UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the Quarterly period ended February 1, 1997
Commission file number 1-5745-1
FOODARAMA SUPERMARKETS, INC.
(Exact name of registrant as specified in its charter)
New Jersey 21-0717108
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
922 Highway 33, Freehold, N.J. 07728
(Address of principal executive offices)
Telephone #908-462-4700
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 12 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
and (2) has been subject to the filing requirements for at least
the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the close of the latest practicable
date.
OUTSTANDING AT
CLASS March 12,1997
Common Stock 1,117,150 shares
$1 par value<PAGE>
FOODARAMA SUPERMARKETS, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Consolidated Balance Sheets
February 1, 1997 and November 2, 1996
Unaudited Consolidated Statements of
Operations for the thirteen weeks ended
February 1, 1997 and January 27, 1996
Unaudited Consolidated Statements of
Cash Flows for the thirteen weeks ended
February 1, 1997 and January 27, 1996
Notes to the Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Certain information included in this report and other Registrant filings
(collectively, "SEC filings") under the Securities Act of 1933, as amended, and
the Securities Exchange Act of 1934, as amended (as well as information
communicated orally or in writing between the dates of such SEC filings) contain
or may contain forward-looking information that is (i) based upon assumptions
which, if changed, could produce significantly different results; or (ii)
subject to certain risks, trends and uncertainties that could cause actual
results to differ materially from expected results. Among these risks, trends
and uncertainties are matters related to national and local economic
conditions, the effect of certain governmental regulations and programs on
the Registrant and competitive conditions in the marketplace in which the
Registrant operates. The forward-looking statements are made as of the date
of this Form 10-Q and the Registrant assumes no obligation to update the
forward-looking statements or to update the reasons actual results could
differ from those projected in such forward-looking statements.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operation."
PART I FINANCIAL INFORMATION
FOODARAMA SUPERMARKETS, INC AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands)
February 1, November 2,
1997 1996
(Unaudited) (1)
ASSETS
Current assets:
Cash and cash equivalents $ 3,797 $ 3,114
Merchandise inventories 32,696 31,654
Receivables and other current assets 3,899 2,731
Prepaid income taxes 915 974
Related party receivables - Wakefern 3,109 6,032
Related party receivables - other 811 1,259
Total current assets 45,227 45,764
Property and equipment:
Land 1,650 1,650
Buildings and improvements 1,867 1,867
Leaseholds and leasehold improvements 33,028 33,238
Equipment 54,965 55,805
Property and equipment under capital leases 19,674 19,674
111,184 112,234
Less accumulated depreciation and
amortization 53,765 53,498
57,419 58,736
Other assets:
Investments in related parties 9,215 9,215
Intangibles 5,381 5,475
Other 2,644 3,730
Related party receivables - Wakefern 1,055 1,029
Related party receivables - other 84 232
18,379 19,681
$ 121,025 $124,181
(continued)
(1) Derived from the Audited Consolidated Financial Statements for the year
ended November 2, 1996.
See accompanying notes to consolidated financial statements.
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands except share data)
February 1, November 2,
1997 1996
(Unaudited) (1)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 5,486 $ 5,182
Current portion of long-term debt,
related party 52 52
Current portion of obligations under
capital leases 200 67
Deferred income tax liability 1,261 1,261
Accounts payable:
Related party 26,162 23,850
Others 4,472 5,100
Accrued expenses 7,720 7,196
Total current liabilities 45,353 42,708
Long-term debt 21,213 26,852
Long-term debt, related party 744 757
Obligations under capital leases 13,522 13,634
Deferred income taxes 2,886 2,886
Other long-term liabilities 5,157 5,329
Total long-term liabilities 43,522 49,458
Mandatory redeemable preferred stock
$12.50 par; authorized
1,000,000 shares; issued and outstanding
136,000 shares 1,700 1,700
Shareholders' equity:
Common stock, $1.00 par; authorized
2,500,000 shares; issued 1,621,627
shares 1,622 1,622
Capital in excess of par 2,351 2,351
Retained earnings 33,106 32,964
37,079 36,937
Less 504,477 shares February 1, 1997;
503,477 shares November 2, 1996, held
in treasury, at cost 6,629 6,622
Total shareholders' equity 30,450 30,315
$ 121,025 $ 124,181
(1) Derived from the Audited Consolidated Financial Statements for the year
ended November 2, 1996. See accompanying notes to consolidated financial
statements.
