1 Page 1 of 95 Exhibit Index on Page 19 FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Annual Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the fiscal year ended August 31, 1994 Commission file number 1- 3208 NATIONAL SERVICE INDUSTRIES, INC. (Exact Name of Registrant as Specified in its Charter) Delaware 58-0364900 (State or Other Jurisdiction of (I.R.S. Employer Identification Number) Incorporation or Organization) 1420 Peachtree Street, N. E., Atlanta, Georgia 30309-3002 (Address of Principal Executive Offices) (Zip Code) (404) 853-1000 (Registrant's Telephone Number, Including Area Code) Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange on Title of Each Class Which Registered Common Stock ($1.00 Par Value) New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Based upon the closing price as quoted on the New York Stock Exchange October 31, 1994 the aggregate market value of the voting stock held by nonaffiliates of the registrant was $1,317,369,635.25. The number of shares outstanding of the registrant's common stock, $1.00 par value, was 49,247,463 shares as of October 31, 1994. DOCUMENTS INCORPORATED BY REFERENCE Location in Form 10-K Incorporated Document Part I, Item 1 1994 Annual Report Part II, Items 5, 6, 7, and 8 1994 Annual Report Part III, Items 10, 11, 12, and 13 1994 Proxy Statement Part IV, Item 14 1994 Annual Report PART I Page 2 ITEM 1. BUSINESS The registrant, incorporated in Delaware in 1928, provides a wide variety of products and services through its operating divisions, as follows: Divisions Principal Products or Services Marketing Area Products and services for industrial, commercial, institutional, and healthcare customers TEXTILE RENTAL National Linen Service Rented napkins and table Principally the southern, National Uniform Service linens, bed linens, towels, southwestern, central, National Healthcare Linen Service uniforms, specialized and northeastern National Dust Control Service garments, sterilized United States National Direct Source products, restroom products, mats and mops, and complimentary direct sale products. CHEMICAL Zep Manufacturing Company Chemical products, Throughout the United Zep Manufacturing Company of Canada primarily for maintenance, States, Canada, Zep Alcare sanitation, and water Puerto Rico, and Zep Europe treatment, including soaps, western Europe. Selig Chemical Industries detergents, waxes, and National Chemical disinfectants. ENVELOPE Atlantic Envelope Company Business and specialty South and Southwest. ATENCO Filing Systems envelopes and records R. P. Gillotte Co. storage and filing systems. Lyon Folder Company Techno-Aide/Stumb Metal Products Company Products for the construction industry LIGHTING EQUIPMENT Lithonia Lighting Fluorescent fixtures for Throughout the United Lithonia Fluorescent commercial, industrial, States, Canada and Lithonia Hi-Tek Lighting and institutional overseas. Lithonia Downlighting applications; high-intensity Major Reflector Products discharge fixtures for RELOC Wiring Systems industrial and commercial Lithonia Controls Systems use; outdoor lighting; Lithonia Emergency Lighting downlighting; track lighting; Lithonia Lighting Canada vandal-resistant fixtures; emergency lighting; lighting and dimming controls; and manufactured wiring systems. INSULATION SERVICE North Bros. Co. Commercial, industrial, and Principally in the South Insulation Company institutional insulation southeastern United Western State Insulation Company products, accessories, and States. Merit Insulation Company contracting services. Precision Foam Fabricators Mid-State Insulation Co. Page 3 Divisions Principal Products or Services Marketing Area Products and services for the consumer LIGHTING EQUIPMENT Home-Vue Lighting Fluorescent work lamps, recessed Throughout the United Light Concepts and track lighting, and other States. decorative fluorescent fixtures. Competition While each of the registrant's businesses is highly competitive, the