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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the fiscal year ended Commission file number
October 31, 1998 1-5745
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.)
Building 6, Suite 1, 922 Hwy. 33, Freehold, New Jersey 07728
(Address of principal executive offices)
Registrant's telephone number, including area code: 732-462-4700
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock American Stock Exchange
Par Value $1.00 per share
Securities registered pursuant to Section 12(g) of the Act:
NONE
(Title of Class)
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 such filing
requirements for the past 90 days.
Yes x No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of voting stock held by non-affiliates of the
Registrant was approximately $15,243,000. Computation is based on the closing
sales price of $32.375 per share of such stock on the American Stock Exchange on
January 15, 1999.
As of January 15, 1999, the number of shares outstanding of Registrant's
Common Stock was 1,117,150.
DOCUMENTS INCORPORATED BY REFERENCE Information contained in the 1999
definitive Proxy Statement to be filed with the Commission and to be delivered
to security holders in connection with the Annual Meeting is incorporated by
reference into this Form 10-K at Part III.
1
PART I
Disclosure Concerning Forward-Looking Statements
All statements, other than statements of historical fact, included in this
Form 10-K, including without limitation the statements under 'Management's
Discussion and Analysis of Financial Condition and Results of Operations'
and 'Business', 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
the Registrant to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements contained in this Form 10-K. Such potential risks and
uncertainties, include without limitation, competitive pressures from other
supermarket operators and warehouse club stores, economic conditions in the
Registrants's primary markets, consumer spending patterns, availability of
capital, cost of labor, cost of goods sold, year 2000 issues relating to
computer applications, and other risk factors detailed herein and in other
of the Registrants's Securities and Exchange Commission filings. The forward-
looking statements are made as of the date of this Form 10-K 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.
Item 1. Business
General
The Registrant, a New Jersey corporation formed in 1958, operates a chain of
twenty-one supermarkets located in Central New Jersey, as well as two liquor
stores and two garden centers, all licensed as ShopRite. The Registrant also
operates a central food processing facility to supply its stores with meat,
various prepared salads, prepared foods and other items, and a central
baking facility which supplies its stores with bakery products. The
Registrant is a member of Wakefern Food Corporation ('Wakefern'), the
largest retailer owned food cooperative warehouse in the United States and
owner of the ShopRite name.
The Registrant has incorporated the concept of 'World Class' supermarkets
into its operations. 'World Class' supermarkets are significantly larger
than conventional supermarkets and feature fresh fish-on-ice, prime meat
service butcher departments, in-store bakeries, international foods
including Chinese, sushi and kosher sections, salad bars, snack bars, bulk
foods and pharmacies. The Registrant has also introduced many of these
features into its conventionally sized supermarkets through extensive
renovations; these stores are considered 'Mini-World Class' supermarkets.
Currently, fifteen of the Registrant's stores are 'World Class', four are
'Mini-World Class' and two are conventional supermarkets.
2
The following table sets forth certain data relating to the Registrant's
business for the periods indicated:
Fiscal Year Ended
Oct.31, Nov. 1, Nov. 2, Oct. 28, Oct.29,
1998 1997 1996** 1995 1994
Average annual sales per store
(in millions)*..................... $35.8 $31.8 $31.8 $30.9 $30.2
Same store sales increase
from prior year.................... 4.79% 1.67% 2.63% 1.62% 0.84%
Total store area in square feet
(in thousands)..................... 1,195 1,080 1,080 954 1,072
Total store selling area in square
feet (in thousands)................ 895 808 807 710 789
Average total square feet per store
(in thousands)..................... 57 54 54 53 54
Average square feet of selling area
per store (in thousands)........... 43 40 40 39 39
Annual sales per square foot of
selling area*...................... $832 $788 $789 $784 $766
Number of stores:
Stores remodeled (over $500,000). 1 0 1 0 0
New stores opened................ 1 0 1 0 0
Stores replaced/expanded......... 2 0 1 0 0
Stores closed/divested........... 0 0 0 2 1
Number of stores by size
(total store area):
30,000 to 39,000 sq.ft .......... 4 4 4 4 4
40,000 to 49,900 sq.ft .......... 3 4 4 4 4
Greater than 50,000 sq.ft........ 14 12 12 10 12
Total stores open at period end.... 21 20 20 18 20
* Sales for stores open less than 52 weeks have been annualized.
** Calculated on a 53 week basis. A like 52 week comparison would be $31.2
million in average sales per store and $781 in annual sales per square foot
of selling area.
3
Store Expansion and Remodeling
The Registrant believes that significant capital investment is critical to
its operating strategy and is continuing its program to upgrade its existing
stores, replace outdated locations and open new 'World Class' supermarkets
within its core market area of Central New Jersey.
In fiscal year 1998, one replacement and one new store were opened in East
Windsor and Bound Brook, New Jersey, respectively. During fiscal year 1996,
one new and one replacement location were opened in Marlboro and Montgomery,
New Jersey, respectively. Over the next three years the Registrant plans to
open four replacement stores and expand three existing locations. The
expansion and remodeling of one location in West Long Branch New Jersey is
presently under way and construction has started on a replacement store in
Wall Township New Jersey.
Technology
Automation and computerization are important to the Registrant's operations
and competitive position. All stores utilize IBM 4690 software for the
scanning checkout systems. These systems improve pricing accuracy, enhance
productivity and reduce checkout time for customers. Additionally, all
stores have IBM RS/6000 processors and satellite communications. The use of
these systems allows the Registrant to offer its customers debit and credit
card payment options as well as participation in Price Plus, ShopRite's
preferred customer program, and the ShopRite co-branded Master Card. By
presenting the scannable Price Plus card or the ShopRite co-branded card,
customers can receive electronic discounts, the value of ShopRite in-ad Clip
Less coupons and cash personal checks. Additionally, customers receive a 1%
future rebate when paying with the ShopRite Master Card.
The Registrant is also using other in store computer systems. Computer
generated ordering is installed in all stores. This system is designed to
reduce inventory levels and out of stock positions, enhance shelf space
utilization and reduce labor costs. In all stores, meat, seafood and
delicatessen prices are maintained on department computers for automatic
weighing and pricing. Additionally, all stores have new computerized time
and attendance systems which are used for, among other things, automated
labor scheduling and most have computerized energy management systems. The
Registrant also utilizes a direct store delivery receiving and pricing
system for most items not purchased through Wakefern in order to provide
cost and retail price control over these products, and computerized pharmacy
systems which provide customer profiles, retail price control and
third-party billing. The replacement of the direct store delivery receiving
systems was completed in fiscal 1998. During fiscal 1998 the Registrant
installed computer based training systems in all stores. The system is
presently being used to train all new checkout personnel and will be used in
the future to train employees in other store level positions.
In addition, all field merchandisers and operations supervisors are
equipped with laptop personal computers. This provides field personnel with
current labor and product information to facilitate making accurate and
timely decisions.
4
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 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 processing 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 financial condition of the
Registrant.
Industry Segment and Principal Products
The Registrant is engaged in one industry segment. For the last three fiscal
years, the Registrant's sales were divided approximately among the
categories listed below:
Fiscal Year Ended
Product Categories 10/31/98 11/01/97 11/02/96
Groceries .................................. 40.0% 40.6% 41.7%
Dairy & Frozen ............................. 16.5 16.4 16.1
Meats, Seafood & Poultry ................... 10.9 11.1 11.2
Non-Foods .................................. 10.1 9.9 9.7
Produce .................................... 8.5 8.3 8.3
Appetizers & Prepared Foods ................ 6.0 5.8 5.5
Pharmacy ................................... 4.0 3.8 3.4
Bakery ..................................... 2.1 2.2 2.2
Liquor, Floral & Garden Centers ............ 1.9 1.9 1.9
100.0% 100.0% 100.0%
5
Gross profit derived by the Registrant from each product category is not
necessarily consistent with the percentage of total sales represented by
such product category.
Wakefern Food Corporation
The Registrant owns a 12.6% interest in Wakefern, a New Jersey corporation
organized in 1946, which provides purchasing, warehousing and distribution
services on a cooperative basis to its shareholder members, including the
Registrant, who are operators of ShopRite or alternate format supermarkets.
Together, Wakefern and its shareholder members operate approximately 198
supermarkets. Products bearing the ShopRite label accounted for
approximately 16% of total sales for the period. Wakefern maintains
warehouses in Elizabeth and South Brunswick, New Jersey which handle a full
line of groceries, meats, frozen foods, produce, bakery, dairy and
delicatessen products and health and beauty aids, as well as a number of
non-food items. Wakefern also operates a grocery and perishable products
warehouse in Wallkill, New York.
Wakefern's professional advertising staff and its advertising agency develop
and place most of the Registrant's advertising on television, radio and in
major newspapers. The Registrant is charged for these services based on
various formulas which account for the estimated proportional benefits it
receives. In addition, Wakefern charges the Registrant for, and provides the
Registrant with, product and support services in numerous administrative
functions. These include insurance, supplies, technical support for
communications and electronic payment systems, equipment purchasing and the
coordination of coupon processing. Additionally, the Registrant subleases
two supermarkets from Wakefern. See Item 2. Properties.
Wakefern distributes, as a patronage dividend to each of its members, a
share of its net earnings in proportion to the dollar volume of business
transacted by each member with Wakefern during each fiscal year.
Although Wakefern has a significant in house professional staff, it operates
as a member cooperative and senior executives of the Registrant spend a
substantial amount of their time working on Wakefern committees overseeing
and directing Wakefern purchasing, merchandising and various other programs.
Wakefern licenses the ShopRite name to its shareholder members and provides
a substantial and extensive merchandising program for the ShopRite label.
Except for the license to use the name 'ShopRite', the Registrant does not
believe that the ownership of or rights in patents, trademarks, licenses,
franchises and concessions is material to its business. The locations at
which the Registrant may open new supermarkets under the name ShopRite are
subject to the approval of Wakefern's Site Development Committee. Under
circumstances specified in its By-Laws, Wakefern may refuse to sell
merchandise to, and may repurchase the Wakefern stock of, any shareholder
member. Such circumstances include certain unapproved transfers by a
shareholder member of its supermarket business or its capital stock in
Wakefern, unapproved acquisition by a shareholder member of certain
supermarket or grocery wholesale supply businesses, the conduct of a
business in a manner contrary to the policies of Wakefern, the material
breach of any provision of Wakefern By-Laws or any agreement with Wakefern
or a determination by Wakefern that the continued supplying of merchandise
or services to such shareholder member would adversely affect Wakefern.
6
Wakefern requires each shareholder to invest in Wakefern's capital stock to
a maximum of $450,000 for each store operated by such shareholder member.
The precise amount of the investment is computed according to a formula
based on the volume of each store's purchases from Wakefern. Effective
November 19, 1998 the maximum investment for each store was increased to
$500,000.
Under its By-Laws, all bills for merchandise and other indebtedness are due
and payable to Wakefern weekly and, in the event that such bills are not
paid in full, an additional 1% service charge is due on the unpaid portion.
Wakefern requires its shareholder members to pledge their Wakefern stock
certificates with it as collateral for payment of their obligation to
Wakefern. As of October 31, 1998 and November 1, 1997, the Registrant's
investment in Wakefern was $8,877,000 and $8,427,000, respectively. The
Registrant also has an investment in another company affiliated with
Wakefern which was $829,000 at both October 31, 1998 and November 1, 1997.
See Note 4 of Notes to Consolidated Financial Statements.
Since September 18, 1987, the Registrant has had an agreement, amended in
1992, with Wakefern and all other shareholders of Wakefern, which provides
for certain commitments and restrictions on all shareholders of Wakefern.
