UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM
10-Q
Quarterly report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended July 31, 2004
Commission file number 1-5745-1
FOODARAMA SUPERMARKETS, INC.
(Exact name of Registrant as specified in its charter)
New Jersey 21-0717108
---------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Building 6, Suite 1, 922 Highway 33, Freehold, N.J. 07728
(Address of principal executive offices)
Telephone #732-462-4700
-----------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No __
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes ____ No X
Indicate the number of shares outstanding of each of the Issuer's classes of
common stock, as of the close of the latest practicable date.
OUTSTANDING AT
CLASS September 10, 2004
----- ------------------
Common Stock, 987,617 shares
$1 par value
FOODARAMA SUPERMARKETS, INC.
----------------------------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Consolidated Condensed Balance Sheets
July 31, 2004 and November 1, 2003
Unaudited Consolidated Condensed Statements
of Operations for the thirteen weeks ended
July 31, 2004 and August 2, 2003
Unaudited Consolidated Condensed Statements
of Operations for the thirty nine weeks
ended July 31, 2004 and August 2, 2003
Unaudited Consolidated Condensed Statements
of Cash Flows for the thirty nine weeks
ended July 31, 2004 and August 2, 2003
Notes to the Unaudited Consolidated Condensed
Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About
Market Risk
Item 4. Controls and Procedures
PART II. OTHER INFORMATION
Item 6. Exhibits
Disclosure Concerning Forward-Looking Statements
------------------------------------------------
All statements, other than statements of historical fact, included in this Form
10-Q, including without limitation the statements under "Management's Discussion
and Analysis of Financial Condition and Results of Operations", are, or may be
deemed to be, "forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such
forward-looking statements involve assumptions, known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of Foodarama Supermarkets, Inc. (the "Company", which may be
referred to as we, us or our) to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements contained in this Form 10-Q. Such potential risks and
uncertainties, include without limitation, competitive pressures from other
supermarket operators, warehouse club stores and general merchandise stores,
economic conditions in the Company's primary markets, consumer spending
patterns, availability of capital, cost of labor, cost of goods sold including
increased costs from the Company's cooperative supplier, Wakefern Food
Corporation ("Wakefern"), and other risk factors detailed herein and in other of
the Company's Securities and Exchange Commission filings. The forward-looking
statements are made as of the date of this Form 10-Q and the Company assumes no
obligation to update the forward-looking statements or to update the reasons
actual results could differ from those projected in such forward-looking
statements.
2
PART I. FINANCIAL INFORMATION
-----------------------------
Item 1. Financial Statements
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(In thousands)
July 31, November 1,
2004 2003
(Unaudited) (1)
----------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 6,026 5,252
Merchandise inventories 53,970 49,224
Receivables and other assets 10,651 12,043
Prepaid and refundable income taxes 73 3,404
Related party receivable - Wakefern 10,530 13,684
------- -------
81,250 83,607
------- -------
Property and equipment:
Land 308 308
Buildings and improvements 1,220 1,220
Leasehold improvements 60,366 49,039
Equipment 159,126 142,021
Property under capital leases 152,353 130,420
Construction in progress 59 6,846
------- -------
373,432 329,854
Less accumulated depreciation and
amortization 134,648 122,339
------- --------
238,784 207,515
------- --------
Other assets:
Investments in relate 17,645 16,173
Goodwill 1,715 1,715
Intangible assets, net 1,541 1,098
Other 3,219 3,264
Related party receivables - Wakefern 1,995 1,874
------- --------
26,115 24,124
------- --------
$ 346,149 $315,246
======= ========
(continued)
(1) Derived from the Audited Consolidated Financial Statements for the year
ended November 1, 2003.
See accompanying notes to consolidated condensed financial statements.
3
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(In thousands except share data)
July 31, November 1,
2004 2003
(Unaudited) (1)
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 8,165 $ 7,916
Current portion of long-term debt,
related party 978 920
Current portion of obligations under
capital leases 1,687 1,622
Current income taxes payable 578 1,415
Deferred income taxes 2,162 2,162
Accounts payable:
Related party-Wakefern 43,973 37,506
Others 12,055 14,622
Accrued expenses 15,011 13,485
-------- ---------
84,609 79,648
Long-term debt 56,853 55,335
Long-term debt, related party 3,680 3,055
Obligations under capital leases 142,902 122,159
Deferred income taxes 2,479 2,749
Other long-term liabilities 13,618 13,278
-------- ---------
219,532 196,576
-------- ---------
Commitments and Contingencies (Note 7)
Shareholders' equity:
Common stock, $1.00 par; authorized
2,500,000 shares; issued 1,621,767 shares;
outstanding 987,617 shares at July 31,
2004 and 986,867 shares at November 1, 2003 1,622 1,622
Capital in excess of par 4,168 4,168
Deferred compensation (673) (952)
Retained earnings 52,231 49,539
Accumulated other comprehensive income:
Minimum pension liability (3,164) (3,164)
-------- ---------
54,184 51,213
Less 634,150 shares July 31, 2004;
shares November 1, 2003, held in
treasury, at cost 12,176 12,191
-------- ---------
42,008 39,022
-------- ---------
$ 346,149 $ 315,246
========== ===========
(1) Derived from the Audited Consolidated Financial Statements for the year
ended November 1, 2003.
See accompanying notes to consolidated condensed financial statements.
