<PAGE>
Securities and Exchange Commission
Washington, D.C. 20549
FORM 11 - K
(Mark One)
[X] Annual Report pursuant to section 15 (d) of the Securities and Exchange act
of 1934 (fee required) for the fiscal year ended December 31, 1995 or
[ ] Annual Report pursuant to section 15 (d) of the Securities and Exchange Act
of 1934 (no fee required) for the transition period from __________ to
__________.
COMMISSION FILE NUMBER 0-9899
A. Full title of the Plan and the address of the Plan, if different from
that of the issuer named below:
Medical Graphics Corporation 401(k) Savings Plan
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Medical Graphics Corporation
350 Oak Grove Parkway
St. Paul, MN 55127-8599
Pursuant to the requirements of the Securities and 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
thereunto duly authorized.
Medical Graphics Corporation 401(k) Savings Plan
Date June 28, 1996 \s\ Eric W. Sivertson
--------------------- --------------------------------------------------
Eric W. Sivertson, President and Chief Executive
Officer (Principal Executive Officer)
<PAGE>
MEDICAL GRAPHICS CORPORATION
401(k) SAVINGS PLAN
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . 1
Statements of Net Assets Available for Plan Benefits . . . . . . . . . . . . . 2
Statement of Changes in Net Assets Available for Plan Benefits . . . . . . . . 3
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . 5
Supplemental Schedules:
Item 27(a)--Schedule of Assets Held for Investment Purposes. . . . . . . . . 8
Item 27(d)--Schedule of Reportable Transactions. . . . . . . . . . . . . . .10
<PAGE>
Report of Independent Auditors
Board of Directors
Medical Graphics Corporation
Medical Graphics Corporation 401(k) Savings Plan
We have audited the accompanying statements of net assets available for plan
benefits of the Medical Graphics Corporation 401(k) Savings Plan as of December
31, 1995 and 1994, and the related statement of changes in net assets available
for plan benefits for the year ended December 31, 1995. 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 provides 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 plan benefits of the Plan at
December 31, 1995 and 1994, and the changes in its net assets available for plan
benefits for the year ended December 31, 1995, 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 accompanying supplemental schedules
of assets held for investment purposes as of December 31, 1995, and reportable
transactions for the year then ended, are presented for purposes of complying
with the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974, and are
not a required part of the basic financial statements. The supplemental
schedules have been subjected to the auditing procedures applied in our audits
of the basic financial statements and, in our opinion, are fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
Ernst & Young LLP
Minneapolis, Minnesota
June 26, 1996
1
<PAGE>
Medical Graphics Corporation 401(k) Savings Plan
Statements of Net Assets Available for Plan Benefits
<TABLE>
<CAPTION>
DECEMBER 31
1995 1994
-------------------------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 17,327 $ 20,799
Investments at fair value (NOTE 2):
Common stocks 1,513,500 1,004,203
Guaranteed interest accounts 536,600 461,279
Pooled separate accounts 736,656 443,091
Medical Graphics Corporation Common Stock 22,249 24,481
Participant loans (NOTE 4) 59,794 54,709
-------------------------
2,868,799 1,987,763
Contributions and other receivables 16,384 20,290
-------------------------
Net assets available for plan benefits $2,902,510 $2,028,852
-------------------------
-------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
2
<PAGE>
Medical Graphics Corporation 401(k) Savings Plan
Statement of Changes in Net Assets Available for Plan Benefits
Year ended December 31, 1995
<TABLE>
<CAPTION>
COMMON ------------------------
STOCKS -
KOPP INTER-
INVESTMENT GUARANTEED U.S. NATIONAL
PORTFOLIO INTEREST STOCKS STOCKS
-------------------------------------------------------
<S> <C> <C> <C> <C>
Net assets available for plan benefits $1,030,745 $467,064 $344,484 $38,362
at January 1, 1995
Additions:
Contributions from employer 29,854 19,565 11,195 8,999
Employee contributions 115,002 101,365 57,827 38,733
Rollover contributions 4,730 8,132 - -
Loan payments 6,761 8,164 2,150 692
Net investment income (loss) 391,974 32,069 117,043 9,256