Under the agreement, each shareholder, including the Registrant, agreed to
purchase at least 85% of its merchandise in certain defined product
categories from Wakefern. The Registrant fulfilled this obligation during
the 52 week period ended October 31, 1998. If any shareholder fails to meet
such purchase requirements, it must make payments to Wakefern (the
'Compensatory Payments') based on a formula designed to compensate Wakefern
for the profit lost by it by virtue of its lost warehouse volume. Similar
payments are due if Wakefern loses volume by reason of the sale of one or
more of a shareholder's stores, any shareholder's merger with another entity
or the transfer of a controlling interest in the shareholder. Subject to a
right of first refusal granted to Wakefern, sales of certain under
facilitated stores are permitted free of the restrictions of the agreement.
Also, the restrictions of the agreement do not apply if volume lost by a
shareholder by the sale of a store is made up by such shareholder by
increased volume of new or existing stores and, in any event, the
Compensatory Payments otherwise required to be made by the shareholder to
Wakefern are not required if the sale is made to Wakefern, another
shareholder of Wakefern or to a purchaser which is neither an owner or
operator of a chain of 25 or more supermarkets in the United States,
excluding any ShopRite supermarkets in any area in which Wakefern operates.
The agreement extends for an indefinite term and is subject to termination
ten years after the approval by a vote of 75% of the outstanding voting
stock of Wakefern.
The loss of, or material change in, the Registrant's relationship with
Wakefern (neither of which is considered likely) could have a significant
adverse impact on the Registrant's business. The failure of Wakefern to
fulfill its obligations or another member's insolvency or withdrawal from
Wakefern could result in additional costs to the remaining members.
The Registrant also purchases products and items sold in the Registrant's
supermarkets from a variety of sources other than Wakefern. Neither the
Registrant nor, to the best of the Registrant's knowledge, Wakefern has
experienced or anticipates experiencing any unique material difficulties in
procuring products and items in adequate quantities.
7
Competition
The supermarket business is highly competitive. The Registrant competes
directly with a number of national and regional chains, including A&P,
Pathmark, Grand Union, Acme, Edwards and Foodtown, as well as various local
chains and numerous single-unit stores. The Registrant also competes with
warehouse club stores which charge a membership fee, are non-unionized and
operate larger units. Additional competition comes from drug stores,
discount general merchandise stores, fast food chains and convenience
stores. See Management's Discussion and Analysis-Results of Operations.
Many of the Registrant's competitors have greater financial resources and
sales. As most of the Registrant's competitors offer substantially the same
type of products, competition is based primarily upon price, and
particularly in the case of meat, produce, delicatessen, and prepared foods,
on quality. Competition is also based on service, the location and
appearance of stores and on promotion and advertising. The Registrant
believes that its membership in Wakefern and ShopRite allows it to maintain
a low-price image while providing quality products and the availability of a
wide variety of merchandise including numerous private label products under
the ShopRite brand name. The Registrant also provides clean, well maintained
stores, courteous and quick service to the customer and flexibility in
tailoring the products offered in each store to the demographics of the
communities it services. The supermarket business is characterized by narrow
profit margins, and accordingly, the Registrant's viability depends
primarily on its ability to maintain a relatively greater sales volume and
more efficient operations than its competitors.
Regulatory and Environmental Matters
The Registrant's stores and facilities, in common with those of the industry
in general, are subject to numerous existing and proposed Federal, State and
Local regulations which regulate the discharge of materials into the
environment or otherwise protect the environment, establish occupational
safety and health standards and cover other matters, including the licensing
of the Registrant's pharmacies and two liquor stores. The Registrant
believes its operations are in compliance with such existing regulations and
is of the opinion that compliance therewith has not had and will not have
any material adverse effect upon the Registrant's capital expenditures,
earnings or competitive position.
Employees
As of December 31, 1998, the Registrant employed approximately 4,550
persons, of whom approximately 4,150 are covered by collective bargaining
agreements. 74% of the employees are part time and almost all of these
employees are covered by the collective bargaining agreements. The
Registrant has historically maintained favorable relations with its
unionized employees. The Registrant is subject to six collective bargaining
agreements expiring on various dates from February 1999 to April 2003. The
bargaining agreement with the United Food and Commercial Workers Local 464A
expired in December 1998 and has been renegotiated. The new contract expires
April 2003.
By virtue of the nature of the Registrant's supermarket operations,
information concerning backlog, seasonality, major customers, government
contracts, research and development activities and foreign operations and
export sales is not relevant.
8
Item 2. Properties
The Registrant's twenty one supermarkets, all of which are leased, range in
size from 31,000 to 101,000 square feet with sales area averaging 75 percent
of the total area. All stores are air-conditioned, have modern fixtures and
equipment, have their own ample parking facilities and are located in
suburban areas.
Leases for 19 of the 21 supermarkets expire on various dates from 2000
through 2022. Two of the Registrant's supermarkets are subleased from
Wakefern and these subleases expire in 2006 and 2008, respectively. Upon
expiration of these subleases, the underlying leases for these supermarkets
will be assigned to and assumed by the Registrant if certain conditions,
which include the absence of defaults by the Registrant in its obligations
to Wakefern and the Registrant's lenders, and the maintenance of a specified
level of net worth, are satisfied. The terms of these leases expire in 2021
and 2018, respectively. Except for the two subleases with Wakefern and one
lease which expires in 2004, all leases contain renewal options ranging from
5 to 25 years. Seven leases require, in addition to a fixed rental, a
further rental payment based on a percentage of the annual sales in excess
of a stipulated minimum. The minimum has been exceeded in two of the seven
locations in the last fiscal year. Most leases also require the Registrant
to pay for insurance, common area maintenance and real estate taxes. Four
additional leases have been signed for supermarket locations, all of which
will be replacements for existing stores. The terms of these leases are
substantially similar to the terms of the leases for the Registrants
existing supermarkets.
Also, the Registrant is subject to a lease covering its executive and
principal administrative offices containing approximately 18,000 square feet
in Howell, New Jersey. The Registrant also leases 57,000 square feet of
space used for its bakery operations and storage in Howell, New Jersey and
owns meat and prepared foods processing facilities in Linden, New Jersey. As
part of the Registrant's Asset Redeployment Program, the Registrant sold in
1997 its limited partnership interest in two real estate partnerships and
financed the facility in Linden, New Jersey, which is the only real property
owned by the Registrant. In addition, the Registrant is a party to an
additional ten leases relating to locations where the Registrant no longer
conducts supermarket operations; seven of such locations have been sublet to
non-affiliated persons. In most instances these stores have been sublet at
terms at least substantially equivalent to the Registrant's obligations
under its prime lease. See Management's Discussion and Analysis-Financial
Condition and Liquidity. See Notes 11 and 15 of Notes to Consolidated
Financial Statements.
Item 3. Legal Proceedings
In the ordinary course of its business, the Registrant is party to various
legal actions not covered by insurance. Although a possible range of loss
cannot be estimated, it is the opinion of management, that settlement or
resolution of these proceedings will not, in the aggregate, have a material
adverse impact on the financial condition or results of operations of the
Registrant.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
9
Part II
Item 5. Market for Registrant's Common Stock and Security Holder Matters
(a) The Registrant's Common Stock is traded on the American Stock
Exchange. The following table sets forth the high and low sales prices for
the Common Stock as reported on the American Stock Exchange for the fiscal
years ended November 1, 1997 and October 31, 1998.
Fiscal Quarter Ended High Low
February 1, 1997 ......................... 16 3/4 14
May 3, 1997 .............................. 17 3/8 14 7/8
August 2, 1997 ........................... 19 1/2 17 1/2
November 1, 1997 ......................... 18 3/4 16 7/8
January 31, 1998 ......................... 24 18 3/4
May 2, 1998 .............................. 43 23 5/8
August 1, 1998 ........................... 37 33 1/2
October 31, 1998 ......................... 34 5/8 31 1/2
(b) The approximate number of record holders of the Registrant's Common
Stock was 400 as of January 15, 1999.
(c) No dividends have been declared or paid with respect to the
Registrant's Common Stock since October 1979. The Registrant is prohibited
from paying dividends on its Common Stock by the Revolving Credit and Term
Loan Agreement between the Registrant and a financial institution. See
Management's Discussion and Analysis-Financial Condition and Liquidity. The
Registrant has no intention of paying dividends on its Common Stock in the
foreseeable future.
Item 6. Selected Financial Data
The selected financial data set forth below is derived from the Registrant's
consolidated financial statements and should be read in conjunction with the
consolidated financial statements and related notes included elsewhere in
this Annual Report. See Management's Discussion and Analysis-Financial
Condition and Liquidity and Results of Operations.
10
Year Ended
Oct. 31, Nov. 1, Nov. 2, Oct. 28 Oct. 29,
1998 (1) 1997 1996 (2) 1995 (3) 1994(4)
(Dollars in thousands, except per share amounts)
Income statement
data:
Sales $697,358 $636,731 $601,143 $586,477 $611,074
Net income (loss) $ 1,780 $ 1,064 $ 1,396 $ (191) $ ( 513)
Income (loss) per
common share $ 1.59 $ .90 $ 1.13 $ (.29) $ (.58)
Cash dividends
per common share - - - - -
Balance sheet data
(at year end):
Working capital $ (2,725) $ 3,532 $ 3,056 $ (4,451) $( 8,674)
Total assets $149,567 $121,500 $124,181 $110,984 $130,821
Long-term debt
(excluding current
portion) $ 50,656 $ 35,918 $ 41,243 $ 28,334 $ 37,439
Common share-
holders' equity $ 33,014 $ 31,315 $ 30,315 $ 28,672 $ 28,984
Book value per
common share $ 29.55 $ 28.03 $ 27.11 $ 25.64 $ 25.92
Tangible book value
per common share $ 25.47 $ 23.47 $ 22.22 $ 20.24 $ 19.21
(1) The Registrant opened one replacement and one new location in February
and August 1998, respectively. See Management's Discussion and Analysis -
Results of Operations - Sales.
(2) 53 week period. The Registrant opened two new locations in June and
July, 1996. See Management's Discussion and Analysis - Results of Operations -
Sales.
(3) The period presented includes the results of operations of the two
Pennsylvania stores for the 30 weeks prior to their sale on May 23, 1995. The
net sales of these two stores for the 30 weeks of fiscal 1995 during which they
were owned by the Registrant were $29.2 million.
(4) The period presented includes the results of operations of one New
Jersey store for 34 weeks prior to its closing on June 25, 1994,. Net sales for
this location for the 34 weeks prior to its closing were $6.0 million.
11
Item 7. 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 a loan in the amount of $1,500,000, made in November 1997, to fund the
acquisition of a building in, and refurbishment of, the Registrant's prepared
food and meat processing facility (the 'Expansion Loan'). As of October 31, 1998
the Registrant owed $5,500,000 on Term Loan C, $1,445,000 on the Stock
Redemption Facility and $1,362,500 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, due 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
ending 2004 based on a ten year amortization. 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 may elect 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
require, among other matters, the maintenance of a debt service coverage ratio.
The Registrant is presently renegotiating the terms and conditions of the Credit
Agreement.
The Registrant's compliance with the major financial covenant under the Amended
and Restated Credit Agreement was as follows as of October 31, 1998:
Actual
Amended and (As defined in the
Financial Restated Credit Amended and Restated
Covenant Agreement Credit Agreement)
Debt Service Coverage
Ratio Not less than 1.00 to 1.00 .60 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 twice in the quarter ended October 31, 1998 and 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 $7,184,000 of
available credit at October 31, 1998, under its revolving credit facility.
