-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, C7ElngvV8lJt11e9pv2w8chZjMJ6uGIfqNwTvd/KxTRtSl1bRSFz6sQbesNwf4SR VXhOIgsxM0OS+IIEvX4TbQ== /in/edgar/work/20000823/0001007507-00-000033/0001007507-00-000033.txt : 20000922 0001007507-00-000033.hdr.sgml : 20000922 ACCESSION NUMBER: 0001007507-00-000033 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20000531 FILED AS OF DATE: 20000823 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORRISON MANAGEMENT SPECIALISTS INC CENTRAL INDEX KEY: 0001007507 STANDARD INDUSTRIAL CLASSIFICATION: [5812 ] IRS NUMBER: 631155966 STATE OF INCORPORATION: GA FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-14194 FILM NUMBER: 708569 BUSINESS ADDRESS: STREET 1: 1955 LAKE PARK DR SE STREET 2: STE 400 CITY: SMYRNA STATE: GA ZIP: 30080-8855 BUSINESS PHONE: 7704373300 MAIL ADDRESS: STREET 1: 1955 LAKE PARK DR SE STREET 2: STE 400 CITY: SMYRNA STATE: GA ZIP: 30080-8855 FORMER COMPANY: FORMER CONFORMED NAME: MORRISON HEALTH CARE INC DATE OF NAME CHANGE: 19960209 10-K 1 0001.txt ANNUAL REPORT ON FORM 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) X Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 (No Fee Required) For the fiscal year ended May 31, 2000 OR Transition Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 (No Fee Required) For the transition period from to Commission file number 1-14194 MORRISON MANAGEMENT SPECIALISTS, INC. (Exact name of Registrant as specified in charter) GEORGIA 63-1155966 (State or other jurisdiction of (I.R.S. Employer identification No.) incorporation or organization) 1955 Lake Park Drive, Suite 400, Smyrna, GA 30080-8855 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (770) 437-3300 Securities Registered Pursuant to Section 12(b) of The Act: Name of each exchange Title of each class on which registered - ------------------------------------------ ----------------------- $0.01 par value Common Stock New York Stock Exchange Rights to Purchase Series A Participating New York Stock Exchange Preferred Stock Securities Registered Pursuant to Section 12(g) of The Act: None Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES[_X_] NO[__] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.[ X ] The aggregate market value of the voting stock held by non-affiliates of the Registrant, based upon the closing sale price of Common Stock on August 11, 2000 as reported on the New York Stock Exchange, was approximately $338,699,620. Shares of Common Stock held by each executive officer and director and by each person who owns 5% or more of the outstanding Common Stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. The number of shares of the Registrant's common stock outstanding at August 11, 2000 was 12,834,806. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's Annual Report to Stockholders for the fiscal year ended May 31, 2000 are incorporated by reference into Parts I and II. Portions of the Registrant's definitive proxy statement dated August 22, 2000 are incorporated by reference into Part III. 2 INDEX PART I Page Number -------- Item 1. Business.............................................. 3-5 Item 2. Properties............................................ 5 Item 3. Legal Proceedings..................................... 6 Item 4. Submission of Matters to a Vote of Security Holders... 6 Executive Officers of the Company..................... 6-7 PART II Item 5. Market for the Registrant's Common Equity and Related Shareholder Matters........................... 8 Item 6. Selected Financial Data............................... 8 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................... 8 Item 7A. Quantitative and Qualitative Disclosures About Market Risk........................................... 8 Item 8. Financial Statements and Supplementary Data........... 8 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure................... 8 PART III Item 10. Directors and Executive Officers of the Company....... 9 Item 11. Executive Compensation................................ 9 Item 12. Security Ownership of Certain Beneficial Owners and Management............................................ 9 Item 13. Certain Relationships and Related Transactions........ 9 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K........................................... 10-13 3 PART I ITEM 1. BUSINESS. General Morrison Management Specialists, Inc., (the "Company" or "MMS"), formerly Morrison Health Care, Inc., became an independent, publicly owned company in March 1996 as a result of the distribution (the "Distribution") by Morrison Restaurants Inc., a Delaware corporation ("MRI"), to its shareholders of all the issued and outstanding shares of common stock of the Company. As a result of the Distribution, MRI's stockholders received one share of Company common stock for every three shares of MRI stock held. MMS is the nation's only company focused exclusively on providing food, nutrition and dining services to the healthcare and senior living markets. It is the nation's second largest outsourcing provider in the healthcare and senior living industries. Its clients include acute care hospitals, health systems, nursing homes and retirement facilities. Morrison Healthcare Food Services Morrison Healthcare Food Services manages on-site facilities and provides comprehensive nutritional programs for patients and high-quality retail dining options for staff and visitors of hospitals and integrated healthcare systems. MMS offers its clients programs designed to reduce costs and increase customer satisfaction. The Company's healthcare foodservice operations originated in the early 1950s. The Company expanded through its own marketing and sales force and by acquiring other foodservice businesses. MMS's healthcare accounts range in size from 100 bed specialty hospitals to facilities with over 1,500 beds. Through its Advanced Culinary System(TM) the Company continues to make advances in cook-chill technology and centralized food production. These systems are designed to increase productivity, enhance food quality and reduce food waste, thereby making healthcare food production more economical for the client and more appealing to the customer at healthcare facilities nationwide. MMS currently has two Advanced Culinary Centers(TM) which utilize centralized food production and cook-chill technology in operation and one under construction. MMS operates "branded concept" restaurants, such as Subway(R), Chick-Fil-A(R) and Healthy Choice(R), on client premises. These small versions ("kiosk" type) of the licensed restaurant concepts are operated pursuant to license arrangements with the appropriate restaurant company. Currently, MMS has 17 license arrangements with nationally and regionally recognized restaurant companies. In addition, MMS operates its own brand - Spice of Life(TM) - with menus and recipes that can be customized to local tastes. Morrison Senior Dining Due to changing demographics and lifestyles and the increasing number of retirement facilities being constructed, the Company believes the senior living market is the fastest growing segment of the healthcare industry. The Company has emphasized its commitment to provide food and nutrition services to the senior living market by acquiring, over the past three fiscal years, three companies in the field: Drake Management Services, Inc. in January 1998, Spectra Services, Inc. in March 1998, and Culinary Service Network, Inc. in October 1998. Dedicated to providing dining services to senior living communities, Morrison Senior Dining helps clients control costs while making informed decisions from kitchen and dining room design to menu selection. Morrison Senior Dining accounts range in size from 100 residents to 600 residents. Believing that this market is under-penetrated and rapidly expanding, the Company plans for future growth in the senior living market to result from internal development. Operations MMS offers its services pursuant to two general types of contracts: (i) profit and loss (or guaranteed cost) contracts, where MMS assumes the risk of profit or loss for the foodservice operation and (ii) management fee contracts, where the client reimburses MMS for all or nearly all costs incurred in providing the services contracted plus a negotiated management fee for supervising the 4 client's food and nutrition services. In addition, some management fee contracts include incentives and penalties with the amount of the management fee determined in whole or in part by the achievement of predetermined goals. Approximately 60% of MMS's accounts are operated pursuant to management fee contracts. The majority of MMS's contracts were awarded through bidding processes. In June 2000, MMS formed a strategic alliance with, and made a $3 million investment in, foodbuy.com, a forerunner in developing the business model for Internet food purchasing. Management believes the alliance will leverage the combined purchasing and technology resources which will lower food costs resulting in savings for MMS's clients. Research and Development The Company does not engage in any material research and development activities. Numerous studies are made, however, on a continuing basis, to improve menus, equipment and methods of operations. Raw Materials Raw materials essential to the operation of the Company's business are obtained principally through national food distributors. The Company uses short-term purchase commitment contracts to stabilize the potentially volatile pricing associated with certain commodities. Because of the relatively short storage life of inventories, limited storage facilities at customer locations, MMS's requirements for freshness and the numerous sources of goods, a minimum amount of inventory is maintained at customer locations. If necessary, all essential food, beverage and operational products are available and can be obtained from alternative suppliers in all cities where the Company operates. Trademarks of the Company The Company has registered certain trademarks and service marks with the United States Patent and Trademark Office including the Pro-Health Dining(R) trademark. The Company believes that this and other related marks, such as its Advanced Culinary System(TM) and Advanced Culinary Center(TM), are important to its business. Registrations of the Company's trademarks expire from 2002 to 2009, unless renewed. Seasonality The Company's revenues are not seasonal to any significant degree. Working Capital Practices Cash provided by operations, along with borrowings under the Company's revolving lines of credit, are used to pay dividends, invest in new units and renovate existing units. Additional information concerning the working capital of the Company is incorporated herein by reference to information presented within the "Liquidity and Capital Resources" section of "Management's Discussion and Analysis of Financial Condition and Results of Operations" of the Company's 2000 Annual Report to Stockholders. Customer Dependence Concentration of business and credit risk is generally limited due to the large number of customers that make up the Company's customer base, thus spreading risk. During fiscal year 2000, the Company was awarded a new five-year contract to provide food and nutrition services to over 60 of Tenet HealthSystem Medical, Inc.'s ("Tenet") hospitals. The revenue from the Tenet accounts for fiscal years 2000, 1999 and 1998 was $69.2 million, $23.2 million and $12.0 million, respectively. These revenues accounted for 15.7%, 7.2% and 4.8% of total revenue for fiscal years 2000, 1999 and 1998, respectively. Tenet accounts receivable accounted for 12.9% and 6.8% of total accounts receivable at May 31, 2000 and 1999, respectively. Government Contracts There is no material portion of the Company's business that is subject to renegotiation of profits or termination of contracts or sub-contracts at the election of the Government. 5 Competition The healthcare food and nutrition services business is highly competitive. The Company competes with national and regional food contract companies that offer the same type of services as the Company. Management believes that competition in healthcare food and nutrition services and senior living markets is based on pricing, quality of services and reputation. Management believes that it compares favorably with its competition in these areas. Government Compliance The Company is subject to various regulations at both the state and local levels for items such as sanitation, health and fire safety, all of which could affect the operation of existing accounts. The Company's business is also subject to various other regulations at the federal level such as fair labor standards and occupational safety and health regulations. Compliance with these regulations has not had, and is not expected to have, a material adverse effect on the Company's operations. Environmental Compliance Compliance with federal, state and local laws and regulations which have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, is not expected to have a material effect upon the capital expenditures, earnings or competitive position of the Company. Personnel The Company employs approximately 10,000 full-time and part-time employees. The Company believes that working conditions are favorable and employee compensation is comparable with its competition. ITEM 2. PROPERTIES. MMS professionally manages foodservice departments on client-owned properties and, therefore, does not own any significant amounts of property. Vending services on client-owned facilities complement the foodservice program. Under the terms of certain contracts, MMS is required to make rent payments to its clients. The corporate headquarters are located in approximately 20,000 square feet of a leased building in a suburb of Atlanta, Georgia. The headquarters' lease term ends in 2001. The Company also has administrative offices in a leased building in Mobile, Alabama. This office has a lease term ending in 2001. In addition, the Company has set up strategic regional offices across the United States to service the needs of Company team members and clients located within that region. During fiscal year 1998, MMS constructed two advanced food preparation facilities or "Advanced Culinary Centers" (ACC) to utilize its expertise in the cook-chill food processing. The first facility, located in Tampa, Florida, includes about 5,000 square feet of light industrial space with a lease term ending in 2002. The second facility, located in Baltimore, Maryland, includes approximately 15,000 square feet of light industrial and regional office space. A new ACC in Charlotte, North Carolina is currently under construction. Facilities and equipment are repaired and maintained to assure their adequacy, productive capacity and utilization. 6 ITEM 3. LEGAL PROCEEDINGS. The Company is presently, and from time to time, subject to pending claims and suits arising in the ordinary course of its business. In the opinion of Management, the ultimate resolution of these pending legal proceedings will not have a material adverse effect on the Company's operations or consolidated financial position. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. Executive Officers of the Company Executive officers of the Company are appointed by and serve at the discretion of the Company's Board of Directors. Information regarding the Company's executive officers as of August 11, 2000 is provided below. Name Age Position with the Company - ---- --- -------------------------------------------------- G. A. Davenport 46 President, Chief Executive Officer and Chairman of the Board of Directors K. W. Engwall 52 Chief Financial Officer and Assistant Secretary J. E. Fountain 49 Vice President, General Counsel and Secretary J. D. Underhill 55 President, Morrison Healthcare Food Services E. D. Dolloff 54 President, Morrison Senior Dining G. L. Gaddy 47 Executive Vice President, Sales and Marketing R. C. Roberson 56 Division Vice President, Morrison Healthcare Food Services G. T. Levins 37 Division Vice President, Morrison Healthcare Food Services Glenn A. Davenport has been President and Chief Executive Officer of the Company since the Distribution in March 1996. He was President of the Health Care Division of MRI's Morrison Group from November 1993 until the Distribution in March 1996. Prior thereto, he served as Senior Vice President, Hospitality Group of MRI from February 1990 through November 1993 and in various other capacities since joining MRI in November 1973. K. Wyatt Engwall has been Chief Financial Officer and Assistant Secretary of the Company since the Distribution in March 1996. Prior thereto, he was Vice President, Controller of MRI's Ruby Tuesday Group from January 1994 until March 1996. He served as Vice President of Financial Planning of MRI from January 1993 through January 1994, Vice President and Controller of MRI's Contract Dining Division from October 1991 through January 1993 and as Controller of MRI's former Morrison's Management Services (Contract Dining) Division from October 1986 through October 1991. Mr. Engwall joined MRI in 1983 as a Financial Systems Analyst. John E. Fountain has been Vice President, General Counsel and Secretary of the Company since the Distribution in March 1996. He was Vice President, Legal of MRI's Morrison Group from August 1994 until March 1996. He served as Senior Attorney of MRI from December 1991 through August 1994. Prior thereto, he served as Staff Attorney of MRI from October 1978 through December 1991. Jerry D. Underhill has been President of the Morrison Healthcare Food Service Division since its inception in June 1999. He was Senior Vice President, Operations of the Company from the Distribution in March 1996 to June 1999. From September 1995 until March 1996 he was Senior Vice President, Retail Development of the Health Care Division of MRI's Morrison Group. Prior thereto, he was Senior Vice President, Development of the Family Dining Division of MRI's Morrison Group from March 1993 to September 1995. Mr. Underhill was President of Mid-Continent Restaurants (currently known as Bravo Restaurants) from July 1988 to March 1993. 