EX-13 2 0002.txt ANNUAL REPORT TO SECURITY-HOLDERS Audited Financial Statements and Supplemental Schedules Morrison Health Care, Inc., Salary Deferral Plan Year ended December 31, 1999 and as of December 31, 1998 with Report of Independent Auditors Morrison Health Care, Inc., Salary Deferral Plan Audited Financial Statements and Supplemental Schedules Year ended December 31, 1999 and as of December 31, 1998 Contents Report of Independent Auditors.........................................1 Audited Financial Statements Statements of Net Assets Available for Benefits........................2 Statement of Changes in Net Assets Available for Benefits..............3 Notes to Financial Statements..........................................4 Supplemental Schedules Schedule of Assets Held for Investment Purposes at End of Year........13 Schedule of Reportable Transactions...................................14 Report of Independent Auditors Plan Administrator Morrison Health Care, Inc., Salary Deferral Plan We have audited the accompanying statements of net assets available for benefits of the Morrison Health Care, Inc. Salary Deferral Plan as of December 31, 1999 and 1998, and the related statement of changes in net assets available for benefits for the year ended December 31, 1999. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 1999 and 1998, and the changes in its net assets available for benefits for the year ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. Our audits were performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedules of assets held for investment purposes at the end of year as of December 31, 1999 and reportable transactions for the year then ended are presented for the purpose of additional analysis and are not a required part of the financial statements but are supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The schedules are the responsibility of the Plan's management. The schedules have been subjected to the auditing procedures applied in our audits of the financial statements and, in our opinion, are fairly stated in all material respects in relation to the financial statements taken as a whole. /s/Ernst & Young, LLP Atlanta, GA May 10, 2000 Morrison Health Care, Inc., Salary Deferral Plan Statements of Net Assets Available for Benefits December 31 1999 1998 ----------------------------- Assets Investments, at fair value: Morrison Management Specialists, Inc. common stock........................................ $ 4,935,000 $ 3,846,539 Unallocated ESOP shares of Morrison Management Specialists, Inc. common stock...... 3,904,857 4,047,146 Merrill Lynch Stable Value Fund............... 5,024,904 - Merrill Lynch Retirement Preservation Trust... - 922,695 Merrill Lynch Federal Securities Fund......... 828 3,575,934 Merrill Lynch Growth Fund..................... 1,115,446 926,482 AIM Equity Constellation Fund................. 2,502,927 1,585,769 Merrill Lynch Equity Index Trust Fund......... 3,952,236 2,418,598 Templeton Foreign Fund........................ 1,390,610 989,915 Franklin Small Cap Fund....................... 213,464 - Hotchkis & Wiley Total Return Fund............ 312,676 - Money market fund............................. 39,874 75,986 Money market fund (unallocated)............... 231,620 - Investments, at contract value: New York Life Insurance Company Guaranteed Investment Contracts......................... - 1,066,568 Transamerica Occidental Life Insurance Company Guaranteed Investment Contract....... 267,628 499,865 ----------------------------- Total investments............................... 23,892,070 19,955,497 Contributions receivable: Participants.................................. 116,106 164,215 Employer (unallocated)........................ 52,187 46,328 ----------------------------- 168,293 210,543 Dividends and interest receivable............... 9,305 4,297 ----------------------------- Total Assets.................................... 24,069,668 20,170,337 Liabilities Accrued Liabilities............................. - 13,371 ESOP note payable (unallocated)................. 2,816,536 3,015,365 ----------------------------- Total Liabilities............................... 2,816,536 3,028,736 ----------------------------- Net assets available for benefits............... $21,253,132 $17,141,601 ============================= See accompanying notes. Morrison Health Care, Inc., Salary Deferral Plan Statement of Changes in Net Assets Available for Benefits Year ended December 31, 1999 Allocated Unallocated Total ---------------------------------------- Additions to net assets attributable to: Interest and dividend income.......... $ 641,508 $ 32,014 $ 673,522 Contributions: Participants......................... 2,191,960 - 2,191,960 Employer............................. - 558,719 558,719 ---------------------------------------- 2,191,960 558,719 2,750,679 ---------------------------------------- Total additions......................... 2,833,468 590,733 3,424,201 Deductions from net assets attributable to: Distributions to participants......... 1,861,367 - 1,861,367 Administrative expenses............... 21,487 - 21,487 ESOP interest expense................. - 154,425 154,425 ---------------------------------------- Total deductions........................ 