<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A-No. 1
/X/ Annual Report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 31, 1996.
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ....................
to .......................
Commission File Number 0-13617
LIFELINE SYSTEMS, INC.
(Exact Name of Registrant as Specified in its Charter)
MASSACHUSETTS 04-2537528
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
640 MEMORIAL DRIVE, CAMBRIDGE, MASSACHUSETTS 02139
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (617) 679-1000
The sole purpose of this Form 10K/A is to file Annual Reports on Form 11-K
for Lifeline's Employee Savings and Investment Plans.
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this amendment to be signed on its
behalf by the undersigned, thereunto duly authorized.
LIFELINE SYSTEMS, INC. (REGISTRANT)
/s/ Dennis M. Hurley
BY Dennis M. Hurley
Vice President, Finance
Chief Financial Officer
DATE June 25, 1997
<PAGE>
PAGE 1
EXHIBIT INDEX
Exhibit No. Exhibit
(99.1) Annual Report for the Lifeline Employees' Savings and
Investment Plan
(99.1a) Consent of Independent Public Accountants
<PAGE>
PAGE 1 EXHIBIT (99.1)
ANNUAL REPORT
Pursuant to Section 15(d) of the
Securities Act of 1934
For the Year Ended
December 31, 1996
-----------------------------------
LIFELINE SYSTEMS, INC. EMPLOYEES' SAVINGS AND INVESTMENT PLAN
--------------------------------------------------------------------
<PAGE>
LIFELINE SYSTEMS, INC. EMPLOYEE SAVINGS AND INVESTMENT PLAN
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES TO
ACCOMPANY 1996 FORM 5500
ANNUAL REPORT OF EMPLOYEE BENEFIT PLAN
UNDER ERISA OF 1974
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<PAGE>
LIFELINE SYSTEMS, INC. EMPLOYEE SAVINGS AND INVESTMENT PLAN
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
for the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
Page(s)
------
<S> <C>
Report of Independent Accountants 2
Financial Statements:
Statements of Net Assets Available for Plan Benefits,
with Fund Information, December 31, 1996 and 1995 3-4
Statements of Changes in Net Assets Available for Plan
Benefits, with Fund Information, for the years ended
December 31, 1996 and 1995 5-6
Notes to Financial Statements 7-13
Supplemental Schedules:
Line 27a - Schedule of Assets Held for Investment
Purposes as of December 31, 1996 14
Line 27d - Schedule of Single Transactions in Excess
of 5% of the Current Value of Plan Assets 15
Line 27d - Schedule of Series of Transactions in Excess
of 5% of the Current Value of Plan Assets 16
</TABLE>
Certain supplementary schedules have been omitted because they are either not
required or not applicable under the Employee Retirement Income Security Act of
1974.
1
<PAGE>
[LETTERHEAD OF COOPERS & LYBRAND APPEARS HERE]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Plan Administrator of the
Lifeline Systems, Inc. Employee Savings
and Investment Plan:
We have audited the accompanying statements of net assets available for plan
benefits of the Lifeline Systems, Inc. Employee Savings and Investment Plan (the
"Plan") as of December 31, 1996 and 1995, and the related statements of changes
in net assets available for plan benefits for the years then ended. 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 plan benefits of the Plan as
of December 31, 1996 and 1995, and the changes in net assets available for plan
benefits for the years then ended 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 supplemental schedules listed in the
index on page 1 are presented for the purpose of additional analysis and are not
a required part of the basic financial statements but are supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. The fund information in the statement of net assets available for plan
benefits and the statement of changes in net assets available for plan benefits
is presented for purposes of additional analysis rather than to present the net
assets available for plan benefits and changes in net assets available for plan
benefits of each fund. The supplemental schedules and fund information have
been subjected to the auditing procedures applied in the 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.
The investments held by the Plan are stated at current value as required for
presentation on Form 5500. As explained in Note D to the financial statements,
the information provided by the custodian does not include the historical cost
of investments. Therefore, the schedule of assets held for investment purposes
and the schedules of reportable transactions do not disclose the historical cost
of investments. Disclosure of this information is required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974.
