FOODARAMA SUPERMARKETS, INC.
303 West Main Street
Freehold, New Jersey 07728
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held April 22, 1994
The Annual Meeting of Shareholders (the "Meeting") of
Foodarama Supermarkets, Inc. (the"Company") will be held at the
offices of the Company, 303 West Main Street, Freehold, New
Jersey,on April 22, 1994 at 10:30 A.M. (local time), for the
following purposes:
1. To elect a Board of four Directors; and
2. To transact such other business as may properly
come before the Meeting and any adjournment
thereof.
The Board of Directors has fixed the close of business on
March 18, 1994 as the record date for determining the
shareholders entitled to notice of and to vote at the Meeting or
any adjournment thereof. A list of shareholders as of the record
date will be available to shareholders at the Meeting.
You are cordially invited to attend the Meeting.
Shareholders who do not expect to be able to attend the Meeting
are requested to fill in, date, sign and return the enclosed
proxy card in the enclosed envelope, which does not require
additional postage if mailed in the United States. This will not
prevent you from voting in person if you can be present at the
Meeting.
By Order of the Board of
Directors,
Freehold, New Jersey
March 26, 1994
Richard J. Saker,
Secretary
<PAGE>
FOODARAMA SUPERMARKETS, INC.
303 West Main Street
Freehold, New Jersey 07728
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
This Proxy Statement and the accompanying form of
proxy are being mailed to shareholders of Foodarama Supermarkets,
Inc. (the "Company") in connection with the solicitation by and
on behalf of the management of the Company of proxies to be voted
at the AnnualMeeting of Shareholders (the"Annual Meeting") to be
held at the offices of the Company, 303 West Main
Street,Freehold, New Jersey, on April 22, 1994, at 10:30 A.M.
(local time) and at all postponements or adjournments thereof.
The Board of Directors of the Company has fixed the
close of business on March 18, 1994 as the record date for the
determination of shareholders entitled to notice of and to vote
at the Annual Meeting or at any adjournments thereof. As of
March 18, 1994, 1,118,150 shares of Common Stock, $1.00 par value
per share, were outstanding. Each issued and outstanding share
of Common Stock of the Company is entitled to one vote.
All shares of Common Stock represented by properly
executed proxies will be voted at the Annual Meeting, unless such
proxies have previously been revoked. Unless otherwise
instructed, the shares of Common Stock represented by such
proxies will be voted "for" the election of management'snominees
for directors. Management does not know of any other matter to
be brought before the Annual Meeting, but it is intended that, as
to any such other matter, votes may be cast pursuant to the
proxies in accordance with the judgment of the person or persons
acting thereunder.
The Company's address is 303 West Main Street,
Freehold, New Jersey 07728 and its telephone number is (908)
462-4700. This notice, proxy statement and enclosed form of
proxy are being mailed to shareholders on or about March 31,
1994.
Any shareholder who executes and delivers a proxy may
revoke it at any time prior to its use by (a) delivering written
notice of such revocation to the Secretary of the Company at its
offices; (b) delivering to the Secretary of the Company a duly
executed proxy bearing a later date; or (c) appearing at the
Annual Meeting and requesting the return of his or her proxy.
YOU ARE REQUESTED TO COMPLETE AND SIGN THE
ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENVELOPE
PROVIDED FOR THAT PURPOSE.
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table shows, as of March 18,1994, the
persons known to the Company who owned directly or beneficially
more than 5% of the outstanding Common Stock of the Company:
Amount
Benefically Percent of
Owned Class
Name of Benefcial Owner
Joseph J. Saker (1)(2)(3). . . . . . . . . . 364,640 3.26
Estate of Mary Saker (1) . . . . . . . . . . 73,296 6.6
Richard J. Saker (1) . . . . . . . . . . . . 67,939 6.1
Dimensional Fund Advisors, Inc. (4). . . . . 60,300 5.4
Southeastern Asset Management, Inc. (5). . . 100,800 9.0
_________________
(1) The address of the foregoing person is c/o Foodarama
Supermarkets, Inc., 303 West Main Street, Freehold, New Jersey 07728.
(2) Includes 18,264 shares held as a trustee for the benefit
of one child, 10,428 shares held by his wife, and 36,648 shares willed to him
by Mary Saker. Does not include an aggregate of 128,703 shares owned by
Richard J. Saker and the other children of Joseph Saker in their own names,
of which Joseph J. Saker disclaims beneficial ownership.
(3) Mary Saker, deceased, was the mother of Joseph J. Saker.
One-half or 36,648 of her shares have been willed to Joseph J. Saker.
(4) The address of Dimensional Fund Advisors, Inc.("Dimensional"), a
registered investment advisor, is 1299 Ocean Avenue, Suite 650, Santa Monica,
California 90401. Based upon a copy of Amendment No. 4 to Schedule 13G signed
on February 9, 1994 and fined with the Securities and Exchange Commission,
Dimensional is deemed to have beneficial ownership of 60,300 shares, all of
which shares are held in portfolios of DFA Investment Dimensions Group Inc.
(the"Fund"), a registered open-end investment company, or the DFA Group Trust,
an investment vehicle for qualified employee benefit plans, both of
which Dimensional serves as investment manager. Dimensional has sole voting
power with respect to 34,400 shares and persons who are officers of
Dimensional also serve as officers of the Fund and in such capacity such
persons vote the remaining 25,900 shares. Dimensional disclaims beneficial
ownership of all such shares.
(5) The address of Southeastern Asset Management, Inc.("SAMI") is 860
Ridgelake Boulevard, Suite 301, Memphis, Tennessee 38120. Based upon a copy
of Amendment No. 5 to Schedule 13G signed on February 11, 1994 and filed
with the Securities and Exchange Commission, SAMI, an investment advisor
registered under Section 203 of the Investment Advisers Act of 1940,
has sole voting and dispositive power with respect to 53,200 shares and
shared voting and dispositive power with respect to 47,600
shares.
<PAGE>
SECURITIES OWNED BY MANAGEMENT
The following table sets forth certain information regarding
beneficial ownership of the Company's Common Stock as of March 18, 1994 by
each director of the Company, the executive officers named in the Summary
Compensation Table who were executive officers of the Company on such date
and the executive officers and directors as a group:
Amount
Beneficially Percent of
Owned Class
Joseph J. Saker (1)(2) . . . . . . . . . 364,640 3.26
Richard J. Saker (1) . . . . . . . . . . 67,939 6.1
Sidney Cohen (1) . . . . . . . . . . . . -- --
John W. Hurley (1) . . . . . . . . . . . 500 *
Arthur M. Borden (1) . . . . . . . . . . 701 *
Joseph C. Troilo (1)(3). . . . . . . . . 1,652 *
Emory Altobelli (1). . . . . . . . . . . -- --
Directors and Executive Officers
as a group (7 persons) (4) . . . . . . 435,432 38.9
_________________
* Less than one percent.
(1) The address of the foregoing person is c/o Foodarama
Supermarkets, Inc., 303 West Main Street, Freehold, New Jersey 07728.
(2) Includes 18,264 shares held as a trustee for the benefit
of one child, 10,428 shares held by his wife, and 36,648 shares willed
to him by Mary Saker. Does not include an aggregate of 128,703 shares
owned by Richard J. Saker and the other children of Joseph Saker
in their own names, of which Mr. Joseph J. Saker disclaims beneficial
ownership.
(3) Does not include an aggregate of 250 shares held by the
wife and son of an officer of the Company, of which shares the officer
disclaims beneficial ownership.
(4) Of the 435,432 shares, 433,780 are owned by the
directors of the Company. Joseph J. Saker has obtained loans in connection
with personal investments and other obligations and has pledged 277,000
shares of the Company's Common Stock beneficially owned by him to secure
such loans. All of such loans were made for varying terms and interest rates
by the respective lenders pursuant to routine promissory notes and
agreements under which the only material event of default consists of
nonpayment of principal or interest when due. Mr. Saker has advised the
Company that the Federal Deposit Insurance Corporation, which succeeded to a
loan of $1,549,500, secured by 129,000 shares of the Company's Common
Stock, has made a demand upon him for payment of the loan. Mr.Saker has
also advised that discussions have been initiated with the FDIC, and that
he is confident the loan will be renewed or the matter otherwise
satisfactorily resolved.
As of February 16, 1993, the Company sold to Wakefern Food
Corporation ("Wakefern") 136,000 shares of 8% Cumulative Convertible
Preferred Stock (the"Preferred Stock") par value of $12.50 per share for
a total of $1,700,000. The Preferred Stock, which is non-voting, is
redeemable at any time in whole or in part at its par value plus accrued and
unpaid dividends, and must be redeemed at such price by June 8, 1999 or
earlier in the event of a "change of control" as defined or other specified
extraordinary event. The dividend rate of the Preferred Stock increases at
the rate of 2% per annum beginning in March, 1996.
<PAGE>
Unpaid dividends are cumulative and compound from the date of issuance of
the Preferred Stock, and no dividends may be paid on the Common Stock unless
the Registrant is current in payment of dividends on the Preferred Stock. As of
October 30, 1993, cumulative dividends on the Preferred Stock that have not
been declared are in arrears to the amount of approximately $97,000.
The Preferred Stock is convertible at any time after March 31, 1996 into
shares of the Common Stock of the Company at the then market value of such
Common Stock at a conversion value of $12.50 per share of Preferred Stock
but with the proviso that no more than 1,381,850 shares (representing the
total of the Company's unissued and treasury shares) may be issued on
conversion of all of the Preferred Stock. If none of the Preferred Stock
has been redeemed prior to March 31, 1996 and if Wakefern were to fully
exercise its right to convert the Preferred Stock on or after such date,
Wakefern could own a maximum of 1,381,850 shares of the Common Stock of the
Company or 55.3% of the voting shares of the Company. Because it is
possible that the Company may not be in a position to redeem the Preferred
Stock prior to the date on which it becomes convertible, the agreement
pursuant to which the Preferred Stock was sold to Wakefern provides that
Messrs. Joseph J. Saker and Richard J.Saker, each a director and executive
officer of the Company, both have an option at any time before an applicable
redemption date to purchase all, but not less than all, of the then
outstanding shares of Preferred Stock at the par value thereof plus accrued
and unpaid dividends. Messrs. Joseph J. Saker and Richard J. Saker have
agreed with the Company that they will not exercise such right except with
the approval of the Board of Directors of the Company and will not convert any
shares of the Preferred Stock so acquired into Common Stock except with the
approval of a majority of the independent directors of the Company. The
Company knows of no other contractual arrangements which may at a
subsequent date result in a change in control of the Company.
