NSI Settles Beaumont, Texas Asbestos Claims

National Service Industries 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.

The cases were filed in Texas on behalf of Alabama residents before tort reform was enacted in 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 CEO 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.

Topics Texas Claims