SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTON 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 FEE REQUIRED
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 NO FEE REQUIRED
For the transition period from _____________ to ______________
Commission file number: 000-21571
A. Full title of the plan and the address of the plan, if different from that
of the issuer named below:
TMP Worldwide Inc.
TMP Worldwide Inc. 401(K) Savings Plan
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
TMP Worldwide Inc.
1633 Broadway, 33rd Floor
New York, New York 10019
Financial Statements and Exhibits
(A) Financial Statements:
Report of Independent Accountants [ ]
Financial Statements Prepared in Accordance
with the Financial Reporting Requirements of ERISA
Notes to Financial Statements
Schedules to Financial Statements
(B) Exhibits:
23 Consent of BDO Seidman [ ]
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, TMP
Worldwide Inc. has duly caused this Annual Report to be signed on its behalf by
the undersigned hereunto duly authorized.
TMP Worldwide Inc.
TMP Worldwide Inc. 401(k) Savings Plan
Dated: December 11, 1996 By: /s/Thomas G. Collison
----------------------------------------
Name: Thomas G. Collison
Title: Principal Financial Officer
TMP Worldwide Inc.
401(k) Savings Plan
Financial Statements
and Supplemental Schedules
Year Ended December 31, 1995
TMP Worldwide Inc.
401(k) Savings Plan
Contents
==============================================================================
INDEPENDENT AUDITORS' REPORT 3
FINANCIAL STATEMENTS:
Statement of net assets available for plan benefits 4
Statement of changes in net assets available
for plan benefits 5
Notes to financial statements 6-12
SUPPLEMENTAL SCHEDULES:
Form 5500 - Item 27a - Schedule of assets held
for investment purposes 13
Form 5500 - Item 27d - Schedule of reportable
transactions 14
2
INDEPENDENT AUDITORS' REPORT
To the Trustee of
TMP Worldwide Inc.
401(k) Savings Plan
We were engaged to audit the financial statements and supplemental schedules of
TMP Worldwide Inc. 401(k) Savings Plan (the "Plan") as of December 31, 1995
and for the year then ended, as listed in the accompanying index. These
financial statements and schedules are the responsibility of the Plan
Administrator.
As permitted by Section 2520.103-8 of the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974, the Plan Administrator instructed us not to perform, and
we did not perform, any auditing procedures with respect to the information
summarized in Note 4 which was certified by Connecticut General Life Insurance
Company, the Custodian of the Plan, except for comparing the information to the
related information included in the financial statements and supplemental
schedules. We have been informed by the Plan Administrator that the Custodian
holds the Plan's investment assets and executes investment transactions. The
Plan Administrator has obtained a certification from the Custodian, as of and
for the year ended December 31, 1995, that the information provided to
the Plan Administrator by the Custodian is complete and accurate.
Because of the significance of the information that we did not audit, we are
unable to, and do not, express an opinion on the accompanying financial
statements and supplemental schedules taken as a whole. The form and content of
the information included in the financial statements and supplemental schedules,
other than that derived from the information certified by the Custodian, have
been audited by us in accordance with generally accepted auditing standards and,
in our opinion, are presented in compliance with the Department of Labor's Rules
and Regulations for Reporting and Disclosure under the Employee Retirement
Income Security Act of 1974.
November 11, 1996
3
TMP WORLDWIDE INC.
401(K) SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
==================================================================================================================================
December 31, 1995
- ----------------------------------------------------------------------------------------------------------------------------------
CIGNA
Guaranteed CIGNA Separate CIGNA Stock CIGNA CIGNA CIGNA
CIGNA Balanced Long-Term Account - Fidelity Market Index Lifetime Lifetime Lifetime
Account Account Growth Opportunities Account Fund 20 Fund 30 Fund 50
- ----------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments
- at market value $767,659 $2,942,817 $3,212,661 $961,973 $ 87 $ 204 $ 2
Loans receivable from
participants 34,215 135,554 81,427 39,648 - - -
Employer contribution
receivable 52,254 165,857 261,375 64,798 1,826 3,601 313
Other - - - - - - -
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 854,128 3,244,228 3,555,463 1,066,419 1,913 3,805 315
- ----------------------------------------------------------------------------------------------------------------------------------
LESS LIABILITIES
Due to Plan participants
(Note 6) - - - - - - -
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES - - - - - - -
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR
PLAN BENEFITS $854,128 $3,244,228 $3,555,463 $1,066,419 $1,913 $3,805 $315
==================================================================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------
Unallocated Total
- ----------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments
- at market value $ - $7,885,403
Loans receivable from
participants 15,778 306,622
Employer contribution
receivable - 550,024
Other 2,594 2,594
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 18,372 8,744,643
- ----------------------------------------------------------------------------------------------------------------------------------
LESS LIABILITIES
Due to Plan participants
(Note 6) 33,762 33,762
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 33,762 33,762
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR
PLAN BENEFITS $(15,390) $8,710,881
==================================================================================================================================
See accompanying notes to financial statements.