1,882,854 154,425 2,037,279 Net realized and unrealized appreciation in fair value of investments........................... 2,224,305 500,304 2,724,609 Allocation of 31,216 shares of Morrison Management Specialists, Inc. common stock, at market............... 642,593 (642,593) - ---------------------------------------- Net increase in net assets available for benefits................ 3,817,512 294,019 4,111,531 Net assets available for benefits: Beginning of year..................... 16,063,492 1,078,109 17,141,601 ---------------------------------------- End of year........................... $19,881,004 $1,372,128 $21,253,132 ======================================== See accompanying notes. Morrison Health Care, Inc., Salary Deferral Plan Notes to Financial Statements December 31, 1999 1. Description of the Plan The Morrison Health Care, Inc. Salary Deferral Plan (the "Plan") is a defined contribution plan and is sponsored by Morrison Management Specialists, Inc. (the "Company") (formerly Morrison Health Care, Inc.). The Plan, which covers all employees of the Company who have attained the age of 21, is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). The following description of the Plan provides only general information. Participants should refer to the Summary Plan Description for a more complete description of the Plan's provisions. General The Plan was established on March 7, 1996 as a result of the Company's spin-off from Morrison Restaurants Inc. (now named Ruby Tuesday, Inc.) to provide additional incentive and retirement security for eligible employees of the Company. In connection with the establishment of the Plan, assets totaling approximately $10,545,000 were transferred from the Morrison Restaurants Inc. Salary Deferral Plan. Effective February 28, 1997, a component of the Plan operates a leveraged employee stock ownership plan ("ESOP") and is designed to comply with section 4975(e)(7) and the related regulations thereunder of the Internal Revenue Code of 1986, as amended ("the Code"). Effective October 1, 1997, the Plan changed custodian and recordkeeper from AmSouth Bank of Alabama to Merrill Lynch, Pierce, Fenner & Smith Incorporated, as recordkeeper, and Merrill Lynch Trust Company, as trustee. Contributions Under the Plan, participants may contribute on a tax deferred basis amounts ranging from 2% to 10% of their compensation subject to certain limitations of the Code. Participants contributing a tax-deferred contribution of at least 2% may elect to make after-tax contributions up to 10% of their annual earnings. Morrison Health Care, Inc., Salary Deferral Plan Notes to Financial Statements (continued) 1. Description of the Plan (continued) Contributions (continued) The Company matches 20% of contributions from participants with three to nine years of service, 30% of contributions from participants with ten to nineteen years of service and 40% of contributions from participants with twenty or more years of service. Matching contributions are invested entirely in Company stock. Participant Accounts Each participant's account is credited, as appropriate, with the participant's contribution, the Company's matching contributions and allocations of investment earnings and losses. Investment results are allocated to participant's accounts based upon relative balances of the individual accounts on the valuation date as defined by the Plan. Participants have the option of allocating their individual accounts, except for Employer Matching accounts, between various separate investment funds maintained by the trustee of the Plan. Participants may change their investment options at any time. Participants may diversify their Company Stock investment held in their Employer Matching account after completing ten years of participation in the Plan and attaining age 55. Vesting Participants are immediately vested in the value of their contributions, employer matching contributions, plus actual earnings thereon. Distributions to Participants Upon his or her retirement, termination, death or disability, as defined by the Plan, a participant or his /her beneficiary may elect to receive a lump sum distribution. Morrison Health Care, Inc., Salary Deferral Plan Notes to Financial Statements (continued) 1. Description of the Plan (continued) Plan Termination Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination (or permanent discontinuance of contributions to the Plan), the Plan's assets are distributable to the participants or their beneficiaries based on the respective values of their accounts. Administrative Costs The Company pays any administrative costs of the Plan not paid from Plan assets. 