers, generally consisting of both a sales office and
warehouse facility, products are distributed directly to National's customers,
principally by a fleet of Company-owned vehicles. In addition to these
distribution facilities, the Company maintains sales branch offices that carry
a relatively small inventory of products, which are delivered directly to
customers on an emergency basis.
Manufacturing
- -------------
The Company markets a line of chemical cleaning, sanitation, and
maintenance compounds under the "National Sanitary Supply Co." proprietary
label. Most of these products are manufactured by the Company in its facility
in Los Angeles, with some being manufactured for the Company under contract.
The Company's manufacturing operations are not labor intensive. The
Company operates two shifts at its manufacturing facility and could increase
its overall production substantially without incurring significant capital
expenditures.
The chemicals used in the Company's manufacturing processes are
purchased from a number of suppliers. The Company does not believe that the
loss of any one chemical supplier would have a material adverse effect on its
business and believes that alternative sources could be found in a relatively
short period of time.
Employees
- ---------
As of December 31, 1994, the Company employed 1,715 persons, of whom
728 were field sales personnel; 345 were clerical personnel; and the remainder
were production personnel, warehousing and shipping personnel, and headquarters
management and administrative personnel.
Page 4 of 13 Pages
<PAGE> 5
Competition
- -----------
The market for sanitary maintenance and paper supplies is highly
competitive and entry is relatively easy. Competition is, however, highly
fragmented in most geographic markets. In the United States, over 9,000 firms
compete in the sanitary maintenance supply distribution business on a local or
regional basis. Competition also exists indirectly from wholesale price clubs,
manufacturers selling directly to customers, and foodservice distributors.
The principal competitive factors in this market are the level of
service provided; range of products offered; speed, efficiency and reliability
of delivery; and price.
Environmental Matters
- ---------------------
The Company's operations are subject to various federal, state, and
local laws and regulations regarding the environmental aspects of the
manufacture and distribution of chemical components. The Company, to the best
of its knowledge, is currently in compliance in all material respects with the
environmental laws and regulations affecting its operations. Capital
expenditures for the purpose of environmental protection during 1995 and 1996
are not expected to be material in amount.
ITEM 2. PROPERTIES
The Company operates three different types of facilities: branch sales
offices, regional distribution centers, and a combination distribution center
and manufacturing facility. Branch sales offices provide office facilities for
sales representatives whose territories are located in outlying areas as well
as storage facilities for maintaining a small inventory of products for
emergency shipments. Regional distribution centers generally consist of not
only a sales office but also a warehouse facility that delivers products to
customers in a wide geographic area including those markets covered by the
related sales branch offices. The third type of facility performs the same
function as a regional distribution center with the added responsibility of
manufacturing and delivering products to regional distribution centers. The
following table provides a summary of the major facilities operated by the
Company as of December 31, 1994:
Page 5 of 13 Pages
<PAGE> 6
<TABLE>
<CAPTION>
SQUARE FEET
-------------------
TYPE/LOCATION OWNED LEASED
- -------------------------- ----- ------
<S> <C> <C>
Distribution/Manufacturing
- --------------------------
California - Los Angeles 190,000 -
Regional Distribution Centers
- -----------------------------
Arizona - Tempe 69,000 -
California - San Francisco (Area) - 66,000
Colorado - Denver - 53,000
Indiana - Marion 30,000 -
Mississippi - Tupelo - 33,000
Jackson - 19,000
Missouri: Kansas City - 25,000
St. Louis - 16,000
Nevada - Las Vegas 24,000 -
New Mexico - Albuquerque - 38,000
Ohio: Fairfield - 38,000
Toledo - 65,000
Oklahoma - Oklahoma City 14,000 77,000
Oregon - Portland 56,000 -
Tennessee - Memphis - 66,000
Knoxville - 17,000
Texas: Amarillo - 25,000
Beaumont - 14,000
Corpus Christi - 58,000
Dallas 54,000 -
El Paso 18,000 -
Houston - 102,000
Laredo - 10,000
McAllen - 9,000
New Braunfels - 54,000
Utah - Salt Lake City - 20,000
Washington - Seattle - 15,000
Branch Sales Offices (a) 3,000 184,000
- --------------------
<FN>
(a) Represents forty-two (42) separate branch sales offices located
throughout the western, midwestern, and southwestern United States.
</TABLE>
The owned property is held in fee and is not subject to any major
encumbrance. Leased properties are occupied under rental agreements having
terms ranging up to ten years and with month-to-month tenancies. Certain of
the leases provide for payment by the Company of insurance, property taxes,
and building operating expenses and for options to purchase and options to
renew. The Company does not believe that failure to obtain the renewal of any
lease would have a material adverse effect on its business.
Management considers all of the facilities to be in good operating
condition and to be generally adequate for the Company's present and
anticipated needs.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
Page 6 of 13 Pages
<PAGE> 7
<TABLE>
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are as follows:
<CAPTION>
NAME AGE OFFICE FIRST ELECTED
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Edward L. Hutton 75 Chairman November, 1983 (1)
Kevin J. McNamara 41 Vice Chairman August, 1986 (2)
Paul C. Voet 48 President and Chief Executive Officer November, 1983 (3)
Robert B. Garber 68 Vice Chairman 1973 (4)
W. Dwight Jackson 48 Executive Vice President; General November, 1994 (5)
Manager of Century
Charles O. Lane 64 Executive Vice President 1965 (6)
Kenneth F. Vuylsteke 48 Executive Vice President; General January, 1992 (7)
Manager of National West
Gary H. Sander 45 Vice President, Treasurer and Chief August, 1988 (8)
Financial Officer
</TABLE>
Page 7 of 13 Pages
<PAGE> 8
(1) Mr. E. L. Hutton is Chairman of the Company and Chairman and Chief
Executive Officer of Chemed. He has held the latter two positions since
November 1993. Previously, from April 1970 to November 1993, he held the
positions of President and Chief Executive Officer of Chemed. He is the
father of Mr. Thomas C. Hutton, a Vice President of Chemed and a director
of the Company.
(2) Mr. McNamara is Vice Chairman of the Company and President of Chemed. From
August 1986 to August 1994 he was General Counsel and Assistant Secretary
of the Company. He served as Executive Vice President, General Counsel and
Secretary of Chemed from November 1993 to August 1994, serving as Chemed's
Vice Chairman from May 1992 to November 1993.
(3) Mr. Voet is President and Chief Executive Officer of the Company and is
also an Executive Vice President of Chemed. He was Vice Chairman and Chief
Executive Officer of the Company from November 1986 to January 1992. He
served as Chemed's Vice Chairman from 1988 until November 1993.
(4) Mr. Garber is a Vice Chairman of the Company. He was President and Chief
Operating Officer of the Company from April 1986 to January 1992.
(5) Mr. Jackson is an Executive Vice President of the Company and is Executive
Vice President and General Manager of Century. He has held these positions
since November and October 1994, respectively. He was Director of Sales
for Scott Paper Co.'s Southwest Division from January 1990 to October 1994.
(6) Mr. Charles Lane is an Executive Vice President of the Company. He is the
brother of Mr. Thomas Lane, Vice President-Administration of the Company.
(7) Mr. Vuylsteke is an Executive Vice President of the Company and General
Manager of its National West division and has held these positions since
January 1992 and July 1991, respectively. He was Vice President and
General Manager of the Company's Northwest division from February 1989 to
July 1991.
(8) Mr. Sander is Vice President, Treasurer and Chief Financial Officer of the
Company, and has held these positions since August 1988.
____________________
Each executive officer holds office until the annual election at the next
annual organizational meeting of the Board of Directors of the Company, which
is scheduled to be held on May 15, 1995.
Page 8 of 13 Pages
<PAGE> 9
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.
MARKET AND PRICE RANGE OF COMMON STOCK, DIVIDENDS
The Company's Common Stock (par value $1 per share) is included in the
NASDAQ Stock Market and is traded under the symbol NSSX. The range of the high
and low trade prices for the Company's Common Stock and dividends paid per
share for each quarter of 1993 and 1994 are set forth below:
<TABLE>
<CAPTION>
CLOSING DIVIDENDS PAID
HIGH LOW PER SHARE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1994
First Quarter $13.50 $12.25 $ .06
Second Quarter 13.50 12.25 .06
Third Quarter 13.25 12.25 .065
Fourth Quarter 12.50 12.25 .065
1993
First Quarter 11.75 9.25 .055
Second Quarter 13.50 10.50 .055
Third Quarter 12.88 12.00 .06
Fourth Quarter 13.50 12.00 .06
</TABLE>
Future dividends are necessarily dependent upon the Company's earnings
and financial condition, and other factors not presently determinable.
APPROXIMATE NUMBER OF HOLDERS OF COMMON STOCK
Approximate Number of Record
Title of Class Holders (as of March 20, 1995)
-------------- ------------------------------
Common Stock 229 *
($1 par Value)
*Includes only stockholders of record; does not include those whose shares are
held in nominee name or within clearinghouse positions of brokers, banks and
other institutions. The Company believes its stockholders number more than
500.
ITEM 6. SELECTED FINANCIAL DATA.
The information called for by this Item for the five years ended
December 31, 1994, appearing on page 1 of the 1994 Annual Report to
Stockholders is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The information called for by this Item is set forth on pages 20
through 21 of the 1994 Annual Report to Stockholders and is incorporated herein
by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information called for by this Item set forth on pages 9 through 19
of the 1994 Annual Report to Stockholders, and the Unaudited Quarterly Data
appearing on page 13 of the 1994 Annual Report to Stockholders, are
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
Page 9 of 13 Pages
<PAGE> 10
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
The directors of the Company are:
<TABLE>
<CAPTION>
<S> <C> <C>
E. L. Hutton N. Gilliatt K. J. McNamara
P. C. Voet J. P. Grace T. S. O'Toole
R. B. Garber W. J. Hoekman D. W. Robbins, Jr.
A. J. Bennert, Jr. T. C. Hutton G. H. Sander
J. A. Cunningham W. D. Jackson J. E. Schnee
N. C. Dallob C. O. Lane K. F. Vuylsteke
C. H. Erhart, Jr. S. E. Laney
</TABLE>
The information required under this Item with respect to directors is
set forth under "Election of Directors" in the Company's 1995 Proxy Statement
which is incorporated herein by reference.