4
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Operations - Unaudited
(In thousands - except share data)
13 Weeks Ended
-------------------------
July 31, August 2,
2004 2003
--------- ---------
Sales $ 302,799 $ 271,333
Cost of goods sold 222,531 201,311
----------- ---------
Gross profit 80,268 70,022
Selling, general and
administrative expenses 75,244 65,686
---------- ----------
Earnings from operations 5,024 4,336
---------- ----------
Other income (expense):
Interest expense (4,248) (3,415)
Interest income 24 39
---------- ----------
(4,224) (3,376)
---------- ----------
Earnings before income tax provision 800 960
Income tax provision (304) (384)
---------- ----------
Net income $ 496 $ 576
=========== ==========
Per share information:
Net income per common share:
Basic $ .50 $ .58
=========== ==========
Diluted $ .48 $ .57
=========== ==========
Weighted average shares outstanding:
Basic 987,175 986,867
=========== ===========
Diluted 1,038,041 1,010,586
=========== ===========
Dividends per common share -0- -0-
=========== ===========
See accompanying notes to consolidated condensed financial statements.
5
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Operations - Unaudited
(In thousands - except share data)
39 Weeks Ended
--------------------------
July 31, August 2,
2004 2003
----------- ---------
Sales $ 876,557 $ 783,002
Cost of goods sold 644,778 581,640
---------- ----------
Gross profit 231,779 201,362
Selling, general and
administrative expenses 215,638 190,977
----------- ----------
Earnings from operations 16,141 10,385
----------- ----------
Other income (expense):
Interest expense (11,886) (8,746)
Interest income 88 116
----------- ----------
(11,798) (8,630)
----------- ----------
Earnings before income tax provision 4,343 1,755
Income tax provision (1,651) (702)
----------- ----------
Net income $ 2,692 $ 1,053
=========== ==========
Per share information:
Net income per common share:
Basic $ 2.73 $ 1.07
=========== ==========
Diluted $ 2.62 $ 1.04
=========== ==========
Weighted average shares outstanding:
Basic 986,970 986,762
=========== ===========
Diluted 1,027,760 1,013,751
=========== ===========
Dividends per common share -0- -0-
=========== ===========
See accompanying notes to consolidated condensed financial statements.
6
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows - Unaudited
(In thousands)
39 Weeks Ended
-----------------------
July 31, August 2,
2004 2003
------- ---------
Cash flows from operating activities:
Net income $ 2,692 $ 1,053
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 15,146 12,613
Amortization, intangibles 93 157
Amortization, deferred financing costs 506 371
Amortization, deferred rent escalation (220) (223)
Provision to value inventory at LIFO 925 556
Deferred income taxes (270) 260
Amortization of deferred compensation 275 269
(Increase) decrease in
Merchandise inventories (5,671) (4,220)
Receivables and other current assets (689) (662)
Prepaid and refundable income taxes 3,331 (1,228)
Other assets (240) 204
Related party receivables-Wakefern 3,033 983
Increase (decrease) in
Accounts payable 3,900 1,439
Income taxes payable (837) 1,478
Other liabilities 2,090 999
-------- --------
24,064 14,049
-------- --------
Cash flows from investing activities:
Decrease in construction advance due from landlords 14,244 4,024
Increase in construction advance due from landlords (12,163) (2,991)
Cash paid for the purchase of property and equipment (23,996) (16,514)
Cash paid for construction in progress (24) (5,881)
Cash paid for purchase of store assets (1,000) -
-------- --------
(22,939) (21,362)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of debt 10,359 16,610
Principal payments under long-term debt (8,592) (5,615)
Principal payments under capital lease obligations (1,126) (1,234)
Principal payments under long-term debt, related party (789) (531)
Deferred financing and other costs (218) (188)
Proceeds from exercise of stock options 15 10
--------- --------
(351) 9,052
--------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS 774 1,739
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 5,252 4,280
--------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 6,026 $ 6,019
========= =========
See accompanying notes to consolidated condensed financial statements.
7
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)
----------------------------------------------------------------
Note 1 Basis of Presentation
-------------------------------
The unaudited Consolidated Condensed Financial Statements as of, or for the
period ended, July 31, 2004, have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and rule 10-01. The balance sheet at November 1, 2003
has been derived from the audited financial statements at that date. In the
opinion of the management of the Company, all adjustments (consisting only of
normal recurring accruals) which are considered necessary for a fair
presentation of the results of operations for the period have been made. Certain
financial information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. The reader is referred to the consolidated
financial statements and notes thereto included in the Company's annual report
on Form 10-K for the year ended November 1, 2003.
At July 31, 2004 and November 1, 2003, approximately 82% and 81%, respectively,
of merchandise inventories are valued by the Last-In-First-Out ("LIFO") method
of inventory valuation while the balance of inventories are valued by the
First-In-First-Out ("FIFO") method. If the FIFO method had been used for the
entire inventory, inventories would have been $3,660,000 and $2,735,000 higher
than reported at July 31, 2004 and November 1, 2003, respectively.
Certain reclassifications have been made to prior year financial statements in
order to conform to the current year presentation.
These results are not necessarily indicative of the results for the entire
fiscal year.
Note 2 Adoption of New Accounting Standards
-----------------------------------------------
In December 2003, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 132 (revised 2003), "Employers' Disclosures about Pensions and Other
Postretirement Benefits - an amendment of FASB Statements No. 87, 88, and 106"
("SFAS 132"). The revised Statement retains the disclosure requirements
contained in SFAS 132 before the amendment but requires additional disclosures
about the assets, obligations, cash flows, and net periodic benefit cost of
defined benefit pension plans and other defined benefit postretirement plans.
The annual disclosure requirements under this Statement are effective for the
Company's fiscal year ending October 30, 2004, and the quarterly disclosure
requirements are effective for the Company's interim periods beginning with the
second quarter ending May 1, 2004. The implementation of SFAS 132, as revised in
2003, did not have a material impact on the Company's consolidated financial
statements (See Note 6).
