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 August 2, 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 #732-462-4700
(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 13 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 September 5, 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
August 2, 1997 and November 2, 1996
Unaudited Consolidated Statements of
Operations for the thirteen weeks ended
August 2, 1997 and July 27, 1996
Unaudited Consolidated Statements of
Operations for the thirty nine weeks ended
August 2, 1997 and July 27, 1996
Unaudited Consolidated Statements of
Cash Flows for the thirty nine weeks ended
August 2, 1997 and July 27, 1996
Notes to the unaudited 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 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)
August 2, November 2,
1997 1996
(Unaudited) (1)
ASSETS
Current assets:
Cash and cash equivalents $ 3,563 $ 3,114
Merchandise inventories 32,109 31,654
Receivables and other current assets 3,671 2,731
Prepaid income taxes 503 974
Related party receivables - Wakefern 3,911 6,032
Related party receivables - other 918 1,259
Total current assets 44,675 45,764
Property and equipment:
Land 95 1,650
Buildings and improvements 827 1,867
Leaseholds and leasehold improvements 32,718 33,238
Equipment 57,581 55,805
Property and equipment under capital leases 23,858 19,674
115,079 112,234
Less accumulated depreciation and
amortization 58,436 53,498
56,643 58,736
Other assets:
Investments in related parties 9,215 9,215
Intangibles 5,194 5,475
Other 2,663 3,730
Related party receivables - Wakefern 1,395 1,029
Related party receivables - other 147 232
18,614 19,681
$ 119,932 $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)
August 2, November 2,
1997 1996
(Unaudited) (1)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 6,257 $ 5,182
Current portion of long-term debt,
related party 52 52
Current portion of obligations under
capital leases 436 67
Deferred income tax liability 1,261 1,261
Accounts payable:
Related party 23,330 23,850
Others 4,467 5,100
Accrued expenses 8,527 7,196
Total current liabilities 44,330 42,708
Long-term debt 18,268 26,852
Long-term debt, related party 718 757
Obligations under capital leases 17,468 13,634
Deferred income taxes 2,886 2,886
Other long-term liabilities 5,518 5,329
Total long-term liabilities 44,858 49,458
Mandatory redeemable preferred stock
$12.50 par; authorized
1,000,000 shares; issued and outstanding
-0- shares August 2, 1997; 136,000 shares
November 2, 1996 0 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 33,400 32,964
37,373 36,937
Less 504,477 shares August 2, 1997;
503,477 shares November 2, 1996 held
in treasury, at cost 6,629 6,622
Total shareholders' equity 30,744 30,315
$ 119,932 $ 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 share data)
13 Weeks Ended
August 2, July 27,
1997 1996
Sales $ 161,128 $ 147,793
Cost of merchandise sold 120,224 110,037
Gross profit 40,904 37,756
Store operating, general and
administrative expenses 39,478 36,465
Income from operations 1,426 1,291
Other (expense) income:
Interest expense (1,075) ( 811)
Interest income 56 26
Income before taxes 407 506
Income tax provision 162 186
Net income $ 245 $ 320
Per Share Information:
Net income per common share $ .22 $ .25
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 Operations - Unaudited
(in thousands - except share data)
39 Weeks Ended
August 2, July 27,
1997 1996
Sales $ 480,470 $ 434,911
Cost of merchandise sold 359,212 325,090
Gross profit 121,258 109,821
Store operating, general and
administrative expenses 117,332 105,618
Income from operations 3,926 4,203
Other (expense) income:
Interest expense (3,242)
(2,414)
Interest income 137 98
Income before taxes 821 1,887
Income tax provision 328 697
Net income $ 493 $ 1,190
Per Share Information:
Net income per common share $ .39 $ 97
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.
<PAGE>
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows - Unaudited
(in thousands) 39 Weeks Ended
August 2,1997 July 27,1996
Cash flows from operating activities:
Net income $ 493 $ 1,190
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 5,951 5,953
Amortization, intangibles 281 468
Amortization, deferred financing costs 458 707
Amortization, deferred rent escalation 325 242
Amortization, other assets 504 -
Changes in assets and liabilities:
Increase in inventories ( 455) 2,579)
Increase in receivables and other current
assets ( 973) ( 743)
Decrease in other assets 328 643
Decrease in related party receivables-Wakefern 2,121 634
(Decrease) increase in accounts payable (1,153) 6,204
Increase (decrease) in other liabilities 1,056 (1,559)
Net cash provided by operating
activities 8,936 11,160
Cash flows from investing activities:
Purchase of property and equipment (1,824) ( 9,808)
Decrease in related party receivables-other 341 83
Net proceeds from sale of property 2,282 -
Net cash provided by (used in)
investing activities 799 ( 9,725)
Cash flows from financing activities:
Principal payments under long-term debt (7,509) ( 6,730)
Principal payments under capital
lease obligations 19 ( 227)
Proceeds from issuance of debt - 6,346
Preferred stock dividend payments ( 57) ( 491)
Principal payments under long-term debt,
related party ( 39) -
Purchase of preferred stock (1,700) -
Net cash used in financing
activities (9,286) ( 1,102)
NET INCREASE IN CASH AND
CASH EQUIVALENTS 449 333
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,114 3,435
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,563 $ 3,768
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
ending August 2, 1997, included herein, 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 derived 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.
