SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the fiscal year ended Commission file number
November 1, 1997 1-5745
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.)
Building 6, Suite 1, 922 Hwy. 33, Freehold, New Jersey 07728
(Address of principal executive offices)
Registrant's telephone number, including area code: (732) 462-4700
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock American Stock Exchange
Par Value $1.00 per share
Securities registered pursuant to Section 12(g) of the Act:
NONE
(Title of Class)
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 such filing requirements for the past 90 days.
Yes x No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of voting stock held by non-affiliates of the
Registrant was approximately $10,601,000.
Computation is based on the closing sales price of $23.50 per share
of such stock on the American Stock Exchange on January 16, 1998.
As of January 16, 1998, the number of shares outstanding of
Registrant's Common Stock was 1,117,150.
DOCUMENTS INCORPORATED BY REFERENCE
Information contained in the 1998 definitive Proxy Statement to
be filed with the Commission and to be delivered to security holders
in connection with the Annual Meeting is incorporated by reference
into this Form 10-K at Part III.
PART I
Disclosure Concerning Forward-Looking Statements
All statements, other than statements of historical fact, included in
this Form 10-K, including without limitation the statements under
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business", are, or may be deemed to be,
"forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act"), and
Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Such forward-looking statements involve assumptions,
known and unknown risks, uncertainties and other factors which may
cause the actual results, performance or achievements of the
Registrant to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements contained in this Form 10-K. Such potential risks
and uncertainties, include without limitation, competitive pressures
from other supermarket operators and warehouse club stores, economic
conditions in the Registrant's primary markets, consumer spending
patterns, availability of capital, cost of labor, cost of goods sold,
year 2000 issues relating to computer applications, and other risk
factors detailed herein and in other of the Registrant's Securities
and Exchange Commission filings. The forward-looking statements are
made as of the date of this Form 10-K 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.
Item 1. Business
General
The Registrant, a New Jersey corporation formed in 1958, operates a
chain of twenty supermarkets located in Central New Jersey, as well
as two liquor stores and two garden centers, all licensed as
ShopRite. The Registrant also operates a central food processing
facility to supply its stores with meat, various prepared salads,
prepared foods and other items, and a central baking facility which
supplies its stores with bakery products. The Registrant is a member
of Wakefern Food Corporation ("Wakefern"), the largest retailer owned
food cooperative warehouse in the United States and owner of the
ShopRite name.
The Registrant has incorporated the concept of "World Class"
supermarkets into its operations. "World Class" supermarkets are
significantly larger than conventional supermarkets and feature fresh
fish-on-ice, prime meat service butcher departments, in-store
bakeries, international cheese cases, salad bars, snack bars, bulk
foods and pharmacies. The Registrant has also introduced many of
these features into its conventionally sized supermarkets through
extensive renovations; these stores are considered "Mini-World Class"
supermarkets. Currently, fourteen of the Registrant's stores are
"World Class", four are "Mini-World Class" and two are conventional
supermarkets.
The following table sets forth certain data relating to the Registrant's
business for the periods indicated:
Fiscal Year Ended
November 1, November 2, October 28, October 29, October 30,
1997 1996* 1995 1994 1993**
Average annual sales per store
(in millions) $31.8 $31.8 $30.9 $30.2 $27.4
Same store sales increase
(decrease) from prior year
......... 1.67% 2.63% 1.62% 0.84% (3.66%)
Total store area in square feet
(in thousands) 1,080 1,080 954 1,072 1,106
Total store selling area in square
feet (thousands) 808 807 710 789 823
Average total square feet per store
(in thousands) 54 54 53 54 53
Average square feet of selling area
/ store(thousands)40 40 39 39 39
Annual sales per square foot of
selling area. $788 $789 $784 $766 $698
Number of stores:
Stores remodeled
(over $500,000) 0 1 0 0 0
New stores opened. 0 1 0 0 0
Replaced/expanded. 0 1 0 0 3
Closed/divested.. 0 0 2 1 6
Number of stores by size
(total store area):
30,000-39,000 sq.ft4 4 4 4 5
40,000-49,900 sq.ft4 4 4 4 4
Over 50,000 sq.ft.12 12 10 12 12
Total stores open
at period end.. 20 20 18 20 21
* Calculated on a 53 week basis. A like 52 week comparison would be $31.2
million in average sales per store and $781 in annual sales per square foot
of selling area.
** A strike by the New Jersey retail clerks union severely impacted
sales of fifteen stores.
Store Expansion and Remodeling
The Registrant believes that significant capital investment is
critical to its operating strategy and is continuing its program to
upgrade its existing stores, replace outdated locations and open new
"World Class" supermarkets within its core market area of Central New
Jersey.
During fiscal year 1996, one new and one replacement location were
opened in Marlboro and Montgomery, New Jersey, respectively. Over the
next three years the Registrant plans to open two new and four
replacement stores and expand three existing locations. One
replacement and one new store are presently under construction in
East Windsor and Bound Brook, New Jersey.
Technology
Automation and computerization are important to the Registrant's
operations
and competitive position. All stores utilize IBM 4690 software for
the scanning checkout systems. These systems improve pricing
accuracy, enhance productivity and reduce checkout time for
customers. Additionally, all stores have IBM RS/6000 processors and
satellite communications. The use of these systems allows the
Registrant to offer its customers debit and credit card payment
options as well as participation in Price Plus, ShopRite's preferred
customer program, and the ShopRite co-branded Master Card. By
presenting the scannable Price Plus card or the ShopRite co-branded
card, customers can receive electronic discounts, the value of
ShopRite in-ad Clip Less coupons and cash personal checks.
Additionally, customers receive a 1% future rebate when paying with
the ShopRite Master Card.
The Registrant is also using other in store computer systems.
Computer generated ordering is installed in all stores. This system
is designed to reduce inventory levels and out of stock positions,
enhance shelf space utilization and reduce labor costs. In all
stores, meat, seafood and delicatessen prices are maintained on
department computers for automatic weighing and pricing.
Additionally, all stores have new computerized time and attendance
systems which are used for, among other things, automated labor
scheduling and most have computerized energy management systems. The
Registrant also utilizes a direct store delivery receiving and
pricing system for most items not purchased through Wakefern in order
to provide cost and retail price control over these products, and
computerized pharmacy systems which provide customer profiles, retail
price control and third-party billing. The direct store delivery
receiving systems are presently being replaced.
In addition, all field merchandisers and operations supervisors are
equipped with laptop personal computers. This provides field
personnel with current labor and product information to facilitate
making accurate and timely decisions.
Both the Registrant and Wakefern have undertaken projects to address
any year 2000 issues in computer applications. At this time the
Registrant does not anticipate any material costs or adverse
consequences relative to year 2000 issues.
Industry Segment and Principal Products
The Registrant is engaged in one industry segment. For the last three
fiscal years, the Registrant's sales were divided approximately among
the categories listed below:
Fiscal Year Ended
Product Categories 11/01/97 11/02/96 10/28/95
Groceries 40.6% 41.7% 42.6%
Dairy & Frozen 16.4 16.1 15.9
Meats, Seafood & Poultry 11.1 11.2 11.3
Non-Foods 9.9 9.7 9.7
Produce 8.3 8.3 8.3
Appetizers & Prepared Foods 5.8 5.5 5.0
Pharmacy 3.8 3.4 3.3
Bakery 2.2 2.2 2.1
Liquor, Floral & Garden Centers 1.9 1.9 1.8
100.0% 100.0% 100.0%
Gross profit derived by the Registrant from each product category is
not necessarily consistent with the percentage of total sales
represented by such product category.
Wakefern Food Corporation
The Registrant owns a 12.9% interest in Wakefern, a New Jersey
corporation organized in 1946, which provides purchasing, warehousing
and distribution services on a cooperative basis to its shareholder
members, including the Registrant, who are operators of ShopRite
supermarkets. Together, Wakefern and its shareholder members operate
approximately 193 supermarkets. Products bearing the ShopRite label
accounted for approximately 17% of total sales for the period.
Wakefern maintains warehouses in Elizabeth and South Brunswick, New
Jersey which handle a full line of groceries, meats, frozen foods,
produce, bakery, dairy and delicatessen products and health and
beauty aids, as well as a number of non-food items. Wakefern also
operates a grocery and perishable products warehouse in Wallkill, New
York.
Wakefern's professional advertising staff and its advertising agency
develop and place most of the Registrant's advertising on television,
radio and in major newspapers. The Registrant is charged for these
services based on various formulas which account for the estimated
proportional benefits it receives. In addition, Wakefern charges the
Registrant for, and provides the Registrant with, product and support
services in numerous administrative functions. These include
insurance, supplies, technical support for communications and
electronic payment systems, equipment purchasing and the coordination
of coupon processing.
Wakefern distributes, as a patronage dividend to each of its members,
a share of its net earnings in proportion to the dollar volume of
business transacted by each member with Wakefern during each fiscal
year.
Although Wakefern has a significant in house professional staff, it
operates as a member cooperative and senior executives of the
Registrant spend a substantial amount of their time working on
Wakefern committees overseeing and directing Wakefern purchasing,
merchandising and various other programs.
Wakefern licenses the ShopRite name to its shareholder members and
provides a substantial and extensive merchandising program for the
ShopRite label. Except for the license to use the name "ShopRite",
the Registrant does not believe that the ownership of or rights in
patents, trademarks, licenses, franchises and concessions is material
to its business. The locations at which the Registrant may open new
supermarkets under the name ShopRite are subject to the approval of
Wakefern's Site Development Committee. Under circumstances specified
in its By-Laws, Wakefern may refuse to sell merchandise to, and may
repurchase the Wakefern stock of, any shareholder member. Such
circumstances include certain unapproved transfers by a shareholder
member of its supermarket business or its capital stock in Wakefern,
unapproved acquisition by a shareholder member of certain supermarket
or grocery wholesale supply businesses, the conduct of a business in
a manner contrary to the policies of Wakefern, the material breach of
any provision of Wakefern By-Laws or any agreement with Wakefern or a
determination by Wakefern that the continued supplying of merchandise
or services to such shareholder member would adversely affect
Wakefern.
Wakefern requires each shareholder to invest in Wakefern's capital
stock to a maximum of $450,000 for each store operated by such
shareholder member. The precise amount of the investment is computed
according to a formula based on the volume of each store's purchases
from Wakefern.
Under its By-Laws, all bills for merchandise and other indebtedness
are due and payable to Wakefern weekly and, in the event that such
bills are not paid in full, an additional 1% service charge is due on
the unpaid portion. Wakefern requires its shareholder members to
pledge their Wakefern stock certificates with it as collateral for
payment of their obligation to Wakefern. As of November 1, 1997 and
November 2, 1996, the Registrant's investment in Wakefern was
$8,427,000. The Registrant also has an investment in another company
affiliated with Wakefern which was $829,000 at November 1, 1997 and
$788,000 at November 2, 1996, respectively. See Note 4 of Notes to
Consolidated Financial Statements.
Since September 18, 1987, the Registrant has had an agreement,
amended in 1992, with Wakefern and all other shareholders of
Wakefern, which provides for certain commitments and restrictions on
all shareholders of Wakefern. Under the agreement, each shareholder,
including the Registrant, agreed to purchase at least 85% of its
merchandise in certain defined product categories from Wakefern. The
Registrant fulfilled this obligation during the 52 week period ended
November 1, 1997. If any shareholder fails to meet such purchase
requirements, it must make payments to Wakefern (the "Compensatory
Payments") based on a formula designed to compensate Wakefern for the
profit lost by it by virtue of its lost warehouse volume. Similar
payments are due if Wakefern loses volume by reason of the sale of
one or more of a shareholder's stores, any shareholder's merger with
another entity or the transfer of a controlling interest in the
shareholder. Subject to a right of first refusal granted to Wakefern,
sales of certain under facilitated stores are permitted free of the
restrictions of the agreement. Also, the restrictions of the
agreement do not apply if volume lost by a shareholder by the sale of
a store is made up by such shareholder by increased volume of new or
existing stores and, in any event, the Compensatory Payments
otherwise required to be made by the shareholder to Wakefern are not
required if the sale is made to Wakefern, another shareholder of
Wakefern or to a purchaser which is neither an owner or operator of a
chain of 25 or more supermarkets in the United States, excluding any
ShopRite supermarkets in any area in which Wakefern operates. The
agreement extends for an indefinite term and is subject to
termination ten years after the approval by a vote of 75% of the
outstanding voting stock of Wakefern. See Management's Discussion and
Analysis - Financial Condition and Liquidity for a discussion of
Preferred Stock issued by the Registrant to Wakefern.
The loss of, or material change in, the Registrant's relationship
with Wakefern (neither of which is considered likely) could have a
significant adverse impact on the Registrant's business. The failure
of Wakefern to fulfill its obligations or another member's insolvency
or withdrawal from Wakefern could result in additional costs to the
remaining members.
The Registrant also purchases products and items sold in the
Registrant's supermarkets from a variety of sources other than
Wakefern. Neither the Registrant nor, to the best of the Registrant's
knowledge, Wakefern has experienced or anticipates experiencing any
unique material difficulties in procuring products and items in
adequate quantities.
Competition
The supermarket business is highly competitive. The Registrant
competes directly with a number of national and regional chains,
including A&P, Pathmark, Grand Union, Acme, Edwards and Foodtown, as
well as various local chains and numerous single-unit stores. The
Registrant also competes with warehouse club stores which charge a
membership fee, are non-unionized and operate larger units.
Additional competition comes from drug stores, discount general
merchandise stores, fast food chains and convenience stores. See
Management's Discussion and Analysis-Results of Operations.
Many of the Registrant's competitors have greater financial resources
and sales. As most of the Registrant's competitors offer
substantially the same type of products, competition is based
primarily upon price, and particularly in the case of meat, produce,
delicatessen, and prepared foods, on quality. Competition is also
based on service, the location and appearance of stores and on
promotion and advertising. The Registrant believes that its
membership in Wakefern and ShopRite allows it to maintain a low-price
image while providing quality products and the availability of a wide
variety of merchandise including numerous private label products
under the ShopRite brand name. The Registrant also provides
clean, well maintained stores, courteous and quick service to the
customer and flexibility in tailoring the products offered in each
store to the demographics of the communities it services. The
supermarket business is characterized by narrow profit margins, and
accordingly, the Registrant's viability depends primarily on its
ability to maintain a relatively greater sales volume and more
efficient operations than its' competitors.
Regulatory and Environmental Matters
The Registrant's stores and facilities, in common with those of the
industry in general, are subject to numerous existing and proposed
Federal, State and Local regulations which regulate the discharge of
materials into the environment or otherwise protect the environment,
establish occupational safety and health standards and cover other
matters, including the licensing of the Registrant's pharmacies and
two liquor stores. The Registrant believes its operations are in
compliance with such existing regulations and is of the opinion that
compliance therewith has not had and will not have any material
adverse effect upon the Registrant's capital expenditures, earnings
or competitive position.
Employees
As of December 31, 1997, the Registrant employed approximately 4,000
persons, of whom approximately 3,600 are covered by collective
bargaining agreements. 73% of the employees are part time and almost
all of these employees are covered by the collective bargaining
agreements. The Registrant has historically maintained favorable
relations with its unionized employees. However, a strike of Retail
Clerk Union Local 1262 workers occurred in May 1993 against the
Registrant and three other New Jersey supermarket chains and
continued for three weeks until it was satisfactorily settled. The
Registrant is subject to six collective bargaining agreements
expiring on various dates from April 1998 to April 2001.
By virtue of the nature of the Registrant's supermarket operations,
information concerning backlog, seasonality, major customers,
government contracts, research and development activities and foreign
operations and export sales is not relevant.
