SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
(Amendment No. )
Filed by the Registrant [ ]
Filed by a party other than the Registrant [X]
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[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
MORTON'S RESTAURANT GROUP, INC.
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(Name of Registrant as Specified In Its Charter)
BFMA HOLDING CORPORATION
MARIETTA CORPORATION
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(Name of Persons(s) Filing Proxy Statement, if other than the Registrant)
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and 0-11.
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LETTER TO SHAREHOLDERS
OF MORTON'S RESTAURANT GROUP, INC.
FROM BFMA HOLDING CORPORATION
On July 19, 2002, BFMA Holding Corporation ("BFMA") delivered a letter
to shareholders of Morton's Restaurant Group, Inc. ("Morton's"), in the form set
forth below:
BFMA HOLDING CORPORATION
50 EAST SAMPLE ROAD, SUITE 400
POMPANO BEACH, FL 33064
July 19, 2002
Dear Morton's Shareholder:
TELL MORTON'S YOU WANT A FAIR PRICE RESULTING FROM A FAIR PROCESS
In this era, when attention has been focused on management abuse and
director indifference to such abuse, we believe that no rule, regulation or law
passed by Congress, the SEC or any stock exchange will, by itself, halt
anti-shareholder practices - a company's shareholders must act where they can to
influence a company to correct these corporate governance failings. We have
detailed in past letters ways in which we believe Morton's management has abused
its position. As a shareholder of Morton's, you have an opportunity to influence
the governance and operations of the company by voting AGAINST the Allen
Bernstein/Castle Harlan deal, which we believe is the product of a rigged
process. We believe that the process was unfair and that the price resulting
from this process is still inadequate. Vote AGAINST the Allen Bernstein/Castle
Harlan deal, and tell Morton's that you want a fair price resulting from a fair
process.
DON'T LET THE COMPANY BULLY YOU INTO
ACCEPTING AN INADEQUATE PRICE FOR YOUR SHARES
In a press release issued by the company on July 17, 2002 in which the
company released what appeared to us to be positive quarterly results in line
with those of its competitors, the company stated that Morton's "has
experienced, and may continue to experience, weak revenue trends and negative
comparable restaurant revenues ... [which] have, and are expected to continue to
negatively impact results." Do not allow Messrs. Bernstein, Baldwin and Castle
and this board of directors to use bully tactics to influence your decision to
vote. We urge you to read all statements from Morton's with a jaundiced eye.
Keep in mind that the proposed deal involves director John Castle's firm Castle
Harlan and that Morton's has disclosed that CEO Allen Bernstein and CFO Thomas
J. Baldwin will be offered the opportunity to participate as equity partners
with Castle Harlan in the transaction. We don't trust them and we don't trust
what they are telling us.
YOUR SHARES ARE WORTH MORE THAN $17.00 PER SHARE
We believe that the true value of the company is greater than the
current $17.00 offer. The company is emerging from one of the worst periods in
its history, resulting from the economic affects of the tragic events of
September 11th. We view the company's second quarter financial results released
on July 17, 2002 as indicating that the worst is behind us. However, we believe
that the $17.00 sale price does not take this recovery into account. We have
prepared an analysis of historical and expected quarterly and annual results
that confirm our belief, a copy of which is attached to this letter. We hope you
will review the attached analysis carefully.
Morton's second quarter results released on July 17, 2002 were not as
bad as management led us to believe they would be in their prior press releases.
The company's reported EBITDA (earnings before interest, taxes, depreciation and
amortization, and the tip FICA tax credit(1)) of $6.5 million and $14.4 million
for the second quarter of 2002 and the first half of 2002, respectively, imply a
seasonally adjusted expected annual EBITDA which we have estimated to be
approximately $33.2 million ("Estimated 2002 EBITDA"). Management's most
recently published estimate of its 2002 EBITDA is $34.7 million ("Management's
Revised Estimated 2002 EBITDA"), which was set forth in the March 26, 2002
"Revised 2002 Operating Plan" summarized in Morton's proxy materials. We believe
that EBITDA could be as much as $38.2 million, or $5 million higher than
Estimated 2002 EBITDA, if
--------
(1) The tip FICA tax credit reverses the company's charge to restaurant
operating expenses of approximately $1.5 million annually for FICA taxes it does
not have to pay. The company charges restaurant operating expenses and then
takes a credit against taxes due, which has the effect of reducing EBITDA (as it
would normally be calculated) without reducing the company's net income or
earnings per share.
Morton's eliminated some of the overhead related to the restaurant
holding-company structure that we believe to be unnecessary now that it has
written off all of its other restaurant concepts ("Pro Forma Estimated 2002
EBITDA").