4
TMP WORLDWIDE INC.
401(K) SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
====================================================================================================================================
December 31, 1995
- ---------------------------------------------------------------------------------------------------------------------------
CIGNA
Guaranteed CIGNA Separate CIGNA Stock CIGNA
CIGNA Balanced Long-Term Account - Fidelity Market Index Lifetime
Account Account Growth Opportunities Account Fund 20
- ---------------------------------------------------------------------------------------------------------------------------
ADDITIONS:
Participant contributions $168,212 $490,509 $766,847 $188,955 $77
(Note 1)
Employer contributions
(Note 1) 52,254 165,857 261,375 64,798 1,826
Interest and dividends 1,519 148,767 3,282 2,074 -
Net appreciation in value 107,091 - 708,623 222,455 10
of investments
Rollovers of participant (69) 22,887 (4,291) 13,070 -
balances (Note 1)
Transferred assets from 10,089 1,506,896 227,659 54,069 -
acquired companies
(Note 4)
Transfers 24,009 (145,201) 41,445 79,671 -
Forfeitures to Plan 3,427 (1,659) 14,273 3,101 -
(Note 1)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL ADDITIONS 366,532 2,188,056 2,019,213 628,193 1,913
- ---------------------------------------------------------------------------------------------------------------------------
DEDUCTIONS:
Participant withdrawals 88,603 666,758 241,576 105,508 -
Administrative expenses 3,333 18,505 5,046 3,226 -
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL DEDUCTIONS 91,936 685,263 246,622 108,734 -
- ---------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET 274,596 1,502,793 1,772,591 519,459 1,913
ASSETS
NET ASSETS AVAILABLE FOR 579,532 1,741,435 1,782,872 546,960 -
BENEFITS, BEGINNING OF YEAR
===========================================================================================================================
NET ASSETS AVAILABLE FOR
BENEFITS, END OF YEAR $854,128 $3,244,228 $3,555,463 $1,066,419 $1,913
===========================================================================================================================
- ---------------------------------------------------------------------------------
CIGNA CIGNA
Lifetime Lifetime
Fund 30 Fund 50 Unallocated Total
- ---------------------------------------------------------------------------------
ADDITIONS:
Participant contributions
(Note 1) $108 $- $- $1,614,708
Employer contributions
(Note 1) 3,601 313 - 550,024
Interest and dividends - - - 155,642
Net appreciation in value 20 2 - 1,038,201
of investments
Rollovers of participant - - - 31,597
balances (Note 1)
Transferred assets from - - - 1,798,713
acquired companies
(Note 4)
Transfers 76 - - -
Forfeitures to Plan - - - 19,142
(Note 1)
- ---------------------------------------------------------------------------------
TOTAL ADDITIONS 3,805 315 - 5,208,027
- ---------------------------------------------------------------------------------
DEDUCTIONS:
Participant withdrawals - - 15,390 1,117,835
Administrative expenses - - - 30,110
- ---------------------------------------------------------------------------------
TOTAL DEDUCTIONS - - 15,390 1,147,945
- ---------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET 3,805 315 (15,390) 4,060,082
ASSETS
NET ASSETS AVAILABLE FOR - - - 4,650,799
BENEFITS, BEGINNING OF YEAR
=================================================================================
NET ASSETS AVAILABLE FOR
BENEFITS, END OF YEAR $3,805 $315 $(15,390) $8,710,881
=================================================================================
See accompanying notes to financial statements.
5
TMP Worldwide Inc.
401(k) Savings Plan
Notes to Financial Statements
===============================================================================
1. Description of Plan The following description of the TMP
Worldwide Inc. 401(k) Savings Plan and its
related Trust arrangement (collectively, the
"Plan") is provided for general information
purposes only. Participants should refer to
the current Plan document for a complete
description of the Plan's provisions.
