-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, G+AtR9cEdwFNUFcdc9IlYw8sIWhzawOSp3SwEjiAzZh4oKSteenBTlb0cN5F1w4B Si14CNudQik9gpfH+H5lHQ== 0000950148-00-000979.txt : 20000512 0000950148-00-000979.hdr.sgml : 20000512 ACCESSION NUMBER: 0000950148-00-000979 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000511 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JERRYS FAMOUS DELI INC CENTRAL INDEX KEY: 0000948308 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 953302338 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-26956 FILM NUMBER: 626172 BUSINESS ADDRESS: STREET 1: 12711 VENTURA BLVD STREET 2: STE 400 CITY: STUDIO CITY STATE: CA ZIP: 91604 BUSINESS PHONE: 8187668311 MAIL ADDRESS: STREET 1: 12711 VENTURA BLVD STREET 2: STE 400 CITY: STUDIO CITY STATE: CA ZIP: 91604 10-Q 1 FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to __________ Commission File No. 33-94724 JERRY'S FAMOUS DELI, INC. (Exact name of registrant as specified in its charter) California 95-3302338 - ------------------------------- ------------------------------------ (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 12711 Ventura Boulevard, Suite 400, Studio City, California 91604 ----------------------------------------------------------------- (Address of Principal Executive Offices) (818) 766-8311 ---------------------------------------------------- (Registrant's Telephone Number, Including Area Code) ---------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As of May 1, 2000, outstanding common shares totaled 4,673,045. 2 JERRY'S FAMOUS DELI, INC. INDEX
Page Number PART I - FINANCIAL INFORMATION Item 1. Consolidated Financial Statements Consolidated Balance Sheets as of March 31, 2000 and December 31, 1999 ......... 2 Consolidated Statements of Operations for the Three Months Ended March 31, 2000 and March 31, 1999 .............................................. 3 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2000 and March 31, 1999 .............................................. 4 Notes to Consolidated Financial Statements ..................................... 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations .......................................................... 7 Liquidity and Capital Resources ................................................ 8 Item 3. Quantitative and Qualitative Disclosure About Market Risk ...................... 9 PART II - OTHER INFORMATION Items 1. through 6 ..................................................................... 9 Signatures .................................................................... 9
1 3 JERRY'S FAMOUS DELI, INC. CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31, 2000 1999 ----------- ------------ (unaudited) ASSETS Current assets Cash and cash equivalents $ 547,754 $ 1,184,329 Accounts receivable, net 357,366 519,948 Inventory 1,353,385 1,382,784 Prepaid expenses 600,678 349,105 Deferred income taxes 288,725 288,725 Income taxes receivable -- 201,700 ----------- ----------- Total current assets 3,147,908 3,926,591 Property and equipment, net 29,930,909 30,155,403 Deferred income taxes 312,531 312,531 Goodwill and covenants not to compete 9,053,949 9,184,526 Other assets 1,576,454 1,569,138 ----------- ----------- Total assets $44,021,751 $45,148,189 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $ 3,204,713 $ 3,378,452 Accrued expenses 1,073,661 1,414,934 Sales tax payable 365,822 404,613 Income taxes payable 216,328 -- Current portion of long-term debt 1,700,955 1,700,955 ----------- ----------- Total current liabilities 6,561,479 6,898,954 Long-term debt 9,567,012 11,042,092 Deferred rent 456,585 456,774 ----------- ----------- Total liabilities 16,585,076 18,397,820 Minority interest 726,939 677,053 Shareholders' equity Preferred stock Series A, no par, 5,000,000 shares authorized; no shares issued or outstanding at March 31, 2000 or December 31, 1999 -- -- Common stock, no par value, 60,000,000 shares authorized, 4,673,068 issued and outstanding at March 31, 2000 and December 31, 1999 24,575,522 24,575,522 Retained earnings 2,134,214 1,497,794 ----------- ----------- Total shareholders' equity 26,709,736 26,073,316 ----------- ----------- Total liabilities and shareholders' equity $44,021,751 $45,148,189 =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. 2 4 JERRY'S FAMOUS DELI, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
THREE MONTHS ENDED MARCH 31, 2000 1999 ------------ ------------ Revenues $ 18,820,317 $ 19,587,393 Cost of sales 6,325,905 6,822,682 ------------ ------------ Gross profit 12,494,412 12,764,711 Operating expenses Labor 6,376,278 6,862,750 Occupancy and other 2,283,925 2,414,935 Occupancy - related party 278,765 259,986 General and administrative expenses 1,231,863 1,216,125 Depreciation and amortization expenses 866,891 871,041 ------------ ------------ Total expenses 11,037,722 11,624,837 ------------ ------------ Income from operations 1,456,690 1,139,874 Other income (expense) Interest income 10,370 5,845 Interest expense (263,227) (358,959) ------------ ------------ Income before income tax provision and minority interest 1,203,833 786,760 Provision for income taxes 328,028 205,987 Minority interest 72,702 67,782 ------------ ------------ Net income $ 803,103 $ 512,991 ============ ============ Net income per share Basic $ 0.17 $ 0.11 ============ ============ Diluted $ 0.17 $ 0.11 ============ ============ Weighted average common shares outstanding - Basic 4,673,068 4,817,256 ============ ============ Weighted average common shares outstanding - Diluted 4,673,068 4,826,988 ============ ============