Forfeitures 3,727 3,436 1,439 656
-------------------------------------------------------
552,048 172,731 189,654 58,336
Deductions:
New loans (13,554) (17,397) (2,976) -
Benefit payments (34,130) (49,941) (9,743) (2,396)
Administrative and loan expenses - (651) (421) (42)
-------------------------------------------------------
(47,684) (67,989) (13,140) (2,438)
Investment transfers (12,674) 2,773 (28,361) (16,230)
-------------------------------------------------------
Net additions (deductions) 491,690 107,515 148,153 39,668
-------------------------------------------------------
Net assets available for plan benefits
at December 31, 1995 $1,522,435 $574,579 $492,637 $78,030
-------------------------------------------------------
-------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
3
<PAGE>
<TABLE>
<CAPTION>
POOLED SEPARATE ACCOUNTS
- ------------------------------------------------------- MEDICAL
BOND GRAPHICS
EMPHASIS CORPORATION
BALANCED MONEY STOCK BOND AND COMMON PARTICIPANT
ACCOUNT MARKET INDEX MORTGAGE STOCK LOANS TOTAL
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$28,925 $27,254 $10,795 $1,095 $25,419 $54,709 $2,028,852
1,933 1,316 593 - 1,118 - 74,573
7,133 6,810 2,109 65 4,020 - 333,064
4,731 - - - - - 17,593
446 189 - - 110 (14,749) 3,763
6,641 3,681 3,813 120 (3,075) - 561,522
174 898 193 - 49 - 10,572
- ----------------------------------------------------------------------------------------------------
21,058 12,894 6,708 185 2,222 (14,749) 1,001,087
- (974) - - - 34,901 -
(3,982) (10,942) - - (61) (15,067) (126,262)
(15) (35) (2) (1) - - (1,167)
- ----------------------------------------------------------------------------------------------------
(3,997) (11,951) (2) (1) (61) 19,834 (127,429)
5,422 58,516 (3,895) (576) (4,975) - -
- ----------------------------------------------------------------------------------------------------
22,483 59,459 2,811 (392) (2,814) 5,085 873,658
- ----------------------------------------------------------------------------------------------------
$51,408 $86,713 $13,606 $ 703 $22,605 $59,794 $2,902,510
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
Medical Graphics Corporation 401(k) Savings Plan
Notes to Financial Statements
Year ended December 31, 1995
1. PLAN DESCRIPTION
GENERAL
The Medical Graphics Corporation 401(k) Savings Plan (the Plan) was established
on October 1, 1986 and was subsequently restated on January 1, 1989 and July 1,
1991. The Plan is a contributory defined contribution plan covering
substantially all employees of Medical Graphics Corporation (the Company).
Each employee who elects to become a member of the Plan may authorize a
deduction of up to 17% of their gross earnings as contributions to the Plan. The
participant has the option of having the funds invested in equity, short-term
investment funds or a combination thereof. The Company matches 25% of the
employee contributions up to 6% of the employee's gross earnings.
Contributions are credited to the individual accounts of the participants.
Employee contributions are 100% vested at all times. Discretionary and employer-
matching contributions become 100% vested after five years of service, with
staggered vesting percentages prior to that time.
Information about the Plan Agreement, including vesting provisions, is contained
in the MEDICAL GRAPHICS CORPORATION 401(K) SAVINGS PLAN DESCRIPTION, which can
be obtained from the Company.
ADMINISTRATION
The Plan is sponsored and administered by the Company and is subject to the
provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
Administrative expenses are taken out of the assets of the Plan and allocated to
the participants' accounts.
5
<PAGE>
Medical Graphics Corporation 401(k) Savings Plan
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING METHOD
The accounting records of the Plan are maintained on the accrual basis.
INVESTMENT VALUATION
Investments are stated at current market value. Brokers' commissions incurred
upon the purchase of securities are included in the cost of the securities.
Securities traded on a national securities exchange are valued at the last
reported sales price on the last day of the year.
Securities transactions are recognized on the trade date (date the order to buy
or sell is executed). Dividend income is recognized on the ex-dividend date and
interest income is accrued as earned. The cost of securities sold is determined
using the average cost method.
