<PAGE>
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 30, 1997
-------------------
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 RESTAURANTS 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
-------------
MORRISON FRESH COOKING, INC.
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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 [ ]
9,226,310
- -------------------------------------------------------------------
(Number of shares of $0.01 par value common stock outstanding as of
September 24, 1997)
1
<PAGE>
INDEX
-----
Page
Number
------
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS AS OF AUGUST 30,
1997 AND MAY 31, 1997............................................ 3
STATEMENTS OF OPERATIONS FOR THE
THIRTEEN WEEKS ENDED AUGUST 30,
1997 AND AUGUST 31, 1996......................................... 4
STATEMENTS OF CASH FLOWS FOR THE
THIRTEEN WEEKS ENDED AUGUST 30,
1997 AND AUGUST 31, 1996......................................... 5
NOTES TO FINANCIAL
STATEMENTS....................................................... 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.................................................... 7-10
PART II - OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS................................................ 11
ITEM 2. CHANGES IN SECURITIES............................................ NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.................................. NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS................................................. NONE
ITEM 5. OTHER INFORMATION................................................ 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................. 11
SIGNATURES................................................................ 12
- ----------
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1
MORRISON RESTAURANTS INC. (f.k.a. MORRISON FRESH COOKING, INC.)
BALANCE SHEETS
(IN THOUSANDS EXCEPT PER-SHARE DATA)
<TABLE>
<CAPTION>
AUGUST 30, 1997 MAY 31, 1997
(UNAUDITED) (AUDITED)
--------------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and short-term investments................................... $ 664 $ 2,939
Receivables - accounts and notes (net)............................ 2,070 1,547
Inventories....................................................... 2,436 2,412
Prepaid other expenses............................................ 1,372 1,545
Current deferred income tax benefit............................... 2,757 5,027
--------- ---------
Total current assets........................................... 9,299 13,470
--------- ---------
PROPERTY AND EQUIPMENT - at cost..................................... 161,826 161,734
Less accumulated depreciation and amortization (101,035) (100,834)
--------- ---------
60,791 60,900
DEFERRED INCOME TAX BENEFITS......................................... 6,291 2,615
OTHER ASSETS......................................................... 7,068 7,043
--------- ---------
TOTAL ASSETS................................................... $ 83,449 $ 84,028
========= =========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.................................................. $ 6,830 $ 8,212
Short-term borrowings............................................. 8,072 7,564
Accrued liabilities............................................... 16,847 14,677
--------- ---------
Total current liabilities...................................... 31,749 30,453
--------- ---------
CAPITAL LEASE OBLIGATIONS............................................ 532 662
EMPLOYEE BENEFIT OBLIGATIONS......................................... 8,258 8,285
OTHER DEFERRED LIABILITIES........................................... 4,383 4,684
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value (100,000 shares
authorized; 9,225 shares issued - 1998,
9,214 shares issued - 1997)..................................... 91 90
Capital in excess of par value.................................... 41,743 41,428
Unearned ESOP shares.............................................. (595) (715)
Accumulated deficit............................................... (2,433) (593)
--------- ---------
38,806 40,210
Less common stock held in treasury - at cost
(48 shares @ 08/30/97)
(44 shares @ 05/31/97) (279) (266)
--------- ---------
38,527 39,944
--------- ---------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY. $ 83,449 $ 84,028
========= =========
The accompanying notes are an integral part of the financial statements.
</TABLE>
3
<PAGE>
MORRISON RESTAURANTS INC. (F.K.A. MORRISON FRESH COOKING, INC.)
STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER-SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
-----------------------------------
AUG. 30, 1997 AUG. 31, 1996
------------- -------------
<S> <C> <C>
Net Sales............................................................ $ 61,091 $ 63,246
Operating Costs and Expenses:
Cost of merchandise............................................... 17,254 18,284
Payroll and related costs......................................... 23,651 23,062
Other operating costs............................................. 14,880 13,528
Depreciation and amortization..................................... 2,501 2,374
Selling, general and administrative............................... 4,360 4,763
Interest expense (income), net.................................... 70 (27)
--------- ---------
62,716 61,984
--------- ---------
Income (Loss) before Income Taxes................................. (1,625) 1,262
Provision for (benefit from) federal
and state income taxes.......................................... (601) 467
--------- ---------
Net Income (Loss)................................................. $ (1,024) $ 795
========= =========
Earnings (Loss) per Common and Common
Equivalent Share.................................................. $ (0.11) $ 0.09
========= =========
Common and Common Equivalent Shares.................................. 9,082 9,082
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
MORRISON RESTAURANTS INC. (F.K.A. MORRISON FRESH COOKING, INC.)
