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 SEPTEMBER 2, 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 .
34,579,357
(Number of shares of $0.01 par value common stock outstanding
as of October 7, 1995)
Exhibit Index appears on page 15
INDEX
PAGE
NUMBER
PART I - FINANCIAL INFORMATIONFP
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF
SEPTEMBER 2, 1995 AND JUNE 3, 1995............. 3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THIRTEEN WEEKS ENDED SEPTEMBER 2,
1995 AND SEPTEMBER 3, 1994..................... 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS FOR THE THIRTEEN WEEKS ENDED
SEPTEMBER 2, 1995 AND SEPTEMBER 3, 1994........ 5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS..................................... 6-7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.................................. 8-11
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.............................. 12
ITEM 2. CHANGES IN SECURITIES.......................... NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES................ NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS............................. 12
ITEM 5. OTHER INFORMATION.............................. 12-13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............... 13
SIGNATURES... .............................................. 14
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
ITEM 1
MORRISON RESTAURANTS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT PER-SHARE DATA)
<CAPTION>
SEPT. 2, 1995 JUNE 3, 1995
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and short-term investments.................. $ 8,706 $ 8,321
Receivables - Accounts and Notes (net)........... 27,799 29,043
Inventories...................................... 14,492 13,598
Prepaid expenses................................. 10,868 17,492
Deferred income tax benefits..................... 8,911 11,744
Total Current Assets........................... 70,776 80,198
PROPERTY AND EQUIPMENT - at cost................... 649,259 600,712
Less accumulated depreciation and amortization... 266,486 255,549
382,773 345,163
COSTS IN EXCESS OF NET ASSETS ACQUIRED............. 27,000 27,187
OTHER ASSETS....................................... 31,080 31,503
TOTAL ASSETS................................. $511,629 $484,051
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts and notes payable....................... $ 60,047 $ 58,793
Other current liabilities........................ 60,561 66,185
Total Current Liabilities.................... 120,608 124,978
LONG-TERM DEBT..................................... 76,041 52,095
OTHER DEFERRED LIABILITIES......................... 62,446 61,485
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value
(authorized: 100,000 shares;
issued: 09/02/95 - 43,644 shares
issued: 06/03/95 - 43,644 shares)............. 436 436
Capital in excess of par value................... 84,731 84,515
Retained earnings................................ 304,616 298,181
389,783 383,132
Less common stock held in treasury - at cost
(9,092 shares @ 09/02/95; 9,119 shares @ 06/03/95) 137,249 137,639
252,534 245,493
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY..... $511,629 $484,051
The accompanying notes are an integral part of the condensed consolidated financial statements
</TABLE>
</PAGE>
<PAGE>
<TABLE>
MORRISON RESTAURANTS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER-SHARE DATA)
(UNAUDITED)
<CAPTION>
THIRTEEN WEEKS ENDED
SEPT. 2, 1995 SEPT. 3, 1994
<S> <C> <C>
SALES................................. $272,225 $241,250
OPERATING COSTS AND EXPENSES:
Cost of merchandise................. 78,204 70,493
Payroll and related costs........... 96,220 83,598
Other operating costs............... 52,215 43,299
Selling, general and administrative. 18,207 17,729
Depreciation........................ 11,348 8,656
Interest expense net of
interest income................... 901 150
L&N conversion/closing costs........ 0 19,727
Net gain on sale/closure of
B&I accounts...................... 0 (46,782)
257,095 196,870
INCOME BEFORE PROVISION FOR
INCOME TAXES....................... 15,130 44,380
PROVISION FOR FEDERAL AND STATE
INCOME TAXES........................ 5,674 19,870
NET INCOME............................ $ 9,456 $ 24,510
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE.................... $0.27 $0.67
CASH DIVIDENDS PER SHARE PAID......... $0.0875 $0.0833
WEIGHTED AVERAGE SHARES USED IN
EARNINGS PER SHARE COMPUTATION...... 35,550 36,558
The accompanying notes are an integral part of the condensed
consolidated financial statements.
