8
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 NOVEMBER 30, 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 .
9,038,119
(Number of shares of $0.01 par value common stock outstanding as of
December 20, 1996)
INDEX
Page
Number
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS AS OF NOVEMBER 30,
1996 AND JUNE 1, 1996............................ 3
STATEMENTS OF INCOME FOR THE
THIRTEEN WEEKS AND TWENTY-SIX WEEKS ENDED
NOVEMBER 30, 1996 AND DECEMBER 2, 1995........... 4
STATEMENTS OF CASH FLOWS FOR THE
TWENTY-SIX WEEKS ENDED NOVEMBER 30,
1996 AND DECEMBER 2, 1995........................ 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............................... 11
ITEM 5. OTHER INFORMATION.............................. 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............... 12
SIGNATURES............................................. 13
PART I - FINANCIAL INFORMATION
ITEM 1
MORRISON FRESH COOKING, INC.
BALANCE SHEETS
(IN THOUSANDS EXCEPT PER-SHARE DATA)
NOV 30, 1996 JUNE 1, 1996
(UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and short-term investments........... $ 1,697 $ 1,561
Receivables - accounts and notes (net)..... 1,652 1,907
Inventories................................ 2,842 2,416
Prepaid other expenses..................... 2,796 1,791
Current deferred income tax benefit........ 4,225 5,605
Total current assets................. 13,212 13,280
PROPERTY AND EQUIPMENT - at cost................. 159,547 154,942
Less accumulated depreciation and amortization (98,884) (95,828)
60,663 59,114
DEFERRED INCOME TAX BENEFITS...................... 2,992 2,226
OTHER ASSETS...................................... 7,562 7,820
TOTAL ASSETS............................ $ 84,429 $ 82,440
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable............................ $ 8,636 $ 9,579
Accrued liabilities................. ....... 22,014 17,455
Total current liabilities............... 30,650 27,034
CAPITAL LEASE OBLIGATIONS......................... 716 775
EMPLOYEE BENEFIT OBLIGATIONS...................... 8,250 8,620
OTHER DEFERRED LIABILITIES........................ 4,657 6,167
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value (100,000 shares
authorized; 9,038 shares issued)........... 90 90
Capital in excess of par value............... 40,619 40,279
Accumulated deficit.......................... (210) (70)
40,499 40,299
Less common stock held in treasury - at cost
(41 shares @ 11/30/96)
(48 shares @ 06/01/96) (343) (455)
40,156 39,844
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY. $ 84,429 $ 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)
Thirteen Weeks Ended Twenty-Six Weeks Ended
Nov 30, Dec 2, Nov 30, Dec 2,
1996 1995 1996 1995
<TABLE>
<S> <C> <C> <C> <C>
Revenues............................. $ 62,889 $ 67,889 $ 126,135 $ 138,018
Operating costs and expenses:
Cost of merchandise.............. 17,903 19,643 36,187 39,302
Payroll and related costs........ 23,020 26,294 46,082 51,897
Other operating costs............ 14,122 13,449 27,650 28,590
Depreciation and amortization.... 2,466 2,727 4,840 5,342
Selling, general and administrative 4,218 4,451 8,981 8,728
Interest expense (income), net... 57 (62) 30 (109)
61,786 66,502 123,770 133,750
Income before income taxes........... 1,103 1,387 2,365 4,268
Provision for federal
and state income taxes............. 413 545 880 1,761
Net income........................... $ 690 $ 842 $ 1,485 $ 2,507
Earnings per common and common
equivalent share....................$ 0.08 $ 0.10 $ 0.16 $ 0.28
Common and common equivalent shares....9,073 8,821 9,077 8,854
</TABLE>
The accompanying notes are an integral part of the financial
statements.