NOMINEES AS DIRECTORS OF THE COMPANY
It is intended that the shares of the Company's Common Stock
represented by proxies solicited hereby will be voted for the five nominees
listed below. If for any reason any of the said nominees should be unable
or unwilling to serve, which is not now anticipated, the proxies will be
voted for a substitute nominee who will be designated by the Board of
Directors. The Directors will be elected to hold office until the next annual
meeting and until their respective successors are duly elected and qualifIed.
Year First
Elected a
Name and Age Principal Occupaton Director
Joseph J. Saker (64). . . . . . . Chairman of the Board and 1958
President of the Company
Richard J. Saker (42). . . . . . . Senior Vice President- 1987
Operations, Secretary and
Assistant Treasurer of the
Company
John W. Hurley (68) . . . . . . . Senior Vice-President-TM 1970
Capital Corp
Arthur M. Borden (73). . . . . . Of counsel, Roseman & Colin 1965
Mr. Joseph J. Saker Company since its incorporation in 1958 and Chairman
since 1971. In addition to his responsibilities with the Company, he
serves on the Board of Governors of the Academy of Food Marketing of
St. Joseph's College (Philadelphia); is a member of the Board of Directors of
the New Jersey Food Council and a member of the Board ofDirectors of
Wakefern Food Corporation, and is active in other community affairs.
<PAGE>
Mr. Richard J. Saker, a graduate of St. Joseph's
College, has been employed by the Company since 1969, and has served
as Senior Vice President - Operations since 1984. He is the son of
Joseph J. Saker.
Mr. Hurley has been a Senior Vice President of TM
Capital Corp., investment bankers, since July 1989, and before that he was
for more than five years an officer of Thomson McKinnon Securities, Inc.,
investment bankers.
Mr. Borden has been of counsel to the firm of
Rosenman & Colin since February 1992. He was a partner in Rosenman & Colin
from March 1987 to January 1992 and prior to that and for more than five
years he was a partner in Sage Gray Todd & Sims, both New York City law
firms. Mr. Borden is also a director of ScientifIc Industries, Inc.
engaged in the manufacture of scientific instruments, and Shelter Components
Corporation, a distributor to the manufactured housing and recreational
vehicle industries.
DIRECTORS MEETINGS AND COMMITTEES
The Company held five meetings of its Board of
Directors during the fiscal year ended October 30, 1993.
(Each of Messrs. Joseph J. Saker, Richard J. Saker and Arthur M. Borden did
not attend one meeting of the Board of Directors.)
The Board of Directors of the Company has appointed
Executive, Audit and Stock Option Committees. The Board of Directors
performs the functions of a board compensation committee. The Executive
Committee, which consists of Messrs. Joseph J. Saker and Richard J. Saker,
held weekly meetings. The Audit and Stock Option Committees both consist of
Messrs. Hurley, Borden and Cohen. The Audit Committee is responsible
for recommending a firm of independent auditors for the Company each year
and reviews the results of the annual audit with the auditors. During the
fiscal year ended October 30, 1993, the Audit Committee held seven
meetings and there were no meetings of the Stock Option Committee.
The Company paid Mr. Hurley and Mr. Cohen fees of $800 and
$ 1,400, respectively, for Board and Committee meetings attended during the
fiscal year ended October 30, 1993. Full-time employees of the Company who
also serve as directors of the company do not receive any compensation for
serving on the Board of Directors, nor does Mr. Borden whose firm acts as
counsel to the Company.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are as set forth below:
Name Age Capacities in Which Served
Joseph J. Saker (1). . . . 64 Chairman of the Board and President
Richard J. Saker (1) . . . 42 Senior Vice President - Operations,
Secretary and Assistant Treasurer
Joseph C. Troilo (2) . . . 59 Senior Vice President - Finance,
Assistant Secretary and Treasurer
Emory Altobelli (3). . . . 53 Senior Vice President - Administration
_____________________________
(1) See Directors of the Company.
(2) Mr. Troilo has served as Chief Financial Officer of the
Company since 1974.
<PAGE>
(3) Mr. Altobelli has served as Senior Vice President -Administration
since June 1990. From 1984 to such date, he served as
a Regional Vice-President of Operations of the Company.
EXECUTIVE COMPENSATION
The aggregate compensation paid or accrued by the Company during
the last three fiscal years ended November 2, 1991, October 31, 1992 and
October 30, 1993, to the Chief Executive Officer of the Company and to the
four most highly compensated executive officers (other than the Chief
Executive Officer) whose compensation in salary and bonus exceeded $100,000
in the last fiscal year is set forth in the following table:
Summary Compensation Table
Annual Compensation
Name and Principal Position Year Salary
Joseph J. Saker . . . . . . . . . . . . . . 1993 $154,544
Chairman of the Board, President
1992 159,518
and Chief Executive Officer
1991 147,620
Richard J. Saker. . . . . . . . . . . . . . 1993 132,444
Senior Vice President - Operations,
Secretary and Assistant Treasurer 1992 129,991
1991 125,944
Joseph C. Troilo. . . . . . . . . . . . . 1993 106,188
Senior Vice President - Finance,
Assistant Secretary and Treasurer 1992 102,616
1991 99,429
Emory Altobelli. . . . . . . . . . . . . . 1993 110,377
Senior Vice President - Administration
1992 107,034
1991 104,240
STOCK OPTIONS
The Company has a key employee stock option plan adopted by
the Board of Directors and approved by the shareholders of the Company in
1987 which authorized the grant of options to purchase a maximum of 200,000
shares of the Company's common stock. To date, no options have been granted
under the Plan.
<PAGE>
PENSION PLAN
The Company maintains a defined benefit pension plan for
eligible employees. The retirement benefits of Messrs. Joseph J. Saker,
Richard J. Saker, Joseph C. Troilo, and Emory Altobelli are fully vested.
Full vesting occurs after five years of service. Benefits upon retirement prior
to age 65 are reduced actuarially. Benefits under the plan are determined by a
formula equal to .6% times the highest five consecutive year average of the
regular or base salary of a participant together with bonuses and other
compensation times the total years of service. The following sets forth the
estimated annual benefits payable upon normal retirement at a normal retirement
age of 65 for each of the executive officers named in the Summary Compensation
Table:
Executive Officer Estimated AnnualRetirement Benefit
Under Defined Benefit Pension Plan
Joseph J. Saker . . . . . . . . . . . $40,846
Richard J. Saker. . . . . . . . . . . 38,100
Joseph C. Troilo. . . . . . . . . . . 20,461
Emory Altobelli . . . . . . . . . . . 15,124
The Board of Directors of the Company approved a Deferred
Compensation Plan on January 17, 1989. This Plan covers the four executive
officers (in addition to Sidney Cohen who retired as an officer on
April 25, 1990 and John J. McAteer who retired as an officer on
December 15, 1992) and five other key employees and is intended to
supplement the Company's pension plan. The Company anticipates paying for
benefits as they become due out of current operating income, but expects over
the long term to be recouped out of proceeds of life insurance on the lives
of the beneficiaries purchased by the Company. The current annual premiums
for all employees covered by the Plan are approximately $50,000.
Amounts payable at retirement under the Deferred Compensation
Plan range from 40% to 50% of the employee's highest average salary over a
five-year period less primary Social Security and pension plan benefits,
and are payable each year until death, but for a minimum of ten years.
The Deferred Compensation Plan provides for a
pre-retirement death benefit of one-half the amount payable upon
retirement, actuarially computed, payable to the employee's
beneficiary over 120 months. If the employee dies after
retirement, such employee's beneficiary will receive the same benefit the
employee would have received if the employee had lived for 120
months.
Estimated Annual Retirement Benefit
Executive Officer UnderDeferred Compensation Plan
Joseph J. Saker $ 23,300
Richard J. Saker 103,300
Joseph C. Trolio 26,700
Emory Altobelli 33,100
<PAGE>
COMPLIANCE WITH REPORTING REQUIREMENTS
The Company believes that, during the fiscal year
ended October 30, 1993, all filing requirements under Section
16(a) of the Securities Exchange Act of 1934, as amended, applicable to
its officers, directors and greater than ten percent beneficial
owners were complied with on a timely basis.
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION IN COMPENSATION DECISIONS
For the fiscal year ended October 30, 1993, the
Board of Directors performed the functions of a board
compensation committee. Executive Officers who served on the Board of
Directors were Mr. Joseph J. Saker, Chairman of the Board,
President and Chief Executive Officer, and Mr. Richard J. Saker,
Senior Vice President - Operations, Secretary and Assistant
Treasurer.
COMPENSATION REPORT OF THE BOARD OF DIRECTORS
The Board of Directors has furnished the following
report on executive compensation.
The Board of Directors has acted as a compensation
committee and has annually set the compensation of the Chief
Executive Officer, who in turn has set the compensation of the
other officers of the Company. The independent members of the
Board of Directors have for many years believed that the
compensation of the Chief Executive Officer was substantially
below that for like positions in comparable companies, and suggested
increases during profitable years. The Chief Executive Officer
has, however, been unwilling to accept any increase not in line
with the general salary increase made for the Company's other
salaried personnel, and has generally raised other officers only
in accordance with the same policy. Because such compensation
of the Chief Executive Officer has been considered to be
significantly below an appropriate level for a company of this
size, and the unwillingness of the Chief Executive Officer to accept any
further compensation, the Board of Directors has not given
detailed consideration to any performance based criteria, but,
subject to the business plan presently being developed with the
assistance of financial advisors, intends to create a
compensation committee to review compensation for the ensuing
years, including a review of performance based programs.
Due to increasing competitive pressures impacting
the Company's sales base, a recessionary economic condition,
operating losses on the Company's New York stores, which were
sold on October 18, 1993, a labor strike affecting the Company
and several other retail supermarket operators which occurred in
May of 1993 and continued for a period of three weeks and the
Company's financial performance for the fiscal year ended October
30, 1993, salary increases were limited to four percent. The
Board of Directors believes that the aggregate current salaries
of the Company's executive officers is significantly lower than
the salaries of other executive officers of companies involved in
businesses comparable to the business of the Company.
Board of Directors: Messrs. Joseph J. Saker, Richard
J. Saker, Arthur M. Borden and John W. Hurley.
<PAGE>
PERFORMANCE ANALYSIS
Set forth below is a line graph comparing the
cumulative total return of the Company, the AMEX Market Value
Index and the AMEX Market Value Retail Index for the five years commencing
October 30, 1988 and ended October 30, 1993.
