-----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, Tr/5dl308ADAPrjaODJJO7ZdWWPiEnstDAGzy9dyVSB6Q2U/mYBl+Irg1468cu2o 7VtuF+G5Z5hIKo5uiYJKSw== 0001007507-99-000027.txt : 19990825 0001007507-99-000027.hdr.sgml : 19990825 ACCESSION NUMBER: 0001007507-99-000027 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19990531 FILED AS OF DATE: 19990824 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORRISON MANAGEMENT SPECIALISTS INC CENTRAL INDEX KEY: 0001007507 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [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: 99698714 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 ANNUAL REPORT ON FORM 10-K 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, 1999 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.[ ] 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 13, 1999 as reported on the New York Stock Exchange, was approximately $274,167,678. 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 13, 1999 was 12,071,204. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's Annual Report to Stockholders for the fiscal year ended May 31, 1999 are incorporated by reference into Parts I and II. Portions of the Registrant's definitive 1999 proxy statement are incorporated by reference into Part III. INDEX PART I Page Number Item 1. Business.............................................. 3-6 Item 2. Properties............................................ 6 Item 3. Legal Proceedings..................................... 6 Item 4. Submission of Matters to a Vote of Security Holders... 7 Executive Officers of the Company..................... 7-8 PART II Item 5. Market for the Registrant's Common Equity and Related Shareholder Matters........................... 9 Item 6. Selected Financial Data............................... 9 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................... 9 Item 7A. Quantitative and Qualitative Disclosures About Market Risk........................................... 9 Item 8. Financial Statements and Supplementary Data........... 9 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure................... 9 PART III Item 10. Directors and Executive Officers of the Company....... 10 Item 11. Executive Compensation................................ 10 Item 12. Security Ownership of Certain Beneficial Owners and Management............................................ 10 Item 13. Certain Relationships and Related Transactions........ 10 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K........................................... 11-14 PART I ITEM 1. BUSINESS. General Morrison Management Specialists, Inc. (the "Company" or "MMSI"), 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. MMSI is the largest independent company focused exclusively on healthcare food service. Its clients include acute care hospitals, health systems and senior living communities. With contracts in 35 states and Washington D.C., MMSI is one of the leading providers of food, nutrition and dining services to the healthcare and senior living industries. The Company's healthcare food service operations originated in the early 1950s. The Company has expanded through its own marketing and sales force and by acquiring other food service businesses. In August 1994, the Company sold certain of its education, business and industry ("B&I") contracts and assets and closed the remaining B&I accounts. This divestiture left the Company with only healthcare contracts and allowed the Company to concentrate its capital and management team in the healthcare industry, which Management believes has significant opportunity for growth and profitability. The Company believes the senior living market is the fastest growing segment of the healthcare industry. Changing demographics and lifestyles are accelerating the construction of retirement communities. Over the past two fiscal years, the Company has emphasized its commitment to provide dining services to the senior living market by acquiring 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. Believing that this market is under-penetrated and rapidly expanding, the Company plans for future growth in the senior living market to result primarily from internal development and acquisitions. Operations The Company has two operating divisions. Morrison Healthcare Food Services manages the food and nutrition services departments of hospitals, health systems, and other healthcare facilities. These departments typically include retail outlets for staff, residents and visitors and patient food and nutrition services. Morrison Senior Dining provides dining services to senior living communities. MMSI healthcare accounts range in size from 100 bed specialty hospitals to facilities with over 1,500 beds. MMSI senior living accounts range in size from 100 residents to 600 residents. The Company has operations in 35 states and Washington, D.C. Approximately 68% of the accounts are in hospitals, while over 30% of the accounts are in senior living communities. The Company provides its clients with the flexibility to adjust programs, staffing and service plans to meet the changing needs of the industry. MMSI has capitalized on its restaurant heritage to bring a retail-oriented mentality to healthcare and senior living clients. MMSI offers its clients programs designed to reduce costs and increase customer (patients, residents and staff) satisfaction. To better serve its clients and provide them with specialized expertise, MMSI's staff is organized into regional teams. Teams may include a regional vice president, regional director of operations, regional director of nutrition services, regional director of culinary, human resources director, support services coordinator and a director of business development. Each team member is dedicated to sharing the best industry practices and performance improvement ideas. The regional teams are supported by a corporate staff that includes nutrition services, marketing, sales, vending, human resources, legal, finance, layout and design and culinary services. MMSI markets its services nationwide through its business development directors. Each business development director focuses on potential clients in a specific territory pursuant to a marketing plan. The business development directors, along with a vice president of sales and marketing, also market MMSI's services to large national healthcare accounts. In addition, MMSI personnel market to existing clients to expand the Company's food service responsibilities and increase sales of existing services to complement the facility's food services department. The Company is planning to continue its expansion into the senior living market through internal growth and development as well as through key acquisitions. MMSI offers its services pursuant to two general types of contracts:(i) profit and loss (or guaranteed cost) contracts, where MMSI assumes the risk of profit or loss for the food service operation and (ii) management fee contracts, where the client reimburses MMSI for all or nearly all costs incurred in providing the services contracted plus a negotiated management fee for supervising the client's food and nutrition services operations. In addition, some management fee contracts include incentives and penalties, pursuant to which MMSI manages the client's food and nutrition operations on a management fee basis, with the amount of the management fee determined in whole or in part by the achievement of predetermined goals. Approximately 71% of MMSI's accounts are operated pursuant to management fee contracts. Management fee contracts with incentives and penalties are becoming more popular. The majority of MMSI's contracts were awarded through bidding processes. In addition, MMSI operates "branded concept" restaurants such as Burger King(R), Chick-Fil-A(R), Pizza Hut(R)and Taco Bell(R) on client premises. These branded concept accounts are operated pursuant to license arrangements with the appropriate restaurant company. Currently, MMSI has 16 license arrangements with nationally and regionally recognized restaurant companies. The Company has advanced food preparation and delivery systems designed to increase customer satisfaction by enhancing production consistencies while generating significant cost reductions and providing quality services for healthcare facilities nationwide. Research and Development The Company does not engage in any material research and development activities. 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, MMSI'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 are important to its business. Registrations of the Company's trademarks expire from 2000 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 1999 Annual Report to Shareholders. Customer Dependence No material part of the business of the Company is dependent upon a single customer, or a very few customers, the loss of any one of which would have a material adverse effect on the Company. 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. 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 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 5,700 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. MMSI manages food and dining services on client-owned properties and, therefore, does not own any significant amounts of property. Vending services on client-owned facilities complement the food service program. Under the terms of certain contracts, MMSI 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, with remaining average annual lease payments of approximately $365,000. 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 the Company's team members and clients located within that region. During fiscal year 1998, MMSI constructed two advanced food preparation facilities or "Advanced Culinary Centers" (ACC) to utilize its expertise in the cook-chill food processing. The Tampa, Florida ACC includes about 5,000 square feet of light industrial space with a lease term ending in 2002. The Baltimore, Maryland ACC includes approximately 15,000 square feet of light industrial and regional office space. Facilities and equipment are repaired and maintained to assure their adequacy, productive capacity and utilization. 