Morgan's Foods, Inc. Releases Earnings

        Print
| Source: Morgan's Foods

CLEVELAND, Dec. 20, 2013 (GLOBE NEWSWIRE) -- Morgan's Foods, Inc. (OTC:MRFD), today announced third quarter fiscal 2014 results.

Results of Morgan's Foods, Inc. and its consolidated subsidiaries for the third quarter and third quarter year to date of fiscal 2014 and 2013 are summarized below:

  Third Quarter Ended Thirty-six Weeks Ended
  November 10, 2013 November 4, 2012 November 10, 2013 November 4, 2012
Revenues  $ 19,050,000  $ 20,060,000  $ 59,732,000  $ 61,016,000
Adjusted EBITDA*  1,390,000  1,650,000  4,561,000  5,176,000
Cash Flow from Operations  89,000  93,000  2,900,000  2,133,000
         
Cash Balance (unrestricted)  2,676,000  2,971,000  2,676,000  2,971,000
Restricted Cash  2,773,000  350,000  2,773,000  350,000
Bank Debt  8,731,000  8,216,000  8,731,000  8,216,000
Shares Outstanding  4,048,147  2,934,995  4,048,147  2,934,995
         
Comparable Restaurant Revenue -3.0% 5.8% -0.1% 7.3%
Total Restaurants  69  75  69  75
*Adjusted EBITDA is presented as a performance measure because management believes that it best represents the operating metrics of the Company without the potentially distortive effects of financing and fixed asset levels. The adjustments were made to remove non-operating, non-recurring items from EBITDA to improve comparability. These adjustments are outlined in the reconciliation attached to this release.

The Company recorded a comparable restaurant revenue decrease of 3.0% in the fiscal quarter ended November 10, 2013 compared to a 5.8% increase for the prior year quarter. The decrease in the current year quarter was primarily the result of weak sales in the KFC brand. The increase in the prior year quarter was the result of positive sales growth in both the KFC and Taco bell concepts and both periods included the effects of certain temporary and permanent restaurant closings. The comparable decrease of 0.1% and the comparable increase of 7.3% for the thirty-six weeks ended November 10, 2013 and November 4, 2012 respectively resulted from the same factors as the quarterly results.

Cash flow from operations is taken from the Company's financial statements and includes a number of working capital reconciling items such as changes in accruals, prepaids and accounts payable. Additionally, the Company made rent payments on capitalized leases of $586,000 in the third quarter of fiscal 2014 and $572,000 in the third quarter of fiscal 2013.

The Company reported a pre-tax loss for the third quarter of fiscal 2014 of $244,000 compared to pre-tax net income of $196,000 in the comparable prior year quarter. The reduction in net income reflects lower sales as well as $336,000 of financing cost write offs related to the refinancing of debt and $130,000 of unrealized loss on the change in market value of derivatives during the current year quarter compared to none in the prior year quarter partially offset by decreases of $73,000 in bank interest expense and $39,000 in capitalized lease interest compared to the prior year.

About the Company

Morgan's Foods, Inc. operates 53 KFC restaurants, 4 Taco Bell restaurants, 9 KFC/Taco Bell "2n1's" and 3 Taco Bell/Pizza Hut Express "2n1's".

Forward-Looking Statements and Use of Non-GAAP Financial Metrics

This press release includes certain non-GAAP financial measures. The reconciliations of such measures to the most comparable GAAP figures in accordance with Regulation G are included herein.

Statements in this release that are not historical in nature are forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual events or results to differ materially from those expressed or implied in this release. The forward-looking statements reflect the Company's current expectations based upon data available at the time of the statement. Such risks and uncertainties include both Company risks and uncertainties and general economic and industry risks and uncertainties. Such risks and uncertainties include, but are not limited to, the Company's debt covenant compliance, actions that lenders may take with respect to any debt covenant violations, if necessary, the Company's ability to obtain waivers of any debt covenant violations or to pay all of its current and long-term obligations and those risks described in Part I Item 1A.("Risk Factors") of the Company's Form 10-K for the fiscal year ended March 3, 2013. Economic and industry risks and uncertainties include, but are not limited to, franchisor promotions, business and economic conditions, legislation and governmental regulation, competition, success of operating initiatives and advertising and promotional efforts, volatility of commodity costs and increases in minimum wage and other operating costs, availability and cost of land and construction, consumer preferences, spending patterns and demographic trends. The Company does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after the date of this release.