Boston, Massachusetts /s/ Coopers & Lybrand L.L.P.
May 21, 1997
2
<PAGE>
LIFELINE SYSTEMS, INC. EMPLOYEE SAVINGS AND INVESTMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS, WITH FUND INFORMATION
December 31, 1996
<TABLE>
<CAPTION>
Fidelity Fidelity
Fidelity Asset Blue Chip
Income Balanced Allocation Growth
ASSETS Fund Fund Fund Fund
------ -------- ---------- ---------
<S> <C> <C> <C> <C>
Investments, at fair value (Notes C and D):
Bank pooled fund $ 1,619,950
Shares of registered investment companies $ 641,432 $ 401,737 $ 2,215,056
Lifeline Systems, Inc. stock
Participant loans receivable
Bank account
------------ ---------- ---------- ------------
Total investments 1,619,950 641,432 401,737 2,215,056
Employer contributions receivable 13,118 8,110 6,114 26,485
Employee contributions receivable 13,173 8,819 8,153 30,538
Loan payment receivable 4,004 1,906 865 4,105
Interfund transfers 75,388 80,322
------------ ---------- ---------- ------------
Total assets 1,725,633 740,589 416,869 2,276,184
LIABILITIES AND NET ASSETS
AVAILABLE FOR PLAN BENEFITS
Interfund transfers pending 84,364 106,260
Other payables 377 48 (12) 191
------------ ---------- ---------- ------------
Total liabilities 377 48 84,352 106,451
------------ ---------- ---------- ------------
Net assets available for plan benefits $ 1,725,256 $ 740,541 $ 332,517 $ 2,169,733
============ ========== ========== ============
<CAPTION>
Lifeline
Systems, Inc. Participant Conduit Total
Stock Fund Loan Fund Account Plan
ASSETS ------------- ----------- ------- -----
<S> <C> <C> <C> <C>
Investments, at fair value (Notes C and D):
Bank pooled fund $ 1,619,950
Shares of registered investment companies 3,258,225
Lifeline Systems, Inc. stock $ 1,028,405 1,028,405
Participant loans receivable $ 295,447 295,447
Bank account $ 21,439 21,439
------------ ----------- ----------- ------------
Total investments 1,028,405 295,447 21,439 6,223,466
Employer contributions receivable 10,276 64,103
Employee contributions receivable 10,114 70,797
Loan payment receivable 2,418 13,298
Interfund transfers 34,914 190,624
------------ ----------- ----------- ------------
Total assets 1,086,127 295,447 21,439 6,562,288
LIABILITIES AND NET ASSETS
AVAILABLE FOR PLAN BENEFITS
Interfund transfers pending 190,624
Other payables 67 21,439 22,110
------------ ----------- ----------- ------------
Total liabilities 67 21,439 212,734
------------ ----------- ----------- ------------
Net assets available for plan benefits $ 1,086,060 $ 295,447 -- $ 6,349,554
============ =========== =========== ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
LIFELINE SYSTEMS, INC. EMPLOYEE SAVINGS AND INVESTMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS, WITH FUND INFORMATION
December 31, 1995
<TABLE>
<CAPTION>
Fidelity Fidelity
Fidelity Asset Blue Chip
Income Balanced Allocation Growth
ASSETS Fund Fund Fund Fund
------ -------- ---------- ---------
<S> <C> <C> <C> <C>
Investments, at fair value (Notes C and D):
Bank pooled fund $ 1,261,916
Shares of registered investment companies $ 624,284 $ 252,492 $ 1,409,962
Lifeline Systems, Inc. stock
Participant loans receivable
Bank account
Investments, at contract value (Notes C and D):
Pooled separate accounts 380,617
------------ ----------- ----------- ------------
Total investments 1,642,533 624,284 252,492 1,409,962
Employer contributions receivable 13,593 5,954 2,271 13,538
Employee contributions receivable 13,580 6,842 3,446 15,891
Loan payment receivable 4,774 1,278 422 4,251
Interfund transfers 9,026 24,688 64,687
------------ ----------- ----------- ------------
Total assets 1,674,480 647,384 283,319 1,508,329
LIABILITIES AND NET ASSETS
AVAILABLE FOR PLAN BENEFITS
Payable to other funds 52,220
Other payables 331 50 175
------------ ----------- ----------- ------------
