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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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AMENDED FORM 8-K
CURRENT REPORT
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
Date of Report (Date of earliest event reported) June 30, 1996
JERRY'S FAMOUS DELI, INC.
(Exact name of registrant as specified in its charter)
California 0-26956 95-3302338
- ------------------------------ ------------------------ -------------------
(State or Other Jurisdiction of (Commission File Number) (I.R.S. Employer
Incorporation or Organization) Identification No.)
12711 Ventura Boulevard, Suite 400, Studio City, California 91604
-----------------------------------------------------------------
(Address of Principal Executive Offices)
(818) 766-8311
---------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
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This Form 8-K amends Form 8-K filed on September 11, 1996 by the
registrant, Jerry's Famous Deli, Inc. The purpose of this Form 8-K is to
provide the financial statements and the pro forma financial information for
the acquired business, One Hundred Seventy-Second Collins Corp. d/b/a Rascal
House, required under Item 7.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
Pursuant to Regulation S-X 210.3-05, audited
financial statements for the years ended December 31,
1995 and 1994 and unaudited financial statements for
the six-month periods ended June 30, 1996 and 1995,
are provided. Jerry's Famous Deli, Inc. acquired
certain assets (inventory and property and equipment)
and the operations of One Hundred Seventy-Second
Collins Corp. d/b/a Rascal House ("172 Corp."), and
the land and building from a related party to 172
Corp., on September 9,1996.
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of
One Hundred Seventy-Second
Collins Corp. d/b/a Rascal House
We have audited the accompanying balance sheets of One Hundred Seventy-Second
Collins Corp. d/b/a Rascal House as of December 31, 1995 and 1994, and the
related statements of income, changes in shareholders' equity, and cash flows
for the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of One Hundred Seventy-Second
Collins Corp. d/b/a Rascal House as of December 31, 1995 and 1994, and the
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
August 26, 1996, except for
Note 7 as to which the date is
September 9, 1996
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ONE HUNDRED SEVENTY-SECOND COLLINS CORP.
D/B/A RASCAL HOUSE
BALANCE SHEETS
DECEMBER 31,
-------------------------- JUNE 30,
1995 1994 1996
--------- ---------- ----------
(UNAUDITED)
ASSETS
Current assets
Cash and cash equivalents $ 597,743 $ 790,535 $ 918,586
Inventories 92,869 122,881 102,489
Prepaid expenses and other current assets 82,873 89,289 60,297
--------- ---------- ----------
Total current assets 773,485 1,002,705 1,081,372
--------- ---------- ----------
Equipment and leasehold improvements:
Leasehold improvements 970,188 913,197 970,188
Restaurant equipment 257,896 282,662 272,214
--------- ---------- ----------
1,228,084 1,195,859 1,242,402
Less: accumulated depreciation and amortization 1,131,962 1,112,808 1,171,952
--------- ---------- ----------
Equipment and leasehold improvements, net 96,122 83,051 70,450
--------- ---------- ----------
Deposits and other assets 1,950 1,950 2,600
--------- ---------- ----------
Total assets $ 871,557 $1,087,706 $1,154,422
========= ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 347,770 $ 332,404 $ 278,146
Accrued expenses 70,728 54,817 166,715
Sales tax payable 24,914 24,600 15,262
--------- ---------- ----------
Total current liabilities 443,412 411,821 460,123
--------- ---------- ----------
Commitments (Note 5)
Shareholders' equity:
Common stock, $20 par value; 1,000 shares
authorized; 820 shares issued and outstanding 16,400 16,400 16,400
Additional paid-in capital 138,600 138,600 138,600
Note receivable from shareholder (16,000) (20,000) (16,000)
Retained earnings 289,145 540,885 555,299
--------- ---------- ----------
Total shareholders' equity 428,145 675,885 694,299
--------- ---------- ----------
Total liabilities and shareholders' equity $ 871,557 $1,087,706 $1,154,422
========= ========== ==========
The accompanying notes are an integral part of these financial statements.
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ONE HUNDRED SEVENTY-SECOND COLLINS CORP.
