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 April 29, 2000
Commission file number 1-5745-1 FOODARAMA SUPERMARKETS, INC.
(Exact name of Registrant as specified in its charter)
New Jersey 21-0717108
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
922 Highway 33, Freehold, N.J. 07728
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(Address of principal executive offices)
Telephone #732-462-4700
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(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 2, 2000
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Common Stock 1,117,290 shares
$1 par value
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FOODARAMA SUPERMARKETS, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Consolidated Condensed Balance Sheets
April 29, 2000 and October 30, 1999
Unaudited Consolidated Condensed
Statements of Operations for the
thirteen weeks ended April 29, 2000
and May 1, 1999
Unaudited Consolidated Condensed
Statements of Operations for the
twenty six weeks ended April 29, 2000
and May 1, 1999
Unaudited Consolidated Condensed
Statements of Cash Flows for the
twenty six weeks ended April 29, 2000
and May 1, 1999
Notes to the 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,
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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.
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PART I FINANCIAL INFORMATION
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(in thousands)
April 29, October 30,
2000 1999
(Unaudited) (1)
ASSETS
Current assets:
Cash and cash equivalents $ 5,307 $ 4,094
Merchandise inventories 42,237 38,113
Receivables and other current assets 4,387 4,496
Related party receivables - Wakefern 4,938 8,000
Related party receivables - other 13 25
-------- --------
56,882 54,728
--------- --------
Property and equipment:
Land 308 308
Buildings and improvements 1,220 1,220
Leaseholds and leasehold improvements 35,986 35,032
Equipment 91,948 80,991
Property under capital leases 59,909 38,218
Construction in progress 835 2,481
--------- --------
190,206 158,250
Less accumulated depreciation and
amortization 81,721 76,227
--------- --------
108,485 82,023
--------- --------
Other assets:
Investments in related parties 11,656 10,992
Intangibles 3,663 3,839
Other 3,045 2,872
Related party receivables - Wakefern 1,644 1,555
Related party receivables - other 177 177
-------- --------
20,185 19,435
-------- --------
$ 185,552 $156,186
========= ========
(continued)
(1) Derived from the Audited Consolidated Financial Statements for the year
ended October 30, 1999.
See accompanying notes to consolidated condensed financial statements.
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FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(in thousands except share data)
April 29, October 30,
2000 1999
(Unaudited) (1)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 4,103 $ 2,605
Current portion of long-term debt,
related party 566 503
Current portion of obligations under
capital leases 646 492
Current income taxes payable 469 457
Deferred income tax liability 1,541 1,541
Accounts payable:
Related party-Wakefern 32,855 29,699
Others 9,319 7,115
Accrued expenses 11,141 9,809
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60,640 52,221
--------- ---------
Long-term debt 21,394 23,126
Long-term debt, related party 1,736 1,450
Obligations under capital leases 56,196 35,028
Deferred income taxes 2,399 2,732
Other long-term liabilities 6,828 6,589
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88,553 68,925
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Shareholders' equity:
Common stock, $1.00 par; authorized
2,500,000 shares; issued 1,621,767 shares;
Outstanding 1,117,290 shares 1,622 1,622
Capital in excess of par 2,351 2,351
Retained earnings 39,015 37,696
---------- ---------
42,988 41,669
Less 504,477 shares held in treasury,
at cost 6,629 6,629
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36,359 35,040
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$ 185,552 $ 156,186
========== =========
(1) Derived from the Audited Consolidated Financial Statements for the year
ended October 30, 1999.
See accompanying notes to consolidated condensed financial statements.
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FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Operations - Unaudited
(in thousands - except share data)
13 Weeks Ended
April 29, May 1,
2000 1999
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Sales $ 217,209 $ 195,420
Cost of merchandise sold 160,123 143,696
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Gross profit 57,086 51,724
Operating, general and
administrative expenses 54,823 49,835
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Income from operations 2,263 1,889
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Other (expense) income:
Interest expense (1,604) (1,420)
Interest income 67 98
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(1,537) (1,322)
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Earnings before income tax provision 726 567
Income tax provision ( 291) ( 190)
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Net income $ 435 $ 377
=========== ========
Per share information:
Net income per common share,
basic and diluted $ .39 $ .34
=========== =========
Weighted average number of common
shares outstanding 1,117,290 1,117,290
=========== =========
Dividends per common share -0- -0-
=========== =========
See accompanying notes to consolidated condensed financial statements.
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FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Operations - Unaudited
(in thousands - except share data)
26 Weeks Ended
April 29, May 1,
2000 1999
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Sales $ 433,431 $ 399,027
Cost of merchandise sold 321,030 294,426
----------- ---------
Gross profit 112,401 104,601
Operating, general and
administrative expenses 107,369 100,554
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Income from operations 5,032 4,047
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Other (expense) income:
Interest expense (2,978) (2,816)
Interest income 145 151
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(2,833) (2,665)
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Earnings before income tax provision 2,199 1,382
Income tax provision ( 880) ( 470)
----------- ---------
Net income $ 1,319 $ 912
=========== ========
Per share information:
Net income per common share,
basic and diluted $ 1.18 $ .82
=========== =========
Weighted average number of common
shares outstanding 1,117,290 1,117,290
=========== =========
Dividends per common share -0- -0-
=========== =========
See accompanying notes to consolidated condensed financial statements.