competitive conditions and the registrant's relative position and market share vary widely from business to business. A limited number of the competitors of each division are large diversified companies, but most of the competitors of the principal divisions are smaller companies than the registrant. Such smaller companies frequently specialize in one industry or one geographic area, which in many instances increases the intensity of competition. Management believes that its lighting equipment division is the largest manufacturer of lighting fixtures in the world and its textile rental division is one of the largest such companies in the United States. Raw Materials There were no significant shortages of materials or components during the years ended August 31, 1994, 1993, and 1992. No one commodity or supplier provided a significant portion of the company's material requirements. Total Employment The registrant employs approximately 22,000 people. Financial Information about Industry Segments The financial information required by this item is included on page 32 of the company's annual report for the year ended August 31, 1994, under the caption "Business Segment Information" and is incorporated herein by reference. Page 4 ITEM 2. PROPERTIES The general offices of the company are located in Atlanta, Georgia. Because of the diverse nature of the operations and the large number of individual locations, it is neither practical nor significant to describe all of the operating facilities owned or leased by the company. The following listing summarizes the significant facility categories by division: Number of Facilities Division Owned Leased Nature of Facilities Lighting Equipment 9 3 Manufacturing plants 1 2 Distribution centers - 30 Field warehouses Textile Rental 71 19 Linen plants 17 42 Linen service centers - 1 Distribution centers Chemical 9 4 Manufacturing plants 22 48 Distribution centers - 3 Sales offices Insulation Service 2 - Fabrication plants 26 13 Warehouses Envelope 6 4 Manufacturing plants - 3 Warehouses - 1 Sales office Corporate Office 1 - Corporate headquarters Page 5 ITEM 3. LEGAL PROCEEDINGS The Registrant is neither a party to nor is its property subject to any material pending legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information required by this item is included on the inside back cover of the company's annual report for the year ended August 31, 1994, under the caption "Common Share Prices and Dividends per Share" and is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA The information required by this item is included on pages 36 and 37 of the company's annual report for the year ended August 31, 1994, under the caption "Ten-Year Financial Summary" and is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this item is included on pages 34 and 35 of the company's annual report for the year ended August 31, 1994, under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" and is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this item is included on pages 25 through 33 of the company's annual report for the year ended August 31, 1994, under the captions "Consolidated Balance Sheets," "Consolidated Statements of Income," Consolidated Statements of Stockholders' Equity," "Consolidated Statements of Cash Flows," "Notes to Consolidated Financial Statements," and "Report of Independent Public Accountants" and is incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. Page 6 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this item, with respect to directors, is included on pages 2 through 4 under the caption "Information Concerning Nominees" of the company's proxy statement for the annual meeting of stockholders to be held January 4, 1995, filed with the Commission pursuant to Regulation 14A, and is incorporated herein by reference. EXECUTIVE OFFICERS OF THE REGISTRANT Executive officers of the company are elected at the organizational meeting of the Board of Directors