 
 
MORGAN'S FOODS, INC.
SELECTED FINANCIAL INFORMATION (unaudited)
         
  Quarter Ended Thirty-six Weeks Ended
  November 10, 2013 November 4, 2012 November 10, 2013 November 4, 2012
Revenues  $ 19,050,000  $ 20,060,000  $ 59,732,000  $ 61,016,000
Cost of sales:        
Food, paper and beverage 6,137,000 6,466,000 19,482,000 19,769,000
Labor and benefits 5,448,000 5,747,000 17,049,000 17,261,000
Restaurant operating expenses 4,635,000 5,073,000 14,759,000 15,333,000
Depreciation and amortization 707,000 644,000 2,071,000 1,869,000
G&A expenses 1,068,000 1,140,000 3,443,000 3,524,000
Loss (gain) on restaurant assets 205,000 106,000 736,000 564,000
Operating income 850,000 884,000 2,192,000 2,696,000
Interest Expense:        
Bank debt and notes payable  127,000  200,000  461,000  647,000
Capital leases  465,000  504,000  1,406,000  1,512,000
Other income and expense, net  372,000  (16,000)  438,000  (47,000)
Unrealized loss on derivatives  130,000  --   130,000  -- 
Income (loss) before income taxes  (244,000)  196,000  (243,000)  584,000
Income tax provision  63,000  71,000  234,000  214,000
Net Income (loss)  $ (307,000)  $ 125,000  $ (477,000)  $ 370,000
Basic net income (loss) per common share  $ (0.08)  $ 0.04  $ (0.12)  $ 0.13
Diluted net income (loss) per common share  $ (0.08)  $ 0.04  $ (0.12)  $ 0.13
Basic average number of shares outstanding 4,044,147 2,934,995 3,875,374 2,934,995
Diluted average number of shares outstanding 4,044,147 2,984,694 3,875,374 2,953,294
         
  November 10, 2013 March 3, 2013    
ASSETS        
Current assets  $ 8,417,000  $ 6,049,000    
Property and equipment, net  34,799,000  34,401,000    
Other assets  352,000  411,000    
Intangibles  9,487,000  9,639,000    
Total assets  $ 53,055,000  $ 50,500,000    
LIABILITIES AND SHAREHOLDERS' EQUITY        
Current liabilities  $ 8,308,000  $ 8,279,000    
Long-term debt  7,789,000  7,338,000    
Long-term capital lease obligations  22,839,000  22,079,000    
Other long-term liabilities  10,541,000  10,812,000    
Deferred tax liabilities  3,367,000  3,175,000    
Total shareholder's equity  211,000  (1,183,000)    
Total liabilities and shareholders' equity  $ 53,055,000  $ 50,500,000    
 
 
 
Reconciliation of Non-GAAP Measures
         
  Third Quarter Ended Thirty-six Weeks Ended
  November 10, 2013 November 4, 2012 November 10, 2013 November 4, 2012
Net income from continuing operations  $ (307,000)  $ 125,000  $ (477,000)  $ 370,000
Provision for income taxes  63,000  71,000  234,000  214,000
Interest expense, bank debt  127,000  200,000  461,000  647,000
Interest expense, capitalized leases  465,000  504,000  1,406,000  1,512,000
Depreciation and amortization  707,000  644,000  2,071,000  1,869,000
EBITDA  $ 1,055,000  $ 1,544,000  $ 3,695,000  $ 4,612,000
Loss on restaurant assets  205,000  106,000  736,000  564,000
Unrealized loss on derivatives  130,000  --   130,000  -- 
Adjusted EBITDA  $ 1,390,000  $ 1,650,000  $ 4,561,000  $ 5,176,000

The above chart outlines the financial statement line items that reconcile the Company's net income from continuing operations to EBITDA (earnings before interest, taxes, depreciation and amortization). Additionally, non-recurring, non-operating items are removed to arrive at Adjusted EBITDA. As a result, Adjusted EBITDA improves the comparability of EBITDA as a relative measure of the Company's performance from period to period.
 

Ken Hignett
(216) 359-2102