[GRAPH]
CERTAIN TRANSACTIONS
(a) Transactions with Management and Others
As required by the By-Laws of Wakefern, a
retailer-owned food distribution corporation which provides
purchasing, warehousing and distribution services to the Company as well as
other retail supermarket chains, the obligations owed by the
Company to Wakefern are personally guaranteed by Joseph J. Saker
and Richard Saker. As of February 28, 1994, the Company
was indebted to Wakefern in the amount of approximately
$8,927,000 for current charges in the ordinary course of
business. Wakefern presently requires each of its shareholders to invest up
to $400,000 in Wakefern's non-voting capital stock for each store
operated by it, computed in accordance with a formula based on
the volume of such store's purchases from Wakefern.
During the year ended October 30, 1993, the Company
paid T.M. Capital Corp., of which John W. Hurley, a director of
the Company, is a Senior Vice President, $120,000 for investment
and financial advisory services. Pursuant to a financial
advisory service agreement entered into on June 11, 1993 by the Company
and T.M. Capital Corp., which is terminable by either party at
any time, the Company is providing a payment of $20,000 per month
to T.M. Capital Corp.
(b) Certain Business Relationships
The Company leases from Joseph J. Saker, the
President of the Company, and his wife, doing business as Saker
Enterprises, a 56,000 square foot supermarket in Freehold, New Jersey, under a
lease terminating in 2003. The Company also leases from Saker
Enterprises a 5,400 square foot garden center building and 5,000
square feet of yard area under a lease expiring on December 31,
1993 and a 9,000 square feet of space for its liquor store
effective September 1992, under a lease expiring December 31,
2003, both of which are located in the same shopping center as the
supermarket. During the fiscal year ended October 31, 1992,
aggregate amounts for rent (including taxes and insurance) of $468,970,
$40,134 and $105,688 were paid by the Company to Saker
Enterprises for the supermarket, garden center and liquor store,
respectively.
In addition, the Company subleases to ESCI Corp., a
corporation in which Sidney Cohen, a former director of the
Company, is a 50% shareholder, approximately 4,900 square feet of space at
its supermarket located at Sayreville, New Jersey. The sublease
provides for an annual rent of $53,000 to be increased every four
years. The sublease term expires on November 30, 1999. ESCI
Corp. operates a liquor store in the subleased space. ESCI Corp.
is indebted to the Company in the amount of approximately
$140,000 as of February 28, 1994, representing monies advanced by
the Company for fixtures and equipment installed in the liquor
store and other charges for rent, etc. The Company is charging
interest at the rate of 10% per annum on the outstanding balance.
<PAGE>
In connection with the sublease with ESCI Corp., the Company has
a right of first refusal to purchase the assets and related license.
The Company has been advised by the Executive
Committee, of which Joseph J. Saker is the Chairman, that the
terms of the foregoing transactions are comparable to those available for
non-affiliated persons in the respective localities.
See "Securities Owned by Management" for information
with respect to the sale of Preferred Stock to Wakefern Food
Corporation and certain options granted to Joseph J. Saker and
Richard J. Saker with respect thereto.
(c) Indebtedness of Management
Joseph J. Saker, President of the Company doing
business as Saker Enterprises is indebted to the Company for
advances made for construction on the South Freehold shopping center in
the amount of $198,499. Interest at 7-1/2% per annum is charged
on these advances.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The firm of Deloitte & Touche, Independent CertifIed
Public Accountants, was retained as auditors to the Company for
the year ended October 30, 1993, as recommended by the Audit
Committee. A representative of Deloitte & Touche will be present
at the meeting to make a statement, if desired, and to respond to
appropriate questions.
ANNUAL REPORT
The Company's Annual Report to shareholders for the
fiscal year ended October 30, 1993, including financial statements,
which Annual Report is not part of this proxy solicitation material,
is being mailed to shareholders with the proxy solicitation. On
written request, the Company will provide without charge to each
record or beneficial holder of the Company's Common Stock, a
copy of the Company's Annual Report on Form 10-K as filed with
the Securities and Exchange Commission for the fiscal year ended
October 30, 1993. Requests should be addressed to Mr. Joseph C.
Troilo, Senior Vice President-Finance, Foodarama Supermarkets,
Inc., 303 West Main Street, Freehold, New Jersey 07728.
OTHER BUSINESS
Management of the Company does not intend to bring
before the Annual Meeting any matters except the election of
Directors. Management is not aware at this time of any other
matters to be presented for action. If however, any other
matters properly come before the Annual Meeting, the persons named on the
proxy intend to vote in accordance with their judgment on the
matters presented.
PROXY SOLICITATION
The cost of solicitation of proxies will be borne by
the Company. Such solicitation will be made by mail and may also
be made by the Company's directors, officers, or regular employees
personally or by telephone or telegraph. Brokerage houses,
nominees, fiduciaries and other custodians will be requested to
forward soliciting materials to beneficial owners of shares and
will be reimbursed by the Company for their reasonable expenses.
The Company does not expect to pay any compensation to third parties
for the solicitation of proxies, unless such solicitation has
been requested by the Company.
<PAGE>
SHAREHOLDER PROPOSALS
A shareholder of the Company who wishes to present a
proposal for action at the Company's 1995 annual meeting of
shareholders must submit such proposal to the Company and such
proposal must be received by the company by November 26, 1994.
By Order of the Board of
Directors,
Freehold, New Jersey
March 26, 1994
[Signature]
Richard J. Saker,
Secretary
<PAGE>
THE COMPANY
Operating 21 supermarkets in two states, Foodarama
Supermarkets, Inc. is a member of the ShopRite group. Nineteen
Foodarama stores are located in New Jersey and two in Pennsylvania.
In addition, the Company operates two liquor stores and two
garden centers. The Company also operates meat and bakery
commissaries.
Foodarama stores offer shoppers a wide assortment of
food and non-food items, in modern, attractive stores with ample
parking immediately adjacent. Chief products sold include
groceries, meat, poultry, produce, dairy products, fresh fruits
and vegetables, bakery products, frozen foods, delicatessen and
appetizer goods. Non-foods include health and beauty aids and
housewares. Stores stock nationally advertised brands as well as
products sold under the ShopRite label.
ROSTER OF STORES
NEW JERSEY Franklin Pistcataway
Aberdeen(Matawan) Freehold Sayerville
Belmar Hazlet(Keyport) West Long Branch
Bricktown Highstown Woodbridge
Brielle Kingstown
East Brunswick Lakewood PENNSYLVANIA
Edison Middletown Bethlehem Township
Edison (Oak Tree Road) Neptune Whitehall
STOCK PRICE AND DIVIDEND INFORMATION
The Common Stock of Foodarama Supermarkets, Inc. is
traded on the American Stock Exchange under the ticket symbol "FSM."
High and low stock prices were as follows:
Fiscal Quarter Ended High Low
February 1, 1992 . . . . . . . . . . 17-1/2 14-1/2
May 2, 1992. . . . . . . . . . . . . 18-1/8 14-3/4
August 1, 1992 . . . . . . . . . . . 18-1/4 16-1/2
October 31,1992. . . . . . . . . . . 17-3/4 15-3/8
January 30, 1993 . . . . . . . . . . 16-7/8 15
May 1, 1993. . . . . . . . . . . . . 15-3/4 14-3/4
July 30,1993 . . . . . . . . . . . . 15-1/8 14-1/2
October 30,1993. . . . . . . . . . . 15-3/8 14-1/4
No dividends have been declared or paid since October 1979.
<PAGE>
5 YEAR SUMMARY OF OPERATIONS
Fiscal Years Ended
October 30, October 31, November 2, November 3, October 28,
1993 1992 1991 1990(a) 1989
(000's omitted except per share data)
Sales. . . . $ 670,180 $ 695,157 $ 695,306 $ 673,124 $ 571,269
Cost of sales. . 510,276 519,193 523,575 507,929 433,278
Gross profit . . 159,904 175,964 171,731 165,195 137,991
Operating expenses. 167,482 167,860 165,173 156,450 130,999
Interest, net. . . . 6,479 6,876 7,363 7,017 5,017
Gain on sale of store 11,199 -- -- -- --
162,762 174,736 172,536 163,467 136,016
(Loss) income before
income taxes. . . . (2,858) 1,228 (805) 1,728 1,975
Income taxes (benefit)
provision . . . . . (893) 516 (252) 680 825
Net (loss) income $(1,965) $ 712 $ 553 1,048 1,150
(Loss) earnings per
common share. . . $ (1.84) $ .64 $ (.49) $ (.94) $ 1.01
Weighted average
number of common
shares outstanding 1,118,150 1,118,150 1,118,308 1,130,313 1,136,579
<PAGE>
DIRECTORS GENERAL COUNSEL
Joseph J. Saker Rosenaman & Colin
Chairman of the Board and President 575 Madison Avenue
New York, N.Y. 10022
Richard J. Saker
Senior Vice President AUDITORS
Foodarama Supermarkets, Inc.
Deloitte & Touche
Arthur M. Borden Two Hilton Court
Of Counsel Parsippany, N.J. 07054
Rosenman & Colin, Attorneys
Sidney Cohen TRANSFER AGENT AND REGISTRAR
John W. Hurley American Stock Transfer Company
Senior Vice President, 99 Wall Street
TM Capital Corp., New York, N.Y. 10005
Investment Bankers
Member, Audit and Stock Option Committees CORPORATE OFFICES
303 West Main Street
Freehold, N.J. 07728
(908) 462-4700
EXECUTIVE OFFICERS
Joseph J. Saker The Company is relocating its offices
Chairman of the Board and President on or about May 15, 1994 to:
922 Highway 33
Richard J. Saker Building 6, Suite 1
Senior Vice President Operations, Freehold, N.J. 07728
Secretary and Assistant Treasurer
Joseph C. Trolio FORM 10-K REPORT
Senior Vice President Finance,
Treasurer and Assistant Secretary A copy of the Company's Form 10-k
Annual Report, as filed with the
Securities and Exchange Commission,
Emory Altobelli is available to shareholders without
Senior Vice President charge upon written request to
Mr. Joseph C. Trolio, Senior Vice
President, Foodarama Supermarkets,
Inc., P.O. Box 592, Freehold, New
Jersey 07728
<PAGE>
PRESIDENT'S MESSAGE
Dear Shareholder:
Fiscal 1993 was a disappointing year for our
Company. Sales declined to $670,180,000 from $695,157,000
in fiscal 1992 and the Company incurred a net loss of $1,965,000,
only the fourth loss in the Company's history. This loss compares to net
income of $712,000 for fiscal 1992. The loss was after a $11,199,000
pretax gain on the sale of the five stores which constituted our New York
division.