in January. Name and age of each executive officer Business experience of executive officers during the five and positions held with the company years ended August 31, 1994 and term in office D. Raymond Riddle, age 61 Mr. Riddle served as President and Chief Executive Chairman and Chief Executive Officer, Officer from January, 1993 to September, 1994 when he Director, and member of the Executive was elected Chairman and Chief Executive Office. He Committee of the Board served from 1985 until 1993 as an Executive Vice President of Wachovia Corporation and from 1987 until 1993 as President and Chief Executive Officer and as a director of Wachovia Corporation of Georgia and its lead bank, Wachovia Bank of Georgia, N.A. Don W. Hubble, age 55 Mr. Hubble was elected President effective September, President and Chief Operating Officer 1994 and was designated Chief Operating Officer in and Director September, 1993. He served as a Group Vice President from 1980 until 1988, when he was elected Executive Vice President. David Levy, age 57 Mr. Levy was elected Executive Vice President, Executive Vice President, Administration Administration in October, 1992. He served as Vice and Counsel and Director President, Secretary and Counsel from 1975 until he was elected Senior Vice President in 1982. J. Robert Hipps, age 54 Mr. Hipps was elected Senior Vice President, Finance in Senior Vice President, Finance March, 1990 and also served as Treasurer until June, 1992. Previously, he served General Signal Corporation as Vice President and Treasurer and, from 1987, as Vice President and Controller. ITEM 11. EXECUTIVE COMPENSATION The information required by this item is included on pages 6 through 13 under the captions "Compensation of Directors," "Other Information Concerning the Board and its Committees," "Compensation Committee Interlocks and Insider Participation," "Summary Compensation Table," "Option Grants in Last Fiscal Year," "Aggregated Option Exercises and Fiscal Year-End Option Values," "Other Agreements," and "Pension and Supplemental Retirement Benefits" of the company's proxy statement for the annual meeting of stockholders to be held January 4, 1995, filed with the Commission pursuant to Regulation 14A, and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item is included on page 5 under the caption "Beneficial Ownership of the Corporation's Securities" of the company's proxy statement for the annual meeting of stockholders to be held January 4, 1995, filed with the Commission pursuant to Regulation 14A, and is incorporated herein by reference. Page 7 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item is included on page 5 under the caption "Certain Transactions" of the company's proxy statement for the annual meeting of stockholders to be held January 4, 1995, filed with the Commission pursuant to Regulation 14A, and is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) The following documents are filed as a part of this report: Financial Statements The company's 1994 Annual Report contains the consolidated balance sheets as of August 31, 1994 and 1993, the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended August 31, 1994, and the related report of Arthur Andersen LLP. The financial statements, incorporated herein by reference, include the following: Consolidated Balance Sheets - August 31, 1994 and 1993 Consolidated Statements of Income for the years ended August 31, 1994, 1993, and 1992 Consolidated Statements of Stockholders' Equity for the years ended August 31, 1994, 1993, and 1992 Consolidated Statements of Cash Flows for the years ended August 31, 1994, 1993, and 1992 Notes to Consolidated Financial Statements Financial Statement Schedules: Report of Independent Public Accountants on Schedules Schedule Number II Amounts Receivable from Related Parties and Underwriters, Promoters, and Employees Other than Related Parties V Property, Plant, and Equipment VI Accumulated Depreciation and Amortization