12
Commencing in February 1995, the Registrant pursued an asset redeployment
program under the Credit Agreement utilizing the proceeds from the disposition
of certain assets to repay indebtedness under the Credit Agreement. The
components of the asset redeployment program concluded in November 1997 included
the sale/leaseback of a supermarket property; the sale of two real estate
partnership interests, one relating to property in a shopping center where the
Registrant operates a supermarket and the other a non-supermarket property; and
the financing of two buildings owned by the Registrant. These transactions
resulted in the receipt of $1,500,000 from the financing, which is referred to
above as the Expansion Loan, and $3,852,000 from the sale of properties and
gains on the sales of $1,074,000. The proceeds from the sales were used to pay
down the revolving credit facility and the proceeds from the Expansion Loan were
used to purchase a third building for $606,000, with the balance of the proceeds
used for the remodeling and refurbishment of the meat and prepared foods
processing facility which is housed in the three buildings.
In 1996 the Registrant financed $4,068,000 of used equipment at three existing
locations. The note bears interest at 10.58% and is payable in monthly
installments over its four year term. The proceeds were used to repay existing
debt.
In 1995 the Registrant concluded the sale of its two operating locations in
Pennsylvania for $5,700,000 plus inventory of $2,300,000 and obtained the return
of its investments of $1,200,000 in Wakefern, a related party, with respect to
the two stores. All proceeds were in cash and were used to reduce outstanding
debt.
On April 2, 1998 the Registrant financed the purchase of $3,000,000 of equipment
for the new store location in East Windsor, New Jersey. The note bears interest
at 7.44% and is payable in monthly installments over its seven year term.
On October 22, 1998 the Registrant financed the purchase of $4,000,000 of
equipment for the new store location in Bound Brook, New Jersey. The note bears
interest at 7.26% and is payable in monthly installments over its six year term.
On September 13, 1996 the Registrant financed $536,000 of Point of Sale ('POS')
equipment at two existing locations. The note bears interest at 8.82% and is
payable in monthly installments over its four year term. The proceeds were used
to purchase the POS equipment.
On September 30, 1996 and November 1, 1996 the Registrant financed the purchase
of $4,602,000 and $1,398,000, respectively, of equipment for the two new store
locations in Marlboro and Montgomery, New Jersey. The notes bear interest at
9.02% and 8.74%, respectively, and are payable in monthly installments over
their eight year terms.
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.
13
Working Capital:
At October 31, 1998, the Registrant had a working capital deficiency of
$2,725,000 compared to working capital of $3,532,000 at November 1, 1997 and
$3,056,000 at November 2, 1996. Working capital in fiscal 1998 decreased
primarily due to increases in accounts payable and the current portion of long
term debt partially offset by increases in inventory and receivables. These
increases were primarily due to increased sales from two new locations and the
impact of double coupons. Accounts receivable consist primarily of returned
checks due the Registrant, coupon receivables, third party pharmacy insurance
claims and organization charge accounts. The terms of most receivables are 30
days or less. The allowance for uncollectible accounts is large in comparison to
the amount of accounts receivable because the allowance consists primarily of a
reserve for returned checks which are not written off until all collection
efforts are exhausted. 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 in fiscal 1997 remained at approximately the same levels as the
prior year.
Working capital improved in fiscal 1996 as the result of (a) the equipment
financing completed in January 1996, with $3,000,000 of current debt replaced by
long term borrowing; (b) the reduction in current payables relating to inventory
and store operations using proceeds of long term borrowing under the revolving
credit facility; and (c) an increase of $1,000,000 in current related party
receivables which became due in fiscal 1997.
Working capital ratios were as follows:
October 31, 1998 .95 to 1.00
November 1, 1997 1.08 to 1.00
November 2, 1996 1.07 to 1.00
Cash flows (in millions) were as follows:
1998 1997 1996
From operations..................... $14.9 $ 9.7 $ 9.7
Investing activities................ (17.0) .5 (6.5)
Financing activities................ 2.3 ( 9.6) (3.5)
Totals $ .2 $ .6 $( .3)
Fiscal 1998 capital expenditures totaled $17,625,000 with depreciation of
$8,273,000 compared to $3,620,000 and $8,104,000 respectively for fiscal
1997 and $13,181,000 and $8,207,000, respectively, for fiscal 1996. In fiscal
1998 long-term debt increased $16,246,000 due to the capitalization of a real
estate lease for the Bound Brook, New Jersey store, the financing of equipment
for the two new locations in East Windsor and Bound Brook, New Jersey, the
financing of the acquisition and refurbishing of the meat and prepared foods
processing facility in Linden, New Jersey and financing obtained under the
revolving credit facility. These increases were partially offset by cash
generated by operations used to pay down existing debt.
14
In fiscal 1997 long-term debt decreased $3,981,000, using proceeds from the sale
of assets under the asset redeployment program and cash generated by operations
which was partially offset by financing obtained under the Stock Redemption
Facility, and the capitalization of a real estate lease for the Aberdeen, New
Jersey store.
In fiscal 1996 long-term debt increased $10,106,000 as the result of the
financing of POS equipment in two locations and equipment in the two new
locations in Marlboro and Montgomery, New Jersey and the capitalization of a
real estate lease for the Montgomery store.
The Registrant had $7,184,000 of available credit, at October 31, 1998, 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 fiscal
1999.
RESULTS OF OPERATIONS
Sales:
The Company's sales were $697.4 million, $636.7 million and $601.1 million,
respectively in fiscal 1998, 1997 and 1996. This represents an increase of
9.5 percent in 1998 and an increase of 5.9 percent in 1997. These changes in
sales levels were the result of the opening of two new locations in February and
August 1998, the impact of significantly increased promotional activities and
expenditures and the full year of operations in fiscal 1997 of two locations
opened in 1996. The increase in fiscal 1997 was partially offset by sales from a
53rd week in fiscal 1996. Comparable store sales increased 4.8% in fiscal 1998
and 1.7% in fiscal 1997 after adjusting for the 53rd week in fiscal 1996. A
significant increase in promotional activities, including a variety of incentive
programs and double couponing, in the current year contributed to this increase.
Gross Profit:
Gross profit totaled $176.7 million in fiscal 1998 compared to $161.0 million in
fiscal 1997 and $152.1 million in fiscal 1996. Gross profit as a percent of
sales was 25.3%, in each of the three fiscal years 1998, 1997 and 1996.
In fiscal 1998, 1997 and 1996 gross profit percentage was positively affected by
the continued improvement in product mix and Wakefern incentive programs for the
new locations. However, this improvement was offset by price reductions
instituted to combat increased competitive pressure in the Registrant's
marketing area.
Patronage dividends applied as a reduction of the cost of merchandise sold were
$7,438,000, $6,633,000 and $6,905,000 for the last three fiscal years. This
translates to 1.07%, 1.04% and 1.15% of sales for the respective periods.
15
Fiscal Years Ended
10/31/98 11/01/97 11/02/96
(in millions)
Sales ................................ $ 697.4 $ 636.7 $ 601.1
Gross profit ......................... 176.7 161.0 152.1
Gross profit percentage .............. 25.3% 25.3% 25.3%
Operating, General and Administrative Expenses:
Fiscal 1998 expenses totaled $170.6 million compared to $155.9 million in fiscal
1997 and $147.0 million in fiscal 1996.
Fiscal Years Ended
10/31/98 11/01/97 11/02/96
(in millions)
Sales........................ $697.4 $636.7 $601.1
Operating, General and
Administrative Expenses...... 170.6 155.9 147.0
% of Sales................... 24.5% 24.5% 24.5%
Operating, general and administrative expenses as a percent of sales remained
the same in fiscal 1998 compared to fiscal 1997. Decreases in general liability
insurance expense, depreciation and amortization and corporate administrative
expense, were offset by increases in selling expense and repairs and maintenance
costs. The decrease in general liability insurance expense was the result of
final prior year premium calls from Insure-Rite, Ltd., a Wakefern affiliate
which provided the Registrant with liability and property insurance coverage,
being expensed in fiscal 1997. 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. As a percentage of sales,
general liability insurance costs decreased .23%, depreciation and amortization
decreased .12% and corporate administrative expense decreased .06%. These
decreases were offset by increases in selling expense of .31% and repairs and
maintenance expense of .07%. Pre-opening costs were $702,000 in fiscal 1998.
Operating, general and administrative expenses as a percent of sales remained
the same in fiscal 1997 compared to fiscal 1996. Decreases, primarily related to
the two new locations opened in fiscal 1996, in selling expense and labor and
related fringe benefit costs, as well as reduced corporate administrative
expense, were offset by increases in general liability insurance expense, other
store expenses, which include debit and credit card processing fees and Wakefern
support services, and the amortization of deferred pre-store opening costs. The
general liability insurance increase was the result of premium calls from
Insure-Rite, Ltd., for policy years ended December 1, 1993 and December 1, 1994,
as previously discussed in the Commitments and Contingencies footnote in prior
years financial statements. As a percentage of sales, selling expense decreased
.27%, payroll and related fringe benefit costs decreased .10% and corporate
administrative expense decreased .09%. These decreases were offset by increases
in general liability insurance of .27%, other store expenses of .18% and
amortization of deferred pre-store opening costs of .04%. Pre-opening costs were
$505,000 in fiscal 1997.
Amortization expense decreased in fiscal 1998 to $1,339,000 compared to
$1,956,000 in fiscal 1997 and $1,826,000 in fiscal 1996. The decrease in fiscal
1998, as compared to fiscal 1997, was the result of a change in accounting for
pre-store opening costs and decreased amortization of deferred financing costs
16
and deferred escalation rents partially offset by increased amortization of
bargain leases. The increase in fiscal 1997, as compared to fiscal 1996, was the
result of increased amortization of deferred escalation rents and deferred pre-
store opening costs partially offset by decreased amortization of goodwill and
deferred financing costs. See Note 1 of Notes to Consolidated Financial
Statements - Pre-opening Costs.
Interest Expense:
Interest expense totaled $3.9 million in fiscal 1998 compared to $4.3 million in
fiscal 1997 and $3.5 million in fiscal 1996. The decrease in fiscal 1998, as
compared to fiscal 1997, was due to a decrease in average debt outstanding since
November 1, 1997 and lower interest rates on the Registrant's credit facility.
The increase in fiscal 1997, as compared to fiscal 1996, was due to an increase
in the average debt outstanding since November 2, 1996 partially offset by lower
interest rates on the Registrant's credit facility. Interest income was $0.4
million in fiscal 1998 compared to $0.3 million in fiscal 1997 and $0.2 million
in fiscal 1996.
Income Taxes:
The Registrant recorded a tax provision of $0.9 million in fiscal 1998, $0.6
million in fiscal 1997 and $0.3 million in fiscal 1996. See Note 14 of Notes to
Consolidated Financial Statements.
Net Income:
The Registrant had net income of $1,780,000 or $1.59 per share in fiscal 1998
compared to net income of $1,064,000 or $.90 per share in fiscal 1997. 1997
results included a net gain after tax on real estate transactions of $413,000 or
$.37 per share. Earnings before interest, taxes, depreciation and amortization
('EBITDA') for fiscal 1998 were $15,765,000 as compared to $15,744,000 in fiscal
1997. Fiscal 1997 EBITDA includes $656,000 as a result of the gain on real
estate transactions.
Fiscal 1996 resulted in net income of $1,396,000 or $1.13 per share. EBITDA for
fiscal 1996 were $15,107,000.
