SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 11-K
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(Mark One)
(x) ANNUAL REPORT PURSUANT TO SECTION 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED] for the fiscal year ended April 2, 1998
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 No. 0-23832
A. Full title and address of the plan, if different from that of the
issuer named below:
PHYSICIAN SALES & SERVICE, INC.
EMPLOYEE STOCK OWNERSHIP AND SAVINGS PLAN
4345 SOUTHPOINT BOULEVARD
JACKSONVILLE, FLORIDA 32216
(904) 332-3000
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
PSS WORLD MEDICAL, INC.
4345 SOUTHPOINT BOULEVARD
JACKSONVILLE, FLORIDA 32216
(904) 332-3000
REQUIRED INFORMATION
The following financial statements and schedules have been prepared in
accordance with the financial reporting requirements of the Employee Retirement
Income Security Act of 1974, as amended:
1. Statements of Net Assets Available for Benefits--April 2, 1998 and
April 3, 1997.
2. Statement of Changes in Net Assets Available for Benefits, With Fund
Information for the Year Ended April 2, 1998.
PHYSICIAN SALES & SERVICE, INC.
EMPLOYEE STOCK OWNERSHIP AND SAVINGS PLAN
FINANCIAL STATEMENTS AND SCHEDULES
AS OF APRIL 2, 1998 AND APRIL 3, 1997
TOGETHER WITH
AUDITORS' REPORT
PHYSICIAN SALES & SERVICE, INC.
EMPLOYEE STOCK OWNERSHIP AND SAVINGS PLAN
FINANCIAL STATEMENTS AND SCHEDULES
APRIL 2, 1998 AND APRIL 3, 1997
TABLE OF CONTENTS
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
FINANCIAL STATEMENTS
Statements of Net Assets Available for BenefitS--April 2, 1998 and April 3,
1997
Statement of Changes in Net Assets Available for Benefits, With Fund
Information, for the Year Ended April 2, 1998
NOTES TO FINANCIAL STATEMENTS AND SCHEDULES
SCHEDULES SUPPORTING FINANCIAL STATEMENTS
Schedule I: Item 27a--Schedule of Assets Held for Investment Purposes--
April 2, 1998
Schedule II: Item 27d--Schedule of Reportable Transactions for the Year
Ended April 2, 1998
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Plan Administrator of the
Physician Sales & Service, Inc. Employee Stock
Ownership and Savings Plan:
We have audited the accompanying statements of net assets available for benefits
of the PHYSICIAN SALES & SERVICE, INC. EMPLOYEE STOCK OWNERSHIP AND SAVINGS PLAN
as of April 2, 1998 and April 3, 1997, and the related statement of changes in
net assets available for benefits, with fund information, for the year ended
April 2, 1998. These financial statements and the schedules referred to below
are the responsibility of the Plan's administrator. 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 Physician
Sales & Service, Inc. Employee Stock Ownership and Savings Plan as of April 2,
1998 and April 3, 1997, and the changes in net assets available for benefits for
the year ended April 2, 1998, in conformity with generally accepted accounting
principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets
held for investment purposes as of April 2, 1998 and reportable transactions for
the year then ended 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 Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. The fund information in the statement of changes in net assets available
for benefits, with fund information, for the year ended April 2, 1998 is
presented for purposes of additional analysis rather than to present the changes
in net assets available for benefits of each fund. The supplemental schedules
and fund information have been subjected to the auditing procedures applied in
the audits of the basic financial statements and, in our opinion, are fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
As explained in Note 6, information provided by the custodian and presented in
the schedule of assets held for investment purposes and reportable transactions
does not disclose the historical cost of investments. Disclosure of this
information is required by the Department of Labor Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974.
ARTHUR ANDERSEN LLP
Jacksonville, Florida
September 22, 1998
PHYSICIAN SALES & SERVICE, INC.
EMPLOYEE STOCK OWNERSHIP AND SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
APRIL 2, 1998 AND APRIL 3, 1997
1998 1997
----------- -----------
INVESTMENTS, AT FAIR VALUE:
Money market:
Alex Brown Cash Reserve Fund $ 273,102 $ 112,814
Mutual funds:
Bond Fund 312,251 158,334
Balanced Fund 6,137,184 4,169,315
Growth Fund 2,872,450 1,465,953
AIM Constellation Fund 4,360,940 2,733,125
Kaufmann Fund 3,201,810 1,728,027
Common stock:
PSS World Medical, Inc. Stock, participant-directed 16,245,985 9,181,963
PSS World Medical, Inc. Stock, nonparticipant-directed
30,619,438 20,921,338
----------- -----------
Total investments 64,023,160 40,470,869
----------- -----------
RECEIVABLES:
Participant contributions 349,941 447,316
Employer Contributions 134,496 120,000
Other (Note 3) 867,056 0
----------- -----------
Total receivables 1,351,493 567,316
----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $65,374,653 $41,038,185
=========== ===========
The accompanying notes are an integral part of this statement.
