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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, 1996
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
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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 as of December 31, 1996 and
1995
Statement of Changes in Net Assets Available for Benefits, with Fund
Information, for the Year Ended December 31, 1996
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 18, 1997 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
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, 1996 and 1995 and the related statement of changes in net assets
available for benefits, with fund information, for the year ended December 31,
1996. 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, 1996 and 1995 and the changes in net assets available for benefits
for the year ended December 31, 1996 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
June 12, 1997
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ZEP MANUFACTURING COMPANY
PROFIT SHARING/401(k) RETIREMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1996 AND 1995
1996 1995
INVESTMENT IN NSI DC TRUST, at fair value (Note 2):
Balanced Fund ................................. $ 31,021,864 $26,008,943
Diversified Equity Fund ....................... 34,447,797 25,767,562
Stable Value Fund ............................. 30,420,099 30,426,021
NSI Stock Fund ................................ 8,034,434 5,948,705
Loan Fund ..................................... 3,884,463 3,487,013
International Fund ............................ 1,604,209 609,181
Total investment .................... 109,412,866 92,247,425
CONTRIBUTIONS RECEIVABLE:
Employer ...................................... 0 2,006,967
Participant ................................... 0 288,794
Total contributions receivable ...... 0 2,295,761
NET ASSETS AVAILABLE FOR BENEFITS ................. $109,412,866 $94,543,186
The accompanying notes are an integral part of these statements.
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ZEP MANUFACTURING COMPANY
PROFIT SHARING/401(k) RETIREMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS,
WITH FUND INFORMATION,
FOR THE YEAR ENDED DECEMBER 31, 1996
Diversified Stable NSI
Balanced Equity Value Stock Loan International
Fund Fund Fund Fund Fund Fund Total
CONTRIBUTIONS:
Employer ..................... $ 543,265 $ 690,569 $ 705,086 $ 209,745 $ 0 $ 52,502 $ 2,201,167
Participant .................. 1,228,272 1,577,428 860,454 410,204 0 106,051 4,182,409
Total contributions ....... 1,771,537 2,267,997 1,565,540 619,949 0 158,553 6,383,576
NET GAIN FROM INVESTMENT
IN NSI DC TRUST .................. 3,906,311 5,604,593 2,093,830 1,038,229 0 110,959 12,753,922
BENEFITS PAID TO PARTICIPANTS .... (1,204,671) (936,648) (1,601,641) (245,166) (223,662) (56,030) (4,267,818)
INTRAPLAN TRANSFERS .............. (41,113) 1,020,714 (2,847,163) 493,643 621,112 752,807 0
NET INCREASE (DECREASE) .......... 4,432,064 7,956,656 (789,434) 1,906,655 397,450 966,289 14,869,680
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
NET ASSETS AVAILABLE FOR BENEFITS,
December 31, 1996 ............... $ 31,021,864 $ 34,447,797 $ 30,420,099 $ 8,034,434 $ 3,884,463 $ 1,604,209 $ 109,412,866
The accompanying notes are an integral part of this statement.
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ZEP MANUFACTURING COMPANY
PROFIT SHARING/401(k) RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
1. PLAN DESCRIPTION
The following is a brief description of the Zep Manufacturing Company
Profit Sharing/401(k) Retirement Plan (the "Plan") of Zep Division of
National Service Industries, Inc. of Georgia and Zep Division of Zep
Manufacturing Company (together, the "Employer"). Both National Service
Industries, Inc. of Georgia and Zep Manufacturing Company are wholly owned
subsidiaries of National Service Industries, Inc. ("NSI"). This description
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"). The Plan covers all
salaried, commissioned, and union and nonunion hourly employees of the
Employer with at least six months of service and who have attained the age
of 21. The Plan is subject to the provisions of the Employee Retirement
Income Security Act of 1974, as amended.
Contributions
Participants may elect to contribute between 1% and 15% of before-tax
compensation, as defined in the Plan, subject to certain limitations under
the IRC.
The Employer 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 and (b) multiplied by a fraction which represents the relationship
between the annual compensation of all salaried, commissioned, and 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.
The Employer also makes a profit-sharing contribution to the Plan for the
union employees, which is calculated in a similar manner as that described
above.
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Employer contributions are allocated to all participants who are actively
employed on November 30 of the plan year and who have a year of service,
as defined, during the plan year which contains such November 30.