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying financial statements of the Plan are presented on the accrual basis of accounting. Valuation of Investments Investments in mutual funds are stated at fair value based on quoted redemption values on the last business day of the plan year. Morrison Management Specialists, Inc. (formerly Morrison Health Care, Inc.) common stock is traded on the New York Stock Exchange and is valued at the closing sales price on the last business day of the plan year. Fair values for investments in collective trust funds are valued by the trustee based upon the quoted market values of the underlying investments on the last business day of the plan year. Guaranteed investment contracts held in the Stable Value Fund are fully benefit responsive and are valued at contract value. Contract value represents the contributions of employer and participants plus interest, less withdrawals. Morrison Health Care, Inc., Salary Deferral Plan Notes to Financial Statements (continued) 2. Summary of Significant Accounting Policies (continued) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. Reclassification Certain amounts in the 1998 financial statements have been reclassified to conform to the 1999 presentation. 3. Investments During 1999, the Plan's investments (including investments purchased, sold, as well as held during the year) appreciated in fair value as determined by quoted market prices as follows: Year ended December 31, 1999 -------------- Net appreciation in fair value of investments: Morrison Management Specialists, Inc. common stock............................... $1,022,954 Mutual Funds................................ 1,158,957 Common/Collective Trust Funds............... 542,698 -------------- $2,724,609 ============== Morrison Health Care, Inc., Salary Deferral Plan Notes to Financial Statements (continued) 3. Investments (continued) The fair value of individual investments that represent 5 percent or more of the Plan's net assets is as follows: December 31 1999 1998 ----------------------------- Merrill Lynch Stable Value Fund........... $5,024,904 $ - AIM Equity Constellation Fund............. 2,502,927 1,585,769 Morrison Management Specialists, Inc. common stock*........................... 8,839,857 7,893,685 Merrill Lynch Federal Securities Fund..... ** 3,575,934 Merrill Lynch Equity Index Trust Fund..... 3,952,236 2,418,598 Templeton Foreign Fund.................... 1,390,610 989,415 Merrill Lynch Retirement Preservation Trust................................... - 922,695 Merrill Lynch Growth Fund................. 1,115,446 926,482 * Nonparticipant-Directed ** Amount is less then 5 percent. Morrison Health Care, Inc., Salary Deferral Plan Notes to Financial Statements (continued) 4. Nonparticipant Directed Investments Information about the net assets and the significant components of changes in net assets related to the nonparticipant directed investment is as follows: December 31 1999 1998 ----------------------------- Investment at fair value: Morrison Management Specialists, Inc. common stock ........................... $8,839,857 $7,893,685 Year ended December 31, 1999 ---------------- Change in net assets: Contributions $ 849,104 Dividends 66,085 Net realized and unrealized appreciation in fair value 1,022,954 Interfund transfers, net (80,767) Allocation of common stock (642,593) Administrative expenses (4,171) Distributions to participants (264,440) ---------------- $ 946,172 ================ 5. Income Tax Status The Plan has received a determination letter from the Internal Revenue Service dated December 19, 1997, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (the "Code") and, therefore, the related trust is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The Plan Administrator believes the Plan is being operated in compliance with the applicable requirements of the Code and, therefore, believes that the Plan is qualified and the related trust is tax exempt. Morrison Health Care, Inc., Salary Deferral Plan Notes to Financial Statements (continued) 6. Transactions with Parties-in-Interest The Plan held 409,974 shares of Morrison Management Specialists, Inc. common stock valued at $8,839,857 at December 31, 1999. During 1999, the Plan received $66,085 in dividends on Morrison Management Specialists, Inc. common stock. Also during 1999, the Plan sold shares of Morrison Management Specialists, Inc. resulting in a net gain of $279,549. Certain Plan investments are units of participation in collective trust funds maintained by the trustee. 7. Guaranteed Investments Contracts At December 31, 1999 and 1998, the Plan had guaranteed investment contracts with insurance companies. The fair values of the guaranteed investment contracts are approximated by contract values based on current interest rates. Deposits made under these contracts earn interest at guaranteed rates as follows: December 31, 1999 1998 ----------------------------- Crediting Crediting Company Interest Rate Interest Rate ------------------------------------------------------------------ New York Life Insurance Company #GA30795002........................ - 7.2% #GM30795001........................ - 7.2% Transamerica Occidental Life Insurance Company #51471............................ 