<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 NOVEMBER 29, 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
-------------
- --------------------------------------------------------------------------------
(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 .
---- ----
9,229,020
-------------------------------------------------------------------
(Number of shares of $0.01 par value common stock outstanding as of
December 19, 1997)
<PAGE>
INDEX
-----
PART I - FINANCIAL INFORMATION
------------------------------
Page
Number
------
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS AS OF NOVEMBER 29,
1997 AND MAY 31, 1997. ......................... 3
STATEMENTS OF INCOME FOR THE
THIRTEEN WEEKS AND TWENTY-SIX WEEKS ENDED
NOVEMBER 29, 1997 AND NOVEMBER 30, 1996.. ...... 4
STATEMENTS OF CASH FLOWS FOR THE
TWENTY-SIX WEEKS ENDED NOVEMBER 29,
1997 AND NOVEMBER 30, 1996................. .... 5
NOTES TO FINANCIAL STATEMENTS................... 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.................................. 7-10
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK.............................. 10
PART II - OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS.............................. 11
ITEM 2. CHANGES IN SECURITIES.......................... 11
ITEM 3. DEFAULTS UPON SENIOR SECURITIES................ 11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS............................... 11
ITEM 5. OTHER INFORMATION.............................. 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............... 12
SIGNATURES............................................. 13
- ----------
2
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
MORRISON RESTAURANTS INC.
BALANCE SHEETS
(IN THOUSANDS EXCEPT PER-SHARE DATA)
<TABLE>
<CAPTION>
NOV 29, 1997 MAY 31, 1997
(UNAUDITED) (AUDITED)
------------ ------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and short-term investments................ $ 1,373 $ 2,939
Receivables - accounts and notes (net)........... 1,664 1,547
Inventories.................................... 2,649 2,412
Prepaid other expenses........................... 1,358 1,545
Current deferred income tax benefit.............. 2,982 5,027
--------- ---------
Total current assets............................. 10,026 13,470
--------- ---------
PROPERTY AND EQUIPMENT - at cost................. 161,501 161,734
Less accumulated depreciation.................... (101,389) (100,834)
--------- ---------
60,112 60,900
DEFERRED INCOME TAX BENEFITS..................... 7,140 2,615
OTHER ASSETS..................................... 7,340 7,043
--------- ---------
TOTAL ASSETS................................. $ 84,618 $ 84,028
========= =========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable............................... $ 8,123 $ 8,212
Accrued liabilities............................ 14,902 14,677
Short-term borrowings.......................... 11,137 7,461
Current portion of capital lease obligations 76 103
--------- ---------
Total current liabilities.................... 34,238 30,453
--------- ---------
CAPITAL LEASE OBLIGATIONS........................ 519 662
EMPLOYEE BENEFIT OBLIGATIONS..................... 8,430 8,285
OTHER DEFERRED LIABILITIES....................... 4,575 4,684
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value (100,000 shares
authorized; 9,229 shares issued - 1998,
9,214 shares issued - 1997)................... 92 90
Capital in excess of par value................. 41,740 41,428
Unearned ESOP shares........................... (484) (715)
Accumulated deficit............................ (4,209) (593)
--------- ---------
37,139 40,210
Less common stock held in treasury - at cost
(49 shares @ 11/29/97)
(44 shares @ 05/31/97) (283) (266)
--------- ---------
36,856 39,944
--------- ---------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 84,618 $ 84,028
============ =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
MORRISON RESTAURANTS INC.
STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER-SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-Six Weeks Ended
---------------------------- --------------------------
Nov 29, 1997 Nov 30, 1996 Nov 29, 1997 Nov 30, 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues............................... $59,816 $62,889 $120,907 $126,135
Operating Costs and Expenses:
Cost of merchandise.................. 16,945 17,903 34,199 36,187
Payroll and related costs............ 24,057 23,020 47,708 46,082
Other operating costs................ 15,402 14,122 30,282 27,650
Depreciation......................... 2,505 2,466 5,006 4,840
Selling, general and administrative 3,620 4,218 7,980 8,981
Interest expense, net................ 119 57 189 30
------- ------- -------- --------
62,648 61,786 125,364 123,770
------- ------- -------- --------
Income (Loss) before Income Taxes...... (2,832) 1,103 (4,457) 2,365
Provision for (benefit from) federal
and state income taxes............... (1,056) 413 (1,657) 880
------- ------- -------- --------
Net Income (Loss)..................... $(1,776) $ 690 $ (2,800) $ 1,485
======= ======= ======== ========
Earnings (Loss) per Common and Common
Equivalent Share...................... $ (0.19) $ 0.08 $ (0.31) $ 0.16
======= ======= ======== ========
Common and Common Equivalent Shares..... 9,112 9,073 9,097 9,077
======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
MORRISON RESTAURANTS INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Twenty-Six Weeks Ended
--------------------------
Nov 29, 1997 Nov 30, 1996
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income (Loss)................................ $(2,800) $1,485
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation.................................... 5,006 4,840
Loss on disposition of assets................... 62 255
Deferred income taxes........................... (2,480) 615
Changes in operating assets and liabilities:
(Increase)/decrease in receivables............. (140) 255
Increase in inventories........................ (237) (426)
Increase in prepaid and other assets........... (86) (748)
Increase/(decrease) in accounts payable,
accrued and other liabilities............... 172 (2,617)
------- -------
Net cash provided (used) by operating activities.. (503) 3,659
------- -------
INVESTING ACTIVITIES:
Purchases of property and equipment............... (6,021) (7,713)
Proceeds from disposal of assets.................. 1,739 17
Other, net........................................ 0 14
------- -------
Net cash used by investing activities............. (4,282) (7,682)
------- -------
Financing activities:
Principal payments on capital leases.............. (170) (54)
Short-term borrowings............................. 3,676 5,386
Proceeds from option exercises.................... 270 341
Dividends paid.................................... (817) (1,626)
ESOP shares released.............................. 276 0
(Increase)/decrease in treasury stock held........ (16) 112
------- -------
Net cash provided/(used) by financing activities.. 3,219 4,159
------- -------
Increase (decrease) in cash and short-term
investments..................................... (1,566) 136
Cash and short-term investments:
Beginning of period............................. 2,939 1,561
------- -------
End of period................................... $ 1,373 $ 1,697
======= =======
</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 November 29, 1997, the Company had $11.1 million in borrowings under its
$25.0 million revolving line of credit, a net increase of $3.6 million from May
31, 1997. Effective August 31, 1997, a waiver and modification agreement was
entered into by the Company and its lender to modify the terms of certain
restrictions, including, but not limited to, incurring additional indebtedness
and certain funded debt, net worth and fixed charge coverage requirements. The
Company anticipates that a restructured line of credit agreement will be
completed by the quarter ending February 28, 1998.
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 $(1.8) million and $(2.8)
million, respectively, for the 13-week and the 26-week periods ended November
29, 1997, compared with net income of $0.7 and $1.5 million reported for the
corresponding periods of the prior fiscal year. The Company operated eight fewer
units compared to the same 13- 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 second quarter.
To-Date To-Date Total Open at End
Openings CLOSINGS OF SECOND QUARTER
-------------- -------------- ------------------
Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal
1998 1997 1998 1997 1998 1997
------ ------ ------ ------ ------ --------
TRADITIONAL 0 0 8 1 121 132
SMALL/CONTEMPORARY 2 1 0 0 13 10
Buffets 0 0 0 0 3 3
QSRs 0 1 0 0 11 11
------ ------ ------ ------ ------ --------
Total 2 2 8 1 148 156
The Company opened two small cafeterias and closed three traditional cafeterias
in the second quarter of fiscal 1998. One cafeteria which was destroyed by storm
damage in the first quarter will not be reopened. In addition, the Company
anticipates closing three existing locations during the remainder of fiscal
1998. The Company operated 148 units at the end of the quarter.
7
<PAGE>
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
The following table sets forth selected data as a percentage of sales for the
periods indicated.
