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 May 1, 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 June 4,1999
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
May 1, 1999 and October 31, 1998
Unaudited Consolidated Statements of
Operations for the thirteen weeks
ended May 1, 1999 and May 2, 1998
Unaudited Consolidated Statements of
Operations for the twenty six weeks
ended May 1, 1999 and May 2, 1998
Unaudited Consolidated Statements of
Cash Flows for the twenty six weeks
ended May 1, 1999 and May 2, 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 Operation."
2
<PAGE>
PART I FINANCIAL INFORMATION
FOODARAMA SUPERMARKETS, INC AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands)
May 1, October 31,
1999 1998
(Unaudited) (1)
ASSETS
Current assets:
Cash and cash equivalents $ 3,980 $ 3,905
Merchandise inventories 39,311 37,804
Receivables and other current assets 4,002 3,382
Prepaid income taxes 890 1,005
Related party receivables - Wakefern 4,438 6,860
Related party receivables - other 130 152
-------- --------
52,751 53,108
-------- --------
Property and equipment:
Land 308 308
Buildings and improvements 1,220 1,220
Leaseholds and leasehold improvements 34,890 34,031
Equipment 78,735 75,756
Property under capital leases 38,218 32,353
-------- --------
153,371 143,668
Less accumulated depreciation and
amortization 70,852 65,389
-------- --------
82,519 78,279
-------- --------
Other assets:
Investments in related parties 10,992 9,706
Intangibles 4,200 4,562
Other 2,854 2,384
Related party receivables - Wakefern 1,462 1,370
Related party receivables - other 117 158
-------- --------
19,625 18,180
-------- --------
$154,895 $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)
May 1, October 31,
1999 1998
(Unaudited) (1)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 15,554 $ 7,812
Current portion of long-term debt,
related party 517 211
Current portion of obligations under
capital leases 468 667
Deferred income tax liability 1,464 1,464
Accounts payable:
Related party-Wakefern 28,514 30,525
Others 6,926 6,446
Accrued expenses 9,620 8,708
--------- ---------
63,063 55,833
---------- ----------
Long-term debt 10,741 20,289
Long-term debt, related party 1,701 916
Obligations under capital leases 35,280 29,451
Deferred income taxes 3,634 3,508
Other long-term liabilities 6,550 6,556
---------- ----------
57,906 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 36,663 35,751
Accumulated comprehensive income:
Minimum pension liability adjustment (81) (81)
--------- ---------
40,555 39,643
Less 504,477 shares held in treasury,
at cost 6,629 6,629
---------- ---------
33,926 33,014
---------- ---------
$ 154,895 $ 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
May 1 May 2,
1999 1998
----------- ------------
Sales $ 195,420 $ 166,245
Cost of merchandise sold 143,696 123,820
----------- -----------
Gross profit 51,724 42,425
Operating, general and
administrative expenses 49,835 41,304
----------- -----------
Income from operations 1,889 1,121
----------- -----------
Other (expense) income:
Interest expense (1,420) (889)
Interest income 98 159
----------- -----------
(1,322) (730)
----------- -----------
Income before taxes 567 391
Income tax provision (190) (133)
----------- -----------
Net income $ 377 $ 258
=========== ===========
Per share information:
Net income per common share,
basic and diluted $ .34 $ .23
=========== ===========
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 Operations - Unaudited
(in thousands - except share data)
26 Weeks Ended
May 1, May 2,
1999 1998
----------- ------------
Sales $ 399,027 $ 336,476
Cost of merchandise sold 294,426 251,617
----------- -----------
Gross profit 104,601 84,859
Operating, general and
administrative expenses 100,554 81,649
----------- -----------
Income from operations 4,047 3,210
----------- -----------
Other (expense) income:
Interest expense (2,816) (1,849)
Interest income 151 217
----------- -----------
(2,665) (1,632)
Income before taxes 1,382 1,578
Income tax provision (470) (537)
----------- -----------
Net income $ 912 $ 1,041
=========== ===========
Per share information:
Net income per common share,
basic and diluted $ .82 $ .93
=========== ===========
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.
