UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 4, 1995
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 1-12454
MORRISON RESTAURANTS INC.
(Exact name of registrant as specified in charter)
DELAWARE 63-0475239
(State of incorporation or (I.R.S. Employer identifi-
organization) cation no.)
4721 Morrison Drive
P.O. Box 160266
Mobile, AL 36625
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (334)344-3000
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 .
34,502,351
(Number of shares of $0.01 par value common stock outstanding
as of April 8, 1995)
Exhibit Index appears on page 19
INDEX
PAGE
NUMBER
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF
MARCH 4, 1995 AND JUNE 4, 1994................. 3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THIRTEEN AND THIRTY-NINE WEEKS ENDED
MARCH 4, 1995 AND MARCH 5, 1994................ 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS FOR THE THIRTY-NINE WEEKS ENDED
MARCH 4, 1995 AND MARCH 5, 1994................ 5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS..................................... 6-8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.................................. 9-16
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.............................. 16
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.............................. 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............... 17
SIGNATURES... .............................................. 18
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
MORRISON RESTAURANTS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT PER-SHARE DATA)
<CAPTION>
MAR. 4, 1995 JUNE 4, 1994
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and short-term investments.................. $ 5,708 $ 5,021
Receivables - Accounts and Notes (net)........... 25,884 33,059
Inventories...................................... 13,716 16,396
Prepaid expenses................................. 10,239 13,327
Deferred income tax benefits..................... 15,600 11,813
Total Current Assets........................... 71,147 79,616
PROPERTY AND EQUIPMENT - at cost................... 577,037 507,781
Less accumulated depreciation and amortization... 251,361 240,124
325,676 267,657
OTHER INVESTMENTS.................................. 12,416 10,270
COSTS IN EXCESS OF NET ASSETS ACQUIRED............. 26,636 22,571
OTHER ASSETS....................................... 21,103 28,339
TOTAL ASSETS................................. $456,978 $408,453
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts and notes payable....................... $ 83,835 $ 51,922
Other current liabilities........................ 76,403 70,701
Total Current Liabilities.................... 160,238 122,623
LONG-TERM DEBT..................................... 2,138 9,526
OTHER DEFERRED LIABILITIES......................... 59,196 55,168
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value
(authorized: 100,000 shares;
issued: 03/04/95 - 43,644 shares
issued: 06/04/94 - 43,644 shares)............. 436 436
Capital in excess of par value................... 83,994 77,656
Retained earnings................................ 288,814 248,044
373,244 326,136
Less common stock held in treasury - at cost
(9,173 shares @ 03/04/95; 8,335 shares @ 06/04/94) 137,838 105,000
235,406 221,136
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY..... $456,978 $408,453
The accompanying notes are an integral part of the condensed consolidated financial statements
</TABLE>
</PAGE>
<PAGE>
<TABLE>
ITEM 1 - FINANCIAL STATEMENTS
MORRISON RESTAURANTS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER-SHARE DATA)
(UNAUDITED)
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
MAR. 4, 1995 MAR. 5, 1994 MAR. 4, 1995 MAR. 5, 1994
<S> <C> <C> <C> <C>
SALES................................. $271,966 $309,951 $765,739 $ 902,469
OPERATING COSTS AND EXPENSES:
Cost of merchandise................. 79,062 95,690 221,569 281,437
Payroll and related costs........... 92,873 110,701 264,589 325,881
Other operating costs............... 50,205 53,239 138,630 157,204
Selling, general and administrative. 18,018 20,125 54,746 55,956
Depreciation........................ 10,078 10,141 28,065 29,208
Interest expense net of
interest income................... 648 181 297 283
L&N conversion/closing costs........ 0 0 19,727 0
Net gain on sale/closure of
B&I accounts...................... 0 0 (46,782) 0
250,884 290,077 680,841 849,969
INCOME BEFORE PROVISION FOR
INCOME TAXES....................... 21,082 19,874 84,898 52,500
PROVISION FOR FEDERAL AND STATE
INCOME TAXES........................ 7,940 7,574 35,115 20,053
NET INCOME............................ $ 13,142 $ 12,300 $ 49,783 $ 32,447
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE:
Primary............................. $0.37 $0.33 $1.38 $0.87
Fully Diluted....................... $0.37 $0.33 $1.38 $0.87
CASH DIVIDENDS PER SHARE PAID......... $0.0875 $0.0833 $0.2583 $0.2466
WEIGHTED AVERAGE SHARES USED IN
EARNINGS PER SHARE COMPUTATION:
Primary............................. 35,473 37,556 36,041 37,481
Fully Diluted....................... 35,548 37,585 36,104 37,510
The accompanying notes are an integral part of the condensed consolidated financial statements.
