UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: July 30, 2005
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to _______________
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, New Jersey 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 9, 2005
------ -----------------
Common Stock 988,117 shares
$1 par value
FOODARAMA SUPERMARKETS, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Consolidated Condensed Balance
Sheets July 30, 2005 and October 30, 2004
Unaudited Consolidated Condensed Statements
of Operations for the thirteen weeks ended
July 30, 2005 and July 31, 2004
Unaudited Consolidated Condensed Statements
of Operations for the thirty nine weeks
ended July 30, 2005 and July 31, 2004
Unaudited Consolidated Condensed Statements
of Cash Flows for the thirty nine weeks
ended July 30, 2005 and July 31, 2004
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 discount 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
-----------------------------
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(In thousands)
July 30, October 30,
2005 2004
(Unaudited) (1)
----------- ------
ASSETS
Current assets:
Cash and cash equivalents $ 5,322 $ 6,001
Merchandise inventories 53,133 57,123
Receivables and other current assets 7,239 8,456
Prepaid and refundable income taxes 845 170
Related party receivables - Wakefern 10,314 14,799
------- ------
76,853 86,549
------- ------
Property and equipment:
Land 308 308
Buildings and improvements 1,220 1,220
Leasehold improvements 61,323 60,488
Equipment 163,718 161,554
Property under capital leases 152,354 152,354
Construction in progress 90 60
------- -------
379,013 375,984
Less accumulated depreciation and
amortization 156,625 140,138
------- -------
222,388 235,846
------- -------
Other assets:
Investments in related parties 17,638 17,655
Goodwill 1,715 1,715
Intangible assets, net 1,351 1,493
Other 3,185 3,339
Related party receivables - Wakefern 2,149 2,039
------- -------
26,038 26,241
------- -------
$325,279 $348,636
======== ========
(continued)
(1) Derived from the Audited Consolidated Financial Statements for the year
ended October 30, 2004.
See accompanying notes to the consolidated condensed financial statements.
3
FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(In thousands except share data)
July 30, October 30,
2005 2004
(Unaudited) (1)
----------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 8,991 $ 8,415
Current portion of long-term debt, related party 925 867
Current portion of obligations under capital leases 1,917 1,727
Current income taxes payable 203 408
Deferred income taxes 1,579 1,579
Accounts payable:
Related party-Wakefern 40,963 39,639
Others 8,588 14,384
Accrued expenses 14,085 15,236
------- -------
77,251 82,255
------- -------
Long-term debt 46,609 63,051
Long-term debt, related party 2,888 3,590
Obligations under capital leases 141,050 142,504
Deferred income taxes 1,032 2,292
Other long-term liabilities 14,092 13,711
------- -------
205,671 225,148
------- -------
Commitments and Contingencies
Shareholders' equity:
Common stock, $1.00 par; authorized 2,500,000 shares;
issued 1,621,767 shares; outstanding 988,117 shares
July 30, 2005; 987,617 shares October 30, 2004 1,622 1,622
Capital in excess of par 4,168 4,168
Deferred compensation (326) (580)
Retained earnings 52,199 51,339
Accumulated other comprehensive income:
Minimum pension liability (3,140) (3,140)
-------- --------
54,523 53,409
Less 633,650 shares July 30, 2005; 634,150 shares
October 30, 2004, held in treasury, at cost 12,166 12,176
-------- --------
42,357 41,233
-------- --------
$ 325,279 $ 348,636
========== =========
(1) Derived from the Audited Consolidated Financial Statements for the year
ended October 30, 2004.
