<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 2, 2000
-------------------------------------------------
OR
[ ] 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 1-12692
-------------------------------------------------
MORTON'S RESTAURANT GROUP, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3490149
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
3333 New Hyde Park Road, Suite 210, New Hyde Park, New York 11042
- --------------------------------------------------------------------------------
(Address of principal executive offices) (zip code)
516-627-1515
- --------------------------------------------------------------------------------
(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 X No
As of May 5, 2000, the registrant had 4,768,632 Shares of its Common Stock, $.01
par value, outstanding.
1
<PAGE>
MORTON'S RESTAURANT GROUP, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of April 2, 2000 and January 2, 2000 3-4
Consolidated Statements of Income for the three month periods ended April 2, 2000 and
April 4, 1999 5
Consolidated Statements of Cash Flows for the three month periods ended April 2, 2000
and April 4, 1999 6
Notes to Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9-13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of Stockholders 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
</TABLE>
2
<PAGE>
Item 1. Financial Statements
MORTON'S RESTAURANT GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(amounts in thousands)
<TABLE>
<CAPTION>
April 2, January 2,
2000 2000
---- ----
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,289 $ 5,806
Accounts receivable 1,653 1,093
Inventories 6,637 7,134
Landlord construction receivables, prepaid expenses and other
current assets 2,815 2,724
Deferred income taxes 6,060 5,699
-------- --------
Total current assets 19,454 22,456
-------- --------
Property and equipment, at cost:
Furniture, fixtures and equipment 30,144 30,696
Leasehold improvements 37,740 38,002
Land 6,236 6,236
Construction in progress 6,206 2,281
-------- --------
80,326 77,215
Less accumulated depreciation and amortization 11,846 10,500
-------- --------
Net property and equipment 68,480 66,715
-------- --------
Intangible assets, net of accumulated amortization of $4,392 at
April 2, 2000 and $4,286 at January 2, 2000 11,603 11,709
Other assets and deferred expenses, net of accumulated
amortization of $599 at April 2, 2000 and $698 at
January 2, 2000 6,076 5,970
Deferred income taxes 6,322 7,511
-------- --------
$111,935 $114,361
======== ========
</TABLE>
(Continued)
3
<PAGE>
MORTON'S RESTAURANT GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
(amounts in thousands, except share data)
<TABLE>
<CAPTION>
April 2, January 2,
2000 2000
---- ----
(unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,983 $ 7,870
Accrued expenses 19,317 22,036
Current portion of obligations to financial institutions
and capital leases 4,375 4,422
Accrued income taxes 369 140
--------- ---------
Total current liabilities 30,044 34,468
Obligations to financial institutions and capital leases,
less current maturities 70,689 60,970
Other liabilities 6,458 6,855
--------- ---------
Total liabilities 107,191 102,293
--------- ---------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value per share. Authorized 3,000,000
shares, no shares issued or outstanding - -
Common stock, $.01 par value per share. Authorized
25,000,000 shares, issued and outstanding 6,758,575 shares at
April 2, 2000 and 6,758,200 shares at January 2, 2000 68 68
Nonvoting common stock, $.01 par value per share. Authorized
3,000,000 shares, no shares issued or outstanding - -
Additional paid-in capital 62,853 62,849
Accumulated other comprehensive income (loss) (72) (79)
Accumulated deficit (24,095) (27,146)
Less treasury stock at cost, 1,979,326 shares at April 2, 2000 and
1,381,190 shares at January 2, 2000 (34,010) (23,624)
--------- ---------
Total stockholders' equity 4,744 12,068
--------- ---------
$ 111,935 $ 114,361
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
MORTON'S RESTAURANT GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
April 2, April 4,
2000 1999
---- ----
(unaudited)
<S> <C> <C>
Revenues $63,595 $ 52,747
