<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934 For the quarterly period ended October 2, 1999
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934
For the transition period from ___________ to ____________
Commission File No. 0-11271
-------
WALL STREET DELI, INC.
(Exact name of registrant as specified in its Charter)
DELAWARE 63-0514240
(State of Incorporation) (IRS Employer I.D. No.)
One Independence Plaza, Suite 100
Birmingham, Alabama 35209
(Address of principal executive offices)
(205) 870-0020
(Registrant's telephone number)
Indicate by check mark whether the registrant has (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of the registrant's class of
common stock, as of the latest practicable date.
Class Outstanding at November 9, 1999
- ---------------------------- -------------------------------
Common Stock, $.05 Par Value 2,896,477
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
PART I: FINANCIAL INFORMATION
ITEM 1: Financial Statements......................................................... 1
Consolidated Balance Sheets.......................................... 2
Consolidated Statements of Operations................................ 4
Consolidated Statements of Stockholders' Equity...................... 5
Consolidated Statements of Cash Flows................................ 6
Notes to Consolidated Financial Statements................................... 8
ITEM 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................................... 11
PART II: OTHER INFORMATION
ITEM 6: Exhibits and Reports on Form 8-K ............................................ 16
SIGNATURES..................................................................................... 16
</TABLE>
<PAGE> 3
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
The financial statements listed below are included on the following
pages of this Report on Form 10-Q:
Consolidated Balance Sheets at October 2, 1999 (unaudited) and
July 3, 1999.
Consolidated Statements of Operations (unaudited) for the
thirteen week periods ended October 2, 1999 and September 26,
1998.
Consolidated Statements of Stockholders' Equity (unaudited)
for the thirteen week periods ended October 2, 1999 and
September 26, 1998.
Consolidated Statements of Cash Flows (unaudited) for the
thirteen week periods ended October 2, 1999 and September 26,
1998.
Notes to Consolidated Financial Statements (unaudited).
1
<PAGE> 4
WALL STREET DELI, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
October 2, 1999 July 3, 1999
(unaudited)
--------------------------------
<S> <C> <C>
Assets
Current
Cash and cash equivalents $ 1,215,272 $ 1,305,652
Accounts and notes receivable, net (Note 1) 1,178,023 982,975
Inventories 559,761 564,061
Refundable income taxes 348,352 346,140
Deferred tax assets (Note 5) 495,000 495,000
Prepaid rent 632,023 676,166
Other 251,609 202,557
------------ ------------
Total current assets 4,680,040 4,572,551
------------ ------------
Equipment and improvements (Note 4)
Equipment and fixtures 15,354,813 15,554,760
Leasehold improvements 12,779,505 12,793,819
------------ ------------
28,134,318 28,348,579
Less accumulated depreciation and amortization (19,496,178) (19,132,868)
------------ ------------
Net equipment and improvements 8,638,140 9,215,711
------------ ------------
Other
Long-term portion of notes receivable (Note 1) 876,234 1,004,196
Deferred tax assets (Note 5) 2,381,000 2,381,000
------------ ------------
Total other assets 3,257,234 3,385,196
------------ ------------
$ 16,575,414 $ 17,173,458
============ ============
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
2
<PAGE> 5
WALL STREET DELI, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
October 2, 1999 July 3, 1999
(unaudited)
--------------------------------
<S> <C> <C>
Liabilities and Stockholders' Equity
Current Liabilities
Bank overdrafts $ -- $ 1,441,444
Notes payable (Note 2) 403,617 398,004
Accounts payable 2,597,439 1,509,329
Accruals:
Taxes other than income 647,135 592,053
Compensation 1,437,556 798,868
Rent 832,155 925,072
Workers' compensation 361,254 972,101
Other insurance 461,803 459,079
Miscellaneous 134,725 176,550
------------ ------------
Total current liabilities 6,875,684 7,272,500
------------ ------------
Commitments and contingencies (Note 8)
Stockholders' equity (Note 3)
Common stock, $.05 par - shares authorized
20,000,000; issued 3,414,802 170,740 170,740
Additional paid-in capital 10,787,369 10,787,369
Retained earnings 988,712 1,189,940
------------ ------------
11,946,821 12,148,049
Treasury stock, at cost, 518,325 shares (2,247,091) (2,247,091)
------------ ------------
Total stockholders' equity 9,699,730 9,900,958
------------ ------------
$ 16,575,414 $ 17,173,458
============ ============
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
3
<PAGE> 6
WALL STREET DELI, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the thirteen week periods ended
-----------------------------------
October 2, September 26,
1999 1998
-----------------------------------
<S> <C> <C>
Revenues
Net sales $ 12,838,407 $ 15,253,413
Franchise revenues 52,372 46,270
------------ ------------
Total revenues 12,890,779 15,299,683
------------ ------------
Costs of restaurant operations
Food and paper costs 4,528,676 5,560,693
Labor 2,978,412 3,406,188
Store expenses 3,528,459 3,897,032