Certain reclassifications have been made to prior year financial statements
in order to conform to the current year presentation.
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 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 August 2, 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 August 2, 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") and as of May 2, 1997 (the "Amended and
Restated Credit Agreement"). The Amended Credit Agreement was assigned by
the lending group to one financial institution on December 12, 1996. The
Amended and Restated Credit Agreement is secured by substantially all of the
Registrant's assets and provides for a total commitment of $30,200,000,
including a revolving credit facility of up to $17,500,000 and term loans
referred to as Term Loan C in the amount of $11,000,000 and the Stock
Redemption Facility in the amount of $1,700,000. The Amended and Restated
Credit Agreement contains certain affirmative and negative covenants which,
among other matters will require the maintenance of a debt service coverage
ratio. The Registrant was in compliance with such covenants through August
2, 1997.
The Amended and Restated Credit Agreement (a) provides for a Stock Redemption
Facility of $1,700,000 which the Registrant is required to use to repay the
revolving credit facility for the monies used to redeem the Preferred Stock
on March 31, 1997; (b) revises the repayment schedule for Term Loan C to
provide for a quarterly payment schedule through December 31, 1999 and a
final payment of $500,000 on February 15, 2000;(c)amends certain definitions;
(d) changes certain borrowing limitations, including a provision which
permits secured borrowing of up to $1,500,000 from third party lenders in
fiscal 1997; (e)eliminates all the major financial covenants except the fixed
charge coverage ratio which was redefined and renamed the debt service
coverage ratio; and (f)reduces interest rates on the revolving credit
facility by .50% and on Term Loan C by .25% to the Base Rate (defined below)
plus .75% and 1.00%, respectively. The interest rate on the Stock Redemption
Facility is the same as for Term Loan C. The Base Rate is the rate which is
the greater of the (i) bank prime loan rate as published by the Board of
Governors of the Federal Reserve System, or (ii) the Federal Funds rate, plus
.50%. Additionally, the Registrant has the ability to use the London
Interbank Offered Rate ("LIBOR") to determine the interest rate. 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 and 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, New
Jersey. The sale/leaseback of a supermarket property in Aberdeen, which was
part of the asset redeployment program, was completed on February 3, 1997 for
$2.3 million which resulted in a deferred gain of $199,000. The sale of the
partnership interest in the West Long Branch shopping center is under
contract. Additionally, a commitment has been received for the financing of
the buildings in Linden.
The Amended and Restated 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 covenant under the
Amended and Restated Credit Agreement was as follows as of August 2, 1997.
Actual
Amended and (As defined in the
Financial Restated Credit Amended and Restated
Covenant Agreement Credit Agreement)
Debt Service Coverage
Ratio Not less than 1.00 to 1.00 1.39 to 1.00
As of March 29, 1996 the Registrant and Wakefern Food Corporation
("Wakefern"), 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 redeemed all of the
outstanding Preferred Stock on March 31, 1997. The pro-rata portion of the
dividend due, $22,667, was also paid at that time.
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 and Restated Credit Agreement
does not permit the payment of any cash dividends on the Registrant's Common
Stock.
Working Capital
At August 2, 1997, the Registrant had working capital of $345,000 compared
to working capital of $3,056,000 at November 2, 1996 and a working capital
deficiency of $2,061,000 at July 27, 1996.
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:
August 2, 1997 1.01 to 1.00
November 2, 1996 1.07 to 1.00
July 27, 1996 0.95 to 1.00
Cash flows (in millions) were as follows:
39 Weeks Ended
8/2/97 7/27/96
Operating activities... $ 8.9 $11.1
Investing activities... 0.8 (9.7)
Financing activities... (9.3) (1.1)
Totals $ 0.4 $ 0.3
The Registrant had $12,310,000 of available credit, at August 2, 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 39 weeks ended August 2, 1997 depreciation was $5,951,000 while
capital expenditures totaled $1,824,000, compared to $5,953,000 and
$9,808,000 respectively, in the prior year period.
Results of Operations (13 weeks ended August 2, 1997 compared to 13
weeks ended July 27, 1996)
Sales:
Same store sales from the eighteen stores in operation for 13 weeks in both
periods increased 2.6% in the current year period versus the prior year
period. Increased sales from stores affected by competitive openings in the
prior fiscal year contributed to this increase.