The accompanying notes are an integral part of these consolidated financial statements. 3 5 JERRY'S FAMOUS DELI, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
THREE MONTHS ENDED MARCH 31, 2000 1999 ----------- ----------- Cash flows from operating activities: Net income $ 803,103 $ 512,991 ----------- ----------- Adjustments to reconcile net income to net cash provided by (used in) operating activities Depreciation and amortization 866,891 871,041 Minority interest 72,702 67,782 Changes in assets and liabilities Accounts receivable 162,582 (71) Inventory 29,399 71,400 Prepaid expenses (251,573) (33,167) Income taxes receivable 201,700 205,987 Other assets (52,296) 4,378 Accounts payable (173,739) 83,360 Accrued expenses (341,273) 433,555 Sales tax payable (38,791) (7,377) Income taxes payable 216,328 -- Deferred credits -- 25,532 ----------- ----------- Total adjustments 691,930 1,722,420 ----------- ----------- Net cash provided by operating activities 1,495,033 2,235,411 ----------- ----------- Cash flows from investing activities: Additions to equipment (181,469) (265,034) Additions to improvements - land, building and leasehold (285,560) (375,000) ----------- ----------- Net cash used in investing activities (467,029) (640,034) ----------- ----------- Cash flows from financing activities: Payments on long-term debt (1,475,080) (459,918) Purchase of Company's common stock -- (516,319) Distributions paid to minority shareholders (166,683) -- Dividends paid to minority shareholders (22,816) (26,315) ----------- ----------- Net cash used in financing activities (1,664,579) (1,002,552) ----------- ----------- Net (decrease) increase in cash and cash equivalents (636,575) 592,825 Cash and cash equivalents, beginning of period 1,184,329 985,382 ----------- ----------- Cash and cash equivalents, end of period $ 547,754 $ 1,578,207 =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. 4 6 JERRY'S FAMOUS DELI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. BASIS OF PRESENTATION AND ORGANIZATION Basis of Presentation The accompanying consolidated financial statements of Jerry's Famous Deli, Incorporated and its subsidiaries ("the Company") for the three months ended March 31, 2000 and March 31, 1999 have been prepared in accordance with generally accepted accounting principles and with the instructions to Form 10-Q and Article 10 of Regulation S-X. These financial statements have not been audited by independent accountants, but include all adjustments (consisting of normal recurring adjustments) which are, in Management's opinion, necessary for a fair presentation of the financial condition, results of operations and cash flows for such periods. However, these results are not necessarily indicative of results for any other interim period or for the full year. The December 31, 1999 consolidated balance sheet financial statement is derived from audited consolidated financial statements included in the Company's December 31, 1999 Form 10-K. Certain information and footnote disclosures normally included in financial statements in accordance with generally accepted accounting principles have been omitted pursuant to requirements of the Securities and Exchange Commission. Management believes that the disclosures included in the accompanying interim financial statements and footnotes are adequate to make the information not misleading, but should be read in conjunction with the consolidated financial statements and notes thereto included in the Form 10-K for the preceding fiscal year. Organization The accompanying consolidated financial statements consist of Jerry's Famous Deli, Incorporated ("JFD--Inc."), a California corporation and JFD--Encino ("JFD--Encino"), a California limited partnership, and National Deli Corporation ("NDC"), a Florida corporation and wholly-owned subsidiary of JFD--Inc. JFD--Inc. and JFD--Encino operate family oriented, full-service restaurants. NDC operates The Epicure Market, ("Epicure"), a specialty gourmet market located in Miami Beach, Florida. These entities are collectively referred to as "Jerry's Famous Deli, Inc." or the "Company." JFD--Inc. and JFD--Encino include the operations of the Southern California restaurants located in Studio City, Encino, Marina del Rey, West Hollywood, Westwood, Sherman Oaks, Woodland Hills, and Costa Mesa. JFD--Inc. also includes the two Rascal House restaurants, located in Miami Beach and Boca Raton, Florida. Reclassifications Certain amounts in the previously presented financial statements have been reclassified to conform with the current period presentation. 2. SUPPLEMENTAL CASH FLOW INFORMATION
