Morgan’s Foods, Inc. Third Quarter Report

December 28, 2011



Morgan’s Foods, Inc. (OTCPink: MRFD.PK) reported revenues for its third quarter ended November 6, 2011 fell 9.3% to $19.3 million compared to $21.3 million during the third quarter of fiscal 2011.  Revenues for the first nine months of fiscal 2012 dropped 10.4% to $58.4 million versus $65.1 million during the same period in fiscal 2011.  Revenues for fiscal 2012 have been negatively impacted by the permanent closing of 16 restaurants and the removal of the Taco Bell concept from three locations.

The net loss for the third quarter of fiscal 2012 increased to $93 thousand or $(0.03) per share compared to a net loss of $54 thousand or $(0.02) per share during the third quarter of fiscal 2011.  For the first nine months of fiscal 2012, the company reported a net loss of $567 thousand or $(0.19) per share versus a net profit of $684 thousand or $0.23 per share during the same period in fiscal 2011.  The loss for the third quarter increased only modestly given the nearly $2 million drop in revenue as the company was able to reduce its material expenses across the board.  While the company was also successful reducing expenses during the first nine months of fiscal 2012, it was not enough to keep pace with the loss of revenue resulting in the loss for the period.  Due to the restaurant closures noted above, the company also reported a loss on restaurant assets of $267 thousand in the third quarter and $626 thousand in the nine month period during fiscal 2012 compared to $39 thousand and $138 thousand, respectively during fiscal 2011.

The balance sheet was strained at the end of the third quarter as the company was not in compliance with multiple compliance ratios associated with its debt arrangements.  The company had current assets of $5.2 million, total assets of $41.41 million, current liabilities of $33.16 million and total liabilities of $41.34 million.  However, subsequent to the end of the third quarter, the company refinanced substantially all of the debt reflected on its balance sheet.  The refinancing involved the sale and leaseback of 29 restaurant properties for approximately $22 million and a new term loan in the amount of $8.25 million.

Morgan’s Foods, Inc. operates 57 KFC restaurants, 5 Taco Bell restaurants, 10 KFC/Taco Bell “2n1′s”, 3 Taco Bell/Pizza Hut Express “2n1′s”, and 1 KFC/A&W “2n1″.

Source: Morgan’s Foods, Inc.


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