The information required under this Item with respect to executive
officers is set forth under Part I hereof. The information required under this
item set forth under "Compliance with Section 16(a) of the Securities and
Exchange Act of 1934", in the Company's 1995 Proxy Statement, is incorporated
herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
Information required under this Item is set forth under "Executive
Compensation" in the Company's 1995 Proxy Statement which is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information required under this Item is set forth under "Security
Ownership of Certain Beneficial Owners and Management" in the Company's 1995
Proxy Statement which is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required under this Item is set forth under "Certain
Arrangements and Transactions" in the Company's 1995 Proxy Statement which is
incorporated herein by reference.
Page 10 of 13 Pages
<PAGE> 11
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
EXHIBITS
3.1. Certificate of Incorporation of Chemed Supply, Inc., dated September
19, 1983.*
3.2. Certificate of Merger of La-Ru Truck Rental Company, Inc. into
Chemed Supply, Inc., dated November 15, 1983.*
3.3. Certificate of Amendment of the Certificate of Incorporation, as
amended, of National Sanitary Supply Company, dated July 13, 1987.*
3.4. Amended and Restated By-Laws of the Company as of November 3, 1993.*
10.1. 1986 Stock Incentive Plan of the Company, as amended through August
4, 1993.*,***
10.2. Executive Salary Protection Plan of the Company.*,***
10.3. Form of Executive Salary Protection Agreement.*,***
10.4. Amended Tax Procedures and Services Agreement as of January 1, 1993
between the Company and Chemed Corporation.*
10.5. Employment Agreement, dated November 12, 1991, between Robert B.
Garber and the Company.*,***
10.6. Employment Agreement, dated November 3, 1993, between Charles O.
Lane and the Company.*,***
10.7. Employment Agreement, dated November 3, 1993, between Thomas M. Lane
and the Company.*,***
18.1. Letter regarding change in accounting principles.*
10.8. 1988 Stock Incentive Plan adopted May 19, 1988, as amended through
August 4, 1993.*,***
10.9. $1,600,000 Promissory Note issued by Century Papers, Inc. to Chemed
Corporation on November 10, 1988.*
10.10. $9,400,000 Promissory Note issued by the Company to Chemed
Corporation on November 10, 1988.*
10.11. $8,000,000 Promissory Note issued by the Company to Chemed on
January 1, 1993.*
10.12. Benefit Equalization Plan, as amended November 6, 1991.*,***
10.13. Employment Contracts with Executives.*,***
10.14. Amendment No. 2 to Employment Contracts with Executives.***
10.15. Assignment of $1,600,000 Promissory Note from Century Papers, Inc.
to the Company of May 1, 1992.*
10.16. Employees Thrift and Profit Sharing Plan.*,***
10.17. Trust Agreement of Employees Thrift and Profit Sharing Plan.*,***
10.18. Employment Agreement, dated November 1, 1994, between W. Dwight
Jackson and Century Papers, Inc.***
Page 11 of 13 Pages
<PAGE> 12
11.1. Computation of earnings per share.
13.1. 1994 Annual Report to Stockholders.
21.1. Subsidiaries of the Company.
23.1. Consent of Independent Accountants.
24.1. Powers of Attorney.
27.1. Financial Data Schedule. +
* This exhibit is being filed by means of incorporation by reference (see
Index to Exhibits on page E-1). Each other exhibit is being filed with
this report.
*** Management contract or Executive Compensation Plan or Arrangement.
+ Not filed herewith.
FINANCIAL STATEMENT SCHEDULES
See Index to Financial Statements and Financial Statement Schedules on
page S-1.
REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the fourth quarter of the year
ended December 31, 1994.
Page 12 of 13 Pages
<PAGE> 13
SIGNATURES
Pursuant to the requirement of Section 13 or 15(b) 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 SANITARY SUPPLY COMPANY
March 28, 1995 By: /s/ Paul C. Voet
-------------------------------------
Paul C. Voet
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934 this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
_
/s/ Edward L. Hutton Chairman and a Director |
- --------------------- (Principal Executive Officer) |
Edward L. Hutton |
| March 28, 1995
/s/ Paul C. Voet President & Chief Executive | --------------
- --------------------- Officer and a Director |
Paul C. Voet (Principal Executive Officer) |
|
/s/ Gary H. Sander Vice President, Treasurer, |
- --------------------- Chief Financial Officer, |
Gary H. Sander and a Director |
(Principal Financial and Accounting |
Officer) |
_|
Directors _
|
Arthur J. Bennert, Jr. * Thomas C. Hutton * |
James A. Cunningham * W. Dwight Jackson * |
Charles H. Erhart, Jr. * Charles O. Lane * |
Robert F. Garber * Sandra E. Laney * | March 28, 1995
N. Gilliatt * Kevin J. McNamara * | --------------
J. Peter Grace Timothy S. O'Toole * |
Will J. Hoekman * D. Walter Robbins, Jr. *|
Jerome E. Schnee * |
Kenneth F. Vuylsteke * |
_|
<FN>
* Naomi C. Dallob, General Counsel and Secretary of the Company, by signing
her name hereto signs this document on behalf of each of the persons
indicated above pursuant to powers of attorney duly executed by such
persons and filed with the Securities and Exchange Commission.
</TABLE>
March 28, 1995 /s/ Naomi C. Dallob
- -------------- ------------------------------
Date Naomi C. Dallob
(Attorney-in-Fact and a Director)
Page 13 of 13 Pages
<PAGE> 14
<TABLE>
NATIONAL SANITARY SUPPLY COMPANY
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
1992, 1993 AND 1994
<CAPTION>
Page(s)
National Sanitary Supply Company Financial
Statements and Financial Statement Schedules
<S> <C>
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 *
Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 *
Consolidated Statement of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 *
Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . 12 *
Consolidated Statement of Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . 13 *
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 14 *
Report of Independent Accountants on Financial Statement Schedules . . . . . . . . . . . S-2
Schedule VIII - Valuation and Qualifying Accounts and Reserves . . . . . . . . . . . . . S-3
<FN>
* Indicates page numbers in the National Sanitary Supply Company 1994 Annual
Report to Stockholders.
</TABLE>
- -------------------------------------------------------------------------------
The financial statements of National Sanitary Supply Company listed
above, appearing in the accompanying 1994 Annual Report to Stockholders, are
incorporated herein by reference. The financial statement schedules should be
read in conjunction with the financial statements listed above. Schedules not
included have been omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto as listed
above.
S-1
<PAGE> 15
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
The Board of Directors of
National Sanitary Supply Company
Our audits of the consolidated financial statements referred to in our report
dated January 31, 1995 appearing on page 9 of the 1994 Annual Report to
Stockholders of National Sanitary Supply Company (which report and consolidated
financial statements are incorporated by reference in this Annual Report on
Form 10-K) also included an audit of the Financial Statement Schedule listed in
Item 14 of this Form 10-K. In our opinion, this Financial Statement Schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
/s/ PRICE WATERHOUSE LLP
- -------------------------------------
PRICE WATERHOUSE LLP
Cincinnati, Ohio
January 31, 1995
<PAGE> 16
<TABLE>
NATIONAL SANITARY SUPPLY COMPANY
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
SCHEDULE VIII
(thousands of dollars)
<CAPTION>
- ----------------------------------------------------------------------------------
Column A | Column B | Column C | Column D | Column E
- ----------------------------------------------------------------------------------
| | Additions | |
| ----------------------- |
| | Charged Charged | |
| | to Costs to Other| |
| Balance at | and Accounts| Deductions | Balance
Description | Beginning | Expenses (a) | (b) | At End
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful
notes and accounts
receivable (deducted
from related asset
account) year ended:
December 31, 1994 $1,290 $ 970 $ - $ 832 $1,428
December 31, 1993 1,181 1,003 - 894 1,290
December 31, 1992 1,334 1,145 - 1,298 1,181
- ----------------------------------------------------------------------------------
<FN>
(a) Relates to companies acquired.
(b) Accounts and notes written off.
</TABLE>
<PAGE> 17
<TABLE>
INDEX TO EXHIBITS
<CAPTION>
Page Number
or
Incorporation by Reference
--------------------------
Exhibit File No. and Previous
Number Filing Date Exhibit No.
- ------- ------------ -----------
<S> <C> <C>
3.1 Certificate of Incorporation of Chemed S-1 3a(i)
Supply, Inc., dated September 19, 1983. Registration
No. 33-5604
5/12/86
3.2 Certificate of Merger of La-Ru Truck S-1 3a(ii)
Rental Company, Inc. into Chemed Registration
Supply, Inc., dated November 15, 1983. No. 33-5604
5/12/86
3.3 Certificate of Amendment of the Form 10-Q 2
Certificate of Incorporation, as 8/13/87
amended, of National Sanitary Supply
Company, dated July 13, 1987.
3.4 Amended and Restated By-Laws of the Form 10-K 4
Company as of November 3, 1993. 3/28/94
10.1 1986 Stock Incentive Plan of the Form 10-Q 2
Company, as amended through August 4, 8/13/93
1993.