<TABLE>
<CAPTION>
For the For the
13 Weeks Ended 26 Weeks Ended
------------------------- ------------------
Nov 29, Nov 30, Nov 29, Nov 30,
1997 1996 1997 1996
--------------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0%
Operating costs and expenses:
Cost of merchandise 28.3 28.5 28.3 28.7
Payroll and related costs 40.2 36.6 39.5 36.6
Other operating costs 25.7 22.5 25.0 21.9
Depreciation 4.2 3.9 4.1 3.8
Selling, general and
administrative 6.1 6.7 6.6 7.1
Interest expense, net 0.2 0.1 0.2 0.0
----- ----- ----- -----
Total operating costs 104.7 98.3 103.7 98.1
----- ----- ----- -----
Income (loss) from operations
before income taxes (4.7) 1.7 (3.7) 1.9
Provision for (benefit from)
income taxes (1.7) 0.6 (1.4) 0.7
----- ----- ----- -----
Net income (loss) (3.0)% 1.1% (2.3)% 1.2%
===== ===== ===== =====
</TABLE>
- -------------------------------------------------------------------------------
COMPANY RESTAURANT SALES:
Company restaurant sales decreased $3.0 million or 4.9% to $59.8 million for the
quarter and decreased $5.2 million or 4.1% to $120.9 for the 26 weeks ended
November 29, 1997. These decreases are the result of a net reduction of eight
units from the prior year. Also, same store sales were down 2.4% for the quarter
and 1.6% for the 26-week period due to a decline in customer counts, offset in
part by price increases in October 1996 and June 1997.
- -------------------------------------------------------------------------------
COST OF MERCHANDISE, PAYROLL AND RELATED COSTS AND OTHER OPERATING COSTS:
Cost of merchandise decreased slightly as a percentage of sales from the
comparable periods in the prior year. The decrease of 20 basis points for the
quarter and 40 basis points for the 26-week period is primarily attributable to
the retail price increases and cost containment measures implemented in 1998.
Payroll and related costs increased as a percentage of sales from the same
periods in the prior year by 360 basis points for the quarter and 290 basis
points for the 26-week period. Federal minimum wage rates increased in October
1996 and again in September 1997 resulting in a cumulative increase of $.80 per
hour. Management labor costs also increased due to full restaurant staffing.
Payroll and related costs
8
<PAGE>
were further impacted by increased accruals for workers' compensation insurance
to meet actuarially projected claims.
Other operating costs increased 320 basis points and 310 basis points for the
13-week and the 26-week periods, respectively. For the quarter, the Company
incurred costs of $0.4 million in consulting fees. General liability insurance
also increased due to increased accruals to meet actuarially projected claims.
The 26-week period was further impacted by an increase in the expense accrued
for projected costs associated with previously closed units.
Depreciation expense increased compared to the same periods in the prior year
principally as a result of equipment upgrades and the Company's remodeling
program.
Selling, general and administrative costs decreased 60 basis points for the
quarter and 50 basis for the 26-week period. This decrease resulted from the
elimination of 23 administrative staff positions as well as the Company's
increased focus on local store marketing rather than mass media advertising.
- --------------------------------------------------------------------------------
INTEREST EXPENSE, NET:
Borrowings under the Company's line of credit increased by $5.7 million since
the same period in the prior year, primarily to fund new construction and the
remodeling of old units.
- --------------------------------------------------------------------------------
INCOME TAXES:
The effective income tax rate on continuing operations for the 13 weeks and the
26 weeks ended November 29, 1997 was unchanged at 37%.
- --------------------------------------------------------------------------------
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 November 29, 1997 were $84.6 million, a $0.6 million increase
from $84.0 million as of the prior fiscal year end. Two new cafeterias were
opened and eight cafeterias were closed since May 31, 1997.
