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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 May 31, 1999
------------
or
[ ] Transition Report Pursuant to Section 15(d) of the Securities Exchange
Act of 1934
Commission file number 33-62357
TAB Products Co. Tax Deferred Savings Plan
(Full title of the Plan)
TAB Products Co.
(Name of issuer of the securities held pursuant to the plan)
1400 Page Mill Road
Palo Alto, CA 94304
(Address of principal executive office)
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SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934,
the administrator has duly caused this annual report to be signed on its behalf
by the undersigned hereunto duly authorized.
TAB PRODUCTS CO.
TAX DEFERRED SAVINGS PLAN
Date: December 14, 1999 By /s/ R. J. Sexton
-----------------------------------
R. J. Sexton, Treasurer and
Member of the Administrative
Committee for the Plan
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TAB PRODUCTS CO.
TAX DEFERRED SAVINGS PLAN
FINANCIAL STATEMENTS
MAY 31, 1999 AND 1998
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TAB PRODUCTS CO.
TAX DEFERRED SAVINGS PLAN
Financial Statements and
Form 5500 Supplemental Schedule G
Years ended May 31, 1999 and 1998
Table of Contents
Independent Accountants' Report 4-5
Financial Statements:
Statements of Net Assets Available for Benefits 6
Statements of Changes in Net Assets Available for Benefits 7
Notes to Financial Statements 8
Form 5500 Supplemental Schedules as of and for the year ended
May 31, 1999 14
27a, Part I - Schedule of Assets Held for Investment Purposes
27d, Part V - Schedule of Reportable Transactions
Consent of Independent Accountants 17
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To the Participants and
Plan Administrator of the
TAB Products Co.
Tax Deferred Savings Plan
INDEPENDENT ACCOUNTANTS' REPORT
We have audited the financial statements and supplemental schedules of the TAB
Products Co. Tax Deferred Savings Plan (the Plan) as of May 31, 1999, and for
the year then ended, as listed in the accompanying table of contents. These
financial statements and supplemental schedules are the responsibility of the
Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audit. Other auditors were engaged to audit
the financial statements and supplemental schedules of the Plan as of and for
the year ended May 31, 1998 and in their report dated September 25, 1998, they
expressed an unqualified opinion on those statements.
We conducted our audit 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 the
Plan's management, as well as evaluating the overall financial statement
presentation. We believe that our audit 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 benefits of the Plan as of
May 31, 1999, and the changes in net assets available for benefits for the year
then ended, in conformity with generally accepted accounting principles.
Our audit was performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules 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
4
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for Reporting and Disclosure under the Employee Retirement Income Security Act
of 1974. These supplemental schedules are the responsibility of the Plan's
management. The supplemental schedules have been subjected to the auditing
procedures applied in the audit 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.
/s/ Mohler, Nixon & Williams
MOHLER, NIXON & WILLIAMS
Accountancy Corporation
Campbell, California
December 8, 1999
5
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TAB PRODUCTS CO.
TAX DEFERRED SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
<TABLE>
<CAPTION>
May 31,
--------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Investments, at fair value $18,602,366 $23,795,641
------------ ------------
Assets held for investment purposes 18,602,366 23,795,641
Accrued interest and dividends receivable 6,782 4,985
Employer's contribution receivable 19,435 17,148
Participants' contributions receivable 67,734 57,586
------------ ------------
Net assets available for benefits $18,696,317 $23,875,360
------------ ------------
------------ ------------
</TABLE>
See independent accountants' report and accompanying notes to financial
statements.
6 of 17
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TAB PRODUCTS CO.
TAX DEFERRED SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
<TABLE>
<CAPTION>
For the years ended
May 31,
-----------------------------
1999 1998
------------- -----------
<S> <C> <C>
Additions to net assets attributed to:
Investment income (loss):
Dividends and interest $ 1,019,864 $1,265,240
Net realized and unrealized appreciation
(depreciation) in fair value of investments (5,011,816) 3,537,305
------------- -----------
(3,991,952) 4,802,545
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Contributions:
Participant 1,765,896 1,560,822
Employer 449,132 463,659
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2,215,028 2,024,481
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Total additions (deductions) (1,776,924) 6,827,026
Deductions from net assets attributed to:
Withdrawals and distributions 3,402,119 2,508,546
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Net increase (decrease) in net assets (5,179,043) 4,318,480
Net assets available for benefits:
Beginning of year 23,875,360 19,556,880
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End of year $18,696,317 $23,875,360
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</TABLE>
See independent accountants' report and accompanying notes to financial
statements.