Shares outstanding were 1,117,150 for fiscal 1998 and fiscal 1997 and 1,118,150
for fiscal 1996. Per share amounts for fiscal 1998, 1997 and 1996 are after
Preferred Stock dividends of $0, $57,000 and $136,000, respectively.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ('FASB') issued 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. The Registrant
does not expect a material impact from adopting the provisions of SFAS No. 130
which becomes effective for the Registrant in fiscal 1999.
17
In June 1997, the FASB issued 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.
The Registrant does not expect a material impact from adopting the provisions of
SFAS No. 131 which becomes effective for the Registrant in fiscal 1999.
In June 1998, the FASB issued SFAS 133, 'Accounting for Derivative Instruments
and Hedging Activities.' This Statement establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, (collectively referred to as derivatives) and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. The Registrant does not expect a material
impact from adopting the provisions of SFAS No. 133 which becomes effective for
the Registrant in fiscal 2000.
Year 2000.
For information with respect to Year 2000 compliance, see Item 1. Business -
Year 2000.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Except for indebtedness under the Registrant's revolving credit facility which
is variable rate financing, the balance of the Registrant's indebtedness is
fixed rate financing. The Registrant believes that its exposure to market risk
relating to interest rate risk is not material. The Registrant believes that its
business operations are not exposed to market risk relating to foreign currency
exchange risk, commodity price risk or equity price risk.
Item 8. Financial Statements and Supplementary Data
See Consolidated Financial Statements and Schedules included in Part IV, Item
14.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
18
Part III
Item 10. Directors and Executive Officers of the Registrant
The information required in response to this item is contained in the
Registrant's definitive proxy statement to be filed pursuant to Regulation
14A under the caption "Directors and Executive Officers of the Registrant"
and such information is incorporated herein by reference.
Item 11. Executive Compensation
The information required in response to this item is contained in the
Registrant's definitive proxy statement to be filed pursuant to Regulation
14A under the caption "Executive Compensation" and such information is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required in response to this item is contained in the
Registrant's definitive proxy statement to be filed pursuant to Regulation
14A under introductory paragraphs and under the captions "Principal
Shareholders" and "Election of Directors" and such information is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
The information required in response to this item is contained in the
Registrant's definitive proxy statement to be filed pursuant to Regulation
14A under the caption "Executive Compensation - Certain Transactions" and
such information is incorporated herein by reference.
19
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
a.1. Audited financial statements and Page No.
supplementary data
Independent Auditors' Report F-1
Foodarama Supermarkets, Inc. and
Subsidiaries Consolidated Financial
Statements:
Balance Sheets as of October 31, 1998 F-2-3
and November 1, 1997.
Statements of Operations for each of the F-4
fiscal years ended October 31, 1998,
November 1, 1997 and November 2, 1996.
Statements of Shareholders' Equity F-5
for each of the fiscal years ended
October 31, 1998, November 1, 1997
and November 2, 1996.
Statements of Cash Flows for each of the F-6
fiscal years ended October 31, 1998,
November 1, 1997 and November 2, 1996.
Notes to Consolidated Financial Statements F-7 to 25
a.2. Financial Statement Schedules
Schedule II S-1
Schedules other than Schedule II have been
omitted because they are not applicable.
a.3. Exhibits E-1 to 6
b. Reports on Form 8-K
No reports on Form 8-K were required to be filed
during the fourth quarter of fiscal 1998.
* * * * * *
20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities 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)
/S/ Michael Shapiro
Michael Shapiro
Senior Vice President,
Chief Financial Officer
/S/ Joseph C. Troilo
Joseph C. Troilo
Senior Vice President,
Principal Accounting Officer
Date: January 29, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Name Title Date
/S/ Joseph J. Saker
Joseph J. Saker Chairman of the Board January 28, 1999
of Directors and President,
Chief Executive Officer
/S/ Charles T. Parton
Charles T. Parton Director January 28, 1999
/S/ Albert A. Zager
Albert A. Zager Director January 28, 1999
/S/ Richard Saker
Richard Saker Executive Vice President, January 28, 1999
Secretary and Director,
Chief Operating Officer
21
Independent Auditors' Report
Board of Directors and Shareholders
Foodarama Supermarkets, Inc.
Freehold, New Jersey
We have audited the accompanying consolidated balance sheets of Foodarama
Supermarkets, Inc. and Subsidiaries as of October 31, 1998 and November 1, 1997
and the related consolidated statements of operations, shareholders' equity and
cash flows for the fiscal years ended October 31, 1998, November 1, 1997 and
November 2, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Foodarama Supermarkets, Inc.
and Subsidiaries as of October 31, 1998 and November 1, 1997 and the results of
their operations and their cash flows for the fiscal years ended October 31,
1998, November 1, 1997 and November 2, 1996 in conformity with generally
accepted accounting principles.
In connection with our audits of the financial statements referred to
above, we audited the financial schedule listed under Item 14. In our opinion,
the financial schedule, when considered in relation to the financial statements
taken as a whole, presents fairly, in all material respects, the information
stated therein.
Amper, Politziner & Mattia P.A.
AMPER, POLITZINER & MATTIA P.A.
January 22, 1999
Edison, New Jersey
F-1
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
October 31, 1998 and November 1, 1997
(In thousands)
Assets
1998 1997
Current assets
Cash and cash equivalents $ 3,905 $ 3,678
Merchandise inventories 37,804 33,585
Receivables and other current assets 3,382 3,576
Prepaid income taxes 1,005 392
Related party receivables - Wakefern 6,860 5,389
Related party receivables - other 152 238
53,108 46,858
Property and equipment
Land 308 93
Buildings and improvements 1,220 829
Leasehold improvements 34,031 32,064
Equipment 75,756 65,935
Property under capital leases 32,353 19,443
143,668 118,364
Less accumulated depreciation and amortization 65,389 62,210
78,279 56,154
Other assets
Investments in related parties 9,706 9,256
Intangibles 4,562 5,100
Other 2,384 2,847
Related party receivables - Wakefern 1,370 1,191
Related party receivables - other 158 94
18,180 18,488
$ 149,567 $ 121,500
See notes to consolidated financial statements.
F-2
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
October 31, 1998 and November 1, 1997
(In thousands)
Liabilities and Shareholders' Equity
1998 1997
Current liabilities
Current portion of long-term debt $ 7,812 $ 6,647
Current portion of long-term debt, related party 211 66
Current portion of obligations under capital leases 667 469
Deferred income tax liability 1,464 945
Accounts payable
Related party - Wakefern 30,525 24,381
Others 6,446 3,763
Accrued expenses 8,708 7,055
55,833 43,326
Long-term debt 20,289 17,874
Long-term debt, related party 916 719
Obligations under capital leases 29,451 17,325
Deferred income taxes 3,508 3,828
Other long-term liabilities 6,556 7,113
60,720 46,859
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 35,751 33,971
Minimum pension liability (81) -
39,643 37,944
Less 504,477 shares held in treasury, at cost 6,629 6,629
33,014 31,315
$ 149,567 $ 121,500
See notes to consolidated financial statements.
F-3
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Fiscal Years Ended October 31, 1998, November 1, 1997 and November 2, 1996
(In thousands, except per share data)
1998 1997 1996
Sales $ 697,358 $ 636,731 $ 601,143
Cost of merchandise sold 520,624 475,764 449,077
Gross profit 176,734 160,967 152,066
Operating, general and administrative expenses 170,581 155,939 146,992
Income from operations 6,153 5,028 5,074
Other (expense) income:
Gain on real estate transactions - 656 -
Interest expense (3,881) (4,273) (3,522)
Interest income 448 279 183
(3,433) (3,338) (3,339)
Earnings before income tax provision 2,720 1,690 1,735
Income tax provision (940) (626) (339)
Net income $ 1,780 $ 1,064 $ 1,396
Per share information:
Net income per common share, basic and diluted $ 1.59 $ .90 $ 1.13
Weighted average shares outstanding 1,117,150 1,117,150 1,118,150
See notes to consolidated financial statements.
F-4
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
Fiscal Years Ended October 31, 1998, November 1, 1997 and November 2, 1996
(In thousands, except per share data)
Common Stock Capital Minimum
Shares in Excess Retained Pension Treasury Stock Total
Issued Amount of Par Earnings Liability Shares Amount Equity
Balance - October 28, 1995 .... 1,621,627 $ 1,622 $ 2,351 $32,127 (806) (503,477) $ (6,622) $ 28,672
Net income 1996 ............... - - - 1,396 - - - 1,396
Preferred stock dividends
paid - $4.11 per share ....... - - - (559) - - - (559)
Minimum pension liability ..... - - - - 806 - - 806
Balance - November 2, 1996 .... 1,621,627 1,622 2,351 32,964 - (503,477) (6,622) 30,315
Net income 1997 ............... - - - 1,064 - - - 1,064
Shares repurchased ............ - - - - - (1,000) (7) (7)
Preferred stock dividends
paid - $.42 per share ........ - - - (57) - - - (57)
Balance - November 1, 1997 .... 1,621,627 1,622 2,351 33,971 - (504,477) (6,629) 31,315
Net income 1998 ............... - - - 1,780 - - - 1,780
Minimum pension liability ..... - - - - (81) - - (81)
Balance - October 31, 1998 .... 1,621,627 $1,622 2,351 $35,751 (81) (504,477) $ (6,629) $ 33,014
See notes to consolidated financial statements.
F-5
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Fiscal Years Ended October 31, 1998, November 1, 1997 and November 2, 1996
(In thousands)
1998 1997 1996
Cash flows from operating activities
Net income $ 1,780 $ 1,064 1,396
Adjustments to reconcile net income to net
cash from operating activities
Depreciation 8,273 8,104 8,207
Amortization, intangibles 538 375 563
Amortization, deferred financing costs 535 642 820
Amortization, deferred rent escalation 266 434 353
Amortization, other assets - 505 90
Gain on real estate transactions - (656) -
Deferred income taxes 253 626 136
(Increase) decrease in
Merchandise inventories (4,219) (1,931) (3,985)
Receivables and other current assets 194 (845) 185
Prepaid income taxes (613) 582 (974)
Other assets 90 (78) 2,484
Related party receivables - Wakefern (1,650) 481 (1,386)
Increase (decrease) in
Accounts payable 8,827 (1,343) 2,690
Income taxes payable - - (77)
Other liabilities 695 1,739 (774)
14,969 9,699 9,728
Cash flows from investing activities
Net proceeds from real estate transactions - 2,938 -
Cash paid for the purchase of property
and equipment (17,019) (3,620) (6,645)
Decrease in related party receivables - other 22 1,159 95
(16,997) 477 (6,550)
Cash flows from financing activities
Payment for redemption of preferred stock - (1,700) -
Preferred stock dividend payments - (57) (559)
Proceeds from issuance of debt 9,937 1,700 13,202
Principal payments under long-term debt (6,963) (9,213) (15,768)
Principal payments under capital lease obligations (586) (91) (197)
Principal payments under long-term debt,
related party (108) (24) (177)
Deferred financing costs (25) (227) -
2,255 (9,612) (3,499)
Net change in cash and cash equivalents 227 564 (321)
Cash and cash equivalents, beginning of year 3,678 3,114 3,435
Cash and cash equivalents, end of year $ 3,905 $ 3,678 3,114
Supplemental disclosures of cash paid (received)
Interest $ 3,960 $ 4,277 3,526
Income taxes 900 (606) 1,263
See notes to consolidated financial statements.