10.2 Executive Salary Protection Plan of S-1 10e
the Company. Registration
No. 33-5604
5/12/86
10.3 Form of Executive Salary Protection S-1 10f
Agreement. Registration
No. 33-5604
5/12/86
10.4 Amended Tax Procedures and Services Form 10-K 12
Agreement as of January 1, 1993 3/29/93
between the Company and Chemed
Corporation.
10.5 Employment Agreement, dated November Form 10-K 13
12, 1991, between Robert B. Garber 3/27/92
and the Company.
10.6 Employment Agreement, dated November Form 10-K 10
3, 1993, between Charles O. Lane 3/28/94
and the Company.
10.7 Employment Agreement, dated November Form 10-K 11
3, 1993, between Thomas M. Lane and 3/28/94
the Company.
</TABLE>
E-1
<PAGE> 18
<TABLE>
<CAPTION>
Page Number
or
Incorporation by Reference
--------------------------
Exhibit File No. and Previous
Number Filing Date Exhibit No.
- ------- ------------ -----------
<S> <C> <C> <C>
18.1 Letter regarding change in accounting Form 10-Q 3
principles. 5/13/88
10.8 1988 Stock Incentive Plan of the Form 10-Q 3
Company, as amended through August 4, 8/13/93
1993
10.9 $1,600,000 Promissory Note issued by Form 10-K 38
Century Papers, Inc. to Chemed 3/29/89
Corporation on November 10, 1988.
10.10 $9,400,000 Promissory Note issued by Form 10-K 39
the Company to Chemed Corporation on 3/29/89
November 10, 1988.
10.11 $8,000,000 Promissory Note issued by Form 10-Q 2
the Company to Chemed Corporation on 3/13/93
January 1, 1993.
10.12 Benefit Equalization Plan, as amended Form 10-K 38
November 6, 1991. 3/27/92
10.13 Employment Contracts with Executives. Form 10-K 39
3/29/93
10.14 Amendment No. 2 to Employment Contracts *
with Executives.
10.15 Assignment of $1,600,000 Promissory Form 10-K 40
Note from Century Papers, Inc. to the 3/29/93
Company of May 1, 1992.
10.16 Employees Thrift and Profit Sharing Plan Form S-8 4.1
9/30/94
10.17 Trust Agreement of Employees Thrift and Form S-8 4.2
Profit Sharing Plan 9/30/94
18.18 Employment Agreement, dated November 1, *
1994 between W. Dwight Jackson and
Century Papers, Inc.
11.1 Computation of earnings per share. *
13.1 1994 Annual Report to Stockholders. *
21.1 Subsidiaries of the Company. *
23.1 Consent of Independent Accountants. *
24.1 Powers of Attorney. *
27.1 Financial Data Schedule
<FN>
_______________
*Filed herewith.
</TABLE>
E-2
<PAGE> 1
EXHIBIT 10.14
AMENDMENT NO. 2
TO EMPLOYMENT AGREEMENT
AGREEMENT dated as of May 16, 1994 between
_________________("Employee") and National Sanitary Supply Company (the
"Company").
WHEREAS, Employee and the Company have entered into an Employment
Agreement dated as of May 19, 1992 and amended May 17, 1993, ("Employment
Agreement"); and
WHEREAS, Employee and the Company desire to further amend the
Employment Agreement in certain respects.
NOW THEREFORE, Employee and the Company mutually agree that the
Employment Agreement shall be amended, effective as of May 16, 1994, as
follows:
A. The base salary amount per annum as set forth in the first
sentence of Section 2.1 of the Employment Agreement is hereby
deleted and the base salary amount of $__________ per annum is
hereby substituted therefor.
B. The date of May 31, 1996 set forth in Section 1.2 of the
Employment Agreement, is hereby deleted and the date of May
31, 1997 is hereby substituted therefor.
C. For clarification purposes only, Section 3.4(b) of the
Employment Agreement is hereby rewritten in its entirety to
read as follows:
"(b) If the company shall terminate Employee's employment hereunder
Without Cause, the Company shall pay Employee monthly severance
payments at an annual rate equal to 150% of the sum of (i) the
Employee's
<PAGE> 2
then current base salary plus (ii) the amount of the annual
incentive bonus most recently paid or approved to be paid to Employee
in respect of the previous, plus (iii) the fair market value of all
shares of National Sanitary Supply Company common stock subject to
stock awards granted to Employee under one or more stock incentive
plans which have vested during the 12 months prior to the Employee's
termination, such fair market value to be determined as of the date of
vesting of any such shares. Such monthly severance payments shall be
made for a period equal to the balance of the term of employment
provided for in Section 1.2."
Except as specifically amended in this Amendment No. 2 to Employment
Agreement, the Employment Agreement shall continue in full force and effect in
accordance with its original terms, conditions and provisions.
IN WITNESS WHEREOF, the parties have duly executed this amendatory
agreement as of the date first above written.
EMPLOYEE
______________________________
NATIONAL SANITARY SUPPLY COMPANY
______________________________
<PAGE> 3
SCHEDULE TO EXHIBIT
EXHIBIT A
Current
Current Current Expiration
Salary and Stock Award Date of
Name and Position Age Bonus Compensation (b) Agreement
- ----------------- --- ---------- ---------------- ---------
Harvey S. Glanzrock 48 $211,250 $35,696 5/31/96
Executive Vice
President/President
of Century Papers
Kenneth F. Vuylsteke 47 180,000 24,047 5/31/96
Executive Vice
President/General
Manager of National
West
Gary H. Sander 44 112,500 21,403 5/31/96
Vice President and
Chief Financial
Officer (a)
Scott R. Pancoast 35 129,500 19,968 5/31/96
Senior Vice President-
Operations (a)
Arthur J. Bennert, Jr. 36 87,000 16,719 5/31/96
Vice President-
Corporate Planning (a)
_______________________
(a) Employment Agreements executed with Chemed Corporation; reimbursment
to be provided by the Company.
(b) Amount of unrestricted Company stock awards recognized in lieu of
incentive compensation in 1993.
<PAGE> 1
EXHIBIT 10.18
EMPLOYMENT AGREEMENT
Agreement made effective this 1st day of November, 1994, by and
between W. Dwight Jackson, residing at 57 North Turtle Rock Court, The
Woodlands, Texas, 77381 (the "Employee"), and Century Papers, Inc., a Texas
corporation having its executive offices at 4902 Gulf Freeway, Houston, Texas,
77023 ("Century").
WHEREAS, Century desires to continue to employ the Employee in an
executive capacity to continue and carry out the expansion of the businesses of
Century, and the Employee desires to work for Century in such capacity on the
terms and conditions hereinafter provided;
NOW THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties hereto agree as follows:
1. For the period commencing November 1, 1994 and ending on October
31, 1996, subject to earlier termination as provided in Section 8 hereof,
Century shall employ the Employee and the Employee shall work in such executive
capacity as the Chairman of Century shall specify. Employee shall devote his
full-time effort, skill and attention to the affairs of the Company.
2. While the Employee works for Century, in accordance with the
provisions of Section 1 hereof, Century shall pay the Employee a base salary at
the rate of not less than $125,000 per annum. In addition, the Employee will
be considered annually for an incentive compensation payment as determined by
National Sanitary Supply Company's Board of Directors at an annualized rate of
not less than $20,000, pro-rated for the percentage of the calendar year
actually employed by Century. Century shall make available to the Employee
medical insurance and certain other fringe benefits which it makes available to
its salaried employees generally. In addition, Employee shall participate in
National Sanitary Supply Company's Executive Salary Protection Plan. Employee
shall be entitled to reimbursement of his reasonable business and travel
expenses on the same basis and subject to the same conditions as such expenses
are reimbursed to other executives of Century.
<PAGE> 2
3. The Employee shall not (except in the performance of his
duties hereunder) at any time during the term of this agreement make or cause
to be made any copies, pictures, duplicates, facsimiles or other reproductions
or recordings or any abstracts or summaries of any reports, studies, memoranda,
correspondence, manuals, records, plans or other written, printed or otherwise
recorded materials of any kind whatever belonging to or in the possession of
Century or any subsidiary or affiliate of Century. The Employee shall have no
right, title or interest in any such material, and the Employee agrees that
(except in the performance of his duties hereunder) he will not, without the
prior written consent of Century, remove any such material from any premises of
Century, or any parent or subsidiary or affiliate of Century, and that he will
surrender all such material to Century immediately upon the termination of his
employment.
4. Without the prior written consent of Century, the Employee shall
not at any time (whether during or after his employment with Century) use for
his own benefit or purposes or for the benefit or purposes of any other person,
firm, partnership, association, corporation or business organization, entity or
enterprise, or disclose (except in the performance of his duties hereunder) in
any manner to any person, firm, partnership, association, corporation or
business organization, entity or enterprise, any trade secrets, information,
data, know-how or knowledge (including, but not limited to, that relating to
costs, products, equipment, marketing or laboratory methods, formulae,
suppliers, customers, personnel training programs, business expansion plans or
financing or marketing methods) proprietary to Century, or any subsidiary or
affiliate of Century.
5. The Employee shall promptly disclose to Century (and to no one
else) all improvements, discoveries, ideas and inventions that may be of
significance to Century or to any subsidiary or affiliate of Century, made or
conceived alone or in conjunction with others (whether or not patentable,
whether or not made or conceived at the request of or upon the suggestion of
Century during or out of his usual hours of work or in or about the premises of
Century or elsewhere, and whether made or conceived prior or subsequent to the
execution of this agreement) while in the employ of Century or made or
conceived within one year after the termination of his employment by Century if
2
<PAGE> 3
resulting from, suggested by or relating to such employment. All such
improvements, discoveries, ideas and inventions shall be the sole and exclusive
property of Century and are hereby assigned to Century. At the request of
Century and at its cost, the Employee shall assist Century, or any person or
persons from time to time designated by it, to obtain the grant of patents in
the United States and/or in such other country or countries as may be
designated by Century, covering such improvements, discoveries, ideas and
inventions and shall in connection therewith and in connection with the defense
of any patents execute such applications, statements or other documents,
furnish such information and data and take all such other action (including,
but not limited to, the giving of testimony) as Century may from time to time
reasonably request.