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations - Unaudited
(in thousands - except per share data)
13 Weeks Ended
February 1, January 27,
1997 1996
Sales $ 163,356 $ 146,303
Cost of merchandise sold 122,768 109,763
Gross profit 40,588 36,540
Store operating, general and
administrative expenses 39,246 34,889
Income from operations 1,342 1,651
Other (expense) income:
Interest expense (1,077) (882)
Interest income 29 19
(1,048) (863)
Income before taxes 294 788
Income tax provision 118 292
Net income $ 176 $ 496
Per share information:
Net income per common share $ .13 $ .41
Weighted average number of common
shares outstanding 1,117,150 1,118,150
Dividends per common share -0- -0-
See accompanying notes to consolidated financial statements.
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows - Unaudited
(in thousands)
13 Weeks Ended
Feb. 1,1997 Jan. 27,1996
Cash flows from operating activities:
Net income $ 176 $ 496
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 2,019 2,049
Amortization, intangibles 94 209
Amortization, deferred financing costs 171 262
Amortization, deferred rent escalation 108 81
Amortization, other assets 181 -
Changes in assets and liabilities:
(Increase)in inventories (1,042) (696)
(Increase) decrease in receivables and
other current assets (1,290) 239
Decrease in other assets 1,037 1,094
Decrease in related party receivables-Wakefern 2,923 1,831
Increase in accounts payable 1,684 5,584
Increase (decrease)in other liabilities 237 (196)
Net cash provided by operating
activities 6,298 10,953
Cash flows from investing activities:
Purchase of property and equipment (702) (1,554)
Decrease(increase) in related party
receivables-other 448 (309)
Net cash used in investing
activities (254) (1,863)
Cash flows from financing activities:
Principal payments under long-term debt (5,335) (13,049)
Principal payments under capital
lease obligations 21 ( 76)
Proceeds from issuance of debt - 4,068
Preferred stock dividend payments (34) -
Principal payments under long-term
debt, related party (13) -
Net cash used in financing activities (5,361) (9,057)
NET INCREASE IN CASH AND CASH EQUIVALENTS 683 33
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,114 3,435
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,797 $ 3,468
See accompanying notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 1 Basis of Presentation
The unaudited Consolidated Financial Statements as of or for the period
endingFebruary 1, 1997, have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and rule 10-01. The balance sheet at November 2,
1996 has been taken from the audited financial statements at that date.
In the opinion of the management of the Registrant, all adjustments
(consisting only of normal recurring accruals) which the Registrant considers
necessary for a fair presentation of the results of operations for the period
have been made.
Certain financial information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. The reader is referred to the
consolidated financial statements and notes thereto included in the Registrant's
annual report on Form 10-K for the year ended November 2, 1996.
These results are not necessarily indicative of the results for the entire
fiscal year.
Note 2 Adoption of Accounting Standards
Impairment of Assets
Effective November 3, 1996, the Registrant adopted Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the impairment of
Long-Lived assets and for Long-Lived Assets to be Disposed of." This
Statement establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles and goodwill related to those assets.
This Statement requires that an asset to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. There was no
material effect on earnings, in the quarter ended February 1, 1997, from the
adoption of SFAS No. 121.
Stock-Based Compensation
Effective November 3, 1996, The Registrant adopted SFAS No. 123, "Accounting
for Stock-Based Compensation." This Statement establishes a method of
accounting for stock compensation plans based on fair value of employee stock
options and similar equity instruments. There was no material effect on
earnings, in the quarter ended February 1, 1997, from the adoption of SFAS
No. 123.
Part I - Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations
Financial Condition and Liquidity
The Registrant entered into a Revolving Credit and Term Loan Agreement on
February 15, 1995 ("the Credit Agreement"), which was amended as of July 26,
1996 (the "Amended Credit Agreement"). The Amended Credit Agreement, which was
assigned by the lending group to one financial institution on December 12,
1996, is secured by substantially all of the Registrant's assets and provides
for a total commitment of $30,000,000, including a revolving credit facility
and term loan referred to as Term Loan C. The Amended Credit Agreement
contains certain affirmative and negative covenants which, among other
matters will, (i) restrict capital expenditures, (ii) require the maintenance
of certain levels of net worth and earnings before interest, taxes,
depreciation and amortization ("EBITDA"), and maintenance of (iii) fixed
charge coverage and total liabilities to net worth ratios. The Registrant was
in compliance with such covenants through February 1, 1997 except for
the minimum level of
EBITDA which was $330,000 or 2.2% less than the covenant requirement, and
the maximum level of capital expenditures, which was exceeded by $282,000 or
4.9% of the covenant limit. The Registrant obtained a waiver of these
covenants.
