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Exhibit Index on Page 2
FORM 11-K
UNITED STATES
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.
For the fiscal year ended: December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
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:
North Bros., Inc. 401(k) Retirement Plan For
Field Employees
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, 1997 and 1996
Statement of Changes in Net Assets Available for Benefits, with Fund
Information, for the Year Ended December 31, 1997
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.
North Bros., Inc. 401(k) Retirement Plan
for Field Employees
Date: June 30, 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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North Bros., Inc.
401(k) Retirement Plan for Field Employees
Financial Statements as of December 31, 1997 and 1996
Together With
Auditors' Report
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Plan Administrator of
North Bros., Inc. 401(k) Retirement Plan
for Field Employees:
We have audited the accompanying statements of net assets available for benefits
of NORTH BROS., INC. 401(k) RETIREMENT PLAN FOR FIELD EMPLOYEES as of December
31, 1997 and 1996, and the related statement of changes in net assets available
for benefits, with fund information, for the year ended December 31, 1997. 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, 1997 and 1996, and the changes in net assets available for benefits
for the year ended December 31, 1997, in conformity with generally accepted
accounting principles.
As further discussed in Note 1 to the accompanying financial statements, on
February 21, 1997, the Plan was terminated.
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 15, 1998
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NORTH BROS., INC.
401(k) RETIREMENT PLAN FOR FIELD EMPLOYEES
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1997 AND 1996
1997 1996
INVESTMENT IN NSI DC TRUST, at fair value (Note 2):
Balanced Fund..................................... $ 543 $ 4,278
Diversified Equity Fund........................... 4,791 9,628
Stable Value Fund................................. 2,729 9,642
NSI Stock Fund.................................... 503 4,440
Loan Fund......................................... 0 2,677
International Fund................................ 2,182 4,704
NET ASSETS AVAILABLE FOR BENEFITS..................... $10,748 $35,369
The accompanying notes are an integral part of these statements.
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NORTH BROS., INC.
401(k) RETIREMENT PLAN FOR FIELD EMPLOYEES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS,
WITH FUND INFORMATION,
FOR THE YEAR ENDED DECEMBER 31, 1997
Diversified Stable NSI
Balanced Equity Value Stock Loan International
Fund Fund Fund Fund Fund Fund Total
PARTICIPANT CONTRIBUTIONS .......................... $ 559 $ 1,133 $ 1,343 $ 592 $ 0 $ 438 $ 4,065
NET GAIN (LOSS) FROM INVESTMENT IN NSI DC TRUST .... 1,054 2,837 467 1,270 0 (79) 5,549
BENEFITS PAID TO PARTICIPANTS ...................... (5,348) (8,955) (8,723) (5,852) (2,422) (2,935) (34,235)
INTRAPLAN TRANSFERS ................................ 0 148 0 53 (255) 54 0
NET (DECREASE)...................................... (3,735) (4,837) (6,913) (3,937) (2,677) (2,522) (24,621)
NET ASSETS AVAILABLE FOR BENEFITS, December 31, 1996 4,278 9,628 9,642 4,440 2,677 4,704 35,369
NET ASSETS AVAILABLE FOR BENEFITS, December 31, 1997 $ 543 $ 4,791 $ 2,729 $ 503 $ 0 $ 2,182 $ 10,748
The accompanying notes are an integral part of this statement.
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NORTH BROS., INC.
401(k) RETIREMENT PLAN FOR FIELD EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
1. PLAN DESCRIPTION
The following brief description of the North Bros., Inc. 401(k) Retirement
Plan for Field Employees (the "Plan") is provided for informational
purposes only. Participants should refer to the plan agreement for more
complete information. North Bros., Inc. (the "Company") was a subsidiary of
National Service Industries, Inc. ("NSI").
General
The Plan is a defined contribution plan established effective October 1,
1995 under the provisions of Section 401(a) of the Internal Revenue Code
("IRC"). The Plan covered all nonunion employees of the Company who were
classified as field employees, who had attained the age of 21, and who had
completed 12 months of service, as defined. The Plan is subject to the
provisions of the Employee Retirement Income Security Act of 1974, as
amended.
Plan Termination
The Plan was amended, effective February 21, 1997, to suspend all
contributions to the Plan and to terminate the Plan. All participants
became fully vested. In addition, North Bros., Inc. was sold by NSI to
Performance Contracting Group, Inc., and all employees of the Company
became employees of Performance Contracting Group, Inc. The Plan is in the
process of distributing amounts to participants.
Contributions
Participants could elect to contribute between 1% and 15% of before-tax
compensation, as defined in the Plan, subject to certain limitations under
the IRC. Matching contributions could be made at the Company's discretion,
but none were made in 1997. Additional discretionary profit-sharing
amounts, as determined by the board of directors of NSI, could be
contributed by the Company, but none were made in 1997.
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Vesting
Participants were always fully vested in their individual contributions.
Vesting of employer contributions occurred on an increasing scale, ranging
from 20% vesting after one year of service, as defined, to 100% vesting
after five years of service. Nonvested employer contributions are forfeited
upon a participant's withdrawal from the Plan and are used to reduce future
employer contributions or to offset the operational expenses of the Plan.
Administration
All administrative expenses of the Plan were paid by the Company during the
year ended December 31, 1997.
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 investment management fees and expenses.