</TABLE>
</PAGE>
<PAGE>
<TABLE>
ITEM 1 - FINANCIAL STATEMENTS
MORRISON RESTAURANTS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<CAPTION>
FOR THE 39-WEEKS ENDED
MAR. 4, 1995 MAR. 5, 1994
<S> <C> <C>
CASH FROM OPERATIONS........................... $27,601 $78,365
INVESTING ACTIVITIES:
Purchases of property and equipment............ (97,142) (69,028)
Proceeds from sale of B&I contracts and assets. 100,000 0
Other.......................................... (7,535) (1,527)
NET CASH USED BY INVESTING
ACTIVITIES.................................... (4,677) (70,555)
FINANCING ACTIVITIES:
Early retirement of debt....................... (12,000) 0
Net change in borrowings....................... 34,274 0
Stock repurchases.............................. (42,882) (14,087)
Dividends paid................................. (9,012) (8,896)
Proceeds from stock option exercises........... 9,109 6,165
Other.......................................... (1,726) (3,335)
NET CASH USED BY FINANCING ACTIVITIES.......... (22,237) (20,263)
INCREASE/(DECREASE) IN CASH AND
SHORT-TERM INVESTMENTS...................... 687 (12,453)
Beginning cash and short-term investments...... 5,021 31,372
Ending cash and short-term investments......... $ 5,708 $18,919
The accompanying notes are an integral part of the condensed consolidated financial statements.
</TABLE>
</PAGE>
ITEM 1
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited, condensed consolidated 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 consolidated financial statements included in
Morrison Restaurants Inc.'s annual report for the fiscal year ended
June 4, 1994. The accompanying unaudited, condensed consolidated
financial statements reflect all adjustments for normal recurring
accruals and also include the accruals for the phase out of the L&N
Seafood Grill concept and the remaining expenses to be incurred in
connection with the sale/closing of the education, business and
industry accounts. 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 - NOTES AND MORTGAGES PAYABLE
During the quarter ended September 3, 1994, the Company retired the
$12.0 million 8.88% Senior Promissory Note payable to Life Insurance
Company of Georgia which was due in equal annual principal
installments of $4.0 million, commencing December 31, 1994 through
December 31, 1996. The note was paid with funds received from the
sale of the education, business and industry contracts and assets. As
a result, the restrictions on the incurring of additional
indebtedness, minimum consolidated working capital and net worth
requirements, as well as dividend payments and purchases of its
capital stock (which were described in Note 8 of Notes to Consolidated
Financial Statements of the Company's annual report for fiscal 1994)
are no longer in effect.
On September 30, 1994, the Company entered into a five-year revolving
line of credit with various banks which will allow the Company to
borrow a total of $200.0 million over the next five years under
various interest rate options. Commitment fees ranging from 0.0625%
to 0.15% per annum are payable on the unused portion of the credit
facility. The Company is not required to maintain compensating
balances in connection with this agreement. At March 4, 1995, the
Company had $50.0 million of borrowings outstanding with various banks
under the terms of the agreement at interest rates ranging from 6.375%
to 6.50% per annum. These loans, which under the terms of the credit
agreement can have maturities of seven to 180 days, have been
classified as current in the accompanying financial statements.
Subsequent to the end of the quarter, the Company replaced the notes
with notes for an equal amount with similar terms.
The credit agreement requires the Company, among other things, to
maintain minimum levels of net worth and certain minimum financial
ratios. Under the provisions of the net worth covenant,
stockholders' equity available to pay cash dividends or purchase
treasury stock was $35.5 million at March 4, 1995.