Item 2. Properties
The Registrant's twenty supermarkets, all of which are leased, range
in size from 31,000 to 101,000 square feet with sales area averaging
75 percent of the total area. All stores are air-conditioned, have
modern fixtures and equipment, have their own ample parking
facilities and are located in suburban areas.
The leases expire on various dates from 1999 through 2022. One lease
expires in 1999 and does not contain a renewal clause. This location
will be replaced by a new supermarket which is under construction and
for which a lease has been signed. All other leases contain renewal
options ranging from 5 to 25 years. Six leases require, in addition
to a fixed rental, a further rental payment based on a percentage of
the annual sales in excess of a stipulated minimum. The minimum has
been exceeded in two of the six locations in the last fiscal year.
Most leases also require the Registrant to pay for insurance, common
area maintenance and real estate taxes. Four additional leases have
been signed for supermarket locations, one of which is scheduled to
open during fiscal year 1998. The three other sites will be
replacements for existing stores.
Also, the Registrant is subject to a lease covering its executive and
principal administrative offices containing approximately 18,000
square feet in Howell, New Jersey. The Registrant also leases 57,000
square feet of space used for its bakery operations and storage in
Howell, New Jersey and owns meat and prepared foods processing
facilities in Linden, New Jersey. As part of the Registrant's Asset
Redeployment Program, the Registrant sold in 1997 its limited
partnership interest in two partnerships and financed the facility in
Linden, New Jersey, which is the only real property owned by the
Registrant. In addition, the Registrant is a party to an additional
fifteen leases relating to locations where the Registrant no longer
conducts supermarket operations; thirteen of such locations have been
sublet to non-affiliated persons. In most instances these stores have
been sublet at terms at least substantially equivalent to the
Registrant's obligations under its prime lease. See Management's
Discussion and Analysis-Financial Condition and Liquidity.
Item 3. Legal Proceedings
In the ordinary course of its business, the Registrant is party to
various legal actions not covered by insurance. Although a possible
range of loss cannot be estimated, it is the opinion of management,
that settlement or resolution of these proceedings will not, in the
aggregate, have a material adverse impact on the financial condition
or results of operations of the Registrant.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Part II
Item 5. Market for Registrant's Common Stock and Security Holder
Matters
(a) The Registrant's Common Stock is traded on the American
Stock Exchange. The following table sets forth the high and low sales
prices for the Common Stock as reported on the American Stock
Exchange for the fiscal years ended November 2, 1996 and November 1,
1997.
<PAGE>
Fiscal Quarter Ended High Low
January 27, 1996 13 5/8 10
April 27, 1996 18 1/4 13 3/8
July 27, 1996 21 1/2 17
November 2, 1996 17 1/2 14 1/4
February 1, 1997 16 3/4 14
May 3, 1997 17 3/8 14 7/8
August 2, 1997 19 1/2 17 1/2
November 1, 1997 18 3/4 16 7/8
(b) The approximate number of record holders of the Registrant's
Common Stock was 435 as of January 16, 1998.
(c) No dividends have been declared or paid with respect to the
Registrant's Common Stock since October 1979. The Registrant is
prohibited from paying dividends on its Common Stock by the Revolving
Credit and Term Loan Agreement between the Registrant and a financial
institution. See Management's Discussion and Analysis-Financial
Condition and Liquidity. The Registrant has no intention of paying
dividends on its Common Stock in the foreseeable future.
Item 6. Selected Financial Data
The selected financial data set forth below is derived from the
Registrant's consolidated financial statements and should be read in
conjunction with the consolidated financial statements and related
notes included elsewhere in this Annual Report. See Management's
Discussion and Analysis-Financial Condition and Liquidity and Results
of Operations.
Year Ended
November 1, November 2, October 28, October 29, October 30,
1997 1996 (1) 1995 (2) 1994 (3) 1993 (4)
(Dollars in thousands, except per share amounts)
Income Statement
Data:
Sales $636,731 $601,143 $586,477 $611,074 $674,675
Net income (loss) $ 1,064 $ 1,396 $ (191) $ (513) $ (1,965)
Income (loss) per
common share $ .90 $ 1.13 $ (.29) $ (.58) $ (1.84)
Cash dividends
per common share - - - - -
Balance sheet data
(at year end):
Working capital $ 3,518 $ 3,056 $ (4,451) $ (8,674) $ (30,613)(5)
Total assets $121,500 $124,181 $110,984 $130,821 $137,440
Long-term debt
(excluding current
portion) $ 36,996 $ 41,243 $ 28,334 $ 37,439 $ 13,432 (6)
Common share-
holders' equity $ 31,315 $ 30,315 $ 28,672 $ 28,984 $ 30,182
Book value per
common share $ 28.03 $ 27.11 $ 25.64 $ 25.92 $ 27.00
Tangible book value
per common share $ 23.47 $ 22.22 $ 20.24 $ 19.21 $ 19.71
(1) 53 week period. The Registrant opened two new locations in June and
July, 1996. See Management's Discussion and Analysis - Results of
Operations - Sales.
(2) The period presented includes the results of operations of the two
Pennsylvania stores for the 30 weeks prior to their sale on May 23,
1995. The net sales of these two stores for the 30 weeks of fiscal 1995
during which they were owned by the Registrant were $29.2 million.
(3) The period presented includes the results of operations of one New
Jersey store for 34 weeks prior to its closing on June 25, 1994,. Net
sales for this location for the 34 weeks prior to its closing were $6.0
million.
(4) The period presented includes the results of operations of the five
New York stores for the 50 weeks prior to their sale on October 18,
1993. Net sales for the five locations for the 50 weeks of fiscal 1993
during which they were owned by the Registrant were $85.4 million.
(5) Includes $32.6 million of long term debt at October 30, 1993
reclassified as current. See note 6 below.
(6) Does not include $32.6 million of long-term debt at October 30,
1993 reclassified as current due to a default of a loan covenant under
the Registrant's credit agreements which terminated February 15, 1995.
Such long-term debt was classified as a current liability on the
Registrant's balance sheet at October 30, 1993.
Item 7. 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 was assigned by the lending group to one financial institution
on December 12, 1996, and was further amended as of May 2, 1997, October
28, 1997, November 14, 1997 and January 15, 1998 (the "Amended and
Restated Credit Agreement"). 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 November 1,
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 held by Wakefern 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; (f) reduces interest rates on the revolving credit facility by
1.00% and on Term Loans by .75% to the Base Rate (defined below) plus
.25% and .50%, respectively; and (g) redefines Term Loan C and the Stock
Redemption Facility as Fixed Rate Loans. The interest rate on the Fixed
Rate Loans is 8.38%. 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
program was completed November 14, 1997. The components of the asset
redeployment program completed in 1997 were the sale/leaseback of a
supermarket property in Aberdeen, New Jersey on February 3, 1997 for
$2.3 million which resulted in a deferred gain of $199,000; the sale of
a real estate partnership interest in a shopping center in West Long
Branch, New Jersey in which the Registrant operates a supermarket on
October 6, 1997 resulting in a gain of $140,000 and the receipt of
$677,000 in payment of accounts receivable owed by the partnership to
the Registrant; the sale of a real estate partnership interest in a
non-supermarket property located in Shrewsbury, New Jersey on October 8,
1997 for $735,000 which resulted in a gain of the same amount; and the
financing of two buildings owned by the Registrant and located in
Linden, New Jersey on November 14, 1997. The proceeds from the
financing, $1.5 million, were used to purchase a third building in the
complex for $600,000, with the balance of the proceeds to be used for
the remodeling and refurbishment of the meat and prepared foods
processing facility which is housed in the three buildings. The note
bears interest at 9.18% and is payable in monthly installments over its
seven year term based on a ten year amortization.
The Amended and Restated Credit Agreement combined with the completion
of the asset redeployment plan described above strengthened the
Registrant's financial condition by increasing liquidity and providing
increased working capital through the Revolving Note.
On May 23, 1995 the Registrant concluded the sale of its two operating
locations in Pennsylvania for $5,700,000 plus inventory of $2,300,000
and obtained the return of its investments of $1,200,000 in Wakefern, a
related party, with respect to the two stores. All proceeds were in cash
and were used to reduce outstanding debt.
On January 25, 1996 the Registrant financed $4,068,000 of used equipment
at three existing locations. The note bears interest at 10.58% and is
payable in monthly installments over its four year term. The proceeds
were used to repay existing debt.
On September 13, 1996 the Registrant financed $536,000 of Point of Sale
("POS") equipment at two existing locations. The note bears interest at
8.82% and is payable in monthly installments over its four year term.
The proceeds were used to purchase the POS equipment.
On September 30, 1996 and November 1, 1996 the Registrant financed the
purchase of $4,602,075 and $1,397,925, respectively, of equipment for
the two new store locations in Marlboro and Montgomery, New Jersey. The
notes bear interest at 9.02% and 8.74%, respectively, and are payable in
monthly installments over their eight year terms.
The Registrant's compliance with the major financial covenant under the
Amended and Restated Credit Agreement was as follows as of November 1,
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 1.26 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 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 November 1, 1997, the Registrant had working capital of $3,518,000
compared to $3,056,000 at November 2, 1996 and a deficiency of
$4,451,000 at October 28, 1995. Working capital in fiscal 1997 remained
at approximately the same levels as the prior year. Accounts receivable
consist primarily of bad checks due the Registrant, coupon receivables,
third party pharmacy insurance claims and organization charge accounts.
The terms of most receivables are 30 days or less. The allowance for
uncollectible accounts is large in comparison to the amount of accounts
receivable because the allowance consists primarily of a reserve for bad
checks which are not written off until all collection efforts are
exhausted. 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 improved in fiscal 1996 as the result of (a) the
equipment financing completed in January 1996, with $3,000,000 of
current debt replaced by long term borrowing; (b) the reduction in
current payables relating to inventory and store operations using
proceeds of long term borrowings under the Revolving Note; and (c) an
increase of $1,000,000 in current related party receivables which become
due in fiscal 1997.
Changes in working capital components for fiscal 1995 were primarily
attributable to the sale of assets in Pennsylvania, the accelerated
application of cash receipts against the Revolving Note and the improved
liquidity resulting from the Credit Agreement.
Working capital ratios were as follows:
November 1, 1997 1.1 to 1.0
November 2, 1996 1.1 to 1.0
October 28, 1995 .9 to 1.0
Cash flows (in millions) were as follows:
1997 1996 1995
From operations..................... $10.1 $ 9.7 $ 9.6
Investing activities................ .5 (6.5) 2.7
Financing activities................ (10.0) (3.5) (14.4)
Totals $ .6 $( .3) $(2.1)
Fiscal 1997 capital expenditures totaled $3,620,000 with depreciation of
$8,104,000 compared to $13,181,000 and $8,207,000 respectively for
fiscal 1996 and $3,755,000 and $8,371,000 respectively for fiscal 1995.
In fiscal 1997 long-term debt decreased $2,231,000, using proceeds from
the sale of assets under the asset redeployment program and cash
generated by operations which was partially offset by financing obtained
under the Stock Redemption Facility, the capitalization of a real estate
lease for the Aberdeen, New Jersey store and increased debt as the
result of the Insur-Rite premium calls.
In fiscal 1996 long-term debt increased $10,106,000 as the result of the
financing of POS equipment in two locations and equipment in the two
new locations in Marlboro and Montgomery, New Jersey and the
capitalization of a real estate lease for the Montgomery store.
In fiscal 1995 the Registrant reduced its long-term debt by $13.0
million, using proceeds from the sale of the Pennsylvania stores and
cash generated by operations.
The Registrant had $11,727,000 of available credit, at November 1, 1997,
under its revolving credit facility and believes that its capital
resources are adequate to meet its operating needs, scheduled capital
expenditures and debt service for fiscal 1998.
RESULTS OF OPERATIONS
Sales:
The Company's sales were $636.7 million, $601.1 million and $586.5
million, respectively in fiscal 1997, 1996 and 1995. This represents an
increase of 5.9 percent in 1997 and an increase of 2.5 percent in 1996.
These changes in sales levels were the result of the 53rd week in fiscal
1996, opening of two new locations in June and July 1996 and the sale of
two Pennsylvania stores in May 1995. Comparable store sales were $581.1
million, $571.5 million and $556.9 million in the respective three year
periods, an increase of 1.7% in fiscal 1997 and 2.6% in fiscal 1996
after adjusting for the 53rd week in fiscal 1996.
Gross Profit:
Gross profit totaled $161.0 million in fiscal 1997 compared to $152.1
million in fiscal 1996 and $148.3 million in fiscal 1995. Gross profit
as a percent of sales was 25.3%, in each of the three fiscal years 1997,
1996 and 1995.
In both fiscal 1997 and 1996 gross profit percentage was positively
affected by the continued improvement in product mix and Wakefern
incentive programs for the two new locations. However, this improvement
was offset by price reductions instituted to combat increased
competitive pressure in the Registrant's marketing area.
The increase in gross profit percentage in fiscal 1995, when compared to
the gross profit percentage of 24.3% for fiscal 1994, was primarily due
to improved product mix and the ability of the Registrant to maintain
full inventory levels in its stores. The ability to maintain full
inventory levels is the result of improved liquidity under the new
financing obtained on February 15, 1995. The exclusion of results of the
two Pennsylvania stores sold on May 23, 1995 would not have had any
material impact on gross profit percentages when comparing fiscal 1995
results to the prior year results.
Patronage dividends applied as a reduction of the cost of merchandise
sold were $6,633,000, $6,905,000 and $7,246,000 for the last three
fiscal years. This translates to 1.04%, 1.15% and 1.24% of sales for the
respective periods.
Fiscal Years Ended
11/01/97 11/02/96 10/28/95
(in millions)
Sales........................ $636.7 $601.1 $586.5
Gross profit................. 161.0 152.1 148.3
Gross profit percentage...... 25.3% 25.3% 25.3%
Operating, General and Administrative Expenses:
Fiscal 1997 expenses totaled $155.9 million compared to $147.0 million
in fiscal 1996 and $142.9 million in fiscal 1995.
Fiscal Years Ended
11/01/97 11/02/96 10/28/95
(in millions)
Sales........................ $636.7 $601.1 $586.5
Operating, General and
Administrative Expenses...... 155.9 147.0 142.9
% of Sales................... 24.5% 24.5% 24.4%
Operating, general and administrative expenses as a percent of sales
remained the same in fiscal 1997 compared to fiscal 1996. Decreases,
primarily related to the two new locations opened in fiscal 1996, in
selling expense and labor and related fringe benefit costs, as well as
reduced corporate administrative expense, were offset by increases in
general liability insurance expense, other store expenses, which include
debit and credit card processing fees and Wakefern support services, and
the amortization of deferred pre-store opening costs. The general
liability insurance increase was the result of premium calls from
Insure-Rite, Ltd., for policy years ended December 1, 1993 and December
1, 1994 as previously discussed in the Commitments and Contingencies
footnote in prior years financial statements. As a percentage of sales,
selling expense decreased .27%, payroll and related fringe benefit costs
decreased .10% and corporate administrative expense decreased .09%.
These decreases were offset by increases in general liability insurance
of .27%, other store expenses of .18% and amortization of deferred pre-store
opening costs of .04%. Pre-opening costs were $505,000 in fiscal 1997.
Operating, general and administrative expenses increased slightly in
fiscal 1996 compared to fiscal 1995. This increase was the result of
grand opening expenses for the two new locations, as well as increased
promotional activity in the Registrant's marketing area and a decrease
in income generated from the sale of cardboard due to a drop in the
cardboard market. As a percentage of sales, labor and related fringe
benefit costs increased .28%, selling expense increased .25% and
miscellaneous income declined .08%. These increases were partially
offset by decreases in other store expenses of .13% and administrative
expense of .29%. Pre-opening costs were $90,000 in fiscal 1996.
