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 July 29, 2000
Commission file number 1-5745-1
FOODARAMA SUPERMARKETS, INC.
(Exact name of Registrant as specified in its charter)
New Jersey 21-0717108
------------------------------- -----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
922 Highway 33, Freehold, N.J. 07728
-----------------------------------------
(Address of principal executive offices)
Telephone #732-462-4700
---------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months and (2) has been subject to
the filing requirements for at least the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the close of the latest practicable
date.
OUTSTANDING AT
CLASS September 8, 2000
------------- -----------------
Common Stock 1,117,290 shares
$1 par value
<PAGE>
FOODARAMA SUPERMARKETS, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Consolidated Condensed Balance Sheets
July 29, 2000 and October 30, 1999
Unaudited Consolidated Condensed Statements of
Operations for the thirteen weeks ended
July 29, 2000 and July 31, 1999
Unaudited Consolidated Condensed Statements of
Operations for the thirty nine weeks ended
July 29, 2000 and July 31, 1999
Unaudited Consolidated Condensed Statements of
Cash Flows for the thirty nine weeks ended
July 29, 2000 and July 31, 1999
Notes to the Unaudited Consolidated
Condensed 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
Disclosure Concerning Forward-Looking Statements
All statements, other than statements of historical fact, included in this
Form 10-Q, including without limitation the statements under "Management's
Discussion and Analysis of Financial Condition and Results of Operations", 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 Foodarama Supermarkets, Inc. (the
"Company") to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements contained
in this Form 10-Q. Such potential risks and uncertainties, include without
limitation, competitive pressures from other supermarket operators and warehouse
club stores, economic conditions in the Company's primary markets, consumer
spending patterns, availability of capital, cost of labor, cost of goods sold,
and other risk factors detailed herein and in other of the Company's Securities
and Exchange Commission filings. The forward-looking statements are made as of
the date of this Form 10-Q and the Company 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.
2
<PAGE>
PART I FINANCIAL INFORMATION
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(in thousands)
July 29, October 30,
2000 1999
(Unaudited) (1)
ASSETS
Current assets:
Cash and cash equivalents $ 7,602 $ 4,094
Merchandise inventories 41,642 38,113
Receivables and other current assets 4,589 4,496
Related party receivables - Wakefern 6,198 8,000
Related party receivables - other 12 25
--------- -------
60,043 54,728
--------- -------
Property and equipment:
Land 308 308
Buildings and improvements 1,220 1,220
Leaseholds and leasehold improvements 36,412 35,032
Equipment 93,643 80,991
Property under capital leases 59,909 38,218
Construction in progress 1,350 2,481
------- -------
192,842 158,250
Less accumulated depreciation and
amortization 84,685 76,227
------- -------
108,157 82,023
------- -------
Other assets:
Investments in related parties 11,656 10,992
Intangibles 3,575 3,839
Other 3,369 2,872
Related party receivables - Wakefern 1,692 1,555
Related party receivables - other 185 177
----- ------
20,477 19,435
------- -------
$ 188,677 $156,186
------- -------
(continued)
(1) Derived from the Audited Consolidated Financial Statements for the year
ended October 30, 1999.
See accompanying notes to the consolidated condensed financial statements.
3
<PAGE>
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(in thousands - except share data)
July 29, October 30,
2000 1999
(Unaudited) (1)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 4,054 $ 2,605
Current portion of long-term debt,
related party 582 503
Current portion of obligations under
capital leases 633 492
Current income taxes payable 920 457
Deferred income tax liability 1,541 1,541
Accounts payable:
Related party - Wakefern 34,247 29,699
Others 9,765 7,115
Accrued expenses 12,437 9,809
---------- ----------
64,179 52,221
---------- ----------
Long-term debt 21,123 23,126
Long-term debt, related party 1,587 1,450
Obligations under capital leases 56,031 35,028
Deferred income taxes 2,041 2,732
Other long-term liabilities 6,921 6,589
---------- ----------
87,703 68,925
---------- ----------
Shareholders' equity:
Common stock, $1.00 par; authorized
2,500,000 shares; issued 1,621,767 shares;
Outstanding 1,117,290 shares 1,622 1,622
Capital in excess of par 2,351 2,351
Retained earnings 39,451 37,696
--------- ----------
43,424 41,669
Less 504,477 shares held in treasury,
at cost 6,629 6,629
---------- ----------
36,795 35,040
---------- ----------
$ 188,677 $ 156,186
========== ==========
(1) Derived from the Audited Consolidated Financial Statements for the year
ended October 30, 1999.