The Plan was adopted as of January 1, 1992 by
McKelvey Enterprises, Inc. ("McKelvey",
formerly Telephone Marketing Programs, Inc.)
for the benefit of its eligible employees and
the eligible employees of any other
organization designated by McKelvey's Board
of Directors. The Plan was amended twice
during 1992. The first amendment was
effective January 1, 1992 altering the Plan's
vesting rules and effective July 1, 1992,
altering the eligibility rules. The second
amendment was effective October 1, 1992 and
that amendment permitted McKelvey to extend
the coverage of the Plan to employees of
organizations not considered an affiliate. As
of December 31, 1992, TMP Worldwide Inc. and
TMP Medical Listings, Inc. are the only
organizations designated as additional
participating employers. The Plan also
accommodates the transfer of assets from
seven (7) profit sharing and/or 401(k) plans,
each of which was previously maintained by
companies that were merged into TMP Worldwide
Inc.
6
TMP Worldwide Inc.
401(k) Savings Plan
Notes to Financial Statements
===============================================================================
General
The Plan is a defined contribution plan and
provides for elective contributions on the
part of the participating employees and for
employer matching contributions. The Plan
extends coverage to each employee of the
participating employers, except those
employees covered by a collective bargaining
agreement where the agreement does not
specifically provide for the participation in
the Plan of the employees subject to that
bargaining agreement. As of February 1, 1992
and April 1, 1992, the first two Plan entry
dates, any eligible employee had to have
completed one year of service (a twelve-month
period of at least 1,000 employment hours) to
enter the Plan. Subsequently, the Plan was
revised to allow eligible employees to enter
the Plan beginning each calendar quarter
following their completion of one hour of
service. The Plan designates McKelvey as the
plan administrator (the "Plan
Administrator"). The Plan Administrator shall
be responsible for the operations of the Plan
in accordance with prevailing government
requirements. The Plan is subject to the
provisions of the Employee Retirement Income
Security Act of 1974 ("ERISA") and provisions
of the Internal Revenue Code of 1986 as
pertains to plans intended to qualify under
Section 401(a) of that Code.
Contributions
Participating employees have the option to
make elective contributions of up to 15% of
their compensation, subject to the limit of
Internal Revenue Code Section 402(g) ($9,240
for 1995. Participating employers shall make
a matching contribution equal to the elective
contribution, but not more than 2% of each
contributing employee's compensation. A
participating employee who makes an elective
contribution, however, is only eligible for
an employer matching contribution for the
plan year (the calendar year) if the
employee is employed by the employer on the
last day of such year. Notwithstanding the
employment requirement, the Plan provides
that an employer matching contribution shall
be made to a sufficient number of
nonhighly-compensated employees who have
terminated during the Plan year as may
be necessary to satisfy the requirements of
Internal Revenue Code Section 410(b).
7
TMP Worldwide Inc.
401(k) Savings Plan
Notes to Financial Statements
===============================================================================
Participants' Accounts
Each participant's account is credited with
the elective contributions made by that
participant and employer matching
contributions for which that participant is
eligible. The participating employees direct
the investment of the contributions credited
to their account into one or more of the
investment funds which have been made
available to them. Each participant's account
will be credited with its share of the net
investment earnings of the funds in which
that account is invested. The benefits to
which a participant is entitled is the amount
that can be provided from the participant's
vested account. The Plan also accepts
rollover contributions (i.e., amounts which
can be rolled over into a tax qualified plan
from an Individual Retirement Account or from
another employer's plan).
Forfeitures of terminated participants'
nonvested accounts are applied as a reduction
to the otherwise required employer matching
contribution. Forfeitures occur in a plan
year when a terminated participant receives
the vested portion of their account or, if
earlier, upon the occurrence of six
consecutive one-year breaks in service. If
the terminated participant resumes employment
before six consecutive one-year breaks in
service, the amount that the participant
forfeited will be reinstated with, under
certain circumstances, investment earnings.
8
TMP Worldwide Inc.
401(k) Savings Plan
Notes to Financial Statements
===============================================================================
Vesting
The portion of a participant's account
attributed to elective contributions and
rollover contributions is nonforfeitable at
all times. Vesting (i.e., nonforfeitable
rights to the portion of a participant's
account arising from employer matching
contributions) is based upon the number of
years of service, with a year generally being
a plan year in which the participant
accumulates at least 1,000 employment hours.
Vesting starts with the completion of two
years of service at the rate of 40% and
increases 20% for each subsequent year until
full vesting is achieved with five or more
years. Notwithstanding the number of years of
service, a participant is considered fully
vested at the normal retirement age of
sixty-five, in the event of death, or should
the participant incur a disability which is
considered to be total and permanent. The
Plan provides special vesting rules with
regard to any benefits a participant may have
from a plan that was merged into the TMP
Worldwide Inc. 401(k) Savings Plan.
