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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (Fee Required)
For the fiscal year ended January 2, 2000
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (No Fee Required)
For the transition period from to
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Commission file number 1-12692
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MORTON'S RESTAURANT GROUP, INC.
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(Exact name of registrant as specified in its charter)
Delaware 13-3490149
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(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
3333 New Hyde Park Road, New Hyde Park, NY 11042
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(Address of principal executive offices) (zip code)
516-627-1515
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(Registrant's telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class Name of exchange
Common Stock, $.01 par value New York Stock Exchange
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Securities Registered Pursuant to Section 12(g) of the Act:
None
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(Title of Class)
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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of March 23, 2000, the aggregate market value of voting stock held by
non-affiliates of the registrant was $86,536,623.
As of March 23, 2000, the registrant had 4,828,374 shares of its common stock,
$.01 par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
(1) portions of the registrant's annual report to stockholders for the fiscal
year ended January 2, 2000 (the "Annual Report") are incorporated by
reference into Part II hereof; and
(2) portions of the registrant's definitive proxy statement (to be filed
pursuant to Regulation 14A) for the 2000 Annual Meeting of Stockholders
(the "Proxy Statement") are incorporated by reference into Part III hereof.
1
PART I
ITEM 1. BUSINESS
GENERAL
Morton's Restaurant Group, Inc. was incorporated as a Delaware corporation
on October 3, 1988. As used in this Report, the terms "MRG" or "Company" refer
to Morton's Restaurant Group, Inc. and its consolidated subsidiaries.
At January 2, 2000, the Company owned and operated 50 Morton's of Chicago
Steakhouse restaurants ("Morton's") and 8 Bertolini's Authentic Trattoria
restaurants ("Bertolini's"). These concepts appeal to a broad spectrum of
consumer tastes and target separate price points and dining experiences.
The Company provides strategic support and direction to its subsidiary
companies, and evaluates and analyzes potential locations for new restaurants.
Management consists of Allen J. Bernstein, Chairman of the Board, President and
Chief Executive Officer and vice presidents responsible for site selection and
development, finance, and administration.
The Company plans to expand by adding new Morton's of Chicago steakhouse
restaurants. No new Bertolini's are planned for 2000. The Company has no
agreements or letters of intent with respect to any potential acquisition.
However, the Company has investigated, and may possibly continue to investigate,
the acquisition of other restaurant concepts. The Company does not currently
intend to develop a franchise program for any of its concepts.
There can be no assurance that the Company's expansion plans will be
successfully achieved or that new restaurants will meet with consumer acceptance
or can be operated profitably.
MORTON'S OF CHICAGO STEAKHOUSE RESTAURANTS
At January 2, 2000, the Company owned and operated 50 Morton's of Chicago
steakhouses (47 in the United States and one each in Toronto, Canada; Hong Kong;
and Singapore) located in 46 cities. Morton's offers its clientele a combination
of excellent service and large quantities of the highest quality menu items.
Morton's has received awards in many locations for the quality of its food and
hospitality. Morton's serves USDA prime aged beef, including, among others, a 24
oz. porterhouse, a 20 oz. NY strip sirloin and a 16 oz. ribeye. Morton's also
offers fresh fish, lobster, veal and chicken. All Morton's have identical dinner
menu items. While the emphasis is on beef, the menu selection is broad enough to
appeal to many taste preferences. The Morton's dinner menu consists of a
tableside presentation by the server of many of the dinner items, including a 48
oz. porterhouse steak and a live Maine lobster, and all Morton's restaurants
feature an open display kitchen where steaks are prepared. Each restaurant has a
fully stocked bar with a complete list of name brands and an extensive premium
wine list that offers approximately 175 selections.
Morton's caters primarily to high-end, business-oriented clientele. During
the year ended January 2, 2000, the average per-person check, including dinner
and lunch, was approximately $67.75. Management believes that a vast majority of
Morton's weekday revenues and a substantial portion of its
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weekend revenues are derived from business people using expense accounts. Sales
of alcoholic beverages accounted for approximately 32% of Morton's revenues
during fiscal 1999. In the nine Morton's serving both dinner and lunch during
fiscal 1999, dinner service accounted for approximately 86% of revenues and
lunch service accounted for approximately 14%. All Morton's are open seven days
a week. Those 41 Morton's serving only dinner are typically open from 5:30 p.m.
to 11:30 p.m., while those Morton's serving both dinner and lunch are also
typically open from 11:30 a.m. to 2:30 p.m. for the lunch period. 49 Morton's
(including all restaurants opened since the 1989 acquisition) have on-premises,
private dining and meeting facilities referred to as "Boardrooms". During fiscal
1999, Boardroom revenues were approximately 19% of sales in those locations
offering Boardrooms.
Morton's believes that its operations and cost systems, developed over 21
years, enable Morton's to maintain tight controls over operating expenses. The
cooking staff is highly trained and experienced. Uniform staffing patterns
throughout Morton's restaurants enhance operating efficiencies. Morton's
management believes that its centralized sourcing from primary suppliers of USDA
prime aged beef gives it significant cost and availability advantages over many
independent restaurants. Morton's purchases Midwest-bred, grain-fed, USDA prime
aged beef (approximately the finest two to three percent of a 1,200 pound
steer).