F-6
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tabular dollars in thousands, except per share amounts)
Note 1 -Summary of Significant Accounting Policies
Nature of Operations
Foodarama Supermarkets, Inc. and Subsidiaries (the "Company"), operate 21
ShopRite supermarkets, primarily in central New Jersey. The Company is a member
of Wakefern Food Corporation ("Wakefern"), the largest retailer-owned food
cooperative in the United States.
Fiscal Year
The Company's fiscal year ends on the Saturday closest to
October 31. Fiscal 1998 consists of the 52 weeks ended October 31, 1998, fiscal
1997 consists of the 52 weeks ended November 1, 1997 and fiscal 1996 consists of
the 53 weeks ended November 2, 1996.
Principles of Consolidation
The consolidated financial statements include
the accounts of the Company and its wholly owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Industry Segment
The Company operates in one industry segment, the retail sale of food and
nonfood products, primarily in the central New Jersey region.
Reclassifications
Certain reclassifications have been made to prior years' financial statements
in order to conform to the current year presentation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash Equivalents
The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.
Merchandise Inventories
Merchandise inventories are stated at the lower of cost (first-in, first-out)
or market with cost being determined under the retail method.
Property and Equipment
Property and equipment is stated at cost and is depreciated on a straight-line
basis over the estimated useful lives of between three and ten years for
equipment, the shorter of the useful life or lease term for leasehold
improvements, and twenty years for buildings.
F-7
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tabular dollars in thousands, except per share amounts)
Note 1 -Summary of Significant Accounting Policies - (continued)
Property and Equipment - (continued)
Property and equipment under capital leases are recorded at the lower of
fair market value or the net present value of the minimum lease payments.
They are depreciated on a straight-line basis over the shorter of the related
lease terms or its useful life.
Investments
The Company's investment in its principal supplier, Wakefern,
is stated at cost (see Note 4).
Intangibles
Intangibles consist of goodwill and favorable operating lease costs. Goodwill
is being amortized on a straight-line basis over periods from 15 to 36 years.
The favorable operating lease costs are being amortized on a straight-line
basis over the terms of the related leases which range from 12 to 24 years.
Deferred Financing Costs
Deferred financing costs are being amortized over the life of the related debt
using the effective interest method.
Postretirement Benefits other than Pensions
The Company accrues for the cost of providing postretirement benefits,
principally supplemental income payments and limited medical benefits, over the
working careers of the officers in the plan.
Postemployment Benefits
The Company accrues for the expected cost of providing postemployment
benefits, primarily short-term disability payments, over the working careers
of its employees.
Advertising
Advertising costs are expensed as incurred. Advertising expense was $16.4,
$13.2 and $14.0 million for the fiscal years 1998, 1997 and 1996,
respectively.
Pre-opening Costs
Effective November 2, 1997, the Company elected early application of Statement
of Position 98-5 ("SOP 98-5"), "Reporting on the Cost of Start-Up Activities."
In accordance with SOP 98-5, the Company expenses costs associated with the
opening of new stores as incurred. The Company previously amortized these
costs over a period of twelve months, commencing one month after the opening of
the store. The effect of adopting SOP 98-5 on net income for the
year ended October 31, 1998 was a decrease of $249,000 or $.22 per share.
Financial statements for the years ended November 1, 1997 and November 2, 1996
have not been restated.
Store Closing Costs
The costs, net of amounts expected to be recovered, are expensed when a
decision to close a store is made. It is reasonably possible that these
estimates may change in the near term. Operating results continue to
be reported until a store is closed.
F-8
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tabular dollars in thousands, except per share amounts)
Note 1 - Summary of Significant Accounting Policies - (continued)
Earnings Per Share
Effective for the Company's financial statements for the fiscal year
ended October 31, 1998, the Company adopted Statement of Financial Accounting
Standards No. 128, "Earnings per Share" ("SFAS 128"). SFAS 128 replaces the
presentation of primary earnings per share ("EPS") and fully diluted EPS with a
presentation of basic EPS and diluted EPS, respectively. Basic EPS excludes
dilution and is computed by dividing earnings available to common stockholders
by the weighted-average number of common shares outstanding during the period.
Diluted EPS assumes conversion of dilutive options and warrants, and the
issuance of common stock for all other potentially dilutive equivalent shares
outstanding.
All EPS data for prior periods has been restated. The adoption of SFAS 128
did not have a material effect on the Company's reported EPS amounts.
Employee Benefit Plan
As of November 2, 1997, the Company adopted Statement of Financial Accounting
Standards No. 132 ("SFAS 132"), "Employers' Disclosures about Pensions and
Other Postretirement Benefits." SFAS 132 modifies the disclosure
requirements for pensions and other postretirement benefits, but does
not change the measurement or recognition of those plans. Adoption of this
statement had no effect on the Company's financial position or results of
operations.
Note 2 - Concentration of Cash Balance
As of October 31, 1998 and November 1, 1997, cash balances of approximately
$561,000 and $954,000, respectively, were maintained in bank accounts
insured by the Federal Deposit Insurance Corporation (FDIC). These balances
exceed the insured amount of $100,000.
Note 3 -Receivables and Other Current Assets
October 31, November 1,
1998, 1997
Accounts receivable $ 2,380 $ 2,676
Prepaids 1,321 1,279
Rents receivable 83 94
Less allowance for uncollectible accounts (402) (473)
$ 3,382 $ 3,576
F-9
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tabular dollars in thousands, except per share amounts)
Note 4 - Related Party Transactions
Wakefern Food Corporation
As required by Wakefern's By-Laws, all members of the cooperative are
required to make an investment in the common stock of Wakefern for each
supermarket operated ("Store Investment Program"), with the exact amount per
store computed in accordance with a formula based on the volume of each
store's purchases from Wakefern. The maximum required investment per store
was $450,000 at October 31, 1998 and November 1, 1997 (See Note 22). The
Company has a 12.6% investment in Wakefern of $8,877,000 at October 31, 1998
and $8,427,000 at November 1, 1997. Wakefern is operated on a cooperative
basis for its members. The shares of stock in
Wakefern are assigned to and held by Wakefern as collateral for any obligations
due Wakefern. In addition, the obligations to Wakefern are personally guaranteed
by principal officers/shareholders of the Company. As of October 31, 1998 and
November 1, 1997, the Company was obligated to Wakefern for $1,113,000 and
$757,000, respectively, for the increase in its required investment (see Note 9
Long-term Debt, Related Party).
The Company also has an investment of approximately 13% in Insure-Rite,
Ltd., a company affiliated with Wakefern, which was $829,000 at October 31, 1998
and November 1, 1997. Insure-Rite, Ltd. provides the Company with liability and
property insurance coverage. As of October 31, 1998 and November 1, 1997, the
Company was obligated to Insure-Rite, Ltd. for $14,000 and $28,000,
respectively (see Note 9 - Long - term Debt, Related Party).
In fiscal 1997, Insure-Rite, Ltd. made two retrospective premium calls for
the 1992/93 and the 1993/94 policy years for $869,000 and $770,000,
respectively. The premium calls represent actuarial projections of claims to be
paid in excess of the deposit premium paid by the Company. The Company also had
a balance due in fiscal 1997 of $139,000 for premium calls for the 1991/92
policy year. After the 1993/94 policy year, Insure-Rite, Ltd. changed its policy
to provide for a fixed premium covering all insured losses and the elimination
of premium calls. The premium calls are payable in scheduled semi-annual
payments through September 1999. No interest is being charged on this
obligation. At October 31, 1998 and November 1, 1997, $1,092,000 and $686,000
was included in accounts payable-related party, respectively, and $1,092,000 was
included in other long- term liabilities at November 1, 1997. Insurance premiums
paid to Insure-Rite, Ltd. for fiscal years 1998, 1997 and 1996 were $3,031,000,
$2,702,000 and $2,738,000, respectively.
As a stockholder member of Wakefern, the Company earns a share of an annual
Wakefern patronage dividend. The dividend is based on the distribution of
operating profits on a pro rata basis in proportion to the dollar volume of
business transacted by each member with Wakefern during each fiscal year. It is
the Company's policy to accrue quarterly an estimate of the annual patronage
dividend. The Company reflects the patronage dividend as a reduction of the cost
of merchandise in the consolidated statements of operations. For fiscal 1998,
1997 and 1996, the patronage dividends were $7,438,000, $6,633,000 and
$6,905,000, respectively.
F-10
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tabular dollars in thousands, except per share amounts)
Note 4 -Related Party Transactions - (continued)
Wakefern Food Corporation - (continued)
At October 31, 1998 and November 1, 1997, the Company has current
receivables due from Wakefern of approximately $6,860,000 and $5,389,000,
respectively, representing patronage dividends, vendor rebates, coupons and
other receivables due in the ordinary course of business and a noncurrent
receivable representing a deposit of approximately $1,370,000 and $1,191,000,
respectively.
In September 1987, the Company and all other stockholder members of
Wakefern entered into an agreement, as amended in 1992, with Wakefern which
provides for certain commitments and restrictions on all stockholder members of
Wakefern. The agreement contains an evergreen provision providing for an
indefinite term and is subject to termination ten years after the approval of
75% of the outstanding voting stock of Wakefern. Under the agreement, each
stockholder, including the Company, agreed to purchase at least 85% of its
merchandise in certain defined product categories from Wakefern and, if it fails
to meet such requirements, to make payments to Wakefern based on a formula
designed to compensate Wakefern for its lost profit. Similar payments are due if
Wakefern loses volume by reason of the sale of one or more of a stockholder's
stores, merger with another entity or on the transfer of a controlling interest
in the stockholder.
The Company fulfilled its obligation to purchase a minimum of 85% in
certain defined product categories from Wakefern for all periods presented. The
Company's merchandise purchases from Wakefern, including direct store delivery
vendors processed by Wakefern, approximated $494, $447 and $416 million for the
fiscal years 1998, 1997 and 1996, respectively.
Wakefern charges the Company for, and provides the Company with product and
support services in numerous administrative functions. These services include
advertising, insurance, supplies, technical support for communications and
electronic payment systems, equipment purchasing and the coordination of coupon
processing.
In addition to its investment in Wakefern, which carries only voting
rights, the Company's President serves as a member of Wakefern's Board of
Directors and its finance committee. Several of the Company's officers and
employees also hold positions on various Wakefern committees.
Other
The Company has receivables from related parties that include
shareholders, directors, officers and real estate partnerships. At October 31,
1998 and November 1, 1997, approximately $295,000 and $307,000, respectively, of
these receivables, consist of notes bearing interest at 7% to 9%. These
receivables have been classified based upon the scheduled payment terms. The
remaining amounts are not due upon any specified date and do not bear interest.
The Company's management has classified these loans based upon expected payment
dates.
F-11
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tabular dollars in thousands, except per share amounts)
Note 4 -Related Party Transactions - (continued)
Fair Value
Determination of the fair value of the above receivables is not
practicable due to their related party nature. As the Company's
investments in Wakefern can only be sold to Wakefern for approximately
the amount invested, it is not practicable to estimate the fair
value of such stock.
Note 5 -Intangibles
October 31, November 1,
1998 1997
Goodwill $ 3,493 $ 3,493
Favorable operating lease costs, net 4,685 4,685
8,178 8,178
Less accumulated amortization 3,616 3,078
$ 4,562 $ 5,100
Note 6- Accrued Expenses
October 31, November 1,
1998 1997
Payroll and payroll related expenses $ 4,451 $ 3,579
Insurance 417 324
Sales, use and other taxes 1,020 924
Interest 128 207
Employee benefits 673 569
Occupancy costs 1,148 964
Real estate taxes 344 276
Other 527 212
$ 8,708 $ 7,055
Note 7 -Real Estate Transactions
During the fiscal year ended November 1, 1997, the Company sold its
Shrewsbury and West Long Branch, New Jersey real estate partnership
interests, which resulted in total proceeds and a gain before income
taxes of $875,000. The Company had other miscellaneous real estate
transactions that resulted in a loss before income taxes of
$219,000 in fiscal year 1997.
