Page 58
Exhibit 13
Consolidated Balance Sheets
National Service Industries, Inc.
August 31
(In thousands, except share data) 1996 1995
Assets
Current Assets:
Cash and cash equivalents ........................................................................ $ 58,662 $ 79,402
Short-term investments ........................................................................... 551 3,598
Receivables, less reserves for doubtful accounts of $5,807 in 1996 and $6,467 in 1995 ............ 269,971 266,056
Inventories, at the lower of cost (on a first-in, first-out basis) or market ..................... 169,813 185,789
Linens in service, net of amortization ........................................................... 97,710 88,605
Deferred income taxes ............................................................................ 2,152 10,221
Prepayments ...................................................................................... 7,522 6,739
Total Current Assets ..................................................................... 606,381 640,410
Property, Plant, and Equipment, at cost:
Land ............................................................................................. 29,062 31,016
Buildings and leasehold improvements ............................................................. 194,219 192,023
Machinery and equipment .......................................................................... 542,056 503,868
Total Property, Plant, and Equipment ..................................................... 765,337 726,907
Less-Accumulated depreciation and amortization ................................................... 407,941 377,003
Property, Plant, and Equipment-net ....................................................... 357,396 349,904
Other Assets:
Goodwill and other intangibles ................................................................... 89,427 101,410
Other ............................................................................................ 41,442 39,622
Total Other Assets ....................................................................... 130,869 141,032
Total Assets ..................................................................... $1,094,646 $1,131,346
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Page 59
Exhibit 13
Consolidated Balance Sheets (continued)
National Service Industries, Inc.
August 31
(In thousands, except share data) 1996 1995
Liabilities and Stockholders' Equity
Current Liabilities:
Current maturities of long-term debt ............................................................. $ 46 $ 87
Notes payable .................................................................................... 6,696 6,399
Accounts payable ................................................................................. 79,851 81,524
Accrued salaries, commissions, and bonuses ....................................................... 42,788 43,944
Current portion of self-insurance reserves ....................................................... 15,396 16,276
Other accrued liabilities ........................................................................ 52,649 54,340
Total Current Liabilities ................................................................ 197,426 202,570
Long-Term Debt, less current maturities .................................................................. 24,920 26,776
Deferred Income Taxes .................................................................................... 63,347 65,756
Self-Insurance Reserves, less current portion ............................................................ 63,369 67,830
Other Long-Term Liabilities .............................................................................. 27,576 24,010
Commitments and Contingencies (Note 4)
Stockholders' Equity:
Series A participating preferred stock, $.05 stated value, 500,000 shares authorized, none issued
Preferred stock, no par value, 500,000 shares authorized, none issued
Common stock, $1 par value, 80,000,000 shares authorized, 57,918,978 shares issued in 1996 and 1995 57,919 57,919
Paid-in capital .................................................................................. 11,021 8,065
Retained earnings ................................................................................ 791,367 746,256
860,307 812,240
Less-Treasury stock, at cost (11,447,036 shares in 1996 and 9,609,261 shares in 1995)..................... 142,299 67,836
Total Stockholders' Equity ............................................................... 718,008 744,404
Total Liabilities and Stockholders' Equity ....................................... $1,094,646 $1,131,346
The accompanying notes to consolidated financial statements are an integral part of these balance sheets.
19
Page 60
Exhibit 13
Consolidated Statements of Income
National Service Industries, Inc.
Years Ended August 31
(In thousands, except per-share data) 1996 1995 1994
Sales and Service Revenues:
Net sales of products ..................................... $ 1,482,937 $1,424,180 $1,337,410
Service revenues .......................................... 530,625 546,447 544,454
Total Revenues .................................... 2,013,562 1,970,627 1,881,864
Costs and Expenses:
Cost of products sold ..................................... 933,405 908,869 875,055
Cost of services .......................................... 304,381 299,687 286,519
Selling and administrative expenses ....................... 616,513 601,143 576,463
Interest expense, net ..................................... 1,565 1,648 2,788
Other (income) expense, net ............................... (4,150) 8,783 8,841
Total Costs and Expenses .......................... 1,851,714 1,820,130 1,749,666
Income before Provision for Income Taxes .......................... 161,848 150,497 132,198
Provision for Income Taxes ........................................ 60,700 56,400 49,500
Net Income ........................................................ $ 101,148 $ 94,097 $ 82,698
Earnings per Share ................................................ $ 2.11 $ 1.93 $ 1.67
Weighted Average Number of Shares Outstanding ..................... 47,941 48,696 49,547
The accompanying notes to consolidated financial statements are an integral part of these statements.
20
Page 61
Exhibit 13
Consolidated Statements of Stockholders' Equity
National Service Industries, Inc.
Common Paid-in Retained Treasury
(In thousands, except per-share data) Stock Capital Earnings Stock Total
Balance August 31, 1993 .......................................... $57,919 $ 7,299 $ 673,399 $ (34,594) $ 704,023
Treasury stock purchased(1) .................................. -- -- -- (27) (27)
Stock options exercised(2) ................................... -- 385 -- 90 475
Treasury stock acquired in connection with divestiture(3) .... -- -- -- (9,191) (9,191)
Net income ................................................... -- -- 82,698 -- 82,698
Cash dividends of $1.07 per share paid on common stock ....... -- -- (53,042) -- (53,042)
Adjustment to recognize net decrease in pension liability .... -- -- 2,203 -- 2,203
Foreign currency translation adjustment ...................... -- -- -- 246 246
Balance August 31, 1994 ......................................... 57,919 7,684 705,504 (43,722) 727,385
Treasury stock purchased(4) .................................. -- -- -- (24,127) (24,127)
Stock options exercised(5) ................................... -- 380 -- 148 528
Adjustment of treasury stock issued in connection with acquisition(6) -- 1 -- (1) --
Adjustment of treasury stock acquired in connection with divestiture(7) -- -- -- (134) (134)
Net income ................................................... -- -- 94,097 -- 94,097
Cash dividends of $1.11 per share paid on common stock ....... -- -- (54,156) -- (54,156)
Adjustment to recognize net increase in pension liability .... -- -- (3) -- (3)
Foreign currency translation adjustment ...................... -- -- 814 -- 814
Balance August 31, 1995 .......................................... 57,919 8,065 746,256 (67,836) 744,404
Treasury stock purchased(8) .................................. -- -- -- (75,223) (75,223)
Stock options exercised(9) ................................... -- 2,956 -- 760 3,716
Net income ................................................... -- -- 101,148 -- 101,148
Cash dividends of $1.15 per share paid on common stock ....... -- -- (55,272) -- (55,272)
Adjustment to recognize net increase in pension liability .... -- -- (23) -- (23)
Foreign currency translation adjustment . .................... -- -- (742) -- (742)
Balance August 31, 1996 .......................................... $57,919 $ 11,021 $ 791,367 $(142,299) $ 718,008
(1)992 shares. (2)21,705 shares. (3) 341,840 shares. (4)949,178 shares. (5)23,598 shares.