PHYSICIAN SALES & SERVICE, INC.
EMPLOYEE STOCK OWNERSHIP AND SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND
INFORMATION,
FOR THE YEAR ENDED APRIL 2, 1998
PARTICIPANT-DIRECTED
------------------------------------------------------------------------------
ALEX
BROWN
CASH AIM
RESERVE BOND BALANCED GROWTH CONSTELLATION KAUFMANN
FUND FUND FUND FUND FUND FUND
--------- -------- ---------- ---------- ------------- ----------
ADDITIONS:
Investment income:
Net appreciation (depreciation) in fair
value of investments $ (80) $ 8,324 $ 818,507 $ 479,673 $ 774,342 $ 680,851
Dividends and interest 7,774 12,930 613,202 235,767 267,650 84,157
--------- -------- ---------- ---------- ---------- ----------
Total investment income 7,694 21,254 1,431,709 715,440 1,041,992 765,008
--------- -------- ---------- ---------- ---------- ----------
Contributions:
Employee, including rollovers 151,516 86,285 863,759 503,490 732,841 830,598
Employer, net of forfeitures 267 335 9,143 3,187 6,403 3,599
--------- -------- ---------- ---------- ---------- ----------
Total contributions 151,783 86,620 872,902 506,677 739,244 834,197
--------- -------- ---------- ---------- ---------- ----------
Total additions 159,477 107,874 2,304,611 1,222,117 1,781,236 1,599,205
BENEFITS PAID TO PARTICIPANTS (132,487) (8,036) (468,394) (46,711) (114,638) (133,903)
INTERFUND TRANSFERS 133,298 54,079 131,652 231,091 (38,783) 8,481
--------- -------- ---------- ---------- ---------- ----------
NET INCREASE 160,288 153,917 1,967,869 1,406,497 1,627,815 1,473,783
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 112,814 158,334 4,169,315 1,465,953 2,733,125 1,728,027
--------- -------- ---------- ---------- ---------- ----------
End of year $ 273,102 $312,251 $6,137,184 $2,872,450 $4,360,940 $3,201,810
========= ======== ========== ========== ========== ==========
PARTICIPANT-DIRECTED NONPARTICIPANT-DIRECTED
------------------------- ------------------------
PSS WORLD PSS WORLD
MEDICAL, INC. MEDICAL, INC.
STOCK FUND OTHER STOCK FUND OTHER TOTAL
------------- -------- ------------ --------- -----------
ADDITIONS:
Investment income:
Net appreciation (depreciation) in fair
value of investments $ 5,196,943 $ 15,966 $13,773,472 $ 147,584 $21,895,582
Dividends and interest 4,925 0 2,553 0 1,228,958
----------- -------- ----------- --------- -----------
Total investment income 5,201,868 15,966 13,776,025 147,584 23,124,540
----------- -------- ----------- --------- -----------
Contributions:
Employee, including rollovers 2,011,133 (97,375) 0 0 5,082,247
Employer, net of forfeitures 17,880 118,530 79,186 (120,000) 118,530
----------- -------- ----------- --------- -----------
Total contributions 2,029,013 21,155 79,186 (120,000) 5,200,777
----------- -------- ----------- --------- -----------
Total additions 7,230,881 37,121 13,855,211 27,584 28,325,317
BENEFITS PAID TO PARTICIPANTS (925,922) 0 (2,878,230) 719,472 (3,988,849)
INTERFUND TRANSFERS 759,063 0 (1,278,881) 0 0
----------- -------- ----------- --------- -----------
NET INCREASE 7,064,022 37,121 9,698,100 747,056 24,336,468
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 9,181,963 447,316 20,921,338 120,000 41,038,185
----------- -------- ----------- --------- -----------
End of year $16,245,985 $484,437 $30,619,438 $ 867,056 $65,374,653
=========== ======== =========== ========= ===========
The accompanying notes are an integral part of this statement.
PHYSICIAN SALES & SERVICE, INC.