6
<PAGE>
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows - Unaudited
(in thousands)
26 Weeks Ended
May 1, May 2,
1999 1998
Cash flows from operating activities:
Net income $ 912 $ 1,041
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 5,463 3,879
Amortization, intangibles 362 269
Amortization, deferred financing costs 212 326
Amortization, deferred rent escalation ( 131) 133
Deferred income taxes (benefit) 126 (135)
(Increase) decrease in
Merchandise inventories (1,507) (2,471)
Receivables and other current assets ( 620) ( 252)
Prepaid income taxes 115 312
Other assets ( 682) 702
Related party receivables-Wakefern 2,330 2,086
Increase (decrease) in
Accounts payable (1,531) 4,930
Other liabilities 1,037 544
--------- ---------
6,086 11,364
Cash flows from investing activities:
Cash paid for the purchase of property
and equipment (3,311) (7,492)
Cash paid for construction in progress (1,000)
Decrease(increase) in related party
receivables-other 63 ( 64)
---------- ---------
(3,248) (8,556)
Cash flows from financing activities:
Proceeds from issuance of debt 1,663 3,894
Principal payments under long-term debt (3,996) (6,194)
Principal payments under capital
lease obligations ( 235) ( 207)
Principal payments under long-term
debt, related party ( 195) ( 40)
--------- ---------
(2,763) (2,547)
NET INCREASE IN CASH AND CASH EQUIVALENTS 75 261
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,905 3,678
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,980 $ 3,939
========- =========
See accompanying notes to consolidated financial statements.
7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 1 Basis of Presentation
The unaudited Consolidated Financial Statements as of or for the period ending
May 1, 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 May 1, 1999.
There were no comprehensive income items during the quarter ended May 1, 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 May 1, 1999.
8
<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 $34,200,000, including a revolving credit
facility of up to $20,000,000 (increased from $17,500,000 on March 15, 1999) 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 May 1, 1999 the Registrant owed $3,500,000 on Term
Loan C, $1,275,000 on the Stock Redemption Facility and $1,287,500 on the
Expansion Loan. Term Loan C and the Stock Redemption Facility 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 May 1, 1999.
Actual
Financial Credit (As defined in the
Covenant Agreement Credit Agreement)
Debt Service Coverage
Ratio Not less than 1.00 to 1.00 .71 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. After giving effect to this
restriction on borrowing, the Registrant had $8,021,000 of available credit at
May 1, 1999, under its revolving credit facility.
9
<PAGE>
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.
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 May 1, 1999, the Registrant had a working capital deficiency of $10,312,000
compared to a deficiency of $2,725,000 at October 31, 1998 and $2,532,000 at May
2, 1998.
The decline in working capital from October 31, 1998 was primarily due to the
reclassification of the Revolving Note from long term to current debt. This
reclassification was necessary since the loan facility matures in less than one
year.
10
<PAGE>
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:
May 1, 1999 .84 to 1.0
October 31, 1998 .95 to 1.0
May 2, 1998 .95 to 1.0
Cash flows (in millions) were as follows:
5/01/99 5/02/98
Operating activities... $ 6.1 $11.4
Investing activities... (3.2) (8.6)
Financing activities... (2.8) (2.5)
------ ------
Totals $ 0.1 $ 0.3
====== ======
The Registrant had $8,021,000 of available credit, at May 1, 1999, under its
revolving credit facility. The March 15, 1999 amendment to the revolving credit
facility increasing the amount available thereunder from $17,500,000 to
$20,000,000 is expected to provide the Registrant with working capital adequate
to meet its needs for the balance of the fiscal year. The Registrant is
presently negotiating the terms and conditions of a new credit agreement with
several financial institutions. A new credit facility is expected to allow the
Registrant to more adequately meet its operating needs, scheduled capital
expenditures and debt service during fiscal 2000 and thereafter.
For the twenty six weeks ended May 1, 1999 depreciation was $5,463,000 while
capital expenditures totaled $3,838,000, compared to $3,879,000 and $8,098,000
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 May 1, 1999 compared to
13 weeks ended May 2, 1998)
Sales:
Same store sales from the nineteen stores in operation in both periods increased
9.4%. Sales for the current period totaled $195.4 million as compared to $166.2
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.
