e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934. |
For the quarterly period ended August 15, 2010
or
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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 1-08395
Morgan’s Foods, Inc.
(Exact name of registrant as specified in its charter)
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| Ohio
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34-0562210 |
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| (State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.) |
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| 4829 Galaxy Parkway, Suite S, Cleveland, Ohio
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44128 |
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| (Address of principal executive offices)
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(Zip Code) |
(216) 359-9000
(Registrant’s telephone number, including area code)
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 þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes
o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated
filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.
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| Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company þ |
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(do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
Yes o No þ
As of September 24, 2010, the issuer had 2,934,995 common shares outstanding.
TABLE OF CONTENTS
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
MORGAN’S FOODS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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Quarter Ended |
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August 15, 2010 |
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August 16, 2009 |
Revenues |
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$ |
21,673,000 |
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$ |
23,202,000 |
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Cost of sales: |
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Food, paper and beverage |
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6,728,000 |
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7,356,000 |
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Labor and benefits |
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6,348,000 |
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6,405,000 |
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Restaurant operating expenses |
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5,717,000 |
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6,004,000 |
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Depreciation and amortization |
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648,000 |
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711,000 |
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General and administrative expenses |
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1,419,000 |
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1,437,000 |
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Loss on restaurant assets |
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49,000 |
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15,000 |
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Operating income |
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764,000 |
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1,274,000 |
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Interest expense: |
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Prepayment and deferred financing costs |
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— |
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82,000 |
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Bank debt and notes payable |
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534,000 |
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591,000 |
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Capital leases |
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24,000 |
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25,000 |
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Other income and expense, net |
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(17,000 |
) |
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(43,000 |
) |
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Income before income taxes |
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223,000 |
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619,000 |
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Provision for income taxes |
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60,000 |
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299,000 |
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Net income |
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$ |
163,000 |
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$ |
320,000 |
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Basic net income per common share: |
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$ |
0.06 |
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$ |
0.11 |
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Diluted net income per common share: |
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$ |
0.05 |
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$ |
0.11 |
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Basic weighted average number of shares outstanding |
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2,934,995 |
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2,934,995 |
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Diluted weighted average number of shares outstanding |
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3,018,782 |
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2,990,361 |
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See notes to these consolidated financial statements.
2
MORGAN’S FOODS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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Twenty-four Weeks Ended |
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August 15, 2010 |
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August 16, 2009 |
Revenues |
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$ |
43,843,000 |
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$ |
46,133,000 |
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Cost of sales: |
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Food, paper and beverage |
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13,485,000 |
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14,766,000 |
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Labor and benefits |
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12,579,000 |
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12,833,000 |
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Restaurant operating expenses |
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11,351,000 |
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11,880,000 |
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Depreciation and amortization |
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1,295,000 |
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1,428,000 |
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General and administrative expenses |
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2,739,000 |
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2,846,000 |
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Loss on restaurant assets |
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99,000 |
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21,000 |
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Operating income |
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2,295,000 |
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2,359,000 |
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Interest expense: |
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Prepayment and deferred financing costs |
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98,000 |
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82,000 |
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Bank debt and notes payable |
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1,095,000 |
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1,216,000 |
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Capital leases |
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48,000 |
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50,000 |
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Other income and expense, net |
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72,000 |
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(87,000 |
) |
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Income before income taxes |
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982,000 |
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1,098,000 |
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Provision for income taxes |
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244,000 |
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424,000 |
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Net income |
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$ |
738,000 |
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$ |
674,000 |
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Basic net income per common share: |
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$ |
0.25 |
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$ |
0.23 |
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Diluted net income per common share: |
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$ |
0.24 |
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$ |
0.23 |
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Basic weighted average number of shares outstanding |
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2,934,995 |
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2,934,995 |
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Diluted weighted average number of shares outstanding |
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3,026,208 |
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2,976,733 |
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See notes to these consolidated financial statements
3
MORGAN’S FOODS, INC.
CONSOLIDATED BALANCE SHEET
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August 15, 2010 |
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February 28, 2010 |
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(UNAUDITED) |
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ASSETS |
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Current assets: |
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Cash and equivalents |
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$ |
4,584,000 |
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$ |
4,205,000 |
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Receivables |
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427,000 |
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470,000 |
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Inventories |
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708,000 |
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682,000 |
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Prepaid expenses |
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420,000 |
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742,000 |
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Deferred tax asset |
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15,000 |
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15,000 |
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Assets held for sale |
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640,000 |
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678,000 |
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6,794,000 |
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6,792,000 |
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Property and equipment: |
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Land |
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9,308,000 |
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9,558,000 |
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Buildings and improvements |
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20,657,000 |
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20,960,000 |
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Property under capital leases |
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1,314,000 |
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1,314,000 |
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Leasehold improvements |
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10,322,000 |
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10,373,000 |
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Equipment, furniture and fixtures |
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20,371,000 |
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20,337,000 |
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Construction in progress |
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112,000 |
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626,000 |
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62,084,000 |
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63,168,000 |
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Less accumulated depreciation and amortization |
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31,374,000 |
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31,941,000 |
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30,710,000 |
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31,227,000 |
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Other assets |
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508,000 |
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546,000 |
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Franchise agreements, net |
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1,069,000 |
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1,133,000 |
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Goodwill |
