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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the period ended May 25, 2003
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Commission file number 0-3833
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Morgan's Foods, Inc.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 34-0562210
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
24200 Chagrin Boulevard, Suite 126, Beachwood, Ohio 44122
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 360-7500
--------------------------
- ------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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 ...X... No .......
Indicate by check mark whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the Act).
Yes ....... No ...X...
As of June 27, 2003, the issuer had 2,718,441 shares of common stock
outstanding.
1
PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
Morgan's Foods, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
- -------------------------------------------------------------------------------
QUARTER ENDED
------------------------------
MAY 25, 2003 MAY 26, 2002
------------ ------------
REVENUES ................................... $ 19,828,000 $ 19,159,000
COST OF SALES:
FOOD, PAPER AND BEVERAGE .................. 6,069,000 5,834,000
LABOR AND BENEFITS ........................ 5,358,000 5,233,000
RESTAURANT OPERATING EXPENSES .............. 5,000,000 4,758,000
DEPRECIATION AND AMORTIZATION .............. 803,000 764,000
GENERAL AND ADMINISTRATIVE EXPENSES ........ 1,305,000 1,315,000
LOSS ON RESTAURANT ASSETS .................. 10,000 10,000
------------ ------------
OPERATING INCOME ........................... 1,283,000 1,245,000
INTEREST EXPENSE:
BANK DEBT AND NOTES PAYABLE ............... (1,109,000) (1,141,000)
CAPITAL LEASES ............................ (11,000) (14,000)
OTHER INCOME AND EXPENSE, NET .............. 21,000 54,000
------------ ------------
NET INCOME BEFORE INCOME TAXES ............. 184,000 144,000
PROVISION FOR INCOME TAXES ................. 4,000 2,000
------------ ------------
NET INCOME ................................. $ 180,000 $ 142,000
============ ============
BASIC AND DILUTED NET INCOME
PER COMMON SHARE .......................... $ .07 $ .05
============ ============
BASIC WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING ........................ 2,718,441 2,726,468
DILUTED WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING ........................ 2,725,293 2,734,600
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
2
MORGAN'S FOODS, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
- -------------------------------------------------------------------------------
MAY 25, 2003 MARCH 2, 2003
------------ ------------
ASSETS
CURRENT ASSETS:
CASH AND EQUIVALENTS ............................ $ 4,791,000 $ 4,901,000
CERTIFICATE OF DEPOSIT .......................... 300,000 --
RECEIVABLES ..................................... 457,000 300,000
INVENTORIES ..................................... 517,000 492,000
PREPAID EXPENSES ................................ 640,000 562,000
------------ ------------
6,705,000 6,255,000
PROPERTY AND EQUIPMENT:
LAND ............................................ 10,970,000 10,970,000
BUILDINGS AND IMPROVEMENTS ...................... 18,795,000 18,781,000
PROPERTY UNDER CAPITAL LEASES ................... 1,006,000 1,006,000
LEASEHOLD IMPROVEMENTS .......................... 7,389,000 7,380,000
EQUIPMENT, FURNITURE AND FIXTURES ............... 18,691,000 18,618,000
CONSTRUCTION IN PROGRESS ........................ 323,000 54,000
------------ ------------
57,174,000 56,809,000
LESS ACCUMULATED DEPRECIATION AND AMORTIZATION .. 21,127,000 20,357,000
------------ ------------
36,047,000 36,452,000
OTHER ASSETS ..................................... 1,299,000 1,331,000
FRANCHISE AGREEMENTS ............................. 1,986,000 2,016,000
DEFERRED TAXES ................................... 600,000 600,000
GOODWILL ......................................... 9,371,000 9,371,000
------------ ------------
$ 56,008,000 $ 56,025,000
============ ============
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
CURRENT MATURITIES OF LONG-TERM DEBT .......... $ 2,651,000 $ 2,603,000
CURRENT MATURITIES OF CAPITAL LEASE OBLIGATIONS 98,000 108,000
ACCOUNTS PAYABLE .............................. 3,696,000 3,193,000
