-----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, Ga3kw66gyfbATaY4+GY8E50JlCmMYaI2XgV0DK7xLEZNhl7L4q/rxZ9YlEFOg56p t3XCrHUJUpZAuT1hB3gRRA== 0000950148-96-000882.txt : 19960517 0000950148-96-000882.hdr.sgml : 19960517 ACCESSION NUMBER: 0000950148-96-000882 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: NONE 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: 1934 Act SEC FILE NUMBER: 000-26956 FILM NUMBER: 96566045 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 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, 1996 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 April 30, 1996, outstanding common shares totaled 10,386,250. 2 JERRY'S FAMOUS DELI, INC. AND SUBSIDIARIES INDEX
Page Number PART I - FINANCIAL INFORMATION Item 1. Consolidated Financial Statements Consolidated Balance Sheets as of March 31, 1996 and December 31, 1995 . . 2 Consolidated Statements of Operations for the Three Months Ended March 31, 1996 and March 31, 1995 . . . . . . . . . . . . . . . . . . . . 3 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1996 and March 31, 1995 . . . . . . . . . . . . . . . . . . . . 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 PART II - OTHER INFORMATION Items 1. through 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1 3 JERRY'S FAMOUS DELI, INC. CONSOLIDATED BALANCE SHEETS
March 31, December 31, 1996 1995 ------------- ------------ ASSETS Current assets Cash and cash equivalents $ 3,163,910 $ 7,214,412 Accounts receivable, net 338,921 215,925 Accounts receivable - related party - 16,020 Inventory 147,879 118,382 Prepaid expenses 381,634 222,650 Preopening costs 183,806 83,025 Deferred income taxes 33,398 44,531 ------------- ------------- Total current assets 4,249,548 7,914,945 Property and equipment, net 15,843,133 10,417,601 Organization costs 97,671 68,174 Deferred income taxes 103,466 103,466 Other assets 189,926 278,126 ------------- ------------- Total assets $ 20,483,744 $ 18,782,312 ============= ============= LIABILITIES AND EQUITY Current liabilities Accounts payable $ 885,823 $ 1,678,421 Accrued expenses 707,623 756,997 Sales tax payable 263,773 232,050 Income taxes payable 137,773 79,906 Note payable to related party 25,586 1,154,036 Current portion of long-term debt 124,188 125,137 Current portion of obligations under capital leases 39,881 43,140 ------------- ------------- Total current liabilities 2,184,647 4,069,687 Long-term debt 4,298,104 1,086,813 Obligations under capital leases 12,697 20,722 Deferred credits 560,803 575,653 ------------- ------------- Total liabilities 7,056,251 5,752,875 Minority interest 347,619 263,212 Equity Preferred stock, 5,000,000 shares authorized, none issued or outstanding - - Common stock, no par value, 60,000,000 shares authorized, 10,386,250 issued and outstanding 12,664,752 12,664,752 Equity 415,122 101,473 ------------- ------------- Total equity 13,079,874 12,766,225 ------------- ------------- Total liabilities and equity $ 20,483,744 $ 18,782,312 ============= =============
The accompanying notes are an integral part of these financial statements 2 4 JERRY'S FAMOUS DELI, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31, 1996 1995 ------------ ----------- Revenues $ 7,734,528 $ 7,193,774 Cost of sales 2,346,173 2,396,435 ------------ ----------- Gross profit 5,388,355 4,797,339 Operating expenses Labor 2,669,200 2,429,604 Occupancy and other 1,023,739 1,067,526 Occupancy - related party 45,000 45,000 General and administrative expenses 769,627 600,372 General and administrative expenses - related party - 222,839 Depreciation and amortization expenses 281,290 263,591 Restaurant concept discontinuation costs - 137,396 ------------ ----------- Total expenses 4,788,856 4,766,328 ------------ ----------- Income from operations 599,499 31,011 Other income (expense) Interest income 77,774 1,028 Interest expense (39,085) (49,726) Other income, net 6,534 - ------------ ----------- Income (loss) before provision for income taxes and minority interest 644,722 (17,687) Provision (benefit) for income taxes 214,000 (148,672) Minority interest 110,540 14,777 ------------ ----------- Net income $ 320,182 $ 116,208 ============ =========== Net income per common share $ 0.03 ============ Weighted average shares outstanding 10,386,250 ========== Pro forma data for 1995 Pro forma net income per common share $ 0.01 ============ Pro forma common shares outstanding 10,386,250 ============