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 13, 1999 is provided below. Name Age Position with the Company G. A. Davenport 45 Chairman of the Board of Directors, President and Chief Executive Officer K. W. Engwall 51 Senior Vice President, Finance and Assistant Secretary J. E. Fountain 48 Vice President, General Counsel and Secretary J. D. Underhill 54 President, Morrison Healthcare Food Services E. D. Dolloff 53 President, Morrison Senior Dining G. L. Gaddy 46 Senior Vice President, Sales and Marketing F. G. Michels 61 Senior Vice President, Support Services R. C. Roberson 55 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 and was appointed Chairman of the Board in July 1999. 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 Senior Vice President, Finance 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 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. Eugene D. Dolloff has been President of the Morrison Senior Dining Division since 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 Senior Vice President, Sales and Marketing of the Company since March 1998. 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. Frances G. Michels has been Senior Vice President, Support Services of the Company since the Distribution in March 1996. She was Senior Vice President, Support Services of the Health Care Division of MRI's Morrison Group from January 1996 until March 1996. Prior thereto, she served MRI's Health Care Division in various capacities, including as Vice President of Nutrition Services from December 1984 through January 1996, Area Manager for Operations and Nutrition Services from January 1982 through December 1984, Consulting Dietitian for the Health Care Division from June 1974 through January 1982, Food service Director from July 1973 through June 1974, and Chief Therapeutic Dietitian from June 1970 through July 1973. 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. 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, 1999. 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, 1999 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, 1999 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, 1999 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, 1999, are incorporated herein by reference: Consolidated Statements of Income - Fiscal years ended May 31, 1999, May 31, 1998 and May 31, 1997. Consolidated Balance Sheets - As of May 31, 1999 and May 31, 1998. Consolidated Statements of Stockholders' Equity - Fiscal years ended May 31, 1999, May 31, 1998 and May 31, 1997. Consolidated Statements of Cash Flows - Fiscal years ended May 31, 1999, May 31, 1998 and May 31, 1997. Notes to Consolidated Financial Statements. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. 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 1999 proxy statement of the Registrant, relating to the Registrant's annual meeting of shareholders to be held on September 28, 1999. (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 1999 proxy statement of the Registrant relating to the Registrant's annual meeting of shareholders to be held on September 28, 1999. 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 1999 proxy statement of the Registrant, relating to the Registrant's annual meeting of shareholders to be held on September 28, 1999. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. None. 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, 1999, 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, 1999, May 31, 1998 and May 31, 1997...................... 22 Consolidated Balance Sheets as of May 31, 1999 and May 31, 1998...................... 23 Consolidated Statements of Stockholders' Equity for the fiscal years ended May 31, 1999, May 31, 1998 and May 31, 1997...................... 25 Consolidated Statements of Cash Flows for the fiscal years ended May 31, 1999, May 31, 1998 and May 31, 1997...................... 24 Notes to Consolidated Financial Statements......... 26 - 34 Report of Independent Auditors..................... 35 Page Reference in Form 10-K 2. Financial statement schedules: Schedule II - Valuation and Qualifying Accounts for the fiscal years ended May 31, 1999, May 31, 1998 and May 31, 1997....................................... 17 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: 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 Form of 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.* 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 Form of 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*** Form of First Amendment to the Morrison Management Specialists, Inc. Executive Supplemental Pension Plan.++ 10.22*** Form of First Amendment to the Morrison Management Specialists, Inc. Management Retirement Plan.++ 10.23*** Form of First Amendment to the Morrison Management Specialists, Inc. Salary Deferral Plan.++ 10.24*** Form of Second Amendment to the Morrison Management Specialists, Inc. Salary Deferral Plan.++ 10.25*** Form of First Amendment to the Morrison Management Specialists, Inc. Deferred Compensation Plan.++ 10.26*** Form of Second Amendment to the Morrison Management Specialists, Inc. Deferred Compensation Plan.++ 10.27*** Form of Morrison Management Specialists, Inc. Salary Deferral Plan Trust Agreement with Merrill Lynch Trust Company (Florida) as Trustee.++++ 10.28*** Form of Morrison Management Specialists, Inc. Deferred Compensation Plan Trust Agreement with Merrill Lynch Trust Company (Florida) as Trustee.++++. 10.29*** Form of First Amendment to the 1996 Executive Stock Incentive Plan.++++ 10.30*** Form of First Amendment to the 1996 Non-Executive Stock Incentive Plan.++++ 10.31*** Form of Second Amendment to the 1996 Executive Stock Incentive Plan.++++ 10.32*** Form of Second Amendment to the 1996 Non-Executive Stock Incentive Plan.++++ 10.33*** Form of 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.++++ 13 Annual Report to Stockholders for the fiscal year ended May 31, 1999 (Only portions specifically incorporated by reference in the Form 10-K are incorporated herewith.) 21 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 99.1 to the Registrant's Current Report on Form 8-K filed on July 6, 1999. ++++ Incorporated by reference to Exhibit of the same number to the Registrant's Amendment No. 1 on Form 10-K/A filed on September 3, 1998 to the Annual Report on Form 10-K for the fiscal year ended May 31, 1998. (b) Reports on Form 8-K None. 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 08/24/99 By:/s/ Glenn A. Davenport Glenn A. Davenport Chairman of the Board, President and Chief Executive Officer 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 08/24/99 By:/s/ Glenn A. Davenport Glenn A. Davenport Chairman of the Board, President and Chief Executive Officer Date 08/24/99 By:/s/ K. Wyatt Engwall K. Wyatt Engwall Senior Vice President, Finance and Assistant Secretary (Principal Accounting Officer) Date 08/20/99 By:/s/ Claire L. Arnold Claire L. Arnold Director Date 08/21/99 By:/s/ E. Eugene Bishop E. Eugene Bishop Director Date 08/23/99 By:/s/ Fred L. Brown Fred L. Brown Director Date 08/24/99 By:/s/ Michael F. Corbett Michael F. Corbett Director Date 08/21/99 By:/s/ John B. McKinnon John B. McKinnon Director Date 08/20/99 By:/s/ Arthur R. Outlaw, Jr. Arthur R. Outlaw, Jr. Director Date 08/24/99 By:/s/ Dr. Benjamin F. Payton Dr. Benjamin F. Payton Director Morrison Management Specialists, Inc. Schedule II - VALUATION AND QUALIFYING ACCOUNTS For the Fiscal Periods Ended May 31, 1999, May 31, 1998 and May 31, 1997 (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, 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 =========================================================== Year ended May 31, 1997: Trade receivables: Allowance for doubtful accounts $1,122 $ 0 $ 0 $ 378 $ 744 ===========================================================
Notes: (A) Write-off of trade receivables determined to be uncollectible against the allowance for doubtful accounts. EX-13 2 1999 ANNUAL REPORT TO SHAREHOLDERS 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 "MMSI") and is derived from the Financial Statements of MMSI. The Selected Financial Data of MMSI is presented as if MMSI had been a separate entity for fiscal years 1996 and 1995. 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 MMSI 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. Earnings per share and dividend data have not been presented for fiscal year 1995 as MMSI was not a separate publicly held company prior to March 1996. - ----------------------------------------------------------------------------------------------------------------------------------- For The Fiscal Year * - ----------------------------------------------------------------------------------------------------------------------------------- (In thousands except per share data) 1999 1998 1997 1996 1995 - -----------------------------------------------------------------------------------------------------------------------------------
Consolidated statements of income data: Managed volume (estimated and unaudited)................. $ 647,900 $ 504,400 $ 464,800 $ 435,600 $ 408,300 ========================================================================= Revenues................................................. $ 324,968 $ 250,371 $ 221,011 $ 219,995 $ 225,392 ========================================================================= Income before provision for income taxes................. $ 22,197 $ 19,065 $ 17,576 $ 16,011 $ 65,295 Provision for federal and state income taxes............. 8,657 7,513 7,290 6,731 28,469 ------------------------------------------------------------------------- Net income............................................... $ 13,540 $ 11,552 $ 10,286 $ 9,280 $ 36,826** ========================================================================= Earnings per share - Basic............................... $ 1.14 $ 0.97 $ 0.87 $ 0.79 ===================================================== Earnings per share - Diluted............................. $ 1.12 $ 0.95 $ 0.87 $ 0.79 ===================================================== Weighted average common shares - Basic................... 11,883 11,938 11,785 11,673 Net dilutive effect of stock options and nonvested stock awards................................. 222 254 56 51 ----------------------------------------------------- Weighted average common shares - Diluted................. 12,105 12,192 11,841 11,724 ===================================================== *Fiscal years 1999 and 1998 are twelve-month years. Fiscal years 1997, 1996 and 1995 are composed of 52 weeks. **Includes an after-tax gain of $25.8 million from the sale of certain education, business and industry ("B&I") contracts and assets to Gardner Merchant Services, Inc. for a cash payment of $100 million. The remaining B&I accounts were closed.