Effective July 1, 1992, a participant who was
eligible to enter the Plan as of February 1,
1992 with less than one year of service as of
that date automatically received an
additional year of service if that individual
remained in the employment of a participating
employer as of December 31, 1992.
Payment of Benefits
Benefits are generally payable in the form of
a lump sum following a participant's
termination of employment or death. The
portion of a participant's account attributed
to benefits from a merged plan, however, is
subject to specific rules. Provision is also
made for a participant to request a
withdrawal of all or a portion of the
participant's account attributed to elective
contributions after the attainment of age
59-1/2. Further, upon the showing of
substantial hardship, and in accordance with
specific rules set forth in the Plan
concerning hardship withdrawals, a
participant may withdraw that portion of
their account attributed to the remaining
employer matching contributions that have
vested and the amount of elective deferrals
which have not previously been withdrawn.
9
TMP Worldwide Inc.
401(k) Savings Plan
Notes to Financial Statements
===============================================================================
Participants' Loans
In general, a participant may borrow an
amount not exceeding the lesser of $50,000 or
50% of the vested portion of their account.
If the proceeds of the loan are to be applied
to the purchase of a dwelling which will be
used as a principal residence of the
participant, the repayment period shall be as
agreed upon by the Plan Administrator and the
borrowing participant. If the proceeds of the
loan are used for any other purpose, the
repayment of the loan must be made within
five years. Interest will be charged at an
annual rate which is comparable to a
commercial rate for a similar type of loan.
Principal and interest payments will be due
at a frequency no longer than quarterly and,
with respect to employees, will be made by
payroll deductions.
The loans are collateralized by the
participants' interest in their accounts.
2. Accounting Policies Basis of Accounting
Accounting records maintained by the
Custodian (see Note 4) are on the cash basis
of accounting. The financial statements
included herein include all material
adjustments necessary to place the financial
statements on the accrual basis of
accounting.
Investments
Investments are stated at their current
value, which is determined using quoted
market prices, if available.
3. Tax Status
The Internal Revenue Service has determined
and informed TMP Worldwide, Inc. by a letter
dated May 8, 1995 that the Plan and related
trust are designed in accordance with
applicable sections of the Internal Revenue
Code.
4. Trustee and The funds of the Plan are maintained under a
Custodian Trust with Andrew J. McKelvey as Trustee. The
duties and authority of the Trustee are
defined in the related Trust Agreement.
10
TMP Worldwide Inc.
401(k) Savings Plan
Notes to Financial Statements
===============================================================================
The Connecticut General Life Insurance
Company ("CIGNA") has been appointed the
Custodian of the Plan. The duties of the
Custodian include administration of the trust
fund (including income therefrom) at the
direction of the Trustee, and the payment of
benefits and loans to plan participants and
the payment of expenses incurred by the Plan
in accordance with instructions from the Plan
Administrator and Trustee (with the option
given to participants to individually direct
the investment of their interest in the
Plan). CIGNA is also responsible for the
maintenance of the individual participant
records and to render statements to the
participants as to their interest in the
Plan.
In accordance with the instructions of the
Plan Administrator, the following information
certified by CIGNA (Note 2) was not subject
to examination by the independent auditors,
except for comparing the information to the
related information in the financial
statements:
December 31, 1995
-----------------------------------
Cash and investments $7,885,403
Net investment
income 155,642
Rollovers of
participant balances 31,597
Transferred assets
from acquired
companies 1,798,713
Participant
withdrawals 1,172,204
==================================
In addition, the information included in the
supplemental schedules was certified by
CIGNA.
5. Termination Although it has not expressed any intent to
do so, each participating employer has the
right under the Plan to discontinue its
contributions at any time and to terminate
its participation in the Plan, subject to the
provisions of ERISA. If the Plan is fully or
partially terminated, all amounts credited to
the affected participants' accounts will
become fully vested.
Upon termination, the Plan Administrator
shall take steps necessary to have the assets
of the Plan distributed among the affected
participants.
11
TMP Worldwide Inc.
401(k) Savings Plan
Notes to Financial Statements
===============================================================================
6. Maximum In order to ensure favorable tax treatment of
Contribution participant accounts, the Plan must not
exceed certain maximums for employee elective
contributions and employer matching
contributions of highly compensated employees
as defined in the Internal Revenue Code. Any
excess contributions, at the discretion of
the Plan Administrator, may be refunded to
the affected employees by March 15 of the
following year. Due to Plan participants at
December 31, 1995 amounted to $33,762 of
excess contributions refunded in 1996.
