<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, 1996
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 45202-4790
255 East Fifth Street
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.
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, 1997 ($13.25 per share): $78,344,306.
As of March 14, 1997, 6,192,820 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, 1996, 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 19, 1997, are incorporated by reference into Part
III of this Report.
Exhibit Index at Page E-1
Page 1 of 13 Pages
<PAGE> 2
NATIONAL SANITARY SUPPLY COMPANY
1996 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I PAGE
<S> <C> <C>
Item 1. Business.................................................................................................3
Item 2. Properties...............................................................................................5
Item 3. Legal Proceedings........................................................................................6
Item 4. Submission of Matters to a Vote of Security Holders......................................................7
---- Executive Officers of the Company........................................................................7
PART II
Item 5. Market for the Company's Common Stock and Related Stockholder Matters....................................8
Item 6. Selected Financial Data..................................................................................8
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations....................8
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..........................................................9
Item 11. Executive Compensation...................................................................................9
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>
PART I
Page 2 of 13 Pages
<PAGE> 3
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. In
September 1983 the Company was incorporated in Delaware as a wholly-owned
subsidiary of Chemed Corporation (a diversified public corporation with
interests in residential and commercial plumbing and drain cleaning services,
home repair service contracts, janitorial supply products distribution, medical
and dental disposable product supply distribution for private practices, and
home healthcare services). As used herein, "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,
1996 Chemed owned 83 percent of the outstanding shares of Common Stock, or
5,144,551 of the 6,162,019 shares outstanding.
In September 1988 the Company acquired by merger Century Papers, Inc.,
which is now a wholly-owned subsidiary ("National Southwest"). Effective
December 31, 1996 Cardinal Papers, Inc., a subsidiary of National Southwest,
was merged into its parent corporation.
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 over
750 sales personnel employed by the Company to a wide variety of commercial,
institutional, and industrial customers. In 1996, the Company serviced
approximately 125,000 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 8 percent of
the Company's total sales for 1996. These sales are attributable to over 1,200
different agencies whose purchasing decisions generally are made separately.
Other than sales to the aforementioned entities, no one customer accounts for
more than 4 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 1996 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
National Southwest, food service disposable products, packaging materials, and
business paper for use in institutional and industrial establishments. Except
for the various chemical products that are manufactured by and for the Company,
the products sold by the Company are purchased from outside suppliers.
Approximately 26 percent of the Company's total sales in 1996 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, a
federally registered trademark. Most of the proprietary-label chemical products
are manufactured by the Company.
Page 3 of 13 Pages
<PAGE> 4
Approximately 17 percent of the Company's total 1996 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 33 percent of the Company's total 1996 sales were of paper
products, such as towels and tissues used in public restrooms.
The remaining 24 percent of the Company's total 1996 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 or vehicles leased from
Chemed. 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, 1996, the Company employed 1,710 persons, of whom 755
were field sales personnel; 320 were clerical personnel; and the remainder were
production personnel, warehousing and shipping personnel, and headquarters
management and administrative personnel. The Company generally considers its
relationship with its employees as good. 8% of its employees are represented by
labor unions.
Competition
The market for sanitary maintenance and paper supplies is highly
competitive. Competition is, however, highly fragmented. In the United States,
over 7,000 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.
Page 4 of 13 Pages
<PAGE> 5
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 1997 and 1998 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, 1996:
Page 5 of 13 Pages
<PAGE> 6
<TABLE>
<CAPTION>
SQUARE FEET
--------------------
TYPE/LOCATION OWNED LEASED
- ----------------------- --------------------
<S> <C> <C>
Distribution/Manufacturing
California - Los Angeles 145,000 76,000
Regional Distribution Centers
- -----------------------------
Arizona - Tempe 69,000 -
California - San Francisco (Area) - 67,000
Colorado - Denver - 53,000
Indiana - Marion 30,000 -
Mississippi - Tupelo - 33,000
Missouri: Kansas City - 25,000
St. Louis - 16,000
Nevada - Las Vegas 24,000 -
New Mexico - Albuquerque - 21,000
Ohio: Fairfield - 38,000
Toledo - 65,000
Oklahoma - Oklahoma City - 75,000
Oregon - Portland 56,000 -
Tennessee - Memphis - 66,000
Texas: Amarillo - 28,000
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) 3,000 188,000
- --------------------
</TABLE>
(a) Represents forty-four (44) separate branch sales offices located throughout
the western, midwestern, and southwestern United States.
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.
Page 6 of 13 Pages
<PAGE> 7
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE OFFICE FIRST ELECTED
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Edward L. Hutton 77 Chairman November, 1983 (1)
Kevin J. McNamara 43 Vice Chairman August, 1986 (2)
Paul C. Voet 50 President and Chief Executive Officer November, 1983 (3)
Robert B. Garber 70 Vice Chairman 1973 (4)
W. Dwight Jackson 50 Executive Vice President; General November, 1994 (5)
Manager of National Southwest
Kenneth F. Vuylsteke 50 Executive Vice President; General January, 1992 (6)
Manager of National West
Gary H. Sander 47 Senior Vice President, Treasurer and August, 1988 (7)
Chief Financial Officer
</TABLE>
(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 a 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 National Southwest. 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. 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.
(7) Mr. Sander is Senior Vice President, Treasurer and Chief Financial Officer
of the Company, and has held these positions since August 1996 and May
1988, respectively. From August 1988 to August 1996 he was a Vice President
of the Company.
Page 7 of 13 Pages
<PAGE> 8
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 19, 1997.
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) trades on the NASDAQ
National Market tier of its Stock Market 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 1995 and 1996 are set forth below:
<TABLE>
<CAPTION>
==================================================================================================================================
CLOSING DIVIDENDS PAID
HIGH LOW PER SHARE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1996
First Quarter $13.75 $11.75 $.075
Second Quarter 14.25 12.50 .075
Third Quarter 14.25 12.75 .080
Fourth Quarter 14.25 13.00 .080
1995
First Quarter 13.50 12.00 .065
Second Quarter 13.00 12.00 .065
Third Quarter 13.50 12.00 .075
Fourth Quarter 14.00 11.50 .075
==================================================================================================================================
</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
<TABLE>
<CAPTION>
Approximate Number of Record
Title of Class Holders (as of March 15, 1997)
-------------- ------------------------------
<S> <C>
Common Stock 210 *
($1 par Value)
</TABLE>
*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, 1996, appearing on page 1 of the 1996 Annual Report to Stockholders is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
Page 8 of 13 Pages
<PAGE> 9
OF OPERATIONS.
The information called for by this Item is set forth on pages 20 through
21 of the 1996 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 10 through 19
of the 1996 Annual Report to Stockholders, and the Unaudited Quarterly Data
appearing on page 13 of the 1996 Annual Report to Stockholders, are
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
The directors of the Company are:
<TABLE>
<S> <C> <C>
E.L. Hutton N. Gilliatt K.J. McNamara
P.C. Voet W.J. Hoekman J.M. Mount
R.B. Garber T.C. Hutton T.S. O'Toole
J.A. Cunningham W.D. Jackson D.W. Robbins, Jr.
N.C. Dallob C.O. Lane G.H. Sander
C.H. Erhart S.E. Laney K.F. Vuylsteke
G.J. Walsh III
</TABLE>
The information required under this Item with respect to directors is set forth
under "Election of Directors" in the Company's 1997 Proxy Statement which is
incorporated herein by reference, with the exception of Mr. Cunningham. Mr.
Cunningham, age 52, is a Senior Chemical Advisor to Schroder Wertheim, Inc.,
New York, New York, an investment banking, asset management and securities
firm. He has held this position since March 1992. From October 1990 to March
1992 he was a Managing Director of Furman Selz Incorporated, New York, New
York, an institutional investment firm. He is a director of Chemed.
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 "Section 16(a) Beneficial Ownership Reporting Compliance", in the
Company's 1997 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 1997 Proxy Statement which is incorporated
herein by reference.