NOTE C - SUPPLEMENTAL CASH FLOW INFORMATION
In January 1995 the Company acquired, through the issuance of $9.0 million of
Morrison common stock, all of the outstanding common stock of Tias, Inc. as
described in Section 3.2, "Acquisition of Tias, Inc." The acquisition has
been accounted for by the purchase method of accounting. The transaction had
the following non-cash impact on the Company's third quarter balance sheet
which would have been reflected as follows in the accompanying Cash Flow
Statement had it been a cash transaction. (amounts shown in thousands)
Operating Activities
Operating liabilities assumed in
excess of operating assets $ 418
Investing Activities
Property & Equipment received in
acquisition of Tias, Inc. (8,489)
Financing Activities
Long-term debt assumed
in acquisition 777
Stock issued in acquisition
of Tias, Inc. 9,000
<PAGE>
<TABLE>
ITEM 1
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE D- MORRISON RESTAURANTS INC. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
(IN THOUSANDS EXCEPT PER-SHARE DATA)
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
% %
MAR. 4, 1995 MAR. 5, 1994 Change MAR. 4, 1995 MAR. 5, 1994 Change
<S> <C> <C> <C> <C> <C> <C>
SALES:
Ruby Tuesday Group $141,737 $106,143 34 $375,759 $292,240 29
Morrison Group 129,872 124,287 4 389,583 375,418 4
Corporate and Other 357 92 397 (58)
271,966 230,522 18 765,739 667,600 15
L&N* 0 16,503 0 48,403
B&I** 0 62,926 0 186,466
$271,966 $309,951 (12) $765,739 $902,469 (15)
OPERATING PROFIT:
Ruby Tuesday Group $ 15,281 $ 12,345 24 $ 36,680 $ 30,240 21
Morrison Group 9,584 8,287 16 30,465 25,938 17
24,865 20,632 21 67,145 56,178 20
L&N* 0 645 0 (318)
B&I** 0 1,898 0 5,622
24,865 23,175 7 67,145 61,482 9
Corporate Expenses (3,135) (3,120) 0 (9,005) (8,699) 4
Net Interest Income (Expense) (648) (181) (297) (283)
L&N Conversion/Closing Costs 0 0 (19,727) 0
Net Gain on Sale/Closure
of B&I Contracts 0 0 46,782 0
Income Before Income Taxes 21,082 19,874 6 84,898 52,500
Income Taxes 7,940 7,574 5 35,115 20,053
Net Income $ 13,142 $ 12,300 7 $ 49,783 $ 32,447
Earnings per Common and
Common Equivalent Share:
Primary $0.37 $0.33 $1.38 $0.87
Fully Diluted $0.37 $0.33 $1.38 $0.87
Common and Common Equivalent
Shares:
Primary 35,473 37,556 36,041 37,481
Fully Diluted 35,548 37,585 36,104 37,510
OPERATING PROFIT MARGINS:
Ruby Tuesday Group 10.8% 11.6% 9.8% 10.3%
Morrison Group 7.4% 6.7% 7.8% 6.9%
* Represents the L&N Seafood Grill units of the Ruby Tuesday Group which are being converted
or closed.
** Represents the education, business and industry (B&I) contracts of the Morrison Group which
were sold or closed.
</TABLE>
</PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
In March 1994, the Board of Directors of the Company approved four-
year financial and business plans for the Company and a strategy to
invest in high-growth businesses that have or can obtain a dominant
market position in their respective categories. Pursuant to this
strategy, on June 27, 1994, the Company announced that it had
reached a definitive agreement to sell certain of the education,
business and industry (B&I) contracts and assets and plans to phase
out its L&N Seafood Grill concept by converting certain units to
its more profitable and successful Ruby Tuesday restaurants and
Mozzarella's Cafes and selling or closing the remaining units.
Management believed that while the education, business and
industrial food service division was a growing and important
segment of the Company, the Company was not likely to achieve
dominance in that category. Management also believed that the
Company's growth opportunities for casual dining had been and
continue to be in the under $10 average check segment of the
industry and thus determined to phase out the higher-priced L&N
Seafood Grill concept and concentrate on expanding the Company's
proven growth vehicles in the casual dining market.