Other Financial Data: Total assets............................................. $ 102,927 $ 84,374 $ 60,203 $ 61,101 $ 69,028 Long-term debt........................................... $ 49,305 $ 31,690 $ 15,022 $ 20,034 $ 19,245 Stockholders' equity..................................... $ 14,563 $ 10,220 $ 6,969 $ 5,645 $ 9,015 Cash dividends per share of common stock................. $ 0.16 $ 0.82 $ 0.82 $ 0.205*** - Working capital.......................................... $ 15,670 $ 7,344 $ 3,891 $ 8,677 $ 13,318 Current ratio............................................ 1.6:1 1.2:1 1.1:1 1.3:1 1.5:1
***Dividends were not paid prior to the fourth quarter of fiscal year 1996. 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. RESULTS OF OPERATIONS Effects of Distribution on Results of Operations 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. (the "Company" or "MMSI") effective June 30, 1999. Management believes that the Distribution has had a material impact on the results of operations due to the added separate company costs that were incurred by MMSI. 1999 Compared To 1998 Overview MMSI is the only national, publicly held company which specializes exclusively in providing food, nutrition and dining services to the health care and senior living industries. MMSI's client base includes some of the largest and most prominent hospitals, health systems and senior living communities in the United States. In fiscal year 1999, MMSI's third full year as an independent company, the Company again demonstrated strong financial results, with increases in managed volume, revenue, operating profit and net income. These accomplishments were due to strong new account sales, high account retention, continued focus on cost reductions in all accounts, and growth in existing accounts. Hospitals are experiencing increasing cost pressures and many are outsourcing their food services to achieve cost reductions along with patient satisfaction goals. Another prime factor which added to the increases in managed volume, revenue, operating profit and net income was the acquisition of Culinary Service Network, Inc. in October 1998. Culinary Service Network was MMSI's third acquisition in the senior living market. The experience and practices of these industry experts create a solid foundation for further developing and growing the nation's foremost senior living services business. (See Note 2 of the Notes to Consolidated Financial Statements for more information.) Managed Volume/Revenue 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, MMSI 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 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, MMSI assumes the risk of profit or loss for the food service operation. For such accounts, the amount of revenue reported is the actual revenue generated from meals served to patients, client employees and visitors. Because of the difference between the amount of revenue that is reported for the fee account (net management fees plus reimbursed expenses) and the profit and loss account (gross revenues of meal sales), Management uses the concept of managed volume to evaluate the Company's true growth. Managed volume is defined by MMSI as the total costs of operating the food services, regardless of which type of contract exists with the client. Management believes managed volume is its best indicator of performance because it measures total activity from all client accounts and provides an indication of what gross revenues would be if the Company performed all services pursuant to profit and loss contracts. Management uses managed volume as an additional indicator of performance and not as a replacement of measures such as revenues, as defined and required by generally accepted accounting principles. Managed volume increased $143.5 million, or 28.5%, to $647.9 million in fiscal year 1999 when compared to fiscal year 1998. Revenue increased $74.6 million, or 29.8%, to $325.0 million in fiscal year 1999 as compared to fiscal year 1998. The primary sources of these increases were opening more and larger accounts than accounts which were closed, key acquisitions, and growth at existing accounts, including adding vending operations and increasing employee payrolls. Gross Profit Gross profit, defined as revenue less operating expenses, increased $11.2 million or 26.0% for fiscal year 1999. Management's continued emphasis on food and labor cost reductions, acquisitions, and growth of existing account business all contributed to the favorable results. Selling, General and Administrative Selling, general and administrative expenses were 4.6% of managed volume, which is a slight increase over the 4.5% of managed volume in fiscal year 1998. Interest Expense, Net Interest expense increased 110% compared to 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 improvements to the Company's management information systems. Federal and State Income Taxes The combined federal and state effective tax rate decreased to 39% in fiscal year 1999 from 39.4% in fiscal year 1998. 1998 COMPARED TO 1997 Overview In MMSI's second full year as an independent company, fiscal year 1998, the Company showed strong financial results, with increases in managed volume, 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 acquisitions of Drake Management Services, Inc. (January 1998) and Spectra Services, Inc. (March 1998) in the senior living market. (See Note 2 of the Notes to Consolidated Financial Statements for more information.) Managed Volume/Revenue In fiscal year 1998, managed volume increased $39.6 million, or 8.5%, to $504.4 million when compared to fiscal year 1997. Revenue increased $29.4 million, or 13.3%, to $250.4 million in fiscal year 1998 as compared to fiscal year 1997. The primary sources of these increases were growth at existing accounts, including adding vending operations and increasing employee payrolls, opening more accounts and larger accounts than accounts which were closed, and key acquisitions. Gross Profit Gross profit increased $3.3 million, or 8.4%, to $43.1 million for 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 Selling, general and administrative expenses decreased as a percentage of managed volume and revenue, although they increased overall when compared to the prior year. The expenses were 4.5% of managed volume in fiscal year 1998 and were 4.6% of managed volume in fiscal year 1997. Compared to fiscal year 1997, the expenses increased $1.5 million, or 7.1%, versus a revenue increase of 13.3% for the same period. Interest Expense, Net Interest expense increased 39.0% compared to 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 improvements to the management information systems. Federal and State Income Taxes The combined federal and state effective tax rate decreased to 39.4% in fiscal 1998 from 41.5% in fiscal 1997. The higher effective income tax rate in fiscal 1997 as compared to fiscal 1998 is primarily due to higher non-deductible expenses in fiscal 1997. YEAR 2000 The "Year 2000 Issue" is a term used to describe the problems created by the inability of certain computer software programs to properly recognize and process date-sensitive information relative to dates after December 31, 1999. These problems arise mostly from the fact that many software programs have historically been programmed to accept only two digit entries in the date code fields and use such two digit entries in the software's calculation and report generation formats. State of Readiness The Company is currently addressing the impact of the Year 2000 Issue. After completing inventories of its technology systems, MMSI elected to replace its most critical system, a shared-mainframe corporate system, with client-server systems architected using Year 2000 standards. The transition to this new system began in June 1997 and was completed in January 1999. The Company continues its testing and preparations of other systems, which it anticipates completing before December 31, 1999. In addition, the Company has verified that all other significant vendor licensed software applications are either currently year 2000 compliant or will be by December 31, 1999. Costs The Company's technology initiatives include both preparations for the Year 2000 Issue and significant system upgrades and enhancements. While it is not possible to give an estimate of the costs specifically related to the Year 2000 Issue, the total cost of the Company's technology initiatives is approximately $5 million, substantially all of which has been incurred. External Relationships All major suppliers have provided letters assuring the Company of their Year 2000 readiness. To date, the Company is not aware of any external supplier, vendor or other party with a Year 2000 Issue that would materially impact the Company's results of operations, liquidity or capital resources. However, the Company has no means of ensuring that external parties will be ready for Year 2000 Issues. Risks Management of the Company believes it has an effective program in place to resolve problems related to the Year 2000 Issue in a timely manner. There can be no assurance that the Company will be completely successful in its preparations to address the Year 2000 Issue. If the Company is not completely successful in its preparations, the Company could suffer loss of sales or other adverse consequences, including, but not limited to, diversion of resources, damage to the Company's reputation and increased litigation, any of which could have a material adverse effect on the Company's business operations or