Page 9 of 13 Pages
<PAGE> 10
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 1997
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 1997 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 6, 1995, between Thomas M. Lane and
the Company.*,***
10.6. 1988 Stock Incentive Plan adopted May 19, 1988, as amended through
August 4, 1993.*,***
10.7. $1,600,000 Promissory Note issued by Century Papers, Inc. to Chemed
Corporation on November 10, 1988.*
10.8. $9,400,000 Promissory Note issued by the Company to Chemed Corporation
on November 10, 1988.*
10.9. $8,000,000 Promissory Note issued by the Company to Chemed on January 1,
1993.*
10.10. Benefit Equalization Plan, as amended November 6, 1991.*,***
10.11. Employment Contracts with Executives.*,***
10.12. Amendment No. 4 to Employment Contracts with Executives.***
10.13. Assignment of $1,600,000 Promissory Note from Century Papers, Inc. to
the Company of May 1, 1992.*
10.14. Employees Thrift and Profit Sharing Plan.*,***
10.15. Trust Agreement of Employees Thrift and Profit Sharing Plan.*,***
10.16. Employment Agreement, dated May 20, 1996, between W. Dwight Jackson and
Century Papers, Inc.***
10.17. 1995 Stock Incentive Plan of the Company. *,***
Page 11 of 13 Pages
<PAGE> 12
10.18. Split Dollar Life Insurance Agreements.*, ***
11.1. Computation of earnings per share.
13.1. 1996 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, 1996.
Page 12 of 13 Pages
<PAGE> 13
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
NATIONAL SANITARY SUPPLY COMPANY
March 28, 1997 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) March 28, 1997
Edward L. Hutton
/s/ PAUL C. VOET President & Chief Executive
- ------------------------- Officer and a Director March 28, 1997
Paul C. Voet (Principal Executive Officer)
/s/ GARY H. SANDER Senior Vice President, Treasurer,
- ------------------------- Chief Financial Officer,
Gary H. Sander and a Director March 28, 1997
(Principal Financial and Accounting
Officer)
Directors
James A. Cunningham* Sandra E. Laney*
Charles H. Erhart, Jr.* Kevin J. McNamara*
Robert F. Garber* John M. Mount*
Neal Gilliatt* Timothy S. O'Toole* March 28, 1997
Will J. Hoekman* D. Walter Robbins, Jr. * --------------
Thomas C. Hutton* Kenneth F. Vuylsteke*
W. Dwight Jackson* George J. Walsh III*
Charles O. Lane*
</TABLE>
* 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.
March 28, 1997 /s/ NAOMI C. DALLOB
- -------------- --------------------------
Date Naomi C. Dallob
(Attorney-in-Fact and a Director)
<PAGE> 14
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
PAGE NUMBER
OR
INCORPORATION BY REFERENCE
--------------------------------
EXHIBIT FILE NO. AND PREVIOUS
NUMBER FILING DATE EXHIBIT NO.
- ------ ----------- -----------
<S> <C> <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
</TABLE>
E-2
<PAGE> 15
<TABLE>
<S> <C> <C> <C>
CORPORATION.
10.5 EMPLOYMENT AGREEMENT, DATED NOVEMBER 6, FORM 10-K 10.6
1995, BETWEEN THOMAS M. LANE AND 3/28/96
THE COMPANY
10.6 1988 STOCK INCENTIVE PLAN OF THE FORM 10-Q 3
COMPANY, AS AMENDED THROUGH AUGUST 4, 8/13/93
1993
10.7 $1,600,000 PROMISSORY NOTE ISSUED BY FORM 10-K 38
CENTURY PAPERS, INC. TO CHEMED 3/29/89
CORPORATION ON NOVEMBER 10, 1988.
10.8 $9,400,000 PROMISSORY NOTE ISSUED BY FORM 10-K 39
THE COMPANY TO CHEMED CORPORATION ON 3/29/89
NOVEMBER 10, 1988.
10.9 $8,000,000 PROMISSORY NOTE ISSUED BY FORM 10-Q 2
THE COMPANY TO CHEMED CORPORATION ON 3/13/93
JANUARY 1, 1993.
10.10 BENEFIT EQUALIZATION PLAN, AS AMENDED FORM 10-K 38
NOVEMBER 6, 1991. 3/27/92
10.11 EMPLOYMENT CONTRACTS WITH EXECUTIVES. FORM 10-K 39
3/29/93
10.12 AMENDMENT NO. 4 TO EMPLOYMENT CONTRACTS *
WITH EXECUTIVES.
10.13 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.
10.14 EMPLOYEES THRIFT AND PROFIT SHARING PLAN FORM S-8 4.1
9/30/94
10.15 TRUST AGREEMENT OF EMPLOYEES THRIFT AND FORM S-8 4.2
PROFIT SHARING PLAN 9/30/94
10.16 EMPLOYMENT AGREEMENT, DATED MAY 20, *
</TABLE>
E-3
<PAGE> 16
<TABLE>
<S> <C> <C> <C>
1996 BETWEEN W. DWIGHT JACKSON AND
CENTURY PAPERS, INC.
10.17 1995 STOCK INCENTIVE PLAN OF THE COMPANY FORM 10-K 10.18
3/28/96
10.18 SPLIT DOLLAR AGREEMENTS FORM 10-K 10.19
3/28/96
11.1 COMPUTATION OF EARNINGS PER SHARE.
13.1 1996 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
</TABLE>
E-4
<PAGE> 1
EXHIBIT 10.12
AMENDMENT NO. 4
TO EMPLOYMENT AGREEMENT
AGREEMENT dated as of May 20, 1996 between ________________,
("Employee") and Chemed Corporation (the "Company").
WHEREAS, Employee and the Company have entered into an Employment
Agreement dated as of May 19, 1992 and amended May 17, 1993, May 16, 1994 and
May 15, 1995, ("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 20, 1996, 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, 1998 set forth in Section 1.2 of the
Employment Agreement, is hereby deleted and the date of May
31, 1999 is hereby substituted therefor.
C. The amount of unrestricted stock award recognized in lieu of
incentive compensation in l995 is __________.
D. Section 3.4(b)(iii) is hereby amended to read as follows:
Section 3.4(b)(iii) The fair market value of all shares of
Chemed Corporation capital stock and its subsidiaries' common
stock subject to stock awards granted to Employee under one or
more stock incentive plans of Chemed Corporation or of any of
its subsidiaries 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 in Section 1.2.
Except as specifically amended in this Amendment No. 4 to Employment
Agreement, the Employment Agreement shall continue in full force and effect in
accordance with its original terms, conditions and provisions.
<PAGE> 2
IN WITNESS WHEREOF, the parties have duly executed this amendatory
agreement as of the date first above written.
Employee
--------------------------
CHEMED CORPORATION
By:
------------------------
<PAGE> 3
<TABLE>
<CAPTION>
EXHIBIT A
Current
Current Expiration
Current Stock Award Date of
Name & Position (c) Age Salary Bonus Compensation(b) Agreement
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth F. Vuylsteke 49 $155,000 $50,000 $31,708 5/31/98
Executive Vice President/
General Manager of
National West
Gary H. Sander 46 102,500 32,000 22,227 5/31/98
Vice President, Chief
Financial Officer &
Treasurer (a)
W. Dwight Jackson 49 140,000 50,000 -0- 10/31/96
Executive Vice President/
General Manager of
Century Papers, Inc.
<FN>
- ----------
(a) Employment Agreement executed with Chemed Corporation; reimbursement to
be provided by the Company
(b) Amount of unrestricted Company stock awards recognized in lieu of
incentive compensation in l995.
(c) The Company's President and Chief Executive Officer has an employment
agreement with Chemed Corporation. The Company reimburses Chemed, under
a Services Agreement, for 80 percent of his compensation costs.
</TABLE>
<PAGE> 1
Exhibit 10.16
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 20th day of May 1996 by and between W. Dwight
Jackson residing at 57 North Turtle Rock Court, The Woodlands, Texas 77381
("Employee"), and National Sanitary Supply Company, a Delaware corporation (the
"Company").