Pursuant to the agreement entered into and announced on June 27,
1994, on August 8, 1994, the Company sold certain education,
business and industry contracts and assets of the Morrison Group to
Gardner Merchant Food Services, Inc., a wholly owned subsidiary of
Gardner Merchant Ltd., for $100.0 million in cash. The Company
announced it would close the remaining accounts and as of January
1, 1995 all of the accounts which were not sold to Gardner Merchant
have been closed. The sale, net of related expenses and closing
costs of approximately $11.1 million, resulted in a net pre-tax
gain of $46.8 million.
The plan to phase out the L&N concept, as approved by the Board of
Directors on June 27, 1994, provided for the conversion of 30 of
the 38 L&N Seafood Grill units into other concepts and the sale or
closing of the remaining units. As a result of a default on a
licensing agreement with the Company, three additional L&N Seafood
Grill units will likely revert to the Company and be sold or
closed. Based on favorable operating results, management has
decided at the beginning of the quarter ended March 4, 1995 to
continue to operate four of the L&N Seafood Grill units as L&N's
through the end of their remaining lease terms rather than
converting or closing the units as originally planned. The sales
and earnings of these four L&N units have been included in the
operating results of the Ruby Tuesday Group in the current quarter.
Operating results for the two quarters prior to management's
decision were charged to the L&N closing/conversion reserve.
The Company's phase out plan presently calls for the conversion of
23 of the 41 L&N Seafood Grill units, the continued operation of
four units and the closing or sale of 14 units. Funding for the
conversion/closing of the L&N units has been provided by a
combination of remaining proceeds from the sale of the B&I
contracts and assets and ongoing operations and will continue to be
financed by ongoing operations. The Company intends to complete
the plan to phase out the L&N concept by the end of fiscal 1995 and
as of March 4, 1995, the Company has converted 20 units, closed 11
units and currently has three units in the process of being
converted.
The Company accrued approximately $19.7 million for costs to be
incurred as a result of the phase out of the L&N concept consisting
primarily of the following: losses on disposal of fixed assets net
of anticipated proceeds and the net cost of related lease
obligations for the units to be closed (approximately $11.6
million), expected operating losses during the phase out period
(approximately $4.8 million), severance pay (approximately $1.1
million), and other losses on the conversion of units consisting
primarily of the write off of fixed assets, inventory, and
unamortized cost in excess of net assets acquired (approximately
$2.2 million). At March 4, 1995, $8.4 million of expenses related
to the phase out of the L&N concept had been charged against the
reserve with $4.8 million of these charges related to fiscal 1995
L&N operating losses and the remaining $3.6 million related to
write-offs of inventories, intangibles and other assets, severance
pay and other expenses which were incurred as a result of the phase
out of the L&N concept. At March 4, 1995, $11.3 million of the
original reserves remain outstanding. A majority of these reserves
relate to costs anticipated to be incurred to settle the lease
obligations on units closed or to be closed. The Company
anticipates settlement of most, if not all, of these leases in the
fourth quarter.
1. FINANCIAL CONDITION
1.1 ASSETS
Total Assets at March 4, 1995 were $457.0 million, a $48.5 million
increase from $408.5 million as of the prior fiscal year end. Cash
and short-term investments were $5.7 million at March 4, 1995 which
is a slight increase from the prior fiscal year total of $5.0
million. Accounts and Notes Receivable decreased $7.2 million to
$25.9 million from $33.1 million at June 4, 1994. This fluctuation
is the net result of a $9.6 million decrease in trade receivables
primarily due to the sale of the B&I contracts and assets; an
increase in vendor rebates due the Company of $2.3 million; and an
increase in various other items of $0.1 million. Inventories
decreased $2.7 million from $16.4 million at June 4, 1994. The
decrease was primarily the result of the sale of the B&I contracts
and assets offset by additional inventories resulting from new unit
openings in the Ruby Tuesday Group. Prepaid expenses declined $3.1
million to $10.2 million primarily due to a reduction of prepaid
income taxes. Deferred Tax Benefits increased $3.8 million to $15.6
million at March 4, 1995 primarily as a result of the effects of
the phase out of the L&N Seafood Grill concept and the sale of
certain B&I contracts and assets and the closure of the remaining
B&I accounts. Property and Equipment increased $58.0 million from
the prior fiscal year ended June 4, 1994. The increase is due to
the net result of capital expenditures of $97.1 million, $8.5
million of assets acquired as a result of the Tias, Inc.
