<PAGE> 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.
<PAGE> 2
JERRY'S FAMOUS DELI, INC.
INDEX
<TABLE>
<CAPTION>
Page
Number
<S> <C>
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
</TABLE>
1
<PAGE> 3
JERRY'S FAMOUS DELI, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
----------- ------------
(unaudited)
<S> <C> <C>
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
=========== ===========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
2
<PAGE> 4
JERRY'S FAMOUS DELI, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
2000 1999
------------ ------------
<S> <C> <C>
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
============ ============
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
3
<PAGE> 5
JERRY'S FAMOUS DELI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
2000 1999
----------- -----------
<S> <C> <C>
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
=========== ===========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
4
<PAGE> 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
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
-------- --------
<S> <C> <C>
Supplemental cash flow information:
Cash paid for:
Interest ............................... $274,000 $345,000
Income taxes ........................... $ -- $ --
</TABLE>
5
<PAGE> 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
<PAGE> 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.
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL REVENUE
THREE MONTHS ENDED
MARCH 31,
----------------------
2000 1999
------ ------
<S> <C> <C>
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%
====== ======
</TABLE>
7
<PAGE> 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
<PAGE> 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
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 547,754
<SECURITIES> 0
<RECEIVABLES> 360,726
<ALLOWANCES> 3,360
<INVENTORY> 1,353,385
<CURRENT-ASSETS> 3,147,908
<PP&E> 44,070,798
<DEPRECIATION> 14,139,889
<TOTAL-ASSETS> 44,021,751
<CURRENT-LIABILITIES> 6,561,479
<BONDS> 9,567,012
0
0
<COMMON> 24,575,522
<OTHER-SE> 2,134,214
<TOTAL-LIABILITY-AND-EQUITY> 44,021,751
<SALES> 18,820,317
<TOTAL-REVENUES> 18,820,317
<CGS> 6,325,905
<TOTAL-COSTS> 6,325,905
<OTHER-EXPENSES> 11,037,722
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 263,227
<INCOME-PRETAX> 1,131,131
<INCOME-TAX> 328,028
<INCOME-CONTINUING> 803,103
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 803,103
<EPS-BASIC> .17
<EPS-DILUTED> .17
</TABLE>