7 of 17
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TAB PRODUCTS CO.
TAX DEFERRED SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
May 31, 1999 and 1998
Note 1 - The Plan and its significant accounting policies:
The following description of the TAB Products Co. (the Company) Tax Deferred
Savings Plan (the Plan) provides only general information. Participants should
refer to the Plan document for a more complete description of the Plan's
provisions.
The Plan is a defined contribution plan that was adopted in 1956 by the Company
to provide benefits to eligible employees. The Plan covers all employees of the
Company except employees covered by a collective bargaining agreement,
independent contractors, and non-resident aliens.
Effective January 1, 1998, the Plan document was amended and restated in its
entirety.
The Plan administrator believes that the Plan is currently designed and operated
in compliance with the applicable requirements of the Internal Revenue Code and
the provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
Administration -
The Company has appointed an Administrative Committee (the Committee) to manage
the operation and administration of the Plan. The Company has contracted with
Merrill Lynch Trust Company (Merrill Lynch) to act as the custodian, trustee and
third-party administrator to process and maintain the records of participant
data. Substantially all expenses incurred for administering the Plan are paid by
the Company.
Investments -
Participant contributions to the Plan are held by Merrill Lynch and invested
based solely upon instructions received from participants. Company matching
contributions to the Plan are non-participant directed and are invested in
shares of the Company's common stock.
The Plan's investments in mutual funds and Company stock are valued at fair
value as of the last day of the Plan year, as measured by quoted market prices.
Participant loans are valued at cost, which approximates fair value.
8
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Vesting -
Participants are immediately vested in their salary deferral contributions,
rollover contributions, and related earnings. Participants vest ratably after
two years of service and are fully vested in the employer's matching
contributions and incentive contributions allocated to their account after
five years of credited service.
Income taxes -
The Plan has been amended since receiving its latest favorable determination
letter dated March 29, 1996. However, the Company intends that the Plan continue
to qualify under the applicable requirements of the Internal Revenue Code and
related state statutes and believes that the trust, which forms a part of the
Plan, is exempt from federal income and state franchise taxes.
Reclassifications -
Certain reclassifications were made to the fiscal 1998 financial statements to
conform to the fiscal 1999 presentation.
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 changes therein, and
disclosure of contingent assets and liabilities. Actual results could differ
from those estimates.
Basis of accounting and presentation -
The Plan's financial statements have been prepared on the accrual basis of
accounting.
Risks and uncertainties -
The Plan provides for various mutual fund investment options and Company stock.
These investments are exposed to various risks, such as interest rate, market
fluctuations and credit risks. Due to the level of risk associated with certain
investment securities, it is at least reasonably possible that changes in risks
in the near term would materially affect participants' account balances and the
amounts reported in the statements of net assets available for benefits and the
statements of changes in net assets available for benefits.
9
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New accounting pronouncement -
In September 1999, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of
Position ("SOP") 99-3, "Accounting for and Reporting of Certain Defined
Contribution Benefit Plan Investments and Other Disclosure Matters". This SOP
eliminates the previous requirement for a defined contribution plan to
disclose participant-directed investment programs by fund. SOP 99-3 is
effective for financial statements for plan years ending after December 15,
1999. However, earlier application is encouraged for fiscal years for which
annual financial statements have not been issued. The Plan has adopted SOP
99-3 in its financial statements for the year ended May 31, 1999.
Note 2 - Participation and benefits:
Participant contributions -
Participants may elect to have the Company contribute a percentage, from 1%
to 15%, of their eligible pre-tax compensation up to the amount allowable
under the Internal Revenue Code. Participants who elect to have the Company
contribute a portion of their compensation to the Plan agree to accept an
equivalent reduction in taxable compensation. Contributions withheld are
invested in accordance with the participant's direction and are allocated to
funds in 1% increments.
Participants are also allowed to make rollover contributions of amounts
received from other tax-qualified employer-sponsored retirement plans. Such
contributions are deposited in the appropriate investment funds in accordance
with the participant's direction and the Plan's provisions.
Employer contributions -
The Company will make matching contributions equal to 50% of each eligible
participant's contribution up to a maximum of 2% of the participant's
compensation. In addition, the Company may make an incentive contribution
equal to a percentage of the matching contribution for each participant if
the Company's net profits (as defined in the Plan) exceed 5% of Company
revenues for the Plan year. No incentive contribution has been made for the
years ended May 31, 1999 and 1998. The Company's contributions may be made in
the form of cash or common stock of the Company. The Company's actual
contribution may be reduced by certain available forfeitures, if any, during
the Plan year.
