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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS
AND SIMILAR PLANS PURSUANT TO SECTION 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended September 30, 1999
Commission file number: 1-12238
MHM SERVICES, INC. 401(k) SAVINGS PLAN
MHM Services, Inc.
8605 Westwood Center Drive, Suite 400
Vienna, Virginia 22182
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MHM SERVICES, INC. 401(k) SAVINGS PLAN
TABLE OF CONTENTS
<TABLE>
<S> <C>
Independent Auditors' Report 1
Financial Statements:
Statements of Net Assets Available for Plan Benefits for 1999 and 1998 2
Statements of Changes in Net Assets Available for Plan Benefits 3
for 1999, 1998, and 1997
Notes to Financial Statements 4-7
Supplemental Schedules as of and for the Year Ended September 30, 1999:
Line 27a - Schedule of Assets Held for Investment Purposes 8
Line 27d - Schedule of Reportable Transactions 9
Signature 10
Exhibit 23 - Consent of Independent Auditors-KPMG LLP 11
</TABLE>
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INDEPENDENT AUDITORS' REPORT
To the Trustees and Participants of the
MHM Services, Inc. 401(k) Savings Plan:
We have audited the accompanying statements of net assets available for plan
benefits of the MHM Services, Inc. 401(k) Savings Plan (the "Plan") as of
September 30, 1999 and 1998, and the related statements of changes in net assets
available for plan benefits for each of the years in the three-year period ended
September 30, 1999. These financial statements are the responsibility of the
Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits as of
September 30, 1999 and 1998 and the changes in net assets available for plan
benefits for each of the years in the three-year period ended September 30, 1999
in conformity with generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules listed in the
foregoing table of contents are presented for the purpose of additional analysis
and are not a required part of the basic financial statements, but are
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. These supplemental schedules are the responsibility of the
Plan's management. The supplemental schedules have been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, are fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
The schedules of assets held for investment purposes and reportable transactions
that accompany the Plan's financial statements do not disclose certain
historical cost information. Disclosure of this information is required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974.
KPMG LLP
McLean, Virginia
January 14, 2000
1
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MHM SERVICES, INC. 401(k) SAVINGS PLAN
Statements of Net Assets Available for Plan Benefits
September 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
---------------- ----------------
<S> <C> <C>
Assets:
Investments (note 4) $ 1,426,372 1,364,290
Participant loans 14,660 14,145
Receivables:
Employee contributions 17,286 20,331
Employer contributions 7,380 10,232
---------------- ----------------
Total receivables 24,666 30,563
---------------- ----------------
Total assets 1,465,698 1,408,998
Liabilities - accrued expenses (207) (985)
---------------- ----------------
Net assets available for plan benefits $ 1,465,491 1,408,013
================ ================
</TABLE>
See accompanying notes to financial statements.
2
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MHM SERVICES, INC. 401(k) SAVINGS PLAN
Statements of Changes in Net Assets Available for Plan Benefits
Years ended September 30, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
-------------- --------------- --------------
<S> <C> <C> <C>
Additions:
Additions (deductions) to (from) net assets attributed to:
Investment income (loss):
Net appreciation (depreciation) in fair value
of investments $ 194,642 (199,484) 266,821
Interest on loans 1,045 1,276 552
Dividends 34,559 80,741 101,474
-------------- --------------- --------------
Total investment income (loss) 230,246 (117,467) 368,847
Less investment expenses (14,190) (11,547) (10,246)
-------------- --------------- --------------
216,056 (129,014) 358,601
-------------- --------------- --------------
Contributions:
Employee contributions 220,738 275,400 232,847
Employer contributions 29,479 42,856 37,656
-------------- --------------- --------------
250,217 318,256 270,503
-------------- --------------- --------------
Total additions 466,273 189,242 629,104
-------------- --------------- --------------
Deductions:
Deductions from net assets attributed to:
Benefits paid to participants (392,183) (548,329) (526,566)
Administrative expenses (note 3) (16,612) (21,946) --
-------------- --------------- --------------
Total deductions (408,795) (570,275) (526,566)
-------------- --------------- --------------
Net increase (decrease) 57,478 (381,033) 102,538
Net assets available for benefits:
Beginning of year 1,408,013 1,789,046 1,686,508
-------------- --------------- --------------
End of year $ 1,465,491 1,408,013 1,789,046
============== =============== ==============
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 6
MHM SERVICES, INC. 401(k) SAVINGS PLAN
Notes to the Financial Statements
September 30, 1999 and 1998
(1) DESCRIPTION OF THE PLAN
The following description of the MHM Services, Inc. 401(k) Savings Plan
(the Plan), formerly known as Mental Health Management, Inc. Employees'
Savings Plan, provides only general information. Participants should refer
to the Summary Plan Description for a more complete description of the
Plan provisions.