WHEREAS, the Company has employed Employee and desires to continue to
employ Employee as an Executive Vice President and General Manager of its
Century Papers subsidiary and Employee desires to work for the Company in such
capacity on the terms and conditions hereinafter provided;
WHEREAS, this Agreement replaces the Employment Agreement of October
31, 1994 between Company and Employee;
WHEREAS, Employee is a key senior executive of the Company with major
responsibilities for planning, directing, coordinating and controlling various
corporate operations;
WHEREAS, in such capacity Employee will develop or have access to all
or substantially all of the business methods and confidential information
relating to the Company, including but not limited to, its financial performance
and results, its product formulae, its manufacturing organization and methods,
its product research and development policies and programs, its service
techniques, its purchasing organization and methods, its sales organization and
methods, its pricing of products, its market development and expansion plans,
its personnel policies
1
<PAGE> 2
and training and development programs, and its customer and supplier
relationships.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties hereto agree as follows:
1. EMPLOYMENT
1.1 POSITIONS AND DUTIES. The Company agrees to employ Employee and
Employee agrees to work for the Company as an executive employee. Employee shall
have such duties and authority as are normally associated with an executive.
Employee will also serve in such other senior management capacities as may be
mutually agreed upon from time to time. While employed hereunder, Employee shall
devote his full time, effort, skill and attention to the affairs of the Company.
During the term of his employment hereunder, Employee shall not render any
services to any other person that might be in competition with the Company or
any of its subsidiaries or affiliates or in conflict with his position as a
senior executive of the Company or his duty of undivided loyalty to the Company.
1.2 TERM. Unless sooner terminated in accordance with the provisions
hereof, the term of employment hereunder shall commence on May 21, 1996 and
shall continue until May 31, 1999.
2. COMPENSATION
2.1 BASE SALARY. While employed hereunder the Company shall pay
Employee a base salary of $140,000 per annum or
2
<PAGE> 3
such higher amount or amounts as the Board of Directors may from time to time
approve. The base salary shall be due and payable at the same times and
intervals at which salary payments are made to other senior executives.
2.2 INCENTIVE COMPENSATION. Employee will be entitled to participate
in all incentive compensation and bonus plans as such have been maintained by
the Company for its senior executives generally. The Employee's annual incentive
compensation will be payable, with respect to each calendar year, on or before
February 10 in the following year.
2.3 EMPLOYEE BENEFITS. Employee shall be entitled to participate in
and receive rights and benefits under those "fringe" benefit plans which the
Company provides for its executives generally, which at the present time
include:
Life and Accidental Death & Dismemberment Plan
Major Medical Plan
Dental Plan
Employee Spending Account (Medical & Dependent Care)
Voluntary Short Term Disabililty
Long Term Disability Plan
Business Travel Accident Plan
Employee Assistance Program
Employee's participation in such plans will be in accordance with
and subject to the terms and provisions thereof.
2.4 PENSION. Employee will continue to participate in the Company's
Thrift and Profit Sharing Plan and Chemed ESOP II in accordance with and subject
to their respective provisions.
2.5 MISCELLANEOUS.
3
<PAGE> 4
(a) Company will pay or reimburse Employee for his
reasonable business expenses in accordance with Company policies.
(b) Employee will be entitled to paid vacation in
accordance with current Company policy.
(c) Subject to 1.1 of this Agreement, compliance with
applicable laws relating to interlocking directorships, the Company's policies
on conflicts of interest and improper payments and accounting records contained
in a statement entitled "Policies on Business Ethics" and to any other current
applicable Company policy, during the term of Employee's employment hereunder,
Employee will be permitted to accept election, and to serve as, a director of
other entities. Employee will be permitted to retain all fees and other benefits
resulting from his service as a director of any such entity.
(d) The Company shall promptly pay upon demand any
reasonable legal fees incurred by Employee in connection with any enforcement of
his rights under this Agreement.
3. TERMINATION
3.1 TERMINATION OF EMPLOYMENT. The employment of Employee shall
terminate prior to the expiration of the term specified in 1.2 upon the
occurrence of any of the following:
(a) The death of Employee;
(b) The termination by the Company Employee's
employment for Cause pursuant to 3.2.
4
<PAGE> 5
The termination by the Company of Employee's employment hereunder
for any reason other than those specified in paragraphs (a) and (b) above shall
hereinafter be referred to as a termination "Without Cause". Any disability of
Employee shall not be grounds for termination.
3.2 FOR CAUSE. The Company may, at any time by written notice to the
Employee, terminate his services hereunder for Cause. Such notice shall specify
the event or events and the actions or failure to act constituting Cause. The
term "Cause", as used herein, shall mean and be limited to the occurrence of one
or more of the following events:
(a) His conviction, by a court of competent jurisdiction,
of a felony, which through lapse of time or otherwise is not subject to appeal;
(b) His commission of an act of fraud upon, or an act
evidencing material dishonesty toward, the Company; or
(c) Any willful failure by him to observe or perform his
material agreements herein contained.
If the basis for discharge is pursuant to paragraph (c) above,
Employee shall have thirty (30) days from his receipt of the notice of
termination for Cause to cure the actions or failure to act specified in such
notice and, in the event of any such cure within such period, such conduct shall
not constitute Cause hereunder.
3.3 CONSEQUENCES OF TERMINATION.
5
<PAGE> 6
(a) If Employee's employment hereunder shall terminate
pursuant to any of the provisions of this Article 3, his base salary and
incentive compensation referred to in sections 2.1 and 2.2 shall cease to accrue
forthwith.
(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 percent of the sum of: (i)the Employee's
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
year, 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
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 1.2.
(c) In the event that Employee's employment hereunder shall
terminate pursuant to any of the provisions of this Article 3, the rights of
Employee under any incentive compensation plan referred to in 2.2, under the
employee benefit plans or arrangements referred to in 2.3 and 2.4 or otherwise,
shall be determined in accordance with the terms and provisions of such plans,
arrangements and options applicable to an employee whose employment has
terminated in the manner that occurred,
6
<PAGE> 7
except that a termination Without Cause shall be treated as a retirement under a
retirement plan of the Company for the purposes of the Company stock incentive
plans.
4. OTHER COVENANTS OF EMPLOYEE.
4.1 Employee shall have no right, title or interest in any reports,
studies, memoranda, correspondence, manuals, records, plans, or other written,
printed or otherwise recorded materials of any kind belonging to or in the
possession of the Company or its subsidiaries, or in any copies, pictures,
duplicates, facsimiles or other reproductions, recordings, abstracts or
summaries thereof and Employee will promptly surrender to the Company any such
materials (other than materials which have been published or otherwise have
lawfully been made available to the public generally) in his possession upon the
termination of his employment or any time prior thereto upon request of the
Company.
4.2 Without the prior written consent of the Company, Employee shall
not at any time (whether during or after his employment with the Company) 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 secret, or
other confidential or proprietary information, data, know-how or
7
<PAGE> 8
knowledge (including, but not limited to, that relating to financial policies,
product composition, manufacturing organization and methods, research and
development policies and programs, service techniques, purchasing organization
and methods, sales organization and methods, product pricing, market development
and expansion plans, personnel policies and training and development programs
and customer and supplier relationships) belonging to, or relating to the
affairs of, the Company or its subsidiaries.
4.3 Employee shall promptly disclose to the Company (and to no one
else) all improvements, discoveries and inventions that may be of significance
to the Company or its subsidiaries 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 the Company during or out of his usual
hours of work or in or about the premises of the Company or elsewhere) while in
the employ of the Company, or made or conceived within six months after the
termination of his employment by the Company, if resulting from, suggested by or
relating to such employment. All such improvements, discoveries and inventions
shall, to the extent that they are patentable, be the sole and exclusive
property of the Company and are hereby assigned to the Company. At the request
of the Company and at its cost and without liability to Employee, Employee shall
assist the Company, or any person or persons from time to time designated by it,
in obtaining
8
<PAGE> 9
the grant of patents in the United States and/or in such other country or
countries as may be designated by the Company covering such improvements,
discoveries and inventions and shall in connection therewith 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 the Company may from time to time request.