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FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows - Unaudited
(in thousands)
26 Weeks Ended
April 29, May 1,
2000 1999
----------------------
Cash flows from operating activities:
Net income $ 1,319 $ 912
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 5,494 5,463
Amortization, intangibles 176 362
Amortization, deferred financing costs 124 212
Amortization, deferred rent escalation 42 ( 131)
Deferred income taxes ( 333) 126
(Increase) decrease in
Merchandise inventories (4,124) (1,507)
Receivables and other current assets 109 ( 620)
Prepaid income taxes - 115
Other assets 634 ( 682)
Related party receivables-Wakefern 2,973 2,330
Increase (decrease) in
Accounts payable 5,360 (1,531)
Income taxes payable 12 -
Other liabilities 1,529 1,037
--------- --------
13,315 6,086
--------- --------
Cash flows from investing activities:
Cash paid for the purchase of property
and equipment ( 9,908) (3,311)
Cash paid for construction in progress ( 410) -
Decrease in related party receivables-other 12 63
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(10,306) (3,248)
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Cash flows from financing activities:
Proceeds from issuance of debt 16,421 1,663
Principal payments under long-term debt (16,655) (3,996)
Principal payments under capital
lease obligations ( 369) ( 235)
Principal payments under long-term
debt, related party ( 315) ( 195)
Deferred financing costs ( 878) -
--------- ---------
(1,796) (2,763)
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,213 75
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,094 3,905
--------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 5,307 $ 3,980
========= ========
See accompanying notes to consolidated condensed financial statements.
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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 April 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.
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.
Part I - Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations
Financial Condition and Liquidity
The Company was a party to a Loan Agreement (the "Credit Agreement") with one
financial institution which would have terminated on February 15, 2000. On
January 7, 2000 the Credit Agreement was assigned to a lending group and amended
and restated (the "Amended Credit Agreement"). The Amended Credit Agreement is
secured by substantially all of the Company's assets and provides 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") of
$10,000,000 and a capital expenditures facility (the "Capex Facility") of up to
$20,000,000. The Amended 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 Amended Credit Agreement (a) increases the total amount available to the
Company under the Revolving Note from $20,000,000 to $25,000,000, subject to the
borrowing base limitation of 65% (previously 60%) of eligible inventory; (b)
increases the Term Loan facility by $9,500,000; (c) eliminates the Stock
Redemption Loan ($1,020,000) and the Expansion Loan ($1,175,000) which were part
of the Credit Agreement; (d) extends the term of the Amended Credit Agreement to
December 31, 2004; (e) provides for repayment of the Term Loan in quarterly
installments of $500,000 each, commencing April 1, 2000 and ending on December
31, 2004; (f) provides for the payment of
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interest only on the outstanding balance of the Capex Facility, and an unused
facility fee of .50% for the first two years of the term of this loan and fixed
quarterly principal payments thereafter based on a seven year amortization
schedule with a balloon payment due December 31, 2004; (g) provides for three
additional financial covenants; (h) amends certain definitions; (i) increases
the interest rate on the Revolving Note by .25% to the Base Rate (defined below)
plus .50%; (j) changes the Term Loan to a floating rate loan at the Base Rate
plus .75%; (k) provides for the Capex Facility to be a floating rate loan at the
Base Rate plus .75%; and (l) provides for certain additional borrowing
limitations over the term of the Amended Credit Agreement. Other terms and
conditions of the Credit Agreement previously reported on by the Company have
not been modified. 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 may elect 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.
As of April 29, 2000 the Company owed $9,500,000 on the Term Loan and $6,421,000
under the Capex Facility.
The Company's compliance with the major financial covenants under the Amended
Credit Agreement was as follows as of April 29, 2000:
Amended Actual
Financial Credit (As defined in the
Covenant Agreement Amended Credit Agreement)
Adjusted EBITDA Greater than $13,000,000 $ 16,940,000
Leverage Ratio Less than 3.0 to 1.00 1.64 to 1.00
Debit Service Coverage
Ratio Greater than 1.10 to 1.00 1.41 to 1.00
Adjusted Capex Less than $6,750,000 (1) $ 2,462,000 (2)
Store Project Capex Less than $14,800,000 (1) $ 7,856,000 (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 26 weeks ended April 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 Amended Credit Agreement does not permit the payment of
any cash dividends on our Common Stock.
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
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encountered for the remainder of the year 2000 that would have a material effect
on the operating results of the Company.