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
----------------------------------
AUG. 30, 1997 AUG. 31, 1996
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income (Loss).................................................... $(1,024) $ 795
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization..................................... 2,501 2,374
(Gain)loss on disposition and write-down of assets.............. (35) 86
Deferred income taxes............................................. (1,170) 255
Changes in operating assets and liabilities:
Increase in receivables......................................... (523) (125)
Increase in inventories......................................... (24) (107)
(Increase)/decrease in prepaid and other
assets....................................................... 148 (679)
(Decrease)/increase in accounts payable, accrued
and other liabilities........................................ 460 (216)
------- ------
Net cash provided by operating activities............................ 333 2,383
------- -------
INVESTING ACTIVITIES:
Purchases of property and equipment.................................. (2,695) (3,777)
Proceeds from disposal of assets..................................... 339 14
------- -------
Net cash used by investing activities................................ (2,356) (3,763)
------- -------
Financing activities:
Principal payments on capital leases................................. (149) (14)
Short-term borrowings................................................ 539 1,276
Proceeds from option exercises....................................... 72 252
Dividends paid....................................................... (817) (813)
ESOP shares released................................................. 116 0
(Increase)/decrease in treasury stock held........................... (13) 35
Other (net).......................................................... 0 43
------- -------
Net cash provided/(used) by financing activities..................... (252) 779
------- -------
Decrease in cash and short-term investments.......................... (2,275) (601)
Cash and short-term investments:
Beginning of period............................................... 2,939 1,561
------- -------
End of period.................................................... $ 664 $ 960
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
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 the Company's annual report for
the fiscal year ended May 31, 1997. 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 - EARNINGS PER SHARE
________________________________________________________________________________
Earnings per share are based on the weighted average number of shares
outstanding during each quarter, excluding unallocated ESOP shares, 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 if such
assumption is dilutive in effect.
NOTE C - CREDIT FACILITY
________________________________________________________________________________
At August 30, 1997, the Company had $8.0 million in borrowings under its $25
million revolving line of credit, a net increase of $0.5 million from May 31,
1997.
NOTE D - CAPITAL LEASES
________________________________________________________________________________
In June 1997, the Company settled the capital lease on a closed unit for 90% of
the existing principal balance at May 31, 1997. This payment is reflected in the
table of future minimum lease payments contained in Note 3 to the Financial
Statements included in the Company's annual report for the fiscal year ended May
31, 1997.
6
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
________________________________________________________________________________
GENERAL
The Company reported a net loss from operations of $(1.0) million for the
thirteen week period ended August 30, 1997, compared with net income of $0.8
million reported for the corresponding period of the prior fiscal year. The
Company operated four 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
1998 1997 1998 1997 1998 1997
------ ------ ------ ----- ------ -------
Traditional 0 0 4 1 125 132
Small/Contemporary 0 0 0 0 11 9
Buffets 0 0 0 0 3 3
QSRs 0 0 0 0 11 10
------ ------ ------ ------ ------ --------
Total 0 0 4 1 150 154
The Company closed four traditional cafeterias in the first quarter of fiscal
1998. The Company anticipates closing one traditional cafeteria and opening two
small cafeterias during the second quarter of fiscal 1998. The Company operated
150 locations at the end of the quarter.
________________________________________________________________________________
RESULTS OF OPERATIONS
The following table sets forth selected data as a percentage of sales for the
periods indicated.