</TABLE>
</PAGE>
<PAGE>
<TABLE>
MORRISON RESTAURANTS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<CAPTION>
FOR THE 13-WEEKS ENDED
SEPT. 2, 1995 SEPT. 3, 1994
<S> <C> <C>
CASH FROM OPERATIONS........................... $27,557 $ 1,902
INVESTING ACTIVITIES:
Purchases of property and equipment............ (49,652) (28,180)
Proceeds from sale of B&I contracts and assets. 0 100,000
Other.......................................... (110) (985)
NET CASH PROVIDED (USED)
BY INVESTING ACTIVITIES....................... (49,762) 70,835
FINANCING ACTIVITIES:
Early retirement of debt....................... 0 (12,000)
Net change in borrowings....................... 25,005 (17,446)
Stock repurchases.............................. (458) (7,550)
Dividends paid................................. (3,021) (2,942)
Other.......................................... 1,064 884
NET CASH PROVIDED (USED)
BY FINANCING ACTIVITIES....................... 22,590 (39,054)
INCREASE IN CASH AND
SHORT-TERM INVESTMENTS...................... 385 33,683
Beginning cash and short-term investments...... 8,321 5,021
Ending cash and short-term investments......... $ 8,706 $38,704
The accompanying notes are an integral part of the condensed consolidated financial statements.
</TABLE>
</PAGE>
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 3, 1995. The accompanying
unaudited, condensed consolidated 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 - SUBSEQUENT EVENTS
On September 27, 1995 the Board of Directors approved a plan to
spin off the Registrant's family dining and health-care businesses
to shareholders to create three separate publicly held
corporations.
Under the plan of distribution, Morrison Fresh Cooking, Inc. (a
newly created corporation) will operate the business currently
conducted by the Family Dining Division of the Morrison Group;
Morrison Health Care, Inc. (a newly created corporation) will
operate the business currently conducted by the Health Care
Division of the Morrison Group; the name of the Company will be
changed to Ruby Tuesday, Inc. which will operate the casual dining
restaurant business currently conducted by the Ruby Tuesday Group.
The plan of distribution is subject to a number of conditions,
including receipt of a favorable tax ruling from the Internal
Revenue Service regarding the spinoff and approval by the Company's
stockholders. It is contemplated that the distribution will occur
late in the first calendar quarter of 1996.
<PAGE>
<TABLE>
ITEM 1
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE C- MORRISON RESTAURANTS INC. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
(IN THOUSANDS EXCEPT PER-SHARE DATA)
<CAPTION>
THIRTEEN WEEKS ENDED
%
SEPT. 2, 1995 SEPT. 3, 1994 Change
<S> <C> <C> <C>
SALES:
Ruby Tuesday Group.............. $145,627 $113,240 29
Morrison Group.................. 126,261 127,966 (1)
Corporate and Other............. 337 44
$272,225 $241,250 13
OPERATING PROFIT:
Ruby Tuesday Group.............. $ 8,776 $ 11,015 (20)
Morrison Group.................. 9,702 9,384 3
18,478 20,399 (9)
Corporate Expenses.............. (2,447) (2,924)
Net Interest Income (Expense)... (901) (150)
L&N Conversion/Closing Costs.... 0 (19,727)
Net Gain on Sale/Closure
of B&I Contracts............... 0 46,782
Income Before Income Taxes...... 15,130 44,380
Income Taxes.................... 5,674 19,870
Net Income...................... $ 9,456 $ 24,510
Earnings per Common and
Common Equivalent Share......... $0.27 $0.67
Common and Common Equivalent
Shares.......................... 35,550 36,558
OPERATING PROFIT MARGINS:
Ruby Tuesday Group.............. 6.0% 9.7%
Morrison Group.................. 7.7% 7.3%
</TABLE>
</PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The Company reported net income of $9.5 million for the quarter
ended September 2, 1995, compared with $24.5 million reported for
the corresponding quarter of the prior fiscal year. The decline in
net income from the prior year primarily relates to the net tax
effect in the prior year of the net gain on sale/closure of the
education business and industry (B&I) accounts offset by the
conversion/closing costs which resulted from the decision to phase
out the L&N Seafood Grill (L&N) concept.
In the fiscal 1995 period, the Company accrued approximately $19.7
million for costs to be incurred as a result of the decision
announced on June 27, 1994, to phase out the L&N concept. As of
September 2, 1995, $14.3 million of expenses related to operating
losses, the write-offs of inventories, intangibles and other
assets, severance pay and other expenses had been charged against
the reserve. The remaining $5.4 million reserve relates primarily
to remaining asset write-offs and costs anticipated to be incurred
to settle lease obligations on units closed.
The following table shows restaurant openings during the first
quarter as well as total restaurants open at the end of the first
quarter.