BERTOLINI'S AUTHENTIC TRATTORIA RESTAURANTS
At January 2, 2000, the Company owned and operated 8 Bertolini's, located
in seven cities. Bertolini's is a white tablecloth, authentic Italian trattoria,
which provides table service in a casual dining atmosphere. For the year ended
January 2, 2000, Bertolini's average per-person check, including dinner and
lunch, was approximately $20.25. Bertolini's restaurants are open seven days a
week, for dinner and lunch, with typical hours of 11:00 a.m. to 12:00 midnight.
During fiscal 1999, dinner service accounted for approximately 68% of revenues
and lunch service accounted for approximately 32%. Sales of alcoholic beverages
accounted for approximately 21% of Bertolini's revenues during fiscal 1999.
Based on a strategic assessment of trends and a downturn in comparable
revenues of Bertolini's Authentic Trattorias, during fiscal 1998, pursuant to
the approval of the Board of Directors, the Company recorded a nonrecurring,
pre-tax charge representing the write-down of impaired Bertolini's restaurant
assets, and the write-down and accrual of lease exit costs associated with the
closure of specified Bertolini's restaurants, as well as other items. During
fiscal 1999 four such restaurants were closed. See Note 3 to the Company's
consolidated financial statements.
SITE DEVELOPMENT AND EXPANSION
General. To date, the Company has attempted to maximize its capital resources by
obtaining substantial development or rent allowances from its landlords. The
Company's leases typically provide for substantial landlord development and or
rent allowances and an annual percentage rent based on gross revenues, subject
to market-based minimum annual rents. This leasing strategy enables the Company
to reduce its net investments in newly developed restaurants.
The costs of opening a Morton's vary by restaurant depending upon, among
other things, the location of the site and construction required. The Company
generally leases its restaurant sites and operates both free-standing and
in-line restaurants. In recent years, the Company has received substantial
landlord development and or rent allowances for leasehold improvements,
furniture, fixtures and
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equipment. The Company currently targets its average cash investment, net of
such landlord allowances in new restaurants, in leased premises, to be less than
$2.0 million per restaurant, although the Company may expend greater amounts for
particular restaurants.
During 1999, the Company purchased one parcel of land to develop as a
Morton's. During 1998, the Company executed contracts to purchase five parcels
of land to develop four Morton's and one Bertolini's. As of March 2000, of
these, three Morton's and one Bertolini's were built and opened, and two
properties are under development as Morton's.
The Company believes that the locations of its restaurants are critical to
its long-term success, and management devotes significant time and resources to
analyzing each prospective site. As it has expanded, the Company has developed
specific criteria by which each prospective site is evaluated. Potential sites
are generally sought in major metropolitan areas. Management considers such
factors as demographic information, average household size, income, traffic
patterns, proximity to shopping areas and office buildings, area restaurant
competition, accessibility and visibility. The Company's ability to open new
restaurants depends upon locating satisfactory sites, negotiating favorable
lease terms, securing appropriate government permits and approvals, obtaining
liquor licenses and recruiting or transferring additional qualified management
personnel. For these and other reasons, there can be no assurance that the
Company's expansion plans will be successfully achieved or that new restaurants
will meet with consumer acceptance or can be operated profitably.
The standard decor and interior design of each of the Company's restaurant
concepts can be readily adapted to accommodate different types of locations.
MORTON'S. The first Morton's was opened in 1978 in downtown Chicago, where
Morton's headquarters are still located. From 1978 to 1989, Morton's expanded to
a group of nine restaurants in nine cities. Since the 1989 acquisition by the
Company, Morton's has grown from nine to 50 restaurants through March 1, 2000.
During 1999, new Morton's opened in Boca Raton, FL; Hong Kong; Indianapolis, IN;
Kansas City, MO; Schaumburg, IL; Scottsdale, AZ; and Seattle, WA. Two Morton's
were relocated within Nashville, TN and within Philadelphia, PA.
Morton's are very similar in terms of style concept and decor and are
located in retail, hotel, commercial and office building complexes in major
metropolitan areas and urban centers. Management believes that fixed investment
costs and occupancy costs have been relatively low, as appropriate space for new
Morton's restaurants has been readily available. The approximate gross costs to
the Company, for the seven Morton's opened or relocated, in leased premises,
between January 4, 1999 and March 1, 2000, ranged from $1.9 million to $3.1
million, including costs for leasehold construction, improvements, furniture,
fixtures, equipment, and pre-opening expenses. These aggregate per-restaurant
costs were substantially offset by landlord development and or rent allowances
ranging from $0.9 million to $1.1 million and equipment lease financings of
approximately $0.4 million. The Company's average net cash investment for those
seven restaurants was approximately $1.2 million, in each case, net of landlord
development and or rent allowances and restaurant equipment lease financings.
The approximate gross costs to the Company, for the two restaurants built, on
properties owned by the Company, including costs for land acquisition,
construction improvements, furniture, fixtures, equipment and pre-opening
expenses averaged $4.8 million. Such amounts were substantially reduced by
proceeds from mortgage and restaurant equipment lease financings.
4
The Company plans to continue the development of Morton's and has selected
several possible domestic and international sites for further expansion.
BERTOLINI'S AUTHENTIC TRATTORIA RESTAURANTS. The first Bertolini's opened in Las
Vegas in May 1992, and is located in the Forum Shops Mall, adjacent to Caesar's
Palace Casino. At January 2, 2000 the Company owned and operated eight
Bertolini's. No Bertolini's were opened during fiscal 1999 and none are planned
for fiscal 2000.