Total liabilities 52,551 50 175
------------ ----------- ----------- ------------
Net assets available for plan benefits $ 1,621,929 $ 647,334 $ 283,319 $ 1,508,154
============ =========== =========== ============
<CAPTION>
Lifeline
Systems, Inc. Participant Conduit Total
ASSETS Stock Fund Loan Fund Account Plan
------------- ----------- ------- -----
<S> <C> <C> <C> <C>
Investments, at fair value (Notes C and D):
Bank pooled fund $ 1,261,916
Shares of registered investment companies 2,286,738
Lifeline Systems, Inc. stock $ 786,913 786,913
Participant loans receivable $ 190,236 190,236
Bank account $ 24,174 24,174
Investments, at contract value (Notes C and D):
Pooled separate accounts 380,617
----------- ----------- ---------- ------------
Total investments 786,913 190,236 24,174 4,930,594
Employer contributions receivable 5,870 41,226
Employee contributions receivable 7,018 46,777
Loan payment receivable 749 11,474
Interfund transfers 98,401
----------- ----------- ---------- ------------
Total assets 800,550 190,236 24,174 5,128,472
LIABILITIES AND NET ASSETS
AVAILABLE FOR PLAN BENEFITS
Payable to other funds 46,188 98,408
Other payables 24,174 24,730
----------- ----------- ---------- ------------
Total liabilities 46,188 24,174 123,138
----------- ----------- ---------- ------------
Net assets available for plan benefits $ 754,362 $ 190,236 -- $ 5,005,334
=========== =========== ========== ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
LIFELINE SYSTEMS, INC. EMPLOYEE SAVINGS AND INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS,
WITH FUND INFORMATION
for the year ended December 31, 1996
<TABLE>
<CAPTION>
Fidelity Fidelity
Fidelity Asset Blue Chip
Income Balanced Allocation Growth
Fund Fund Fund Fund
---- ---- ---- ----
<S> <C> <C> <C> <C>
Additions:
Employee contributions and rollovers $ 145,952 $ 96,252 $ 72,736 $ 359,562
Employer contributions 53,704 30,461 20,039 94,608
Interest and dividend income 90,095 30,440 31,680 156,823
Net appreciation in fair value of investments 25,680 11,758 132,400
Interfund transfers 148,796 103,273 31,503 300,440
----------- --------- --------- ------------
Total additions 438,547 286,106 167,716 1,043,833
Deductions:
Benefits and withdrawals 121,283 80,372 20,270 204,979
Net depreciation in fair value of investments 2,692
Administrative expenses 1,463 300 14 950
Interfund transfers 209,782 112,227 98,234 176,325
----------- --------- --------- ------------
Total deductions 335,220 192,899 118,518 382,254
----------- --------- --------- ------------
Net additions 103,327 93,207 49,198 661,579
Net assets available for plan benefits, beginning of year 1,621,929 647,334 283,319 1,508,154
----------- --------- --------- ------------
Net assets available for plan benefits, end of year $ 1,725,256 $ 740,541 $ 332,517 $ 2,169,733
============ ========== ========== =============
<CAPTION>
Lifeline
Systems, Inc. Participant Total
Stock Fund Loan Fund Plan
---------- --------- ----
<S> <C> <C> <C>
Additions:
Employee contributions and rollovers $ 121,414 $ 795,916
Employer contributions 35,612 234,424
Interest and dividend income 238 $ 18,347 327,623
Net appreciation in fair value of investments 316,414 486,252
Interfund transfers 90,261 270,209 944,482
------------ ---------- ------------
Total additions 563,939 288,556 2,788,697
Deductions:
Benefits and withdrawals 51,180 16,141 494,225
Net depreciation in fair value of investments 2,692
Administrative expenses 351 3,078
Interfund transfers 180,710 167,204 944,482
------------ ---------- ------------
Total deductions 232,241 183,345 1,444,477
------------ ---------- ------------
Net additions 331,698 105,211 1,344,220
Net assets available for plan benefits, beginning of year 754,362 190,236 5,005,334
