CLEVELAND, July 10, 2013 (GLOBE NEWSWIRE) -- Morgan's Foods, Inc. (OTC:MRFD), today announced first quarter fiscal 2014 results.
Results of Morgan's Foods, Inc. and its consolidated subsidiaries for the first quarter of fiscal 2014 and 2013 are summarized below.
| First Quarter Ended | ||
| May 26, 2013 | May 20, 2012 | |
| Revenues | $ 20,930,000 | $ 20,314,000 |
| Adjusted EBITDA* | 1,889,000 | 1,816,000 |
| Cash Flow from Operations | 3,355,000 | 2,386,000 |
| Cash Balance | 4,894,000 | 2,971,000 |
| Bank Debt | 6,406,000 | 8,216,000 |
| Shares Outstanding | 4,039,147 | 2,934,995 |
| Comparable Restaurant Revenue | 5.8% | 9.6% |
| Total Restaurants | 73 | 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 comparable restaurant revenue increases of 5.8% in the fiscal quarter ended May 26, 2013 compared to 9.6% for the prior year quarter. The increases in both periods were partially offset by certain temporary and permanent restaurant closings.
Cash balances as shown do not include restricted cash. 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. In the Company's payment cycle, many payments are made on the first of the calendar month and thus can improve cash flow from operations when the period end changes from a date after the first of the month to a date prior to the first as it did in the first quarter of the 2014 fiscal year which began on March 4, 2013 and ended on May 26, 2103. Additionally, the Company made rent payments on capitalized leases of $536,000 in the first quarter of fiscal 2014 and $529,000 in the prior year quarter.
The Company reported pre-tax net income for the first quarter of fiscal 2014 of $492,000 compared to pre-tax net income of $110,000 in the comparable prior year quarter. The improvement in net income reflects improved restaurant operating efficiencies due to higher sales levels, reductions in general and administrative expenses, a reduction of $311,000 in loss on restaurant assets and reductions of $50,000 in bank interest expense and $25,000 in capitalized lease interest expense. These improvements were partially offset by a penalty of $100,000 for the closure of a franchised restaurant prior to the expiration of the franchise agreement.
About the Company
Morgan's Foods, Inc. operates 57 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 | ||
| May 26, 2013 | May 20, 2012 | |
| Revenues | $ 20,930,000 | $ 20,314,000 |
| Cost of sales: | ||
| Food, paper and beverage | 6,863,000 | 6,597,000 |
| Labor and benefits | 5,957,000 | 5,751,000 |
| Restaurant operating expenses | 4,971,000 | 4,975,000 |
| Depreciation and amortization | 681,000 | 604,000 |
| G&A expenses | 1,168,000 | 1,194,000 |
| Loss on restaurant assets | 59,000 | 370,000 |
| Operating income | 1,231,000 | 823,000 |
| Interest Expense: | ||
| Bank debt and notes payable | 180,000 | 230,000 |
| Capital leases | 477,000 | 502,000 |
| Other income and expense, net | 82,000 | (19,000) |
| Income before income taxes | 492,000 | 110,000 |
| Income tax provision | 85,000 | 71,000 |
| Net Income | $ 407,000 | $ 39,000 |
| Basic net income per common share | $ 0.11 | $ 0.01 |
| Diluted net income per common share | $ 0.11 | $ 0.01 |
| Basic average number of shares outstanding | 3,542,519 | 2,934,995 |
| Diluted average number of shares outstanding | 3,613,868 | 2,934,995 |
| May 26, 2013 | March 3, 2013 | |
| ASSETS | ||
| Current assets | $ 7,588,000 | $ 6,049,000 |
| Property and equipment, net | 35,004,000 | 34,401,000 |
| Other assets | 374,000 | 411,000 |
| Intangibles | 9,601,000 | 9,639,000 |
| Total assets | $ 52,567,000 | $ 50,500,000 |
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||
| Current liabilities | $ 10,092,000 | $ 8,279,000 |
| Long-term debt | 5,527,000 | 7,338,000 |
| Long-term capital lease obligations | 22,022,000 | 22,079,000 |
| Other long-term liabilities | 10,690,000 | 10,812,000 |
| Deferred tax liabilities | 3,244,000 | 3,175,000 |
| Total shareholder's equity (deficit) | 992,000 | (1,183,000) |
| Total liabilities and shareholders' equity | $ 52,567,000 | $ 50,500,000 |
Reconciliation of Non-GAAP Measures
| First Quarter Ended | ||
| May 26, 2013 | May 20, 2012 | |
| Net income from continuing operations | $ 407,000 | $ 39,000 |
| Provision for income taxes | 85,000 | 71,000 |
| Interest expense, bank debt | 180,000 | 230,000 |
| Interest expense, capitalized leases | 477,000 | 502,000 |
| Depreciation and amortization | 681,000 | 604,000 |
| EBITDA | $ 1,830,000 | $ 1,446,000 |
| Loss on restaurant assets | 59,000 | 370,000 |
| Adjusted EBITDA | $ 1,889,000 | $ 1,816,000 |
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.