Given these expected levels of financial performance, the current offer
of $17.00 per share represents only 4.8x Estimated 2002 EBITDA, 4.6x
Management's Revised Estimated 2002 EBITDA and 4.2x Pro Forma Estimated 2002
EBITDA. Based on the number of outstanding shares publicly disclosed by the
company and using Estimated 2002 EBITDA, Management's Revised Estimated 2002
EBITDA and Pro Forma Estimated 2002 EBITDA, we have calculated diluted EPS
(earnings per share) for 2002 of $1.93, $1.76 and $2.68, respectively. See the
attached "Annual Summary". The implied P/E (price-to-earnings) multiple of the
Allen Bernstein/Castle Harlan offer, based on the $17.00 offer price and using
Estimated 2002 EBITDA, Management's Revised Estimated 2002 EBITDA and Pro Forma
Estimated 2002 EBITDA were only 8.8x, 9.7x and 6.3x, respectively. These seem
more like cash flow multiples than like earnings multiples. Even with the most
recent market declines, we believe that these purchase multiples are
substantially below traditional market valuation averages.
IMPLIED PURCHASE MULTIPLES FOR MANAGEMENT'S OFFER
MANAGEMENT'S
REVISED PRO FORMA
ESTIMATED ESTIMATED (1) ESTIMATED
--------- ------------- ---------
Offer Price Per Share ............................... $ 17.00 $ 17.00 $ 17.00
Shares Outstanding .................................. 4,189,711 4,189,711 4,189,711
------------ ------------ ------------
Implied Value of Equity ........................... $ 71,225,087 $ 71,225,087 $ 71,225,087
Estimated Cost to Terminate Warrants .............. 2,299,000 2,299,000 2,299,000
------------ ------------ ------------
Implied Cost of Equity ............................ $ 73,524,087 $ 73,524,087 $ 73,524,087
Plus: Debt (2) ................................... 99,410,000 99,410,000 99,410,000
Less: Cash on Balance Sheet (2) ................... 5,163,000 5,163,000 5,163,000
Less: Cash Adjustment (3) ......................... 8,000,000 8,000,000 8,000,000
Implied Purchase Value of Enterprise .............. 159,771,087 159,771,087 159,771,087
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EBITDA (4) ...................................... $ 33,243,473 $ 34,700,000 $ 38,243,473
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Implied Multiple of Purchase Value to EBITDA ........ 4.8x 4.6x 4.2x
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EPS (4) ......................................... $ 1.93 $ 1.76 $ 2.68
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Implied Purchase Price P/E Ratio .................... 8.8x 9.7x 6.3x
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(1) From the Company's proxy statement filed with the SEC on June 18, 2002 and
is an extrapolation of a sales, EBITDA and EPS forecast, adjusted for the
Tip FICA tax credit (see above).
(2) From the Company's most recent balance sheet as of June 30, 2002 as
disclosed in the Company's press release dated July 17, 2002.
(3) Assumes the anticipated return to historical levels of payables and accrued
expenses generating an estimated approximately $6.2 million of additional
cash and the collection of an approximately $1.8 million income tax
receivable.
(4) See "Annual Summary" attached.
If we simply apply conservative valuation multiples of 5.0x to 7.0x to
the various expected EBITDA levels or P/E multiples of 10x to 15x, the resulting
values for each of the company's shares are in the range of $20 to $40 per
share. Why would you sell something for only $17 when a conservative valuation
clearly indicates that it is worth much more? We believe that a fair process
would result in a fair price, not the inadequate price we are forced to vote for
today.
IMPLIED SHARE VALUES AT COMPARABLE MULTIPLES
MANAGEMENT'S
REVISED PRO FORMA
EBITDA VALUATION: ESTIMATED ESTIMATED (1) ESTIMATED
------------------------------ ------------------------------ -------------------------------
Multiple ...................... 5.0x 7.0x 5.0x 7.0x 5.0x 7.0x
EBITDA (4) .................... 33,243,473 33,243,473 34,700,000 34,700,000 38,243,473 38,243,473
----------- ----------- ----------- ----------- ----------- -----------
Implied Enterprise Value ...... 166,217,366 232,704,313 173,500,000 242,900,000 191,217,366 267,704,313
Less: Debt (2) ................ 99,410,000 99,410,000 99,410,000 99,410,000 99,410,000 99,410,000
Plus: Cash on Balance Sheet (2) 5,163,000 5,163,000 5,163,000 5,163,000 5,163,000 5,163,000
Plus: Cash Adjustment (3) ..... 8,000,000 8,000,000 8,000,000 8,000,000 8,000,000 8,000,000
----------- ----------- ----------- ----------- ----------- -----------
Implied Equity Value .......... 79,970,366 146,457,313 87,253,000 156,653,000 104,970,366 181,457,313
Shares Outstanding ............ 4,182,000 4,182,000 4,182,000 4,182,000 4,182,000 4,182,000
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Implied Value Per Share ....... $ 19.12 $ 35.02 $ 20.86 $ 37.46 $ 25.10 $ 43.39
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P/E VALUATION:
Multiple ...................... 10.0x 15.0x 10.0x 15.0x 10.0x 15.0x
EPS (4) ....................... $ 1.93 $ 1.93 $ 1.76 $ 1.76 $ 2.68 $ 2.68
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Implied Value Per Share ....... $ 19.33 $ 29.00 $ 17.59 $ 26.38 $ 26.80 $ 40.19
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(1) From the Company's proxy statement filed with the SEC on June 18, 2002 and
is an extrapolation of a sales, EBITDA and EPS forecast, adjusted for the
Tip FICA tax credit (see above).