ACCRUED LIABILITIES ........................... 3,405,000 3,462,000
------------ ------------
9,850,000 9,366,000
LONG-TERM DEBT .................................. 45,428,000 46,113,000
LONG-TERM CAPITAL LEASE OBLIGATIONS ............. 419,000 436,000
OTHER LONG-TERM LIABILITIES ..................... 1,553,000 1,532,000
SHAREHOLDERS' DEFICIT
PREFERRED SHARES, 1,000,000 SHARES AUTHORIZED,
NO SHARES OUTSTANDING
COMMON STOCK
AUTHORIZED SHARES - 25,000,000
ISSUED SHARES - 2,969,405 ........................ 30,000 30,000
TREASURY STOCK - 250,964 IN 2004 AND 2003 ........ (284,000) (284,000)
CAPITAL IN EXCESS OF STATED VALUE ................. 28,829,000 28,829,000
ACCUMULATED DEFICIT ............................... (29,817,000) (29,997,000)
------------ ------------
TOTAL SHAREHOLDERS' DEFICIENCY .................... (1,242,000) (1,422,000)
------------ ------------
$ 56,008,000 $ 56,025,000
============ ============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
Morgan's Foods, Inc.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIENCY
(unaudited)
COMMON SHARES TREASURY SHARES CAPITAL IN TOTAL
----------------------- ------------------------- EXCESS OF ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT STATED VALUE DEFICIT DEFICIENCY
--------- ---------- --------- ------------ ------------ ------------ ------------
Balance, March 3, 2002 .. 2,969,405 $ 30,000 (241,564) $ (251,000) $ 28,829,000 $(28,805,000) $ (197,000)
Net loss ................ -- -- -- -- -- (1,192,000) (1,192,000)
Purchase of common shares -- -- (9,400) (33,000) -- -- (33,000)
--------- ---------- --------- ------------ ------------ ------------ ------------
Balance March 2, 2003 ... 2,969,405 30,000 (250,964) (284,000) 28,829,000 (29,997,000) (1,422,000)
Net income .............. -- -- -- -- -- 180,000 180,000
--------- ---------- --------- ------------ ------------ ------------ ------------
Balance May 25, 2003 .... 2,969,405 $ 30,000 (250,964) $ (284,000) $ 28,829,000 $(29,817,000) $ (1,242,000)
========= ========== ========= ============ ============ ============ ============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
Morgan's Foods, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
QUARTER ENDED
---------------------------
MAY 25, 2003 MAY 26, 2002
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME .................................... $ 180,000 $ 142,000
ADJUSTMENTS TO RECONCILE TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION .............. 803,000 764,000
AMORTIZATION OF DEFERRED FINANCING COSTS ... 32,000 33,000
AMORTIZATION OF SUPPLY AGREEMENT ADVANCES .. (179,000) (196,000)
FUNDING FROM SUPPLY AGREEMENTS ............. 68,000 62,000
LOSS ON RESTAURANT ASSETS .................. 10,000 10,000
CHANGE IN ASSETS AND LIABILITIES:
INCREASE IN RECEIVABLES ................... (157,000) (102,000)
INCREASE IN INVENTORIES ................... (25,000) (63,000)
DECREASE (INCREASE) IN PREPAID EXPENSES ... (78,000) 110,000
DECREASE IN OTHER ASSETS .................. -- 18,000
INCREASE (DECREASE) IN ACCOUNTS PAYABLE ... 503,000 (249,000)
INCREASE IN ACCRUED LIABILITIES ........... 65,000 51,000
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES ..... 1,222,000 580,000
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
CAPITAL EXPENDITURES .......................... (368,000) (98,000)
PURCHASE OF CERTIFICATE OF DEPOSIT ............ (300,000) --
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES ......... (668,000) (98,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
PRINCIPAL PAYMENTS ON LONG-TERM DEBT .......... (637,000) (370,000)
PRINCIPAL PAYMENTS ON CAPITAL LEASE OBLIGATIONS (27,000) (25,000)
PURCHASE OF TREASURY SHARES ................... -- (33,000)
----------- -----------
NET CASH USED BY FINANCING ACTIVITIES ......... (664,000) (428,000)
----------- -----------
NET CHANGE IN CASH AND EQUIVALENTS ............ (110,000) 54,000
CASH AND EQUIVALENTS, BEGINNING BALANCE ....... 4,901,000 7,441,000
----------- -----------
CASH AND EQUIVALENTS, ENDING BALANCE .......... $ 4,791,000 $ 7,495,000
=========== ===========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
5
Morgan's Foods, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTERS ENDED MAY 25, 2003 AND MAY 26, 2002
(unaudited)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
The interim consolidated financial statements of Morgan's Foods, Inc.