(6) 39 shares. (7) 4,976 shares. (8)2,000,000 shares. (9)185,044 shares.
The accompanying notes to consolidated financial statements are an integral part of these statements.
21
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Exhibit 13
Consolidated Statements of Cash Flows
National Service Industries, Inc.
Years Ended August 31
(In thousands) 1996 1995 1994
Cash Provided by (Used for) Operating Activities
Net income .......................................................................... $ 101,148 $ 94,097 $ 82,698
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization ............................................... 58,428 57,130 60,548
Provision for losses on accounts receivable ................................. 2,708 3,170 2,804
(Gain) loss on the sale of property, plant, and equipment ................... (1,652) 1,138 (76)
Gain on the sale of businesses .............................................. (7,579) (5,726) (2,249)
Change in non-current deferred income taxes ................................. 1,864 (3,663) (1,092)
Change in assets and liabilities net of effect of acquisitions-
Receivables ......................................................... (7,343) (11,367) (8,425)
Inventories and linens in service, net .............................. 5,308 (8,522) (23,095)
Current deferred income taxes ....................................... 8,069 (2,243) 11,359
Prepayments ......................................................... (940) 2,086 4,635
Accounts payable and accrued liabilities ............................ (6,117) 11,945 5,796
Changes in self-insurance reserves and other long-term liabilities .. (895) 7,819 576
Net Cash Provided by Operating Activities ................... 152,999 145,864 133,479
Cash Provided by (Used for) Investing Activities
Change in short-term investments .................................................... 3,047 (1,019) 2,197
Purchases of property, plant, and equipment ......................................... (65,499) (58,768) (42,517)
Sale of property, plant, and equipment .............................................. 9,105 8,491 4,552
Sale of businesses .................................................................. 15,250 14,044 2,395
Acquisitions ........................................................................ (600) (2,668) (569)
Change in other assets .............................................................. (3,071) (4,848) 52
Net Cash Used for Investing Activities ...................................... $ (41,768) $ (44,768) $ (33,890)
22
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Exhibit 13
Consolidated Statements of Cash Flows (continued)
National Service Industries, Inc.
Years Ended August 31
(In thousands) 1996 1995 1994
Cash Provided by (Used for) Financing Activities
Repayment of long-term debt ......................................................... $ (1,897) $ (667) $ (2,680)
Recovery of investment in tax benefits .............................................. 1,720 1,329 2,080
Deferred income taxes from investment in tax benefits ............................... (4,273) (3,900) (3,875)
(Purchase) issuance of treasury stock, net .......................................... (71,507) (23,733) 448
Cash dividends paid ................................................................. (55,272) (54,156) (53,042)
Net Cash Used for Financing Activities ...................................... (131,229) (81,127) (57,069)
Effect of Exchange Rate Changes on Cash ..................................................... (742) 814 246
Net Change in Cash and Cash Equivalents ..................................................... (20,740) 20,783 42,766
Cash and Cash Equivalents at Beginning of Year .............................................. 79,402 58,619 15,853
Cash and Cash Equivalents at End of Year .................................................... $ 58,662 $ 79,402 $ 58,619
Supplemental Cash Flow Information:
Income taxes paid during the year ................................................... $ 58,974 $ 50,630 $ 41,584
Interest paid during the year ....................................................... 4,994 3,671 4,030
Noncash Investing and Financing Activities:
Noncash aspects of sale of businesses-
Receivables incurred ........................................................ $ (234) $ (3,003) $ --
Liabilities assumed (removed) ............................................... 1,009 1,064 (2,442)
Treasury stock acquired ..................................................... -- -- (9,191)
Noncash aspects of acquisitions-
Liabilities assumed or incurred ............................................. $ 6 $ 468 $ --
Treasury stock returned ..................................................... -- (1) --
The accompanying notes to consolidated financial statements are an integral part of these statements.
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Page 64
Exhibit 13
Notes to Consolidated Financial Statements
National Service Industries, Inc.
NOTE 1. Summary of Accounting Policies
Description of Business
The company has leadership positions in four business segments-Lighting
Equipment, Textile Rental, Chemicals, and Envelopes. The Lighting Equipment
segment produces a variety of fluorescent and non-fluorescent fixtures for
markets throughout the United States, Canada, Mexico, and overseas. The Textile
Rental segment provides linens, garments, and dust control products to
healthcare, linen supply, and industrial customers principally in the United
States. The Chemical segment produces maintenance, sanitation, and water
treatment products for customers throughout the United States, Canada, Puerto
Rico, and Western Europe. The Envelope segment produces business and specialty
envelopes in the South and Southwest. The company's other business, which is
being divested (Note 5), provides insulation products and services principally
in the southeastern United States.
Principles of Consolidation
The consolidated financial statements include the accounts of the company and
all subsidiaries after elimination of significant intercompany transactions and
accounts.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash, Cash Equivalents, and Short-Term Investments
Cash in excess of daily requirements is invested in time deposits and marketable
securities, consisting of taxable and tax exempt variable rate demand notes,
included in the balance sheet at market value. The company considers time
deposits and marketable securities purchased with an original maturity of three
months or less to be cash equivalents. Investments purchased with a maturity of
more than three months are considered short-term investments. The carrying
amounts of short-term investments at August 31, 1996 and 1995 approximate fair
value. At August 31, 1996, short-term investments consisted of preferred stocks.
In accordance with the criteria specified by Statement of Financial Accounting
Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," these investments were classified as "available for sale."
Concentrations of Credit Risk
Concentrations of credit risk with respect to receivables are limited due to the
wide variety of customers and markets into which the company's products and
services are provided, as well as their dispersion across many different
geographic areas. As a result, as of August 31, 1996, the company does not
consider itself to have any significant concentrations of credit risk.