(2) From the Company's most recent balance sheet as of June 30, 2002 as
disclosed in the Company's press release dated July 17, 2002.
(3) Assumes the anticipated return to historical levels of payables and accrued
expenses generating an estimated approximately $6.2 million of additional
cash and the collection of an approximately $1.8 million income tax
receivable.
(4) See "Annual Summary" attached.
YOUR VOTE COUNTS
Every vote counts. Although there is a large concentration of shares
held by mutual funds and a few large blocks held by institutional shareholders,
your vote can send a message. Despite the propensity for these shareholders to
avoid voting against management on contentious issues, we are optimistic that
the mutual funds and institutional shareholders will do the right thing in this
situation - and vote AGAINST the Allen Bernstein/Castle Harlan deal. We believe
that these institutions blindly trusted management to do the right thing last
year when BFMA's nominees were voted down at a time when its own offer for
$28.25 per share was outstanding. Their trust in management appears to have been
misplaced. We believe that they are smart enough not to make the same mistake
twice and are sophisticated enough to see the true value in their holdings. You,
too, should see the true value of Morton's and vote AGAINST the Allen
Bernstein/Castle Harlan deal.
DON'T VOTE WITH MANAGEMENT! A VOTE AGAINST THE ALLEN BERNSTEIN/CASTLE
HARLAN OFFER IS A VOTE FOR SHAREHOLDER VALUE. ACT NOW - THE MEETING IS IN 4
DAYS! WE URGE YOU TO GRANT YOUR PROXY AGAINST THE CASTLE HARLAN OFFER BY
SIGNING, DATING AND RETURNING YOUR PROXY CARD TODAY.
Sincerely,
/s/ Barry W. Florescue
Barry W. Florescue
Chairman and CEO
of BFMA Holding Corporation
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********** IMPORTANT **********
Please vote your proxy card TODAY AGAINST the Castle Harlan offer.
IF ANY OF YOUR SHARES ARE HELD IN THE NAME OF A BANK OR BROKER OR OTHER
NOMINEE, PLEASE CONTACT THE PERSON RESPONSIBLE FOR YOUR ACCOUNT AND DIRECT
HIM/HER TO VOTE AGAINST THE CASTLE HARLAN OFFER.
IF YOU HAVE ANY QUESTIONS OR NEED ASSISTANCE IN VOTING YOUR
SHARES, PLEASE FEEL FREE TO CONTACT:
MR. RICHARD A. BLOOM
PRESIDENT AND CHIEF OPERATING OFFICER
MARIETTA CORPORATION
37 HUNTINGTON STREET
CORTLAND, NEW YORK 13045
CALL (TOLL-FREE): (800) 431-3023
FAX: (607) 756-0657
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MORTON'S RESTAURANT GROUP, INC.