D/B/A RASCAL HOUSE
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------ -------------------------
1995 1994 1996 1995
---- ---- ---- ----
(UNAUDITED)
Sales $7,775,245 $8,107,218 $4,255,552 $4,210,627
Cost of sales 2,610,033 2,595,256 1,434,389 1,383,444
---------- ---------- ---------- ----------
Gross profit 5,165,212 5,511,962 2,821,163 2,827,183
---------- ---------- ---------- ----------
Labor 3,307,960 3,316,418 1,678,465 1,711,075
Occupancy 282,563 283,716 134,625 140,849
Officers salaries 412,939 423,676 147,114 213,244
General and administrative expenses 1,122,615 1,089,361 577,245 584,670
Depreciation and amortization expense 45,496 35,685 39,990 22,482
---------- ---------- ---------- ----------
Income (loss) from operations (6,361) 363,106 243,724 154,863
Interest income 22,019 17,221 16,266 11,667
Other income 19,602 21,110 6,164 14,427
---------- ---------- ---------- ----------
Net income $ 35,260 $ 401,437 $ 266,154 $ 180,957
========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
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ONE HUNDRED SEVENTY-SECOND COLLINS CORP.
D/B/A RASCAL HOUSE
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995 AND THE SIX MONTHS ENDED
JUNE 30, 1996 (UNAUDITED)
Common Stock
--------------------------------------- Note
Shares Additional Receivable Total
Issued And Paid-in Retained From Shareholders'
Outstanding Par Value Capital Earnings Shareholder Equity
----------- --------- ---------- ---------- ----------- -------------
Balance, December 31, 1993 820 $16,400 $138,600 $449,651 $ (24,000) $580,651
Payment on note receivable
from shareholder 4,000 4,000
Net income 401,437 401,437
Cash distributions to
shareholders (310,203) (310,203)
-------- -------- -------- -------- --------- --------
Balance, December 31, 1994 820 16,400 138,600 540,885 (20,000) 675,885
Payment on note receivable
from shareholder 4,000 4,000
Net income 35,260 35,260
Cash distributions to
shareholders (287,000) (287,000)
-------- -------- -------- -------- --------- --------
Balance, December 31, 1995 820 16,400 138,600 289,145 (16,000) 428,145
Net income (unaudited) 266,154 266,154
-------- -------- -------- -------- --------- --------
Balance, June 30, 1996
(unaudited) 820 $ 16,400 $138,600 $555,299 $ (16,000) $694,299
======== ======== ======== ======== ========= ========
The accompanying notes are an integral part of these financial statements.
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ONE HUNDRED SEVENTY-SECOND COLLINS CORP.
D/B/A RASCAL HOUSE
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------- -------------------------
1995 1994 1996 1995
---- ---- ---- ----
(UNAUDITED)
Cash flows from operating activities:
Net income $35,260 $401,437 $266,154 $180,957
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization of
equipment and leasehold
improvements 45,496 35,685 39,990 22,482
Changes in operating assets and
liabilities:
Inventories 30,012 444 (9,620) 14,588
Prepaid expenses and other
current assets 6,416 1,380 22,576 57,381
Deposits and other assets - - (650) -
Accounts payable, accrued expenses
and sales tax payable 31,591 (88,047) 16,711 (16,148)
------ ------- ------ -------
Net cash provided by operating
activities 148,775 350,899 335,161 259,260
------- ------- ------- -------
Cash flows from investing activities:
Expenditures for equipment and
leasehold improvements (58,567) (12,593) (14,318) (46,301)
------- ------- ------- -------
Net cash used in investing
activities (58,567) (12,593) (14,318) (46,301)
------- ------- ------- -------
Cash flows from financing activities:
Payments on note receivable
from shareholder 4,000 4,000 - 4,000
Distributions to shareholders (287,000) (310,203) - (287,000)
-------- -------- ------- --------
Net cash used in financing
activities (283,000) (306,203) - (283,000)
-------- -------- ------- --------
Net increase (decrease) in cash
and cash equivalents (192,792) 32,103 320,843 (70,041)
Cash and cash equivalents at beginning
of period 790,535 758,432 597,743 790,535
------- ------- ------- -------
Cash and cash equivalents at end of period $597,743 $790,535 $918,586 $720,494
======== ======== ======== ========
The accompanying notes are an integral part of these financial statements.
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ONE HUNDRED SEVENTY-SECOND COLLINS CORP.
D/B/A RASCAL HOUSE
NOTES TO FINANCIAL STATEMENTS
1. Organization and Business:
One Hundred Seventy-Second Collins Corp. d/b/a Rascal House, (the
"Company") was incorporated in the state of Florida and commenced operations on
December 10, 1953. The Company owns and operates the Rascal House restaurant
in Miami Beach, Florida.
