-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GMUlylA68/cxUNpRNuSQs3iT9J1JsxBgJl0h0+GPSOsCYbfdoc1b+13BHXj2lFiE SAH71GZvgbTzJOqzpodzgw== 0001007507-00-000019.txt : 20000417 0001007507-00-000019.hdr.sgml : 20000417 ACCESSION NUMBER: 0001007507-00-000019 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000229 FILED AS OF DATE: 20000414 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORRISON MANAGEMENT SPECIALISTS INC CENTRAL INDEX KEY: 0001007507 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 631155966 STATE OF INCORPORATION: GA FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-14194 FILM NUMBER: 602273 BUSINESS ADDRESS: STREET 1: 1955 LAKE PARK DR SE STREET 2: STE 400 CITY: SMYRNA STATE: GA ZIP: 30080-8855 BUSINESS PHONE: 7704373300 MAIL ADDRESS: STREET 1: 1955 LAKE PARK DR SE STREET 2: STE 400 CITY: SMYRNA STATE: GA ZIP: 30080-8855 FORMER COMPANY: FORMER CONFORMED NAME: MORRISON HEALTH CARE INC DATE OF NAME CHANGE: 19960209 10-Q 1 FORM 10-Q FOR THE NINE MONTHS ENDED FEB. 29, 2000 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 February 29, 2000 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 1-14194 MORRISON MANAGEMENT SPECIALISTS, INC. (Exact name of Registrant as specified in charter) GEORGIA 63-1155966 ________________________________________________________________________________ (State or other jurisdiction of incorporation or (I.R.S. Employer organization) identification No.) 1955 Lake Park Drive, Suite 400, Smyrna, GA 30080-8855 ________________________________________________________________________________ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (770) 437-3300 _____________________________ 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 11,711,055 ________________________________________________________________________________ (Number of shares of $0.01 par value common stock outstanding as of March 31, 2000) INDEX ----- PART I Financial Information Page Number ------ Item 1. Financial Statements Condensed Consolidated Balance Sheets as of February 29, 2000 and May 31, 1999..................... 3 Condensed Consolidated Statements of Income for the Three Months and Nine Months Ended February 29, 2000 and February 28, 1999................ 4 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended February 29, 2000 and February 28, 1999...................................... 5 Notes to Condensed Consolidated Financial Statements... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................... 7-9 Item 3. Quantitative and Qualitative Disclosures about Market Risk................................................... 9 PART II Other Information Item 1. Legal Proceedings...................................... 10 Item 2. Changes in Securities.................................. 10 Item 3. Defaults upon Senior Securities........................ 10 Item 4. Submission of Matters to a Vote of Security Holders.... 10 Item 5. Other Information...................................... 10 Item 6. Exhibits and Reports on Form 8-K....................... 10 Signatures............................................................. 11 Index to Exhibits, Financial Statement Schedules, and Reports on Form 8-K............................................................... 12 PART I - FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS Morrison Management Specialists, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (In thousands, except per share data) As of As of February 29, May 31, 2000 1999 -------------------------------- (Unaudited)
Assets Current assets: Cash and short-term investments........... $ 10,280 $ 2,780 Receivables - accounts and notes (net).... 36,364 34,035 Inventories............................... 4,221 2,940 Prepaid expenses.......................... 1,375 2,312 Deferred income tax benefits.............. 1,511 1,747 -------------------------------- Total current assets.................... 53,751 43,814 -------------------------------- Property and equipment - at cost............ 35,063 30,975 Less accumulated depreciation............. 14,366 12,376 -------------------------------- 20,697 18,599 Cost in excess of net assets acquired, net.. 18,934 18,331 Other assets................................ 21,649 22,183 -------------------------------- Total assets............................ $115,031 $102,927 ================================ Liabilities and Stockholders' Equity Current liabilities: Accounts payable.......................... $ 20,575 $ 15,091 Other accrued liabilities................. 16,519 12,917 Current portion of long-term debt......... 45 136 -------------------------------- Total current liabilities............... 37,139 28,144 -------------------------------- Long-term debt.............................. 45,751 49,305 Other deferred liabilities.................. 12,563 10,915 Stockholders' equity: Common stock, $0.01 par value (authorized 100,000 shares; issued: 12,989 and 11,977 shares, FY2000 and FY1999, respectively)......... 130 120 Capital in excess of par value............ - 3,324 Unearned ESOP shares (2,475) (2,806) Deferred Compensation Plan liability payable in Company stock................ 1,683 1,518 Company stock held by Deferred Compensation Plan....................... (1,683) (1,518) Retained earnings......................... 21,923 13,925 -------------------------------- Total stockholders' equity.................. 19,578 14,563 -------------------------------- Total liabilities and stockholders' equity.................. $115,031 $102,927 ================================