Inventories and Linens in Service
Inventories are valued at the lower of cost (on a first-in, first-out basis) or
market and consisted of the following at August 31, 1996 and 1995:
(In thousands) 1996 1995
Raw materials and supplies ............................... $ 73,236 $ 87,470
Work in progress ......................................... 9,679 9,879
Finished goods ........................................... 86,898 88,440
$169,813 $185,789
Linens in service are recorded at cost and are amortized over their
estimated useful lives of 15 to 60 months
Goodwill and Other Intangibles
Goodwill of $3,460,000 was recognized in connection with a 1969 acquisition and
is not being amortized. Remaining amounts of goodwill ($45,029,000 in 1996 and
$47,853,000 in 1995) and other intangible assets are being amortized on a
straight-line basis over various periods up to 40 years.
The company periodically evaluates whether events and circumstances have
occurred that may warrant revision of the estimated useful lives of goodwill and
other long-lived assets or whether the remaining balance of goodwill should be
evaluated for possible impairment. The company uses an estimate of related
undiscounted net income over the remaining life of the goodwill in measuring
whether the goodwill is recoverable.
Depreciation
For financial reporting purposes, depreciation is determined principally on a
straight-line basis using estimated useful lives of plant and equipment (20 to
45 years for buildings and 3 to 16 years for machinery and equipment) while
accelerated depreciation methods are used for income tax purposes. Leasehold
improvements are amortized over the life of the lease or the useful life of the
improvement, whichever is shorter.
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Page 65
Exhibit 13
Notes to Consolidated Financial Statements (continued)
National Service Industries, Inc.
Foreign Currency Translation
The functional currency for the company's foreign operations is the local
currency. The translation of foreign currencies into U.S. dollars is performed
for balance sheet accounts using exchange rates in effect at the balance sheet
date and for revenue and expense accounts using a weighted average exchange rate
during the period. The gains or losses, net of applicable income taxes,
resulting from the translation are included in retained earnings and are
excluded from net income.
Gains or losses resulting from foreign currency transactions are included
in "Other (income) expense, net" in the consolidated statements of income and
amounted to gains of $249,000 in 1996 and $201,000 in 1995 and a loss of
$379,000 in 1994.
Pension and Profit Sharing Plans
The company has several pension plans covering hourly and salaried employees.
Benefits paid under these plans are based generally on employees' years of
service and/or compensation during the final years of employment. The company
makes annual contributions to the plans to the extent indicated by actuarial
valuations. Plan assets are invested primarily in equity and fixed income
securities.
Net pension (income) expense for 1996, 1995, and 1994 included the
following components:
(In thousands) 1996 1995 1994
Service cost of benefits earned during the period $ 2,719 $ 2,648 $ 2,466
Interest cost on projected benefit obligation ... 7,438 7,277 7,262
Return on plan assets ........................... (28,255) (12,178) (1,929)
Net amortization and deferral ................... 17,383 2,257 (8,215)
Net pension (income) expense .................... $ (715) $ 4 $ (416)
The following schedule reconciles the funded status of the plans as of June
1, 1996 and 1995, with amounts reported in the company's balance sheets at
August 31, 1996 and 1995:
1996 1995
Plan Accumulated Plan Accumulated
Assets Benefit Assets Benefit
Exceed Obligation Exceed Obligation
Accumulated Exceeds Accumulated Exceeds
Benefit Plan Benefit Plan
(In thousands) Obligation Assets Obligation Assets
Actuarial present value of benefit obligations as of June 1:
Vested ..................................................... $ (91,127) $(3,784) $ (77,505) $(3,879)
Nonvested .................................................. (4,281) (1,407) (6,585) (90)
Accumulated benefit obligation ..................................... (95,408) (5,191) (84,090) (3,969)
Effect of projected salary increases ............................... (7,431) (1,640) (6,295) (1,731)
Total projected benefit obligation ................................. (102,839) (6,831) (90,385) (5,700)
Fair value of plan assets .......................................... 134,426 -- 113,510 --
Plan assets greater (less) than projected benefit obligation ....... 31,587 (6,831) 23,125 (5,700)
Unrecognized transition (asset) liability .......................... (9,475) 74 (10,777) 86
Unrecognized prior service cost obligation ......................... 3,056 2,528 2,847 2,262
Unrecognized net loss (gain) ....................................... 6,471 (371) 13,549 (755)
Adjustment required to recognize minimum liability ................. -- (918) -- (426)
Prepaid (accrued) pension expense at August 31 ..................... $ 31,639 $(5,518) $ 28,744 $(4,533)
For all periods presented, the discount rate used to determine the
projected benefit obligation is 8 percent, the assumed growth rate of
compensation is 5.5 percent, and the expected long-term rate of return on plan
assets is 9.5 percent. During 1996, the company implemented the widely used,
more conservative GA83 mortality table.
The company also has profit sharing and 401(k) plans to which both
employees and the company contribute. At August 31, 1996, assets of the 401(k)
plans included shares of the company's common stock with a market value of
approximately $11,412,000. The company's cost of these plans was $4,595,000 in
1996, $3,810,000 in 1995, and $3,133,000 in 1994.
25
Page 66
Exhibit 13
Notes to Consolidated Financial Statements (continued)
National Service Industries, Inc.
Postretirement Healthcare and Life Insurance Benefits
The company's retiree medical plans are financed entirely by retiree
contributions; therefore, the company has no liability in connection with them.
Several programs provide limited retiree life insurance benefits. The liability
for these plans is not significant.
Postemployment Benefits
During fiscal 1995, the company adopted Statement of Financial Accounting
Standards (SFAS) No. 112, "Employers' Accounting for Postemployment Benefits,"
requiring the accrual of the estimated cost of benefits provided by an employer
to former or inactive employees after employment but before retirement. The
accrual, which is not material, relates primarily to severance agreements and
the liability for life insurance coverage for certain eligible employees.
Interest Expense, Net
Interest expense, net is comprised primarily of interest expense on long-term
debt and short-term line of credit borrowings and interest income on cash, cash
equivalents, and short-term investments.
Other (Income) Expense, Net
Other (income) expense, net is comprised primarily of amortization of intangible
assets net of gains resulting from the sale of fixed assets and businesses and
casualty loss insurance proceeds.
Accounting Standards Yet to Be Adopted
During fiscal 1997, the company is required to adopt Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed of." SFAS No. 121
requires that long-lived assets and certain intangibles be reviewed whenever
events or changes in circumstances indicate that the carrying value of an asset
may not be recoverable. In the opinion of management, the adoption of SFAS No.
121 is not expected to have a material impact on the company's financial
position or results of operations.
Reclassifications
Certain amounts in the 1995 and 1994 financial statements and notes have been
reclassified to conform with the 1996 presentation.