EMPLOYEE STOCK OWNERSHIP AND SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS AND SCHEDULES
APRIL 2, 1998 AND APRIL 3, 1997
1. DESCRIPTION OF PLAN
AMENDMENT AND RESTATEMENT OF THE PHYSICIAN SALES & SERVICE, INC. EMPLOYEE STOCK
OWNERSHIP AND SAVINGS PLAN
Effective January 1, 1997, the Physician Sales & Service, Inc. Employee Stock
Ownership and Savings Plan (the "Plan") was amended and restated. The Plan
was amended to provide for the merger of the Brown's Medical Supply Company
Retirement Savings Plan into this Plan effective as of January 1, 1997, and
to include other changes required in order to conform with applicable
requirements of the Internal Revenue Code (the "IRC").
The following description of the Plan provides only general information.
Participants should refer to the plan document for a more complete
description of the Plan's provisions.
GENERAL
On March 26, 1998, Physician Sales & Service, Inc., the plan sponsor, changed
its name to PSS World Medical, Inc. ("PSS" or the "Company").
The Plan is a defined contribution plan covering substantially all employees
of PSS World Medical, Inc. and its subsidiaries (the "Company"). The Plan
was created under the provisions of Section 401(a) of the IRC, which includes
a qualified deferred arrangement as described in Section 401(k) of the IRC,
for the benefit of eligible employees of the Company. The Plan also has the
features of an employee stock ownership plan ("ESOP"), whereby employee and
employer contributions are invested in PSS World Medical, Inc. common stock
(the "Company's stock"). The Plan is subject to the provisions of the
Employee Retirement Income Security Act of 1974.
The Company has overall responsibility for administering the Plan. Custody
of the Plan's assets resides with Northwestern Trust and Investors Advisory
Company ("Northwestern Trust"), the Plan trustee (Note 7). Howard Johnson &
Company provides record-keeping services for the Plan.
CONTRIBUTIONS
The Plan is funded through voluntary employee salary deferrals and employer
contributions. Participants can elect to defer up to 20% but not less than
1% of compensation, as defined by the Plan, and as limited by requirements of
the IRC.
Employer contributions are made at the discretion of the Company's board of
directors and are allocated based on the ratio of each eligible participant's
deferred compensation to the total deferred compensation of all eligible
participants who are employees of the Company as of the last day of the plan
year. Employer contributions are invested by the trustee in the
nonparticipant-directed PSS World Medical, Inc. Stock Fund. Employer
contributions were $120,000 for fiscal year 1997, net of approximately
$82,000 in forfeitures. Employer contributions were $134,496 for fiscal year
1998.
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Certain contributions made to the Plan in 1998 and 1997 were determined to be
in excess of allowable limits under the IRC. These contributions will be
refunded to the participants subsequent to year end and are recorded in the
accompanying financial statements as excess contributions payable.
VESTING
Participants are immediately vested in their voluntary contributions and the
earnings thereon. Participants are vested in the Company's discretionary
contributions based on years of continuous service, as defined in the Plan,
according to the following schedule:
Less than three years of service 0%
Three years but less than four years 20
Four years but less than five years 40
Five years but less than six years 60
Six years but less than seven years 80
Seven years or more 100
Nonvested portions of the Company's discretionary contributions are forfeited
as of an employee's termination date and are used to reduce future Company
contributions. At April 2, 1998 and April 3, 1997, forfeited nonvested
accounts totaled approximately $19,000 and $10,000, respectively.
BENEFITS
Upon retirement, death, disability, or other severance of employment, a
participant or his or her beneficiary may elect to receive an amount equal to
the value of the participant's vested interest in his or her account.
Balances in participant accounts are paid in a single lump sum or in equal
annual installments, at the election of the participant, over a period not
extending past the participant's life expectancy or the joint life expectancy
of the participant and his or her designated beneficiary. Balances in the
ESOP accounts are generally distributed in shares of the Company's stock
(with fractional shares paid in cash) to the participant, by direct transfer
to the participant's individual retirement account, or to the plan of the
participant's new employer.
PARTICIPANT ACCOUNTS
Each participant's account is credited with his or her contribution, the
Company's discretionary contribution, and an allocation of Plan earnings.
Allocations are based on the proportion that each participant's account
balance bears to the total of all participant account balances. The benefit
to which a participant is entitled is the vested portion of the benefit that
can be provided from the participant's account.