6. During the continuance of Employee's employment with Century and
for a period of two years after Employee has ceased to be an employee of
Century, or of any subsidiary or affiliate of Century, whether or not pursuant
to this agreement, the Employee shall not without the prior written consent of
Century:
a. directly or indirectly engage in, or
b. assist or have an active interest in whether as proprietor,
partner, investor, shareholder, officer, director or any type of principal
whatever, or
c. enter the employment of or act as an agent for or advisor or
consultant to any person, firm, partnership, association, corporation or
business organization, entity or enterprise that is, or is about to become,
directly or indirectly engaged in
any business in any area described in Exhibit A to this agreement whether in
operation or in the planning or development stage, that competes with or is
substantially similar to any business that Century or any subsidiary or
affiliate of Century has operated, or had in the planning or development stage,
during the 120-day period immediately prior to the Employee's ceasing to an
3
<PAGE> 4
employee of or consultant to Century or any subsidiary or affiliate of Century,
provided that the restrictions contained in this Section 6 shall not apply to
any area described in Exhibit A to this agreement that does not meet the
following requirements:
(1) Century or a subsidiary or affiliate of Century
shall have operated such business in such area, or had such business in the
planning or development stage therein, during the 120-day period immediately
prior to the Employee's ceasing to be an active employee of, or consultant to,
Century or any subsidiary or affiliate of Century, and
(2) the Employee, during such 120-day period, shall
have had substantial planning, development, administrative or operational
responsibilities for such business of Century or any subsidiary or affiliate of
Century in such area.
If the scope of any restriction contained in this Section 6 is too
broad to permit enforcement of such restriction to its full extent, then such
restriction shall be enforced to the maximum extent permitted by law, and the
Employee hereby consents and agrees that such scope may be judicially modified
accordingly in any proceeding brought to enforce such restriction.
7. The Employee acknowledges and agrees that Century's remedy
at law for any breach of any of the Employee's obligations under Sections 3, 4,
5 and 6 hereof would be inadequate, and agrees and consents that temporary and
permanent injunctive relief may be granted in any proceeding that may be
brought to enforce any provision of any of such Sections, without the necessity
of actual damage. The provisions of Sections 4 and 6 hereof shall survive the
termination of this agreement.
8. At Century's option the Employee's employment hereunder
and his aforesaid base salary and incentive bonus compensation shall terminate
and cease to accrue forthwith upon:
(i) his death, or
(ii) his inability (other than temporary inability
which shall not exceed an aggregate of ninety (90) days
4
<PAGE> 5
during any consecutive 12-month period) to perform his duties hereunder, or
(iii) any failure by him to observe or perform his
agreements herein contained, or his neglect of the faithful performance of his
duties hereunder, if such failure or neglect is not corrected within 45 days of
Employee's receipt of written notice of same.
Should Century determine in its sole discretion to terminate
Employee's employment hereunder for a reason other than as described above,
Employee agrees that his sole entitlement shall be his salary and minimum bonus
payments, to be paid on a monthly basis over the remaining term of this
agreement.
9. This agreement sets forth the entire agreement and
understanding of the parties concerning the subject matter hereof and
supersedes all prior agreements and understandings between the parties hereto.
No representation, promise, inducement or statement of intention has been made
by or on behalf of either party hereto that is not set forth in this agreement.
This agreement may not be amended or modified except with a written instrument
executed by the parties hereto.
10. The terms and provisions of this agreement shall be binding on
and inure to the benefit of the Employee, his heirs at law, legatees,
distributees, executors, administrators and other legal representatives, and
shall be binding on and inure to the benefit of Century and its subsidiaries,
successors and assigns. The Employee expressly agrees that Century may assign
this agreement and all of Century's rights and obligations hereunder without
the consent of Employee (i) to National Sanitary Supply Company, or its parent,
or (ii) to any successor in interest to the business and assets of Century.
The Employee may not assign, pledge or encumber in any way all or part of his
interest under this agreement without the prior written consent of Century.
The failure of either party hereto at any time or from time to time to require
performance of any of the other party's obligations under this agreement shall
in no manner affect the right to enforce any provision of this agreement at a
subsequent time, and the waiver of any rights arising out of any breach shall
not be construed as a waiver of any rights arising out of any subsequent
breach.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this
instrument on the day first above written.
EMPLOYEE
/s/ Michael G. Moncrief /s/ W. Dwight Jackson
- ----------------------- ------------------------
Witness W. Dwight Jackson
ATTEST: CENTURY PAPERS, INC.
/s/ Naomi C. Dallob By: /s/ Paul C. Voet
- ------------------- -----------------------
Secretary
6
<PAGE> 7
EXHIBIT A
TO
EMPLOYMENT AGREEMENT
The States of Arizona, California, Colorado, Indiana, Kansas,
Louisiana, Michigan, Missouri, Mississippi, Nevada, New Mexico, Ohio, Oklahoma,
Oregon, Tennessee, Texas, Utah and Washington.
<PAGE> 1
EXHIBIT 11
<TABLE>
NATIONAL SANITARY SUPPLY COMPANY
COMPUTATION OF EARNINGS PER SHARE (a)
(thousands, except per share data)
<CAPTION>
Years Ended December 31,
------------------------
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Computation of Earnings Per Common
and Common Equivalent Share
- ----------------------------------------
Net Income $4,753 $4,277 $3,972
====== ====== ======
Average Number of Shares of
Common Stock Outstanding 5,974 5,897 5,863
Incremental Effect of Unexercised
Stock Options 99 102 21
------ ------ ------
Average Number of Shares of Common Stock
and Common Stock Equivalents Outstanding 6,073 5,999 5,884
====== ====== ======
Earnings per Common and Common
Equivalent Share $ 0.78 $0.71 $0.68
====== ====== ======
Computation of Earnings Per Common Share
Assuming Full Dilution
- ----------------------------------------
Net Income $4,753 $4,277 $3,972
====== ====== ======
Average Number of Shares of
Common Stock Outstanding 5,974 5,897 5,863
Incremental Effect of Unexercised
Stock Options 101 138 47
------ ------ ------
Average Number of Shares of Common Stock
Assuming Full Dilution 6,075 6,035 5,910
====== ====== ======
Earnings Per Common Share Assuming
Full Dilution $ 0.78 $0.71 $0.67
====== ====== ======
<FN>
(a) This calculation is submitted in accordance with the Securities Exchange Act
of 1934. Because the incremental effect of unexercised stock options results
in dilution of less than 3%, the per share data presented in the consolidated
statement of income excludes the impact of common stock equivalents.
</TABLE>
<PAGE> 1
Exhibit 13
CONSOLIDATED SELECTED FINANCIAL DATA
NATIONAL SANITARY SUPPLY COMPANY
(thousands of dollars, except per share and other data)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1986 1987 1988 1989 1990 1991 1992 1993 1994
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Results
Sales $ 80,021 $ 92,620 $179,191 $262,351 $265,424 $267,508 $288,731 $296,865 $308,280
Gross profit 34,923 40,125 58,636 79,992 84,128 84,766 92,508 94,330 97,739
Net income 2,351(1) 3,043 3,910(2) 4,315 4,104 3,483 3,972 4,277 4,753
- ------------------------------------------------------------------------------------------------------------------------------------
Per Share Data
Net income $ .43(1) $ .51 $ .65(2) $ .71 $ .68 $ .60 $ .68 $ .73 $ .80
Dividends .04 .09 .12 .15 .17 .19 .21 .23 .25
Book value 5.50(1) 5.90 6.61 7.16 7.74 8.14 8.60 8.98 9.56
- ------------------------------------------------------------------------------------------------------------------------------------
Financial Position
Working capital $ 19,677 $ 23,366 $ 40,138 $ 39,593 $ 39,682 $ 26,911 $ 16,894 $ 25,641 $ 26,259
Total assets 51,879 57,948 111,839 116,276 115,857 108,868 115,007 114,144 124,072
- ------------------------------------------------------------------------------------------------------------------------------------
Short-term debt $ 157 $ 17 $ 3,000 $ 2,186 $ 2,138 $ 7,581 $ 16,733 $ 10,702 $ 14,721
Long-term debt 10,020 10,000 43,714 41,022 38,943 24,921 13,750 17,000 16,000
Stockholders' equity 33,014 35,287 40,347 43,838 44,944 47,494 50,461 53,148 57,561
- ------------------------------------------------------------------------------------------------------------------------------------
Total capital $ 43,191 $ 45,304 $ 87,061 $ 87,046 $ 86,025 $ 79,996 $ 80,944 $ 80,850 $ 88,282
- ------------------------------------------------------------------------------------------------------------------------------------
Other Data
Current ratio 3.7 3.4 2.7 2.4 2.3 1.8 1.3 1.6 1.5
Debt as a % of total capital 24 % 22 % 54 % 50 % 48 % 41 % 38 % 34 % 35 %
Sales personnel 273 322 455 597 640 657 716 738 728
Number of locations 25 26 51 53 57 60 67 67 71
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Unaudited pro forma data for 1986.
(2) Income before cumulative effect of accounting change which for 1988 totaled
$830,000 or $.13 per share.