Amortization expense increased in fiscal 1997 to $1,956,000 compared to
$1,826,000 in fiscal 1996 and $2,954,000 in fiscal 1995. The increase in
fiscal 1997, as compared to fiscal 1996, was the result of increased
amortization of deferred escalation rents and deferred pre-store opening
costs partially offset by decreased amortization of goodwill and
deferred financing costs. The decline in fiscal 1996 was the result of
decreased amortization of goodwill and deferred escalation rents as
compared to fiscal 1995 which included the write off of goodwill on the
sale of the Pennsylvania stores.
Interest Expense:
Interest expense totaled $4.3 million in fiscal 1997 compared to $3.5
million in fiscal 1996 and $4.6 million in fiscal 1995. The increase in
fiscal 1997, as compared to fiscal 1996, was due to an increase in the
average debt outstanding since November 2, 1996 partially offset by
lower interest rates on the Registrant's credit facility. The decrease
in fiscal 1996, as compared to fiscal 1995, resulted from an overall
reduction in debt levels coupled with lower rates on the Registrant's
bank credit facility. Interest income was $0.3 million in fiscal 1997
compared to $0.2 million in fiscal 1996 and $0.4 million in fiscal 1995.
Income Taxes:
The Registrant recorded a tax provision of $0.6 million in fiscal 1997
and $0.3 million in fiscal 1996 and a tax benefit of $0.2 million in
fiscal 1995. See Note 15 of Notes to Consolidated Financial Statements.
Net Income:
The Registrant had net income of $1,064,000 or $.90 per share in fiscal
1997 compared to net income of $1,396,000 or $1.13 per share in fiscal
1996. 1997 results included a net gain after tax on real estate
transactions of $413,000 or $.37 per share. Earnings before interest,
taxes, depreciation and amortization ("EBITDA") for fiscal 1997 were
$15,744,000 as compared to $15,107,000 in fiscal 1996. Fiscal 1997
EBITDA includes $656,000 as a result of the gain on real estate
transactions.
Fiscal 1995 resulted in a net loss of $191,000 or $.29 per share after
an extraordinary charge of $1,009,000 or $.90 per share for the write
off of expenses related to the early extinguishment of debt and a charge
for the cumulative effect of a change in accounting for post-employment
benefits of $129,000 or $.12 per share in fiscal 1995. 1995 results
included a net gain on real estate transactions of $259,000 or $.23 per
share. Excluding the net loss from the sale of, and operating losses
from, the two Pennsylvania stores sold on May 23, 1995, income before
the extraordinary item and the change in accounting would have been
$1,802,000 or $1.49 a share for fiscal 1995. EBITDA for fiscal 1995 were
$17,205,000 after the gain of $474,000 on real estate transactions.
Shares outstanding were 1,117,150 for fiscal 1997 and 1,118,150 for
fiscal 1996 and fiscal 1995. Per share amounts for fiscal 1997, 1996 and
1995 are after Preferred Stock dividends of $56,667, $136,000 and
$136,000, respectively.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the FASB issued SFAS No. 128, "Earnings per Share".
This Statement establishes standards for computing and presenting
earnings per share and applies to entities with publicly held common
stock or potential common stock. This Statement simplifies the standards
for computing earnings per share and makes them comparable to
international EPS standards. It replaces the presentation of primary EPS
with a presentation of basic EPS. It also requires dual presentation of
basic and diluted EPS on the face of the income statement for all
entities with complex capital structures and requires a reconciliation
of the numerator and denominator of the basic EPS computation to the
numerator and denominator of the diluted EPS computation. The Registrant
does not expect a material impact from adopting the provisions of SFAS
No. 128 which becomes effective for the Registrant in the first quarter
of fiscal 1998.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." This Statement establishes standards for reporting and display
of comprehensive income and its components (revenue, expenses, gains,
and losses) in a full set of general-purpose financial statements. This
Statement requires that all items that are required to be recognized
under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same
prominence as other financial statements. The Registrant does not expect
a material impact from adopting the provisions of SFAS No. 130 which
becomes effective for the Registrant in fiscal 1999.
In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments
of an Enterprise and Related Information." This Statement establishes
standards for the way that public business enterprises report
information about operating segments in annual financial statements and
requires that those enterprises report selected information about
operating segments in interim financial reports issued to shareholders.
It also establishes standards for related disclosures about products and
services, geographic areas, and major customers. The Registrant does not
expect a material impact from adopting the provisions of SFAS No. 131
which becomes effective for the Registrant in fiscal 1999.
Item 8. Financial Statements and Supplementary Data
See Consolidated Financial Statements and Schedules included in Part IV,
Item 14.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
As previously reported in Form 8-K filed November 1, 1996 and Form 8-K/A
filed December 4, 1996, on October 25, 1996, Amper, Politziner and
Mattia was appointed to serve as the independent public accountants for
the Registrant for the fiscal year ended November 2, 1996. Deloitte &
Touche, LLP ("Deloitte") had served as the Registrant's independent
public accountants for the fiscal year ended October 28, 1995 and until
Deloitte's dismissal on October 25, 1996. The decision to dismiss
Deloitte and appoint Amper, Politziner and Mattia was approved by the
Registrant's Audit Committee and Board of Directors.
In connection with the audits of the fiscal year ended October 28, 1995,
and the subsequent interim period through October 25, 1996, there were
no disagreements with Deloitte on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or
procedures, which disagreements if not resolved to Deloitte's
satisfaction would have caused them to make reference in connection with
their opinion to the subject matter of the disagreement. The
Registrant's audit report issued by Deloitte contained no adverse
opinion or disclaimer of opinion, and was not qualified or modified as
to uncertainty, audit scope, or accounting principles.
Part III
Item 10. Directors and Executive Officers of the Registrant
The information required in response to this item is contained in the
Registrant's definitive proxy statement to be filed pursuant to
Regulation 14A under the caption "Directors and Executive Officers of
the Registrant" and such information is incorporated herein by
reference.
Item 11. Executive Compensation
The information required in response to this item is contained in the
Registrant's definitive proxy statement to be filed pursuant to
Regulation 14A under the caption "Executive Compensation" and such
information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The information required in response to this item is contained in the
Registrant's definitive proxy statement to be filed pursuant to
Regulation 14A under introductory paragraphs and under the captions
"Principal Shareholders" and "Election of Directors" and such
information is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
The information required in response to this item is contained in the
Registrant's definitive proxy statement to be filed pursuant to
Regulation 14A under the caption "Executive Compensation - Certain
Transactions" and such information is incorporated herein by reference.
Part IV
Item 14. Exhibits, Financial Statement Schedules,and Reports on Form 8-K
a.1. Audited financial statements and Page
No.
supplementary data
Independent Auditors' Report F-1-2
Foodarama Supermarkets, Inc. and
Subsidiaries Consolidated Financial
Statements:
Balance Sheets as of November 1, 1997 F-3-4
and November 2, 1996.
Statements of Operations for each of the F-5
fiscal years ended November 1, 1997,
November 2, 1996 and October 28, 1995.
Statements of Shareholders' Equity F-6
for each of the fiscal years ended
November 1, 1997, November 2, 1996
and October 28, 1995.
Statements of Cash Flows for each of the F-7
fiscal years ended November 1, 1997,
November 2, 1996 and October 28, 1995.
Notes to Consolidated Financial Statements F-8 to 30
a.2. Financial Statement Schedules
Schedule II S-1
Schedules other than Schedule II have been
omitted because they are not applicable.
a.3. Exhibits E-1 to 6
b. Reports on Form 8-K
No reports on Form 8-K were required to be filed
during the fourth quarter of fiscal 1997.
* * * * * *
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
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)
/S/ Michael Shapiro
Michael Shapiro
Senior Vice President,
Chief Financial Officer
/S/ Joseph C. Troilo
Joseph C. Troilo
Senior Vice President,
Principal Accounting Officer
Date: January 29, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
Name Title Date
/S/ Joseph J. Saker
Joseph J. Saker Chairman of the Board January 27, 1998
of Directors and President,
Chief Executive Officer
/S/ Charles T. Parton
Charles T. Parton Director January 28, 1998
Albert A. Zager Director
/S/ Richard Saker
Richard Saker Executive Vice President, January 27, 1998
Secretary and Director,
Chief Operating Officer
Independent Auditors' Report
Board of Directors and Shareholders
Foodarama Supermarkets, Inc.
Freehold, New Jersey
We have audited the accompanying consolidated balance sheets of Foodarama
Supermarkets, Inc. and Subsidiaries as of November 1, 1997 and November 2,
1996 and the related consolidated statements of operations, shareholders'
equity and cash flows for the fiscal years ended November 1, 1997 and
November 2, 1996. 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 audit. The consolidated
statements of operations, shareholders' equity and cash flows of Foodarama
Supermarkets Inc. and Subsidiaries for the fiscal year ended October 28,
1995 were audited by other auditors whose report dated January 25, 1996
expressed an unqualified opinion on those statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 November 1, 1997 and November 2, 1996 and the
results of their operations and their cash flows for the fiscal years
ended November 1, 1997 and November 2, 1996 in conformity with generally
accepted accounting principles.
In connection with our audits of the financial statements referred to
above, we audited the financial schedule listed under Item 14. In our
opinion, the financial schedule, when considered in relation to the
financial statements taken as a whole, presents fairly, in all material
respects, the information stated therein.
Amper, Politziner & Mattia P.A.
AMPER, POLITZINER & MATTIA P.A.
January 23, 1998
Edison, New Jersey
Independent Auditors' Report
Board of Directors and Shareholders
Foodarama Supermarkets, Inc.
Freehold, New Jersey
We have audited the accompanying consolidated statements of operations,
shareholders' equity and cash flows for the fiscal year ended October
28, 1995 of Foodarama Supermarkets, Inc. and Subsidiaries. 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 audit.
We conducted our audit 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 audit
provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the results of operations and cash flows of
Foodarama Supermarkets, Inc. and Subsidiaries for the fiscal year ended
October 28, 1995 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
January 25, 1996
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
November 1, 1997 and November 2, 1996
Assets
1997 1996
Current assets
Cash and cash equivalents $ 3,678,000 $ 3,114,000
Merchandise inventories 33,585,000 31,654,000
Receivables and other current assets 3,576,000 2,731,000
Prepaid income taxes 392,000 974,000
Related party receivables - Wakefern 5,389,000 6,032,000
Related party receivables - other 238,000 1,259,000
46,858,000 45,764,000
Property and equipment
Land 93,000 1,650,000
Buildings and improvements 829,000 1,867,000
Leasehold improvements 32,064,000 33,238,000
Equipment 65,935,000 62,314,000
Property under capital leases 19,443,000 15,259,000
118,364,000 114,328,000
Less accumulated depreciation
and amortization 62,210,000 55,592,000
56,154,000 58,736,000
Other assets
Investments in related parties 9,256,000 9,215,000
Intangibles 5,100,000 5,475,000
Other 2,847,000 3,730,000
Related party receivables - Wakefern 1,191,000 1,029,000
Related party receivables - other 94,000 232,000
18,488,000 19,681,000
$ 121,500,000 $ 124,181,000
See notes to consolidated Financial Statements.
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
November 1, 1997 and November 2, 1996
Liabilities and Shareholders' Equity
1997 1996
Current liabilities
Current portion of long-term debt $ 6,647,000 $ 5,182,000
Current portion of long-term debt,
related party 738,000 589,000
Current portion of obligations under
capital leases 469,000 67,000
Deferred income tax liability 945,000 1,261,000
Accounts payable
Related party - Wakefern 23,723,000 23,850,000
Others 3,763,000 5,100,000
Accrued expenses 7,055,000 6,659,000
43,340,000 42,708,000
Long-term debt 17,874,000 26,852,000
Long-term debt, related party 1,797,000 757,000
Obligations under capital leases 17,325,000 13,634,000
Deferred income taxes 3,828,000 2,886,000
Other long-term liabilities 6,021,000 5,329,000
46,845,000 49,458,000
Mandatory redeemable preferred stock,
$12.50 par; authorized 1,000,000
shares; issued and outstanding -0-
shares November 1, 1997; 136,000
shares November 2, 1996 - 1,700,000
Shareholders' equity
Common stock, $1.00 par; authorized
2,500,000 shares; issued 1,621,627
shares 1,622,000 1,622,000
Capital in excess of par 2,351,000 2,351,000
Retained earnings 33,971,000 32,964,000
37,944,000 36,937,000
Less 504,477 shares November 1, 1997;
503,477 shares November 2, 1996,
held in treasury, at cost 6,629,000 6,622,000
31,315,000 30,315,000
$ 121,500,000 124,181,000
See notes to consolidated financial statments
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Fiscal Years Ended November 1, 1997, November 2, 1996
and October 28, 1995
1997 1996 1995
Sales $ 636,731,000 $ 601,143,000 $ 586,477,000
Cost of merchandise sold 475,764,000 449,077,000 438,222,000
Gross profit 160,967,000 152,066,000 148,255,000
Operating, general and
administrative expenses 155,939,000 146,992,000 142,849,000
Income from operations 5,028,000 5,074,000 5,406,000
Other (expense) income:
Gain on sale of stores - - 474,000
Gain on real estate
transactions 656,000 - -
Interest expense (4,273,000) (3,522,000) (4,578,000)
Interest income 279,000 183,000 432,000
(3,338,000) (3,339,000) (3,672,000)
Income before taxes,
extraordinary item and
cumulative effect of
change in accounting 1,690,000 1,735,000 1,734,000
Income tax provision (626,000) (339,000) (787,000)
Income before
extraordinary item and
cumulative effect of
change in accounting 1,064,000 1,396,000 947,000
Extraordinary item:
Early extinguishment of
debt (net of tax benefit
of $839,000) - - (1,009,000)
Cumulative effect of
change in accounting
(net of tax benefit
of $107,000) - - (129,000)
Net income (loss) $ 1,064,000 $ 1,396,000 $ (191,000)
Per share information:
Income before extraordinary
item and cumulative effect
of change in accounting $ .90 $ 1.13 $ .73
Extraordinary item - - (.90)
Cumulative effect of change
in accounting - - (.12)
Net income (loss) per
common share $ .90 $ 1.13 $ ( .29)
Weighted average shares
outstanding 1,117,150 1,118,150 1,118,150
See notes to consolidated financial statements.
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
Fiscal Years Ended November 1, 1997, November 2, 1996 and October 28, 1995
Capital
Common Stock in Excess Retained
Shares Amount of Par Earnings
Balance - October 29,1994
1,621,627 $ 1,622,000 $ 2,351,000 $ 32,318,000
Net loss 1995 - - - (191,000)
Minimum pension
liability adjustment - - - -
Balance - October 28,
1995 1,621,627 1,622,000 2,351,000 32,127,000
Net income 1996 - - - 1,396,000
Preferred stock
dividends paid -
$4.11 per share - - - (559,000)
Minimum pension
liability adjustment - - - -
Balance - November 2,
1996 1,621,627 1,622,000 2,351,000 32,964,000
Net income 1997 - - - 1,064,000
Shares repurchased - - - -
Preferred stock
dividends paid -
$.42 per share - - - (57,000)
Balance - November 1,
1997 1,621,627 $ 1,622,000 $ 2,351,000 $ 33,971,000
Minimum
Pension
Liability Treasury Stock Total
Adjustment Shares Amount Equity
Balance - October 29,
1994 $ (685,000) $ (503,477) $(6,622,000) $ 28,984,000
Net Loss 1995 - - - (191,000)
Minimum pension
liability adjustment (121,000) - - (121,000)
Balance - October 28,
1995 (806,000) (503,477) (6,622,000) 28,672,000
Net Income 1996 - - - 1,396,000
Preferred Stock
dividends paid -
$4.11 per share - - - (559,000)
Minimum pension
liability adjustment 806,000 - - 806,000
Balance - Novemeber 2,
1996 - (503,477) (6,622,000) 30,315,000
Net Income 1997 - - - 1,064,000
Shares repurchased - (1,000) (7,000) (7,000)
Preferred stock
dividends paid -
$.42 per share - - - (57,000)
Balance - November 1,
1997 - (504,477) $ (6,629,000) $ 31,315,000
See notes to consolidated financial statements.
