EXHIBIT 99.1
PRESS RELEASE
Investor Relations Contact:
Chester J. Popkowski (Chet)
Senior Vice President,
Chief Financial Officer, and Treasurer
(404) 853-1205
Web site: www.nationalservice.com
November 13, 2002
NSI
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ANNOUNCES SETTLEMENT OF BEAUMONT, TEXAS ASBESTOS CLAIMS;
INCREASES RESERVE FOR FISCAL 2002
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Atlanta, GA -- National Service Industries (NYSE: NSI) today announced
that it has entered into an agreement in principle to settle a significant
number of asbestos claims currently pending against the Company in Jefferson
County (Beaumont) and Orange County, Texas. These cases were filed in Texas on
behalf of Alabama residents before tort reform was enacted in the State of Texas
in 1997. Texas tort reform prohibits future out-of-state plaintiffs with
injuries incurred in other states from bringing their claims in Texas state
courts.
The settlement will require a series of scheduled payments in 2003 and
2004. NSI expects substantially all of these payments to be covered by its
available insurance. Specific terms of the settlement are confidential, pursuant
to agreement with the plaintiffs' counsel.
"We are pleased to put these pre-tort reform Texas cases behind us,"
said Brock Hattox, Chairman and Chief Executive Officer of NSI. "These cases
involved out-of-state plaintiffs who brought these claims against us in
unfavorable judicial venues in Jefferson County and Orange County, Texas. We
recognize that this is a large settlement. However, by settling these cases we
believe we have significantly reduced our overall litigation risk."
Subsequent to August 31, the company concluded that it was in the best
interests of the company and its shareholders to settle these Texas pre-tort
reform claims for amounts greater than originally anticipated, rather than risk
potentially higher jury awards. As a result, the company will increase on its
balance sheet its asbestos liability and recoverable insurance receivable by $64
million and $53 million, respectively, as of August 31, 2002. The difference
between the increase in the liability and receivable will result in an
additional $11 million pre-tax charge to earnings in the fourth quarter of the
fiscal year ended August 31, 2002. Although substantially all of the cash
payments associated with this settlement are anticipated to be covered by
insurance, the $11 million charge is necessary to account for insolvent insurers
based on future projections. After considering the recording of this
transaction, the Company's diluted earnings per share from continuing operations
for the year ended August 31, 2002 will be a 67-cent loss per share.
Management will continue to monitor its asbestos related activities,
including all claims, the status of lawsuits (including settlement initiatives),
legislative developments, insurance related matters and costs incurred. As
additional information becomes available, the company will reassess its
liability and insurance receivable and revise and record its estimates in the
future reporting periods as necessary.
* * *
National Service Industries, Inc., with fiscal year 2002 sales of $530
million, has two business segments -- textile rental and envelopes.
* * *
Certain information contained in this press release constitutes
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are inherently
uncertain and involve risks. Statements that are not historical facts, including
statements about management's estimates, beliefs and expectations, are
forward-looking statements. These statements include, among others, statements
regarding amounts and timing of expenditures with respect to liabilities
relating to asbestos litigation or environmental claims and amounts and timing
of insurance recoveries covering those expenses. Forward-looking statements are
only predictions and are not guarantees of performance. These statements are
based on management's beliefs and assumptions, which in turn are based on
currently available information. Important assumptions relating to the
forward-looking statements include, among others, assumptions regarding expected
outcomes of pending litigation and dispute resolution, the expected costs of
pending and future asbestos claims, the solvency of the Company's insurers and
the resolution of allocation and coverage issues with those insurers on a basis
consistent with management's current expectations, competitive conditions and
general economic conditions. These assumptions could prove inaccurate.
Forward-looking statements also involve risks and uncertainties, which could
cause actual results to differ materially from those contained in any
forward-looking statement. Many of these factors are beyond the Company's
ability to control or predict. Such factors include, but are not limited to, (a)
unexpected developments or outcomes in the Company's legal proceedings, (b) the
risk of additional insolvencies among the Company's insurance carriers, and (c)
the risk of an increase or acceleration in the number of asbestos-related claims
filed against the Company.
NATIONAL SERVICE INDUSTRIES, INC.
