The Second Cup Ltd. (TSE:SKL) today announced its results for the first quarter ended September 16, 2000. Earnings before interest, taxes, depreciation and amortization (EBITDA) totaled $2.2 million, an 8.8 per cent increase over the prior year's results. Systemwide sales rose by 8.2 per cent to $37.3 million and same store sales decreased slightly by 0.7 per cent. Net earnings for the quarter were unchanged at $1 million, or 11 cents per share reflecting increased interest expense of $225,000 compared with last year. This resulted from the payment of a special dividend of $2 per share carried out on May 31, 2000.

Seven new cafes were opened in the first quarter resulting in Second Cup exceeding the 400 cafe plateau. The Company reduced debt by more than $2.5 million to $10.7 million during the quarter using cash generated from operations and cash reserves.

"Our first quarter results continue to reflect Second Cup's position as Canada's leading specialty coffee retailer," says Alton McEwen, Chief Executive Officer of Second Cup.

The Company remains committed to growth and will place emphasis on building sales, earnings and share value.

"We continue to grow our network of new cafes and expect to open 25 to 30 new cafes during the coming year," says Mr. McEwen.

"We're looking forward to leveraging our strong brand equity and continuing to grow our business as we move forward," he concludes.

The Second Cup Ltd. trades on the Toronto Stock Exchange under the symbol SKL. As the leading specialty coffee company in Canada, Second Cup offers the world's finest coffee through more than 400 owner-operated cafes across the country and select marketing partners including Air Canada, VIA Rail and Delta Hotels.

Consolidated Statements of Operations and Deficit

(unaudited) Twelve (12) weeks ended
(thousands of dollars,
except per share data)

September 16, 2000 September 18, 1999


Systemwide sales $37,384 $34,535
---------- ----------
---------- ----------
Revenue
Franchise revenue $4,355 $4,084
Sales from corporate stores 317 452
Product sales 74 23
---------- ----------
Total revenue $4,746 $4,559
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EBITDA * $2,231 $2,051

Depreciation of capital assets 103 110
Amortization of goodwill 69 69
---------- ----------

Earnings before interest and income
taxes 2,059 1,872

Net interest expense (237) (12)
---------- ----------

Earnings before income taxes 1,822 1,860

Income taxes 832 847
---------- ----------

Net earnings 990 1,013

Deficit, beginning of period (60,657) (42,910)
---------- ----------

Deficit, end of period ($59,667) ($41,897)
---------- ----------
---------- ----------

Weighted average shares outstanding
during the fiscal period 9,360 9,333
---------- ----------
---------- ----------

Earnings per share $0.11 $0.11
---------- ----------
---------- ----------

*EBITDA represents earnings before interest, taxes, depreciation and
amortization.


Consolidated Balance Sheets


(unaudited) September 16, 2000 June 24, 2000
(thousands of dollars)

ASSETS

Current assets
Cash and cash equivalents $ 122 $ 1,446
Accounts receivable 2,254 2,294
Inventories 115 107
Prepaid expenses and sundry assets 330 419
Income taxes receivable 703 1,150
------- ---------
3,524 5,416

Capital assets 1,521 1,768
Deferred financing charges 101 125
Loans to directors and officers 674 674
Investment in Diedrich Coffee, Inc. 1,838 1,838
Future income taxes 295 295
Goodwill, less accumulated amortization 8,380 8,449
$ 16,333 $ 18,565
------- ---------
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LIABILITIES

Current liabilities
Accounts payable and accrued liabilities $ 2,101 $ 2,718
Current portion, long-term debt 3,000 3,000
Deposits 498 687
------- ---------
5,599 6,405

Long-term debt 7,700 10,250
Other deferred liabilities 208 212

SHAREHOLDERS' EQUITY

Share capital 62,493 62,355
Deficit (59,667) (60,657)
------- ---------
2,826 1,698
------- ---------
$ 16,333 $ 18,565
------- ---------
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Consolidated Statements of Cash Flows

(unaudited)
(thousands of dollars) Twelve (12) weeks ended

September 16, 2000 September 18, 1999


Cash provided by (used in)
Operating activities
Net earnings for the fiscal period $990 $1,013
Items not involving cash:
Amortization and depreciation 172 179
Shares reserved for issue to
directors 11 -
Amortization of deferred financing
charges 24 4
------- -------
Cash flow from operations 1,197 1,196
Decrease (increase) in non-cash
working capital items related
to operations (119) 22,561
------- -------
1,078 23,757
------- -------

Investing activities
Purchase of capital assets (171) (122)
Proceeds from disposal of capital assets 315 -
Proceeds from The Great Canadian
Bagel, Ltd. debenture 0 3,495
------- -------
144 3,373
------- -------

Financing activities
Proceeds on issuance of shares 8 367
Repayment of long-term debt (2,550) (6,800)
Other deferred liabilities (4) (2)
------- -------
(2,546) (6,435)
------- -------

Increase (decrease) in cash and cash
equivalents during the period (1,324) 20,695
Cash and cash equivalents, beginning
of period 1,446 822
------- -------
Cash and cash equivalents,
end of period $ 122 $ 21,517
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