(a) GENERAL
The effective date of the Plan was September 1, 1993. The Plan is a
defined contribution plan. Employees who are age 21 or older are
eligible to join the Plan upon completion of six months of service.
The Plan is subject to the provisions of the Employee Retirement
Income Security Act of 1974 (ERISA).
(b) CONTRIBUTIONS
Participants may contribute to the Plan from 1 percent to 15 percent
(1 percent to 23 percent beginning in July 1998) of their salaries to
be invested, as they choose, in various mutual funds and common stock
of MHM Services, Inc. (the Company). The Plan provides that the
Company will make a matching contribution equal to $.50 for each
$1.00 contributed by a participant, not to exceed 3 percent of the
participant's contribution (to a maximum of 1.5 percent of the
participant's salary). The Company's matching contribution is made in
cash to be distributed among the funds elected by the participant.
(c) PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's
contributions and allocations of the Company's contribution and Plan
earnings, and charged with an allocation of administrative expenses.
Allocations are based on participant earnings or account balances.
The benefit to which a participant is entitled is the benefit that
can be provided from the participant's vested account.
(d) VESTING
A participant's accrued benefit is at all times fully vested and
nonforfeitable upon death, retirement, disability or termination of
employment.
(e) PARTICIPANT LOANS
Participants may borrow from their fund accounts a minimum of $1,000
up to a maximum equal to the lesser of $50,000 or 50 percent of their
account balance. Loan terms range from one to five years or up to ten
years for the building, rehabilitation or purchase of a primary
residence. The loans are secured by the balances in the participants'
accounts and bear interest at a rate commensurate with local
prevailing rates. Principal and interest are paid ratably through
payroll deductions.
4
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MHM SERVICES, INC. 401(k) SAVINGS PLAN
Notes to the Financial Statements
September 30, 1999 and 1998
(f) PAYMENT OF BENEFITS
Upon termination of service, participants may elect to receive a
lump-sum payout of their accounts. If the account balance at
termination exceeds $3,500, a participant may leave the money in the
Plan after leaving the Company. Participants may also qualify for up
to two hardship withdrawals per Plan year with respect to amounts
attributable to basic contributions. In order to obtain a hardship
withdrawal, participants must exhaust the possibility of all other
withdrawals (other than hardship withdrawals) under the Plan. Upon
receiving a hardship distribution, participants are suspended from
making contributions to the Plan for one year.
The Plan permits certain annuity options as follows: 50 percent joint
and survivor annuity if married, a 100 percent life annuity to single
participants, and 100 percent pre-retirement survivor annuity to the
surviving spouse of a married participant who dies before retirement.
Participants may elect a single sum distribution with appropriate
consent.
Distributions from the funds, with the exception of the MHM Services,
Inc. (MHM) stock fund, are made in cash. Distributions from the MHM
stock fund are in the form of the securities held; however,
distributions of the Company's common stock shall be made in cash
whenever the number of shares to be distributed is 100 or less.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF ACCOUNTING
The financial statements of the Plan are prepared under the accrual
method of accounting.
In September 1999, the American Institute of Certified Public
Accountants issued Statement of Position 99-3, Accounting for and
Reporting of Certain Defined Contribution Benefit Plan Investments
and Other Disclosure Matters (SOP 99-3). SOP 99-3 simplifies the
disclosure for certain investments and is effective for plan years
ending after December 15, 1999 with earlier application encouraged.
The Plan adopted SOP 99-3 during the Plan year ending September 30,
1999. Accordingly, information previously required to be disclosed
about participant-directed fund investment programs are not presented
in the Plan's 1998 or 1997 financial statements.
(b) 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 assets and
liabilities and disclosure of contingent 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.