The Amended Credit Agreement (a) increases the total amount available to the
Registrant under the working capital facility ("Revolving Note") portion of
the Agreement to $17,500,000 from $15,000,000, subject to the borrowing base
limitation of 60% of eligible inventory; (b) increases the Term Loan C portion
of the borrowings by $1,825,000 to its original principal amount of $12,500,000;
(c) revises the repayment schedule for Term Loan C to provide that the first
quarterly payment becomes due on December 31, 1996, subsequent quarterly
payments are reduced in amount and a balloon payment of $4,500,000 becomes due
on February 15, 1999; (d) amends certain definitions; (e) changes certain
borrowing limitations, including a provision which permits secured borrowing
of up to $6,536,000 from third party lenders in fiscal 1996; (f) permits
capital expenditures in fiscal 1996 and 1997 in a manner consistent with the
projected timing of such expenditures; and (g) waives technical
non-compliance by the Registrant with certain covenants of the Credit
Agreement. Other terms and conditions of the Credit Agreement previously
reported upon by the Registrant have not been modified.
The Registrant has pursued an asset redeployment program since entering into
the Credit Agreement, utilizing the proceeds from the disposition of certain
assets to repay indebtedness under the Credit Agreement. The remaining
components of the asset redeployment program consist of the sale of real
estate partnership interests in a non-supermarket property located in
Shrewsbury, New Jersey, a shopping center in West Long Branch, New Jersey
in which the Registrant operates a supermarket and the sale/leaseback or
mortgaging of buildings owned by the Registrant and located in Linden and
Aberdeen, New Jersey. The sale/leaseback of the supermarket property in
Aberdeen was completed on February 3, 1997 for $2.3 million.
The Amended Credit Agreement combined with the asset redeployment plan
described above strengthen the Registrant's financial condition by increasing
liquidity and providing increased working capital through the Revolving Note.
The Registrant's compliance with the major financial covenants under the
Agreement was as follows as of February 1, 1997.
Amended Actual
Financial Credit (As defined in the
Covenant Agreement Amended Credit Agreement
Capital Expenditures Less than $5,700,000 $ 5,982,000 (1)
Net Worth Greater than $28,500,000 $33,344,000
Fixed Charge Coverage
Ratio Greater than .9 to 1.00 1.18 to 1.00
Total Liabilities to
Net Worth Ratio Less than 2.45 to 1.00 2.32 to 1.00
EBITDA Greater than $15,100,000 $14,770,000 (1)
(1) Non-compliance with these covenants was waived.
As of March 29, 1996 the Registrant and Wakefern Food Corporation, the owner
of the Registrant's Class A 8% Cumulative Convertible Preferred Stock (the
"Preferred Stock"), amended certain provisions of the Preferred Stock to (a)
extend the date after which Wakefern shall be entitled to convert the
Preferred Stock to Common Stock from March 31, 1996 to March 31, 1997; and
(b) defer the 2% increase in the dividend rate effective March 1996 to March
1997. On May 14, 1996 the Registrant paid dividends in arrears on the
Preferred Stock of $456,980 as well as a quarterly dividend of $34,000 for
the quarter ended April 30, 1996 and since then has paid dividends of $34,000
per quarter. The Amended Credit Agreement provides that the Preferred Stock
may be redeemed only if the Registrant has met or exceeded its financial
performance and debt reduction targets for the year ended November 2, 1996.
The Registrant has met all of these targets and although there can be no
assurance, believes that it will be in a position and intends to redeem the
Preferred Stock prior to March 31, 1997.
No cash dividends have been paid on the Common Stock since 1979, and the
Registrant has no present intentions or ability to pay any dividends in the
near future on its Common Stock. The Amended Credit Agreement does not permit
the payment of any cash dividends on the Registrant's Common Stock.
Working Capital
At February 1, 1997, the Registrant had a working capital deficiency of
$126,000 compared to positive working capital of $3,056,000 at
November 2, 1996 and a deficiency of $7,488,000 at January 27, 1996.
The decline in working capital from November 2, 1996 was due to the collection
of $3,533,000 of current related party receivables which were used to reduce
the Revolving Note which is classified as long term borrowings.
The Registrant normally requires small amounts of working capital since
inventory is generally sold at approximately the same time that payments to
Wakefern and other suppliers are due and most sales are for cash or cash
equivalents.