NOTE 2. Long-Term Debt and Lines of Credit
Long-term debt at August 31, 1996 and 1995, consisted of the following:
(In thousands) 1996 1995
6.5% to 9.25% mortgage notes, payable in installments
through 2000 (secured in part by property, plant,
and equipment having a net book value of $632,000
at August 31, 1996) $ 148 $ 244
3.55% to 8.5% other notes, payable in installments to 2021 24,818 26,619
24,966 26,863
Less-Amounts payable within one year included in
current liabilities 46 87
$24,920 $26,776
The annual maturities of long-term debt are as follows:
(In thousands) Amounts
Year Ending August 31
1997 $ 46
1998 5,500
1999 25
2000 28
2001 16
Later years 19,351
$24,966
Late in fiscal 1996, the company negotiated a $250,000,000 multi-currency
committed credit facility, of which $187,500,000 has been provided through
domestic banks and $62,500,000 through foreign banks. The company had no
outstanding borrowings under the facility at August 31, 1996.
The company has complimentary lines of credit totaling $132,000,000, of
which $110,000,000 has been provided domestically and $22,000,000 is available
on a multi-currency basis primarily from a European bank. At August 31, 1996 the
company had foreign currency short-term bank borrowings equivalent to $6,696,000
at an average interest rate of 4.0%.
Under one of the domestic lines of credit, up to $40,000,000 may be used
for letters of credit. At August 31, 1996, $16,683,000 in letters of credit
associated with the company's self-insurance program (Note 4) was outstanding
and $23,317,000 was available under the line of credit.
26
Page 67
Exhibit 13
Notes to Consolidated Financial Statements (continued)
National Service Industries, Inc.
Long-term debt recorded in the accompanying balance sheets
approximates fair value based on the borrowing rates currently available to the
company for bank loans with similar terms and average maturities.
NOTE 3. Common Stock and Related Matters
The company has a shareholder rights plan under which one preferred stock
purchase right is presently attached to and trades with each outstanding share
of the company's common stock.
The rights become exercisable and transferable apart from the common stock
ten days after a person or group, without the company's consent, acquires
beneficial ownership of, or the right to obtain beneficial ownership of, 20
percent or more of the company's common stock or announces or commences a tender
offer or exchange offer that could result in 20 percent ownership (unless such
date is extended by the Board of Directors). Once exercisable, each right
entitles the holder to purchase one one-hundredth share of Series A
Participating Preferred Stock at an exercise price of $80, subject to adjustment
to prevent dilution. The rights have no voting power and, until exercised, no
dilutive effect on net income per common share. The rights expire on May 19,
1998, and are redeemable under certain circumstances.
If a person acquires 20 percent ownership, except in an offer approved by
the company under the plan, each right not owned by the acquirer or related
parties will entitle its holder to purchase, at the right's exercise price,
common stock or common stock equivalents having a market value immediately prior
to the triggering of the right of twice that exercise price. In addition, after
an acquirer obtains 20 percent ownership, if the company is involved in certain
mergers, business combinations, or asset sales, each right not owned by the
acquirer or related persons will entitle its holder to purchase, at the right's
exercise price, shares of common stock of the other party to the transaction
having a market value immediately prior to the triggering of the right of twice
that exercise price.
The company has 1,000,000 shares of preferred stock authorized, 500,000 of
which have been reserved for issuance under the shareholder rights plan. No
shares of preferred stock had been issued at August 31, 1996.
In 1990, the stockholders approved the National Service Industries, Inc.
Long-Term Incentive Program for the benefit of officers and other key employees.
There were 1,750,000 treasury shares reserved for issuance under the program.
The employee stock options granted under the program become exercisable in four
equal annual installments beginning one year from the date of the grant.
In 1993, the stockholders approved the National Service Industries, Inc.
1992 Nonemployee Directors' Stock Option Plan under which a maximum of 100,000
shares were reserved for issuance. The shares become exercisable one year from
the date of the grant.
Under both plans, the options expire ten years from the date of the grant
and have an exercise price equal to the fair market value on the date of the
grant.
Stock option transactions for the stock option plans and stock option
agreements during the years ended August 31, 1996, 1995, and 1994 were as
follows:
1996 1995 1994
Options outstanding at September 1 1,088,773 820,752 680,139
Granted 513,200 325,400 214,700
Exercised 185,044 23,598 21,705
Canceled 150,886 33,781 52,382
Options outstanding at August 31 1,266,043 1,088,773 820,752
Option price range at August 31 $19.75-$39.75 $19.75-$29.00 $19.75-$29.00
Options exercisable at August 31 466,377 513,665 316,024
Options available for grant at
August 31 300,408 657,565 949,184
Potential dilution of earnings per share applicable to these stock options
is not significant.
In 1996, the Board of Directors adopted the National Service Industries,
Inc. Nonemployee Director Deferred Stock Unit Plan under which eligible
directors are required to defer into the plan a portion of their annual
directors fees and may defer an additional optional amount. At quarterly
intervals, participants are granted stock units equal to one-fourth of the
annual deferred amount divided by the fair market value at the date of the
grant. At each dividend payment date, the deferred stock units are further
increased based on the dividend rate and the fair market value of the company's
common stock at the dividend payment date. The deferred stock units have no
voting rights and vest one year from the date of grant. Upon termination,
participants receive a cash payment for vested deferred stock units at the fair
market value at that date. At August 31, 1996, participants had been credited
with 708 deferred stock units. During fiscal 1996, there was no related
compensation expense.
27
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Exhibit 13
Notes to Consolidated Financial Statements (continued)
National Service Industries, Inc.
NOTE 4. Commitments and Contingencies
Self Insurance
It is the policy of the company to self insure for certain insurable risks
consisting primarily of physical loss to property; business interruptions
resulting from such loss; and workers' compensation, comprehensive general, and
auto liability. Insurance coverage is obtained for catastrophic property and
casualty exposures as well as those risks required to be insured by law or
contract. Based on an independent actuary's estimate of the aggregate liability
for claims incurred, a provision for claims under the self-insured program is
recorded and revised annually. Based on the 1996 actuarial review, reserves
relating to prior years were reduced by $14,100,000 as a result of improved
claims experience. Expense associated with the program was $13,677,000 in 1996,
$22,800,000 in 1995, and $25,588,000 in 1994.
Leases
The company leases certain of its buildings and equipment under noncancelable
lease agreements. Minimum lease payments under noncancelable leases for years
subsequent to August 31, 1996, are as follows:
(In thousands) Amount
Year Ending August 31
1997 $ 9,524
1998 7,389
1999 5,769
2000 4,246
2001 3,462
Later years 9,015
Total minimum lease payments $39,405
Total rent expense was $10,907,000 in 1996, $11,607,000 in 1995, and
$10,585,000 in 1994.