<TABLE>
<CAPTION>
Total Open at End
1st Qtr. Openings 1st Qtr. Closings of First Quarter
Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal
1996 1995 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C>
Ruby Tuesday Group:
Ruby Tuesday 11 11 3 1 283 233
Mozzarella's 3 1 0 0 47 25
Tia's 2 n/a 0 n/a 16 n/a
Morrison Group:
Family Dining 2 1 2 1 151 151
QSRs 3 1 0 0 26 13
Health Care Units 4 10 6 12 289 280
</TABLE>
The Company estimates that approximately 35 additional Ruby
Tuesday, Mozzarella's and Tia's units will be opened during the
remainder of fiscal 1996. The Company also anticipates opening
four additional Fresh Cooking restaurants in the remaining three
quarters of fiscal 1996.
Company Restaurant Sales:
Company restaurant sales increased $30.9 million or 12.8% from
$241.3 million for the quarter ended September 3, 1994 to $272.2
million for the quarter ended September 2, 1995. The increase for
the quarter as compared to the same quarter in the prior year was
the result of a 28.6% sales increase in the Ruby Tuesday Group and
a 1.3% decrease in the Morrison Group.
The sales increase in the Ruby Tuesday Group was primarily the
result of the net addition of 85 units offset by decrease in same
store sales.
The sales decrease in the Morrison Group was attributable primarily
to a decline in same store sales for the cafeterias in the Family
Dining Division.
Cost of Merchandise, Payroll and Related Costs and Other Operating
Costs:
Cost of merchandise increased $7.7 million or 10.9% to $78.2
million. These costs have decreased as a percentage of sales from
the comparable period in the prior year as a result of a change in
menu items and improved cost controls. Payroll and related costs
increased $12.6 million or 15.1% to $96.2 million. These costs
increased as a percentage of sales from the prior year due to
increased staffing levels and ongoing programs designed to improve
guest satisfaction in the Ruby Tuesday Group. Other operating costs
increased $8.9 million or 20.6% to $52.2 million. Other operating
costs have increased as a percent of sales primarily due to the
relationship of fixed costs such as rent and leasing and other
taxes to the decline in same-store sales. Depreciation expense
increased $2.6 million or 31.1% to $11.3 million as a result of an
increase in the number of freestanding restaurants.
Interest Expense (net of Interest Income):
Net interest expense increased to $0.9 million from $0.2 million
due to the borrowings incurred on the Company's revolving line of
credit.
Income Taxes
The effective income tax rate for the quarter ended September 2,
1995 was 37.5%, as compared to 44.8% for the same period of the
prior year. Excluding the effects of B&I and L&N, the effective
income tax rate would have been 38.3% for the prior year. The
decrease in income taxes is primarily due to the utilization of
net operating losses obtained in the Tias, Inc. acquisition.
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.
LIQUIDITY AND CAPITAL RESOURCES
Total assets at September 2, 1995 were $511.6 million, a $27.5
million increase from $484.1 million as of the prior fiscal year
end. Prepaid expenses declined $6.6 million to $10.9 million
primarily due to a collection of prepaid income taxes from June 3,
1995. Net property and equipment increased $37.6 million from June
3, 1995. The increase was due to the net result of capital
expenditures of $49.7 million, depreciation expense totaling $11.4
million, and $0.7 million in retirements. Capital expenditures in
the Ruby Tuesday Group were $40.4 million and $6.8 million in the
Morrison Group. The Company anticipates that during the remainder
of fiscal 1996, capital expansion will be financed by funds
generated by operations and from borrowings on lines of credit.
Total Liabilities at September 2, 1995 were $259.1 million, a $20.5
million increase from $238.6 million as of the end of the prior
fiscal year. Long-term borrowings increased $23.9 million during
the quarter primarily as a result of $24.0 million of additional
borrowings on the Company's revolving line of credit. At September
2, 1995 the Company had $74.0 million in borrowings on this
revolving line of credit. The weighted average interest rate on
these borrowings including the effective cost of an interest rate
swap agreement during the quarter was 6.938%.
In addition, at September 2, 1995, the Company had committed lines
of credit amounting to $32.0 million (of which $18.3 million
remained available at September 2, 1995) and non-committed lines of
credit amounting to $94.0 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.
Cash dividends paid during the first quarter of fiscal year 1996
amounted to $3.0 million. Dividends paid per share were $0.0875
for the quarter, an increase of 5.0% from the same quarter of the
prior fiscal year.