Note 8 -Long-term Debt
Long-term debt consists of the following:
October 31, November 1,
1998 1997
Revolving note $ 5,816 $ 3,773
Term loan 5,500 9,500
Stock redemption note 1,445 1,700
Expansion loan 1,363 -
Other notes payable 13,977 9,548
28,101 24,521
Less current portion 7,812 6,647
$ 20,289 $ 17,874
F-12
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tabular dollars in thousands, except per share amounts)
Note 8 -Long-term Debt - (continued)
The Company has an amended and restated Revolving Credit and Term Loan
Agreement with a financial institution (the "Agreement"), which was
last amended January 15, 1998. The Agreement is collateralized by
substantially all of the Company's assets and provided for a total
commitment of $31,700,000. The Agreement consists of a Revolving Note,
a Term Loan, a Stock Redemption Note and an Expansion Loan.
The Revolving Note has an overall availability of $17,500,000, not to
exceed 60% of eligible inventory. The Note bears interest at .25% over
prime and matures February 15, 2000. The Agreement provides the
Company with the option to borrow a portion of the Revolving Note under
a Eurodollar loan rate based on LIBOR plus 2.25%. Interest rates on
the Eurodollar loans are fixed at the beginning of the loan term, which
cannot exceed six months. At November 1, 1997, $1,800,000 was under a
fixed Eurodollar loan rate of 8.97%, which expired December 1997.
The prime rate at October 31, 1998 and November 1, 1997 was 8% and
8.50%, respectively.
The Company had a $2,000,000 letter of credit outstanding at October
31, 1998 and November 1, 1997. A commitment fee of .5% is charged on
the unused portion of the Revolving Note. Available credit under the
Revolving Note was $9,684,000 and $11,727,000 at October 31, 1998 and
November 1, 1997. As of October 31, 1998 and November 1, 1997,
$5,796,000 and $5,201,000 of cash receipts on hand or in transit were
restricted for application against the Revolving Note balance.
The Agreement places restrictions on dividend payments and requires the
maintenance of a debt service coverage ratio. If the debt service
coverage ratio is not met, the availability of the Revolving Note is
reduced by $2,500,000. At October 31, 1998, the Company did not meet
the debt service coverage ratio; therefore, the Revolving Note
availability was reduced to $7,184,000.
The Term Loan is payable in quarterly principal installments, through
December 31, 1999, of $1,000,000 plus interest at 8.38%, with the
remaining balance of $500,000 due February 15, 2000. At
November 1, 1997, the Term Loan bore interest at 9.22%.
The Stock Redemption Note was used to reimburse the funding of the
redemption of the Preferred Stock on March 31, 1997. The note is
payable in quarterly principal installments of $85,000, commencing
March 31, 1998 through December 31, 1999, plus interest at 8.38%, with
the remaining principal balance of $1,020,000 due February 15,
2000. At November 1, 1997, this note bore interest at 9.22%.
On November 14, 1997, the Company obtained an Expansion Loan of
$1,500,000 which was used to purchase a building and equipment in
Linden, New Jersey. The Expansion Loan is collateralized by the
building, all improvements and equipment. The loan is payable in
monthly principal installments of $12,500 plus interest at 9.18%,
with a final principal payment of $462,500 due December 1, 2004.
F-13
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tabular dollars in thousands, except per share amounts)
Note 8 -Long-term Debt - (continued)
Other Notes Payable
Included in other notes payable are the following:
October 31, November 1,
1998 1997
Note payable to a financing institution, maturing
October 2004, payable at $56,000 per month
plus interest at 7.26%, collateralized by related
equipment. $ 4,000 $ -
Note payable to a financing institution, maturing
April 2005, payable at $46,000 per month
including interest at 7.44%, collateralized by
related equipment. 2,821 -
Note payable to a financing institution, maturing
January 2000, payable at $105,000 per month
including interest at 10.58%, collateralized by
related equipment. 1,550 2,578
Various equipment loans maturing through
November 2004, at interest rates ranging from
5.87% to 10.58%, collateralized by various
equipment. 5,606 6,970
Total other notes payable. $ 13,977 $ 9,548
Aggregate maturities of long-term debt are as follows:
Fiscal Year
1999 $ 7,812
2000 11,006
2001 2,003
2002 2,098
2003 2,201
Thereafter 2,981
As of October 31, 1998, the fair value of long-term debt was
approximately equivalent to its carrying value, due to the fact that
the interest rates currently available to the Company for debt with
similar terms are approximately equal to the interest rates for its
existing debt.
F-14
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tabular dollars in thousands, except per share amounts)
Note 9 -Long-term Debt, Related Party
As of October 31, 1998 and November 1, 1997, the Company was indebted
for an investment in Wakefern in the amount of $1,113,000 and $757,000
and for an investment in Insure-Rite, Ltd. in the amount of $14,000
and $28,000, respectively (see Note 4). The debt is non-interest
bearing and payable in scheduled installments as follows:
Fiscal Year
1999 $ 211
2000 208
2001 257
2002 261
2003 91
Thereafter 99
Determination of the fair value of the above long-term debt is not
practicable due to its related party nature.
Note 10 -Other Long-term Liabilities
October 31, November 1,
1998 1997
Deferred escalation rent $ 4,675 $ 4,409
Insure-Rite, Ltd. retro premium, net of
current portion (Note 4) - 1,092
Postretirement benefit cost 975 859
Other 906 753
$ 6,556 $ 7,113
Note 11 -Long-term Leases
Capital Leases
October 31, November 1,
1998 1997
Real estate $ 32,353 $ 19,443
Less accumulated amortization 6,385 5,406
$ 25,968 $ 14,037
During fiscal 1997, the Company sold the Aberdeen, New Jersey store at
a sale price of $2,300,000, which resulted in a gain of $199,000. The
store was leased back for a lease term of twenty-five years. The lease
was capitalized and the gain was deferred and is being amortized over
the life of the lease.
F-15
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tabular dollars in thousands, except per share amounts)
Note 11 -Long-term Leases - (continued)
Capital Leases - (continued)
The following is a schedule by year of future minimum lease payments
under capital leases, together with the present value of the net
minimum lease payments, as of October 31, 1998:
Fiscal Year
1999 $ 3,382
2000 3,382
2001 3,397
2002 3,546
2003 3,601
Thereafter 46,362
Total minimum lease payments 63,670
Less amount representing interest 33,552
Present value of net minimum lease payments 30,118
Less current maturities 667
Long-term maturities $ 29,451
Included in the above are five leases on stores, one of which is being
leased from a partnership in which the Company had a 40% limited
partnership interest at annual lease payments of $663,000 in fiscal
1997 and $628,000 in fiscal 1996. The 40% interest was sold in
fiscal 1997.
Operating Leases
The Company is obligated under operating leases for rent payments
expiring at various dates through 2021. Certain leases provide for the
payment of additional rentals based on certain escalation clauses and
six leases require a further rental payment based on a percentage of
the stores' annual sales in excess of a stipulated minimum. Percentage
rent expense was $229,000, $219,000, and $225,000 for the fiscal years
1998, 1997 and 1996, respectively. Under the majority of the leases,
the Company has the option to renew for additional terms at specified
rentals.
Total rental expense for all operating leases consists of:
Fiscal 1998 Fiscal 1997 Fiscal 1996
Land and buildings $ 10,928 $ 10,471 $ 9,824
Less subleases (1,765) (1,963) (2,140)
$ 9,163 $ 8,508 $ 7,684
F-16
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tabular dollars in thousands, except per share amounts)
Note 11 -Long-term Leases - (continued)
Operating Leases - (continued)
The minimum rental commitments under all noncancellable operating
leases reduced by income from noncancellable subleases at October
31, 1998 are as follows:
Income from
Land and Noncancellable Net Rental
Fiscal Year Buildings Subleases Commitment
1999 $ 10,239 $ 1,556 $ 8,683
2000 10,181 945 9,236
2001 9,701 847 8,854
2002 9,031 475 8,556
2003 8,608 255 8,353
Thereafter 51,504 23 51,481
$ 99,264 $ 4,101 $ 95,163
The Company is presently leasing one of its supermarkets, a garden
center and liquor store from a partnership in which the president has
an interest, at an annual aggregate rental of $660,000, $645,000 and
$591,000 for the fiscal years 1998, 1997 and 1996, respectively.
Note 12 -Mandatory Redeemable Preferred Stock
In fiscal 1993, the Company received $1,700,000 for the issuance of
136,000 shares of Preferred Stock at $12.50 par value per share to
Wakefern Food Corporation. Dividends on the Preferred Stock were
cumulative and accrued at an annual rate of 8%. The Preferred Stock
was redeemed and canceled on March 31, 1997, at par value, for
$1,700,000. As of the redemption date, all dividends had been declared
and paid.
Note 13 -Stock Options
On May 10, 1995, the Company's shareholders approved the Foodarama
Supermarkets, Inc. 1995 Stock Option Plan, which provides for the
granting of options to purchase up to 100,000 common shares until
January 31, 2005, at prices not less than fair market value at the date
of the grant. Options granted under the plan vest over a period of
three years from the date of grant. At October 31, 1998, no options
had been granted.
Note 14 -Income Taxes
The income tax provisions consist of the following:
Fiscal 1998 Fiscal 1997 Fiscal 1996
Federal:
Current $ 638 $ - $ -
Deferred 99 526 114
State and local:
Current 49 - 203
Deferred 154 100 22
$ 940 $ 626 $ 339
F-17
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tabular dollars in thousands, except per share amounts)
Note 14 -Income Taxes
The following tabulations reconcile the federal statutory tax rate to
the effective rate:
Fiscal 1998 Fiscal 1997 Fiscal 1996
Tax provision at the statutory rate 34.0 % 34.0 % 34.0 %
State and local income tax provision,
net of federal income tax 5.9 % 5.9 % 5.9 %
Goodwill amortization not deductible
for tax purposes 1.8 % 2.9 % 2.8 %
Adjustment to prior years tax provision(5.4)% (6.3)% (2.7)%
Adjustment to estimated tax liabilities - - (19.0)%
Other (1.7)% .5 % (1.5)%
Actual tax provision 34.6 % 37.0 % 19.5 %
Net deferred tax assets and liabilities consist of the following:
October 31, November 1,
1998 1997
Current deferred tax assets:
Reserves $ 663 $ 654
Other 698 646
1,361 1,300
Current deferred tax liabilities:
Patronage dividend receivable (1,623) (1,401)
Inventories (188) (194)
Prepaid pension (488) (451)
Other (526) (199)
(2,825) (2,245)
Current deferred income tax liability $ (1,464) $ (945)
Noncurrent deferred tax assets:
Alternative minimum tax credits $ - $ 66
State loss carryforward 741 664
Lease obligations 1,691 1,532
Other 368 380
2,800 2,642
Valuation allowance (506) (617)
2,294 2,025
Noncurrent deferred tax liabilities:
Depreciation of fixed assets (4,718) (4,606)
Pension obligations (330) (347)
Other (754) (900)
(5,802) (5,853)
Noncurrent deferred income tax liability $ (3,508) $ (3,828)
State loss carryforwards expire October 2003 through October 2005.