acquisition, depreciation expense totaling $31.0 million, and $16.6
million in retirements ($10.0 million and $3.9 million of
retirements resulting from the sale of the B&I contracts and assets
and closure of the remaining B&I accounts, respectively). Capital
expenditures consisted primarily of $80.7 million in the Ruby
Tuesday Group and $14.4 million in the Morrison Group. The Company
anticipates that during the remaining quarter of fiscal 1995
capital expansion will be financed by funds generated by operations
and from borrowings on lines of credit as discussed in Section 1.4
"Short-Term Borrowings". Costs in excess of net assets acquired
increased $4.0 million to $26.6 million at March 4, 1995 due to an
additional $11.6 million from the acquisition of Tias, Inc. offset
by a $6.8 million reduction due to the sale of the B&I contracts
and assets in the first quarter of fiscal 1995 and systematic
amortization throughout fiscal 1995. Other Assets decreased $7.2
million primarily as a result of the elimination of long-term notes
receivable due from Tias, Inc. and a reduction in assets as a
result of the sale of the B&I contracts and assets.
1.2. LIABILITIES
Total Liabilities at March 4, 1995 were $221.6 million, a $34.3
million increase from $187.3 million as of the end of the prior
fiscal year. Accounts and Notes Payable at March 4, 1995 were
$83.8 million, a $31.9 million increase from the end of the prior
year. The increase is primarily due to $50.0 million in borrowings
under the Company's revolving credit facility, $1.8 million in
borrowings on the Company's other lines of credit and a $1.5
million net increase in trade accounts payable offset by the early
retirement of the Life Insurance Company of Georgia note payable
(the current portion of which was $4.0 million at year end), and
repayment of the $17.4 million of short-term borrowings outstanding
at June 4, 1994. Both the Life Insurance Company of Georgia note
payable and the short-term borrowings were paid with proceeds from
the sale of the B&I contracts and assets. Long-Term Debt decreased
$7.4 million to $2.1 million at March 4, 1995 from the end of the
prior year as a result of the early retirement of the Life
Insurance Company of Georgia note payable offset by notes assumed
in the Tias, Inc. acquisition.
1.3 WORKING CAPITAL
The Company had negative Working Capital of $89.1 million and the
Current Ratio was .44 at March 4, 1995, compared to negative $43.0
million Working Capital and .65 Current Ratio at the end of the
prior year. Borrowings under the Company's revolving line of
credit, capital expenditures resulting from the Company's
expansion, and stock purchases under the Company's stock repurchase
program in amounts exceeding the proceeds from the sale of the B&I
contracts and assets caused the decrease in the Company's working
capital.
1.4 SHORT-TERM BORROWINGS
On September 30, 1994, the Company entered into a five-year
revolving line of credit with various banks which will allow the
Company to borrow a total of $200.0 million over the next five
years under various interest rate options. The Company intends to
borrow against this line during the remainder of fiscal 1995 to
help finance the Company's expansion of operations. At March 4,
1995 the Company had $50.0 million in borrowings on this revolving
line of credit. The weighted average interest rate on these
borrowings during the quarter was 6.28%.
Subsequent to the end of the quarter ended March 4, 1995, the
Company entered into an interest rate swap agreement to fix its
fiscal 1996 interest costs. This swap agreement which has a
notional amount accreting from $85.0 to $115.0 million effectively
limits the interest rate to 7.02% per annum for a one year period
commencing June 5, 1995.
In addition, at March 4, 1995, the Company had committed lines of
credit amounting to $27.0 million and non-committed lines of credit
amounting to $64.0 million with various banks at varying interest
rates. These lines are subject to periodic review by each bank and
may be canceled by the Company at any time. During the quarter
ended March 4, 1995, borrowings on these lines of credit averaged
$2.1 million.