of Property, Plant, and Equipment VIII Valuation and Qualifying Accounts IX Short-Term Borrowings X Supplementary Income Statement Information Any of schedules I through XIV not listed above have been omitted because they are not applicable or the required information is included in the consolidated financial statements or notes thereto. Page 8 ITEM 14. (Continued) 3. Exhibits filed with this report Reference No. from Reg. 229.601 Item 601 Description of Exhibit 3 Restated Certificate of Incorporation and By-Laws 4 Shareholder Rights Plan Adopted May 9, 1988 10(i) Section 168 Agreement and Election dated as of April 9, 1982, between National Service Industries, Inc. and Oglethorpe Power Corporation 10(iii)A Management Contracts and Compensatory Arrangements: (a) Directors' Deferred Compensation Plan (b) Executives' Deferred Compensation Plan and Amendment (c) Restated and Amended Supplemental Retirement Plan for Executives of National Service Industries, Inc. and Amendment (d) The National Service Industries, Inc. Senior Management Benefit Plan and Amendments (e) Severance Protection Agreement between National Service Industries, Inc. and David Levy (f) Severance Protection Agreements between National Service Industries, Inc. and (i) D. Raymond Riddle (ii) Don W. Hubble (iii) J. Robert Hipps (g) Bonus Letter Agreements between National Service Industries, Inc. and (i) D. Raymond Riddle (ii) Don W. Hubble (iii) David Levy (iv) J. Robert Hipps (h) Long-Term Incentive Program and Amendment (i) Incentive Stock Option Agreements between National Service Industries, Inc. and (i) D. Raymond Riddle (ii) Don W. Hubble (iii) David Levy (iv) J. Robert Hipps (j) Nonqualified Stock Option Agreement for Corporate Officers between National Service Industries, Inc. and (i) D. Raymond Riddle (ii) Don W. Hubble (iii) David Levy (iv) J. Robert Hipps Page 9 ITEM 14. (Continued) 3. Exhibits filed with this report (Continued) Reference No. from Reg. 229.601 Item 601 Description of Exhibit (k) Nonqualified Stock Option Agreement for Corporate Officers Effective Beginning September 21, 1994 between National Service Industries, Inc. and (i) D. Raymond Riddle (ii) Don W. Hubble (iii) David Levy (l) Benefits Protection Trust Agreement and Amendment (m) Executive Benefits Trust Agreement (n) Consulting Agreement between National Service Industries, Inc. and Erwin Zaban (o) Consulting Agreement between National Service Industries, Inc. and Sidney Kirschner (p) 1992 Nonemployee Directors' Stock Option Plan Effective September 16, 1992 (q) Nonemployee Directors' Stock Option Agreement between National Service Industries, Inc. and (i) John L. Clendenin (ii) Jesse Hill, Jr. (iii) Robert M. Holder, Jr. (iv) F. Ross Johnson (v) James C. Kennedy (vi) Donald R. Keough (vii) Bryan D. Langton (viii)Bernard Marcus (ix) John G. Medlin, Jr. (x) Dr. Betty L. Siegel (xi) Erwin Zaban (r) Summary of Incentive Bonus Program for Executive Officers of National Service Industries, Inc. ("NSI") for the Fiscal Year Ending August 31, 1994 (s) National Service Industries, Inc. Executive Savings Plan Effective September 1, 1994 (t) National Service Industries, Inc. Management Compensation and Incentive Plan Effective September 1, 1994, Subject to Approval by Shareholders at Annual Meeting to be Held January 4, 1995 11 Computations of Net Income per Share of Common Stock 13 Information Incorporated by Reference from Annual Report for the Year Ended August 31, 1994 21 List of Subsidiaries 23 Consent of Independent Public Accountants 24 Powers of Attorney 27 Financial Data Schedules Page 10 ITEM 14. (Continued) (b) No reports on Form 8-K were filed for the three months ended August 31, 1994. (c) Exhibits 2, 9, 12, 18, 22, and 28 have been omitted because they are not applicable. (d) Not applicable. Page 11 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NATIONAL SERVICE INDUSTRIES, INC. Date: November 18, 1994 By: /s/ Kenyon W. Murphy Kenyon W. Murphy Secretary and Assistant Counsel Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title D. Raymond Riddle* Chairman and Chief Executive Officer J. Robert Hipps* Senior Vice President, Finance (Principal Financial Officer) John A. Bostater* Vice President and Controller John L. Clendenin* Director Jesse Hill, Jr.