Cash and cash equivalents consist primarily of deposits in short-term investment
funds.
3. INVESTMENTS
The Plan's investments are held by its trustees. The current value of individual
investments that represent 5% or more of plan assets is as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1995 1994
-----------------------
<S> <C> <C>
Principal Mutual Life Insurance Co.:
Guaranteed Interest Account $536,600 $461,279
U.S. Stock Account 490,166 340,847
Picturetel Corp. common stock 172,500 48,000
Tellabs Inc. common stock 111,000 111,500
Stratacom Inc. common stock 36,750 105,000
</TABLE>
6
<PAGE>
Medical Graphics Corporation 401(k) Savings Plan
Notes to Financial Statements (continued)
4. LOANS TO PARTICIPANTS
Under the Plan Agreement, a participant may borrow a portion of his or her
vested benefits from the Plan. The number of outstanding loans per participant
is limited to one. Loan amounts are limited to the lesser of:
a) $50,000, reduced by the highest outstanding loan balance of loans
during the one-year period ending on the day before the new loan is
made; or
b) The greater of 1) or 2), reduced by 3) below:
1) 1/2 of the Participant's Vested Account
2) $10,000
3) Any outstanding loan balance on the date the new loan is made
and are collateralized by the Participant's Vested Account.
As of December 31, 1995, $59,794 of loans are outstanding bearing interest
ranging from 7.00% to 8.75% annually and payable from 2 1/2 to 5 years.
5. PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the right to
terminate the Plan at any time. Upon termination, all amounts in participants'
accounts will be 100% vested.
6. FEDERAL INCOME TAX STATUS
The Internal Revenue Service has ruled that the Plan qualifies under Section
401(a) of the Internal Revenue Code (IRC) and is, therefore, not subject to tax
under present income tax laws.
The most recent determination by the Internal Revenue Service that the Plan is a
qualified plan under the Internal Revenue Code is dated July 27, 1993. Once
qualified, the Plan is required to operate in conformity with the IRC to
maintain its qualification. The Pension Administrative Committee is not aware of
any course of action or series of events that have occurred that might adversely
affect the Plan's qualified status.
7
<PAGE>
Schedule 1
Medical Graphics Corporation 401(k) Savings Plan
Item 27(a)--Schedule of Assets Held for Investment Purposes
December 31, 1995
<TABLE>
<CAPTION>
NAME OF ISSUER, BORROWER DESCRIPTION OF CURRENT
OR SIMILAR PARTY INVESTMENT COST VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
KOPP Investment Portfolio:
Common stocks:
3 Com Corporation 2,500 shares $ 36,761 $ 116,563
ADC Telecommunications 2,000 shares 26,308 73,000
Aseco Corp. 1,000 shares 15,205 16,500
BBN Corp. 2,500 shares 34,388 102,813
Cincinnati Microwave 2,500 shares 18,832 11,250
Computer Network Tech Corp. 4,000 shares 27,280 18,000
Cornerstone Imaging Inc. 2,500 shares 39,262 36,250
DSC Communications 2,000 shares 4,810 73,750
Dallas Semiconductor 2,000 shares 30,660 41,500
Digital Microwave Corp. 2,500 shares 21,737 25,000
EMPI Inc. 3,400 shares 36,633 86,700
FTP Software Inc. 1,200 shares 32,046 34,800
Global Village Comm. 700 shares 15,281 13,562
Integrated Micro Prods PLC
Spons ADR 1500 shares 22,620 27,750
Itron Inc. 2,000 shares 52,660 67,500
Level One Communications Inc. 2,500 shares 37,952 45,000
Network Equipment 2,000 shares 16,640 54,750
Technologies
Norand Corp. 2,000 shares 52,796 23,500
Octel Communications 1,500 shares 35,620 48,375
Picturetel Corp. 4,000 shares 35,949 172,500
Stac Inc. 3,000 shares 29,460 43,125
Stanford Telecommunications 1,500 shares 30,495 33,375
Stratacom Inc. 500 shares 4,431 36,750
Summa Four Inc. 3,000 shares 60,365 40,125
Techne Corp. 1,000 shares 10,820 20,125
Telco Systems Inc. 2,000 shares 16,515 21,250
Tellabs Inc. 3,000 shares 10,932 111,000
Verifone Inc. 1,500 shares 36,120 42,937
Vitesse Semiconductor 4,000 shares 47,411 51,000
Xircom 2,000 shares 37,435 24,750
-------------------------
877,424 1,513,500
</TABLE>
8
<PAGE>
Schedule 1
Medical Graphics Corporation 401(k) Savings Plan
Item 27(a)--Schedule of Assets Held for Investment Purposes (continued)
<TABLE>
<CAPTION>
NAME OF ISSUER, BORROWER DESCRIPTION OF
OR SIMILAR PARTY INVESTMENT COST FAIR VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
The Principal Mutual Life
Insurance Co.:
Guaranteed interest Trustee's general
account invested
mostly in private
placement bonds and
commercial and
residential mortgages $ 536,600 $ 536,600
Pooled separate account:
U.S. stocks Investments in U.S.