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Fiscal Years Ended November 1, 1997, November 2, 1996 and October 28,
1995
1997 1996 1995
Cash flows from operating
activities
Net income (loss) $ 1,064,000 $ 1,396,000 $ (191,000)
Adjustments to reconcile net
income (loss) to net cash
from operating activities
Depreciation 8,104,000 8,207,000 8,371,000
Amortization, intangibles 375,000 563,000 1,440,000
Amortization, deferred
financing costs 642,000 820,000 846,000
Amortization, deferred rent
escalation 434,000 353,000 539,000
Amortization, other assets 505,000 90,000 129,000
Gain on real estate
transactions (656,000) - (474,000)
Deferred income taxes 626,000 136,000 (729,000)
Loss on disposal of store
property and equipment
and other assets - - 93,000
(Increase) decrease in
Merchandise inventories (1,931,000) (3,985,000) 2,131,000
Receivables and other
current assets (845,000) 185,000 946,000
Prepaid income taxes 582,000 (974,000) -
Other assets (78,000) 2,484,000 1,928,000
Related party
receivables - Wakefern 481,000 (1,386,000) 1,065,000
Increase (decrease) in
Accounts payable (1,464,000) 2,958,000 (5,551,000)
Income taxes payable - (77,000) (168,000)
Other liabilities 2,286,000 (1,042,000) (623,000)
Other - - (121,000)
10,125,000 9,728,000 9,631,000
Cash flows from investing
activities
Net proceeds from the sale
of property and equipment - - 41,000
Net proceeds from the sale
of stores - - 6,649,000
Net proceeds from real
estate transactions 2,938,000 - -
Cash paid for the purchase
of property and equipment (3,620,000) (6,645,000) (3,755,000)
(Increase) decrease in
related party
receivables - other 1,159,000 95,000 (246,000)
477,000 (6,550,000) 2,689,000
See notes to consolidated financial statements.
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows - (continued)
Fiscal Years Ended November 1, 1997, November 2, 1996 and October 28,
1995
Cash flows from financing
activities
Payment for redemption of
preferred stock (1,700,000) - -
Preferred stock dividend
payments (57,000) (559,000) -
Proceeds from issuance
of debt 1,700,000 13,202,000 35,005,000
Principal payments under
long-term debt (9,213,000) (15,768,000) (46,618,000)
Principal payments under
capital lease obligations (91,000) (197,000) (1,380,000)
Principal payments under
long-term debt, related
party (450,000) (177,000) -
Deferred financing costs (227,000) - -
Debt restructuring costs - - (1,434,000)
(10,038,000) (3,499,000) (14,427,000)
Net change in cash and cash
equivalents 564,000 (321,000) (2,107,000)
Cash and cash equivalents,
beginning of year 3,114,000 3,435,000 5,542,000
Cash and cash equivalents,
end of year $ 3,678,000 $ 3,114,000 $ 3,435,000
Supplemental disclosures of
cash paid (received)
Interest $ 4,277,000 $ 3,526,000 $ 5,105,000
Income taxes (606,000) 1,263,000 494,000
See notes to consolidated financial statement.
Notes to Consolidated Financial Statements.
Note 1 - Summary of Significant Accounting Policies
Nature of Operations
Foodarama Supermarkets, Inc. and Subsidiaries operate
20 ShopRite supermarkets primarily in Central New
Jersey. The Company is a member of Wakefern Food
Corporation ("Wakefern"), the largest retailer-owned
food cooperative in the United States.
Fiscal Year
The Company's fiscal year ends on the Saturday closest
to October 31. Fiscal 1997 consists of the 52 weeks
ended November 1, 1997, fiscal 1996 consists of the 53
weeks ended November 2, 1996 and fiscal 1995 consists
of the 52 weeks ended October 28, 1995.
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.
Industry Segment
The Company operates in one industry segment, the
retail sale of food and non-food products, primarily in
the central New Jersey region.
Reclassifications
Certain reclassifications have been made to prior
years' financial statements in order to conform to the
current year presentation.
Use of Estimates
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that
affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported
amounts of revenues and expenses during the reporting
period. Actual results could differ from those
estimates.
Cash Equivalents
The Company considers all highly liquid debt
instruments purchased with an original 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 under the retail method.
Note 1 - Summary of Significant Accounting Policies - (continued)
Property and Equipment
Property and equipment is stated at cost and is
depreciated on a straight-line basis over the estimated
useful lives of between three and ten years for
equipment, the shorter of the useful life or lease term
for leasehold improvements, and twenty years for
buildings.
Property and equipment under capital leases is recorded
at the lower of fair market value or the net present
value of the minimum lease payments. They are
depreciated on a straight-line basis over the shorter
of the related lease terms or its useful life.
Investments
The Company's investment in its principal supplier,
Wakefern, is stated at cost (see Note 4).
Intangibles
Intangibles consist of goodwill, favorable operating
lease costs and a covenant not to compete. Goodwill is
being amortized on a straight-line basis over periods
from 15 to 37 years. The favorable operating lease
costs are being amortized on a straight-line basis over
the terms of the related leases which range from 14 to
31 years. The covenant not to compete was amortized on
a straight-line basis over the contractual life of the
agreements of six years, ending March 1996.
Deferred Financing Costs
Deferred financing costs are being amortized over the
life of the related debt using the effective interest
method.
Postretirement Benefit other than Pensions
The Company accrues for the cost of providing
Postretirement benefits, principally supplemental
income payments and limited medical benefits, over the
working careers of the officers in the plan.
Postemployment Benefits
Effective October 30, 1994, the Company adopted
Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Postemployment Benefits"
(SFAS No. 112). In accordance with SFAS No. 112, the
Company accrues for the expected cost of providing
postemployment benefits, primarily short-term
disability payments, over the working careers of its
employees. The Company previously expensed the cost of
these benefits as claims were paid.
Note 1 - Summary of Significant Accounting Policies - (continued)
Advertising
Advertising costs are expensed as incurred.
Advertising expense was $13,204,000, $14,028,000 and
$12,776,000, for the fiscal years 1997, 1996 and 1995,
respectively.
Preopening Costs
Costs associated with the opening of new stores are
amortized over a period of twelve months 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.
Until a store is closed, operating results continue to
be reported.
Earnings (Loss) Per Share
The computation of earnings (loss) per share is based
on the weighted average number of common shares
outstanding during each year (1,117,150 shares in 1997
and 1,118,150 shares in 1996 and 1995) and mandatory
preferred stock dividend requirements of $57,000 in
fiscal 1997 and $136,000 in fiscal 1996 and 1995.
Fully diluted net income (loss) per share has not been
presented since the amount would be antidilutive or
would not result in a material dilution of net income
(loss) per share.
Note 2 - Concentration of Cash Balance
As of November 1, 1997 and November 2, 1996 cash
balances of approximately $854,000 and $1,051,000,
respectively, were maintained in bank accounts insured
by the Federal Deposit Insurance Corporation (FDIC).
These balances exceed the insured amount of $100,000.
Note 3 - Receivables and Other Current Assets
November 1, November 2,
1997 1996
Accounts receivable $ 2,676,000 $ 1,867,000
Prepaids 1,279,000 979,000
Rents receivable 94,000 550,000
Less allowance for
uncollectible accounts (473,000) (665,000)
$ 3,576,000 $ 2,731,000
Note 4 - Related Party Transactions
Wakefern Food Corporation
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 operated
("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 $450,000
at November 1, 1997 and November 2, 1996. The Company
has a 13% investment in Wakefern of $8,427,000 at
November 1, 1997 and November 2, 1996. Wakefern is
operated on a cooperative basis for its members. The
shares of stock in Wakefern are assigned to and held by
Wakefern as collateral for any obligations due
Wakefern. In addition, the obligations to Wakefern are
personally guaranteed by principal
officers/shareholders of the Company. As of November
1, 1997 and November 2, 1996, the Company was obligated
to Wakefern for $757,000 and $809,000, respectively,
for the increase in its required investment (see Note
10 Long-Term Debt, Related Party).
The Company also has an investment of approximately 13%
in Insure-Rite, Ltd., a company affiliated with
Wakefern, which was $829,000 at November 1, 1997 and
$788,000 at November 2, 1996. Insure-Rite, Ltd.
provides the Company with liability and property
insurance coverage.
In fiscal 1997, Insure-Rite, Ltd. made two
retrospective premium calls for the 1992/93 and the
1993/94 policy years for $869,000 and $770,000,
respectively. The premium calls represent actuarial
projections of claims to be paid in excess of the
deposit premium paid by the members. The Company also
has a balance due of $139,000 for premium calls for the
1991/92 policy year. After the 1993/94 policy year,
Insure-Rite, Ltd. changed its policy to provide for a
fixed premium covering all insured losses and the
elimination of premium calls. The premium calls are
payable in scheduled semi-annual payments through
September 1999. No interest is being charged on this
obligation. At November 1, 1997 and November 2, 1996,
$686,000 and $537,000 was included in current portion
of long-term debt, respectively, and $1,092,000 was the
long-term portion at November 1, 1997. Insurance
premiums paid to Insure-Rite, Ltd. for fiscal years
1997 and 1996 was $2,702,000 and $2,738,000
respectively.
Note 4 - Related Party Transactions - (continued)
Wakefern Food Corporation - (continued)
As a stockholder member of Wakefern, the Company earns
a share of an annual Wakefern patronage dividend. The
dividend is based on the distribution of operating
profits on a pro rata basis in proportion to the dollar
volume of business transacted by each member with
Wakefern during each fiscal year. 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 merchandise in
the consolidated financial statements. For fiscal
1997, 1996 and 1995, the patronage dividends were
$6,633,000, $6,905,000 and $7,246,000, respectively.
At November 1, 1997 and November 2, 1996, the Company
has current receivables due from Wakefern of
approximately $5,389,000 and $6,032,000, respectively,
representing patronage dividends, vendor rebates,
coupons and other receivables due in the ordinary
course of business and a noncurrent receivable
representing a deposit of approximately $1,191,000 and
$1,029,000, respectively.
In September 1987, the Company and all other
stockholder members of Wakefern, entered into an
agreement, as amended in 1992, with Wakefern which
provides for certain commitments and restrictions on
all stockholder members of Wakefern. The agreement
contains an evergreen provision providing for an
indefinite term and is subject to termination ten years
after the approval of 75% of the outstanding voting
stock of Wakefern. 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
its lost profit. Similar payments are due if Wakefern
loses volume by reason of the sale of one or more of a
stockholder's stores, merger with another entity or on
the transfer of a controlling interest in the
stockholder.
The Company fulfilled its obligation to purchase a
minimum of 85% in certain defined product categories
from Wakefern for all periods presented. The Company's
merchandise purchases from Wakefern, including direct
store delivery vendors processed by Wakefern,
approximated $444,000,000, $416,000,000 and
$404,000,000 for the fiscal years 1997, 1996 and 1995,
respectively.
Note 4 - Related Party Transactions - (continued)
Wakefern Food Corporation - (continued)
Wakefern charges the Company for, and provides the
Company with product and support services in numerous
administrative functions. These services include
advertising, insurance, supplies, technical support for
communications and electronic payment systems,
equipment purchasing and the coordination of coupon
processing.
In addition to its investment in Wakefern, which
carries only voting rights, the Company's President
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.
Other
The Company has receivables from related parties that
include shareholders, directors, officers and real
estate partnerships. At November 1, 1997 and November
2, 1996, approximately $307,000 and $840,000
respectively, of these receivables, consist of notes
bearing interest at 7% to 9%. These receivables have
been classified based upon the scheduled payment terms.
The remaining amounts are not due upon any specified
date and do not bear interest. The Company's
management has classified these loans based upon
expected payment dates.
Fair Value
Determination of the fair value of the above
receivables is not practicable due to their related
party nature. As the Company's investments in Wakefern
can only be sold to Wakefern at amounts that
approximate the Company's cost, it is not practicable
to estimate the fair value of such stock.
Note 5 - Intangibles
November 1, November 2,
1997 1996
Goodwill $ 3,493,000 $ 3,493,000
Favorable operating
lease costs 4,685,000 4,685,000
8,178,000 8,178,000
Less accumulated
amortization 3,078,000 2,703,000
$ 5,100,000 $ 5,475,000
<PAGE>
Note 6 - Other Assets
November 1, November 2,
1997 1996
Cash collateral for
workers compensation
insurance $ 905,000 $ 927,000
Deferred financing costs 696,000 1,156,000
Deposits 560,000 394,000
Other 686,000 1,253,000
$ 2,847,000 $ 3,730,000
Note 7- Accrued Expenses
November 1, November 2,
1997 1996
Payroll and payroll
related expenses $ 3,579,000 $ 3,263,000
Insurance 324,000 86,000
Sales, use and other
taxes 924,000 900,000
Interest 207,000 207,000
Employee benefits 569,000 544,000
Occupancy costs 964,000 1,058,000
Real estate taxes 276,000 316,000
Other 212,000 285,000
$ 7,055,000 $ 6,659,000
Note 8 - Real Estate Transactions
In order to repay indebtedness under the Revolving
Credit and Term Loan agreement on a timely basis (see
Note 9 Long-Term Debt), the Company developed an Asset
Redeployment Program. This program consists of the
sale of the assets of two supermarkets, located in
Bethlehem and Whitehall, Pennsylvania, the sale of a
real estate partnership interest in a non-supermarket
property located in Shrewsbury, New Jersey and a
shopping center in West Long Branch in which the
Company operates a supermarket, the sale/leaseback or
mortgaging of buildings owned by the Company and
located in Linden and Aberdeen, New Jersey and the
financing of equipment at three operating locations in
Neptune, Piscataway and Sayreville, New Jersey.
On October 8, 1997, the Company sold its Shrewsbury,
New Jersey real estate partnership interest, which
resulted in proceeds and a gain of $735,000.
<PAGE>
Note 8 - Real Estate Transactions - (continued)
On October 6, 1997, the Company sold its West Long
Branch, New Jersey real estate partnership interest,
which resulted in proceeds and a gain of $140,000.
On April 10, 1997, the Company sold its lessee interest
in a Colonia, New Jersey location to the subtenant.
The sale provided proceeds and a gain of $245,000.
On February 26, 1997, the Company bought out its lease
on the East Northport, New York location for $331,000,
which resulted in a net loss of $342,000 after the
write off of related fixed assets and expenses.
On February 3, 1997, the Company bought out its lease
on the Oakhurst, New Jersey location for $218,000 and
had a loss on fixed assets written off $67,000. The
transaction was reserved for in previous years in the
amount of $261,000, therefore the transaction resulted
in a net loss of $24,000.
The Company had other miscellaneous transactions that
resulted in a net loss of $97,000 in fiscal year 1997.
On May 23, 1995, the Company sold its two operating
locations in Pennsylvania to another Wakefern member
(see Note 16 Commitments and Contingencies). The sale
provided proceeds to the Company of $5,700,000 plus
merchandise inventory of $2,300,000 and the return of
its investment in Wakefern of $1,200,000. The proceeds
were used to reduce outstanding debt as follows:
$2,000,000 repaid Term Loan A, $3,000,000 was applied
against Term Loan B, $1,200,000 of equipment leases
were fully repaid, $900,000 repaid debt due to Wakefern
and the balance of the proceeds was applied against
accounts payable and the Revolving Note. The sale
resulted in a loss of $96,000.