See accompanying notes to the 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 30, July 31,
2005 2004
---------- --------
Sales $ 304,462 $ 302,799
Cost of goods sold 223,867 222,531
----------- ----------
Gross profit 80,595 80,268
Selling, general and administrative expenses 75,156 75,244
-------- -------
Earnings from operations 5,439 5,024
-------- -------
Other income (expense):
Interest expense (4,573) (4,248)
Interest income 26 24
--------- -------
(4,547) (4,224)
--------- -------
Earnings before income tax provision 892 800
Income tax provision (339) (304)
--------- -------
Net income $ 553 $ 496
========= =======
Per share information:
Net income per common share:
Basic $ .56 $ .50
========== =======
Diluted $ .54 $ .48
========== =======
Weighted average shares outstanding:
Basic 988,117 987,175
========== =======
Diluted 1,027,862 1,038,041
========== =========
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 30, July 31,
2005 2004
--------- --------
Sales $ 914,086 $ 875,335
Cost of goods sold 676,296 644,778
---------- ----------
Gross profit 237,790 230,557
Selling, general and administrative expenses 222,625 214,416
---------- --------
Earnings from operations 15,165 16,141
---------- --------
Other income (expense):
Interest expense (13,870) (11,886)
Interest income 93 88
---------- --------
(13,777) (11,798)
---------- --------
Earnings before income tax provision 1,388 4,343
Income tax provision (528) (1,651)
---------- --------
Net income $ 860 $ 2,692
========= =========
Per share information:
Net income per common share:
Basic $ .87 $ 2.73
========= =========
Diluted $ .83 $ 2.62
========= =========
Weighted average shares outstanding:
Basic 987,799 986,970
========= =========
Diluted 1,031,904 1,027,760
========== ==========
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 30, July 31,
2005 2004
-------- --------
Cash flows from operating activities:
Net income $ 860 $ 2,692
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 16,487 15,146
Non cash impairment charge 163 -
Amortization, intangibles 142 93
Amortization, deferred financing costs 512 506
Amortization, deferred rent escalation (241) (220)
Provision to value inventory at LIFO 563 925
Deferred income taxes (1,260) (270)
Amortization of deferred compensation 253 275
(Increase) decrease in
Merchandise inventories 3,427 (5,671)
Receivables and other current assets 420 (689)
Prepaid and refundable income taxes (675) 3,331
Other assets (326) (240)
Related party receivables-Wakefern 4,375 3,033
Increase (decrease) in
Accounts payable (4,472) 3,900
Income taxes payable (205) (837)
Other liabilities (528) 2,090
--------- --------
19,495 24,064
--------- --------
Cash flows from investing activities:
Decrease in construction advance due from landlords 797 14,244
Increase in construction advance due from landlords - (12,163)
Cash paid for the purchase of property and equipment (3,162) (23,996)
Cash paid for construction in progress (30) (24)
Cash paid for purchase of store assets - (1,000)
--------- --------
(2,395) (22,939)
--------- --------
Cash flows from financing activities:
Proceeds from issuance of debt - 10,359
Principal payments under long-term debt (15,866) (8,592)
Principal payments under capital lease obligations (1,264) (1,126)
Principal payments under long-term debt, related party (627) (789)
Deferred financing and other costs (32) (218)
Proceeds from exercise of stock options 10 15
--------- ---------
(17,779) (351)
--------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS (679) 774
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 6,001 5,252
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 5,322 $ 6,026
========= =========
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 ending July 30, 2005, have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and rule 10-01. The balance sheet at October 30, 2004
has been taken from the audited financial statements at that date. In the
opinion of the management of the Company, all adjustments (consisting only of
normal recurring accruals) which are considered necessary for a fair
presentation of the results of operations for the period have been made. Certain
financial information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. The reader is referred to the consolidated
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K and Form 10-K/A for the year ended October 30, 2004.
At both July 30, 2005 and October 30, 2004, approximately 82% of merchandise
inventories were valued by the Last-In-First-Out ("LIFO") method of inventory
valuation while the balance of inventories is valued by the First-In-First-Out
("FIFO") method. If the FIFO method had been used for the entire inventory,
inventories would have been $4,303,000 and $3,740,000 higher than reported at
July 30, 2005 and October 30, 2004, 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 November 2004, the Financial Accounting Standards Board (the "FASB") issued
SFAS No. 151, "Inventory Costs", an amendment of ARB No. 43, Chapter 4. SFAS No.
151 amends the guidance in ARB No. 43, Chapter 4, "Inventory Pricing," to
clarify the accounting for abnormal amounts of idle facility expense, freight,
handling costs, and spoilage. This statement requires that those items be
recognized as current period charges regardless of whether they meet the
criterion of "so abnormal" which was the criterion specified in ARB No. 43. This
pronouncement is effective for fiscal years beginning after June 15, 2005. The
Company does not expect an impact from adopting this new standard.
In December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share-Based
Payment", which is a revision of SFAS No. 123, "Accounting for Stock-Based
Compensation." SFAS No. 123(R) supersedes APB Opinion No. 25, "Accounting for
Stock Issued to Employees" and amends SFAS No. 95, "Statement of Cash Flows."
Generally, the approach in SFAS No. 123(R) is similar to the approach described
in SFAS No. 123. However, SFAS No. 123(R) requires all share-based payments to
employees, including grants of employee stock options, to be recognized in the
income statement based on their fair values. Pro forma disclosure is no longer
an alternative. In April 2005, the Securities and Exchange Commission adopted a
final rule amending Rule 4-01(a) of Regulation S-X amending the compliance date
for FASB Statement No. 123(R) to be effective starting with the first interim or
annual reporting period of the first fiscal year beginning on or after June 15,
2005. The provisions of FASB Statement No. 123(R) will be effective for the
Company's first quarter of fiscal year 2006 beginning October 30, 2005. The
Company has not yet assessed the impact of adopting this new standard.