1.5 LONG-TERM BORROWING
Long-term borrowing decreased $7.4 million from the prior year as a
result of the early retirement of the Senior Promissory Note
payable to Life Insurance Company of Georgia during the first
quarter offset by additional liabilities assumed through the
acquisition of Tias, Inc. The Life Insurance Company of Georgia
note was repaid with proceeds from the sale of the education,
business and industry contracts and assets.
1.6 CASH DIVIDENDS
Cash dividends paid during the third quarter of fiscal year 1995
amounted to $3.0 million. Dividends paid per share were $0.0875
for the third quarter, an increase of 5.0% from the same quarter of
the prior fiscal year amount of $0.0833 per share.
2. RESULTS OF OPERATIONS
2.1 SALES
Total sales for the quarter ended March 4, 1995 decreased 12.3%
from total sales for the same quarter of the prior year. Total
sales for the 39 weeks ended March 4, 1995 decreased 15.2% from
total sales for the same period of the prior year. The decrease for
the quarter as compared to the same quarter in the prior year was
the result of the decrease caused by the inclusion of all L&N unit
sales and B&I sales in third quarter of fiscal 1994 ($79.4
million), offset by a 33.5% sales increase in the Ruby Tuesday
Group and a 4.5% increase in the Morrison Group. The decrease in
sales for the 39 weeks ended March 4, 1995 as compared to the 39
weeks ended March 5, 1994 was the net result of the decrease caused
by the inclusion of all L&N unit sales and B&I sales in the fiscal
1994 period ($234.9 million), offset by a 28.6% sales increase in
the Ruby Tuesday Group and a 3.8% increase in the Morrison Group.
The sales increases in the Ruby Tuesday Group are primarily the
result of additional units and an increase in same store sales.
Excluding the effects of all prior year sales for L&N and B&I
discussed above, consolidated sales increased 18.0% for the quarter
and 14.7% year to date over the comparable prior fiscal year
periods.
Excluding the L&N units from the prior year, the Ruby Tuesday Group
had a net increase of 85 units when compared to the same quarter of
the prior year. On March 4, 1995, the Ruby Tuesday Group was
composed of 266 Ruby Tuesday restaurants, 45 Mozzarella's Cafes and
14 Tia's restaurants. For the quarter ended March 4, 1995 and for
the duration of their lease terms, the four L&N units remaining
open will be grouped with Mozzarella's Cafes.
The sales increase in the Morrison Group, excluding the B&I
accounts, is attributable primarily to larger accounts in the
Health Care Division and increased sales of the Quick Service
Restaurants and Small Cafeterias in the Family Dining Division. On
March 4, 1995 the Health Care Division was composed of 281 accounts
in hospitals, nursing homes and other health-related facilities,
and the Family Dining Division was composed of 175 units.
2.2 OPERATING COSTS AND EXPENSES
Total operating costs and expenses for the 13 and 39 weeks ended
March 4, 1995 were $250.9 million and $680.8 million, respectively.
Excluding the effects of L&N and B&I for each 13 and 39 week
period, total operating costs and expenses were $250.9 million and
$707.9 million in the current year compared to costs and expenses
of $213.2 million and $620.4 million in the same periods of the
prior fiscal year, an increase of $37.7 million or 17.7% for the 13
weeks and $87.5 million or 14.1% for 39 weeks ended March 4, 1995
over the comparable periods in the prior fiscal year.