MORRISON FRESH COOKING, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
Twenty-Six Weeks Ended
Nov 30, 1996 Dec 2, 1995
<TABLE>
<S> <C> <C>
Operating Activities:
Net Income........................................ $ 1,485 $ 2,507
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................... 4,840 5,342
(Gain)/loss on disposition and write-down of assets 255 164
Deferred income taxes........................... 615 194
Changes in operating assets and liabilities:
(Increase)/decrease in receivables............ 255 (74)
(Increase) in inventories..................... (426) (29)
(Increase)/decrease in prepaid and other
assets...................................... (748) 250
Decrease in accounts payable, accrued
and other liabilities....................... (2,617) (2,165)
Decrease in income taxes payable.............. 0 (11)
Net cash provided by operating activities......... 3,659 6,178
Investing activities:
Purchases of property and equipment............... (7,713) (7,705)
Proceeds from disposal of assets.................. 17 65
Other, net........................................ 126 (512)
Net cash used by investing activities............. (7,570) (8,152)
Financing activities:
Principal payments on capital leases.............. (54) (37)
Net transfers from Morrison Restaurants Inc....... 0 2,198
Short-term borrowings............................. 5,386 0
Proceeds from option exercises.................... 341 0
Dividends paid.................................... (1,626) 0
Net cash provided by financing activities......... 4,047 2,161
Increase in cash and short-term
investments..................................... 136 187
Cash and short-term investments:
Beginning of period............................. 1,561 1,632
End of period................................... $ 1,697 $ 1,819
</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. 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 $0.7 million and
$1.5 million for the thirteen and twenty-six week periods ended
November 30, 1996, compared with net income of $0.8 and $2.5 million
reported for the corresponding periods of the prior fiscal year. The
Company operated 21 fewer units compared to the same thirteen week
period in the prior year, primarily due to the 22 units closed in
conjunction with the restructuring in the third quarter of fiscal 1996.
The following table shows year-to-date restaurant openings and closings
as well as total restaurants open at the end of the second quarter.
To-Date To-Date Total Open at End
Openings Closings of Second Quarter
Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal
1997 1996 1997 1996 1997 1996
Traditional 0 0 1 3 132 140
Small/contemporary 1 3 0 0 10 7
Buffets 0 0 0 0 3 4
QSRs 1 3 0 0 11 26
The Company opened one small cafeteria and reopened one QSR in the
second quarter of fiscal 1997. In addition, it anticipates opening one
new location and closing two existing locations during the remainder of
fiscal 1997. The Company operated 156 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 For the
13 weeks ended 26 weeks ended
Nov 30 Dec 2, Nov 30, Dec 2,
1996 1995 1996 1995
<TABLE>
<S> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0%
Operating costs and expenses:
Cost of merchandise 28.5 28.9 28.7 28.5
Payroll and related costs 36.6 38.7 36.6 37.6
Other operating costs 22.5 19.8 21.9 20.7
Depreciation and amortization 3.9 4.0 3.8 3.9
Selling, general and
administrative 6.7 6.6 7.1 6.3
Interest expense (income), net 0.1 0.0 0.0 (0.1)
Total operating costs 98.3 98.0 98.1 96.9
Income from operations before
taxes 1.8 2.0 1.9 3.1
Provision for income taxes 0.7 0.8 0.7 1.3
Net income 1.1% 1.2% 1.2% 1.8%
</TABLE>
_______________________________________________________________________
Company Restaurant Sales:
Company restaurant sales decreased $5.0 million or 7.4% to $62.9
million for the quarter and decreased $11.9 million or 8.6% to $126.1
for the twenty-six weeks ended November 30, 1996. These decreases are
the result of there being 21 fewer units at the end of the current
quarter compared to the same quarter of the prior year. Also, same
store sales were down 2.8% for the quarter due to decreased customer
traffic attributable to industry-wide customer trends, severe weather
in Florida and South Carolina, net of a price increase implemented in
mid-October.
_______________________________________________________________________
Cost of Merchandise, Payroll and Related Costs and Other Operating
Costs:
Cost of merchandise decreased as a percentage of sales for the quarter
but increased slightly for the twenty-six weeks from the comparable
periods in the prior year. For the quarter cost of merchandise
increased 40 basis points due to inflationary pressures, offset by the
retail price increase taken in mid-October.
Payroll and related costs decreased 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, an increased use of part-time labor and a
reduction in bonuses associated with profit performance for the
quarter. Fringe benefit costs decreased due to a workers' compensation
rate decline as a result of recent favorable claims experience. This
decrease was partially offset by the increase in the federal minimum
wage rate which became effective on October 1, 1996.