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Summary of Operations (unaudited)
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(amounts in thousands, except per-share data)
THREE MONTHS ENDED TWELVE MONTHS ENDED
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AUGUST 31, August 31, AUGUST 31, August 31,
2002 2001 2002 2001
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Sales and Service Revenues:
Textile rental $ 79,760 $ 86,086 $ 319,669 $ 334,820
Envelope 50,164 57,039 212,761 228,462
Total Operating Revenues 129,924 143,125 532,430 563,282
Operating Profit (Loss):
Textile rental 1,337 (3,480) 2,996 12,553
Envelope 177 (17,136) 3,004 (13,145)
1,514 (20,616) 6,000 (592)
Corporate (17,491) (18,049) (24,590) (21,909)
Gain on sale of building -- -- 7,966 --
Interest expense, net 16 442 385 1,770
Income from continuing operations before
taxes and cumulative effect of a change in
accounting principle (15,993) (39,107) (11,009) (24,271)
Income tax provision (5,956) (14,469) (4,074) (8,980)
Loss from continuing operations before
cumulative effect of a change in accounting principle (10,037) (24,638) (6,935) (15,291)
Discontinued Operations:
Income from discontinued operations, net of tax -- 6,718 11,534 42,304
Costs associated with effecting spin-off, net of tax -- -- (19,069) --
Cumulative effect of a change in accounting principle,
net of tax -- -- (17,602) --
Net (Loss) Income $ (10,037) $ (17,920) $ (32,072) $ 27,013
Basic EPS:
Loss from continuing operations before
cumulative effect of a change in accounting principle $ (0.97) $ (2.39) $ (0.67) $ (1.49)
Discontinued Operations:
Income from discontinued operations, net of tax -- 0.65 1.12 4.12
Costs associated with effecting spin-off, net of tax -- -- (1.85) --
Cumulative effect of a change in accounting principle,
net of tax -- -- (1.71) --
Net (Loss) Income $ (0.97) $ (1.74) $ (3.11) $ 2.63
Diluted EPS:
Loss from continuing operations before
cumulative effect of a change in accounting principle $ (0.97) $ (2.39) $ (0.67) $ (1.49)
Discontinued Operations:
Income from discontinued operations, net of tax -- 0.65 1.12 4.12
Costs associated with effecting spin-off, net of tax -- -- (1.85) --
Cumulative effect of a change in accounting principle,
net of tax -- -- (1.71) --
Net (Loss) Income $ (0.97) $ (1.74) $ (3.11) $ 2.63
Basic weighted-average shares outstanding during period 10,343 10,289 10,324 10,267
Diluted weighted-average shares outstanding during period 10,343 10,289 10,324 10,267
Dividends paid per share $ 0.04 $ 1.32 $ 0.76 $ 5.28
Actual Shares outstanding end of period 10,968 10,306
NATIONAL SERVICE INDUSTRIES, INC.
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Condensed Consolidated Balance Sheets (unaudited)
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(amounts in thousands)
AUGUST 31, August 31,
2002 2001
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ASSETS
Current Assets:
Cash and Short-Term Investments $ 20,969 $ --
Receivables, net 52,198 60,406
Inventories and Linens in Service 67,843 76,105
Insurance Receivable 42,024 28,616
Other Current Assets 5,779 21,242
Total Current Assets 188,813 186,369
Property, Plant and Equipment, net 147,956 171,045
Insurance Receivable 140,831 66,574
Other Assets 41,498 74,110
Net Assets of Discontinued Operations -- 400,296
TOTAL ASSETS $519,098 $898,394
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Portion of Litigation Reserve $ 41,288 $ 30,453
Other Current Liabilities 64,548 68,195
Long-Term Debt, Less Current Maturities 984 1,990
Deferred Income Taxes 7,853 32,431
Litigation Reserve, less Current Portion 166,844 82,917
Other Long-Term Liabilities 16,948 19,780
Stockholders' Equity 220,633 662,628
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $519,098 $898,394
Condensed Consolidated Cash Flows (unaudited)
(amounts in thousands)
TWELVE MONTHS ENDED
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AUGUST 31, August 31,
2002 2001
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CASH PROVIDED BY (USED FOR):
Operations-
Net loss from continuing operations $ (6,935) $ (15,291)
Depreciation and amortization 25,615 27,633
Other operating activities 1,152 (41,479)
Net cash provided by discontinued operations 6,935 105,187
Cash Provided by Operations 26,767 76,050
Investing-
Capital expenditures (17,178) (23,053)
Sale of property, plant and equipment 22,867 1,289
Acquisitions (3,696) (5,596)
Divestitures 1,062 4,888
Other investing activities 1,120 (2,182)
Cash Provided by (Used for) Investing Activities 4,175 (24,654)
Financing-
Repayments of credit facility, net (1,999) -
Repayments of long-term debt (924) -
Treasury shares, net 875 3,054
Dividends (7,925) (54,450)
Cash Used for Financing Activities (9,973) (51,396)
Net Change in Cash 20,969 -
Cash at Beginning of Year - -
Cash at End of Year $ 20,969 $ -