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FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
For Quarter Ended February 16, 2003 Commission file number 0-11514
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Max & Erma's Restaurants, Inc.
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(Exact name of registrant as specified in its charter)
Delaware No. 31-1041397
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4849 Evanswood Drive, Columbus, Ohio 43229
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (614) 431-5800
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Indicate by checkmark 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, and (2) has been subject to the filing
requirements for at least the past 90 days.
YES X NO
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Indicate by checkmark whether the registrant is an accelerated filer (as defined
in Rule 12b-2 of the Exchange Act).
YES NO X
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As of the close of the period covered by this report, the registrant had
outstanding 2,468,344 common shares.
MAX & ERMA'S RESTAURANTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
February 16,
ASSETS 2003 October 27,
(UNAUDITED) 2002
------------ ------------
Current Assets:
Cash $ 2,545,606 $ 3,406,702
Inventories 1,215,055 1,096,228
Other Current Assets 1,580,082 1,146,941
------------ ------------
Total Current Assets 5,340,743 5,649,871
Property - At Cost: 84,607,729 80,116,750
Less Accumulated Depreciation and Amortization 33,952,809 32,423,502
------------ ------------
Property - Net 50,654,920 47,693,248
Other Assets 8,410,713 8,628,311
------------ ------------
Total $ 64,406,376 $ 61,971,430
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current Maturities of Long-Term Obligations $ 2,622,712 $ 2,548,008
Accounts Payable 4,291,956 4,596,833
Accrued Payroll and Related Taxes 2,488,548 2,877,095
Accrued Liabilities 3,952,025 3,729,604
------------ ------------
Total Current Liabilities 13,355,241 13,751,540
Long-Term Obligations - Less Current Maturities 38,610,953 36,862,008
Stockholders' Equity:
Preferred Stock - $.10 Par Value;
Authorized 500,000 Shares - none outstanding
Common Stock - $.10 Par Value;
Authorized 5,000,000 Shares,
Issued and Outstanding 2,468,344 Shares
at 2/16/03 and 2,346,798 Shares at 10/27/02 246,834 234,680
Additional Capital 183,350
Accumulated Other Comprehensive Loss (806,085) (794,290)
Retained Earnings 12,816,083 11,917,492
------------ ------------
Total Stockholders' Equity 12,440,182 11,357,882
------------ ------------
Total $ 64,406,376 $ 61,971,430
============ ============
MAX & ERMA'S RESTAURANTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Sixteen Weeks Ended
---------------------------------
February 16, February 17,
2003 2002
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REVENUES: $49,207,603 $44,494,582
COSTS AND EXPENSES:
Costs of Goods Sold 11,912,018 11,033,539
Payroll and Benefits 15,871,669 14,289,533
Other Operating Expenses 15,447,021 13,804,575
Pre-Opening Expenses 201,137 187,434
Administrative Expenses 4,052,195 3,415,082
----------- -----------
Total Operating Expenses 47,484,040 42,730,163
----------- -----------
Operating Income 1,723,563 1,764,419
Interest Expense 487,719 634,645
Minority Interest in Income of Affiliated Partnerships 19,251
----------- -----------
INCOME BEFORE INCOME TAXES 1,235,844 1,110,523
INCOME TAXES 328,000 292,000
----------- -----------
NET INCOME $ 907,844 $ 818,523
=========== ===========
NET INCOME PER SHARE:
Basic $ 0.38 $ 0.35
=========== ===========
Diluted $ 0.34 $ 0.31
=========== ===========
SHARES OUTSTANDING:
Basic 2,384,445 2,370,164
=========== ===========
Diluted 2,702,461 2,629,291
=========== ===========
MAX & ERMA'S RESTAURANTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Sixteen Weeks Ended
-----------------------------------
February 16, February 17,
2003 2002
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 907,844 $ 818,523
Depreciation and amortization 1,868,112 1,652,315
Minority interest in income of Affiliated Partnerships 19,251
Changes in other assets and liabilities (334,862) (384,128)
------------ ------------
Net cash provided by operating activities 2,441,094 2,105,961
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (5,484,419) (4,336,684)
Proceeds from sale of assets 3,693 2,300
Decrease in other assets 164,885 51,781
------------ ------------
Net cash used by investing activities (5,315,841) (4,282,603)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under long-term obligations (16,921,781) (17,322,714)