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. Except as noted in the notes to
the financial statements, 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 March 2, 2003.
Certificate of Deposit. During the first quarter of fiscal 2004, the
Company issued a letter of credit for $300,000 in favor of one of its vendors.
The letter of credit which expires September 27, 2003 is secured by a $300,000
certificate of deposit.
NOTE 2. 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.
NOTE 3. STOCK OPTIONS.
The Company's outstanding stock options are accounted for using the
intrinsic value method, under which compensation cost is measured as the excess,
if any, of the quoted market price of the stock at the grant date over the
amount an employee must pay to acquire the stock. Had compensation cost for the
options granted been determined based on their fair values at the grant dates in
accordance with the fair value method of Statement of Financial Accounting
Standards ("SFAS") No. 123, Accounting for Stock-Based Compensation, the
Company's net income and earnings per share would have been presented at the pro
forma amounts indicated below:
Quarter Ended
--------------------------
May 25, 2003 May 26, 2002
------------ ------------
Net income as reported .................. $ 180,000 $ 142,000
Add (subtract) stock-based compensation
expense, net of tax:
- As reported (intrinsic value method) -- --
- Pro forma (fair value method) ...... -- --
----------- -----------
Net income - pro forma .................. $ 180,000 $ 142,000
=========== ===========
Basic and diluted income
per common share:
As reported .......................... $ .07 $ .05
Pro forma ............................ $ .07 $ .05
6
NOTE 4. NEW ACCOUNTING STANDARDS.
In June 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 143, Accounting for Asset Retirement Obligations, which addresses
financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and associated asset retirement costs.
The new rules apply to legal obligations associated with the retirement of
long-lived assets that result from the acquisition, construction, development
and/or normal operation of long-lived assets. The Company adopted the provisions
of SFAS No. 143 beginning in fiscal 2004. The adoption of SFAS No. 143 did not
have a material impact on the Company's consolidated financial position or
results of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Description of Business. Morgan's Foods, Inc. ("the Company") operates,
through wholly-owned subsidiaries KFC restaurants under franchises from KFC
Corporation and Taco Bell restaurants under franchises from Taco Bell
Corporation. As of June 27, 2003, the Company operates 75 KFC restaurants, 7
Taco Bell restaurants, 16 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" operated under franchisees from Taco Bell
Corporation and licenses from Pizza Hut Corporation, 1 KFC/Pizza Hut Express
"2n1" operated 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.
SUMMARY OF EXPENSES AND OPERATING INCOME AS A PERCENTAGE OF REVENUES
QUARTER ENDED
----------------------------
MAY 25, 2003 MAY 26, 2002
------------ ------------
Cost of sales:
Food, paper and beverage ........ 30.6% 30.5%
Labor and benefits .............. 27.0% 27.3%
Restaurant operating expenses ..... 25.2% 24.8%
Depreciation and amortization ..... 4.0% 4.0%
General and administrative expenses 6.6% 6.9%
Operating income .................. 6.5% 6.5%
Revenues. Revenues for the quarter ended May 25, 2003 were $19,828,000
compared to $19,159,000 for the quarter ended May 26, 2002. This increase of
$669,000 was primarily due to a 3.2% increase in comparable restaurant revenues.
The increase in comparable restaurant revenues was primarily the result of
effective product promotions by the franchisors and increased local advertising
during the quarter.
Costs of Sales - Food, Paper and Beverages. Food, paper and beverage
costs for the first quarter increased as a percentage of revenue from 30.5% in
fiscal 2003 to 30.6% in fiscal 2004. This increase was primarily the result of
product promotions during the first quarter of fiscal 2004 having a higher food
cost than those which were promoted during the first quarter of fiscal 2003.
This increase was partially offset by efficiencies gained from higher average
restaurant volumes as well as rebates from increased beverage sales.
7
Cost of Sales - Labor and Benefits. Labor and benefits decreased as a
percentage of revenue for the quarter ended May 25, 2003 to 27.0% compared to
27.3% for the year earlier quarter. The decrease was primarily due to
efficiencies gained from higher average restaurant volumes which were partially
offset by increased health care costs.
Restaurant Operating Expenses. Restaurant operating expenses increased
as a percentage of revenue to 25.2% in the first quarter of fiscal 2004 compared
to 24.8% in the first quarter of fiscal 2003. This increase was primarily due to
increased general insurance and local advertising costs which were partially
offset by efficiencies gained from higher restaurant volumes.