------------ ---------- ------------
Net assets available for plan benefits, end of year $ 1,086,060 $ 295,447 $ 6,349,554
============ ========== ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
LIFELINE SYSTEMS, INC. EMPLOYEE SAVINGS AND INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS,
WITH FUND INFORMATION
for the year ended December 31, 1995
<TABLE>
<CAPTION>
Fidelity Fidelity
Fidelity Asset Blue Chip
Income Balanced Allocation Growth
Fund Fund Fund Fund
---- ---- ---- ----
<S> <C> <C> <C> <C>
Additions:
Employee contributions and rollovers $ 203,233 $ 114,090 $ 44,306 $ 238,429
Employer contributions 61,812 26,186 8,800 45,376
Interest and dividend income 106,276 27,847 6,698 5,172
Net appreciation in fair value of investments 58,458 27,625 249,896
Interfund transfers 230,415 25,505 43,944 386,564
------------ ---------- ---------- ------------
Total additions 601,736 252,086 131,373 925,437
Deductions:
Benefits and withdrawals 177,825 71,370 629 98,751
Net depreciation in fair value of investments 2,359
Administrative expenses 1,800 225 888
Interfund transfers 352,314 284,958 43,388 31,418
------------ ---------- ---------- ------------
Total deductions 534,298 356,553 44,017 131,057
------------ ---------- ---------- ------------
Net additions (deductions) 67,438 (104,467) 87,356 794,380
Net assets available for plan benefits, beginning of year 1,554,491 751,801 195,963 713,774
------------ ---------- ---------- ------------
Net assets available for plan benefits, end of year $ 1,621,929 $ 647,334 $ 283,319 $ 1,508,154
============ ========== ========== ============
<CAPTION>
Lifeline
Systems, Inc. Participant Conduit Total
Stock Fund Loan Fund Account Plan
---------- --------- ------- ----
<S> <C> <C> <C> <C>
Additions:
Employee contributions and rollovers $ 81,714 $ 681,772
Employer contributions 15,598 157,772
Interest and dividend income 156 $ 17,077 163,226
Net appreciation in fair value of investments 343,544 679,523
Interfund transfers 144,529 143,355 974,312
---------- ---------- ----------- ------------
Total additions 585,541 160,432 2,656,605
Deductions:
Benefits and withdrawals 4,518 7,826 360,919
Net depreciation in fair value of investments 2,359
Administrative expenses 250 3,163
Interfund transfers 59,005 126,924 $ 74,337 972,344
---------- ---------- ----------- ------------
Total deductions 63,773 134,750 74,337 1,338,785
---------- ---------- ----------- ------------
Net additions (deductions) 521,768 25,682 (74,337) 1,317,820
Net assets available for plan benefits, beginning of year 232,594 164,554 74,337 3,687,514
---------- ---------- ----------- ------------
Net assets available for plan benefits, end of year $ 754,362 $ 190,236 -- $ 5,005,334
========== ========== =========== ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
LIFELINE SYSTEMS, INC. EMPLOYEE SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
A. Description of the Plan:
-----------------------
The following description of the Lifeline Systems, Inc. Employee Savings and
Investment Plan (the "Plan") provides only general information. Participants
should refer to the plan document for a more complete description of the
Plan's provisions.
General
The Plan is a defined contribution profit-sharing plan covering all
employees of Lifeline Systems, Inc. (the "Company") who work at least
1,000 hours during the plan year. Employees become eligible to
participate on the entry date following six months of service. The Plan
was established in 1984 to provide participants an opportunity to defer
taxes on their savings and is intended to be a "qualified cash or deferred
arrangement" under certain sections of the Internal Revenue Code. It is
subject to the provisions of the Employee Retirement Income Security Act
of 1974 (ERISA).