12
TMP Worldwide Inc.
401(k) Savings Plan
Form 5500 - Item 27a - Schedule of Assets Held for
Investment Purposes
EIN: 13-2633092 Plan Number: 002
=============================================================================================================================
December 31, 1995
- -----------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
Description of investment,
Identity of issuer, including maturity date, rate of
borroweer, lessor or similar interest, collateral, par or maturity Current
party value Cost Value
- -----------------------------------------------------------------------------------------------------------------------------
* CIGNA Balanced Account, equity/fixed
income fund. There is no
maturity date, rate of interest,
collateral, par or maturity value. $ 660,562 $ 767,659
* CIGNA Guaranteed Long-term Account,
fixed income fund, 7.05%.
There is no maturity date,
collateral, par or maturity value. 2,942,817 2,942,817
* CIGNA Separate Account - Fidelity Growth
Opportunities, equity fund.
There is no maturity date, rate of
interest, collateral, par or
maturity value. 2,480,594 3,212,661
* CIGNA Stock Market Index Account,
equity fund. There is no maturity
date, rate of interest, collateral,
par or maturity value. 750,410 961,973
* CIGNA Lifetime Fund 20 Account Equity
Fund. There is no maturity date,
rate of interest, collateral, par or
maturity value. 77 87
* CIGNA Lifetime Fund 30 Account. There
is no maturity date, rate of
interest, collateral, par or
maturity value. 184 204
* CIGNA Lifetime Fund 50 Account. There
is no maturity date, rate of
interest, collateral, par or
maturity value. - 2
- ----------------------------------------------------------------------------------------------------------------------------
$6,834,644 $7,885,403
============================================================================================================================
Loans due from participants of the
plan, 5 years, 8%, participant's
Participant loans account balance. There is no par
receivable or maturity value. $ - $ 306,622
============================================================================================================================
- --------------
Note: In column (a), place an asterisk (*) on the line of each identified
person known to be a party-in-interest to the Plan. Include all
loans that were renegotiated during the Plan year. Also, explain
what steps have been taken or will be taken to collect overdue
amounts for each loan listed.
TMP Worldwide Inc.
401(k) Savings Plan
Form 5500 - Item 27d - Schedule of Reportable Transactions
EIN: 13-2633092 Plan Number: 002
===========================================================================================================================
Year ended December 31, 1995
- ------------------------- ---------------------------- --------------- ---------------- ---------------- -----------------
(a) (b) (c) (d) (e) (f)
Identity of party Expense incurred
involved Description of asset Purchase price Selling price Lease rental with transaction
- ------------------------- ---------------------------- --------------- ---------------- ---------------- -----------------
CIGNA Purchases of units in $263,501 N/A N/A N/A
Balanced Account
CIGNA Sales of units in Balanced N/A $147,172 N/A N/A
Account
CIGNA Purchases of units in 1,373,925 N/A N/A N/A
Fidelity Growth
Opportunities
CIGNA Sales of units in Fidelity N/A 511,124 N/A N/A
Growth Opportunities
CIGNA Purchases of units in 2,302,687 N/A N/A N/A
Guaranteed Long-term
Account
CIGNA Sales of units in N/A 1,080,302 N/A N/A
Guaranteed Long-term
Account
CIGNA Purchase of units in 414,825 N/A N/A N/A
Fidelity Stock Market Index
CIGNA Sales of units in Fidelity N/A 180,077 N/A N/A
Stock Market Index
- ------------------------- ----------------- ---------------- ----------------
(a) (g) (h) (i)
Identity of party Value of asset on Net gain or
involved Cost of asset transaction date (loss)
- ------------------------- ----------------- ---------------- ----------------
CIGNA $263,501 $263,501 $-
CIGNA 138,380 147,172 8,792
CIGNA 1,373,925 1,373,925 -
CIGNA 428,161 511,124 82,963
CIGNA 2,302,687 2,302,687 -
CIGNA 1,080,302 1,080,302 -
CIGNA 414,825 414,825 -
CIGNA 153,631 180,077 26,446
===========================================================================================================================
MCKELVEY ENTERPRISES, INC.
PROFIT SHARING PLAN AND TRUST
FINANCIAL STATEMENTS
AND SUPPLEMENTAL SCHEDULES
YEAR ENDED DECEMBER 31, 1995
MCKELVEY ENTERPRISES, INC.
