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Morton’s Q2 Revenues Up 10.7%

2011-07-28

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Comparable restaurant revenues for Morton’s steakhouses increased 8.2%.

- Second Quarter Revenues Increased 10.7% to $78.0 Million from $70.5 Million –

- Revenues for Morton’s Comparable Restaurants Increased 8.2% –

- Company Provides Guidance for Fiscal Third Quarter and Revised Full Year 2011 –

Morton’s Restaurant Group, Inc. (NYSE: MRT) today reported unaudited financial results for its fiscal 2011 second quarter ended July 3, 2011.

“We are pleased to report a strong second quarter, with comparable restaurant revenue up by 8.2%, reflecting our sixth consecutive quarter with positive comparable revenues”

Financial results for the three month period ended July 3, 2011, compared to the three month period ended July 4, 2010

Revenues increased 10.7% to $78.0 million from $70.5 million.
Comparable restaurant revenues for Morton’s steakhouses increased 8.2%.
Income from continuing operations attributable to controlling interest was $0.7 million, or $0.04 per diluted share, for the three month period ended July 3, 2011, compared to $0.3 million, or $0.02 per diluted share, for the three month period ended July 4, 2010.
The three month period ended July 3, 2011 included a charge of $0.2 million, or $0.01 per diluted share, relating to professional fees associated with the previously announced exploration of strategic alternatives.
Adjusted income from continuing operations was $0.9 million, or $0.05 per diluted share, for the three month period ended July 3, 2011, compared to $0.3 million, or $0.02 per diluted share, for the three month period ended July 4, 2010. Refer to the reconciliation of adjusted income from continuing operations to GAAP income from continuing operations in the tables that follow for additional details.

Financial results for the six month period ended July 3, 2011, compared to the six month period ended July 4, 2010

Revenues increased 10.1% to $160.5 million from $145.8 million.
Comparable restaurant revenues for Morton’s steakhouses increased 7.8%.
Income from continuing operations attributable to controlling interest was $2.8 million, or $0.16 per diluted share, for the six month period ended July 3, 2011, compared to $1.5 million, or $0.09 per diluted share, for the six month period ended July 4, 2010.
The six month period ended July 3, 2011 included a charge of $0.9 million, or $0.05 per diluted share, relating to the settlement of certain wage and hour and similar labor claims as well as relating to professional fees associated with the previously announced exploration of strategic alternatives. The six month period ended July 4, 2010 included a final mark-to-market adjustment of $0.5 million, or $0.03 per diluted share, related to the Company’s convertible preferred shares issued in connection with the fiscal 2009 settlement of certain wage and hour litigation.
Adjusted income from continuing operations was $3.7 million, or $0.21 per diluted share, for the six month period ended July 3, 2011, compared to $2.0 million, or $0.12 per diluted share, for the six month period ended July 4, 2010. Refer to the reconciliation of adjusted income from continuing operations to GAAP income from continuing operations in the tables that follow for additional details.

“We are pleased to report a strong second quarter, with comparable restaurant revenue up by 8.2%, reflecting our sixth consecutive quarter with positive comparable revenues,” said Christopher J. Artinian, President and Chief Executive Officer of Morton's Restaurant Group, Inc. “We also experienced an increase in overall traffic during the quarter, and our higher sales volumes were accompanied by expanded operating margins. In addition, business travel continues to trend positively, as evidenced by our increased traffic in convention markets. We remain well positioned to continue to grow our world recognized brand both domestically and internationally, especially in Asia. I remain especially proud of our employees who set the bar so high and consistently deliver the Morton's Gold Standard experience to our guests, and who take such pride in serving ‘The Best Steak Anywhere!’”

Fiscal 2011 Financial Guidance

Actual results could differ materially from the guidance provided herein as a result of numerous factors, many of which are beyond the Company’s control and are highly dependent upon overall economic conditions. Please refer to the “Cautionary Note on Forward-Looking Statements” later in this press release in conjunction with this guidance.