4.4 During the continuance of Employee's employment and for a period
of two years after Employee has ceased to be an employee of Company, or of any
subsidiary or affiliate of Company, whether or not pursuant to this agreement,
the Employee shall not without the prior written consent of Company:
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 Company or any
subsidiary or affiliate of Company has operated, or had in the planning or
development
9
<PAGE> 10
stage, during the 120-day period immediately prior to the Employee's
ceasing to be an employee of or consultant to Company or any subsidiary or
affiliate of Company, provided that the restrictions contained in this Section
4.4 shall not apply to any area described in Exhibit A to this agreement that
does not meet the following requirements:
(1) Company or a subsidiary or affiliate of Company 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, Company or any
subsidiary or affiliate of Company, and
(2) the Employee, during such 120-day period, shall have had
substantial planning, development, administrative or operational
responsibilities for such business of Company or any subsidiary or affiliate of
Company in such area.
If the scope of any restriction contained in this Section 4.4 is too
broad to permit enforcement by 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.
4.5 The obligations of Employee set forth in this Article 4 are in
addition to and not in limitation of any obligations which would otherwise exist
as a matter of law. The
10
<PAGE> 11
provisions of this Article 4 shall survive the termination of Employee's
employment hereunder.
5. CERTAIN REMEDIES
5.1 BREACH BY THE COMPANY. In the event that the Company shall fail,
in any material respect, to observe and perform its obligations hereunder, the
Employee may give written notice to the Company specifying the nature of such
failure. If within thirty (30) days after its receipt of such notice the Company
shall not have remedied such failure, the Employee shall have the right and
option to treat such failure as termination of his employment by the Company
Without Cause, to cease rendering services hereunder and thereafter to receive
the severance benefits and have the other rights and obligations provided for in
Article 3 hereof in the case of a termination by the Company Without Cause. The
parties agree that a material breach by the Company for purposes of this 5.1
shall include, but not be limited to, a material reduction in Employee's title,
authority or responsibilities from those he was exercising on the date of
execution of this Agreement. The remedy provided for in this 5.1 shall be in
addition to and not in limitation of any other remedies which would otherwise
exist as a matter of law.
5.2 BREACH BY THE EMPLOYEE. Employee acknowledges and agrees that
the Company's remedy at law for any breach of any of Employee's obligations
under 1.1, 4.1, 4.2, 4.3 and 4.4 would be inadequate, and agrees and consents
that temporary and permanent injunctive relief may be granted in any proceeding
that
11
<PAGE> 12
may be brought to enforce any provision of any such sections, without the
necessity of proof of actual damage.
6. GENERAL PROVISIONS
6.1 REPRESENTATIONS AND WARRANTIES. Employee represents and warrants
to the Company that he is free to enter into the Agreement and that he has no
prior or other obligations or commitments of any kind to anyone that would in
any way hinder or interfere with his acceptance of, or the full, uninhibited and
faithful performance of, his employment hereunder or the exercise of his best
efforts as an employee of the Company.
6.2 UNDERSTANDINGS; AMENDMENTS. Except as otherwise provided herein,
this Agreement sets forth the entire agreement and understanding of the parties
concerning the subject matter hereof and supersedes all prior agreements,
arrangements and understandings between Employee and the Company concerning such
subject matter. 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 or the documents referred to herein. This Agreement may not be
amended or modified except by a written instrument specifically referring to
this Agreement executed by the parties hereto.
12
<PAGE> 13
6.3 NOTICES.
(a) Any notice or other communication required or permitted to be
given hereunder shall be in writing and may either be delivered personally to
the addressee or be mailed, registered mail, postage prepaid, as follows:
If to the Company:
National Sanitary Supply Company
2900 Chemed Center
255 East Fifth Street
Cincinnati, OH 45202
Attn: President
with a copy to:
Secretary
National Sanitary Supply Company
2600 Chemed Center
255 East Fifth Street
Cincinnati, OH 45202
If to Employee:
57 North Turtle Rock Court
The Woodlands, Texas 77381
(b) Either party may change the address to which any such notices or
communications are to be directed to it by giving written notice to the other
party in the manner provided in the preceding paragraph (a).
13
<PAGE> 14
6.4 ASSIGNMENTS; BINDING EFFECT.
(a) Employee acknowledges that the services to be rendered by him
are unique and personal. Accordingly, Employee may not assign any of his rights
or delegate any of his duties or obligations under this Agreement. This
Agreement shall be binding upon, and to the extent herein permitted shall inure
to the benefit of, Employee's heirs, legatees and legal representatives.
(b) The Company may not assign this Agreement or its rights
hereunder except to a successor of all or substantially all of the business and
assets of the Company. This Agreement shall be binding upon, and shall inure to
the benefit of, the Company's successors and permitted assigns.
6.5 WAIVERS. 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.
6.6 SEVERANCE PLANS. Amounts paid hereunder are in addition to any
amounts payable under the Company severance plans, without offset or reduction.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first written hereinabove.
NATIONAL SANITARY SUPPLY COMPANY
14
<PAGE> 15
By: /s/ P. C. VOET
-----------------------
EMPLOYEE
/s/ W. DWIGHT JACKSON
--------------------------
W. Dwight Jackson
15
<PAGE> 16
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 11.1
NATIONAL SANITARY SUPPLY COMPANY
COMPUTATION OF EARNINGS PER SHARE (a)
(thousands, except per share data)
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Computation of Earnings Per Common
and Common Equivalent Share
- -----------------------------------------
Net Income $5,009 $5,745 $4,753
====== ====== ======
Average Number of Shares of
Common Stock Outstanding 6,144 6,073 5,974
Incremental Effect of Unexercised
Stock Options 78 81 99
------ ------ ------
Average Number of Shares of Common Stock
and Common Stock Equivalents Outstanding 6,222 6,154 6,073
====== ====== ======
Earnings per Common and Common
Equivalent Share $ 0.81 $ 0.93 $ 0.78
====== ====== ======
Computation of Earnings Per Common Share
Assuming Full Dilution
- -----------------------------------------
Net Income $5,009 $5,745 $4,753
====== ====== ======
Average Number of Shares of
Common Stock Outstanding 6,144 6,073 5,974
Incremental Effect of Unexercised
Stock Options 94 94 101
------ ------ ------
Average Number of Shares of Common Stock
Assuming Full Dilution 6,238 6,167 6,075
====== ====== ======
Earnings Per Common Share Assuming
Full Dilution $ 0.80 $ 0.93 $ 0.78
====== ====== ======
</TABLE>
(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.