* Director Robert M. Holder, Jr.* Director Don W. Hubble* Director F. Ross Johnson* Director - November 18, 1994 James C. Kennedy* Director Donald R. Keough* Director Bryan D. Langton* Director David Levy* Director Bernard Marcus* Director John G. Medlin, Jr.* Director Betty L. Siegel* Director Erwin Zaban* Director *By /s/ David Levy Attorney-in-Fact David Levy Page 12 Arthur Andersen LLP Atlanta, Georgia REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES To National Service Industries, Inc.: We have audited, in accordance with generally accepted auditing standards, the consolidated financial statements included in NATIONAL SERVICE INDUSTRIES, INC. and subsidiaries' annual report to stockholders incorporated by reference in this Form 10-K and have issued our report thereon dated October 20, 1994. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedules listed in Item 14 in this Form 10-K are the responsibility of the Company's management and are presented for the purpose of complying with the Securities and Exchange Commission's rules and are not part of the basic consolidated financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. /s/ Arthur Andersen LLP ARTHUR ANDERSEN LLP October 20, 1994 Page 13 SCHEDULE II NATIONAL SERVICE INDUSTRIES, INC. AND SUBSIDIARIES AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTORS, AND EMPLOYEES OTHER THAN RELATED PARTIES FOR THE YEARS ENDED AUGUST 31, 1994, 1993, AND 1992 (In thousands) Balance at Beginning Amounts Balance at End of Period Description of Period Additions Collected Current Noncurrent YEAR ENDED AUGUST 31, 1994: Division Officers $ 119 $ - $ 26 $ 93 $ - YEAR ENDED AUGUST 31, 1993: Division Officers $ 109 $ 18 $ 8 $ 119 $ - YEAR ENDED AUGUST 31, 1992: Division Officers $ 250 (1),(2) $ - $ 141 $ 109 $ - <FN> (1) $150,000 promissory note receivable from Mr. Peele, secured by real property, originally due November 15, 1991, with interest at prime rate announced by FNB-Atlanta adjusted at first of month. (2) $100,000 promissory note receivable from Mr. Gurbacki, secured by real property, originally due December 31, 1991, with interest at prime rate announced by FNB-Atlanta adjusted on first of month. SCHEDULE V NATIONAL SERVICE INDUSTRIES, INC. AND SUBSIDIARIES PROPERTY, PLANT, AND EQUIPMENT FOR THE YEARS ENDED AUGUST 31, 1994, 1993, AND 1992 (In thousands) Balance at Other Balance at Beginning Additions (1) Sales or Changes (2) End Classification of Period at Cost Retirements Add (Deduct) of Period YEAR ENDED AUGUST 31, 1994: Land $ 33,304 $ 295 $ 1,371 $ 9 $ 32,237 Buildings 173,288 3,715 7,495 296 169,804 Machinery and equipment 371,354 23,082 18,225 (479) 375,732 Delivery equipment 65,203 8,751 5,386 4 68,572 Furniture and fixtures 55,207 6,307 1,863 496 60,147 Service equipment 8,648 - 5,553 (138) 2,957 Leasehold improvements 17,034 368 255 (22) 17,125 $ 724,038 $ 42,518 $ 40,148 $ 166 $ 726,574 YEAR ENDED AUGUST 31, 1993: Land $ 29,534 $ 4,392 $ 590 $ (32) $ 33,304 Buildings 154,606 21,809 2,685 (442) 173,288 Machinery and equipment 350,057 36,169 13,990 (882) 371,354 Delivery equipment 56,372 12,392 3,505 (56) 65,203 Furniture and fixtures 58,545 6,972 10,520 210 55,207 Service equipment 12,642 - 3,994 - 8,648 Leasehold improvements 17,781 437 1,126 (58) 17,034 $ 679,537 $ 82,171 $ 36,410 $ (1,260) $ 724,038 YEAR ENDED AUGUST 31, 1992: Land $ 28,462 $ 1,492 $ 411 $ (9) $ 29,534 Buildings 148,066 11,690 4,274 (876) 154,606 Machinery and equipment 332,306 26,007 7,881 (375) 350,057 Delivery equipment 55,749 4,438 3,822 7 56,372 Furniture and fixtures 53,929 5,505 1,717 828 58,545 Service equipment 12,274 515 147 - 12,642 Leasehold improvements 18,520 