Depreciation and Amortization. Depreciation and amortization increased
to $803,000 in the current year first quarter from $764,000 in the prior year
first quarter. This increase was a result of restaurant development which was
placed in service later in fiscal year 2003.
General and Administrative Expenses. General and administrative
expenses were substantially unchanged at $1,305,000 and $1,315,000 for the first
quarters of fiscal 2004 and 2003 respectively.
Loss on Restaurant Assets. The loss on restaurant assets was unchanged
at $10,000 in the first quarters of fiscal 2004 and 2003.
Operating Income. Operating income in the first quarter of fiscal 2004
increased to $1,283,000 or 6.5% of revenues compared to $1,245,000 or 6.5% of
revenues for the first quarter of fiscal 2003. Operating income was a consistent
percentage of revenues as a result of higher average restaurant volumes being
offset by higher cost product promotions, increased health care and general
insurance costs and increased depreciation expense.
Iterest Expense. Interest expense on bank debt decreased to $1,109,000
in the first quarter of fiscal 2004 from $1,141,000 in fiscal 2003 due to lower
debt balances during the fiscal 2004 quarter. Interest expense on capitalized
leases was substantially unchanged from the prior year first quarter.
Other Income. Other income decreased to $21,000 in the first quarter of
fiscal 2004 from $54,000 in the first quarter of fiscal 2003 as a result of
lower interest income due to decreases in both the interest rate earned and the
average cash balance in the first quarter of fiscal 2004.
Provision for Income Taxes. The provision for income taxes was
substantially unchanged at $4,000 and $2,000 in the first quarters of fiscal
2004 and 2003, respectively.
Liquidity and Capital Resources. Cash flow activity for the twelve
weeks of fiscal 2004 and fiscal 2003 is presented in the Consolidated Statements
of Cash Flows. Cash provided by operating activities was $1,222,000 for the
twelve weeks ended May 25, 2003. The Company paid scheduled long-term bank and
capitalized lease debt of $664,000 in the first quarter of fiscal 2004.
The quick service restaurant operations of the Company have
historically provided sufficient cash flow to service the Company's debt,
refurbish and upgrade restaurant properties and cover administrative overhead.
Management believes that operating cash flow will provide sufficient capital to
continue to operate and maintain the KFC, Taco Bell and "2n1" restaurants,
service the Company's debt and support required corporate expenses.
8
The Company's debt arrangements require the maintenance of a
consolidated fixed charge coverage ratio of 1.2 to 1 regarding all of its
mortgage loans and individual restaurant coverage ratios between 1.2 and 1.5 to
1 on certain of its loans. As of March 2, 2003, the Company was not in
compliance with the consolidated ratio of 1.2 to 1 or the unit level ratios
relating to $33,346,000 of its debt. The Company has obtained waivers of these
violations from the applicable lenders. As these waivers continue through the
end of fiscal year 2004, the Company has classified its debt as long term as of
March 2, 2003 and May 25, 2003. All payments on the Company's debt have been,
and continue to be current and management believes that the Company will
continue to be able to service the debt. If the Company does not comply with
debt covenants in the future, and if future waivers are not obtained, the
lenders will have certain remedies available to them which could include calling
of the debt or acceleration of payments. Noncompliance with the requirements of
the Company's mortgage debt, if not waived, could also trigger cross-default
provisions of other debt agreements.
The Company continues to be out of compliance with certain of the
continued listing standards of the American Stock Exchange and was required to
submit a revised business plan to the Exchange indicating how the Company would
achieve compliance with those standards. Specifically, the Company fell under
the guidelines in Section 1003(a)(i) with shareholders' equity of less than
$2,000,000 and has sustained losses from continuing operations and/or net losses
in two of its three most recent fiscal years and Section 1003(a)(ii) with
shareholder's equity of less than $4,000,000 and has sustained losses from
continuing operations and/or net losses in three out of its four most recent
fiscal years.
On March 25, 2003 the Company submitted its revised plan to the staff
at the Exchange indicating how it would regain compliance with the continued
listing standards and received notice from the Exchange on April 30, 2003 that
it has accepted the Company's revised plan. The Exchange has allowed the Company
to continue its plan for compliance until August 17, 2003, the end of the
Company's second fiscal quarter, at which time the Exchange will reassess the
Company's compliance with the continued listing standards. During the term of
the extension, the Exchange will monitor the Company's performance and the
Company will be required to report to the Exchange any change in its performance
which would be inconsistent with the plan which was approved by the Exchange on
April 30. Any failure to meet the operating plan which was accepted by the
Exchange could result in the commencement of delisting proceedings. If the
Company were delisted, or if its common shares were suspended from trading, the
liquidity of its common shares could be diminished.