Contributions
Participants may contribute from 1% to 15% of their pay on a pretax basis
subject to the annual dollar limits established by the Internal Revenue
Service (IRS) and plan limitations. Participants are immediately vested
in their contributions and earnings thereon. Rollover contributions from
qualified 401(k) plans are also allowed. Withdrawals are permitted as
specified by IRS regulations.
Employer contributions may vary from year to year in such amounts as have
been voted by the Company pursuant to the provisions of the Plan. For the
year ended December 31, 1996, the Company matched 100% of the first 2%
contributed and 50% of the next 2% contributed up to a maximum of $400 per
quarter, or $1,600 per year. This was an increase from 1995 in which the
Company contributed up to a maximum of $250 per quarter, or $1,000 per
year per participant.
Loans
With the approval of the plan administrator, participants may borrow from
their vested account balance attributable to employee pre-tax, matching,
discretionary, and rollover contributions. The maximum amount that may be
borrowed is 50% of a participant's vested interest or $50,000, whichever
is less. The minimum loan is $1,000. The interest rate is fixed and will
be equal to the prime rate plus one and one-half percent. The maximum
loan period is five years. The interest rate charged on participant loans
ranged from 9.75% to 10.00% in 1996 and 10.00% to 10.50% in 1995.
Continued
7
<PAGE>
LIFELINE SYSTEMS, INC. EMPLOYEE SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Benefits and Withdrawals
The Plan allows benefits to be paid in the form of a cash payment or an
in-kind distribution for employees who invest in the Company Stock Fund.
Several annuity options may be selected by participants (or their
beneficiaries) with account balances exceeding $3,500 as of December 1,
1990.
The Plan also provides for a preretirement survivor annuity to
participants of the Plan with account balances exceeding $3,500 as of
December 1, 1990, which allows 100% of a married participant's benefits to
be used to provide benefits to his/her spouse if the participant dies
before benefit payments commence. This provision may be waived once the
participant reaches age 35 and obtains written consent from his/her
spouse. Benefits to participants not married who die before retirement
will be distributed to designated beneficiaries. No death benefits were
paid in 1996 or 1995.
Hardship withdrawals are allowed under the provisions of the Plan.
Vesting
Plan participants are 100% vested in the value of their own contributions,
rollovers and employer matching contributions immediately.
The Plan allows that, upon disability, normal retirement age or death, an
employee is 100% vested in all contributions.
In May 1995, when the Company acquired Tele-Response & Support Services,
Inc., the Plan was amended. An employee's months of service with Tele-
Response were credited towards meeting the Company's service requirements
for eligibility in the Plan.
Investment Options
Participants may invest in the following investment options at December
31, 1996:
. The Income Fund -
Bankers Trust Company Pyramid Guaranteed Investment Contracts Fund -
This fund invests in Guaranteed Investment Contracts and Bank
Investment Contracts issued by life insurance companies or banks.
The estimated range of returns for the fund is announced at the
beginning of each year. Interest is credited monthly. The interest
rate ranged from 5.32% to 5.68% and 5.91% to 6.14% for the years
ended December 31, 1996 and 1995, respectively.
. Fidelity Balanced Fund - Funds are invested in shares of a registered
investment company that invests in stocks and bonds. This is a
"moderate risk" mutual fund investing no greater than 75% of its assets
in common stocks and no less than 25% in bonds.
Continued
8
<PAGE>
LIFELINE SYSTEMS, INC. EMPLOYEE SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
. Fidelity Asset Allocation Fund - Funds are invested in shares of a
registered investment company that invests in stocks, bonds and short-
term fixed income investments. The assets will normally be invested
within the following ranges: 10% - 60% in stocks; 20% - 60% in bonds;
and 0 - 70% in short-term fixed income instruments.
. Fidelity Blue Chip Growth Fund - Funds are invested in shares of a
registered investment company that invests in stocks, seeking long-term
earnings growth. At least 65% of its assets are invested in the common
stocks of large blue chip growth companies.
. Lifeline Systems, Inc. Common Stock - The Plan's trustee purchases the
stock on the open market. For the years ended December 31, 1996 and
1995, purchases and sales of Lifeline Systems, Inc. Common Stock
amounted to $142,098 and $216,665, and $211,119 and $0, respectively.