See accompanying notes to the consolidated condensed financial statements.
4
<PAGE>
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Operations - Unaudited
(in thousands - except share data)
13 Weeks Ended
July 29, July 31,
2000 1999
Sales $ 228,475 $ 203,243
Cost of merchandise sold 169,015 150,475
-------- --------
Gross profit 59,460 52,768
Operating, general and
administrative expenses 56,506 50,839
-------- ---------
Income from operations 2,954 1,929
-------- ---------
Other (expense) income:
Interest expense (1,958) (1,366)
Interest income 63 74
--------- ---------
(1,895) (1,292)
--------- ---------
Earnings before income tax provision 1,059 637
Income tax provision ( 423) ( 216)
--------- ----------
Net income $ 636 $ 421
============ ==========
Per share information:
Net income per common share, basic and
diluted $ .57 $ .38
============ ===========
Weighted average number of common
shares outstanding 1,117,290 1,117,290
===========================
Dividends per common share -0- -0-
============ ===========
See accompanying notes to the consolidated condensed financial statements.
5
<PAGE>
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Operations - Unaudited
(in thousands - except share data)
39 Weeks Ended
July 29, July 31,
2000 1999
---------- ---------
Sales $ 661,906 $ 602,270
Cost of merchandise sold 490,378 444,901
------- ---------
Gross profit 171,528 157,369
Operating, general and
administrative expenses 163,875 151,393
------- ----------
Income from operations 7,653 5,976
------- ----------
Other (expense) income:
Interest expense (4,936) (4,182)
Interest income 208 225
-------- ----------
(4,728) (3,957)
-------- ----------
Earnings before income tax provision 2,925 2,019
Income tax provision (1,170) ( 686)
------- --------
Net income $ 1,755 $ 1,333
========== ===========
Per share information:
Net income per common share, basic and
diluted $ 1.57 $ 1.19
========== ==========
Weighted average number of common
shares outstanding 1,117,290 1,117,290
=========== ==========
Dividends per common share -0- -0-
============ ============
See accompanying notes to the consolidated condensed financial statements.
6
<PAGE>
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows - Unaudited
(in thousands)
39 Weeks Ended
July 29, 2000 July 31, 1999
Cash flows from operating activities:
Net income $ 1,755 $ 1,333
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 8,458 8,154
Amortization, intangibles 264 543
Amortization, deferred financing costs 186 254
Amortization, deferred rent escalation 63 ( 89)
Deferred income taxes (benefit) ( 691) 177
Provision to value inventory at lifo 500 -
(Increase) decrease in
Merchandise inventories (4,029) ( 881)
Receivables and other current assets ( 93) ( 944)
Prepaid income taxes - 173
Other assets 319 ( 786)
Related party receivables-Wakefern 1,665 1,373
Increase (decrease) in
Accounts payable 7,198 ( 600)
Income taxes payable 463 -
Other liabilities 2,897 1,822
--------- --------
18,955 10,529
--------- --------
Cash flows from investing activities:
Cash paid for the purchase of property
and equipment (12,029) (4,224)
Cash paid for construction in progress ( 925) (1,651)
Decrease in related party
receivables-other 5 88
--------- ---------
(12,949) (5,787)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of debt 17,161 2,096
Principal payments under long-term debt (17,715) ( 5,898)
Principal payments under capital
lease obligations ( 547) ( 348)
Principal payments under long-term debt,
related party ( 448) ( 321)
Deferred financing costs ( 949) -
--------- ---------
(2,498) ( 4,471)
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 3,508 271
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,094 3,905
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 7,602 $ 4,176
========= =========
See accompanying notes to the consolidated condensed financial statements.
7
<PAGE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)
Note 1 Basis of Presentation
The unaudited Consolidated Condensed Financial Statements as of or for the
period ended July 29, 2000 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 30, 1999
has been taken from the audited financial statements at that date. In the
opinion of the management of the Company, all adjustments (consisting only of
normal recurring accruals) which are considered 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 Company's annual report
on Form 10-K for the year ended October 30, 1999.