On February 3, 1995, the Company sold an owned location
in Neptune, New Jersey which had been operated as a
supermarket until September 1993. The sale provided
net proceeds of $949,000 and resulted in a gain of
$570,000.
<PAGE>
Note 9 - Long-term Debt
Long-term debt consists of the following:
November 1, November 2,
1997 1996
Term loan C $ 9,500,000 $ 12,500,000
Stock redemption note 1,700,000 -
Revolving note 3,773,000 7,809,000
Other notes payable 9,548,000 11,725,000
24,521,000 32,034,000
Less current portion 6,647,000 5,182,000
$ 17,874,000 $ 26,852,000
On February 15, 1995, the Company entered into a
Revolving Credit and Term Loan Agreement ("the
Agreement"), which was assigned to a financial
institution and amended and restated as of May 2, 1997
and had an additional amendment as of October 28, 1997
("the Amended Agreement"). The Amended Agreement is
collateralized by substantially all of the Company's
assets and provides for a total commitment of
$30,200,000. The Amended Agreement provides the
Company with the option to borrow any of the loan
amounts in the agreement under a Eurodollar loan rate
based on LIBOR. Eurodollar loans must be borrowed in
multiples of $1,000,000, no more than three Eurodollar
loans can be outstanding at any one time, and the
Eurodollar loan term cannot exceed six months.
Interest rates on the Eurodollar loans are fixed for
that loan term based on the borrowing terms.
The Agreement consisted of three Term Loans (A, B, and
C) and a Revolving Note. The Amended Agreement
consists of the remaining Term Loan C, a Stock
Redemption Note and a Revolving Note. Term Loan A
totaled $2,000,000, and was due within six months from
closing. Term Loan B totaled $8,500,000, and was due
within 1 year from closing. As of November 2, 1996,
Term Loans A and B have been fully repaid.
Term Loan C totaled $12,500,000 and bore interest at
1.25% over prime under the original Agreement. Under
the Amended Agreement dated May 2, 1997, Term Loan C
totaled $11,000,000, bears interest at .5% over prime
or 2.50% over LIBOR, and is payable in quarterly
installments through February 15, 2000. At November 1,
1997, the principal balance due on Term Loan C was
$9,500,000 and the full balance was under a Eurodollar
loan rate, expiring December 1997, with a fixed
interest rate of 9.21875%.
Note 9 - Long-term Debt - (continued)
The Stock Redemption Note totaled $1,700,000 and was
used to reimburse the funding of the redemption of the
Preferred Stock on March 31, 1997. The Stock
Redemption Note bears interest at .5% over prime or
2.50% over LIBOR, and is payable in quarterly
installments commencing March 31, 1998 through February
15, 2000. At November 1, 1997, the entire Stock
Redemption Note was under a Eurodollar loan rate,
expiring December 1997, with a fixed interest rate of
9.21875%.
The Revolving Note, with a total availability, based on
60% of eligible inventory, of up to $17,500,000, bears
interest at .25% over prime (1.25% over prime under the
original Agreement) or 2.25% over LIBOR. A commitment
fee of 1/2 of 1 percent is charged on the unused portion
of the Revolving Note. At November 1, 1997, $1,800,000
of the revolving note was under a Eurodollar loan rate,
expiring December 1997, with a fixed interest rate of
8.96875%. The remaining principal balance of
$1,973,000 was at a rate of 8.75% (prime plus .25%).
The prime rate on November 1, 1997 was 8.50% and on
November 1, 1996 was 8.25%.
The Revolving Note matures February 15, 2000. The
Company had a $2,000,000 letter of credit outstanding
at November 1, 1997 and November 2, 1996 and available
credit under the revolving note was $11,727,000 and
$7,691,000, respectively. All cash receipts are
required to be deposited each day and applied against
the Revolving Note balance. Disbursements are charged
as they are paid and increase the Revolving Note
balance. As of November 1, 1997 and November 2, 1996,
$5,201,000 and $4,904,000 of cash receipts on hand or
in transit were restricted for application against the
Revolving Note balance.
The Amended Agreement contains certain affirmative and
negative covenants which, among other matters,
restrict payment of common dividends, and require the
maintenance of a debt service ratio.
Pursuant to the provisions of loan agreements which
terminated on February 15, 1995, the Company was
required to pay a special premium totaling $1,100,000.
Additionally, the Company paid the new lenders a
facility fee of $1,000,000 and an annual administrative
fee of $150,000. The Company recorded an extraordinary
write-off of $1,848,000 in 1995 on the early
extinguishment of debt.
Note 9 - Long-term Debt - (continued)
On January 25, 1996, the Company financed, and pledged
as collateral, equipment which cost approximately
$9,942,000. The note for $4,068,000 bears interest at
10.58% and is payable in monthly installments over its
four year term. At November 1, 1997 and November 2,
1996, the balance outstanding on this loan was
$2,578,000 and $3,503,000, respectively and is included
in other notes payable. Term Loan B was fully repaid
from the proceeds of this equipment financing and from
the collection of other non-operating assets.
The balance of other notes payable consists of various
equipment loans. These notes bear interest ranging
from 5.87% to 10.58% and the due dates range from March
1999 to November 2004. At November 1, 1997 and
November 2, 1996, property and equipment which cost
approximately $20,371,000, was pledged as collateral
for these notes.
Aggregate maturities of long-term debt are as follows:
Fiscal Year
1998 $ 6,647,000
1999 6,619,000
2000 7,756,000
2001 772,000
2002 843,000
Thereafter 1,884,000
As of November 1, 1997, the fair value of long-term
debt was approximately equivalent to its carrying
value, due to the fact that the interest rates
currently available to the Company for debt with
similar terms are approximately equal to the interest
rates for its existing debt.
Note 10 - Long-term Debt, Related Party
As of November 1, 1997 the Company was indebted for an
investment in Wakefern in the amount of $757,000 and to
Insure-Rite, Ltd. in the amount of $1,778,000 (see Note
4). The debt is non-interest bearing and payable in
scheduled installments as follows:
Fiscal Year
1998 $ 738,000
1999 1,263,000
2000 182,000
2001 182,000
2002 170,000
Determination of the fair value of the above long-term
debt is not practicable due to its related party
nature.
Note 11 - Other Long-term Liabilities
November 1, November 2,
1997 1996
Deferred escalation rent $ 4,409,000 $ 3,975,000
Deferred compensation 859,000 760,000
Other 753,000 594,000
$ 6,021,000 $ 5,329,000
Note 12 - Long-term Leases
Capital Leases
November 1, November 2,
1997 1996
Real estate $ 19,443,000 $ 15,259,000
Less accumulated
amortization 5,406,000 4,600,000
$ 14,037,000 $ 10,659,000
On February 3, 1997, the Company sold the Aberdeen, New
Jersey store at a sale price of $2,300,000 which
resulted in a gain of $199,000. The store was leased
back for a lease term of twenty-five years. The lease
was capitalized and the gain was deferred and will be
amortized over the life of the lease.
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
November 1, 1997:
Fiscal Year
1998 $ 2,087,000
1999 2,087,000
2000 2,087,000
2001 2,101,000
2002 2,251,000
Thereafter 26,605,000
Total minimum lease payments 37,218,000
Less amount representing interest 19,424,000
Present value of net minimum
lease payments 17,794,000
Less current maturities 469,000
Long-term maturities $ 17,325,000
Included in the above are four leases on stores, one of
which is being leased from a partnership in which the
Company has a 40% limited partnership interest at
annual lease payments of $663,000 in fiscal 1997, and
$628,000 in fiscal 1996 and 1995. The 40% interest was
sold on October 6, 1997.
Note 12 - Long-term Leases - (continued)
Operating Leases
The Company is obligated under operating leases for
rent payments expiring at various dates through 2021.
Certain leases provide for the payment of additional
rentals based on certain escalation clauses and six
leases require a further rental payment based on a
percentage of the stores annual sales in excess of a
stipulated minimum. Percentage rent expense was
$219,000, $225,000 and $206,000 for the fiscal years
1997, 1996 and 1995, respectively. Under the majority
of the leases, the Company has the option to renew for
additional terms at specified rentals.
Total rental expense for all operating leases consists
of:
Fiscal 1997 Fiscal 1996 Fiscal 1995
Land and buildings $ 10,471,000 $ 9,824,000 $ 10,152,000
Less subleases (1,963,000) (2,140,000) (1,920,000)
$ 8,508,000 $ 7,684,000 $ 8,232,000
The minimum rental commitments under all noncancellable
operating leases reduced by income from noncancellable
subleases at November 1, 1997 are as follows:
Income from
Fiscal Land and Noncancellable Net Rental
Year Buildings Subleases Commitment
1998 $ 9,389,000 $ 1,538,000 $ 7,851,000
1999 9,385,000 1,199,000 8,186,000
2000 8,885,000 595,000 8,290,000
2001 8,406,000 506,000 7,900,000
2002 7,734,000 201,000 7,533,000
Thereafter 67,739,000 161,000 67,578,000
$ 111,538,000 $ 4,200,000 $ 107,338,000
The Company is presently leasing one of its
supermarkets, a garden center and liquor store, from a
partnership in which the president has an interest, at
an annual aggregate rental of $645,000, $591,000 and
$560,000 for the fiscal years 1997, 1996 and 1995,
respectively.
Note 13 - Mandatory Redeemable Preferred Stock
As of February 16, 1993, the Company received
$1,700,000 for the issuance of 136,000 shares of
Preferred Stock at $12.50 par value per share to
Wakefern Food Corporation. These securities were issued
partially to fund capital expenditures made in fiscal
1992.
Note 13 - Mandatory Redeemable Preferred Stock - (continued)
Dividends on the Preferred Stock are cumulative, accrue
at an annual rate of 8% for the first four years and
increase by 2% per year thereafter until redeemed, and
are payable when and as declared by the Company's board
of directors. The Preferred Stock was redeemed and
canceled on March 31, 1997, at par value, for
$1,700,000. As of the redemption date, all dividends
had been declared and paid.
Note 14 - Stock Options
On May 10, 1995, the Company's shareholders approved
the Foodarama Supermarkets, Inc. 1995 Stock Option Plan
which provides for the granting of options to purchase
up to 100,000 common shares until January 31, 2005, at
prices not less than fair market value at the date of
the grant. Options granted under the plan vest over a
period of three years from the date of grant. At
November 1, 1997, no options had been granted.
Note 15 - Income Taxes
The income tax provision (benefit) consists of the
following:
Fiscal 1997 Fiscal 1996 Fiscal 1995
Federal:
Current $ - $ - $ 412,000
Deferred 526,000 114,000 (699,000)
State and local:
Current - 203,000 135,000
Deferred 100,000 22,000 (7,000)
$ 626,000 $ 339,000 $ (159,000)
<PAGE>
Note 15 - Income Taxes - (continued)
The following tabulations reconcile the federal
statutory tax rate to the effective rate:
Fiscal Fiscal Fiscal
1997 1996 1995
Tax provision at the
statutory rate 34.0 % 34.0 % 34.0%
State and local income tax
provision, net of federal
income tax 5.9 % 5.9 % 9.0%
Goodwill amortization not
deductible for tax purposes 2.9 % 2.8 % -
Officers' life insurance
income not includable for
tax purposes (0.1)% (2.0)% -
Adjustment to prior years
tax provision (6.3)% (2.7)% -
Adjustment to contingent
tax liabilities - (19.0)% -
Other 0.6 % .5 % 2.5%
Actual tax provision 37.0 % 19.5 % 45.5%
Net deferred tax assets and liabilities consist of the
following:
November 1, November 2,
1997 1996
Current deferred tax assets:
Reserves $ 654,000 $ 687,000
Other 646,000 581,000
1,300,000 1,268,000
Current deferred tax
liabilities:
Patronage dividend
receivable (1,401,000) (1,426,000)
Inventories (194,000) (291,000)
Prepaid pension (451,000) (316,000)
Other (199,000) (496,000)
(2,245,000) (2,529,000)
Current deferred income
tax liability $ (945,000) $ (1,261,000)
Noncurrent deferred tax assets:
Alternative minimum tax
credits $ 66,000 $ 230,000
State loss
carryforward 664,000 630,000
Investment tax
credits - 1,089,000
Lease obligations 1,532,000 1,233,000
Other 380,000 397,000
2,642,000 3,579,000
Note 15 - Income Taxes - (continued)
Noncurrent deferred tax liabilities:
Depreciation of fixed
assets (4,606,000) (5,285,000)
Pension obligations (347,000) (311,000)
Other (1,517,000) (869,000)
(6,470,000) (6,465,000)
Noncurrent deferred income
tax liability $(3,828,000) $(2,886,000)
Note 16 - Commitments and Contingencies
Legal Proceedings
The Company is involved in various 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 effect
on the Company's financial position or results of
operations.
Guarantees
The Company remains contingently liable under leases
assumed by third parties. As of November 1, 1997, the
minimum annual rental under these leases amounted to
approximately $428,000, expiring at various dates
through 2000. The Company has not experienced and does
not anticipate any material nonperformance by such
third parties.
Contingencies
In May, 1995 the Company sold its two operating
locations in Pennsylvania. If the purchaser of these
supermarkets ceases to operate prior to May, 2000 the
Company may be liable for an unfunded pension
withdrawal liability. As of November 1, 1997 the
potential withdrawal liability was approximately
$860,000. The Company fully anticipates that the
purchaser of these stores, a Wakefern member, will
remain in operation throughout this period.
<PAGE>
Note 17 - Retirement and Benefit Plans
Defined Benefit Plans
The Company sponsors two defined benefit pension plans
covering administrative personnel and members of a
union. Employees covered under the administrative
pension plan earn benefits based upon percentage 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. As of November 1, 1997 and November 2,
1996, the plans held at fair market value $688,000 and
$523,000 in common stock of the Company.
Net pension expense consists of the following:
Fiscal Fiscal Fiscal
1997 1996 1995
Service cost - benefits earned
during the period $ 296,000 $ 308,000 $ 276,000
Interest cost on projected
benefit obligation 466,000 445,000 398,000
Actual return on plan assets (675,000) (621,000) (404,000)
Net amortization and deferral 277,000 360,000 154,000
Net pension cost $ 364,000 $ 492,000 $ 424,000
On September 30, 1997, the Company adopted an amendment
to freeze all future benefit accruals relating to the
plan covering administrative personnel. A curtailment
gain of $55,000 was recorded relating to this
amendment.
The following table sets forth the two pension plan's
funded status and amounts recognized in the Company's
consolidated financial statements at November 1, 1997
and November 2, 1996.
November 1, November 2,
1997 1996
Actuarial present value
of benefit obligations:
Vested benefits
obligation $ 5,162,000 $ 5,106,000
Non-vested benefits
obligation 336,000 218,000
Accumulated benefit
obligations $ 5,498,000 $ 5,324,000
Note 17 - Retirement and Benefit Plans - (continued)
Defined Benefit Plans - (continued)
Projected benefit
obligations $(5,498,000) $ (6,569,000)
Plan assets at fair
value 6,206,000 5,658,000
Plan assets in excess
of projected benefit
obligations 708,000 -
Projected benefit
obligations in excess
of plan assets - (911,000)
Unrecognized transition
asset (27,000) (36,000)
Unrecognized prior
service costs 348,000 381,000
Unrecognized loss from
prior experience,
amortized over eleven
and eight years 84,000 1,345,000
Prepaid pension cost $ 1,113,000 $ 779,000
The discount rate used in determining the actuarial
present value of the projected benefit obligation
ranged from 7.25% to 7.5% at November 1, 1997 and was
7.5% at November 2, 1996. The expected long-term rate
of return on plan assets was 8% at November 1, 1997 and
November 2, 1996. The rate of increase in future
compensation levels was 4% at November 1, 1997 and
November 2, 1996.