The accompanying notes are an integral part of these consolidated financial statements 3 5 JERRY'S FAMOUS DELI, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 1996 1995 ------------ ----------- Cash flows from operating activities: Net income $ 320,182 $ 116,208 Adjustments to reconcile net income to net cash used in operating activities Depreciation and amortization 281,290 263,591 Minority interest 110,540 14,777 Deferred income taxes 11,133 (233,597) Shares issued for services provided - 17,500 Changes in assets and liabilities Accounts receivable - related party 16,020 (1,923) Accounts receivable (122,996) (51,915) Inventory (29,497) - Prepaid expenses (158,984) (80,089) Preopening costs (110,781) - Other assets 5,695 85,074 Organization costs (3,826) (8,725) Accounts payable (792,598) (692,115) Accrued expenses (49,374) (531,404) Sales tax payable 31,723 (11,176) Income taxes payable 57,867 84,925 Deferred credits (2,968) 909 ----------- ----------- Total adjustments (756,756) (1,144,168) ----------- ----------- Net cash used in operating activities (436,574) (1,027,960) ----------- ----------- Cash flows from investing activities: Purchases of equipment and leasehold improvements (383,969) (149,978) Additions to construction-in-progress (1,270,913) (214,255) Purchase of land (2,477) - Purchase of building and related purchase option payments (744,510) (3,000) ----------- ----------- Net cash used in investing activities (2,401,869) (367,233) ----------- ----------- Cash flows from financing activities: Borrowings from credit facility 3,165 100,000 Payments on credit facility (40,000) (100,000) Borrowings on long-term debt - 30,000 Payments on long-term debt (1,997) (1,367,319) Advances to related parties (1,128,450) - Payments from related parties - 119,950 Capital lease payments (12,110) (12,114) Distribution paid to shareholder (6,534) (6,534) Dividends paid to minority shareholders (26,133) (26,133) Proceeds from stock issuance, net - 3,368,452 ----------- ----------- Net cash (used) provided by financing activities (1,212,059) 2,106,302 ----------- ----------- Net (decrease) increase in cash and cash equivalents (4,050,502) 711,109 Cash and cash equivalents, beginning of period 7,214,412 290,425 ----------- ----------- Cash and cash equivalents, end of period $ 3,163,910 $ 1,001,534 =========== ===========
The accompanying notes are an integral part of these consolidated financial statements 4 6 JERRY'S FAMOUS DELI, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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, 1996 and March 31, 1995 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, 1995 balance sheet financial statement is derived from audited financial statements included in the Company's December 31, 1995 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 financial statements are comprised of the consolidated (1996) and combined (1995) financial statements ("consolidated statements"), which consist of Jerry's Famous Deli, Incorporated ("JFD--Inc."), a California corporation; JFD-Encino ("JFD--Encino"), a California limited partnership; and Pizza By The Pound, dba Jerry's Famous Pizza, a California corporation ceased operations in June 1995. JFD--Inc., JFD--Encino and Jerry's Famous Pizza operate or operated family oriented, full-service restaurants. These entities are collectively referred to as "Jerry's Famous Deli, Inc." or the "Company". The 1995 financial statements have been presented on a combined basis, similar to a pooling of interests, due to common ownership and business. All significant intercompany transactions and balances have been eliminated. The combination excludes certain other entities under common ownership or control of the shareholders, since these entities engage in unrelated business lines and, in certain instances, have ceased operations. JFD--Inc. and JFD--Encino include the operations of Southern California restaurants located in Studio City, Encino, Marina del Rey, West Hollywood and Pasadena, which opened February 20, 1996. A sixth restaurant in Westwood is scheduled to open in the second quarter of 1996. On March 13, 1996, Jerry's Deli, L.A., Incorporated ("JFDLA"), a subsidiary of JFD--Inc. and the co-general partner of JFD- -Encino, made a tender offer to purchase up to 100% of the outstanding limited partnership units of JFD--Encino. Through April 13, 1996, the expiration