7.0% 7.0% The average yield of each of the foregoing contracts does not differ materially from the crediting interest rate. Morrison Health Care, Inc., Salary Deferral Plan Notes to Financial Statements (continued) 8. ESOP Fund and Note Payable On February 28, 1997 and in connection with a private letter ruling from the IRS concerning the tax-free reorganization of Morrison Restaurants Inc., the Plan, in conjunction with the Company, created an employee stock ownership feature for the Plan, which is herein referred to as the "ESOP". In connection with the ESOP's formation, the Company issued 254,502 shares of its common stock with a fair market value of $14.125 per share to the Plan in exchange for a 10-year note (the "note") with a principal amount of $3,594,841 executed by the Plan's trustee. These shares, together with those already held by the Plan, increased the Plan's level of ownership of the Company to 3%. The note bears interest at 5.47% and provides for scheduled principal payments totaling $467,520 in each of the next ten years. The Plan uses employer matching contributions and dividends received to make loan payments. Shares are released for allocation to participants based upon the ratio of the year's principal and interest payments to the sum of the total principal and interest payments expected over the remaining life of the note. The released shares are allocated to participant accounts based on a matching formula as defined by the Plan. The loan is collateralized by the unallocated shares of the Company's stock. Accordingly, the financial statements of the Plan for 1999 and 1998 present separately the assets and liabilities and changes therein pertaining to Plan assets which have been allocated to participant accounts and the Plan assets that are unallocated. Although participants do not have any investment discretion regarding the ESOP Fund portions of their account balances, each participant is entitled to exercise voting rights attributable to shares of Company stock allocated to his/her account and is notified before such rights are to be exercised. The trustee votes any unallocated shares and any allocated shares for which it does not receive voting directions. Morrison Health Care, Inc., Salary Deferral Plan Notes to Financial Statements (continued) 9. Differences Between Financial Statements and Form 5500 The following is a reconciliation of net assets available for benefits per the financial statements to those per the Form 5500 as of December 31: 1999 1998 ------------- ------------- Net assets available for benefits per the financial statements..................... $21,253,132 $17,141,601 Benefits payable to participants........... - (42,857) ------------- ------------- Net assets available for benefits per the Form 5500.............................. $21,253,132 $17,098,744 ============= ============= The following is a reconciliation of benefits paid to participants per the financial statements to those per the Form 5500: Year ended December 31, 1999 ------------------ Benefits paid per the financial statements........ $1,861,367 Benefits payable to participants at December 31, 1998............................... (42,857) ------------------ Benefits paid per the Form 5500................... $1,818,510 ================== Supplemental Schedules Morrison Health Care, Inc., Salary Deferral Plan EIN: 63-1155966 Plan No.: 001 Schedule H, Line 4i Schedule of Assets Held for Investment Purposes at End of Year December 31, 1999 (b) Identity of Issue, (c) (e) Borrower, Lessor or Description of (d) Current (a) Similar Party Investments Cost Value ----------------------------------------------------------------------------------
* Morrison Management 409,974 shares of common Specialists, Inc. stock $6,742,563 $ 8,839,857 * Merrill Lynch & Co., 5,292,532 units Stable Inc. Value Fund # 5,024,904 * Merrill Lynch & Co., 89 units Federal Inc. Securities Fund # 828 * Merrill Lynch & Co., 40,680 units Growth Fund # 1,115,446 Inc. AIM Management Group, 61,785 units AIM Equity Inc. Constellation Fund # 2,502,927 * Merrill Lynch & Co., 39,053 units Equity Index Inc. Trust Fund # 3,952,236 Franklin Templeton 123,940 units Templeton Group Foreign Fund # 1,390,610 Franklin Templeton 4,838 units Small Group Cap Fund # 213,464 Hotchkis & Wiley 25,094 units Total Company Return Fund # 312,676 Transamerica Guaranteed investment Occidental Life contract #51471; matures Insurance Company 3/27/2000; 7.0% # 267,628 * Merrill Lynch & Co., Money market fund; variable Inc. rate # 271,494 ------------- Total Investments................................................ $23,892,070 ============= * Indicates a party-in-interest to the Plan. # Not applicable for participant directed investments.
Morrison Health Care, Inc., Salary Deferral Plan EIN: 63-1155966 Plan No.: 001 Schedule H, Line 4j - Schedule of Reportable Transactions Year ended December 31, 1999 (h) Current Value (b) (c) (d) (g) of Asset on (a) Description Purchase Selling Cost of Transaction (i) Identity of Party Involved of Asset Price Price Asset Date Net Gain ------------------------------------------------------------------------------------------------------------- Category (iii) - Series of securities transactions in excess of 5% of plan assets.
Morrison Management Specialists, Inc......... Common stock $1,048,819 $ - $1,048,819 $1,048,819 $ - Morrison Management Specialists, Inc......... Common stock - 1,125,601 846,052 1,125,601 279,549 There were no category (i), (ii) or (iv) transactions during the year ended December 31, 1999. Note: The information required by columns (e) and (f) is not applicable.