F-18
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tabular dollars in thousands, except per share amounts)
Note 15 -Commitments and Contingencies
Legal Proceedings
The Company is involved in various legal actions and claims arising in
the ordinary course of business. Management believes that the outcome
of any such litigation and claims will not have a material effect on
the Company's financial position or results of operations.
Guarantees
The Company remains contingently liable under leases assumed by third
parties. As of October 31, 1998, the minimum annual rental under these
leases amounted to approximately $1,469,000, expiring at various dates
through 2011. The Company has not experienced and does not anticipate
any material nonperformance by such third parties.
Contingencies
In May 1995 the Company sold its two operating locations in
Pennsylvania. If the purchaser of these supermarkets ceases to operate
prior to May 2000, the Company may be liable for an unfunded pension
withdrawal liability. As of October 31, 1998 the potential withdrawal
liability was approximately $860,000. The Company fully anticipates
that the purchaser of these stores, a Wakefern member, will remain in
operation throughout this period.
Note 16 -Retirement and Benefit Plans
Defined Benefit Plans
The Company sponsors two defined benefit pension plans covering
administrative personnel and members of a union. Employees covered
under the administrative pension plan earned benefits based upon a
percentage of annual compensation and could make voluntary
contributions to the plan. Employees covered under the union pension
benefit plan earn benefits based on a fixed amount for each year of
service. The Company's funding policy is to pay at least the minimum
contribution required by the Employee Retirement Income Security Act of
1974. The plans' assets consist primarily of publicly traded stocks
and fixed income securities. As of October 31, 1998 and November 1,
1997, the plans' assets included common stock of the Company with a
fair value of $1,167,000 and $688,000, respectively.
A summary of the plans funded status and the amounts recognized in the
consolidated balance sheet as of October 31, 1998 and November 1, 1997
follows:
October 31, November 1,
1998 1997
Change in benefit obligation
Benefit obligation - beginning of year $ (5,499) $ (6,569)
Service cost (36) (296)
Interest cost (404) (466)
Actuarial gain (loss) (182) 1,777
Curtailment gain - 55
Benefit obligation - end of year (6,121) (5,499)
F-19
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tabular dollars in thousands, except per share amounts)
Note 16 -Retirement and Benefit Plans - (continued)
Defined Benefit Plans - (continued)
October 31, November 1,
1998 1997
Change in plan assets
Fair value of plan assets - beginning of year 6,206 5,658
Actual return on plan assets 740 675
Employer contributions 94 643
Benefits paid (397) (770)
Fair value of plan assets - end of year 6,643 6,206
Funded status 522 707
Unrecognized prior service cost 311 348
Unrecognized net loss (gain) from past
experience different from that assumed 394 84
Unrecognized transition asset (21) (26)
Adjustment required to recognize minimum
liability (188) -
Prepaid pension cost $ 1,018 $ 1,113
Pension expense consists of the following:
Fiscal 1998 Fiscal 1997Fiscal 1996
Service cost - benefits earned during
the period $ 36 $ 296 $ 308
Interest expense on benefit obligation 404 466 445
Expected return on plan assets (471) (469) (396)
Amortization of prior service costs 37 37 8
Amortization of unrecognized net loss (gain) - 43 139
Amortization of unrecognized transition
obligation (asset) (5) (9) (12)
Total pension expense $ 1 $ 364 $ 492
The discount rate used in determining the actuarial present value of
the projected benefit obligation ranged from 6.75% to 7.25% at
October 31, 1998 and from 7.25% to 7.5% at November 1, 1997. The
expected long-term rate of return on plan assets was 8% at
October 31, 1998 and November 1, 1997.
On September 30, 1997, the Company adopted an amendment to freeze all
future benefit accruals relating to the plan covering administrative
personnel. A curtailment gain of $55,000 was recorded related to this
amendment.
F-20
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tabular dollars in thousands, except per share amounts)
Note 16 -Retirement and Benefit Plans - (continued)
Defined Benefit Plans - (continued)
At October 31, 1998, the accumulated benefit obligation exceeded the fair
value of the plans' assets in the plan covering members of one union. The
provisions of SFAS 87, "Employers' Accounting for Pensions," require recognition
in the balance sheet of an additional minimum liability and related intangible
asset for pension plans with accumulated benefits in excess of plan assets; any
portion of such additional liability which is in excess of the plan's prior
service cost is reflected as a direct charge to equity, net of related tax
benefit. Accordingly, at October 31, 1998 a liability of $188,000 is included in
other long-term liabilities, an intangible asset equal to the prior service cost
of $53,000 is included in other assets, and a charge of $81,000 net of deferred
taxes of $54,000 is reflected as a minimum pension liability in stockholders'
equity in the Consolidated Balance Sheet.
Multi-Employer Plans
Health, welfare and retirement expense was approximately $7,804,000 in
fiscal 1998, $6,354,000 in fiscal 1997 and $6,036,000 in fiscal 1996 under plans
covering union employees. Such plans are administered through the unions
involved. Under Federal legislation regarding such pension plans, a company is
required to continue funding its proportionate share of a plan's unfunded vested
benefits in the event of withdrawal (as defined by the legislation) from a plan
or plan termination. The Company participates in a number of these pension plans
and may have a potential obligation as a participant. The information required
to determine the total amount of this contingent obligation as well as the total
amount of accumulated benefits and net assets of such plans, is not readily
available. However, the Company has no present intention of withdrawing from any
of these plans, nor has the Company been informed that there is any intention to
terminate such plans (see Note 15).
401(k)/Profit Sharing Plan
The Company maintains an employee 401(k) Savings Plan for all qualified
non-union employees. Employees are eligible to participate in the Plan after
completing one year of service (1,000 hours) and attaining age 21. Employee
contributions are discretionary to a maximum of 15% of compensation. Effective
October 1, 1997, the Company matches 25% of the employees' contributions up to
6% of employee compensation. The Company has the right to make additional
discretionary contributions, which are allocated to each eligible employee in
proportion to their eligible compensation, which was 2% for fiscal year 1998.
401(k) expense for the fiscal years ended October 31, 1998 and November 1, 1997
was approximately $480,000 and $12,000, respectively.
F-21
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tabular dollars in thousands, except per share amounts)
Note 17 -Other Postretirement and Postemployment Benefits
Postretirement Benefits
The Company provides certain current and former officers with
supplemental income payments and limited medical benefits during
retirement. The Company recorded an estimate of deferred compensation
payments to be made to the officers based on their anticipated period
of active employment and the relevant actuarial assumptions at October
31, 1998 and November 1, 1997, respectively. The Company purchased
life insurance to partially fund this obligation. The participants
have agreed to certain non-compete arrangements and to provide
continued service availability for consulting services after
retirement.
A summary of the plan's funded status and the amounts recognized in the
balance sheet as of October 31, 1998 and November 1, 1997 follows:
October 31, November 1,
1998 1997
Change in benefit obligation
Benefit obligation - beginning of year $ (1,309) $ (1,240)
Service cost (39) (18)
Interest cost (88) (90)
Actuarial gain (loss) (481) (8)
Benefits paid 42 47
Benefit obligation - end of year (1,875) (1,309)
Change in plan assets
Fair value of plan assets - beginning of year - -
Actual return on plan assets - -
Employer contributions - -
Benefits paid - -
Fair value of plan assets - end of year - -
Funded status (1,875) (1,309)
Unrecognized prior service cost 15 36
Unrecognized net loss (gain) from past experience
different from that assumed 885 414
Accrued postretirement benefit cost $ (975) $ (859)
F-22
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tabular dollars in thousands, except per share amounts)
Note 17 -Other Postretirement and Postemployment Benefits - (continued)
Postretirement Benefits - (continued)
Net postretirement benefit expense consists of the following:
Fiscal 1998 Fiscal 1997 Fiscal 1996
Service cost - benefits earned
during the period $ 39 $ 18 $ 16
Interest expense on benefit obligation 88 90 83
Expected return on plan assets - - -
Amortization of prior service costs 2 - -
Amortization of unrecognized net
loss (gain) 30 s 38 30
Amortization of unrecognized transition
obligation (asset) - - -
Postretirement benefit expense $ 159 $ 146 $ 129
The assumed discount rate used in determining the postretirement
benefit obligation as of October 31, 1998 and November 1, 1997 was
7.25% and 7.5%, respectively.
Postemployment Benefits
Under SFAS No. 112, the Company is required to accrue the expected cost
of providing postemployment benefits, primarily short-term disability
payments, over the working careers of its employees.
The accrued liability under SFAS No. 112 as of October 31, 1998 and
November 1, 1997 was $359,000 and $384,000, respectively.
Note 18 -Earnings Per Share
Fiscal 1998 Fiscal 1997 Fiscal 1996
Net income $ 1,780 $ 1,064 $ 1,396
Less: preferred stock dividends - (57) (136)
Income available to common
stockholders $ 1,780 $ 1,007 $ 1,260
Basic EPS $ 1.59 $ .90 $ 1.13
Dilutive EPS $ 1.59 $ .90 $ 1.13
Weighted average shares outstanding 1,117,150 1,117,150 1,118,150
Note 19- Noncash Investing and Financing Activities
The Company was required to make an additional investment in Wakefern
of $450,000 for a new store opened during fiscal 1998. In conjunction
with the investment, liabilities were assumed for the same amount.
F-23
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tabular dollars in thousands, except per share amounts)
Note 19- Noncash Investing and Financing Activities - (continued)
A capital lease obligation of $12,910,000 was incurred when the Company
entered into a lease for a new store in fiscal 1998.
During fiscal 1998, the Company purchased a building in Linden, New
Jersey for $606,000 and obtained financing for $1,500,000. The
additional financing of $894,000 was used to purchase equipment at a
later date.
At October 31, 1998, the Company had an additional minimum pension
liability of $188,000, a related intangible of $53,000 and a direct
charge to equity of $81,000, net of deferred taxes of $54,000.
A capital lease obligation of $4,184,000 was incurred when the Company
entered into a lease for a store in a sale/leaseback transaction during
fiscal 1997.
During fiscal 1996, the Company acquired additional property and
equipment for $13,181,000. In conjunction with the acquisition,
liabilities were assumed as follows:
Cost of property and equipment acquired $ 13,181
Cash paid (6,645)
Liabilities assumed $ 6,536
In addition, a capital lease obligation of $5,610,000 was incurred in
fiscal 1996 when the Company entered into a lease for a new store.
The Company was required to make an additional investment in Wakefern
for $900,000 for the two new stores opened during fiscal 1996. In
conjunction with the investment, liabilities were assumed for the same
amount.
At November 2, 1996, the additional minimum pension liability of
$880,000, the related intangible of $74,000 and the direct charge to
equity of $806,000 were reversed since the Company's defined benefit
plans' assets exceeded the accumulated benefit obligations.
Note 20 -Year 2000
The Company is currently working to resolve the potential impact of the
Year 2000 ("Y2K") problem on the processing of date-sensitive
information by the Company's computerized information systems. The
year 2000 problem is the result of computer programs being written
using two digits (rather than four) to define the applicable year.
Any of the Company's programs that have time-sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000,
which could result in miscalculations or system failures. The Company
is currently in the process of addressing the problem by identifying
all computer-based systems and applications, including embedded chip
systems, assessing the Y2K compliancy of the systems, upgrading or
replacing any systems that are not currently Y2K compliant, and testing
the systems. The Company is also participating in the same process
with Wakefern to determine that all jointly operated systems will meet
Y2K compliancy. The Company estimates that all critical systems and
applications will be Y2K compliant by the end of fiscal 1999 and does
not currently expect the costs of addressing and correcting the systems
to have a material effect on the financial condition of the Company.