Food and beverage costs 21,422 18,119
Restaurant operating expenses 26,352 22,425
Pre-opening costs, depreciation, amortization and
non-cash charges 3,080 1,557
General and administrative expenses 5,058 4,229
Marketing and promotional expenses 1,876 1,427
Interest expense, net 1,448 910
------- --------
Income before income taxes and cumulative
effect of a change in an accounting principle 4,359 4,080
Income tax expense 1,308 1,020
------- --------
Income before cumulative effect of a change
in an accounting principle 3,051 3,060
Cumulative effect of a change in an accounting principle, net of
income tax benefit of $1,357 - 2,281
------- --------
Net income $ 3,051 $ 779
======= ========
Net income per share - basic:
Before cumulative effect of a change in an accounting principle $ 0.60 $ 0.48
Cumulative effect of a change in an accounting principle - (0.36)
------- --------
Net income $ 0.60 $ 0.12
======= ========
Net income per share - diluted:
Before cumulative effect of a change in an accounting principle $ 0.58 $ 0.47
Cumulative effect of a change in an accounting principle - (0.35)
------- --------
Net income $ 0.58 $ 0.12
======= ========
Weighted average shares outstanding:
Basic 5,093 6,354
======= ========
Diluted 5,232 6,541
======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
MORTON'S RESTAURANT GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(amounts in thousands)
<TABLE>
<CAPTION>
Three Months Ended
April 2, April 4,
2000 1999
---- ----
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,051 $ 779
Adjustments to reconcile net income to net cash provided
by operating activities:
Cumulative effect of a change in an accounting principle - 2,281
Depreciation, amortization and other non-cash charges 2,319 1,115
Deferred income taxes 828 693
Change in assets and liabilities:
Accounts receivable (562) 97
Inventories 492 66
Prepaid expenses and other assets (151) 539
Accounts payable, accrued expenses and other liabilities (4,724) (4,815)
Accrued income taxes 229 (293)
-------- -------
Net cash provided by operating activities 1,482 462
-------- -------
Cash flows from investing activities:
Purchases of property and equipment (3,456) (1,372)
-------- -------
Net cash used by investing activities (3,456) (1,372)
-------- -------
Cash flows from financing activities:
Principal reduction on obligations to financial institutions and capital leases (4,084) (2,945)
Proceeds from obligations to financial institutions and capital leases 12,927 8,035
Purchases of treasury stock (10,386) (3,867)
Net proceeds from issuance of stock 4 20
-------- -------
Net cash (used) provided by financing activities (1,539) 1,243
-------- -------
Effect of exchange rate changes on cash (4) (33)
-------- -------
Net increase (decrease) in cash and cash equivalents (3,517) 300
Cash and cash equivalents at beginning of period 5,806 2,117
-------- -------
Cash and cash equivalents at end of period $ 2,289 $ 2,417
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
MORTON'S RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
April 2, 2000 and April 4, 1999
1) The accompanying unaudited, consolidated financial statements have been
prepared in accordance with instructions to Form 10-Q and, therefore, do not
include all information and footnotes normally included in financial statements
prepared in conformity with generally accepted accounting principles. They
should be read in conjunction with the consolidated financial statements of
Morton's Restaurant Group, Inc. (the "Company") for the fiscal year ended
January 2, 2000 filed by the Company on Form 10-K with the Securities and
Exchange Commission on March 31, 2000.
The accompanying financial statements are unaudited and include all
adjustments (consisting of normal recurring adjustments and accruals) that
management considers necessary for a fair presentation of its financial position
and results of operations for the interim periods presented. The results of
operations for the interim periods are not necessarily indicative of the results
that may be expected for the entire year.
The Company uses a fiscal year which consists of 52 weeks.
Approximately every six or seven years, a 53rd week will be added.