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9,227,000 |
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9,227,000 |
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$ |
48,308,000 |
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$ |
48,925,000 |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current liabilities: |
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Long-term debt, current |
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$ |
3,211,000 |
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$ |
3,165,000 |
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Current maturities of capital lease obligations |
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46,000 |
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44,000 |
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Accounts payable |
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3,788,000 |
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3,683,000 |
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Accrued liabilities |
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4,293,000 |
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3,884,000 |
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11,338,000 |
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10,776,000 |
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Long-term debt |
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27,712,000 |
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29,725,000 |
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Long-term capital lease obligations |
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1,038,000 |
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1,061,000 |
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Other long-term liabilities |
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3,731,000 |
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3,853,000 |
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Deferred tax liabilities |
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2,128,000 |
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1,887,000 |
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SHAREHOLDERS’ EQUITY |
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Preferred shares, 1,000,000 shares authorized,
no shares outstanding |
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— |
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— |
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Common stock, no par value |
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Authorized shares - 25,000,000 |
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Issued shares - 2,969,405 |
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30,000 |
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30,000 |
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Treasury shares - 34,410 |
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(81,000 |
) |
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(81,000 |
) |
Capital in excess of stated value |
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29,488,000 |
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29,488,000 |
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Accumulated deficit |
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(27,076,000 |
) |
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(27,814,000 |
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Total shareholders’ equity |
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2,361,000 |
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1,623,000 |
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$ |
48,308,000 |
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$ |
48,925,000 |
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See notes to these consolidated financial statements
4
MORGAN’S FOODS, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(UNAUDITED)
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Capital in |
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Total |
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Common Shares |
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Treasury Shares |
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Excess of |
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Accumulated |
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Shareholders’ |
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Shares |
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Amount |
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Shares |
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Amount |
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Stated Value |
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Deficit |
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Equity |
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Balance February 28, 2010 |
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2,969,405 |
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$ |
30,000 |
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(34,410 |
) |
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$ |
(81,000 |
) |
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$ |
29,488,000 |
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$ |
(27,814,000 |
) |
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$ |
1,623,000 |
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Net income |
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738,000 |
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738,000 |
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Balance August 15, 2010 |
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2,969,405 |
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$ |
30,000 |
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(34,410 |
) |
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$ |
(81,000 |
) |
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$ |
29,488,000 |
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$ |
(27,076,000 |
) |
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$ |
2,361,000 |
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See notes to these consolidated financial statements.
5
MORGAN’S FOODS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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Twenty-four Weeks Ended |
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August 15, 2010 |
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August 16, 2009 |
Cash flows from operating activities: |
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Net income |
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$ |
738,000 |
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$ |
674,000 |
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Adjustments to reconcile to net cash
provided by operating activities: |
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Depreciation and amortization |
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1,295,000 |
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1,428,000 |
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Amortization of deferred financing costs |
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52,000 |
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57,000 |
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Amortization of supply agreement advances |
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(559,000 |
) |
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(563,000 |
) |
Funding from supply agreements |
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764,000 |
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— |
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Deferred income taxes |
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241,000 |
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409,000 |
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Stock compensation expense |
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— |
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56,000 |
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Disposal of restaurant assets |
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99,000 |
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21,000 |
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Changes in assets and liabilities: |
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Receivables |
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10,000 |
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395,000 |
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Inventories |
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(26,000 |
) |
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21,000 |
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Prepaid expenses |
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322,000 |
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302,000 |
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Other assets |
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(14,000 |
) |
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5,000 |
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Accounts payable |
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105,000 |
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196,000 |
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Accrued liabilities |
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115,000 |
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1,106,000 |
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Net cash provided by operating activities |
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3,142,000 |
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4,107,000 |
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Cash flows from investing activities: |
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Proceeds from sale of restaurant |
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234,000 |
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119,000 |
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Capital expenditures |
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(1,009,000 |
) |
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(802,000 |
) |
Purchase of license and other investments |
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— |
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(4,000 |
) |
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Net cash used in investing activities |
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(775,000 |
) |
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(687,000 |
) |
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Cash flows from financing activities: |
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Principal payments on long-term debt |
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(1,516,000 |
) |
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(1,478,000 |
) |
Principal payments on capital lease obligations |
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(21,000 |
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(18,000 |
) |
Bank debt repayment in advance |
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(451,000 |
) |
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(306,000 |
) |
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Net cash used in financing activities |
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(1,988,000 |
) |
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(1,802,000 |
) |
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Net change in cash and equivalents |
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379,000 |
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1,618,000 |
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Cash and equivalents, beginning balance |
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4,205,000 |
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5,257,000 |
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Cash and equivalents, ending balance |
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$ |
4,584,000 |
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$ |
6,875,000 |
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Supplemental Cash Flow Information:
Interest paid on debt and capitalized leases was $1,233,000 and $1,361,000 in fiscal 2011 and 2010, respectively.
Cash payments/(refunds) for income taxes were ($13,000) and $3,000 in the first 24 weeks of fiscal 2011 and
2010, respectively.
See notes to these consolidated financial statements.
6
MORGAN’S FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The interim consolidated financial statements of Morgan’s Foods, Inc. (the “Company”) have been
prepared without audit. In the opinion of Company management, all adjustments have been included.
Unless otherwise disclosed, all adjustments consist only of normal recurring adjustments necessary
for a fair statement of results of operations for the interim periods. These unaudited financial
statements have been prepared using the same accounting principles that were used in preparation of
the Company’s annual report on Form 10-K for the year ended February 28, 2010. Certain prior
period amounts have been reclassified to conform to current period presentations. The results of
operations for the twenty-four weeks ended August 15, 2010 are not necessarily indicative of the
results to be expected for the full year. Although the Company believes that the disclosures are
adequate to make the information presented not misleading, it is suggested that these condensed
consolidated financial statements be read in conjunction with the audited consolidated financial
statements and the notes thereto included in the Company’s Form 10-K for the fiscal year ended
February 28, 2010.
The Company’s debt is reported at historical cost, based upon stated interest rates which
represented market rates at the time of borrowing. Due to subsequent declines in credit quality
throughout the restaurant industry resulting from weak and volatile operating performance and
related declines in restaurant values, the market for fixed rate mortgage debt for restaurant
financing is currently extremely limited. The Company’s debt is not publicly traded and there are
few lenders or financing transactions for similar debt in the marketplace at this time.
