<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
[x] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from __________________________ to ___________________
Commission file Number 34-0-20400
----------
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
UNIVERSAL STANDARD MEDICAL LABORATORIES, INC.
TAX DEFERRED SAVINGS PLAN AND TRUST
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
UNIVERSAL STANDARD MEDICAL LABORATORIES, INC.
26500 Northwestern Highway, Suite 400
Southfield, Michigan 48076
<PAGE> 2
UNIVERSAL STANDARD MEDICAL LABORATORIES, INC.
TAX DEFERRED SAVINGS PLAN AND TRUST
INDEX
<TABLE>
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 3
FINANCIAL STATEMENTS
Statements of Net Assets Available for Plan Benefits
as of December 31, 1996 and 1995 4
Statement of Changes in Net Assets Available for Plan
Benefits for the Year Ended December 31, 1996 5
NOTES TO FINANCIAL STATEMENTS 6-12
SUPPLEMENTAL SCHEDULES
Schedule of Assets Held for Investment
Purposes at December 31, 1996 14
Schedule of Reportable Transactions for
the Year Ended December 31, 1996 15-16
EXHIBIT NO. 23
Consent of Independent Certified Public Accountants 18
</TABLE>
2
<PAGE> 3
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Plan Administrator of the
Universal Standard Medical Laboratories, Inc.
Tax Deferred Savings Plan and Trust
We have audited the accompanying statements of net assets available for plan
benefits of Universal Standard Medical Laboratories, Inc. Tax Deferred Savings
Plan and Trust as of December 31, 1996 and 1995, and the related statement of
changes in net assets available for Plan benefits for the year ended December
31, 1996. 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, 1996 and 1995, and the changes in net assets available for
benefits for the year ended December 31, 1996, in conformity with generally
accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the
financial statements taken as a whole. The supplemental schedules contained on
pages 14 through 16 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 supplemental schedules 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 schedule of assets held for investment purposes that accompanies the Plan's
financial statement does not disclose the historical cost of certain plan
assets held by the Plan custodian. 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. In addition, the
Plan custodian does not provide information separately for the components of
investment income including interest and dividend income, realized gains and
losses, and unrealized appreciation or depreciation of the investments.
BDO SEIDMAN, LLP
Troy, Michigan
June 20, 1997
3
<PAGE> 4
UNIVERSAL STANDARD MEDICAL LABORATORIES, INC.
TAX DEFERRED SAVINGS PLAN AND TRUST
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
<TABLE>
<CAPTION>
December 31, 1996 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at fair value $ 4,016,335 $ 4,398,649
Participant loans receivable 137,547 67,310
Employee contribution receivable 37,765 88,912
- ----------------------------------------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS $ 4,191,647 $ 4,554,871
================================================================================================================
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 5
UNIVERSAL STANDARD MEDICAL LABORATORIES, INC.
TAX DEFERRED SAVINGS PLAN AND TRUST
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
ADDITIONS
Participant contributions $ 715,624
Investment income, net 483,931
- ---------------------------------------------------------------------------------------------------------------
TOTAL ADDITIONS 1,199,555
- ---------------------------------------------------------------------------------------------------------------
DEDUCTIONS
Benefit payments 1,536,119
Administrative expenses 26,660
- ---------------------------------------------------------------------------------------------------------------
TOTAL DEDUCTIONS 1,562,779
- ---------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS (363,224)
NET ASSETS AVAILABLE FOR PLAN BENEFITS, beginning of year 4,554,871
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS, end of year $ 4,191,647
===============================================================================================================
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 6
UNIVERSAL STANDARD MEDICAL LABORATORIES, INC.
TAX DEFERRED SAVINGS PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS
1. PLAN DESCRIPTION The following description of the Universal Standard
Medical Laboratories, Inc. (the "Company" or
"USML") Tax Deferred Savings Plan and Trust (the
"Plan") is provided for general Participants should
refer to the plan document, as amended, for more
complete information.
GENERAL
The Plan is a defined contribution plan covering
substantially all employees of the Company who have
one year of service and have attained the age of
21. The plan is subject to the Employee Retirement
Income Security Act of 1974 ("ERISA").
CONTRIBUTIONS
Each year, participants may contribute up to 15
percent of pretax annual compensation, as defined
by the Plan. Company contributions are on a
discretionary basis, as defined by the Plan.
Contributions are subject to certain limitations
established by the Internal Revenue Service.
VESTING AND DISTRIBUTIONS
Under the provisions of the Plan, participant's
contributions vest immediately, while the employer
contributions vest as follows:
Employer
Participants' Contributions
Years of Vesting
Service Percentage
---------------------------------------------------
1 25
2 50
3 75
4 100
===================================================
6
<PAGE> 7
UNIVERSAL STANDARD MEDICAL LABORATORIES, INC.