2) For the purposes of the consolidated statements of cash flows, the
Company considers all highly liquid instruments purchased with a maturity of
three months or less to be cash equivalents. The Company paid cash interest and
fees, net of amounts capitalized, of approximately $1,207,000 and $785,000, and
income taxes of approximately $309,000 and $632,000, for the three months ended
April 2, 2000 and April 4, 1999, respectively. During the first quarter of
fiscal 2000 and 1999, the Company entered into capital lease arrangements for
restaurant equipment of approximately $843,000 and $352,000, respectively.
3) Based on a strategic assessment of trends and a downturn in comparable
revenues of Bertolini's Authentic Trattorias, during the fourth quarter of
fiscal 1998, pursuant to the approval of the Board of Directors, the Company
recorded a nonrecurring, pre-tax charge of $19,925,000 representing the
write-down of impaired Bertolini's restaurant assets, the write-down and accrual
of lease exit costs associated with the closure of specified Bertolini's
restaurants as well as the write-off of the residual interests in Mick's and
Peasant restaurants. The Company performed an in-depth analysis of historical
and projected operating results and, as a result of significant operating
losses, identified several nonperforming restaurants which have all been closed.
At April 2, 2000 and January 2, 2000, included in "Accrued expenses" in the
accompanying consolidated balance sheets is approximately $2,451,000 and
$2,582,000 representing the lease disposition liabilities related to the closing
of these nonperforming restaurants. Additionally, the analysis identified
several underperforming restaurants, which reflected a pattern of historical
operating losses and negative cash flow, as well as continued projected negative
cash flow and operating results for 1999 and 2000. Accordingly, the Company
recorded an impairment charge in the fourth quarter of fiscal 1998 to write-down
these impaired assets and will contemplate their potential closure based upon
future operating results. One such underperforming restaurant was closed in
September 1999. (See "Part II - Other Information, Item 1. Legal Proceedings".)
7
<PAGE>
4) Beginning in fiscal 1999, in accordance with its adoption of Statement
of Position 98-5 ("SOP 98-5"), "Reporting on the Costs of Start-up Activities",
the Company expenses all costs incurred during start-up activities, including
pre-opening costs, as incurred. In connection with the adoption, the Company
recorded a charge for the cumulative effect of an accounting change of
approximately $2,281,000, net of income tax benefits of approximately $1,357,000
in the first quarter of fiscal 1999.
5) During fiscal 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income". The components
of comprehensive income for the three months ended April 2, 2000 and April 4,
1999 are as follows:
<TABLE>
<CAPTION>
April 2, 2000 April 4, 1999
------------- -------------
(amounts in thousands)
<S> <C> <C>
Net Income $ 3,051 $ 779
Other comprehensive income (loss):
Foreign currency translation 7 (52)
-------- -------
Total comprehensive income $ 3,058 $ 727
======== =======
</TABLE>
6) The Company is involved in various legal actions. See "Part II - Other
Information, Item 1. Legal Proceedings" on page 14 of this Form 10-Q for a
discussion of these legal actions.
8
<PAGE>
MORTON'S RESTAURANT GROUP, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
Revenues increased $10.8 million, or 20.6%, to $63.6 million for the
three month period ended April 2, 2000, from $52.7 million during the
comparable 1999 period. Of the increase in revenues, $6.6 million was
attributable to incremental restaurant revenues from eight new restaurants
opened after January 4, 1999 and $5.2 million, or 10.5%, was attributable to
additional comparable revenues from restaurants open all of both periods.
Revenues for the five closed Bertolini's restaurants (see Note 3) decreased
by $1.0 million compared to the first quarter of fiscal 1999. Average
Morton's and Bertolini's revenues per restaurant open for a full period
increased 13.8%. Higher revenues for the first quarter of fiscal 2000 reflect
the impact of price increases of approximately 1% in September 1999 and 1% in
February 2000. The Company believes that the presence of Easter and Passover
in the 1999 first quarter had an adverse impact on comparable restaurant
revenues for the period.