<PAGE> 2
FINANCIAL REVIEW
Contents
Consolidated Balance Sheet 10
Consolidated Statement of Income 11
Consolidated Statement of Cash Flows 12
Consolidated Statement of Stockholders' Equity 13
Consolidated Quarterly Results (Unaudited) 13
Notes to Consolidated Financial Statements 14
Management's Discussion and Analysis 20
PRICE WATERHOUSE LLP
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of National Sanitary Supply Company
In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of income, cash flows, and stockholders' equity
present fairly, in all material respects, the financial position of National
Sanitary Supply Company and its subsidiaries at December 31, 1994 and 1993, and
the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
/s/
Cincinnati, Ohio
January 31, 1995
<PAGE> 3
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
NATIONAL SANITARY SUPPLY COMPANY
December 31 (thousands, except share data) 1994 1993
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,713 $ 1,110
Accounts receivable, less allowances (1994-$1,428; 1993-$1,290) 41,655 36,607
Inventories 28,344 26,955
Deferred income taxes 1,831 1,776
Prepaid expenses and other current assets 1,527 1,189
-------------------------
Total current assets 75,070 67,637
Properties and equipment, at cost, less accumulated depreciation 21,851 17,383
Goodwill, less accumulated amortization 26,650 27,513
Other assets 501 1,611
-------------------------
Total assets $124,072 $114,144
=========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 21,538 $ 18,223
Accrued liabilities 12,552 13,071
Loans payable to Chemed Corporation 13,721 9,702
Current portion of notes to Chemed Corporation 1,000 1,000
-------------------------
Total current liabilities 48,811 41,996
Notes to Chemed Corporation 16,000 17,000
Deferred income taxes 441 701
Other noncurrent liabilities 1,259 1,299
-------------------------
Total liabilities 66,511 60,996
-------------------------
Stockholders' equity:
Preferred stock - 1,000,000 shares authorized,
$1 par value (none issued) - -
Common stock - 7,000,000 shares authorized, $1 par value
(issued: 1994- 6,396,756 shares; 1993- 6,323,206 shares) 6,397 6,324
Paid-in capital 25,312 24,369
Retained earnings 28,695 25,468
Treasury stock, at cost (1994- 373,783 shares; 1993- 403,984 shares) (2,843) (3,013)
-------------------------
Total stockholders' equity 57,561 53,148
-------------------------
Total liabilities and stockholders' equity $124,072 $114,144
=========================
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE> 4
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
NATIONAL SANITARY SUPPLY COMPANY
Years Ended December 31 (thousands, except per share data) 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $308,280 $296,865 $288,731
Cost of sales 210,541 202,535 196,223
------------------------------------------
Gross profit 97,739 94,330 92,508
------------------------------------------
Expenses and other income:
Operating expenses 86,573 84,369 82,490
Amortization of goodwill 874 868 847
Chemed interest expense 2,381 2,220 2,834
Other interest expense 25 99 171
Other income, net (203) (570) (460)
------------------------------------------
Total expenses and other income 89,650 86,986 85,882
------------------------------------------
Income before income taxes 8,089 7,344 6,626
Income taxes 3,336 3,067 2,654
------------------------------------------
Net income $ 4,753 $ 4,277 $ 3,972
==========================================
Earnings per share $ 0.80 $ 0.73 $ 0.68
==========================================
Dividends per share $ 0.25 $ 0.23 $ 0.21
==========================================
Average shares outstanding 5,974 5,897 5,863
==========================================
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE> 5
CONSOLIDATED STATEMENT OF CASH FLOWS
NATIONAL SANITARY SUPPLY COMPANY
<TABLE>
<CAPTION>
Years Ended December 31 (thousands of dollars) 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,753 $ 4,277 $ 3,972
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 3,210 3,467 3,493
Amortization of goodwill and deferred charges 1,315 1,285 1,223
Deferred income tax provision (22) 172 (714)
Provision for losses on accounts receivable 970 1,003 1,145
Changes in operating assets and liabilities, excluding
amounts acquired in business combinations:
Increase in accounts receivable (5,781) (1,409) (4,619)
(Increase)/decrease in inventories (1,112) 279 (278)
(Increase)/decrease in other assets (390) (175) 29
Increase/(decrease) in accounts payable 3,169 (950) 3,011
Increase/(decrease) in other liabilities (643) (903) 1,484
------------------------------------------
Net cash provided by operating activities 5,469 7,046 8,746
------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Business combinations (646) (481) (4,025)
Capital expenditures (6,715) (2,688) (3,949)
Other 116 158 741
------------------------------------------
Net cash used by investing activities (7,245) (3,011) (7,233)
------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loans payable to Chemed Corporation 4,019 3,219 983
Principal payments on notes to Chemed Corporation (1,000) (6,000) (1,250)
Principal payments on other long-term debt (46) (147) (1,411)
Dividends paid (1,494) (1,357) (1,232)
Proceeds from sale of treasury stock 525 - -
Proceeds from/(purchases of) common stock 375 (14) -
------------------------------------------
Net cash provided by/(used by) financing activities 2,379 (4,299) (2,910)
------------------------------------------
Increase/(decrease) in cash and cash equivalents 603 (264) (1,397)
Cash and cash equivalents at beginning of period 1,110 1,374 2,771
------------------------------------------
Cash and cash equivalents at end of period $ 1,713 $ 1,110 $ 1,374
==========================================
SUPPLEMENTAL DISCLOSURES
Cash paid during the year for interest $ 2,297 $ 2,306 $ 2,990
Cash paid during the year for income taxes 4,208 2,357 3,582
==========================================
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE> 6
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
NATIONAL SANITARY SUPPLY COMPANY
Common Paid in Retained Treasury
Stock Capital Earnings Stock Total
(thousands of dollars, except per share data) ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1991 $ 6,212 $ 23,613 $ 20,302 $ (2,633) $ 47,494
Net income - - 3,972 - 3,972
Dividends ($.21 per share) - - (1,232) - (1,232)
Stock awards granted or terminated 30 203 - (6) 227
------------------------------------------------------------------------
Balance at December 31, 1992 6,242 23,816 23,042 (2,639) 50,461
Net income - - 4,277 - 4,277
Dividends ($.23 per share) - - (1,357) - (1,357)
Minimum pension liability adjustment - - (494) - (494)
Stock options exercised/
awards granted 82 553 - (374) 261
------------------------------------------------------------------------
Balance at December 31, 1993 6,324 24,369 25,468 (3,013) 53,148
Net income - - 4,753 - 4,753
Dividends ($.25 per share) - - (1,494) - (1,494)
Minimum pension liability adjustment - - (32) - (32)
Treasury stock sold - 201 - 324 525
Stock options exercised/
awards granted or terminated 73 742 - (154) 661
------------------------------------------------------------------------
Balance at December 31, 1994 $ 6,397 $ 25,312 $ 28,695 $ (2,843) $ 57,561
========================================================================
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
Consolidated Quarterly Results (Unaudited)
<TABLE>
<CAPTION>
NATIONAL SANITARY SUPPLY COMPANY
First Second Third Four Total
Quarter Quarter Quarter Quarter Year
(thousands of dollars, except per share data) ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994
Sales $71,460 $ 76,975 $ 81,232 $ 78,613 $308,280
Gross profit 22,261 24,115 25,260 26,103 97,739
Net income 574 1,104 1,654 1,421 4,753
========================================================================
Earnings per share $ .10 $ .19 $ .28 $ .24 $ .80
========================================================================
Dividends per share $ .060 $ .060 $ .065 $ .065 $ .250
========================================================================
Average shares outstanding 5,937 5,961 5,982 6,016 5,974
========================================================================
1993
Sales $69,347 $ 75,281 $ 78,598 $ 73,639 $296,865
Gross profit 21,945 23,654 24,431 24,300 94,330
Net income 501 950 1,509 1,317 4,277
========================================================================
Earnings per share $ .09 $ .16 $ .26 $ .22 $ .73
========================================================================
Dividends per share $ .055 $ .055 $ .060 $ .060 $ .230
========================================================================
Average shares outstanding 5,882 5,895 5,899 5,911 5,897
========================================================================
</TABLE>
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the
accounts of National Sanitary Supply Company and its wholly owned subsidiaries
("National"). All Intercompany accounts and transactions have been eliminated.
Chemed Corporation ("Chemed") owned 85% of National's outstanding common stock
on December 31, 1994.
BUSINESS SEGMENT. National operates in one business segment. All significant
revenues relate to the sale and distribution of sanitary maintenance and paper
supplies including cleaners, floor finishes, hand soaps, paper towels and
tissues, cleaning equipment, packaging supplies, business paper, and general
maintenance products used by commercial, institutional, and industrial
businesses.
Except for significant customers disclosed elsewhere herein, National sells
to a wide variety of customers in the western, southwestern, and midwestern
areas of the United States, thus reducing the Company's credit risk.
Credit risks are monitored by management following policies deemed reasonable
in the circumstances.
CASH EQUIVALENTS include highly liquid investments with maturities of three
months or less when purchased.
INVENTORIES, which are substantially composed of finished goods and general
merchandise, are stated at the lower of cost or market, with cost determined
using the weighted average unit cost method. Certain selling and administrative
costs are capitalized into inventory and are included in cost of sales as the
related sales are recorded. As of December 31, 1994, the inventories included
capitalized general and administrative expenses of $312,000, and as of December
31, 1993, $310,000. The aggregate amount of general and administrative
expenses incurred was $27,236,000 in 1994, $26,487,000 in 1993, and $26,109,000
in 1992.
DEPRECIATION, RETIREMENT, AND MAINTENANCE POLICIES. Depreciation is computed
using the straight-line method based on the following useful lives:
Building and improvements 20-35 years
Leasehold improvements Life of lease
Transportation equipment 3-10 years
Office and warehouse equipment 5-15 years
When assets are retired or otherwise disposed of, their cost and the
applicable accumulated depreciation and amortization are removed from the
accounts, and the resulting gain or loss is reflected in income. Expenditures
for maintenance, repairs, renewals, and betterments that do not materially
prolong the useful life of assets are expensed.