Litigation
The company is involved in various legal matters primarily arising in the
normal course of business. In the opinion of management, the company's liability
in any of these matters will not have a material adverse effect on its financial
condition or results of operations.
NOTE 5. Divestitures and Acquisitions
In September 1996, the company announced its intention to divest the North Bros.
insulation business. The company does not expect the sale to have a material
impact on earnings.
Acquisitions during 1996 related to the Textile Rental segment and were not
material. During 1996 and 1995, the company divested several non-strategic or
unprofitable businesses, primarily in the Textile Rental segment, generating
cash of $15,250,000 and $14,044,000, respectively.
In May 1995, the company acquired the assets of Infranor Canada Inc., a
Canadian lighting products manufacturer based in Saint Hyacinthe, Quebec. The
operating results of Infranor were included in the Lighting Equipment segment
for the fourth quarter of fiscal 1995. Full-year acquisition spending of $2.7
million also included several small purchases for the Textile Rental segment.
Effective August 31, 1994, the company sold its Marketing Services
division. A small gain resulted from the transaction as the company received
approximately 342,000 of its common shares in return for those assets
transferred to the purchasers. The division had sales of approximately
$32,000,000 in 1994 and an immaterial operating loss.
NOTE 6. Income Taxes
Income taxes are reconciled with the Federal statutory rate as follows:
(In thousands) 1996 1995 1994
Federal income tax computed at statutory rate $56,647 $52,674 $46,269
Increase (decrease) in taxes:
State income tax, net of Federal income
tax benefit 5,368 4,308 4,693
Other, net (1,315) (582) (1,462)
$60,700 $56,400 $49,500
The following summarizes the components of income tax expense:
(In thousands) 1996 1995 1994
Provision for current Federal taxes $50,899 $55,921 $40,253
Provision for current state taxes 8,258 6,628 7,220
Provision (credit) for deferred taxes 1,543 (6,149) 2,027
$60,700 $56,400 $49,500
28
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Exhibit 13
Notes to Consolidated Financial Statements (continued)
National Service Industries, Inc.
Components of the net deferred income tax liability at August 31, 1996 and
1995 include:
(In thousands) 1996 1995
Deferred tax liabilities:
Depreciation $ 43,790 $ 45,125
Safe harbor lease 39,030 43,303
Amortization of linens 19,116 11,933
Pension 10,906 7,522
Total deferred tax liabilities 112,842 107,883
Deferred tax assets:
Self insurance (30,249) (34,551)
Deferred compensation (7,966) (3,706)
Bonuses (2,816) (5,145)
Foreign tax losses (2,483) (4,414)
Other assets (8,133) (4,532)
Total deferred tax assets (51,647) (52,348)
Net deferred tax liability $ 61,195 $ 55,535
At August 31, 1996, the company had foreign net operating loss
carryforwards of $12,974,000 expiring in fiscal years 1997 through 2004.
Current income taxes payable were $5,374,000 and $11,257,000 at August 31,
1996 and 1995, respectively.
NOTE 7. Quarterly Financial Data (Unaudited)
Sales and Income
(In thousands, except Service Gross before Net Earnings
earnings per share) Revenues Profit Taxes Income per Share
1996
1st Quarter $492,550 $190,747 $37,095 $23,269 $ .48
2nd Quarter 482,206 180,258 30,720 19,250 .40
3rd Quarter(1) 516,870 202,378 44,336 27,677 .58
4th Quarter(1) 521,936 202,393 49,697 30,952 .66
1995
1st Quarter $480,984 $185,951 $33,735 $21,114 $ .43
2nd Quarter 465,810 174,793 28,031 17,578 .36
3rd Quarter 505,798 196,903 41,064 25,627 .53
4th Quarter(2) 518,035 204,424 47,667 29,778 .62
(1) Results for the third and fourth quarters include favorable self-insurance
reserve adjustments of $6,302,000 and $7,644,000, respectively.
(2) Results include favorable self-insurance reserve adjustment of $4,592,000.
NOTE 8. Business Segment Information
Depreciation Capital
Sales and and Expenditures
Service Operating Identifiable Amortization Including
(In thousands) Revenues Profit(Loss) Assets Expense Acquisitions
1996
Lighting Equipment $ 867,771 $ 76,085 $ 332,006 $15,224 $20,800
Textile Rental(1) 530,625 42,198 420,169 29,753 28,418
Chemical 367,682 38,611 170,327 8,127 5,744
Other 247,484 15,283 80,694 4,151 6,980
2,013,562 172,177 1,003,196 57,255 61,942
Corporate (8,764) 91,450 1,173 3,624
Interest Expense, net (1,565)
$ 2,013,562 $ 161,848 $1,094,646 $58,428 $65,566
1995
Lighting Equipment $ 851,363 $ 61,313 $ 340,187 $14,205 $23,098
Textile Rental(1) 546,447 51,016 422,108 30,787 28,144
Chemical 352,670 35,227 169,376 6,711 4,527
Other 220,147 14,351 83,400 3,827 4,120
1,970,627 161,907 1,015,071 55,530 59,889
Corporate (9,762) 116,275 1,600 21
Interest Expense, net (1,648)
$ 1,970,627 $ 150,497 $1,131,346 $57,130 $59,910
1994
Lighting Equipment $ 763,592 $ 50,092 $ 323,335 $15,460 $13,183
Textile Rental(1) 544,454 48,840 432,994 31,656 20,986
Chemical 332,298 35,368 168,956 6,392 5,315
Other 241,520 8,822 75,580 5,792 2,695
1,881,864 143,122 1,000,865 59,300 42,179
Corporate (8,964) 100,396 1,248 339
Interest Expense, net (1,960)
$ 1,881,864 $ 132,198 $1,101,261 $60,548 $42,518
(1) Textile Rental segment operating profit includes one-time gains, primarily
resulting from the sale of fixed assets and businesses, of $7,800,000 in 1996,
$6,300,000 in 1995, and $1,250,000 in 1994.
29
Page 70
Exhibit 13
Report of Management
National Service Industries, Inc.
The management of National Service Industries, Inc. is responsible for the
integrity and objectivity of the financial information in this annual report.
These financial statements are prepared in conformity with generally accepted
accounting principles, using informed judgements and estimates where
appropriate. The information in other sections of this report is consistent with
the financial statements. The company maintains a system of internal controls
and accounting policies and procedures designed to provide reasonable assurance
that assets are safeguarded and transactions are executed and recorded in
accordance with management's authorization. The audit committee of the Board of
Directors, composed entirely of outside directors, is responsible for monitoring
the company's accounting and reporting practices. The audit committee meets
regularly with management, the internal auditors, and the independent public
accountants to review the work of each and to assure that each performs its
responsibilities. Both the internal auditors and Arthur Andersen LLP have
unrestricted access to the audit committee allowing open discussion, without
management's presence, on the quality of financial reporting and the adequacy of
internal accounting controls.