7 Eugene D. Dolloff has been President of the Morrison Senior Dining Division since is its inception in March 1999. He was co-founder and President of Culinary Service Network, Inc., a senior dining contract management company, from April 1982 to September 1998. Prior thereto he served in various operational capacities with Stouffer's Management Food Service from January 1976 to February 1982. Gary L. Gaddy has been Executive Vice President, Sales and Marketing of the Company since June 2000. He was Senior Vice President, Sales and Marketing of the Company from March 1998 to June 2000. Prior thereto, he was Vice President, Health Systems for the Company from July 1997 to March 1998. Mr. Gaddy was Vice President of Sales and Marketing for EmCare, Inc., an emergency medicine contract management company from January 1995 to July 1997. He was Vice President/General Manager of Business Development for HMSS Management, Inc., a home infusion company, from August 1990 to December 1994. Mr. Gaddy has over 20 years of sales and marketing experience in the healthcare industry. Richard C. Roberson has been a Division Vice President of the Company since October 1997. He was a Regional Vice President of the Company since the Distribution in March 1996. Prior thereto, he served MRI's Health Care Division in various capacities, including as a Regional Vice President, District Manager and Food Service Director. George T. Levins has been a Division Vice President of the Company since June 1999. He was a Regional Vice President of the Company from January 1998 to June 1999. Prior thereto, he was a Regional Director of Operations from January 1997 to June 1999 and a director of Food and Nutrition Services from June 1996 to January 1997. He served in various operational capacities with Baxter Healthcare from June 1989 to June 1996, including Account Manager, Region Manager and Sales Manager. Mr Levins served in the Marine Corps from June 1985 to May 1989. 8 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS. Certain information required by this item is incorporated herein by reference to information contained under the caption "Common Stock Market Prices and Dividends" of the Registrant's Annual Report to Shareholders for the fiscal year ended May 31, 2000. The Company intends to continue to pay dividends in the future. ITEM 6. SELECTED FINANCIAL DATA. The information contained under the caption "Selected Financial Data" of the Registrant's Annual Report to Shareholders for the fiscal year ended May 31, 2000 is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The information contained under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" of the Registrant's Annual Report to Shareholders for the fiscal year ended May 31, 2000 is incorporated herein by reference. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information contained under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" of the Registrant's Annual Report to Shareholders for the fiscal year ended May 31, 2000 is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The following consolidated financial statements and the related report of the Company's independent auditors contained in the Registrant's Annual Report to Shareholders for the fiscal year ended May 31, 2000, are incorporated herein by reference: Consolidated Statements of Income - Fiscal years ended May 31, 2000, May 31, 1999 and May 31, 1998. Consolidated Balance Sheets - As of May 31, 2000 and May 31, 1999. Consolidated Statements of Cash Flows - Fiscal years ended May 31, 2000, May 31, 1999 and May 31, 1998. Consolidated Statements of Stockholders' Equity - Fiscal years ended May 31, 2000, May 31, 1999 and May 31, 1998. Notes to Consolidated Financial Statements. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. 9 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY. (a) The information regarding directors of the Company is incorporated herein by reference to the information set forth in the sections captioned "Election of Directors" and "Nominee Biographies" and "Standing Director Biographies" in the definitive proxy statement of the Registrant dated August 22, 2000, relating to the Registrant's annual meeting of shareholders to be held on September 27, 2000. (b) Pursuant to Form 10-K General Instruction G(3), the information regarding executive officers of the Company has been included in Part I of this Report under the caption "Executive Officers of the Company." ITEM 11. EXECUTIVE COMPENSATION. The information required by this Item 11 is incorporated herein by reference to the information set forth under the captions "Executive Compensation" and "Board of Directors Information" in the definitive proxy statement of the Registrant dated August 22, 2000 relating to the Registrant's annual meeting of shareholders to be held on September 27, 2000. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information required by this Item 12 is incorporated herein by reference to the information set forth in the table captioned "Beneficial Ownership of Common Stock" under "Election of Directors" in the definitive proxy statement of the Registrant dated August 22, 2000, relating to the Registrant's annual meeting of shareholders to be held on September 27, 2000. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. None. 10 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) The following documents are incorporated by reference into or are filed as part of this report: 1. Financial Statements: The following consolidated financial statements and the independent auditors' report thereon, included in the Registrant's Annual Report to Shareholders for the fiscal year ended May 31, 2000, a copy of which is contained in the exhibits to this report, are incorporated herein by reference: Page Reference in paper version of Annual Report to Shareholders ---------------- Consolidated Statements of Income for the fiscal years ended May 31, 2000, May 31, 1999 and May 31, 1998...................... 22 Consolidated Balance Sheets as of May 31, 2000 and May 31, 1999...................... 23 Consolidated Statements of Cash Flows for the fiscal years ended May 31, 2000, May 31, 1999 and May 31, 1998...................... 24 Consolidated Statements of Stockholders' Equity for the fiscal years ended May 31, 2000, May 31, 1999 and May 31, 1998...................... 25 Notes to Consolidated Financial Statements......... 26 - 34 Report of Independent Auditors..................... 35 Page Reference in Form 10-K -------------- 2. Financial statement schedule: Schedule II - Valuation and Qualifying Accounts for the fiscal years ended May 31, 2000, 1999 and 1998............................................... 16 Financial statement schedules other than those shown above are omitted because they are either not required or the required information is shown in the financial statements or notes thereto. 3. Exhibits The following exhibits are filed as part of this report: 11 MORRISON MANAGEMENT SPECIALISTS, INC. LIST OF EXHIBITS Exhibit Number Description - -------------------------------------------------------------------------------- 3.1 Amended and Restated Articles of Incorporation of Morrison Management Specialists, Inc.* 3.2 Bylaws, as amended, of Morrison Management Specialists, Inc.** 4.1 Specimen Common Stock Certificate.+ 4.2 Amended and Restated Articles of Incorporation of Morrison Management Specialists, Inc. (see Exhibit 3.1 hereto). 4.3 Bylaws, as amended, of Morrison Management Specialists, Inc. (see Exhibit 3.2 hereto). 4.4 Form of Rights Agreement between Morrison Management Specialists, Inc. and AmSouth Bank of Alabama, as Rights Agent.+ 4.5 Form of Rights Certificate (attached as Exhibit B to the Rights Agreement filed as Exhibit 4.4 hereto). 4.6 First Amendment to Rights Agreement. 10.1 Form of Distribution Agreement among Morrison Restaurants Inc., Morrison Fresh Cooking, Inc. and Morrison Management Specialists, Inc.* 10.2 Form of Amended and Restated Tax Allocation and Indemnification Agreement among Morrison Restaurants Inc., Custom Management Corporation of Pennsylvania, Custom Management Corporation, John C. Metz & Associates, Inc., Morrison International, Inc., Morrison Custom Management Corporation of Pennsylvania, Morrison Fresh Cooking, Inc., Ruby Tuesday, Inc., a Delaware corporation, Ruby Tuesday (Georgia), Inc., a Georgia corporation, Galaxy Management, Inc., Manask Food Service, Inc., Morrison of New Jersey, Inc., Tias, Inc. and Morrison Management Specialists, Inc.* 10.3 Form of Agreement Respecting Employee Benefit Matters among Morrison Restaurants Inc., Morrison Fresh Cooking, Inc. and Morrison Management Specialists, Inc.+ 10.4 Form of License Agreement between Morrison Fresh Cooking, Inc. and Morrison Management Specialists, Inc.* 10.5 Form of License Agreement between Ruby Tuesday, Inc. and Morrison Management Specialists, Inc.* 10.6 Form of Amended and Restated Operating Agreement of MRT Purchasing, LLC among Morrison Restaurants Inc., Ruby Tuesday, Inc., Morrison Fresh Cooking, Inc. and Morrison Management Specialists, Inc.* 12 10.7*** Form of Morrison Management Specialists, Inc. 1996 Stock Incentive Plan.+ 10.8*** Form of Morrison Management Specialists, Inc. Stock Incentive and Deferred Compensation Plan for Directors.+ 10.9*** Form of 1996 Non-Executive Stock Incentive Plan.+ 10.10*** Form of Morrison Management Specialists, Inc. Executive Supplemental Pension Plan.+ 10.11*** Form of Morrison Management Specialists, Inc. Management Retirement Plan.+ 10.12*** Form of Morrison Management Specialists, Inc. Salary Deferral Plan together with related form of Trust Agreement.+ 10.13*** Form of Morrison Management Specialists, Inc. Deferred Compensation Plan and related form of Trust Agreement.+ 10.14*** Form of Morrison Management Specialists, Inc. Executive Group Life and Executive Accidental Death and Dismemberment Plan.+ 10.15*** Form of Morrison Management Specialists, Inc. Executive Life Insurance Plan.+ 10.16 Form of Indemnification Agreement to be entered into with executive officers and directors.* 10.17*** Form of Change of Control Agreement to be entered into with executive officers.+ 10.18 Non-Qualified Stock Option Agreement between Morrison Restaurants Inc. and Eugene E. Bishop.+ 10.19 Non-Qualified Stock Option Agreement between Morrison Restaurants Inc. and Samuel E. Beall, III.+ 10.20 Amended and Restated Credit Agreement dated July 2, 1998, together with related Amended and Restated Revolving Credit Notes, Amended and Restated Swing Line Note and Subsidiary Guaranty.+++ 10.21*** First Amendment to the Morrison Management Specialists, Inc. Executive Supplemental Pension Plan.++ 10.22*** First Amendment to the Morrison Management Specialists, Inc. Management Retirement Plan.++ 10.23*** First Amendment to the Morrison Management Specialists, Inc. Salary Deferral Plan.++ 10.24*** Second Amendment to the Morrison Management Specialists, Inc. Salary Deferral Plan.++ 13 10.25*** First Amendment to the Morrison Management Specialists, Inc. Deferred Compensation Plan.++ 10.26*** Second Amendment to the Morrison Management Specialists, Inc. Deferred Compensation Plan.++ 10.27*** Morrison Management Specialists, Inc. Salary Deferral Plan together with related form of Amended Trust Agreement.+++ 10.28*** Morrison Management Specialists, Inc. Deferred Compensation Plan and related form of Amended Trust Agreement.+++ 10.29*** First Amendment to the 1996 Executive Stock Incentive Plan.+++ 10.30*** First Amendment to the 1996 Non-Executive Stock Incentive Plan.+++ 10.31*** Second Amendment to the 1996 Executive Stock Incentive Plan.+++ 10.32*** Second Amendment to the 1996 Non-Executive Stock Incentive Plan.+++ 10.33*** Third Amendment to the Morrison Management Specialists, Inc. Salary Deferral Plan.+++ 10.34 Stock Purchase Agreement of Drake Management Services, Inc.+++ 10.35 Asset Purchase Agreement of Spectra Services, Inc.+++ 10.36*** Fourth Amendment to the Morrison Management Specialists, Inc. Salary Deferral Plan. 11 Statement regarding computation of per share earnings. 13 Annual Report to Stockholders for the fiscal year ended May 31, 2000 (Only portions specifically incorporated by reference in the Form 10-K are incorporated herewith.) 21.1 List of subsidiaries of Morrison Management Specialists, Inc. 23 Consent of Independent Auditors. 27 Financial Data Schedule. * Incorporated by reference to Exhibit of the same number in the Registrant's Registration Statement on Form 10 filed with the Commission on February 8, 1996. ** Incorporated by reference to Exhibit of the same number in the Registrant's Quarterly Report on Form 10-Q for the quarter ended February 28, 1998. *** Denotes a management contract or compensatory plan or arrangement. + Incorporated by reference to Exhibit of the same number in the Registrant's amendment to Registration Statement on Form 10/A filed with the Commission on February 29, 1996. ++ Incorporated by reference to Exhibit of the same number in the Registrant's Annual report on Form 10-K for the fiscal year ended May 31, 1997. +++ Incorporated by reference to Exhibit of the same number in the Registrant's Annual report on Form 10-K for the fiscal year ended May 31, 1998. (b) Reports on Form 8-K There were no reports filed on Form 8-K during the most recent fiscal quarter. 14 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MORRISON MANAGEMENT SPECIALISTS, INC. Date 08/22/00 By:/s/ Glenn A. Davenport Glenn A. Davenport President, Chief Executive Officer and Chairman of the Board Date 08/22/00 By:/s/ K. Wyatt Engwall K. Wyatt Engwall Chief Financial Officer and Assistant Secretary Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: Date 08/22/00 By:/s/Glenn A. Davenport Glenn A. Davenport President, Chief Executive Officer and Chairman of the Board Date 08/22/00 By:/s/K. Wyatt Engwall K. Wyatt Engwall Chief Financial Officer and Assistant Secretary Date 08/22/00 By:/s/Claire L. Arnold Claire L. Arnold Director Date 08/22/00 By:/s/ E. Eugene Bishop E. Eugene Bishop Director Date 08/22/00 By:/s/Fred L. Brown Fred L. Brown Director 15 Date 08/22/00 By:/s/Michael F. Corbett Michael F. Corbett Director Date 08/22/00 By:/s/John B. McKinnon John B. McKinnon Director Date 08/22/00 By:/s/A. Robert Outlaw, Jr. A. Robert Outlaw, Jr. Director Date 08/22/00 By:/s/Dr. Benjamin F. Payton Dr. Benjamin F. Payton Director 16 Morrison Management Specialists, Inc. Schedule II - VALUATION AND QUALIFYING ACCOUNTS For the Periods Ended May 31, 2000, 1999 and 1998 (Dollars in Thousands) Column A Column B Column C Column D (A) Column E - ----------------------------------------------------------------------------------------------- Additions ----------------------- Balance Charged Charged Balance at to to at Beginning Costs and Other End Description of Period Expenses Accounts Deductions of Period --------------------------- -----------------------------------------------------------
Year ended May 31, 2000: Trade receivables: Allowance for doubtful accounts $ 712 $ 61 $ 0 $ 96 $ 677 =========================================================== Year ended May 31, 1999: Trade receivables: Allowance for doubtful accounts $ 887 $ 0 $ 36 $ 211 $ 712 =========================================================== Year ended May 31, 1998: Trade receivables: Allowance for doubtful accounts $ 744 $ 0 $ 196 $ 53 $ 887 ===========================================================