FOR THE
13 WEEKS ENDED
---------------------
AUGUST 30, AUGUST 31,
1997 1996
---- ----
Net Sales 100.0% 100.0%
Operating costs and expenses:
Cost of merchandise 28.2 28.9
Payroll and related costs 38.7 36.5
Other operating costs 24.5 21.4
Depreciation and amortization 4.1 3.7
Selling, general and administrative 7.1 7.5
Interest expense 0.1 0.0
----- -----
Total operating costs 102.7 98.0
----- -----
7
<PAGE>
Income (loss) from operations
before income taxes (2.7) 2.0
Provision for (benefit from)
income taxes (1.0) 0.7
-------------
Net income (loss) (1.7)% 1.3%
=============
________________________________________________________________________________
COMPANY RESTAURANT SALES:
Company restaurant sales decreased $2.2 million, or 3.4%, to $61.1 million for
the quarter ended August 30, 1997. At the end of the first quarter of fiscal
1998, the Company operated four fewer units as compared with the same period of
the prior fiscal year. Same store sales were down 1.0% from the same quarter of
the prior year due to a decline in customer counts, offset by price increases in
October 1996 and June 1997, respectively.
________________________________________________________________________________
COST OF MERCHANDISE, PAYROLL AND RELATED COSTS AND OTHER OPERATING COSTS:
Cost of merchandise decreased as a percentage of sales for the quarter from the
comparable period in the prior year. Cost of merchandise decreased 70 basis
points due to the retail price increase taken in the first quarter of fiscal
1998 and in the second quarter of fiscal 1997.
Payroll and related costs for the quarter increased as a percentage of sales
from the same period in the prior year. This increase was due to the increase in
the federal minimum wage rate in October 1996, coupled with increased accruals
for workers' compensation insurance necessary to meet actuarially projected
claims. Federal minimum wage rates increased again in September 1997.
Other operating costs increased as a percentage of sales due to the increase in
accruals for projected costs of closed units, as well as an increase in supply
and repair costs since the same quarter of the prior year.
Depreciation expense increased as a percentage of sales compared to the same
period of the prior year as a result of equipment upgrades and the Company's
remodeling program.
Selling, general and administrative costs decreased as a percentage of sales
from the prior year primarily due to a reduction in mass media efforts during
the quarter in favor of lower cost local store marketing. This decrease was
largely offset by increased costs associated with the Company's management
training program and an increase in payroll costs attributable to additional
supervisory operations positions. The Company eliminated 23 administrative staff
positions during the quarter in order to reduce overhead expenses. In addition,
three restaurant supervisory positions were eliminated during
8
<PAGE>
the quarter, including the Senior Vice President of Operations position.
________________________________________________________________________________
INTEREST EXPENSE (INTEREST INCOME), NET:
Interest expense for the first quarter of fiscal 1998 was associated with
borrowings on the Company's line of credit. The Company's short-term borrowings
increased by $6.7 million from the same period of the prior year.
________________________________________________________________________________
INCOME TAXES:
The effective income tax rate on continuing operations remained stable at 37.0%
for the thirteen weeks ended August 30, 1997, as compared to the same period of
the prior year.
________________________________________________________________________________
EARNINGS PER SHARE:
Earnings per share are based on the weighted average number of shares
outstanding during each quarter, excluding unallocated ESOP shares, 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 if such
assumption is dilutive in effect.
________________________________________________________________________________
LIQUIDITY AND CAPITAL RESOURCES
Total assets at August 30, 1997, were $83.4 million, a $0.6 million decrease
from $84.0 million as of the prior fiscal year end. Construction of four of the
six small cafeterias that the Company expected to open during fiscal 1998 has
been put on hold. Projected capital expenditures for the year have been adjusted
accordingly from $14.8 million to $8.8 million.
In accordance with Financial Accounting Standard No. 121, "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of", the
Company records impairment losses on long-lived assets used in operations when
events and circumstances indicate that the assets might be impaired and the
undiscounted cash flows estimated to be generated by those assets are less than
the carrying amount of those assets. In light of the results of operations in
the first quarter of fiscal 1998, the Company is monitoring closely the effects
of improvement plans being implemented. In the event these improvement plans are
not effective, the Company may need to write down certain assets to their
estimated fair value. Based on the results of future operations, the Company may
also implement plans to close certain underperforming restaurants and dispose of
assets. Once adopted, these plans could result in a write-down of certain assets
to estimated fair value.