The accompanying notes are an integral part of the financial statements. Morrison Management Specialists, Inc. and Subsidiaries Condensed Consolidated Statements of Income (In thousands, except per share data) (Unaudited) For the Three Months Ended For the Nine Months Ended February 29, February 28, February 29, February 28, 2000 1999 2000 1999 ------------------------------------------------------------------
Revenues........................... $115,024 $84,085 $310,192 $234,164 Operating expenses................. 99,599 70,314 263,626 195,541 ------------------------------------------------------------------ Gross profit....................... 15,425 13,771 46,566 38,623 Selling, general and administra- tive expenses.................... 10,797 7,876 28,935 20,789 ------------------------------------------------------------------ 4,628 5,895 17,631 17,834 Interest expense, net of interest income........................... 752 644 2,055 1,708 ------------------------------------------------------------------ Income before provision for income taxes............................ 3,876 5,251 15,576 16,126 Provision for federal and state income taxes..................... 1,546 2,021 6,153 6,320 ------------------------------------------------------------------ Net income......................... $ 2,330 $ 3,230 $ 9,423 $ 9,806 ================================================================== Earnings per share - Basic......... $ 0.19 $ 0.26 $ 0.73 $ 0.75 ================================================================== Earnings per share - Diluted....... $ 0.18 $ 0.24 $ 0.71 $ 0.73 ================================================================== Weighted-average common shares - Basic................... 12,812 13,054 12,978 13,129 Net effect of dilutive stock options.......................... 357 300 379 253 ----------------------------------------------------------------- Weighted-average common and common equivalent shares - Diluted...... 13,169 13,354 13,357 13,382 ==================================================================
The accompanying notes are an integral part of the financial statements. Morrison Management Specialists, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Amounts in thousands) (Unaudited) For the Nine Months Ended February 29, February 28, 2000 1999 ------------------------------
Operating activities: Net income........................................ $ 9,423 $ 9,806 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation.................................. 3,515 2,182 Amortization of intangibles................... 806 610 Deferred income taxes......................... 385 (1,344) Gain on disposal of assets.................... (153) (101) Changes in operating assets and liabilities: Receivables................................ 575 (5,994) Inventories................................ (1,281) (80) Prepaid and other assets................... (1,301) (2,921) Accounts payable, accrued and other liabilities........................ 10,734 (1,106) Income taxes receivable.................... (336) 0 ------------------------------ Net cash provided by operating activities......... 22,367 1,052 ------------------------------ Investing activities: Purchases of property and equipment............... (6,517) (7,663) Proceeds from disposal of assets.................. 1,057 763 Cost of acquisitions, net......................... (1,354) (6,528) ------------------------------ Net cash used by investing activities............. (6,814) (13,428) ------------------------------ Financing activities: Net change in long-term debt...................... (3,645) 16,629 Proceeds from the issuance of stock............... 808 522 Proceeds from exercise of stock options........... 2,151 3,855 Purchase of Treasury Stock........................ (6,510) (10,134) Dividends paid.................................... (1,390) (1,472) ESOP shares released.............................. 533 359 ------------------------------ Net cash (used)/ provided by financing activities. (8,053) 9,759 ------------------------------ Increase/(decrease) in cash and short-term investments..................................... 7,500 (2,617) Cash and short-term investments at the beginning of the period......................... 2,780 5,720 ------------------------------ Cash and short-term investments at the end of the period............................... $10,280 $ 3,103 ==============================
The accompanying notes are an integral part of the financial statements. Morrison Management Specialists, Inc. and Subsidiaries 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 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. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended May 31, 1999. Certain prior reported amounts and balances have been reclassified to conform to the current year presentation. NOTE B - SUBSEQUENT EVENTS Declaration of Cash and Stock Dividends On March 28, 2000, the Company's Board of Directors declared a quarterly cash dividend of $0.04 per share of outstanding common stock payable on April 28, 2000 to shareholders of record at the close of business on April 14, 2000. The Company's Board of Directors also declared a 10% stock dividend on the Company's outstanding common stock. The stock dividend is payable on May 19, 2000 to shareholders of record at the close of business on May 1, 2000. The condensed consolidated balance sheet as of February 29, 2000 and the results of operations, common shares issued, basic and diluted weighted average number of shares outstanding and the earnings per share information for all prior reporting periods presented have been restated to reflect the effects of the stock dividend. ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The discussion below relates to the results of operations of Morrison Management Specialists, Inc. ("MMSI" or the "Company") for the quarter and nine months ended February 29, 2000 compared with the results for the comparable periods of the prior year. MANAGED VOLUME The Company generally performs its services pursuant to either management fee or profit and loss contracts. While actual services performed are the same, revenue recognition varies by type of contract. In a management fee account, MMSI manages the services and facilities, but the client is responsible for all or nearly all the costs. Revenues and fees are recognized for the amount of the contractually agreed-upon management fee and any earned incentives plus the amount of any expenses or employee payroll costs paid by the Company and charged back to the client. In a profit and loss account, MMSI assumes the risk of profit or loss for the food service operation. For such accounts, the amount of revenue reported is the actual revenue generated from meals served to patients, client employees and visitors. Because of the difference between the amount of revenue that is reported for the fee account (net management fees plus reimbursed expenses) and the profit and loss account (gross revenues of meal sales), Management uses the concept of managed volume to evaluate the Company's true growth. Managed volume is defined by MMSI as the total costs of operating the food services, regardless of which type of contract exists with the client. Management believes managed volume is its best indicator of performance because it measures total activity from all client accounts and provides an indication of what gross revenues would be if the Company performed all services pursuant to profit and loss contracts. Management uses managed volume as an additional indicator of performance and not as a replacement of measures such as revenues, as defined and required by generally accepted accounting principles. Managed volume from operations increased $30.3 million or 18.0% to $198.9 million for the quarter and increased $96.2 million or 20.6% to $562.4 million for the nine months ended February 29, 2000 over the corresponding prior year periods due to new accounts, acquired accounts and growth in existing accounts. RESULTS OF OPERATIONS The Company's net income from continuing operations decreased 27.9% to $2.3 million for the quarter and decreased 3.9% to $9.4 million for the nine months ended February 29, 2000, compared with net income of $3.2 million and $9.8 million reported for the corresponding periods of the prior fiscal year. Earnings before interest and taxes decreased 21.5% or $1.3 million to $4.6 million for the quarter and decreased 1.1% or $0.2 million to $17.6 million for the nine months ended February 29, 2000. The decrease from the corresponding prior year periods was due to start-up costs and expenses for recruiting, training, relocations and promotions incurred by the Company associated with the significant volume of new business. In particular, in January, 2000, Tenet Healthcare Corp., one of the nation's largest healthcare systems, awarded the Company a five-year contract to provide food and nutrition services to 58 of Tenet's acute care hospitals. Under the contract, the Company will manage an estimated $100 million in annual managed volume. The Company believes the decline in earnings to be short-term and that the long-term rewards will be significant. The Company continues to experience growth in continuing accounts and high account retention. Revenue from operations increased $30.9 million or 36.8% to $115.0 million for the quarter and increased $76.0 million or 32.5% to $310.2 million for the nine months ended February 29, 2000 over the corresponding prior year periods. The increase was primarily attributable to significant new business, the conversion of client-paid payroll to Company-paid payroll in continuing accounts and accounts acquired in acquisitions. OPERATING EXPENSES Operating expenses increased $29.3 million or 41.6% to $99.6 million for the quarter and increased $68.1 million or 34.8% to $263.6 million for the nine months ended February 29, 2000. These expenses have increased over the prior year periods primarily as a result of start-up costs associated with the addition of a significant level of new and acquired accounts and the conversion of client-paid payroll to Company-paid payroll in continuing accounts. Selling, general and administrative expenses increased $2.9 million or 37.1% to $10.8 million for the quarter and increased $8.1 million or 39.2% to $28.9 million for the nine months ended February 29, 2000 as compared to the corresponding periods of the prior year. This increase is due to start-up and opening costs related to a significant level of new business and prior year acquisitions which resulted in increased investments in human resources recruiting, training and development, relocations and promotions. INTEREST EXPENSE, Net of Interest Income Net interest expense increased from $0.6 million to $0.8 million for the quarter and increased from $1.7 million to $2.1 million for the nine months ended February 29, 2000 as compared to the corresponding periods of the prior year. The increase in interest