11
<PAGE>
Gross Profit:
Gross profit as a percent of sales increased to 26.5% of sales compared to 25.5%
in the prior year period. Patronage dividends, applied as a reduction of the
cost of merchandise sold, were $1.3 million in the current period compared to
$1.2 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 25.5%
versus 24.8% 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 1.66% and other store expenses, which include debit
and credit card processing fees and Wakefern support services, increased .11%.
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 .35%, supplies of .15%, occupancy of
.09%, pre-store opening costs of .17%, corporate administrative expense of .13%
and an increase in miscellaneous income of .09%.
Interest Expense:
Interest expense increased to $1,420,000 from $889,000, while interest income
was $98,000 compared to $159,000 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 May
2, 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 $377,000 in the current year period compared to $258,000 in the
prior year period. Earnings before interest, taxes, depreciation and
amortization ("EBITDA") for the current period were $4,937,000 as compared to
$3,434,000 in the prior year period. Net income per common share was $.34 in the
current period compared to $.23 in the prior year period. Per share calculations
are based on 1,117,150 shares outstanding in both periods.
12
<PAGE>
Results of Operations (26 weeks ended May 1, 1999 compared to 26
weeks ended May 2, 1998)
Sales:
Same store sales from the nineteen stores in operation in both periods increased
8.7%. Sales for the current twenty six week period totaled $399.0 million as
compared to $336.5 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 twenty six week period 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 26.2% of sales compared to 25.2%
in the prior year period. Patronage dividends, applied as a reduction of the
cost of merchandise sold, were $2.7 million in the current period compared to
$2.3 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 25.2%
versus 24.3% 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 1.62% and other store expenses, which include debit
and credit card processing fees and Wakefern support services, increased .12%.
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 .32%, supplies of .09%, occupancy of
.05%, pre-store opening costs of .09%, corporate administrative expense of .19%
and an increase in miscellaneous income of .12%.
Interest Expense:
Interest expense increased to $2,816,000 from $1,849,000, while interest income
was $151,000 compared to $217,000 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 May
2, 1998 partially offset by a decrease in the average interest rate paid on
debt.
13
<PAGE>
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 $912,000 in the current year period compared to $1,041,000 in the
prior year period. Earnings before interest, taxes, depreciation and
amortization ("EBITDA") for the current period were $9,953,000 as compared to
$7,817,000 in the prior year period. Net income per common share, both basic and
diluted, was $.82 in the current period compared to $.93 in the prior year
period. Per share calculations are based on 1,117,150 shares outstanding in the
both periods.
14
<PAGE>
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit (27) - Financial Data Schedule.
Exhibit (99) - Amendment to the Amended and Restated
Revolving Credit and Term Loan Agreement dated March
11, 1999 and amended Schedule 2.01 and the Second
Amended and Restated Revolving Note Exhibit A
thereto.
(b) No reports on Form 8-K were required to be filed for
the 13 weeks ended May 1, 1999.
15
<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: June 11, 1999 /S/ MICHAEL SHAPIRO
-----------------------------
(Signature)
Michael Shapiro
Senior Vice President
Chief Financial Officer
Date: June 11, 1999 /S/ JOSEPH C. TROILO
-----------------------------
(Signature)
Joseph C. Troilo
Senior Vice President
Principal Accounting Officer
16
<PAGE>
EXHIBIT 99
HELLER FINANCIAL, INC.
500 West Monroe Street
Chicago, Illinois 60661
March ___, 1999
Foodarama Supermarkets, Inc.
922 Highway 33, Building 6, Suite 1
Freehold, New Jersey 07728
Gentlemen:
Reference is made to that certain Amended and Restated Revolving Credit
and Term Loan Agreement dated as of May 2, 1997 (as amended, restated, modified
or supplemented from time to time, the "Loan Agreement") by and among FOODARAMA
SUPERMARKETS, INC. ("Foodarama"), NEW LINDEN PRICE RITE, INC., SHOP RITE OF
READING, INC., SHOP RITE OF MALVERNE, INC., HELLER FINANCIAL, INC. ("Heller"),
the various other financial institutions named therein or which hereafter become
a party thereto (Heller and such other financial institutions, collectively, the
"Lenders") and Heller as agent for the Lenders (Heller in such capacity,
"Agent"). All capitalized terms used herein shall have the meanings ascribed
thereto in the Loan Agreement.