/s/ James S. Balloun
James S. Balloun
Chairman, President, and Chief Executive Officer
/s/ Brock Hattox
Brock Hattox
Executive Vice President and Chief Financial Officer
/s/ Mark R. Bachmann
Mark R. Bachmann
Vice President and Controller
Report of Independent Public Accountants
To the Stockholders of National Service Industries, Inc.:
We have audited the accompanying consolidated balance sheets of National Service
Industries, Inc. (a Delaware corporation) and subsidiaries as of August 31, 1996
and 1995 and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended August 31, 1996.
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 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 financial position of National Service Industries,
Inc. and subsidiaries as of August 31, 1996 and 1995 and the results of their
operations and their cash flows for each of the three years in the period ended
August 31, 1996 in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Atlanta, Georgia
October 21, 1996
30
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Exhibit 13
Management's Discussion and Analysis of
Financial Condition and Results of Operations
National Service Industries, Inc.
Financial Condition
National Service Industries' financial condition remained sound at August 31,
1996. Net working capital was $409.0 million, down from $437.8 million at August
31, 1995, and the current ratio was 3.1, compared with 3.2 at last year end.
Cash and short-term investments were reduced to $59.2 million, from $83.0
million at the prior year end, as the company accelerated its share repurchases.
During 1996, the company invested $66.1 million in capital expenditures and
acquisitions. The percent of short-term and long-term debt to total
capitalization was 4.2 percent at August 31, 1996 and 4.3 percent at the prior
year end. Cash provided by operating activities rose to $153.0 million from
$145.9 million in 1995 and $133.5 million in 1994. The 1996 improvement was due
in large part to better management of inventories and higher net income. The
improvement in 1995 resulted primarily from a lower rate of investment in
inventories and linens in service and a decrease in prepayments.
Capital expenditures, exclusive of acquisition spending, were $65.5 million
in 1996, $58.8 million in 1995, and $42.5 million in 1994. During 1996, Lighting
Equipment segment spending included expansion of its production facility in
Monterrey, Mexico, as well as continued investment in equipment replacements,
process improvements, and tooling for new products. The Textile Rental segment
invested substantially in facility improvements and replacement of equipment and
vehicles. In the prior year, the Lighting Equipment segment invested in
manufacturing equipment replacements and improvements and the construction of
its Mexican production facility, which began production in the fourth quarter of
1995. Textile Rental segment expenditures for 1995 included fleet upgrades,
facility improvements, and information system enhancements.
Cash payments in connection with acquisitions totaled $.6 million in 1996,
$2.7 million in 1995, and $.6 million in 1994. All three years included spending
for small acquisitions in the Textile Rental segment. In 1995, the company
acquired the assets of Infranor Canada Inc., a Canadian lighting products
manufacturer based in Saint Hyacinthe, Quebec. The operating results of this
acquisition were included in the Lighting Equipment segment beginning with the
fourth quarter of fiscal 1995.
During 1996 and 1995, the company divested several non-strategic
businesses, primarily in the Textile Rental segment, generating cash of $15.3
million and $14.0 million, respectively.
During 1996, the company distributed 129 percent of net income to
shareholders through dividends and share repurchases. The company accelerated
its share repurchase program, spending $75.2 million for the full 2,000,000
shares authorized annually. Last year, the company spent $24.1 million on the
repurchase of approximately 949,000 shares of its common stock. Dividend
payments totaled $55.3 million, or $1.15 per share, in 1996, $54.2 million, or
$1.11 per share, in 1995, and $53.0 million, or $1.07 per share, in 1994. The
fiscal 1996 dividend of $1.15 per share was a 3.6 percent increase. For the
periods presented, capital expenditures, working capital needs, dividends,
acquisitions, and share repurchases were financed primarily with internally
generated funds. European operations were supplemented by short-term borrowings
in the European market. The Infranor acquisition was a cash transaction.
Contractual commitments for capital and acquisition spending for fiscal 1997
total $17.3 million. The company expects actual capital expenditures in 1997 to
be somewhat higher than the 1996 level. Late in fiscal 1996, the company
negotiated a $250 million multi-currency committed credit facility, of which
31
Page 72
Exhibit 13
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
National Service Industries, Inc.
$187.5 million has been provided through domestic banks and $62.5 million
through foreign banks. The company has complimentary lines of credit totaling
$132 million, of which $110 million has been provided domestically and $22
million is available on a multi-currency basis primarily from a European bank.
Current liquid assets, internally generated funds, and the available credit are
expected to meet most of the anticipated general operating cash requirements for
the next twelve months.
Results of Operations
National Service Industries posted a record $2.01 billion in revenues for the
fiscal year ended August 31, 1996. Total year revenues increased $42.9 million,
or 2.2 percent, from $1.97 billion in 1995, primarily as a result of higher
pricing in the Lighting Equipment segment and volume gains across the Chemical
and Envelope segments. Fiscal 1995 revenues rose 4.7 percent from 1994's $1.88
billion, as a result of volume gains in the Lighting Equipment and Chemical
segments and pricing improvements in the Envelope segment. Adjusted for the
divestiture of the Marketing Services division, which contributed $32 million to
1994 sales, the 1995 sales gain was 6.5 percent.
Net income for fiscal 1996 increased $7.1 million, or 7.5 percent, to a
record $101.1 million, or $2.11 per share. Earnings per share grew at the
greater rate of 9.2 percent, benefiting from an average of 755,000 fewer shares
outstanding for the year. The performance of all segments was enhanced by
improved workers' compensation claims experience, which resulted in a $14.1
million reduction in expense. For fiscal 1995, net income grew 13.8 percent to
$94.1 million, or $1.93 per share.
Lighting Equipment segment sales grew 1.9 percent to a record $868 million
from $851 million in 1995. Pricing gains were offset somewhat by lower unit
volumes. Sales for 1995 increased 11.5 percent from 1994 on the strength of
volume gains. For 1996, operating profit advanced 24.1 percent to 8.8 percent of
revenues, compared with 7.2 percent of revenues in 1995 and 6.6 percent in 1994.
Current-year margin improvements resulted from a more favorable product mix and
lower manufacturing costs. In 1995, higher unit volumes more than compensated
for higher product and selling costs.