Working Capital
At April 29,2000, the Company had a working capital deficiency of $3,758,000
compared to working capital of $2,507,000 at October 30, 1999 and a deficiency
of $10,312,000 at May 1, 1999.
The decline in working capital from October 30, 1999 was primarily due to the
collection of $3,062,000 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 $2,568,000 in accounts payable over the increase in inventory
which relates primarily to operating expenses and capital expenditures 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:
April 29, 2000 .94 to 1.0
October 30, 1999 1.05 to 1.0
May 1, 1999 .84 to 1.0
Cash flows (in millions) were as follows:
Twenty Six Weeks Ended
4/29/00 5/01/99
Operating activities... $13.3 $ 6.1
Investing activities... (10.3) (3.2)
Financing activities... ( 1.8) (2.8)
------ ------
Totals $ 1.2 $ 0.1
====== ======
The Company had $21,200,000 of available credit, at April 29, 2000, under its
revolving credit facility. On January 7, 2000 the Company completed the
renegotiation of the terms and conditions of the Credit Agreement. The Amended
Credit Agreement will adequately meet our operating needs, scheduled capital
expenditures and debt service for fiscal 2000 and 2001. For the twenty six weeks
ended April 29, 2000 depreciation was $5,494,000 while capital expenditures
totaled $9,908,000, compared to $5,463,000 and $3,838,000 respectively in the
prior year period.
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Results of Operations (13 weeks ended April 29, 2000 compared to 13 weeks
ended May 1, 1999)
Sales:
Same store sales from the twenty stores in operation in both periods increased
3.4%. Sales for the current period totaled $217.2 million as compared to $195.4
million 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 as a percent of sales decreased to 26.3% of sales compared to 26.5%
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
$1.3 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 and the completion of Wakefern incentive programs for the new locations
opened in fiscal 1998, partially offset by 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 25.2%
versus 25.5% in the prior year period. The decrease in operating, general and
administrative expenses as a percent of sales was primarily due to decreases in
certain expense categories as a percentage of sales. As a percentage of sales,
occupancy decreased .27%, depreciation decreased .12%, administration decreased
.11%, insurance decreased .06% and other income increased .12%. These decreases
were partially offset by increases in labor and related fringe benefits of .21%
and pre-opening costs of .24%. Pre-opening costs were for the new Branchburg and
Wall Township stores opened in February and April 2000, respectively.
Interest Expense:
Interest expense increased to $1,604,000 from $1,420,000, while interest income
was $67,000 compared to $98,000 for the prior period. The increase in interest
expense for the current year period was due to an increase in average
outstanding debt, including increased capitalized lease obligations, and an
increase in the average interest rate paid on debt.
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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 $435,000 in the current year period compared to $377,000 in the
prior year period. Earnings before interest, taxes, depreciation and
amortization ("EBITDA") for the current period were $5,227,000 as compared to
$4,937,000 in the prior year period. Net income per common share, both basic and
diluted, was $.39 in the current period compared to $.34 in the prior year
period. Per share calculations are based on 1,117,290 shares outstanding in both
periods.
Results of Operations (26 weeks ended April 29, 2000 compared to 26 weeks
ended May 1, 1999)
Sales:
Same store sales from the twenty stores in operation in both periods increased
4.9%. Sales for the current twenty six week period totaled $433.4 million as
compared to $399.0 million in the prior year period. Sales for the current
twenty six 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 as a percent of sales decreased to 25.9% of sales compared to 26.2%
in the prior year period. Patronage dividends, applied as a reduction of the
cost of merchandise sold, were $2.8 million in the current period compared to
$2.7 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 and the completion of Wakefern incentive programs for the new locations
opened in fiscal 1998, partially offset by 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 25.2% in the prior year period. The decrease in operating, general and
administrative expenses 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 .26%, occupancy decreased .18%, depreciation decreased
.11% and other income increased .08%. These decreases were partially offset by
increases in labor and related fringe benefits of .06% and pre-opening costs of
.20%. Pre-opening costs were for the new Branchburg and Wall Township stores
opened in February and April 2000, respectively.
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Interest Expense:
Interest expense increased to $2,978,000 from $2,816,000, while interest income
was $145,000 compared to $151,000 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 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 $1,319,000 in the current year period compared to $912,000 in the
prior year period. Earnings before interest, taxes, depreciation and
amortization ("EBITDA") for the current period were $10,868,000 as compared to
$9,953,000 in the prior year period. Net income per common share, both basic and
diluted, was $1.18 in the current period compared to $.82 in the prior year
period. Per share calculations are based on 1,117,290 shares outstanding in both
periods.
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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 April 29, 2000.
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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 8, 2000 /S/ MICHAEL SHAPIRO
----------------------
(Signature)
Michael Shapiro
Senior Vice President
Chief Financial Officer
Date: June 8, 2000 /S/ THOMAS H. FLYNN
---------------------
(Signature)
Thomas H. Flynn
Principal Accounting Officer