Consequently, management has not been able to identify a market for fixed rate restaurant mortgage
debt with a similar risk profile, and has concluded that it is not practicable to estimate the fair
value of the Company’s debt as of August 15, 2010.
NOTE 2 — RECENT ACCOUNTING PRONOUNCEMENTS
Effective July 1, 2009, the FASB (Financial Accounting Standards Board) Accounting Standards
Codification (ASC) (Topic 105, “Generally Accepted Accounting Principles”), became the single
source for authoritative nongovernmental U.S. generally accepted accounting principles. During
fiscal 2010, several Accounting Standards Updates (“ASU”) were issued.
ASU 2010-05 January, 2010 — Topic 718 “Compensation-Stock Compensation”
This update is a clarification of the treatment of escrowed share arrangements and provides
guidance on the presumption of compensation under such arrangements. The Company has determined
that the changes to the accounting standards required by this update do not have a material effect
on the Company’s financial position or results of operations.
ASU 2010-06 January, 2010 — Topic 820 “Fair Value Measurements and Disclosures”
This update improves the disclosures regarding fair value measurements including information
regarding the level of disaggregation of assets and liabilities and the valuation methods being
employed. The provisions of this update are effective for the Company’s fiscal year ending
February 27, 2011. Management is evaluating what effect, if any, the adoption of these provisions
will have on the Company’s financial position or results of operations.
NOTE 3 — NET INCOME PER COMMON SHARE
Basic net income per common share is computed by dividing net income by the weighted average
number of common shares outstanding during the period. Diluted net income per common share is
based on the combined weighted average number of shares outstanding, which includes the assumed
exercise, or conversion of options. In computing diluted net income per common share, the Company
has utilized the treasury stock method. The following table reconciles the difference between
basic and diluted earnings per common share:
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|
|
|
|
|
|
|
|
|
|
| |
|
Quarter ended August 15, 2010 |
|
|
Quarter ended August 16, 2009 |
|
| |
|
Net income |
|
|
Shares |
|
|
Per Share |
|
|
Net income |
|
|
Shares |
|
|
Per Share |
|
| |
|
(Numerator) |
|
|
(Denominator) |
|
|
Amount |
|
|
(Numerator) |
|
|
(Denominator) |
|
|
Amount |
|
| |
|
|
Basic EPS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income available to common shareholders |
|
$ |
163,000 |
|
|
|
2,934,995 |
|
|
$ |
0.06 |
|
|
$ |
320,000 |
|
|
|
2,934,995 |
|
|
$ |
0.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Dilutive Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Stock Options |
|
|
— |
|
|
|
83,787 |
|
|
|
|
|
|
|
— |
|
|
|
55,366 |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income available to common shareholders |
|
$ |
163,000 |
|
|
|
3,018,782 |
|
|
$ |
0.05 |
|
|
$ |
320,000 |
|
|
|
2,990,361 |
|
|
$ |
0.11 |
|
| |
|
|
7
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Twenty-four weeks ended August 15, 2010 |
|
|
Twenty-four weeks ended August 16, 2009 |
|
| |
|
Net income |
|
|
Shares |
|
|
Per Share |
|
|
Net income |
|
|
Shares |
|
|
Per Share |
|
| |
|
(Numerator) |
|
|
(Denominator) |
|
|
Amount |
|
|
(Numerator) |
|
|
(Denominator) |
|
|
Amount |
|
| |
|
|
Basic EPS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income available to common shareholders |
|
$ |
738,000 |
|
|
|
2,934,995 |
|
|
$ |
0.25 |
|
|
$ |
674,000 |
|
|
|
2,934,995 |
|
|
$ |
0.23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Dilutive Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Stock Options |
|
|
— |
|
|
|
91,213 |
|
|
|
|
|
|
|
— |
|
|
|
41,738 |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income available to common shareholders |
|
$ |
738,000 |
|
|
|
3,026,208 |
|
|
$ |
0.24 |
|
|
$ |
674,000 |
|
|
|
2,976,733 |
|
|
$ |
0.23 |
|
| |
|
|
Options to purchase 149,000 common shares were outstanding during both the 2011 and 2010 fiscal
years and were included in the computation only for the time during which their exercise price was
greater than the average market price of the common shares. The options for 149,000 shares,
exercisable at $1.50 per share expire on November 5, 2018.
NOTE 4 — DEBT
The Company’s debt arrangements require the maintenance of a consolidated fixed charge coverage
ratio of 1.20 to 1 regarding all of the Company’s loans and the maintenance of individual
restaurant fixed charge coverage ratios of between 1.20 and 1.50 to 1 on certain of the Company’s
individual restaurant loans. A portion of the Company’s debt also contains a funded debt to
EBITDAR (earnings before interest, taxes, depreciation, amortization and rent) requirement of 5.5.
Fixed charge coverage ratios are calculated by dividing the cash flow before rent and debt service
for the previous 12 months by the debt service and rent due in the coming 12 months. In the
calculation of funded debt to EBITDAR, funded debt is the next twelve month operating lease
obligation times eight plus the debt balance at the measurement date. The funded debt is then
divided by the prior twelve month EBITDAR to obtain the calculated ratio. The consolidated and
individual ratios are all computed quarterly. The Company entered into a loan modification
agreement covering a portion of its debt which decreased the fixed charge coverage ratio to 1.10
and increased the funded debt to EBITDAR ratio to 6.0 from 5.5 through the first quarter of fiscal
2012 and is in compliance with that requirement. The Company has obtained waivers of its
noncompliance covering the appropriate time frames for its other debt. In exchange for the waivers
and loan modifications, the Company will pay fees of approximately $140,000 and, on loans covering
two of it restaurant properties, will pay increased interest rates. As of the measurement date of
August 15, 2010, the Company’s consolidated fixed charge coverage ratio was 1.12 to 1, funded debt
to EBITDAR was 5.8 and management projects that the Company will be in compliance with its
consolidated debt covenants, as modified, at the relevant future measurement dates. As of August
15, 2010, the Company was not in compliance with the individual fixed charge coverage ratio on 18
of its restaurant properties and has obtained waivers of these requirements covering a period of
longer than one year. The debt obligations of the Company which contain fixed charge coverage
ratio and funded debt to EBITDAR requirements are classified as long-term, except for the amounts
due within one year. If the Company does not comply with the covenants of its various debt
agreements in the future, and if future waivers or loan modifications are not obtained, the
respective lenders will have certain remedies available to them which include calling the debt,
increasing the interest rates and the acceleration of payments. Noncompliance with the
requirements of the Company’s debt agreements, if not waived, could also trigger cross-default
provisions contained in the respective agreements.