Restaurant depreciation 631,040 779,599
Franchise expenses 39,607 90,660
------------ ------------
Total cost of restaurant operations 11,706,194 13,734,172
------------ ------------
Restaurant operating income 1,184,585 1,565,511
------------ ------------
Administrative expenses
Division level 433,798 459,630
Catering sales 155,300 183,320
Corporate 755,670 862,973
------------ ------------
Total general and administrative 1,344,768 1,505,923
------------ ------------
Other income (expense)
Interest income (expense) (16,088) (37,834)
Gain (loss) from sale of assets (24,957) 37,908
------------ ------------
Total other income (expense) (41,045) 74
------------ ------------
Income (loss) before taxes (201,228) 59,662
Taxes on income (Note 5) 0 22,926
------------ ------------
Net income (loss) $ (201,228) $ 36,736
============ ============
Basic and diluted income (loss) per share $ (0.07) $ 0.01
============ ============
Weighted average number of common shares
outstanding (Note 5) 2,896,477 3,016,588
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
4
<PAGE> 7
WALL STREET DELI, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock Treasury Stock
----------------------- ----------------------------
Number Additional Number
of Paid-in Retained of
Shares Amount Capital Earnings Shares Amount
--------- ------- ---------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 27, 1998 3,414,802 170,740 10,787,369 3,523,082 368,325 (1,764,467)
Net income for the quarter -- -- -- 36,736 -- --
Treasury stock acquired -- -- -- -- 80,000 (253,124)
--------- -------- ----------- ----------- ------- -----------
Balance, September 26,
1998 (unaudited) 3,414,802 $170,740 $10,787,369 $ 3,559,818 448,325 $ 2,017,591
========= ======== =========== =========== ======= ===========
Balance, July 3, 1999 3,414,802 $170,740 $10,787,369 $ 1,189,940 518,325 $(2,247,091)
Net loss for the quarter -- -- -- (201,228) -- --
Treasury stock acquired -- -- -- -- -- --
--------- -------- ----------- ----------- ------- -----------
Balance, October 2, 1999 3,414,802 $170,740 $10,787,369 $ 988,712 518,325 $(2,247,091)
========= ======== =========== =========== ======= ===========
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
5
<PAGE> 8
WALL STREET DELI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the thirteen week periods ended
-----------------------------------
October 2, September 26,
1999 1998
-----------------------------------
<S> <C> <C>
Operating activities
Net income (loss) $(201,228) $ 36,736
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 656,634 779,715
Loss (gain) on sale of property and equipment 24,957 (37,908)
Deferred income taxes -- 22,926
Provision for loss on accounts and
notes receivable 42,000 --
Changes in operating assets and
liabilities:
Receivables - net (Note 3) (149,175) (19,653)
Inventories 4,300 28,587
Refundable income taxes (2,212) --
Prepaid expenses and other (4,909) 17,138
Accounts payable and bank overdraft (353,334) (212,864)
Accruals (49,095) (336,788)
--------- ---------
Cash provided by operating activities (32,062) 277,889
--------- ---------
Investing activities
Payments for purchase of equipment and
improvements (105,611) (67,116)
Proceeds from sale of equipment and
improvements 1,591 --
Net collections on notes receivable 40,089 11,017
Decrease (increase) in cash surrender value
of insurance on officers' lives -- (17,400)
--------- ---------
Cash provided (used) by investing activities (63,931) (73,499)
--------- ---------
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
6
<PAGE> 9
WALL STREET DELI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the thirteen week periods ended
-----------------------------------
October 2, September 26,
1999 1998
-----------------------------------
<S> <C> <C>
Financing activities
Net borrowings (payments) under line of credit 5,613 (157,878)
Acquisition of treasury stock -- (253,124)
----------- ---------
Cash provided (used) by financing activities 5,613 (411,002)
----------- ---------
Net increase (decrease) in cash for the period (Note 7) (90,380) (206,612)
Cash and cash equivalents, beginning of period 1,305,652 409,044
----------- ---------
Cash and cash equivalents, end of period $ 1,215,272 $ 202,432
----------- ---------
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ 20,199 $ 40,657
Income taxes $ -- $ 19,600
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
7
<PAGE> 10
WALL STREET DELI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. In the opinion of management of the Company, the accompanying unaudited
consolidated financial statements contain all adjustments (consisting
of only normal recurring accruals) necessary to present fairly the
financial position as of October 2, 1999, and the results of
operations, changes in stockholders' equity and cash flows for the
thirteen week periods ended October 2, 1999 and September 26, 1998.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements. Estimates also affect the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
2. The results of operations for the thirteen week periods ended October
2, 1999 and September 26, 1998 are not necessarily indicative of the
results to be expected for the full year. Certain amounts during the
first quarter of fiscal 1999 have been reclassified to conform to the
current year presentation.