financial statements. The Company's year 2000 compliance is also dependent on external parties which exposes it to risks including, but not limited to, loss of local or regional utilities, loss of telecommunications services and delays or cancellations by suppliers. Because of the Company's dependence upon certain external parties being year 2000 compliant on a timely basis (including infrastructure providers), there can be no assurance that the Company's preparations will prevent a material adverse effect on its business, results of operations or financial condition. Contingency Plans The Company maintains manual procedures in the normal course of business that may be utilized if the Company, or an external party upon which the Company is dependent, is unable to achieve year 2000 readiness. Although the Company has not formalized a comprehensive contingency plan specific to the Year 2000 Issue, the Company's year 2000 preparations are ongoing and its ultimate scope, as well as the consideration of formalized contingency plans, will continue to be evaluated as new information becomes available. See "Special Note Regarding Forward-Looking Information." LIQUIDITY AND CAPITAL RESOURCES Cash Flow, Capital Expenditures and Financing Due to the nature of its contract food service business, the Company is able to maintain a relatively steady cash flow. Cash flow from operations has historically financed MMSI's capital investments. MMSI plans for expansion over the next several years and anticipates 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." In July 1998, the Company replaced its $50 million credit facility with a $75 million revolving credit line from four financial institutions. The new credit line has a variable interest rate based on LIBOR and variable interest payment requirements. The principal is due no later than July 2, 2003. The initial amount borrowed was $35.4 million, all of which was used to repay the balance due on the $50 million and $5 million credit facilities. In June 1998, the Company entered into 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 and to exchange floating rate for fixed rate payments on certain debt. These swap agreements effectively convert $20 million of variable rate borrowings to fixed rates of approximately 5.6%. 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 market and credit risks which 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. As a result of the new credit facility, the related swap agreements, the Company's strong financial position, and the general decline in LIBOR, the Company's effective interest rate was decreased from approximately 6.65% in fiscal year 1998 to 5.75% in fiscal year 1999. On May 31, 1999, MMSI had $49.4 million outstanding in total debt, an increase of $12.7 million from the prior year. Trade accounts receivable make up the majority of MMSI'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. MMSI 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 $8.1 million for fiscal year 1999. Capital expenditures were approximately $8.4 million, a decrease of $0.5 million compared to the prior year period. Capital expenditures are anticipated to total $10 million to $15 million in fiscal year 2000. Cash used for acquisitions and related costs was $6.9 million for fiscal year 1999, a decrease of $0.6 million compared to the prior year. MMSI plans to finance this amount primarily through internally generated funds. See "Special Note Regarding Forward-Looking Information." Stock Repurchase Program In March 1998, MMSI's Board of Directors authorized a program to repurchase up to 1,000,000 shares of the Company's Common Stock. During fiscal year 1999, 777,210 shares of the Company's stock were purchased at an aggregate cost of $14.5 million. Subsequent to year end, in June 1999, the Company's Board of Directors authorized the repurchase of an additional 1,000,000 shares. Working Capital As of May 31, 1999, working capital was $15.7 million while the current ratio was 1.6:1. Working capital increased $8.3 million and the current ratio increased 0.4 when compared to the prior year. Dividends MMSI paid approximately $1.9 million in cash dividends to stockholders during fiscal year 1999. The Company plans to pay annual dividends of approximately $1.9 million in the next fiscal year. See "Special Note Regarding Forward-Looking Information." KNOWN EVENTS, UNCERTAINTIES AND TRENDS Impact of Inflation In the past, MMSI 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 MMSI's ability to recover such cost increases in their entirety. Historically, the effects of inflation on MMSI'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 health care systems and senior living communities, and through expanding services at the Company's existing accounts and the Advanced Culinary Centers(TM). Morrison Healthcare Food Services, the Company's health care division, believes that pressures on hospitals and health care systems to outsource food services are increasing due to the Balanced Budget Act and managed care. Management believes these pressures will aid the continued growth of MMSI. The Company also expects growth to come from its newly created Morrison Senior Dining division. Management believes growth in this division will result primarily from focused expertise and the ability to provide unique dining solutions for senior living communities. MMSI serves some of the largest and most prominent hospitals, health care 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, MMSI 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 health care 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 contains various "forward-looking statements" which represent the Company's expectations or beliefs concerning future events, including the following: statements regarding account growth, impact of the Year 2000, 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: health care spending trends; the growth of systems and group purchasing organizations; changes in health care regulations; increased competition in the health care food and nutrition market; customers' acceptance of the Company's cost saving programs; impact of the year 2000; and laws and regulations affecting labor and employee benefit costs. Consolidated Statements of Income Morrison Management Specialists, Inc. and Subsidiaries For the Fiscal Year Ended - ----------------------------------------------------------------------------------------------------- (In thousands, except per share data) May 31, 1999 May 31, 1998 May 31, 1997 - -----------------------------------------------------------------------------------------------------
Revenues........................................ $324,968 $250,371 $221,011 Operating expenses.............................. 270,637 207,265 181,233 ----------------------------------------------------- Gross Profit.................................... 54,331 43,106 39,778 Selling, general and administrative expenses.... 29,776 22,919 21,395 ----------------------------------------------------- 24,555 20,187 18,383 Interest expense, net of interest income of $396 in 1999, $406 in 1998, and $687 in 1997.. 2,358 1,122 807 ----------------------------------------------------- Income before provision for income taxes........ 22,197 19,065 17,576 Provision for federal and state income taxes.... 8,657 7,513 7,290 ----------------------------------------------------- Net income...................................... $ 13,540 $ 11,552 $ 10,286 ===================================================== Earnings per share - Basic...................... $ 1.14 $ 0.97 $ 0.87 Earnings per share - Diluted.................... $ 1.12 $ 0.95 $ 0.87 Weighted average common shares - Basic.......... 11,883 11,938 11,785 Net dilutive effect of stock options and nonvested stock awards........................ 222 254 56 ----------------------------------------------------- Weighted average common shares - Diluted........ 12,105 12,192 11,841 =====================================================
The accompanying notes are an integral part of the financial statements. Consolidated Balance Sheets Morrison Management Specialists, Inc. and Subsidiaries (In thousands) May 31, 1999 May 31, 1998 - --------------------------------------------------------------------------------
