UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly period ended January 30, 1999
Commission file number 1-5745-1
FOODARAMA SUPERMARKETS, INC.
(Exact name of Registrant as specified in its charter)
New Jersey 21-0717108
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
922 Highway 33, Freehold, N.J. 07728
(Address of principal executive offices)
Telephone #732-462-4700
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
and (2) has been subject to the filing requirements for at least
the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the close of the latest practicable
date.
OUTSTANDING AT
CLASS March 5,1999
Common Stock 1,117,150 shares
$1 par value
<PAGE>
FOODARAMA SUPERMARKETS, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Consolidated Balance Sheets
January 30, 1999 and October 31, 1998
Unaudited Consolidated Statements of
Operations for the thirteen weeks
ended January 30, 1999 and January 31, 1998
Unaudited Consolidated Statements of
Cash Flows for the thirteen weeks ended
January 30, 1999 and January 31, 1998
Notes to the Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Certain information included in this report and other Registrant filings
(collectively, 'SEC filings') under the Securities Act of 1933, as amended, and
the Securities Exchange Act of 1934, as amended (as well as information
communicated orally or in writing between the dates of such SEC filings) contain
or may contain forward-looking information that is (i) based upon assumptions
which, if changed, could produce significantly different results; or (ii)
subject to certain risks, trends and uncertainties that could cause actual
results to differ materially from expected results. Among these risks, trends
and uncertainties are matters related to national and local economic conditions,
the effect of certain governmental regulations and programs on the Registrant,
year 2000 issues related to computer applications and competitive conditions in
the marketplace in which the Registrant operates. The forward-looking statements
are made as of the date of this Form 10-Q and the Registrant assumes no
obligation to update the forward-looking statements or to update the reasons
actual results could differ from those projected in such forward-looking
statements. See 'Management's Discussion and Analysis of Financial Condition
and Results of Operations.'
2
<PAGE>
PART I FINANCIAL INFORMATION
FOODARAMA SUPERMARKETS, INC AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands)
January 30, October 31,
1999 1998
(Unaudited) (1)
ASSETS
Current assets:
Cash and cash equivalents $ 4,729 $ 3,905
Merchandise inventories 40,053 37,804
Receivables and other current assets 3,827 3,382
Prepaid income taxes 924 1,005
Related party receivables - Wakefern 3,903 6,860
Related party receivables - other 143 152
53,579 53,108
Property and equipment:
Land 308 308
Buildings and improvements 1,220 1,220
Leaseholds and leasehold improvements 34,678 34,031
Equipment 77,054 75,756
Property under capital leases 38,218 32,353
151,478 143,668
Less accumulated depreciation and
amortization 68,102 65,389
83,376 78,279
Other assets:
Investments in related parties 10,992 9,706
Intangibles 4,381 4,562
Other 2,214 2,384
Related party receivables - Wakefern 1,416 1,370
Related party receivables - other 135 158
19,138 18,180
$156,093 $149,567
(continued)
(1) Derived from the Audited Consolidated Financial Statements for the year
ended October 31, 1998.
See accompanying notes to consolidated financial statements.
3
<PAGE>
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands except share data)
January 30, October 31,
1999 1998
(Unaudited) (1)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 7,778 $ 7,812
Current portion of long-term debt,
related party 517 211
Current portion of obligations under
capital leases 457 667
Deferred income tax liability 1,464 1,464
Accounts payable:
Related party-Wakefern 32,691 30,525
Others 6,012 6,446
Accrued expenses 9,435 8,708
58,354 55,833
Long-term debt 16,949 20,289
Long-term debt, related party 1,827 916
Obligations under capital leases 35,401 29,451
Deferred income taxes 3,592 3,508
Other long-term liabilities 6,421 6,556
64,190 60,720
Shareholders' equity:
Common stock, $1.00 par; authorized
2,500,000 shares; issued 1,621,627
shares; outstanding 1,117,150 shares 1,622 1,622
Capital in excess of par 2,351 2,351
Retained earnings 36,286 35,751
Accumulated comprehensive income:
Minimum pension liability adjustment (81) (81)
40,178 39,643
Less 504,477 shares held
in treasury, at cost 6,629 6,629
33,549 33,014
$ 156,093 $ 149,567
(1) Derived from the Audited Consolidated Financial Statements for the year
ended October 31, 1998.
See accompanying notes to consolidated financial statements.