QUARTERLY SUMMARY
Q1 - 3 MONTHS ENDED Q2 - 3 MONTHS ENDED
----------------------------------- ---------------------------------
ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL
2-APR-00 1-APR-01 31-MAR-02 2-JUL-00 1-JUL-01 1-JUL-02
-------- -------- --------- -------- -------- --------
REVENUE:
Total Revenue .......................... $63,595 $66,342 $61,106 $58,600 $57,006 $57,800
COST RESTAURANT OPERATIONS:
Food and beverage costs .............. 21,422 22,670 21,204 19,603 19,602 19,509
Restaurant operating expenses ........ 26,352 27,833 27,365 25,150 26,485 27,002
Tip FICA Credit (2) .................. (355) (416) (383) (327) (358) (400)
----------------------------------- ---------------------------------
Total Cost of Restaurant Operations 47,419 50,087 48,186 44,426 45,729 46,111
RESTAURANT CONTRIBUTION ................ 16,176 16,255 12,920 14,174 11,277 11,689
Marketing and promotional .............. 1,876 2,199 1,188 1,669 1,674 1,493
General and administrative ............. 5,058 4,932 3,758 4,872 4,846 3,727
Savings .............................. 0 0 0 0 0 0
----------------------------------- ---------------------------------
Total SG&A ........................... 6,934 7,131 4,946 6,541 6,520 5,220
EBITDA (2) ............................. 9,242 9,124 7,974 7,633 4,757 6,469
Depreciation & Amortization ............ 2,319 2,142 2,150 2,139 2,513 2,547
----------------------------------- ---------------------------------
EBIT (OPERATING INCOME) .............. 6,923 6,982 5,824 5,494 2,244 3,922
Pre-opening expenses ................... 761 614 287 800 1,800 363
Non-recurring charges .................. 0 0 (79) 0 370 1,001
Interest expense, net & other .......... 1,448 2,032 1,997 1,354 1,909 2,064
----------------------------------- ---------------------------------
PRE-TAX INCOME ....................... 4,714 4,336 3,619 3,340 (1,835) 494
Tip FICA Credit (2) .................... 355 416 383 327 358 400
Income Tax Expense ..................... 1,308 1,176 971 904 (658) 28
----------------------------------- ---------------------------------
NET INCOME ........................... 3,051 2,744 2,265 2,109 (1,535) 66
SHARES: BASIC .......................... 5,093 4,158 4,182 4,698 4,173 4,188
DILUTED ........................ 5,232 4,425 4,182 4,878 4,173 4,244
EPS: BASIC ............................. $ 0.60 $ 0.66 $ 0.54 $ 0.45 $ (0.37 $ 0.02
DILUTED ........................... 0.58 0.62 0.54 0.43 (0.37) 0.02
OPERATING MARGINS
Cost of Restaurant Operations:
Food and beverage / revenue ......... 33.7% 34.2% 34.7% 33.5% 34.4% 33.8%
Restaurant operations / revenue ...... 41.4% 42.0% 44.8% 42.9% 46.5% 46.7%
----------------------------------- ---------------------------------
Total cost of Restaurant Operations 74.6% 75.5% 78.9% 75.8% 80.2% 79.8%
Restaurant Contribution 25.4% 24.5% 21.1% 24.2% 19.8% 20.2%
Marketing and promotional / revenue .... 2.9% 3.3% 1.9% 2.8% 2.9% 2.6%
General and administrative / revenue ... 8.0% 7.4% 6.1% 8.3% 8.5% 6.4%
----------------------------------- ---------------------------------
Total SG&A/Revenue ................... 10.9% 10.7% 8.1% 11.2% 11.4% 9.0%
EBITDA ................................. 14.5% 13.8% 13.1% 13.0% 8.3% 11.2%
Q3 - 3 MONTHS ENDED Q4 - 3 MONTHS ENDED
----------------------------------- -------------------------------------
ACTUAL ACTUAL ESTIMATED (1) ACTUAL ACTUAL ESTIMATED (1)
1-OCT-00 30-SEP-01 30-SEP-02 30-DEC-00 30-DEC-01 31-DEC-02
-------- --------- --------- --------- --------- ---------
REVENUE:
Total Revenue .......................... $56,314 $52,274 $57,500 $69,873 $61,489 $68,000
COST RESTAURANT OPERATIONS:
Food and beverage costs .............. 19,522 19,097 19,500 23,677 20,780 23,600
Restaurant operating expenses ........ 25,542 26,524 25,500 28,536 27,063 28,500
Tip FICA Credit (2) .................. (314) (328) (400) (390) (386) (400)
----------------------------------- -------------------------------------
Total Cost of Restaurant Operations 44,750 45,293 44,600 51,823 47,457 51,700
RESTAURANT CONTRIBUTION ................ 11,564 6,981 12,900 18,050 14,032 16,300
Marketing and promotional .............. 1,342 1,759 1,350 1,992 1,295 1,300
General and administrative ............. 4,435 3,213 3,750 5,446 4,210 4,000
Savings .............................. 0 0 0 0 0 0
----------------------------------- -------------------------------------
Total SG&A ........................... 5,777 4,972 5,100 7,438 5,505 5,300
EBITDA (2) ............................. 5,787 2,009 7,800 10,612 8,527 11,000
Depreciation & Amortization ............ 1,255 1,991 2,000 1,366 1,420 2,000
----------------------------------- -------------------------------------
EBIT (OPERATING INCOME) .............. 4,532 18 5,800 9,246 7,107 9,000
Pre-opening expenses ................... 1,200 400 400 1,247 1,800 400
Non-recurring charges .................. 0 155 0 0 1,829 0
Interest expense, net & other .......... 1,696 1,924 2,100 1,929 1,752 2,200