Notes: (A) Write-off of trade receivables determined to be uncollectible against the allowance for doubtful accounts. EX-10.36 2 0002.txt FOURTH AMENDMENT TO THE MMSI SALARY DEFERRAL PLAN FOURTH AMENDMENT TO THE MORRISON MANAGEMENT SPECIALISTS, INC. SALARY DEFERRAL PLAN THIS FOURTH AMENDMENT is made as of this 29th day of June, 2000 by MORRISON MANAGEMENT SPECIALISTS, INC., a corporation duly organized and existing under the laws of the state of Georgia (the "Primary Sponsor"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Primary Sponsor maintains the Morrison Health Care, Inc. Salary Deferral Plan (the "Plan") under an indenture dated March 7, 1996; and WHEREAS, to reflect the change in the name of the Primary Sponsor to Morrison Management Specialists, Inc., the Primary Sponsor desires to change the name of the Plan to the "Morrison Management Specialists, Inc. Salary Deferral Plan." WHEREAS, the Primary Sponsor wishes to amend the Plan to reflect certain changes under the Uniformed Services Employment and Reemployment Rights Act, the Small Business Job Protection Act of 1996 and the Taxpayer Relief Act of 1997; and WHEREAS, the Primary Sponsor wishes to amend the Plan to reflect the preservation of certain protected benefits within the meaning of Section 411(d)(6) of the Internal Revenue Code resulting from the transfer of assets from the Charlotte-Mecklenburg Hospital Authority 401(k) Matched Savings Plan. NOW, THEREFORE, the Plan is hereby amended, effective as of January 1, 1997, except as otherwise provided herein, as follows: 1. Effective January 1, 2000, by deleting Section 1.1(c) in its entirety and by substituting therefor the following: "(c) `Employee Deferred Account' which shall reflect a Member's interest in contributions made by a Plan Sponsor under Plan Section 3.1 and a Member's interest, if any, in his Deferred Income Account under the CHS Plan which has been transferred to the Plan in a trust-to-trust transfer." 2. Effective January 1, 2000, by deleting Section 1.1(f) in its entirety and by substituting therefor the following: "(f) `Rollover Account' which shall reflect a Member's interest in Rollover Amounts and a Member's interest, if any, in his Rollover Account under the CHS Plan which has been transferred to the Plan in a trust-to-trust transfer." 3. Effective January 1, 2000, by adding the following new Section 1.1(l)A as follows: "(l)A `Discretionary Profit Sharing Contribution Account' which shall reflect a Member's interest in discretionary profit sharing contributions made by a Plan Sponsor under Plan Section 3.4C and a Member's interest, if any, in his Employer Discretionary Contributions Account under the Charlotte-Mecklenburg Hospital Authority 401(k) Matched Savings Plan (the `CHS Plan') which has been transferred to the Plan in a trust-to-trust transfer." 4. Effective January 1, 2000, by adding the following new Section 1.1(m) as follows: "(m) `CHS Matching Employer Contributions Account' which shall reflect a Member's interest, if any, in his Matching Employer Contributions Account, if any, under the CHS Plan which has been transferred to the Plan in a trust-to-trust transfer." 5. Effective January 1, 1998, by deleting existing Plan Section 1.5 in its entirety and by substituting the following: "1.5 `Annual Compensation' means wages within the meaning of Code Section 3401(a) (for purposes of income tax withholding at the source) paid to an Employee by a Plan Sponsor and Affiliates during a Plan Year (but without regard to any rules that limit the remuneration included in wages based on the nature or location of the employment or the services performed, such as the exception for agricultural labor in Code Section 3401(a)(2)), to the extent not in excess of the Annual Compensation Limit for all purposes under the Plan except for purposes of determining who are Highly Compensated Employees. Notwithstanding the above, Annual Compensation shall be determined as follows: (a) (1) for purposes of determining, with respect to each Plan Sponsor, the amount of contributions made by or on behalf of an Employee under Plan Section 3 and allocations under Plan Section 4, and (2) for purposes of applying the provisions of Appendix A hereto for such Plan Years as the Secretary of the Treasury may allow, Annual Compensation shall only include amounts received for the portion of the Plan Year during which the Employee was a Member; and (b) for all purposes under the Plan, Annual Compensation shall include any amount which would have been paid during a Plan Year, but was contributed by a Plan Sponsor on behalf of an Employee pursuant to a salary reduction agreement which is not includable in the gross income of the Employee under Section 125, 402(g)(3), or 457 of the Code." 6. Effective January 1, 2000, by adding the following new Section 1.9A as follows: "1.9A `CHS Facility' means any facility or location, or successor thereto, previously operated by the Charlotte-Mecklenburg Hospital Authority." 7. By deleting Section 1.19 in its entirety and by substituting therefor the following: "1.19 `Eligible Employee' means any Employee of a Plan Sponsor other than an Employee who is (a) an Employee covered by a collective bargaining agreement between a union and a Plan Sponsor, provided that retirement benefits were the subject of good faith bargaining, unless the bargaining agreement provides for participation in the Plan; or (b) a leased employee within the meaning of Code Section 414(n)(2), or deemed to be an Employee of a Plan Sponsor pursuant to regulations under Code Section 414(o). Notwithstanding the foregoing, no person who is initially classified by a Plan Sponsor as an independent contractor for federal income tax purposes shall be regarded as an Eligible Employee for that period, regardless of any subsequent determination that any such person should have been characterized as a common law employee of the Plan Sponsor for the period in question." 8. Effective January 1, 2000, by deleting Section 1.21 in its entirety and by substituting therefore the following: "1.21 `Eligible Rollover Distribution' means any distribution of all or any portion of the Distributee's Account, except that an Eligible Rollover Distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee's designated Beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Code Section 401(a)(9); the portion of any distribution that is not includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities); and any distribution contemplated by Code Section 401(k)(2)(B)(i)(IV)." 9. By deleting existing Plan Section 1.31 in its entirety and substituting therefor the following: "1.31 `Highly Compensated Employee' means, with respect to a Plan Year, each Employee who: (a) was at any time during the Plan Year or the immediately preceding Plan Year an owner of more than five percent (5%) of the outstanding stock of a Plan Sponsor or Affiliate or more than five percent (5%) of the total combined voting power of all stock of a Plan Sponsor or Affiliate; or (b) received Annual Compensation in excess of $85,000 during the immediately preceding Plan Year ($80,000 for preceding Plan Years beginning on or before January 1, 1999), which amount shall be adjusted for changes in the cost of living as provided in regulations issued by the Secretary of the Treasury. (c) is a former Employee who met the requirements of Subsection (a) or (b) at the time the former Employee separated from service with the Plan Sponsor or an Affiliate or at any time after the former Employee attained age 55." 10. By deleting existing Plan Section 1.37(c) in its entirety and by substituting therefor the following: "[Reserved.]" 11. Effective January 1, 2000, by deleting Section 1.44 in its entirety and by substituting the following: "1.44 `Profit Sharing Plan' means the portion of the Plan pertaining to Discretionary Profit Sharing Contribution Accounts, Employee Deferred Accounts, Voluntary Contribution Accounts, Pre-Spinoff Matching Accounts, Diversification Accounts, CHS Matching Employer Contributions Accounts, and Rollover Accounts." 12. Effective January 1, 2000, by adding the following new Section 3.4C as follows: "3.4C Discretionary Profit Sharing Contributions. The Plan Sponsor proposes to make contributions to the Fund with respect to each Plan Year on behalf of each Member who is an Eligible Employee entitled to an allocation under Plan Section 4.1A in an amount determined by the Plan Sponsor." 13. Effective January 1, 2000, by deleting Section 3.6 in its entirety and by substituting therefor the following: "3.6 In no event will the sum of contributions under Plan Sections 3.1, 3.2, 3.4A, 3.4B, and 3.4C exceed the deductible limits under Code Section 404." 14. Effective January 1, 2000, by adding the following new Section 4.1A as follows: "4.1A Discretionary Profit Sharing Contributions. As soon as reasonably practicable following the date of receipt by the Trustee, Plan Sponsor contributions made pursuant to Section 3.4C shall be allocated to the Discretionary Profit Sharing Contribution Account of each Member who is employed by a Plan Sponsor on the last day of the Plan Year at a CHS Facility in the proportion that the Member's Compensation bears to the Annual Compensation of all Members entitled to an allocation under this Plan Section 4.1A." 15. By deleting Sections 4.4(b) and (c) in their entirety and by substituting the following: "(b) Any shares of Company Stock which are released from the Loan Suspense Account that are attributable (1) to Plan Sponsor contributions under Plan Section 3.3 and forfeitures; (2) to cash dividends paid on shares of Company Stock allocated to the Loan Suspense Account that are used to make a payment on an Acquisition Loan; and (3) to proceeds on the sale of shares of Company Stock held in the Loan Suspense Account that are used to make a payment on an Acquisition Loan shall be allocated to Company Matching Accounts in accordance with Plan Section 4.2(a). Proceeds on the sale of shares of Company Stock held in the Loan Suspense Account may be used to repay an Acquisition Loan if the transaction, based on all the surrounding facts and circumstances, satisfies the requirements of Treasury Regulations Section 54.4975-7(b)(3). (c) To the extent the proceeds on the sale of Company Stock held in the Loan Suspense Account exceed the amount of the Acquisition Loan, such proceeds shall be treated as earnings and shall be allocated to each Member's Supplemental Matching Account in the proportion that the balance of the Member's Accounts under the ESOP as of the immediately preceding Valuation Date bears to the total value of all Members' Accounts under the ESOP as of the immediately preceding Valuation Date." 16. By deleting Section 4.4(e) in its entirety. 17. Effective January 1, 2000, by adding the following new Section 6.3A as follows: "6.3A Subject to the rules and conditions as the Plan Administrator may prescribe, by request, a Member who has attained the age of 59 1/2 may elect to withdrawal all or any portion of his vested Account." 18. By deleting Section 6.4 in its entirety and by substituting therefor the following: "6.4 Any distribution pursuant to this Plan Section, other than a distribution on account of a hardship, shall be made in a lump sum to the Member and shall be subject to the Eligible Rollover Distribution requirements set forth in Plan Section 11.2." 19. Effective January 1, 2000, by deleting Section 8.4 in its entirety and by substituting therefor the following: "8.4 Payment of the Member's Accrued Benefit shall be made as soon as administratively feasible after the Member terminates employment, but in no event later than, unless the Member otherwise elects, the 60th day after the latest of the close of the Plan Year in which the Member terminates his service with the Plan Sponsor; provided, however, if the Member's Accrued Benefit exceeds $5,000 it will not be distributed before the Member's `required beginning date,' within the meaning of Plan Section 11.3(c), without the Member's consent." 20. Effective January 1, 2000, by deleting Section 9.3 in its entirety and by substituting therefor the following: "9.3 Payment of the Member's Accrued Benefit shall be made as soon as administratively feasible after the Member terminates employment, but in no event later than, unless the Member otherwise elects, the 60th day after the latest of the close of the Plan Year in which the Member terminates his service with the Plan Sponsor; provided, however, if the Member's Accrued Benefit exceeds $5,000 it will not be distributed before the Member's `required beginning date,' within the meaning of Plan Section 11.3(c), without the Member's consent." 21. Effective January 1, 2001, by deleting Section 11.3(c) in its entirety and by substituting therefor the following: "(c) For purposes of this Section, the term `required beginning date' means April 1 of the calendar year following the later of the calendar year in which the Member attains age 70 1/2 or the calendar year in which the Member retires, except that in the case of a person described in Section l(b)(3) of Appendix C, the `required beginning date' shall be April 1 of the calendar year following the calendar year in which the Member attains age 70 1/2. Notwithstanding the foregoing, with respect to a Member who attains age 70 1/2 prior to January 1, 2001, such Member may elect to receive minimum required distributions in accordance with Section 401(a)(9) as in effect prior to January 1, 1997, or, in the alternative, such Member may elect to defer distribution, in which event benefits will be paid in accordance with the remaining provisions of the Plan." 22. By deleting the first sentence of Section 22.1 in its entirety and by substituting therefor the following: "Subject to the provisions of the Plan and the Trust, on and after the date the provisions of this Section are activated by express written action of the Plan Administrator, each Member who is an Employee shall have the right, subject to prior approval by the Plan Administrator, to borrow from the Fund." 23. By adding a new final sentence to Section 22.1 as follows: "In addition, any loan made to a Member under the CHS Plan and transferred to the Plan shall be governed and administered by the Plan Administrator in accordance with the terms of the notes evidencing such loans and shall be subject to the terms of the Plan and the Trust." 24. By deleting Section 22.7 in its entirety and by substituting therefor the following: "22.7 Each loan, by its terms, shall be repaid within five (5) years; except that the Plan Administrator by uniform rule, may allow any loan which is used to acquire any dwelling unit which within a reasonable time is to be used (determined at the time the loan is made) as the principal residence of the borrower, by its terms, to be repaid within a longer period of time." 25. By deleting Appendix A in its entirety and by substituting the following: "APPENDIX A SPECIAL NONDISCRIMINATION RULES SECTION 1 As used in this Appendix, the following words shall have the following meanings: (a) `Eligible Member' means a Member who is an Employee during any particular Plan Year. (b) `Highly Compensated Eligible Member' means any Eligible Member who is a Highly Compensated Employee. (c) `Matching Contribution' means any contribution made by a Plan Sponsor to a Matching Account and any other contribution made to a plan by a Plan Sponsor or an Affiliate on behalf of an Employee on account of a contribution made by an Employee or on account of an Elective Deferral. (d) `Qualified Matching Contributions' means Matching Contributions which are immediately nonforfeitable when made, and which would be nonforfeitable, regardless of the age or service of the Employee or whether the Employee is employed on a certain date, and which may not be distributed, except upon one of the events described under Section 401(k)(2)(B) of the Code and the regulations thereunder. (e) `Qualified Nonelective Contributions' means contributions of the Plan Sponsor or an Affiliate, other than Matching Contributions or Elective Deferrals, which are nonforfeitable when made, and which would be nonforfeitable regardless of the age or service of the Employee or whether the Employee is employed on a certain date, and which may not be distributed, except upon one of the events described under Code Section 401(k)(2)(B) and the regulations thereunder. SECTION 2 In addition to any other limitations set forth in the Plan, for each Plan Year one of the following tests must be satisfied: (a) the actual deferral percentage for the Highly Compensated Eligible Members for the Plan Year must not be more than the actual deferral percentage of all other Eligible Members for the preceding Plan Year multiplied by 1.25; or (b) the excess of the actual deferral percentage for the Highly Compensated Eligible Members for the Plan Year over that of all other Eligible Members for the preceding Plan Year must not be more than two (2) percentage points, and the actual deferral percentage for the Highly Compensated Eligible Members for the Plan Year must not be more than the actual deferral percentage of all other Eligible Members for the preceding Plan Year multiplied by two (2). The `actual deferral percentage' for the Highly Compensated Eligible Members and all other Eligible Members for a Plan Year is the average in each group of the ratios, calculated separately for each Employee, of the Deferral Amounts contributed by the Plan Sponsor on behalf of an Employee for the Plan Year to the Annual Compensation of the Employee in the Plan Year. In addition, for purposes of calculating the `actual deferral percentage' as described above, Deferral Amounts of Employees who are not Highly Compensated Employees which are prohibited by Code Section 401(a)(30) shall not be taken into consideration. Except to the extent limited by Treasury Regulation section 1.401(k)-l(b)(5) and any other applicable regulations promulgated by the Secretary of the Treasury, all or part of the Qualified Matching Contributions and Qualified Nonelective Contributions made pursuant to the Plan may be treated as Deferral Amounts for purposes of determining the `actual deferral percentage.' SECTION 3 If the Deferral Amounts contributed on behalf of any Highly Compensated Eligible Member exceeds the amount permitted under the `actual deferral percentage' test described in Section 2 of this Appendix A for any given Plan Year, then before the end of the Plan Year following the Plan Year for which the Excess Deferral Amount was contributed, (a) the portion of the Excess Deferral Amount for the Plan Year attributable to a Highly Compensated Member, as adjusted to reflect income, gain, or loss attributable to it through the date the end of the Plan Year for which the test is being performed and reduced by any excess Elective Deferrals as determined pursuant to Plan Section 3.1 previously distributed to a Member for the Member's taxable year ending with or within the Plan Year, may be distributed to the Highly Compensated Eligible Member or (b) to the extent provided in regulations issued by the Secretary of the Treasury, the Plan Administrator may permit the Member to elect, within two and one-half months after the end of the Plan Year for which the Excess Deferral Amount was contributed, to treat the Excess Deferral Amount, unadjusted for earnings, gains, and losses, but as so reduced, as an amount distributed to the Member and then contributed as an after-tax contribution by the Member to the Plan (`recharacterized amounts'). The income allocable to such Excess Deferral Amount shall be determined in a similar manner as described in Section 4.3 of the Plan. The Excess Deferral Amount to be distributed or recharacterized shall be reduced by Deferral Amounts previously distributed or recharacterized for the taxable year ending in the same Plan Year, and shall also be reduced by Deferral Amounts previously distributed or recharacterized for the Plan Year beginning in such taxable year. For all other purposes under the Plan other than this Appendix A, recharacterized amounts shall continue to be treated as Deferral Amounts. In the event the multiple use of limitations contained in Sections 2(b) and 5(b) of this Appendix A, pursuant to Treasury Regulations section 1.401(m)-2 as promulgated by the Secretary of the Treasury, requires a corrective distribution, such distribution shall be made pursuant to this Section 3, and not Section 6 of Appendix A. The portion of the Matching Contribution on which such Excess Deferral Amount was based shall be forfeited upon the distribution or recharacterization, as the case may be, of such Excess Deferral Amount. (a) For purposes of this