Allocations are made based on each qualifying participant's compensation
relative to the compensation of 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 a participant's withdrawal from the Plan and are allocated
to remaining participants in the same manner as contributions.
Administration
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 Employer
during the year ended December 31, 1996.
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.
The Plan assigns units to its participants. At December 31, 1996 and 1995,
11,359,095 and 10,421,383 units, respectively, were assigned to plan
participants. Unit values for each investment fund were as follows at
December 31, 1996 and 1995:
1996 1995
Balanced Fund .................. $ 26.40 $ 22.95
Diversified Equity Fund ........ 12.05 10.57
Stable Value Fund .............. 11.31 10.59
NSI Stock Fund ................. 14.52 12.39
International Fund ............. 5.01 4.59
Investment in Master Trust
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 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.
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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 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:
o Diversified Equity Fund. This fund is a diversified stock fund
designed to invest in a broad range of common stocks providing capital
growth.
o Stable Value Fund. This is a fixed income fund designed to provide a
steady level of current income while focusing on preservation of
principal.
o 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.
o 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.
o 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 lesser of 50% of the
participant's vested account balance or $50,000. A participant has up to
five years to repay the principal and interest. Loan processing fees are
charged directly to the participant's account. Interest rates on loans to
participants are 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 can be paid in installments at the election of the
participant. 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 $5,000, then the participant
may elect to have his/her interest distributed immediately in a lump sum.
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.
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Hardship withdrawals may be made upon proven financial hardship of a
participant, as defined in the plan agreement and as approved by the Plan's
retirement committee.
Plan Termination
Although the Employer intends for the Plan to be permanent, the Plan
provides that the Employer 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 or forfeitures.
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 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.
GICs included in the NSI DC 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, 1996 and 1995, contract value approximates fair
value. At December 31, 1996, the weighted average crediting interest rate
was 6.74%. For the year ended December 31, 1996, the annual yield on the
GICs held by the NSI DC Trust was 6.9%. For certain of the GICs held by the
NSI DC Trust, crediting interest rates may be changed if certain events
occur, 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.
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3. NSI DC TRUST
Investment Income
Investment income of the NSI DC Trust for the year ended December 31, 1996
is summarized as follows:
Dividends on common stock .................... $ 360,166
Interest income .............................. 4,320,463
Net appreciation in fair value of common stock 1,031,354
Net income from mutual fund .................. 10,129,284
Net income from common/collective trust ...... 7,315,993
Net income from pooled separate account ...... 160,826
Total investment income ........ $23,318,086
The investment income of the NSI DC Trust for the year ended December 31,
1996 is allocated among participating plans as follows:
Zep Manufacturing Company Profit
Sharing/401(k) Retirement Plan ........... $12,753,922
All other NSI plans ...................... 10,564,164
Total ....................... $23,318,086
Net Assets
The net assets of the NSI DC Trust are as follows at December 31, 1996 and
1995:
1996 1995
Mutual fund ...................... $ 63,411,122 $ 47,636,487
Common/collective trust .......... 57,558,795 48,146,903
Guaranteed investment contracts .. 55,187,898 55,129,605
Loans receivable from participants 6,828,607 6,104,302
NSI common stock ................. 11,279,289 7,637,554
Money market fund ................ 3,704,985 1,377,443
Pooled separate account .......... 2,723,094 871,467
200,693,790 166,903,761
Cash ............................ 13,342 127,031
200,707,132 167,030,792
Accrued investment income ....... 100,534 76,779
Adjustments for pending trades ... (223,542) (211,964)
Other ............................ (54,239) 49,961
Net assets ....................... $ 200,529,885 $ 166,945,568
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The allocation of the net assets of the NSI DC Trust to participating plans
is based on participant units and is as follows as of December 31, 1996 and
1995:
1996 1995
Amount Percent Amount Percent
Zep Manufacturing Company Profit
Sharing/401(k) Retirement Plan $109,412,866 54.6% $ 92,247,425 55.3%
All other plans .................. 91,117,019 45.4 74,698,143 44.7
Total ............... $200,529,885 100.0% $166,945,568 100.0%
Investment in NSI Common Stock
As of December 31, 1996 and 1995, approximately 5.6% and 4.6%,
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 May 21, 1996 stating that the Plan was designed 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
that the related trust was tax-exempt as of December 31, 1996 and 1995.