----------------------------------- -------------------------------------
PRE-TAX INCOME ....................... 1,636 (2,461) 3,300 6,070 1,726 6,400
Tip FICA Credit (2) .................... 314 328 400 390 386 400
Income Tax Expense ..................... 397 (837) 986 1,703 (392) 2,040
----------------------------------- -------------------------------------
NET INCOME ........................... 925 (1,952) 1,914 3,977 1,732 3,960
SHARES: BASIC .......................... 4,322 4,177 4,188 4,231 4,180 4,188
DILUTED ........................ 4,548 4,177 4,244 4,370 4,189 4,244
EPS: BASIC ............................. $ 0.21 $ (0.47) $ 0.46 $ 0.94 $ 0.41 $ 0.95
DILUTED ........................... 0.20 (0.47) 0.45 0.91 0.41 0.93
OPERATING MARGINS
Cost of Restaurant Operations:
Food and beverage / revenue ......... 34.7% 36.5% 33.9% 33.9% 33.8% 34.7%
Restaurant operations / revenue ...... 45.4% 50.7% 44.3% 40.8% 44.0% 41.9%
----------------------------------- -------------------------------------
Total cost of Restaurant Operations 79.5% 86.6% 77.6% 74.2% 77.2% 76.0%
Restaurant Contribution 20.5% 13.4% 22.4% 25.8% 22.8% 24.0%
Marketing and promotional / revenue .... 2.4% 3.4% 2.3% 2.9% 2.1% 1.9%
General and administrative / revenue ... 7.9% 6.1% 6.5% 7.8% 6.8% 5.9%
----------------------------------- -------------------------------------
Total SG&A/Revenue ................... 10.3% 9.5% 8.9% 10.6% 9.0% 7.8%
EBITDA ................................. 10.3% 3.8% 13.6% 15.2% 13.9% 16.2%
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(1) Quarterly results for the 3rd and 4th quarter of FY 2002 are estimated.
(2) The Tip FICA tax credit reverses the Company's charge to restaurant
operating expenses for FICA taxes the Company does not have to pay.
Amounts for FY 2000 and FY 2001 are actual reported amounts distributed to
each quarter proportionally based on sales. Estimated figures for FY 2002
are based on a similar % of sales.
MORTON'S RESTAURANT GROUP, INC.
ANNUAL SUMMARY
ACTUAL ACTUAL MANAGEMENT'S (2) PRO FORMA
FYE FYE ESTIMATED (1) REVISED ESTIMATED ESTIMATED (3)
31-DEC-00 31-DEC-01 FY 2002 FY 2002 FY 2002
--------- --------- ------- ------- -------
Revenue:
Total Revenue ......................... $ 248,382 $ 237,111 $ 244,406 $ 261,300 $ 244,406
COST RESTAURANT OPERATIONS:
Food and beverage costs ............. 84,224 82,149 83,813 90,149 83,813
Restaurant operating expenses ....... 105,580 107,905 108,367 115,702 108,367
Tip FICA Credit (4) ................. (1,386) (1,488) (1,583) (1,500) (1,583)
--------- --------- --------- --------- ---------
Total Cost of Restaurant Operations 188,418 188,566 190,597 204,350 190,597
RESTAURANT CONTRIBUTION ............... 59,964 48,545 53,809 56,950 53,809
Marketing and promotional ............. 6,879 6,927 5,331 6,250 5,331
General and administrative ............ 19,811 17,201 15,235 16,000 15,235
Savings ............................. 0 -- -- -- (5,000)
--------- --------- --------- --------- ---------
Total SG&A .......................... 26,690 24,128 20,566 22,250 15,566
EBITDA (4) ............................ 33,274 24,417 33,243 34,700 38,243
Depreciation & Amortization ........... 7,079 8,066 8,697 8,550 8,697
--------- --------- --------- --------- ---------
EBIT (OPERATING INCOME) ............. 26,195 16,351 24,546 26,150 29,546
Pre-opening expenses .................. 4,008 4,614 1,450 4,250 1,450
Non-recurring charges ................. 0 2,354 922 1,000 922
Interest expense, net & other ......... 6,427 7,617 8,361 8,250 8,361
--------- --------- --------- --------- ---------
PRE-TAX INCOME ...................... 15,760 1,766 13,813 12,650 18,813
Tip FICA Credit (4) ................... 1,386 1,488 1,583 1,500 1,583
Income Tax Expense .................... 4,312 (711) 4,025 3,795 5,858
--------- --------- --------- --------- ---------
NET INCOME .......................... 10,062 989 8,205 7,355 11,372
SHARES: BASIC ......................... 4,565 4,172 4,188 4,182 4,188
DILUTED ....................... 4,756 4,241 4,244 4,182 4,244
EPS: BASIC ............................ $ 2.20 $ 0.24 $ 1.96 $ 1.76 $ 2.72
DILUTED .......................... 2.12 0.23 1.93 1.76 2.68
OPERATING MARGINS
Cost of Restaurant Operations:
Food and beverage / revenue ........ 33.9% 34.6% 34.3% 34.5% 34.3%
Restaurant operations / revenue ..... 42.5% 45.5% 44.3% 44.3% 44.3%
--------- --------- --------- --------- ---------
Total cost of Restaurant Operations 75.9% 79.5% 78.0% 78.2% 78.0%
Restaurant Contribution ............... 24.1% 20.5% 22.0% 21.8% 22.0%
Marketing and promotional / revenue ... 2.8% 2.9% 2.2% 2.4% 2.2%
General and administrative / revenue .. 8.0% 7.3% 6.2% 6.1% 6.2%
--------- --------- --------- --------- ---------
Total SG&A/Revenue .................. 10.7% 10.2% 8.4% 8.5% 6.4%
EBITDA ................................ 13.4% 10.3% 13.6% 13.3% 15.6%
---------------
(1) Estimated results reflect actual reported Q1 and Q2 figures and estimates
of Q3 and Q4 financial performance for FY 2002.
