SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [ FEE REQUIRED]
For the fiscal year end December 31, 1996.
[ ] TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [ FEE REQUIRED]
For the transition report period from ______________ to_______________.
Commission File number 1-14194
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
MORRISON HEALTH CARE, INC. SALARY DEFERRAL PLAN
B. Name of issuer of the securities held pursuant to the Plan and
address of its principal executive office:
Morrison Health Care, Inc.
1955 Lake Park Drive
Suite 400
Smyrna, GA 30080
Exhibit index appears on page 2.
EXHIBIT INDEX
Exhibit
Number Description
13 Annual report to Security-Holders
23 Consent of Independent Auditors
SIGNATURES
Morrison Health Care, Inc. Salary Deferral Plan.
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Compensation Committee of the Morrison Health
Care, Inc. Salary Deferral Plan have duly caused this annual
report to be signed on its behalf by the undersigned
hereunto duly authorized.
Morrison Health Care, Inc.
Salary Deferral Plan
(Name of Plan)
Date: June 30, 1997 /s/ Claire L. Arnold
Claire L. Arnold
Director; Chairman,
Compensation Committee
Morrison Health Care, Inc.
Salary Deferral Plan
Audited Financial Statements and Supplemental Schedules
For the period from March 7, 1996 (date of inception) to
December 31, 1996
Contents
Report of Independent Auditors 1
Audited Financial Statements
Statement of Net Assets Available for Benefits 2
Statement of Changes in Net Assets Available for Benefits 3
Notes to Financial Statements 4
Supplemental Schedules
Line 27a Assets Held for Investment Purposes 13
Line 27d Reportable Transactions 14
Report of Independent Auditors
Compensation Committee
Morrison Health Care, Inc. Salary
Deferral Plan
We have audited the accompanying statement of net assets
available for benefits of the Morrison Health Care, Inc.
Salary Deferral Plan (the "Plan") as of December 31, 1996,
and the related statement of changes in net assets available
for benefits for the period from March 7, 1996 (date of
inception) to December 31, 1996. These financial statements
are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the net assets
available for benefits of the Plan at December 31, 1996, and
the changes in its net assets available for benefits for the
period from March 7, 1997 (date of inception) to
December 31, 1996, in conformity with generally accepted
accounting principles.
Our audit was made for the purpose of forming an opinion on
the basic financial statements taken as a whole. The
accompanying supplemental schedules of assets held for
investment purposes as of December 31, 1996, and reportable
transactions for the period from March 7, 1996 (date of
inception) to December 31, 1996, are presented for purposes
of complying with the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974, and are not a
required part of the basic financial statements. The
supplemental schedules have been subjected to the auditing
procedures applied in our audit of the basic financial
statements and, in our opinion, are fairly stated in all
material respects in relation to the basic financial
statements taken as a whole.
/s/ Ernst & Young LLP
Ernst & Young LLP
Atlanta, Georgia
June 23, 1997
Morrison Health Care, Inc.
Salary Deferral Plan
Statement of Net Assets Available for Benefits
December 31, 1996
Total
Assets
Investments, at fair value:
Morrison Health Care, Inc. common stock $1,686,248
Morrison Fresh Cooking, Inc. common stock 134,844
Ruby Tuesday, Inc. common stock 1,364,578
Delaware Group Value Fund 1,527,817
Templeton Growth Fund 1,459,370
Guaranteed investment contracts with insurance
companies, at contract value 3,272,517
Phoenix Fund 1,433,056
Total investments 10,878,430
Receivable from related plan 1,113,000
Contributions receivable:
Participants 100,568
Employer 20,660
121,228
Dividends and interest receivable 1,708
Total receivables 1,235,936
Cash 246,520
Net assets available for benefits $12,360,886
See accompanying notes.
Morrison Health Care, Inc.
Salary Deferral Plan
Statement of Changes in Net Assets Available for Benefits
Period from March 7, 1996 (date of inception) to December
31, 1996
Total
Additions:
Transfer from Morrison Restaurants Inc.
Salary Deferral Plan $11,658,020
Interest and dividend income 739,255
Contributions:
Employee 1,138,024
Employer 194,066
1,332,090
Total additions 13,729,365
Deductions:
Distributions to participants 1,540,617
Administrative expenses 106,853
Total deductions 1,647,470
Net realized and unrealized appreciation in fair
value of investments 278,991
Net increases 12,360,886
Net assets available for benefits at beginning
of period -
Net assets available for benefits at end of
period $12,360,886
See accompanying notes.
Morrison Health Care, Inc.