Sales for the current quarter totaled $161.1 million as compared to $147.8
million of sales in the prior year period. Sales for the current quarter
included the operations of the new locations in Marlboro and Montgomery, New
Jersey for the entire period while the prior year period only included the
sales from the two new locations from their opening dates of June 19, 1996
and July 13, 1996, respectively.
Gross Profit:
Gross profit on sales decreased slightly to 25.4% of sales in the current
period compared to 25.5% in the prior year period. Patronage dividends,
applied as a reduction of the cost of merchandise sold, were $1.0 million in
the current period versus $1.2 million in the prior year period. The decrease
in gross profit was due to the reduced assessment charged by Wakefern on
purchases for new store locations received in the prior year period.
Operating Expenses:
Store operating, general and administrative expenses as a percent of sales
were 24.5% versus 24.7% in the prior year period. The decrease in selling,
general and administrative expenses as a percent of sales was due to
decreases in certain expense categories. As a percentage of sales, labor and
related fringe benefit costs decreased .30% and selling expense decreased
.53%. These decreases were partially offset by increased supply costs of
.11%, general liability insurance costs of .16%, other store expenses, which
include debit and credit card processing fees and Wakefern support services,
of .19% and the amortization of deferred pre-store opening costs of .16%.
Interest Expense:
Interest expense increased to $1,075,000 from $811,000 while interest income
was $56,000 compared to $26,000 for the prior period. The increase in
interest expense for the current year period was due to an increase in the
average outstanding debt since July 27, 1996.
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 $245,000 in the current year period as compared to $320,000
in the prior year period. Earnings before interest, taxes, depreciation and
amortization ("EBITDA") for the thirteen weeks ended August 2, 1997 were
$3,930,000 as compared to $3,744,000 in the prior year period. Net income per
common share was $.22 in the current period compared to $.25 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 and a provision
of $34,000 for preferred stock dividends in the prior year period. There were
no dividends paid on the preferred stock in the current year period since the
preferred stock was redeemed on March 31, 1997.
Results of Operations (39 weeks ended August 2, 1997 compared to 39
weeks ended July 27, 1996)
Sales:
Same store sales from the eighteen stores in operation in both periods
increased 2.0% in the current year period versus the prior year period.
Increase sales from stores affected by competitive openings in the prior
fiscal year contributed to this increase.
Sales for the stores in operation for the current year thirty nine week
period totaled $480.5 million as compared to $434.9 million of sales from the
stores operated in the prior year period. Sales for the thirty nine weeks
ended August 2, 1997 include the operations of two new locations in Marlboro
and Montgomery, New Jersey opened June 19, 1996 and July 13, 1996,
respectively, while the prior year period includes sales from these two new
locations for only six and two weeks, respectively.
Gross profit:
Gross profit on sales decreased slightly to 25.2% of sales compared to 25.3%
in the prior year period. Patronage dividends, applied as a reduction of the
cost of merchandise sold, were $3.6 million compared to $3.4 million in the
prior year period.
Operating Expenses:
Store operating, general and administrative expenses as a percent of sales
were 24.4% compared to 24.3% in the prior year period. The increase in
selling, general and administrative expenses as a percent of sales was due
to increases in certain expense categories. As a percentage of sales, supply
costs increased .04%, general liability insurance costs increased .14%,
other store expenses, which include debt and credit card processing fees and
Wakefern support services, increased .19% and the amortization of deferred
pre-store opening costs increased .10%. These increases were partially offset
by decreases in selling expense of .17% and labor and related fringe benefit
costs of .08%.
Interest Expense:
Interest expense increased to $3,242,000 from $2,414,000 while interest
income was $137,000 compared to $98,000 for the prior period. The increase
in interest expense for the current year period was due to an increase in the
average outstanding debt since July 27, 1996.
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 $493,000 in the current year period. This compares to
$1,190,000 in the prior year period. Earnings before interest, taxes,
depreciation and amortization ("EBITDA") for the current period were
$11,445,000 as compared to $11,573,000 in the prior year period. Net income
per common share was $.39 in the current period compared to $.97 in the prior
year period. Per share calculations are based on 1,117,150 shares outstanding
and preferred stock dividends of $56,667 in the current year period and
1,118,150 shares outstanding and a provision of $102,000 for preferred stock
dividends in the prior year period.
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit (27) - Financial Data Schedule.
(b) No reports on Form 8-K were required to be
filed for the 13 weeks ended August 2, 1997.
<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: September 15, 1997 /S/ Michael Shapiro
(Signature)
Michael Shapiro
Senior Vice President
Chief Financial Officer
Date: September 8, 1997 /S/ Joseph C. Troilo
(Signature)
Joseph C. Troilo
Senior Vice President
Principal Accounting Officer
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