RESTAURANT LOCATIONS
The Company owned and operated 50 Morton's and 8 Bertolini's as of March 1,
2000. The following table provides information with respect to those restaurants
which are open:
MORTON'S OF CHICAGO STEAKHOUSE RESTAURANTS DATE OPENED
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Chicago, IL (1) December 1978
Washington (Georgetown), DC November 1982
Westchester/Oakbrook, IL June 1986
Dallas, TX May 1987
Boston, MA December 1987
Rosemont, IL June 1989
Cleveland, OH September 1990
Tysons Corner, VA November 1990
Columbus, OH April 1991
Cincinnati, OH August 1991
San Antonio, TX September 1991
Palm Beach, FL November 1991
Minneapolis, MN December 1991
Beverly Hills, CA (2) October 1992
Detroit (Southfield), MI November 1992
Las Vegas, NV January 1993
Sacramento, CA May 1993
Pittsburgh, PA August 1993
New York (Midtown Manhattan), NY October 1993
St. Louis (Clayton), MO December 1993
Palm Desert, CA January 1994
Atlanta (Buckhead), GA March 1994
Charlotte, NC July 1994
San Francisco, CA November 1994
Dallas (Addison), TX November 1994
Costa Mesa (Orange), CA March 1995
Denver, CO March 1995
Atlanta (Downtown), GA November 1995
Houston, TX January 1996
Phoenix, AZ March 1996
Orlando, FL March 1996
New York (Downtown Manhattan), NY June 1996
Washington (Connecticut Ave.), DC January 1997
5
MORTON'S OF CHICAGO STEAKHOUSE RESTAURANTS (CONTINUED) DATE OPENED
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San Diego, CA April 1997
Baltimore, MD August 1997
Miami, FL December 1997
Stamford, CT February 1998
Singapore May 1998
North Miami Beach, FL July 1998
Toronto, Canada September 1998
Portland, OR December 1998
Nashville, TN (3) January 1999
Scottsdale, AZ January 1999
Philadelphia, PA (4) July 1999
Boca Raton, FL August 1999
Kansas City, MO October 1999
Indianapolis, IN November 1999
Schaumburg, IL December 1999
Hong Kong December 1999
Seattle, WA December 1999
BERTOLINI'S AUTHENTIC TRATTORIAS DATE OPENED
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Las Vegas, NV May 1992
Washington, DC September 1995
Rockville, MD October 1995
King of Prussia, PA November 1995
Irvine, CA November 1995
Indianapolis, IN October 1996
Charlotte, NC July 1997
West Las Vegas, NV December 1998
Additional sites are under active review for potential new Morton's
restaurants to open. The Company has executed agreements to open Morton's of
Chicago Steakhouses in Denver, CO; Great Neck (Long Island), NY; Hartford, CT;
Jacksonville, FL; San Juan, Puerto Rico; and Vancouver, Canada. The Company
currently intends to open approximately seven to eight new Morton's restaurants
during 2000. There can be no assurance, however, that the Company's expansion
plans will be successfully achieved or that new restaurants will meet with
consumer acceptance or can be operated profitably.
(1) Excludes Morton's Boardroom Banquet facilities.
(2) Operates under the name "Arnie Morton's of Chicago."
(3) The Morton's Nashville, TN location was relocated in January 1999 to a new
site. The original location had been opened since September, 1992.
(4) The Morton's Philadelphia, PA location was relocated in July 1999 to a new
site. The original location had been opened since May, 1985.
6
RESTAURANT OPERATIONS AND MANAGEMENT
Morton's and Bertolini's restaurants have a well-developed management
infrastructure and are operated and managed as distinct concepts. Operations for
the Company's restaurants are supervised by regional managers, each of whom is
responsible for several restaurants and report to a division vice president.
Division vice president and regional managers meet frequently with senior
management to review operations and to resolve any issues. Working in concert
with division vice presidents, regional managers and restaurant general
managers, senior management defines operations and performance objectives for
each restaurant. Incentive plans tied to achievement of specified revenue,
profitability and operating targets and related quality objectives have been
established for division vice presidents, regional managers and certain
restaurant managers.
The Company strives to maintain quality and consistency in its restaurants
through the careful training and supervision of personnel and the establishment
of standards relating to food and beverage preparation, maintenance of
facilities and conduct of personnel. Restaurant managers, many of whom are
developed from the Company's restaurant personnel, must complete a training
program of typically eight to twelve weeks during which they are instructed in
areas of restaurant management, including food quality and preparation, customer
service, alcoholic beverage service, liquor liability avoidance and employee
relations. Restaurant managers are also provided with operations manuals
relating to food and beverage preparation and operation of restaurants. These
manuals are designed to ensure uniform operations, consistently high quality
products and service and proper accounting for restaurant operations. The
Company holds regular meetings of its restaurant managers to discuss menu items,
continuing training and other aspects of business management.
The staff for a typical Morton's consists of one general manager, up to
four assistant managers and approximately 40 to 60 hourly employees. The staff
for a typical Bertolini's consists of one general manager and up to six
assistant managers, and approximately 100 hourly employees. Each new restaurant
employee of the Company participates in a training program during which the
employee works under the close supervision of restaurant managers. Management
strives to instill enthusiasm and dedication in its employees. Restaurant
management regularly solicits employee suggestions concerning restaurant
operations, strives to be responsive to the employees' concerns and meets
regularly with employees at each of the restaurants.