Other operating costs increased as a percentage of sales primarily due
to an increase in accruals for unit closure expenses in the current
quarter compared to the same quarter of the prior year. There were also
slight increases in other operating expenses associated with becoming a
separate company.
Selling, general and administrative costs increased as a percentage of
sales from the prior year due to the increased number of restaurant
supervisory positions aimed at improving management's control of
operations.
Depreciation expense has decreased slightly as a percentage of sales
compared to the same period of the prior year as a result of the
closure of 21 locations since the same quarter of the prior year.
_______________________________________________________________________
Interest Expense (Interest Income), net:
Interest expense increased as a percentage of sales due to short-term
borrowing expense incurred during the quarter, primarily to fund new
construction and the remodeling of old units. In the prior year,
interest expense was incurred by Morrison Restaurants Inc.
_______________________________________________________________________
Income Taxes
The effective income tax rate on continuing operations for the thirteen
weeks ended November 30, 1996 was 37.4%, as compared to 39.3% 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.
_______________________________________________________________________
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. 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 November 30, 1996 were $84.4 million, a $2.0 million
increase from $82.4 million as of the prior fiscal year end. Net
property and equipment increased $1.5 million from June 1, 1996.
Total liabilities at November 30, 1996 were $44.3 million, a $1.7
million increase from $42.6 as of the end of the prior fiscal year.
Current liabilities have increased $3.6 million, primarily due to short-
term borrowings on the Company's line of credit.
At November 30, 1996 the Company had $5.4 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 second quarter of fiscal year 1997
amounted to $0.8 million or $0.09 per share.
Note Regarding Forward-Looking Information
The foregoing sections contains "forward-looking" statements which
represent the Company's expectations or beliefs concerning results and
growth during the remainder of fiscal year 1997. 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; increased competition in the restaurant industry; and changes
in the laws and regulations affecting labor and employee benefits.
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 first 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
The other members of the Board of Directors are:
Ronnie L. Tatum
Dolph W. von Arx
J. Veronica Biggins
Dr. Donald Ratajczak
Against/
PROPOSAL 2 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 December 20, 1996, the Board
of Directors declared a cash dividend of $0.09 per share,
payable on January 31, 1997 to shareholders of record as of
January 10, 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 November 30, 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)
01/13/97 /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)
<TABLE>
13 weeks ended 26 weeks ended
Nov 30, Dec 2, Nov 30, Dec 2,
1996 1995 1996 1995
PRIMARY EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE
<S> <C> <C> <C> <C>
Average common shares outstanding...... 9,038 (1) 9,038 (1)
Average additional common shares
issuable on exercise of dilutive
stock options (computed by use of
the "treasury stock method", at 35 39
the average market price)............
Number of shares used in computation
of primary earnings per share........ 9,073 8,821 9,077 8,854
Net Income............................. $ 690 $ 842 $1,485 $ 2,507
Primary earnings per common and
common equivalent share.............. $0.08 $0.10 $0.16 $0.28
FULLY DILUTED EARNINGS PER COMMON
AND COMMON EQUIVALENT SHARE
Average common shares outstanding...... 9,038 (1) 9,038 (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 35 42
or average market price).............
Number of shares used in computation of
fully diluted earnings per share..... 9,073 8,821 9,080 8,854
Net Income............................. $ 690 $ 842 $1,485 $ 2,507
Fully diluted earnings per common and
common equivalent share.............. $0.08 $0.10 $0.16 $0.28
</TABLE>
(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 NOVEMBER
30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> NOV-30-1996
<CASH> 1,697
<SECURITIES> 0
<RECEIVABLES> 247
<ALLOWANCES> 0
<INVENTORY> 2,842
<CURRENT-ASSETS> 13,212
<PP&E> 159,547
<DEPRECIATION> 98,884
<TOTAL-ASSETS> 84,429
<CURRENT-LIABILITIES> 30,650
<BONDS> 716
0
0
<COMMON> 90
<OTHER-SE> 40,066
<TOTAL-LIABILITY-AND-EQUITY> 84,429
<SALES> 126,135
<TOTAL-REVENUES> 126,135
<CGS> 36,187
<TOTAL-COSTS> 114,759
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30
<INCOME-PRETAX> 2,365
<INCOME-TAX> 880
<INCOME-CONTINUING> 1,485
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,485
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.16
</TABLE>