Assets Current assets: Cash and short-term investments............. $ 2,780 $ 5,720 Receivables: Trade, less allowance for doubtful accounts of $712 at May 31, 1999 and $887 at May 31, 1998..................... 27,804 21,381 Other...................................... 6,231 6,372 Inventories................................. 2,940 2,936 Prepaid expenses............................ 2,312 1,262 Deferred income tax benefits................ 1,747 1,949 ----------------------------------- Total current assets......................... 43,814 39,620 Property and equipment - at cost: Buildings and improvements.................. 5,931 3,425 Equipment................................... 24,923 16,037 Construction in progress.................... 121 4,729 ----------------------------------- 30,975 24,191 Less accumulated depreciation............... 12,376 10,232 ----------------------------------- 18,599 13,959 Deferred income tax benefits................. 2,947 2,503 Cost in excess of net assets acquired, net... 18,331 12,097 Notes receivable, less current portion....... 3,626 3,729 Other assets................................. 15,610 12,466 ----------------------------------- Total assets................................. $102,927 $84,374 =================================== Liabilities and Stockholders' Equity: Current liabilities: Accounts payable............................ $15,091 $14,545 Accrued liabilities: Taxes, other than income taxes............. 2,187 1,818 Payroll and related costs.................. 7,322 6,395 Insurance.................................. 1,909 2,289 Other...................................... 1,499 2,207 Current portion of long-term debt........... 136 5,022 ----------------------------------- Total current liabilities.................... 28,144 32,276 Long-term debt............................... 49,305 31,690 Other liabilities............................ 10,915 10,188 Stockholders' equity: Common stock, $0.01 par value (authorized 100,000 shares; issued: 1999 - 11,977 shares, 1998 - 12,379 shares).............. 120 124 Capital in excess of par value.............. 3,324 12,859 Unearned ESOP shares........................ (2,806) (3,195) Deferred Compensation Plan liability payable in Company stock................... 1,518 1,848 Retained earnings............................ 13,925 2,322 ----------------------------------- 16,081 13,958 Less cost of treasury/Company stock held by Deferred Compensation Plan......... 1,518 3,738 ----------------------------------- Total stockholders' equity................... 14,563 10,220 ----------------------------------- Total liabilities and stockholders' equity... $102,927 $84,374 ===================================
The accompanying notes are an integral part of the financial statements. Consolidated Statements of Cash Flows Morrison Management Specialists, Inc. and Subsidiaries For the Fiscal Year Ended - ----------------------------------------------------------------------------------------------- (In thousands) May 31, 1999 May 31, 1998 May 31, 1997 - -----------------------------------------------------------------------------------------------
Operating activities: Net income....................................... $ 13,540 $ 11,552 $ 10,286 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.................... 3,254 2,538 1,992 Amortization of intangibles...................... 860 377 153 Deferred income taxes............................ (182) (811) 514 (Gain)/loss on disposition of assets............. (112) (19) 29 Changes in operating assets and liabilities: Receivables.................................... (5,949) (6,359) 2,486 Inventories.................................... (4) (246) (24) Prepaid and other assets....................... (4,141) (3,420) 241 Accounts payable, accrued and other liabilities.................................. 855 3,430 4,699 --------------------------------------------- Net cash provided by operating activities........ 8,121 7,042 20,376 --------------------------------------------- Investing activities: Purchases of property and equipment.............. (8,389) (8,850) (4,843) Proceeds from disposal of assets................. 799 268 459 Acquisition of businesses, net of cash acquired.. (6,859) (7,464) 0 --------------------------------------------- Net cash used by investing activities........... (14,449) (16,046) (4,384) --------------------------------------------- Financing activities: Net proceeds from long-term debt................. 18,323 21,690 0 Principal payments on long-term debt............. (7,309) (5,011) (11) Net change in short-term borrowings.............. 1,570 0 (6,760) Proceeds from exercise of stock options and issuance of stock, net of income tax benefits... 6,766 3,054 679 Dividends paid................................... (1,937) (9,877) (9,725) Payments to acquire Treasury Stock............... (14,539) (1,891) 0 ESOP shares released............................. 514 412 84 --------------------------------------------- Net cash provided/(used) by financing activities. 3,388 8,377 (15,733) --------------------------------------------- (Decrease)/Increase in cash and short-term investments......................... (2,940) (627) 259 Cash and short-term investments at the beginning of the year........................ 5,720 6,347 6,088 --------------------------------------------- Cash and short-term investments at the end of the year.............................. $ 2,780 $ 5,720 $ 6,347 ============================================= Supplemental disclosure of cash flow information-cash paid for: Interest........................................ $ 2,924 $ 1,696 $ 1,190 Income taxes.................................... $ 9,386 $ 7,933 $ 8,000
The accompanying notes are an integral part of the financial statements. Consolidated Statements of Stockholders' Equity Morrison Management Specialists, Inc. and Subsidiaries For the Fiscal Year Ended --------------------------------------------------------------------- (In thousands, except per share data) May 31, 1999 May 31, 1998 May 31, 1997 --------------------------------------------------------------------- Shares Amount Shares Amount Shares Amount ---------------------------------------------------------------------
Common Stock Beginning balance..................................... 12,379 $ 124 12,165 $ 122 11,791 $ 118 Shares issued to ESOP................................. 0 0 0 0 255 3 Shares issued under Stock Incentive Plans............. 470 5 214 2 119 1 Cancellation of Treasury Stock........................ (872) (9) 0 0 0 0 --------------------------------------------------------------------- Ending balance............................... 11,977 120 12,379 124 12,165 122 --------------------------------------------------------------------- Capital in Excess of Par Value Beginning balance..................................... 12,859 9,717 5,441 Shares issued to ESOP................................. 0 0 3,592 Shares issued under Stock Incentive Plans, net of income tax benefits........................... 6,761 3,052 678 Shares released from ESOP............................. 125 90 6 Cancellation of Treasury Stock........................ (16,421) 0 0 --------------------------------------------------------------------- Ending balance............................... 3,324 12,859 9,717 --------------------------------------------------------------------- Unearned ESOP Shares Beginning balance..................................... (226) (3,195) (249) (3,517) 0 0 Shares issued to ESOP................................. 0 0 0 0 (255) (3,595) Shares released from ESOP............................. 28 389 23 322 6 78 ---------------------------------------------------------------------- Ending balance............................... (198) (2,806) (226) (3,195) (249) (3,517) ---------------------------------------------------------------------- Deferred Compensation Plan liability payable in Company stock Beginning balance..................................... 1,848 1,341 929 Net change ........................................... (330) 507 412 ----------------------------------------------------------------------- Ending balance............................... 1,518 1,848 1,341 ----------------------------------------------------------------------- Retained Earnings Beginning balance..................................... 2,322 647 86 Net income............................................ 13,540 11,552 10,286 Cash dividends of $0.16 per share in fiscal 1999 and $0.82 per share in fiscal 1998 and 1997.............................. (1,937) (9,877) (9,725) ----------------------------------------------------------------------- Ending balance............................... 13,925 2,322 647 ----------------------------------------------------------------------- Treasury/Company Stock Held By Deferred Compensation Plan Beginning balance..................................... (199) (3,738) (95) (1,341) (62) (929) Cancellation/(Purchase) of Treasury Stock............. 95 1,891 (95) (1,891) 0 0 Sale/(Purchase) of Company Stock - held by Deferred Compensation Plan.......................... 19 329 (9) (506) (33) (412) ------------------------------------------------------------------------ Ending balance............................... (85) (1,518) (199) (3,738) (95) (1,341) ------------------------------------------------------------------------ Total Stockholders' Equity............................ $ 14,563 $10,220 $6,969 ========================================================================