Effective October 31, 1999 the Company adopted the Last-in-First-Out (LIFO)
method of inventory valuation for its grocery and nonfood inventory items. The
Company believes that the LIFO method as applied to these inventory items
results in a better matching of revenues and expenses. Because the October 30,
1999 inventory valued at the First-In-First-Out (FIFO) method is the opening
LIFO inventory, there is neither a cumulative effect to October 31, 1999, nor
pro forma amounts of retroactive application of changing to the LIFO method. The
decision to change to LIFO was made in the third quarter. The effect of the
change on the three months and nine months ended July 29, 2000 was to reduce net
income $100,000 ($.09 per share) and $300,000 ($.27 per share), respectively.
The effect of the change on the first quarter ended January 29, 2000 was to
decrease net income $100,000 ($.09 per share) to $784,000 ($.70 per share). The
effect of the change on the second quarter ended April 29, 2000 was to decrease
net income $100,000 ($.09 per share) to $335,000 ($.30 per share).
If the FIFO method had been used, inventory at July 29, 2000 would have been
$500,000 higher.
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.
8
<PAGE>
Part I - Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations
Financial Condition and Liquidity
The Company is a party to a Second Amended and Restated Revolving Credit and
Term Loan Agreement ("the Credit Agreement") with three financial institutions.
The Credit Agreement is secured by substantially all of the Company's assets and
provided for a total commitment of up to $55,000,000, including a revolving
credit facility ("the Revolving Note") of up to $25,000,000, a term loan ("the
Term Loan") in the amount of $10,000,000 and a capital expenditures facility
("the Capex Facility") of up to $20,000,000. As of July 29, 2000 the Company
owed $9,000,000 on the Term Loan and $7,160,721 under the Capex Facility. The
Term Loan is to be paid in quarterly payments of $500,000 through December 31,
2004. The revolving credit facility also matures December 31, 2004 and the Capex
facility provides for the payment of interest only on its outstanding balance,
an unused facility fee of .50% for the first two years of this loan and fixed
quarterly principal payments thereafter based on a seven year amortization
schedule with a balloon payment due December 31, 2004. Interest rates float on
the revolving credit facility, Term Loan and Capex Facility at the Base Rate
(defined below) plus .50%, .75% and .75%, respectively 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 Company has the ability to use the London Interbank
Offered Rate ("LIBOR") plus 2.50% to determine the interest rate on the
revolving credit facility and LIBOR plus 2.75% to determine the interest rate on
the Term Loan and Capex Facility. The Credit Agreement contains certain
affirmative and negative covenants which, among other matters, will (i) restrict
capital expenditures, (ii) require the maintenance of certain levels of earnings
before interest, taxes, depreciation and amortization less rent payments for
capitalized lease locations ("Adjusted EBITDA") and (iii) require debt service
coverage and leverage ratios to be maintained.
The Company's compliance with the major financial covenants under the Credit
Agreement was as follows as of July 29, 2000:
Actual
Financial Credit (As defined in the
Covenant Agreement Credit Agreement)
--------- --------- ------------------
Adjusted EBITDA Greater than $13,000,000 $ 18,594,000
Leverage Ratio Less than 3.00 to 1.00 1.47 to 1.00
Debit Service Coverage
Ratio Greater than 1.10 to 1.00 1.65 to 1.00
Adjusted Capex Less than $6,750,000 (1) $ 4,258,000 (2)
Store Project Capex Less than $14,800,000 (1) $ 8,696,000 (2)
(1) Represents limitations on capital expenditures for fiscal 2000.
Adjusted Capex is all capital expenditures other than
New/Replacement Store Project Capex.
(2) Represents capital expenditures for the 39 weeks ended July 29,
2000.
No cash dividends have been paid on the Common Stock since 1979, and the Company
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 our Common Stock.
9
<PAGE>
Year 2000
The Company and Wakefern did not experience any material adverse effect on store
or warehouse operations as the result of the impact of year 2000 ("Y2K") issues
on our computer based systems and applications. In preparation for the new
millennium all critical systems were made Y2K compliant. The costs related to
the Y2K project were included in the normal operating results and capital
expenditures of both the Company's and Wakefern's Information Technology
Departments and did not have any material effect on the Company's operating
results. The Company does not currently expect any Y2K problems to be
encountered for the remainder of the year 2000 that would have a material effect
on the operating results of the Company.