In May 2004, the staff of the FASB issued FASB Staff Position ("FSP") No. FAS
106-2, "Accounting and Disclosure Requirements Related to the Medicare
Prescription Drug, Improvement and Modernization Act of 2003," which superseded
FSP No. FAS 106-1. This FSP provides guidance on the accounting for the effects
of the Medicare Prescription Drug, Improvement and Modernization Act of 2003
(the "Act") for employers that sponsor postretirement health care plans that
provide prescription drug benefits. This FSP also requires those employers to
provide certain disclosures regarding the effect of the federal subsidy provided
by the Act (the "Subsidy"). The guidance in this FSP related to the accounting
for the Subsidy applies only to the sponsor of a single-employer defined benefit
postretirement health care plan for which (a) the employer has concluded that
prescription drug benefits available under the plan to some or all participants
for some or all future years are "actuarially equivalent" to Medicare Part D and
thus qualify for the Subsidy under the Act and (b) the expected Subsidy will
offset or reduce the employer's share of the cost of the underlying
postretirement prescription drug coverage on which the Subsidy is based. This
8
FSP also provides guidance for the disclosures about the effects of the Subsidy
for an employer that sponsors a postretirement health care benefit plan that
provides prescription drug coverage but for which the employer has not yet been
able to determine actuarial equivalency. This FSP is effective for the first
interim period beginning after June 15, 2004. We are currently investigating the
impact of FSP No. FAS 106-2's initial recognition, measurement and disclosure
provisions on our financial statements.
Note 3 Stock-Based Compensation
---------------------------------
The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," ("APB 25") and related
interpretations in accounting for its employee stock options. Under this method,
compensation cost is measured as the amount by which the market price of the
underlying stock exceeds the exercise price of the stock option at the date at
which both the number of options granted and the exercise price are known.
In accordance with SFAS 148, "Accounting for Stock-Based Compensation -
Transition and Disclosure," the effect on net income and earnings per share if
the Company had applied the fair value recognition provisions of SFAS 123,
"Accounting for Stock-Based Compensation," to stock-based employee compensation
is as follows:
Thirteen Weeks Thirty Nine Weeks
Ended Ended
-------------------------------------------
(In thousands, except (In thousands, except
per share amounts) per share amounts)
-------------------------------------------
July 31, August 2, July 31, August 2,
2004 2003 2004 2003
-------------------------------------------
Net income - as reported $ 496 $ 576 $ 2,692 $ 1,053
Add:
Stock-based employee compensation
expense, determined under the
intrinsic value method, included in
reported net income, net of related 54 56 162 168
tax effects
Deduct:
Adjustment to total stock-based
employee compensation expense
determined under the fair value
based method, net of related tax
effects (74) ( 76) (222) (228)
-------------------------------------------
Pro forma net income $ 476 $ 556 $ 2,632 $ 993
===========================================
Earnings per share:
Basic, as reported $ .50 $ .58 $ 2.73 $ 1.07
===========================================
Basic, pro forma $ .48 $ .56 $ 2.67 $ 1.01
===========================================
Diluted, as reported $ .48 $ .57 $ 2.62 $ 1.04
===========================================
Diluted, pro forma $ .46 $ .55 $ 2.56 $ .98
===========================================
9
Note 4 Goodwill and Other Intangible Assets
---------------------------------------------
The Company completed its annual impairment test prescribed by SFAS 142 and
concluded that no impairment of goodwill existed as of November 2, 2003. The
gross carrying amount and accumulated amortization of the Company's other
intangible assets as of July 31, 2004 and November 1, 2003 are as follows:
July 31, 2004 November 1, 2003
------------- ----------------
(In thousands)
Gross Gross
Carrying Accumulated Carrying Accumulated
Amount Amortization Amount Amortization
------- ------------ -------- ------------
Amortized Intangible Assets
Bargain Leases $4,454 $ 3,133 $3,918 $ 3,040
Unamortized Intangible Assets
Liquor Licenses 220 - 220 -
----------------------------------------------------
Total $4,674 $ 3,133 $4,138 $ 3,040
====================================================
Amortization expense recorded on the intangible assets for the thirteen weeks
ended July 31, 2004 and August 2, 2003 was $41,000 and $52,000, respectively and
was $93,000 and $157,000 for the thirty nine weeks ended July 31, 2004 and
August 2, 2003, respectively. The estimated amortization expense for the
Company's other intangible assets for the current and four succeeding fiscal
years is as follows:
Fiscal Year (In thousands)
----------- --------------
2004 $141
2005 189
2006 189
2007 189
2008 189
Thereafter 517
Note 5 Long-term Debt
On January 30, 2004 the Company completed the financing for the purchase of
$1,100,000 of equipment for the expanded and renovated store location in East
Brunswick, New Jersey. The note bears interest at 6.20% and is payable in
monthly installments over its five year term.
As of April 15, 2004 the Third Amended and Restated Revolving Credit and Term
Loan Agreement (the "Credit Agreement") was amended to allow the Company to
borrow under the revolving credit facility, on any Tuesday or Wednesday, up to
$5,000,000 in excess of the availability under the borrowing base limitation of
65% of eligible inventory as long as a like amount of cash and cash equivalents
are on hand at store level or in transit to the Company's banks. This amount is
reduced to $4,000,000 on June 16, 2004 and $3,000,000 on July 16, 2004 with the
provision expiring on August 16, 2004. Additionally, the amendment realigned the
annual limits on Adjusted Indebtedness, Indebtedness attributable to Capitalized
Lease Obligations, Adjusted Capex and Store Project Capex to more closely follow
the timing of the Company's new store and store remodeling program. The lending
group also consented to the purchase of a store location from Wakefern for
$1,000,000.