Proceeds from long-term obligations 18,749,181 20,651,333
Proceeds from sale of stock 186,251 127,868
Purchase of common stock (1,601,805)
Distributions to minority interests in Affiliated Partnership (19,251)
------------ ------------
Net cash provided by financing activities 2,013,651 1,835,431
------------ ------------
NET DECREASE IN CASH AND EQUIVALENTS (861,096) (341,211)
CASH AND EQUIVALENTS AT
BEGINNING OF PERIOD 3,406,702 2,350,828
------------ ------------
CASH AND EQUIVALENTS AT END OF PERIOD $ 2,545,606 $ 2,009,617
============ ============
SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for:
Interest $ 940,228 $ 1,179,595
Income taxes $ 132,908 $ 428,650
Non-cash activities:
Property additions financed by accounts payable $ 1,010,313 $ 701,288
(See notes to interim unaudited condensed consolidated financial statements)
3
MAX & ERMA'S RESTAURANTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Presentation
The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and include
all of the information and disclosures required by accounting
principles generally accepted in the United States of America for
interim reporting, which are less than those required for annual
reporting. In the opinion of management, all adjustments, consisting of
only normal recurring accruals, considered necessary for a fair
presentation have been included.
The Company and its Affiliated Partnership each have a 52-53 week
fiscal year, which ends on the last Sunday in October. Fiscal 2002 and
2003 each consist of 52 weeks and include one sixteen-week and three
twelve-week quarters.
2. Recently Issued Financial Accounting Standards
In April 2002, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 145,
"Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB No.
13, and Technical Corrections" ("SFAS 145"). SFAS 145 will require
gains and losses on extinguishments of debt to be classified as income
or loss from continuing operations rather than as extraordinary items
as previously required under SFAS No. 4, "Reporting Gains and Losses
from Extinguishment of Debt," ("SFAS 4"). SFAS 145 will be effective
for fiscal years beginning after May 15, 2002 (fiscal 2003 for the
Company). Losses on extinguishment of debt previously classified as
extraordinary charges will be reclassified to conform to the provisions
of SFAS 145.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" ("SFAS 146") which
requires companies to recognize costs associated with exit or disposal
activities when they are incurred rather than at the date of a
commitment to exit or disposal plan. SFAS 146 is to be applied
prospectively to exit or disposal activities initiated after December
31, 2002.
In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure," ("SFAS 148").
SFAS 148 amends FASB Statement No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123") to provide alternative methods for an entity
that voluntarily changes to the fair value based method of accounting
for stock-based compensation, amends the disclosure provisions of SFAS
123 and amends APB Opinion No. 28, "Interim Financial Reporting," to
require disclosure about those effects in interim financial
information. The transition guidance and annual disclosure provisions
of SFAS 148 are effective for fiscal years ending after December 15,
2002. In addition, this Statement amends the disclosure requirements of
Statement No. 123 to require prominent disclosures in both annual and
interim financial statements. Certain of the disclosure modifications
are required for fiscal years ending after December 15, 2002 and are
included in the notes to these consolidated financial statements.
4
In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN
45"), Guarantor's Accounting and Disclosure Requirements for Gurantees,
Including Indirect Guarantees of Indebtedness of Others, an
interpretation of FASB Statements No. 5, 57 and 107 and Rescission of
FASB Interpretation No. 34. FIN 45 clarifies the requirements of SFAS
No. 5, "Accounting for Contingencies," relating to the guarantor's
accounting for, and disclosure of, the issuance of certain types of
guarantees. The disclosure provisions of FIN 45 are effective for the
current fiscal year. However, the provisions for initial recognition
and measurement are effective on a prospective basis for guarantees
that are issued or modified after December 31, 2002, irrespective of a
guarantor's year-end. The adoption of the initial recognition and
measurement provisions of FIN 45 did not have a material impact on the
Company's financial condition or results of operations.
