<PAGE 1>
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[x] Annual Report Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934 [Fee Required]. For the fiscal year ended July 30, 1994.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934 [Fee Required] for the transition period from ______
to ___________.
Commission file Number 0-2633
VILLAGE SUPER MARKET, INC.
(Exact name of registrant as specified in its charter)
New Jersey 22-1576170
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
733 Mountain Avenue, Springfield, New Jersey 07081
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (201)-467-2200
Securities registered pursuant of Section 12 (b) of the Act:
Title of Each Class Name of Each Exchange on Which
Registered
None None
Securities registered pursuant to Section 12(g) of the Act:
CLASS A COMMON STOCK, NO PAR VALUE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No___.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
The aggregate market value of the Class A common stock of Village Super
Market, Inc. held by non-affiliates was approximately $8,129,296, and the
aggregate market value of the Class B common stock held by non-affiliates
was approximately $1,200,376 (based upon the closing price of the Class A
shares on the Over the Counter Market on October 11, 1994).
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of latest practicable date.
<TABLE>
<CAPTION>
Outstanding at
Class October 24, 1994
<S> <C>
Class A common stock, no par value 1,315,800 Shares
Class B common stock, no par value 1,594,076 Shares
</TABLE>
DOCUMENTS INCORPORATED BY REFERENCE
Information contained in the 1994 Annual Report to Shareholders and the 1994
definitive Proxy Statement to be filed with the Commission and delivered to
security holders in connection with the Annual Meeting scheduled to be held on
December 9,1994 are incorporated by reference into this Form 10-K at Part II,
Items 5, 6, 7 and 8 and Part III.
<PAGE 2>
Part I
ITEM I. BUSINESS
GENERAL
The Company operates a chain of 21 ShopRite supermarkets, 15 of which
are located in northern New Jersey, 1 of which is in northeastern
Pennsylvania and 5 of which are in the southern shore area of New
Jersey.
In addition, the Company operates two former ShopRite stores under a
"Village Market" format as described below. The Company's membership in
Wakefern Food Corporation ("Wakefern"), the nation's largest retailer
owned food cooperative and owner of the ShopRite name, provides the
Company many of the economies of scale in purchasing, distribution and
advertising associated with chains of greater size and geographic reach.
The Company believes that the regional nature of its business and the
continuity of its management under the leadership of its founding family
have permitted the Company to operate with greater flexibility and
responsiveness to the demographic characteristics of the communities
served by its stores.
The Company seeks to generate high sales volume by offering a wide
variety of high quality products at consistently low prices. The
Company attempts to efficiently utilize its selling space, gives
continuing attention to the decor and format of its stores and tailors
each store's product mix to the preferences of the local community. The
Company concentrates on development of superstores, which, in addition
to their larger size (an average of 50,000 total square feet, including
office and storage space, compared with an average of 30,000 total
square feet for conventional supermarkets), feature such higher margin
specialty service departments as an on-site bakery, an expanded
delicatessen, a fresh seafood section and, in most cases, a prescription
pharmacy. Superstores also offer an expanded selection of higher margin
non-food items such as cut flowers, health and beauty aids, greeting
cards, videocassette rentals and small appliances. The two most recent
superstores also include a warehouse section featuring products in giant
sizes. The following table shows the percentage of the Company's sales
allocable to various product categories during each of the periods
indicated as well as the number of the Company's superstores and
percentage of selling square feet allocable to these stores during each
of these periods:
<TABLE>
<CAPTION>
Product Categories Fiscal Year Ended In July
1992 1993 1994
<S> <C> <C> <C>
Groceries 44.4% 44.2% 44.0%
Dairy and Frozen 15.5 15.8 15.7
Meats 11.2 11.1 11.1
Non-Foods 9.4 9.2 9.2
Produce 9.1 9.4 9.3
Delicatessen 4.5 4.1 4.1
Seafood 1.9 2.0 1.9
Pharmacy 2.3 2.5 2.8
Bakery 1.4 1.6 1.6
Other .3 .1 .3
100.0% 100.0% 100.0%
Number of superstores 20 19 18
Selling square feet
represented by superstores 80% 82% 82%
</TABLE>
<PAGE 3>
Because of its increased size and broader product mix, a superstore
can satisfy a greater percentage of a customer's weekly shopping needs
and, as a result, the typical superstore generally has a higher volume
of sales per square foot and sales per customer than a conventional
supermarket. In addition, because of their greater total sales volume
and increased percentage of their sales allocable to higher margin
items, superstores generally operate more profitably than conventional
supermarkets.