<PAGE> 1
FINANCIAL REVIEW
CONTENTS
<TABLE>
<S> <C>
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
</TABLE>
[LOGO]
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, 1996 and 1995, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996, 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/ PRICE WATERHOUSE LLP
- ------------------------
Cincinnati, Ohio
February 4, 1997
9
<PAGE> 2
Consolidated Balance Sheet
<TABLE>
<CAPTION>
NATIONAL SANITARY SUPPLY COMPANY
December 31 (thousands, except share data) 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,425 $ 1,491
Accounts receivable, less allowances (1996--$1,071; 1995--$1,458) 34,856 42,083
Inventories 27,614 28,285
Deferred income taxes 2,366 2,305
Prepaid expenses and other current assets 1,088 1,074
------- -------
Total current assets 67,349 75,238
Properties and equipment, at cost, less accumulated depreciation 21,992 21,453
Goodwill, less accumulated amortization 25,872 25,795
Other assets 771 753
-------- --------
Total assets $115,984 $123,239
-------- --------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 19,424 $ 21,950
Accrued liabilities 13,349 14,574
Loans payable to Chemed Corporation 540 6,989
Current portion of notes to Chemed Corporation 1,000 1,000
-------- --------
Total current liabilities 34,313 44,513
Notes to Chemed Corporation 14,000 15,000
Deferred income taxes 849 506
Other noncurrent liabilities 1,298 1,353
-------- --------
Total liabilities 50,460 61,372
-------- --------
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: 1996--6,644,466 shares; 1995--6,554,543 shares) 6,644 6,555
Paid-in capital 27,658 26,763
Retained earnings 35,499 32,487
Treasury stock, at cost (1996--482,447 shares; 1995--456,263 shares) (4,277) (3,938)
-------- --------
Total stockholders' equity 65,524 61,867
-------- --------
Total liabilities and stockholders' equity $115,984 $123,239
-------- --------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE> 3
Consolidated Statement Of Income
<TABLE>
<CAPTION>
NATIONAL SANITARY SUPPLY COMPANY
Years Ended December 31 (thousands, except per share data) 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $310,125 $340,913 $308,280
Cost of sales 207,119 234,707 210,541
-------- -------- --------
Gross profit 103,006 106,206 97,739
-------- -------- --------
Expenses and other income:
Operating expenses 92,122 93,488 86,573
Amortization of goodwill 895 871 874
Chemed Corporation interest expense 1,578 2,184 2,381
Other income, net (231) (156) (178)
-------- -------- --------
Total expenses and other income 94,364 96,387 89,650
-------- -------- --------
Income before income taxes 8,642 9,819 8,089
Income taxes 3,633 4,074 3,336
-------- -------- --------
Net income $ 5,009 $ 5,745 $ 4,753
-------- -------- --------
Earnings per share $ .82 $ .95 $ .80
-------- -------- --------
Cash dividends per share $ .31 $ .28 $ .25
-------- -------- --------
Average shares outstanding 6,144 6,073 5,974
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE> 4
Consolidated Statement Of Cash Flows
<TABLE>
<CAPTION>
NATIONAL SANITARY SUPPLY COMPANY
Years Ended December 31 (thousands of dollars) 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net income $ 5,009 $ 5,745 $ 4,753
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 3,353 3,560 3,210
Amortization of goodwill and deferred charges 1,506 1,288 1,315
Deferred income tax provision (384) (279) (22)
Provision for losses on accounts receivable 791 1,145 970
Changes in operating assets and liabilities, excluding
amounts acquired in business combinations:
(Increase)/decrease in accounts receivable 6,542 (1,573) (5,781)
(Increase)/decrease in inventories 708 59 (1,112)
(Increase)/decrease in other assets (144) 171 (390)
Increase/(decrease) in accounts payable (2,526) 412 3,169
Increase/(decrease) in other liabilities (1,500) 1,819 (643)
------- ------- -------
Net cash provided by operating activities 13,355 12,347 5,469
------- ------- -------
Cash Flows From Investing Activities
Business combinations (266) (53) (646)
Capital expenditures (3,996) (3,393) (6,715)
Other 114 231 116
------- ------- -------
Net cash used for investing activities (4,148) (3,215) (7,245)
------- ------- -------
Cash Flows From Financing Activities
Proceeds from/(payments on) loans payable
to Chemed Corporation (6,449) (6,732) 4,019
Principal payments on notes to Chemed Corporation (1,000) (1,000) (1,000)
Principal payments on other long-term debt (48) (48) (46)
Dividends paid (1,908) (1,701) (1,494)
Proceeds from/(purchase of) treasury stock -- (47) 525
Proceeds from common stock 132 174 375
------- ------- -------
Net cash provided by/(used for) financing activities (9,273) (9,354) 2,379
------- ------- -------
Increase/(decrease) in cash and cash equivalents (66) (222) 603
Cash and cash equivalents at beginning of period 1,491 1,713 1,110
------- ------- -------
Cash and cash equivalents at end of period $ 1,425 $ 1,491 $ 1,713
------- ------- -------
Supplemental Disclosures
Cash paid during the year for interest $ 1,632 $ 2,271 $ 2,297
Cash paid during the year for income taxes 4,193 3,949 4,208
------- ------- -------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE> 5
Consolidated Statement Of Stockholders' Equity
<TABLE>
<CAPTION>
NATIONAL SANITARY SUPPLY COMPANY
Common Paid-in Retained Treasury
(thousands of dollars, except per share data) Stock Capital Earnings Stock Total
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
Net income -- -- 5,745 -- 5,745
Dividends ($.28 per share) -- -- (1,701) -- (1,701)
Minimum pension liability adjustment -- -- (252) -- (252)
Treasury stock purchased -- -- -- (47) (47)
Stock options exercised/awards granted or terminated 158 1,451 -- (1,048) 561
------- ------- ------- ------- -------
BALANCE AT DECEMBER 31, 1995 6,555 26,763 32,487 (3,938) 61,867
NET INCOME -- -- 5,009 -- 5,009
DIVIDENDS ($.31 PER SHARE) -- -- (1,908) -- (1,908)
MINIMUM PENSION LIABILITY ADJUSTMENT -- -- (89) -- (89)
STOCK OPTIONS EXERCISED/AWARDS GRANTED OR TERMINATED 89 895 -- (339) 645
------- ------- ------- ------- -------
BALANCE AT DECEMBER 31, 1996 $ 6,644 $27,658 $35,499 $(4,277) $65,524
------- ------- ------- ------- -------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Consolidated Quarterly Results (Unaudited)
<TABLE>
<CAPTION>
NATIONAL SANITARY SUPPLY COMPANY
First Second Third Fourth Total
(thousands, except per share data) Quarter Quarter Quarter Quarter Year
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996
SALES $77,277 $77,210 $80,652 $74,986 $310,125
GROSS PROFIT 24,865 25,625 26,979 25,537 103,006
NET INCOME 832 1,321 1,812 1,044 5,009
------- ------- ------- -------- --------
EARNINGS PER SHARE $ .14 $ .22 $ .29 $ .17 $ .82
------- ------- ------- -------- --------
DIVIDENDS PER SHARE $ .075 $ .075 $ .080 $ .080 $ .310
------- ------- ------- -------- --------
AVERAGE SHARES OUTSTANDING 6,123 6,140 6,153 6,160 6,144
------- ------- ------- -------- --------
1995
Sales $80,793 $85,571 $89,396 $85,153 $340,913
Gross profit 25,462 26,629 27,705 26,410 106,206
Net income 759 1,370 1,977 1,639 5,745
------- ------- ------- -------- --------
Earnings per share $ .13 $ .23 $ .33 $ .27 $ .95
------- ------- ------- -------- --------
Dividends per share $ .065 $ .065 $ .075 $ .075 $ .280
------- ------- ------- -------- --------
Average shares outstanding 6,050 6,073 6,079 6,091 6,073
------- ------- ------- -------- --------
</TABLE>
13
<PAGE> 6
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 83% of National's outstanding common stock
on December 31, 1996.
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, 1996, the inventories included
capitalized general and administrative expenses of $292,000, and as of December
31, 1995, $288,000. The aggregate amount of general and administrative expenses
incurred was $27,999,000 in 1996, $29,752,000 in 1995, and $27,236,000 in 1994.
DEPRECIATION, RETIREMENT, AND MAINTENANCE POLICIES. Depreciation is computed
using the straight-line method based on the following useful lives:
<TABLE>
<S> <C>
Building and improvements 20-35 years
Leasehold improvements Life of lease
Transportation equipment 4-7 years
Office and warehouse equipment 3-15 years
</TABLE>
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 arises from business combinations accounted for as purchase
transactions and is 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 goodwill based on key
financial indicators. If the projected undiscounted cash flows of a business
unit indicate that goodwill has been impaired, a write-down to fair value is
made.
SALES are recognized when products are delivered to the customer. One customer,
a fast-food restaurant chain, accounted for approximately $12,000,000,
$50,000,000, and $42,000,000 of National's 1996, 1995, and 1994 sales,
respectively. During the first quarter of 1996, National lost the disposable
foodservice products portion of this business as this customer decided to
consolidate the procurement of these products with food items purchased through
foodservice distributors. National continues to provide promotional and
specialty-type products to this customer.
14
<PAGE> 7
STOCK-BASED COMPENSATION PLANS are recorded using Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees."
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.
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.
ESTIMATES. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
FINANCIAL INSTRUMENTS. For cash and cash equivalents, accounts receivable and
accounts payable, the carrying amount is a reasonable estimate of fair value
because of the liquidity and short-term nature of these instruments. The fair
value of notes to Chemed, determined by discounting the future cash outlays
associated with each obligation based on current interest rates for debt with
similar remaining terms and maturities, is $15,650,000 at December 31, 1996.