In January 2003, the FASB issued FIN 46, Consolidation of Variable
Interest Entities. FIN 46 clarifies the application of Accounting
Research Bulletin No. 51, Consolidated Financial Statements, to certain
entities in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk
for the entity to finance its activities without additional
subordinated financial support from other parties. FIN 46 requires a
variable interest entity to be consolidated by a company, if that
company is subject to a majority of the risk of loss from the variable
interest entity's activities or entitled to receive a majority of the
entity's residual returns or both. FIN 46 also requires disclosures
about variable interest entities that a company is not required to
consolidate but in which it has a significant variable interest. The
consolidation requirements of FIN 46 apply immediately to variable
interest entities created after January 31, 2003 and to existing
entities in the first fiscal year or interim period beginning after
June 15, 2003. Certain of the disclosure requirements apply to all
financial statements issued after January 31, 2003, regardless of when
the variable interest entity was established. The initial adoption of
this accounting pronouncement did not have a material impact on the
Company's consolidated financial statements.
3. Stock Options
During the three months ended February 16, 2003, the Company's stock
options activity and weighted average exercise prices were as follows:
Shares Exercise Price
Outstanding, October 27, 2002 522,200 $ 7.77
Granted 155,000 $ 14.20
Exercised (236,000) $ (7.68)
---------
Outstanding, February 16, 2003 441,200 $ 10.08
=========
The Company accounts for employee and director stock options using the
intrinsic value method. Under this method, no compensation expense was
recorded in all years presented because all stock options were granted
at an exercise price equal to the fair market value of the Company's
stock on the date of the grant. If compensation expense for the
Company's stock option grants had been determined based on their
estimated fair value at the grant dates, the Company's net income and
earnings per share for the quarter ending February 16, 2003 would have
been as follows:
5
Net income, as reported $ 907,844
Deduct: total stock-based compensation expense
determined under the fair value method for all
awards, net of related tax benefits (341,622)
---------
Pro forma net income $ 566,222
=========
Earnings per common share, basic:
As reported $ 0.38
=========
Pro forma $ 0.24
=========
Earnings per common share, diluted:
As reported $ 0.34
=========
Pro forma $ 0.21
=========
The fair value of options granted was estimated on the date of the grant
using the Black-Scholes option-pricing model.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
REVENUES
Revenues for the first quarter of 2003 increased $4,713,000 or 10.6%
from the first quarter of 2002. The increase was a result of i) the opening of
six Max & Erma's restaurants during 2002 and ii) increased franchise fees and
royalties from the opening of three franchised Max & Erma's restaurants during
2002 and the opening of two franchised restaurants during the first quarter of
2003. These increases were offset by a $437,000 or 1% decline in same-store
sales for restaurants opened at least 18 months.
The decline in same-store sales is the first quarterly decline in the
last 15 quarters and is largely due to a winter storm which hit the mid-west on
Valentine's Day weekend, the last weekend of the quarter. The Company estimates
it lost approximately $350,000 in sales during the last three days of the first
quarter of 2003. Prior to the last three days of the quarter, same-store sales
had declined approximately 0.4% or $168,000 from the first quarter of 2002 to
the first quarter of 2003. Management believes this slight decline was a result
of the overall harsh winter in 2003 as compared to a relatively mild winter in
2002 and a general decline in the overall economy. The decline reflects a 2.7%
decline in customer counts which was offset by an approximate 1.5% menu price
increase over last year.
The Company expects to open six to seven Company-owned restaurants
during the remainder of 2003. Three restaurants were under construction at the
end of the first quarter of 2003, two of which opened early in the second
quarter. The Company owned one additional site and was under contract to
purchase or lease two other sites. Additionally, the Company was in final stages
of negotiations to purchase or lease seven additional locations, which would
open through 2004.