In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary
Assets, an amendment of APB Opinion No. 29." SFAS No. 153 specifies the criteria
8
required to record a nonmonetary asset exchange using carryover basis. SFAS No.
153 is effective for nonmonetary asset exchanges occurring after July 1, 2005.
The Company adopted this statement in the third quarter of fiscal 2005 and the
adoption of this standard did not have any impact on our financial statements.
In December 2004, the FASB issued FSP FAS 109-1, Application of FASB Statement
No. 109, "Accounting for Income Taxes," to the "Tax Deduction on Qualified
Production Activities Provided by the American Jobs Creation Act of 2004" to
provide accounting guidance on the appropriate treatment of tax benefits
generated by the enactment of the Act. The FSP requires that the manufacturer's
deduction be treated as a special deduction in accordance with SFAS 109 and not
as a tax rate reduction. The Company is awaiting final tax regulations from the
Internal Revenue Service before completing its assessment of the impact of
adopting FSP FAS 109-1 on its financial statements.
In March 2005, the FASB issued FASB Interpretation (FIN) No. 47, "Accounting for
Conditional Asset Retirement Obligations - an Interpretation of Financial
Accounting Standard (FAS) No. 143, `Accounting for Asset Retirement
Obligations.'" FIN No. 47 clarifies the requirements to record liabilities
stemming from a legal obligation to clean up and retire fixed assets, when
retirement depends on a future event. FASB believes this interpretation will
result in more consistent recognition of liabilities relating to asset
retirement obligations, more information about expected future cash outflows
associated with the obligations and investments in long-lived assets because
additional asset retirement costs will be recognized as part of the carrying
amounts of the assets. FIN No. 47 will be effective no later than the end of
fiscal years ending after December 15, 2005. The adoption of this standard does
not have an impact on the Company's financial statements.
In March 2005, the FASB issued FSP No. 46(R)-5, "Implicit Variable Interests
under FASB Interpretation No.46, or FIN 46 (Revised December 2003),
Consolidation of Variable Interest Entities," or FSP FIN 46(R)-5. FSP FIN
46(R)-5 provides guidance for a reporting enterprise on whether we hold an
implicit variable interest in Variable Interest Entities, or VIEs, or potential
VIEs when specific conditions exist. This FSP is effective in the first period
beginning after March 3, 2005 in accordance with the transition provisions of
FIN 46 (Revised 2003), "Consolidation of Variable Interest Entities -- an
Interpretation of Accounting Research Bulletin No. 51," or FIN 46(R). The
adoption of FSP FIN 46(R)-5 did not have any impact on our results of operations
and financial condition.
In May 2005, the FASB issued FASB Statement No. 154 "Accounting Changes and
Error Corrections a replacement of APB Opinion No. 20 and FASB Statement No. 3."
This Statement applies to all voluntary changes in accounting principle. It also
applies to changes required by an accounting pronouncement in the unusual
instance that the pronouncement does not include specific transition provisions.
APB Opinion No. 20 previously required that most voluntary changes in accounting
principle be recognized by including in net income of the period of the change
the cumulative effect of changing to the new accounting principle. This
Statement requires retrospective application to prior periods' financial
statements of changes in accounting principle, unless it is impracticable to
determine either the period-specific effects or the cumulative effect of the
change. FASB Statement No.154 will be effective for accounting changes and
corrections of errors made in fiscal years beginning after December 15, 2005.
In June 2005, the FASB issued Emerging Issues Task Force (EITF) Issue No. 05-06,
"Determining the Amortization Period for Leasehold Improvements." EITF Issue No.