A variety of factors affect the profitability of each of the
Company's stores including local competitors, size, access and parking,
lease terms, management supervision, and the strength of the ShopRite
trademark in the local community. The Company continually evaluates
individual stores to decide whether they should be closed. Accordingly,
the Orange, Maplewood, Kingston, Morristown and Easton stores have been
sold since December 1991. In addition, two stores were converted to a
"Village Market" format designed to reduce costs and increase margins in
lower volume locations.
The Company operates a separate liquor store adjacent to one Company
supermarket.
DEVELOPMENT AND EXPANSION
The Company is engaged in a continuing program to upgrade and expand
its supermarket chain. This program has included major store
remodelings as well as the opening or acquisition of additional stores.
When remodeling, the Company has sought, whenever possible, to increase
the amount of selling space in its stores and, where feasible within
existing site limitations, to convert conventional supermarkets to
superstores. The Company completed one major expansion and remodel in
fiscal 1994 and two smaller expansions. The Company has budgeted
$8,000,000 for capital expenditures in fiscal 1995. The major planned
expenditures are the expansion and remodel of the Chester store and the
beginning of the expansion of the Absecon store.
In the last five years, the Company has added one new store and
completed five remodels. The Company's goal has been to open an average
of one new superstore and conduct a major remodel of one store each
year. However, because of delays associated with increased governmental
regulations, including sewage moratoriums and environmental cleanup
regulations effecting sites and the lack of recent activity by real
estate developers, the Company has been unable to open the desired
number of new stores. Additional store remodelings and sites for new
stores are in various stages of development. The Company will also
consider additional acquisitions should appropriate opportunities arise.
<PAGE 4>
WAKEFERN
The Company is the second largest member of Wakefern (owning 17.2% of
Wakefern's outstanding stock) and two of the Company's principal
shareholders were founders of Wakefern. Wakefern, which was organized
in 1946, is the nation's largest retailer-owned food cooperative. There
are presently 30 individual member companies and 180 supermarkets which
comprise the Wakefern cooperative. Only Wakefern and member companies
are entitled to use the ShopRite name and trademark, purchase their
product requirements and participate in ShopRite advertising and
promotional programs and its computerized purchasing, warehousing and
distribution services.
The principal benefits to the Company from its relationship with
Wakefern are the use of the ShopRite name and trademark, volume
purchasing, ShopRite private label products, distribution and
warehousing on a cooperative basis, and ShopRite advertising and
promotional programs. The Company believes that the ShopRite name is
widely recognized by its customers and is a factor in those customers'
decisions about where to shop. In addition, Wakefern can purchase large
quantities and varieties of products at favorable prices which it can
then pass on to its members. These benefits are important to the
Company's success.
Wakefern distributes as a "patronage dividend" to each of its
stockholders a share of the earnings of Wakefern in proportion to the
dollar volume of business done by the stockholder with Wakefern during
each fiscal year.
While Wakefern has a substantial professional staff, it operates as a
member cooperative. Executives of most members make contributions of
time to the business of Wakefern. Senior executives of the Company
spend a significant amount of their time working on various Wakefern
committees which oversee and direct Wakefern purchases and other
programs.
Most of the Company's advertising is developed and placed by
Wakefern's professional advertising staff. Wakefern is responsible for
all television, radio and major newspaper advertisements. Wakefern
bills its members by various formulas which distribute advertising costs
in accordance with the estimated proportional benefits to each member
from such advertising. The Company also places Wakefern developed
materials with local newspapers.