142 856 (25) 17,781 $ 649,306 $ 49,789 $ 19,108 $ (450) $ 679,537 <FN> (1) Additions during the year included property, plant, and equipment recorded in acquisitions and normal replacements and purchases of property, plant, and equipment for divisions to meet operational requirements. (2) Transfers and foreign currency conversion. Page 14 Page 15 SCHEDULE VI NATIONAL SERVICE INDUSTRIES, INC. AND SUBSIDIARIES ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT, AND EQUIPMENT FOR THE YEARS ENDED AUGUST 31, 1994, 1993, AND 1992 (In thousands) Balance at Other Balance at Beginning Charged to Sales or Changes (1) End Classification of Period Expense Retirements Add (Deduct) of Period YEAR ENDED AUGUST 31, 1994: Buildings $ 48,342 $ 5,880 $ 2,138 $ 191 $ 52,275 Machinery and equipment 213,945 25,351 13,705 (30) 225,561 Delivery equipment 38,740 7,374 4,974 5 41,145 Furniture and fixtures 38,014 7,035 1,488 159 43,720 Service equipment 7,624 482 5,540 (113) 2,453 Leasehold improvements 12,188 1,131 198 (13) 13,108 $358,853 $ 47,253 $ 28,043 $ 199 $378,262 YEAR ENDED AUGUST 31, 1993: Buildings $ 42,260 $ 5,981 $ 1,600 $1,701 $ 48,342 Machinery and equipment 199,802 25,929 12,348 562 213,945 Delivery equipment 35,252 6,576 3,123 35 38,740 Furniture and fixtures 38,958 7,008 10,448 2,496 38,014 Service equipment 10,943 663 3,983 1 7,624 Leasehold improvements 11,972 1,282 1,058 (8) 12,188 $339,187 $ 47,439 $ 32,560 $4,787 $358,853 YEAR ENDED AUGUST 31, 1992: Buildings $ 38,958 $ 5,150 $ 1,734 $ (114) $ 42,260 Machinery and equipment 181,135 23,734 4,884 (183) 199,802 Delivery equipment 32,821 5,625 3,185 (9) 35,252 Furniture and fixtures 32,489 8,005 1,572 36 38,958 Service equipment 10,229 803 89 0 10,943 Leasehold improvements 11,330 1,373 721 (10) 11,972 $306,962 $ 44,690 $ 12,185 $ (280) $339,187 <FN> (1) Transfers, foreign currency conversion, and accumulated depreciation recorded in acquisitions. SCHEDULE VIII NATIONAL SERVICE INDUSTRIES, INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED AUGUST 31, 1994, 1993, AND 1992 (In thousands) Balance at Additions Charged to Balance at Beginning Costs and Other End Description of Period Expenses Accounts (1) Deductions (2) of Period YEAR ENDED AUGUST 31, 1994: Deducted in the balance sheet from the asset to which it applies- Reserve for doubtful accounts $7,170 $2,804 $ 923 $3,512 $7,385 YEAR ENDED AUGUST 31, 1993: Deducted in the balance sheet from the asset to which it applies- Reserve for doubtful accounts $3,696 $3,300 $3,462 $3,288 $7,170 YEAR ENDED AUGUST 31, 1992: Deducted in the balance sheet from the asset to which it applies- Reserve for doubtful accounts $3,443 $3,398 $ 49 $3,194 $3,696 <FN> (1) Recoveries credited to reserve and reserves recorded in acquisitions. (2) Uncollectible accounts written off. Page 16 Page 17 SCHEDULE IX NATIONAL SERVICE INDUSTRIES, INC. AND SUBSIDIARIES SHORT-TERM BORROWINGS FOR THE YEARS ENDED AUGUST 31, 1994, 1993, AND 1992 (In thousands) <CAPTIONS> Maximum Amount Average Weighted Weighted Outstanding Amount Average Balance at Average at Month End Outstanding Interest Rate Category of Aggregate End Interest during during during Short-Term Borrowings of Period Rate the Period the Period the Period YEAR ENDED AUGUST 31, 1994: Banks (1) $5,098 5.90% $ 5,098 $ 4,481 7.41% YEAR ENDED AUGUST 31, 1993: Banks (1) $4,404 11.50% $42,732 $22,916 9.75% YEAR ENDED AUGUST 31, 1992: Banks (2) $ - - $ 1,372 $ 1,000 7.93% <FN> (1) Short-term borrowings under multi-currency lines of credit from a European bank. (2) Short-term revolving credit assumed in connection with Canadian acquisition in January, 1991. Page 18 SCHEDULE X NATIONAL SERVICE INDUSTRIES, INC. AND SUBSIDIARIES SUPPLEMENTARY INCOME STATEMENT INFORMATION FOR THE YEARS ENDED AUGUST 31, 1994, 1993, AND 1992 (In thousands) Charged to Costs and Item Expenses YEAR ENDED AUGUST 31, 1994: Maintenance and Repairs $26,581 YEAR ENDED AUGUST 31, 1993: Maintenance and Repairs $26,414 YEAR ENDED