10
As of August 24, 2004 the Credit Agreement was further amended to allow the
Company to borrow under the revolving credit facility, on any Tuesday and on any
Wednesday, up to $3,000,000 in excess of the availability under the borrowing
base limitation of 65% of eligible inventory as long as a like amount of cash
and cash equivalents are on hand at store level or in transit to the Company's
banks. This provision will expire on January 15, 2005.
As of July 19, 2004 the Credit Agreement was amended to increase the limit on
the amount of Adjusted Capex for fiscal 2004 to $5,100,000 and decrease the
limit on the amount of Adjusted Capex for fiscal 2005 to $4,000,000. The
amendment realigned the annual limits on Adjusted Capex to more closely follow
the timing of the Company's store remodeling program.
Note 6 Employee Benefit Plans
------------------------------
The following tables summarize the components of the net periodic pension
expense for the Company sponsored defined benefit pension plans (both funded and
unfunded postretirement plans) for the 13 and 39 weeks ended July 31, 2004 and
August 2, 2003 (in thousands):
Components of Net Periodic Benefit Cost:
Pension Plans 13 Weeks Ended 39 Weeks Ended
July 31, 2004 August 2, 2003 July 31,2004 August 2,2003
------------- -------------- ------------ -------------
Service cost $ 85 $ 29 $ 254 $ 88
Interest cost 125 132 401 396
Expected return on plan
assets (121) (97) (356) (291)
Settlement (gain) loss
recognized 265 - 265 273
Amortization of prior
service cost 10 12 32 36
Recognized net actuarial loss 77 98 275 294
------ ----- ----- -----
Net periodic benefit cost $ 441 $ 174 $ 871 $ 796
====== ====== ====== =====
Other Postretirement Plan 13 Weeks Ended 39 Weeks Ended
July 31,2004 August 2,2003 July 31,2004 August 2,2003
------------ ------------- -------------------------
Service cost $ 43 $ 31 $128 $ 94
Interest cost 81 68 238 203
Amortization of prior service 22 6 62 17
cost
Recognized net actuarial loss 24 34 126 103
----- ---- ---- ----
Net periodic benefit cost $ 170 $ 139 $554 $ 417
====== ===== ==== =====
As previously disclosed in the Notes to the Consolidated Financial Statements in
the Company's 2003 Annual Report on Form 10-K filed with the SEC on January 29,
2004, the Company's current funding policy for its qualified pension plans is to
contribute annually the amount required by regulatory authorities to meet
minimum funding requirements. The Company presently anticipates contributing
approximately $1,047,000 to its pension plans during fiscal 2004. This amount is
based on preliminary information and the actual amount contributed will be
determined based on the final actuarial calculations, plan asset performance,
possible changes in law and other factors. The Company has contributed $649,000
in the first 39 weeks of fiscal 2004, and anticipates contributing approximately
$398,000 more for expected future benefit payments during the remainder of
fiscal 2004.
11
Since the Company's Other Post Retirement Plan is unfunded, the contributions to
this plan are equal to the benefit payments made during the year. There were no
benefit payments made during the thirty nine weeks ended July 31, 2004.
Note 7 Commitments and Contingencies
--------------------------------------
The Company previously reported, in Item 3. Legal Proceedings and Note 14 of
Notes to Consolidated Financial Statements in its Annual Report on Form 10-K for
its fiscal year ended November 1, 2003, on the settlement of a shareholders
derivative action commenced by Melvin Jules Bukiet et. al. (together the
"Plaintiffs") against the Company, as nominal defendant, and against all five
members of the Board of Directors, Joseph J. Saker, Richard J. Saker, Charles T.
Parton, Albert A. Zager and Robert H. Hutchins (together, the "Defendants"), in
their capacities as directors and/or officers of the Company. The Company has
reached a settlement, subject to the approval of The Court, with the Plaintiffs
with regard to their application for attorney's fees and with the directors and
officers insurance carrier with regard to their participation in the total costs
of the proceeding. As a result of accruing the cost of this settlement, net
income for the thirteen and thirty nine weeks ended July 31, 2004 was reduced by
$214,000.
Part I - Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
---------------------
Critical Accounting Policies and Estimates
------------------------------------------
Critical accounting policies are those accounting policies that management
believes are important to the portrayal of the Company's financial condition and
results and require management's most difficult, subjective or complex
judgments, often as a result of the need to make estimates about the effect of
matters that are inherently uncertain. The preparation of financial statements
in conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures 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. The Company's critical accounting policies relating
to the impairment of goodwill, patronage dividends earned as a stockholder of
Wakefern, pension plans and workers' compensation insurance are described in the
Company's Annual Report on Form 10-K for the year ended November 1, 2003. As of
July 31, 2004 there have been no material changes to any of the critical
accounting policies contained therein.
Financial Condition and Liquidity
---------------------------------
The Company is a party to a Third Amended and Restated Revolving Credit and Term
Loan Agreement (the "Credit Agreement") with four financial institutions. The
Credit Agreement is secured by substantially all of the Company's assets and
provided for a total commitment of up to $80,000,000, including a revolving
credit facility (the "Revolving Note") of up to $35,000,000, a term loan ("the
Term Loan") in the amount of $25,000,000 and a capital expenditures facility
(the "Capex Facility") of up to $20,000,000. As of July 31, 2004 the Company
owed $16,250,000 on the Term Loan and $20,000,000 under the Capex Facility.