NOTE 5 — STOCK OPTIONS
On April 2, 1999, the Board of Directors of the Company approved a Stock Option Plan for Executives
and Managers. Under the plan 145,500 shares were reserved for the grant of options. The Stock
Option Plan for Executives and Managers provides for grants to eligible participants of
nonqualified stock options only. The exercise price for any option awarded under the Plan is
required to be not less than 100% of the fair market value of the shares on the date that the
option is granted. Options are granted by the Stock Option Committee of the Company. Options for
145,150 shares were granted to executives and managers of the Company on April 2, 1999 at an
exercise price of $4.125, all of which have either expired or been exercised. Options for 350
common shares were granted on November 6, 2008, all of which are currently outstanding. The
options vested in six months and expire ten years after date of issue.
At the Company’s annual meeting on June 25, 1999 the shareholders approved the Key Employees Stock
Option Plan. This plan allows the granting of options covering 291,000 shares of stock and has
essentially the same provisions as the Stock Option Plan for Executives and Managers which was
discussed above. Options for 129,850 shares were granted to executives and managers of the Company
on January 7, 2000 at an exercise price of $3.00. Options for 11,500 shares were granted to
executives on April 27, 2001 at an exercise price of $.85, all of which have either expired or been
exercised. Options for 149,650 common shares were granted on November 6, 2008 at the closing price
on that day of $1.50 per share of which 148,650 are currently outstanding. The options vested in
six months and expire ten years after date of issue.
As of August 15, 2010, a total of 149,000 options were outstanding, fully vested and exercisable at
a weighted average exercise price of $1.50 per share. No options are available for grant.
The following table summarizes information about stock options outstanding at August 15, 2010:
8
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Exercise |
|
Outstanding |
|
|
|
|
|
Number |
| |
|
Price |
|
8-15-10 |
|
Average Life |
|
Exercisable |
| |
|
|
|
|
$ |
1.50 |
|
|
|
149,000 |
|
|
|
8.2 |
|
|
|
149,000 |
|
| |
|
|
|
|
|
|
NOTE 6 — CAPITAL EXPENDITURES
The Company is required by its franchise agreements to periodically bring its restaurants up
to the required image of the franchisor. This typically involves a new dining room décor and
seating package and exterior changes and related items but can, in some cases, require the
relocation of the restaurant. If the Company deems a particular image enhancement expenditure to
be inadvisable, it has the option to cease operations at that restaurant. Over time, the estimated
cost and time deadline for each restaurant may change due to a variety of circumstances and the
Company revises its requirements accordingly. Also, significant numbers of restaurants may have
image enhancement deadlines that coincide, in which case, the Company will adjust the actual timing
of the image enhancements in order to facilitate an orderly construction schedule. During the
image enhancement process, each restaurant is normally closed for up to two weeks, which has a
negative impact on the Company’s revenues and operating efficiencies. At the time a restaurant is
closed for a required image enhancement, the Company may deem it advisable to make other capital
expenditures in addition to those required for the image enhancement.
The franchise agreements with KFC and Taco Bell Corporation require the Company to upgrade and
remodel its restaurants to comply with the franchisors’ current standards within agreed upon
timeframes. The franchisor may terminate the franchise agreement for those restaurants for which
the required image enhancement is not in progress. In the case of a restaurant containing two
concepts, even though only one is required to be remodeled, additional costs will be incurred
because the dual concept restaurant is generally larger and contains more equipment and signage
than the single concept restaurant. If a property is of usable size and configuration, the Company
can perform an image enhancement to bring the building to the current image of the franchisor. If
the property is not large enough to fit a drive-thru or has some other deficiency, the Company
would need to relocate the restaurant to another location within the trade area to meet the
franchisor’s requirements. In order to meet the terms and conditions of the franchise agreements,
the Company has the following image enhancement obligations as of August 15, 2010:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Number of Units |
|
Period |
|
Type |
|
Total (1) |
|
Required (2) |
|
Additional (3) |
| |
| |
1 |
|
|
Fiscal 2010 |
|
IE (4) |
|
$ |
340,000 |
|
|
|
300,000 |
|
|
$ |
40,000 |
|
| |
1 |
|
|
Fiscal 2010 |
|
Relo (4) (5) |
|
|
750,000 |
|
|
|
750,000 |
|
|
$ |
— |
|
| |
1 |
|
|
Fiscal 2011 |
|
Relo (5) |
|
|
1,400,000 |
|
|
|
1,400,000 |
|
|
|
— |
|
| |
5 |
|
|
Fiscal 2011 |
|
IE |
|
|
1,600,000 |
|
|
|
1,400,000 |
|
|
|
200,000 |
|
| |
8 |
|
|
Fiscal 2012 |
|
IE |
|
|
2,560,000 |
|
|
|
2,240,000 |
|
|
|
320,000 |
|
| |
5 |
|
|
Fiscal 2013 |
|
IE |
|
|
1,600,000 |
|
|
|
1,400,000 |
|
|
|
200,000 |
|
| |
1 |
|
|
Fiscal 2015 |
|
Rebuild |
|
|
1,000,000 |
|
|
|
1,000,000 |
|
|
|
— |
|
| |
4 |
|
|
Fiscal 2015 |
|
Relo (5) |
|
|
5,600,000 |
|
|
|
5,600,000 |
|
|
|
— |
|
| |
1 |
|
|
Fiscal 2016 |
|
Relo (5) |
|
|
1,400,000 |
|
|
|
1,400,000 |
|
|
|
— |
|
| |
4 |
|
|
Fiscal 2020 |
|
Relo (5) |
|
|
5,600,000 |
|
|
|
5,600,000 |
|
|
|
— |
|
| |
1 |
|
|
Fiscal 2020 |
|
Rebuild |
|
|
1,000,000 |
|
|
|
1,000,000 |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
| |
32 |
|
|
Total |
|
|
|
$ |
22,850,000 |
|
|
$ |
22,090,000 |
|
|
$ |
760,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| (1) |
|
