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Exhibit Index on Page 2
FORM 11-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Annual Report Pursuant to Section 15(d) of the Securities Exchange Act
of 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED].
For the fiscal year ended: December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED].
For the transition period from to
Commission file number 1- 3208
A. Full title of the plan and the address of the plan, if
different from that of the issuer named below:
National Service Industries Retirement and 401(k) Plan
B. Name of issuer of the securities held pursuant to the plan and
the address of the principal executive office:
National Service Industries, Inc.
1420 Peachtree Street, NE
Atlanta, Georgia 30309
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REQUIRED INFORMATION
The following documents are filed as a part of this report:
1. Financial Statements
Plan financial statements prepared in accordance with
the financial reporting requirements of ERISA include the following:
Report of Independent Public Accountants
Statements of Net Assets Available for Benefits, with Fund Information, as
of December 31, 1995 and 1994.
Statement of Changes in Net Assets Available for Benefits for
the Year Ended December 31, 1995.
Notes to Financial Statements
2. Exhibits
Sequentially
Numbered
The following exhibit is filed with this report: Page
23 Consent of Arthur Andersen LLP 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit
plan) have duly caused this annual report to be signed on its behalf
by the undersigned hereunto duly authorized.
National Service Industires
Retirement and 401(k) Plan
Date: June 28, 1996 By: National Service Industries, Inc.
Plan Administrator
By: /s/ James S. Balloun
Name: James S. Balloun
Title: Chairman and Chief Executive Officer
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Plan Administrator of
National Service Industries
Retirement and 401(k) Plan:
We have audited the accompanying statements of net assets available for benefits
of the NATIONAL SERVICE INDUSTRIES RETIREMENT AND 401(k) PLAN as of December 31,
1995 and 1994 and the related statement of changes in net assets available for
benefits, with fund information, for the year ended December 31, 1995. These
financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 1995 and 1994 and the changes in net assets available for benefits
for the year ended December 31, 1995 in conformity with generally accepted
accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The fund information in the statement of
changes in net assets available for benefits is presented for the purpose of
additional analysis rather than to present the changes in net assets available
for benefits of each fund. The fund information has been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Atlanta, Georgia
May 31, 1996
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NATIONAL SERVICE INDUSTRIES
RETIREMENT AND 401(k) PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1995 AND 1994
1995 1994
INVESTMENT IN NSI DC TRUST, at fair value (Note 2):
Diversified Equity Fund ............................ $271,482 $140,512
NSI Stock Fund ..................................... 140,684 63,505
Balanced Fund ...................................... 120,197 59,427
Stable Value Fund .................................. 26,259 18,133
International Fund ................................. 21,464 0
Loan Fund .......................................... 11,703 0
NET ASSETS AVAILABLE FOR BENEFITS ...................... $591,789 $281,577
The accompanying notes are an integral part of these statements.
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NATIONAL SERVICE INDUSTRIES
RETIREMENT AND 401(k) PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION,
FOR THE YEAR ENDED DECEMBER 31, 1995
-----------------Participant-Directed--------------------- Nonparticipant-
Diversified Stable NSI Directed
Balanced Equity Value Stock Loan Int'l NSI Stock
Fund Fund Fund Fund Fund Fund Fund Total
CONTRIBUTIONS:
Employer .................................... $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 46,918 $ 46,918
Participant ................................. 51,670 111,734 27,370 22,818 0 11,188 0 224,780
Total contributions ............... 51,670 111,734 27,370 22,818 0 11,188 46,918 271,698
NET GAIN FROM INVESTMENT IN NSI DC TRUST ........ 21,458 58,561 2,120 10,191 490 861 15,848 109,529
BENEFITS PAID TO PARTICIPANTS ................... (7,494) (31,861) (3,052) (467) 0 (204) (4,028) (47,106)
INTRAPLAN TRANSFERS ............................. (4,828) 353 (16,858) (499) 12,213 9,619 0 0
OTHER ........................................... (36) (7,817) (1,454) (7,084) (1,000) 0 (6,518) (23,909)
NET INCREASE .................................... 60,770 130,970 8,126 24,959 11,703 21,464 52,220 310,212
NET ASSETS AVAILABLE FOR BENEFITS,
December 31, 1994 ............................... 59,427 140,512 18,133 25,661 0 0 37,844 281,577
NET ASSETS AVAILABLE FOR BENEFITS,
December 31, 1995 ............................... $ 120,197 $ 271,482 $ 26,259 $ 50,620 $ 11,703 $ 21,464 $ 90,064 $ 591,789
The accompanying notes are an integral part of this statement.