As of April 15, 2004 the Credit Agreement was amended to allow the Company to
borrow under the revolving credit facility, on any Tuesday or Wednesday, up to
$5,000,000 in excess of the availability under the borrowing base limitation of
65% of eligible inventory as long as a like amount of cash and cash equivalents
are on hand at store level or in transit to the Company's banks. This amount is
reduced to $4,000,000 on June 16, 2004 and $3,000,000 on July 16, 2004 with the
provision expiring on August 16, 2004.
12
Additionally, the amendment realigned the annual limits on Adjusted
Indebtedness, Indebtedness attributable to Capitalized Lease Obligations,
Adjusted Capex and Store Project Capex to more closely follow the timing of the
Company's new store and store remodeling program. The lending group also
consented to the purchase of a store location from Wakefern for $1,000,000.
As of August 24, 2004 the Credit Agreement was further amended to allow the
Company to borrow under the revolving credit facility, on any Tuesday and on any
Wednesday, up to $3,000,000 in excess of the availability under the borrowing
base limitation of 65% of eligible inventory as long as a like amount of cash
and cash equivalents are on hand at store level or in transit to the Company's
banks. This provision will expire on January 15, 2005.
As of July 19, 2004 the Credit Agreement was amended to increase the limit on
the amount of Adjusted Capex for fiscal 2004 to $5,100,000 and decrease the
limit on the amount of Adjusted Capex for fiscal 2005 to $4,000,000. The
amendment realigned the annual limits on Adjusted Capex to more closely follow
the timing of the Company's store remodeling program.
The Company's compliance with the major financial covenants under the Credit
Agreement was as follows as of July 31, 2004:
Actual
(As defined in the
Financial Covenant Credit Agreement Credit Agreement)
--------------------------------------------------------------------------------
Adjusted EBITDA (1) Greater than $25,000,000 $ 29,151,000
--------------------------------------------------------------------------------
Leverage Ratio (1)(2) Less than 3.0 to 1.00 2.39 to 1.00
--------------------------------------------------------------------------------
Debt Service Coverage
Ratio (3) Greater than 1.10 to 1.00 2.18 to 1.00
--------------------------------------------------------------------------------
Adjusted Capex (4) Less than $5,100,000 (5) $ 1,837,000 (6)
--------------------------------------------------------------------------------
Store Project Capex Less than $24,500,000 (5) $ 22,647,000 (6)
--------------------------------------------------------------------------------
(1) Excludes obligations under capitalized leases, interest expense and
depreciation expense attributable to capitalized leases and changes in the
LIFO reserve.
(2) The Leverage Ratio is calculated by dividing the current and non-current
portions of Long-Term Debt and Long-Term Debt Related Party by Adjusted
EBITDA.
(3) The Debt Service Coverage Ratio is calculated by dividing Operating Cash
Flow by the sum of adjusted net interest expense, which excludes interest
on capitalized leases, the current provision for income taxes and
regularly scheduled principal payments, which exclude principal payments
on capitalized leases. Operating Cash Flow is calculated by subtracting
amounts expended for property and equipment which are not used for
projects in excess of $500,000 ($1,328,000 for the thirty nine weeks ended
July 31, 2004) from Adjusted EBITDA.
(4) Adjusted Capex is all capital expenditures other than Store Project Capex.
(5) Represents limitations on capital expenditures for fiscal 2004.
(6) Represents capital expenditures for fiscal 2004.
No cash dividends have been paid on the Common Stock since 1979, and the Company
has no present intentions or ability to pay any dividends in the near future on
its Common Stock. The Credit Agreement does not permit the payment of any cash
dividends on our Common Stock.
13
Working Capital
---------------
At July 31, 2004, the Company had a working capital deficiency of $3,359,000
compared to working capital of $3,959,000 at November 1, 2003 and a working
capital deficiency of $752,000 at August 2, 2003. Since the end of fiscal 2003,
working capital declined and a deficiency was created as a result of the
collection of related party receivables from Wakefern related to the fiscal 2003
patronage dividend and the collection of refundable income taxes and the
application of the funds collected. The funds collected were applied to the
revolving credit facility thereby decreasing the Revolving Note which is
classified as long-term borrowings. This resulted in a corresponding decrease in
working capital.
During fiscal year 2002, the Business Tax Reform Act was passed in the State of
New Jersey. This legislation is effective for tax years beginning on or after
January 1, 2002 (fiscal 2003). Corporate taxpayers are subject to an Alternative
Minimum Assessment ("AMA"), which is based upon either New Jersey Gross Receipts
or New Jersey Gross Profits, if the AMA exceeds the tax based on net income. We
have included in our current tax provision the effect of the AMA. The AMA
increased our cumulative State current tax liability, net of Federal tax
benefit, by $2,289,000. This liability was funded prior to May 1, 2004.
Additionally, in March 2002 and May 2003 The Job Creation and Worker Assistance
Act of 2002 and The Jobs and Growth Tax Relief Reconciliation Act of 2003 ("Tax
Acts") were passed by the United States Congress. The accumulated Federal tax
benefit for accelerated depreciation resulting from the Tax Acts is
approximately $3,560,000 for fiscal 2003 and the first nine months of fiscal
2004. A refund for fiscal 2003 of $3,266,000 resulting from this accelerated
depreciation was received prior to July 31, 2004. The balance of $294,000 is
reflected as a reduction to our current income taxes payable.
The Company normally requires small amounts of working capital since inventory
is generally sold at approximately the same time that payments to Wakefern and
other suppliers are due and most sales are for cash or cash equivalents.