The accompanying notes are an integral part of the financial statements. Notes to Consolidated Financial Statements Morrison Management Specialists, Inc. and Subsidiaries 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 "MMSI"). Prior to the Distribution, MMSI was a wholly owned health care contract food and nutrition business of MRI. The accompanying financial statements reflect MMSI as a stand-alone entity. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires Management to make estimates and assumptions that affect the 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. Concentration of Credit Risk The Company primarily competes in the health care food and nutrition services and senior living industries, and encounters significant competition in the markets in which it operates. The length of contract varies by customer. Concentration of credit risk with respect to accounts receivable are limited due to the large number of customers that make up the Company's customer base, thus spreading trade credit risk. The Company maintains reserves for potential uncollectible amounts which, in the aggregate, have not exceeded Management's expectations. Principles of Consolidation The accompanying consolidated financial statements include the accounts of MMSI 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. The fiscal year ended May 31, 1997 comprised of 52 weeks. 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 and 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 1999 and 1998, $219,000 and $127,000 of interest was capitalized, respectively. No interest was capitalized in fiscal 1997. 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, 1999 and May 31, 1998, the accumulated amortization for costs in excess of net assets acquired was $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. 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, MMSI 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, MMSI assumes the risk of profit or loss for the food service 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 In 1997, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" and No. 131, "Disclosures about Segments of an Enterprise and Related Information." In 1998, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 132, "Employer's Disclosures about Pensions and other Postretirement Benefits." These statements, which were effective for fiscal years beginning after December 15, 1997, expand or modify disclosures and had no impact on the Company's consolidated financial position, results of operations or cash flow. In June 1998, the Financial Accounting Standards Board issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities," which establishes accounting and reporting standards for derivative instruments. The statement is effective for all fiscal quarters of 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, 1999, May 31, 1998, and May 31, 1997 consisted of cash and short-term investments, accounts and notes receivable, and long-term debt. The fair value of these financial instruments 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 exposures. The Company specifically designates these agreements as hedges of debt instruments and recognizes interest differentials as adjustments to interest expense in the period the differentials occur. Although substantially all of the Company's trade accounts receivable are from health care 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. 2. Acquisitions 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 provide 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. The acquisitions were accounted for using the purchase method 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 are not significant during the periods presented. 3. Long-Term Debt Long-term debt consists of the following: (In thousands) Fiscal Year Ended ----------------------------------- May 31, 1999 May 31, 1998 ----------------------------------- Variable rate revolving credit facility due in full 7/2/03........ $46,555 $17,500 Variable rate demand lines of credit................................ 0 4,190 Term note................................... 0 15,000 Other notes and mortgages................... 2,886 22 ----------------------------------- 49,441 36,712 Less current maturities..................... 136 5,022 ----------------------------------- $49,305 $31,690 =================================== In July 1998, the Company entered into a $75 million credit facility with four financial institutions. This credit facility replaced the previous $50 million credit facility. The new credit line has a variable interest rate based upon LIBOR and variable interest payment requirements. The principal is due no later than July 2, 2003. Commitment fees of 0.25% per annum are payable on the unused portion of the credit facility. At May 31, 1999, the Company had $46.6 million in borrowings under the agreement, with a weighted average variable rate of approximately 5.8%. In June 1998, the Company entered into two interest rate swap agreements to reduce the impact of changes in the interest rates on its floating rate debt and to exchange floating rate for fixed rate payments at certain debt. Under theses agreements, with a notional amount of $20 million at May 31, 1999, MMSI will pay the counterparties interest at a weighted average fixed interest rate of approximately 5.6% at May 31, 1999, and the counterparties will pay MMSI 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. The fair value of such swap agreements was not significant at May 31, 1999. In addition, the Company had uncommitted demand lines of credit amounting to $5 million. At May 31, 1999, 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, 1999. 4. Income Taxes The components of income tax expense are as follows: (In thousands) For the Fiscal Year Ended --------------------------------------- May 31, 1999 May 31, 1998 May 31,1997 --------------------------------------- Current: Federal................................. $7,301 $6,875 $5,960 State................................... 1,538 1,449 816 --------------------------------------- 8,839 8,324 6,776 Deferred: Federal................................. (150) (670) 440 State................................... ( 32) (141) 74 --------------------------------------- (182) (811) 514 --------------------------------------- $8,657 $7,513 $7,290 ======================================= Deferred tax assets and liabilities are comprised of the following: (In thousands) Fiscal Year Ended --------------------------- May 31, 1999 May 31, 1998 --------------------------- Deferred tax assets: Employee benefits....................... $4,484 $4,346 Insurance reserves...................... 1,093 1,366 Bad debt reserve........................ 292 349 Other................................... 907 487 --------------------------- Total deferred tax assets............... 6,776 6,548 Deferred tax liabilities: Depreciation............................ 517 282 Retirement plans........................ 451 479 Prepaid deductions...................... 157 131 Other................................... 957 1,204 --------------------------- Total deferred tax liabilities......... 2,082 2,096 --------------------------- Net deferred tax assets............... $4,694 $4,452 =========================== 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 and, 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, May 31, May 31, 1999 1998 1997 ------------------------------- Statutory federal income taxes.......... $7,769 $6,673 $6,152 State income taxes net of federal income tax benefit............ 839 853 804 Other, net.............................. 49 (13) 334 ------------------------------- $8,657 $7,513 $7,290 =============================== The effective income tax rate was 39.0%, 39.4%, and 41.5% in fiscal years 1999, 1998, and 1997, respectively. The higher effective income tax rate in fiscal year 1997 was due to higher nondeductible expenses. 5. Employee Benefit 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. Employees contributing a pretax contribution of at least 2% may elect to make after-tax contributions not in excess of 10% of annual earnings. The Company's contribution to the Plan is based on the employee's pretax contribution and years of service. Generally, after three years of service, the Company contributes 20% of the employee's pretax contribution, 30% after ten years of service, and 40% after 20 years of service. Normally, the full amount of each participant's interest in the trust fund will be paid upon retirement or total disability. However, the Plan allows participants to make early withdrawals of pretax and after-tax contributions, subject to certain restrictions. 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 $515,000, $414,000 and $257,000 for fiscal years 1999, 1998 and 1997, 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 $2.8 million and $3.2 million at May 31, 1999 and May 31, 1998, respectively) to purchase approximately 255,000 shares of common stock, at an interest rate of 5.47%. The loan is payable in 120 monthly installments of principal and interest. The Company makes monthly contributions sufficient to cover principal and interest on the loan made to the Plan. Shares are released and allocated to participant accounts monthly as loan repayments are made. 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. Dividends paid on unallocated shares held by the Plan are used to make principal and interest payments and are not charged to retained earnings, and shares not yet committed to be released are not considered outstanding in the calculation of earnings per share. The fair value of unearned shares at May 31, 1999 and May 31, 1998 was approximately $3,885,000 and $3,874,000, 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 $112,000, $104,000 and $125,000, for fiscal years 1999, 1998 and 1997, respectively. Assets of the Plan are held by a rabbi trust. Under current accounting rules, assets of a rabbi trust must be accounted for as if they are assets of the Company. Therefore, all earnings and expenses of the rabbi trust are recorded in the Company's financial statements. Assets and liabilities of the Plan approximated $6,428,000 and $6,043,000 at May 31, 1999 and 1998, respectively, and include $1,518,000 and $1,848,000, respectively, of MMSI common stock, which is accounted for as treasury stock at cost. 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 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. There were no contributions made to the Plan in fiscal years 1999, 1998 or 1997. 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. 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 $2,204,000 at May 31, 1999 and $1,897,000 at May 31, 1998. The policies have been placed in a rabbi trust which will hold the policies and death benefit proceeds as they are received. 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. 5. Employee Benefit Plans (continued) (In thousands) Benefit Obligation Exceeds Assets - Assets Exceed Benefit Obligation - Executive Supplemental Pension Plan Retirement Plan and Management Retirement Plan ---------------------------------- ------------------------------------ For the Fiscal Year Ended May 31, May 31, May 31, May 31, May 31, May 31, 1999 1998 1997 1999 1998 1997 ---------------------------------- ------------------------------------