05-06 indicates that for operating leases, leasehold improvements that are
placed in service significantly after and not contemplated at or near the
beginning of the lease term should be amortized over the shorter of the useful
life of the assets or a term that includes required lease periods and renewals
that are deemed to be reasonably assured at the date the leasehold improvements
are purchased. Leasehold improvements acquired in a business combination should
be amortized over the shorter of the useful life of the assets or a term that
includes required lease periods and renewals that are deemed to be reasonably
9
assured at the date of acquisition. EITF Issue No. 05-06 is effective for
leasehold improvements that are purchased or acquired in reporting periods
beginning after June 28, 2005. Earlier application is permitted in periods for
which financial statements have not been issued. The adoption of this Issue is
not expected to have an impact on the Company's 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 30, July 31, July 30, July 31,
2005 2004 2005 2004
---------------------------------------------
Net income - as reported $ 553 $ 496 $ 860 $ 2,692
Add:
Stock-based employee compensation
expense, determined under the
intrinsic value method, included in
reported net income, net of related
tax effects 52 54 156 162
Deduct:
Adjustment to total stock-based
employee compensation expense
determined under the fair value
based method, net of related tax
effects (71) (74) (213) (222)
------------------------------------------
Pro forma net income $ 534 $ 476 $ 803 $ 2,632
==========================================
Earnings per share:
Basic, as reported $ .56 $ .50 $ .87 $ 2.73
==========================================
Basic, pro forma $ .54 $ .48 $ .81 $ 2.67
==========================================
Diluted, as reported $ .54 $ .48 $ .83 $ 2.62
==========================================
Diluted, pro forma $ .52 $ .46 $ .78 $ 2.56
==========================================
10
Note 4 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 30, 2005 and
July 31, 2004 (in thousands):
Components of Net Periodic Benefit Cost:
Pension Plans 13 Weeks Ended 39 Weeks Ended
------------- -------------- --------------
July 30, July 31, July 30, July 31,
2005 2004 2005 2004
---- ---- ---- ----
Service cost $ 123 $ 85 $ 369 $ 254
Interest cost 132 125 396 401
Expected return on plan assets (134) (121) (402) (356)
Settlement (gain) loss recognized - 265 - 265
Amortization of prior service cost 11 10 33 32
Recognized net actuarial loss 95 77 285 275
------ ------ ------ ------
Net periodic benefit cost $ 227 $ 441 $ 681 $ 871
====== ====== ====== ======
Other Postretirement Plan 13 Weeks Ended 39 Weeks Ended
------------------------- -------------- --------------
July 30, July 31, July 30, July 31,
2005 2004 2005 2004
---- ---- ---- ----
Service cost $ 46 $ 43 $ 138 $ 46
Interest cost 83 81 249 238
Amortization of prior service cost 21 22 63 62
Recognized net actuarial loss 46 24 138 126
----- ---- ----- ----
Net periodic benefit $ 196 $ 170 $ 588 $ 554
===== ==== ===== =====
As previously disclosed in the Notes to the Consolidated Financial Statements in
the Company's 2004 Annual Report on Form 10-K/A filed with the SEC on February
28, 2005, 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 $1,246,000 to its pension plans during fiscal 2005. 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 $862,000
during the thirty nine weeks ended July 30, 2005, and anticipates contributing
approximately $384,000 more for expected future benefit payments during the
remainder of fiscal 2005.
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 39 weeks ended July 30, 2005.
Note 5 Long-term Debt
-----------------------
As of August 22, 2005, in order to better accommodate the Company's cash
requirements, the Credit Agreement was amended to allow the Company to borrow
under the revolving credit facility up to $7,000,000 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 lenders. The overall borrowing limit under the
revolving credit facility remains at $35,000,000.
11
Note 6 Long-Lived Assets
------------------------
In accordance with SFAS No. 144, the Company recorded a non-cash pre-tax charge
for the impairment of long-lived assets of $163,000 in the third quarter of
2005. These charges are included as a component of selling, general and
administrative expenses. This loss resulted from the difference between the book
value and expected sale price of assets at a location having a lease which
expires in November 2005.
PART I - Item 2 Management's Discussion and Analysis of Financial Condition and
--------------------------------------------------------------------------------
Results of Operations
---------------------
OVERVIEW
--------
We operate a chain of 26 ShopRite supermarkets in Central New Jersey. We believe
it is important to maintain a modern, one stop competitive shopping environment
for our customers and therefore have invested heavily in new, expanded and
remodeled facilities. We have incorporated upscale service departments in our
World Class supermarket concept. We are the largest member of Wakefern, the
largest retailer owned food cooperative warehouse in the United States. Since we
purchase from Wakefern most of the product we sell, participate in advertising,
supply, insurance and technology programs with Wakefern, and receive 13.5% of
Wakefern's patronage dividend, our success is integrally tied to the success of
Wakefern.
We operate in a highly competitive geographic area. Certain of our competitors
are non-union and therefore may have lower labor and related fringe benefit
costs. In the past five years a non-union competitor, Wegmans, has opened five
stores in our trading area. We expect Wegmans to continue to open additional
locations in our marketing area in the future. Additionally, another non-union
operator, Wal-Mart, is expected to open Super Centers, which include extensive
food operations, in our trading area.
Certain categories of selling, general and administrative expenses have
increased disproportionately in comparison to our sales growth and to inflation
in the last three years. We have experienced substantial increases in employee
health and pension costs under union contracts and for non-union associates.