10
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Participant accounts -
Each participant's account is credited with the participant's contribution,
the Company's matching contribution and incentive contribution, if any, along
with the participant's allocable shares of the Plan's earnings or losses.
Allocation of the Company's contribution is based on participant
contributions.
Payment of benefits -
Upon termination, the participant or beneficiary will receive the benefits in
a lump sum amount equal to the value of the participant's vested interest in
his or her account. Distributions are in cash except the participant may
elect to have his or her investment in Company stock distributed in whole
shares of Company Stock.
Loans to participants -
The Plan allows participants to borrow not less than $1,000 and up to the lesser
of $50,000 or 50% of their vested account balance. The loans are secured by the
participant's vested balance. Such loans bear interest at 1% above the prime
rate as published in the Wall Street Journal and must be repaid to the Plan
within a five-year period, unless the loan is used for the purchase of a
residence in which case the maximum repayment period is 15 years. The specific
terms and conditions of such loans are established by the Committee. At May 31,
1999, outstanding loans to participants carried interest rates that ranged from
8.75% to 9.75%.
Note 3 - Investments:
The following table lists the fair values of investments that represent 5% or
more of the Plan's net assets at May 31:
1999 1998
Merrill Lynch:
Retirement Preservation Trust $2,843,036 $2,746,749
Growth Fund Class A 2,528,126 4,433,685
Corporate Bond Fund Investment
Grade Class A 1,653,912 1,724,763
Basic Value Fund Class A 5,250,554 5,488,640
AIM Equity Constellation Fund 1,744,446 1,188,965
TAB Products Co. Common Stock 3,249,024* 6,962,647*
*Includes non-participant directed amounts
11
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Note 4 - Related party transactions:
As allowed in the Plan, participants may elect to invest a portion of their
accounts in TAB Products Co. Common Stock. In addition, the Company's
matching and incentive contributions are invested in TAB Products Co. Common
Stock. All Company contributions may be made in TAB Products Co. Common Stock
or cash, which is used to purchase TAB Products Co. Common Stock in the open
market. Aggregate investment in TAB Products Co. Common Stock at May 31, 1999
and 1998 was as follows:
Date Number of shares Fair value
1999 499,850 $3,249,024
1998 476,078 $6,962,647
During fiscal year 1999 and 1998, dividends paid for investments in TAB
Products Co. Common Stock were $95,418 and $73,131, respectively. Net
realized and unrealized appreciation (depreciation) in fair value of
investments in Company stock was ($3,836,015) and $2,550,329 in fiscal 1999
and 1998, respectively.
Certain Plan investments are shares of mutual funds managed by the Plan
trustee, Merrill Lynch. These transactions qualify as party-in-interest. Any
purchases and sales of these funds are open market transactions at fair
market value. Such transactions are permitted under the provisions of the
Plan and are exempt from the prohibition of party-in-interest transactions
under ERISA and applicable exemptions promulgated thereunder.
Note 5 - Plan termination and/or modification:
The Company intends to continue the Plan indefinitely for the benefit of its
employees; however, it reserves the right to terminate and/or modify the Plan at
any time by resolution of its Board of Directors and subject to the provisions
of ERISA. In the event the Plan is terminated in the future, participants would
become fully vested in their accounts.
Note 6 - Subsequent events:
Effective June 1, 1999, the Company appointed Charles Schwab Trust Company and
TRI-AD Company to replace Merrill Lynch as trustee and third-party
administrator, respectively.
12
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During March 1999, the Employee Benefits Committee approved the first
amendment to the restated Plan document to be effective June 1, 1999. The
amendment increases the limit of the matching contribution from 2% to 3% of
participants' compensation. In addition, the Company may make a discretionary
matching contribution as determined by the Board of Directors every year.
This discretionary matching contribution is in addition to the 50% match and
the incentive contribution. The Plan was also amended to provide for a
Special Matching Contribution for Plan years beginning June 1, 1999 through
June 1, 2001, to qualified employees based on years of service.
Effective June 1, 1999, each eligible employee who has not completed an
enrollment election form will be automatically enrolled in the Plan as of the
next payroll period. All eligible employees hired after June 1, 1999 who do
not complete an enrollment election form will be automatically enrolled in
the Plan on the first payroll period following his or her date of hire. Any
participant who is automatically enrolled in the Plan will have a deferral
contribution made on his or her behalf equal to 1% of his or her eligible
compensation which will be invested in the Plan's investment options as
determined by the Committee.