Components of net periodic pension (income)/expense: Service cost....................... $ 0 $ 0 $ 0 $ 140 $ 108 $ 81 Interest cost...................... 274 347 341 322 270 230 Expected return on plan assets..... (342) (1,046) (700) 0 0 0 Amortization and deferral.......... (8) 629 341 184 149 122 ---------------------------------- ------------------------------------- Net periodic pension (income)/expense................. $ (76) $ (70) $ (18) $ 646 $ 527 $ 433 ================================== ===================================== Change in benefit obligation: Benefit obligation at beginning of year................ $3,895 $4,210 $ 4,318 $ 3,246 Service cost................... 0 0 140 108 Interest cost.................. 274 347 322 270 Actuarial (gains) losses....... 588 (23) 524 730 Benefit payments............... (594) (639) (43) (36) ------------------- ------------------------ Benefit obligation at end of year.. $4,163 $3,895 $ 5,261 $ 4,318 =================== ======================== Change in fair value of plan assets: Fair value at beginning of year.... $4,425 $4,859 $ 0 $ 0 Transfer of retiree liability.... 0 (840) 0 0 Benefit payments................. (593) (640) 0 0 Actual return on plan assets..... 266 486 0 0 Gains on investments............. 76 560 0 0 ------------------- ------------------------ Fair value at end of year.......... $4,174 $4,425 $ 0 $ 0 =================== ======================== Funded (unfunded) status........... $ 11 $ 530 $(5,261) $(4,318) Unrecognized prior service cost.... 0 0 207 276 Unrecognized net losses............ 1,071 407 1,383 913 Unrecognized net transition obligation....................... 211 280 456 516 Additional minimum liability....... 0 0 (291) (658) ------------------- ------------------------ Prepaid (accrued) benefit cost..... $1,293 $1,217 $(3,506) $(3,271) =================== ========================
The weighted average discount rate for all three plans was 7.5%, 7.5% and 8.25% for fiscal years 1999, 1998 and 1997, 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 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 $5,261,000 and $3,463,000, respectively, as of May 31, 1999 and $4,318,000 and $2,889,000, respectively, as of May 31, 1998. 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, 1999 and May 31, 1998. 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 health care 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, 1999 May 31, 1998 May 31, 1997 ----------------------------------------- Components of net periodic postretirement expense: Service cost.......................... $ 8 $ 7 $ 7 Interest cost......................... 136 147 140 Amortization and deferral............. 17 4 23 --------------------------------------- Net periodic postretirement expense... $ 161 $ 158 $ 170 ======================================= Change in benefit obligation: Benefit Obligation at beginning of year................... $ 1,919 $ 1,934 Service cost...................... 8 7 Interest cost..................... 136 147 Actuarial (gains) losses.......... - 41 Benefit payments.................. (210) (210) -------------------------- Benefit obligation at end of year..... $ 1,853 $ 1,919 ========================== Change in fair value of plan assets: Fair Value at beginning of year...... $ 0 $ 0 Employer contributions............. 210 210 Benefit payments................... (210) (210) -------------------------- Fair value at end of year............. $ 0 $ 0 ========================== Funded (unfunded) status.............. $ (1,853) $ (1,919) Unrecognized prior service cost....... (117) (138) Unrecognized net losses............... 466 504 -------------------------- Accrued postretirement benefit cost... $ (1,504) $ (1,553) ========================== The weighted average discount rate used for measuring the accumulated postretirement benefit obligation was 7.5%, 7.5% and 8.25% for fiscal years 1999, 1998 and 1997, respectively. SFAS No. 132 requires the disclosure of the impact of a one percent increase and a one percent decrease in the assumed health care 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 health care inflation and therefore, there is no impact from a one percent increase or decrease in the trend rates. 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, 1999. 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. 8. Stock Incentive Plans Under the Company's stock incentive plans, incentive and non-qualified stock options may be granted to Management, 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. These discretionary awards may be made on an individual basis or pursuant to a program approved by the Committee for the benefit of a group of eligible persons. 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, 1999 and 1998, the Company had reserved a total of 1,602,441 and 1,704,376 shares, respectively, of common stock under the Company's 1996 Stock Incentive Plan. In March 1997, the Board of Directors approved a resolution to offer the Company's non-executive employees the opportunity to reprice certain options which were originally granted under the Company's 1996 Non-Executive Stock Incentive Plan. The repricing occurred on March 25, 1997, and resulted in the cancellation of approximately 290,000 options and the granting of approximately 174,000 new options with an exercise price equal to $13.125, the closing price on March 24, 1997. The canceled options were replaced with fewer new options in accordance with a formula to result in economic equivalence between the old and new options. The new options were granted with two-year vesting periods and ten-year terms. At May 31, 1999 and 1998, the Company had reserved a total of 1,837,204 and 1,464,820 shares, respectively, of common stock for this Plan. The Company's Stock Incentive and Deferred Compensation Plan for Directors provides nonmanagement 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 nonmanagement directors. To facilitate attaining the target ownership level, the Plan provides that the directors must use at least 60% of their retainer to purchase shares of the Company until they reach the target ownership level. Each director purchasing stock receives additional shares equal to 15% of the shares purchased and three times the total shares in options, which after six months vest and become exercisable for five years from the grant date. In addition, under the Plan, an option to purchase 5,000 shares is granted to each director upon his initial election to the Board of Directors and options to purchase 2,000 shares each are granted to directors upon re-election to the Board of Directors. All options awarded under the Plan have been at the prevailing market price at the time of grant. Pursuant to this Plan, a one-time restricted stock award totaling 5,000 shares was made in fiscal year 1997 to a nonmanagement director. A Committee, appointed by the Board, administers the Plan on behalf of the Company. At May 31, 1999 and 1998, the Company had reserved 77,619 and 81,917 shares, respectively, of common stock for this Plan. Under the terms of the Distribution, holders of MRI stock options received adjusted, substitute options in MMSI, Morrison Fresh Cooking, Inc. ("MFC") and RTI which, in the aggregate, preserved the economic value as well as the material terms, such as option period, vesting provisions and payment terms, the optionee had in the original MRI options prior to the Distribution. For SFAS No. 123 disclosure purposes, these options, if granted in fiscal year 1996, were valued as of the original grant date. 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 equals the market price of the stock on the date of grant, 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 1999, 1998 and 1997, respectively: risk-free interest rates of 5.5%, 5.7% and 6.6%; volatility factors of .17, .24 and .19; dividend yields of 0.7%, 0.9% and 4.3%; and weighted average expected lives of 7.0, 7.5 and 7.6 years. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The Company's pro forma information follows: For the Fiscal Year Ended ------------------------------------ May 31, May 31, May 31, (In thousands, except per share data) 1999 1998 1997 - -------------------------------------------------------------------------------- Pro forma net income - Basic and Diluted... $12,224 $10,771 $9,618 Pro forma earnings per share - Basic....... $ 1.03 $ 0.90 $ 0.82 Pro forma earnings per share - Diluted..... $ 1.02 $ 0.89 $ 0.82 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. A summary of the Company's stock option activity and related information for the years ended May, 31, 1999, May 31, 1998 and May 31, 1997 follows: May 31, 1999 May 31, 1998 May 31, 1997 ---------------------- --------------------- ---------------------- Weighted Weighted Weighted Average Average Average Options Exercise Options Exercise Options Exercise (000) Price (000) Price (000) Price ----------------------- --------------------- ----------------------