AUGUST 31, 1992: Maintenance and Repairs $26,074 Page 19 INDEX TO EXHIBITS Page No. EXHIBIT 3 - Restated Certificate of Incorporation Reference is made to Exhibit 3 of registrant's Form 10-Q for the quarter ended May 31, 1992, which is incorporated herein by reference. - By-Laws as Amended and Restated June 21, Reference is made to Exhibit 3 of registrant's 1989 Form 10-K for the fiscal year ended August 31, 1989, which is incorporated herein by reference. EXHIBIT 4 - Shareholder Rights Plan Adopted May 9, 1988 Reference is made to Exhibit 1 of registrant's Form 8-A as filed with the Commission on May 11, 1988, which is incorporated herein by reference. EXHIBIT 10(i) - Section 168 Agreement and Election Dated Reference is made to Exhibit 10(i) of April 9, 1982 between National Service registrant's Form 10-K for the fiscal year Industries, Inc. and Oglethorpe Power ended August 31, 1982, which is incorporated Corporation herein by reference. EXHIBIT 10(iii)A Management Contracts and Compensatory Arrangements: (a)-Director's Deferred Compensation Plan Reference is made to Exhibit 10(iii)A (b) of registrant's Form 10-K for the fiscal year ended August 31, 1982, which is incorporated herein by reference. (b)-(i) Executives' Deferred Compensation Plan Reference is made to Exhibit 19 of registrant's Form 10-K for the fiscal year ended August 31, 1982, which incorporated herein by reference. (ii) First Amendment To Executives' Reference is made to Exhibit 10(iii)A (b)-(ii) Deferred Compensation Plan, Dated of registrant's Form 10-K for the fiscal year September 21, 1989 ended August 31, 1989, which is incorporated herein by reference. (c)-(i)Restated and Amended Supplemental Reference is made to Exhibit 10(iii)A (c)-(i) Retirement Plan for Executives of National of registrant's Form 10-K for the fiscal year Service Industries, Inc. (Supplemental ended August 31, 1993, which is incorporated Pension Plan) herein by reference. (ii) Amendment to Restated and Amended Reference is made to Exhibit 10(iii)A (a) of Supplemental Retirement Plan for Executives registrant's Form 10-Q for the quarter ended of National Service Industries, Inc. February 28, 1994, which is incorporated (Supplemental Pension Plan) herein by reference. (d)-(i) The National Service Industries, Inc. Reference is made to Exhibit 10(iii)A (f) of Senior Management Benefit Plan, Dated registrant's Form 10-K for the fiscal year August 15, 1985 ended August 31, 1985, which is incorporated herein by reference. (ii) First Amendment to National Service Reference is made to Exhibit 10(iii)A (e)-(ii) Industries, Inc. Senior Management Benefit of registrant's Form 10-K for the fiscal year Plan, Dated September 21, 1989 ended August 31, 1989, which is incorporated herein by reference. Page 20 INDEX TO EXHIBITS Page No. (d) (iii) Second Amendment to National Service 23 Industries, Inc. Senior Management Benefit Plan, Dated September 16, 1994 (e)-Severance Protection Agreement between Reference is made to Exhibit 10(iii)A (h) of National Service Industries, Inc. and David registrant's Form 10-K for the fiscal year Levy ended August 31, 1989, which is incorporated herein by reference. (f)-Severance Protection Agreements between Reference is made to Exhibit 10(iii)A (i) of National Service Indus tries, Inc. and registrant's Form 10-K for the fiscal year (i) D. Raymond Riddle ended August 31, 1989, which is incorporated (ii) Don W. Hubble herein by reference. (iii)J. Robert Hipps (g)-Bonus Letter Agreements between Reference is made to Exhibit 10(iii)A (j) of National Service Industries, Inc. and registrant's Form 10-K for the fiscal year (i) D. Raymond Riddle ended August 31, 1989, which is incorporated (ii) Don W. Hubble herein by reference. (iii)David Levy (iv) J. Robert Hipps (h)-(i)Long-Term Incentive Program, Dated Reference is made to Exhibit 10(iii)A (k) of September 20, 1989 registrant's Form 10-K for the fiscal year ended August 31, 1989, which is incorporated herein