6
The Company also expects increased franchise fees and royalties in
2003. For the first quarter, franchise fees and royalties increased from
$144,000 for 2002 to $393,000 for 2003. The number of franchised restaurants
increased from nine at the end of the second quarter of 2002 to fourteen at the
end of the first quarter of 2003. Two franchised restaurants opened during the
first quarter of 2003 in Downingtown, Pennsylvania and Edinburgh, Indiana. Two
additional franchised restaurants were under construction in the Cleveland and
Cincinnati, Ohio airports. Including the two restaurants under construction, the
Company anticipates the opening of four additional franchised restaurants during
the remainder of 2003.
COSTS AND EXPENSES
Cost of goods sold, as a percentage of revenues decreased from 24.8%
for the first quarter of 2002 to 24.2% for the first quarter of 2003. The
decrease was a result of an approximately 1.5% menu price increase over last
year and slightly reduced produce and dairy prices. Most other inventory costs
remained relatively stable.
Payroll and benefits, as a percentage of revenues, increased slightly
from 32.1% for the first quarter of 2002 to 32.3% for the first quarter of 2003
due entirely to higher health insurance expense. Health insurance expense
increased 40 basis points from the first quarter of 2002 to the first quarter of
2003 due to the rising cost of health care. Other than health insurance expense,
there has been a leveling off in wage rates during the last two years, which has
allowed payroll and benefits expense to generally stabilize.
Other operating expenses, as a percentage of revenues, increased from
31.0% for the first quarter of 2002 to 31.4% for the first quarter of 2003. The
increase was due to slightly higher natural gas costs and higher occupancy
costs.
Pre-opening expenses, as a percentage of revenues, remained constant at
0.4% for both the first quarter of 2002 and 2003. The Company opened one
restaurant during the first quarter of 2002. No restaurants were opened during
the first quarter of 2003, however, most of the pre-opening expenses for two
restaurants opened early in the second quarter of 2003 was actually incurred and
expensed during the first quarter.
ADMINISTRATIVE EXPENSES
Administrative expenses, as a percentage of revenues, increased from
7.7% for the first quarter of 2002 to 8.2% for the first quarter of 2003. In
dollar terms, administrative expenses increased 19% from the first quarter of
2002 to the first quarter of 2003. The increase was, in part, a result of raises
for corporate personnel, higher recruiting costs, a market research study
performed during 2003 and the addition of a second Regional Vice President
during mid 2002, two additional regional managers and several additional
corporate support personnel, all of which relates to providing support for
additional company-owned and franchised restaurants.
INTEREST EXPENSE
Interest expense decreased 23% from the first quarter of 2002 to the
first quarter of 2003 due primarily to declining interest rates. At February 16,
2003, the interest rate under the Company's revolving credit line
7
was 4.5% versus 5.0% at February 17, 2002. Through the use of an interest rate
swap, the interest rate on approximately 65% of the Company's term note is
essentially fixed at approximately 9.5%. The interest rate on approximately 35%
of the term note declined from 5.0% at February 17, 2002 to 4.5% at February 16,
2003. Total interest bearing debt remained essentially unchanged at $31.6
million at both February 17, 2002 and February 16, 2003. Additionally, since the
first quarter of 2002, the Company has repurchased very few shares of its common
stock and essentially used cash flow to repay stock related borrowings under its
credit line. As a result, most of the outstanding borrowings under its credit
line are construction related with the related interest being capitalized. The
Company capitalized $188,000 during the first quarter of 2003 versus $155,000
during the first quarter of 2002.
INCOME TAXES
The Company's effective tax rate remained relatively constant at
approximately 26.5% and the first quarter of 2003. The Company expects its
effective tax rate will remain in the 26 to 28 percent range for fiscal 2003.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital ratio remained at .4 to 1 at October 27,
2002 and February 16, 2003. Historically, the Company has been able to operate
with a working capital deficiency because 1) restaurant operations are primarily
conducted on a cash basis, 2) high turnover (about once every 10 days) permits a
limited investment in inventory, and 3) trade payables for food purchases
usually become due after receipt of cash from the related sales.