Outstanding - beginning of year.. 2,246 $16.45 2,307 $15.82 2,368 $15.97 Granted.......................... 571 17.52 357 17.76 493 13.21 Exercised........................ (634) 14.68 (274) 12.05 (200) 9.69 Forfeited........................ (261) 21.06 (144) 15.55 (354) 16.78 - ------------------------------------------------------------------------------------------------------ Outstanding - end of year........ 1,922 $16.72 2,246 $16.45 2,307 $15.82 ====================================================================================================== Exercisable at end of year....... 1,039 $16.52 1,110 $17.09 1,068 $15.95 ====================================================================================================== Weighted average fair value of options granted during the year.. $ 5.34 $ 6.66 $ 1.89 ======================================================================================================
The following table summarizes information about stock options outstanding at the end of: May 31, 1999 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 - ------------------------------------------------------------------------------- $ 8.98 - $14.38... 513 $13.56 5.59 341 $13.30 $16.50 - $16.50... 523 $16.50 2.14 498 $16.50 $16.56 - $17.13... 504 $17.10 8.80 14 $17.05 $17.21 - $31.59... 382 $20.76 5.17 186 $22.40 - ------------------------------------------------------------------------------- 1,922 $16.72 5.41 1,039 $16.52 =============================================================================== May 31, 1998 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 - ------------------------------------------------------------------------------- $ 8.98 - $14.38... 567 $12.77 5.70 187 $11.93 $14.50 - $16.38... 469 $14.78 1.83 432 $14.68 $16.50 - $16.50... 578 $16.50 3.11 110 $16.50 $16.56 - $31.59... 632 $20.94 4.48 381 $22.51 - ------------------------------------------------------------------------------- 2,246 $16.45 3.88 1,110 $17.09 =============================================================================== 9. Contingencies At May 31, 1999, the Company was contingently liable for approximately $7.4 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 MFC and RTI 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 1999 or 1998. 11. Supplemental Quarterly Financial Data (Unaudited) Quarterly financial results for the years ended May 31, 1999 and May 31, 1998 are summarized below. All quarters are composed of three months. (In thousands, except per share First Second Third Fourth data) Quarter Quarter Quarter Quarter Total =================================================== 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............................$ 0.26 $ 0.28 $ 0.28 $ 0.32 $ 1.14 Diluted..........................$ 0.26 $ 0.28 $ 0.27 $ 0.31 $ 1.12 For thefiscal year ended May 31, 1998 Revenues...........................$57,754 $60,646 $63,337 $68,634 $250,371 =================================================== Gross profit*......................$10,027 $10,688 $10,541 $11,850 $ 43,106 =================================================== Income before income taxes.........$ 4,674 $ 5,035 $ 4,292 $ 5,064 $ 19,065 Provision for federal and state income taxes..................... 1,846 1,989 1,695 1,983 7,513 --------------------------------------------------- Net income.........................$ 2,828 $ 3,046 $ 2,597 $ 3,081 $ 11,552 =================================================== Earnings per share: Basic............................$ 0.24 $ 0.25 $ 0.22 $ 0.26 $ 0.97 Diluted..........................$ 0.24 $ 0.25 $ 0.21 $ 0.25 $ 0.95
*The Company defines gross profit as revenue less operating expenses. 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, 1999 and May 31, 1998, 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, 1999. 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 generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by Management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Morrison Management Specialists, Inc. and Subsidiaries at May 31, 1999 and May 31, 1998, and the consolidated results of their operations and their cash flows for each of the three fiscal years in the period ended May 31, 1999, in conformity with generally accepted accounting principles. /s/ERNST & YOUNG LLP Atlanta, Georgia June 23, 1999 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 prices on the NYSE or the high and low bid prices for each quarter during fiscal years 1999 and 1998. First Second Third Fourth Quarter Quarter Quarter Quarter ------------------------------------------- 1999 market price per share: High.............................$19.875 $18.500 $20.125 $19.938 Low..............................$16.875 $16.000 $18.125 $17.500 1998 market price per share: High.............................$17.250 $19.750 $20.188 $22.875 Low..............................$15.375 $15.750 $17.063 $16.250 Cash dividends on the common stock of Morrison Management Specialists, Inc. were paid during each quarter of fiscal years 1999 and 1998 as follows: First Second Third Fourth Quarter Quarter Quarter Quarter Total ---------------------------------------------------
1999 cash dividends per share......$0.040 $0.040 $0.040 $0.040 $0.160 1998 cash dividends per share......$0.205 $0.205 $0.205 $0.205 $0.820
On June 30, 1999, the Company's Board of Directors declared a quarterly dividend of $0.04 per share, payable July 30, 1999, to 3,493 stockholders of record on July 16, 1999. SHAREHOLDER INFORMATION Morrison Management Specialists, Inc. and Subsidiaries Transfer Agent, Registrar, Executive and Operating Offices Dividend Disbursing Agent 1955 Lake Park Drive, SE and Dividend Reinvestment Suite 400 Plan Administrator Smyrna, GA 30080 SunTrust Bank, Atlanta (770) 437-3300 Mail Code 258 PO Box 4625 Form 10-K Information Atlanta, GA 30302 A copy of the Company's annual report (800) 568-3476 on Form 10-K, excluding exhibits, filed with the Securities and Dividend Reinvestment Plan Exchange Commission, will be For information contact the furnished to any shareholder without Investor Relations Department or charge upon written request to the: the Dividend Reinvestment Plan Investor Relations Department Administrator. 1955 Lake Park Drive, SE, Suite 400 Smyrna, GA 30080 Independent Auditors Ernst & Young LLP 600 Peachtree Street Annual Meeting Atlanta, GA 30308 The Annual Meeting ofStockholders will be held Tuesday, September 28, Legal Counsel 1999, starting at 1:00 p.m. EST at Powell, Goldstein, Frazer & Murphy LLP the Georgia International Convention 191 Peachtree Street, NE Center, 1902 Sullivan Road, College Atlanta, GA 30303 Park, GA 30337 Common Stock Morrison's Spice of Life, Advanced Common Stock of Morrison Management Culinary Centers, ACC and Resident's Specialists, Inc. is traded on the New Choice are trademarks or registered York Stock Exchange. (NYSE symbol: MHI) trademarks of Morrison Management Specialists, Inc. All other trademarks identified in this Annual Report are the property of third parties. The Board of Directors Officers of the Company Glenn A. Davenport Glenn A. Davenport Chairman of the Board and Chairman of the Board and Chief Executive Officer, Chief Executive Officer Morrison Management Specialists Eugene D. Dolloff Claire L. Arnold (1,2,3) President, Morrison Chairman and Chief Executive Senior Dining Officer, Leapfrog Services Inc.; Former Chief Executive K. Wyatt Engwall Officer, NCC L.P. Senior Vice President, Finance and Assistant E. Eugene Bishop (1,2,3) Secretary Former Chairman of the Board and Chief Executive John E. Fountain Officer, Morrison Vice President, General Restaurants Inc Counsel and Secretary Fred L. Brown (1,2,3) Gary L. Gaddy Vice Chairman, BJC Health Senior Vice President, Health System; Chairman, Sales and Marketing American Hospital Association; Chairman, Advisory Board of Frances G. Michels AmericasDoctor.com Senior Vice President, Support Services Michael F. Corbett (1,2,3) President, Michael F. Richard C. Roberson Corbett & Associates, LTD; Division Vice President, Chairman and Executive Morrison Healthcare Food Services Director of The Outsourcing Research Council; Chairman of The Jerry D. Underhill Corbett Group 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; Former President And Chief Executive Officer, Integon Corporation Arthur R. Outlaw, Jr. (1,2,3) Chairman of the Board 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 EX-21 3 LIST OF SUBSIDIARIES MORRISON MANAGEMENT SPECIALISTS, INC. EXHIBIT 21 List of Subsidiaries -------------------------------------------- State of Incorporation - Arizona Drake Management Services, Inc. State of Incorporation - Georgia Culinary Solutions, Inc. State of Incorporation - Illinois Morrison Holding Company State of Incorporation - Tennessee Culinary Concepts, Inc. State of Incorporation - Pennsylvania Culinary Services Network 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 Health Care of Texas, Inc. EX-23 4 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 23, 1999, included in the 1999 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 23, 1999, 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, 1999. -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 20, 1999 Atlanta, Georgia EX-27 5 FDS FOR THE YEAR ENDED MAY 31, 1999
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 1999 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-31-1999 JUN-01-1998 MAY-31-1999 2,780 0 28,516 712 2,940 43,814 30,975 12,376 102,927 28,144 49,305 0 0 120 14,443 102,927 324,968 324,968 270,637 270,637 0 0 2,754 22,197 8,657 13,540 0 0 0 13,540 1.14 1.12
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