The Company's market risk exposure is primarily due to possible
fluctuations in interest rates as they relate to future borrowings. The Company
has evaluated the potential effect of a 1.0% increase in these rates on future
capital spending plans and believes that there would be no material effect. The
Company does not enter into derivative financial investments for trading or
speculation purposes. As a result, the Company believes that its market risk
exposure is not material to the Company's financial position, liquidity or
results of operations.
Commitments. During the first quarter of fiscal year 2004, the Company
issued a letter of credit for $300,000 in favor of one of its vendors. The
letter of credit which expires September 27, 2003 is secured by a $300,000
certificate of deposit.
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.
9
SAFE HARBOR STATEMENTS. This document 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. 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 and its ability to obtain
waivers of any debt covenant violations as well as the listing status of its
common shares with the American Stock Exchange.
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.
Information required by this item is included under "Liquidity and
Capital Resources".
ITEM 4. CONTROLS AND PROCEDURES.
(a) Within the 90-day period prior to the filing date of this Quarterly Report
on Form 10-Q, the Company, under the supervision, and with the
participation, of its management, including its Chief Executive Officer and
Chief Financial Officer, performed an evaluation of the Company's
disclosure controls and procedures, as contemplated by Securities Exchange
Act Rule 13a-15. Based on that evaluation, the Company's Chief Executive
Officer and Chief Financial Officer concluded that such disclosure controls
and procedures were effective.
(b) No significant changes were made in the Company's internal controls or in
other factors that could significantly affect these controls subsequent to
the date of the evaluation performed pursuant to Securities Exchange Act
Rule 13a-15 referred to above.
10
PART II OTHER INFORMATION
ITEM 5. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's annual meeting of shareholders was held on June 27, 2003
and voting was conducted on the following proposals:
Proposal 1 - The election of seven Directors. The following seven Directors were
elected:
NAME FOR WITHHOLD ABSTAIN
- ---- --- -------- -------
Leonard Stein-Sapir 2,493,319 5,048 26,262
Lawrence S. Dolin 2,497,640 727 26,262
Bahman Guyuron, M.D 2,496,540 1,827 26,262
Kenneth L. Hignett 2,494,306 4,061 26,262
Steven S. Kaufman 2,497,814 553 26,262
Bernard Lerner 2,497,814 553 26,262
James J. Liguori 2,493,540 4,827 26,262
11
MORGAN'S FOODS, INC.
INDEX TO EXHIBITS
Exhibit
Number Exhibit Description
- ------- -------------------
99.1 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 Leonard R. Stein-Sapir, Chairman of the Board and Chief
Executive Officer
99.2 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 Kenneth L. Hignett, Senior Vice President, Chief Financial
Officer and Secretary
12
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.
Morgan's Foods, Inc.
-----------------------------------------
(Registrant)
Dated: July 9, 2003 By: /s/ Kenneth L. Hignett
------------ -------------------------------------
Kenneth L. Hignett
Senior Vice President,
Chief Financial Officer & Secretary
13
CERTIFICATIONS
--------------
I, Leonard R. Stein-Sapir, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Morgan's Foods, Inc.;
2. Based on my knowledge, this annual 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 annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this quarterly
report;
4. The registrant's other certifying officers 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 date of this
report (the "Evaluation Date"); and
c) presented in this 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 officers 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 officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or 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: July 9, 2003 /s/ Leonard R. Stein-Sapir
------------------------------
Leonard R. Stein-Sapir
Chairman of the Board,
Chief Executive Officer
CERTIFICATIONS
--------------
I, Kenneth L. Hignett, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Morgan's Foods, Inc.;
2. Based on my knowledge, this annual 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 annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this quarterly
report;
4. The registrant's other certifying officers 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 date of this
report (the "Evaluation Date"); and
c) presented in this 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 officers 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 officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or 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: July 9, 2003 /s/ Kenneth L. Hignett
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Kenneth L. Hignett,
Senior Vice President,
Chief Financial Officer & Secretary