F-24
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tabular dollars in thousands, except per share amounts)
Note 20 -Year 2000 - (continued)
The Company is also assessing the possible effects on its operations of
Y2K problems of outside suppliers and services and is in the process of
developing contingency plans to provide alternatives to ensure that
business operations are not significantly impacted by Y2K related
system failures, whether internal or external. Since the Company
cannot fully anticipate the effects of noncompliance by outside
suppliers and services, there could be possible failure of critical
systems which could result in the interruption of the Company's
operations and have a material adverse effect on the Company's
financial position.
Note 21 -Unaudited Summarized Consolidated Quarterly Information
Summarized quarterly information for the years ended October 31, 1998
and November 1, 1997 was as follows:
Thirteen Weeks Ended
January 31, May 2, August 1, October 31,
1998 1998 1998 1998
Sales $170,231 $166,245 $176,172 $184,710
Gross profit 42,434 42,425 44,634 47,241
Net income 783 258 255 484
Earnings available per
basic and diluted share .70 .23 .23 .43
Thirteen Weeks Ended
February 1, May 3, August 2, November 1,
1997 1997 1997 1997
Sales $163,356 $155,986 $161,128 $156,261
Gross profit 40,588 39,766 40,904 39,709
Net income 176 72 245 571
Mandatory preferred stock
dividend requirement (34) (23) - -
Earnings available to common
stock 142 49 245 571
Earnings available per basic
and diluted share .13 .04 .22 .51
Note 22 -Subsequent Events
Effective November 19, 1998, the required investment in Wakefern
increased. The maximum required investment per store was increased
from $450,000 to $500,000. This resulted in a total increase in the
investment in Wakefern by $1,286,000 and a related increase in the
obligations due Wakefern for the same amount. The obligation is non-
interest bearing and is payable over the next four years.
F-25
Schedule II
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
Fiscal Years Ended October 31, 1998, November 1, 1997 and November 2, 1996
(In thousands)
Additions
Balance Charge to Charge to Balance
at beginning costs and other at end
Description of year expenses accounts Deductions of year
Fiscal year ended
October 31, 1998:
Allowance for doubtful
accounts (deducted from
receivables and other
current assets) $ 473 $ 149 $ - $ 220 (1) $ 402
Fiscal year ended
November 1, 1997:
Allowance for doubtful
accounts (deducted from
receivables and other
current assets) $ 665 $ 120 $ - $ 312 (1) $ 473
Fiscal year ended
November 2, 1996:
Allowance for doubtful
accounts (deducted from
receivables and other
current assets) $ 516 $ 149 $ - $ - $ 665
(1) Accounts deemed to be uncollectible.
S-1
Schedule X
c. Exhibits
3. Articles of Incorporation and By-Laws
*i. Restated Certificate of Incorporation of Registrant
filed with the Secretary of State of the State of New
Jersey on May 15, 1970.
*ii. Certificate of Merger filed with the Secretary of
State of the State of New Jersey on May 15, 1970.
*iii. Certificate of Merger filed with the Secretary of
State of the State of New Jersey on March 14, 1977.
*iv. Certificate of Merger filed with the Secretary of
State of the State of New Jersey on June 23, 1978.
*v. Certificate of Amendment to Restated Certificate of
Incorporation filed with the Secretary of State of the
State of New Jersey on May 12, 1987.
**vi. Certificate of Amendment to Restated Certificate of
Incorporation filed with the Secretary of State of the
State of New Jersey on February 16, 1993.
*****vii. Amendment to the Certificate of Incorporation of the
Registrant dated April 4, 1996.
*viii. By-Laws of Registrant.
*ix. Amendments to By-Laws of Registrant adopted
September 14,1983.
x. Amendment to By-Laws of Registrant adopted March
15, 1991 is incorporated herein by reference to the
Registrant's Annual Report on Form 10-K for the year
ended November 2, 1991 filed with the Securities and
Exchange Commission on February 18, 1992.
* Each of these Exhibits is incorporated herein by reference to
the Registrant's Annual Report on Form 10-K for the year ended
October 29, 1988 filed with the Securities and Exchange
Commission on February 13, 1989.
** Each of these Exhibits is incorporated herein by reference to
the Registrant's Annual Report on Form 10-K for the year ended
October 31, 1992 filed with the Securities and Exchange
Commission on February 19, 1993.
E-1
10. Material Contracts.
i. The Agreement dated September 18, 1987 entered into by
Wakefern Food Corporation and the Registrant is
incorporated herein by reference to Exhibit A to the
Registrant's Form 8-K filed with the Securities and
Exchange Commission on November 19, 1987.
***ii. Certificate of Incorporation of Wakefern Food
Corporation together with amendments thereto and
certificates of merger.
***iii. By-laws of Wakefern Food Corporation.
iv. Purchase Agreement, dated March 10, 1989, by and
between Hilltop Supermarkets, Inc. and the Registrant is
incorporated herein by reference to Exhibit (2)(i) to
the Registrant's Form 8-K filed with the Securities and
Exchange Commission on April 4, 1989.
v. Agreement, dated March 10, 1989, by and between Afta
Equipment Leasing Co., an affiliate of Hilltop
Supermarkets, Inc., and the Registrant is incorporated
herein by reference to Exhibit (2)(i) to the
Registrant's Form 8-K filed with the Securities and
Exchange Commission on April 4, 1989.
***vi. Agreements between the Registrant and the principals
of Hilltop Supermarkets, Inc.
***vii. Credit Agreement, dated as of March 16, 1989, among
the Registrant, each of the Banks which are a
signatory thereto and The Chase Manhattan Bank
(National Association).
***viii. Amendment No.1 to the Credit Agreement, dated as of
June 16, 1989, among the Registrant, each of the Banks
which are a signatory thereto and The Chase Manhattan
Bank (National Association).
***ix. Note Purchase Agreements, dated as of June 1, 1989,
between the Registrant and various institutional
Lenders.
*** Each of these Exhibits is incorporated herein by reference to
the Registrant's Annual Report on Form 10-K for the year ended
October 28, 1989 filed with the Securities and Exchange
Commission on February 9, 1990.
E-2
***x. Letter Agreement, dated January 25, 1990, among the
Registrant, the Banks which are parties to the Credit
Agreement, dated as of March 16, 1989, and each of
institutional lenders who were issued senior secured
notes pursuant to the several Note Agreements, dated
as of June 1, 1989 between each such institutional
investor and the Registrant.
***xi. Form of Deferred Compensation Agreement, between the
Registrant and certain of its key employees.
xii. Registrant's 1987 Incentive Stock Option Plan is
incorporated herein by reference to Exhibit 4 (a) to
the Registrant's Form S-8 filed with the Securities
and Exchange Commission on May 26, 1989.
xiii. Amendment No. 2 to the Credit Agreement, dated as of
January 25, 1990, among the Registrant, each of the
Banks which are a signatory thereto and The Chase
Manhattan Bank (National Association) is incorporated
herein by reference to the Registrant's Annual Report
on Form 10-K for the year ended November 3, 1990 filed
with the Securities and Exchange Commission on
February 20, 1991.
****xiv. Amendment No. 3 to the Credit Agreement, dated as of
February 5, 1992, among the Registrant, each of the
Banks which are a signatory thereto and The Chase
Manhattan Bank (National Association).
**** Each of these Exhibits is incorporated herein by reference to
the Registrant's Annual Report on Form 10-K for the year ended
November 2, 1991, filed with the Securities and Exchange
Commission on February 18, 1992.
E-3
**xv. Amendment No. 4 to the Credit Agreement, dated as of
February 12, 1993, among the Registrant, each of the
Banks which are a signatory thereto and The Chase
Manhattan Bank (National Association).
****xvi. Modification Letter to Note Purchase Agreement, dated
as of June 1, 1989, between the Registrant and various
Institutional Lenders.
****xvii. Amendment Letter to Note Purchase Agreement, dated as
of August 10, 1989, between the Registrant and various
Institutional Lenders.
****xviii. Modification Letter to Note Purchase Agreement, dated
as of February 5, 1992, between the Registrant and
various Institutional Lenders.
**xix. Modification Letter to Note Purchase Agreement, dated
as of February 16, 1993, between the Registrant and
various Institutional Lenders.
xx. Agreement, dated September 20, 1993, between the
Registrant, ShopRite of Malverne, Inc. and The Grand
Union Company is incorporated herein by reference to the
Registrant's Annual Report on Form 10-K for the year
ended October 30, 1993, filed with the Securities and
Exchange Commission on February 24, 1994.
xxi. Revolving Credit and Term Loan Agreement, dated as of
February 15, 1995 between the Registrant and NatWest
Bank as agent for a group of banks is incorporated
herein by reference to the Registrant's Form 8-K filed
with the Securities and Exchange Commission on July
10, 1995.
xxii. Asset Purchase Agreement dated April 20, 1995 and
Amendment No. 1 to the Agreement dated May 24, 1995
between the Registrant and Wakefern Food Corp. is
incorporated herein by reference to the Registrant's
Form 8-K filed with the Securities and Exchange
Commission on July 27, 1995.
E-4
xxiii. Amendment of Revolving Credit and Term Loan Agreement,
dated as of January 25, 1996, between the Registrant
and each of the banks which are signatory thereto is
incorporated herein by reference to the Registrant's
Form 10-Q for the quarterly period ended January 27,
1996, filed with the Securities and Exchange
Commission on March 12, 1996.
*****xxiv. Agreement, dated as of March 29, 1996, between the
Registrant and Wakefern Food Corporation.
*****xxv. Amendment of Revolving Credit and Term Loan Agreement,
dated as of May 10, 1996, between the Registrant and
each of the Banks which are signatory thereto.
xxvi. Waiver and Amendment of Revolving Credit and Term Loan
Agreement, dated as of July 26, 1996, between the
Registrant and each of the Banks which are signatory
thereto is incorporated herein by reference to the
Registrant's Form 10-Q for the quarterly period ended
July 27, 1996, filed with the Securities and Exchange
Commission on September 10, 1996.
xxvii. Amended and Restated Revolving Credit and Term Loan
Agreement, dated as of May 2, 1997, between the
Registrant and the Financial Institution which are
signatory thereto is incorporated herein by reference to
the Registrant's Form 10-Q for the quarterly period ended
May 3, 1997, filed with the Securities and Exchange
Commission on June 16, 1997.
******xxviii. First Amendment to Amended and Restated Revolving Credit
and Term Loan Agreement, dated October 28, 1997, between
the Registrant and the Financial Institution which are
signatory thereto.
******xxix. Consent and Second Amendment to Amended and Restated
Revolving Credit and Term Loan Agreement and other loan
documents, dated November 14, 1997, between the
Registrant and the Financial Institution which are
signatory thereto.
******xxx. Third Amendment to Amended and Restated Revolving Credit
and Term Loan Agreement, dated January 15, 1998, between
the Registrant and the Financial Institution which are
signatory thereto.
***** Incorporated herein by reference to the Registrant's Form
10-Q for the quarterly period ended April 27, 1996, filed
with the Securities and Exchange Commission on
June 10, 1996.
****** Incorporated herein by reference to the Registrant's Form
10-K for the year ended November 1, 1997 filed with the
Securities and Exchange Commission on January 29, 1998.
E-5
Exhibit 21
LIST OF SUBSIDIARIES
OF FOODARAMA SUPERMARKETS, INC.
Name of Subsidiary State of
Incorporation
ShopRite of Malverne, Inc. New York
New Linden Price Rite, Inc. New Jersey
ShopRite of Reading, Inc. Pennsylvania
E-6