-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NZOtEA+kzLHtSqaPdO4NKK4NajdEZqH+4h6jJomRYHnXD02JwHSJSzzuHZMRukbU 9kBSq/tWpTTPoEteFRpBhQ== 0000037914-99-000004.txt : 19990312 0000037914-99-000004.hdr.sgml : 19990312 ACCESSION NUMBER: 0000037914-99-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990130 FILED AS OF DATE: 19990311 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FOODARAMA SUPERMARKETS INC CENTRAL INDEX KEY: 0000037914 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 210717108 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1102 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-05745 FILM NUMBER: 99563235 BUSINESS ADDRESS: STREET 1: 922 HIGHWAY 33 STREET 2: BLDG 6 CITY: FREEHOLD STATE: NJ ZIP: 07728 BUSINESS PHONE: 732-462-4700 MAIL ADDRESS: STREET 1: 922 HIGHWAY 33 STREET 2: BLDG 6 CITY: FREEHOLD STATE: NJ ZIP: 07728 10-Q 1 10-Q QUARTER-ENDING 1-30-1999 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 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 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 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 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 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 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 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 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 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 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 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 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 EX-27 2 FDS --
5 1000 3-Mos Oct-30-1999 Nov-01-1998 Jan-30-1999 4,729 0 8,366 (493) 40,053 53,579 151,478 (68,102) 156,093 58,354 0 0 0 1,622 31,927 156,093 203,607 0 150,730 0 50,719 0 1,396 815 280 535 0 0 0 535 0.48 0.48
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