Textile Rental segment revenues declined 2.9 percent to $531 million
largely due to lost sales from previously divested branches and continued price
pressure. Revenues for 1995 were $546 million, compared with $544 million in
1994, and reflected pricing gains offset by declining volumes, particularly in
the hospital market. For 1996, operating income decreased 17.3 percent to 8.0
percent of revenues, compared with 9.3 percent of revenues in 1995 and 9.0
percent in 1994. The decline resulted from lower selling prices and cost
increases for labor and merchandise, which were partially offset by lower
workers' compensation costs and one-time gains on asset sales. The improvement
in 1995 was due to reduced labor and workers' compensation costs and gains
related to plant divestitures.
Chemical segment
revenues advanced 4.3 percent to $368 million, from $353 million in 1995, which
was a 6.1 percent increase from 1994's $332 million. The gains in both periods
resulted from higher unit volumes, predominantly in domestic operations.
Operating income grew 9.6 percent to 10.5 percent of revenues, from 10.0 percent
of revenues in 1995 and 10.6 percent in 1994. Margins benefited from the volume
32
Page 73
Exhibit 13
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
National Service Industries, Inc.
increases and lower material and operating costs. The margin decline in 1995
resulted from the segment's increased investment in recruiting and training
sales representatives and because of increases in certain raw material costs.
The Envelope and Insulation Service businesses combined for a 12.4 percent
sales increase. Revenues were $247 million in 1996, $220 million in 1995, and
$242 million in 1994. The decline in 1995 resulted from the divestiture of
Marketing Services. Operating profit increased to $15.3 million in 1996, largely
as a result of volume increases in the Envelope business. Operating profit was
$14.4 million in 1995 and $8.8 million in 1994. The 1995 profit gain was due
primarily to margin improvements on pricing gains.
The company recently announced that it is in the process of selling the
North Bros. insulation service business. The company does not expect the sale to
have a material impact on earnings.
Effective August 31, 1994, the company sold its Marketing Services
division. A small gain resulted from the transaction as the company received
approximately 342,000 of its common shares in return for those assets
transferred to the purchasers. The division had sales of $32 million in 1994 and
an immaterial operating loss.
Corporate income increased in 1996 and declined in 1995 mainly because of
1995 accruals for higher business taxes. During both 1996 and 1995, the company
benefited from higher average levels of short-term investments although interest
rates declined somewhat in 1996. Interest expense increased only slightly in
1996 and 1995 compared with 1994.
Consolidated income before taxes and net income grew 7.5 percent in 1996
compared with 13.8 percent for both measures in 1995. The year-to-year decline
was due primarily to a lower rate of growth in segment operating profits. The
provision for income taxes was 37.5 percent of pretax income in 1996 and 1995,
compared with 37.4 percent in 1994.
During fiscal 1997, the company is required to adopt Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed of." SFAS No. 121
requires that long-lived assets and certain intangibles be reviewed whenever
events or changes in circumstances indicate that the carrying value of an asset
may not be recoverable. In the opinion of management, the adoption of SFAS No.
121 is not expected to have a material impact on the company's financial
position or results of operations.
Outlook
With a new management team, NSI has implemented an economic profit-based
compensation program, a financial strategy geared toward leverage, and in-depth
strategic reviews to establish an environment that fosters profitable growth.
The company has begun to measure and reward its operating units on economic
profit to better align their actions with the interests of shareholders. With
1997 operating plan reviews completed, continued growth is anticipated in the
Lighting Equipment, Chemical, and Envelope segments, while the Textile Rental
segment's profit forecast is flat as the improving operating rate of the segment
is not expected to offset 1996's favorable one-time events. These factors are
expected to result in modest 1997 earnings per share growth and continued growth
in economic profit.
33
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Exhibit 13
Ten-Year Financial Summary
National Service Industries, Inc.
(Dollar amounts in thousands, except per-share data)
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
Operating Results
Net sales of products $1,482,937 $1,424,180 $1,337,410 $1,257,906 $1,189,684 $1,164,181 $1,250,833 $1,183,666 $1,093,163 $1,032,145
Service revenues ..... 530,625 546,447 544,454 546,916 444,127 437,534 396,981 355,845 321,025 294,713
Total revenues 2,013,562 1,970,627 1,881,864 1,804,822 1,633,811 1,601,715 1,647,814 1,539,511 1,414,188 1,326,858
Cost of products sold 933,405 908,869 875,055 832,264 810,552 791,355 832,867 800,385 741,383 690,689
Cost of services ..... 304,381 299,687 286,519 281,551 236,474 240,376 219,673 198,262 179,793 159,019
Selling and administrative
expenses(2) ......... 616,513 601,143 576,463 556,162 462,240 456,622 438,949 397,160 361,845 350,466
Interest expense
(income),net (2)..... 1,565 1,648 2,788 3,645 (837) (4,332) (3,712) (3,805) (2,429) (1,315)
Restructuring expense -- -- -- -- -- 63,467 -- -- -- --
Other (income)
expense,net(2)....... (4,150) 8,783 8,841 11,684 8,474 5,591 4,322 (509) 374 (4,391)
Income before taxes .. 161,848 150,497 132,198 119,516 116,908 48,636 155,715 148,018 133,222 132,390
Income taxes ......... 60,700 56,400 49,500 44,400 42,800 16,400 56,000 53,300 47,100 56,700
Net income ...........$ 101,148 $ 94,097 $ 82,698 $ 75,116 $ 74,108 $ 32,236 $ 99,715 $ 94,718 $ 86,122 $ 75,690
Per-Share Data(1)
Net income ...........$ 2.11 $ 1.93 $ 1.67 $ 1.52 $ 1.50 $ .65 $ 2.02 $ 1.92 $ 1.75 $ 1.54
Cash dividends ....... 1.15 1.11 1.07 1.03 .99 .95 .90 .82 .73 .62
Stockholders' equity . 15.45 15.41 14.77 14.21 13.79 13.33 13.68 12.44 11.33 10.31
Financial Ratios
Current ratio ........ 3.1 3.2 3.2 2.9 3.5 3.4 4.5 4.8 5.0 5.1
Net income as a
percent of sales ..... 5.0% 4.8% 4.4% 4.2% 4.5% 2.0% 6.1% 6.2% 6.1% 5.7%
Return on average
stockholders' equity .. 13.6% 13.0% 11.6% 10.9% 11.1% 4.8% 15.6% 16.3% 16.3% 15.7%
Dividends as a percent of
current-year earnings 54.6% 57.6% 64.1% 67.9% 66.3% 146.2% 44.6% 42.6% 41.8% 40.2%
Percent of debt to
total capitalization . 4.2% 4.3% 4.3% 4.7% 4.2% 5.0% 4.2% 3.5% 3.9% 4.3%
34
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Exhibit 13
Ten-Year Financial Summary (continued)
National Service Industries, Inc.