Participants may allocate their individual accounts among the five
investment alternatives and may make transfers as specified in the plan
document. At December 31, 1996, there were 138 employees participating in
the Income Fund, 121 employees participating in the Balanced Fund, 88
employees participating in the Asset Allocation Fund, 195 employees
participating in the Blue Chip Growth Fund, and 96 employees participating
in the Stock Fund. The Plan also has a Conduit Account which is invested
with PNC Bank and is utilized as a "pass-through" holding account for
employer and employee contributions. Funds are deposited into this account
and allocated to other investment options based on participant's elections.
B. Summary of Significant Accounting Policies:
------------------------------------------
Basis of Presentation
The financial statements of the Plan have been prepared under the accrual
basis of accounting and in conformity with generally accepted accounting
principles. Interest and dividend income is recorded as earned on the
accrual basis. Benefit payments are recorded when paid.
Investment Valuation
Investments in mutual and pooled funds and the Company's common stock are
valued at fair market value using year-end closing prices. Investments in
group annuity contracts are valued at the contract value (see Note C).
Participant loans are valued at cost which approximates fair value.
The Plan presents in the statement of changes in net assets the net
appreciation (depreciation) in the fair value of its investments which
consists of the realized gains or losses and the unrealized appreciation
(depreciation) on those investments.
Continued
9
<PAGE>
LIFELINE SYSTEMS, INC. EMPLOYEE SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Contributions
Contributions from the Company are accrued as of December 31 based upon
the contribution formula. Employee contributions are recorded in the
period in which the employee payroll deductions are made.
Expenses
All administrative expenses and fees are paid by the Company except for
loan fees which are paid by the Plan.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of income and expenses
during the reporting period. Actual results could differ from those
estimates.
Reclassifications
Certain prior year balances have been reclassified to conform to the
current year's presentation.
C. Investment Contracts with Insurance Company and Bank:
----------------------------------------------------
In 1991, the Plan entered into an investment contract with Massachusetts
Mutual Life Insurance Company ("Mass Mutual"). This investment is maintained
in a pooled account. The account is credited with earnings on the underlying
investments and charged for plan withdrawals and administrative expenses.
The contract is included in the financial statements at contract value, which
approximates fair value, as reported to the Plan by Mass Mutual. Contract
value represents contributions made under the contract, plus earnings, less
plan withdrawals and administrative expenses. Withdrawals are allowed under
the terms of the contract. The withdrawal method used for administrative
purposes is the Current Contract Pro Rata Withdrawal Method. The contract
expired on January 2, 1996 resulting in a transfer of $380,697 of assets to
the Bankers Trust Pyramid Guaranteed Investment Contracts Fund.
In January 1992 the Plan entered into an investment agreement with Bankers
Trust Company to enter into the Bankers Trust Pyramid Guaranteed Investment
Contracts Fund, a separate pooled fund established and managed by Bankers
Trust Company. The Fund invests primarily in Guaranteed Investment Contracts
("GICs") and Bank Investment Contracts issued by life insurance companies,
banks or other financial institutions, and any of the Bankers Trust
Commingled short-term investments funds. The Fund's assets are valued at
fair market value, provided, however, assets for which there is no readily
ascertainable market value are valued at fair value determined in good faith
by the Trustee of the Fund. The Fund expects to maintain a constant unit
Continued
10
<PAGE>
LIFELINE SYSTEMS, INC. EMPLOYEE SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
value of $1.00. Withdrawals are permitted and are subject to a deferred
payout schedule which may have an average maturity of no greater than 2.5
years and a final payment no later than 5 years from the receipt of such
notice by the Trustee of the Fund.