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
9
<PAGE>
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 and second quarters 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 November 29, 1997 were $47.8 million, a $3.7 million
increase from $44.1 as of the end of the prior fiscal year. Current liabilities
have increased $3.8 million, due to increased short-term borrowings on the
Company's line of credit and additional provisions for the cost of closing
restaurants.
At November 29, 1997 the Company had $11.1 million in borrowings under its $25.0
million revolving line of credit, a net increase of $3.6 million from May 31,
1997. Effective August 31, 1997, a waiver and modification agreement was entered
into by the Company and its lender as discussed in Note C to the financial
statements.
There was no cash dividend paid during the second quarter of fiscal year 1998.
- --------------------------------------------------------------------------------
KNOWN EVENTS, UNCERTAINTIES AND TRENDS
NOTE REGARDING FORWARD-LOOKING INFORMATION
The foregoing sections contain "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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
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 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Shareholders held on September 24, 1997, the
shareholders of the Company elected Class II Directors to serve a three-year
term on the Board. The results of the voting were as follows:
PROPOSAL 1
- ----------
Authority
Director Nominees For Withheld
- ----------------- --------- ---------
Ronnie L. Tatum 8,094,526 37,031
J. Veronica Biggins 8,088,012 43,545
The continuing members of the Board of Directors are:
Dolph W. von Arx
Arthur R. Outlaw
E. Eugene Bishop
Donald Ratajczak
ITEM 5. OTHER INFORMATION
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.
11
<PAGE>
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
99(a) Waiver and Modification Agreement effective
as of August 31, 1997, but executed November
25, 1997, between Morrison Restaurants Inc.
and AmSouth Bank.
99(b) Company press release dated January 13, 1998.
- --------------------------------------------------------------------------------
REPORTS ON FORM 8-K
During the second quarter of fiscal 1998, the Company filed a Current Report on
Form 8-K dated September 8, 1997, reporting under Item 5 the change in the
Company's name and New York Stock Exchange trading symbol from Morrison Fresh
Cooking, Inc. (ticker symbol MFC) to Morrison Restaurants Inc. (ticker symbol
MRN).
12
<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)
01/12/98 /s/ Craig D. Nelson
- -------- -----------------------------------
DATE CRAIG D. NELSON
Senior Vice President, Finance
(Senior Vice President and
Chief Financial Officer)
13
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
11 Computation of Primary and Fully Diluted Earnings Per Share
27 Financial Data Schedule
99(a) Waiver and Modification Agreement effective as of August 31, 1997, but
executed November 25, 1997, between Morrison Restaurants Inc. and
AmSouth Bank.
99(b) Company press release dated January 13, 1998.
14
<PAGE>
EXHIBIT 11
MORRISON RESTAURANTS INC.
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS EXCEPT PER-SHARE DATA)
13 Weeks Ended 26 Weeks Ended
---------------- ----------------
Nov 29, Nov 30, Nov 29, Nov 30,
1997 1996 1997 1996
------- ------- ------- ------
PRIMARY EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE
Average common shares outstanding.......... 9,112 9,038 9,097 9,038
Average additional common shares
issuable on exercise of dilutive
stock options (computed by use of
the "treasury stock method", at the
average market price)..................... 35 39
------- ------ ------- ------
Number of shares used in computation of
primary earnings per share................ 9,112 9,073 9,097 9,077
======= ====== ======= ======
Net Income (Loss).......................... $(1,776) $ 690 $(2,800) $1,485
======= ====== ======= ======
Primary earnings (loss) per common and
common equivalent share................... $ (0.19) $ 0.08 $ (0.31) $ 0.16
======= ====== ======= ======
FULLY DILUTED EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE
Average common shares outstanding.......... 9,112 9,038 9,097 9,038
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
or average market price).................. 35 42