Percentage changes in comparable restaurant revenues for the three
month period ended April 2, 2000 versus April 4, 1999 for restaurants open all
of both periods are as follows:
<TABLE>
<CAPTION>
Three Months
Ended April 2, 2000
Percentage Change
-----------------
<S> <C>
Morton's 12.3%
Bertolini's -2.3%
Total 10.5%
</TABLE>
Food and beverage costs increased from $18.1 million for the three
month period ended April 4, 1999 to $21.4 million for the three month period
ended April 2, 2000. These costs as a percentage of revenues decreased from
34.4% for the 1999 period to 33.7% for the 2000 period.
Restaurant operating expenses, which include labor, occupancy and
other operating expenses, increased from $22.4 million for the three month
period ended April 4, 1999 to $26.4 million for the three month period ended
April 2, 2000, an increase of $4.0 million associated with additional
restaurants. Those costs as a percentage of revenues decreased 1.1% from
42.5% for the three month period ended April 4, 1999 to 41.4% for the three
month period ended April 2, 2000.
Pre-opening costs, depreciation, amortization and non-cash charges
increased from $1.6 million for the three month period ended April 4, 1999 to
$3.1 million for the three month period ended April 2, 2000 and increased as a
percentage of revenues by 1.9%. Beginning in fiscal 1999, in accordance with the
adoption of SOP 98-5 (see Note 4), the Company expenses all costs incurred
during start-up activities, including pre-opening costs, as incurred.
Pre-opening costs incurred and recorded as expense for the three month period
ended April 2, 2000 and April 4, 1999 were $0.8 million and $0.4 million,
respectively. The timing of restaurant openings, as well as costs per
restaurant, affected the amount of such costs. Included in the first quarter of
fiscal 2000 are charges of approximately $0.5 million related to the March 2000
disposition of one Bertolini's restaurant not previously provided for in the
fiscal 1998 charge. (See Note 3.)
General and administrative expenses for the three month period ended
April 2, 2000 were $5.1 million, which increased from $4.2 million for the three
month period ended April 4, 1999. Such costs as a
9
<PAGE>
percentage of revenues remained constant at 8.0% for the 2000 and 1999 three
month periods. The increase in such expense is driven by incremental costs
associated with increased restaurant development, training and salary costs.
Marketing and promotional expenses were $1.9 million for the three
month period ended April 2, 2000 and $1.4 million for the three month period
ended April 4, 1999. Such costs as a percentage of revenues were 2.9% for the
three month period ended April 2, 2000, an increase of 0.2% from the three month
period ended April 4, 1999.
Interest expense, net of interest income, increased to $1.4 million for
the three month period ended April 2, 2000 from $0.9 million for the three month
period ended April 4, 1999 due to increased borrowings and higher interest
rates.
Income tax expense of $1.3 million for the three month period ended
April 2, 2000 represents Federal income taxes, which were partially offset by
the establishment of additional deferred tax assets relating to FICA and other
tax credits that were generated during fiscal 2000, as well as state income
taxes. The Company's effective tax rate increased in part due to higher state
income taxes.
LIQUIDITY AND CAPITAL RESOURCES
At present and in the past, the Company has had, and may have in the
future, negative working capital balances. The working capital deficit is
produced principally as a result of the Company's investment in long-term
restaurant operating assets and real estate. The Company does not have
significant receivables or inventories and receives trade credit based upon
negotiated terms in purchasing food and supplies. Funds available from cash
sales not immediately needed to pay for food and supplies or to finance
receivables or inventories are used for noncurrent capital expenditures and or
payments of long-term debt balances under revolving credit agreements.