D. Investments:
-----------
Investments held by the Plan at December 31, 1996 and 1995 are summarized as
follows:
<TABLE>
<CAPTION>
1996 1995
Fair Fair
Description Value Value
----------- ----- -----
<S> <C> <C>
Income Fund:
Bankers Trust Company Pyramid Guaranteed
Investment Contracts Fund $1,619,950* $1,261,916*
Massachusetts Mutual Life Insurance Company
Group Annuity Contract - 380,617*
Fidelity Balanced Fund 641,432* 624,284*
Fidelity Asset Allocation Fund 401,737* 252,492*
Fidelity Blue Chip Growth Fund 2,215,056* 1,409,962*
Lifeline Systems, Inc. Common Stock 1,028,405* 786,913*
Participant Loan Fund 295,447 190,236
PNC Bank Conduit Account 21,439 24,174
---------- ----------
$6,223,466 $4,930,594
========== ==========
</TABLE>
* Investment represents 5% or more of net assets available for plan
benefits.
Information provided by the custodian does not disclose the historical cost
of investments. This information required by the Department of Labor's Rules
and Regulations for Reporting and Disclosure under the Employee Retirement
Income Security Act of 1974 is not available and is not disclosed.
Continued
11
<PAGE>
LIFELINE SYSTEMS, INC. EMPLOYEE SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
E. Reconciliation of Financial Statements to Form 5500:
---------------------------------------------------
The following is a reconciliation of net assets available for plan benefits
per the financial statements to the Form 5500:
<TABLE>
<CAPTION>
December 31,
----------------------------
1996 1995
---- ----
<S> <C> <C>
Net assets available for plan benefits per
the financial statements $6,349,554 $5,005,334
Amounts allocated to withdrawing participants (830,362) (874,388)
---------- ----------
Net assets available for plan benefits per the Form 5500 $5,519,192 $4,130,946
========== ==========
</TABLE>
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500:
<TABLE>
<CAPTION>
Year Ended
December 31, 1996
-----------------
<S> <C>
Benefits paid to participants per the financial statements $494,225
Add: amounts allocated to withdrawing participants at
December 31, 1996 830,362
Less: amounts allocated to withdrawing participants at
December 31,1995 (874,388)
---------
Benefits paid to participants per the Form 5500 $450,199
========
</TABLE>
Amounts allocated to withdrawing participants are recorded on the Form 5500
for benefit claims that have been processed and approved for payment prior
to December 31, but not yet paid as of that date.
F. Tax Status:
----------
The Internal Revenue Service has determined and informed the Company by a
letter dated July 10, 1995 that the Plan and related trust are designed in
accordance with applicable sections of the Internal Revenue Code (IRC). The
Plan has been amended since receiving the determination letter. However,
the plan administrator and the Plan's tax counsel believe that the Plan is
designed and is currently being operated in compliance with the applicable
requirements of the IRC.
Continued
12
<PAGE>
LIFELINE SYSTEMS, INC. EMPLOYEE SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
G. Plan Termination:
----------------
The Company intends to continue the Plan indefinitely but reserves the right
to terminate the Plan at any time without any liability whatsoever for such
discontinuance or termination. After payment of expenses by the trustee,
the Plan would be liquidated and each participant would receive his or her
interest in the form of a lump-sum payment.
H. Subsequent Event:
----------------
Effective January 1, 1997, the Company changed its Plan administrator from
New York Life Benefit Services to State Street Solutions. In addition, the
Plan has changed its investment advisor to State Street Global Advisors and
as such now offers ten investment options including stock of the Company to
which employees may allocate their contributions and the Company-matching
contributions. Also, the Company match was increased to a maximum of $500
per quarter, or $2,000 per year.
13
<PAGE>
LIFELINE SYSTEMS, INC. EMPLOYEE SAVINGS AND INVESTMENT PLAN
SUPPLEMENTAL SCHEDULE
Line 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
December 31, 1996
<TABLE>
<CAPTION>
Identity of Issue, Borrower, Rate of Current
Lessor or Similar Party Description of Investment Interest Cost ** Value
- ---------------------------- ------------------------- -------- ------- -----
<S> <C> <C> <C> <C>
Bankers Trust Company Pyramid
Guaranteed Investment Contracts
Fund Bank Pooled Fund 5.32% - 5.68 % $1,619,950
Fidelity Balanced Fund Mutual Fund N/A 641,432
Fidelity Asset Allocation Fund Mutual Fund N/A 401,737
Fidelity Blue Chip Growth Fund Mutual Fund N/A 2,215,056
* Lifeline Systems, Inc. Common Stock Shares of Common Stock N/A 1,028,405
* Participant loans, payment
schedule: fully amortized Participant Loans 9.75% - 10.00% 295,447
PNC Bank Conduit Account Cash Account Floating 21,439
----------
$6,223,466
==========
</TABLE>
* Party-in-interest
** NYL Benefit Services Company does not maintain historical cost
information required by the Department of Labor's Rules and Regulations
for reporting and disclosure under the Employee Retirement Income
Security Act of 1974. Accordingly, for the purpose of this schedule,
historical cost information is not presented.