GOODWILL and other intangible assets arise from business combinations accounted
for as purchase transactions and are amortized using the straight-line method
over the periods to be benefited, but not in excess of 40 years. National
periodically makes an estimation and valuation of the future benefits of its
intangible assets based on key financial indicators. If the projected
undiscounted cash flows of a business unit indicate that goodwill or other
intangible assets have been impaired, a write-down to fair value is made.
<PAGE> 8
SALES are recognized when products are delivered to the customer. One customer,
a fast food restaurant chain, accounted for approximately $42,000,000,
$38,000,000, and $29,000,000 of National's 1994, 1993, and 1992 sales,
respectively. This chain consists of over 1,250 franchises and 150
company-owned restaurants. Sales to this customer primarily consisted of
low-margin foodservice products such as paper napkins, plates, and cups.
INCOME TAXES. In accordance with an agreement with Chemed, federal and state
income taxes are provided on a separate company basis, although National's
taxable income is included in the U.S. federal and certain state income tax
returns of Chemed. The provisions of SFAS No. 109 are followed in recording
income tax expense.
EARNINGS PER SHARE data are computed on the weighted average number of shares
of common stock outstanding during the period. The dilutive effect of common
stock equivalents is not material.
2. BUSINESS COMBINATIONS
During 1994, National acquired two small sanitary maintenance supply
businesses in two separate transactions. During 1993, National purchased the
assets of a small sanitary maintenance supply company. The impact of these
acquired businesses on National's 1994 and 1993 results of operations was not
material. During 1992, National acquired four sanitary maintenance supply
businesses in four separate purchase transactions. Assuming the business
combinations made in 1992 were completed at the beginning of the period, sales
for National in 1992 would have been $290,173,000. Except for sales, the impact
of the acquired businesses on National's results of operations for 1992 was not
material. All of the aforementioned business combinations were accounted for as
purchase transactions with the excess purchase price over the fair value of the
net tangible and intangible assets acquired classified as goodwill.
3. RELATED PARTY TRANSACTIONS
MANAGEMENT OF THE COMPANY. During 1994, National finalized the purchase of
two Los Angeles facilities at a cost of $3,275,000. These facilities had
been leased from the former owners of National since 1983. The lease had
included an option to purchase these facilities at their fair market value
as of November, 1983.
CHEMED provides to National certain administrative, financial, legal,
internal audit, insurance, and staff functions, the costs of which are included
in the accompanying historical financial statements. The fees for these
services are allocated and determined based on Chemed's cost and are deemed
reasonable by management. Service fees paid to Chemed amounted to $580,000 in
1994, $512,000 in 1993, and $482,000 in 1992.
National has entered into an agreement with Chemed under which National's
excess funds are deposited with Chemed, bear interest at a rate based on U.S.
Treasury Notes, and are payable upon demand. Any advances made by Chemed to
National, unless otherwise specifically agreed to in writing, also bear
interest at the same rate and are payable on demand. The net amount of interest
expense paid to Chemed totaled $719,000 in 1994, $444,000 in 1993, and $291,000
in 1992.
National has also obtained long-term financing from Chemed on which
interest expense amounted to $1,662,000 in 1994, $1,776,000 in 1993, and
$2,543,000 in 1992.
<PAGE> 9
4. BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
1994 1993
December 31 (thousands of dollars) -------------------------
<S> <C> <C>
PROPERTIES AND EQUIPMENT
Land $ 3,524 $ 1,557
Buildings and leasehold improvements 12,441 9,714
Transportation equipment 9,181 9,294
Office and warehouse equipment 14,641 13,337
Projects under construction 1,421 933
-------------------------
Total property and equipment 41,208 34,835
Accumulated depreciation (19,357) (17,452)
-------------------------
Net properties and equipment $ 21,851 $ 17,383
=========================
GOODWILL $ 33,532 $ 33,521
Less accumulated amortization (6,882) (6,008)
-------------------------
Net goodwill $ 26,650 $ 27,513
=========================
ACCRUED LIABILITIES
Accrued commissions, wages, and benefits $ 3,438 $ 3,004
Accrued insurance 5,347 5,563
Federal and state income taxes 1,000 2,028
Interest payable to Chemed 468 288
Other accrued expenses 2,299 2,188
-------------------------
Total other current liabilities $ 12,552 $ 13,071
=========================
NOTES TO CHEMED
11% note with semiannual interest payments,
due in equal annual installments through 2003 $ 9,000 $ 10,000
8% note with quarterly interest payments,
due on January 1, 1998 8,000 8,000
-------------------------
Total notes to Chemed 17,000 18,000
Less current portion 1,000 1,000
-------------------------
Noncurrent portion of notes to Chemed $ 16,000 $ 17,000
=========================
Scheduled aggregate annual payments of notes to Chemed are $1,000,000 each year for 1995, 1996, and 1997,
$9,000,000 for 1998, $1,000,000 for 1999, and $4,000,000 thereafter.
</TABLE>
<PAGE> 10
5. LEASES
National leases the majority of its office and warehouse facilities under
operating leases, including transactions with Chemed, with terms generally from
one to ten years, and in most cases, management expects that these leases will
be renewed or replaced by other leases in the normal course of business. The
Company also enters into short-term operating leases for various transportation
and office equipment. Rent expense incurred under operating leases amounted to
$3,748,000 in 1994, $3,420,000 in 1993, and $3,017,000 in 1992. Rents related
to Chemed transactions totaled $220,000, $125,000, and $76,000 in 1994, 1993,
and 1992 respectively.
Aggregate minimum rental payments required under future operating leases
that had initial or remaining noncancelable terms in excess of one year as of
December 31, 1994 total $7,715,000 scheduled as follows: $2,383,000 for 1995;
$1,836,000 for 1996; $1,364,000 for 1997; $998,000 for 1998; $654,000 for
1999; and $480,000 thereafter.
6. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
Years Ended December 31 (thousands of dollars) 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current tax expense:
U.S. Federal $ 2,850 $ 2,338 $ 2,837
State and local 508 557 531
------------------------------------------
Total current tax expense 3,358 2,895 3,368
Deferred tax expense/(income) (22) 172 (714)
------------------------------------------
Total income tax provision $ 3,336 $ 3,067 $ 2,654
==========================================
The differences between the federal income tax rate and the effective tax rate are as follows:
Years Ended December 31 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------
Statutory U.S. Federal income tax rate 34.0% 34.0% 34.0%
State and local income taxes, less federal income tax benefit 4.1 5.0 2.8
Purchase accounting differences 3.7 4.0 4.4
All other items, net (0.6) (1.2) (1.1)
------------------------------------------
Effective tax rate 41.2% 41.8% 40.1%
==========================================
Deferred tax assets/(liabilities) are comprised of the following:
December 31 (thousands of dollars) 1994 1993
- ------------------------------------------------------------------------------------------------------------------
Accrued liabilities $ 1,467 $ 1,569
Bad debt reserves 432 394
Amortization of intangible assets 261 130
Defined benefit pension plans 93 96
Other 38 69
-------------------------
Gross deferred tax assets 2,291 2,258
-------------------------
Depreciation, including impact of disposals (853) (1,015)
Inventory differences (48) (168)
-------------------------
Gross deferred tax liabilities (901) (1,183)
-------------------------
Deferred tax assets $ 1,390 $ 1,075
=========================
The change in deferred tax assets and liabilities includes the deferred tax
provision for income taxes and timing differences arising from business
combinations and pension liability adjustments.
</TABLE>
<PAGE> 11
7. STOCK INCENTIVE PLANS
National has two stock incentive plans covering the issuance or transfer of up
to 750,000 shares of its common stock. The latest plan, covering 250,000
shares, was adopted in May 1988, and the original plan of 500,000 shares was
adopted in May 1986. Under both plans, stock incentives may be granted in the
form of a stock option or stock award. Options are granted at a price equal to
the market value of National's common stock on the date of the grant and
generally become exercisable beginning one year following the date of the grant
in four equal annual installments. Stock awards are issued to key employees at
no cost and generally are restricted as to the transfer of ownership.
Restrictions covering stock awards lapse proportionately over a three-year
period. The following summarizes the activity in the stock incentive plans for
1994 and 1993:
<TABLE>
<CAPTION>
1994 1993
------------------------------------------------------
Number Average Number Average
of Shares Price of Shares Price
------------------------------------------------------
<S> <C> <C> <C> <C>
Options:
Outstanding at January 1 535,383 $ 8.29 604,909 $8.19
Exercised (50,835) 7.35 (49,650) 7.28
Terminated (21,109) 8.41 (19,876) 7.78
-------- -------
Outstanding at December 31 463,439 8.39 535,383 8.29
======== =======
Exercisable at December 31 438,890 8.45 450,522 8.52
======== =======
Awards:
Outstanding at January 1 47,915 7.84 45,525 7.38
Granted 27,700 12.25 32,625 8.43
Terminated (5,035) 10.54 - -
Vested (35,437) 8.31 (30,235) 7.79
-------- -------
Not vested at December 31 35,143 10.45 47,915 7.84
======== =======
Shares available for
granting at December 31 36,877 38,433
======== =======
</TABLE>
8. PENSION AND PROFIT SHARING PLANS
DEFINED CONTRIBUTION PLANS. Effective January 1, 1992, substantially all
nonunion employees began participating in Chemed's Employee Stock Ownership
Plan (ESOP). Under the ESOP, a portion of the Chemed capital stock held by the
ESOP is allocated to a participant's account as Chemed's ESOP loans are repaid.