securities, mainly 348,833 490,166
common stocks
International stocks Investments in common
stock of corporations
located outside of U.S. 70,070 76,597
Bond emphasis balanced Investments in other
account separate accounts of 44,777 50,576
the trustee
Money market Investments in money
market instruments 100,896 105,091
Stock index Investments in the
common stock of firms
included in the
Standards & Poor's 500 9,871 13,523
Stock Index
Bond and mortgage Investments in
intermediate-term
fixed-income loans 594 703
----------------------------
1,111,641 1,273,256
Participant Loans Interest from 7.00% to
8.75%, maturing from - 59,794
1996 to 2000
Corporate Stock:
Medical Graphics
Corporation* 4,394 shares 11,147 22,249
----------------------------
Total investments held $2,000,212 $2,868,799
----------------------------
----------------------------
</TABLE>
*Indicates party-in-interest to the Plan.
9
<PAGE>
Medical Graphics Corporation 401(k) Savings Plan
Item 27(d)--Schedule of Reportable Transactions
Year ended December 31, 1995
CATEGORY (I) - INDIVIDUAL TRANSACTIONS IN EXCESS OF 5% OF PLAN ASSETS
<TABLE>
<CAPTION>
CURRENT
VALUE ON
IDENTITY OF PARTY DESCRIPTION OF PURCHASE SELLING COST OF TRANSACTION NET GAIN
INVOLVED TRANSACTION PRICE PRICE ASSET DATE OR (LOSS)
<S> <C> <C> <C> <C> <C> <C>
The Principal Mutual Sale of investments
Life Insurance in Guaranteed
Company Interest Account $109,012 $109,012 -
CATEGORY (III) - SERIES OF SECURITIES TRANSACTIONS IN EXCESS OF 5% OF THE CURRENT VALUE OF PLAN ASSETS
CURRENT
VALUE ON
ASSET
IDENTITY OF PARTY DESCRIPTION OF PURCHASE SELLING COST OF TRANSACTION NET GAIN
INVOLVED TRANSACTION PRICE PRICE ASSET DATE OR (LOSS)
The Principal Mutual Guaranteed Interest
Life Insurance Account--75 transactions $230,323 - $230,323 $230,323 -
Company
Guaranteed Interest
Account--48 transactions $186,881 186,881 186,881 -
U.S. Stocks (Pooled Separate
Account)--74 transactions 89,102 - 89,102 89,102 -
U.S. Stocks (Pooled
Separate Account)--
32 transactions 57,113 57,113 57,113 -
Money Market (Pooled
Separate Account)--
67 transactions 99,435 - 99,435 99,435 -
Money Market (Pooled
Separate Account)--
25 transactions 23,343 23,343 23,343 -
</TABLE>
There were no category (ii) and (iv) reportable transactions for 1995.
10
<PAGE>
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-64430) pertaining to the Medical Graphics Corporation 401(k)
Savings Plan of our report dated June 26, 1996, with respect to the financial
statements and schedules of Medical Graphics Corporation 401(k) Savings Plan
included in this Annual Report (Form 11-K) for the year ended December 31, 1995.
Ernst & Young LLP
Minneapolis, Minnesota
June 26, 1996