The Plan's investment fund balances are expressed in units. At December 31,
1997 and 1996, 1,063 and 5,734 units, respectively, were assigned to plan
participants. Unit values for each investment fund were as follows at
December 31, 1997 and 1996:
1997 1996
Balanced Fund ................... $ 33.18 $ 26.40
Diversified Equity Fund ......... 14.04 12.05
Stable Value Fund ............... 12.07 11.31
NSI Stock Fund .................. 19.61 14.52
International Fund .............. 4.82 5.01
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
Plan's Master Trust (the "NSI DC Trust"). Effective January 1, 1998,
INVESCO Trust Company has been appointed trustee of 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.
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 could make their investment
elections in 5% increments, with changes allowed on a daily basis.
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The separate investment options offered by the Plan were 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
Prior to the termination of the Plan, the Plan permitted loans to
participants up to the lesser of 50% of a participant's vested account
balance or $50,000. A participant had up to five years to repay the
principal and interest, unless the loan was for the purchase of a primary
residence, in which case the repayment period was established at the time
the loan was approved. Loan processing fees were charged directly to the
participant's account. Interest rates on loans to participants were based
on market rates, as determined by the plan administrator. The interest rate
as of December 31, 1997 was 9.5%.
Loan issuances and repayments are included in intraplan transfers in the
accompanying statement of changes in net assets available for benefits.
Interest on loans is included in the net gain from investment in NSI DC
Trust and is allocated to each investment fund based on participants'
investment elections.
Benefits
Prior to the termination of the Plan, a participant was entitled to receive
the distribution of his/her vested account balance upon death, disability,
or retirement (age 65). These benefits were payable in a lump-sum amount or
could be paid in installments at the participant's election if his/her
vested balance was greater than $3,500 and he/she was age 55 or older. A
participant who terminated employment with the Company for reasons other
than these was entitled to receive his/her contributions in a lump sum as
soon as administratively feasible.
Benefits are payable in cash, except that any portion of a participant's
account balance which is invested in the NSI Stock Fund is distributed in
the form of shares of NSI common stock, with fractional shares paid in
cash. If the equivalent number of shares to be distributed to a participant
is less than 100, then the participant may elect to receive cash instead of
shares as his/her distribution.
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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, 1997 and 1996, contract value approximates
fair value. At December 31, 1997, the weighted average crediting interest
rate was 7.0%. For the year ended December 31, 1997, 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.
Certain GICs included in the NSI DC Trust are synthetic; that is, the NSI
DC Trust owns certain fixed income securities, and the contract issuer
provides a "wrapper" that guarantees a fixed rate of return and provides
benefit responsiveness. At December 31, 1997, the value of the underlying
assets of the synthetic GICs (determined from quoted market prices) and the
value of the related wrapper contracts were $42,945,334 and $(825,875),
respectively.
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3. NSI DC TRUST
Investment Income
Investment income of the NSI DC Trust for the year ended December 31, 1997
is summarized as follows:
Dividends on common stock .............................$ 454,559
Interest income ....................................... 4,303,571
Net appreciation in fair value of NSI common stock .... 4,046,711
Net income from common/collective trust ............... 18,537,212
Net income from mutual funds .......................... 14,708,000
Net loss from pooled separate account ................. (104,200)
Total investment income .................$ 41,945,853
The investment income of the NSI DC Trust for the year ended December 31,
1997 is allocated among participating plans as follows:
North Bros., Inc. 401(k)
Retirement Plan for Field Employees................... $ 5,549
All other NSI plans................................... 41,940,304
Total................................................. $41,945,853
Net Assets
The net assets of the NSI DC Trust are as follows at December 31, 1997 and
1996:
1997 1996
Mutual funds ..................... $ 79,312,170 $ 63,411,122
Common/collective trust .......... 79,112,333 57,558,795
Guaranteed investment contracts .. 52,443,357 55,187,898
NSI-common stock ................. 18,045,789 11,279,289
Loans receivable from participants 7,564,684 6,828,607
Money market fund ................ 1,740,602 3,704,985
Pooled separate account .......... 2,385,857 2,723,094
240,604,792 200,693,790
Cash ............................. 9,476 13,342
240,614,268 200,707,132
Accrued investment income ........ 112,870 100,534
Adjustments for pending trades ... (199,191) (223,542)
Other ............................ (47,759) (54,239)
Net assets ....................... $ 240,480,188 $ 200,529,885
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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, 1997 and
1996:
1997 1996
Amount Percent Amount Percent
North Bros., Inc. 401(k) Retirement
Plan for Field Employees ... $ 10,748 0% $ 35,369 0%
All other plans............. 240,469,440 100 200,494,516 100
Total ............... $240,480,188 100% $200,529,885 100%
Investment in NSI Common Stock
As of December 31, 1997 and 1996, approximately 7.5% and 5.6%,
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 ("IRS") dated April 1, 1997 stating that the Plan was
designed in accordance with plan design requirements as of that date. The
plan administrator believes that the Plan is currently designed and is
being operated in compliance with the applicable requirements of the IRC.
Therefore, the plan administrator believes that the Plan was qualified and
that the related trust was tax-exempt as of December 31, 1997 and 1996.
The Plan has received a favorable determination letter from the IRS dated
July 2, 1997 stating that the termination of the Plan (Note 1) does not
adversely affect its qualification.