by reference. -(ii)First Amendment to Long-Term 28 Incentive Program, Dated September 20, 1989 (i)-Incentive Stock Option Agreements between Reference is made to Exhibit 10(iii)A (l) of National Service Industries, Inc., and registrant's Form 10-K for the fiscal year (i) D. Raymond Riddle ended August 31, 1989, which is incorporated (ii) Don W. Hubble herein by reference. (iii)David Levy (iv) J. Robert Hipps (j)-Nonqualified Stock Option Agreement for Reference is made to Exhibit 10(iii)A (j) of Corporate Officers between National Service registrant's Form 10-K for the fiscal year Industries, Inc. and ended August 31, 1992, which is incorporated (i) D. Raymond Riddle herein by reference. (ii) Don W. Hubble (iii)David Levy (iv) J. Robert Hipps (k)-Nonqualified Stock Option Agreement for 29 Corporate Officers Effective Beginning September 21, 1994 between National Service Industries, Inc. and (i) D. Raymond Riddle (ii) Don W. Hubble (iii)David Levy (l)-(i)Benefits Protection Trust Agreement Dated Reference is made to Exhibit 10(iii)A (n) of July 5, 1990, between National Service Indus- registrant's Form 10-K for the fiscal year tries, Inc. and Wachovia Bank and Trust ended August 31, 1990, which is incorporated Company herein by reference. Page 21 INDEX TO EXHIBITS Page No. (l)-(ii)Amended Schedule 1 of Benefits Reference is made to Exhibit 10(iii)A (k)-(ii) Protection Trust Agreement between of registrant's Form 10-K for the fiscal year National Service Industries, Inc. and ended August 31, 1993, which is incorporated Wachovia Bank and Trust Company herein by reference. Dated September 15, 1993 (m)-Executive Benefits Trust Agreement Dated Reference is made to Exhibit 10(iii)A (o) of July 5, 1990, between National Service Indus- registrant's Form 10-K for the fiscal year tries, Inc. and Wachovia Bank and Trust ended August 31, 1990, which is incorporated Company herein by reference. (n)-Consulting Agreement between National Reference is made to Exhibit 10(iii)A of Service Industries, Inc. and Erwin Zaban, registrant's Form 10-Q for the quarter ended Dated December 30, 1991 November 30, 1991, which is incorporated herein by reference. (o)-Consulting Agreement between National Reference is made to Exhibit 10(iii)A (n) of Service Industries, Inc. and Sidney Kirschner, registrant's Form 10-K for the fiscal year Effective November 1, 1992 ended August 31, 1992, which is incorporated herein by reference. (p)-1992 Nonemployee Directors' Stock Option Reference is made to Exhibit 10(iii)A (o) of Plan Effective September 16, 1992 registrant's Form 10-K for the fiscal year ended August 31, 1992, which is incorporated herein by reference. (q)-Nonemployee Directors' Stock Option 35 Agreement between National Service Industries, Inc. and (i) John L. Clendenin (ii) Jesse Hill, Jr. (iii)Robert M. Holder, Jr. (iv) F. Ross Johnson (v) James C. Kennedy (vi) Donald R. Keough (vii)Bryan D. Langton (vii)Bernard Marcus (ix) John G. Medlin, Jr. (x) Dr. Betty L. Siegel (xi) Erwin Zaban (r)-Summary of Incentive Bonus Program for Reference is made to Exhibit 10(iii)A (p) of Executive Officers of National Service registrant's Form 10-K for the fiscal year Industries, Inc. ("NSI") for the Fiscal Year ended August 31, 1993, which is incorporated Ending August 31, 1994 herein by reference. (s)-National Service Industries, Inc. Executive 40 Savings Plan Effective September 1, 1994 (t)-National Service Industries, Inc. Management 61 Compensation and Incentive Plan Effective September 1, 1994, Subject to Approval by Shareholders at the Annual Meeting to be Held January 4, 1995 EXHIBIT 11 - Computations of Net Income per Share of 65 Common Stock EXHIBIT 13 - Information Incorporated by Reference from 66 Annual Report for the Year Ended August 31, 1994 INDEX TO EXHIBITS Page 22 Page No. EXHIBIT 21 - List of Subsidiaries 81 EXHIBIT 23 - Consent of Independent Public Accountants 82 EXHIBIT 24 - Powers of Attorney 83 EXHIBIT 27 - Financial Data Schedules 95