During the first quarter of 2003, the Company expended approximately
$5,484,000 for property additions, and $16,922,000 to reduce long-term
obligations. Funds for such expenditures were provided primarily by $18,749,000
from proceeds of long-term obligations, $2,441,000 from operations and $861,000
from cash on hand. The Company routinely draws down and repays balances under
its revolving credit agreement, the gross amounts of which are included in the
above numbers.
The Company intends to open six to seven Max & Erma's restaurants
during the remainder of 2003 and seven to eight Max & Erma's restaurants during
fiscal 2004. At February 16, 2003, the Company was contractually committed to
the purchase or lease of six sites, three of which were under construction.
Seven additional sites had been approved and were in some stage of negotiations.
The estimated cost to complete the six restaurants that the Company is
contractually committed to is approximately $7.0 million as of February 16,
2003. Funding for new restaurants is expected to be provided by cash flow from
operations, the sale-leaseback of real estate, equipment leasing and the
Company's revolving credit line. At February 16, 2002, the Company had
approximately $4.9 million available under its $15.0 million revolving credit
line, approximately $16.0 million available under sale-leaseback commitments for
six properties and approximately $2.7 million available under equipment lease
commitments.
8
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management's Discussion and Analysis of Operations and Financial
Condition discusses the Company's consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these consolidated financial statements
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. On an
ongoing basis, management evaluates its estimates and judgments. We believe that
of our significant accounting policies, the following may involve a higher
degree of judgment and complexity.
Derivative Instruments
The Company utilizes interest rate swap agreements to manage interest rate
exposure on floating-rate obligations. It does not use derivative instruments
unless there is an underlying exposure and, therefore, does not use derivative
instruments for trading or speculative purposes. The evaluation of hedge
effectiveness is subject to assumptions based on the terms and timing of the
underlying exposures. All derivative instruments are recognized in the
Consolidated Balance Sheets at fair value.
Asset Impairments
The Company reviews each restaurant to ascertain whether property and equipment,
goodwill, and other intangibles have been impaired based on the sum of expected
future undiscounted cash flows from operating activities. If the estimated net
cash flows are less than the carrying amount of such assets, the Company will
recognize an impairment loss in an amount necessary to write down the assets to
a fair value as determined from expected future discounted cash flows.
Same-Store Sales
The Company discloses certain information regarding the performance of certain
restaurants in operation at least 18 consecutive months in its management's
discussion and analysis. Management excludes restaurants from this calculation
that do not meet this definition. In addition, restaurants are excluded when
unusual events or circumstances outside the Company's control significantly
change the business of the restaurant.
SAFE HARBOR STATEMENT UNDER THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
This Management's Discussion and Analysis of Financial Condition and
Results of Operations ("MD&A") contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and
Section 27A of the Securities Act of 1933, as amended. The words "plan,"
"anticipate," "believe," "expect," "estimate," and "project" and similar words
and expressions identify forward-looking statements which speak only as of the
date hereof. Forward-looking statements in this MD&A include statements
regarding estimated lost sales during the first quarter of 2003 (paragraph 2),
the belief that the first quarter decline in same-store sales was weather
related (paragraph 2), the expected opening of new Company-owned restaurants
(paragraph 3 and 14), the expectation of increased franchise fees and royalties
(paragraph 4), the expected opening of franchised restaurants (paragraph 4), the
Company's expected effective tax rate for 2003 (paragraph 11), the estimated
cost to complete the Max & Erma's which were committed to at February 16, 2003
(paragraph 15) and the expected source of funds for new Max & Erma's restaurants
(paragraph 15).
9
Investors are cautioned that forward-looking statements involve risks
and uncertainties that could cause actual results to differ materially from
historical or anticipated results due to many factors, including, but not
limited to, the Company's ability to open or franchise new restaurants as
planned, changes in competition in markets where the Company operates
restaurants, the availability of restaurant workers, the Company's ability to
control administrative expenses, changes in interest rates, changes in cash
flows from operations, the availability of real estate for purchase or lease,
and other risks, uncertainties and factors described in the Company's most
recent Annual Report on Form 10-K and other filings from time to time with the
Securities and Exchange Commission. The Company undertakes no obligation to
publicly update or revise any forward-looking statements.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary market risk results from fluctuations in interest rates.