4
<PAGE>
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations - Unaudited
(in thousands - except share data)
13 Weeks Ended
January 30, January 31,
1999 1998
Sales $ 203,607 $ 170,231
Cost of merchandise sold 150,730 127,797
Gross profit 52,877 42,434
Operating, general and
administrative expenses 50,719 40,345
Income from operations 2,158 2,089
Other (expense) income:
Interest expense (1,396) ( 960)
Interest income 53 58
(1,343) ( 902)
Income before taxes 815 1,187
Income tax provision (280) (404)
Net income $ 535 $ 783
Per share information:
Net income per common share, basic
and diluted $ .48 $ .70
Weighted average number of common
shares outstanding 1,117,150 1,117,150
Dividends per common share -0- -0-
See accompanying notes to consolidated financial statements.
5
<PAGE>
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows - Unaudited
(in thousands)
13 Weeks Ended
January 30, January 31,
1999 1998
Cash flows from operating activities:
Net income $ 535 $ 783
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 2,713 1,941
Amortization, intangibles 181 134
Amortization, deferred financing costs 136 153
Amortization, deferred rent escalation (172) 66
Deferred income taxes 84 (100)
(Increase) decrease in
Merchandise inventories (2,249) (1,625)
Receivables and other current assets ( 445) ( 64)
Prepaid income taxes 81 392
Other assets 34 1,153
Related party receivables-Wakefern 2,911 2,594
Increase (decrease) in
Accounts payable 1,732 6,002
Other liabilities 764 283
6,305 11,712
Cash flows from investing activities:
Cash paid for the purchase of property
and equipment (1,945) ( 890)
Construction in progress - (2,837)
Decrease(increase) in related party
receivables-other 32 ( 10)
(1,913) (3,737)
Cash flows from financing activities:
Proceeds from issuance of debt 894
Principal payments under long-term debt (3,374) (5,377)
Principal payments under capital
lease obligations ( 125) ( 113)
Principal payments under long-term
debt, related party ( 69) ( 27)
(3,568) (4,623)
NET INCREASE IN CASH AND CASH EQUIVALENTS 824 3,352
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,905 3,678
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 4,729 $ 7,030
See accompanying notes to consolidated financial statements.
6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 1 Basis of Presentation
The unaudited Consolidated Financial Statements as of or for the period ending
January 30, 1999, have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and rule 10-01. The balance sheet at October 31, 1998
has been taken from the audited financial statements at that date. In the
opinion of the management of the Registrant, all adjustments (consisting only
of normal recurring accruals) which the Registrant considers necessary for a
fair presentation of the results of operations for the period have been made.
Certain financial information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. The reader is referred to the
consolidated financial statements and notes thereto included in the Registrant's
annual report on Form 10-K for the year ended October 31, 1998.
Certain reclassifications have been made to prior year financial statements in
order to conform to the current year presentation.
These results are not necessarily indicative of the results for the entire
fiscal year.
Note 2 Adoption of Accounting Standards
Reporting Comprehensive Income
Effective November 1, 1998, the Registrant adopted Statement of Financial
Accounting Standards (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. There was no material impact
from adopting the provisions of SFAS No. 130 in the quarter ended January 30,
1999. There were no comprehensive income items during the quarter ended January
30, 1999.
Disclosure about Segments of an Enterprise and Related Information
Effective November 1, 1998 the Registrant adopted 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. There was no material impact from adopting the provisions of SFAS No.
131 in the quarter ended January 30, 1999.
7
<PAGE>
Part I - Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations
Financial Condition and Liquidity
The Registrant is a party to an Amended and Restated Revolving Credit and Term
Loan Agreement ('the Credit Agreement') with one financial institution. The
Credit Agreement is secured by substantially all of the Registrant's assets and
provided for a total commitment of $31,700,000, 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, the Stock Redemption Facility in the amount of $1,700,000
and the Expansion Loan in the amount of $1,500,000. As of January 30, 1999 the
Registrant owed $4,500,000 on Term Loan C, $1,360,000 on the Stock Redemption
Facility and $1,325,000 on the Expansion Loan. Term Loan C and the Stock
Redemption Loan are to be paid quarterly through December 31, 1999 with final
payments of $500,000 and $1,020,000, respectively, on February 15, 2000. The
revolving credit facility also matures February 15, 2000 and the Expansion Loan
is payable in monthly installments over its seven year term based on a ten year
amortization, with a final payment of $462,500 payable December 1, 2004.