3. Accounts and notes receivable consists of:
<TABLE>
<CAPTION>
October 2, 1999 July 3, 1999
--------------- ------------
<S> <C> <C>
Accounts receivable $ 646,745 $ 637,496
Notes receivable 397,153 461,242
Assets of business transferred under contractual
arrangement 773,000 791,000
Other receivables 828,804 758,804
----------- -----------
2,645,702 2,648,542
Less allowance for doubtful accounts (591,445) (661,371)
----------- -----------
2,054,257 1,987,171
Less non-current portion of notes receivable (876,234) (1,004,196)
----------- -----------
$ 1,178,023 $ 982,975
=========== ===========
</TABLE>
8
<PAGE> 11
4. Inventories are valued at the lower of cost (first-in, first-out) or
market.
5. Earnings per share ("EPS") have been computed in accordance with the
provisions of SFAS 128. Basic EPS excludes dilution and is computed by
dividing income available to common stockholders by the weighted
average number of shares outstanding during the respective periods.
Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock are exercised or
converted into common stock or result in the issuance of common stock
that then shares in the earnings of the Company. The effect of shares
issuable under the Company's stock option plan are excluded for the
thirteen week periods ended October 2, 1999 and September 26, 1998 as
the effect would be anti-dilutive. The assumed exercise of the common
stock options is not included in the computation of common stock
equivalents for the thirteen week period ended October 2, 1999 because
the significant majority of common options outstanding were at prices
which exceed the common stock market price.
Earnings per share has been calculated using the following:
<TABLE>
<CAPTION>
For the Thirteen
Week Periods Ended
------------------------------
October 2, September 26,
1999 1998
---------- -------------
<S> <C> <C>
Weighted average number of common
shares used for basic EPS 2,896,477 3,016,588
Effect of dilutive stock options -- --
Weighted average number of common shares and
dilutive potential common stock used in
diluted EPS 2,896,477 3,016,588
</TABLE>
6. Effective December 31, 1998, the Company transferred leasehold
improvements and equipment and subleased five stores in the Los
Angeles, California area to California Fresh Deli, Inc. ("CFD"). CFD
entered into a franchise agreement with the Company to operate the five
stores and a management agreement to manage for the Company a sixth
store also in the Los Angeles area for the remainder of the current
lease term.
The Company received approximately $40,500 in cash and a $800,000
non-interest bearing note, payable in monthly installments at $12,000
from June 1999 through November 2000, and at the greater of $13,333 or
eight percent of monthly revenues thereafter until the note is repaid.
The realization of the note is dependent on future operations of the
five stores and has been reported as "Assets of business transferred
under contractual arrangement" net of a valuation allowance of
$162,000. Franchise fees payable by CFD under the franchise agreement
have been deferred until the note has been paid in full.
9
<PAGE> 12
7. The effective tax rate for the thirteen weeks ended October 2, 1999 was
-0- percent. Estimated amounts of tax benefits not considered more
likely than not to be realized result in decreases from the effective
tax rate of 40 percent for the thirteen week period ended October 2,
1999.
8. At July 3, 1999, the Company was not in compliance with the debt
service coverage ratio covenant and the tangible net worth ratio under
its existing short-term bank line of credit (the "Credit Agreement")
and accordingly, had requested and was granted waivers and amendments
to such covenants from its lender for periods up to and including
October 31, 1999. Additionally, on February 1, 1999, the lender had
lowered the available line from $7,500,000 to $4,000,000 and changed
the interest rate from a LIBOR denominated rate to prime. On September
20, 1999, the lender again lowered the available line from $4,000,000
to $1,750,000 and increased the interest rate from prime to prime plus
2%. At September 20, 1999 the interest rate was 10.25%. There can be no
assurance that the Company will not require additional waivers in the
future or if required, that the lender will grant them.