Three Months Ended March 31, 2000 1999 -------- -------- Supplemental cash flow information: Cash paid for: Interest ............................... $274,000 $345,000 Income taxes ........................... $ -- $ --
5 7 JERRY'S FAMOUS DELI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 3. NET INCOME PER SHARE In accordance with Statement of Financial Accounting Standard ("SFAS") No. 128, "Earnings Per Share," basic net income per share is computed by dividing the net income attributable to common shareholders by the weighted average number of common shares outstanding during the period. Diluted net income per common share is computed by dividing the net income attributable to common shareholders by the weighted average number of common and common share equivalents outstanding during the period. Common share equivalents included in the diluted computation represent shares issuable upon assumed exercise of stock options using the treasury stock method. 4. SALE OF PASADENA PROPERTY The Company closed escrow on the sale of its Pasadena facility at the close of business on May 2, 1999. The gross proceeds from the sale were $4,120,000. Of these proceeds, approximately $3,750,000 was used to reduce the Company's debt and the remaining proceeds were applied to other related costs of the sale. No significant gain or loss resulted from this sale. 5. SHAREHOLDERS' EQUITY As of February 3, 2000, the Company's stock is being traded over the Nasdaq SmallCap Market. On February 9, 2000, the Company completed a one-for-three reverse stock split of its Common Stock applicable to the shareholders of record on February 9, 2000. The reverse stock split reduced the Company's outstanding shares from 14,019,203 to approximately 4,673,068. All common share and per share amounts have been adjusted to give retroactive effect to the one-for-three reverse stock split for the periods presented. 6 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The following table presents for the three months ending March 31, 2000 and 1999, the Consolidated Statements of Operations of the Company expressed as percentages of total revenue. The results of operations for the first three months of 2000 are not necessarily indicative of the results to be expected for the full year ending December 31, 2000.
PERCENTAGE OF TOTAL REVENUE THREE MONTHS ENDED MARCH 31, ---------------------- 2000 1999 ------ ------ Revenues 100.0% 100.0% Cost of sales 33.6 34.8 ------ ------ Gross profit 66.4 65.2 Operating expenses Labor 33.9 35.0 Occupancy and other 13.6 13.7 ------ ------ Total operating expenses 47.5 48.7 General and administrative expenses 6.6 6.2 Depreciation and amortization expenses 4.6 4.5 ------ ------ Total expenses 58.7 59.4 ------ ------ Income from operations 7.7 5.8 Interest income 0.1 -- Interest expense (1.4) (1.8) ------ ------ Income before income tax provision and minority interest 6.4 4.0 Provision for income taxes 1.7 1.0 Minority interest 0.4 0.4 ------ ------ Net income 4.3% 2.6% ====== ======
7 9 RESULTS OF OPERATIONS Revenues decreased $767,000, or 3.9%, to approximately $18,820,000 for the 2000 three-month period from approximately $19,587,000 for the 1999 three-month period. The overall decrease in revenues was primarily due to the sale of the Pasadena restaurant, which had revenues of approximately $731,000 for the quarter ended March 31, 1999. Also contributing to the overall decrease was a decrease in revenues of approximately $268,000 for the Florida restaurants. Management believes this decrease in the Florida area is primarily attributable to the area's increasing restaurant competition. However, the overall decrease in revenues was partially offset by the increase in sales of approximately $158,000, or 4.0%, for Epicure for the three months ended March 31, 2000 compared to the same period for 1999. Another component offsetting the decrease in revenues was the approximately $65,000, or 0.6%, increase in same store sales for the other eight Southern California stores in operation since January 1, 1999 for the three months ended March 31, 2000 compared to the same period for 1999. As a percentage of revenues, cost of sales, which consists primarily of food costs, decreased 1.2 percentage points to 33.6% in 2000 from 34.8% for the same three-month period in 1999. This decrease is primarily the result of the Company's continued focus on more efficient buying and increased management monitoring of purchase costs at both the restaurants and Epicure. Total expenses, as a percentage of revenues, decreased slightly by 0.7 percentage point to 58.7% for the three months ended March 31, 2000 from 59.4% for the three months ended March 31, 1999. The overall decrease in total expenses is primarily attributable to a decrease in labor expense of 1.1 percentage points to 33.9% for the 2000 quarter from 35.0% for the 1999 quarter. The decrease in labor expense is primarily the result of