Interest rates are fixed on Term Loan C and the Stock Redemption Facility at
8.38% and on the Expansion Loan at 9.18%. The interest rate on the revolving
credit facility floats at the Base Rate (defined below) plus .25%. The Base Rate
is the rate which is the greater of (i) the 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') plus 2.25% to determine the interest
rate on the revolving credit facility. The Credit Agreement contains certain
affirmative and negative covenants which, among other matters will require the
maintenance of a debt service coverage ratio.
The Registrant's compliance with the major financial covenant under the Credit
Agreement was as follows as of January 30, 1999.
Actual
Financial Credit (As defined in the
Covenant Agreement Credit Agreement)
Debt Service Coverage
Ratio Not less than 1.00 to 1.00 .54 to 1.00
Although the Debt Service Coverage Ratio (the 'Ratio') is below the level
required by the Credit Agreement, the Credit Agreement provides a second
criteria, if the Ratio is not met, before a default is deemed to have occurred.
Under this criteria, at all times when the Ratio is less than 1.00 to 1.00, the
amount available and undrawn on the revolving credit facility must equal or
exceed $2,500,000 which, in turn will mean that in order to remain in compliance
with this covenant, the Registrant cannot borrow the last $2,500,000 of funds
available under the revolving credit facility. This borrowing limitation was
exceeded once in the quarter ended January 30, 1999. This non-compliance with
the covenant was waived. After giving effect to this restriction on borrowing,
the Registrant had $8,543,000 of available credit at January 30, 1999, under its
revolving credit facility.
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 Credit Agreement does not permit the payment of
any cash dividends on the Registrant's Common Stock.
8
<PAGE>
Year 2000
In 1997, the Registrant appointed a year 2000 task force (the 'Task Force') to
review all aspects of the Registrant's operations relating to Year 2000 ('Y2K')
issues. The Task Force reports to the Registrant's Chief Financial Officer and
is staffed primarily with representatives of the Registrant's Information
Technology and Store Systems departments. Reports are made regularly to the
Registrant's Board of Directors.
The Task Force is participating with Wakefern Food Corporation ('Wakefern') in
the inventory and assessment of jointly operated store systems for Y2K
readiness. The Task Force and Wakefern, where involved, have identified all
computer-based systems and applications (including embedded chip systems) the
Registrant uses or that affect its operations that might not be Y2K compliant.
Those systems and equipment which are not Y2K compliant have been, or will be,
modified, reprogrammed or replaced. The Registrant estimates that all critical
systems and applications will be Y2K compliant by the fourth quarter of fiscal
1999. The costs related to the Y2K project are included in the normal operating
and capital budgets of both the Registrant's and Wakefern's Information
Technology Departments' budgets and should not have any material effect on the
Registrant's operating results.
Both the Registrant and Wakefern are in the process of developing contingency
plans to provide for viable alternatives to ensure that business operations are
able to continue in the event of Y2K related system failures. The most
significant impacts would likely be the inability to conduct normal operations
due to a power failure at store level or at Wakefern or a systems failure in the
banking process either at the local, federal or electronic payment level. If the
Registrant, Wakefern or third party vendors are unable to resolve these issues
in a timely manner, the failure of these systems could result in the
interruption of the Registrant's operations, which could have a material adverse
effect on the operating results and financial condition of the Registrant.
Working Capital
At January 30, 1999, the Registrant had a working capital deficiency of
$4,775,000 compared to a deficiency of $2,725,000 at October 31, 1998 and
$1,575,000 at January 31, 1998.
The decline in working capital from October 31, 1998 was primarily due to the
collection of $3,778,000 of current related party receivables which were used
to reduce the Revolving Note which is classified as long term borrowings.
The Registrant normally requires small amounts of working capital since
inventory is generally sold at approximately the same time that payments to
Wakefern and other suppliers are due and most sales are for cash or cash
equivalents.
Working capital ratios were as follows:
January 30, 1999 .92 to 1.0
October 31, 1998 .95 to 1.0
January 31, 1998 .97 to 1.0
9
<PAGE>
Cash flows (in millions) were as follows:
1/30/99 1/31/98
Operating activities... $ 6.3 $11.7
Investing activities... (1.9) (3.7)
Financing activities... (3.6) (4.6)
Totals $ 0.8 $ 3.4
The Registrant had $8,543,000 of available credit, at January 30, 1999, under
its revolving credit facility. The Registrant is presently renegotiating the
terms and conditions of the Credit Agreement in order to more adequately meet
its operating needs, scheduled capital expenditures and debt service for the
balance of fiscal 1999 and for periods thereafter.