The Company currently expects the following financial results for the third fiscal quarter of 2011:

Revenues to range between $71 million and $73 million;
Comparable restaurant revenues to increase approximately 6% to 7% as compared to the third quarter of fiscal 2010;
Diluted loss per share from continuing operations of approximately $(0.10) to $(0.12), excluding professional fees associated with the previously announced exploration of strategic alternatives; and
An estimated effective tax rate that is not expected to exceed 21%.

The Company currently expects the following financial results for the full year fiscal 2011:

Revenues to range between $320 million and $323 million;
Comparable restaurant revenues to increase approximately 6% to 8% as compared to the full year fiscal 2010;
Diluted income per share from continuing operations of approximately $0.45 to $0.49, excluding expenses relating to the settlement of certain wage and hour and similar labor claims as well as professional fees associated with the previously announced exploration of strategic alternatives; and
An estimated effective tax rate that is not expected to exceed 21%.

Development Activity

During fiscal year 2011, the Company expects to retrofit up to four Morton’s steakhouses to include a Bar 12?21, two of which were completed in the first quarter of fiscal 2011 and one which was completed more recently in our Singapore restaurant. In addition, we opened a new Morton's steakhouse on February 24, 2011 in the Uptown area of Dallas, TX, which also includes a Bar 12?21 and have entered into a lease to open a new Morton's steakhouse in the Tyson’s Corner area of Vienna, Virginia.

Morton’s Restaurant Group, Inc. is the world's largest operator of company-owned upscale steakhouses. Morton's steakhouses have remained true to our founders' original vision of combining generous portions of high quality food, prepared to exacting standards, with exceptional service in an enjoyable dining environment. As of July 28, 2011, the Company owned and operated 77 Morton's steakhouses located in 64 cities across 26 states, Puerto Rico and 6 international locations (Hong Kong, Macau, Shanghai, Mexico City, Singapore and Toronto), as well as Trevi, our Italian restaurant, which is located next to the 'Fountain of the Gods' at The Forum Shops at Caesars Palace in Las Vegas, NV.


Morton's Restaurant Group, Inc.
Consolidated Statements of Operations and Margin Analysis - Unaudited
(Amounts in thousands, except per share data)

	Three Month Periods Ended									Six Month Periods Ended
	July 3, 2011				July 4, 2010					July 3, 2011				July 4, 2010

Revenues	$	77,963	100.0	%	$	70,457		100.0	%	$	160,486	100.0	%	$	145,779		100.0	%

Food and beverage costs		23,958	30.7	%		21,481		30.5	%		49,575	30.9	%		44,142		30.3	%
Restaurant operating expenses		42,389	54.4	%		39,326		55.8	%		85,251	53.1	%		80,559		55.3	%
Pre-opening costs		82	0.1	%		325		0.5	%		354	0.2	%		429		0.3	%
Depreciation and amortization		2,734	3.5	%		2,543		3.6	%		5,395	3.4	%		5,042		3.5	%
General and administrative expenses		4,767	6.1	%		3,838		5.4	%		9,778	6.1	%		8,088		5.5	%
Marketing and promotional expenses		1,703	2.2	%		1,889		2.7	%		3,229	2.0	%		3,285		2.3	%
Charge related to legal settlements		-	0.0	%		-		0.0	%		481	0.3	%		540		0.4	%
Operating income		2,330	3.0	%		1,055		1.5	%		6,423	4.0	%		3,694		2.5	%

Interest expense, net		1,344	1.7	%		923		1.3	%		2,686	1.7	%		1,875		1.3	%

Income before income taxes from continuing operations		986	1.3	%		132		0.2	%		3,737	2.3	%		1,819		1.2	%

Income tax expense		248	0.3	%		6		0.0	%		824	0.5	%		438		0.3	%

Income from continuing operations		738	0.9	%		126		0.2	%		2,913	1.8	%		1,381		0.9	%

Discontinued operations		-	0.0	%		(789	)	(1.1	%)		-	0.0	%		(803	)	(0.6	%)

Net income (loss)		738	0.9	%		(663	)	(0.9	%)		2,913	1.8	%		578		0.4	%

Net income (loss) attributable to noncontrolling interest		84	0.1	%		(147	)	(0.2	%)		103	0.1	%		(113	)	(0.1	%)