(2) From the Company's proxy statement filed with the SEC on June 18, 2002 and
is an extrapolation of a sales, EBITDA and EPS forecast, adjusted for the
Tip FICA tax credit.
(3) Assumes $5 million of additional cost savings from the elimination of
overhead related to the Company's restaurant holding-company structure that
we believe to be unnecessary now that it has written off all of its other
restaurant concepts.
(4) The Tip FICA tax credit reverses the Company's charge to restaurant
operating expenses for FICA taxes the Company doesn't have to pay.
The Company charges restaurant operating expenses and then takes a credit
against taxes due, which has the effect of reducing EBITDA (as it would
normally be calculated).
MORTON'S RESTAURANT GROUP, INC.
WORKING CAPITAL ANALYSIS
Q4 - FY 98 Q4 - FY 99 Q1 Q2 Q3 Q4 - 2000
ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL
Assets: 3-JAN-99 2-JAN-00 2-APR-00 2-JUL-00 1-OCT-00 30-DEC-00
------- ------- -------- -----------------------------------------------
Current assets:
Cash & equivalents ....................... $2,117 $5,806 $2,289 $2,227 $2,002 $2,296
Accounts receivable ...................... 894 1,093 1,653 1,151 905 4,639
Inventory ................................ 6,400 7,134 6,637 6,691 6,553 8,303
Income taxes receivable .................. 0 0 0 0 0 0
Deferred income taxes .................... 6,005 5,699 6,060 6,194 6,297 5,653
Other current assets ..................... 3,920 2,724 2,815 4,244 2,920 2,867
------- -------- -----------------------------------------------
Total current assets ................... 19,336 22,456 19,454 20,507 18,677 23,758
Net Property, Plant & Equipment ............ 45,811 66,715 68,480 68,936 73,884 78,047
Goodwill and Intangibles ................... 12,134 11,709 11,603 11,497 11,391 11,327
Deferred taxes ............................. 8,466 7,511 6,322 5,615 5,138 4,866
Other assets ............................... 9,237 5,970 6,076 5,982 6,016 6,412
------- -------- -----------------------------------------------
Total assets ........................... $94,984 $114,361 $111,935 $112,537 $115,106 $124,410
======= ======== ===============================================
LIABILITIES:
Current liabilities:
Accounts payable ......................... $6,553 $7,870 $5,983 $5,291 $6,884 $8,677
Accrued expenses ......................... 19,466 22,036 19,317 19,761 17,627 21,375
------- -------- -----------------------------------------------
Sub-total ............................ 26,019 29,906 25,300 25,052 24,511 30,052
Other current liabilities ................ 372 140 369 269 275 1,004
------- -------- -----------------------------------------------
Total current liabilities .............. 26,391 30,046 25,669 25,321 24,786 31,056
Long-term debt:
Total long-term debt (2) ............... 42,055 65,392 75,064 80,336 90,241 89,771
Other long-term liabilities ................ 3,581 6,855 6,458 5,768 5,072 4,506
Shareholder's equity ....................... 22,957 12,068 4,744 1,112 (4,993) (923)
------- -------- -----------------------------------------------
Total Shareholders' equity ............. 22,957 12,068 4,744 1,112 (4,993) (923)
------- -------- -----------------------------------------------
Liabilities & Shareholder's equity ... $94,984 $114,361 $111,935 $112,537 $115,106 $124,410
======= ======== ===============================================
Current Assets ............................ 19,336 22,456 19,454 20,507 18,677 23,758
Current Liabilities w/o debt .............. 26,391 30,046 25,669 25,321 24,786 31,056
-------------------------------------------------------------------------------------------------------------------------------
Net Working Capital (4) ................... (7,055) (7,590) (6,215) (4,814) (6,109) (7,298)
-------------------------------------------------------------------------------------------------------------------------------
(1) (5)
Q1 Q2 Q3 Q4 - 2001 Q1 - 2002 Q2 - 2002 Q2 - 2002
ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL PRO FORMA