These amounts are based on estimates of current construction costs and actual costs may
vary. |
| |
| (2) |
|
These amounts include only the items required to meet the franchisor’s current image
requirements. |
| |
| (3) |
|
These amounts are for capital upgrades performed on or which may be performed on the image
enhanced restaurants which were or may be deemed by the Company to be advantageous to the operation
of the units and which may be done at the time of the image enhancement. |
| |
| (4) |
|
Not completed in fiscal 2010, as required. |
| |
| (5) |
|
Relocations of fee owned properties are shown net of expected recovery of capital from the sale
of the former location. Relocation of leased properties assumes the capital cost of only equipment
because it is not known until each lease is finalized whether the lease will be a capital or
operating lease. |
9
As referenced above, the Company did not meet its obligations with respect to four
restaurants due in fiscal 2010 but the image enhancement of one of the restaurants was completed in
April, 2010 and another in July, 2010. Additionally, subsequent to the end of the fiscal second
quarter, the Company completed the image enhancement of a restaurant which is included in the
accompanying schedule as a fiscal 2012 obligation. The Company recently received letters from the
franchisor regarding two of these restaurants warning of the necessity to perform the image
enhancements. The Company relies mainly on cash flow and borrowings to complete its image
enhancements and experienced a decline in cash flow during the later part of fiscal 2009 and early
fiscal 2010 which caused the Company to temporarily suspend its image enhancement activities
resulting in the failure to complete the referenced projects. Negotiations are continuing between
the Company and the franchisor to obtain revisions to its image enhancement schedule. In
addition, as of August 15, 2010 management believes that the Company will not meet the stated
deadlines for seven of the image enhancement projects and is in discussions with its franchisors to
obtain revised schedules. Any revisions to the image enhancement schedule arrived at
through these negotiations may, and likely will, involve material differences when compared to the
schedule presented above. The Company can provide no assurance that the Company’s negotiations to
modify the required image enhancement schedule will be successful or, if successful, that the
modified schedule will not require materially increased capital expenditures in any fiscal year
over the next ten years. In addition, no assurance can be given that if the negotiations are not
successful that the franchisor will not terminate the franchise agreement on the two restaurants
not completed in 2010. The termination of those franchise agreements would likely have a material
adverse effect on the Company’s financial condition and results of operations.
Capital expenditures to meet the image requirements of the franchisors and additional capital
expenditures on those same restaurants being image enhanced are a large portion of the Company’s
annual capital expenditures. However, the Company also has made and may make capital expenditures
on restaurant properties not included on the foregoing schedule for upgrades or replacement of
capital items appropriate for the continued successful operation of its restaurants. The Company
may not be able to finance capital expenditures in the volume and time horizon required by the
image enhancement deadlines solely from existing cash balances and existing cash flow and the
Company expects that it will have to utilize financing for a portion of the capital expenditures.
The Company may use both debt and sale/leaseback financing but has no commitments for either.
There can be no assurance that the Company will be able to accomplish the image enhancements
and relocations required in the franchise agreements on terms acceptable to the Company. If the
Company is unable to meet the requirements of a franchise agreement, the franchisor may choose to
extend the time allowed for compliance or may terminate the franchise agreement.
NOTE 7 — ASSETS HELD FOR SALE
The Company owns the land and building of two closed KFC restaurants and the land and building
adjacent to another of its restaurants, all of which are listed for sale and are shown on the
Company’s consolidated balance sheet as Assets Held for Sale as of August 15, 2010.
NOTE 8 — SUBSEQUENT EVENTS
Subsequent to August 15, 2010 (i) the Company removed the Taco Bell brand from one of its KFC/Taco
Bell restaurants in Pennsylvania as management determined that the Taco Bell revenues at the
location were too low to profitably maintain the brand and (ii) the Company completed the image
enhancement of one of its KFC restaurants in West Virginia.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Description of Business. Morgan’s Foods, Inc. (the “Company”), which was formed in 1925,
operates through wholly-owned subsidiaries KFC restaurants under franchises from KFC Corporation,
Taco Bell restaurants under franchises from Taco Bell Corporation, Pizza Hut Express restaurants
under licenses from Pizza Hut Corporation and an A&W restaurant under a license from A&W
Restaurants, Inc. As of September 24, 2010, the Company operates 70 KFC restaurants, 6 Taco Bell
restaurants, 10 KFC/Taco Bell “2n1’s” under franchises from KFC Corporation and franchises or
licenses from Taco Bell Corporation, 3 Taco Bell/Pizza Hut Express “2n1’s” under franchises from
Taco Bell Corporation and licenses from Pizza Hut Corporation, 1 KFC/Pizza Hut Express “2n1” under
a franchise from KFC Corporation and a license from Pizza Hut Corporation and 1 KFC/A&W “2n1”
operated under a franchise from KFC Corporation and a license from A&W Restaurants, Inc. The
Company’s fiscal year is a 52 — 53 week year ending on the Sunday nearest the last day of February.