The Company and Fleet National Bank ("Fleet") (formerly BankBoston,
N.A.) entered into the Second Amended and Restated Revolving Credit and Term
Loan Agreement, dated June 19, 1995, as amended, from time to time (the "Credit
Agreement"), pursuant to which the Company's credit facility (the "Credit
Facility") is $74,750,000. The Credit Facility consists of a $24,750,000 term
loan (the "Term Loan") and a $50,000,000 revolving credit facility (the
"Revolving Credit"). Loans made pursuant to the Credit Agreement bear interest
at a rate equal to the lender's base rate (plus applicable margin) or, at the
Company's option, the Eurodollar Rate (plus applicable margin). At April 2,
2000, calculated pursuant to the Credit Agreement, the Company's applicable
margin on the Revolving Credit was 0.00% on base rate loans and 2.00% on
Eurodollar Rate loans and the Company's applicable margin on the Term Loan was
0.25% on base rate loans and 2.25% on Eurodollar Rate loans. In addition, the
Company is obligated to pay fees of 0.25% on unused loan commitments less than
$10,000,000, 0.375% on unused loan commitments greater than $10,000,000 and a
per annum letter of credit fee (based on the face amount thereof) equal to the
applicable margin on the Eurodollar Rate loans. Fleet has syndicated portions of
the Credit Facility to First Union Corporation, Imperial Bank and Chase
Manhattan Bank.
As of April 2, 2000 and January 2, 2000, the Company had outstanding
borrowings of $49,875,000 and $41,625,000, respectively, under the Credit
Facility. At April 2, 2000, $185,000 was restricted for letters of credit issued
by the lender on behalf of the Company. Unrestricted and undrawn funds available
to the Company under the Credit Facility were $24,690,000 and the weighted
average interest rate on all borrowings under the Credit Facility was 8.22% on
April 2, 2000.
Quarterly principal installments on the Term Loan of $250,000 which
began March 31, 2000 are due at the end of each calendar quarter thereafter
through December 31, 2002. Quarterly principal installments of $2,500,000 are
due from March 31, 2003 through December 31, 2003 and $3,000,000 from March 31,
10
<PAGE>
2004 through December 31, 2004. The Revolving Credit will be payable in full on
December 31, 2004. Total amounts of principal payable by the Company under the
Credit Facility during the five years subsequent to April 2, 2000 amount to
$750,000 in 2000, $1,000,000 in 2001, $1,000,000 in 2002, $10,000,000 in 2003
and $37,125,000 in 2004. Borrowings under the Credit Agreement have been
classified as noncurrent on the Company's consolidated balance sheet since the
Company may borrow amounts due under the Term Loan from the Revolving Credit,
including the Term Loan principal payments payable during 2000.
Borrowings under the Credit Facility are secured by all tangible and
intangible assets of the Company. The Credit Agreement contains certain
restrictive covenants with respect to the Company that, among other things,
create limitations (subject to certain exceptions) on: (i) the incurrence or
existence of additional indebtedness or the granting of liens on assets or
contingent obligations; (ii) the making of certain investments; (iii) mergers,
dispositions of assets or consolidations; (iv) prepayment of certain other
indebtedness; (v) making capital expenditures above specified amounts; (vi) the
repurchase of the Company's outstanding common stock; and (vii) the ability to
make certain fundamental changes or to change materially the present method of
conducting the Company's business. The Credit Agreement also requires the
Company to satisfy certain financial ratios and tests. As of April 2, 2000, the
Company believes it was in compliance with such covenants.
On April 7, 1998 and May 29, 1998, the Company entered into interest
rate swap agreements with Fleet on notional amounts of $10,000,000 each.
Interest rate swap agreements are used to reduce the potential impact of
interest rate fluctuations relating to $20,000,000 of variable rate debt. The
term of the agreements are for three years and may be extended for an additional
two years at the option of Fleet.
In March 1997, a subsidiary of the Company and CNL Financial I, Inc.
("CNL") entered into a $2,500,000 loan agreement (the "CNL Loan") which matures
on April 1, 2007 and has a 10.002% per annum interest rate. Principal and
interest payments will be made over the term of the loan. At April 2, 2000 and
January 2, 2000 the outstanding principal balance of the CNL Loan was
approximately $1,990,000 and $2,039,000, respectively, of which approximately
$207,000 and $202,000, respectively, has been included in "Current portion of
obligations to financial institutions and capital leases" in the accompanying
consolidated balance sheets.