------- ------ ------- ------
Number of shares used in computation of
fully diluted earnings per share.......... 9,112 9,073 9,097 9,080
======= ====== ======= ======
Net Income (Loss).......................... $(1,776) $ 690 $(2,800) $1,485
======= ====== ======= ======
Fully diluted earnings (loss) per common
and common equivalent share.............. $ (0.19) $ 0.08 $ (0.31) $ 0.16
======== ====== ======== ======
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MORRISON
RESTAURANTS INC. FINANCIAL STATEMENTS AS OF AND FOR THE PERIOD ENDED
NOVEMBER 29, 1997, 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> JUN-06-1998
<PERIOD-END> NOV-29-1997
<CASH> 1,373
<SECURITIES> 0
<RECEIVABLES> 1,664
<ALLOWANCES> 0
<INVENTORY> 2,649
<CURRENT-ASSETS> 9,877
<PP&E> 161,501
<DEPRECIATION> 101,389
<TOTAL-ASSETS> 84,618
<CURRENT-LIABILITIES> 34,238
<BONDS> 519
0
0
<COMMON> 92
<OTHER-SE> 36,764
<TOTAL-LIABILITY-AND-EQUITY> 84,618
<SALES> 120,907
<TOTAL-REVENUES> 120,907
<CGS> 34,199
<TOTAL-COSTS> 117,195
<OTHER-EXPENSES> 7,980
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 189
<INCOME-PRETAX> (4,457)
<INCOME-TAX> (1,657)
<INCOME-CONTINUING> (2,800)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,800)
<EPS-PRIMARY> (.31)
<EPS-DILUTED> (.31)
</TABLE>
<PAGE>
EXHIBIT 99(a)
WAIVER AND MODIFICATION AGREEMENT
---------------------------------
THIS WAIVER AND MODIFICATION AGREEMENT ("this Agreement"), effective as of
August 31, 1997, but executed on November 25, 1997, is entered into by MORRISON
FRESH COOKING, INC., a Georgia corporation, (the "Borrower"), and AMSOUTH BANK,
an Alabama banking corporation and formerly known as AmSouth Bank of Alabama
(the "Lender").
RECITALS
--------
A. The Borrower and the Lender have entered into a Credit Agreement dated
as of June 19, 1997 (the "Credit Agreement").
B. The Borrower has requested that the Lender enter into this Agreement in
order to grant certain waivers and modifications with respect to the Credit
Agreement as hereinafter described.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing recitals and of the
mutual agreements of the parties hereto:
1. The parties agree that capitalized terms used in this Agreement and not
otherwise defined herein have the respective meanings attributed thereto in the
Credit Agreement.
2. From and after the effective date of this Agreement to and including
January 31, 1998, the Lender waives the failure of the Borrower to:
(a) maintain its Fixed Charges Coverage Ratio of not less than 1.15 to 1.0
any time during fiscal year 1998, as required by Section 7.8(1) of the Credit
Agreement; provided, however, in no event shall the Fixed Charges Coverage Ratio
be less than 1.0 to 1.0 at any time during fiscal year 1998; and
(b) maintain its ratio of Debt plus six times Operating Lease Payments to
EBITDAR of not greater than 4.0 to 1.0 at the end of any fiscal quarter during
fiscal year 1998, as required by Section 7.8(2) of the Credit Agreement;
provided, however, in no event shall such ratio be greater than 5.5 to 1.0 at
the end of any fiscal quarter during fiscal year 1998.
3. From and after the effective date of this Agreement to and including
January 31, 1998, the Lender agrees that the number "2.25" set forth in
subparagraph (a) of the definition of "Maximum Credit Amount" shall be modified
to read "3.45".
<PAGE>
4. This Agreement may be executed in one or more counterparts, each of
which shall for all purposes be deemed to be an original and all of which shall
constitute the same instrument, but only one of which need be produced.
5. The Borrower hereby represents and warrants that all representations
and warranties contained in the Credit Agreement are true and correct as of the
date hereof (except representations and warranties that are expressly limited to
an earlier date); and the Borrower certifies that except for those matters
waived or consented to herein, no Event of Default nor any event that, upon
notice or lapse of time or both, would constitute an Event of Default, has
occurred and is continuing.
6. Nothing contained herein shall be construed as a waiver, acknowledgment
or consent to any breach or Event of Default of the Credit Agreement and the
Credit Documents not specifically mentioned herein, and the waivers and
modifications granted herein are effective only in the specific instance and the
purposes which given.