10
Summary of Expenses and Operating Income as a Percentage of Revenues
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Quarter Ended |
|
Twenty-four Weeks Ended |
| |
|
August 15, 2010 |
|
August 16, 2009 |
|
August 15, 2010 |
|
August 16, 2009 |
| |
|
|
Cost of sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food, paper and beverage |
|
|
31.0 |
% |
|
|
31.7 |
% |
|
|
30.8 |
% |
|
|
32.0 |
% |
Labor and benefits |
|
|
29.3 |
% |
|
|
27.6 |
% |
|
|
28.7 |
% |
|
|
27.8 |
% |
Restaurant operating expenses |
|
|
26.4 |
% |
|
|
25.9 |
% |
|
|
25.9 |
% |
|
|
25.8 |
% |
Depreciation and amortization |
|
|
3.0 |
% |
|
|
3.1 |
% |
|
|
3.0 |
% |
|
|
3.1 |
% |
General and administrative expenses |
|
|
6.5 |
% |
|
|
6.2 |
% |
|
|
6.2 |
% |
|
|
6.2 |
% |
Operating income |
|
|
3.5 |
% |
|
|
5.5 |
% |
|
|
5.2 |
% |
|
|
5.1 |
% |
Revenues. The revenue decrease of $1,529,000 in the quarter ended August 15, 2010 as
compared to the prior year quarter was primarily the result of a 5.6%, or $1,292,000, decrease in
comparable restaurant revenues, the permanent closing of one restaurant and the temporary closing
during the current year quarter of two restaurants for image enhancement. The decline in
comparable restaurant revenues was exacerbated by having no KFC national advertising for five and
one half weeks during the current year quarter due to issues in the national advertising committee.
The revenue decrease of $2,290,000 for the twenty-four weeks ended August 15, 2010 compared to the
twenty-four weeks ended August 16, 2009 was primarily the result of a 4.1% or $1,873,000 decrease
in comparable restaurant revenues, the permanent closing of two restaurants and the temporary
closing during the current year of three restaurants for image enhancement. The decline in
comparable restaurant revenues resulted primarily from higher sales in the prior year first quarter
during the introduction of grilled chicken (KGC) and the advertising blackout discussed above.
Cost of Sales — Food, Paper and Beverage. Food, paper and beverage costs decreased as a
percentage of revenue to 31.0% for the quarter ended August 15, 2010 compared to 31.7% for the
quarter ended August 16, 2009. The decrease in the current year quarter was primarily the result
of continued lower commodity costs and the lack of the free grilled chicken promotions of the prior
year quarter. Food, paper and beverage costs for the twenty-four weeks ended August 15, 2010
decreased to 30.8% compared to 32.0% in the comparable prior year period primarily due to the
reasons discussed above.
Cost of Sales — Labor and Benefits. Labor and benefits increased as a percentage of
revenue for the quarter ended August 15, 2010 to 29.3% compared to 27.6% for the comparable year
earlier quarter. The increase was primarily due to decreased efficiencies caused by lower sales
volumes. Labor and benefits increased to 28.7% of revenues for the twenty-four weeks ended August
15, 2010 compared to 27.8% in the comparable prior year period primarily for the reasons discussed
above.
Restaurant Operating Expenses. Restaurant operating expenses increased slightly to 26.4%
of revenue in the second quarter of fiscal 2011 compared to 25.9% in the second quarter of fiscal
2010 primarily due to higher utility and repair costs in the current year period. For the
twenty-four weeks ended August 15, 2010, restaurant operating expenses were relatively unchanged as
a percentage of revenue at 25.9% from 25.8% in the comparable prior year period.
Depreciation and Amortization. Depreciation and amortization decreased to $648,000 for the
quarter and $1,295,000 for the twenty-four weeks ended August 15, 2010 compared to $711,000 for the
quarter and $1,428,000 for the twenty-four weeks ended August 16, 2009 primarily due to the greater
volume of assets becoming fully depreciated than new assets being acquired.
General and Administrative Expenses. General and administrative expenses decreased to
$1,419,000 in the second quarter of fiscal 2011 compared to $1,437,000 in the prior year quarter
primarily due to lower bonuses for operations management personnel. General and administrative
expenses for the twenty-four weeks ended August 15, 2010 decreased to $2,739,000 from $2,846,000
for the prior year period primarily due to the bonuses mentioned above, reduced fees related to
professional services and stock option compensation expense in the prior year.
Loss on Restaurant Assets. The Company experienced a loss on restaurant assets of
$49,000 for the second quarter of fiscal 2011 compared to a loss of $15,000 for the second quarter
of fiscal 2010. The current year amounts include $38,000 of reductions in the carrying value of
assets held for sale and write offs caused by image enhancements. Prior year amounts include
reductions in the reserve for closed restaurant locations and the sale of one restaurant. The loss
on restaurant assets for the first twenty-four weeks of fiscal 2011 was $99,000 compared to a loss
of $21,000 for the first twenty-four weeks of fiscal 2010. Current year amounts consist mainly of
reductions in the carrying value of assets held for sale, the permanent closing of one restaurant,
the sale of one restaurant location and write offs caused by image enhancements. Prior year
amounts reflect reductions in the reserve for closed restaurants offset by a loss on the sale of
one restaurant location and the permanent closing of another.
Operating Income. Operating income in the second quarter of fiscal 2011 decreased to
$764,000, or 3.5% of revenues, compared to $1,274,000, or 5.5% of revenues, for the second quarter
of fiscal 2010 primarily due to the decreased efficiencies caused by lower sales volumes as
discussed above. Operating income for the twenty-four weeks ended August 15, 2010 decreased to
$2,295,000, or 5.2% of
11
revenues, from $2,359,000, or 5.1% of revenues, for the twenty-four weeks ended August 16, 2009 as
a result of operating income being 6.9% of revenues in the first quarter of fiscal 2011 offset by
the lower operating income percentage of the second quarter.