date of the tender offer, one of the limited partners submitted his interest in JFD--Encino for approximately $158,000. This resulted in a change in minority interest to 72.45% from 80%. On March 16, 1996, the Company entered a lease agreement with the purchaser in escrow of 3.5 acres in Las Vegas, Nevada, which is contingent upon the closing of the purchase of the property. As of the date hereof, management has reason to believe that the purchaser will not be able to obtain financing for the purchase. The lease will terminate if the purchaser cannot obtain financing necessary to close the purchase. On March 27, 1996, the Company purchased the site of its existing Marina del Rey restaurant from its landlord, for a purchase price of $3,964,000, paid $714,000 in cash and financed the remaining $3,250,000 in the form of a collateralized promissory note with monthly interest only payments at 9% per annum until March 26, 2001, when the entire balance is due. On March 28, 1996, the Company entered into a lease agreement for a new 9,400 square foot restaurant to be located in Costa Mesa, California. The Company plans to renovate the building at an estimated cost of approximately $2,500,000 and open it in late 1996. 5 7 2. INCOME TAXES Upon termination of the subchapter S election on January 11, 1995, deferred income taxes became an asset of the Company and was recorded in the balance sheet with a corresponding credit to the combined statement of operations. The estimated deferred tax asset, principally resulting from temporary differences in the recognition of depreciation expense for financial statement and tax reporting purposes, as of March 31, 1995, was approximately $137,000. 3. SUPPLEMENTAL CASH FLOW INFORMATION
Three Months Ended March 31, 1996 1995 ----------- ---------- Supplemental cash flow information: Cash paid for: Interest...................................................................... $ 41,564 $ 42,328 Income taxes.................................................................. $ 145,000 - Supplelmental information on noncash investing and financing activities: Increase in loan payable--related party as a result of distributions.. - $ 795,054 (Decrease) increase in deferred costs capitalized to construction-in-progress................................................ $ (11,882) $ 20,634 Issuance of common stock for services rendered................................ - $ 130,000 Purchase of restaurant......................................................... $ 3,250,000 -
4. NET INCOME PER SHARE AND PRO FORMA DATA Net income per common share for the 1996 three-month period are based on the weighted average number of common shares outstanding. Pro forma net income per common share for the 1995 three-month period was calculated using net income and based on, as if, 10,386,250 shares of common stock were outstanding for all of fiscal year 1995. The pro forma shares outstanding are based on (i) 7,460,000 shares outstanding for the Company at December 31, 1994, (ii) 40,000 shares issued on January 9, 1995, per the terms of a consulting agreement, (iii) 931,250 shares sold through a private placement which was completed in March 1995 and (iv) and additional 1,955,000 shares sold through an initial public offering in October 1995. 5. SUBSEQUENT EVENTS On May 7, 1996, the Company signed a letter of intent to acquire two Solley's Delicatessen restaurants in Woodland Hills and Sherman Oaks, California, with combined annual revenues of approximately $7,500,000. These two restaurants are in close proximity to the Company's Encino and Studio City restaurants, all located in the San Fernando Valley. The transaction requires certain landlord consents, governmental approvals and negotiation of a definitive acquisition agreement, as preconditions to closing which is not expected before July 1, 1996. This is a forward-looking statement. There are significant risks that the required consents and approvals cannot be obtained or a definitive acquisition agreement cannot be negotiated which would preclude the closing of this acquisition. 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, 1996 and 1995, the Consolidated Statements of Operations of the Company expressed as percentages of total revenue. The results of operations for the first three months of 1996 are not necessarily indicative of the results to be expected for the full year ending December 31, 1996.