You have requested that Agent, on behalf of Lenders, increase the amount
of the revolving credit facility under the Loan Agreement, and Agent, on behalf
of Lenders is willing to do so on the terms and conditions set forth herein.
Subject to Agent's receipt of (a) the Second Amended and Restated
Revolving Credit Note (the "Amended Note") duly executed by Borrowers, and (b)
resolutions of each Borrower duly authorizing the execution, delivery and
performance of the transactions contemplated by this letter agreement, which
resolutions shall be certified by the Secretary or Assistant Secretary of such
Borrower, the parties hereto agree that the Loan Agreement is hereby amended as
follows:
(a) Schedule 2.01 is hereby replaced with Schedule 2.01 to this
letter agreement; and
(b) Exhibit A is hereby replaced with Exhibit A to this letter
agreement.
Except as expressly provided herein, the execution, delivery and
effectiveness of this letter shall not operate as a waiver of any right, power
or remedy of Agent or any Lender, nor constitute a waiver of any provision of
the Loan Agreement, the Loan Documents or any other documents, instruments or
agreements executed and/or delivered thereunder or in connection therewith and
the Loan Agreement, the Loan Documents and all other documents, instruments and
agreements executed and/or delivered in connection therewith, shall remain in
full force and effect, and are hereby ratified and confirmed.
This letter may be executed by the parties hereto in one or more
<PAGE>
counterparts, each of which shall be deemed an original and all of which
taken together shall constitute one and the same agreement.
By its signature below, each Borrower hereby represents and warrants to
Agent and Lenders that (a) it has the requisite corporate power to execute,
deliver and perform its obligations under this letter, to borrow the additional
loans under the revolving credit facility and to execute and deliver the Amended
Note and (b) no consent of any Person (including any party to an intercreditor,
subordination or similar agreement) is necessary in order for such Borrower to
execute, deliver and perform its obligations under this letter or the Amended
Note.
If you are in agreement with the foregoing, kindly execute and have the
other Borrowers and Guarantors execute this letter in the space provided below
and return same to the undersigned.
Sincerely,
HELLER FINANCIAL, INC., as Agent and as a Lender
By:______________________
Name:
Title:
CONSENTED AND AGREED TO:
FOODARAMA SUPERMARKETS, INC., as
Parent and as Guarantor
By:_____________________________
Name:
Title:
NEW LINDEN PRICE RITE, INC., as
Borrower and as Guarantor
By:_____________________________
Name:
Title:
SHOP RITE OF READING, INC., as
Borrower and as Guarantor
By:_____________________________
Name:
Title:
SHOP RITE OF MALVERNE, INC., as
Guarantor
By:_____________________________
Name:
Title:
<PAGE>
Schedule 2.01
Heller Financial, Inc., as Agent
Revolving Loan Commitment: $20,000,000
Term Loan Commitment: $11,000,000
Stock Redemption Facility: $ 1,700,000
<PAGE>
Exhibit A
SECOND AMENDED AND RESTATED REVOLVING NOTE
$20,000,000 New York, New York
March ___, 1999
FOR VALUE RECEIVED, the undersigned, NEW LINDEN PRICE RITE, INC., a New
Jersey corporation ("New Linden"), and SHOP RITE OF READING, INC., a
Pennsylvania corporation ("Reading", and together with New Linden, each a
"Maker" and collectively, the "Makers"), jointly and severally, hereby promise
to pay to the order of HELLER FINANCIAL, INC. (the "Lender"), at the office of
HELLER FINANCIAL, INC. (the "Agent"), 500 West Monroe Street, Chicago, Illinois
60661, on the Termination Date as defined in the Amended and Restated Revolving
Credit and Term Loan Agreement dated as of May 2, 1997 among the Makers,
Foodarama Supermarkets, Inc., a New Jersey corporation, the Guarantors named
therein, the Lenders named therein and the Agent (as the same may be amended,
restated, modified or supplemented from time to time in accordance with its
terms, the "Credit Agreement") or earlier as provided for in the Credit
Agreement, the lesser of the principal sum of TWENTY MILLION DOLLARS AND NO
CENTS ($20,000,000) or the aggregate unpaid principal amount of all Revolving
Loans from the Lender pursuant to the terms of the Credit Agreement, in lawful
money of the United States of America in immediately available funds, and to pay
interest from the date hereof on the principal amount hereof from time to time
outstanding, in like funds, at said office, at a rate or rates per annum and
payable on such dates as determined pursuant to the terms of the Credit
Agreement.