Assets: 1-APR-01 1-JUL-01 30-SEP-01 30-DEC-01 31-MAR-02 1-JUL-02 1-JUL-02
------- ------------------------------------------- --------------------- --------
Current assets:
Cash & equivalents ............ $1,721 $1,685 $1,623 $6,509 (3) $5,798 $5,163 $8,000 $13,163
Accounts receivable ........... 1,094 1,690 1,498 3,988 2,699 3,133 3,133
Inventory ..................... 8,142 8,111 7,608 8,061 7,616 7,497 7,497
Income taxes receivable ....... 0 0 0 560 560 1,788 (1,788) 0
Deferred income taxes ......... 5,497 5,784 5,772 4,616 4,854 4,203 4,203
Other current assets .......... 2,948 2,047 2,449 2,632 2,365 1,557 1,557
------------------------------------------- --------------------- --------
Total current assets ........ 19,402 19,317 18,950 26,366 23,892 23,341 29,553
Net Property, Plant & Equipment . 78,818 81,380 81,064 82,936 82,152 81,391 81,391
Goodwill and Intangibles ........ 11,226 11,125 11,024 10,923 10,923 10,923 10,923
Deferred taxes .................. 4,025 4,830 5,904 6,907 5,985 5,926 5,926
Other assets .................... 6,782 6,985 7,234 7,582 7,675 8,029 8,029
------------------------------------------- --------------------- --------
Total assets ................ $120,253 $123,637 $124,176 $134,714 $130,627 $129,610 $135,822
=========================================== ===================== ========
LIABILITIES:
Current liabilities:
Accounts payable .............. $6,622 - - 6,566 - - -
Accrued expenses .............. 16,569 - - 19,531 - - -
------------------------------------------- --------------------- --------
Sub-total ................. 23,191 23,993 23,628 26,097 22,964 22,595 6,212 28,807
Other current liabilities ..... 126 72 42 0 305 659 659
------------------------------------------- --------------------- --------
Total current liabilities ... 23,317 24,065 23,670 26,097 23,269 23,254 29,466
Long-term debt:
Total long-term debt (2) .... 90,843 95,397 98,921 104,709 100,900 99,410 99,410
Other long-term liabilities ..... 4,181 3,854 3,534 4,118 4,289 4,510 4,510
Shareholder's equity ............ 1,912 321 (1,949) (210) 2,169 2,436 2,436
------------------------------------------- --------------------- --------
Total Shareholders' equity .. 1,912 321 (1,949) (210) 2,169 2,436 2,436
------------------------------------------- --------------------- --------
Liabilities & Shareholder's
equity .................. $120,253 $123,637 $124,176 $134,714 $130,627 $129,610 $135,822
=========================================== ===================== ========
Current Assets ................. 19,402 19,317 18,950 26,366 23,892 23,341 29,553
Current Liabilities w/o debt ... 23,317 24,065 23,670 26,097 23,269 23,254 29,466
----------------------------------------------------------------------------------------------------------------------------------
Net Working Capital (4) ........ (3,915) (4,748) (4,720) 269 623 87 87
----------------------------------------------------------------------------------------------------------------------------------
--------------
(1) From the Company's most recent balance sheet as of June 30, 2002 as
disclosed in the Company's press release dated July 17, 2002
(2) Includes capital leases and all debt obligations, long-term and current.
(3) Includes $1,682 of an insurance receivable.
(4) Current assets less current liabilities (excluding current portion of
debt).
(5) Assumes the anticipated return to historical levels of payables and accrued
expenses generating an estimated approximately $6.2 million of additional
cash and the collection of an approximately $1.8 million income tax
receivable.
INFORMATION CONCERNING PARTICIPANTS
BFMA, Marietta Corporation ("Marietta") and certain other persons named
below may be deemed to be participants in the solicitation of proxies in respect
of (1) the opposition to the sale of Morton's to an affiliate of John Castle, a
director of Morton's and (2) the election of Richard A. Bloom, Barry W.
Florescue and Charles W. Miersch as Directors of Morton's.