The following discussion of costs and expenses excludes the effects
of L&N and B&I for the prior year 13 and 39 week periods but
includes costs and expenses in the current quarter of the four L&N
units which remain operational. Cost of merchandise increased
$11.6 million or 17.2% to $79.1 million for the 13 weeks and $23.6
million or 11.9% to $221.6 million for the 39 weeks ended March 4,
1995. These costs have decreased as a percentage of sales from the
comparable period in the prior year as a result of improved cost
controls and increased vendor discounts. Payroll and related costs
increased $10.8 million or 13.2% to $92.9 million for the 13 weeks
and $26.9 million or 11.3% to $264.6 million for the 39 weeks ended
March 4, 1995. As a percentage of sales, payroll and related costs
have decreased from 35.6% to 34.1% and from 35.6% to 34.5% for the
13 and 39 weeks ended March 4, 1995. These decreases as a
percentage of sales were primarily due to improved experience for
health and workers compensation claims. Other operating costs
increased $10.7 million or 27.1% to $50.2 million for the 13 week
period and $21.4 million or 18.2% to $138.6 million for the 39
weeks ended March 4, 1995. The increase in other operating costs
for the quarter and year to date period are primarily due to
increased expenses due to expanded operations in the Ruby Tuesday
Group. Selling, general and administrative costs increased $2.4
million or 15.4% to $18.0 million for the 13 week period and $11.4
million or 26.3% to $54.7 million for the 39 weeks ended March 4,
1995. This increase for the quarter primarily results from
expanded operations in the Ruby Tuesday Group and the year to date
increase is primarily the result of the cost of the Company's
expanded advertising strategy over the prior year. Costs and
expenses when expressed as a percent of sales for the period ended
March 4, 1995, excluding the L&N and B&I transactions in the
current and prior year period, decreased to 92.2% from 92.5% for
the quarter and to 92.4% from 92.9% for the year to date period.
These decreases are largely attributable to the success of food-
cost control programs.
2.3 PRE-TAX PROFIT
The consolidated pre-tax profit increased $1.2 million for the
quarter and increased $32.4 million for the year to date period
compared to the same periods of the prior year due to the net
effects of the L&N phase out and the sale of the B&I contracts and
assets coupled with the increased profits resulting from expansion
of the business of the Company over the prior year. The
consolidated year to date pre-tax profit excluding the effects of
L&N and B&I discussed above was $57.8 million, an increase of $10.6
million or 22.6% over the same period of the prior year.
2.4 INCOME TAX EXPENSE
The effective income tax rates for the quarter and year to date
period ended March 4, 1995 were 37.7% and 41.4%, respectively, as
compared to 38.1% and 38.2% for the same periods of the prior year.
Excluding the effects of B&I and L&N, the effective income tax
rates would have been 37.7% and 37.8% for the quarter and year to
date, respectively, down from 38.5% and 38.3% for the third quarter
and year to date periods of the prior year primarily due to
increased Targeted Jobs Tax Credits.
2.5 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. The difference between primary and fully diluted
weighted average shares reflects the maximum extent of potential
dilution that conversions of shares could create.
3. KNOWN EVENTS, UNCERTAINTIES AND TRENDS
3.1 FINANCIAL AND STOCK REPURCHASE PLANS
On March 30, 1994, the Board of Directors adopted a new financial
strategy that places more emphasis on debt management and
establishes a target capital structure which utilizes prudent
amounts of debt to minimize the weighted average cost of capital
while allowing the Company to maintain financial flexibility and
the equivalent of an investment-grade (BBB) bond rating. The
financial strategy sets a target debt-to-capital ratio of 60%,
including operating leases. The plan also provides for
repurchasing Company stock whenever cash flow exceeds funding
requirements while maintaining the target capital structure.
Accordingly, the Board approved the repurchase of up to an
additional 2.5 million shares, bringing the total authorized for
repurchase under all of the Company's stock repurchase plans and
programs as of March 30, 1994, to 4.6 million shares. During the
39 weeks ended March 4, 1995, the Company repurchased 1.6 million
shares of the Company's stock at an average purchase price of
$26.84 per share leaving 2.4 million shares available for purchases
under all of the Company's stock repurchase plans and programs.
3.2 ACQUISITION OF TIAS, INC.
On January 16, 1995, the Company completed the previously announced
acquisition of Tias, Inc., a chain of Tex-Mex/Southwestern
restaurants based in Dallas, Texas for $9.0 million in Morrison
common stock (354,673 shares) and assumption of liabilities of
approximately $12.8 million.
At the time of the acquisition of Tias, Inc. there were 12 Tia's
restaurants in Dallas and Little Rock, Arkansas. Subsequent to
January 16, 1995 two additional units, which were under
construction at the time of acquisition, were opened in Tampa,
Florida.
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 consolidated financial position.
ITEM 5
OTHER INFORMATION
At their regular quarterly meeting on March 29, 1995, the Board of
Directors announced a regular cash dividend of eight and three-
fourth cents per share, payable at the close of business on April
28, 1995 to shareholders of record as of April 14, 1995.