Working Capital
At July 29, 2000, the Company had a working capital deficiency of $4,136,000
compared to working capital of $2,507,000 at October 30, 1999 and a deficiency
of $10,702,000 at July 30, 1999. The decline in working capital from October 30,
1999 was primarily due to the collection of $1,802,000 of current related party
receivables which were used to reduce the Revolving Note which is classified as
long-term borrowings and the net increase of $5,897,000 in accounts payable over
the increase in inventory which relates primarily to cost of merchandise and
operating expenses for the new Branchburg and Wall Township, New Jersey stores,
which when paid, will increase the Revolving Note. The Company 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:
July 29, 2000 .94 to 1.0
October 30, 1999 1.05 to 1.0
July 31, 1999 .83 to 1.0
Cash flows (in millions) were as follows:
Thirty Nine Weeks Ended
----------------------------------------
7/29/00 7/31/99
Operating activities... $19.0 $10.6
Investing activities... (13.0) ( 5.8)
Financing activities... ( 2.5) ( 4.5)
------ ------
Totals $ 3.5 $ 0.3
====== ======
The Company had $20,900,000 of available credit, at July 29, 2000, under its
revolving credit facility. The amount available under the Credit Agreement will
adequately meet our operating needs, scheduled capital expenditures and debt
service for fiscal 2000 and 2001. For the thirty nine weeks ended July 29, 2000
depreciation was $8,458,000 while capital expenditures totaled $12,954,000,
compared to $8,154,000 and $6,402,000, respectively, in the prior year period.
The increase in depreciation was caused by the addition of two new locations and
two additional capital leases in fiscal 2000 .
10
<PAGE>
Results of Operations (13 weeks ended July 29, 2000 compared to 13
weeks ended July 31, 1999)
Sales:
Same store sales from the twenty stores in operation in both periods increased
2.5%. Sales for the current quarter totaled $228.5 million as compared to $203.2
million of sales in the prior year period. Sales for the current quarter
included the operations of two new locations opened in February and April 2000.
The location opened in April 2000 replaced an older, smaller store.
Gross Profit:
Gross profit on sales was 26.0% of sales in both the current and prior year
periods. Patronage dividends, applied as a reduction of the cost of merchandise
sold, were $1.5 million in the current period versus $1.4 million in the prior
year period. Improved product mix and reduced Wakefern assessment as a
percentage of sales, was offset by decreased patronage dividends as a percentage
of sales and the adoption of the LIFO method of inventory valuation for grocery
and nonfood inventory items.
Operating Expenses:
Operating, general and administrative expenses as a percent of sales were 24.7%
versus 25.0% in the prior year period. The decrease in operating, general and
administrative expenses, as a percent of sales, were due to decreases in certain
expense categories as a percentage of sales. As a percentage of sales, selling
expense decreased .78%, administration decreased .31%, occupancy decreased .18%
and other expense, including insurance, decreased .10%. These decreases were
partially offset by increases in labor and related fringe benefits of .44%,
supplies of .10%, reserve for closed store expense of .43% and a decrease in
other income of .09%. The increase in reserve for closed store expense is
related to the anticipated expenses to be incurred over the balance of the lease
for the location closed in April 2000 when the new Wall Township store opened.
Interest Expense:
Interest expense increased to $1,958,000 from $1,366,000 while interest income
was $63,000 compared to $74,000 for the prior year period. The increase in
interest expense for the current year period was due to an increase in the
average outstanding debt, including increased capitalized lease obligations, and
an increase in the average interest rate paid on debt.
Income Taxes:
An income tax rate of 40% has been used in the current year period compared to a
rate of 34% in the prior year period based on the expected effective tax rates.
11
<PAGE>
Net Income:
Net income was $636,000 in the current year period as compared to $421,000 in
the prior year period. Earnings before interest, taxes, depreciation and
amortization ("EBITDA") for the thirteen weeks ended July 29, 2000 were
$6,089,000 as compared to $4,885,000 in the prior year period. Net income per
common share, both basic and diluted, was $.57 in the current period compared to
$.38 in the prior year period. Per share calculations are based on 1,117,290
shares outstanding in both periods.
Results of Operations (39 weeks ended July 29, 2000 compared to 39
weeks ended July 31, 1999)
Sales:
Same store sales from the twenty stores in operation in both periods increased
4.1%. Sales for the stores in operation for the current thirty nine week period
totaled $661.9 million as compared to $602.3 million of sales from the stores
operated in the prior year period. Sales for the current thirty nine week period
included the operations of two new locations opened in February and April 2000.
The location opened in April 2000 replaced an older, smaller store.