Interest Expense. The first quarter of fiscal 2011 contained $98,000 of prepayment fees
and write off of deferred financing costs related to the early payment of the debt on a closed
restaurant location which was sold, while the prior year second quarter contained $82,000 of
similar expense related to the sale of another closed restaurant facility. Interest expense on
bank debt and notes payable including capitalized leases decreased to $558,000 in the second
quarter of fiscal 2011 from $616,000 in the second quarter of fiscal 2010 due to lower debt
balances in the current year. Interest expense on bank debt and notes payable including
capitalized leases for the twenty-four weeks ended August 15, 2010 was $1,143,000 compared to
$1,266,000 for the comparable prior year period primarily for the reasons discussed above.
Other Income and Expense. Other income and expense was $17,000 of income for the
second quarter and expense of $72,000 for the first twenty-four weeks of fiscal 2011 compared to
income of $43,000 for the second quarter and income of $87,000 for the first twenty-four weeks of
fiscal 2010. Other expenses in the current year included $111,000 in charitable contributions to
the Susan G. Komen Foundation generated by KFC’s Buckets for the Cure promotion during the first
quarter of fiscal 2011.
Provision for Income Taxes. The provision for income taxes for the quarter ended August
15, 2010 was $60,000 on pre-tax income of $223,000 compared to $299,000 on pre-tax income of
$619,000 for the comparable prior year period. The provision for income taxes is recorded at the
Company’s projected annual effective tax rate and consists of a current tax benefit of $2,000 and
a deferred tax provision of $62,000 compared to a current tax provision of $7,000 and a deferred
tax provision of $292,000 for the comparable prior year period.
The provision for income taxes for the twenty-four weeks ended August 15, 2010 was $244,000 on
pre-tax income of $982,000 compared to $424,000 on pre-tax income of $1,098,000 for the comparable
prior year period. The components of the tax provision for the twenty-four weeks ended August 15,
2010 were a current tax expense of $3,000 and deferred tax provision of $241,000 compared to a
current income tax provision of $16,000 and a deferred tax provision of $408,000 for the
comparable prior year period.
The effective tax rate for the current year quarter is lower than the comparable prior year period
by 15 percentage points due to a decrease in the deferred tax asset valuation allowance. The
decrease is based on the Company’s estimate regarding the realization of its net deferred tax
assets remaining unchanged since its last fiscal year end. The projections indicate that a lower
valuation allowance is required to properly state net deferred tax assets. Since the decrease is
due to the projected realization of ordinary income, it has been included in the computation of the
effective tax rate. The changes in deferred taxes and valuation allowances are non-cash items and
do not affect the Company’s cash flow or cash balances.
Liquidity and Capital Resources. Cash provided by operating activities was $3,142,000 for
the twenty-four weeks ended August 15, 2010 compared to $4,107,000 for the twenty-four weeks ended
August 16, 2009. The decrease in operating cash flow was primarily the result of $168,000 less in
cash provided by the change in deferred taxes, $385,000 less in cash provided by the reduction of
accounts receivable, $91,000 less of cash provided by the increase in accounts payable and $227,000
less cash provided by funding from supply agreements in the current year period compared the prior
year period. The Company paid scheduled long-term bank and capitalized lease debt of $1,537,000
and $451,000 of debt before its scheduled maturity in the first twenty-four weeks of fiscal 2011
compared to payments of $1,496,000 and $306,000 for the same period in fiscal 2010. Capital
expenditures for the first twenty-four weeks of fiscal 2011 were $1,009,000 less $234,000 of
proceeds from the sale of assets, compared to $802,000 and $119,000, respectively, for the same
period in fiscal 2010. As of August 15, 2010 management believes that it will not meet the stated
deadlines for seven of its image enhancement projects and is in discussions with its franchisors to
obtain revised schedules. Capital expenditure activity is discussed in more detail in Note 6 to
the consolidated financial statements.
The Company’s debt arrangements require the maintenance of a consolidated fixed charge coverage
ratio of 1.20 to 1 regarding all of the Company’s loans and the maintenance of individual
restaurant fixed charge coverage ratios of between 1.20 and 1.50 to 1 on certain of the Company’s
individual restaurant loans. A portion of the Company’s debt also contains a funded debt to
EBITDAR (earnings before interest, taxes, depreciation, amortization and rent) requirement of 5.5.
Fixed charge coverage ratios are calculated by dividing the cash flow before rent and debt service
for the previous 12 months by the debt service and rent due in the coming 12 months. In the
calculation of funded debt to EBITDAR, funded debt is the next twelve month operating lease
obligation times eight plus the debt balance at the measurement date. The funded debt is then
divided by the prior twelve month EBITDAR to obtain the calculated ratio. The consolidated and
individual ratios are all computed quarterly. The Company entered into a loan modification
agreement covering a portion of its debt which decreased the fixed charge coverage ratio to 1.10
and increased the funded debt to EBITDAR ratio to 6.0 from 5.5 through the first quarter of fiscal
2012 and is in compliance with that requirement. The Company has obtained waivers of its
noncompliance covering the appropriate time frames for its other debt. In exchange for the waivers
and loan modifications, the Company will pay fees of approximately $140,000 and, on loans covering
two of it restaurant properties, will pay increased interest rates. As of the measurement date of
August 15, 2010, the Company’s consolidated fixed charge coverage ratio was 1.12 to 1, funded debt
to EBITDAR was 5.8 and management projects that the Company will be in compliance with its
consolidated debt covenants, as modified, at the relevant future measurement dates. As of
12
August 15, 2010, the Company was not in compliance with the individual fixed charge coverage ratio
on 18 of its restaurant properties and has obtained waivers of these requirements covering a period
of longer than one year. The debt obligations of the Company which contain fixed charge coverage
ratio and funded debt to EBITDAR requirements are classified as long-term, except for the amounts
due within one year. If the Company does not comply with the covenants of its various debt
agreements in the future, and if future waivers or loan modifications are not obtained, the
respective lenders will have certain remedies available to them which include calling the debt,
increasing the interest rates and the acceleration of payments. Noncompliance with the
requirements of the Company’s debt agreements, if not waived, could also trigger cross-default
provisions contained in the respective agreements.