PERCENTAGE OF TOTAL REVENUE --------------------------- THREE MONTHS ENDED MARCH 31, ---------------------------- 1996 1995 ---- ---- Revenues 100.0% 100.0% Cost of sales Food 27.7 30.5 Other 2.6 2.8 ----- ----- Total cost of sales 30.3 33.3 ----- ----- Gross profit 69.7 66.7 Operating expenses Labor 34.5 33.8 Occupancy and other 13.8 15.4 ----- ----- Total operating expenses 48.3 49.2 General and administrative expenses 10.0 11.5 Depreciation and amortization expenses 3.7 3.7 Restaurant concept discontinuation costs - 1.9 ----- ----- Total expenses 62.0 66.3 ----- ----- Income from operations 7.7 0.4 Interest income 1.0 - Interest expense (0.5) (0.7) Other income (loss), net 0.1 - ----- ----- Income before provision for income taxes and minority interest 8.3 (0.3) Provision (benefit) for income taxes 2.9 (2.7) Minority interest 1.4 0.2 ----- ----- Net income 4.0% 2.2% ===== =====
RESULTS OF OPERATIONS Income before income taxes for the three months ended March 31, 1996 increased $566,000 to $534,000 from a $32,000 loss for the three months ended March 31, 1995. The Company converted from an S corporation to a C corporation in January 1995, resulting in an income tax benefit of $149,000 in the 1995 period and an income tax provision of $214,000 in the 1996 period. In spite of the change in the income tax provision, net income for the 1996 period increased $204,000, or 175.5%, to $320,000 from $116,000 for the 1995 period. Total revenues increased $541,000, or 7.5%, to $7,735,000 for the 1996 three-month period from $7,194,000 for the 1995 three-month period. The two major factors contributing to this net increase were the additional sales of $645,000 from the Pasadena restaurant, which opened in February 1996, and reduced by the closure of Jerry's Famous Pizza restaurant ("JFD Pizza") in June 1995, which contributed $124,000 of revenue in 1995. 7 9 Although total revenues increased in 1996, cost of sales declined $50,000, or 2.1%, to $2,346,000 for the 1996 period from $2,396,000 for the comparable 1995 period. The cost of food, which comprises over 90% of cost of sales, decreased as a percentage of revenues to 27.7% in 1996 from 30.5% in 1995. Management attributes this decrease primarily to its continuing program of more effective buying, improved cost control and better financial liquidity since the Company's October 1995 Public Offering, which has allowed the Company to take advantage of vendor discounts for prompt or early payments. As a result of decreased cost of sales, gross profit improved as a percentage of revenues to 69.7% for 1996 from 66.7% for 1995. Total expenses, as a a percentage of revenues, decreased 4.3 percentage points to 62.0% for the three months ended March 31, 1996 from 66.3% for the three months ended March 31, 1995. A major factor for the decrease was the 1995 restaurant concept discontinuation costs of $137, 000, which were due to the closing of JFD Pizza in June 1995. Total operating expenses, which include all restaurant level operating costs, including, but not limited to, labor, rent, laundry, maintenance, utilities and repairs, increased $196,000, or 5.5%, to $3,738,000 for the 1996 three-month period from $3,542,000 for the 1995 three-month period. The $240,000 increase in labor expense included $266,000 for the Pasadena restaurant, which opened in February 20, 1996. Labor expense, as a percentage of revenues, increased to 34.5% for 1996 from 33.8% for 1995. Two primary reasons for this increase were the addition in the last seven months of five personnel for the centralization of the purchase of food products and of the training of new restaurant personnel, and due to a higher labor costs for the Pasadena restaurant, which is common to new restaurants the first few weeks after opening. General and administrative expenses decreased $53,000, or 6.5%, to $770,000 for the 1996 period from $823,000 for the comparable 1995 period. A major factor for this change relates to a $103,000 decrease in officers salaries which resulted from a reduction in Mr. Isaac Starkman's base salary in October 1995. Interest income increased $77,000 to $78,000 for the 1996 period from $1,000 for the 1995 period. This increase is primarily due to earnings on the investment of funds received from the October 1995 Public Offering. LIQUIDITY AND CAPITAL RESOURCES The Company is continuing its current plans for expansion and plans to open its sixth restaurant in Westwood, California in the second quarter of 1996 and its seventh restaurant in Costa Mesa, California in the fourth quarter of 1996. Even if the purchase of the two Solley's Delicatessen restaurants should close in the third quarter of 1996 and Westwood and Costa Mesa proceed as planned, management believes that the cash on hand, cash flow from operations and drawings on its bank lines of credit will be sufficient to finance the Company's immediate expansion. In planning for future expansion beyond that mentioned above, management is currently seeking to increase the Company's bank line of credit. No assurances can be given that such an increase can be obtained. 8 10 PART II - OTHER INFORMATION Items 1 through 6 are not applicable. 9 11 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 14, 1996 By: /s/ Isaac Starkman ----------------------------------------------- Isaac Starlkam Chief Executive Officer and Chairman of the Board of Directors By: /s/ Christina Sterling ----------------------------------------------- Christina Sterling Chief Financial Officer
10 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS, THE CONSOLIDATED STATEMENTS OF OPERATIONS AND THE CONSOLIDATED STATEMENTS OF CASH FLOWS. 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 3,163,910 0 348,922 10,001 147,879 4,249,548 20,216,208 4,373,075 20,483,744 2,184,647 4,474,870 0 0 12,664,752 415,122 20,483,744 7,734,528 7,734,528 2,346,173 2,346,173 4,788,856 0 39,085 534,182 214,000 320,182 0 0 0 320,182 0.03 0.03
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