is attributable to a higher effective interest rate. INCOME TAXES The effective income tax rate on continuing operations for the quarter and the nine months ended February 29, 2000 was 39.9% and 39.5%, respectively, as compared to 38.5% and 39.2%, respectively, for the quarter and the nine months ended February 28, 1999. LIQUIDITY AND CAPITAL RESOURCES Total assets at February 29, 2000 were $115.0 million, a $12.1 million increase over $102.9 million as of the prior fiscal year end. This increase is attributable to an increase in current assets of $9.9 million comprised of increases in cash, accounts receivable, inventories and an increase in long-term assets of $2.2 million comprised of increases in fixed assets and goodwill. Total liabilities at February 29, 2000 were $95.5 million, a $7.1 million increase from $88.4 million as of the end of the prior fiscal year. This increase was primarily due to the net of a $5.5 million increase in accounts payable, a $1.1 increase in accrued payroll and related costs, a $1.6 million increase in deferred other liabilities and a $3.6 decrease in long-term debt. The Company expects that funds generated from operations and existing lines of credit will be sufficient to meet its normal operating requirements over the near term. See "Special Note Regarding Forward-Looking Information." YEAR 2000 The Company has not experienced any disruptions in its business as a result of the transition to the Year 2000. However, the Company cannot give any assurances that the Company will not encounter year 2000 related issues in the future. The Company will continue to monitor its software programs and information systems for year 2000 issues. See "Special Note Regarding Forward-Looking Information." SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION The foregoing sections contain "forward-looking" statements which represent the Company's expectations or beliefs concerning future events, including statements regarding liquidity and capital resources and impact of the year 2000 issue. 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: healthcare spending trends; the growth of systems and group purchasing organizations; changes in healthcare regulations; increased competition in the healthcare food and nutrition market; customer acceptance of the Company's cost saving programs; impact of the year 2000; and changes in laws and regulations affecting labor and employee benefit costs. SUBSEQUENT EVENTS Declaration of Cash and Stock Dividends On March 28, 2000, the Company's Board of Directors declared a quarterly cash dividend of $0.04 per share of outstanding common stock payable on April 28, 2000 to shareholders of record at the close of business on April 14, 2000. The Company's Board of Directors also declared a 10% stock dividend on the Company's outstanding common stock. The stock dividend is payable on May 19, 2000 to shareholders of record at the close of business on May 1, 2000. The condensed consolidated balance sheet as of February 29, 2000 and the results of operations, common shares issued, basic and diluted weighted average number of shares outstanding and the earnings per share information for all prior reporting periods presented have been restated to reflect the effects of the stock dividend. ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's swap agreements expose it to market and credit risks which are inherent in all interest rate swaps. Counterparties to these agreements are major financial institutions. Consequently, the Company believes that the credit risk of its swap agreements is minimal. The Company does not believe that any reasonably likely change in near-term interest rates would have a material adverse effect on the future earnings or cash flows of the Company. 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 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 None ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: Exhibit 27 Financial Data Schedule - For the Nine Months ended February 29, 2000 (b) Reports on Form 8-K: None 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 MANAGEMENT SPECIALISTS, INC. ------------------------------------- (Registrant) 04/14/00 By: /S/ K. WYATT ENGWALL - --------- --------------------------- DATE K. WYATT ENGWALL Senior Vice President, Finance (Senior Vice President and Principal Accounting Officer) MORRISON MANAGEMENT SPECIALISTS, INC. LIST OF EXHIBITS Exhibit Number Description - ------------------------------------------------------------------------------- 27 Financial Data Schedule - For the Nine Months ended February 29, 2000 EX-27 2 FDS FOR THE NINE MONTHS ENDED FEBRUARY 29, 2000
5 This schedule contains summary financial information extracted from the consolidated balance sheets and consolidated statements of income in the Company's Quarterly Report to Shareholders for the quarter ended February 29, 2000 and is qualified in its entirety by reference to such financial statements. 0001007507 MORRISON MANAGEMENT SPECIALISTS, INC. 1000 9-MOS MAY-31-2000 JUN-01-1999 FEB-29-2000 10,280 0 30,947 725 4,221 53,751 35,063 14,366 115,031 37,139 45,751 0 0 130 19,448 115,031 310,192 310,192 263,626 263,626 0 0 2,341 15,576 6,153 9,423 0 0 0 9,423 0.73 0.71 On March 28, 2000, the Company's Board of Directors declared a 10% stock dividend payble on May 19, 2000 to shareholders of record on May 1, 2000. Prior Financial Data Schedules have not been restated to reflect the stock dividend.
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