The Company devotes considerable attention to controlling food costs. The
Company makes extensive use of information technology providing management with
pertinent information on daily revenues and inventory requirements, thus
minimizing the need to carry excessive quantities of food inventories. This cost
management system is complemented by the Company's ability to obtain certain
volume-based discounts. In addition, each Morton's and Bertolini's have similar
menu items and common operating methods, allowing for more simplified management
operating controls.
The Company maintains financial and accounting controls for each of its
restaurants through the use of centralized accounting and management information
systems and reporting requirements. Revenue, cost and related information is
collected daily for each restaurant. Restaurant managers are provided with
operating statements for their respective restaurants. Cash and credit card
receipts are controlled through daily deposits to local operating accounts, the
balances of which are wire transferred or deposited to cash concentration
accounts.
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PURCHASING
The Company's ability to maintain consistent quality throughout its
restaurants depends in part upon the ability to acquire food products and
related items from reliable sources in accordance with Company specifications.
The Company has no long-term contracts for any food items used in its
restaurants. The Company currently does not engage in any futures contracts and
all purchases are made at prevailing market or contracted prices. While
management believes adequate alternative sources of supply are readily
available, these alternative sources might not provide as favorable terms to the
Company as its current suppliers when viewed on a long-term basis. All of
Morton's USDA prime aged beef is shipped to Morton's restaurants by refrigerated
common carrier from its primary Chicago-based suppliers. All other products used
by Morton's are procured locally based on strict Company specifications.
Bertolini's restaurants also adhere to strict product specifications and use,
national, regional, and local suppliers. Food and supplies are shipped directly
to the restaurants and invoices for purchases are sent for payment to the
headquarters office.
MARKETING
Management believes that the Company's commitment to quality food,
hospitality and value/price is the most effective approach to attracting guests.
Accordingly, the Company has historically focused its resources on providing its
customers with superior service and value, and has relied primarily on word of
mouth to attract new customers. The Company utilizes public relations
consultants, local restaurant promotions and limited print, billboard and direct
mail advertising. The Company's expenditure for advertising, marketing and
promotional expenses, as a percentage of its revenues, was 2.7% during fiscal
1999.
COMPETITION
The restaurant business is highly competitive and fragmented, and the
number, size and strength of competitors varies widely by region. The Company
believes that restaurant competition is based on, among other things, quality of
food products, customer service, reputation, restaurant location, name
recognition and menu price points. The Company's restaurants compete with a
number of restaurants within their markets, both locally owned restaurants and
other restaurants which are members of regional or national chains. Some of the
Company's competitors are significantly larger and have greater financial and
other resources and greater name recognition than the Company and its
restaurants. Many of such competitors have been in existence longer than the
Company and are better established in areas where the Company's restaurants are,
or are planned to be, located. The restaurant business is often affected by
changes in consumer taste and spending habits, national, regional or local
economic conditions, population and traffic patterns and weather. In addition,
factors such as inflation, increased costs, food, labor and benefits and the
lack of experienced management and hourly staff employees may adversely affect
the restaurant industry in general and, in particular, the Company's
restaurants.
SERVICE MARKS AND TRADEMARKS
The Company has registered the names Morton's, Morton's of Chicago,
Bertolini's and certain other names used by its restaurants as trademarks or
service marks with the United States Patent and Trademark Office and in certain
foreign countries. The Company is aware of names similar to that of the
Company's restaurants used by third parties in certain limited geographical
areas, although the
8
Company does not anticipate that such use will prevent the Company from using
its marks in such areas. The Company is not aware of any infringing uses that
could materially affect its business. The Company believes that its trademarks
and service marks are valuable to the operation of its restaurants and are
important to its marketing strategy.
GOVERNMENT REGULATION
The Company's business is subject to extensive Federal, state and local
government regulation, including those relating to, among others, alcoholic
beverage control, public health and safety, zoning and fire codes. Failure to
obtain or retain food, liquor or other licenses would adversely affect the
operations of the Company's restaurants. While the Company has not experienced
and does not anticipate any problems in obtaining required licenses, permits or
approvals, any difficulties, delays or failures in obtaining such licenses,
permits or approvals could delay or prevent the opening of a restaurant in a
particular area. Approximately 32% and 21% of the revenues of Morton's and
Bertolini's, respectively, for fiscal 1999 were attributable to the sale of
alcoholic beverages. Each restaurant has appropriate licenses to sell liquor,
beer, wine and food. The Company's licenses to sell alcoholic beverages must be
renewed annually and may be suspended or revoked at any time for cause,
including violation by the Company, or its employees, of any law or regulation
pertaining to alcoholic beverage control, such as those regulating the minimum
age of patrons or employees, advertising, wholesale purchasing, and inventory
control, handling and storage. However, each restaurant is operated in
accordance with certain standards and procedures designed to comply with
applicable codes and regulations.
The Company is subject in certain states to "dram-shop" statutes, which
generally provide a person injured by an intoxicated person the right to recover
damages from an establishment which wrongfully served alcoholic beverages to
such person. While the Company carries liquor liability coverage as part of its
existing comprehensive general liability insurance, a judgment against the
Company under a dram-shop statute in excess of the Company's liability coverage,
or inability to continue to obtain such insurance coverage at reasonable costs,
could have a material adverse effect on the Company.