TAX DEFERRED SAVINGS PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS
Withdrawals of contributions and interest earned
can be made only at the time of retirement, on and
after the attainment of age 59 1/2, on the
termination of employment, at the death of the
participant, or disability of the participant
as defined by the Plan.
PARTICIPANTS' ACCOUNTS
Each participant's account is credited with the
participant's contributions, employer
contributions, if any, and the participant's share
of the Plan earnings. The Plan earnings from
investments are allocated quarterly to the
participant's account proportionately based on the
account balance at the prior allocation date,
adjusted for any contributions or withdrawals made
during the period.
LOANS
A participant may elect to draw an
interest-bearing loan from the Plan in accordance
with the plan agreement. Loan transactions are
treated as a transfer to (from) the fixed income
account (to) from the participant loan account.
INVESTMENT OPTIONS
Under the Plan and Trust agreement the Company has
appointed Equitable Life Assurance Society of the
United States ("Equitable") as custodian of the
Plan. Upon enrollment in the Plan, and monthly, a
participant may direct its credited account balance
in any of the following six investment options:
(1) EQUITABLE GUARANTEED INTEREST ACCOUNT
Funds are invested in the Equitable general
account, which supports all of its insurance and
annuity operations. Contributions allocated to the
account earn interest at the current guaranteed
interest rate, which was 6.15% during 1996.
(2) EQUITABLE COMMON STOCK FUND
Funds are invested primarily in common stock and
other equity-type securities issued by intermediate
and large-sized companies.
7
<PAGE> 8
UNIVERSAL STANDARD MEDICAL LABORATORIES, INC.
TAX DEFERRED SAVINGS PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS
(3) EQUITABLE BOND FUND
Funds are invested primarily in publicly traded
fixed income securities, such as bonds, debentures
and notes.
(4) EQUITABLE AGGRESSIVE STOCK FUND
Funds are invested primarily in securities of
medium and smaller-sized companies perceived to
have greater growth potential than larger
companies.
(5) EQUITABLE BALANCED FUND
Funds are invested primarily in common stock,
other equity-type instruments, longer-term fixed
income securities, publicly-traded debt securities
and short term money market instruments.
(6) USML STOCK FUND
Funds are invested in common stock of USML. On
December 31, 1996, the Plan was amended so that
effective January 1, 1997, no additional
contributions shall be made to the USML stock fund.
8
<PAGE> 9
UNIVERSAL STANDARD MEDICAL LABORATORIES, INC.
TAX DEFERRED SAVINGS PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS
2. SUMMARY OF The following is a summary of significant
SIGNIFICANT accounting policies followed in the preparation
ACCOUNTING of the financial statements. These policies are
POLICIES in accordance with generally accepted accounting
principles.
INVESTMENT VALUATION
The Plan's investments are stated at fair value.
Investments in the Common Stock Fund, Bond Fund,
Aggressive Stock Fund and Balanced Fund represent
interest in pooled investment funds. The fair
value of pooled investments represents the Plan's
pro rata interests in the aggregate fair value of
the pooled investment funds as determined by the
custodian. The Guaranteed Interest Account is
included in the financial statements at contract
value, which approximates fair value, as reported
to the Plan by Equitable. Contract value
represents total contributions, plus interest at
the current guaranteed interest rate, less benefit
payments or other withdrawals and deductions for
fees and expenses. The Company stock fund is
valued as its quoted market price. Participant
notes receivable are valued at cost which
approximates fair value.
Investment transactions are reflected on a
trade-date basis. Interest income is recorded on
the accrual basis.
INVESTMENT INCOME
Investment income included in the Statement of
Changes in Net Assets Available for Plan Benefits
represents the accumulated changes in net asset
fair values of the accounts in which the plan
assets are invested, including interest and
dividend income, realized gains or losses and
unrealized appreciation or depreciation of the
investments.
BENEFIT PAYMENT
Benefit payments to participants are recorded when
paid.
9
<PAGE> 10
UNIVERSAL STANDARD MEDICAL LABORATORIES, INC.
TAX DEFERRED SAVINGS PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS
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 revenues and expenses during the reporting
period. Actual results could differ from those
estimates.
3. INVESTMENTS The following table represents the fair value of
investments available for plan benefits at
December 31, 1996 and 1995. Investments that
represent five percent or more of the Plan's net
assets are separately identified.