Section 3, `Excess Deferral Amount' means, with respect to a Plan Year, the excess of: (1) the aggregate amount of Deferral Amounts contributed by a Plan Sponsor on behalf of Highly Compensated Eligible Members for the Plan Year, over (2) the maximum amount of Deferral Amounts permitted under Section 2 of this Appendix A for the Plan Year, which shall be determined by reducing the Deferral Amounts contributed on behalf of Highly Compensated Eligible Members in order of the actual deferral percentages beginning with the highest of such percentages. (b) Distribution of the Excess Deferral Amount for any Plan Year shall be made to Highly Compensated Eligible Members on the basis of the dollar amount of Deferral Amounts attributable to each Highly Compensated Eligible Member. The Plan Sponsor shall determine the amount of Excess Deferral Amounts which shall be distributed to each Highly Compensated Eligible Member as follows. (1) The Deferral Amounts allocated to the Highly Compensated Eligible Member with the highest dollar amount of Deferral Amounts for the Plan Year shall be reduced by the amount required to cause that Highly Compensated Eligible Member's remaining Deferral Amounts for the Plan Year to be equal to the dollar amount of the Deferral Amounts allocated to the Highly Compensated Eligible Member with the next highest dollar amount of Deferral Amounts for the Plan Year. This amount is then distributed to the Highly Compensated Eligible Member with the highest dollar amount of Deferral Amounts, unless a smaller reduction, when added to the total dollar amount already distributed pursuant to this Paragraph (1), equals the total Excess Deferral Amounts. (2) If the total amount distributed under Paragraph (1) of this Section 3(b) is less than the total Excess Deferral Amounts, the procedure in Paragraph (1) shall be successively repeated until the total dollar amount distributed is equal to the total Excess Deferral Amounts attributable to Highly Compensated Eligible Members. If a distribution of the Excess Deferral Amounts attributable to the Highly Compensated Eligible Members is made in accordance with Paragraphs (1) and (2) of this Section, the limitations in Section 2 of this Appendix A shall be treated as being met regardless of whether the actual deferral percentage, if recalculated after such distributions, would have satisfied the requirements of Section 2. SECTION 4 The Plan Administrator shall have the responsibility of monitoring the Plan's compliance with the limitations of this Appendix A and shall have the power to take all steps it deems necessary or appropriate to ensure compliance, including, without limitation, restricting the amount which Highly Compensated Eligible Members can elect to have contributed pursuant to Plan Section 3.1. Any actions taken by the Plan Administrator pursuant to this Section 4 shall be pursuant to non-discriminatory procedures consistently applied. SECTION 5 In addition to any other limitations set forth in the Plan, Matching Contributions under the Plan and the amount of nondeductible employee contributions under the Plan, for each Plan Year must satisfy one of the following tests: (a) The contribution percentage for Highly Compensated Eligible Members for the Plan Year must not exceed 125% of the contribution percentage for all other Eligible Members for the preceding Plan Year; or (b) The contribution percentage for Highly Compensated Eligible Members for the Plan Year must not exceed the lesser of (1) 200% of the contribution percentage for all other Eligible Members for the preceding Plan Year, and (2) the contribution percentage for all other Eligible Members for the preceding Plan Year plus two (2) percentage points. Notwithstanding the foregoing, for purposes of this Section 5, the terms Highly Compensated Eligible Member and Eligible Member shall not include any Member who is not eligible to receive a Matching Contribution under the provisions of the Plan, other than as a result of the Member failing to contribute to the Plan or failing to have an Elective Deferral contributed to the Plan on the Member's behalf. Notwithstanding the foregoing, if Qualified Matching Contributions are taken into account for purposes of applying the test contained in Section 2 of this Appendix A, they shall not be taken into account under this Section 5. In applying the above tests, the Plan Administrator shall comply with any regulations promulgated by the Secretary of the Treasury which prevent or restrict the use of the test contained in Section 2(b) of this Appendix A and the test contained in Section 5(b) of this Appendix A. The `contribution percentage' for Highly Compensated Eligible Members and for all other Eligible Members for a Plan Year shall be the average of the ratios, calculated separately for each Member, of (A) to (B), where (A) is the amount of Matching Contributions under the Plan (excluding Qualified Matching Contributions which are used to apply the test set forth in Section 2 of this Appendix A or Matching Contributions which are used to satisfy the minimum required contributions to the Accounts of Eligible Members who are not Key Employees pursuant to Section 1 of Appendix C to the Plan) and nondeductible employee contributions made under the Plan for the Eligible Member for the Plan Year, and where (B) is the Annual Compensation of the Eligible Member for the Plan Year. Except to the extent limited by Treasury Regulation Section 1.401(m)-l(b)(5) and any other applicable regulations promulgated by the Secretary of the Treasury, a Plan Sponsor may elect to treat Deferral Amounts and Qualified Nonelective Contributions as Matching Contributions for purpose of determining the `contribution percentage,' provided the Deferral Amounts, excluding those treated as Matching Contributions, satisfy the test set forth in Section 2 of Appendix A. SECTION 6 If either (a) the Matching Contributions and, if taken into account under Section 5 of this Appendix A, the Deferral Amounts, Qualified Nonelective Contributions and/or Qualified Matching Contributions made on behalf of Highly Compensated Eligible Members, or (b) the nondeductible employee contributions made by Highly Compensated Eligible Members exceed the amount permitted under the `contribution percentage test' for any given Plan Year, then, before the close of the Plan Year following the Plan Year for which the Excess Aggregate Contributions were made, the amount of the Excess Aggregate Contributions attributable to the Plan for the Plan Year under either Section (6)(a)(1) or (2), or both, as adjusted to reflect any income, gain or loss attributable to such contributions through the date the Excess Aggregate Contributions are distributed shall be distributed or, if the Excess Aggregate Contributions are forfeitable, forfeited. The income allocable to such contributions shall be determined in a similar manner as described in Section 4.3 of the Plan. As to any Highly Compensated Employee, any distribution or forfeiture of his allocable portion of the Excess Aggregate Contributions for a Plan Year shall first be attributed to any nondeductible employee contributions made by the Member during the Plan Year for which no corresponding Plan Sponsor contribution is made and then to any remaining nondeductible employee contributions made by the Member during the Plan Year and any Matching Contributions thereon. As between the Plan and any other plan or plans maintained by the Plan Sponsor in which Excess Aggregate Contributions for a Plan Year are held, each such plan shall distribute or forfeit a pro-rata share of each class of contribution based on the respective amounts of a class of contribution made to each plan during the Plan Year. The payment of the Excess Aggregate Contributions shall be made without regard to any other provision in the Plan. In the event the multiple use of limitations contained in Sections 2(b) and 5(b) of this Appendix A, pursuant to Treasury Regulation section 1.401(m)-2 as promulgated by the Secretary of the Treasury, requires a corrective distribution, such distribution shall be made pursuant to Section 3 of Appendix A, and not this Section 6. For purposes of this Section 6, with respect to any Plan Year, `Excess Aggregate Contributions' means the excess of: (a) the aggregate amount of the Matching Contributions and nondeductible employee contributions (and any Qualified Nonelective Contributions or Qualified Matching Contributions) and, it taken into account under Section 5 of this Appendix A, the Deferral Amounts actually made on behalf of Highly Compensated Eligible Members for the Plan Year, over (b) the maximum amount of contributions permitted under the limitations of Section 5 of this Appendix A, determined by reducing contributions made on behalf of Highly Compensated Eligible Members in order of their contribution percentages beginning with the highest of such percentages. The determination of the amount of Excess Aggregate Contributions under this Section 6 shall be made after (1) first determining the excess Elective Deferrals under Section 3.1(b) of the Plan and (2) then determining the Excess Deferral Amounts under Section 3 of this Appendix A. (c) Distribution or forfeiture of nondeductible employee contributions or Matching Contributions in the amount of the Excess Aggregate Contributions for any Plan Year shall be made with respect to Highly Compensated Eligible Members on the basis of the dollar amount of the Excess Aggregate Contributions attributable to each Highly Compensated Eligible Member. Forfeitures of Excess Aggregate Contributions may not be allocated to Members whose contributions are reduced under this Section 6. The Plan Sponsor shall determine the amount of Excess Aggregate Contributions which shall be distributed to each Highly Compensated Eligible Member as follows. (1) The Matching Contributions and nondeductible contributions allocated to the Highly Compensated Eligible Member with the highest dollar amount of such contributions for the Plan Year shall be reduced by the amount required to cause that Highly Compensated Eligible Member's remaining Matching Contributions and nondeductible contributions for the Plan Year to be equal to the dollar amount of such contributions allocated to the Highly Compensated Eligible Member with the next highest dollar amount of Matching contributions and nondeductible contributions for the Plan Year. This amount is then distributed to the Highly Compensated Eligible Member with the highest dollar amount of Matching Contributions and nondeductible contributions, unless a smaller reduction, when added to the total dollar amount already distributed pursuant to this Subsection (1), equals the total Excess Aggregate Contributions. (2) If the total amount distributed under Paragraph (1) is less than the total Excess Aggregate Contributions, the procedure in Paragraph (1) shall be repeated until the total dollar amount of Matching Contributions and nondeductible contributions distributed is equal to the total Excess Aggregate Contributions attributable to Highly Compensated Eligible Members. If a distribution of the total Excess Aggregate Contributions is made in accordance with Paragraphs (1) and (2) of this Section 6(c), the limitations in Section 5 of this Appendix A shall be treated as being met regardless of whether the actual contribution percentage, if recalculated after such distributions, would have satisfied the requirements of Section 5. SECTION 7 Except to the extent limited by rules promulgated by the Secretary of the Treasury, if a Highly Compensated Eligible Member is a participant in any other plan of the Plan Sponsor or any Affiliate which includes Matching Contributions, deferrals under a cash or deferred arrangement pursuant to Code Section 401(k), or nondeductible employee contributions, any contributions made by or on behalf of the Member to the other plan shall be allocated with the same class of contributions under the Plan for purposes of determining the `actual deferral percentage' and `contribution percentage' under the Plan; provided, however, contributions that are made under an `employee stock ownership plan' (within the meaning of Code Section 4975(e)(7)) shall not be combined with contributions under any plan which is not an employee stock ownership plan (within the meaning of Code Section 4975(e)(7)). Except to the extent limited by rules promulgated by the Secretary of the Treasury, if the Plan and any other plans which include Matching Contributions, deferrals under a cash or deferred arrangement pursuant to Code Section 401(k), or nondeductible employee contributions are considered as one plan for purposes of Code Section 401(a)(4) and 410(b)(1), any contributions under the other plans shall be allocated with the same class of contributions under the Plan for purposes of determining the `contribution percentage' and `actual deferral percentage' under the Plan; provided, however, contributions that are made under an `employee stock ownership plan' (within the meaning of Code Section 4975(e)(7)) shall not be combined with contributions under any plan which is not an employee stock ownership plan (within the meaning of Code Section 4975(e)(7)). SECTION 8 Effective January 1, 1999, notwithstanding any other provision in this Appendix A to the contrary, to the extent otherwise applicable, the limitations expressed in this Appendix A shall not apply with respect to those Plan Years in which the Plan satisfies the requirements of Code Sections 401(k)(11) and/or 401(k)(12)." 26. By deleting, effective January 1, 1999, the word "preceding" from Section 2(a) and (b) and Section 5(a) and (b) of Appendix A. 27. By deleting the existing first sentence of Section 3 of Appendix B and substituting therefor the following: "Prior to January 1, 2000, in the event a Plan Sponsor maintains a defined benefit plan under which a Member also participates, the sum of the defined benefit plan fraction and the defined contribution plan fraction for any limitation year for any Member may not exceed 1.0." Except as specifically amended hereby, the Plan shall remain in full force and effect as it was prior to this Fourth Amendment. IN WITNESS WHEREOF, the parties hereto have caused this Fourth Amendment to be executed as of the day and year first above written. MORRISON MANAGEMENT SPECIALISTS, INC. By: /s/Glenn A. Davenport Glenn A. Davenport Title: President, Chief Executive Officer and Chairman of the Board ATTEST:/s/John E. Fountain John E. Fountain Title: Vice President, General Counsel and Secretary [CORPORATE SEAL] EX-13 3 0003.txt FISCAL YEAR 2000 ANNUAL REPORT TO SHAREHOLDERS 2000 FINANCIAL REVIEW Selected Financial Data..................................18 Management's Discussion and Analysis of Financial Condition and Results of Operations............19 Consolidated Statements of Income........................22 Consolidated Balance Sheets..............................23 Consolidated Statements of Cash Flows....................24 Consolidated Statements of Stockholders' Equity..........25 Notes to Consolidated Financial Statements...............26 Report of Independent Auditors...........................35 Shareowner Information...................................36 Directors and Executive Officers.........................37 Page 17 in Annual Report SELECTED FINANCIAL DATA Morrison Management Specialists, Inc. and Subsidiaries The following table summarizes certain selected financial information with respect to Morrison Management Specialists, Inc. (the "Company" or "MMS") and is derived from the Financial Statements of MMS. Effective March 9, 1996, Morrison Health Care, Inc. ("MHCI") was spun off (the "Distribution") from Morrison Restaurants Inc. ("MRI"), becoming an independent public corporation trading under the symbol MHI on the New York Stock Exchange. MHCI subsequently changed its name to Morrison Management Specialists, Inc. effective June 30, 1999. The Selected Financial Data of MMS is presented as if MMS had been a separate entity for fiscal year 1996. The information set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Financial Statements of MMS and notes thereto. Weighted average shares for 1996 were determined as if the shares issued in connection with the Distribution were outstanding from the beginning of the year. For the Fiscal Year* - ---------------------------------------------------------------------------------------------------------------- (In thousands except per share data) 2000 1999 1998 1997 1996 - ---------------------------------------------------------------------------------------------------------------- Consolidated Statements of Income Data:
Revenues ................................... $441,074 $ 324,968 $ 250,371 $ 221,011 $ 219,995 ============================================================================================================== Income before provision for income taxes.... $ 23,573 $ 22,197 $ 19,065 $ 17,576 $ 16,011 Provision for federal and state income taxes. 9,311 8,657 7,513 7,290 6,731 ---------------------------------------------------------------- Net income.................................. $ 14,262 $ 13,540 $ 11,552 $ 10,286 $ 9,280 ================================================================ Earnings per share - Basic.................. $ 1.10 $ 1.04 $ 0.88 $ 0.79 $ 0.72 ================================================================ Earnings per share - Diluted................ $ 1.07 $ 1.02 $ 0.86 $ 0.79 $ 0.72 Weighted average common shares - Basic ..... 12,918 13,071 13,132 12,964 12,841 Net dilutive effect of stock options and nonvested stock awards................... 427 244 279 62 56 ------------------------------------------------------------------ Weighted average common shares - Diluted.... 13,345 13,315 13,411 13,026 12,897 ================================================================== *Fiscal years 2000, 1999 and 1998 are 12-month years. Fiscal years 1997 and 1996 are composed of 52 weeks. Prior years' share data and earnings per share amounts have been adjusted to reflect the May 2000 stock dividend.