2. Summary of Significant Accounting Policies:
Cash and Cash Equivalents
All highly liquid investments with an original maturity of three
months or less from the date of purchase are considered cash equivalents. The
Company currently maintains all of its cash balances with a single financial
institution. At times, these cash balances may be in excess of Federal Deposit
Insurance Corporation insurance limits.
Inventories
Inventories, which consist of food, beverages and supplies, are stated
at the lower of cost (first-in, first-out method) or market.
Equipment and Leasehold Improvements
Equipment and leasehold improvements are stated at cost. Additions,
major renewals and betterments are capitalized, while normal repairs and
maintenance are expensed as incurred. Depreciation is computed using
accelerated or straight-line methods over the estimated useful lives of the
assets ranging from 5-20 years. Leasehold improvements are amortized on a
straight-line basis over the lease terms or estimated useful lives of the
assets, whichever is shorter. When items are sold or otherwise disposed of,
the related costs and accumulated depreciation are removed from the accounts
and any resulting gains or losses are recognized.
Income Taxes
The Company, with the consent of its shareholders, has elected to be
treated as an S-Corporation. Accordingly, the accompanying financial
statements do not reflect a provision for income taxes since each shareholder's
proportional share of the Company's taxable income or loss is reported by each
of the shareholders on their individual income tax returns.
Use of Estimates
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 the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
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ONE HUNDRED SEVENTY-SECOND COLLINS CORP.
D/B/A RASCAL HOUSE
NOTES TO FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies (continued):
New Accounting Pronouncements
For the year ended December 31, 1995, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 107, "Disclosures About Fair Value of
Financial Instruments," which requires disclosure of fair value information
relating to financial instruments, whether or not recognized in the balance
sheet. In the opinion of management, the fair values of the Company's
financial instruments approximate their respective carrying values.
For the year ended December 31, 1995, the Company also adopted
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of,"
which, in general, requires that such impaired assets be written down to a
reduced carrying value. In the opinion of management, no long-lived assets
have impaired values. Accordingly, this standard did not impact the Company's
financial statements.
Unaudited Interim Financial Information
The unaudited balance sheet as of June 30, 1996 and the unaudited
statements of income and cash flows for the six-month periods ended June 30,
1996 and 1995 and the unaudited statement of changes in shareholders' equity
for the six months ended June 30, 1996 (collectively, "interim financial
information"), are unaudited and have been prepared on the same basis as the
audited financial statements included herein. In the opinion of the Company's
management, the interim financial information includes all adjustments,
consisting of only normal recurring adjustments, necessary for a fair statement
of the results of the interim periods.
The results of operations for the six months ended June 30, 1996, may
not be indicative of the operating results to be achieved for the full year or
any other interim period.
3. Restricted Cash:
In accordance with an agreement to waive all bank service charges, a
minimum balance of $189,000 must be maintained in the bank account at all
times. As this amount is not legally restricted, it is included in cash and
cash equivalents in the accompanying financial statements.
4. Note Receivable:
Effective July 1, 1989 the Company sold 20 shares of its common stock
to an employee for an aggregate of $40,000, evidenced by a 9% note which is
payable in annual installments of $4,000, plus interest, through July 1998.
The payment due July 1995 had not yet been received as of December 31, 1995.
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ONE HUNDRED SEVENTY-SECOND COLLINS CORP.
D/B/A RASCAL HOUSE
NOTES TO FINANCIAL STATEMENTS
5. Commitments:
The Company leases its restaurant facilities under the terms of a
noncancelable lease which expires October 31, 1997. The lessor is a
partnership whose partners are, directly or indirectly, shareholders or
relatives of shareholders of the Company. The lease provides for additional
rentals which may result from increases in the Consumer Price Index determined
as of October 31, 1982, and each succeeding five-year period thereafter. The
lease also provides for additional rentals based on a percentage of sales in
excess of stipulated amounts with a specified maximum. The Company is also
required to pay property taxes, insurance and sales tax on the rental payments.
The lease payments are modified annually by agreement with the partnership.
Aggregate minimum base rental payments are scheduled to be approximately
$208,500 for 1996.