5
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MHM SERVICES, INC. 401(k) SAVINGS PLAN
Notes to the Financial Statements
September 30, 1999 and 1998
(c) INVESTMENT VALUATION AND INCOME RECOGNITION
The Plan's managed investment funds and Company common stock are
stated at fair value which is determined by closing prices as of the
last trading day of the Plan year. Purchases and sales of securities
are recorded on a trade-date basis. Participant loans are valued at
cost which approximates fair market value. Dividends and interest are
recorded when earned.
(d) PAYMENT OF BENEFITS
Benefits are recorded when paid.
(e) RECLASSIFICATIONS
Certain 1998 and 1997 amounts have been reclassed to conform to the
1999 presentation.
(3) ADMINISTRATIVE EXPENSES
Beginning in 1998, administrative expenses are charged directly to the
Plan. Prior to 1998, these expenses were paid by the Company.
Administrative expenses amounted to $16,612 and $21,946 for the years
ended September 30, 1999 and 1998, respectively.
(4) INVESTMENTS
The following presents investments that represent 5 percent or more of the
Plan's net assets:
<TABLE>
<CAPTION>
1999 1998
------------- -----------
<S> <C> <C>
BT International Equity Fund, 4,498 and 0 units, respectively $ 108,889 --
American Century Income and Growth Fund, 14,330 and
15,325 units, respectively 429,748 381,751
Papp America Abroad Fund, 7,382 and 9,444, units, respectively 227,960 237,703
Managers Special Equity Fund, 5,437 and 6,248 units,
respectively 377,444 319,698
Schwab Institutional Advantage Money Fund, 191,723 and
151,879 units, respectively 191,723 151,879
Hotchkis and Wiley International Fund, 0 and 5,113 units,
respectively -- 105,732
Stein Roe Income Trust Income Fund, 0 and 8,063 units,
respectively -- 79,658
MHM Services, Inc. common stock, 70,312 shares -- 76,921
============= ===========
</TABLE>
6
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MHM SERVICES, INC. 401(k) SAVINGS PLAN
Notes to the Financial Statements
September 30, 1999 and 1998
(5) PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the
right under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions of ERISA.
(6) PLAN AMENDMENT
Effective October 1, 1997, the Plan was amended and restated through the
adoption of a new 401(k) prototype plan document. The amendments had no
effect on net assets and the significant plan provisions have basically
remained the same.
(7) TAX STATUS
The Plan was amended and restated on October 10, 1997 through the adoption
of a prototype 401(k) plan provided by Milliman and Robertson, the Plan
Administrator. The original Plan received an opinion letter from the IRS
dated August 2, 1993, which indicates that the Plan and the related trust
are designed in accordance with applicable sections of the Internal
Revenue Code (IRC). The amended and restated Plan is relying on a
determination letter dated April 13, 1993 with respect to the prototype
plan document. The Plan Administrator believes that the Plan is designed
and is currently being operated in compliance with the applicable
requirements of the IRC. Therefore, no provision for income tax has been
included in the Plan's financial statements.
(8) RELATED-PARTY TRANSACTIONS
Certain Plan investments are shares of mutual funds managed by Charles
Schwab. Charles Schwab is the custodian of the Plan and was the trustee of
the Plan until August 1999 and, therefore, these transactions qualify as
party-in-interest transactions. Fees paid by the Plan to Charles Schwab
for the investment management services amounted to $9,760 and $7,548 for
the years ended September 30, 1999 and 1998, respectively.