The development and construction of additional restaurants will be subject
to compliance with applicable zoning, land use and environmental regulations.
Management believes that Federal and state environmental regulations have not
had a material effect on the Company's operations, but more stringent and varied
requirements of local government bodies with respect to zoning, land use and
environmental factors could delay construction and increase development costs
for new restaurants.
The Company is also subject to the Fair Labor Standards Act, the
Immigration Reform and Control Act of 1986 and various federal and state laws
governing such matters as minimum wages, overtime, tips, tip credits and other
working conditions. A significant number of the Company's hourly staff are paid
at rates related to the Federal minimum wage and, accordingly, increases in the
minimum wage or decreases in allowable tip credits will increase the Company's
labor cost.
EMPLOYEES
As of January 2, 2000, the Company had 3,518 employees, of whom 2,993 were
hourly restaurant employees, 422 were salaried restaurant employees engaged in
administrative and supervisory capacities and 103 were corporate and office
personnel. Many of the hourly employees are employed on a part-
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time basis to provide services necessary during peak periods of restaurant
operations. None of the Company's employees are covered by a collective
bargaining agreement. The Company believes that its relations with its employees
are good.
FORWARD-LOOKING STATEMENTS
This Form 10-K 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 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 and 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 2. PROPERTIES
The Company's restaurants are generally located in space leased by
subsidiaries of the Company. Restaurant lease expirations, including renewal
options, range from 1 to 40 years. The Company's leases typically provide for
renewal options for terms ranging from five years to twenty years. Restaurant
leases provide for a specified annual rent, and most leases call for additional
or contingent rent based on revenues above specified levels. Generally, leases
are "net leases" which require the Company's subsidiary to pay its pro rata
share of taxes, insurance and maintenance costs. In some cases, the Company or
another subsidiary guarantees the performance of new leases of the tenant
subsidiary for a portion of the lease term, typically not exceeding the first
five years. The Company currently operates four restaurants on properties which
it owns.
The Company maintains its executive offices, in leased space, of
approximately 9,800 square feet in New Hyde Park, New York and approximately
15,100 square feet in Chicago. The Company believes its current office and
operating space is suitable and adequate for its intended purposes.
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ITEM 3. 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 also 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. See Note 3 to the Company's consolidated
financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The following sets forth certain information regarding the Company's executive
officers:
NAME AGE POSITION
---- --- --------
Allen J. Bernstein (1) 54 Chairman of the Board, President and Chief Executive Officer
Thomas J. Baldwin 44 Executive Vice President, Chief Financial Officer,
Assistant Secretary, Treasurer and Director
Agnes Longarzo 61 Vice President-Administration and Secretary
Allan C. Schreiber 59 Senior Vice President-Development
Klaus W. Fritsch 56 Vice Chairman and Co-Founder-Morton's of Chicago
John T. Bettin 44 President-Morton's of Chicago
(1) Member of Executive Committee of the Board of Directors.
Allen J. Bernstein has been Chairman of the Board of the Company since
October 1994 and Chief Executive Officer and a Director of the Company since
December 1988. He has been President of the Company since September 1997 and was
previously President of the Company from December 1988 through October 1994. Mr.
Bernstein has worked in many various aspects of the restaurant industry since
1970. Mr. Bernstein is also a director of Dave and Busters, Inc., Charlie Browns
Acquisition Corp., Luther's Acquisition Corp. and Wilshire Restaurant Group,
Inc.
Thomas J. Baldwin was elected a Director of the Company in November 1998
and Executive Vice President in January 1997. He previously served as Senior
Vice President, Finance of the Company since June 1992, and Vice President,
Finance since December 1988. In addition, Mr. Baldwin has been Chief Financial
Officer, Assistant Secretary and Treasurer of the Company since December 1988.
His previous experience includes seven years at General Foods Corp., now a
subsidiary of Kraft General Foods/Philip Morris Companies, Inc., where he worked
in various financial management and accounting positions and two years at
Citicorp where he served as Vice President responsible for strategic planning
and financial analysis at a major corporate banking division. Mr. Baldwin is
also a director of Charlie Browns Acquisition Corp. Mr. Baldwin is a licensed
certified public accountant in the State of New York.
Agnes Longarzo has been Vice President of Administration and Secretary of
the Company since December 1988. Ms. Longarzo had been Vice President of
Administration and Corporate Secretary for Le Peep Restaurants, Inc. from March
1983 to December 1988. Prior to joining Le Peep Restaurants, Inc., Ms. Longarzo
served as the Director of Administration of Wenco Food Systems, Inc.
Allan C. Schreiber has been Senior Vice President, Development since
January 1999, Vice President of Real Estate since January 1996 and Director of
Real Estate since November 1995. Mr. Schreiber had
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been a Senior Managing Director at The Galbreath Company since 1991. Prior to
joining Galbreath, he served as an Executive Vice President of National
Westminster Bank USA from 1982 to 1991. Previously, Mr. Schreiber had been a
Vice President and Division Executive of the Chase Manhattan Bank.
Klaus W. Fritsch has been the Vice Chairman of Morton's of Chicago, Inc.
since May 1992. Mr. Fritsch has been with Morton's of Chicago, Inc. since its
inception in 1978, when he co-founded Morton's. After Mr. Arnold Morton ceased
active involvement in 1987, Mr. Fritsch assumed all operating responsibilities
as President in which capacity he served until May 1992.