Consolidated Balance Sheets Data: Total assets............................... $120,460 $ 102,927 $ 84,374 $ 60,203 $ 61,101 Long-term debt............................. $ 54,865 $ 49,305 $ 31,690 $ 15,022 $ 20,034 Stockholders'equity........................ $ 15,085 $ 14,563 $ 10,220 $ 6,969 $ 5,645 Working capital............................ $ 16,870 $ 15,670 $ 7,344 $ 3,891 $ 8,677 Current ratio.............................. 1.5:1 1.6:1 1.2:1 1.1:1 1.3:1 Other Data: Managed volume** (unaudited)............... $778,600 $ 647,900 $ 504,400 $464,800 $ 435,600 Cash dividends per share of common stock*** $ 0.16 $ 0.16 $ 0.82 $ 0.82 $ 0.205
**The Company generally performs its services pursuant to either management fee or profit and loss contracts. See "Management's Discussion and Analysis of Financial Condition and Results of Operations-Managed Volume". Management uses the concept of managed volume as an important indicator of the Company's growth and performanace. MMS defines and estimates managed volume as the total cost of operating all client accounts as if MMS performed all services on a profit and loss basis. Managed volume is not a measure of performance under accounting principles generally accepted in the United States. Management uses managed volume as an additional indicator of performance and not as a replacement of financial measures, such as revenues, as defined and required by accounting principles generally accepted in the United States. ***Dividends were not paid prior to the fourth quarter of fiscal year 1996. Cash dividends per share of common stock have not been adjusted to reflect the May 2000 stock dividend. Page 18 in Annual Report MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Morrison Management Specialists, Inc. and Subsidiaries This discussion should be read in conjunction with the Financial Statements and related notes found on pages 22 to 34. MANAGED VOLUME - -------------- Morrison Management Specialists, Inc. (the "Company" or "MMS") generally performs its services pursuant to either management fee or profit and loss contracts. While the services performed are the same, revenue recognition varies by type of contract. In a management fee account, MMS manages the services and facilities, but the client is responsible for all or nearly all the costs. Revenues and fees are recognized for the amount of the contractually agreed-upon management fee, any earned incentives, plus any expenses or employee payroll costs paid by the Company and charged back to the client. In a profit and loss account, MMS assumes the risk of profit or loss for the foodservice operation. For such accounts, the amount of revenue reported is the actual revenue generated from meals served to patients, client employees and visitors. Due to the difference between the amount of revenue that is reported for a fee account (net management fees plus reimbursed expenses) and a profit and loss account (gross revenues from meal sales), Management uses the concept of managed volume as an important indicator of the Company's growth and performance. MMS defines and estimates managed volume as the total cost of operating all client accounts as if MMS performed all services on a profit and loss basis. Management uses managed volume as an additional indicator of performance and not as a replacement of financial measures, such as revenues, as defined and required by accounting principles generally accepted in the United States. The Company's managed volume continues to increase at record levels. In fiscal year 2000, managed volume increased $130.7 million, or 20.2%, to $778.6 million compared to $647.9 million in fiscal year 1999. Managed volume increased $143.5 million in fiscal year 1999, or 28.5%, to $647.9 million as compared to $504.4 million in fiscal year 1998. RESULTS OF OPERATIONS - --------------------- 2000 Compared To 1999 Overview The Company is the nation's second largest outsourcing provider in the healthcare and senior living industries. MMS is the only national, publicly held company which specializes exclusively in providing food, nutrition and dining services to the healthcare and senior living markets. MMS serves some of the largest and most prominent hospitals, integrated healthcare systems and senior living communities in the United States. In fiscal year 2000, the Company continued to demonstrate strong financial results, with increases in revenue, operating profit and net income. These accomplishments were due to record levels of new account sales, high account retention, and growth in existing accounts. A key factor contributing to the new record new business was the award of a five-year contract to provide food and nutrition services to over 60 of Tenet HealthSystem Medical, Inc.'s hospitals. Revenue For fiscal year 2000, revenue increased $116.1 million, or 35.7%, to $441.1 million as compared to $325.0 million for fiscal year 1999. The primary source of the increase was the opening of a significant number of new accounts that were larger than accounts which closed during the year. Adding vending operations and increasing employee payrolls at existing accounts also contributed to the growth of revenue as a whole. Gross Profit Gross profit, defined as revenue less operating expenses, increased $12.5 million, or 22.9%, to $66.8 million in fiscal year 2000 as compared to $54.3 million in fiscal year 1999. Management's continued emphasis on food and labor cost reductions and growth of existing account business contributed to the favorable results. Selling, General and Administrative Expenses Selling, general and administrative expenses increased $10.7 million, or 35.9%, to $40.5 million in fiscal year 2000 as compared to $29.8 million in fiscal year 1999. The increase was associated with significant new business attained during the fiscal year, which required additional operating costs and expenses for human resources, training, relocations and promotions. Interest Expense, Net Interest expense increased 16.0% to $2.7 million in fiscal year 2000 as compared to $2.4 million in the prior year due to increased debt levels associated with the Company's increased capital expenditures and stock repurchases. Federal and State Income Taxes The combined federal and state effective tax rate increased to 39.5% in fiscal year 2000 from 39.0% in fiscal year 1999. 1999 Compared To 1998 Overview In fiscal year 1999, the Company showed strong financial results, with increases in revenue, operating profit and net income. The accomplishments were due to continued focus on cost reductions in all accounts, growth in existing accounts, strong new account sales and the acquisition of Culinary Service Network, Inc. ("CSN") in October 1998. CSN was MMS's third acquisition in the senior living market. The experience and practices of these industry experts created a solid foundation for further developing and growing the nation's foremost senior dining services business. (See Note 2 of the Notes to Consolidated Financial Statements for more information.) Page 19 in Annual Report MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Morrison Management Specialists, Inc. and Subsidiaries Revenue In fiscal year 1999, revenue increased $74.6 million, or 29.8%, to $325.0 million as compared to $250.4 million in fiscal year 1998. The primary sources of this increase were growth at existing accounts, including adding vending operations and increasing employee payrolls, opening more and larger accounts than were closed and key acquisitions. Gross Profit Gross profit increased $11.2 million, or 26.0%, to $54.3 million for fiscal year 1999 as compared to $43.1 million in fiscal year 1998. Growth of existing account business, continued emphasis on food and labor cost reductions, and acquisitions all contributed to the favorable results. Selling, General and Administrative Expenses Selling, general and administrative expenses increased $6.9 million, or 29.9%, to $29.8 million for fiscal year 1999 as compared to $22.9 million in fiscal year 1998. The increase was associated with additional costs associated with obtaining new business, such as additional expenses related to human resources, training, relocations and promotions. Interest Expense, Net Interest expense increased 110.0% to $2.4 million in fiscal year 1999 as compared to $1.1 million in the prior year due to higher debt levels associated with the Company's acquisitions and increased capital expenditures for both the Advanced Culinary Centers(TM) and the Company's technology initiatives. Federal and State Income Taxes The combined federal and state effective tax rate decreased to 39.0% in fiscal 1999 from 39.4% in fiscal 1998. YEAR 2000 COMPLIANCE - -------------------- The Company's technology initiatives included both preparations for the year 2000 issue and significant system upgrades and enhancements. Such initiatives identified plans necessary to minimize failures of systems to process date-sensitive information in the year 2000 and beyond. MMS elected to replace its most critical system, a shared-mainframe corporate system, with client-server systems developed using Year 2000 compliant standards. The Company also verified that all other significant vendor licensed software applications were either Year 2000 compliant or would be by December 31, 1999. The Company did not experience any significant failures of its systems during the transition from 1999 to 2000. MMS will continue to monitor system performance throughout the year 2000 to ensure continued compliance. While it is not possible to give an estimate of the costs specifically related to the year 2000 issue, the total cost of these technology initiatives was approximately $5 million. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Cash Flow, Capital Expenditures and Financing Due to the nature of its contract foodservice business, the Company is able to maintain a relatively steady cash flow. Cash flow from operations has historically financed MMS's capital investments. MMS has plans for expansion over the next several years and expects that cash flow from operations plus utilization of the existing lines of credit will be sufficient to provide for this expansion. See "Special Note Regarding Forward-Looking Information." The Company has a $75 million revolving credit facility from four financial institutions extending through July 2, 2003. Borrowings under the credit facility bear interest based on LIBOR. The Company utilizes two interest rate swap agreements with notional amounts of $10 million each to reduce the impact of changes in the interest rates on its floating rate debt. These swap agreements effectively converted $20 million of variable rate borrowings to fixed rates of approximately 5.6% plus the credit spread. Interest expense is adjusted for the differential to be paid or received as interest rates change. The effect of such adjustments on interest expense has not been significant. The Company's swap agreements expose it to credit risks that are inherent in all interest rate swaps. Counterparties to these agreements are major financial institutions. Consequently, the Company believes that the credit risk of its swap agreements is minimal. The Company does not believe that any reasonably likely change in near-term interest rates would have a material adverse effect on the future earnings or cash flows of the Company. The Company's effective interest rate increased to approximately 6.1% in fiscal year 2000 from 5.8% in fiscal year 1999. The increase was primarily due to the increase in the LIBOR rate throughout the fiscal year. On May 31, 2000, MMS had $54.9 million outstanding in total debt, an increase of $5.5 million from $49.4 million in the prior year. Trade accounts receivable make up the majority of MMS's total current assets. Historically, the average days outstanding in trade accounts receivable is less than one month and bad debt expense has been minimal. MMS requires capital principally for acquisitions, new accounts, equipment replacement and remodeling of existing accounts, and the construction of Advanced Culinary Centers(TM). Cash provided by operating activities approximated $22.0 million for fiscal year 2000 compared to $8.1 million in fiscal year 1999. Capital expenditures were approximately $12.6 million, an increase of $4.2 million compared to the $8.4 million in the prior year. The Company did not have material commitments for capital expenditures as of the end of fiscal year 2000. Capital expenditures are anticipated to total approximately $15 million to $20 million for fiscal year 2001. MMS plans to finance this amount primarily through internally generated funds. See "Special Note Regarding Forward-Looking Information." Cash used for acquisition-related expenditures was $1.4 million for fiscal year 2000, a decrease of $5.5 million compared to the $6.9 million in fiscal year 1999. Page 20 in Annual Report MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS(continued) Morrison Management Specialists, Inc. and Subsidiaries Stock Repurchase Program In March 1998, MMS's Board of Directors authorized a program to repurchase up to 1,000,000 shares of the Company's Common Stock. An additional 1,000,000 shares were authorized to be repurchased in June of 1999. During fiscal year 2000, the Company repurchased 868,200 shares of the Company's stock at an aggregate cost of $21.0 million. During fiscal year 1999, the Company repurchased 777,210 shares at an aggregate cost of $14.5 million. A total of 259,790 shares remained authorized for repurchase under the Company's stock repurchase program as of the end of fiscal year 2000. Subsequent to year end, in June 2000, the Company's Board of Directors authorized the repurchase of another 1,000,000 shares. Working Capital As of May 31, 2000, working capital was $16.9 million while the current ratio was 1.5:1. Working capital increased $1.2 million from $15.7 million and the current ratio decreased 0.1 from 1.6:1 for fiscal year 1999. Dividends MMS paid approximately $1.9 million in cash dividends to stockholders during fiscal year 2000. The Company plans to pay annual cash dividends of approximately $2.1 million in the next fiscal year. On March 28, 2000, MMS's Board of Directors declared a 10% stock dividend payable on May 19, 2000 to shareholders of record on May 1, 2000. See "Special Note Regarding Forward-Looking Information." KNOWN EVENTS, UNCERTAINTIES AND TRENDS - -------------------------------------- Impact of Inflation In the past, MMS has been able to recover inflationary cost increases through contract inflation adjustments, increased productivity and menu changes. There have been, and there may be in the future, delays in contract inflation adjustments and competitive pressures which limit MMS's ability to recover such cost increases in their entirety. Historically, the effects of inflation on MMS's net income have not been materially adverse. See "Special Note Regarding Forward-Looking Information." Management's Outlook Management believes that growth will continue to occur through sales to integrated healthcare systems and senior living communities, and through expanding services at the Company's existing accounts and the Advanced Culinary Centers(TM). Morrison believes that pressures on hospitals and healthcare systems to outsource foodservices are increasing due to the Balanced Budget Act and managed care. Management believes these pressures will aid the continued growth of MMS. The Company expects growth from the senior living market primarily from focused expertise and the ability to provide unique dining solutions for senior living communities. MMS serves some of the largest and most prominent hospitals, healthcare systems and senior living communities in the United States. The Company strives to maintain its long-term partnerships with these facilities and communities by continuing to increase quality and lower costs. During the upcoming year, MMS believes that additional investments in its team members and programs designed to enhance its aggressive sales drive will add new clients while building stronger relationships with current accounts. By focusing on its market of hospitals and integrated healthcare systems and expanding into the senior living market, the Company believes that it is strategically positioned for strong growth. See "Special Note Regarding Forward-Looking Information." Special Note Regarding Forward-Looking Information The foregoing section and other areas of this report contain various "forward-looking statements" which represent the Company's expectations or beliefs concerning future events, including the following: statements regarding account growth, future capital expenditures and borrowings, the payment of dividends, the impact of inflation and the effects of Management's strategies for growth. The Company cautions that a number of important factors could, individually or in the aggregate, cause actual results to differ materially from those included in the forward-looking statements including, without limitation, the following: healthcare spending trends; the growth of systems and group purchasing organizations; changes in healthcare regulations; increased competition in the healthcare food and nutrition or senior living markets; customers' acceptance of the Company's cost-saving programs; and laws and regulations affecting labor and employee benefit costs. Page 21 in Annual Report CONSOLIDATED STATEMENTS OF INCOME Morrison Management Specialists, Inc. and Subsidiaries For the Fiscal Year Ended - ----------------------------------------------------------------------------------- (In thousands, except per share data) May 31, 2000 May 31, 1999 May 31, 1998 - -----------------------------------------------------------------------------------
Revenues........................... $441,074 $324,968 $250,371 Operating expenses................. 374,310 270,637 207,265 ------------------------------------------------ Gross profit....................... 66,764 54,331 43,106 Selling, general and administra- tive expenses.................... 40,457 29,776 22,919 ------------------------------------------------ 26,307 24,555 20,187 Interest expense, net of interest income of $315 in 2000, $396 in 1999 and $406 in 1998......... 2,734 2,358 1,122 ------------------------------------------------ Income before provision for income taxes..................... 23,573 22,197 19,065 Provision for federal and state income taxes..................... 9,311 8,657 7,513 ------------------------------------------------ Net income......................... $ 14,262 $ 13,540 $ 11,552 ================================================ Earnings per share - Basic......... $ 1.10 $ 1.04 $ 0.88 Earnings per share - Diluted....... $ 1.07 $ 1.02 $ 0.86 Weighted average common shares - Basic................... 12,918 13,071 13,132 Net dilutive effect of stock options and nonvested stock awards........................... 427 244 279 ------------------------------------------------ Weighted average common shares - Diluted................. 13,345 13,315 13,411 ================================================ Prior years' share data and earnings per share amounts have been adjusted to reflect the May 2000 stock dividend. The accompanying notes are an integral part of the financial statements.