operational improvements and the leveling of labor costs which occurs when all restaurants have been open for more than one year, combined with the impact of the sale of the Pasadena restaurant. Labor costs for Epicure remained comparable at 26.7% of Epicure revenues for the 2000 quarter as compared to the same 1999 quarter. The decrease in labor expense was partially offset by an increase of 0.4 percentage point in general and administrative expenses to 6.6% for the 2000 quarter from 6.2% for the 1999 quarter. This increase is mostly a function of certain costs remaining unchanged despite a slight decrease in revenues. Occupancy and other expenses decreased slightly by 0.1 percentage point to 13.6% for the 2000 period as compared to 13.7% for the same 1999 period. And, depreciation and amortization expenses increased slightly by 0.1 percentage point to 4.6% for the 2000 period as compared to 4.5% for the same 1999 period. The decrease in interest expense of $96,000 to $263,000 for the 2000 three-month period from $359,000 for the same 1999 period, resulted primarily from the reduction in the Company's debt. LIQUIDITY AND CAPITAL RESOURCES The Company paid down approximately $1,500,000 of debt and spent approximately $167,000 for the distribution of capital to minority shareholders during the first quarter of 2000. The Company's capital requirements are primarily for the development, construction and equipping of new restaurants. Generally, the Company leases the property and extensively remodels the existing building. Additional capital expenditures will be required if new locations are added. The cost of renovation will depend upon the style of restaurant being converted. Renovation of Jerry's Famous Deli restaurants have cost between $2.0 million and $3.0 million per location, or $267 to $400 per square foot. In September 1998, the Company entered into a $15,000,000 credit facility with BankBoston, N.A. in the form of a $9,000,000 term loan and $6,000,000 revolving line of credit. In conjunction with the agreement, the Company repaid certain existing debt with proceeds from the term loan. The term loan and revolver mature five years from inception and bear interest at the Eurodollar rate plus a variable percentage margin totaling approximately 8.3% at March 31, 2000. The debt is collateralized by assets of the Company and includes certain financial covenants. Management believes that cash on hand, including cash drawn on the lines of credit, proceeds from the sale of the Pasadena facility and cash flows from operations will be sufficient for operation of the Company's existing restaurants and market. Future anticipated capital needs cannot be projected with certainty. Additional capital expenditures will be required if new locations are added. 8 10 The Company continues to search for prime locations appropriate for its customer base and to develop them into restaurants, both in the Southern California and Southern Florida areas, as well as new areas, while continuing to provide quality food and service in its existing restaurants. However, the issue of whether or not to aggressively expand, in light of stock market conditions, is currently under review. The Company seeks to exploit its brand names for ancillary income from licensing and possibly third party retail sales. This is a new initiative and the outlook is not yet clear. Statements made herein that are not historical facts are forward looking statements and are subject to a number of risk factors, including the public's acceptance of the Jerry's Famous Deli format in each new location, consumer trends in the restaurant industry, competition from other restaurants, the costs and delays experienced in the course of remodeling or building new restaurants, the amount and rate of growth of administrative expenses associated with building the infrastructure needed for future growth, the availability, amount, type and cost of financing for the Company and general economic conditions and other factors. Further information on these and other factors is contained in the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and its other reports filed with the Securities and Exchange Commission. Item 3. Quantitative and Qualitative Disclosure About Market Risk. Not applicable. PART II - OTHER INFORMATION Items 1. through 6. Not applicable. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. JERRY'S FAMOUS DELI, INC. Date: May 10, 2000 By: /s/ Isaac Starkman ------------------------------------------ Isaac Starkman Chief Executive Officer and Chairman of the Board of Directors By: /s/ Christina Sterling ------------------------------------------ Christina Sterling Chief Financial Officer 9 EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 547,754 0 360,726 3,360 1,353,385 3,147,908 44,070,798 14,139,889 44,021,751 6,561,479 9,567,012 0 0 24,575,522 2,134,214 44,021,751 18,820,317 18,820,317 6,325,905 6,325,905 11,037,722 0 263,227 1,131,131 328,028 803,103 0 0 0 803,103 .17 .17
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