I am pleased to report that after losses in the
last two quarters of fiscal 1993, the first quarter of fiscal
1994 provided evidence of the ability of your Company to be
profitable. Sales for the quarter were $157,491,000
compared with sales from the same period of the prior year of
$172,719,000, including sales from the divested New
York stores of $23,337,000. Sales increased by 5.1%, including
the new Neptune store and excluding the five divested New York stores.
Net income for the first quarter was $40,000 versus $121,000 in the
prior year period.
As of the end of the fiscal year, as well as
currently, Foodarama was operating twenty-one supermarkets,
two garden centers and two commissaries. A new World Class store
was opened on September 23, 1993 in Neptune, New Jersey, replacing an
older facility. This 100,000 square foot store has been recognized by our
industry as being on the leading edge of design and customer
service and has been well received by our customers.
A significant contributor to our Company's loss
last year was the strike of the New Jersey Clerk's Union in May 1993. We
estimate that the strike resulted in lost sales of approximately
$14,000,000. Gross profits declined by approximately $7,300,000, partially
as a result of the strike and a general reduction in gross profit levels
following the strike and additional direct operating expenses of
$500,000. In spite of the severe impact of the strike,we believe that our
new labor agreement benefits the Company by providing for more stable and
predictable future labor costs.
Our Company also has been positioned better for the
future through the sale of the five New York stores on October 18, 1993.
These stores, which generated sales of $85,361,000 in fiscal 1993 versus
sales of $88,223,000 in fiscal 1992, also contributed to the Company's
loss last year. We estimate that the gross profits
from the New York stores were adversely impacted by approximately
$1,500,000 during the long process of concluding a sale. Nevertheless, the
sale of these stores will enable the Company to focus its management and
financial resources on its key New Jersey and Pennsylvania
markets and also contributed $10,500,000 to the
$21,000,000 net reduction in our outstanding indebtedness which
we were able to effect during the year. This reduction in debt will permit
a substantial reduction in interest expense for the coming year.
As a result of the difficulties experienced over
the past year, Foodarama, as previously announced, is in default of several
covenants under its credit agreements, although all required payments of
interest and principal have been made in a timely manner. Management has
retained the services of an independent financial advisor to
assist in the preparation of a business plan. In addition to
serving as the basis for negotiating amended loan
agreements, this plan will serve as a guidepost for the future.
The ShopRite cooperative, operating as Wakefern
Food Corporation, continues to assist its members to respond to an i
ncreasingly competitive marketplace. We are attracting loyal ShopRite
customers through the popular "Price Plus Club," which provides our
customers with an opportunity to share in manufacturer's promotions. In
addition, Wakefern has responded to the need for more effective
and faster information and communication through the development and
installation of new computer systems in 1993. We already have seen the
benefits of these new systems in electronic funds transfers, benefits
transfers and computer generated ordering.
We want to take this opportunity to thank Mr.
Sidney Cohen, who is retiring as a Director of our Company, for his many
years of loyal and dedicated service as an officer and Director.
<PAGE>
As always, we also extend our appreciation to our
stockholders, vendors and employees for their continued loyalty and support.
A special thank you is extended to our customers who make Foodarama ShopRite
Supermarkets part of their daily life.
[Signed] [Signed]
Joseph J. Saker Richard J. Saker
President and Senior Vice President
Chief Executive Officer Chief Operating Officer
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
As of October 30, 1993, the Company was not in
compliance with several covenants under its credit
agreements at least in part because of the strike that occurred
during the third quarter and continued to negatively
impact the Company during the fourth quarter. Due to the
covenant violations, as of October 30, 1993, the
Company has classifIed its debt to these lenders totaling $34.4
million as a current liability. (See Notes 2 and 7
to Notes to Consolidated Financial Statements--Going Concern
Matters and Long Term Debt, respectively.) The
Company is currently pursuing a forbearance agreement with its
senior lenders. The Company also has retained
an independent financial advisor to assist in the preparation of
a business plan which is anticipated to form the basis
for the negotiation of amended credit agreements with such
lenders.
The Company has made all required principal and
interest payments under such credit agreements. The
Company anticipates that all future payments can be made,
including principal payments of $2.5 million on June
1, 1994 and $4.3 million on October 31, 1994, although no such
assurances can be made. The Company is
pursuing actions to increase operating cash flow through
inventory and expense reductions and to provide positive
cash flow from investing activities through limitations on
capital expenditures and the sale of certain operating and
non-operating assets.
The Company is carrying an outstanding balance with
its cooperative supplier, Wakefern Food Corporation,
for products and services. Wakefern continues to provide
products and services to the Company as usual. Pursuant
to the by-laws of the cooperative, the Company has incurred
service fees at the rate of 1% per week on the
outstanding balance since July 17, 1993. Such fees, which
aggregated approximately $581,000 through October
30, 1993 and an additional $700,000 from that date to February
12, 1994, are anticipated to continue at least
through the second quarter of fiscal year 1994.
The ability of the Company to continue as a going
concern is dependent on its ability to successfully
implement the plans and actions described above with regard to
improving its cash flow. Due to the uncertainties
associated with these plans, there can be no assurances that the
Company will achieve its goals nor is there any
assurance that the Company will be able to negotiate a
forbearance agreement or amended credit agreements with
its lenders. The Company believes that such programs will be
implemented successfully and that sufficient cash
flow will be generated to meet its obligations as they become
due.
On February 16, 1993, in order partially to fund
capital expenditures made in fiscal 1992 and also to induce
the senior lenders to amend the loan agreements as aforesaid, the
Company sold to Wakefern Food Corporation
136,000 shares of a duly authorized Class A 8% Cumulative
Convertible Preferred Stock (the "Preferred Stock")
par value $12.50 per share, for $1.7 million, the aggregate par
value of such shares. The Preferred Stock bears
a preferential cumulative dividend at the rate of 8% per annum
for three years, increasing at the rate of 2% per annum each 12 months
thereafter.
<PAGE>
Unpaid dividends are cumulative and compound from the date of
issuance of the Preferred Stock, and no dividends may be paid on the Common
Stock unless the Company is current in payment
of dividends on the Preferred Stock. The Preferred Stock is
redeemable by the Company in whole or in part at any
time and must be redeemed by the earlier of (i) June 8, 1999,
(II) consummation of a sale of all or substantially
all of the Company's assets or upon the entering into of the
first of a related series of transactions for the purpose
of selling all or substantially all of the Company's assets,
(iii) the changing of shares of the common stock of the
Company into, or the exchange of such shares for, the securities
of any other corporation, or (iv) a "Change of
Control" (as such term is defined in Article Fifth of the
Company's Certificate of Incorporation) of its equity voting
securities by way of merger, consolidation or otherwise. The
Preferred Stock is convertible at any time after March
31, 1996 into shares of the common stock of the Company at the
then market value of such shares at a conversion
value of $12.50 per share of Preferred Stock but with the proviso
that no more than 1,381,850 shares (representing
the total of the Company's unissued and treasury shares) may be
issued on conversion of all of the Preferred Stock.
The amendment to the loan agreements provides that dividends can
be paid and shares repurchased (or redeemed)
only out of 25% of net income for the most recently completed
fiscal year, and then only if certain financial
covenants are met. As of October 30, 1993, there was no
availability under these provisions. It is, however, the
Company's intention to redeem the Preferred Stock prior to March
31, 1996.
No cash dividends have been paid since 1979, and
the Company has no present intentions or ability to pay
any dividends in the near future.
Working Capital
As a result of several covenant violations at
October 30, 1993, $34.4 millIon of total debt due to senior
lenders has been classifIed as a current liability thereby
creating a working capital deficiency of $29.8 millIon. The
regular scheduled repayment to these lenders is $2.5 million for
fiscal 1994.
At October 31, 1992, working capital was $13.1
million compared to $16.8 million at November 2, 1991
with ratios of 1.29 to 1 and 1.47 to 1, respectively.
Cash flows (in millions) were as follows:
Fiscal Year Fiscal Year Fiscal Year
1993 1992 1991
Operating activities . . . . $8.6 $14.5 $14.3
Investing activities . . . . 7.2 (10.6) (7.1)
Financing activities . . . (19.4) (3.1) (4.7)
Total. . . . . . . . . . . ($3.6) $ 0.8 $ 2.5
Fiscal 1993 capital expenditures totaled $9.3
million with depreciation of $10.3 million compared to $10.6
million and $10.4 million for fiscal 1992 and compared to $7.1
million and $11.1 million for fiscal 1991.
During fiscal 1993, the Company paid down $23.1
million of its debt of which $10.5 million represented
proceeds from the sale of its New York stores, and borrowed $2
million on other debt. In fiscal 1992, $7.1 million
was paid while $4 million was borrowed. In fiscal 1991, $5.1
million was paid and $7 million borrowed. The
Company has no available lines of credit.
<PAGE>
RESULTS OF OPERATIONS
Sales:
Sales of 26 stores open during all periods totaled
$670.2 million in fiscal 1993, $689.1 million in fiscal
1992 and $678.3 million in fiscal 1991. The Company sold its
five stores in Long Island, New York on October
18, 1993 and their sales are reflected in stores open for all
periods. One store was closed on March 29, 1992.
A strike by the New Jersey retail clerks union
affected fifteen stores in May 1993. New Jersey store sales
totaled $527 million, $541 million and $543 million for the
respective three fiscal years. New York store sales were
$85 million (50 weeks), $88 million and $89 million for the
respective three fiscal years. Sales growth in fiscal
1992 was affected by general deflation in food prices and the
opening of warehouse club stores in competitive
market areas.
Fiscal Years Ended
10/30/93 10/31/92 11/2/91
(in millions)
Stores open all periods. . . $670.2 $689.1 $678.3
Stores closed. . . . . . . . - 6.1 17.0
Total. . . . . . . . . . . . $670.2 $695.2 $695.3
Gross Profit:
Fiscal 1993 was severely impacted by the New Jersey
retail clerks union strike in May 1993 which changed
consumer buying habits coupled with an increase in shrinkage.