Effective as of November 1, 1999, the expiration date of the Credit
Agreement has been extended to November 30, 1999. Management expects
that the expiration date will be extended from November 30, 1999 to
October 31, 2000. However, should negotiations with the lender not
proceed as expected, management believes there are a number of viable
refinancing alternatives, though there can be assurance that such
alternatives would be on terms as favorable as the present
arrangements.
9. In June 1998, the Financial Accounting Standards Board Issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities
("SFAS 133"). SFAS 133 requires companies to recognize all derivatives
contracts as either assets or liabilities in the balance sheet and to
measure them at fair value. If certain conditions are met, a derivative
may be specifically designated as a hedge, the objective of which is to
match the timing of gain or loss recognition on the hedging derivative
with the recognition of (i) the changes in the fair value of the hedged
asset or liability that are attributable to the hedged risk or (ii) the
earnings effect of the hedged forecasted transaction. For a derivative
not designated as a hedging instrument, the gain or loss is recognized
in income in the period of change. SFAS 133 amends the guidance in SFAS
No. 52, "Foreign Currency Translation," to permit special accounting
for a hedge of a foreign currency forecasted transaction with a
derivative. It also supersedes SFAS No. 80, "Accounting for Futures
Contracts," SFAS No. 105, "Disclosure of Information about Financial
Instruments with Off-Balance-Sheet Risk and Financial Instruments with
Concentrations of Credit Risk," and SFAS No. 119, "Disclosure about
Derivative Financial Instruments." In addition, it amends SFAS No. 107,
"Disclosures about Fair Value of Financial Instruments," to include in
SFAS No. 107 the disclosure provisions about concentrations of credit
risk from SFAS No. 105.
10
<PAGE> 13
SFAS 133 is effective for financial statements for periods beginning
after June 15, 1999. Historically, the Company has not entered into
derivatives contracts either to hedge existing risk or for speculative
purposes. Accordingly, the Company does not expect adoption of the new
standard on July 2, 2000 to materially affect its financial statements.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain
significant factors that have affected the Company's financial condition and
earnings during the periods included in the accompanying consolidated balance
sheets and statements of operations.
Forward Looking Statements. The statements in this Form 10-Q that are
not historical fact are forward looking statements. Such statements appear in a
number of places in this report and include statements regarding the intent,
belief or expectations of the Company and its management with respect to, among
other things, the Company's operating performance, anticipated growth
strategies, trends in the food service industry and other trends that may affect
the Company's financial condition or results of operations. Such statements are
subject to numerous risks and uncertainties which could cause actual results to
differ materially from those anticipated or projected, including, among others,
recent changes in management, the availability of financing, new franchising
programs and other new products and programs, competition for customers, labor
force and store sites, the effects of changes in the economy such as inflation
and unemployment rates, and weather conditions and seasonal effects. In
addition, a significant area of uncertainty and risk has been occasioned by
recently-terminated discussions concerning the possible sale of the Company and
subsequent new strategic planning.
Readers are cautioned not to place undue reliance on these forward
looking statements which speak only as of the date hereof and reflect only
management's belief and expectations based upon presently available information.
Readers are also urged to carefully review and consider the various
disclosures made by the Company which attempt to advise interested parties of
the factors which affect the Company's business, including the disclosures made
in other periodic reports on Forms 10-K, 10-Q and 8-K filed with the Securities
and Exchange Commission.
11
<PAGE> 14
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the
percentages of revenues represented by certain items in the Company's
consolidated statements of operations.