During 1999 and 1998, various subsidiaries of the Company and FFCA
Acquisition Corporation ("FFCA") entered into loan commitments, aggregating
$27,000,000, to fund the purchases of land and construction of restaurants.
During 2000, 1999 and 1998, $1,927,000, $4,757,000 and $5,315,000, respectively,
was funded, with the interest rates ranging from 7.68% to 9.26% per annum.
Monthly principal and interest payments have been scheduled over twenty-year
periods. At April 2, 2000 and January 2, 2000 the aggregate outstanding
principal balance due to FFCA was approximately $11,773,000 and $9,943,000,
respectively, of which approximately $211,000 and $206,000, respectively, of
principal is included in "Current portion of obligations to financial
institutions and capital leases" in the accompanying consolidated balance
sheets.
During the first three months of fiscal 2000, the Company's net
investment in fixed assets and related investment costs, including pre-opening
costs, net of equipment lease and mortgage financings, approximated $4.2
million. The Company estimates that it will expend up to an aggregate of $16.0
million in 2000 to finance ordinary refurbishment of existing restaurants and
capital expenditures, net of landlord development and or rent allowances and net
of equipment lease and mortgage financing, for new restaurants. The Company has
entered into various equipment lease, sale-leaseback and mortgage financing
agreements with several financial institutions of which approximately $19.2
million, in the aggregate, is available for future fundings. The Company
anticipates that funds generated through operations and funds
11
<PAGE>
available through equipment lease and mortgage financing commitments, as well as
funds available under the Credit Agreement will be sufficient to fund planned
expansion.
In fiscal 1999 and 1998, the Company's board of directors authorized
repurchases of the Company's outstanding common stock of up to approximately
1,930,600 shares. In March 2000, the board of directors increased the Company's
authorization by an additional 500,000 shares. As of April 2, 2000, the Company
had repurchased 1,979,326 shares at an average stock price of $17.18.
NEW ACCOUNTING PRONOUNCEMENT
Statement of Financial Accounting Standards ("SFAS") No. 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of SFAS No. 133" ("Statement 137") amends Statement 133
"Accounting for Derivative Instruments and Hedging Activities" ("Statement
133"), which was issued in June 1998 and was to be effective for fiscal quarters
beginning after June 15, 1999. Statement 137 defers the effective date of
Statement 133 to all fiscal quarters of fiscal years beginning after June 15,
2000. Statement 133 standardizes the accounting for derivative instruments and
requires that all derivative instruments be carried at fair value. The Company
has not determined the impact that Statement 133 will have on its consolidated
financial statements and believes that such determination will not be meaningful
until closer to the date of initial adoption in January 2001.
FORWARD-LOOKING STATEMENTS
This Form 10-Q contains various "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. Forward-looking
statements, written, oral or otherwise made, represent the Company's expectation
or belief concerning future events. Without limiting the foregoing, the words
"believes," "thinks", "anticipates," "plans," "expects," and similar expressions
are intended to identify forward-looking statements. The Company cautions that
these statements are further qualified by important economic and competitive
factors that could cause actual results to differ materially, or otherwise, from
those in the forward-looking statements, including, without limitation, risks of
the restaurant industry, including a highly competitive environment and industry
with many well-established competitors with greater financial and other
resources than the Company, and the impact of changes in consumer tastes, local,
regional and national economic and market conditions, restaurant profitability
levels, expansion plans, demographic trends, traffic patterns, employee
availability and benefits, cost increases, and other risks detailed from time to
time in the Company's periodic earnings releases and reports filed with the
Securities and Exchange Commission. In addition, the Company's ability to expand
is dependent upon various factors, such as the availability of attractive sites
for new restaurants, the ability to negotiate suitable lease terms, the ability
to generate or borrow funds to develop new restaurants and obtain various
government permits and licenses and the recruitment and training of skilled
management and restaurant employees. Accordingly, such forward-looking
statements do not purport to be predictions of future events or circumstances
and therefore there can be no assurance that any forward-looking statement
contained herein will prove to be accurate.