Additionally, the delayed closing on the sale of the
New York stores finalized on October 18, 1993 instead of August
31, 1993, as expected, caused a further decline
in gross profits of approximately $1.5 million.
Gross profit totaled $159.9 million in fiscal 1993
compared to $176.0 million in fiscal 1992 and $171.7
million in fiscal 1991. Gross profit in fiscal 1992 increased to
25.3% from 24.7% in fiscal 1991. In spite of sales
being essentially flat, the Company was able to improve its gross
profit in fiscal 1992 by 0.6% of sales produced
by higher margins in several departments and tighter controls on
shrinkage.
Fiscal Years Ended
(in millions)
10/30/93 10/31/92 11/2/91
Gross profit . . . . . . $159.9 $176.0 $171.7
Gross margin . . . . . . 23.9% 25.3% 24.7%
Operating Expenses:
Fiscal 1993 expenses totaled $167.5 million
compared to $167.9 million in fiscal 1992 and $165.2 million
in fiscal 1991. Fringe benefits increased $2.0 million and
advertising costs rose $1.0 million in fiscal 1992 versus
fiscal 1991 in comparable stores.
<PAGE>
Fiscal Years Ended
10/30/93 10/31/92 11/2/91
(in millions)
Sales. . . . . . . $670.2 $695.2 $695.3
Operating Expenses . 167.5 167.9 165.2
% of sales . . . . . 25.0% 24.2% 23.8%
Non-recurring items included in fiscal 1993
expenses include a reserve for future rent payments on three
closed properties and the write-off of equipment in closed stores
totaling $900,000, a bad debt reserve and write
down of real estate joint ventures of $600,000 and strike costs
of $500,000.
Also included in fiscal 1993, is a customer claims
reserve of $700,000 and pre-opening costs of
$1,100,000.
In fiscal 1992, a customer claims reserve of
$600,000 was included and pre-opening costs totaled $400,000
which costs were $1,100,000 and $160,000, respectively, in fiscal
1991.
Interest Expense:
Interest expense totaled $6.7 million in fiscal
1993 compared to $7.4 million in fiscal 1992 and $8.1 million
in fiscal 1991. The decrease in fiscal 1993 and 1992 resulted
from an overall reduction in debt levels coupled with
lower rates on the Company's bank credit facility. Interest
income was $0.2 million in fiscal 1993 compared to $0.5
million in fiscal 1992 and $0.8 million in fiscal 1991.
Income Taxes:
Fiscal 1993 resulted in a tax benefit of $0.9
million due to a change in deferred taxes which more than
offsets alternative minimum tax expense versus $0.5 million tax
expense in fiscal 1992 as a result of the Federal
alternative minimum tax while fiscal 1991 resulted in a tax
benefit of $0.3. (See Note 13 of Notes to Consolidated
Financial Statements for fiscal 1993 regarding unused tax credits
and net operating loss carry forwards available).
The Financial Accounting Standards Board issued SFAS No. 109
(which supersedes Statement No. 96), "Accounting
for Income Taxes," which requires the Company to change its
method of accounting for income taxes. The
Company has not elected to adopt this statement early which is
not required until fiscal 1994. The Company has
not yet determined the effect or method of adoption.
Net Income:
Fiscal 1993 produced a net loss of $1,965,000 or
$(1.84) per share after preferred stock dividend
requirements, based on 1,118,150 shares outstanding compared to
net income of $712,000 or $.64 per share based
on 1,118,150 shares outstanding for fiscal 1992 and a net loss of
$553,000 or $.49 per share based on 1,118,308
shares outstanding for fiscal 1991.
The strike by the retail clerks union in May 1993,
affecting 15 of the Company's New Jersey stores, took
its toll on lost sales and gross profits and added additional
costs as noted in discussions above. The Company's two
Pennsylvania stores were also adversely affected by reason of
media coverage of the strike.
The Company sold its five store New York division
on October 18, 1993, which generated a net profit of
$11,199,000 or $ 10.01 per share. Due to the prolonged closing
process, the division suffered excessive operating
losses estimated at $ 1.5 million in the quarter ended October
30, 1993.
<PAGE>
CONSOLIDATED BALANCE SHEETS
October 30, 1993 and October 31, 1992
1993 1992
ASSETS
Current Assets:
Cash and cash equivalents. . . . . . . . . . $ 4,765,000 $ 8,348,000
Merchandise inventories. . . . . . . . . . . 33,983,000 39,584,000
Subscription receivable - mandatory redeemable
preferred stock . . . . . . . . . . . . . . . -- 1,700,000
Receivables and other current assets . . . . . 8,624,000 8,771,000
Total current assets . . . . . . . . . 47,372,000 58,403,000
Property and equipment:
Land . . . . . . . . . . . . . . . . . . . . . 1,762,000 2,170,000
Buildings and improvements . . . . . . . . . . 2,132,000 2,132,000
Leaseholds and leasehold improvements. . . . . 31,732,000 28,344,000
Equipment. . . . . . . . . . . . . . . . . . . 48,042,000 58,125,000
Property and equipment under capital leases. . 18,508,000 21,053,000
102,176,000 111,824,000
Less accumulated depreciation and amortization. 39,474,000 44,145,000
62,702,000 67,679,000
Other assets:
Investments in related parties . . . . . . . . 8,626,000 9,971,000
Intangibles. . . . . . . . . . . . . . . . . . 8,145,000 10,020,000
Other. . . . . . . . . . . . . . . . . . . . . 4,457,000 6,420,000
21,228,000 26,411,000
$131,302,000 $152,493,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt. . . . . . . . . $ 2,523,000 $ 6,937,000
Current portion of long-term debt, related party. . . . 204,000 716,000
Long-term obligations in default classified as current. 34,415,000 --
Current portion of obligations under capital leases. . 1,245,000 1,540,000
Current income taxes payable . . . . . . . . . . . . . . 546,000 500,000
<PAGE>
Accounts payable:
Related party. . . . . . . . . . . . . . . . . . . . 16,638,000 11,767,000
Others . . . . . . . . . . . . . . . . . . . . . . 12,112,000 12,809,000
Accrued expenses and other . . . . . . . . . . . . . 9,463,000 10,965,000
Total current liabilities. . . . . . . . . . . . . 77,146,000 45,234,000
Long-term debt . . . . . . . . . . . . . . . . . . . 3,587,000 51,297,000
Long-term debt, related party. . . . . . . . . . . . . 176,000 1,021,000
Obligations under capital leases . . . . . . . . . . . 9,669,000 11,201,000
Deferred income taxes. . . . . . . . . . . . . . . . . 4,921,000 6,547,000
Other long-term liabilities. . . . . . . . . . . . . . 3,921,000 3,346,000
Mandatory redeemable preferred stock,
$12.50 par; authorized 1,000,000 shares
136,000 shares issued, 1993. . . . . . . . . . . . 1,700,000 1,700,000
Shareholders' equity:
Common stock, $1.00 par; authorized 2,500,000
shares; issued 1,621,627 shares 1993 and 1992 . . . . 1,622,000 1,622,000
Capital in excess of par . . . . . . . . . . . . . . . 2,351,000 2,351,000
Retained earnings. . . . . . . . . . . . . . . . . . 32,831,000 34,796,000
36,804,000 38,769,000
Less 503,477 shares, 1993 and 1992 held in
treasury, at cost . . . . . . . . . . . . . . . . . 6,622,000 6,622,000
30,182,000 32,147,000
$131,302,000 $152,493,000
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
Fiscal Years Ended October 30, 1993, October 31, 1992 and
November 2, 1991
1993 1992 1991
Sales . . . . . . . . . $670,180,000 $695,157,000 $695,306,000
Cost of sales. . . . . . . . 510,276,000 519,193,000 523,575,000
Gross profit. . . . . . . 159,904,000 175,964,000 171,731,000
Operating expenses . . . . . . 167,482,000 167,860,000 165,173,000
(Loss) income from operations. (7,578,000) 8,104,000 6,558,000
Other (income) expense:. . . .
Gain on the sale of stores . (11,199,000) ----
Interest expense . . . . . . . 6,698,000 7,368,000 8,137,000
Interest income. . . . . . . . (219,000) (492,000) (774,000)
(4,720,000) 6,876,000 7,363,000
(Loss) income before taxes . . . (2,858,000) 1,228,000 (805,000)
Income tax (benefit) provision . (893,000) 516,000 (252,000)
Net (loss) income. . . . . . . . $(1,965,000) $ 712,000 $ (553,000)
(Loss) earnings per common share $(1.84) $.64 $(.49)
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Fiscal Years Ended October 30, 1993, October 31, 1992 and
November 2, 1991
Capital in
Common stock excess of Retained Treasury Stock
Shares Amount par earnings Shares Amount
Balance,
November 3, 1990 1,621,627 1,622,000 2,351,000 34,637,000 501,052 6,568,000
Net loss . . . -- -- -- (553,000) -- --
Purchase of
treasury stock -- -- -- 2,425 54,000
Balance,
November 2, 1991 1,621,627 1,622,000 2,351,000 34,084,000 503,477 6,622,000
Net income . . . -- -- -- 712,000 -- --
Balance,
October 31, 1992 1,621,627 1,622,000 2,351,000 34,796,000 503,477 6,622,000
Net loss . . . . -- -- -- (1,965,000) -- --
Issuance of 136,000 shares
of preferred stock -- -- -- -- -- --
Balance,
October 30, 1993 1,621,627 1,622,000 2,351,000 32,831,000 503,477 6,622,000
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal Years Ended October 30, 1993, October 31, 1992 and
November 2, 1991
1993 1992 1991
Cash flows from operating activities:
Net income (loss). . . . . . . . . $(1,965,000) $ 712,000 $ (553,000)
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization of
property and equipment. . . . . . 10,251,000 10,370,000 11,082,000
Amortization, other . . . . . . . 3,443,000 2,751,000 2,428,000
Gain on store divestitures. . . .(11,199,000) -- --
Deferred income taxes . . . . . .(1,647,000) 16,000 1,055,000
Loss on disposal of store
property and equipment. . . 667,000 111,000 400,000
Changes in assets and liabilities:
Decrease (increase) in inventories 5,601,000 (2,244,000) (3,074,000)
Decrease (increase) in
receivables and other 147,000 (1,053,000) (837,000)
Decrease (increase) in other assets 332,000 (3,638,000) 791,000
Increase (decrease) in
accounts payable. . . . 4,174,000 6,819,000 2,197,000
Increase income taxes payable. . . 42,000 500,000 --
(Increase) decrease in other
liabilities . . .(927,000) 750,000 820,000
Other . . . . . . . . . . . . . . .(362,000) (574,000) (43,000)
Net cash provided by
operating activities. . . . 8,557,000 14,520,000 14,266,000
Cash flows from investing activities:
Net proceeds from the sale of stores . 14,827,000 -- --
Purchase of property and equipment . . (9,260,000) (10,579,000) (7,056,000)
Proceeds from store investment program 1,699,000 -- --
Net cash provided by (used in)
investing activities. . 7,266,000 (10,579,000) (7,056,000)
Cash flows from financing activities:
Issuance of redeemable preferred stock 1,700,000 -- --
Payment of equipment liability . . . . -- -- (7,578,000)
Demand note, related party . . . . . . -- -- 1,000,000
Proceeds from issuance of debt . . . . 2,000,000 3,998,000 7,000,000
Principal payments under
long-term debt. . . . . . (21,278,000) (5,030,000) (2,988,000)
<PAGE>
Principal payments under capital
lease obligations . . . . (1,828,000) (2,100,000) (2,081,000)
Purchase of treasury stock . . . . . -- -- (54,000)
Net cash used in financing activities (19,406,000) (3,132,000) (4,701,000)
Net increase (decrease) in cash
and cash equivalents . . . (3,583,000) 809,000 2,509,000
Cash and cash equivalents,
beginning of year . . . . . 8,348,000 7,539,000 5,030,000
Cash and cash equivalents, end of year $ 4,765,000 $ 8,348,000 $ 7,539,000
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest. . . . . . . . . . . . . . . $ 6,963,000 $ 7,532,000 $ 8,129,000
Income taxes. . . . . . . . . . . . . . . 600,000 -- --
Cash received from tax refund. . . . . . -- 547,000 --
Supplemental disclosures of noncash investing and financing
activities:
Long-term debt issued for acquisition of
equipment and investment in related party $ 264,000 $ 997,000 $ 400,000
Mandatory redeemable preferred
stock subscribed. . . . . -- 1,700,000 --
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of significant accounting policies
Fiscal year
The Company's fiscal year ends on the Saturday
nearest to October 31. Fiscal 1993, 1992 and 1991 consist
of the 52 weeks ended October 30, 1993, October 31, 1992 and
November 2, 1991, respectively.