INVESTMENT OPTIONS
Participants may direct their contributions and any related earnings into
seven investment options. Participants may change their investment elections
monthly. Participants may not direct the investment of the Company's
discretionary contributions. Under the terms of the Plan, employer
contributions are invested in the nonparticipant-directed PSS World Medical,
Inc. Stock Fund. A description of each investment option as of April 2,
1998, is provided below:
ALEX BROWN CASH RESERVE FUND
This money market fund consists of a portfolio invested in commercial
paper, U.S. government or federal agency obligations, short-term
corporate obligations, bank certificates
-3-
of deposit, savings accounts, and/or comparable investments designed to
provide maximum protection of capital with a conservative rate of
return.
BOND FUND
This mutual fund consists of a portfolio invested in marketable
corporate debt securities, mortgage-related securities, other asset-
backed securities, and cash or money market instruments designed to
provide a level of current income consistent with the preservation of
capital by investing primarily in bonds.
BALANCED FUND
This mutual fund consists of a portfolio invested in securities,
including common stocks, preferred stocks, corporate bonds, and U.S.
government securities designed to provide conservation of capital,
current income, and long-term growth of capital and income.
GROWTH FUND
This mutual fund consists of a portfolio invested primarily in common
stocks and other securities convertible into common stocks, cash or cash
equivalents, straight debt securities, or nonconvertible preferred
stocks providing for growth of capital.
AIM CONSTELLATION FUND
This mutual fund consists of a portfolio invested in common stocks, with
emphasis on medium-sized and smaller emerging-growth companies,
designated to provide capital appreciation.
KAUFMANN FUND
This mutual fund consists of a portfolio invested in common stocks and
convertible preferred stocks and bonds, including convertible bonds,
designated to provide capital appreciation.
PSS WORLD MEDICAL, INC. STOCK (PARTICIPANT-DIRECTED)
This common stock fund is a participant-directed account in which
employee contributions are invested in the stock of the Company.
Contributions to the nonparticipant-directed PSS World Medical, Inc. Stock
Fund represent the Company's discretionary contributions which are invested
principally in the Company's stock.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The accompanying financial statements have been prepared using the accrual
basis of accounting. The preparation of the financial statements in
conformity with generally accepted accounting principles requires the Plan's
management to use estimates and assumptions that affect the accompanying
financial statements and disclosures. Actual results could differ from these
estimates.
INCOME RECOGNITION
Interest income is recorded as earned on the accrual basis. Dividend income
is recorded on the ex-dividend date.
INVESTMENT VALUATION
Investments of the Plan are stated at fair value. Securities traded on a
national securities exchange are valued at the last reported sales price on
the last business day of the plan year. The Company's
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common stock as of April 2, 1998 and April 3, 1997 is valued at its quoted
market price as listed on the NASDAQ National Market under the ticker symbol
"PSSI."
NET APPRECIATION IN FAIR VALUE OF INVESTMENTS
Net realized gains and losses and the changes in the unrealized appreciation
(depreciation) are recorded in the accompanying statement of changes in net
assets available for benefits, with fund information, as net appreciation
(depreciation) in fair value of investments.
ADMINISTRATIVE EXPENSES
All administrative expenses of the Plan are paid by the Company.
RECLASSIFICATIONS
Certain 1997 balances have been reclassed to conform to current year
presentation.
3. OTHER RECEIVABLES
A duplicate distribution was made to a participant during the plan year. The
distributed shares were retrieved and redeposited into the Plan on August 28,
1998. The receivables-other at April 2, 1998 represents the fair market
value of the shares on that date.
4. TAX STATUS
On June 3, 1997, the Plan, as amended and restated, received a favorable
determination letter from the Internal Revenue Service. The plan
administrator and management believe that the Plan, as amended and restated,
is designed and operated in compliance with the applicable requirements of
the IRC. Therefore, they believe that the Plan is qualified and the related
trust continues to be tax-exempt.
5. PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate
the Plan subject to the provision of ERISA. In the event of plan
termination, participants will become fully vested in their account balances.
6. INFORMATION PROVIDED BY THE CUSTODIANS
Disclosure of historical cost information with regard to certain plan
investments is required to be presented in the schedules of assets held for
investment purposes and reportable transactions (Schedules I and II) in
accordance with the Department of Labor Rules and Regulations for Reporting
and Disclosure under ERISA. Due to the record-keeping systems maintained by
the trustee, certain of this information cannot be provided.
7. RELATED PARTIES
During periods prior to January 1, 1997, the nonparticipant-directed PSS
World Medical, Inc. Stock Fund was held by a transfer agent and managed by
the former trustees, who were participants in the Plan. Effective January 2,
1997, trustee responsibilities were transferred to Northwestern Trust, a
company not affiliated with the plan sponsor.