<TABLE>
<CAPTION>
Thirteen week periods ended
---------------------------
October 2, September 26,
1999 1998
---------- -------------
<S> <C> <C>
Net sales 99.6% 99.7%
Franchise revenues 0.4 0.3
----- -----
Total revenues 100.0 100.0
Cost of restaurant operations 90.8 89.8
----- -----
Restaurant operating income 9.2 10.2
General and administrative 10.4 9.8
----- -----
Operating income (loss) (1.2) 0.4
Other income (expense) (0.3) --
----- -----
Income (loss) before taxes (1.5) 0.4
----- -----
Taxes -- 0.2
----- -----
Net income (loss) (1.5)% 0.2%
===== =====
</TABLE>
NET SALES
Net sales for company-owned restaurants for the thirteen weeks ended
October 2, 1999 declined 15.8% to $12,838,407 from $15,253,413 recorded during
the comparable prior year period. Comparable sales per restaurant declined by
10.0% due to increased competition and lower catering sales. In addition, the
number of company-owned restaurants declined from 111 at the end of the first
quarter of fiscal 1999 to 101 at the end of the first quarter of fiscal 2000. A
number of the company-owned restaurants that were open in the first quarter of
fiscal 1999 were sold to franchisees during the past 12 months. See "Franchise
Operations" later in this report for additional details concerning franchised
operations.
12
<PAGE> 15
COST OF RESTAURANT OPERATIONS
The components of cost of restaurant operations for the thirteen week
periods ended October 2, 1999 and September 26, 1998, respectively, are shown in
the following table:
<TABLE>
<CAPTION>
For the thirteen week periods ended
----------------------------------------------------------------
October 2, 1999 September 26, 1998
------------------------------- -----------------------------
Amount % of Net Sales Amount % of Net Sales
------ -------------- ------ --------------
<S> <C> <C> <C> <C>
Food and Paper $ 4,528,676 35.3% $ 5,560,693 36.5%
Labor 2,978,412 23.2 3,406,188 22.3
Store Expenses 3,528,459 27.5 3,897,032 25.5
Restaurant Depreciation 631,040 4.9 779,599 5.1
----------- ---- ----------- ----
$11,666,587 90.9% $13,642,512 89.4%
----------- ---- ----------- ----
</TABLE>
Cost of restaurant operations declined 14.4% to $11,666,587 from
$13,642,512 incurred during the comparable prior year quarter. Cost of food and
paper as a percent of net sales declined from 36.5% to 35.3% due to improved
buying practices. Labor as a percent of net sales increased as a percent of net
sales to 23.2% from 22.3% during the prior year quarter primarily due to the
relatively fixed nature of these expenses. Store expenses, which include mostly
fixed expenses such as rent, taxes and insurance, declined by 9.4% but increased
as a percent of sales to 27.5% compared to 25.5% during the comparable period.
Depreciation and amortization declined 19.0% to $631,040 from $779,599 primarily
due to impairment adjustments recorded in fiscal 1999 and ten fewer restaurants
were in operation at the end of the first quarter of fiscal 2000 compared to the
same time in fiscal 1999. All of these factors resulted in an increase in the
cost of restaurant operations as a percent of net sales to 90.9% for the first
quarter of fiscal 2000 compared to 89.4% for the comparable prior year period.
GENERAL AND ADMINISTRATIVE
General and administrative expenses consist of overhead expenses
associated with each of our operating divisions, expenses associated with
catering operations and corporate administration. Each of these expense
categories declined compared to the prior year due to fewer restaurants, lower
sales and certain cost savings actions. Total general and administrative
expenses declined $161,155 or 10.7% compared to the comparable prior year
period. Management expects general and administrative expenses to continue to be
below the prior year but at a lesser rate in future quarters due to the filling
of several key officer positions during the second quarter of fiscal 2000.
13
<PAGE> 16
FRANCHISE OPERATIONS
A brief summary of franchise operations for the first quarter of fiscal
2000 compared to the comparable prior year period follows:
<TABLE>
<CAPTION>
October 2, September 26,
Description 1999 1998
- ----------- ---------- -------------
<S> <C> <C>
Royalty income $52,372 $ 36,270
Initial franchise fees -- 10,000
------- --------
Total franchise revenues 52,372 46,270
Franchise expenses 39,607 90,660
------- --------
Franchise income $12,765 $(44,390)
======= ========
</TABLE>
During the first quarter of fiscal 2000 there were 17 franchised
restaurants in operation compared to six at the end of the first quarter of
fiscal 1999. As a result, royalty income increased 44.3% to $52,372, compared to
$36,270 recorded in the comparable prior year quarter. During the comparable
quarter, one franchised restaurant opened resulting in $10,000 of initial
franchise fees compared to none during the current quarter. Franchise expenses
were higher in the prior year primarily due to opening expenses and a higher
level of franchise administration costs. Management expects franchise expenses
to increase due to additional store openings and the addition of a yet to be
hired director of franchising and real estate.