The allocation is based on eligible compensation. The cost of the ESOP to
National is based on 75% of the prior-year average Chemed stock price. For
1994, the stock price was $22.31, resulting in a cost to National of
$1,346,000, for 1993, the stock price was $20.70, resulting in a cost to
National of $1,090,000, and for 1992, the stock price was $16.41, resulting in
a cost of $860,000.
All nonunion employees are eligible to participate in National's Savings and
Investment Plan. Each participant may contribute up to 6% of eligible
compensation, and National contributes an additional 25% of the participant's
contribution. These employees also participate in profit sharing plans. Under
the provisions of these plans National may contribute, at the discretion of its
Board of Directors, up to a maximum of 15% of a participant's eligible
compensation.
<PAGE> 12
Union employees in National's western operations participate in
the Western Conference of Teamsters Pension Trust Fund, a multi-employer
defined contribution plan.
The expenses relating to the defined contribution plans, including the ESOP,
amounted to $1,981,000 in 1994, $1,363,000 in 1993, and $1,779,000 in 1992.
DEFINED BENEFIT PLANS. In National's Century subsidiary, all employees with at
least one year of service on or before December 31, 1991 participate in a
noncontributory defined benefit plan. Effective December 31, 1991, the Company
froze the employee benefits accrued under this defined benefit plan. As a
result, the projected benefit obligation equals the accumulated benefit
obligation and is fully vested. Benefits are based on years of service and the
employee's highest consecutive five-year average compensation prior to December
31, 1991. Century's funding policy is to contribute annually an amount not
greater than the maximum that can be deducted for federal income tax purposes.
Plan assets are primarily invested in government debt securities.
The provisions of SFAS No. 87, "Employers' Accounting for Pensions," require
the recognition of a liability equal to the amount by which the accumulated
benefit obligation exceeds the fair value of plan assets. Recognition of an
additional liability is required to the extent of prepaid pension cost.
National has recorded the additional pension liability with an offsetting
intangible asset. Because the asset recorded exceeds the unrecognized prior
service cost, the balance (net of tax benefits) is recorded as a reduction in
stockholders' equity.
The following table summarizes the funded status of Century's defined
benefit plan and amounts recognized in the consolidated balance sheet:
<TABLE>
<CAPTION>
December 31 (thousands of dollars) 1994 1993
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Projected/accumulated benefit obligation $ 5,861 $ 5,814
Plan assets at fair value (5,292) (5,289)
--------------------------
Plan assets less than projected/accumulated benefit obligation 569 525
Unrecognized net loss (1,280) (1,233)
Unrecognized net asset 484 484
Additional pension liability adjustment 796 749
--------------------------
Accrued pension cost $ 569 $ 525
==========================
Intangible asset $ 796 $ 749
Tax benefit 270 255
--------------------------
Additional pension liability adjustment
to stockholders' equity $ 526 $ 494
==========================
Assumptions:
Discount rate 7.25% 7.25%
Long-term rate of return on plan assets 7.50 7.50
The components of net periodic pension cost for Century's defined benefit plan follow:
Years ended December 31 (thousands of dollars) 1994 1993 1992
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest cost $ 409 $ 412 $ 397
Return on assets (126) (293) (151)
Net amortization and deferral (230) (95) (246)
---------------------------------------------
Net periodic pension cost $ 53 $ 24 $ -
=============================================
</TABLE>
<PAGE> 13
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
1994 COMPARED WITH 1993
In 1994, National's sales increased 4% to $308,280,000. The sales increase
reflects better economic conditions during the second half of 1994,
particularly in Southern California which was affected by the January 1994
earthquake. The industry-wide deflationary pricing, which has hampered sales
growth for the past several years especially in the commodity-oriented paper
and plastic product categories, began to turn around as prices began increasing
during the second half of 1994. For the full year 1994, prices averaged
approximately 1% less than 1993. The cost for most products also declined in
1994, and as a result, the gross profit margin of 31.7% was comparable with the
prior year.
For 1995, management expects inflation to return and have a similar effect on
both the cost of its products and its selling prices.
Operating expenses as a percentage of sales decreased from 28.4% in 1993 to
28.1% in 1994. The decrease reflects tight control over most expense items
including decreases in the cost of medical benefits and workers compensation.
Chemed interest expense increased $161,000 to $2,381,000 due to both an
increase in the average loan balance and higher short-term interest rates.
National's effective tax rate decreased from 41.8% to 41.2% primarily as a
result of lower state and local income taxes.
National's net income in 1994 increased 11% to $4,753,000. The higher sales
and tight control over most expense items primarily accounts for the increase
in net income.
1993 COMPARED WITH 1992
National's sales for 1993 increased 3% to $296,865,000. The sales growth was
generated by a unit volume increase of 5%, offset in part by industry-wide
deflationary pricing, particularly in the paper and plastic product categories.
In general, National's selling price deflation in certain product categories
resulted from a corresponding decline in the cost for these products. The small
decrease in the gross profit margin from 32.0% in 1992 to 31.8% in 1993
resulted from an increase in the percentage of high-volume, lower-margin
business to the food service industry.
Operating expenses as a percentage of sales decreased from 28.6% in 1992 to
28.4% in 1993, reflecting tight expense control, especially in non-sales
personnel costs and bad debt expense.
The decline in Chemed interest expense of $614,000 to $2,834,000 was due to
a reduction in total borrowing from Chemed, the refinancing of certain
long-term notes with Chemed, and a reduction in short-term interest rates.
The effective tax rate for 1993 was 41.8% compared with 40.1% in 1992.
Higher state and local income taxes primarily account for the increase.
National's net income in 1993 increased 8% to $4,277,000. The additional
sales volume coupled with tight expense controls and lower interest cost
primarily account for the increase in net income.
<PAGE> 14
INFLATION
Over the three-year period from 1992 to 1994, National's average unit selling
prices and average unit cost of goods sold declined due to deflationary pricing
of certain commodity-oriented product categories. During this same period, the
Company experienced inflationary increases in operating expenses. National has
been able to mitigate these economic factors with more efficient operations, by
promoting higher margin products, and through periodic price increases, when
possible.
LIQUIDITY AND CAPITAL RESOURCES
Working capital was $26,259,000 with a current ratio of 1.5:1 at December
31,1994 as compared with working capital of $25,641,000 with a current ratio of
1.6:1 at December 31,1993. The decrease in the current ratio was due to the
increase in loans payable to Chemed as a result of borrowing the funds
necessary to purchase two Los Angeles facilities during the second quarter of
1994 at a cost of $3,275,000.
The increase in accounts receivable at December 31, 1994 reflects a higher
fourth quarter sales volume and a small increase in the number of days
receivables outstanding. Inventories and accounts payable at December 31, 1994
reflect the impact of year-end product purchases which did not occur at the
end of 1993.
On January 1, 1993, a 10% note for $8,000,000 with Chemed due November 1, 1993
was replaced with an 8% note with Chemed due January 1, 1998. Also on January
1, 1993, National retired a 9% note for $5,000,000 with Chemed. Additionally,
for the past three years, National has made the scheduled year-end payments on
its long-term obligations with Chemed of $1,000,000 in 1994 and 1993 and
$1,250,000 in 1992. The Company expects to continue making the required
payments on all its debt obligations with funds generated from operations or,
if necessary, to arrange for new or additional loans from Chemed or other
parties.
At December 31, 1994, debt as a percentage of total capital increased 1% to
35% primarily due to the borrowing necessary to purchase the two Los Angeles
facilities. Debt as a percentage of total capital decreased from 38% in 1992 to
34% in 1993 reflecting excess cash flow from operating and investing
activities.
Management believes that acquisitions of existing businesses will continue to
be one of National's primary means of expansion. These acquisitions will be
financed with funds generated from operations in the future and, if necessary,
with borrowing from Chemed or other parties.
Currently, National has not established independent bank credit relationships.
Management believes, however, that it would be able to obtain this credit
should the need arise. Management also believes the public securities market
could provide additional funds. Under certain loan agreements and guarantees
that Chemed had in place at December 31, 1994, Chemed and National, as a
majority-owned subsidiary of Chemed, are subject to certain financial
restrictions. Because of Chemed's control of National, these restrictions could
limit National's ability to incur debt and to use properties to secure debt. As
of December 31, 1994, Chemed was permitted to incur additional debt of
$91,828,000, of which debt of subsidiaries could not be more than $36,143,000.
Based on National's expectations with respect to its future financial needs, it
is not anticipated that these restrictions will inhibit the Company's ability
to achieve its financial objectives.
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF NATIONAL SANITARY SUPPLY COMPANY
The following is a list of subsidiaries of the Company as of December
31, 1994. Each of the companies is incorporated under the laws of the state
following its name. The percentage given represents the voting securities of
each company owned by the Company or its subsidiary as at December 31, 1994.
All of the companies listed below are included in the consolidated
financial statements as at December 31, 1994.
Century Papers, Inc. (Texas, 100%)
Cardinal Paper Company (Oklahoma, 100% by
Century Papers, Inc.)
National Sanitary Supply (Delaware, 100%)
Development, Inc.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-5604, 33-28593 and 33-55693) of National
Sanitary Supply Company of our report dated January 31, 1995 appearing on page
9 of the 1994 Annual Report to Stockholders which is incorporated in this
Annual Report on Form 10-K. We also consent to the incorporation by reference
of our report on the Financial Statement Schedule, which appears on page S-2 of
this Form 10-K.
/s/ PRICE WATERHOUSE LLP
- ---------------------------------
PRICE WATERHOUSE LLP
Cincinnati, Ohio
March 28, 1995
<PAGE> 1
POWER OF ATTORNEY
The undersigned director of National Sanitary Supply Company
("Company") hereby appoints Edward L. Hutton, Paul C. Voet and Naomi C. Dallob
as his or her true and lawful attorneys-in-fact for the purpose of signing the
Company's Annual Report on Form 10-K for the year ended December 31, 1994, and
all amendments thereto, to be filed with the Securities and Exchange
Commission. Each of such attorneys-in-fact is appointed with full power to act
without the other.