The Plan owns 1,999,313 shares of the Company at April 2, 1998 which
represents approximately 3% of the outstanding common stock of the Company at
that date. Transactions in the stock of the Company are reported in Schedule
II and represent party-in-interest transactions.
-5-
8. RECONCILIATION TO FORM 5500
As of April 2, 1998 and April 3, 1997, the Plan had approximately $143,290
and $1,333,000 of pending distributions to participants who elected
distributions from the Plan. These amounts are recorded as a liability in
the Plan's Form 5500; however, these amounts are not recorded as a liability
in the accompanying statements of net assets available for benefits in
accordance with generally accepted accounting principles.
The following table reconciles net assets available for benefits per the
financial statements to the Form 5500 as filed by the Company for the years
ended April 2, 1998 and April 3, 1997:
NET ASSETS AVAILABLE
BENEFITS FOR BENEFITS
PAYABLE TO BENEFITS ---------------------------
PARTICIPANTS PAID 1998 1997
------------ ----------- ----------- -----------
Per financial statements $ 0 $ 3,988,849 $65,240,157 $41,038,185
1998 amounts pending distribution to participants
143,290 143,290 (143,290) 0
1997 amounts pending distribution to participants
0 (1,333,000) 0 (1,333,000)
-------- ----------- ----------- -----------
Per Form 5500 $143,290 $ 2,799,139 $65,096,867 $39,705,185
======== =========== =========== ===========
9. SUBSEQUENT EVENTS
On March 26, 1998, the Company completed a merger with Gulf South Medical
Supply, Inc. ("GSMS"). The Plan was amended subsequent to the 1998 plan year
end to allow participation by employees of GSMS effective as of May 1, 1998.
SCHEDULE I
PHYSICIAN SALES & SERVICE, INC.
EMPLOYEE STOCK OWNERSHIP AND SAVINGS PLAN
ITEM 27a--SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
APRIL 2, 1998
CURRENT
IDENTITY OF PARTY INVOLVED DESCRIPTION OF INVESTMENT COST VALUE
------------------------------- ------------------------------------------ ------- ------------
* PSS WORLD MEDICAL, INC. PSS World Medical, Inc. Common Stock,
1,999,313 shares (a) $46,865,423
* ALEX BROWN & SONS, INCORPORATED Alex Brown Cash Reserve Fund, money market
fund (a) 273,102
THE AMERICAN FUNDS GROUP The Bond Fund of America, Mutual Fund (a) 312,251
THE AMERICAN FUNDS GROUP American Balanced Fund, Mutual Fund
(a) 6,137,184
THE AMERICAN FUNDS GROUP The Growth Fund of America, Mutual Fund
AIM DISTRIBUTORS, INC. AIM Constellation Fund, Mutual Fund (a) 4,360,940
KAUFMANN The Kaufmann Fund, Mutual Fund (a) 3,201,810
-----------
$64,023,160
===========
*Represents a party in interest.
(a) Historical cost information has been requested from the custodians;
however, due to their record-keeping systems, cost information cannot
be made available.
The accompanying notes are an integral part of this schedule.
SCHEDULE II
PHYSICIAN SALES & SERVICE, INC.
EMPLOYEE STOCK OWNERSHIP AND SAVINGS PLAN
ITEM 27d--SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED APRIL 2, 1998
PURCHASES SALES
-------------------------- --------------------------------------------
NUMBER NUMBER COST NET
OF PURCHASE OF SELLING OF GAIN
IDENTITY OF PARTY INVOLVED DESCRIPTION OF ASSETS TRANSACTIONS PRICE TRANSACTIONS PRICE ASSET (LOSS)
-------------------------- ------------------------ ------------ ---------- ------------ ---------- ----- ------
* PSS WORLD MEDICAL, INC. PSS World Medical, Inc.,
common stock 56 $6,982,366 12 $4,712,083 (a) (a)
THE AMERICAN FUNDS GROUP American Balanced Fund,
mutual fund 61 2,104,000 36 2,894,853 (a) (a)
*Represents a party-in-interest transaction.
(a) Historical cost information has been requested from the custodians;
however, due to their record-keeping systems, cost information cannot
be made available.
The accompanying notes are an integral part of this schedule.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this Annual Report to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Jacksonville, State of Florida, on
September 29, 1998.
PHYSICIAN SALES & SERVICE, INC.
EMPLOYEE STOCK OWNERSHIP AND
SAVINGS PLAN
NORTHWESTERN TRUST AND INVESTORS
ADVISORY COMPANY, TRUSTEE
By: /s/ Gerry Kelley
----------------
Gerry Kelley
Vice President