Page 22 in Annual Report CONSOLIDATED BALANCE SHEETS Morrison Management Specialists, Inc. and Subsidiaries (In thousands) May 31, 2000 May 31, 1999 ----------------------------
ASSETS Current assets: Cash and short-term investments................ $ 3,645 $ 2,780 Receivables: Trade, less allowance for doubtful accounts of $677 at May 31, 2000 and $712 at May 31, 1999......................... 34,952 27,804 Other........................................ 5,465 6,231 Inventories.................................... 4,909 2,940 Prepaid expenses............................... 3,209 2,312 Deferred income tax benefits................... 1,397 1,747 ---------------------------- Total current assets............................. 53,577 43,814 Property and equipment - at cost: Land........................................... 1,375 - Buildings and improvements..................... 6,512 5,931 Equipment...................................... 28,445 24,923 Construction in progress....................... 4,467 121 ---------------------------- 40,799 30,975 Less accumulated depreciation.................... 15,408 12,376 ---------------------------- 25,391 18,599 Deferred income tax benefits..................... 2,506 2,947 Cost in excess of net assets acquired, net....... 18,670 18,331 Notes receivable, less current portion........... 1,024 3,626 Deferred Compensation Plan assets................ 6,517 4,910 Other assets..................................... 12,775 10,700 ---------------------------- Total assets..................................... $120,460 $102,927 ============================ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable............................... $ 19,290 $ 15,091 Accrued liabilities: Taxes, other than income taxes............... 3,834 2,187 Payroll and related costs.................... 10,675 7,322 Insurance.................................... 1,278 1,909 Other........................................ 1,602 1,499 Current portion of long-term debt.............. 28 136 ---------------------------- Total current liabilities........................ 36,707 28,144 Long-term debt................................... 54,865 49,305 Deferred Compensation Plan obligation............ 6,517 4,910 Other liabilities................................ 7,286 6,005 Stockholders' equity: Common stock, $0.01 par value (authorized 100,000 shares; issued: 2000 - 12,704 shares; 1999 - 11,977 shares)....................... 127 120 Capital in excess of par value................ 16,488 3,324 Unearned ESOP shares.......................... (2,292) (2,806) Deferred Compensation Plan liability payable in Company stock.................... 1,645 1,518 Retained earnings............................. 762 13,925 ----------------------------- 16,730 16,081 Less cost of Company stock held by Deferred Compensation Plan............................. 1,645 1,518 ----------------------------- Total stockholders' equity...................... 15,085 14,563 ----------------------------- Total liabilities and stockholders' equity...... $120,460 $102,927 ============================= The accompanying notes are an integral part of the financial statements.
Page 23 in Annual Report CONSOLIDATED STATEMENTS OF CASH FLOWS Morrison Management Specialists, Inc. and Subsidiaries For the Fiscal Year Ended ------------------------------------------------- (In thousands) May 31, 2000 May 31, 1999 May 31, 1998 -------------------------------------------------
OPERATING ACTIVITIES: Net income..................... $14,262 $ 13,540 $ 11,552 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation................... 4,862 3,254 2,538 Amortization of intangibles.... 1,021 860 377 Deferred income taxes.......... 791 (182) (811) Gain on disposition of assets.. (140) (112) (19) Changes in operating assets and liabilities: Receivables................ (3,780) (5,949) (6,359) Inventories................ (1,969) (4) (246) Prepaid and other assets... (4,579) (4,141) (3,420) Accounts payable, accrued and other liabilities.... 11,559 855 3,430 ------------------------------------------------- Net cash provided by operating activities................... 22,027 8,121 7,042 ------------------------------------------------- INVESTING ACTIVITIES: Purchases of property and equipment.................... (12,582) (8,389) (8,850) Proceeds from disposal of assets....................... 1,068 799 268 Acquisition of businesses, net of cash acquired......... (1,360) (6,859) (7,464) ------------------------------------------------- Net cash used by investing activities................... (12,874) (14,449) (16,046) ------------------------------------------------- FINANCING ACTIVITIES: Net proceeds from long-term debt......................... 26,560 19,893 21,690 Principal payments on long-term debt......................... (21,108) (7,309) (5,011) Proceeds from exercise of stock options and issuance of stock, net of income tax benefits..................... 8,211 6,766 3,054 Dividends paid................. (1,886) (1,937) (9,877) Payments to acquire Treasury Stock........................ (20,961) (14,539) (1,891) ESOP shares released .......... 896 514 412 ------------------------------------------------- Net cash (used)/provided by financing activities.......... (8,288) 3,388 8,377 ------------------------------------------------- Increase/(decrease) in cash and short-term investments... 865 (2,940) (627) Cash and short-term investments at the beginning of the year........ 2,780 5,720 6,347 ------------------------------------------------- Cash and short-term investments at the end of the year....... $ 3,645 $ 2,780 $ 5,720 ================================================= Supplemental disclosure of cash flow information - cash paid for: Interest................... $ 3,015 $ 2,924 $ 1,696 Income taxes............... $ 6,938 $ 9,386 $ 7,933 The accompanying notes are an integral part of the financial statements.
Page 24 in Annual Report CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Morrison Management Specialists, Inc. and Subsidiaries (In thousands, except per share data) May 31, 2000 May 31, 1999 May 31, 1998 Shares Amount Shares Amount Shares Amount ----------------- ----------------- -----------------
COMMON STOCK Beginning balance..................... 11,977 $ 120 12,379 $ 124 12,165 $ 122 Stock dividend........................ 1,144 11 0 0 0 0 Shares issued under Stock Incentive Plans............................... 451 5 470 5 214 2 Cancellation of Treasury Stock........ (868) (9) (872) (9) 0 0 ----------------- ----------------- ----------------- Ending balance........................ 12,704 127 11,977 120 12,379 124 ----------------- ----------------- ----------------- CAPTIAL IN EXCESS OF PAR VALUE Beginning balance..................... 3,324 12,859 9,717 Stock dividend........................ 25,528 0 0 Shares issued under Stock Incentive Plans, net of income tax benefits... 8,206 6,761 3,052 Shares released from ESOP............. 382 125 90 Cancellation of Treasury Stock........ (20,952) (16,421) 0 ------------------ ----------------- ----------------- Ending balance........................ 16,488 3,324 12,859 ------------------ ----------------- ----------------- UNEARNED ESOP SHARES Beginning balance..................... (198) (2,806) (226) (3,195) (249) (3,517) Shares released from ESOP............. 20 514 28 389 23 322 ------------------ ----------------- ----------------- Ending balance........................ (178) (2,292) (198) (2,806) (226) (3,195) ------------------ ----------------- ----------------- DEFERRED COMPENSATION PLAN LIABILITY PAYABLE IN COMPANY STOCK Beginning balance..................... 1,518 1,848 1,341 Net change............................ 127 (330) 507 ------------------ ----------------- ----------------- Ending balance........................ 1,645 1,518 1,848 ------------------ ----------------- ----------------- RETAINED EARNINGS Beginning balance..................... 13,925 2,322 647 Net income............................ 14,262 13,540 11,552 Stock dividend........................ (25,539) 0 0 Cash dividends of $0.16 per share in fiscal 2000 and 1999; $0.82 per share in fiscal 1998................ (1,886) (1,937) (9,877) ------------------ ----------------- ----------------- Ending balance........................ 762 13,925 2,322 ------------------ ----------------- ----------------- TREASURY/COMPANY STOCK HELD BY DEFERRED COMPENSATION PLAN Beginning balance..................... (85) (1,518) (199) (3,738) (95) (1,341) Cancellation/(Purchase) of Treasury Stock............................... 0 0 95 1,891 (95) (1,891) (Purchase)/Sale of Company Stock - held by Deferred Compensation Plan.. (13) (127) 19 329 (9) (506) ------------------ ----------------- ----------------- Ending balance........................ (98) (1,645) (85) (1,518) (199) (3,738) ------------------ ----------------- ----------------- Total Stockholders' Equity............ $15,085 $14,563 $10,220 ================== ================= ================= The accompanying notes are an integral part of the financial statements.
Page 25 in Annual Report NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Morrison Management Specialists, Inc. and Subsidiaries NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION On March 9, 1996, Morrison Health Care, Inc. and Subsidiaries ("MHCI") was spun off (the "Distribution") from Morrison Restaurants Inc. ("MRI"). Effective June 30, 1999 MHCI changed its name to Morrison Management Specialists, Inc. (the "Company" or "MMS"). Prior to the Distribution, MMS was a wholly owned healthcare contract food and nutrition business of MRI. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires Management to make estimates and assumptions that affect the reported amounts of the assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. BUSINESS AND CREDIT RISK CONCENTRATIONS The Company primarily competes in the healthcare food, nutrition and senior dining services and encounters significant competition in these markets. The length of each contract varies by customer. During fiscal year 2000, the Company was awarded a new five-year contract to provide food and nutrition services to over 60 of Tenet HealthSystem Medical, Inc.'s ("Tenet") hospitals. The revenue from the Tenet accounts for fiscal years 2000, 1999 and 1998 was $69.2 million, $23.2 million and $12.0 million, respectively. These revenues accounted for 15.7%, 7.2% and 4.8% of total revenue for fiscal years 2000, 1999 and 1998, respectively. Concentration of credit risk with respect to trade accounts receivable is generally limited due to the large number of customers that make up the Company's customer base, thus spreading trade risk. With the addition of new Tenet accounts, Tenet accounted for 12.9% and 6.8% of total accounts receivable at May 31, 2000 and 1999, respectively. The Company maintains reserves for potential uncollectible amounts which, in aggregate, have not exceeded Management's expectations. PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements include the accounts of MMS and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. FISCAL YEAR Effective with the fiscal year 1998, the Company's fiscal year ends on May 31. Starting with fiscal year 1998, the Company changed from a 52-53 week fiscal year to a 12-month fiscal year ending May 31 each year. CASH AND SHORT-TERM INVESTMENTS The Company's cash management program provides for the investment of excess cash balances in short-term money market instruments. Short-term investments are stated at cost, which approximates market. The Company considers marketable securities with a maturity of three months or less when purchased to be short-term investments. INVENTORIES Inventories consist of materials, food supplies, china and silver and are stated at the lower of cost (first in-first out) or market. PROPERTY AND EQUIPMENT DEPRECIATION Property and equipment are stated at cost and are being depreciated for financial reporting purposes using the straight-line method over the estimated useful lives of the assets. Annual rates of depreciation generally range from 3% to 5% for buildings and from 10% to 34% for kitchen and other equipment. Costs incurred in connection with the construction at major facilities or of Advanced Culinary Centers(TM) are capitalized as construction in progress until such facilities or centers become operational. Interest is capitalized in connection with these capitalized construction costs. The capitalized interest is recorded as part of the asset to which it relates and is amortized over the asset's estimated useful life. In fiscal 2000, 1999 and 1998, $37,011, $219,000 and $127,000 of interest was capitalized, respectively. Property and equipment are periodically reviewed for impairment based on an assessment of future operations. The Company records impairment losses on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the asset's carrying amount. INTANGIBLE ASSETS Excess of costs over the fair value of net assets acquired with purchased businesses generally is amortized on a straight-line basis over periods ranging from 10 to 40 years. At May 31, 2000, 1999 and 1998, the accumulated amortization for costs in excess of net assets acquired was $3.8 million, $2.8 million and $1.9 million, respectively. The carrying value of goodwill and other intangibles is evaluated periodically in relation to the operating performance and future undiscounted cash flows of each operating business acquired. Adjustments are made if the sum of expected future net cash flows is less than net book value. The Company believes that the remaining amounts of these assets have continuing value. Page 26 in Annual Report NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Morrison Management Specialists, Inc. and Subsidiaries REVENUE RECOGNITION Revenue is recognized upon performance of services. The Company generally performs its services pursuant to either management fee or profit and loss contracts. While actual services performed are the same, revenue recognition varies by type of contract. In a management fee account, MMS manages the services and facilities, but the client is responsible for all or nearly all the costs. Revenue and fees are recognized for the amount of the contractually agreed upon management fee and any earned incentives plus the amount of any expenses or employee payroll costs paid by the Company and charged back to the client. In a profit and loss account, MMS assumes the risk of profit or loss for the foodservice operation. For such accounts, the amount of revenue reported is the actual revenue generated from meals served to patients, client employees and visitors. INCOME TAXES Deferred income taxes are determined utilizing a liability approach. This method gives consideration to the future tax consequences associated with differences between financial accounting and tax bases of assets and liabilities. STOCK-BASED COMPENSATION Stock options are recorded in accordance with Accounting Principles Board Opinion ("APB") No. 25, with pro forma disclosures of net income and earnings per share as if Statement of Financial Accounting Standards ("SFAS") No. 123 had been applied. NEW ACCOUNTING STANDARDS The Financial Accounting Standards Board has issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities," Statement No. 137, "Accounting for Derivative and Hedging Activities-Deferral of the Effective Date of FASB Statement No. 133," and statement No. 138, "Accounting for Certain Derivative Instruments and certain Hedging Activities- an amendment of FASB Statement No. 133," which establish reporting standards for derivative instruments. These statements are effective for all fiscal quarters of all fiscal years beginning after June 15, 2000, and will be adopted by the Company in fiscal 2002. Based upon the Company's current limited use of derivative instruments and hedging activities, Management does not believe the statement will have a material impact on the Company's consolidated financial position, results of operations or cash flows. PRE-OPENING EXPENSES Pre-opening costs, such as salaries, personnel training costs and other expenses of opening a new account, are often reimbursed by the client. In circumstances when they are not reimbursed, these costs are charged to expense as incurred. FINANCIAL INSTRUMENTS The Company's financial instruments at May 31, 2000, 1999 and 1998 consisted of cash and short-term investments, accounts and notes receivable, long-term debt and interest rate swap agreements. The fair value of these financial instruments, except the interest rate swap agreements, approximated the carrying amounts reported in the balance sheets. Cash is deposited in financial institutions which carry FDIC insurance. From time to time, the cash balances in these institutions exceed the insured amount. Management does not believe this is a significant risk to the Company. The Company uses interest rate swap agreements to manage interest rate exposure. The fair value of such swap agreements was not significant at May 31, 2000. Although substantially all of the Company's trade accounts receivable are from healthcare institutions, Management believes that concentrations of credit risk are limited due to the geographic diversity of the Company's customer base. The Company performs periodic credit evaluations of its customers' financial condition and generally does not require collateral. Historically, the Company has not experienced significant losses related to trade accounts receivable from individual customers or from groups of customers in any geographic area. RECLASSIFICATION Certain prior year amounts and balances have been reclassified to conform to the current year presentation. Page 27 in Annual Report NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Morrison Management Specialists, Inc. and Subsidiaries NOTE 2. ACQUISTIONS In October 1998, the Company acquired all of the outstanding common stock of Philadelphia-based Culinary Service Network, Inc. In March 1998, the Company acquired substantially all of the assets of Chicago-based Spectra Services, Inc. In January 1998, the Company acquired all of the outstanding common stock of Phoenix-based Drake Management Services, Inc. Each of the companies, which provided dining services in the senior living market, were acquired for cash, with a total acquisition price of $12.1 million. Contingent payments may be earned by sellers in future years. Approximately $1.4 million of additional consideration was paid in the year ended May 31, 2000. The acquisitions were accounted for using the purchase method of accounting, and the resulting goodwill is being amortized over 20 years using the straight-line method. The operating results of these companies have been included from their respective acquisition dates. Pro forma results are not presented for these acquisitions as they were not significant during the periods presented. NOTE 3. LONG-TERM DEBT Long-term debt consists of the following: --------------------------------------- (In thousands) May 31, 2000 May 31, 1999 --------------------------------------- Variable rate revolving credit facility due in full 7/2/03............ $52,115 $46,555 Other notes and mortgages................ 2,778 2,886 --------------------------------------- 54,893 49,441 Less current maturities.................. 28 136 --------------------------------------- $54,865 $49,305 ======================================= The Company has a $75 million credit facility with four financial institutions extending through July 2, 2003. Borrowings under the credit facility bear a variable interest rate based upon LIBOR. Commitment fees range from 0.20% to 0.30% per annum based on the Company's leverage ratio and are payable on the unused portion of the credit facility. At May 31, 2000, the Company had $52.1 million in borrowings under the agreement, with a weighted average variable rate of approximately 6.5%. The Company utilizes two interest rate swap agreements, with a notional amount of $20 million at May 31, 2000, to reduce the impact of changes in the interest rates on its floating rate debt. Under these agreements, MMS pays the counterparties interest at a weighted average fixed rate of approximately 5.6% plus the credit spread, and the counterparties pay MMS interest at a variable rate equal to LIBOR. The differential to be paid or received is accrued as interest rates change and is recognized as an adjustment to the interest expense related to the debt. The related amount payable or receivable from counterparties is included in trade and other receivables or payables. In addition, the Company had uncommitted demand lines of credit amounting to $5 million. At May 31, 2000, the Company did not have any borrowings outstanding under these agreements. The credit facility contains certain restrictions on incurring additional indebtedness and certain funded debt, and fixed charge coverage requirements. The Company was in compliance with all such covenants at May 31, 2000. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Morrison Management Specialists, Inc. and Subsidiaries NOTE 4. INCOME TAXES The components of income tax expense (benefit) are as follows: (In thousands) For the Fiscal Year Ended -------------------------------------------------- May 31, 2000 May 31, 1999 May 31,1998 -------------------------------------------------- Current: Federal...................... $7,399 $7,301 $6,875 State........................ 1,121 1,538 1,449 -------------------------------------------------- 8,520 8,839 8,324 -------------------------------------------------- Deferred: Federal...................... 838 (150) (670) State........................ (47) ( 32) (141) -------------------------------------------------- 791 (182) (811) -------------------------------------------------- $9,311 $8,657 $7,513 ================================================== Deferred tax assets and liabilities are comprised of the following: ------------------------------------ (In thousands) May 31, 2000 May 31, 1999 ------------------------------------ Deferred tax assets: Employee benefits.......................... $5,410 $4,484 Insurance reserves......................... 798 1,093 Bad debt reserve........................... 271 292 Other...................................... 467 907 ------------------------------------ Total deferred tax assets.................. 6,946 6,776 ------------------------------------ Deferred tax liabilities: Property and equipment..................... 1,991 517 Retirement plans........................... 502 451 Prepaid deductions......................... 111 157 Other...................................... 439 957 ------------------------------------ Total deferred tax liabilities............. 3,043 2,082 ------------------------------------ Net deferred tax assets.................... $3,903 $4,694 ==================================== Page 28 in Annual Report SFAS No. 109 specifies that deferred tax assets are to be reduced by a valuation allowance if it is more likely than not that some portion of the deferred tax assets will not be realized. Management believes that future taxable income will be sufficient to realize all of the Company's deferred tax assets based on historical earnings of the Company; therefore, a valuation allowance has not been established. A reconciliation from the statutory federal income tax expense to the reported income tax expense is shown below: (In thousands) For the Fiscal Year Ended -------------------------------------------- May 31, 2000 May 31, 1999 May 31,1998 -------------------------------------------- Statutory federal income taxes..... $8,250 $7,769 $6,673 State income taxes net of federal income tax benefit....... 702 839 853 Other, net......................... 359 49 (13) -------------------------------------------- $9,311 $8,657 $7,513 ============================================ The effective income tax rate was 39.5%, 39.0% and 39.4% in fiscal years 2000, 1999 and 1998, respectively. NOTE 5. EMPLOYEE BENEFIT PLANS DEFINED CONTRIBUTION PLANS: Salary Deferral Plan Under the Company's Salary Deferral Plan, each eligible employee may elect to make pretax contributions to a trust fund in amounts ranging from 2% to 10% of their annual earnings. The Company's contribution to the Plan is based on the employee's pretax contribution and years of service. Under the provisions of the Plan, highly compensated employees, as defined by the Internal Revenue Code, are limited to contributions of 3% and receive a maximum of a 20% match. The Company's contributions to the trust fund approximated $655,000, $515,000 and $414,000 for fiscal years 2000, 1999 and 1998, respectively. During fiscal year 1997, the Company began sponsorship of an employee stock ownership (ESOP) feature covering participants in the Salary Deferral Plan. The Company loaned the Plan $3.6 million (with outstanding balances of $2.3 million and $2.8 million at May 31, 2000 and May 31, 1999, respectively) to purchase approximately 280,000 shares of common stock, at an interest rate of 5.47%. The Company adopted the provisions of AICPA Statement of Position No. 93-6 which requires that compensation expense be measured based on the fair value of the shares over the period the shares are earned. The fair value of unearned shares at May 31, 2000 and May 31, 1999 was approximately $4,853,000 and $3,885,000, respectively. Deferred Compensation Plan The Company maintains the Deferred Compensation Plan for certain selected employees. The provisions of this Plan are similar to those of the Salary Deferral Plan. Differences include which employees are eligible to participate and the limitations on the amount of deferrals that may be elected by participants. The Company's contributions under the Plan approximated $185,000, $112,000 and $104,000, for fiscal years 2000, 1999 and 1998, respectively. Assets of the Plan are held in a rabbi trust and must be accounted for as if they are assets of the Company. Assets and liabilities of the Plan approximated $8,162,000 and $6,428,000 at May 31, 2000 and 1999, respectively, and include $1,645,000 and $1,518,000, respectively, of MMS common stock, which is accounted for as treasury stock at cost. DEFINED BENEFIT PLANS: Retirement Plan The Retirement Plan was frozen by Ruby Tuesday, Inc. ("RTI") (formerly Morrison Restaurants Inc.) on December 31, 1987. The Company is a joint sponsor of the Retirement Plan. No additional benefits accrued, no contributions were made, and no new participants entered the Plan after that date. The Company will continue to share in future expenses of the Plan. Participants will receive benefits based upon salary and length of service. The Plan's assets include common stock, fixed income securities, short-term investments and cash. Executive Supplemental Pension Plan Under the Company's Executive Supplemental Pension Plan, employees with a salary of at least $100,000 for five consecutive years in a qualifying position become eligible to earn supplemental retirement payments based upon salary and length of service, reduced by Social Security benefits and amounts otherwise receivable under the Retirement Plan. Management Retirement Plan Under the Company's Management Retirement Plan, individuals that have 15 years of credited service (as defined by the Company) and earn an average annual compensation of at least $40,000 for the immediately preceding three years become participants. Participants receive benefits based upon salary and length of service, reduced by Social Security benefits and benefits payable under the Retirement Plan and Executive Supplemental Pension Plan. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Morrison Management Specialists, Inc. and Subsidiaries To provide a funding source for the payment of benefits under the Executive Supplemental Pension Plan and the Management Retirement Plan, the Company owns various life insurance contracts on some of the participants. The cash value of these policies, net of loans, was $3,632,000 at May 31, 2000 and $2,204,000 at May 31, 1999. The policies have been placed in a rabbi trust which will hold the policies and death benefit proceeds as they are received. Page 29 in Annual Report NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Morrison Management Specialists, Inc. and Subsidiaries The following table reconciles the change in the pension benefit obligation and the fair market value of plan assets and presents the components of pension expense, the funded status and the amounts recognized in the Company's consolidated financial statements for the Retirement Plan, the Executive Supplemental Pension Plan and the Management Retirement Plan. (In thousands) Benefit Obligation Assets Exceed Exceeds Assets -Executive Benefit Obligation - Supplemental Pension Plan Retirement Plan and Management Retirement Plan ---------------------------------- ------------------------------------ May 31, May 31, May 31, May 31, May 31, May 31, For the Fiscal Year Ended 2000 1999 1998 2000 1999 1998 ---------------------------------- ------------------------------------ COMPONENTS OF NET PERIODIC PENSION EXPENSE/(INCOME):
Service cost........................ $ 0 $ 0 $ 0 $ 177 $ 140 $ 108 Interest cost....................... 293 274 347 408 322 270 Expected return on plan assets...... (391) (342) (1,046) 0 0 0 Amortization and deferral........... 128 (8) 629 220 184 149 ---------------------------------- -------------------------------------- Net periodic pension expense/ (income)........................... $ 30 $ (76) $ (70) $ 805 $ 646 $ 527 ================================== ====================================== CHANGE IN BENEFIT OBLIGATION: Benefit obligation at beginning of year........................... $4,163 $3,895 $ 5,261 $ 4,318 Service cost ....................... 0 0 177 140 Interest cost....................... 293 274 408 322 Actuarial (gains) losses............ (33) 588 616 524 Benefit payments.................... (571) (594) (134) (43) -------------------- ------------------------ Benefit obligation at end of year... $3,852 $4,163 $ 6,328 $ 5,261 ==================== ======================== CHANGE IN FAIR VALUE OF PLAN ASSETS: Fair value at beginning of year..... $4,174 $4,425 $ 0 $ 0 Benefit payments.................... (572) (593) 0 0 Actual return on plan assets........ 391 266 0 0 Gains on investments................ 18 76 0 0 -------------------- ------------------------ Fair value at end of year........... $4,011 $4,174 $ 0 $ 0 ==================== ======================== FUNDED(UNFUNDED) STATUS $ 159 $ 11 $(6,328) $(5,261) Unrecognized prior service cost..... 0 0 677 207 Unrecognized net losses............. 961 1,071 1,370 1,383 Unrecognized net transition obligation........................ 142 211 396 456 Additional minimum liability........ 0 0 (609) (291) -------------------- ------------------------ Prepaid (accrued) benefit cost...... $1,262 $1,293 $(4,494) $(3,506) ==================== ========================
The weighted average discount rate for all three plans was 8.0%, 7.5% and 7.5% for fiscal years 2000, 1999 and 1998, respectively. The rate of increase in compensation levels for the Executive Supplemental Pension Plan and the Management Retirement Plan was 4% for all three years presented. The expected long-term rate of return on plan assets for the Retirement Plan was 10% for all three years. The aggregate projected benefit obligation and the accumulated benefit obligation for the Executive Supplemental Pension Plan and the Management Retirement Plan, both of which exceed the fair value of plan assets, were $6,328,000 and $4,494,000, respectively, as of May 31, 2000, and $5,261,000 and $3,463,000, respectively, as of May 31, 1999. For the Retirement Plan, the projected benefit obligation equaled the accumulated benefit obligation and was less than the fair value of plan assets as of May 31, 2000 and May 31, 1999. Page 30 in Annual Report NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Morrison Management Specialists, Inc. and Subsidiaries NOTE 6. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS The Company provides health care benefits and life insurance benefits to eligible retirees. Benefits are funded as medical claims and life insurance premiums are incurred. Retirees become eligible for retirement benefits if they have met certain service and minimum age requirements at date of retirement. The Company accrues expenses related to postretirement healthcare and life insurance benefits during the years an employee provides services. The following table reconciles the change in the postretirement benefit obligation and the fair market value of plan assets and presents the components of net periodic postretirement benefit expense, the funded status and the amounts recognized in the Company's consolidated financial statements: (In thousands) ------------------------------------------------------------------------------- For the Fiscal Year Ended May 31, 2000 May 31, 1999 May 31,1998 ------------------------------------------------------------------------------- Components of net periodic postretirement expense: Service cost........................ $ 6 $ 8 $ 7 Interest cost....................... 89 136 147 Amortization and deferral........... 24 17 4 -------------------------------------------- Net periodic postretirement expense. $ 119 $ 161 $158 ============================================ Change in benefit obligation: Benefit obligation at beginning of year.......................... $ 1,853 $ 1,919 Service cost....................... 6 8 Interest cost...................... 89 136 Actuarial (gains) losses........... (502) 0 Benefit payments................... (119) (210) -------------------------------- Benefit obligation at end of year.. $ 1,327 $ 1,853 ================================ Change in fair value of plan assets: Fair value at beginning of year.... $ 0 $ 0 Employer contributions............. 119 210 Benefit payments................... (119) (210) -------------------------------- Fair value at end of year.......... $ 0 $ 0 ================================ Funded (unfunded) status........... $(1,327) $(1,853) Unrecognized prior service cost.... (95) (117) Unrecognized net (gains)/losses.... (34) 466 -------------------------------- Accrued postretirement benefit cost............................. $(1,456) $(1,504) ================================ The weighted average discount rate used for measuring the accumulated postretirement benefit obligation was 8.0%, 7.5% and 7.5% for fiscal years 2000, 1999 and 1998, respectively. SFAS No. 132 requires the disclosure of the impact of a one percent increase and a one percent decrease in the assumed healthcare cost trend rates on the accumulated postretirement benefit obligation and the service and interest costs components of net periodic postretirement benefit costs. This benefit is not subject to healthcare inflation, therefore, there is no impact from a one percent increase or decrease in the trend rates. NOTE 7. PREFERRED STOCK Under its Certificate of Incorporation, the Company is authorized to issue preferred stock with a par value of $0.01 in an amount not to exceed 250,000 shares which may be divided into and issued in designated series, with dividend rates, rights of conversion, redemption, liquidation prices and other terms or conditions as determined by the Board of Directors. No preferred shares have been issued as of May 31, 2000. The Board of Directors has designated 50,000 of such shares as Series A Junior Participating Preferred Stock and has issued rights to acquire such shares, upon certain events, at an exercise price of $75 per one one-thousandth of a share, subject to adjustment. Under certain circumstances, the rights will entitle the holders thereof to receive, upon payment of the exercise price, in lieu of preferred shares, shares of common stock with a market value equal to twice the exercise price. The rights will expire on March 1, 2006 and may be redeemed prior to ten days after the acquisition by any person or group of 20% or more of the Company's common stock without the consent of the Company. NOTE 8. STOCK DIVIDEND On May 19, 2000, the Company paid a 10% stock dividend to shareholders of record on May 1, 2000. Fractional shares were cashed out and payments were made to shareholders in lieu of fractional shares on May 19, 2000. The basic and diluted weighted average number of shares outstanding and net income per share information for all prior reporting periods have been restated to reflect the effects of the stock dividend. Page 31 in Annual Report NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Morrison Management Specialists, Inc. and Subsidiaries NOTE 9. STOCK INCENTIVE PLANS Under the Company's stock incentive plans, equity incentives may be granted to key employees and outside directors to purchase shares of Company stock. The Company's 1996 Stock Incentive Plan and 1996 Non-Executive Stock Incentive Plan (the Plans) are both administered by a Committee, appointed by the Board, which has complete discretion to determine participants and the terms and provisions of stock incentives, subject to the Plans. The Plans permit the Committee to make awards of a variety of stock incentives, including (but not limited to) dividend equivalent rights, incentive stock options, non-qualified stock options, performance unit awards, phantom shares, stock appreciation rights and stock awards. All options awarded under the Plans have been at the prevailing market value at the time of issue or grant. All options granted have five-year or ten-year terms and become exercisable at the end of two or three years of continued employment. At May 31, 2000 and 1999, the Company had reserved a total of 1,565,758 and 1,762,684 shares, respectively, of common stock under the Company's 1996 Stock Incentive Plan, and a total of 1,725,717 and 2,020,924 shares, respectively, of common stock under the 1996 Non-Executive Stock Incentive Plan. The Company's Stock Incentive and Deferred Compensation Plan for Directors provides non-management directors with opportunities to defer the receipt of their retainer fees or to allocate their retainer fees to purchase shares of the Company. In general, the Plan sets a target ownership level for non-management directors. All options awarded under the Plan have been at the prevailing market price at the time of grant. A Committee, appointed by the Board, administers the Plan on behalf of the Company. At May 31, 2000 and 1999, the Company had reserved 78,910 and 85,380 shares, respectively, of common stock for this Plan. The Company applies APB No. 25 and related interpretations in accounting for its stock incentive plans. Under APB No. 25, because the exercise price of the Company's employee stock options is set at the prevailing market value, no compensation expense is recognized. Pro forma information regarding net income and earnings per share has been determined as if the Company had accounted for its employee stock options under the fair value method of SFAS No. 123. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions for fiscal years 2000, 1999 and 1998, respectively: risk-free interest rates of 5.7%, 5.5% and 5.7%; volatility factors of .28, .17 and .24; dividend yields of 0.6%, 0.7% and 0.9%; and weighted average expected lives of 6.7, 7.0 and 7.5 years. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. Prior years' share data and earnings per share amounts have been adjusted to reflect the May 2000 stock dividend. The Company's pro forma information follows: (In thousands, except per share data) For the Fiscal Year Ended ------------------------------------- May 31, May 31, May 31, 2000 1999 1998 ------------------------------------- Pro forma net income - Basic and Diluted... $12,216 $12,224 $10,771 Pro forma earnings per share - Basic....... $ 0.95 $ 0.94 $ 0.82 Pro forma earnings per share - Diluted..... $ 0.92 $ 0.92 $ 0.80 The effects of applying SFAS No. 123 in this pro forma disclosure are not indicative of future amounts. SFAS No. 123 does not apply to awards made prior to fiscal year 1996, and additional awards are anticipated. Page 32 in Annual Report A summary of the Company's stock option activity and related information for the years ended May, 31, 2000, 1999 and 1998 follows: May 31, 2000 May 31, 1999 May 31, 1998 ------------------- ------------------- ------------------- Weighted Weighted Weighted Average Average Average Options Exercise Options Exercise Options Exercise (000) Price (000) Price (000) Price ------------------- ------------------- -------------------
Outstanding - beginning of year........ 2,114 $15.20 2,471 $14.95 2,538 $14.38 Granted................................ 1,100 $18.25 628 $15.93 392 $16.15 Exercised.............................. (498) $15.19 (697) $13.35 (301) $10.95 Forfeited.............................. (130) $20.93 (288) $19.15 (158) $14.14 ------------------- ------------------- ------------------- Outstanding - end of year.............. 2,586 $16.21 2,114 $15.20 2,471 $14.95 =================== =================== =================== Exercisable at end of year............. 874 $14.26 1,143 $15.02 1,210 $15.54 =================== =================== =================== Weighted average fair value of options granted during the year..... $ 6.30 $ 4.85 $ 6.05 =================== =================== ===================
The following table summarizes information about stock options outstanding at May 31, 2000: ----------------------------------------------------------------- Options Outstanding Options Exercisable ----------------------------------------------------------------- Weighted Weighted Average Weighted Range of Number Average Remaining Number Average Exercise Outstanding Exercise Contractual Exercisable Exercise Prices (000) Price Life (000) Price - ------------------------------------------------------------------------------------------------------
$ 8.16 - $15.00...................... 814 $13.80 2.96 743 $13.70 $15.06 - $16.14...................... 693 $15.65 7.35 80 $15.77 $16.36 - $17.78...................... 674 $17.68 8.73 11 $16.97 $17.84 - $28.72...................... 405 $19.60 6.07 40 $20.73 ----------------------------------------------------------------- 2,586 $16.21 6.13 874 $14.26 =================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Morrison Management Specialists, Inc. and Subsidiaries NOTE 10. CONTINGENCIES At May 31, 2000, the Company was contingently liable for approximately $5.8 million in letters of credit, issued primarily in connection with its workers' compensation and casualty insurance programs. The Company is presently, and from time to time, subject to pending claims and lawsuits arising in the ordinary course of its business. In the opinion of Management, the ultimate resolution of these pending legal proceedings will not have a material adverse effect on the Company's operations or financial position. Prior to the Distribution, the Company entered into an agreement with Morrison Fresh Cooking, Inc., a company also spun off in the Distribution, and MRI, which subsequently changed its name to Ruby Tuesday, Inc., providing for assumptions of liabilities and cross-indemnities. These agreements are designed to allocate generally, among the three companies, effective as of the Distribution date, financial responsibility for liabilities arising out of or in connection with business activities prior to the Distribution. No significant amounts were incurred under this agreement during fiscal year 2000 or 1999. NOTE 11. SUBSEQUENT EVENT (UNAUDITED) Subsequent to May 31, 2000, the Company entered into a strategic alliance with foodbuy.com, Inc., a purchasing services firm in the foodservice industry utilizing e-business technology. In addition, the Company made a minority investment in foodbuy.com, Inc. of approximately $3.0 million. Page 33 in Annual Report NOTE 12. SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED) Quarterly financial results for the years ended May 31, 2000 and May 31, 1999 are summarized below. All quarters are composed of three months. First Second Third Fourth (In thousands, except per share data) Quarter Quarter Quarter Quarter Total - ----------------------------------------------------------------------------------------------------- For the fiscal year ended May 31, 2000
Revenues................................... $93,983 $101,185 $115,024 $130,882 $441,074 ===================================================================================================== Gross profit*.............................. $15,031 $ 16,110 $ 15,425 $ 20,198 $ 66,764 ===================================================================================================== Income before income taxes................. $ 6,020 $ 5,680 $ 3,876 $ 7,997 $ 23,573 Provision for federal and state income taxes............................. 2,375 2,232 1,546 3,158 9,311 ---------------------------------------------------------- Net income................................. $ 3,645 $ 3,448 $ 2,330 $ 4,839 $ 14,262 ========================================================== Earnings per share:** Basic.................................. $ 0.28 $ 0.26 $ 0.19 $ 0.37 $ 1.10 Diluted................................ $ 0.27 $ 0.26 $ 0.18 $ 0.36 $ 1.07 For the fiscal year ended May 31, 1999 Revenues................................... $72,246 $ 77,833 $84,085 $90,804 $324,968 ==================================================================================================== Gross profit*.............................. $11,597 $ 13,255 $13,771 $15,708 $ 54,331 ==================================================================================================== Income before income taxes................. $ 5,255 $ 5,620 $ 5,251 $ 6,071 $ 22,197 Provision for federal and state income taxes............................. 2,103 2,196 2,021 2,337 8,657 --------------------------------------------------------- Net income................................. $ 3,152 $ 3,424 $ 3,230 $ 3,734 $ 13,540 ========================================================= Earnings per share:** Basic.................................. $ 0.24 $ 0.25 $ 0.26 $ 0.29 $ 1.04 Diluted................................ $ 0.24 $ 0.25 $ 0.24 $ 0.29 $ 1.02 *The Company defines gross profit as revenue less operating expenses. **Earnings per share amounts have been adjusted to reflect the May 2000 stock dividend.
Page 34 in Annual Report REPORT OF INDEPENDENT AUDITORS Morrison Management Specialists, Inc. and Subsidiaries Stockholders and Board of Directors Morrison Management Specialists, Inc. and Subsidiaries We have audited the accompanying consolidated balance sheets of Morrison Management Specialists, Inc. and Subsidiaries (formerly Morrison Health Care, Inc.) as of May 31, 2000 and May 31, 1999, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three fiscal years in the period ended May 31, 2000. These financial statements are the responsibility of the Company'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 consolidated financial position of Morrison Management Specialists, Inc. and Subsidiaries at May 31, 2000 and May 31, 1999, and the consolidated results of their operations and their cash flows for each of the three fiscal years in the period ended May 31, 2000, in conformity with accounting principles generally accepted in the United States. /s/Ernst & Young LLP Atlanta, Georgia June 22, 2000 Page 35 in Annual Report SHAREOWNER INFORMATION Morrison Management Specialists, Inc. and Subsidiaries COMMON STOCK MARKET PRICES AND DIVIDENDS Morrison Management Specialists, Inc. common stock is publicly traded on the New York Stock Exchange (NYSE) under the ticker symbol MHI. The following table sets forth the reported high and low sales prices on the NYSE for each quarter during fiscal years 2000 and 1999. First Second Third Fourth Quarter Quarter Quarter Quarter - -------------------------------------------------------------------------------
2000 MARKET PRICE PER SHARE: High............................... $23.409 $22.046 $22.841 $28.000 Low................................ $16.875 $16.364 $17.273 $19.205 1999 MARKET PRICE PER SHARE: High............................... $18.068 $16.818 $18.295 $18.125 Low................................ $15.341 $14.545 $16.477 $15.909
Market price per share data has been adjusted to reflect the May 2000 stock dividend. Cash dividends on the common stock of Morrison Management Specialists, Inc. were paid during each quarter of fiscal years 2000 and 1999 as follows: First Second Third Fourth Quarter Quarter Quarter Quarter Total - -----------------------------------------------------------------------------------------
2000 cash dividends per share.......$0.040 $0.040 $0.040 $0.040 $0.160 1999 cash dividends per share.......$0.040 $0.040 $0.040 $0.040 $0.160
On June 28, 2000, the Company's Board of Directors declared a quarterly dividend of $0.04 per share, payable July 31, 2000, to 3,320 stockholders of record on July 14, 2000. Cash dividends per share of common stock have not been adjusted to reflect the May 2000 stock dividend. TRANSFER AGENT, REGISTRAR, DIVIDEND EXECUTIVE AND OPERATING OFFICES DISBURSING AGENT AND DIVIDEND 1955 Lake Park Drive, SE REINVESTMENT PLAN ADMINISTRATOR Suite 400 SunTrust Bank, Atlanta Smyrna, GA 30080 Mail Code 258 (770) 437-3300 PO Box 4625 Atlanta, GA 30302 FORM 10-K INFORMATION (800) 568-3476 A copy of the Company's annual report on Form 10-K, excluding DIVIDEND REINVESTMENT PLAN exhibits, filed with the Securities For information contact the and Exchange Commission, will be the Dividend Reinvestment Plan furnished to any shareholder Administrator or the Investor Relations without charge upon written request Department. to the: INDEPENDANT AUDITORS Investor Relations Department Ernst & Young LLP 1955 Lake Park Drive, SE, Suite 400 600 Peachtree Street Smyrna, GA 30080 Atlanta, GA 30308 ANNUAL MEETING LEGAL COUNSEL The Annual Meeting of Shareholders Powell, Goldstein, Frazer & Murphy LLP will be held Wednesday, 191 Peachtree Street, NE September 27, 2000, starting at Atlanta, GA 30303 1:00 p.m. EST at the: Georgia International Convention Center 1902 Sullivan Road College Park, GA 30337
Morrison's Spice of Life(TM), The Spice Event (TM) , Advanced Culinary System(TM), Advanced Culinary Center(TM), ACC(TM), Strides for Life(TM), PhD (Pro-Health Dining)(R) and Resident Choice(TM) are trademarks or registered trademarks of Morrison Management Specialists, Inc. Clients for Life(R) is a registered trademark of Tenacity, Inc. All other trademarks identified in this Annual Report are the property of third parties. Page 36 in Annual Report DIRECTORS AND EXECUTIVE OFFICERS Morrison Management Specialists, Inc.
THE BOARD OF DIRECTORS EXECUTIVE OFFICERS OF THE COMPANY Glenn A. Davenport Glenn A. Davenport Chairman and Chairman and Chief Executive Officer, Chief Executive Officer Morrison Management Specialists, Inc. K. Wyatt Engwall Claire L. Arnold (1,2,3) Chief Financial Officer Chairman and Chief Executive and Assistant Secretary Officer, Leapfrog Services Inc.; Former Chief Executive John E. Fountain Officer, NCC L.P. Vice President, General Counsel and Secretary E. Eugene Bishop (1,2,3) Former Chairman Jerry D. Underhill and Chief Executive Officer, President, Morrison Healthcare Morrison Restaurants Inc. Food Services Fred L. Brown (1,2,3) Eugene D. Dolloff Vice Chairman, BJC Health President, Morrison Senior Dining System; Immediate Past Chairman, American Hospital Association; Gary L. Gaddy Visiting Professor, Executive Vice President, Sales George Washington University and Marketing Michael F. Corbett (1,2,3) Richard C. Roberson President, Michael F. Corbett & Division Vice President, Associates, LTD; Chairman and Morrison Healthcare Food Services Executive Director of The Outsourcing Research Council George T. Levins Chairman of The Corbett Group Division Vice President, Morrison Healthcare Food Services John B. McKinnon (1,2,3) Former Dean, Babcock Graduate School of Management, Wake Forest University; Former President, Sara Lee Corporation A. Robert Outlaw, Jr. (1,2,3) Chairman and Chief Executive Officer, Marshall Biscuit Company Dr. Benjamin F. Payton (1,2,3) President, Tuskegee University Committees of the Board 1. Compensation and Stock Option* 2. Audit* 3. Nominating* *Comprised entirely of non-employee Board Members
Page 37 in Annual Report EX-21 4 0004.txt LIST OF SUBSIDIARIES MORRISON MANAGEMENT SPECIALISTS, INC. EXHIBIT 21.1 List of Subsidiaries State of Incorporation - Arizona Drake Management Services, Inc. State of Incorporation - Delaware Morrison Investment Company, Inc. State of Incorporation - Georgia Culinary Solutions, Inc. Morrison Team Services, Inc. State of Incorporation - Illinois Morrison Holding Company State of Incorporation - Tennessee Culinary Concepts, Inc. State of Incorporation - Pennsylvania Culinary Service Network, Inc. Custom Management Corporation Custom Management Corporation of Pennsylvania Morrison Custom Management Corporation of Pennsylvania John C. Metz & Associates, Inc. State of Incorporation - Texas Morrison's Healthcare of Texas, Inc. EX-23 5 0005.txt CONSENT OF INDEPENDENT AUDITORS MORRISON MANAGEMENT SPECIALISTS, INC. EXHIBIT 23 Consent of Independent Auditors We consent to the incorporation by reference in this Annual Report (Form 10-K) of Morrison Management Specialists, Inc. (formerly Morrison Health Care, Inc.) and Subsidiaries of our report dated June 22, 2000, included in the 2000 Annual Report to Stockholders of Morrison Management Specialists, Inc. and Subsidiaries. Our audits also included the financial statement schedule of Morrison Management Specialists, Inc. and Subsidiaries listed in Item 14(a). This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. We also consent to the incorporation by reference in the Registration Statements of Morrison Management Specialists, Inc. and Subsidiaries listed below of our report dated June 22, 2000, with respect to the consolidated financial statements incorporated herein by reference, and our report included in the preceding paragraph with respect to the financial statement schedule included in this Annual Report (Form 10-K) of Morrison Management Specialists, Inc. and Subsidiaries for the year ended May 31, 2000. -Registration Statement No. 333-2098 on Form S-8 dated March 8, 1996 and related Prospectus -Registration Statement No. 333-2100 on Form S-8 dated March 8, 1996 and related Prospectus -Registration Statement No. 333-2102 on Form S-8 dated March 8, 1996 and related Prospectus -Registration Statement No. 333-2104 on Form S-8 dated March 8, 1996 and related Prospectus -Registration Statement No. 333-2106 on Form S-8 dated March 8, 1996 and related Prospectus -Registration Statement No. 333-2108 on Form S-8 dated March 8, 1996 and related Prospectus -Registration Statement No. 333-4504 on Form S-8 dated May 3, 1996 and related Prospectus -Registration Statement No. 333-4508 on Form S-8 dated May 3, 1996 and related Prospectus -Registration Statement No. 333-20197 on Form S-8 dated January 22, 1997 and related Prospectus -Registration Statement No. 333-40177 on Form S-8 dated November 13, 1997 and related Prospectus /s/ Ernst & Young LLP August 17, 2000 Atlanta, Georgia EX-27 6 0006.txt FDS FOR THE YEAR ENDED MAY 31, 2000
5 This schedule contains summary financial information extracted from the consolidated balance sheets and consolidated statements of income on pages 22 and 23 of the Company's 2000 Annual Report to Stockholders and is qualified in its entirety by reference to such financial statements. 0001007507 Morrison Management Specialists, Inc. 1,000 12-MOS MAY-31-2000 JUN-01-1999 MAY-31-2000 3,645 0 35,629 677 4,909 53,577 40,799 15,408 120,460 36,707 54,865 0 0 127 14,958 120,460 441,074 441,074 374,310 374,310 0 0 3,049 23,573 9,311 14,262 0 0 0 14,262 1.10 1.07
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