The Company is exposed to interest rate risk through borrowings under its
revolving credit agreement, which permits borrowings up to $35.6 million. To
minimize the effect of interest rate fluctuations, the Company has entered into
an interest swap arrangement. Under this agreement, the Company pays a fixed
rate of interest on a portion of the outstanding balance.
ITEM 4 - CONTROLS AND PROCEDURES
As of a date within 90 days of the date of this report, the Company's Chief
Executive Officer and Chief Financial Officer evaluated the effectiveness of the
design and operation of the Company's disclosure controls and procedures. Based
upon this evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the disclosure controls and procedures are effective in ensuring
that information required to be disclosed by the Company in the reports that it
files or submits under the Securities and Exchange Act of 1934, as amended, is
recorded, processed, summarized and reported within the time period specified by
the Securities and Exchange Commission's rules and forms.
Additionally, there were no significant changes in the Company's internal
controls that could significantly affect the Company's disclosure controls and
procedures subsequent to the date of their evaluation, nor were there any
significant deficiencies or material weaknesses in the Company's internal
controls. As a result, no corrective actions were required or undertaken.
PART II - OTHER INFORMATION*
Item 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The exhibits listed in the accompanying index to exhibits on page 12
are filed as part of this report.
(b) Reports on Form 8-K
None
10
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.
MAX & ERMA'S RESTAURANTS, INC.
Registrant
Todd B. Barnum
-------------------------------------
Todd. B. Barnum
Chairman of the Board and
Chief Executive Officer
William C. Niegsch, Jr.
-------------------------------------
William C. Niegsch, Jr.
Executive Vice President &
Chief Financial Officer
(Principal Financial and
Accounting Officer)
March 20, 2003
- -------------------------
Date
11
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Todd Barnum, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Max & Erma's
Restaurants, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material aspects the financial condition, results of operations and cash
flows of the registrant as of, and for, the period presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a)
designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared; b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing of
this quarterly report (the "Evaluation Date"); and c) presented in this
quarterly report our conclusions about the effectiveness of the disclosure
controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function): a) all significant deficiencies in the design or
operation of internal controls which could adversely affect the
registrant's ability to record, process, summarize and report financial
data and have identified for the registrant's auditors any material
weaknesses in internal controls; and b) any fraud, whether or not material,
that involves management or other employees who have a significant role in
the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
control and in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: March 20, 2003
Todd B. Barnum
--------------------------------------
Todd B. Barnum, Chief Executive Officer
Max & Erma's Restaurants, Inc.
12
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, William Niegsch, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Max & Erma's
Restaurants, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material aspects the financial condition, results of operations and cash
flows of the registrant as of, and for, the period presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a)
designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared; b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing of
this quarterly report (the "Evaluation Date"); and c) presented in this
quarterly report our conclusions about the effectiveness of the disclosure
controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function): a) all significant deficiencies in the design or
operation of internal controls which could adversely affect the
registrant's ability to record, process, summarize and report financial
data and have identified for the registrant's auditors any material
weaknesses in internal controls; and b) any fraud, whether or not material,
that involves management or other employees who have a significant role in
the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
control and in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: March 20, 2003
William C. Niegsch, Jr.
------------------------------------------------
William C. Niegsch, Jr., Executive Vice President
& Chief Financial Officer
Max & Erma's Restaurants, Inc.
13
MAX & ERMA'S RESTAURANTS INC.
EXHIBIT INDEX
Exhibit No. Exhibit Page No.
- ----------- ------- --------
2 Not applicable
3 Not applicable
4 Not applicable
11 Not applicable
15 Not applicable
18 Not applicable
19 Not applicable
22 Not applicable
23 Not applicable
24 Not applicable
99.1 Chief Executive Officer Certification Statement 15
99.2 Chief Financial Officer Certification Statement 16
14