Additionally, the cost of utilities to operate our stores increased dramatically
in fiscal 2004. This trend has continued in fiscal 2005.
We look at a variety of indicators to evaluate our performance, such as same
store sales; sales per store; sales per selling square foot; percentage of total
sales by department; shrink by department and store; departmental gross profit
margins; sales per man hour; hourly labor rates; and percent of overtime.
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, inventory valuation, patronage dividends earned as a stockholder of
12
Wakefern, pension plans and workers' compensation insurance are described in the
Company's Annual Report on Form 10-K for the year ended October 30, 2004. As of
July 30, 2005 there have been no material changes to any of the critical
accounting policies contained therein. In addition, the Company believes its
policy with regard to long-lived assets is a critical accounting policy. The
Company reviews the carrying values of its long-lived assets, such as property,
equipment and fixtures and intangibles subject to amortization, for possible
impairment whenever events or changes in circumstances indicate that the
carrying amount of assets may not be recoverable. Such review analyzes the
undiscounted estimated future cash flows from such assets to determine if the
carrying value of such assets are recoverable from their respective cash flows.
If an impairment is indicated, it is measured by comparing the discounted cash
flows for the long-lived asset held for use to its carrying value.
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 serves as our primary funding source for working capital and
capital expenditures. 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 30, 2005, the Company owed $11,250,000 on the Term Loan and $18,571,000
under the Capex Facility.
As of August 22, 2005, in order to better accommodate the Company's cash
requirements, the Credit Agreement was amended to allow the Company to borrow
under the revolving credit facility up to $7,000,000 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 lenders. The overall borrowing limit under the
revolving credit facility remains at $35,000,000.
The Company's compliance with the major financial covenants under the Credit
Agreement was as follows as of July 30, 2005:
Actual
(As defined in the
Financial Covenant Credit Agreement Credit Agreement)
------------------ ---------------- -----------------
Adjusted EBITDA (1) Greater than $26,000,000 $ 26,648,000
--------------------------------------------------------------------------------
Leverage Ratio (2) Less than 3.0 to 1.00 2.23 to 1.00
--------------------------------------------------------------------------------
Debt Service Coverage
Ratio (3) Greater than 1.10 to 1.00 1.61 to 1.00
--------------------------------------------------------------------------------
Adjusted Capex (4) Less than $4,117,000 (5) (7) $ 3,118,000 (6)
--------------------------------------------------------------------------------
Store Project Capex Less than $27,269,000 (5) (7) $ 74,000 (6)
--------------------------------------------------------------------------------
(1) EBITDA adjusted for non-cash write downs and changes in the LIFO reserve,
less minimum lease payments due under capitalized leases.
(2) The Leverage Ratio is calculated by dividing the current and non-current
portions of Long-Term Debt, excluding obligations under capitalized
leases, 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
13
regularly scheduled principal payments, which excludes 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 ($2,121,000 for the thirty nine weeks ended
July 30, 2005) from Adjusted EBITDA.
(4) Adjusted Capex is all capital expenditures other than New/Replacement
Store Project Capex.
(5) Represents limitations on capital expenditures for fiscal 2005. For fiscal
2005 the Company has budgeted $8,117,000 for capital expenditures. Any
unused amounts available under the Credit Agreement will be carried
forward to future periods.
(6) Represents capital expenditures for fiscal 2005.
(7) Includes amounts available but not used in the prior fiscal year and
available to be carried forward to fiscal 2005: $117,000 for Adjusted
Capex and $1,251,000 for Store Project Capex.
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.
Working Capital
---------------
At July 30, 2005, the Company had a working capital deficiency of $398,000 as
compared to working capital of $4,294,000 at October 30, 2004 and a working
capital deficiency of $3,359,000 at July 31, 2004. Since the end of fiscal 2004,
working capital declined as a result of the collection of related party
receivables from Wakefern related to the fiscal 2004 patronage dividend
receivable and a decline in inventory, partially offset by a decrease in
accounts payable-others related to the payment of monies due at the end of
fiscal 2004 for construction costs and equipment for new stores and major
remodels. These transactions resulted in a net decrease in the Revolving Note
which is classified as long-term borrowings.
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 30, 2005 .99 to 1.0
October 30, 2004 1.05 to 1.0
July 31, 2004 .96 to 1.0
Cash flows (in millions) were as follows:
Thirty Nine Weeks Ended
-----------------------
July 30, 2005 July 31, 2004
------------- -------------
Operating activities $ 19.5 $ 24.1
Investing activities (2.4) (22.9)
Financing activities (17.8) (.4)
------- -------
Totals $ (.7) $ .8
======== =======
14
The Company had $10,809,000 of available credit, at July 30, 2005, under its
revolving credit facility. The Company has no capital commitments for leasehold
improvements or equipment as of July 30, 2005. The amounts available under the
Credit Agreement will adequately meet our operating needs, scheduled capital
expenditures and debt service for fiscal 2005.