7. This Agreement shall be governed by the laws of the State of Alabama.
IN WITNESS WHEREOF, each of the Borrower and the Lender has caused this
Agreement to be executed by its duly authorized officer as of the day and year
first above written.
MORRISON FRESH COOKING, INC. AMSOUTH BANK
By: /s/ Craig D. Nelson By: /s/ Alan D. Lott
----------------------------- -----------------------------
Its: Senior Vice President Its: Vice President
<PAGE>
EXHIBIT 99(b)
NEWS RELEASE
FOR IMMEDIATE RELEASE
MORRISON RESTAURANTS INC. TO EXPLORE STRATEGIC ALTERNATIVES;
ANNOUNCES SECOND QUARTER RESULTS
Atlanta, Ga. - January 13, 1998 - Morrison Restaurants Inc. today
announced that the Company's Board retained the investment banking firm of
Wheat, First Securities, Inc. and also reported revenues and results of
operations for the second quarter of fiscal year 1998.
Dolph von Arx, Chairman of the Board, stated, "The Board has retained
Wheat, First Securities, Inc. to assist in a review of the Company's operations,
financial structure and strategic alternatives. We decided that now is an
appropriate time to review Morrison's market position and the options available
for maximizing the Company's long-term value for our shareholders as our
employees have made tremendous strides in enhancing the dining experience of our
customers and reaching out in the local markets we serve."
For the second quarter of fiscal 1998, revenues for Morrison Restaurants
Inc. were $59,816,000, a decrease of 4.9% from the same quarter of the prior
year. Sales for units open in both periods were down 2.4% versus last year.
The company incurred an operating loss of ($2,713,000) compared to an operating
profit of $1,160,000 for the second quarter of fiscal 1997. Net loss and loss
per share were ($1,776,000) and ($0.19) for the quarter, respectively. Customer
traffic trends were down versus last year, although the rate of decline has
slowed in the second quarter compared to the first quarter of fiscal 1998.
Lower customer traffic was the primary reason for the second quarter operating
loss. Labor costs increased significantly, primarily as a result of the October
1, 1996 and September 1, 1997 minimum wage increases. Additionally, the results
were adversely impacted by costs associated with the decision to close three
restaurants, two of which are currently generating cash flow losses, and the
third which is being closed at the expiration of the lease by the landlord. The
second quarter results were positively impacted by reduced food costs.
Ronnie Tatum, Chief Executive Officer stated, "While our financial results
do not yet reflect it, we have made significant improvement in providing the
customer with quality, great tasting, attractively displayed food, delivered
quickly by smiling, friendly people! We have returned our focus to local
restaurant marketing and positioned our restaurants as centers of community life
and activities. Our renewed focus on local marketing proved fruitful as we
secured additional sales with civic clubs, church and educational institutions
during the second quarter. We are aggressively addressing our costs,
particularly our food costs. During the second quarter, we reduced our food
cost per meal by 5% as our restaurant managers focused more intensely on sales
forecasting and food production planning. We also continue to evaluate labor
and all overhead costs, and have identified and are implementing several
additional savings opportunities."
<PAGE>
EXHIBIT 99(b)
As announced on September 24, 1997, 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 and second quarters of fiscal
1998, the Company continues to monitor closely the effect 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 their
estimated fair value.
Morrison Restaurants Inc. is a restaurant company with $240 million of
annual revenue with 148 restaurants in 13 states located in the Southeastern and
mid-Atlantic regions. It is publicly traded on the New York Stock Exchange
(symbol:MRN).
# # #
For more information, contact: Ronnie Tatum
Tel: (770) 991-0351, extension 124
Chief Executive Officer
Craig Nelson
Senior Vice President--Finance
This press release contains "forward-looking" statements which represent the
Company's expectations or beliefs concerning results and growth during fiscal
year 1998 and beyond. 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; and changes in laws and regulations affecting labor and employee
benefits.
