1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended AUGUST 31, 1996
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-14202
MORRISON FRESH COOKING, INC.
(Exact name of registrant as specified in its charter)
GEORGIA 63-1155967
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
The Hartsfield Colonnade
4893 Riverdale Road, Suite 260
Atlanta, GA 30337
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770)991-0351
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 .
9,028,540
(Number of shares of $0.01 par value common stock outstanding as of
September 25, 1996)
INDEX
Page
Number
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS AS OF AUGUST 31,
1996 AND JUNE 1, 1996............................ 3
STATEMENTS OF INCOME FOR THE
THIRTEEN WEEKS ENDED AUGUST 31,
1996 AND SEPTEMBER 2, 1995....................... 4
STATEMENTS OF CASH FLOWS FOR THE
THIRTEEN WEEKS ENDED AUGUST 31,
1996 AND SEPTEMBER 2, 1995....................... 5
NOTES TO FINANCIAL
STATEMENTS....................................... 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.................................. 7-9
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.............................. 10
ITEM 2. CHANGES IN SECURITIES.......................... NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES................ NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS............................... 10
ITEM 5. OTHER INFORMATION.............................. 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............... 11
SIGNATURES............................................. 12
PART I - FINANCIAL INFORMATION
ITEM 1
MORRISON FRESH COOKING, INC.
BALANCE SHEETS
(IN THOUSANDS EXCEPT PER-SHARE DATA)
<TABLE>
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AUG 31, 1996 JUNE 1, 1996
(UNAUDITED) (AUDITED)
ASSETS
CURRENT ASSETS:
Cash and short-term investments........... $ 960 $1,561
Receivables - accounts and notes (net)..... 2,032 1,907
Inventories................................ 2,524 2,416
Prepaid other expenses..................... 2,476 1,791
Current deferred income tax benefit........ 4,556 5,605
Total current assets................. 12,548 13,280
PROPERTY AND EQUIPMENT - at cost................. 155,985 154,942
Less accumulated depreciation and amortization (96,662) (95,828)
59,323 59,114
DEFERRED INCOME TAX BENEFITS...................... 3,020 2,226
OTHER ASSETS...................................... 7,813 7,820
TOTAL ASSETS...........................$ 82,704 $ 82,440
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable...........................$ 10,693 $ 9,579
Accrued liabilities:
Taxes, other than income taxes............ 3,094 2,983
Payroll and related costs................. 4,359 4,082
Insurance................................. 5,844 5,829
Rent and other............................ 3,220 4,484
Current portion of long-term debt........... 1,353 77
Total current liabilities............... 28,563 27,034
CAPITAL LEASE OBLIGATIONS......................... 761 775
EMPLOYEE BENEFIT OBLIGATIONS...................... 0 8,620
OTHER DEFERRED LIABILITIES........................ 13,267 6,167
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value (100,000 shares
authorized; 9,030 shares issued)............. 90 90
Capital in excess of par value............... 40,531 40,279
Accumulated deficit.......................... (88) (70)
40,533 40,299
Less common stock held in treasury - at cost
(51 shares @ 08/31/96) (420) (455)
40,113 39,844
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY. $ 82,704 $ 82,440
</TABLE>
The accompanying notes are an integral part of the financial statements.
MORRISON FRESH COOKING, INC.
STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER-SHARE DATA)
(UNAUDITED)
<TABLE>
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Thirteen Weeks Ended
Aug. 31, 1996 Sept. 2, 1995
Net sales .............................. $ 63,246 $70,129
Operating costs and expenses:
Cost of merchandise................ 18,284 19,659
Payroll and related costs.......... 23,062 25,603
Other operating costs.............. 13,528 15,141
Depreciation and amortization...... 2,374 2,615
Selling, general and administrative 4,763 4,277
Interest income, net.............. (27) (47)
61,984 67,248
Income before income taxes .......... 1,262 2,881
Provision for federal and state
income taxes....................... 467 1,216
Net income........................... $ 795 $ 1,665
Earnings per Common and Common
Equivalent Share................... $ 0.09 $ 0.19
Common and Common Equivalent Shares..... 9,082 8,888
</TABLE>
The accompanying notes are an integral part of the financial statements.