Total liabilities at August 30, 1997, were $44.9 million, a $0.8 million
increase from $44.1 as of the end of the prior fiscal year. Current liabilities
have increased $1.3 million, due to increased
9
<PAGE>
short-term borrowings on the Company's line of credit and the timing of payroll
withholdings unremitted at quarter end.
At August 30, 1997, the Company had $8.0 million in borrowings under its line of
credit facility included in current liabilities.
At its quarterly meeting held on September 24, 1997, the Board of Directors
suspended the payment of cash dividends in order to reinvest funds into the
Company's restaurants and revitalize its infrastructure. Cash dividends paid
during the first quarter of fiscal year 1998 amounted to $0.8 million, or $0.09
per share.
________________________________________________________________________________
KNOWN EVENTS, UNCERTAINTIES AND TRENDS
NOTE REGARDING FORWARD-LOOKING INFORMATION
The foregoing section contains "forward-looking" statements which represent the
Company's expectations or beliefs concerning results and growth during the
remainder of fiscal year 1998. The Company cautions that a number of important
factors could, individually or in the aggregate, cause actual results to differ
materially from such forward- looking statements including, without limitation,
the following: general economic conditions; consumer spending trends; mall
traffic trends; changes in food costs; increased competition in the restaurant
industry; the ability to obtain suitable financing; and changes in the laws and
regulations affecting labor and employee benefits.
10
<PAGE>
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 5
________________________________________________________________________________
OTHER INFORMATION
The Company changed its name from Morrison Fresh Cooking, Inc. to Morrison
Restaurants Inc. on September 5, 1997, and began trading on the New York Stock
Exchange under the symbol MRN on September 8, 1997.
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 30, 1997.
11
<PAGE>
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 RESTAURANTS INC.
-------------------------
(Registrant)
10/10/97 /s/ Craig D. Nelson
- -------- ------------------------------
DATE CRAIG D. NELSON
Senior Vice President, Finance
(Senior Vice President and
Chief Financial Officer)
12
<PAGE>
EXHIBIT INDEX
________________________________________________________________________________
Exhibit
Number Description
- ------- ---------------------------------------------------
11 Computation of Primary and Fully Diluted Earnings Per Share
27 Financial Data Schedule
13
<PAGE>
MORRISON RESTAURANTS INC.
(FKA MORRISON FRESH COOKING, INC.)
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS EXCEPT PER-SHARE DATA)
FOR THE QUARTER ENDED
----------------------
AUGUST 30, AUGUST 31,
1997 1996
----------------------
PRIMARY EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE
Average common shares outstanding.......... 9,082 9,030
Average additional common shares
issuable on exercise of dilutive
stock options (computed by use of
the "treasury stock method", at the
average market price)..................... 52
Number of shares used in computation of --------------------
primary earnings per share................ 9,082 9,082
====================
Net Income (Loss).......................... $(1,024) $ 795
====================
Primary earnings (loss) per common and
common equivalent share................... $ (.11) $ 0.09
====================
FULLY DILUTED EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE
Average common shares outstanding.......... 9,082 9,030
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.......... 9,082 9,085
====================
Net Income (Loss).......................... $(1,024) $ 795
====================
Fully diluted earnings (loss) per common and
common equivalent share................. $ (.11) $ 0.09
====================
<TABLE> <S> <C>
<PAGE>
<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
30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-06-1998
<PERIOD-END> AUG-30-1997
<CASH> 664
<SECURITIES> 0
<RECEIVABLES> 2,070
<ALLOWANCES> 0
<INVENTORY> 2,436
<CURRENT-ASSETS> 9,299
<PP&E> 161,826
<DEPRECIATION> 101,035
<TOTAL-ASSETS> 83,449
<CURRENT-LIABILITIES> 31,749
<BONDS> 532
0
0
<COMMON> 91
<OTHER-SE> 38,436
<TOTAL-LIABILITY-AND-EQUITY> 83,449
<SALES> 61,091
<TOTAL-REVENUES> 61,091
<CGS> 17,254
<TOTAL-COSTS> 58,286
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 70
<INCOME-PRETAX> (1,625)
<INCOME-TAX> (601)
<INCOME-CONTINUING> (1,024)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,024)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)
</TABLE>