ITEM 6
EXHIBITS AND REPORTS ON FORM 8-K
(a) 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
(b) REPORTS ON FORM 8-K
The Company filed a Current Report on Form 8-K/A1 on January 3, 1995
amending a Current Report on Form 8-K dated July 27, 1994 reporting
the proposed sale of certain education, business and industry (B&I)
contracts and assets and the closure of the remaining B&I accounts
and containing unaudited Pro Forma Financial Statements reporting
the estimated effects of such sale/closure.
The Company filed a Current Report on Form 8-K/A1 on January 3, 1995
amending a Current Report on Form 8-K dated August 23, 1994
reporting the closing of the sale of certain education, business and
industry (B&I) contracts and assets and the closure of the remaining
B&I accounts and containing unaudited Pro Forma Financial Statements
reporting the estimated effects of such sale/closure.
The Company filed a Current Report on Form 8-K dated January 5, 1995
announcing the appointment of Samuel E. (Sandy) Beall, III, the
Company's President and Chief Executive Officer, as Chairman of the
Board effective May 5, 1995 as part of an established transition
process.
The Company filed a Current Report on Form 8-K, dated January 20,
1995 announcing completion of the acquisition of Tias, Inc., a chain
of Tex-Mex/Southwestern restaurants based in Dallas, Texas.
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)
04/18/95 /s/ J. RUSSELL MOTHERSHED
DATE J. RUSSELL MOTHERSHED
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
<PAGE>
<TABLE>
ITEM 6.(a)
EXHIBIT 11: COMPUTATION OF EARNINGS PER SHARE
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
MAR.4, 1995 MAR.5, 1994 MAR.4, 1995 MAR.5, 1994
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE
Average common shares outstanding...... 34,176 36,051 34,691 36,092
Average additional common shares
issuable on exercise of dilutive
stock options (computed by use of
the "treasury stock method", at the
average market price)................ 1,297 1,505 1,350 1,389
TOTALS............................ 35,473 37,556 36,041 37,481
Net Income............................. $13,142 $12,300 $49,783 $32,447
Primary earnings per common and
common equivalent share.............. $0.37 $0.33 $1.38 $0.87
</TABLE>
</PAGE>
<PAGE>
<TABLE>
<CAPTION>
ITEM 6.(a) (continued)
EXHIBIT 11: COMPUTATION OF EARNINGS PER SHARE
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
MAR.4, 1995 MAR.5, 1994 MAR.4, 1995 MAR.5, 1994
<S> <C> <C> <C> <C>
FULLY DILUTED EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE
Average common shares outstanding...... 34,176 36,051 34,691 36,092
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)........................ 1,372 1,534 1,413 1,418
TOTALS............................ 35,548 37,585 36,104 37,510
Net Income............................. $13,142 $12,300 $49,783 $32,447
Fully diluted earnings per common and
common equivalent share.............. $0.37 $0.33 $1.38 $0.87
</PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MORRISON
RESTAURANTS INC. FINANCIAL STATEMENTS AS OF AND FOR THE PERIOD ENDED MARCH 4,
1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-03-1995
<PERIOD-END> MAR-04-1995
<CASH> 5,708
<SECURITIES> 0
<RECEIVABLES> 21,460
<ALLOWANCES> 2,653
<INVENTORY> 13,716
<CURRENT-ASSETS> 71,147
<PP&E> 577,037
<DEPRECIATION> 251,361
<TOTAL-ASSETS> 456,978
<CURRENT-LIABILITIES> 160,238
<BONDS> 2,138
<COMMON> 436
0
0
<OTHER-SE> 234,970
<TOTAL-LIABILITY-AND-EQUITY> 456,978
<SALES> 764,390
<TOTAL-REVENUES> 765,739
<CGS> 221,569
<TOTAL-COSTS> 652,853
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 297
<INCOME-PRETAX> 84,898
<INCOME-TAX> 35,115
<INCOME-CONTINUING> 49,783
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 49,783
<EPS-PRIMARY> $1.38
<EPS-DILUTED> $1.38
</TABLE>