Working capital ratios were as follows:
July 31, 2004 .96 to 1.0
November 1, 2003 1.05 to 1.0
August 2, 2003 .99 to 1.0
Cash flows (in millions) were as follows:
Thirty Nine Weeks Ended
--------------------------------
July 31, 2004 August 2, 2003
------------- --------------
Operating activities $ 24.1 $14.0
Investing activities (22.9) (21.4)
Financing activities (.4) 9.1
------- -------
Totals $ .8 $ 1.7
======= =======
The Company had $8,913,000 of available credit, at July 31, 2004, under its
revolving credit facility. The Company had no capital commitments for leasehold
improvements or equipment as of July 31, 2004. The amounts available under the
Credit Agreement will adequately meet our operating needs, scheduled capital
expenditures and debt service for fiscal 2004.
14
For the 39 weeks ended July 31, 2004, depreciation was $15,146,000 while capital
expenditures, excluding capitalized leases, totaled $24,484,000, compared to
$12,613,000 and $23,224,000, respectively, in the prior year period. The
increase in depreciation was the result of a full thirty nine weeks of
depreciation for the equipment and leasehold improvements for the four new
locations opened in fiscal 2003, the new bakery facility and the expansion and
remodeling of the East Brunswick store substantially completed in the quarter
ended January 31, 2004, the new locations opened in April 2004 and May 2004, the
location in Bordentown, New Jersey purchased in June 2004, as well as seven
additional capitalized real estate leases. Capital expenditures in the first
nine months of fiscal 2004, consisting of the acquisition of equipment and
leasehold improvements for the two locations opened in April and May 2004, the
East Brunswick store and the Bordentown location, increased slightly as compared
to capital expenditures in the first 39 weeks of fiscal 2003 when three new
locations opened and the bakery commissary and one additional store were under
construction.
The table below summarizes our contractual obligations at July 31, 2004, and the
effect such obligations are expected to have on liquidity and cash flow in
future periods.
--------------------------------------------------------------------------------
Payments Due By Period
--------------------------------------------------------------------------------
Less Than 2-3 4-5 After 5
--------------------------------------------------------------------------------
Contractual Obligations Total 1 Year Years Years Years
(Dollars In Thousands)
--------------------------------------------------------------------------------
Long-term debt $ 65,018 $ 8,165 $18,172 $ 38,681 $ -
--------------------------------------------------------------------------------
Related party debt 4,658 978 1,929 1,487 264
--------------------------------------------------------------------------------
Capital lease obligations 357,912 15,583 31,660 31,502 279,167
--------------------------------------------------------------------------------
Operating leases 64,364 10,352 16,675 12,460 24,877
--------------------------------------------------------------------------------
Purchase obligations -
leaseholds and equipment - - - - -
--------------------------------------------------------------------------------
Lease commitments - stores
under construction - - - - -
--------------------------------------------------------------------------------
Total $ 491,952 $35,078 $68,436 $ 84,130 $304,308
========= ======= ======= ======== ========
Results of Operations (13 weeks ended July 31, 2004 compared to
13 weeks ended August 2, 2003)
Sales:
------
Sales for the current period totaled $302.8 million as compared to $271.3
million in the prior year period. This represents an increase of 11.6 %. Sales
for the current quarter included the operations of the new locations opened in
May 2003, October 2003, April 2004 and May 2004 in North Brunswick, Hamilton,
Lawrenceville and Aberdeen, New Jersey, respectively, as well as the location in
Bordentown, New Jersey purchased from Wakefern in June 2004. The locations in
North Brunswick and Aberdeen replaced older, smaller stores.
Same store sales from the twenty one stores in operation in both periods
increased 1.0%. This increase in comparable store sales was partially offset by
decreased sales in certain of the Company's stores affected by competitive store
openings and the impact from the opening of several of our new locations.
15
Gross Profit:
-------------
Gross profit as a percent of sales increased to 26.5% of sales compared to 25.8%
in the prior year period. Patronage dividends, applied as a reduction of the
cost of merchandise sold, were $2.5 million in the current period compared to
$2.0 million in the prior year period. The improvement in gross profit was the
result of improved product mix, the contribution of the new locations opened in
fiscal 2003 and 2004, increased patronage dividends and a reduction in Wakefern
assessment as a percentage of sales. These increases were partially offset by
programs implemented in certain of the Company's stores to address competitive
store openings.
Operating Expenses:
-------------------
Selling, general and administrative expenses as a percent of sales were 24.8%
versus 24.2% in the prior year period. The increase in selling, general and
administrative expenses as a percent of sales was primarily due to increases in
certain expense categories as a percentage of sales. As a percentage of sales,
labor and related fringe benefits increased .09%, depreciation, including
depreciation on capitalized leases, increased .19%, occupancy increased .29%,
miscellaneous expense increased .11% and pre-opening expense increased .06%.
These increases were partially offset by decreases in administrative expense of
..07%. The increase in labor and related fringe benefits resulted from the
addition of personnel for new stores opened in the second and third quarters and
contractual increases in fringe benefits. The increase in occupancy was
primarily the result of the increased cost of utilities. The increase in
miscellaneous expense was primarily the result of the increased cost and use of
debit and credit card transactions. The decrease in administrative expense was
primarily the result of the decrease of administrative expense as a percentage
of sales which was partially offset by the cost of the settlement with the
plaintiffs and the directors and officers insurance carrier in the shareholders
derivative action. See Part II. Other Information, Item1. Legal Proceedings.
Pre-opening costs were for the new Lawrenceville, New Jersey store opened on
April 28, 2004 and the new Aberdeen, New Jersey store opened on May 19, 2004.
Interest Expense:
-----------------
Interest expense increased to $4,248,000 from $3,415,000, while interest income
was $24,000 compared to $39,000 for the prior period. The increase in interest
expense for the current year period was due to an increase in average
outstanding debt, including increased capitalized lease obligations, and an
increase in the average interest rate paid on debt.