MORRISON FRESH COOKING, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
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Thirteen Weeks Ended
Aug 31, 1996 Sept 2, 1995
Operating Activities:
Net Income........................................ $ 795 $ 1,665
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................... 2,374 2,615
(Gain)/loss on disposition and write-down of assets 86 (11)
Deferred income taxes........................... 255 34
Changes in operating assets and liabilities:
(Increase) in receivables..................... (125) (181)
(Increase) in inventories..................... (107) (176)
(Increase)/decrease in prepaid and other
assets...................................... (679) 278
Decrease in accounts payable, accrued
and other liabilities....................... (216) (2,920)
Increase in income taxes payable.............. 0 2,354
Net cash provided by operating activities......... 2,383 3,658
Investing activities:
Purchases of property, plant and equipment........ (3,777) (4,851)
Proceeds from disposal of assets.................. 14 14
Other, net........................................ 0 (218)
Net cash used by investing activities............. (3,763) (5,055)
Financing activities:
Principal payments on capital leases.............. (14) (18)
Net transfers (to) from Morrison Restaurants Inc.. 0 1,172
Short-term borrowings............................. 1,276 0
Proceeds from option exercises.................... 252 0
Dividends paid.................................... (813) 0
Other, net........................................ 78 0
Net cash provided by financing activities......... 779 1,154
Decrease in cash and short-term
investments..................................... (601) (243)
Cash and short-term investments:
Beginning of period............................. 1,561 1,632
End of period................................... $ 960 $ 1,389
</TABLE>
The accompanying notes are an integral part of the financial statements.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE A - BASIS OF PRESENTATION
_______________________________________________________________________
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-Q, and do not include all
of the information and footnotes required by generally accepted
accounting principles for complete financial statements. The statements
should be read in conjunction with the notes to the financial
statements included in Morrison Fresh Cooking, Inc.'s annual report for
the fiscal year ended June 1, 1996. The accompanying unaudited
financial statements reflect all adjustments for normal recurring
accruals. These adjustments are necessary, in the opinion of
management, for a fair presentation of the financial position, the
results of operations and the cash flows for the interim periods
presented. The results of operations for the interim periods reported
herein are not necessarily indicative of results to be expected for the
full year.
NOTE B - SPIN-OFF OF MORRISON FRESH COOKING, INC.
_______________________________________________________________________
On March 7, 1996, the shareholders of Morrison Restaurants Inc.
approved the distribution of the common stock of the Company, which
comprised the family dining restaurant business of Morrison Restaurants
Inc., to its shareholders. The effective date of the distribution for
accounting purposes was March 3, 1996. Morrison Restaurants Inc.
shareholders received one share of the Company common stock for every
four shares of Morrison Restaurants Inc. common stock then held. The
financial statements of the Company, for periods prior to the
distribution, are presented as if the Company was a separate stand-
alone entity for the dates reflected in the financial statements.
NOTE C - EARNINGS PER SHARE
_______________________________________________________________________
Earnings per share are based on the weighted average number of shares
outstanding during each quarter and are adjusted for the assumed
conversion of shares issuable upon exercise of options, after the
assumed repurchase of common shares with the related proceeds and after
the adjustment for the stock splits and stock dividends through August
31, 1996. For periods prior to the distribution, shares outstanding
were based on the number of shares of Morrison Restaurants Inc. common
stock outstanding adjusted using the 1-for-4 distribution ratio.
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
_______________________________________________________________________
GENERAL
The Company reported net income from operations of $0.8 million for the
thirteen week period ended August 31, 1996, compared with net income of
$1.7 reported for the corresponding period of the prior fiscal year.
The Company operated 23 fewer units compared to the same thirteen week
period in the prior year.
The following table shows year-to-date restaurant openings and closings
as well as total restaurants open at the end of the first quarter.
To-Date To-Date Total Open at End
Openings Closings of First Quarter
Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal
1997 1996 1997 1996 1997 1996
Traditional 0 0 1 2 132 141
Small/contemporary 0 2 0 0 9 6
Buffets 0 0 0 0 3 4
QSRs 0 3 0 0 10 26
The Company opened one small cafeteria in the first week of the second
quarter of fiscal 1997. In addition, it anticipates opening six new
locations and closing four existing locations during the remainder of
fiscal 1997. The Company operated 154 locations at the end of the
quarter.