Multi-Employer Plan
Health, welfare and retirement expense was
approximately $6,354,000 in fiscal 1997, $6,036,000 in
fiscal 1996 and $5,942,000 in fiscal 1995 under plans
covering union employees. Such plans are administered
through the unions involved. Under U.S. legislation
regarding such pension plans, a company is required to
continue funding its proportionate share of a plan's
unfunded vested benefits in the event of withdrawal (as
defined by the legislation) from a plan or plan
termination. The Company participates in a number of
these pension plans and may have potential obligation
as a participant. The information required to
determine the total amount of this contingent
obligation, as well as the total amount of accumulated
benefits and net assets of such plans, is not readily
available. However, the Company has no present
intention of withdrawing from any of these plans, nor
has the Company been informed that there is any
intention to terminate such plans. (see Note 16).
Note 17 - Retirement and Benefit Plans - (continued)
401(k)/Profit Sharing Plan
The Company maintains an employee 401(k) Savings Plan
for all qualified non-union employees. Employees are
eligible to participate in the Plan after completing
one year of service (1,000 hours) and attaining age 21.
Employee contributions are discretionary to a maximum
of 15% of compensation. Effective October 1, 1997, the
Company matches 25% of the employees' contributions up
to 6% of employee compensation. The Company has the
right to make additional discretionary contributions
which are allocated to each eligible employee in
proportion to their compensation. 401(k) expense for
the fiscal year ended November 1, 1997 was
approximately $12,000.
Note 18 - Other Postretirement and Postemployment Benefits
Postretirement Benefits
The Company provides certain current and former
officers with supplemental income payments and limited
medical benefits during retirement. The Company
recorded an estimate of deferred compensation payments
to be made to the officers based on their anticipated
period of active employment, the relevant actuarial
assumptions at November 1, 1997 and November 2, 1996,
respectively. The Company purchased life insurance to
partially fund this obligation. The participants have
agreed to certain non-compete arrangements and to
provide continued service availability for consulting
services after retirement.
Net periodic postretirement benefit cost expense
consists of the following:
Fiscal Fiscal Fiscal
1997 1996 1995
Service cost - benefits
earned during the period $ 18,000 $ 16,000 $ 13,000
Interest cost 90,000 83,000 80,000
Net amortization and deferral 38,000 30,000 35,000
Net periodic postretirement
benefit cost $ 146,000 $ 129,000 $128,000
The following table sets forth the funded status and
amounts recognized in the Company's consolidated
financial statements at November 1, 1997 and November
2, 1996.
<PAGE>
Note 18 - Other Postretirement and Postemployment Benefits -
(continued)
Postretirement Benefits - (continued)
November 1, November 2,
1997 1996
Accumulated postretirement
benefit obligation $ 1,309,000 $ 1,240,000
Unrecognized net loss,
amortized over eleven and
nine years (414,000) (480,000)
Unrecognized prior service
cost, amortized over
ten years (36,000) -
Accrued postretirement
benefit cost $ 859,000 $ 760,000
The assumed discount rate used in determining the
postretirement benefit obligation as of November 1,
1997 and November 2, 1996 was 7.5% and 8%,
respectively.
Postemployment Benefits
Effective October 29, 1994, the Company adopted SFAS
No. 112. Under SFAS No. 112, the Company is required
to accrue the expected cost of providing postemployment
benefits, primarily short-term disability payments,
over the working careers of its employees. The Company
previously expensed the cost of these benefits as
claims were paid.
The effect of this change as of October 29, 1994
resulted in a charge to income of $129,000, net of an
income tax benefit of $107,000, and has been presented
as a cumulative effect of a change in accounting method
in the accompanying consolidated statement of
operations for fiscal 1995.
The accrued liability under SFAS No. 112 as of November
1, 1997 and November 2, 1996 was $384,000 and $306,000,
respectively.
Note 19- Noncash Investing and Financing Activities
A capital lease obligation of $4,184,000 was incurred
when the Company entered into a lease for a store in a
sale/leaseback transaction during the year ended
November 1, 1997.
<PAGE>
Note 19- Noncash Investing and Financing Activities - (continued)
During the year ended November 2, 1996, the Company
acquired additional property and equipment for
$13,181,000. In conjunction with the acquisition,
liabilities were assumed as follows:
Cost of property and equipment
acquired $ 13,181,000
Cash paid (6,645,000)
Liabilities assumed $ 6,536,000
In addition, a capital lease obligation of $5,610,000
was incurred in fiscal 1996 when the Company entered
into a lease for a new store.
The Company was required to make an additional
investment in Wakefern for $900,000 for the two new
stores opened during the year ended November 2, 1996.
In conjunction with the investment, liabilities were
assumed for the same amount.
At November 2, 1996, the additional minimum liability
of $880,000, the related intangible of $74,000 and the
direct charge to equity of $806,000 was reversed since
the Company's defined benefit plans assets exceeded the
accumulated benefit obligations.
Note 20 - Unaudited Summarized Consolidated Quarterly Information
Summarized quarterly information for the years ended
November 1, 1997 and November 2, 1996 was as follows:
Thirteen Weeks Ended
February 1, May 3, August 2, November 1,
1997 1997 1997 1997
(Dollars in thousands, except per share data)
Sales $ 163,356 $ 155,986 $ 161,128 $ 156,261
Gross profit 40,588 39,766 40,904 39,709
Net income 176 72 245 571
Mandatory preferred
stock dividend
requirement (34) (23) - -
Earnings available
to common stock 142 49 245 571
Earnings available per
common share .13 .04 .22 .51
<PAGE>
Note 20 - Unaudited Summarized Consolidated Quarterly Information
- (continued)
Thirteen - Fourteen Weeks Ended
January 27, April 27, July 27, November 2,
1996 1996 1996 1996
(Dollars in thousands, except per share data)
Sales $ 146,303 $ 140,815 $ 147,793 $ 166,232
Gross profit 36,540 35,525 37,756 42,245
Net income 496 374 320 206
Mandatory preferred
stock dividend
requirement (34) (34) (34) (34)
Earnings available to
common stock 462 340 286 172
Earnings available
per common share .41 .31 .25 .16
Note 21 - Subsequent Events
On November 14, 1997, the Company obtained additional
financing on the Revolving Credit and Term Loan
Agreement (Note 9) of $1,500,000. This additional
financing ("Expansion loan") was used to purchase a
building in Linden, New Jersey at a cost of $600,000 on
November 14, 1997. The remaining balance of the loan
will be used to renovate the building and add
additional equipment. The expansion loan is
collateralized by the building, all improvements and
equipment. The note will be payable in monthly
installments of $12,500 plus interest at a fixed rate
of 9.18%, maturing December 1, 2004.
The Revolving Credit and Term Loan Agreement was
amended January 15, 1998. The amendment adjusted the
interest rate for the Term Loan C and the stock
redemption loan to a fixed rate of 8.38% for the
remaining term of the loans.
<PAGE>
Additions
Balance Charge to Charge to Balance
at beginning costs and other at end
Description of year expenses accounts Deductions of year
Fiscal year ended
11/1/97:
Allowance for
doubtful accounts
(deducted from
receivables and other
current assets)$ 665,000 $ 120,000 $ - $ 312,000 (1) $473,000
Fiscal year ended
11/2/96:
Allowance for
doubtful accounts
(deducted from
receivables and other
current assets)$ 516,000 $ 149,000 $ - $ - $ 665,000
Fiscal year ended
10/28/95:
Allowance for
doubtful accounts
(deducted from
receivables and other
current assets)$ 779,000 $ - $ - $ 263,000 (1)$ 516,000
(1) Accounts deemed to be uncollectible.
S-1<PAGE>
Schedule X
c. Exhibits
3. Articles of Incorporation and By-Laws
*i. Restated Certificate of Incorporation of Registrant
filed with the Secretary of State of the State of
New Jersey on May 15, 1970.
*ii. Certificate of Merger filed with the Secretary of
State of the State of New Jersey on May 15, 1970.
*iii. Certificate of Merger filed with the Secretary of
State of the State of New Jersey on March 14, 1977.
*iv. Certificate of Merger filed with the Secretary of
State of the State of New Jersey on June 23, 1978.
*v. Certificate of Amendment to Restated Certificate of
Incorporation filed with the Secretary of State of
the State of New Jersey on May 12, 1987.
**vi. Certificate of Amendment to Restated Certificate of
Incorporation filed with the Secretary of State of
the State of New Jersey on February 16, 1993.
******vii. Amendment to the Certificate of Incorporation of the
Registrant dated April 4, 1996.
**viii. By-Laws of Registrant.
*ix. Amendments to By-Laws of Registrant adopted
September 14,1983.
x. Amendment to By-Laws of Registrant adopted March
15, 1991 is incorporated herein by reference to the
Registrant's Annual Report on Form 10-K for the year
ended November 2, 1991 filed with the Securities and
Exchange Commission on February 18, 1992.
* Each of these Exhibits is incorporated herein by reference
to
the Registrant's Annual Report on Form 10-K for the year
ended
October 29, 1988 filed with the Securities and Exchange
Commission on February 13, 1989.
** Each of these Exhibits is incorporated herein by reference
to
the Registrant's Annual Report on Form 10-K for the year
ended
October 31, 1992 filed with the Securities and Exchange
Commission on February 19, 1993.
E-1
10. Material Contracts.
i. The Agreement dated September 18, 1987 entered into
by Wakefern Food Corporation and the Registrant is
incorporated herein by reference to Exhibit A to the
Registrant's Form 8-K filed with the Securities and
Exchange Commission on November 19, 1987.
***ii. Certificate of Incorporation of Wakefern Food
Corporation together with amendments thereto and
certificates of merger.
***iii. By-laws of Wakefern Food Corporation.
iv. Purchase Agreement, dated March 10, 1989, by and
between Hilltop Supermarkets, Inc. and the
Registrant is incorporated herein by reference to
Exhibit (2)(i) to the registrant's Form 8-K filed
with the Securities and Exchange
Commission on April 4, 1989.
v. Agreement, dated March 10, 1989, by and between Afta
Equipment Leasing Co., an affiliate of Hilltop
Supermarkets, Inc., and the Registrant is
incorporated herein by reference to Exhibit (2)(i)
to the Registrant's Form 8-K filed with the
Securities and Exchange Commission on April 4, 1989.
***vi. Agreements between the Registrant and the principals
of Hilltop Supermarkets, Inc.
***vii. Credit Agreement, dated as of March 16, 1989, among
the Registrant, each of the Banks which are a
signatory thereto and The Chase Manhattan Bank
(National Association).
***viii. Amendment No.1 to the Credit Agreement, dated as of
June 16, 1989, among the Registrant, each of the
Banks which are a signatory thereto and The Chase
Manhattan Bank (National Association).
***ix. Note Purchase Agreements, dated as of June 1, 1989,
between the Registrant and various institutional
Lenders.
*** Each of these Exhibits is incorporated herein by reference to
the Registrant's Annual Report on Form 10-K for the year ended
October 28, 1989 filed with the Securities and Exchange
Commission on February 9, 1990.
E-2
***x. Letter Agreement, dated January 25, 1990, among the
Registrant, the Banks which are parties to the
Credit Agreement, dated as of March 16, 1989, and each of
institutional lenders who issued senior secured notes
pursuant to the several Note Agreements, dated as of June
1, 1989 between each such institutional investor and the
Registrant.
***xi. Form of Deferred Compensation Agreement, between the
Registrant and certain of its key employees.
xii. Registrant's 1987 Incentive Stock Option Plan is
incorporated herein by reference to Exhibit 4 (a) to
the Registrant's Form S-8 filed with the Securities
and Exchange Commission on May 26, 1989.
xiii. Amendment No. 2 to the Credit Agreement, dated as of
January 25, 1990, among the Registrant, each of the
Banks which are a signatory thereto and The Chase
Manhattan Bank (National Association) is incorporated
herein by reference to the Registrant's Annual Report on
Form 10-K for the year ended November 3, 1990 filed with
the Securities and Exchange Commission on February 20,
1991.
****xiv. Amendment No. 3 to the Credit Agreement, dated as of
February 5, 1992, among the Registrant, each of the Banks
which are a signatory thereto and The Chase Manhattan
Bank (National Association).
**** Each of these Exhibits is incorporated herein by reference to
the Registrant's Annual Report on Form 10-K for the year ended
November 2, 1991, filed with the Securities and Exchange
Commission on February 18, 1992.
**xv. Amendment No. 4 to the Credit Agreement, dated as of
February 12, 1993, among the Registrant, each of the
Banks which are a signatory thereto and The Chase
Manhattan Bank (National Association).
****xvi. Modification Letter to Note Purchase Agreement,
dated as of June 1, 1989, between the Registrant and
various Institutional Lenders.
****xvii. Amendment Letter to Note Purchase Agreement, dated
as of August 10, 1989, between the Registrant and
various Institutional Lenders.
****xviii. Modification Letter to Note Purchase Agreement,
dated as of February 5, 1992, between the Registrant
and various Institutional Lenders.
**xix. Modification Letter to Note Purchase Agreement,
dated as of February 16, 1993, between the
Registrant and various Institutional Lenders.
*****xx. Agreement, dated September 20, 1993, between the
Registrant, ShopRite of Malverne, Inc. and The Grand
Union Company.
xxi. Revolving Credit and Term Loan Agreement, dated as
of February 15, 1995 between the Registrant and
NatWest Bank as agent for a group of banks is
incorporated herein by reference to the Registrant's
Form 8-K filed with the Securities and Exchange
Commission on July 10, 1995.
xxii. Asset Purchase Agreement dated April 20, 1995 and
Amendment No. 1 to the Agreement dated May 24, 1995
between the Registrant and Wakefern Food Corp. is
incorporated herein by reference to the Registrant's
Form 8-K filed with the Securities and Exchange
Commission on July 27, 1995.
***** Incorporated herein by reference to the Registrant's Annual
Report on Form 10-K for the year ended October 30, 1993,
filed with the Securities and Exchange Commission on
February 24, 1994.
E-4
xxiii. Amendment of Revolving Credit and Term Loan Agreement, dated
as of January 25, 1996, between the Registrant
and each of the banks which are signatory thereto is
incorporated herein by reference to the Registrant's Form 10-Q
for the quarterly period ended January 27, 1996, filed with the
Securities and Exchange Commission on March 12, 1996.
******xxiv. Agreement, dated as of March 29, 1996, between the
Registrant and Wakefern Food Corporation.
******xxv. Amendment of Revolving Credit and Term Loan
Agreement, dated as of May 10, 1996, between the
Registrant and each of the Banks which are signatory
thereto.
xxvi. Waiver and Amendment of Revolving Credit and Term
Loan Agreement, dated as of July 26, 1996, between the
Registrant and each of the Banks which are
signatory thereto is incorporated herein by
reference to the Registrant's Form 10-Q for the quarterly
period ended July 27, 1996, filed with the Securities
and Exchange Commission on September 10, 1996.
*******xxvii. Amended and Restated Revolving Credit and Term Loan
Agreement, dated as of May 2, 1997, between the Registrant and
the Financial Institution which are signatory thereto.
xxviii. First Amendment to Amended and Restated Revolving
Credit and Term Loan Agreement, dated October 28, 1997,
between the Registrant and the Financial Institution which are
signatory thereto.
xxix. Consent and Second Amendment to Amended and Restated
Revolving Credit and Term Loan Agreement and other loan
documents, dated November 14, 1997, between the
Registrant and the Financial Institution which are
signatory thereto.
xxx. Third Amendment to Amended and Restated Revolving Credit
and Term Loan Agreement, dated January 15, 1998, between
the Registrant and the Financial Institution which are
signatory thereto.