John T. Bettin has been President of Morton's of Chicago since July 1998.
Prior to joining the Company, Mr. Bettin had been Executive Vice President of
Capital Restaurant Concepts, Ltd. since April 1994. Previously, Mr. Bettin
worked for Gilbert Robinson, Inc. where he served in various positions including
Corporate Executive Chef, Vice President Operations and Senior Vice President
Concept Development since 1975.
Officers are elected by and serve at the discretion of the Board of
Directors.
13
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
"Price Range of Common Stock and Related Matters" contained on page 40 of
the Company's Annual Report is hereby incorporated by reference.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
"Selected Financial Information" contained on page 3 of the Company's
Annual Report is hereby incorporated by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" contained on pages 19 to 24 of the Company's Annual Report is hereby
incorporated by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
"Quantitative and Qualitative Disclosures about Market Risks" contained on
page 24 of the Company's Annual Report is hereby incorporated by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following items are hereby incorporated by reference to the Company's
Annual Report on the pages indicated:
PAGE
----
(i) Independent Auditors' Report 25
(ii) Consolidated Balance Sheets as of January 2, 2000 and January 3, 1999 26
(iii) Consolidated Statements of Operations
For the years ended January 2, 2000, January 3, 1999 and December 28, 1997 27
(iv) Consolidated Statements of Stockholders' Equity
For the years ended January 2, 2000, January 3, 1999 and December 28, 1997 28
(v) Consolidated Statements of Cash Flows
For the years ended January 2, 2000, January 3, 1999 and December 28, 1997 29
(vi) Notes to Consolidated Financial Statements 30-39
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
14
Part III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
"Election of Directors" and "Reporting under 16(a) of the Securities
Exchange Act of 1934" contained in the Proxy Statement is hereby incorporated by
reference. See also Item 4A, "Executive Officers of the Registrant" in Part I of
this Annual Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
"Executive Compensation" contained in the Proxy Statement is hereby
incorporated by reference. The matters labeled "Compensation Committee Report"
and "Performance Graph" contained in the Proxy Statement shall not be deemed
incorporated by reference into this Annual Report on Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
"Security Ownership of Certain Beneficial Owners and Management" contained
in the Proxy Statement is hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
"Compensation Committee Interlocks and Insider Participation" contained in
the Proxy Statement is hereby incorporated by reference.
15
Part IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Annual Report on Form
10-K:
(1) ALL FINANCIAL STATEMENTS
The response to this portion of Item 14 is set forth in Item 8 of
Part II hereof.
(2) FINANCIAL STATEMENT SCHEDULES
Schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable, and therefore have
been omitted.
(3) EXHIBITS
See accompanying Index to Exhibits. The Company will furnish to any
stockholder, upon written request, any exhibit listed in the
accompanying Index to Exhibits upon payment by such stockholder of the
Company's reasonable expenses in furnishing any such exhibit.
(b) Reports on Form 8-K:
None.
(c) Reference is made to Item 14(a)(3) above.
(d) Reference is made to Item 14 (a)(2) above.
16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 March 31, 2000 By: /s/ Allen J. Bernstein
---------------------- -----------------------------------
Allen J. Bernstein
Chairman of the Board of Directors, President,
and Chief Executive Officer (Principal Executive
Officer)
Date March 31, 2000 By: /s/ Thomas J. Baldwin
---------------------- -----------------------------------
Thomas J. Baldwin
Executive Vice President, Chief Financial Officer,
Assistant Secretary, Treasurer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Date March 31, 2000 By: /s/ Allen J. Bernstein
---------------------- -----------------------------------
Allen J. Bernstein
Chairman of the Board of Directors, President,
and Chief Executive Officer (Principal Executive
Officer)
Date March 31, 2000 By: /s/ Thomas J. Baldwin
---------------------- -----------------------------------
Thomas J. Baldwin
Executive Vice President, Chief Financial Officer,
Assistant Secretary, Treasurer and Director
(Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated. (CONTINUED)
Date March 31, 2000 By: /s/ Lee M. Cohn
---------------------- -----------------------------------
Lee M. Cohn
Director
Date March 31, 2000 By: /s/ Dianne H. Russell
---------------------- -----------------------------------
Dianne H. Russell
Director
Date March 31, 2000 By: /s/ Alan A. Teran
---------------------- -----------------------------------
Alan A. Teran
Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated. (CONTINUED)
Date March 31, 2000 By: /s/ John K. Castle
---------------------- -----------------------------------
John K. Castle
Director
Date: March 31, 2000 By: /s/ Dr. John J. Connolly
---------------------- -----------------------------------
Dr. John J. Connolly
Director
Date March 31, 2000 By: /s/ David B. Pittaway
---------------------- -----------------------------------
David B. Pittaway
Director
INDEX TO EXHIBITS
The following is a list of all exhibits filed as part of this report:
Exhibit
Number Page Document
- ------ ---- --------
3.01 (a) Amended and Restated Certificate of Incorporation of the
Registrant. (6)
(b) Certificate of Designation for the Preferred Stock issuable
pursuant to the Rights Plan. (4)
(c) Amendment to the Amended and Restated Certificate of
Incorporation of the Registrant. (6)
(d) Second Amendment to the Amended and Restated Certificate of
Incorporation of the Registrant. (9)
3.02 Amended and Restated By-Laws of the Registrant, dated
January 17, 1995. (4)
4.01 (a) Specimen Certificate representing the Common Stock, par value
$.01 per share including Rights Legend and name change to
Morton's Restaurant Group, Inc. (9)
4.02 (a) Registration Rights Agreement for Common Stock, dated as of
July 27, 1989, among the Registrant, BancBoston Capital Inc.,
Legend Capital Group, L.P., Legend Capital International, Ltd.