Principles of consolidation
The consolidated financial statements include the
accounts of the Company and its subsidiaries. All
significant intercompany accounts and transactions have been
eliminated. The Company operates in a single line
of business, the operation of retail grocery stores.
Reclassifications
Certain reclassifications have been made to the
fiscal 1992 and 1991 amounts to conform with the fiscal
1993 classification.
<PAGE>
Cash equivalents
The Company considers all highly liquid debt
instruments purchased with a maturity of three months or
less to be cash equivalents.
Merchandise inventories
Merchandise inventories are stated at the lower of
cost (first-in, first-out) or market with cost being
determined by applying cost percentages to inventories taken at
retail prices.
Property and equipment
Property and equipment is stated at cost and is
depreciated on the straight-line method over the estimated
useful lives for financial reporting and on accelerated methods
for tax reporting. Property and equipment under
capital leases are recorded at the lower of fair market value or
the net present value of the minimum lease payments.
Amortization of the leased property is generally computed using
the straight-line method over the term of the lease.
The useful life of leaseholds and leasehold improvements are
amortized over the term of the lease or the life of the
improvement, whichever is shorter.
Investments
The Company's investment in its principal supplier,
Wakefern Food Corporation ("Wakefern"), is stated
at cost (see Note 5). The Company uses the equity method of
accounting for its interests in real estate partnerships.
Goodwill
Goodwill resulted partly from acquisitions prior to
November 1, 1970 which were accounted for as
purchases. To the extent that there is continuing value, the
Company is not amortizing this excess cost. The
balance of goodwill resulted from the acquisition of assets
during fiscal 1989, and is amortized on a straight-line
basis over periods from 15 to 32 years.
Favorable operating leases
This amount is amortized over the remaining terms
of the related leases over periods from 14 to 32 years.
Covenant not to compete
This amount is amortized on a straight-line basis
over the contractual life of the agreements of 5-1/2 years.
Income taxes
Deferred income taxes are determined using the
liability method in accordance with Statement of Financial
Accounting Standards No. 96, "Accounting for Income Taxes."
Preopening costs
Costs associated with the opening of new stores are
amortized over a period of twelve month commencing
one month after the opening of the store.
Store closing costs
The costs, net of amounts expected to be recovered,
are expensed when a decision to close a store is made.
<PAGE>
2. Going concern matters
The accompanying financial statements have been
prepared on a going concern basis, which contemplates
the realization of assets and liabilities in the normal course of
business. As shown in the financial statements, the
Company incurred a net loss of $1,965,000 which was partially a
result of the effects of the union labor strike,
operating losses on the New York stores and the recessionary
economic conditions. As of October 30, 1993, the
Company was not in compliance with several covenants under its
loan agreements. Due to the covenant violations
as described in Note 7, as of October 30, 1993, the Company has
classified its debt to these lenders totaling
$34,415,000 as a current liabilIty. The Company is currently
pursuing a standstill and forbearance agreement with
its senior lenders. The Company also has retained an independent
financial advisor to assist in the preparation of
a business plan which is anticipated to form the basis for the
negotiation of amended loan agreements.
The Company has made all required principal and
interest payments under such loan agreements.
Management anticipates that all future payments can be made,
including principal payments of $2,523,000 on June
1, 1994 and $4,250,000 on October 31, 1994 (fiscal 1995),
although no such assurances can be made. The
Company is pursuing actions to increase operating cash flow
through inventory and expense reductions and to
provide positive cash flows from investing activities through
limitations on capital expenditures and the sale of
certain operating and non-productive assets.
The Company is carrying an outstanding balance with
its cooperative supplier, Wakefern Food Corporation,
for products and services. Pursuant to the by-laws of the
cooperative, the Company has incurred service fees at
the rate of 1% per week on the outstanding balance since July 17,
1993. Such fees, which adversely impact the
Company's cash flow and operating results, are anticipated to
continue at least through the second quarter of fiscal
1994. Total service fees paid from July 17, 1993 through
February 12, 1994 totaled $1,300,000. Wakefern
continues to provide products and services as usual.
The Company's ability to continue as a going
concern is dependent on its ability to successfully implement
the plans and actions described above with regard to improving
its cash flow. Due to the uncertainties associated
with these plans, there can be no assurances that the Company
will achieve its goals nor is there any assurance that
the Company will be able to negotiate a forbearance agreement or
amended credit agreement with its lenders.
Management of the Company believes that such programs will be
implemented successfully and that sufficient cash
flow will be generated to meet its obligations as they come due.
These factors among others may indicate that the
Company will be unable to continue as a going concern for a
reasonable period of time. The financial statements
do not include any adjustments relating to the recoverability and
the classification of recorded asset amounts or the
amounts and classification of liabilities that might be necessary
should the Company be unable to continue as a going
concern.
3. Store divestitures
On October 18, 1993, the Company sold certain
assets of its five operating Long Island, New York stores
to the Grand Union Company for approximately $16,000,000 plus
inventory merchandise for approximately
$2,200,000.
This sale provided $14,827,000 of net proceeds and
resulted in a gain of $11,199,000, after deducting
estimated N.Y. State Transfer Tax of $561,000 and transaction
expenses of $712,000. The net book value of the
assets sold was approximately $3,628,000.
Concurrent with this transaction, the Company
repaid approximately $10,500,000 to its senior lenders and
approximately $650,000 to pay off equipment leases. Subsequent
payments were also made for professional fees,
severance payments and trade vendors aggregating approximately
$2,300,000.
<PAGE>
Total net sales for these five stores for fiscal
1993, 1992 and 1991 were $85,000,000 (50 weeks),
$88,000,000 and $89,000,000, respectively. The Company incurred
operating losses related to these stores for
fiscal years 1993, 1992 and 1991 of $3,859,000, $1,139,000 and
$688,000, respectively.
The Company utilized $1,699,000 in proceeds from
the Store Investment Program with Wakefern (as
described in Note 5) to pay off the outstanding indebtedness
related to the remaining stores' unfunded investment.
4. Mandatory redeemable preferred stock
As of October 31, 1992, the Company recorded a
Preferred Stock Subscription Receivable in other current
assets for $1,700,000 from Wakefern. On February 16, 1993, the
Company received $1,700,000 of cash proceeds
for the Preferred Stock issuance of 136,000 shares at par value
$12.50 per share to Wakefern. These securities
were issued partially to fund capital expenditures made in fiscal
1992 and to induce the senior lenders to enter into
the amended loan agreements referred to in Note 7 below.
Dividends on the Preferred Stock are cumulative,
accrue at an annual rate of 8% for the first three years
and increase by 2% per year thereafter until redeemed, and are
payable when and as declared by the Company's
board of directors. As of October 30, 1993, cumulative dividends
on preferred shares that have not been declared
are in arrears to the amount of approximately $97,000. The
Preferred Stock is redeemable on June 8, 1999, and
is subject to mandatory earlier redemption on the occurrence of
certain events, including a change of control, as
defined, of the Company.
The Preferred Stock is convertible at any time
after March 31, 1996 into shares of the common stock of
the Company at the then market value of such common stock at a
conversion value of $12.50 per share of Preferred
Stock. The maximum number of common shares which can be issued
upon conversion is 1,381,850 shares
(representing the sum of all of the Company's unissued and
treasury shares).
The loan agreement amendments referred to in Note 7
provide that dividends can be paid and shares
repurchased or redeemed only out of 25% of net income for the
most recently completed fiscal year, and then only
if certain financial covenants are met. Dividends can only be
paid on the common stock if the Company is then
current with all preferred stock dividend payments. As of
October 30, 1993 there was no availability under these
provisions.
5. Related party transactions
Investment in Wakefern Food Corporation:
The Company has approximately 15% investment in
Wakefern of $7,838,000 at October 30, 1993 and
$9,448,000 at October 31, 1992. Wakefern is operated on a
cooperative basis for its stockholder members who
are owners of ShopRite supermarkets. The investment is
collateral for any obligations due Wakefern. In addition,
the obligations to Wakefern are personally guaranteed by
principal officers/shareholders of the Company.
The Company may be required from time to time to
increase its investment in Wakefern. The Company
also has an investment in another Company affiliated with
Wakefern which was $788,000 at October 30, 1993 and
$523,000 at October 31, 1992.