PROFIT SHARING PLAN AND TRUST
CONTENTS
============================================================================
INDEPENDENT AUDITORS' REPORT 3
FINANCIAL STATEMENTS:
Statements of net assets available for plan benefits 4
Statement of changes in net assets available
for plan benefits 5
Notes to financial statements 6-10
SUPPLEMENTAL SCHEDULES:
Form 5500 - Item 27a - Schedule of assets held for
investment purposes 11
Form 5500 - Item 27d - Schedule of reportable transactions 12
2
INDEPENDENT AUDITORS' REPORT
To the McKelvey Enterprises, Inc.
Profit Sharing Plan Committee
We have audited the accompanying statement of net assets available for plan
benefits of McKelvey Enterprises, Inc. Profit Sharing Plan and Trust as of
December 31, 1995, and the related statements of changes in net assets
available for plan benefits for the year then ended. These financial statements
are the responsibility of the McKelvey Enterprises, Inc. Profit Sharing Plan
Committee. Our responsibility is to express an opinion on these financial
statements based on our audits.
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
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 plan benefits of McKelvey
Enterprises, Inc. Profit Sharing Plan and Trust as of December 31, 1995
and the changes in net assets available for plan benefits for the years
then ended, in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets held
for investment purposes and reportable transactions 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 to 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.
November 8, 1996
3
MCKELVEY ENTERPRISES, INC.
PROFIT SHARING PLAN AND TRUST
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
=======================================================
December 31, 1995
- -------------------------------------------------------
ASSETS
Investments, at fair value:
Fixed income funds $68,823
Cumulative preferred stock of McKelvey
Enterprises, Inc. (Notes 1 and 6) 2,000,000
Receivables:
Accrued dividend (Note 6) 18,459
Participants' loans 7,457
Due from McKelvey Enterprises, Inc. 12,834
Other -
- -------------------------------------------------------
TOTAL ASSETS 2,107,573
LESS LIABILITIES:
Due to affiliated plan 2,594
Accrued expenses 10,000
- -------------------------------------------------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS $2,094,979
=======================================================
See accompanying notes to financial statements.
4
MCKELVEY ENTERPRISES, INC.
PROFIT SHARING PLAN AND TRUST
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
=======================================================
Year ended December 31, 1995
- -------------------------------------------------------
ADDITIONS:
Investment income:
Interest and dividends (Note 6) $214,011
- -------------------------------------------------------
TOTAL ADDITIONS 214,011
- -------------------------------------------------------
DEDUCTIONS:
Benefits paid to participants 217,653
Administrative expenses 922
- -------------------------------------------------------
TOTAL DEDUCTIONS 218,575
- -------------------------------------------------------
NET DECREASE (4,564)
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
BEGINNING OF YEAR 2,099,543
- -------------------------------------------------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
END OF YEAR $2,094,979
=======================================================
See accompanying notes to financial statements.
5
McKelvey Enterprises, Inc.
Profit Sharing Plan and Trust
Notes to Financial Statements
==============================================================================
1. Description of Plan The following description of the McKelvey
Enterprises, Inc. ("McKelvey") Profit Sharing Plan
(the "Plan") and Trust (the "Trust") is provided
for general information purposes only.
Participants should refer to the Plan Agreement
(the "Agreement") for a complete description of
the Plan's provisions as amended and restated in
June 1996.
General
The Plan is a defined contribution plan covering
the employees of McKelvey (the "Employer"). The
Plan specifically excludes two categories of
employees, those covered by a collective
bargaining agreement when there has been evidence
of good-faith bargaining for retirement benefits
and when this Plan has not been adopted for those
employees, and employees who are considered
nonresident aliens having no United States source
of earned income. Employees who are not excluded
under those two categories become Plan members as
of their employment commencement date. McKelvey
shall designate one or more persons to act as the
Plan administrator (the "Administrator"). However,
in the absence of such appointment, McKelvey shall
be considered the Administrator. The Administrator
shall be responsible for the operations of the
Plan in accordance with the Agreement and
prevailing government requirements. The Plan is
subject to the provisions of the Employee
Retirement Income Security Act of 1974 ("ERISA")
and provisions of the Internal Revenue Code of
1986 as it pertains to plans intended to qualify
under Section 401(a) of that Code.