Working capital ratios were as follows:
February 1, 1997 1.00 to 1.0
November 2, 1996 1.07 to 1.0
January 27, 1996 0.84 to 1.0
Cash flows (in millions) were as follows:
2/1/97 1/27/96
Operating activities... $ 6.3 $ 10.6
Investing activities... ( .2) ( 1.5)
Financing activities... (5.4) ( 9.1)
Totals $ 0.7 $ 0.0
The Registrant had $11,751,000 of available credit, at February 1, 1997, under
its revolving credit facility and believes that its capital resources are
adequate to meet its operating needs, scheduled capital expenditures and its
debt service in fiscal 1997.
For the 13 weeks ended February 1, 1997 depreciation was $2,019,000 while
capital expenditures totaled $702,000, compared to $2,049,000 and $1,554,000
respectively in the prior year period.
Results of Operations (13 weeks ended February 1, 1997 compared to 13
weeks ended January 27, 1996)
Sales:
Same store sales from the eighteen stores in operation in both periods
increased 2.51% in the current year period versus the prior year period.
An increase in promotion expense in the current period contributed to this
increase.
Sales for the twenty stores in operation for the current quarter totaled $163.4
million as compared to $146.3 million of sales from the eighteen stores
operated in the prior year period.
Gross Profit:
Gross profit on sales declined slightly to 24.8% of sales compared to 25.0%
in the prior year period. Patronage dividends, applied as a reduction of the
cost of merchandise sold, were $1.3 million in both periods. The decline in
gross profit was primarily due to price reductions instituted to combat
increased competitive pressure in the Registrant's marketing area.
Operating Expenses:
Store operating, general and administrative expenses as a percent of sales
were 24.0% versus 23.8% in the prior year period. The increase in selling,
general and administrative expenses was primarily due to increased
promotional activity in the Registrant's trading area as well as increases
in certain expense categories. As a percentage of sales, labor and related
fringe benefit costs increased .10%, selling expense increased .19% and other
store expenses increased .08%. These increases were partially offset by a
decrease in administrative expense of .17%.
Interest Expense:
Interest expense increased to $1,077,000 from $882,000, while interest income
was $29,000 compared to $19,000 for the prior period. The increase in interest
expense for the current year period was due to an increase in outstanding debt
since January 27, 1996, partially offset by a decrease in the interest rate
paid on debt.
Income Taxes:
An income tax rate of 40% has been used in the current period based on the
expected effective tax rate for fiscal 1997, while a rate of 37% was used in
the prior year period.
Net Income:
Net income was $176,000 in the current year period compared to $496,000 in the
prior year period. Earnings before interest, taxes, depreciation and
amortization ("EBITDA") for the current period were $3,915,000 as compared to
$4,252,000 in the prior year period. Net income per common share was $.13 in
the current period compared to $.41 in the prior year period. Per share
calculations are based on 1,117,150 shares outstanding in the current year
period and 1,118,150 shares outstanding in the prior year period and a
provision of $34,000 for preferred stock dividends in both periods.
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit (27) - Financial Data Schedule
(b) Reports on Form 8-K/A
1. December 4, 1996 - Changes in Registrant's
Certifying Accountant as of October 25, 1996
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
FOODARAMA SUPERMARKETS, INC.
(Registrant)
Date: March 14, 1997 /S/ MICHAEL SHAPIRO
(Signature)
Michael Shapiro
Senior Vice President
Chief Financial Officer
Date: March 14, 1997 /S/ JOSEPH C. TROILO
(Signature)
Joseph C. Troilo
Senior Vice President
Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-01-1997
<PERIOD-END> FEB-01-1997
<CASH> 3,797
<SECURITIES> 0
<RECEIVABLES> 7,608
<ALLOWANCES> (771)
<INVENTORY> 32,696
<CURRENT-ASSETS> 45,227
<PP&E> 111,184
<DEPRECIATION> (53,765)
<TOTAL-ASSETS> 121,025
<CURRENT-LIABILITIES> 45,353
<BONDS> 0
1,700
0
<COMMON> 1,622
<OTHER-SE> 28,828
<TOTAL-LIABILITY-AND-EQUITY> 121,025
<SALES> 163,356
<TOTAL-REVENUES> 163,356
<CGS> 122,768
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 39,246
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,048
<INCOME-PRETAX> 294
<INCOME-TAX> 118
<INCOME-CONTINUING> 176
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 176
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