In September 1987, the Company entered into an
agreement with Wakefern and all other stockholders of
Wakefern, which provides for certain commitments and restrictions
on all member-stockholders of Wakefern through
the year 2000. Under the agreement, each stockholder, including
the Company, agreed to purchase at least 85%
of its merchandise in certain defined product categories from
Wakefern and, if it fails to meet such requirements,
to make payments to Wakefern based on a formula designed to
compensate Wakefern for the profit loss. Similar
payments are due if Wakefern loses volume by reason of the sale
of all of a stockholder's stores, its merger with
<PAGE>
another entity or on the sale of an individual store. Purchases
from Wakefern for all periods presented
approximated 85% of total purchases.
As required by Wakefern's by-laws, all members of
the cooperative are required to make an investment
in the common stock of Wakefern for each supermarket owned
("Store Investment Program"), with the exact amount
per store computed in accordance with a formula based on the
volume of each store's purchases from Wakefern.
The maximum required investment per store was $400,000 at October
30, 1993.
As a member of Wakefern, the Company is entitled to
a share of an annual Wakefern patronage dividend
calculated after the close of Wakefern's fiscal year ending on
the Saturday closest to September 30, as the result
of the distribution of all operating profits to its members on a
pro rata basis based on the actual member purchases
from each merchandising division. It is the Company's policy to
accrue quarterly an estimate of the annual
patronage dividend. The Company reflects the patronage dividend
as a reduction of the cost of sales in the
consolidated income statement. For fiscal 1993, 1992 and 1991,
the patronage dividends were $8,047,000,
$6,923,000 and $7,259,000, respectively. At October 30, 1993 and
October 31, 1992, the Company has receivables
due from Wakefern for approximately $4,139,000 and $1,938,000,
respectively, representing vendor rebates,
coupons and other receivables in the ordinary course of business
which have been included in accounts receivable
and other noncurrent assets.
In addition to its investment in Wakefern, which
carries only voting rights, the Company's President also
serves as a member of Wakefern's Board of Directors and its
finance committee. Several of the Company's officers
and employees also hold positions on various Wakefern committees.
Loans due from related parties:
The Company has amounts recorded as receivables
from related parties that include current and former
shareholders, officers and real estate partnerships. The amounts
are not due based upon any specified dates and
do not bear interest. The Company's management has classified
these loans based upon expected payment dates.
At October 30, 1993 and October 31, 1992, $498,000 and $634,000,
respectively, were included in receivables;
$717,000 and $815,000, respectively, were included in other
noncurrent assets.
6. Intangible assets
Intangible assets consist of the following:
October 30, October 31,
1993 1992
Goodwill . . . . . . . $ 4,298,000 $ 4,609,000
Covenant not to compete. . . 5,951,000 5,951,000
Favorable operating leases . . 4,685,000 4,685,000
14,934,000 15,245,000
Less accumulated amortization 6,789,000 5,225,000
$ 8,145,000 $ 10,020,000
<PAGE>
7. Long-term debt
Debt consists of the following:
October 30, October 31,
1993 1992
Senior notes payable (a)(e). . . . $19,195,000 $28,520,000
Notes payable, banks (b)(e). . . . 15,957,000 24,000,000
Notes and mortgages payable (c). . 3,760,000 2,961,000
Notes payable, covenant not
to compete (d) . . 1,613,000 2,753,000
40,525,000 8,234,000
Less current portion . . . . . . . 36,938,000 6,937,000
$ 3,587,000 $ 51,297,000
____________________________
(a) In June 1989, the Company entered into
a note purchase agreement with several institutions providing for
the purchase of $31,000,000 of the Company's (11.90% at issuance; 12.40% at
October 30, 1993) senior secured notes (the "Senior Note Agreement").
These notes are secured by the capital stock of the Company's
subsidiaries. The amount outstanding is payable in varying
annual installments that commenced in 1992 and ends in June 1, 1999.
(b) In March 1989, the Company entered
into a long-term credit agreement with a syndicate of banks
for commitments totaling $65,000,000 to be used for the acquisition of
stores and to fund the Company's capital expansion program.
The interest rate on this bank debt is .75% over prime (7.250% at October 31,
1993). The Credit Agreement provides for a staged reduction of the
commitment through 1996. The Company has agreed to pay a commitment fee
of 1/2 of 1 percent per annum, payable quarterly, on the commitment.
The bank commitment was reduced by the $31,000,000 borrowing under the Senior
Note Agreement.
(c) Property and equipment which cost
approximately $7,500,000, is pledged as collateral for certain
notes and mortgages. These notes have interest rates ranging from prime
to 9.53%. The due dates range from December 1994 to October 2000.
(d) On April 15, 1989, in connection with
the acquisition of four supermarkets, the Company issued notes in exchange
for agreements not to compete. The notes are payable over a 5-1/2 year period
from the date of issuance in varying monthly installments through
March 1995 including interest imputed at 11% per annum.
(e) As of October 30, 1993, the Company
was in violation of certain financial covenants of these loan
agreements. Due to the covenant violations, the Company has classifed
the entire outstanding balance under these loan agreements as
a current liability which is callable by the lenders. In addition, the
Company is required to pay an additional 0.5% of interest per annum during the
period in which these defaults exist. Should the senior lenders exercise
their right to call this debt, management of the Company does
not believe it could internally generate funds sufficient to pay the entire
amount of this debt (see footnote 2 "Going Concern Matters"). Regardless of
the non-compliance with the financial covenants, as of October 30, 1993,
the Company has made every scheduled payment of principal and interest.
<PAGE>
Aggregate maturities of long-term debt are as follows:
Fiscal Year
1994. . . . . . . . . . . . . . . . . . . . . . . . . $36,938,000
1995. . . . . . . . . . . . . . . . . . . . . . . . . 1,230,000
1996. . . . . . . . . . . . . . . . . . . . . . . . . . 594,000
1997. . . . . . . . . . . . . . . . .. . . . . . . . . . 636,000
1998. . . . . . . . . . . . . . . . .. . . . . . . . . . 678,000
Thereafter. . . . . . . . . . . . . .. . . . . . . . . . 449,000
8. Long-term debt, related party
The Company is indebted to a Wakefern affiliate,
principally related to an Investment Program. The notes
are payable as follows:
Fiscal Year
1994. . . . . . . . . . . . . . . . . . . . . . . . . . $204,000
1995. . . . . . . . . . . . . . . . . . . . . . . . . . 88,000
1996. . . . . . . . . . . . . . . . . . . . . . . . . . 88,000
9. Long-term leases
Capital leases:
Property and equipment under capital leases consist of:
October 30, October 31,
1993 1992
Real estate . . . . . . . . . . . . $ 9,649,000 $ 9,649,000
Fixtures and equipment. . . . . . . 8,859,000 11,404,000
18,508,000 21,053,000
Less accumulated amortization . . . 8,984,000 9,470,000
$ 9,524,000 $11,583,000
The following is a schedule by year of future minimum lease
payments under capital leases, together with the present value of the net
minimum lease payments, as of October 30, 1993:
Fiscal Year
1994. . . . . . . . . . . . . . . . . . . . . . . . . $2,316,000
1995. . . . . . . . . . . . . . . . . . . . . . . . . 1,780,000
1996. . . . . . . . . . . . . . . . .. . . . . . . . . 1,657,000
1997. . . . . . . . . . . . . . . . .. . . . . . . . . 1,324,000
1998. . . . . . . . . . . . . . . . . . . . . . . . . 1,239,000
Thereafter. . . . . . . . . . . . . .. . . . . . . . . 10,781,000
Total minimum lease payments. . . . .. . . . . . . . . 19,097,000
Less amount representing interest . . . . . . . . . . 8,183,000
Present value of net minimum lease payments . . . . . $10,914,000
Included in the above are two leases on stores, one
of which is being leased from a partnership in which
the Company has a 40% limited partnership interest at an annual
rental of $480,000.
<PAGE>
Description of operating leasing arrangements:
The Company is obligated under operating leases for
rent payments expiring at various dates through 2018.
Certain leases provide for the payment of additional rentals
based on certain escalation clauses. Under the majority
of the leases, the Company has the option to renew for additional
terms at specified rentals.
Rental expense:
Total rental expenses for all operating leases consist of:
Fiscal Fiscal Fiscal
1993 1992 1991
Land and buildings. . . . . . $ 9,799,000 $ 8,622,000 $ 7,920,000
Less subleases. . . . . . . . 1,188,000 1,256,000 930,000
$ 8,611,000 $ 7,366,000 $ 6,990,000
Operating leases:
The minimum rental commitments under all noncancellable operating leases
reduced by income from noncancellable subleases at October 30, 1993 are as
follows:
Income from
Fiscal Land and noncancellable Net rental
Year buildings subleases commitment
1994. . . . $ 9,718,000 $ 2,156,000 $ 7,562,000
1995. . . . 9,656,000 2,198,000 7,458,000
1996. . . . 10,084,000 2,291,000 7,793,000
1997. . . . 9,867,000 2,217,000 7,650,000
1998. . . . 9,581,000 1,813,000 7,768,000
Thereafter. 108,188,000 2,592,000 105,596,000
$ 157,094,000 $ 13,267,000 $ 143,827,000
The Company is presently leasing one of its Supermarkets,
a garden center and liquor store from the President and Chairman of the
oard at an annual aggregate rental of approximately $539,000.
10. Accrued expenses and other
Accrued expenses and other consist of the following:
October 30, October 31,
1993 1992
Payroll . . . . . . . . . . . . . $3,449,000 $2,055,000
Interest. . . . . . . . . . . . . 1,327,000 1,592,000
Other . . . . . . . . . . . . . . 4,687,000 7,318,000
$9,463,000 $10,965,000
<PAGE>
11. Employee benefit plans
Defined Benefit plans:
The Company sponsors two defined benefit pension plans
covering administrative personnel and members of
one union. Employees covered under the administrative pension
benefit plan earn benefits based upon percentages
of annual compensation and may make voluntary contributions to
the plan. Employees covered under the union
pension benefit plan earn benefits based on a fixed amount for
each year of service. The Company's funding policy
is to pay at least the minimum contribution required by the
Employee Retirement Income Security Act of 1974.
The plans' assets consist primarily of publicly traded stocks and
fixed income securities.