2. Business Combinations
During 1996, National purchased the assets of a small sanitary maintenance
supply company. During 1994, National acquired two sanitary maintenance supply
businesses in two separate transactions. The impact of these acquired
businesses on National's results of operations 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 assets
acquired classified as goodwill.
3. Related Party Transactions
Chemed provides to National certain administrative, financial, legal,
internal audit, insurance, and staff functions, the costs of which are included
in the accompanying 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 $596,000 in 1996, $567,000
in 1995, and $580,000 in 1994.
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 $129,000 in 1996, $629,000 in 1995, and $719,000
in 1994.
National has also obtained long-term financing from Chemed on which interest
expense amounted to $1,449,000 in 1996, $1,555,000 in 1995, and $1,662,000 in
1994.
15
<PAGE> 8
4. Balance Sheet Information
<TABLE>
<CAPTION>
December 31 (thousands of dollars) 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Properties and Equipment
Land $ 3,515 $ 3,515
Buildings and leasehold improvements 12,864 12,533
Transportation equipment 8,949 8,898
Office and warehouse equipment 17,235 15,631
Projects under construction 2,819 1,948
------- -------
Total property and equipment 45,382 42,525
Accumulated depreciation (23,390) (21,072)
------- -------
Net properties and equipment $21,992 $21,453
------- -------
Goodwill $34,522 $33,548
Less accumulated amortization (8,650) (7,753)
------- -------
Net goodwill $25,872 $25,795
------- -------
Accrued Liabilities
Accrued insurance $ 6,159 $ 5,699
Accrued commissions, wages, and benefits 3,622 4,609
Federal and state income taxes 855 1,129
Interest payable to Chemed 234 420
Other accrued expenses 2,479 2,717
------- -------
Total accrued liabilities $13,349 $14,574
------- -------
Notes to Chemed
11% note with semiannual interest payments,
due in equal annual installments through 2003 $ 7,000 $ 8,000
8% note with quarterly interest payments, due on January 1, 1998 8,000 8,000
------- -------
Total notes to Chemed 15,000 16,000
Less current portion 1,000 1,000
------- -------
Noncurrent portion of notes to Chemed $14,000 $15,000
------- -------
</TABLE>
Scheduled aggregate annual payments of notes to Chemed are $1,000,000 for
1997, $9,000,000 for 1998, $1,000,000 each year for 1999 through 2001, and
$2,000,000 thereafter.
5. Leases
National leases the majority of its office and warehouse facilities under
operating leases 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 $4,487,000 in 1996,
$4,224,000 in 1995, and $3,834,000 in 1994. Included in this rent expense are
rents related to Chemed transactions for transportation equipment and
National's Cincinnati headquarters facility which totaled $509,000, $392,000,
and $220,000 in 1996, 1995, and 1994, 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, 1996 total $9,259,000 scheduled as follows: $2,929,000 for 1997;
$2,375,000 for 1998; $1,772,000 for 1999; $1,378,000 for 2000; $617,000 for
2001; and $188,000 thereafter.
16
<PAGE> 9
6. Income Taxes
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
Years Ended December 31 (thousands of dollars) 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current tax expense:
U.S. federal $3,325 $3,631 $2,850
State and local 692 722 508
------ ------ ------
Total current tax expense 4,017 4,353 3,358
Deferred tax benefit (384) (279) (22)
------ ------ ------
Total income tax provision $3,633 $4,074 $3,336
------ ------ ------
</TABLE>
The differences between the federal income tax rate and the effective tax
rate are as follows:
<TABLE>
<CAPTION>
Years Ended December 31 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory U.S. federal income tax rate 34.0% 34.0% 34.0%
State and local income taxes, less federal income tax benefit 5.3 4.8 4.1
Purchase accounting differences 3.1 3.0 3.7
All other items, net (0.4) (0.3) (0.6)
---- ---- ----
Effective tax rate 42.0% 41.5% 41.2%
---- ---- ----
</TABLE>
Deferred tax assets/(liabilities) are comprised of the following:
<TABLE>
<CAPTION>
December 31 (thousands of dollars) 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Accrued liabilities $1,813 $1,560
Bad debt reserves 364 496
Defined benefit pension plans including the minimum pension liability adjustment 446 332
Amortization of intangible assets -- 188
------ ------
Gross deferred tax assets 2,623 2,576
------ ------
Depreciation (474) (458)
Amortization of intangible assets (455) --
Deferred gain on sale of building (112) (277)
Other (65) (42)
------ ------
Gross deferred tax liabilities (1,106) (777)
------ ------
Deferred tax assets $1,517 $1,799
------ ------
</TABLE>
The change in deferred tax assets and liabilities includes the deferred tax
benefit for income taxes, the pension liability adjustment, and in 1996 a
reclassification of intangible assets related to business combinations. Because
National has enjoyed a long and consistent history of taxable earnings, it is
more likely than not that the entire benefit of existing temporary differences
will be realized, and therefore, no valuation allowance has been established for
deferred tax assets at December 31, 1996.
17
<PAGE> 10
7. Stock Incentive Plans
National has three stock incentive plans covering the issuance or transfer
of up to 1,150,000 shares of its common stock. Under these 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 become exercisable in four equal annual installments
beginning six months to one year following the date of the grant. 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:
<TABLE>
<CAPTION>
1996 1995 1994
-----------------------------------------------------------------------------------
NUMBER AVERAGE Number Average Number Average
OF SHARES PRICE of Shares Price of Shares Price
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Options:
Outstanding at January 1 535,827 $ 9.82 463,439 $ 8.39 535,383 $ 8.29
Granted 107,250 12.33 201,750 12.00 -- --
Exercised (46,523) 8.82 (126,237) 8.05 (50,835) 7.35
Terminated (16,125) 11.61 (3,125) 9.14 (21,109) 8.41
-------- -------- --------
Outstanding at December 31 580,429 10.32 535,827 9.82 463,439 8.39
-------- -------- --------
Exercisable at December 31 403,742 9.51 384,508 8.96 438,890 8.45
-------- -------- --------
Awards:
Issued 43,400 11.80 31,550 12.28 27,700 12.25
-------- -------- --------
Compensation cost $386,000 $307,000 $218,000
-------- -------- --------
</TABLE>
The weighted average contractual life of options outstanding at December 31,
1996 was 6.0 years. The exercise prices for these options ranged from $6.50 to
$14.63. At December 31, 1996 there were 72,177 shares available for granting of
stock options and awards.
The following summarizes National's pro forma results assuming the provision
of the fair value based method of valuing stock options had been applied to
options granted in 1995 and 1996:
<TABLE>
<CAPTION>
Years Ended December 31 (thousands of dollars, except per share data) 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Income: As reported $5,009 $5,745
Pro forma 4,773 5,586
Earnings Per Share: As reported .82 .95
Pro forma .78 .92
Per share average fair value of options granted 4.82 4.95
Assumptions: Average risk-free interest rate 5.9% 6.9%
Expected volatility 42.8 42.6
Expected life 6 yrs 6 yrs
</TABLE>
In accordance with SFAS No. 123, "Accounting for Stock-Based Compensation,"
the pro forma data above reflects only options granted in 1995 and 1996, and
therefore, does not reflect the full impact of all stock options issued. The
fair value of employee stock options was estimated using the Black-Scholes
option pricing model and a dividend increase of $.02 per share per year.
8. Pension and Profit Sharing Plans
DEFINED CONTRIBUTION PLANS. Substantially all nonunion employees participate 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 1996, the stock price was $25.75,
resulting in a cost to National of
18
<PAGE> 11
$1,530,000, for 1995, the stock price was $25.16, resulting in a cost to
National of $1,502,000, and for 1994, the stock price was $22.31, resulting in a
cost of $1,346,000.
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.
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 $2,238,000 in 1996, $2,169,000 in 1995, and $1,981,000 in 1994.