This Revolving Note amends and restates in its entirety and is given in
substitution for (but not satisfaction of) that certain Amended and Restated
Revolving Note in the original principal amount of $17,500,000. The obligations
evidenced by this Revolving Note including obligations outstanding under the
Credit Agreement immediately prior to the issuance of this Revolving Note
(including, without limitation accrued and unpaid interest and fees under the
Credit Agreement as of the date hereof), which continue to be outstanding, and
the issuance of this Revolving Note does not evidence or cause a repayment or
novation with respect to such obligations.
This Revolving Note is subject to the terms of the Credit Agreement,
which terms are hereby incorporated herein by reference. This Revolving Note is
secured pursuant to and the holder is entitled to the benefits of the Credit
Agreement.
The Makers promise to pay interest, on demand, on any overdue principal
and fees and, to the extent permitted by law, overdue interest from their due
dates at a rate or rates determined as set forth in the Credit Agreement.
The Makers hereby waive diligence, presentment, demand, protest and
notice of any kind whatsoever. The non-exercise by the holder of any of its
rights hereunder in any particular instance shall not constitute a waiver
thereof in that or any subsequent instance.
All borrowings evidenced by this Revolving Note and all payments and
prepayments of the principal hereof and interest hereon and the respective dates
thereof shall be endorsed by the holder hereof on the schedule attached hereto
and made a part hereof, or on a continuation thereof which shall be attached
hereto and made a part hereof, or otherwise recorded by such holder in its
internal records; provided, however, that the failure of the holder hereof to
make such a notation or any error in such a notation shall not in any manner
affect the obligations of the Makers to make payments of principal and interest
in accordance with the terms of this Revolving Note and the Credit Agreement.
This Revolving Credit Note is one of the Notes referred to in the Credit
Agreement, which, among other things, contains provisions for the acceleration
of the maturity hereof upon the happening of certain events, for optional and
mandatory prepayment of the principal hereof prior to the maturity hereof and
for the amendment or waiver of certain provisions of the Credit Agreement, all
upon the terms and conditions therein specified. THIS NOTE SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
NEW LINDEN PRICE RITE, INC.
By:_________________________
Name:
Title:
SHOP RITE OF READING, INC.
By:_________________________
Name:
Title:
<PAGE>
Loans and Payment
Unpaid
Principal Name of
Amount and Payments of Balance of Person
Making
Date Type of Loan Principal/Interest Note Notation
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-Mos
<FISCAL-YEAR-END> Oct-30-1999
<PERIOD-START> Nov-01-1998
<PERIOD-END> May-01-1999
<CASH> 3,980
<SECURITIES> 0
<RECEIVABLES> 9,080
<ALLOWANCES> (510)
<INVENTORY> 39,311
<CURRENT-ASSETS> 52,751
<PP&E> 153,371
<DEPRECIATION> (70,852)
<TOTAL-ASSETS> 154,895
<CURRENT-LIABILITIES> 63,063
<BONDS> 0
0
0
<COMMON> 1,622
<OTHER-SE> 32,304
<TOTAL-LIABILITY-AND-EQUITY> 154,895
<SALES> 399,027
<TOTAL-REVENUES> 0
<CGS> 294,426
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 100,554
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,816
<INCOME-PRETAX> 1,382
<INCOME-TAX> 470
<INCOME-CONTINUING> 912
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 912
<EPS-BASIC> 0.82
<EPS-DILUTED> 0.82
</TABLE>