Salary Deferral Plan
Notes to Financial Statements
December 31, 1996
1. Significant Accounting Policies
Basis of Presentation
The financial statements of the Morrison Health Care, Inc.
Salary Deferral Plan (the "Plan") are presented on the
accrual basis of accounting.
Valuation of Investments
Investments are stated at fair value. Fair value for
securities that are traded on a national securities exchange
are valued at the last reported sales price on the last
business day of the plan year. Fair value for investments
in commingled trust funds are valued by the trustee based
upon the quoted market values of the underlying investments
on the last business day of the plan year. Purchases and
sales of investments are recorded on a trade-date basis.
Guaranteed investment contracts are stated at the contract
value as determined by the insurance companies. Contract
value represents contributions made under the contracts,
plus interest at the contract rates, less funds used to pay
benefits and the insurance companies' administrative
expenses.
Administrative Costs
The Plan's sponsor, Morrison Health Care, Inc. (the
"Company"), pays any administrative costs of the Plan not
paid from Plan assets.
Use of Estimates
The preparation of the financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
amounts reported in the financial statements and
accompanying notes. Actual results could differ from those
estimates.
Morrison Health Care, Inc.
Salary Deferral Plan
Notes to Financial Statements (continued)
2. Description of the Plan
The following description of the Plan is provided for
general information purposes only. More complete information
regarding items such as vesting, benefit provisions and plan
termination may be found in the Summary Plan Description,
which has been distributed to all participants, and also the
Plan Document, which is available to all participants upon
request.
The Plan was established March 7, 1996 as a result of the
Company's spin-off from Morrison Restaurants Inc. to provide
additional incentive and retirement security for eligible
employees of the Company. In connection with the
establishment of the Plan, assets totalling approximately
$10,545,000 were transferred from the Morrison Restaurants
Inc. Salary Deferral Plan. In addition, in connection with
establishing the trust of the Plan, certain of the Plan's
assets were transferred to the trust of the Morrison Fresh
Cooking, Inc. Salary Deferral Plan ("MFC Plan"). These
assets plus investment income thereon totaled approximately
$1,113,000 at December 31, 1996. Subsequent to December 31,
1996 the MFC Plan transferred such assets to the Plan.
The Plan is a defined contribution plan covering
substantially all employees of the Company. Any employee of
the Company who attains 21 years of age and has completed
one year of service (as defined in the Plan Document) is
eligible to participate in the Plan. Participation is
voluntary and participants may contribute on a pre-tax basis
between 2% and 10% of their annual compensation (not to
exceed $9,500 for 1996) and on an after-tax basis up to 10%
of their annual compensation.
The Company matches 20% of contributions from participants
with three to nine years of service, 30% of contributions
from participants with ten to nineteen years of service and
40% of contributions from participants with twenty or more
years of service. Matching contributions are made to the
fund and are invested entirely in Company stock. The
Company may, at its discretion, offset forfeitures against
its matching contribution obligations. All contributions
are remitted to the Plan monthly.
The Plan is administered by the Compensation Committee (the
"Committee") appointed by the Board of Directors of the Plan
sponsor. The duties of the Committee include interpretation
of the Plan agreement, determination of benefits due
participants, and authorization of disbursements from the
net assets available for plan benefits.
Morrison Health Care, Inc.
Salary Deferral Plan
Notes to Financial Statements (continued)
2. Description of the Plan (continued)
Individual accounts are maintained for each participant.
Investment income earned by the Plan is allocated to
participants' accounts based upon relative balances of the
individual accounts as of the valuation date for which the
allocation is being made.
Participants or their beneficiaries are immediately vested
in the value of their contributions and employer matching
amounts. Upon his or her retirement, death or disability a
participant's total account balance is payable in a lump sum
cash distribution.
At December 31, 1996, account balances allocated to persons
who have withdrawn from participation in the earnings and
operation of the Plan totaled approximately $3,667,000.
Although it has not expressed an intent to do so, the
Company has the right under the Plan to discontinue
contributions at any time and to terminate the Plan subject
to the provisions of ERISA. In the event of plan
termination (or permanent discontinuance of contributions to
the Plan), all amounts credited to the accounts of the
participants will become fully vested. After payment of all
properly chargeable expenses, the Plan's assets are
distributable to the participants in accordance with the
respective values of their accounts.
3. Investments
The Plan's investments are held by a trust fund administered
by AmSouth Bank of Alabama, except for the guaranteed
investment contracts with insurance companies (see Note 6)
and the investments in mutual funds, which are held by the
funds themselves.
Morrison Health Care, Inc.