_______________________________________________________________________
Company Restaurant Sales:
Company restaurant sales decreased $6.9 million or 9.8% to $63.2
million for the thirteen weeks ended August 31, 1996. This decrease is
due in part to there being 23 fewer units at the end of the current
quarter compared to the same quarter of the prior year. Although same
store sales were down for the quarter as a result of decreased customer
traffic, trends have improved steadily.
_______________________________________________________________________
Cost of Merchandise, Payroll and Related Costs and Other Operating
Costs:
Cost of merchandise decreased $1.4 million or 7.0% to $18.3 million for
the thirteen weeks ended August 31, 1996. These costs have increased as
a percentage of sales from the comparable periods in the prior year due
to sales promotions which encouraged an increase in higher cost items
being selected by consumers. There were also significant inflationary
food cost pressures, estimated to be 90 basis points, which were fueled
by higher grain prices.
Payroll and related costs decreased $2.5 million or 9.9% to $23.1
million for the quarter ended August 31, 1996. Payroll and related
costs decreased slightly as a percentage of sales from the same periods
in the prior year. This decrease was due to a reduction in the use of
overtime and a reduction in bonuses associated with profit performance
for the quarter.
Other operating costs decreased $1.6 million or 10.7% to $13.5 million
for the quarter ended August 31, 1996. These costs have decreased
slightly as a percentage of sales primarily due to a decrease in unit
closure expenses, offset partially by higher insurance costs due to
general liability claims experience.
Selling, general and administrative costs increased $0.5 million or
11.4% to $4.8 million for the quarter ended August 31, 1996. This
increase is due to planned increases in advertising expenditures.
General and administrative expenses decreased slightly from the prior
year, due to favorable trends in anticipated separate company costs.
Depreciation decreased $0.2 million or 9.2% to $2.4 million for the
quarter ended August 31, 1996. Depreciation expense has remained
unchanged as a percentage of sales compared to the same period of the
prior year.
_______________________________________________________________________
Interest Expense (Interest Income), net:
There was no material change in net interest income for the quarter
ended August 31, 1996. In the prior year, interest expense was absorbed
by Morrison Restaurants Inc.
_______________________________________________________________________
Income Taxes
The effective income tax rate on continuing operations for the thirteen
weeks ended August 31, 1996 was 37.0%, as compared to 42.2% for the
same period of the prior year. This decrease is due to lower tax rates
in the southern geographic regions where the Company operates
exclusively. Also, the federal rate was reduced from 35% to 34% based
on the expected annual income of the separate Company. In the prior
year, the Company used the historical rate of Morrison Restaurants Inc.
in computing tax expense.
_______________________________________________________________________
Earnings per Share
Earnings per share are based on the weighted average number of shares
outstanding during each quarter and are adjusted for the assumed
conversion of shares issuable upon exercise of options, after the
assumed repurchase of common shares with the related proceeds and after
the adjustment for the stock splits and stock dividends through August
31, 1996. For periods prior to the distribution, shares outstanding
were based on the number of shares of Morrison Restaurants Inc. common
stock outstanding adjusted using the 1-for-4 distribution ratio.
LIQUIDITY AND CAPITAL RESOURCES
_______________________________________________________________________
Total assets at August 31, 1996 were $82.7 million, a $0.3 million
increase from $82.4 million as of the prior fiscal year end. Net
property and equipment of continuing operations increased $0.2 million
from June 1, 1996.
Total liabilities at August 31, 1996 were $42.6 million, the same as of
the end of the prior fiscal year. Current liabilities have increased
$1.5 million, primarily due to short-term borrowings on the Company's
line of credit.
At August 31, 1996 the Company had $1.3 million in borrowings on a
revolving line of credit of $15.0 million. This line is subject to
periodic review by the bank and may be canceled by the Company at any
time.
Cash dividends paid during the first quarter of fiscal year 1997
amounted to $0.9 million or $0.09 per share.
PART II - OTHER INFORMATION
ITEM 1
______________________________________________________________
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
financial position.