<TABLE>
<CAPTION>
December 31, 1996 1995
----------------------------------------------------------------------------------
<S> <C> <C>
EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Guaranteed Interest Account $ 1,410,893 $ 1,795,427
Balanced Fund 970,044 1,071,662
Common Stock Fund 867,001 813,907
Aggressive Stock Fund 668,087 606,924
OTHER 100,310 110,729
----------------------------------------------------------------------------------
$ 4,016,335 $ 4,398,649
==================================================================================
</TABLE>
4. PRIORITIES UPON Although it has not expressed any intent to do so,
TERMINATION OF the Company has the right Termination of the under
THE PLAN the Plan to discontinue its contribution at any
time and to terminate the Plan Plan subject to the
provisions of ERISA. In the event of complete
discontinuance of contributions by the employer or,
if the Plan is terminated, the date of such
discontinuance or determination shall be deemed an
anniversary for the purpose of making the
allocations of earnings. The accounts of the
participant shall thereupon become 100 percent
vested.
5. TAX STATUS The Plan obtained its latest determination letter
on April 20, 1995 in which the Internal Revenue
Service stated that the Plan, as then designed, is
qualified and the trust established under the Plan
is tax-exempt, under the appropriate sections of
the Internal Revenue Code.
10
<PAGE> 11
UNIVERSAL STANDARD MEDICAL LABORATORIES, INC.
TAX DEFERRED SAVINGS PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS
6. EXPENSES For the year ended December 31, 1996, certain
administrative costs associated with the Plan,
including custodian, legal and audit fees, were
paid by the Company and are not reflected as
expenses of the Plan.
7. RECONCILIATION OF The following is a reconciliation of net assets
FINANCIAL STATEMENTS available for benefits per the financial
TO FORM 5500 statements to the Form 5500:
<TABLE>
<CAPTION>
December 31, 1996 1997
----------------------------------------------------------------------------------
<S> <C> <C>
Net assets available for benefits per the financial
statements $4,191,647 $4,554,871
Amounts allocated to withdrawing participants (356,999) (336,826)
----------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS
PER THE FORM 5500 $3,834,648 $4,218,045
==================================================================================
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500 for the year ended December 31, 1996:
BENEFITS PAID TO PARTICIPANTS PER THE FINANCIAL STATEMENTS $1,536,119
ADD AMOUNTS ALLOCATED TO WITHDRAWING PARTICIPANTS,
at December 31, 1996 356,999
LESS AMOUNTS ALLOCATED TO WITHDRAWING PARTICIPANTS,
at December 31, 1995 (336,826)
----------------------------------------------------------------------------------
BENEFITS PAID TO PARTICIPANTS PER THE FORM 5500 $1,556,292
==================================================================================
</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.
11
<PAGE> 12
UNIVERSAL STANDARD MEDICAL LABORATORIES, INC.
TAX DEFERRED SAVINGS PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS
8. RELATED PARTY Certain Plan investments are shares of pooled
investment funds managed by the Transactions
Equitable Life Assurance Society of the United
States. Equitable is the custodian as defined by
the Plan and, therefore, qualifies as a
party-in-interest. Fees paid by the Plan for the
investment management services amounted to $26,660
for the year ended December 31, 1996.
12
<PAGE> 13
SUPPLEMENTAL SCHEDULES
<PAGE> 14
UNIVERSAL STANDARD MEDICAL LABORATORIES, INC.
TAX DEFERRED SAVINGS PLAN AND TRUST
SCHEDULE OF ASSETS HELD FOR
INVESTMENT PURPOSES AT DECEMBER 31, 1996
<TABLE>
<CAPTION>
Identity of Issuer, Borrower, Description of Investment, Including Maturity Date,
Lessor or Similar Party Rate of Interest, Collateral, Par or Maturity Value Cost Value
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES Guaranteed Interest Account $ * $1,410,893
Balanced Fund * 970,044
Common Stock Fund * 867,001
Aggressive Stock Fund * 668,087
Bond Fund * 84,924
USML USML Stock Fund * 15,386
PARTICIPANT LOANS RECEIVABLE Interest rates range from 7-15% - 137,547
- ------------------------------------------------------------------------------------------------------------------------------
$4,153,882
==============================================================================================================================
</TABLE>
* Information regarding the cost of the investments was not available from the
custodian.
14
<PAGE> 15
UNIVERSAL STANDARD MEDICAL LABORATORIES, INC.
TAX DEFERRED SAVINGS PLAN AND TRUST
SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Expenses
Description of Asset (Including Interest Purchase Selling Lease Incurred with
Identity of Party Involved Rate and Maturity in Case of a Loan) Price Price Rental Transaction
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REPORTABLE CRITERION I Any transaction within the plan year, with
respect to any plan asset, involving an amount
in excess of five percent of the current value
of plan assets (Note A)
None
REPORTING CRITERION II Any series of transactions (other than transactions
with respect to securities) within the plan year with
or in conjunction with the same person which, when
aggregated, regardless of the category of asset and
the gain or loss on any transaction, involves an amount
in excess of five percent of the current value of
plan assets.