(Dollar amounts in thousands, except per-share data)
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
Financial Position
Increase (decrease) in:
Cash and
cash equivalents ....$ (20,740)$ 20,783 $ 42,766 $ (85,284)$ 27,617 $ (50,437)$ 23,433 $ 14,612 $ (24,786)$ 16,318
Short-term investments (3,047) 1,019 (2,197) (3,736) (5,551) 12,813 (27,247) (19,633) 35,971 5,160
Net working capital ... 408,955 437,840 413,114 363,575 399,893 386,306 447,800 450,185 439,990 416,801
Short-term debt ......$ 6,742 $ 6,486 $ 5,765 $ 6,196 $ 1,434 $ 3,254 $ 2,253 $ 1,372 $ 1,237 $ 1,443
Long-term debt ....... 24,920 26,776 26,863 28,418 28,359 31,373 27,465 20,765 21,391 21,466
Total debt ........... 31,662 33,262 32,628 34,614 29,793 34,627 29,718 22,137 22,628 22,909
Stockholders' equity . 718,008 744,404 727,385 704,023 682,954 660,567 675,444 612,668 558,160 508,219
Capitalization .......$ 749,670 $ 777,666 $ 760,013 $ 738,637 $ 712,747 $ 695,194 $ 705,162 $ 634,805 $ 580,788 $ 531,128
Other Data
Capital expenditures (including
acquisitions)........$ 65,566 $ 59,910 $ 42,508 $ 82,171 $ 49,789 $ 90,229 $ 82,932 $ 66,491 $ 55,394 $ 45,258
Depreciation and
amortization.......... 58,428 57,130 60,548 62,097 53,816 50,249 42,821 36,260 31,037 27,333
Total assets ..........1,094,646 1,131,346 1,101,261 1,081,510 1,036,908 1,008,319 960,622 886,358 823,906 758,659
Deferred income taxes . 63,347 65,756 73,319 78,286 87,150 96,627 99,277 101,320 103,021 102,374
Self-insurance reserves 63,369 67,830 61,081 56,335 47,638 38,428 15,222 15,213 15,016 13,574
Other long-term
liabilities .......... 27,576 24,010 22,940 27,110 28,677 22,015 16,067 17,964 15,330 12,042
Weighted average number of
shares outstanding
(in thousands)(1)..... 47,941 48,696 49,547 49,556 49,539 49,540 49,389 49,255 49,258 49,278
Shareholders .......... 6,281 6,655 7,034 7,262 7,554 7,996 8,248 8,459 8,851 9,164
Employees ............. 20,600 21,100 22,000 22,200 20,100 20,900 21,800 20,800 20,400 19,400
Use of Total Revenues
Salaries and wages ...$ 580,571 $ 568,616 $ 565,859 $ 572,163 $ 502,709 $ 501,502 $ 491,334 $ 465,522 $ 428,325 $ 399,968
Materials and supplies 875,658 832,668 783,610 760,551 700,338 683,871 713,310 668,655 616,223 574,179
Other operating expenses 340,563 364,849 347,600 299,977 273,330 258,919 246,288 219,270 201,478 188,414
Restructuring expense . -- -- -- -- -- 63,467 -- -- -- --
Taxes and licenses .... 115,621 110,397 102,097 97,015 83,326 59,889 97,167 91,346 82,040 88,607
Dividends paid ........ 55,272 54,156 53,042 51,041 49,105 47,124 44,506 40,389 35,960 30,428
Retained earnings ..... 45,877 39,941 29,656 24,075 25,003 (13,057) 55,209 54,329 50,162 45,262
$2,013,562 $1,970,627 $1,881,864 $1,804,822 $1,633,811 $1,601,715 $1,647,814 $1,539,511 $1,414,188 $1,326,858
(1)Restated to reflect stock splits of 3 for 2 effective January 13, 1987
(2)Prior-year amounts have been restated to conform to current-year presentation.
35
Page 76
Exhibit 13
Shareholder Information
Executive Offices
NSI Center
1420 Peachtree Street, N.E.
Atlanta, Georgia 30309
(404) 853-1000
Transfer Agent and Registrar
Wachovia Bank of North Carolina, N.A.
P.O. Box 8217
Boston, Massachusetts 02266-8217
(800) 633-4236
Independent Public Accountants
Arthur Andersen LLP
133 Peachtree Street, N.E.
Atlanta, Georgia 30303
(404) 658-1776
Annual Meeting
10:00 a.m., Wednesday, January 8, 1997
High Museum of Art
1280 Peachtree Street, N.E.
Atlanta, Georgia 30309
Listing
New York Stock Exchange. Ticker Symbol: NSI.
Shareholders of Record
The number of shareholders of record holding NSI common stock was 6,281 as of
September 27, 1996.
Reports Available to Stockholders
Copies of the following company reports may be obtained, without charge: 1996
Annual Report to the Securities and Exchange Commission, filed on Form 10-K;
andQuarterly Reports to the Securities and Exchange Commission, filed on Form
10-Q.
Requests should be directed to:
National Service Industries, Inc.
Attention: Investor Relations
1420 Peachtree Street, N.E.
Atlanta, Georgia 30309
(404) 853-1216
Dividend Reinvestment Plan
An automatic dividend reinvestment plan is available to all stockholders of
record. Dividends can be automatically reinvested in NSI common stock.
Participants also may add cash for the purchase of additional shares. For more
information, contact the Transfer Agent at (800) 633-4236.
Cash Dividends
NSI now offers direct deposit of dividends to your bank, savings, or money
market account. For more information, contact the Transfer Agent at (800)
633-4236.
Common Share Prices and Dividends per Share
Dividends
Price per Share Paid per
High Low Share
1996
First Quarter .................... $32 3/4 $28 5/8 $ .28
Second Quarter ................... 35 1/4 30 3/4 .29
Third Quarter .................... 39 7/8 32 1/2 .29
Fourth Quarter ................... 40 1/4 37 1/2 .29
1995
First Quarter .................... $27 3/8 $25 3/8 $ .27
Second Quarter ................... 27 1/2 24 7/8 .28
Third Quarter .................... 29 1/8 26 1/2 .28
Fourth Quarter ................... 30 5/8 28 1/8 .28
The above common share prices are as quoted on the New York Stock Exchange.