DEFINED BENEFIT PLANS. In National's Southwest subsidiary, Century Papers,
Inc., 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. National'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 an adjustment needed to recognize the minimum liability
in accordance with SFAS No. 87. Because the adjustment 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 National's defined
benefit plan and amounts recognized in the consolidated balance sheet:
<TABLE>
<CAPTION>
December 31 (thousands of dollars) 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Projected/accumulated benefit obligation $6,106 $6,131
Plan assets at fair value (5,237) (5,265)
------ ------
Plan assets less than projected/accumulated benefit obligation 869 866
Unrecognized net loss (1,634) (1,553)
Unrecognized net asset 321 375
Adjustment needed to recognize minimum liability 1,313 1,178
------ ------
Accrued pension cost $ 869 $ 866
------ ------
Adjustment needed to recognize minimum liability $1,313 $1,178
Tax benefit 446 400
------ ------
Additional pension liability adjustment to stockholders' equity $ 867 $ 778
------ ------
Assumptions:
Discount rate 7.0% 7.0%
Long-term rate of return on plan assets 7.0 7.0
</TABLE>
The components of net periodic pension cost for National's defined benefit
plan follow:
<TABLE>
<CAPTION>
Years ended December 31 (thousands of dollars) 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest cost $417 $415 $409
Return on assets (199) (414) (126)
Net amortization and deferral (79) 221 (230)
---- ------ ------
Net periodic pension cost $139 $222 $ 53
---- ------ ------
</TABLE>
19
<PAGE> 12
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
1996 compared with 1995
National's sales for 1996 decreased 9% to $310,125,000. The decrease
reflects the loss of the foodservice disposable product business to a large
fast-food customer early in 1996. Excluding sales to this customer, sales for
1996 increased 2% over 1995 primarily reflecting price improvements in the
commodity-oriented paper product line.
The gross profit margin improved 2.0% points from 31.2% in 1995 to 33.2% in
1996. Operating expenses as a percentage of sales increased 2.3% points from
27.4% in 1995 to 29.7% in 1996. The change in both the gross profit margin and
operating expenses as percentage of sales primarily reflects the loss of the
low-margin and low-operating-expense business associated with the large
fast-food customer. Excluding this customer, gross profit margins improved
slightly and expenses were maintained at a level below the rate of the sales
increase.
Chemed interest expense decreased $606,000 to $1,578,000 due to a
significant reduction in average loan balances with Chemed.
National's effective tax rate increased from 41.5% to 42.0% primarily as a
result of higher state and local income taxes.
National's net income in 1996 decreased 13% to $5,009,000. The decrease
results from the loss of business with the large fast-food customer somewhat
offset by controlled operating expenses and lower interest cost.
1995 compared with 1994
In 1995, National's sales increased 11% to $340,913,000. The sales
growth was achieved through broad-based volume gains at most locations and
improved product pricing. During 1995, National experienced substantial cost
increases in certain commodity-oriented paper and plastic product categories.
Most of these cost increases were passed on to customers in the form of higher
prices; however, some increases were not passed on and as a result the gross
profit margin decreased from 31.7% in 1994 to 31.2% in 1995.
Operating expenses as a percentage of sales decreased from 28.1% in 1994
to 27.4% in 1995, reflecting tight control over expenses, especially in
nonsales personnel costs.
The reduction in Chemed interest expense of $197,000 to $2,184,000
resulted from a reduction in average loan balances with Chemed.
The effective tax rate for 1995 was 41.5% compared with 41.2% in 1994.
Higher state and local income taxes primarily accounted for the increase.
National's net income in 1995 increased 21% to $5,745,000. The sales
increase coupled with tight control over expenses primarily accounted for the
increase in net income.
Inflation
Part of National's product line consists of certain commodity-oriented
product categories which are subject to price and cost fluctuations based
on economic conditions. National attempts to mitigate these fluctuations
with more efficient operations, by promoting higher margin products and, when
possible, through periodic price increases.
20
<PAGE> 13
Liquidity and capital resources
Over the past three years working capital and the current ratio have
steadily increased from $26,259,000 and 1.5:1 at December 31, 1994 to
$30,725,000 and 1.7:1 at December 31, 1995 to $33,036,000 and 2.0:1 at December
31, 1996. The increase in 1995 was due primarily to the decrease in loans
payable to Chemed offset somewhat by an increase in accrued liabilities. The
increase in 1996 was due primarily to the elimination of the receivables
associated with the large fast-food customer and a reduction in the number of
days outstanding of other receivables, coupled with a corresponding reduction
in loans payable to Chemed.
The decrease in inventories and accounts payable at December 31, 1996 is
primarily related to the loss of business with the large fast-food customer.
The decrease in accrued liabilities reflects lower accruals for
incentive-oriented compensation.
Higher accrued liabilities at December 31, 1995 compared with December 31,
1994 reflect higher accruals for incentive-oriented compensation and insurance.
National has made the scheduled year-end payment of $1,000,000 on its
long-term obligation with Chemed in each of the last three years. 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.
Debt as a percentage of total capital has declined 8% points in each of
the past two years from 35% at December 31, 1994 to 19% at December 31, 1996.
The decline reflects a reduction in loans payable to Chemed.
Management expects that acquisitions will be financed with funds generated
from operations in the future and, if necessary, with borrowings 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, 1996, 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, 1996, Chemed was permitted to incur
additional debt of $77,537,000 of which debt of subsidiaries could not be more
than $40,087,000. 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.
Outlook for 1997
The first quarter of 1997 will be the final quarter in which National will
experience an unfavorable sales and profit comparison with the prior year due
to the loss of business with the large fast-food customer. Sales and profit
comparisons for the remaining three quarters of 1997 will reflect the year to
year performance for the more traditional sanitary maintenance supplies
National distributes.
21
<PAGE> 14
OFFICERS AND DIRECTORS
OFFICERS
Edward L. Hutton
Chairman
Paul C. Voet
President and Chief Executive Officer
Kevin J. McNamara
Vice Chairman
Robert B. Garber
Vice Chairman
W. Dwight Jackson
Executive Vice President; General
Manager of National Southwest
Kenneth F. Vuylsteke
Executive Vice President;
General Manager of National West
Gary H. Sander
Senior Vice President, Chief Financial
Officer, and Treasurer
Jane E. Friedman
Vice President--Marketing
Thomas M. Lane
Vice President--Administration and
Assistant Secretary
Richard M. Stolzman
Vice President--Sales
Naomi C. Dallob
Secretary and General Counsel
Donald J. Pagel
Assistant Vice President; General Manager
of National Midwest
Thomas J. Reilly
Assistant Vice President and Controller
Patrice G. Leeds Richman
Assistant Vice President--Corporate Planning
Mark W. Stephens
Assistant Treasurer
22
<PAGE> 15
DIRECTORS
<TABLE>
<S> <C>
Edward L. Hutton John M. Mount
Chairman of National; Chairman and Chief Principal, Lynch-Mount Associates
Executive Officer of Chemed Corporation (Management Consulting, Cincinnati, Ohio)
Paul C. Voet Timothy S. O'Toole
President and Chief Executive Officer Executive Vice President and Treasurer
of National; Executive Vice President of of Chemed Corporation
Chemed Corporation
D. Walter Robbins, Jr.
Kevin J. McNamara Consultant
Vice Chairman of National;
President of Chemed Corporation Gary H. Sander
Senior Vice President, Chief Financial Officer,
Robert B. Garber and Treasurer of National
Vice Chairman of National
Kenneth F. Vuylsteke
James A. Cunningham Executive Vice President of National;
Senior Chemical Advisor, General Manager of National West
Schroder Wertheim, Inc.
George J. Walsh III
Naomi C. Dallob Partner, Gould & Wilkie
Secretary and General Counsel of (Law Firm, New York, New York)
National; Vice President and Secretary
of Chemed Corporation
</TABLE>
Charles H. Erhart, Jr.
Former President of W.R. Grace & Co.
(retired)
Neal Gilliatt
President of Neal Gilliatt/Stuart Watson, Inc.