****** Incorporated herein by reference to the Registrant's
Form 10-Q for the quarterly period ended April 27, 1996, filed
with the Securities and Exchange Commission on June 10, 1996.
******* Incorporated herein by reference to the Registrant's Form
10-Q for the quarterly period ended May 3, 1997, filed
with the Securities and Exchange Commission on June 16, 1997.
E-5
Exhibit 21
LIST OF SUBSIDIARIES
OF FOODARAMA SUPERMARKETS, INC.
Name of Subsidiary State of
Incorporation
ShopRite of Malverne, Inc. New York
New Linden Price Rite, Inc. New Jersey
ShopRite of Reading, Inc. Pennsylvania
E-6
<PAGE>
MATERIAL CONTRACT XXVIII
FIRST AMENDMENT
TO AMENDED AND RESTATED REVOLVING CREDIT
AND TERM LOAN AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AND
TERM LOAN AGREEMENT__________________ (this "Amendment") is made
and entered into this ______ day of October 1997, by and among
FOODARAMA SUPERMARKETS, INC. ("Parent"), NEW LINDEN PRICE RITE,
INC. ("New Linden"), SHOP RITE OF READING, INC. ("Reading", and
together with New Linden, each a "Borrower" and collectively,
"Borrowers"), the Guarantors signatory hereto and HELLER
FINANCIAL, INC., as Agent for the Lenders party to the Credit
Agreement described below (in such capacity, "Agent").
WHEREAS, Agent, the Lenders, Parent, Borrowers and Guarantors are
parties to a certain Amended and Restated Revolving Credit and
Term Loan Agreement dated May 2, 1997 (as amended, the "Loan
Agreement"); and
WHEREAS, the parties desire to amend the Loan Agreement as
hereinafter set forth;
NOW THEREFORE, in consideration of the mutual conditions and
agreements set forth in the Loan Agreement and this Amendment,
and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Definitions. Capitalized terms used in this Amendment, unless
otherwise defined herein, shall have the meaning ascribed to such
term in the Loan Agreement.
2. Amendments. Article I "Definitions" of the Loan Agreement is
amended by deleting the definition of "Applicable Margin" in its
entirety and replacing it with the following:
"Applicable Margin" shall mean (i) in the case of Loans which are
Base Rate Loans, (x) one-quarter of one percent (.25%) if such
Base Rate Loans are Revolving Loans, and (y) one-half of one
percent (.50%) if such Base Rate Loans are Term Loans or Stock
Redemption Loans; and (ii) in the case of Loans which are
Eurodollar Loans, (x) two and one-quarter percent (2.25%) if such
Eurodollar Loans are Revolving Loans, and (y) two and one-half
percent (2.50%) if such Eurodollar Loans are Term Loans or Stock
Redemption Loans.
3. Conditions. The effectiveness of this Amendment is subject to
the following conditions precedent (unless specifically waived in
writing by Agent):
A. There shall have occurred no material adverse change in the
business, operations, financial condition, profits or prospects
of Parent, Borrowers or Guarantors, or in the Collateral;
B. Parent, Borrowers and Guarantors shall have executed and
delivered such other documents and instruments as Agent may
require;
C. All proceedings taken in connection with the transactions
contemplated by this
Amendment and all documents, instruments and other legal matters
incident thereto shall be satisfactory to Agent and its legal
counsel; and
D. No Default or Event of Default under the Loan Agreement as
amended hereby shall have occurred and be continuing.
5. Corporate Action. The execution, delivery, and performance of
this Amendment has been duly authorized by all requisite
corporate action on the part of Parent, Borrowers and Guarantors
and this Amendment has been duly executed and delivered by
Parent, Borrowers and Guarantors.
6. Severability. Any provision of this Amendment held by a court
of competent jurisdiction to be invalid or unenforceable shall
not impair or invalidate the remainder of this Amendment and the
effect thereof shall be confined to the provision so held to be
invalid or unenforceable.
7. References. Any reference to the Loan Agreement contained in
any of the other Loan Documents or in any notice, request,
certificate, or other document executed concurrently with or
after the execution and delivery of this Amendment shall be
deemed to include this Amendment unless the context shall
otherwise require.
8. Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall constitute an original, but all
of which taken together shall be one and the same instrument.
9. Ratification. The terms and provisions set forth in this
Amendment shall modify and supersede all inconsistent terms and
provisions of the Loan Agreement and, except as expressly
modified and superseded by this Amendment, the terms and
provisions of the Loan Agreement are ratified and confirmed and
shall continue in full force and effect.<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed under seal and delivered by their respective
duly authorized officers on the date first written above.
FOODARAMA SUPERMARKETS, INC.,
as Parent and as Guarantor
By:________________________________
Michael Shapiro
Title: Senior Vice President and CFO
NEW LINDEN PRICE RITE, INC.,
as Borrower and as Guarantor
By:_______________________________
Michael Shapiro
Title: Senior Vice President and CFO
SHOP RITE OF READING, INC.,
as Borrower and as Guarantor
By:______________________________
Michael Shapiro
Title: Senior Vice President and CFO
SHOP RITE OF MALVERNE, INC., as
Guarantor
By:________________________________
Michael Shapiro
Title: Senior Vice President and CFO
HELLER FINANCIAL, INC.,
as Agent and Lender
By:______________________________
Dwayne L. Coker
Title: Vice President
<PAGE>
MATERIAL CONTRACT XXIX
CONSENT AND SECOND AMENDMENT
TO AMENDED AND RESTATED REVOLVING CREDIT
AND TERM LOAN AGREEMENT AND OTHER LOAN DOCUMENTS
THIS CONSENT AND SECOND AMENDMENT TO AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT__________________ AND
OTHER LOAN DOCUMENTS (this "Amendment") is made and entered into
this ______ day of November, 1997 by and among FOODARAMA
SUPERMARKETS, INC. ("Parent"), NEW LINDEN PRICE RITE, INC. ("New
Linden"), SHOP RITE OF READING, INC. ("Reading", and together
with New Linden, each a "Borrower" and collectively,
"Borrowers"), the Guarantors signatory hereto and HELLER
FINANCIAL, INC., as Agent for the Lenders party to the Credit
Agreement described below (in such capacity, "Agent").
WHEREAS, Agent, the Lenders, Parent, Borrowers and Guarantors are
parties to a certain Amended and Restated Revolving Credit and
Term Loan Agreement dated May 2, 1997 (as amended, the "Loan
Agreement"); and
WHEREAS, the parties desire to amend the Loan Agreement and
modify certain other Loan Documents executed and delivered
pursuant to the Loan Agreement as hereinafter set forth;
WHEREAS, Agent and Lenders have also agreed to consent to the
incurrence by Parent of additional secured indebtedness pursuant
to the Asset Redeployment Program contemplated by the Loan
Agreement as described below;
NOW THEREFORE, in consideration of the mutual conditions and
agreements set forth in the Loan Agreement and this Amendment,
and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Definitions. Capitalized terms used in this Amendment, unless
otherwise defined herein, shall have the meaning ascribed to such
term in the Loan Agreement.
2. Amendments to Loan Agreement. The Loan Agreement is amended as
follows:
A. Article I is amended by inserting, in proper alphabetical
order, the following new definitions:
"Expansion Loan" shall mean the $1,500,000 term loan made by
Heller to Parent pursuant to the terms of the Expansion Loan
Documents.
"Expansion Loan Documents" shall mean the $1,500,000 Promissory
Note of even date herewith of Parent payable to the order of
Heller, the Security Agreement dated as of November ___, 1997
between Parent and Heller and the Mortgage, Assignment of Rents
and Security Agreement dated as of November ___, 1997 by Parent
in favor of Heller.
"Expansion Loan Obligations" shall mean that portion of the
Obligations described in clause (b) of the definition of the term
"Obligations" in this Article, regardless of whether Heller is
the holder thereof.
B. Article I is further amended by deleting the definitions of
"Loan Documents," "Obligations," and "Security Documents" in
their entirety and replacing them with the following:
"Loan Documents" shall mean this Agreement, each Security
Document, the Notes, the Intercreditor Agreement, any letter of
credit applications with respect to Letters of Credit and each
other document, instrument, or agreement now or hereafter
delivered to the Agent, any Lender or Heller in connection
herewith or therewith, expressly excluding the Expansion Loan
Documents.
"Obligations" shall mean (a) all obligations, liabilities and
Indebtedness of the Parent, any Borrower and/or any Guarantor to
the Lenders, the Agent and/or Heller, whether now existing or
hereafter created, direct or indirect, due or not, whether
created directly or acquired by assignment, participation or
otherwise, under or with respect to this Agreement, the Notes,
the Security Documents and the other Loan Documents, including
without limitation, the principal of and interest on the Loans
and the payment or performance of all other obligations,
liabilities, and Indebtedness of the Parent, any Borrower and/or
any Guarantor to the Lenders, the Agent and/or Heller hereunder,
under or with respect to the Letters of Credit or under any one
or more of the other Loan Documents, including but not limited to
all fees, costs, expenses and indemnity obligations hereunder and
thereunder expressly excluding the Expansion Loan Obligations,
and (b) for so long as Heller holds both the obligations
described in clause (a) above, and those described in this clause
(b), all other obligations, liabilities and Indebtedness of the
Parent, any Borrower and/or any Guarantor to Heller, whether now
existing or hereafter created, under or with respect to the
Expansion Loan Documents, including but not limited to, the
principal of and interest on the Expansion Loan and all fees,
costs, expenses and indemnity obligations under the Expansion
Loan Documents (but not including any refinancing of all or any
portion thereof by any Person other than Heller).
"Security Documents" shall mean the Pledge Agreement, the
Security Agreement, the Security Agreement (Partnership
Interests), the Mortgages and each other agreement now existing
or hereafter created providing collateral security for the
payment or performance of any Obligations, other than the
Expansion Loan Obligations.
C. Section 2.07 is amended by deleting paragraph (b) in its
entirety and replacing it with the following:
(b) Simultaneously with any termination of the Total Revolving
Commitment pursuant to paragraph (a) of this Section 2.07, the
Borrower shall (i) pay to the Agent for the account of the
Lenders, the Commitment Fee due and owing through and including
the date of such termination on the amount of the Revolving
Commitment and Stock Redemption Facility commitment of such
Lender and (ii) terminate all other Commitments under this
Agreement and repay all of the Obligations (other than the
Expansion Loan Obligations).
D. Section 2.09 is amended by deleting paragraph (b) thereof in
its entirety and substituting the following therefor:
(b) On the date of any termination of the Total Revolving
Commitment pursuant to Section 2.07(a) hereof or elsewhere in
this Agreement, the Borrowers shall pay the aggregate principal
amount of all Loans then outstanding, together with interest to
the date of such payment and all fees and other amounts due under
this Agreement (other than fees and other amounts in connection
with the Expansion Loan Obligations) and deposit in a cash
collateral account with the Agent on terms satisfactory to the
Agent an amount equal to 105% of the amount of the Letter of
Credit Usage.
E. Section 2.09 is further amended by adding the following
sentence to the end of clause (iv) of paragraph (e):
(iv) Notwithstanding anything to the contrary contained in this
paragraph (e), no prepayment of the Obligations shall be due upon
the Parent's or any of its subsidiaries' receipt of any net
proceeds of any insurance referred to in this paragraph (e) or in
Section 6.03 hereof, if such net proceeds constitute proceeds in
respect of assets (and/or business operations relating thereto)
subject to a lien permitted under the Loan Documents in favor of
any person or entity other than Heller, unless such lien is
subordinate to the Liens granted under the Security Documents.
F. Section 2.09 is further amended by deleting paragraph (f)
thereof in its entirety and substituting the following therefor:
(f) Subject to paragraph (e)(ii) above, all prepayments made
pursuant to the foregoing clause (e)(i) shall be applied in a
manner set forth in paragraph (g) below.
G. Section 2.09 is further amended by deleting the third sentence
of paragraph (g) and replacing it with the following:
Prepayments made pursuant to paragraph (d) (other than paragraph
(d)(i)) or (e)(i)(x) above shall be applied to the repayment of
the Stock Redemption Loans, with any excess to be applied to the
repayment of the Term Loan, any further excess to be applied to
the repayment of the Revolving Loans, and if the Stock Redemption
Loans, the Term Loan and the Revolving Loans have been repaid in
full and the Commitment has terminated, any further excess to be
applied to the repayment of the Expansion Loan Obligations in
accordance with the terms of the Expansion Loan Documents (with
respect to the Term Loan and the Stock Redemption Loans, such
payment being applied to installments in inverse order of
maturity (in the case of prepayments of less than $1,000,000) or,
if such prepayment is equal to or greater than $1,000,000, then
pro rata to each installment of the Loan being repaid).
H. Section 2.11 is amended by deleting such Section in its
entirety and substituting the following therefor:
SECTION 2.11. Pro Rata Treatment. Except as otherwise provided
hereunder and subject to the provisions of Section 2.15 and 2.16
hereof, each borrowing, each payment or prepayment of principal
of the Notes, each payment of interest on the Notes, each payment
of any fee or other amount payable hereunder (other than payments
in respect of the Expansion Loan Obligations) and each reduction
of the Total Revolving Loan Commitment and/or the Total Stock
Redemption Facility Commitment shall be made pro rata among the
Lenders in proportions that their Commitments bear to the Total
Commitment.
I. Section 2.13 is amended by deleting the last sentence of
paragraph (c) thereof and substituting the following therefor:
If any Lender receives a refund in respect of any Taxes or Other
Taxes for which such Lender has received payment from the
Borrowers hereunder, such Lender shall promptly notify the
Borrowers of such refund and such Lender shall, within 30 days of
receipt of a request by the Borrowers, repay such refund to the
Borrowers (or if there shall at such time be continuing a Default
or Event of Default, pay the same to the Agent to be applied to
the Obligations (other than the Expansion Loan Obligations) in
such order and manner as the Agent shall choose in its
discretion), provided that the Borrowers, upon the request of
such Lender, agree to return such refund (whether returned to the
Borrowers or applied to the Obligations (other than the Expansion
Loan Obligations)) (plus any penalties, interest or other
charges) to such Lender in the event such Lender is required to
repay such refund.
J. Article VI is amended by deleting the preamble thereto in its
entirety and substituting the following therefor:
The Parent and each Borrower covenants and agrees with each
Lender that, so long as this Agreement shall remain in effect or
the principal of or interest on any Note, any amount under or
with respect to any Letter of Credit or any fee, expense or
amount payable hereunder (other than the Expansion Loan
Obligations) or in connection with any of the Transactions shall
be unpaid, it will, and will cause each of its Subsidiaries and,
with respect to Section 6.07 hereof, each ERISA Affiliate, to:
K. Article VII is amended by deleting the preamble thereto in its
entirety and substituting the following therefor:
The Parent and each Borrower covenants and agrees with each
Lender that, so long as this Agreement shall remain in effect or
the principal of or interest on any Note, any amount under or
with respect to any Letter of Credit or any fee, expense or
amount payable hereunder (other than the Expansion Loan
Obligations) or in connection with any of the Transactions shall
be unpaid, it will, and will cause each of its Subsidiaries and,
with respect to Section 7.15 hereof, each ERISA Affiliate, to,
either directly or indirectly:
L. Article VIII is amended by deleting paragraph (n)(iv) in its
entirety and replacing it with the following:
(iv) FOURTH, to payment of the principal of the Obligations
(excluding the Expansion Loan Obligations and all Obligations
with respect to the undrawn amount of Letters of Credit) ratably
amongst the Lenders and Heller in accordance with the proportion
which the principal amount of the Obligations (excluding the
Expansion Loan Obligations and all Obligations with respect to
the undrawn amount of Letters of Credit) owing to each such
Lender and Heller bears to the aggregate principal amount of the
Obligations (excluding the Expansion Loan Obligations and all
Obligations with respect to the undrawn amount of Letters of
Credit) owing to all of the Lenders and Heller until such
principal of the Obligations (excluding the Expansion Loan
Obligations and all Obligations with respect to the undrawn
amount of Letters of Credit) shall be paid in full;
M. Article VIII is further amended by deleting paragraph (n)(vi)
in its entirety and replacing it with the following two
paragraphs:
(vi) SIXTH, to the payment of the Expansion Loan Obligations, in
such order and manner as is specified in the Expansion Loan
Documents; and
(vii) SEVENTH, the balance if any, after all of the Obligations
have been satisfied, shall, except as otherwise provided in the
Security Documents, be deposited by the Agent in an operating
account of the Borrowers with the Agent designated by the
Borrowers, or paid over to such other person or persons as may be
required by law.