None
REPORTING CRITERION III Any transaction within the plan year involving securities
of the same issue if within the plan year any series of
transactions with respect to such securities, when aggregated,
involves an amount in excess of five percent
of the current value of plan assets (Note B)
<CAPTION>
Description of Asset (Including Interest Cost of Current Value of Asset Net Gain
Identity of Party Involved Rate and Maturity in Case of a Loan) Asset** Transaction Date or (Loss)**
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REPORTABLE CRITERION I Any transaction within the plan year, with
respect to any plan asset, involving an amount
in excess of five percent of the current value
of plan assets (Note A)
None
REPORTING CRITERION II Any series of transactions (other than transactions
with respect to securities) within the plan year with
or in conjunction with the same person which, when
aggregated, regardless of the category of asset and
the gain or loss on any transaction, involves an amount
in excess of five percent of the current value of
plan assets.
None
REPORTING CRITERION III Any transaction within the plan year involving securities
of the same issue if within the plan year any series of
transactions with respect to such securities, when aggregated,
involves an amount in excess of five percent
of the current value of plan assets (Note B)
</TABLE>
15
<PAGE> 16
UNIVERSAL STANDARD MEDICAL LABORATORIES, INC.
TAX DEFERRED SAVINGS PLAN AND TRUST
SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Expenses
Description of Asset (Including Interest Purchase Selling Lease Incurred with
Identity of Party Involved Rate and Maturity in Case of a Loan) Price Price Rental Transaction*
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EQUITABLE LIFE ASSURANCE SOCIETY
OF THE UNITED STATES 32 purchases, Common Stock Fund $266,079
35 sales, Guaranteed Interest Account $ 592,564
13 sales, Common Stock Fund 348,003
11 sales, Aggressive Stock Fund 274,043
24 sales, Balanced Fund 383,691
None
REPORTING CRITERION IV Any transaction within the plan year with
respect to securities with or in conjunction
with a person if any prior or subsequent single
transaction within the plan year with such person
with respect to securities exceeds five percent
of the current value of plan assets (Note C)
None
=============================================================================================================================
<CAPTION>
Description of Asset (Including Interest Cost of Current Value of Asset Net Gain
Identity of Party Involved Rate and Maturity in Case of a Loan) Asset** on Transaction Date or (Loss)**
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EQUITABLE LIFE ASSURANCE SOCIETY
OF THE UNITED STATES 32 purchases, Common Stock Fund $ 266,079
35 sales, Guaranteed Interest Account 592,564
13 sales, Common Stock Fund 348,003
11 sales, Aggressive Stock Fund 274,043
24 sales, Balanced Fund 383,691
None
REPORTING CRITERION IV Any transaction within the plan year with
respect to securities with or in conjunction
with a person if any prior or subsequent single
transaction within the plan year with such person
with respect to securities exceeds five percent
of the current value of plan assets (Note C)
None
=============================================================================================================================
</TABLE>
NOTES
(A) Transaction already reported under Criterion III are not reported here.
(B) Transactions already reported under Criterion I are not reported here.
(C) Transactions already included in Criterion I or III are not reported here.
* Information regarding expenses incurred with each transaction was not
available from the asset custodian.
** Information regarding the cost and net gain or loss on assets sold during
the Plan year was not available from the custodian.
16
<PAGE> 17
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustee (or other persons who administer the Plan) have duly caused this annual
report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: June 23, 1997 UNIVERSAL STANDARD MEDICAL
LABORATORIES, INC. TAX
DEFERRED SAVINGS PLAN
By: UNIVERSAL STANDARD MEDICAL
LABORATORIES, INC.
Its: Plan Administrator
By: /s/Eugene E. Jennings
---------------------
Eugene E. Jennings
Its: Chairman, President and
Chief Executive Officer
<PAGE> 18
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
23 Consent of Independent Certified Public
Accountants
<PAGE> 1
Exhibit 23
Consent of Independent Certified Public Accountants
Universal Standard Medical Laboratories, Inc.
26500 Northwestern Highway
Southfield, Michigan 48076
We hereby consent to the incorporation by reference in the registration
statements of Universal Standard Medical Laboratories, Inc. on Form S-8 of our
report dated June 20, 1997 relating to the financial statements and schedules
of Universal Standard Medical Laboratories, Inc. appearing in the Company's
Annual Report on Form 11-K for the year ended December 31, 1996.
BDO SEIDMAN, LLP
Troy, Michigan
June 27, 1997
18