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NATIONAL SERVICE INDUSTRIES
RETIREMENT AND 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
1. PLAN DESCRIPTION
The following brief description of the National Service Industries
Retirement and 401(k) Plan (the "Plan") of National Service Industries,
Inc. (the "Company" or "NSI") is provided for informational purposes only.
Participants should refer to the plan agreement for more complete
information.
General
The Plan is a defined contribution plan established under the provisions of
Section 401(a) of the Internal Revenue Code ("IRC") which covers all
nonunion, full-time salaried employees of the Company who have attained the
age of 20.5 with at least six months of service.
Contributions
Participants may elect to contribute between 1% and 10% of before-tax
compensation, as defined in the Plan, subject to certain limitations under
the IRC. Matching contributions are made by the Company in an amount equal
to 50% of the participant's contribution up to the lesser of 4% of
compensation or $500 in a plan year. Additional discretionary amounts, as
determined by the board of directors of NSI, may be contributed by the
Company and are allocated to participants at the discretion of the Company.
Effective January 1, 1996, the maximum matching contribution for a plan
year is $1,000.
Vesting
Participants are always fully vested in their individual contributions.
Vesting of employer contributions occurs on an increasing scale ranging
from 10% vesting after two years of service, as defined, to 100% vesting
after seven years of service. Nonvested employer contributions are
forfeited upon withdrawal or termination, as defined, from the Plan and are
used to reduce future employer contributions.
Administration
Under a trust agreement dated September 1, 1993, as amended, Wachovia Bank
of Georgia, N.A. was appointed trustee of the NSI Defined Contribution
Plans Master Trust (the "NSI DC Trust").
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All administrative expenses of the Plan were paid by the Company during
1995.
Participants' Accounts
Individual accounts are maintained for each of the Plan's participants to
reflect the particular participant's contributions and related employer
contributions, as well as the participant's share of the Plan's income and
any related administrative expenses.
Effective with the change in 1995 from monthly to daily valuation of
participant accounts, the Plan assigns units to its participants. At
December 31, 1995, 60,829 units were assigned to plan participants. Unit
values for each investment fund were as follows at December 31, 1995:
Stable Value Fund $10.59
Diversified Equity Fund 10.57
Balanced Fund 22.95
NSI Stock Fund 12.39
International Fund 4.59
Investment in NSI DC Trust
The Plan's assets are commingled in the NSI DC Trust together with the
assets of certain defined contribution plans of other NSI divisions. The
investments of the NSI DC Trust are subject to certain administrative
guidelines and limitations as to type and amount of securities held.
Certain fund assets are allocated to selected independent investment
managers to invest under these general guidelines.
Investment Options
The separate investment options made available under the Plan may be
changed, eliminated, or modified from time to time by the investment
committee for the NSI DC Trust. Participants make their investment
elections in 5% increments, with changes allowed on a daily basis.
Participants may not direct the investment of company matching or
discretionary contributions. These are invested in the NSI Stock Fund
discussed below.
The separate investment options offered by the Plan are as follows:
* Diversified Equity Fund. This fund is a diversified stock fund designed
to invest in a broad range of common stocks providing capital growth.
* Stable Value Fund. This is a fixed income fund designed to provide a
steady level of current income while focusing on preservation of
principal.
* Balanced Fund. This fund is invested in a changing mix of high-quality
stocks and bonds. The fund is designed to provide capital growth and
current income while limiting the risk of principal loss.
* NSI Stock Fund. This fund is invested in NSI common stock, although it
may hold other short-term investments from time to time. A participant
may not direct more than 50% of his/her account balance to be invested in
this fund.
* International Fund. This fund is invested in the stock of non-U. S.
companies and is designed to provide long-term growth.
Loans to Participants
The Plan permits loans to participants up to the lower of 50% of the
participant's vested account balance or $50,000. Participants have up to
five years to pay back the principal and interest unless the loan is for
the purchase of a primary residence, in which case the repayment period
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will be established at the time the loan is approved. Loan processing fees
are charged directly to the participant's account. Interest rates on loans
to participants are based on market rates as determined by the plan
administrator.
Benefits
A participant is entitled to receive the distribution of his/her vested
account balance upon death, disability, or retirement (age 65) or in
installments at the participant's election if he/she is age 55 or older and
his/her vested balance is greater than $3,500. A participant who terminated
employment with the Company for other than these reasons is entitled to
receive his/her contributions in a lump sum as soon as administratively
feasible.