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 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Stockholders held on September 27, 1995,
the stockholders of the Company elected Class II Directors to serve
a three year term on the Board. The results of the voting were as
follows:
<TABLE>
Proposal 1.
<CAPTION>
Authority
Director Nominees For Withheld
<S> <C> <C>
John B. McKinnon 29,711,026 93,314
Dolph W. von Arx 29,699,801 104,539
</TABLE>
ITEM 5.
OTHER INFORMATION
At its quarterly meeting held on September 27, 1995, the Board of
Directors declared a cash dividend of $0.092 cents per share,
payable at the close of business on October 31, 1995 to shareholders
of record as of October 13, 1995. This cash dividend is an increase
of five percent in the cash dividends declared during each quarter
of the prior fiscal year.
SUBSEQUENT EVENTS
On September 27, 1995 the Board of Directors approved a plan to spin
off the Registrant's family dining and health-care businesses to
shareholders to create three separate publicly held corporations.
Under the plan of distribution, Morrison Fresh Cooking, Inc. (a newly
created corporation) will operate the business currently conducted by
the Family Dining Division of the Morrison Group; Morrison Health
Care, Inc. (a newly created corporation) will operate the business
currently conducted by the Health Care Division of the Morrison Group;
the name of the Company will be changed to Ruby Tuesday, Inc. which
will operate the casual dining restaurant business currently conducted
by the Ruby Tuesday Group.
The plan of distribution is subject to a number of conditions,
including receipt of a favorable tax ruling from the Internal Revenue
Service regarding the spinoff and approval by the Company's
stockholders. It is contemplated that the distribution will occur
late in the first calendar quarter of 1996.
ITEM 6
EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
The following exhibits are filed as part of this report:
Exhibit
No.
11 Computation of Primary and Fully Diluted Earnings Per
Share
27 Financial Data Schedule
REPORTS ON FORM 8-K
There were no reports on Form 8-K filed during the quarter
ended September 2, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
MORRISON RESTAURANTS INC.
(Registrant)
10/16/95 /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
(IN THOUSANDS EXCEPT PER-SHARE DATA)
<CAPTION>
THIRTEEN WEEKS ENDED
SEPT 2. 1995 SEPT 3, 1994
PRIMARY EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE
<S> <C> <C>
Average common shares outstanding...... 34,541 35,261
Average additional common shares
issuable on exercise of dilutive
stock options (computed by use of
the "treasury stock method" at the
average market price)................ 1,009 1,297
TOTALS.............. 35,550 36,558
Net Income............................. $ 9,456 $24,510
Primary earnings per common and
common equivalent share.............. $0.27 $0.67
</TABLE>
</PAGE>
<PAGE>
<TABLE>
Page 16
ITEM 6.(a) (continued)
EXHIBIT 11: COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS EXCEPT PER-SHARE DATA)
<CAPTION>
THIRTEEN WEEKS ENDED
SEPT 2, 1995 SEPT 3, 1994
FULLY DILUTED EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE
<S> <C> <C>
Average common shares outstanding...... 34,541 35,261
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)........................ 1,010 1,413
TOTALS.............. 35,551 36,674
Net Income............................. $ 9,456 $24,510
Fully diluted earnings per common and
common equivalent share.............. $0.27 $0.67
Page 17
</TABLE>
</PAGE>
<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 SEPTEMBER
2, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-01-1996
<PERIOD-END> SEP-02-1995
<CASH> 8,706
<SECURITIES> 0
<RECEIVABLES> 21,164
<ALLOWANCES> 1,489
<INVENTORY> 14,492
<CURRENT-ASSETS> 70,776
<PP&E> 649,259
<DEPRECIATION> 266,486
<TOTAL-ASSETS> 511,629
<CURRENT-LIABILITIES> 120,608
<BONDS> 76,041
<COMMON> 436
0
0
<OTHER-SE> 252,098
<TOTAL-LIABILITY-AND-EQUITY> 511,629
<SALES> 271,182
<TOTAL-REVENUES> 272,225
<CGS> 78,204
<TOTAL-COSTS> 237,987
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 901
<INCOME-PRETAX> 15,130
<INCOME-TAX> 5,674
<INCOME-CONTINUING> 9,456
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,456
<EPS-PRIMARY> $0.27
<EPS-DILUTED> $0.27
</TABLE>