and Allen J. Bernstein. (1)
(b) Amendment to Registration Rights Agreement for Common Stock,
dated as of April 1, 1992, among the Registrant, BancBoston
Capital Inc., Legend Capital Group, L.P., Legend Capital
International, Ltd., Allen J. Bernstein, Castle Harlan, Inc. and
certain executive officers of the Registrant. (2)
4.04 (a) Second Amended and Restated Revolving Credit and Term Loan
Agreement, dated June 19, 1995 among the Registrant, The Peasant
Restaurants, Inc., Morton's of Chicago, Inc. and The First
National Bank of Boston, individually and as agent. (6)
(b) First Amendment to the Second Amended and Restated Revolving
Credit and Term Loan Agreement, dated February 14, 1996 among the
Registrant, The Peasant Restaurants, Inc., Morton's of Chicago,
Inc. and The First National Bank of Boston, individually and as
agent. (7)
(c) Second Amendment to the Second Amended and Restated
Revolving Credit and Term Loan Agreement, dated March 5,
1996 among the Registrant, The Peasant Restaurants,
Inc., Morton's of Chicago, Inc. and The First National
Bank of Boston, individually and as agent. (7)
(d) Letter Agreement, dated May 2, 1996, among the Registrant, The
Peasant Restaurants, Inc., Morton's of Chicago, Inc. and The
First National Bank of Boston, individually and as agent. (8)
(e) Third Amendment to the Second Amended and Restated
Revolving Credit and Term Loan Agreement, dated June 28,
1996 among the Registrant, The Peasant Restaurants,
Inc., Morton's of Chicago, Inc. and The First National
Bank of Boston, individually and as agent. (9)
(f) Fourth Amendment to the Second Amended and Restated
Revolving Credit and Term Loan Agreement, dated December
26, 1996 among the Registrant, The Peasant Restaurants,
Inc., Morton's of Chicago, Inc. and The First National
Bank of Boston, individually and as agent. (11)
(g) Fifth Amendment to the Second Amended and Restated
Revolving Credit and Term Loan Agreement, dated December
31, 1996 among the Registrant, The Peasant Restaurants,
Inc., Morton's of Chicago, Inc. and The First National
Bank of Boston, individually and as agent. (11)
(h) Sixth Amendment to the Second Amended and Restated
Revolving Credit and Term Loan Agreement, dated February
6, 1997 among the Registrant, The Peasant Restaurants,
Inc., Morton's of Chicago, Inc. and The First National
Bank of Boston, individually and as agent. (11)
(i) Seventh Amendment to the Second Amended and Restated Revolving
Credit and Term Loan Agreement, dated June 27, 1997 among the
Registrant, Peasant Holding Corp., Morton's of Chicago, Inc. and
BankBoston, N.A., individually and as agent. (12)
(j) Eighth Amendment to the Second Amended and Restated Revolving
Credit and Term Loan Agreement, dated February 12, 1998 among the
Registrant, Peasant Holding Corp., Morton's of Chicago, Inc. and
BankBoston, N.A., individually and as agent. (13)
(k) Letter Agreement, dated April 6, 1998, among BankBoston, N.A. and
the Registrant regarding an Extendible Swap Transaction. (14)
(l) Letter Agreement, dated May 29, 1998, among BankBoston, N.A. and
the Registrant regarding an Extendible Swap Transaction. (15)
(m) Ninth Amendment to the Second Amended and Restated Revolving
Credit and Term Loan Agreement, dated September 25, 1998 among
the Registrant, Peasant Holding Corp., Morton's of Chicago, Inc.
and BankBoston, N.A., individually and as agent. (16)
(n) Tenth Amendment to the Second Amended and Restated Revolving
Credit and Term Loan Agreement, dated November 18, 1998 among the
Registrant, Peasant Holding Corp., Morton's of Chicago, Inc. and
BankBoston, N.A., individually and as agent. (17)
(o) Eleventh Amendment to the Second Amended and Restated Revolving
Credit and Term Loan Agreement, dated May 20, 1999 among the
Registrant, Peasant Holding Corp., Morton's of Chicago, Inc. and
BankBoston, N.A., individually and as agent. (19)
4.05 Rights Agreement, dated as of December 15, 1994, between
the Registrant and The First National Bank of Boston as
Rights Agent, which includes as Exhibit A thereto the
form of Certificate of Designation of Series A Junior
Participating Preferred Stock of the Registrant, as
Exhibit B thereto the form of Rights Certificate and as
Exhibit C thereto the Summary of Rights to Purchase
Preferred Stock. (5)
10.01+ Morton's of Chicago, Inc. Profit Sharing and Cash Accumulation
Plan as Amended Effective January 1, 1989. (4)
10.02 Commercial Lease, between American National Investor Services,
Inc. and Morton's of Chicago, Inc., dated October 15, 1992,
relating to the executive offices of Morton's located at 350 West
Hubbard Street, Chicago, Illinois. (2)
10.03 Commercial Lease, between X-Cell Realty Associates and the
Registrant, dated January 18, 1994 relating to the executive
offices of the Registrant located at 3333 New Hyde Park Road,
Suite 210, New Hyde Park, New York 11042. (3)
10.04 (a)+ Change of Control Agreement, dated December 15, 1994, between the
Registrant and Allen J. Bernstein. (4)
(b)+ Change of Control Agreement, dated December 15, 1994, between the
Registrant and Thomas J. Baldwin. (4)
10.05+ Second Amended and Restated Employment Agreement, dated as of
February 28, 1995, between the Registrant and Allen J. Bernstein.