Net income (loss) attributable to controlling interest	$	654	0.8	%	$	(516	)	(0.7	%)	$	2,810	1.8	%	$	691		0.5	%

Amounts attributable to controlling interest:
Income from continuing operations	$	654			$	273				$	2,810			$	1,494
Discontinued operations		-				(789	)				-				(803	)
Net income (loss)	$	654			$	(516	)			$	2,810			$	691

Basic income (loss) per share:
Continuing operations	$	0.04			$	0.02				$	0.17			$	0.09
Discontinued operations	$	-			$	(0.05	)			$	-			$	(0.05	)
Net income (loss) per share	$	0.04			$	(0.03	)			$	0.17			$	0.04

Diluted income (loss) per share:
Continuing operations	$	0.04			$	0.02				$	0.16			$	0.09
Discontinued operations	$	-			$	(0.05	)			$	-			$	(0.05	)
Net income (loss) per share	$	0.04			$	(0.03	)			$	0.16			$	0.04

Shares used in computing net income (loss) per share:
Basic		16,181.0				16,032.4					16,154.9				16,010.1
Diluted		17,618.5				17,471.6					17,673.8				17,153.2


Morton's Restaurant Group, Inc.
Adjusted Net Income and Adjusted Diluted Net Income Per Share (Note 1)
(Amounts in thousands, except per share data)

	Three Month Periods Ended					Six Month Periods Ended
	July 3, 2011		July 4, 2010			July 3, 2011		July 4, 2010

Income from continuing operations attributable to controlling interest, as reported	$	654	$	273		$	2,810	$	1,494
Net income (loss) attributable to noncontrolling interest		84		(147	)		103		(113	)
Income tax expense		248		6			824		438
Income before income taxes, as reported		986		132			3,737		1,819

Adjustments (1):
Charge related to legal settlements (2)		-		-			481		540
Expenses related to strategic alternatives (3)		218		-			409		-
Adjusted income before income taxes		1,204		132			4,627		2,359

Adjusted income tax expense (4)		248		6			824		438
Net income (loss) attributable to noncontrolling interest		84		(147	)		103		(113	)

Adjusted income from continuing operations attributable to controlling interest	$	872	$	273		$	3,700	$	2,034

Adjusted diluted income per share	$	0.05	$	0.02		$	0.21	$	0.12

Shares used in computing adjusted diluted income per share		17,618.5		17,471.6			17,673.8		17,153.2


Notes:
(1)		The Company includes these adjusted calculations for the three and six month periods ended July 3, 2011 and July 4, 2010 because management believes the information is useful to investors in that it provides for greater transparency with respect to supplemental information used by management in its financial and operational decision making.

		Accordingly, the Company believes that the presentation of this analysis, when used in conjunction with GAAP financial measures, is a useful financial analysis tool that can assist investors in assessing the Company's operating performance and underlying prospects. This analysis should not be considered in isolation or as a substitute for net income prepared in accordance with GAAP. This analysis, as well as the other information in this press release, should be read in conjunction with the Company's financial statements and footnotes contained in the documents that the Company files with the U.S. Securities and Exchange Commission.

(2)		In the first quarter of fiscal 2011, the Company recorded a $481 charge relating to the settlement of certain wage and hour and similar labor claims.

		In the first quarter of fiscal 2010, the Company recorded a $540 charge for a mark-to-market adjustment related to the fair value of the Company’s convertible preferred stock that was subsequently issued in February 2010 as part of the fiscal 2009 settlement of certain wage and hour claims that was approved by the court in January 2010. The charge represents the change in the fair value of the convertible preferred stock through the court approval date.

(3)		In the first quarter of fiscal 2011, the Company incurred expenses of $191 for professional fees related to our previously announced exploration of strategic alternatives. In the second quarter of fiscal 2011, the Company incurred expenses of $218 for professional fees related to our previously announced exploration of strategic alternatives.

(4)		The Company has established a full valuation allowance related to its U.S. deferred tax assets. No tax benefit has been recorded related to the amounts that are added back in calculating adjusted income before income taxes in the table above. Accordingly, adjusted income tax expense is equal to GAAP income tax expense.