Recent Accounting Pronouncements. Effective July 1, 2009, the FASB (Financial Accounting
Standards Board) Accounting Standards Codification (ASC) (Topic 105, “Generally Accepted Accounting
Principles”), became the single source for authoritative nongovernmental U.S. generally accepted
accounting principles. During fiscal 2010, several Accounting Standards Updates (“ASU”) were
issued.
ASU 2010-05 January, 2010 — Topic 718 “Compensation-Stock Compensation”
This update is a clarification of the treatment of escrowed share arrangements and provides
guidance on the presumption of compensation under such arrangements. The Company has determined
that the changes to the accounting standards required by this update do not have a material effect
on the Company’s financial position or results of operations.
ASU 2010-06 January, 2010 — Topic 820 “Fair Value Measurements and Disclosures”
This update improves the disclosures regarding fair value measurements including information
regarding the level of disaggregation of assets and liabilities and the valuation methods being
employed. The provisions of this update are effective for the Company’s fiscal year ending
February 27, 2011. Management is evaluating what effect, if any, the adoption of these provisions
will have on the Company’s financial position or results of operations.
Seasonality. The operations of the Company are affected by seasonal fluctuations.
Historically, the Company’s revenues and income have been highest during the summer months with the
fourth fiscal quarter representing the slowest period. This seasonality is primarily attributable
to weather conditions in the Company’s marketplace, which consists of portions of Ohio,
Pennsylvania, Missouri, Illinois, West Virginia and New York.
Safe Harbor Statements. This report contains “forward-looking statements” within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. The statements include those identified by such words as “may,”
“will,” “expect” “anticipate,” “believe,” “plan” and other similar terminology. Forward looking
statements involve risks and uncertainties that could cause actual events or results to differ
materially from those expressed or implied in this report. The “forward-looking statements”
reflect the Company’s current expectations and are based upon data available at the time of the
statements. Actual results involve risks and uncertainties, including both those specific to the
Company and general economic and industry factors. Factors specific to the Company include, but
are not limited to, its debt covenant compliance, actions that lenders may take with respect to any
debt covenant violations, its ability to obtain waivers of any debt covenant violations and its
ability to pay all of its current and long-term obligations, the Company’s ability to negotiate
extensions to franchisors’ image enhancement requirements and those factors described in Part I
Item 1A (“Risk Factors”) of the Company’s annual report on Form 10-K filed with the SEC on June 1,
2010. 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Certain of the Company’s debt comprising approximately $12.9 million of principal balance has a
variable rate which is adjusted monthly. A one percent increase in variable rate base (90 day
LIBOR) of the loans at the beginning of the year would cost the Company approximately $129,000 in
additional annual interest costs. The Company may choose to offset all, or a portion of the risk
through the use of interest rate swaps or caps. The Company’s remaining borrowings are at fixed
interest rates, and accordingly the Company does not have market risk exposure for fluctuations in
interest rates relative to those loans. The Company does not enter into derivative financial
investments for trading or speculation purposes. Also, the Company is subject to volatility in
food costs as a result of market risk and we manage that risk through the use of a franchisee
purchasing cooperative which uses longer term purchasing contracts. Our ability to recover
increased costs through higher pricing is, at times, limited by the competitive environment in
which we operate. The Company believes that its market risk exposure is not material to the
Company’s financial position, liquidity or results of operations.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
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The Principal Executive Officer (“PEO”) and Principal Financial Officer (“PFO”) carried out an
evaluation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended (“the Exchange Act”)) as of the end
of the period covered by this report. Based on that evaluation, the Company’s PEO and PFO
concluded that our disclosure controls and procedures were effective as of August 15, 2010.
Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal control over financial reporting (as defined in
Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter ended August 15, 2010 that
materially affected, or are reasonably likely to materially affect, the Company’s internal control
over financial reporting.
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
The Company is a party to various legal proceedings and claims arising in the ordinary course of
its business. The Company believes that the outcome of these matters will not have a material
adverse affect on its consolidated financial position, results of operations or liquidity.
Item 1A. Risk Factors
The Company’s annual report on Form 10-K for the fiscal year ended February 28, 2010 discusses the
risk factors facing the Company. There has been no material change in the risk factors facing our
business since February 28, 2010.
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders (removed and reserved)
Item 5. Other Information
None
Item 6. Exhibits
Reference is made to “Index to Exhibits”, filed herewith.
14
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.
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MORGAN’S FOODS, INC.
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/s/ Kenneth L. Hignett
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Senior Vice President, |
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Chief Financial Officer and Secretary
September 29, 2010 |
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MORGAN’S FOODS, INC.
INDEX TO EXHIBITS
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| Exhibit |
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| Number |
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Exhibit Description |
31.1
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Certification of the Chairman of the Board and Chief Executive
Officer pursuant to Rule 13a-14(a) of Securities Exchange Act of
1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002. |
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31.2
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Certification of the Senior Vice President, Chief Financial
Officer and Secretary pursuant to Rule 13a-14(a) of Securities
Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
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32.1
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Certification of the Chairman of the Board and Chief Executive
Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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32.2
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Certification of the Senior Vice President, Chief Financial
Officer and Secretary pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |
16