N. Article VIII is further amended by deleting the last paragraph
thereof in its entirety and replacing it with the following:
The Borrowers and the Guarantors acknowledge and agree that they
shall remain liable to the extent of any deficiency between the
amount of the proceeds of the Collateral and collections under
the Guarantees of the Obligations and the aggregate amount of the
sums referred to in the first through sixth clauses above.
O. Article IX is amended by deleting clause (a) of the second
paragraph of such Article in its entirety and substituting the
following therefor:
(a) to receive on behalf of each of the Lenders any payment of
principal of or interest on the Notes outstanding hereunder and
all other amounts accrued hereunder (other than payments in
respect of the Expansion Loan Obligations) paid to the Agent, and
promptly to distribute to each Lender its proper share of all
payments so received.
P. Section 10.01 is amended by deleting the third sentence of
paragraph (a) in its entirety and replacing it with the
following:
All Payments that are deposited with the Agent in accordance with
the foregoing will, if deposited by 1:00 p.m. (New York time), be
applied by the Agent to reduce the outstanding balance of the
Revolving Loans and thereafter other Obligations then due and
payable (other than the Expansion Loan Obligations), subject to
final collection in cash of the item deposited and subject to
Section 2.09.
Q. Section 10.01 is further amended by deleting the last sentence
of paragraph (b)(i) in its entirety and replacing it with the
following:
This power of attorney being coupled with an interest is
irrevocable until all of the Obligations (other than the
Expansion Loan Obligations) are paid in full and this Agreement
and the Total Commitment is terminated.
R. Section 11.08 is amended by adding the following new clause
(iii) to the end of paragraph (b) of such Section:
and (iii) that no such agreement shall amend, modify or otherwise
affect the rights of Heller with respect to the Expansion Loan
Obligations under this Agreement without the written consent of
Heller
S. Section 11.08 is further amended by deleting the last sentence
of paragraph (c) in its entirety and replacing it with the
following:
Notwithstanding that this Agreement may not be extended, this
Agreement shall continue in full force and effect, and the
duties, covenants and other liabilities of the Borrowers
hereunder and under the other Loan Documents shall continue in
full force and effect until all Obligations have been paid in
full (excluding the Expansion Loan Obligations in the event of a
prepayment in full of the Loans not resulting from the
liquidation of the Collateral).
2. Modifications to other Loan Documents. Certain of the Loan
Documents executed and delivered pursuant to the Loan Agreement
are modified as follows:
A. Section 27 of the Security Agreement is amended by deleting
such Section in its entirety and replacing it with the following:
27. Termination. This Agreement and the Security Interest shall
terminate when all the Obligations (excluding the Expansion Loan
Obligations in the event of a prepayment in full of the Loans not
resulting from the liquidation of the Collateral) have been fully
and indefeasibly paid in cash or in a manner otherwise
satisfactory to the Agent and when the Lenders have no further
commitment to make any Loans or open or cause to be opened
Letters of Credit under the Credit Agreement, at which time the
Agent shall forthwith assign, transfer and deliver to the
Grantors such Collateral as shall not have been sold, transferred
or otherwise applied or disposed of pursuant to the terms hereof,
such assignment, transfer or delivery to be without any
representations or warranties of any kind, and shall execute and
deliver to the Grantors all Uniform Commercial Code termination
statements and similar documents which the Grantors shall
reasonably request to evidence such termination; provided,
however, that all indemnities of the Grantors contained in this
Agreement shall survive, and remain operative and in full force
and effect regardless of the termination of this Agreement.
B. Section 14 of the Pledge Agreement is amended by deleting such
Section in its entirety and replacing it with the following:
14. Termination. This Agreement shall terminate when all
Obligations (excluding the Expansion Loan Obligations in the
event of a prepayment in full of the Loans not resulting from the
liquidation of the Collateral) have been fully and indefeasibly
paid in cash or in a manner otherwise satisfactory to the Agent
and when the Lenders have no further commitment to make Loans or
open or cause to be opened Letters of Credit under the Credit
Agreement, at which time the Agent shall reassign and deliver to
the Grantors, or to such person or persons as the Grantors shall
designate, against receipt, such of the Collateral (if any) as
shall not have been sold or otherwise still be held by it
hereunder, together with appropriate instruments of reassignment
and release; provided, however, that all indemnities of the
Grantors contained in this Agreement shall survive, and remain
operative and in full force and effect regardless of, the
termination of this Agreement. Upon any such termination, the
Agent will, at the Grantors' expense, execute and deliver to the
Grantors such documents as the Grantors shall reasonably request
to evidence such termination, such execution and delivery to be
without recourse to or warranty by the Agent.
4. Consent. Agent and Lenders hereby consent to the execution and
delivery by Parent of the Expansion Loan Documents and its
incurrence of the Expansion Loan Obligations. Agent and Lenders
hereby confirm to Parent and Borrowers that (a) the Expansion
Loan Obligations constitute Indebtedness permitted by Section
7.03 (i) of the Loan Agreement and (b) the Liens created by the
Expansion Loan Documents constitute Liens permitted under Section
7.01(l) of the Loan Agreement. In accordance with Section
2.09(d) of the Loan Agreement, the Parent will not be required to
prepay the Loans with the proceeds of the loan contemplated by
the Expansion Loan Documents.
5. Conditions. The effectiveness of this Amendment is subject to
the following conditions precedent (unless specifically waived in
writing by Agent):
A. There shall have occurred no material adverse change in the
business, operations, financial condition, profits or prospects
of Parent, Borrowers or Guarantors, or in the Collateral;
B. Parent, Borrowers and Guarantors shall have executed and
delivered such other documents and instruments as Agent may
require;
C. All proceedings taken in connection with the transactions
contemplated by this Amendment and all documents, instruments and
other legal matters incident thereto shall be satisfactory to
Agent and its legal counsel; and
D. No Default or Event of Default under the Loan Agreement as
amended hereby shall have occurred and be continuing.
6. Corporate Action. The execution, delivery, and performance of
this Amendment has been duly authorized by all requisite
corporate action on the part of Parent, Borrowers and Guarantors
and this Amendment has been duly executed and delivered by
Parent, Borrowers and Guarantors.
7. Severability. Any provision of this Amendment held by a court
of competent jurisdiction to be invalid or unenforceable shall
not impair or invalidate the remainder of this Amendment and the
effect thereof shall be confined to the provision so held to be
invalid or unenforceable.
8. References. Any reference to the Loan Agreement or to any
other Loan Document modified hereby contained in any of the other
Loan Documents or in any notice, request, certificate, or other
document executed concurrently with or after the execution and
delivery of this Amendment shall be deemed to include this
Amendment unless the context shall otherwise require.
9. Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall constitute an original, but all
of which taken together shall be one and the same instrument.
10. Ratification. The terms and provisions set forth in this
Amendment shall modify and supersede all inconsistent terms and
provisions of the Loan Agreement and the other Loan Documents
and, except as expressly modified and superseded by this
Amendment, the terms and provisions of the Loan Agreement and the
other Loan Documents are ratified and confirmed and shall
continue in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed under seal and delivered by their respective
duly authorized officers on the date first written above.
FOODARAMA SUPERMARKETS, INC.,
as Parent and as Guarantor
By:________________________________
Michael Shapiro
Title: Senior Vice President and CFO
NEW LINDEN PRICE RITE, INC.,
as Borrower and as Guarantor
By:_______________________________
Michael Shapiro
Title: Senior Vice President and CFO
SHOP RITE OF READING, INC.,
as Borrower and as Guarantor
By:______________________________
Michael Shapiro
Title: Senior Vice President and CFO
SHOP RITE OF MALVERNE, INC., as
Guarantor
By:________________________________
Michael Shapiro
Title: Senior Vice President and CFO
HELLER FINANCIAL, INC.,
as Agent and Lender
By:______________________________
Dwayne L. Coker
Title: Vice President
<PAGE>
MATERIAL CONTRACT XXX
THIRD AMENDMENT
TO AMENDED AND RESTATED REVOLVING CREDIT
AND TERM LOAN AGREEMENT
THIS THIRD AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AND
TERM LOAN AGREEMENT__________________ (this "Amendment") is made
and entered into this 15th day of January 1998, by and among
FOODARAMA SUPERMARKETS, INC. ("Parent"), NEW LINDEN PRICE RITE,
INC. ("New Linden"), SHOP RITE OF READING, INC. ("Reading", and
together with New Linden, each a "Borrower" and collectively,
"Borrowers"), the Guarantors signatory hereto and HELLER
FINANCIAL, INC., as Agent for the Lenders party to the Credit
Agreement described below (in such capacity, "Agent").
WHEREAS, Agent, the Lenders, Parent, Borrowers and Guarantors are
parties to a certain Amended and Restated Revolving Credit and
Term Loan Agreement dated May 2, 1997 (as amended, the "Loan
Agreement"); and
WHEREAS, the parties desire to amend the Loan Agreement as
hereinafter set forth;
NOW THEREFORE, in consideration of the mutual conditions and
agreements set forth in the Loan Agreement and this Amendment,
and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Definitions. Capitalized terms used in this Amendment, unless
otherwise defined herein, shall have the meaning ascribed to such
term in the Loan Agreement.
2. Amendments.
A. Article I of the Loan Agreement is amended by deleting the
definitions of "Applicable Margin" and "Interest Payment Date"
contained in said article in their entirety and replacing them
with the following:
"Applicable Margin" shall mean (i) in the case of Loans which are
Base Rate Loans, (x) one-quarter of one percent (.25%) if such
Base Rate Loans are Revolving Loans, and (y) one-half of one
percent (.50%) if such Base Rate Loans are Term Loans; and (ii)
in the case of Loans which are Eurodollar Loans, (x) two and one-quarter
percent (2.25%) if such Eurodollar Loans are Revolving
Loans, and (y) two and one-half percent (2.50%) if such
Eurodollar Loans are Term Loans.
"Interest Payment Date" shall mean (i) in the case of Fixed Rate
and Base Rate Loans, the last Business Day of each December,
March, June and September, commending June 30, 1997, and (ii)
with respect to Eurodollar Loans, the last day of the Interest
Period applicable thereto, and, in addition, in respect of any
Eurodollar Loan of more than three (3) months' duration, each
earlier day which is three (3) months after the first day of such
Interest Period.
Article I is further amended by inserting, in proper alphabetical
order, the following new definition:
"Fixed Rate Loans" shall mean (i) the Term Loan evidenced by that
certain Amended and Restated Term Note C in the original amount
of $12,500,000 dated December 12, 1996 and (ii) the Stock
Redemption Loan evidenced by that certain Stock Redemption
Facility Note in the original amount of $1,700,000 dated May 14,
1997.
B. Section 2.05 of the Loan Agreement is amended by deleting said
section in its entirety and replacing it with the following:
SECTION 2.05. Interest on Loans. (a) Subject to the provisions
of Sections 2.05(c) and Section 2.08 hereof, the Fixed Rate Loans
shall bear interest at a rate per annum equal to eight and three-eighths
percent (8.38%).
(b) Subject to the provisions of Section 2.05(c) and Section
2.08 hereof, (i) each Loan which is a Base Rate Loan shall bear
interest at a rate per annum equal to the Base Rate plus the
Applicable Margin and (ii) each Loan which is a Eurodollar Loan
shall bear interest at a rate per annum equal to the Adjusted
LIBO Rate plus the Applicable Margin.
(c) Interest on each Loan shall be payable in arrears on each
applicable Interest Payment Date and on the maturity thereof
(whether as scheduled, by acceleration or otherwise). Interest
on each Base Rate Loan and each Eurodollar Loan shall be computed
based on the number of days elapsed in a year of 360 days. The
Agent shall determine each interest rate applicable to said Base
Rate and Eurodollar Loans and shall promptly advise the Borrowers
and the Lenders of the interest rate so determined (which
determination shall be conclusive and binding on the Borrowers
and the Lenders absent manifest error).
3. Conditions. The effectiveness of this Amendment is subject to
the following conditions precedent (unless specifically waived in
writing by Agent):
A. There shall have occurred no material adverse change in the
business, operations, financial condition, profits or prospects
of Parent, Borrowers or Guarantors, or in the Collateral;
B. Parent, Borrowers and Guarantors shall have executed and
delivered such other documents and instruments as Agent may
require;
C. All proceedings taken in connection with the transactions
contemplated by this Amendment and all documents, instruments and
other legal matters incident thereto shall be satisfactory to
Agent and its legal counsel; and
D. No Default or Event of Default under the Loan Agreement as
amended hereby shall have occurred and be continuing.
5. Corporate Action. The execution, delivery, and performance of
this Amendment has been duly authorized by all requisite
corporate action on the part of Parent, Borrowers and Guarantors
and this Amendment has been duly executed and delivered by
Parent, Borrowers and Guarantors.
6. Severability. Any provision of this Amendment held by a court
of competent jurisdiction to be invalid or unenforceable shall
not impair or invalidate the remainder of this Amendment and the
effect thereof shall be confined to the provision so held to be
invalid or unenforceable.
7. References. Any reference to the Loan Agreement contained in
any of the other Loan Documents or in any notice, request,
certificate, or other document executed concurrently with or
after the execution and delivery of this Amendment shall be
deemed to include this Amendment unless the context shall
otherwise require.
8. Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall constitute an original, but all
of which taken together shall be one and the same instrument.
9. Ratification. The terms and provisions set forth in this
Amendment shall modify and supersede all inconsistent terms and
provisions of the Loan Agreement and, except as expressly
modified and superseded by this Amendment, the terms and
provisions of the Loan Agreement are ratified and confirmed and
shall continue in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed under seal and delivered by their respective
duly authorized officers on the date first written above.
FOODARAMA SUPERMARKETS, INC.,
as Parent and as Guarantor
By:________________________________
Michael Shapiro
Title: Senior Vice President and CFO
NEW LINDEN PRICE RITE, INC.,
as Borrower and as Guarantor
By:_______________________________
Michael Shapiro
Title: Senior Vice President and CFO
SHOP RITE OF READING, INC.,
as Borrower and as Guarantor
By:______________________________
Michael Shapiro
Title: Senior Vice President and CFO
SHOP RITE OF MALVERNE, INC., as
Guarantor
By:________________________________
Michael Shapiro
Title: Senior Vice President and CFO
HELLER FINANCIAL, INC.,
as Agent and Lender
By:______________________________
Dwayne L. Coker
Title: Vice President
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<FISCAL-YEAR-END> NOV-01-1997
<PERIOD-END> NOV-01-1997
<CASH> 3,678
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<RECEIVABLES> 9,682
<ALLOWANCES> (473)
<INVENTORY> 33,585
<CURRENT-ASSETS> 46,858
<PP&E> 118,364
<DEPRECIATION> (62,210)
<TOTAL-ASSETS> 121,500
<CURRENT-LIABILITIES> 43,340
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0
0
<COMMON> 1,622
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<TOTAL-LIABILITY-AND-EQUITY> 121,500
<SALES> 636,731
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</TABLE>