Gross profit:
Gross profit on sales decreased to 25.9% of sales compared to 26.1% in the prior
year period. Patronage dividends, applied as a reduction of the cost of
merchandise sold, were $4.3 million compared to $4.1 million in the prior year
period. Gross profit as a percentage of sales declined primarily as a result of
decreased patronage dividends as a percentage of sales, promotional programs for
the new locations opened in the current year period, the completion of Wakefern
incentive programs for the new locations opened in fiscal 1998 and the adoption
of the LIFO method of inventory valuation for grocery and nonfood categories,
partially offset by improved product mix, reduced Wakefern assessment as a
percentage of sales and Wakefern incentive programs for the new locations opened
in fiscal 2000.
Operating Expenses:
Operating, general and administrative expenses as a percent of sales were 24.8%
versus 25.1% in the prior year period. The decrease in operating, general and
administrative expense, as a percent of sales was primarily due to decreases in
certain expense categories as a percentage of sales. As a percentage of sales,
selling expense decreased .46%, administration decreased .09%, occupancy
decreased .19%, other expense, including insurance, decreased .09%, and
depreciation decreased .07%. These decreases were partially offset by increases
in labor and related fringe benefits of .19%, supplies of .05%, pre-opening
costs of .13% and reserve for closed store expense of .15%. Pre-opening costs
were for the new Branchburg and Wall township stores opened in February and
April 2000, respectively. The reserve for closed store expense relates to the
anticipated expenses to be incurred over the balance of the lease for the
location closed in April 2000 when the new Wall Township store opened.
12
<PAGE>
Interest Expense:
Interest expense increased to $4,936,000 from $4,182,000 while interest income
was $208,000 compared to $225,000 for the prior year 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 and an
increase in the average interest rate paid on debt.
Income Taxes:
An income tax rate of 40% has been used in the current year period compared to a
rate of 34% in the prior year period based on the expected effective tax rates.
Net Income:
Net income was $1,755,000 in the current year period. This compares to
$1,333,000 in the prior year period. Earnings before interest, taxes,
depreciation and amortization ("EBITDA") for the current period were $16,624,000
as compared to $14,838,000 in the prior year period. Net income per common
share, both basic and diluted, was $1.57 in the current period compared to $1.19
in the prior year period. Per share calculations are based on 1,117,290 shares
outstanding in both periods.
13
<PAGE>
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit (18) - Letter re change in accounting principles
Exhibit (27) - Financial Data Schedule.
(b) No reports on Form 8-K were required to be
filed for the 13 weeks ended July 29, 2000.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FOODARAMA SUPERMARKETS,INC.
(Registrant)
Date: September 12, 2000 /S/ Michael Shapiro
-------------------------
(Signature)
Michael Shapiro
Senior Vice President
Chief Financial Officer
Date: September 12, 2000 /S/ Thomas H. Flynn
-------------------------
(Signature)
Thomas H. Flynn
Director of Accounting
Principal Accounting Officer
15
<PAGE>
Exhibit - 18
Letter Re Change in Accounting Principles
September 11, 2000
To the Board of Directors
Foodarama Supermarkets, Inc.
922 Highway 33
Freehold, N.J. 07728
Dear Directors:
This letter is written to meet the requirements of Regulation S-K calling for a
letter from a registrant's independent accountants whenever there has been a
change in accounting principle or practices.
We have been informed that, effective October 31, 1999, the Company changed its
method of determining the cost of inventory for its grocery and non-food
inventories from the first-in first- out (FIFO) method to the last-in first-out
(LIFO) method. According to the management of the Company, this change results
in a better matching of revenues and expenses in these categories. In addition,
the change will enhance the comparability of the Company's financial statements
by changing to the method utilized in its industry.
A complete coordinated set of financial and reporting standards for determining
the preferability of accounting principles among acceptable alternative
principles has not been established by the accounting profession. Thus, we
cannot make an objective determination of whether the change in accounting
described in the preceding paragraph is to a preferable method. However, we have
reviewed the pertinent factors, including those related to financial reporting,
in this particular case on a subjective basis, and our opinion stated below is
based on our determination made in this manner.
We are of the opinion that the Company's change in method of accounting is to an
acceptable alternative method of accounting, which, based upon the reasons
stated for the change and our discussions with you, is also preferable under the
circumstances in this particular case. In arriving at this opinion, we have
relied on the business judgment and business planning of your management.
We have not audited the application of this change to the financial statements
of any period. Further, we have not examined and do not express any opinion with
respect to you financial statements for the nine months ended July 29, 2000.
Very Truly Yours,
AMPER, POLITZINER & MATTIA