ITEM 4
______________________________________________________________
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Shareholders held on September 25,
1996, the shareholders of the Company elected Class I
Directors to serve a three year term on the Board, and
approved an amendment to the Company's 1996 Stock Incentive
Plan to increase the number of shares available for issuance
and to increase the limit on the number of shares that may be
subject to awards granted to certain employees during any
fiscal year. The results of the voting were as follows:
PROPOSAL 1
Authority
Director Nominees For % Withheld %
E. Eugene Bishop 6,490,318 99.08 59,708 0.92
Christopher P. Elliott 6,441,816 98.35 108,207 1.65
Arthur R. Outlaw 6,490,058 99.08 59,964 0.92
Against/
PROPOSAL For Withhold Abstained Non-Votes
Amend 1996 Stock
Incentive Plan 3,820,236 2,498,402 75,702 2,492,005
ITEM 5
______________________________________________________________
OTHER INFORMATION
At its quarterly meeting held on September 25, 1996, the Board
of Directors declared a cash dividend of $0.09 per share,
payable on October 31, 1996 to shareholders of record as of
October 11, 1996.
ITEM 6
EXHIBITS AND REPORTS ON FORM 8-K
______________________________________________________________
EXHIBITS
The following exhibits are filed as part of this report.
Exhibit No.
11 Computation of Primary and Fully Diluted
Earnings Per Share
27 Financial Data Schedule
REPORTS ON FORM 8-K
The Company did not file any Current Reports on Form 8-K
during the quarter ended August 31, 1996.
SIGNATURES
Pursuant to the requirements 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 FRESH COOKING, INC.
(Registrant)
10/15/96 /s/ Craig D. Nelson
DATE CRAIG D. NELSON
Senior Vice President, Finance
(Senior Vice President and
Principal Accounting Officer)
EXHIBIT INDEX
Exhibit
Number Description
11 Computation of Primary and Fully Diluted
Earnings Per Share
27 Financial Data Schedule
MORRISON FRESH COOKING, INC.
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS EXCEPT PER-SHARE DATA)
for the Quarter Ended
August 31, Sept 2,
1996 1995
PRIMARY EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE
Average common shares outstanding......... 9,030 (1)
Average additional common shares
issuable on exercise of dilutive
stock options (computed by use of
the "treasury stock method", at the 52
average market price)...................
Number of shares used in computation of
primary earnings per share.............. 9,082 8,888
Net Income................................ $ 795 $ 1,665
Primary earnings per common and
common equivalent share................. $0.09 $0.19
FULLY DILUTED EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE
Average common shares outstanding......... 9,030 (1)
Average additional common shares issuable
on exercise of dilutive stock options
(computed by use of the "treasury stock
method", at the higher of period-end 55
or average market price)................
Number of shares used in computation of
fully diluted earnings per share........ 9,085 8,888
Net Income.............................. $ 795 $ 1,665
Fully diluted earnings per common and
common equivalent share................. $0.09 $0.19
(1) Prior to the Distribution earnings per share was calculated based on
the average number of Morrison Restaurant Inc. common shares
outstanding adjusted for the 1-for-4 distribution ratio
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MORRISON
FRESH COOKING, INC. FINANCIAL STATEMENTS AS OF AND FOR THE PERIOD ENDED AUGUST
31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> AUG-31-1996
<CASH> 960
<SECURITIES> 0
<RECEIVABLES> 253
<ALLOWANCES> 0
<INVENTORY> 2,524
<CURRENT-ASSETS> 12,548
<PP&E> 155,985
<DEPRECIATION> 96,662
<TOTAL-ASSETS> 82,704
<CURRENT-LIABILITIES> 28,563
<BONDS> 761
0
0
<COMMON> 90
<OTHER-SE> 40,023
<TOTAL-LIABILITY-AND-EQUITY> 82,704
<SALES> 63,246
<TOTAL-REVENUES> 63,246
<CGS> 18,284
<TOTAL-COSTS> 57,248
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (27)
<INCOME-PRETAX> 1,262
<INCOME-TAX> 467
<INCOME-CONTINUING> 795
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 795
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
</TABLE>