Income Taxes:
-------------
An income tax rate of 38% has been used in the current period as compared to 40%
in the prior year period. The tax rate used is based on the expected effective
tax rates.
Net Income:
-----------
Net income was $496,000 in the current year period compared to $576,000 in the
prior year period. Earnings before interest, taxes, depreciation and
amortization ("EBITDA") for the current period were $10,756,000 as compared to
$8,947,000 in the prior year period. Net income per common share on a diluted
basis was $.48 in the current period compared to $.57 in the prior year period.
Per share calculations are based on 1,038,041 shares outstanding in the current
year period and 1,010,586 shares outstanding in the prior year period.
16
EBITDA is presented because management believes that EBITDA is a useful
supplement to net income and other measurements under accounting principles
generally accepted in the United States since it is a meaningful measure of a
company's performance and ability to meet its future debt service requirements,
fund capital expenditures and meet working capital requirements. EBITDA is not a
measure of financial performance under accounting principles generally accepted
in the United States and should not be considered as an alternative to (i) net
income (or any other measure of performance under generally accepted accounting
principles) as a measure of performance or (ii) cash flows from operating,
investing or financing activities as an indicator of cash flows or as a measure
of liquidity. The following table reconciles reported net income to EBITDA:
Thirteen Weeks Ended
---------------------------------
July 31, 2004 August 2, 2003
------------- ---------------
Net income $ 496,000 $ 576,000
Add:
Interest expense, net 4,224,000 3,376,000
Income tax provision 304,000 384,000
Depreciation 5,580,000 4,492,000
Amortization 152,000 119,000
----------- -----------
EBITDA $ 10,756,000 $ 8,947,000
============ ===========
Results of Operations (39 weeks ended July 31, 2004 compared to
39 weeks ended August 2, 2003)
Sales:
------
Sales for the current thirty nine week period totaled $876.6 million as compared
to $783.0 million in the prior year period. This represents an increase of
11.9%. Sales for the current thirty nine week period included the operations of
six new locations opened in December 2002, January 2003, May 2003, October 2003,
April 2004 and May 2004 in Woodbridge, Ewing, North Brunswick, Hamilton,
Lawrenceville and Aberdeen, New Jersey, respectfully, as well as the location in
Bordentown, New Jersey purchased in June 2004 from Wakefern. The locations in
Woodbridge, North Brunswick and Aberdeen replaced older, smaller stores.
Same store sales from the nineteen stores in operation in both periods increased
2.5%. This increase in comparable store sales was partially offset by decreased
sales in certain of the Company's stores affected by competitive store openings
and the impact from the opening of several of our new locations.
Gross Profit:
-------------
Gross profit as a percent of sales increased to 26.4% of sales compared to 25.7%
in the prior year period. Patronage dividends, applied as a reduction of the
cost of merchandise sold, were $7.2 million in the current period compared to
$5.6 million in the prior year period. The improvement in gross profit was the
result of improved product mix, the contribution of the new locations opened in
fiscal 2003 and fiscal 2004, increased patronage dividends and a reduction in
Wakefern assessment as a percentage of sales. This increase was offset in part
by the costs associated with programs implemented in certain of the Company's
stores to address competitive store openings.
17
Operating Expenses:
-------------------
Selling, general and administrative expenses as a percent of sales increased to
24.6% in the current period compared to 24.4% in the prior year period. The
increase in selling, general and administrative expenses as a percent of sales
was primarily due to increases in certain expense categories as a percentage of
sales. As a percentage of sales, selling expense increased .05%, depreciation,
including depreciation on capitalized leases, increased .11% and occupancy
expense increased .10%. These increases were partially offset by decreases in
administrative expense of .11%. The increase in occupancy was primarily the
result of the increased cost of utilities. The decrease in administrative
expense was the result of the decrease of administrative costs as a percentage
of sales and an increase in the reserve for closed store expense in the prior
year period. This decrease was partially offset by the cost of the settlement
with the plaintiffs and the directors and officers insurance carrier in the
shareholders derivative action. See Part II. Other Information, Item1. Legal
Proceedings.
Interest Expense:
-----------------
Interest expense increased to $11,886,000 from $8,746,000, while interest income
was $88,000 compared to $116,000 for the prior year period. The increase in
interest expense for the current year period was due to an increase in average
outstanding debt, including increased capitalized lease obligations, and an
increase in the average interest rate paid on debt.
Income Taxes:
-------------
An income tax rate of 38% has been used in the current period as compared to 40%
in the prior year period. The tax rate used is based on the expected effective
tax rates.
Net Income:
-----------
Net income was $2,692,000 in the current year period compared to $1,053,000 in
the prior year period. Earnings before interest, taxes, depreciation and
amortization ("EBITDA") for the current period were $31,666,000 as compared to
$23,303,000 in the prior year period. Net income per common share on a diluted
basis was $2.62 in the current period compared to $1.04 in the prior year
period. Per share calculations are based on 1,027,760 shares outstanding in the
current period and 1,013,751 shares outstanding in the prior year period.
EBITDA is presented because management believes that EBITDA is a useful
supplement to net income and other measurements under accounting principles
generally accepted in the United States since it is a meaningful measure of a
company's performance and ability to meet its future debt service requirements,
fund capital expenditures and meet working capital requirements. EBITDA is not a
measure of financial performance under accounting principles generally accepted
in the United States and should not be considered as an alternative to (i) net
income (or any other measure of performance under generally accepted accounting
principles) as a measure of performance or (ii) cash flows from operating,
investing or financing activities as an indicator of cash flows or as a measure
of liquidity. The following table reconciles reported net income to EBITDA:
18
Thirty Nine Weeks Ended
------------------------------
July 31, 2004 August 2, 2003
------------- --------------
Net income $ 2,692,000 $ 1,053,000
Add:
Interest expense, net 11,798,000 8,630,000
Income tax provision 1,651,000 702,000
Depreciation 15,146,000 12,613,000
Amortization 379,000 305,000
---------- ----------
EBITDA $31,666,000 $23,303,000
=========== ===========
Item 3. Quantitative and Qualitative Disclosures About Market Risk
--------------------------------------------------------------------
Except for indebtedness under the Credit Agreement which is variable rate
financing, the balance of our indebtedness is fixed rate financing. We believe
that our exposure to market risk relating to interest rate risk is not material.