The Company sold its Field Service Group to Bell & Howell effective June 1,
1999. Employees of the Field Service Group have the option to rollover their
funds to Bell & Howell's 401(k) plan, leave their funds in the Plan or withdraw
their funds.
Note 7 - Year 2000 compliance (unaudited):
The Plan, as with most users of computer software, was required to modify
significant portions of its internally used software to enable it to function
properly in the year 2000. In addition, the Plan must also insure that its
service providers are in compliance with the year 2000 issue. Since the Plan
uses mainly third-party software and service providers, it does not anticipate a
problem in resolving the year 2000 issue in a timely manner.
13
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TAB PRODUCTS CO.
TAX DEFERRED SAVINGS PLAN
FORM 5500
SUPPLEMENTAL SCHEDULE G
MAY 31, 1999
14
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E.I.N.: 94-1190862
Plan #:001
TAB PRODUCTS CO.
TAX DEFERRED SAVINGS PLAN
ITEM 27a, PART 1 - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
MAY 31, 1999
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Description of investment
Identity of issue, including maturity date,
borrower, lessor rate of interest, collateral, Current
or similar party par or maturity value Cost Value
- ------- ----------------- --------------------------------- ----------- -----------
<S> <C> <C> <C> <C>
* TAB Products Co. TAB Products Co Del New $ 2,660,176 $ 3,249,024
* Merrill Lynch Ret Preservation Trust 2,843,036 2,843,036
* Merrill Lynch Growth Fund Class A 3,136,272 2,528,126
* Merrill Lynch Global Allocation Fund
Class A 332,295 336,457
AIM Equity Constellation Fund 1,494,376 1,744,446
Templeton Foreign Fund 450,609 441,293
* Merrill Lynch Basic Value Fund Class A 3,943,640 5,250,554
* Merrill Lynch Corporate Bond Fund
Investment Grade Class A 1,695,005 1,653,912
* Participant loans Loan fund
(interest rates from 8.75% to 9.75%) 555,518
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Total $18,602,366
------------
------------
* Parties-in-interest
</TABLE>
15 of 17
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E.I.N.:94-1190862
Plan #: 001
TAB PRODUCTS, CO.
TAX DEFERRED SAVINGS PLAN
ITEM 27d, PART V - SCHEDULE OF REPORTABLE TRANSACTIONS
MAY 31, 1999
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e) (f) (g)
Expense
Description of asset incurred
(including interest rate and Purchase Selling Lease with Cost of
maturity in case of a loan) Price Price rental transaction asset
- ------ --------------------------------------- ------------ ---------- --------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
* TAB Products Co Del New $795,808 $795,808
* TAB Products Co Del New $453,470 366,232
* Merrill Lynch Preservation Trust 906,431 906,431
* Merrill Lynch Preservation Trust 815,682 815,682
* Merrill Lynch Growth Fund Class A 679,229 679,229
* Merrill Lynch Growth Fund Class A 1,319,556 1,528,699
* Merrill Lynch Basic Value Fund Class A 1,240,840 1,240,840
* Merrill Lynch Basic Value Fund Class A 1,508,028 1,295,535
* Parties-in-interest
<CAPTION>
(a) (b) (h) (i)
Current value
Description of asset of asset on
(including interest rate and transaction Net gain
maturity in case of a loan) date or (loss)
- ------ --------------------------------------- ------------------ -----------------
<S> <C> <C> <C>
* TAB Products Co Del New $795,808 $ -
* TAB Products Co Del New 453,470 87,238
* Merrill Lynch Preservation Trust 906,431 -
* Merrill Lynch Preservation Trust 815,682 -
* Merrill Lynch Growth Fund Class A 679,229 -
* Merrill Lynch Growth Fund Class A 1,319,556 (209,143)
* Merrill Lynch Basic Value Fund Class A 1,240,840 -
* Merrill Lynch Basic Value Fund Class A 1,508,028 212,493
* Parties-in-interest
</TABLE>
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Exhibit 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-62357) of TAB Products Co. Tax Deferred Savings
Plan of our report dated December 8, 1999, relating to the financial statements
and schedules that appear in this Form 11-K.
/s/ Mohler, Nixon & Williams
MOHLER, NIXON & WILLIAMS
Accountancy Corporation
Campbell, California
December 14, 1999
