Page 1 of 12
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:
Zep Manufacturing Company Profit Sharing/
401(k) Retirement 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
Page 2
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 as of December 31, 1995 and
1994.
Statement of Changes in Net Assets Available for Benefits, with Fund
Information, 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 12
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.
Zep Manufacturing Company Profit Sharing/
401(k) Retirement 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
Page 3
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Plan Administrator of
Zep Manufacturing Company
Profit Sharing/401(k) Retirement Plan:
We have audited the accompanying statements of net assets available for benefits
of ZEP MANUFACTURING COMPANY PROFIT SHARING/401(k) RETIREMENT 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.
Atlanta, Georgia
May 31, 1996
Page 4
ZEP MANUFACTURING COMPANY
PROFIT SHARING/401(k) RETIREMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1995 AND 1994
1995 1994
CONTRIBUTIONS RECEIVABLE:
Employer ....................................... $ 2,006,967 $ 0
Participant .................................... 288,794 273,597
Total contributions receivable ....... 2,295,761 273,597
INVESTMENT IN NSI DC TRUST, at fair value (Note 2):
Stable Value Fund .............................. 30,426,021 29,522,580
Balanced Fund .................................. 26,008,943 17,724,586
Diversified Equity Fund......................... 25,767,562 17,026,627
NSI Stock Fund ................................. 5,948,705 3,710,350
Loan Fund ...................................... 3,487,013 2,421,818
International Fund ............................. 609,181 0
Total investments .................... 92,247,425 70,405,961
NET ASSETS AVAILABLE FOR BENEFITS .................. $94,543,186 $70,679,558
The accompanying notes are an integral part of these statements.
Page 5
ZEP MANUFACTURING COMPANY
PROFIT SHARING/401(k) RETIREMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS,
WITH FUND INFORMATION, FOR THE YEAR ENDED DECEMBER 31, 1995
Diversified Stable NSI
Balanced Equity Value Stock Loan Internat'l
Fund Fund Fund Fund Fund Fund Total
CONTRIBUTIONS:
Employer ..................... $ 493,868 $ 598,991 $ 727,700 $ 164,367 $ 0 $ 25,168 $ 2,010,094
Participant .................. 1,289,795 1,595,377 1,157,540 370,555 0 32,800 4,446,067
Total contributions 1,783,663 2,194,368 1,885,240 534,922 0 57,968 6,456,161
NET GAIN FROM INVESTMENT
IN NSI DC TRUST .................. 5,671,871 6,337,868 2,306,772 1,208,106 230,863 34,993 15,790,473
BENEFITS PAID TO PARTICIPANTS .... (639,163) (875,652) (1,456,996) (220,672) (64,253) (770) (3,257,506)
INTRAPLAN TRANSFERS .............. 1,093,530 1,145,914 (3,331,101) 515,532 30,396 545,729 0
OTHER ............................ (3,424) (6,617) 55,619 6,519 0 0 52,097
NET INCREASE (DECREASE) .......... 7,906,477 8,795,881 (540,466) 2,044,407 197,006 637,920 19,041,225
TRANSFER FROM ZEP PLAN FOR
CONTRACT EMPLOYEES (Note 1) ...... 880,870 566,909 2,155,782 350,652 868,190 0 4,822,403
NET ASSETS AVAILABLE FOR BENEFITS,
December 31, 1994 ................ 17,802,453 17,128,351 29,594,217 3,732,720 2,421,817 0 70,679,558
NET ASSETS AVAILABLE FOR BENEFITS,
December 31, 1995 ................ $ 26,589,800 $ 26,491,141 $ 31,209,533 $ 6,127,779 $ 3,487,013 $ 637,920 $ 94,543,186
The accompanying notes are an integral part of this statement.
Page 6
ZEP MANUFACTURING COMPANY
PROFIT SHARING/401(k) RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
1. PLAN DESCRIPTION
The following brief description of the Zep Manufacturing Company Profit
Sharing/401(k) Retirement Plan (the "Plan") of Zep Manufacturing Company
(the "Company"), a division of National Service Industries, Inc. ("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") covering all salaried,
commissioned, and nonunion hourly employees of the Company with at least
six months of service and who have attained the age of 21.
Effective January 1, 1995, the Zep Manufacturing Company Profit
Sharing/401(k) Retirement Plan for Contract Employees (the "Zep Plan") was
merged into the Plan. In connection with such merger, all of the assets and
liabilities of the Zep Plan were transferred to the Plan and all
participants of the Zep Plan (hourly employees represented by a collective
bargaining unit ["union employees"]) became eligible to participate in the
Plan.
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.
The Company makes a profit-sharing contribution to the Plan for salaried,
commissioned, and nonunion hourly employees in the amount of (a) 5% of net
profits, as defined, plus an amount which represents the same percentage of
total annual compensation of all hourly paid employees who are participants
of the Plan as the 5% of net profits bears to the total annual compensation
of the salaried and commissioned employees who are participants under this
Plan, (b) multiplied by a fraction which represents the relationship
between the annual compensation of all salaried, commissioned, nonunion
hourly employees to the annual compensation of all employees who are
qualifying participants in the Plan. Annual compensation included for each
participant shall not exceed $40,000. An additional amount may be
contributed at the discretion of the board of directors of NSI.
Page 7
The Company also makes a profit-sharing contribution to the Plan for the
union employees which is calculated in a similar manner as that described
above.
Company contributions are allocated to all participants who are actively
employed on the last day of the plan year and who have a year of service,
as defined, for such plan year. Allocations are made based on each
qualifying participant's compensation relative to all qualifying
participants, with a limitation on compensation considered of $40,000.
Vesting
Participants are always fully vested in their individual contributions.
Vesting of employer contributions occurs on an increasing scale ranging
from 20% vesting after three 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
allocated to remaining participants in the same manner as 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").
The responsibility for administration of the Plan rests with the Plan's
profit-sharing committee, which is appointed by the board of directors of
NSI. 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, 10,421,383 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.
Page 8
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 of the NSI DC Trust. Participants make their investment elections
in 5% increments, with changes allowed on a daily basis.
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
capital.
* 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
will be established at the time the loan is approved. Loan processing fees
are charged directly to the participant's account. Interest on loans is
determined 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 age 55
with ten years of credited service). These benefits are payable in a
lump-sum amount or in installment payments at the election of the
participant. A participant who terminates 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. The vested portion of the
participant's employer contributions is generally distributable on the
first day of the first month following the later of his/her termination
date or sixty-fifth birthday. If this vested portion is less than $5,500,
then the participant may elect to have his/her interest distributed
immediately in a lump sum.
Page 9
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,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.
Guaranteed investment contracts ("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.
Page 10
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 among participating plans as follows:
Zep Manufacturing Company Profit
Sharing/401(k) Retirement Plan ................................ $15,790,473
All other NSI plans ........................................... 12,682,500
Total ........................... $28,472,973
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
Page 11
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
Zep Manufacturing Company Profit
Sharing/401(k) Retirement Plan ........... $ 92,247,425 $ 70,405,961
All other plans .............................. 74,698,143 61,759,710
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 favorable determination letter from the Internal
Revenue Service dated October 24, 1994 stating the plan, as designed, is in
accordance with plan design requirements as of that date. The Plan has been
amended since receiving the determination letter. However, 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
the related trust was tax-exempt as of December 31, 1995 and 1994.