Salary Deferral Plan
Notes to Financial Statements (continued)
3. Investments (continued)
The Plan's investments (including investments bought, sold
and held during the period) appreciated (depreciated) in
value by $278,991 during the period from March 7, 1996 (date
of inception) to December 31, 1996, as shown below.
Morrison Health Care, Inc. common stock $ 147,219
Morrison Fresh Cooking, Inc. common stock (200,124)
Ruby Tuesday, Inc. common stock (104,215)
Delaware Group Value Fund 52,680
Templeton Growth Fund 144,323
Guaranteed investment contracts with
insurance companies 239,108
Net realized and unrealized appreciation
in fair value ofinvestments $ 278,991
Participants have the option of allocating their individual
accounts between four separate investment funds maintained
by the trustee of the Plan. A description of these
investment funds is as follows:
Fixed Income Fund
This fund invests in guaranteed investment contracts and the
Phoenix Duff and Phelps Multi Sector Fixed Income Fund (the
"Phoenix Fund"). The primary objective of this fund is to
provide current income. This fund invests in virtually all
areas of the fixed income instrument marketplace, including
corporate and government bonds within and outside the United
States. This fund holds guaranteed investment contracts
previously purchased by the Plan, however, no new monies
will be invested in these contracts.
Morrison Health Care, Inc.
Salary Deferral Plan
Notes to Financial Statements (continued)
3. Investments (continued)
Equity Fund
This fund invests partly in the Templeton Growth Fund and
partly in the Delaware Group Value Fund. The primary
objective of this fund is capital appreciation. The
Templeton Growth fund invests in securities issued by
companies and governments both within and outside the United
States. The Delaware Value fund invests in small to medium-
sized companies that are believed to be undervalued.
Money Market Fund
This fund invests primarily in short-term U.S. government
securities. The primary objective of this fund is to
provide current income with relative stability of principal.
Stock Funds
The Morrison Health Care, Inc. Stock Fund invests in the
common stock of Morrison Health Care, Inc.
When Morrison Health Care, Inc. was spun-off from Morrison
Restaurants Inc. (now named Ruby Tuesday, Inc.), the
resulting distribution created two additional funds under
the Plan: the Ruby Tuesday Stock Fund and the Morrison Fresh
Cooking Stock Fund (collectively, the "Morrison Funds").
The Morrison Funds hold shares which were acquired by
Morrison Restaurant Inc. shareholders (excluding shares in
the Company's common stock) as a result of the spin-off. No
future contributions are allowed to be made to the Morrison
Funds.
The Morrison Fresh Cooking, Inc. Stock Fund is invested in
the common stock of Morrison Fresh Cooking, Inc. The Ruby
Tuesday, Inc. Stock Fund is invested in the common stock of
Ruby Tuesday, Inc.
Morrison Health Care, Inc.
Salary Deferral Plan
Notes to Financial Statements (continued)
3. Investments (continued)
Stock Funds (continued)
The fair value of individual investments which represent 5%
or more of the Plan's net assets at December 31, 1996 are as
follows:
Investments at fair value as determined by
quoted market prices:
Morrison Health Care, Inc. common stock $1,686,248
Ruby Tuesday, Inc. common stock 1,364,578
Templeton Growth Fund 1,459,370
Delaware Group Value Fund 1,527,817
New York Life Insurance Guaranteed
Investment Contract, at contract value 746,782
Phoenix Fund 1,433,056
4. Income Tax Status
The Company has filed a request for a favorable
determination with the Internal Revenue Service in order
that the Plan will qualify under Section 401(a) of the
Internal Revenue Code (IRC) and will, therefore, not be
subject to tax under present income tax law. Once
qualified, the Plan will be required to operate in
conformity with the IRC to maintain its qualification. The
Committee is not aware of any course of action or series of
events that have occurred that might adversely affect the
Plan's pending qualified status.
5. Transactions with Parties-in-Interest
The Plan held 112,605 shares of Morrison Health Care, Inc.
common stock valued at $1,686,248 at December 31, 1996.
During 1996, the Plan received $53,506 in dividends on
Morrison Health Care, Inc. common stock.
Morrison Health Care, Inc.
Salary Deferral Plan
Notes to Financial Statements (continued)
6. Guaranteed Investments Contracts
The Plan has guaranteed investment contracts with several
insurance companies. Deposits made under these contracts
can earn interest at guaranteed rates between 6.1% and
8.1%. The contracts have various terms relating to the
allowance of withdrawals. Each contains provisions for
investment loss (surrender) charges which the Plan would
have to pay in the event of early withdrawal prior to the
maturity date. The contract values of the individual
investments which comprise the total of the guaranteed
investment contracts at December 31, 1996 are as follows:
Ohio National Life $ 365,191
Principal Mutual Life 441,695
Life Insurance Co of Virginia 257,070
New York Life Insurance 746,782
Hartford Life Insurance Co of Virginia 373,805
State Mutual Life 369,029
Protective Life Insurance 368,168
Transamerica 350,777
Total $3,272,517
The average yield on the contracts for the plan period ended
December 31, 1996 was 7.3%. The fair values of the
contracts listed above, determined using the sum of the
present values of each of the contract's projected cash
flows discounted at the December 31, 1996 interest rates
based on the current yields of similar investments with
comparable duration, approximate the contract values.