NAME RELATIONSHIP TO BFMA OR MARIETTA
Barry W. Florescue Chief Executive Officer and Director of BFMA and Marietta;
President of BFMA and nominee for director of Morton's
Richard A. Bloom President and Chief Operating Officer of Marietta and
Director of BFMA and Marietta and nominee for director of
Morton's
Philip A. Shager Senior Vice President, Chief Financial Officer and
Treasurer of BFMA and Marietta
Ronald C. DeMeo Senior Vice President of Sales and Marketing of Marietta
David P. Hempson Senior Vice President of Operations of Marietta
Logan D. Delany, Jr. Director of BFMA and Marietta
Charles W. Miersch Director of BFMA and Marietta and nominee for director of
Morton's
Ned L. Siegel Director of BFMA and Marietta
Charles I. Weissman Assistant Secretary and Director of BFMA and Marietta
As of July 19, 2002, BFMA beneficially owns 488,500 shares of common
stock of Morton's ("Common Stock"), which represents approximately 11.7% of
issued and outstanding Common Stock (based on the number of securities contained
in Morton's most recently available filing with the Securities and Exchange
Commission). In addition, as of July 19, 2002, Barry Florescue ("Florescue")
beneficially owns 517,600 shares of Common Stock, which represents approximately
12.4% percent of issued and outstanding Common Stock (based on the number of
securities contained in Morton's most recently available filing with the
Securities and Exchange Commission), which includes 488,500 shares of Common
Stock for which BFMA has sole voting power and sole dispositive power and an
additional 29,100 shares of Common Stock which Florescue Family Corporation
("FFC") has sole voting power and sole dispositive power.
As of July 19, 2002, Florescue and Ned S. Siegel are deemed to be the
joint beneficial owners of 56,300 shares of Common Stock, which represents
approximately 1.3% percent of issued and outstanding Common Stock (based on the
number of securities contained in Morton's most recently available filing with
the Securities and Exchange Commission).
As of July 19, 2002, Richard A. Bloom beneficially owns 10,000 shares
of Common Stock, which represents less than one percent of issued and
outstanding Common Stock of Morton's (based on the number of securities
contained in Morton's most recently available filing with the Securities and
Exchange Commission).
As of July 19, 2002, Charles W. Miersch beneficially owns 1,000 shares
of Common Stock, which represents less than one percent of issued and
outstanding Common Stock of the Morton's (based on the number of securities
contained in the Morton's most recently available filing with the Securities and
Exchange Commission).
As of July 19, 2002, Marietta does not beneficially own any shares of
Common Stock of Morton's.
No other person listed above (or their associates, other than BFMA)
currently directly or indirectly own any securities of Morton's, either
beneficially or of record, except indirectly through their ownership of
securities of BFMA. BFMA owns 100% of Marietta common stock. Collectively, the
directors and executive officers of BFMA beneficially own approximately 83% of
the outstanding shares of BFMA common stock.
SECURITIES LAW LEGEND
ON JUNE 19, 2002, BFMA HOLDING CORPORATION AND MARIETTA CORPORATION
FILED A DEFINITIVE PROXY STATEMENT CONTAINING INFORMATION ABOUT BFMA AND
MARIETTA, BFMA'S AND MARIETTA'S OPPOSITION TO THE SALE OF MORTON'S TO AN
AFFILIATE OF JOHN CASTLE, A DIRECTOR OF MORTON'S (THE "CASTLE HARLAN OFFER") AND
RELATED MATTERS. BFMA AND MARIETTA INTEND TO SOLICIT PROXIES IN OPPOSITION TO
THE CASTLE HARLAN OFFER.
IN ADDITION, MORTON'S PUBLIC STATEMENTS SUGGESTS THAT IT WILL ONLY HOLD
A MEETING TO ELECT DIRECTORS IN THE EVENT THAT THE STOCKHOLDERS REJECT THE
CASTLE HARLAN OFFER. NEITHER BFMA NOR MARIETTA IS SOLICITING PROXIES TO ELECT
DIRECTORS AT THIS TIME. IN THE EVENT THAT MORTON'S CHOOSES OR IS REQUIRED TO
HOLD A MEETING TO ELECT DIRECTORS, BFMA AND MARIETTA ALSO CURRENTLY INTENDS TO
SOLICIT PROXIES TO ELECT ITS SLATE OF DIRECTORS. IN THAT EVENT, BFMA AND
MARIETTA WILL CAUSE A PROXY STATEMENT AND THE RELATED FORM OF PROXY TO BE MAILED
TO YOU.
YOU SHOULD READ THE PROXY STATEMENT(S) TO OBTAIN INFORMATION ABOUT
BFMA, MARIETTA, THEIR RESPECTIVE OFFICERS AND DIRECTORS, INCLUDING RICHARD A.
BLOOM, BARRY W. FLORESCUE AND CHARLES W. MIERSCH, MORTON'S AND THE CASTLE HARLAN
OFFER. A COPY OF THE PROXY STATEMENT(S) AND OTHER RELATED DOCUMENTS PREPARED BY
OR ON BEHALF OF BFMA AND MARIETTA AND FILED WITH THE SEC ARE AVAILABLE FOR FREE,
EITHER AT THE WEB SITE OF THE SEC (http://www.sec.gov) OR FROM BFMA BY WRITING
TO: BFMA HOLDING CORPORATION, 50 EAST SAMPLE ROAD, SUITE 400, POMPANO BEACH, FL
33064, ATTENTION: SECRETARY.