For the 39 weeks ended July 30, 2005 depreciation was $16,487,000 while capital
expenditures, excluding capitalized leases, totaled $3,192,000, compared to
$15,146,000 and $24,484,000, respectively, in the prior year period. The
increase in depreciation was the result of depreciation for the equipment and
leasehold improvements for the two new locations opened in fiscal 2004 as well
as the additional capitalized real estate lease and the modified capitalized
real estate lease related to these locations. Capital expenditures in the first
thirty nine weeks of fiscal 2005 decreased as compared to capital expenditures
in the first thirty nine weeks of fiscal 2004 when two new locations were opened
and the remodeling and expansion of the East Brunswick, New Jersey location was
completed. Additionally, a non-cash impairment charge of $163,000 was recorded
in the third quarter of fiscal 2005. This loss resulted from the difference
between the book value and expected sale price of assets at a location having a
lease which expires in November 2005.
The following table summarizes our contractual obligations at July 30, 2005, 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 $ 55,600 $ 8,991 $37,464 $ 9,145 $ -
--------------------------------------------------------------------------------
Interest on Long Term Debt (1) 12,967 4,095 6,140 2,725 7
--------------------------------------------------------------------------------
Related party debt,
non interest bearing 3,813 925 1,627 1,089 172
--------------------------------------------------------------------------------
Capital lease obligations (2) 342,452 15,989 31,285 32,096 263,082
--------------------------------------------------------------------------------
Operating leases (2) 56,795 8,909 14,704 10,299 22,883
--------------------------------------------------------------------------------
Other Liabilities (3) 4,056 550 734 1,690 1,082
--------------------------------------------------------------------------------
Purchase obligations -
leaseholds and equipment - - - - -
--------------------------------------------------------------------------------
Lease commitments - stores
under construction - - - - -
--------------------------------------------------------------------------------
Total $ 475,683 $39,459 $91,954 $57,044 $287,226
========= ======= ======= ======== ========
(1) Includes interest expense at estimated interest rates of 7.50% to 8.50% on
variable rate debt of $50,722 and interest expense at interest rates of
6.20% to 6.44% on fixed rate debt of $4,878.
(2) Lease obligation figures do not include insurance, common area maintenance
charges and real estate taxes for which the Company is obligated.
(3) Other liabilities include estimated unfunded pension liabilities, and
estimated post-retirement and post-employment obligations based on
available actuarial data.
15
Results of Operations (13 weeks ended July 30, 2005 compared to 13 weeks ended
July 31, 2004)
Sales:
------
Sales for the current period totaled $304.4 million as compared to $302.8
million in the prior year period. This represents an increase of 0.5%. Sales for
the current quarter included the operations of a new location opened in May 2004
in Aberdeen, New Jersey, as well as the location in Bordentown, New Jersey
purchased from Wakefern in June 2004. The location in Aberdeen replaced an
older, smaller store in the same location.
Same store sales from the twenty four stores in operation in both periods
decreased 1.0%. Decreased sales in certain of the Company's stores affected by
competitive store openings and the impact from the opening of our new locations
were partially offset by comparable store sales increases in locations not
affected by competitive openings.
Gross Profit:
-------------
Gross profit as a percent of sales was 26.5% in both the third quarter of fiscal
2005 and the comparable period in fiscal 2004. Cost of goods sold includes the
costs of inventory sold and the related purchase, inbound freight and
distribution costs including those costs charged by Wakefern for operation of
warehouses, distribution and delivery of product to our stores. Vendor
allowances and rebates and Wakefern patronage dividends are reflected as a
reduction of cost of goods sold. Any costs to us related to other services which
Wakefern provides are not included in cost of goods sold. Patronage dividends,
applied as a reduction of the cost of goods sold, were $2.4 million in the
current period compared to $2.5 million in the prior year period.
As a percentage of sales, gross profit was impacted by a .23% increase in costs
for programs implemented in certain of the Company's stores to address
competitive store openings, a net decrease of .11% in promotional programs,
offset by a decrease in shrink of 30%. Shrink is the difference between
expected gross profit, based on the difference between the cost and expected
selling price of merchandise purchased, and actual gross profit. Shrink results
from theft, spoilage, breakage, mark ups and mark downs.