<TABLE>
Morrison Health Care, Inc.
Salary Deferral Plan
Notes to Financial Statements (continued)
7. Investment Programs
The allocation of Plan assets and liabilities to the separate investment
programs at December 31, 1996 was as follows:
<CAPTION>
Morrison Morrison
Fixed Money Health Fresh Ruby
Income Equity Market Care, Inc. Cooking, Inc. Tuesday, Inc.
Fund Fund Fund Stock Fund Stock Fund Stock Fund Total
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Investments, at fair value:
Morrison Health Care, Inc.
common stock $ - $ - $ - $1,686,248 $ - $ - $ 1,686,248
Morrison Fresh Cooking, Inc.
common stock - - - - 134,844 - 134,844
Ruby Tuesday, Inc.
common stock - - - - - 1,364,578 1,364,578
Delaware Group Value Fund - 1,527,817 - - - - 1,527,817
Templeton Growth Fund - 1,459,370 - - - - 1,459,370
Guaranteed investment contracts
withinsurance companies,
at contract value 3,272,517 - - - - - 3,272,517
Phoenix Fund 1,433,056 - - - - - 1,433,056
Total investments 4,705,573 2,987,187 - 1,686,248 134,844 1,364,578 10,878,430
Receivable from related plan 1,113,000 - - - - - 1,113,000
Contributions receivable:
Participants 30,029 44,084 17,542 8,913 - - 100,568
Employer - - - 20,660 - - 20,660
30,029 44,084 17,542 29,573 - - 121,228
Dividends and interest receivable - - 1,708 - - - 1,708
Total receivables 1,143,029 44,084 19,250 29,573 - - 1,235,936
Cash 9,669 28,386 197,811 7,983 333 2,338 246,520
Net assets available for benefits $5,858,271 $3,059,657 $217,061 $1,723,804 $135,177 $1,366,916 $12,360,886
</TABLE>
<TABLE>
Morrison Health Care, Inc.
Salary Deferral Plan
Notes to Financial Statements (continued)
7. Investment Programs (continued)
Changes in net assets for the period from March 7, 1996 (date of inception) to
December 31, 1996 were allocated to the separate investment programs as follows:
<CAPTION>
Morrison Morrison
Fixed Money Health Fresh Ruby
Income Equity Market Care, Inc. Cooking, Inc. Tuesday, Inc.
Fund Fund Fund Stock Fund Stock Fund Stock Fund Total
<S> <C> <C> <C> <C> <C> <C> <C>
Additions:
Transfer from Morrison
Restaurants Inc. $ 6,820,100 $1,389,603 $ 393,138 $ 757,909 $ 457,025 $1,840,245 $11,658,020
Interest and dividend income 348,280 317,743 11,495 53,506 8,231 - 739,255
Contributions:
Employee 335,627 458,148 29,644 326,701 (1,286) (10,810) 1,138,024
Employer - - - 194,066 - - 194,066
335,627 458,148 29,644 520,767 (1,286) (10,810) 1,332,090
Total additions 7,504,007 2,165,494 434,277 1,332,182 463,970 1,829,435 13,729,365
Deductions:
Distributions to participants (997,216) (152,451) (175,220) (72,491) (18,664) (124,575) (1,540,617)
Administrative expenses (53,401) (15,825) (2,218) (12,623) (6,311) (16,475) (106,853)
Total deductions (1,050,617) (168,276) (177,438) (85,114) (24,975) (141,050) (1,647,470)
Fund transfers, net (834,227) 865,436 (39,778) 329,517 (103,694) (217,254) -
Net realized and unrealized
appreciation (depreciation)
in fair value of investments 239,108 197,003 - 147,219 (200,124) (104,215) 278,991
Net increases 5,858,271 3,059,657 217,061 1,723,804 135,177 1,366,916 12,360,886
Net assets available for
benefits at beginning
of period - - - - - - -
Net assets available for
benefits at end of period $5,858,271 $3,059,657 $217,061 $1,723,804 $ 135,177 $1,366,916 $12,360,886
</TABLE>
<TABLE>
Morrison Health Care, Inc.