14
<PAGE>
LIFELINE SYSTEMS, INC. EMPLOYEE SAVINGS AND INVESTMENT PLAN
SUPPLEMENTAL SCHEDULE
Line 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
SINGLE TRANSACTIONS IN EXCESS OF 5% OF THE CURRENT VALUE OF PLAN ASSETS
for the year ended December 31, 1996
Transactions in excess of 5% of the current value of plan assets as of the
beginning of the plan year are summarized as follows:
<TABLE>
<CAPTION>
Purchase Selling Cost of Net Gain
Identity of Party Involved Description of Asset Price Price Assets * (Loss) *
- -------------------------- -------------------- --------- ------- ------- ----------
<S> <C> <C> <C> <C> <C>
Massachusetts Mutual Life
Insurance Company Group
Annuity Contract Group Annuity Contract $380,697
Bankers Trust Company Pyramid
Guaranteed Investment
Contracts Fund Bank Pooled Fund $380,697
PNC Bank Conduit Account $380,697 $380,697
</TABLE>
* NYL Benefit Services Company does not maintain historical cost information
required by the Department of Labor's Rules and Regulations for reporting
and disclosure under the Employee Retirement Income Security Act of 1974.
Accordingly, for the purpose of this schedule, historical cost information
and the related net gain (loss) are not presented.
15
<PAGE>
LIFELINE SYSTEMS, INC. EMPLOYEE SAVINGS AND INVESTMENT PLAN
SUPPLEMENTAL SCHEDULE
Line 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
SERIES OF TRANSACTIONS IN EXCESS OF 5% OF THE CURRENT VALUE OF PLAN ASSETS
for the year ended December 31, 1996
Series of transactions in excess of 5% of the current value of plan assets as of
the beginning of the plan year are summarized as follows:
<TABLE>
<CAPTION>
Number Number
Description of Purchase of Selling Cost of Net
Identity of Party Involved of Asset Transactions Price Transactions Price Asset * Gain (Loss)*
- -------------------------- ----------- ------------ -------- ------------ ------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Massachusetts Mutual Life
Insurance Company Group
Annuity Contract Group Annuity Contract 1 $ 380,697
Fidelity Balanced Fund Mutual Fund 18 $ 153,754 15 $ 161,813
Fidelity Blue Chip Growth Fund Mutual Fund 24 $ 774,652
Bankers Trust Company Pyramid
Guaranteed Investment
Contracts Fund Bank Pooled Fund 16 $ 629,561 14 $ 357,973
Lifeline Systems, Inc. Stock Fund 17 $ 142,098 13 $ 216,665
PNC Bank Conduit Account Cash Account 97 $2,447,549 170 $2,425,973
</TABLE>
* NYL Benefit Services Company does not maintain historical cost information
required by the Department of Labor's Rules and Regulations for reporting and
disclosure under the Employee Retirement Income Security Act of 1974.
Accordingly, for the purpose of this schedule, historical cost information and
the related net gain (loss) are not presented.
16
<PAGE>
Exhibit 99.1(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements of
Lifeline Systems, Inc. on Form S-8 (File Nos. 33-40684, 33-58632, 33-79294, 33-
59499, 333-03949, 333-03953, 333-03951) of our report dated May 21, 1997, on our
audits of the financial statements of the Lifeline Systems, Inc. Employee
Savings and Investment Plan as of December 31, 1996 and 1995 and for the years
then ended, which report is included in this Annual Report on Form 11-K.
/s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
June 25, 1997