The following schedule shows the composition of total rent expense for
the operating lease:
Year Ended December 31,
-----------------------
1995 1994
---- ----
Rent, including sales tax $238,028 $238,028
Property taxes 44,535 45,688
-------- --------
$282,563 $283,716
======== ========
6. Employee Benefit Plan:
The Company has instituted an employee benefit plan (401(k)) which
provides for basic and supplemental employee contributions and requires the
Company to match the employee's basic contribution. The Company is also
required to make an additional contribution for employees based on a percentage
of their compensation in excess of a stipulated amount. The Company
contributed $55,519 and $63,428 to the Plan for the years ended December 31,
1995 and 1994, respectively.
7. Subsequent Event:
On September 9, 1996, the Company completed the sale of certain assets
(inventory and property and equipment) and its operations to Jerry's Famous
Deli, Inc.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro Forma Financial Statements
Pro Forma Consolidated Statements of Operations and Condensed Consolidated
Balance Sheet
These unaudited Pro Forma Consolidated Statements of Operations are
presented as if the purchase of certain assets and restaurant operations from
One Hundred Seventy-Second Collins Corp., d/b/a Rascal House ("172 Corp."), and
the purchase of the land and building from a partnership owned by certain
shareholders and relatives of the shareholders of 172 Corp., collectively
referred to as "Rascal House", had occurred as of January 1, 1995. The
unaudited Pro Forma Condensed Consolidated Balance Sheet is presented as if the
purchase of certain assets had occurred on June 30, 1996. These financial
statements should be read in conjunction with the Consolidated Financial
Statements of Jerry's Famous Deli, Inc. ("JFD") and the Notes thereto, included
in the Company's Form 10-K for the year ended December 31, 1995. In
management's opinion, all adjustments necessary to reflect the purchase of
Rascal House with JFD have been made.
The unaudited Pro Forma Consolidated Statements of Operations are not
necessarily indicative of what the actual results of operations of Jerry's
Famous Deli, Inc. and 172 Corp. would have been had the acquisition actually
occurred as of January 1, 1995, nor do they purport to represent the results of
operations for future periods.
Funding of the purchase of Rascal House came primarily from the sale
of 6,000 shares of Series A Convertible Preferred Stock (annual dividends are
$80 per share, paid quarterly in arrears) and a warrant (exercisable for 65,000
shares of common stock at $1.00 per share) to Yucaipa Waterton Deli Investors,
L.L.C. ("Yucaipa") (see Form 8-K filed September 4, 1996), resulting in net
proceeds of approximately $5,540,000.
Year Ended December 31, 1995 Six Months Ended June 30, 1996
------------------------------------------ ----------------------------------------------
172 Adjust- Pro 172 Adjust- Pro
JFD Corp. ments Forma JFD Corp. ments Forma
-------- -------- ----- -------- --------- --------- ----- --------
(in thousands, except per share data)
Revenues $28,030 $7,775 $ - $35,805 $15,736 $4,255 $ - $19,991
Cost of goods sold 9,168 2,610 - 11,778 4,883 1,434 - 6,317
------- ------ ----- ------- ------- ------ ----- -------
Gross profit 18,862 5,165 - 24,027 10,853 2,821 - 13,674
Operating expenses 13,634 3,590 (238) (a) 16,986 7,499 1,813 (119) (a) 9,193
General and administrative
expenses 2,924 1,536 (413) (b) 4,047 1,853 724 (147) (b) 2,430
Depreciation and
amortization expenses 977 45 198 (c) 1,220 652 40 81 (c) 773
Restaurant concept
discontinuation costs 137 - - 137 - - - -
------- ------ ----- ------- ------- ------ ----- -------
Total expenses 17,672 5,171 (453) 22,390 10,004 2,577 (185) 12,396
------- ------ ----- ------- ------- ------ ----- -------
Income (loss) from operations 1,190 (6) 453 1,637 849 244 185 1,278
Interest income 72 22 - 94 109 16 - 125
Interest expense (182) - - (182) (156) - - (156)
Other income, net 69 19 - 88 14 6 - 20
------- ------ ----- ------- ------- ------ ----- -------
Income before provision for
income taxes and
minority interest 1,149 35 453 1,637 816 266 185 1,267
Provision for income taxes 187 - 194 (d) 381 274 - 180 (d) 454
Minority interest 180 - - 180 131 - - 131
------- ------ ----- ------- ------- ------ ----- -------
Net income $ 782 $ 35 $ 259 $ 1,076 $ 411 $ 266 $ 5 $ 682
======= ====== ===== ======= ======= ====== ===== =======
Pro forma net income
per share $ 0.08 $ 0.10 $ 0.04 $ 0.06
======= ======= ======= =======
Pro forma weighted average
shares outstanding 10,386,250(e) 10,451,250(f) 10,476,241 10,541,241(f)
- ------------------
(a) Base rent expense paid to the partnership which owned the real property,
in the amounts of approximately $238,000 and $119,000 for the twelve
and six months, respectively, has been eliminated as the property has
been purchased by the Company.