(4)
10.06+ Quantum Restaurant Group, Inc. Stock Option Plan. (7)
10.07 Stock Purchase Agreement, dated as of December 31, 1996, by and
among Peasant Holding Corp., Morton's Restaurant Group, Inc., and
MRI Acquisition Corporation. (10)
10.08 Stock Purchase Agreement, dated as of December 31, 1996, by and
among Peasant Holding Corp., Morton's Restaurant Group, Inc., and
PRI Acquisition Corporation. (10)
10.09 Promissory Note, dated March 4, 1997, between CNL Financial I,
Inc., as Lender, and Morton's of Chicago, Inc. (11)
10.10 Amended and Restated Promissory Note, dated September 18, 1998,
among FFCA Acquisition Corporation and Morton's of Chicago/North
Miami Beach, Inc., a subsidiary of the Registrant. (16)
10.11+ First Amendment to the Second Amended and Restated Employment
Agreement, dated October 1, 1998, between the Registrant and
Allen J. Bernstein. (16)
10.12 Amended and Restated Promissory Note, dated March 19, 1999, among
FFCA Acquisition Corporation and Morton's of Chicago/Scottsdale,
Inc., a subsidiary of the Registrant. (18)
10.13 Amended and Restated Promissory Note, dated March 17, 1999, among
FFCA Acquisition Corporation and Bertolini's at Village Square,
Inc., a subsidiary of the Registrant. (18)
10.14 + Form of Indemnification Agreement for Directors and Executive
Officers.
10.15 + Morton's Restaurant Group, Inc. Employee Stock Purchase Plan.
(20)
10.16 Amended and Restated Promissory Note, dated January 31, 2000,
among FFCA Acquisition Corporation and Morton's of
Chicago/Schaumburg, Inc., a subsidiary of the Registrant.
13.01 Registrant's Annual Report to Stockholders for the year ended
January 2, 2000. Except for the portions thereof which are
expressly incorporated by reference into this report, such Annual
Report is furnished solely for the information of the Commission
and is not to be deemed "filed" as part of this report.
21.01 Subsidiaries of the Registrant.
23.01 Independent Auditors' consent to the incorporation by reference
in the Company's Registration Statement on Form S-8 of the
independent auditors' report included in the Company's Annual
Report to Stockholders.
27.00 Financial Data Schedule
(1) Included as an exhibit to the Registrant's Registration Statement
on Form S-1 (No. 33-45738) and incorporated by reference.
(2) Included as an exhibit to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1992 and incorporated by
reference.
(3) Included as an exhibit to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1993 and incorporated by
reference.
(4) Included as an exhibit to the Registrant's Annual Report on Form
10-K for the year ended January 1, 1995 and incorporated by
reference.
(5) Included as an exhibit to the Registrant's Form 8-K dated on
December 15, 1994 and incorporated by reference.
(6) Included as an exhibit to the Registrant's Quarterly Report on
Form 10-Q, dated July 2, 1995.
(7) Included as an exhibit to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1995 and incorporated by
reference.
(8) Included as an exhibit to the Registrant's Quarterly Report on
Form 10-Q, dated March 31, 1996.
(9) Included as an exhibit to the Registrant's Quarterly Report on
Form 10-Q, dated June 30, 1996.
(10) Included as an exhibit to the Registrant's Form 8-K, dated
January 6, 1996.
(11) Included as an exhibit to the Registrant's Annual Report on Form
10-K for the year ended December 29, 1996 and incorporated by
reference.
(12) Included as an exhibit to the Registrant's Quarterly Report on
Form 10-Q, dated June 29, 1997.
(13) Included as an exhibit to the Registrant's Annual Report on Form
10-K for the year ended December 28, 1997 and incorporated by
reference.
(14) Included as an exhibit to the Registrant's Quarterly Report on
Form 10-Q, dated March 29, 1998.
(15) Included as an exhibit to the Registrant's Quarterly Report on
Form 10-Q, dated June 28, 1998.
(16) Included as an exhibit to the Registrant's Quarterly Report on
Form 10-Q, dated September 27, 1998
(17) Included as an exhibit to the Registrant's Annual Report on Form
10-K for the year ended January 3, 1999 and incorporated by
reference.
(18) Included as an exhibit to the Registrant's Quarterly Report on
Form 10-Q, dated April 4, 1999.
(19) Included as an exhibit to the Registrant's Quarterly Report on
Form 10-Q, dated July 4, 1999.
(20) Included as an exhibit to the Registrant's Form S-8 dated August
27, 1999.
+ Management contracts or compensatory plans or arrangements required to be
filed as an exhibit to the Registrant's Annual Report on Form 10-K
pursuant to Item 14 (a)(3) of this Form 10-K.