Will J. Hoekman
President and Chief Executive Officer,
Composite Technologies Corporation
(Ames, Iowa)
Thomas C. Hutton
Vice President of Chemed Corporation
W. Dwight Jackson
Executive Vice President of National;
General Manager of National Southwest
Charles O. Lane
Former Executive Vice President of National
(retired)
Sandra E. Laney
Senior Vice President and
Chief Administrative Officer of
Chemed Corporation
23
<PAGE> 16
STOCKHOLDERS INFORMATION
CORPORATE HEADQUARTERS
255 East Fifth Street, Suite 2900
Cincinnati, Ohio 45202-4790
(513) 762-6500
http://www.nssc.com
Transfer Agent & Registrar
ChaseMellon Shareholder Services, L.L.C.
Overpeck Centre
85 Challenger Road
Ridgefield Park, New Jersey 07660
Toll-free: (800) 756-3353
<TABLE>
<S> <C>
Stockholder Inquiries
Stockholder relations questions should be directed to: Questions relating to address changes
ChaseMellon Shareholder Services, L.L.C. should be directed to:
PO Box 3315 ChaseMellon Shareholder Services, L.L.C.
South Hackensack, New Jersey 07606 PO Box 3316
South Hackensack, New Jersey 07606
Questions relating to lost certificates Questions relating to certificate transfers
should be directed to: should be directed to:
ChaseMellon Shareholder Services, L.L.C. ChaseMellon Shareholder Services, L.L.C.
PO Box 3317 PO Box 3312
South Hackensack, New Jersey 07606 South Hackensack, New Jersey 07606
</TABLE>
Independent Accountants
Price Waterhouse LLP
Cincinnati, Ohio 45202
Form 10-K
Additional information about National Sanitary Supply Company is available in
the Annual Report on Form 10-K. Copies will be furnished without charge by
writing to: Investor Relations, National Sanitary Supply Company, 255 East
Fifth Street, Suite 2900, Cincinnati, Ohio 45202-4790.
Annual Meeting
The Annual Meeting of the Stockholders of National Sanitary Supply Company will
be held Monday, May 19, 1997, at 1:30 p.m. in the Grand Ballroom of The Phoenix
Club, 812 Race Street, Cincinnati, Ohio.
Number of Stockholders
The number of National Sanitary Supply Company stockholders of record was 189
on December 31, 1996, and 210 on December 31, 1995. (These figures do not
include stockholders with shares held under beneficial ownership in nominee
name or within clearinghouse positions of brokerage firms and banks.)
Market for Common Stock
The Company's common stock trades on the Nasdaq National Market tier of The
Nasdaq Stock Market under the symbol: NSSX.
Common Stock Data
The following table sets forth the high and low closing prices for National
Sanitary Supply Company common stock for each quarter of 1996 and 1995.
<TABLE>
<CAPTION>
1996 1995
--------------------------------------------
Closing Price: HIGH LOW HIGH LOW
<S> <C> <C> <C> <C>
First Quarter $13.75 $11.75 $13.50 $12.00
Second Quarter 14.25 12.50 13.00 12.00
Third Quarter 14.25 12.75 13.50 12.00
Fourth Quarter 14.25 13.00 14.00 11.50
</TABLE>
24
<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, 1996. 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 of December 31, 1996.
All of the companies listed below are included in the consolidated
financial statements as of December 31, 1996.
Century Papers, Inc. (Texas, 100%)
National Sanitary Supply
Development, Inc. (Delaware, 100%)
<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 February 4, 1997 appearing on page 9
of the l996 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 LPP
- ------------------------
PRICE WATERHOUSE LPP
Cincinnati, Ohio
March 4, 1997
<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, 1996, 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.
March 10, 1997 /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, 1995, 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.
March 10, 1997
/s/ JAMES A. CUNNINGHAM
---------------------------
James A. Cunningham
<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, 1996, 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, 1997
/s/ GEORGE J. WALSH III
---------------------------
George J. Walsh III
<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, 1996, 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, 1997
/s/ JOHN M. MOUNT
---------------------------
John M. Mount
<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, 1996, 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, 1997
/s/ WILL J. HOEKMAN
---------------------------
Will J. Hoekman
<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, 1996, 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.
March 14, 1997
/s/ THOMAS C. HUTTON
---------------------------
Thomas C. Hutton
<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, 1996, 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, 1997
/s/ CHARLES H. ERHART, JR.
---------------------------
Charles H. Erhart, Jr.
<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, 1996, 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, 1997
/s/ NEAL GILLIATT
---------------------------
Neal Gilliatt
<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, 1996, 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.
March 11, 1997
/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, 1996, 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, 1997
/s/ D. WALTER ROBBINS, JR.
---------------------------
D. Walter Robbins, Jr.
<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, 1996, 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, 1997
/s/ KENNETH F. VUYLSTEKE
---------------------------
Kenneth F. Vuylsteke
<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, 1996, 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, 1997
/s/ SANDRA E. LANEY
---------------------------
Sandra E. Laney
<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, 1996, 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 11, 1997
/s/ W. DWIGHT JACKSON
---------------------------
W. Dwight Jackson
<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, 1996, 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, 1997
/s/ KEVIN J. MCNAMARA
---------------------------
Kevin J. McNamara
<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, 1996, 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 11, 1997
/s/ TIMOTHY S. O'TOOLE
---------------------------
Timothy S. O'Toole
<PAGE> 16
NATIONAL SANITARY SUPPLY COMPANY
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
1994, 1995 AND 1996
<TABLE>
<CAPTION>
Page(s)
<S> <C>
National Sanitary Supply Company Financial
Statements and Financial Statement Schedules
Report of Independent Accountants ............................................. 9*
Consolidated Balance Sheet ....................................................10*
Consolidated Statement of Income ..............................................11*
Consolidated Statement of Cash Flow ...........................................12*
Consolidated Statement of Stockholders' Equity ................................13*
Notes to Consolidated Financial Statements ....................................14-19*
Report of Independent Accountants on Financial Statement
Schedules ....................................................................S-2
Schedule VIII - Valuation and Qualifying Accounts & Reserves ..................S-3
<FN>
*Indicates page numbers in the National Sanitary Supply Company l996 Annual
Report to Stockholders.
</TABLE>
- ----------
The financial statements of National Sanitary Supply Company listed above,
appearing in the accompanying l996 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> 17
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 February 4, 1997 appearing on page 9 of the l996 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 LPP
- ------------------------
PRICE WATERHOUSE
Cincinnati, Ohio
February 4, 1997
S-2
<PAGE> 18
NATIONAL SANITARY SUPPLY COMPANY
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
SCHEDULE VIII
(thousands of dollars)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- ---------------------------------------------------------------------------------------------------
Additions
-------------------------
Charged to Charged to
Balance at Costs and Other Balance
Name Beginning Expenses Accounts (a) Deductions (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, 1996 $1,458 $791 -- $1,178 $1,071
December 31, 1995 1,428 1,145 -- 1,115 1,458
December 31, 1994 1,290 970 -- 832 1,428
- ----------------------------------------------------------------------------------------------------
</TABLE>
(a) Relates to companies acquired.
(b) Accounts and notes written off.
S-3
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000793500
<NAME> NATIONAL SANITARY SUPPLY CO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,425
<SECURITIES> 0
<RECEIVABLES> 32,303
<ALLOWANCES> (1,071)
<INVENTORY> 27,614
<CURRENT-ASSETS> 67,349
<PP&E> 45,382
<DEPRECIATION> (23,390)
<TOTAL-ASSETS> 115,984
<CURRENT-LIABILITIES> 34,313
<BONDS> 14,000
<COMMON> 0
0
6,644
<OTHER-SE> 58,880
<TOTAL-LIABILITY-AND-EQUITY> 115,984
<SALES> 310,125
<TOTAL-REVENUES> 310,125
<CGS> 207,119
<TOTAL-COSTS> 207,119
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 791
<INTEREST-EXPENSE> 1,578
<INCOME-PRETAX> 8,642
<INCOME-TAX> 3,633
<INCOME-CONTINUING> 5,009
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,009
<EPS-PRIMARY> .82
<EPS-DILUTED> .82
</TABLE>