Salary Deferral Plan
Line 27a - Assets Held For Investment Purposes
December 31, 1996
Fair or
Contract
Identity of Issue Description of Investments Cost Value
<CAPTION>
<S> <C> <C> <C>
Morrison Health Care, Inc.* 115,831 common shares $ 1,527,540 $ 1,686,248
Morrison Fresh Cooking, Inc. 28,786 common shares 270,878 134,844
Ruby Tuesday, Inc. 75,440 common shares 1,493,740 1,364,578
Delaware Group Value Fund 66,601 units 1,489,763 1,527,817
Templeton Growth Fund 74,686 units 1,326,306 1,459,370
Phoenix Duff and Phelps Multi-
Sector Fixed Income Fund 105,765 units 1,418,561 1,433,056
Ohio National Life Guaranteed investment contract
with insurance companies 365,191 365,191
Principal Mutual Life Guaranteed investment contract
with insurance companies 441,695 441,695
Life Insurance Co. of Virginia Guaranteed investment contract
with insurance companies 257,070 257,070
New York Life Insurance Guaranteed investment contract
with insurance companies 746,782 746,782
Hartford Life Insurance Co. Guaranteed investment contract
of Virginia with insurance companies 373,805 373,805
State Mutual Life Guaranteed investment contract
with insurance companies 369,029 369,029
Protective Life Insurance Guaranteed investment contract
with insurance companies 368,168 368,168
Transamerica Guaranteed investment contract
with insurance companies 350,777 350,777
Totals $10,799,305 $10,878,430
* Indicates party-in-interest to the Plan.
</TABLE>
<TABLE>
Morrison Health Care, Inc.
Salary Deferral Plan
Line 27d - Reportable Transactions
Period from March 7, 1996 (date of inception) to December 31, 1996
Fair Asset
Value on
Cost of Transaction Net Gain
Description of Assets Purchases Sales Asset Date (Loss)
Category (i) D Individual transactions in excess of 5 percent of the current value
of total plan assets.
<CAPTION>
<S> <C> <C> <C> <C> <C>
Phoenix Fund $625,000 $ - $ - $625,000 $ -
Phoenix Fund 935,000 - - 935,000 -
Phoenix Fund - 681,000 681,000 - -
Stable Value Fund 883,114 - - 883,114 -
Stable Value Fund - 919,349 919,349 - -
Guaranteed Investment Contracts - 747,082 687,333 - 59,749
Guaranteed Investment Contracts - 625,000 575,014 - 49,986
</TABLE>
<TABLE>
Morrison Health Care, Inc.
Salary Deferral Plan
Line 27d - Reportable Transactions (continued)
Period from March 7, 1996 (date of inception) to December 31, 1996
Fair Asset
Value on
Cost of Transcation Net Gain
Description of Assets Purchases Sales Asset Date (Loss)
Category (iii) D A series of securities transactions with respect to
the same issue which amount in the aggregate to more than 5 percent of
the current value of total plan assets.
<CAPTION>
<S> <C> <C> <C> <C> <C>
Delaware Group Value Fund $ 938,246 $ - $ - $ 938,246 $ -
Delaware Group Value Fund - 170,354 155,726 - 14,628
Ruby Tuesday, Inc. common stock 170,840 - - 170,840 -
Ruby Tuesday, Inc. common stock - 542,291 517,345 - 24,946
Phoenix Fund 2,353,286 - - 2,353,286 -
Phoenix Fund - 937,000 934,724 - 2,276
Stable Value Fund 919,349 - - 919,349 -
Stable Value Fund - 919,349 919,349 - -
Templeton Growth Fund 798,234 - - 798,234 -
Templeton Growth Fund - 165,432 154,173 - 11,259
Morrison Health Care, Inc.
common stock* 1,010,308 - - 1,010,308 -
Morrison Health Care, Inc.
common stock* - 229,188 240,677 - (11,489)
Guaranteed Investment Contracts - 3,000,351 2,775,737 - 224,614
* Indicates party-in-interest to the Plan.
</TABLE>
Consent of Independent Auditors
We consent to the incorporation by reference in the
Registration Statement (Form S-8 No. 33-2098) pertaining to
the Morrison Health Care, Inc. Salary Deferral Plan of our
report dated June 23, 1997, with respect to the financial
statements and schedules of the Morrison Health Care, Inc.
Salary Deferral Plan included in this Annual Report (Form 11
- -K) for the period from March 7, 1996 (date of inception) to
December 31, 1996.
/s/ Ernst & Young LLP
Ernst & Young LLP
Atlanta, Georgia
June 23, 1997