(b) Compensation to the prior owners of 172 Corp. in the amounts of
approximately $413,000 and $147,000 for the twelve and six months,
respectively, has been eliminated.
(c) Includes amortization expense of goodwill of $59,000 and $29,000,
amortization expense of the covenant not to compete of $92,000 and
$46,000 and depreciation expense of the assets acquired (building,
building improvements, property and equipment) of $92,000 and $46,000
for the twelve and six months, respectively. Depreciation expense of
$45,000 and $40,000 taken by 172 Corp. for the twelve and six months,
respectively, has been eliminated.
(d) Assumes the provision for income taxes is based on a 40% effective income
tax rate based on adjusted 172 Corp. income.
(e) Based on, as if, 10,386,250 shares of common stock were outstanding for
all of fiscal year 1995. The pro forma shares outstanding include (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) an additional 1,955,000 shares
sold through an initial public offering in October 1995.
(f) Includes 65,000 common shares from the treatment of a warrant as a common
stock equivalent.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro Forma Financial Statements (continued)
Pro Forma Condensed Consolidated Balance Sheet
June 30, 1996
-------------------------------------------------------------
172
JFD Corp. Adjustments Pro Forma
------- ---- ----------- ---------
(in thousands)
ASSETS
Current assets
Cash and cash equivalents $ 1,462 $ - $ 616 (1) $ 2,078
Inventory 178 102 (52) (2) 228
Other current assets 1,168 - (29) (2) 1,139
------- ---- ------- -------
Total current assets 2,808 102 535 3,445
Land and building, net 7,785 - 2,364 (2) 10,149
Building improvements, property and equipment, net 10,222 70 524 (2) 10,816
Covenant not to compete - - 184 (2) 184
Goodwill - - 1,761 (2) 1,761
Solley's acquisition deposit in escrow 2,543 - - 2,543
Other assets 408 - - 408
------- ---- ------- -------
Total assets $23,766 $172 $ 5,368 $29,306
======= ==== ======= =======
LIABILITIES AND EQUITY
Current liabilities $ 2,943 $ - $ - $ 2,943
Long-term debt and other liabilities 7,317 - - 7,317
Minority interest 342 - - 342
Equity:
Preferred stock - - 5,540 (1) 5,540
Common stock 12,665 - - 12,665
Retained earnings 499 - - 499
------- ---- ------- -------
Total liabilities and equity $23,766 $ - $ 5,540 $29,306
======= ==== ======= =======
- ------------------
(1) Records the net increase in cash and cash equivalents as a result of net
proceeds received from the issuance of 6,000 shares of 8% convertible
preferred stock to Yucaipa on August 30, 1996 of approximately
$5,540,000 less the net purchase price of $4,924,000 for the
acquisition of certain assets of Rascal House.
(2) The purchase price of $4,924,000 was allocated to the following: $50,000
to inventory; a $29,000 reduction to prepaid property taxes; $1,064,000
to land; $1,300,000 to building and $594,000 to building improvements,
property and equipment which are depreciated on a straight-line basis
over 30 and 4 years, respectively; $184,000 for a covenant not to
compete, which is amortized on a straight-line basis over 2 years; and
the balance of approximately $1,761,000 to goodwill, which is amortized
on a straight-line basis over 30 years. Other than inventory and land,
building, building improvements, property and equipment, no other
assets were acquired. In addition, no debt or other liabilities were
assumed from 172 Corp. or the related party.
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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 hereunto duly authorized.
JERRY'S FAMOUS DELI, INC.
Date: October 18, 1996 By: /s/ Isaac Starkman
----------------------------------------
Isaac Starkman
Chief Executive Officer and
Chairman of the Board of Directors
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