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.