For the 13 weeks ended January 30, 1999 depreciation was $2,713,000 while
capital expenditures totaled $1,945,000, compared to $1,941,000 and $1,496,000
respectively in the prior year period. The increase in depreciation was caused
by the addition of two new locations and one additional capital lease in fiscal
1998 and the modification of a capital lease in fiscal 1999.
Results of Operations (13 weeks ended January 30, 1999 compared to 13
weeks ended January 31, 1998)
Sales:
Same store sales from the nineteen stores in operation in both periods increased
8.0%. Sales for the current period totaled $203.6 million as compared to $170.2
million in the prior year period. A significant increase in promotional
activities, including a variety of incentive programs and double couponing, in
the current period contributed to this increase. Sales for the current quarter
included the operations of two new locations opened in February and August 1998.
The location opened in February 1998 replaced an older, smaller store.
Gross Profit:
Gross profit as a percent of sales increased to 26.0% of sales compared to 24.9%
in the prior year period. Patronage dividends, applied as a reduction of the
cost of merchandise sold, were $1.4 million in the current period compared to
$1.1 million in the prior year period. Gross profit improved as a result of
improved product mix, increased patronage dividends, reduced Wakefern assessment
as a percentage of sales and Wakefern incentive programs for the new locations.
Operating Expenses:
Operating, general and administrative expenses as a percent of sales were 24.9%
versus 23.7% in the prior year period. The increase in operating, general and
administrative expenses as a percent of sales was primarily due to increases in
certain expense categories as a percentage of sales. As a percentage of sales,
selling expense increased 1.78% and other store expenses, which include debit
and credit card processing fees and Wakefern support services, increased .13%.
The increase in selling expense was the result of increased promotional
activity, including a variety of incentive programs and double couponing, in the
Registrant's marketing area. These increases were partially offset by decreases
in labor and related fringe benefits of .29%, corporate administrative expense
of .28% and an increase in miscellaneous income of .14%.
10
<PAGE>
Interest Expense:
Interest expense increased to $1,396,000 from $960,000, while interest income
was $53,000 compared to $58,000 for the prior period. The increase in interest
expense for the current year period was due to an increase in average
outstanding debt, including increased capitalized lease obligations, since
January 31, 1998 partially offset by a decrease in the average interest rate
paid on debt.
Income Taxes:
An income tax rate of 34% has been used in both the current and prior year
periods based on the expected effective tax rate.
Net Income:
Net income was $535,000 in the current year period compared to $783,000 in the
prior year period. Earnings before interest, taxes, depreciation and
amortization ("EBITDA") for the current period were $5,016,000 as compared to
$4,383,000 in the prior year period. Net income per common share, both basic and
diluted, was $.48 in the current period compared to $.70 in the prior year
period. Per share calculations are based on 1,117,150 shares outstanding in the
both periods.
11
<PAGE>
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit (27) - Financial Data Schedule
(b) No reports on Form 8-K were required to
be filed for the 13 weeks ended
January 30, 1999
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
FOODARAMA SUPERMARKETS, INC.
(Registrant)
Date: March 11, 1999 /S/ MICHAEL SHAPIRO
(Signature)
Michael Shapiro
Senior Vice President
Chief Financial Officer
Date: March 11, 1999 /S/ JOSEPH C. TROILO
(Signature)
Joseph C. Troilo
Senior Vice President
Principal Accounting Officer
13
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-Mos
<FISCAL-YEAR-END> Oct-30-1999
<PERIOD-START> Nov-01-1998
<PERIOD-END> Jan-30-1999
<CASH> 4,729
<SECURITIES> 0
<RECEIVABLES> 8,366
<ALLOWANCES> (493)
<INVENTORY> 40,053
<CURRENT-ASSETS> 53,579
<PP&E> 151,478
<DEPRECIATION> (68,102)
<TOTAL-ASSETS> 156,093
<CURRENT-LIABILITIES> 58,354
<BONDS> 0
0
0
<COMMON> 1,622
<OTHER-SE> 31,927
<TOTAL-LIABILITY-AND-EQUITY> 156,093
<SALES> 203,607
<TOTAL-REVENUES> 0
<CGS> 150,730
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 50,719
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,396
<INCOME-PRETAX> 815
<INCOME-TAX> 280
<INCOME-CONTINUING> 535
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 535
<EPS-PRIMARY> 0.48
<EPS-DILUTED> 0.48
</TABLE>