The Company 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 4. Controls and Procedures
----------------------------------
As required by Rule 13a-15 under the Exchange Act, as of the end of the period
covered by this quarterly report, the Company carried out an evaluation of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures. This evaluation was carried out under the supervision and with
the participation of the Company's management, including the Company's President
and Chief Executive Officer along with the Company's Chief Financial Officer,
who concluded that the Company's disclosure controls and procedures are
effective. The Company's Vice President - Internal Audit and Principal
Accounting Officer also participated in this evaluation. During the Company's
last fiscal quarter, there has been no significant change in the Company's
internal control over financial reporting that has materially affected, or is
reasonably likely to materially affect, the Company's internal control over
financial reporting.
Disclosure controls and procedures are controls and other procedures that are
designed to ensure that information required to be disclosed in Company reports
filed or submitted under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange
Commission's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed in Company reports filed under the Exchange Act is
accumulated and communicated to management, including the Company's Chief
Executive Officer and Chief Financial Officer as appropriate, to allow timely
decisions regarding required disclosure.
PART II OTHER INFORMATION
--------------------------
Item 1. Legal Proceedings
----------------------------
The Company previously reported, in Item 3. Legal Proceedings and Note
14 of Notes to Consolidated Financial Statements in its Annual Report
on Form 10-K for its fiscal year ended November 1, 2003, on the
settlement of a shareholders derivative action commenced by Melvin
Jules Bukiet et. al. (together the "Plaintiffs") against the Company,
as nominal defendant, and against all five members of the Board of
Directors, Joseph J. Saker, Richard J.
19
Saker, Charles T. Parton, Albert A. Zager and Robert H. Hutchins
(together, the "Defendants"), in their capacities as directors and/or
officers of the Company. The Company has reached a settlement, subject
to the approval of The Court, with the Plaintiffs with regard to their
application for attorney's fees and with the directors and officers
insurance carrier with regard to their participation in the total costs
of the proceeding. As a result of accruing the cost of this settlement,
net income for the thirteen and thirty nine weeks ended July 31, 2004
was reduced by $214,000.
Item 6. Exhibits
------------------
Exhibit 31.1 Section 302 Certification of Chief Executive Officer
Exhibit 31.2 Section 302 Certification of Chief Financial Officer
Exhibit 32.1 Certification of Chief Executive Officer pursuant to
18 U.S.C. Section 1350
Exhibit 32.2 Certification of Chief Financial Officer pursuant to
18 U.S.C. Section 1350
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FOODARAMA SUPERMARKETS, INC.
(Registrant)
Date: September 14, 2004 /S/ MICHAEL SHAPIRO
---------------------------
(Signature)
Michael Shapiro
Senior Vice President
Chief Financial Officer
Date: September 14, 2004 /S/ THOMAS H. FLYNN
--------------------------
(Signature)
Thomas H. Flynn
Director of Accounting
Principal Accounting Officer
21
EXHIBIT 31.1
CERTIFICATION
I, Richard J. Saker, certify that:
1. I have reviewed this report on Form 10-Q of Foodarama Supermarkets, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.
Date: September 10, 2004 /s/ RICHARD J. SAKER
-------------------------------
(Signature) Richard J. Saker
Chief Executive Officer
22
EXHIBIT 31.2
CERTIFICATION
I, Michael Shapiro, certify that:
1. I have reviewed this report on Form 10-Q of Foodarama Supermarkets, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.
Date: September 10, 2004 /s/ MICHAEL SHAPIRO
------------------------------
(Signature)
Michael Shapiro
Chief Financial Officer
23
EXHIBIT 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Foodarama Supermarkets, Inc.
(the "Company") on Form 10-Q for the period ended July 31, 2004 (the "Report"),
I, Richard J. Saker, Chief Executive Officer of the Company, do hereby certify,
pursuant to 18 U.S.C.ss. 1350, as adopted pursuant to ss. 906 of the
Sarbanes-Oxley Act of 2002, that to my knowledge:
(1) the Report fully complies with the requirements of ss. 13(a) or 15(d) of
the Securities Exchange Act of 1934, 15 U.S.C. ss. 78m(a) or 78o(d), and,
(2) the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
Date: September 10, 2004 /s/ RICHARD J. SAKER
------------------------------
(Signature)
Richard J. Saker
Chief Executive Officer
24
EXHIBIT 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Foodarama Supermarkets, Inc.
(the "Company") on Form 10-Q for the period ended July 31, 2004 (the "Report"),
I, Michael Shapiro, Chief Financial Officer of the Company, do hereby certify,
pursuant to 18 U.S.C.ss. 1350, as adopted pursuant to ss. 906 of the
Sarbanes-Oxley Act of 2002, that to my knowledge:
(1) the Report fully complies with the requirements of ss. 13(a) or 15(d) of
the Securities Exchange Act of 1934, 15 U.S.C. ss. 78m(a) or 78o(d), and,
(2) the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
Date: September 10, 2004 /s/ MICHAEL SHAPIRO
------------------------------
(Signature)
Michael Shapiro
Chief Financial Officer
25