Benefits are payable in cash, except that any portion of a participant's
account balance which is invested in the NSI Stock Fund is distributed in
the form of shares of NSI common stock, with fractional shares paid in
cash.
Hardship withdrawals may be made upon proven financial hardship of a
participant as defined in the plan agreement and approved by the Plan's
retirement committee.
Plan Termination
Although the Company intends for the Plan to be permanent, the Plan
provides that the Company has the right to discontinue contributions or to
terminate the Plan at any time. In the event of Plan termination, each
participant shall be vested in the balance of his/her account and his/her
proportionate share of any future adjustments.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The accounts of the Plan are maintained by the trustee on the cash basis of
accounting. The accompanying financial statements have been prepared using
the accrual method of accounting by application of memorandum entries. The
preparation of the financial statements in conformity with generally
accepted accounting principles requires the Plan's management to use
estimates and assumptions that affect the accompanying financial statements
and disclosures. Actual results could differ from these estimates.
Investment Valuation
Investments of the NSI DC Trust, except for the guaranteed investment
contracts ("GICs"), are stated at fair value as determined by the trustee
from quoted market prices. Securities traded on a national exchange are
valued at the last reported sales price on the last business day of the
plan year; investments traded in the over-the-counter market and listed
securities for which no sale was reported on the last day of the plan year
are valued at the last reported bid price.
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GICs included in the master trust are fully benefit-responsive and are
therefore carried at contract value (cost plus accrued interest) in the
accompanying financial statements in accordance with Statement of Position
94-4. At December 31, 1995, contract value approximates fair value. At
December 31, 1995, the weighted average crediting interest rate was 6.77%.
For the year ended December 31, 1995, the annual yield on the GICS held by
the NSI DC Trust was 6.9%. For certain contracts held by the trust,
crediting interest rates may be changed in the event of certain events such
as early retirements, plant closings, etc., but in no case are adjusted to
a rate less than 0%.
GICs are subject to credit risk based on the ability of the insurance
company to meet interest or principal payments, or both, as they become
due.
3. NSI DC TRUST
Investment Income
Investment income of the NSI DC Trust for the year ended December 31, 1995
is summarized as follows:
Dividends on common stock ................................... $ 245,288
Interest income ............................................. 4,597,435
Net appreciation in fair value of common stock .............. 1,408,275
Net income from mutual fund ................................. 11,982,057
Net income from common/collective trust ..................... 10,492,727
Net income from pooled separate account ..................... 21,986
Investment expenses ......................................... (274,795)
Net investment income ......................... $ 28,472,973
The investment income of the NSI DC Trust for the year ended December 31,
1995 is allocated to participating plans as follows:
National Service Industries Retirement and 401(k) Plan .. $ 109,529
All other NSI plans ..................................... 28,363,444
Total ..................................... $28,472,973
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Net Assets
Net assets of the NSI DC Trust are as follows at December 31, 1995 and
1994:
1995 1994
Mutual fund ................................ $ 47,636,487 $ 32,108,552
Common/collective trust .................... 48,146,903 34,036,863
Guaranteed investment contracts ............ 55,129,605 52,672,980
Loans receivable from participants ......... 6,104,302 5,145,365
NSI common stock ........................... 7,637,554 4,925,868
Money market fund .......................... 1,377,443 3,343,227
Pooled separate account .................... 871,467 0
166,903,761 132,232,855
Cash ....................................... 127,031 0
167,030,792 132,232,855
Accrued investment income .................. 76,779 74,167
Adjustments for pending trades ............. (211,964) (149,089)
Other ...................................... 49,961 7,738
Net assets ................... $ 166,945,568 $ 132,165,671
The allocation of the net assets of the NSI DC Trust to participating plans
is based on participant balances and is as follows as of December 31, 1995
and 1994:
1995 1994
National Service Industries Retirement and
401(k) Plan .................................. $ 591,789 $ 281,577
All other plans .................................. 166,353,779 131,884,094
Total .............................. $166,945,568 $132,165,671
Investment in NSI Common Stock
As of December 31, 1995 and 1994, approximately 4.6% and 3.7%,
respectively, of the NSI DC Trust's net assets were invested in the common
stock of NSI, a party in interest to the Plan.
4. TAX STATUS
The Plan has received a determination letter dated October 25, 1995 from
the Internal Revenue Service stating that the plan was in accordance with
plan design requirements as of that date. The plan administrator believes
that the Plan is currently designed and is being operated in compliance
with the applicable requirements of the IRC. Therefore, the plan
administrator believes that the Plan was qualified and that the related
trust was tax-exempt as of December 31, 1995 and 1994.