Operating Expenses:
-------------------
Selling, general and administrative expenses totaled $75.2 million in both the
third quarter of fiscal 2005 and the comparable period in fiscal 2004. Selling,
general and administrative expenses as a percent of sales were 24.7% versus
24.9% in the prior year period. Decreases in labor and pre-opening expense were
partially offset by increases in fringe benefits, occupancy costs, miscellaneous
expense and impairment charges. The decrease in labor was due to improved
efficiency in the locations opened in fiscal 2004. Labor expense decreased from
$31,439,000 to $30,589,000. Pre-opening expense decreased as no new stores were
opened in fiscal 2005. One new location was opened in the third quarter of
fiscal 2004. Pre-opening costs decreased from $364,000 to zero. The increase in
fringe benefits was the result of contractual increases in pension and welfare.
Fringe benefits increased from $12,996,000 to $13,187,000. The increase in
occupancy costs was primarily the result of increases in utility costs, real
estate tax expense and common area maintenance expense. Occupancy costs
increased from $9,694,000 to $10,511,000. The increase in miscellaneous expense
was primarily the result of increases in Wakefern support services, debit/credit
card and bank service fees and services provided by outside vendors, including
floor care and sanitation. Miscellaneous expense increased from $4,988,000 to
$5,125,000. The impairment charge relates to the recording of a non-cash write
down. This loss resulted from the difference between the book value and expected
sale price of assets at a location having a lease which expires in November
2005. Impairment charges increased from zero to $163,000.
16
As a percentage of sales, labor decreased .33% and pre-opening expense decreased
.12%. These decreases were partially offset by an increase in fringe benefits of
.03%, occupancy costs of .25%, miscellaneous expense of .03% and impairment
charges of .05%.
Interest Expense:
-----------------
Interest expense increased to $4,573,000 from $4,248,000, while interest income
was $26,000 compared to $24,000 for the prior year period. The increase in
interest expense for the current year period was due to an increase in the
average interest rate paid on debt partially offset by a net decrease in average
outstanding debt, including capitalized lease obligations.
Income Taxes:
-------------
An income tax rate of 38% has been used in both the current and the prior year
periods. The tax rate used is based on the expected effective tax rates.
Net Income:
-----------
Net income was $553,000 in the current year period compared to $496,000 in the
prior year period. Earnings before interest, taxes, depreciation and
amortization ("EBITDA") for the current period were $11,196,000 as compared to
$10,756,000 in the prior year period. Net income per common share on a diluted
basis was $.54 in the current year period compared to $.48 in the prior year
period. Per share calculations are based on 1,027,862 weighted average diluted
shares outstanding in the current year period and 1,038,041 weighted average
diluted 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:
Thirteen Weeks Ended
--------------------
July 30, 2005 July 31, 2004
------------- -------------
Net income $ 553,000 $ 496,000
Add:
Interest expense, net 4,547,000 4,224,000
Income tax provision 339,000 304,000
Depreciation 5,495,000 5,580,000
Impairment loss 163,000 -
Amortization 99,000 152,000
------------ ------------
EBITDA $11,196,000 $10,756,000
============ ============
Results of Operations (39 weeks ended July 30, 2005 compared to 39 weeks ended
July 31, 2004)
Sales:
------
Sales for the current thirty nine week period totaled $914.1 million as compared
to $875.3 million in the prior year period. This represents an increase of 4.4%.
17
Sales for the current thirty nine week period included the operations of the new
locations opened in April and May 2004 in Lawrenceville and Aberdeen, New
Jersey, respectfully, as well as the location in Bordentown, New Jersey
purchased from Wakefern in June 2004. The location in Aberdeen replaced an
older, smaller store in the same location.
Same store sales from the twenty three stores in operation in both periods
decreased 1.4%. Decreased sales in certain of the Company's stores affected by
competitive store openings and the impact from the opening of our new locations
were partially offset by comparable store sales increases in locations not
affected by competitive openings.
Gross Profit:
-------------
Gross profit as a percent of sales decreased to 26.0% in the first thirty nine
weeks of fiscal 2005 compared to 26.3% for the comparable period in fiscal 2004.
Cost of goods sold includes the costs of inventory sold and the related
purchase, inbound freight and distribution costs including those costs charged
by Wakefern for operation of warehouses, distribution and delivery of product to
our stores. Vendor allowances and rebates and Wakefern patronage dividends are
reflected as a reduction of cost of goods sold. Any costs to us related to other
services which Wakefern provides are not included in cost of goods sold.
Patronage dividends, applied as a reduction of the cost of goods sold, were $7.2
million in both the current and prior year periods.