Net pension expense for the two plans include the
following components:
Fiscal Fiscal Fiscal
1993 1992 1991
Service cost-benefits earned
during the period. . . . $306,000 $264,000 $248,000
Interest cost on projected
benefit obligation . . . 400,000 332,000 306,000
Actual return on
plan assets. . . . . . (127,000) (380,000) (321,000)
Net amortization and
deferral . . . . . . (197,000) 118,000 112,000
Net pension expense . . . . $382,000 $334,000 $345,000
The following table sets forth the two pension plan's
funded status and amounts recognized in the Company's
consolidated financial statements at October 30, 1993 and October
31, 1992.
Actuarial present value of benefit obligations:
Fiscal Fiscal
1993 1992
Accumulated benefit obligations
including vested benefits of
$4,417,052 in 1993 and
$3,819,000 in 1992 . . . . . . $4,529,000 $3,913,000
Projected benefit obligations . $(5,504,000) $(4,743,000)
Plan assets at fair value . . . 4,473,000 4,371,000
Projected benefit obligations in
excess of plan assets. . . (1,031,000) (372,000)
Adjustment required to recognize
minimum liability. . . . . (638,000) (37,000)
Unrecognized transition asset . . (73,000) (85,000)
Unrecognized gain from
prior experience . . . . 1,685,000 925,000
(Accrued) prepaid pension cost. .$ (57,000) $ 431,000
The discount rates used in determining the actuarial present value
of the projected benefit obligation ranged from 6.5% to 7%. The expected
long-term rates of return on plan assets ranged from 6.5% to 7%. The rates
of increase in future compensation levels ranged from 4.0% to 4.5%.
<PAGE>
Multi-employer plan:
Health, welfare and retirement expense was approximately
$7,058,000 in fiscal 1993, $7,514,000 in fiscal 1992
and $7,809,000 in fiscal 1991 under plans covering union
employees which plans are administered through the
unions involved. The Company could, under certain circumstances,
be obligated for unfunded vested retirement
benefits of these union plans.
401(k) savings plan:
The Company sponsors an employee savings plan 401(k) for
all non-union employees. Contributions to the
plan are in the form of employee salary deferrals.
Deferred compensation agreements:
The Company provides certain current and former officers
with supplemental income payments and limited
medical benefits during retirement. The Company recorded an
estimate of future compensation payments to be
made over the officers' anticipated period of active employment
which amounted to $461,000 and $442,000 at
October 30, 1993 and October 31, 1992, respectively. The Company
purchased life insurance to partially fund this
obligation. The postretirement medical benefits are accounted
for on a cash basis. In return, these officers agreed
to certain non-compete arrangements and to provide continued
service availability for consulting services after
retirement.
Other postretirement benefits:
In December 1990, the Financial Accounting Standards
Board issued Statement of Financial Accounting
Standards, No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" ("SFAS No. 106").
This new statement requires an accrual of postretirement benefits
(such as health benefits) during the years an
employee provides services. The Company offers limited
postretirement health care benefits to certain corporate
employees only. The cost of these benefits are currently
expensed on a pay-as-you-go basis by the Company. The
Company is required to adopt this statement in fiscal year 1994.
Management has not yet determined the cost of
existing benefits. The Company does not believe that the
adoption of SFAS No. 106 will have a material effect on
its financial position.
12. Stock options
In April 1987, the Company's shareholders approved a
stock option plan which provides for the granting of
options to purchase 200,000 common shares until 1994, exercisable
over a period of five years at prices not less
than market value at the date of grant. At October 30, 1993, no
options had been granted under this plan.
<PAGE>
13. Income taxes
The provision for income taxes consists of the following:
Fiscal Fiscal Fiscal
1993 1992 1991
Federal:
Current. . . . . . $ 354,000 $ 500,000 $ (1,079,000)
Deferred . . . . . . (1,448,000) (35,700) 864,000
State and local:
Current. . . . . 400,000 -- (228,000)
Deferred . . . . . . (199,000) 51,700 191,000
$ (893,000) $ 516,000 $ (252,000)
Deferred income taxes arise from temporary differences
between the tax basis of assets and liabilities and their reported amounts
in the financial statements. A summary of the components of deferred
income tax expense is as follows:
Fiscal Fiscal Fiscal
1993 1992 1991
Excess of tax over
book depreciation. . . $ 250,000 $ 1,080,000 $ 1,671,000
Allowance for bad debts (253,000) 255,000 (174,000)
Capital leases. . . . (240,000) (167,000) (199,000)
Difference in basis of
assets sold. . . . . . (271,000)
Sale-leasebacks . . . . 86,000 102,000 108,000
Accrued expenses. . . (414,000) (301,000) (3,000)
Reduction of deferred
income taxes attributable
to net operating loss
carry forward . . . . (449,000) (431,000) --
Alternative minimum tax
credit carry forward. . (354,000) (500,000) --
Other . . . . . . . . . (2,000) (22,000) (348,000)
$ (1,647,000) $ 16,000 $ 1,055,000
The following tabulations reconcile the federal statutory
tax rate to the effective rate:
Fiscal Fiscal Fiscal
1993 1992 1991
Tax (benefit) at
the statutory rate . . . . (34.0)% 34.0% (34.0)%
State and local income taxes
(benefit), net of federal
income tax. . . . . . . . . . -- 6.0 (6.0)
Goodwill amortization not
deductible for tax purposes . 1.4 3.7 5.8
Other . . . . . . . . . . . 1.4 2.9
Actual tax expense (benefit) (31.2)% 42.0% (31.3)%
<PAGE>
Because the Company incurred net operating losses for
fiscal 1993, the current federal tax provision for fiscal
year 1993 results from alternative minimum tax ("AMT") related to
the enactment of the Tax Reform Act of 1986. AMT is calculated separately
from the regular Federal Income Tax and is based on a flat rate applied
to a broad tax base. At October 30, 1993, the Company has unused tax
credits which may provide future regular federal tax benefits consisting of
AMT credits of $818,000 which can be carried forward indefinitely.
At October 30, 1993, the Company has unused regular tax
net operating loss carryforwards ("NOLs") of approximately $7,100,000
available to reduce future regular taxable income which expire as follows:
Fiscal
Year
2006. . . . . . . . . . . . . . . . . . . . . . . . $5,400,000
2007. . . . . . . . . . . . . . . . . . . . . . . . 1,700,000
For financial statement purposes, the deferred tax liability has
been offset against available NOLs and would be reinstated to the extent
that the Company is in a regular tax paying position and utilizes such NOLs.
The Financial Accounting Standards Board issued SFAS No.
109 (which supersedes statement No. 96), "Accounting for Income Taxes,"
which requires the Company to change its method of accounting for income taxes.
The Company has not elected to adopt this statement early which is not
required until fiscal 1994. The Company has not yet determined the effect
or method of adoption.
14. Commitments and contingencies
Legal proceedings:
The Company is involved in certain legal actions and
claims arising in the ordinary course of business. Management believes
that the outcome of any such litigation and claims will not have a material
adverse impact on the Company's financial position.
Guarantees:
The Company remains contingently liable under leases
assumed by third parties in the event of nonperformance
by these assignees. As of October 30, 1993, the minimum annual
rental under these leases amounted to approximately $900,000, expiring at
various dates through 2004. The Company has not experienced and does not
anticipate any material nonperformance by these assignees.
In connection with the sale of one of its stores in a
prior fiscal year, the Company has guaranteed a $2,000,000 loan to Wakefern.
The Company has also guaranteed a $2,600,000 debt of one of its real estate
partnerships.
15. Earnings (loss) per share
The computation of earnings per share is based on the
weighted average number of common shares outstanding during each year (
1,118,150 shares in 1993 and 1992 and 1,118,308 shares in 1991) and
mandatory preferred stock dividend requirements of $97,000 in fiscal 1993.
Fully diluted net loss per share has not been presented since the
amount is antidilutive.
<PAGE>
16. Unaudited summarized consolidated quarterly
information
Summarized quarterly information for the years ended
October 30, 1993 and October 31, 1992 is as follows:
Thirteen Weeks Ended
January 30, May 1, July 31, October 30,
1993 1993 1993 1993
(Dollars in thousands, except per share data)
Sales. . . . . . . . . $172,719 $169,002 $167,679 $160,780
Gross profit . . . . . 43,214 41,188 38,427 37,075
Net income (loss). . . 121 290 (3,671) 1,295
Mandatory preferred stock
dividend requirement. . --- (29) (34) (34)
Earnings (loss) available to
common stock. . . . . . 121 261 (3,705) 1,261
Earnings (loss) available per
common share
.11 .23 (3.31) 1.13
During the third quarter, the net loss was primarily
attributable to a 22 day strike by the retail clerks union which
significantly reduced sales volume and margins at fifteen store locations.
In addition, the Company incurred approximately $500,000 in non-recurring
operating expenses for strike costs such as additional security, advertising,
temporary workers, and overtime.
In the fourth quarter, net income was attributable to the
net gain of $11,199,000 related to the sale of New York stores. This gain
was partially offset by the lingering effects of the strike, and
non-recurring losses for a reserve for future rent payments and the
write-off of equipment related to closed store locations totaling
approximately $900,000 and a bad debt reserve and write-down of
investments in real estate joint ventures of approximately $600,000.
Thirteen weeks Ended
February 1, May 2, August 1, October 31,
1992 1992 1992 1992
(Dollars in thousands, except per share data)
Sales. . . . . . $ 177,489 $171,749 $176,493 $169,426
Gross profit . . 43,275 45,453 44,417 42,819
Net income (loss). 367 460 368 (483)
Earnings (loss) per common
share . . . . . . .33 .41 .33 (.43)
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
of Foodarama Supermarkets, Inc.
Freehold, New Jersey
We have audited the accompanying consolidated
balance sheets of Foodarama Supermarkets, Inc. and subsidiaries as of
October 30, 1993 and October 31, 1992, and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of
the three fiscal years in the period ended October 30, 1993. 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, such consolidated financial statements present
fairly, in all material respects, the financial position of Foodarama
Supermarkets, Inc. and subsidiaries as of October 30, 1993 and October 31,
1992, and the results of their operations and their cash flows for each of the
three fiscal years in the period ended October 30, 1993 in conformity with
generally accepted accounting principles.
The accompanying fiscal 1993 financial statements
have been prepared assuming that the Company will continue as a going
concern. As discussed in Note 2 to the financial statements, conditions
exist which raise substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are also described
in Note 2. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
[Signed Deloitte & Touche]
Parsippany, New Jersey
February 22, 1994