During 1992, McKelvey reorganized the
administration of its business and transferred the
payroll of its employees to an affiliate in which
it has an approximate 82% ownership interest. The
transfer of staff was completed by the end of 1992
so that McKelvey did not have any employees on
payroll as of January 1, 1993. Although the Plan
is continuing, notwithstanding the transfer of
payroll, McKelvey is effectively precluded from
making any further contributions to the Plan
because of the rules concerning deductible
employer contributions under the Internal Revenue
Code.
6
McKelvey Enterprises, Inc.
Profit Sharing Plan and Trust
Notes to Financial Statements
==============================================================================
Due to the current inability to make further
contributions, McKelvey amended the Plan effective
December 30, 1992 to fully vest (to the extent not
otherwise fully vested) anyone employed on or
after January 1, 1992 by McKelvey and/or any other
employer which is considered under the Internal
Revenue Code to be commonly owned. That amendment
also fully vested any other participant or former
participant with an account balance as of
January 1, 1993 and provided special rules
concerning the portion of account balances which
were not to be considered vested including the
allocation of those nonvested amounts. In
addition, the same amendment recognized the
corporate name change to McKelvey Enterprises,
Inc. and, in conformity thereto, changed the name
of the Plan effective January 1, 1994 to McKelvey
Enterprises, Inc. Profit Sharing Plan and Trust.
Participants' Accounts
Each participant's account is credited with an
allocation of the Plan's earnings based on the
prior account balance. The benefit to which a
participant is entitled is the amount that can be
provided from the participant's account.
The allocation of forfeitures occurs in the plan
year when a terminated participant receives the
vested portion of his account or if there are five
consecutive one-year breaks in service, as defined
in the Agreement, whichever is sooner. If the
terminated participant resumes employment before
five consecutive one-year breaks in service, he
can have the forfeited amount reinstated provided
he returns to the Plan any distributions received
from the Plan.
In the event required distribution or loan
obligations (the "Obligations") to participants
exceed the cash available for such Obligations,
the Trust may require McKelvey to redeem the
number of shares of Preferred Stock (see Note 5)
needed to satisfy such Obligations pursuant to the
exercise by the Plan of Put Rights as defined, or
take such other action as is available in
accordance with the Agreement to acquire the
necessary cash to make the required distributions.
Benefits payable at December 31, 1995 of
$271,729, represent vested amounts owed to
terminated participants.
7
McKelvey Enterprises, Inc.
Profit Sharing Plan and Trust
Notes to Financial Statements
==============================================================================
Payment of Benefits
Benefits are payable either in the form of a lump
sum or as installment payments over a period not
longer than life expectancy. Special rules apply
with regard to a participant's death. Benefits
otherwise are available following the
participant's severance of service or retirement.
Participant Loans
A participant may borrow an amount not to exceed
the lesser of $50,000 or 50% of the vested
interest in his account determined as of the last
valuation date preceding his election for the
loan.
If the proceeds of the loan are to be applied to
the purchase of a dwelling which will be used as a
principal residence of the participant, the
repayment period shall be comparable to what is
available under similar types of loans from
lending institutions in the local area. If the
proceeds of the loan are used for any other
purposes, the repayment of the loan must be made
within five years. Interest will be charged at an
annual rate which is comparable to a commercial
rate for a similar type of loan. Principal and
interest payments will be due at a frequency no
longer than quarterly and, with respect to
employees, will be made by payroll deductions.
The loans are collateralized by the participants'
interest in their accounts and by such additional
security as may be necessary where the loans would
otherwise exceed the vested account balance.
2. Summary of Basis of Accounting
Accounting Policies
Accounting records maintained by the Custodian
(see Note 3) are on the modified cash basis of
accounting. The financial statements included
herein contain all material adjustments necessary
to present the financial statements on the accrual
basis of accounting.
Investments
Investments are stated at their current value
which is determined using quoted market prices, if
available. The fair value of the cumulative
preferred stock of McKelvey is based on an
independent valuation performed as of December 31,
1995.
8
McKelvey Enterprises, Inc.
Profit Sharing Plan and Trust
Notes to Financial Statements
==============================================================================
Investment transactions are recorded at cost on a
settlement date basis, as adjustments to a trade
date basis do not have a material effect on the
financial statements.
3. Tax Status The Plan obtained its latest determination letter
on February 1, 1995, in which the Internal Revenue
Service stated that the Plan, as then designed,
was in compliance with the applicable requirements
of the Internal Revenue Code. The Plan has not
been amended since receiving the determination
letter. However, the Plan Administrator and the
Plan's tax counsel believe that the Plan is
currently designed and being operated in
compliance with the applicable requirements of the
Internal Revenue Code. Therefore, they believe
that the Plan is qualified and the related Trust
is tax exempt.