The decrease in gross profit was primarily the result of a .28% increase,
measured as a percentage of sales, in costs for programs implemented in certain
of the Company's stores to address competitive store openings.
Operating Expenses:
-------------------
Selling, general and administrative expenses totaled $222.6 million in the first
thirty nine weeks of fiscal 2005 compared to $214.4 million for the comparable
period in fiscal 2004. Selling, general and administrative expenses as a percent
of sales were 24.4% versus 24.5% in the prior year period. Decreases in labor,
administration and pre-opening expense were partially offset by increases in
fringe benefits, depreciation, miscellaneous expense and occupancy costs.
Although labor decreased as a percent of sales, labor expense increased from
$89,895,000 to $91,152,000. The decrease in labor as a percent of sales was due
to improved efficiency in the locations opened in fiscal 2003 and 2004 and the
increase in labor expense was due to two additional locations, the replacement
of a smaller store and the enlargement of an additional location in fiscal 2004.
Administration decreased as several components increased at a slower rate than
the increase in sales and the incentive compensation accrual for administrative
personnel decreased based upon operating results for the current thirty nine
week period. Administration costs declined from $14,906,000 to $14,458,000.
Pre-opening expense decreased as no new stores were opened in fiscal 2005. Two
new locations were opened in the second and third quarters of fiscal 2004.
Pre-opening costs decreased from $1,154,000 to zero. The increase in fringe
benefits was the result of contractual increases. Fringe benefits increased from
$36,908,000 to $39,643,000. Depreciation increased as the result of the purchase
of equipment and leasehold improvements for two new locations opened during 2004
in Lawrenceville and Aberdeen, New Jersey, the completion in January 2004 of the
expansion and remodeling of the East Brunswick store, the remodeling of the
Neptune location in October 2004, the purchase of the Bordentown, New Jersey
location in June 2004, as well as the addition of one new capitalized real
estate lease and the increase in obligations under a capitalized real estate
lease for a replacement store. Depreciation increased from $15,146,000 to
$16,487,000. The increase in occupancy costs was primarily the result of
increases in utility costs, repairs and maintenance, real estate tax expense and
common area maintenance expense. Occupancy costs increased from $27,825,000 to
$30,980,000. The increase in miscellaneous expense was primarily the result of
18
increases in Wakefern support services, debit/credit card and bank service fees
and services provided by outside vendors, including floor care and sanitation.
Miscellaneous expense increased from $13,768,000 to $14,787,000.
As a percentage of sales, labor decreased .30%, administration decreased .12%
and pre-opening expense decreased .13%. These decreases were partially offset by
an increase in fringe benefits of .12%, depreciation, including depreciation on
capitalized leases, of .07%, occupancy of .21% and miscellaneous expense of
.05%.
Interest Expense:
-----------------
Interest expense increased to $13,870,000 from $11,886,000, while interest
income was $93,000 compared to $88,000 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 both the current and the prior year
periods. The tax rate used is based on the expected effective tax rates.
Net Income:
-----------
Net income was $860,000 in the current year period compared to $2,692,000 in the
prior year period. Earnings before interest, taxes, depreciation and
amortization ("EBITDA") for the current period were $32,228,000 as compared to
$31,666,000 in the prior year period. Net income per common share on a diluted
basis was $.83 in the current period compared to $2.62 in the prior year period.
Per share calculations are based on 1,031,904 weighted average diluted shares
outstanding in the current period and 1,027,760 weighted average diluted 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:
Thirty Nine Weeks Ended
-----------------------
July 30, 2005 July 31, 2004
------------- -------------
Net income $ 860,000 $ 2,692,000
Add:
Interest expense, net 13,777,000 11,798,000
Income tax provision 528,000 1,651,000
Depreciation 16,487,000 15,146,000
Impairment loss 163,000 -
Amortization 413,000 379,000
---------- ----------
EBITDA $32,228,000 $31,666,000
=========== ===========
19
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 Director of 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 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 Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
FOODARAMA SUPERMARKETS, INC.
-----------------------------
(Registrant)
Date: September 12, 2005
/S/ MICHAEL SHAPIRO
----------------------
(Signature)
Michael Shapiro
Senior Vice President,
Chief Financial Officer
Date: September 12, 2005
/S/ THOMAS H. FLYNN
-----------------------
(Signature)
Thomas H. Flynn
Vice President,
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 9, 2005 /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 9, 2005 /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 30, 2005 (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 9, 2005 /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 30, 2005 (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 9, 2005 /s/ MICHAEL SHAPIRO
------------------------------
(Signature)
Michael Shapiro
Chief Financial Officer
25