Date: March 8, 1995
/s/ Robert B. Garber
---------------------
Robert B. Garber
<PAGE> 2
POWER OF ATTORNEY
The undersigned director of National Sanitary Supply Company
("Company") hereby appoints Edward L. Hutton, Paul C. Voet and Naomi C. Dallob
as his or her true and lawful attorneys-in-fact for the purpose of signing the
Company's Annual Report on Form 10-K for the year ended December 31, 1994, and
all amendments thereto, to be filed with the Securities and Exchange
Commission. Each of such attorneys-in-fact is appointed with full power to act
without the other.
Date: March 7, 1995
/s/ Arthur J. Bennert, Jr.
---------------------------
Arthur J. Bennert, Jr.
<PAGE> 3
POWER OF ATTORNEY
The undersigned director of National Sanitary Supply Company
("Company") hereby appoints Edward L. Hutton, Paul C. Voet and Naomi C. Dallob
as his or her true and lawful attorneys-in-fact for the purpose of signing the
Company's Annual Report on Form 10-K for the year ended December 31, 1994, and
all amendments thereto, to be filed with the Securities and Exchange
Commission. Each of such attorneys-in-fact is appointed with full power to act
without the other.
Date: March 15, 1995
/s/ James A. Cunningham
-----------------------
James A. Cunningham
<PAGE> 4
POWER OF ATTORNEY
The undersigned director of National Sanitary Supply Company
("Company") hereby appoints Edward L. Hutton, Paul C. Voet and Naomi C. Dallob
as his or her true and lawful attorneys-in-fact for the purpose of signing the
Company's Annual Report on Form 10-K for the year ended December 31, 1994, and
all amendments thereto, to be filed with the Securities and Exchange
Commission. Each of such attorneys-in-fact is appointed with full power to act
without the other.
Date: March 14, 1995
/s/ Charles H. Erhart, Jr.
-------------------------------
Charles H. Erhart, Jr.
<PAGE> 5
POWER OF ATTORNEY
The undersigned director of National Sanitary Supply Company
("Company") hereby appoints Edward L. Hutton, Paul C. Voet and Naomi C. Dallob
as his or her true and lawful attorneys-in-fact for the purpose of signing the
Company's Annual Report on Form 10-K for the year ended December 31, 1994, and
all amendments thereto, to be filed with the Securities and Exchange
Commission. Each of such attorneys-in-fact is appointed with full power to act
without the other.
Date: March 10, 1995
/s/ Neal Gilliatt
--------------------
Neal Gilliatt
<PAGE> 6
POWER OF ATTORNEY
The undersigned director of National Sanitary Supply Company
("Company") hereby appoints Edward L. Hutton, Paul C. Voet and Naomi C. Dallob
as his or her true and lawful attorneys-in-fact for the purpose of signing the
Company's Annual Report on Form 10-K for the year ended December 31, 1994, and
all amendments thereto, to be filed with the Securities and Exchange
Commission. Each of such attorneys-in-fact is appointed with full power to act
without the other.
Date: March 10, 1995
/s/ Will J. Hoekman
---------------------
Will J. Hoekman
<PAGE> 7
POWER OF ATTORNEY
The undersigned director of National Sanitary Supply Company
("Company") hereby appoints Edward L. Hutton, Paul C. Voet and Naomi C. Dallob
as his or her true and lawful attorneys-in-fact for the purpose of signing the
Company's Annual Report on Form 10-K for the year ended December 31, 1994, and
all amendments thereto, to be filed with the Securities and Exchange
Commission. Each of such attorneys-in-fact is appointed with full power to act
without the other.
Date: March 17, 1995
/s/ Thomas C. Hutton
----------------------
Thomas C. Hutton
<PAGE> 8
POWER OF ATTORNEY
The undersigned director of National Sanitary Supply Company
("Company") hereby appoints Edward L. Hutton, Paul C. Voet and Naomi C. Dallob
as his or her true and lawful attorneys-in-fact for the purpose of signing the
Company's Annual Report on Form 10-K for the year ended December 31, 1994, and
all amendments thereto, to be filed with the Securities and Exchange
Commission. Each of such attorneys-in-fact is appointed with full power to act
without the other.
Date: March 8, 1995
/s/ W. Dwight Jackson
-----------------------
W. Dwight Jackson
<PAGE> 9
POWER OF ATTORNEY
The undersigned director of National Sanitary Supply Company
("Company") hereby appoints Edward L. Hutton, Paul C. Voet and Naomi C. Dallob
as his or her true and lawful attorneys-in-fact for the purpose of signing the
Company's Annual Report on Form 10-K for the year ended December 31, 1994, and
all amendments thereto, to be filed with the Securities and Exchange
Commission. Each of such attorneys-in-fact is appointed with full power to act
without the other.
Date: March 8, 1995
/s/ Charles O. Lane
-----------------------
Charles O. Lane
<PAGE> 10
POWER OF ATTORNEY
The undersigned director of National Sanitary Supply Company
("Company") hereby appoints Edward L. Hutton, Paul C. Voet and Naomi C. Dallob
as his or her true and lawful attorneys-in-fact for the purpose of signing the
Company's Annual Report on Form 10-K for the year ended December 31, 1994, and
all amendments thereto, to be filed with the Securities and Exchange
Commission. Each of such attorneys-in-fact is appointed with full power to act
without the other.
Date: March 2, 1995
/s/ Sandra E. Laney
----------------------
Sandra E. Laney
<PAGE> 11
POWER OF ATTORNEY
The undersigned director of National Sanitary Supply Company
("Company") hereby appoints Edward L. Hutton, Paul C. Voet and Naomi C. Dallob
as his or her true and lawful attorneys-in-fact for the purpose of signing the
Company's Annual Report on Form 10-K for the year ended December 31, 1994, and
all amendments thereto, to be filed with the Securities and Exchange
Commission. Each of such attorneys-in-fact is appointed with full power to act
without the other.
Date: March 15, 1995
/s/ Kevin J. McNamara
----------------------
Kevin J. McNamara
<PAGE> 12
POWER OF ATTORNEY
The undersigned director of National Sanitary Supply Company
("Company") hereby appoints Edward L. Hutton, Paul C. Voet and Naomi C. Dallob
as his or her true and lawful attorneys-in-fact for the purpose of signing the
Company's Annual Report on Form 10-K for the year ended December 31, 1994, and
all amendments thereto, to be filed with the Securities and Exchange
Commission. Each of such attorneys-in-fact is appointed with full power to act
without the other.
Date: March 3, 1995
/s/ Timothy S. O'Toole
-----------------------
Timothy S. O'Toole
<PAGE> 13
POWER OF ATTORNEY
The undersigned director of National Sanitary Supply Company
("Company") hereby appoints Edward L. Hutton, Paul C. Voet and Naomi C. Dallob
as his or her true and lawful attorneys-in-fact for the purpose of signing the
Company's Annual Report on Form 10-K for the year ended December 31, 1994, and
all amendments thereto, to be filed with the Securities and Exchange
Commission. Each of such attorneys-in-fact is appointed with full power to act
without the other.
Date: March 6, 1995
/s/ D. Walter Robbins, Jr.
-----------------------------
D. Walter Robbins, Jr.
<PAGE> 14
POWER OF ATTORNEY
The undersigned director of National Sanitary Supply Company
("Company") hereby appoints Edward L. Hutton, Paul C. Voet and Naomi C. Dallob
as his or her true and lawful attorneys-in-fact for the purpose of signing the
Company's Annual Report on Form 10-K for the year ended December 31, 1994, and
all amendments thereto, to be filed with the Securities and Exchange
Commission. Each of such attorneys-in-fact is appointed with full power to act
without the other.
Date: March 9, 1995
/s/ Jerome E. Schnee
----------------------
Jerome E. Schnee
<PAGE> 15
POWER OF ATTORNEY
The undersigned director of National Sanitary Supply Company
("Company") hereby appoints Edward L. Hutton, Paul C. Voet and Naomi C. Dallob
as his or her true and lawful attorneys-in-fact for the purpose of signing the
Company's Annual Report on Form 10-K for the year ended December 31, 1994, and
all amendments thereto, to be filed with the Securities and Exchange
Commission. Each of such attorneys-in-fact is appointed with full power to act
without the other.
Date: March 6, 1995
/s/ Kenneth F. Vuylsteke
------------------------
Kenneth F. Vuylsteke
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10-K FOR
THE YEAR ENDED DECEMBER 31, 1994 FOR NATIONAL SANITARY SUPPLY COMPANY AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000793500
<NAME> NATIONAL SANITARY SUPPLY CO.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 1713
<SECURITIES> 0
<RECEIVABLES> 37415
<ALLOWANCES> (1428)
<INVENTORY> 28344
<CURRENT-ASSETS> 75070
<PP&E> 41208
<DEPRECIATION> (19357)
<TOTAL-ASSETS> 124072
<CURRENT-LIABILITIES> 48811
<BONDS> 16000
<COMMON> 6397
0
0
<OTHER-SE> 51164
<TOTAL-LIABILITY-AND-EQUITY> 124072
<SALES> 308280
<TOTAL-REVENUES> 308280
<CGS> 210541
<TOTAL-COSTS> 210541
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 970
<INTEREST-EXPENSE> 2406
<INCOME-PRETAX> 8089
<INCOME-TAX> 3336
<INCOME-CONTINUING> 4753
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4753
<EPS-PRIMARY> .80
<EPS-DILUTED> .80
</TABLE>