4. Trustee and Custodian The funds of the Plan are maintained under a trust
with Andrew J. McKelvey as trustee. The duties and
authority of the trustee are defined in the
Agreement.
Effective December 1992, Connecticut General
Insurance Company ("CIGNA") was appointed the
Custodian of the Plan. Previous to that date,
People's Bank served as the Plan's Custodian. The
duties of the Custodian include administration of
the trust fund (including income therefrom), the
payment of benefits and loans to Plan participants
and the payment of expenses incurred by the Plan.
5. Termination Although it has not expressed any intent to do so,
the Employer has the right under the Plan to
terminate the Plan subject to the provisions of
ERISA. Upon termination, the Administrator shall
take steps necessary to have the assets of the
Plan distributed among participants.
9
McKelvey Enterprises, Inc.
Profit Sharing Plan and Trust
Notes to Financial Statements
==============================================================================
6. Related Party In April 1991, the Plan purchased 200,000 shares
Transaction of 10.5% nonvoting cumulative preferred stock at
$10.00 par value (the "Preferred Stock") of
McKelvey for $2,000,000.
The Plan obtained an independent fairness opinion
(the "Opinion") regarding the transaction as a
whole and an independent valuation (the
"Valuation") of the Preferred Stock. The Opinion
concluded, partly based on the Valuation, that, as
of December 31, 1991, the value of the Preferred
Stock was not less than $2 million and that the
transaction was fair to the Plan and all of its
participants from a financial point of view. In
addition, the Plan's attorneys have advised the
Administrator that this transaction is not in
violation of ERISA's prohibited transaction rules
and the exempt status of the Plan and Trust will
not be affected as a result of the transaction.
7. Government Audits An audit of Plan operations was conducted by the
United States Department of Labor for the years
1988 through 1992. This audit did not result in
any change to the Plan's operations.
The latest audit of the Plan by the Internal
Revenue Service was conducted for the 1990 Plan
Year and resulted in no change to the Plan's
operations.
10
McKelvey Enterprises, Inc.
Profit Sharing Plan and Trust
Form 5500 - Item 27a - Schedule of Assets Held for
Investment Purposes
EIN: 13-2633092 Plan Number: 001
===============================================================================
December 31, 1995
- -------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
- -------------------------------------------------------------------------------
Description of investment,
Identity of issuer, including maturity date,
borrower, lessor or rate of interest, Cost Current
similar party collateral, par or value
maturity value
- --------------------------------------------------------------------------------
CIGNA Guaranteed long-term, fixed
income fund, 7.05%. There
is no maturity date,
collateral, par or
maturity value. $68,823 $68,823
* Cumulative Preferred 200,000 shares,
Stock of McKelvey 10.5% nonvoting
Enterprises, Inc. cumulative preferred
stock, $10 par value.
There is no maturity
date, collateral or
maturity value. 2,000,000 2,000,000
- --------------------------------------------------------------------------------
$2,068,823 $2,068,823
================================================================================
Participants' loans
receivable Loans due from
participants of the
plan, 5 years, 8%,
participant's account
balance. There is no
par or maturity value. $ - $ 7,457
================================================================================
- ------------------
Note: In column (a), place an asterisk (*) on the line of each identified
person known to be a party-in-interest to the Plan. Include all loans
that were renegotiated during the Plan year. Also, explain what steps
have been taken or will be taken to collect overdue amounts for each
loan listed.
11
McKelvey Enterprises, Inc.
Profit Sharing Plan and Trust
Form 5500 - Item 27d - Schedule of Reportable Transactions
EIN: 13-2633092 Plan Number: 001
==================================================================================================================================
Year ended December 31, 1995
- ----------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f)
Expense
Description of incurred with
Identity of party involved asset Purchase price Selling price Lease rental transaction
- ----------------------------------------------------------------------------------------------------------------------------------
CIGNA Fixed income fund $ 222,491 $ - N/A $-
CIGNA Fixed income fund - 218,578 N/A -
McKelvey Enterprises, Inc. Cumulative
Preferred Stock 2,000,000 - N/A -
(g) (h) (i)
Value of asset
on transaction Net gain or
Identity of party involved Cost of asset date (loss)
- ----------------------------------------------------------------------------------------------------------------------------------
CIGNA $ 222,491 $ 222,491 $ -
CIGNA 222,491 218,578 (3,913)
McKelvey Enterprises, Inc. 2,000,000 2,000,000 -
==================================================================================================================================
12