7
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MHM SERVICES, INC. 401(k) SAVINGS PLAN
Line 27a - Schedule of Assets Held for Investment Purposes
As of September 30, 1999
<TABLE>
<CAPTION>
SHARES OR CURRENT
ISSUER UNITS DESCRIPTION COST VALUE
- ---------------------------- ------------ -------------------------------------------- ----------- ------------
<S> <C> <C> <C> <C>
* Charles Schwab 5,179 PIMCO Total Return Institutional Class $ ** 52,099
* Charles Schwab 4,498 BT International Equity Fund ** 108,889
* Charles Schwab 14,330 American Century Income & Growth Fund ** 429,748
* Charles Schwab 7,382 Papp America Abroad Fund ** 227,960
* Charles Schwab 5,437 Managers Special Equity Fund ** 377,444
* Charles Schwab 878 Gabelli Westwood Balance D Fund Retail Class ** 10,514
* Charles Schwab 191,723 Schwab Institutional Advantage Money Fund ** 191,723
* MHM Services, Inc. 63,990 MHM Services, Inc. common stock ** 27,995
----------- ------------
Total investments $ ** 1,426,372
=========== ============
Plan Participant loans (interest rates ranging
from 9% to 10%, maturing through 2008). 14,660 14,660
=========== ============
</TABLE>
* Party-in-interest
** Information not available
8
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MHM SERVICES, INC. 401(k) SAVINGS PLAN
Line 27d - Schedule of Reportable Transactions
Year ended September 30, 1999
<TABLE>
<CAPTION>
NUMBER OF PURCHASE SELLING LEASE
IDENTITY OF PARTY INVOLVED DESCRIPTION OF ASSET TRANSACTIONS PRICE PRICE RENTAL
- ------------------ -------------------- ------------- ----------- --------- --------
<S> <C> <C> <C> <C> <C>
SINGLE TRANSACTIONS
*Charles Schwab BT International Equity Fund 1 $ 107,575 -- --
*Charles Schwab Hotchkis & Wiley International Fund 1 -- 107,577 --
SERIES OF TRANSACTIONS
*Charles Schwab American Century Income & Growth Fund 28 -- 147,949 --
*Charles Schwab American Century Income & Growth Fund 62 119,656 -- --
*Charles Schwab BT International Equity Fund 49 118,559 -- --
*Charles Schwab Hotchkis & Wiley International Fund 9 -- 122,047 --
*Charles Schwab Managers Special Equity Fund 28 -- 89,702 --
*Charles Schwab Papp America Abroad Fund 27 -- 95,333 --
*Charles Schwab Stein Roe Income Trust Income Fund 15 -- 83,247 --
============= ============ =========== =========
</TABLE>
<TABLE>
<CAPTION>
CURRENT
EXPENSE VALUE OF
INCURRED ASSET ON NET
WITH COST OF TRANSACTION GAIN
IDENTITY OF PARTY INVOLVED DESCRIPTION OF ASSET TRANSACTION ASSET DATE (LOSS)
- ------------------ -------------------- ------------ --------- ------------ --------
<S> <C> <C> <C> <C> <C>
SINGLE TRANSACTIONS
*Charles Schwab BT International Equity Fund -- 107,575 107,575 --
*Charles Schwab Hotchkis & Wiley International Fund -- 108,017 107,577 (440)
SERIES OF TRANSACTIONS
*Charles Schwab American Century Income & Growth Fund -- ** 147,949 **
*Charles Schwab American Century Income & Growth Fund -- 119,656 119,656 --
*Charles Schwab BT International Equity Fund -- 118,559 118,559 --
*Charles Schwab Hotchkis & Wiley International Fund -- 123,118 122,047 (1,071)
*Charles Schwab Managers Special Equity Fund -- ** 89,702 **
*Charles Schwab Papp America Abroad Fund -- ** 95,333 **
*Charles Schwab Stein Roe Income Trust Income Fund -- 85,365 83,247 (2,118)
=========== ========== =========== ===========
</TABLE>
* Party-in-interest
** Information not available
9
<PAGE> 12
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned hereunto
duly authorized.
MHM Services, Inc.
401(k) Savings Plan
Date: March 31, 2000 By: /s/ Cleveland E. Slade
-----------------------
Cleveland E. Slade
Vice President and
Chief Financial Officer
MHM Services, Inc.
10
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CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
MHM Services, Inc.
We consent to the use of our report dated January 14, 2000, on the statements
of net assets available for plan benefits as of September 30, 1999 and 1998,
and the related statements of changes in net assets available for plan benefits
for each of the years in the three-year period ended September 30, 1999 for the
MHM Services, Inc. 401(k) Savings Plan (the "Plan") included in the Annual
Report on Form 11-K relating to the Plan filed by MHM Services, Inc. for the
year ended September 30, 1999 and to the incorporation by reference of such
report in the Registration Statement on Form S-8 pertaining to the Plan (File
No. 333-09147).
/s/ KPMG LLP
McLean, Virginia
March 31, 2000