TAXES ON INCOME
The effective tax rate for each of the thirteen weeks ended October 2,
1999 and September 26, 1998 was -0- percent and 38.4 percent, respectively.
INTEREST INCOME (EXPENSE), NET
Net interest expense was $16,088 compared to $37,834 incurred during
the comparable prior year quarter primarily due to significantly lower average
daily balances on the line of credit. At the end of the first quarter of fiscal
2000 there was a $403,617 balance on the line compared to $398,004, at the end
of fiscal 1999 and $1,846,932 at the end of the first quarter of fiscal 1999.
See Note 8 for additional details.
IMPACT OF INFLATION
In most cases, management has been able to pass on the impact of wage
and food inflation through modest price increases, but there is no assurance
that it will be able to do so in the future.
14
<PAGE> 17
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has generated most of its cash from
operations, and to a lesser extent from bank borrowings on the Company's
short-term line of credit. Cash flow from operations, equity financings and bank
borrowings have historically funded expansion. The Company currently does not
have long-term debt. In the future the Company anticipates that it may rely on
long-term debt or lease financing to fund the purchase of point-of-sale
management information systems, remodeling or Company expansion.
At the end of the first quarter liquidity improved. The current ratio
was .68 to 1.00 compared to .63 to 1.00 at the end of fiscal 1999 and .48 to
1.00 at the end of the first quarter of fiscal 1999.
The Company's principal capital requirements are for the remodeling of
Company stores and to a lesser degree new restaurants. Capital expenditures for
these purposes were $105,611 compared to $67,116 expended during the comparable
prior year quarter. The Company has one company-owned restaurant under
construction which the Company anticipates opening at the end of the second
quarter or beginning of the third quarter.
The Company has historically met its capital need from short-term bank
borrowings and internally generated funds. Cash generated from operations for
the first quarter of fiscal 2000 was a negative $32,062 compared to a positive
$277,889 recorded for the comparable prior year quarter. The primary use of
funds for the first quarter was the reduction in bank overdrafts from year end
of $1,441,444 offset by an increase in accounts payable of $1,088,110. In
addition, the Company paid prior year accrued workers compensation claims of
approximately $600,000 during the current quarter. The balance on the line of
credit ($403,617) was virtually the same as year end but substantially down from
the balance at the end of the first quarter of fiscal 1999 of $1,846,932. See
Note 8 to the financial statements in this report for additional details about
the line of credit. During the prior year comparable quarter, funds generated
from operations were used to purchase 80,000 shares of treasury stock for
$253,124 and to pay down the line of credit by $157,878.
15
<PAGE> 18
PART II: OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule, submitted to the
Securities and Exchange Commission in electronic
format
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the quarter
ended October 2, 1999.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
DATE: WALL STREET DELI, INC.
November 15, 1999 /s/ Jeffrey V. Kaufman
-------------------------------------
JEFFREY V. KAUFMAN
President and Chief Executive Officer
November 15, 1999 /s/ Thomas J. Sandeman
-------------------------------------
THOMAS J. SANDEMAN
Chief Financial Officer
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF WALL STREET DELI, INC. FOR THE QUARTER ENDED OCTOBER 2,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-01-2000
<PERIOD-START> JUL-04-1999
<PERIOD-END> OCT-02-1999
<CASH> 1,215,272
<SECURITIES> 0
<RECEIVABLES> 2,645,702
<ALLOWANCES> 591,445
<INVENTORY> 559,761
<CURRENT-ASSETS> 4,680,040
<PP&E> 28,134,318
<DEPRECIATION> 19,496,178
<TOTAL-ASSETS> 16,575,414
<CURRENT-LIABILITIES> 6,875,684
<BONDS> 0
0
0
<COMMON> 170,740
<OTHER-SE> 9,528,990
<TOTAL-LIABILITY-AND-EQUITY> 16,575,414
<SALES> 12,838,407
<TOTAL-REVENUES> 12,890,779
<CGS> 11,706,194
<TOTAL-COSTS> 13,050,962
<OTHER-EXPENSES> (41,045)
<LOSS-PROVISION> 591,445
<INTEREST-EXPENSE> 16,088
<INCOME-PRETAX> (201,228)
<INCOME-TAX> 0
<INCOME-CONTINUING> (201,228)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (201,228)
<EPS-BASIC> (.07)
<EPS-DILUTED> (.07)
</TABLE>