Item 3. Quantitative and Qualitative Disclosure about Market Risk
The inherent risk in market risk sensitive instruments and positions
primarily relates to potential losses arising from adverse changes in foreign
currency exchange rates and interest rates.
As of April 2, 2000, the Company operated three international
locations, one in Singapore (opened May 1998), one in Toronto (opened September
1998), and one in Hong Kong (opened December 1999). As
12
<PAGE>
a result, the Company is subject to risk from changes in foreign exchange rates.
These changes result in cumulative translation adjustments which are included in
other comprehensive income. The potential loss resulting from a hypothetical 10%
adverse change in quoted foreign currency exchange rates, as of April 2, 2000,
is not considered material.
The Company is subject to market risk from exposure to changes in
interest rates based on its financing activities. This exposure relates to
borrowings under the Company's Credit Facility which are payable at floating
rates of interest. The Company has entered into interest rate swap agreements to
manage some of its exposure to interest rate fluctuations. The change in fair
value of our long-term debt resulting from a hypothetical 10% fluctuation in
interest rates as of April 2, 2000 is not considered material.
13
<PAGE>
MORTON'S RESTAURANT GROUP, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
During fiscal 1998, the Company identified several under performing
Bertolini's restaurants and authorized a plan for the closure or abandonment of
specified restaurants which have all been closed. The Company is involved in
legal action relating to such closures, however, the Company does not believe
that the ultimate resolution of these actions will have a material effect beyond
that recorded during fiscal 1998.
The Company is involved in other various legal actions incidental to
the normal conduct of its business. Management does not believe that the
ultimate resolution of these actions will have a material adverse effect on the
Company's consolidated financial position, equity, results of operations,
liquidity and capital resources.
Item 4. Submission of Matters to a Vote of Stockholders
No matters were submitted to a vote of stockholders during the quarter
for which this report was filed.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
27.0 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter for which
this report was filed.
14
<PAGE>
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.
MORTON'S RESTAURANT GROUP, INC.
----------------------------------------
(Registrant)
Date May 16, 2000
----------------
By: /s/ ALLEN J. BERNSTEIN
------------------------------------
Allen J. Bernstein
Chairman of the Board, President
and Chief Executive Officer
Date May 16, 2000 By: /s/ THOMAS J. BALDWIN
---------------- ------------------------------------
Thomas J. Baldwin
Executive Vice President,
Chief Financial Officer and Director
15
<PAGE>
INDEX TO EXHIBITS
The following is a list of all exhibits filed as part of this report.
Exhibit
Number Page Document
------ ---- --------
27.00 Financial Data Schedule
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE APRIL 2,
2000 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-03-2000
<PERIOD-END> APR-02-2000
<CASH> 2,289
<SECURITIES> 0
<RECEIVABLES> 1,653
<ALLOWANCES> 0
<INVENTORY> 6,637
<CURRENT-ASSETS> 19,454
<PP&E> 80,326
<DEPRECIATION> 11,846
<TOTAL-ASSETS> 111,935
<CURRENT-LIABILITIES> 30,044
<BONDS> 63,221
0
0
<COMMON> 68
<OTHER-SE> 4,676
<TOTAL-LIABILITY-AND-EQUITY> 111,935
<SALES> 63,595
<TOTAL-REVENUES> 63,595
<CGS> 21,422
<TOTAL-COSTS> 50,854
<OTHER-EXPENSES> 6,934
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,448
<INCOME-PRETAX> 4,359
<INCOME-TAX> 1,308
<INCOME-CONTINUING> 3,051
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,051
<EPS-BASIC> $0.60
<EPS-DILUTED> $0.58
</TABLE>