Wakefern operates warehouses and distribution facilities in
Elizabeth, New Jersey; Dayton, New Jersey; Wallkill, New York; and South
Brunswick, New Jersey. Each member is obligated to purchase from
Wakefern a minimum of 85% of its requirements for products offered by
Wakefern until ten years from the date that stockholders representing
75% of Wakefern sales notify Wakefern that those stockholders request
the Wakefern Stockholder Agreement be terminated. If this purchase
obligation is not met, the member is required to pay Wakefern's profit
contribution shortfall attributable to this failure. This agreement
also makes unapproved changes in control of the Company and sale of the
<PAGE 5>
Company or of individual Company stores, except to a qualified
successor, financially prohibitive by requiring the Company in such
cases to pay Wakefern the profit contribution shortfall attributable to
the sale of store or change in control. Such payments were waived by
Wakefern in connection with the sale of the Orange, Maplewood, Kingston
and Morristown stores. A "qualified successor" must be or agree to
become a member of Wakefern and may not own or operate any supermarkets
other than ShopRite supermarkets, in the states of New York, New Jersey,
Pennsylvania, Delaware, Maryland, Virginia, Connecticut, Massachusetts,
Rhode Island, Vermont, New Hampshire, Maine or the District of Columbia
or own or operate more than 25 non-ShopRite supermarkets in any other
locations in the United States.
Wakefern, under circumstances specified in its bylaws, may refuse to
sell merchandise to, and may repurchase the Wakefern stock of, any
member. Such circumstances include certain unapproved transfers by a
member of its supermarket business or its capital stock in Wakefern,
unapproved acquisition by a member of certain supermarket or grocery
wholesale supply businesses, the material breach by a member of any
provision of the bylaws of Wakefern or any agreement with Wakefern or a
determination by Wakefern that the continued supplying of merchandise or
services to such member would adversely affect Wakefern.
Any material change in Wakefern's method of operation or a
termination or material modification of the Company's relationship with
Wakefern following expiration of the above agreements or otherwise (none
of which are contemplated or considered likely) might have an adverse
impact on the conduct of the Company's business and could involve
additional expense for the Company. The failure of any Wakefern member
to fulfill its obligations under these agreements or a member's
insolvency or withdrawal from Wakefern could result in increased costs
to remaining members.
Wakefern owns and operates 23 supermarkets. The Company believes
that Wakefern may consider purchasing additional stores in the future
from non-members and from existing members who may desire to sell their
stores for financial, estate planning or other reasons. The Company
also understands that Wakefern may consider opening and operating new
ShopRite supermarkets as well.
Wakefern does not prescribe geographical franchise areas to its
members. The specific locations at which the Company, other members of
Wakefern or Wakefern itself may open new units under the ShopRite name
are, however, subject to the approval of Wakefern's Site Development
Committee. This committee is composed of persons who are not employees
or members of Wakefern and from whose decision to deny a site
application may be appealed to the Wakefern Board of Directors.
Wakefern assists its members in their site selection by providing
appropriate demographic data, volume projections and projections of the
impact of the proposed market on existing member supermarkets in the
area.
Each member's Wakefern stock (including the Company's) is pledged to
Wakefern to secure all of that member's obligations to Wakefern.
<PAGE 6>
Moreover, every owner of 5% or more of the voting stock of a member
(including six members of the Sumas family) must personally guarantee
prompt payment of all amounts due Wakefern from that member. Wakefern
does not own any securities of the Company or its subsidiaries.
Each of Wakefern's members is required to make capital contributions
to Wakefern based on the number of stores operated by that member (and
to a limited extent the sales volume generated by those stores). As
additional stores are opened or acquired by a member (including the
Company), additional capital must be contributed by it to Wakefern. On
occasion, as its business needs have required, Wakefern has increased
the per-store capital contributions required of its members. Wakefern
has in the past permitted these increases in required capital to be paid
in installments over a period of time. The Company is required to
invest approximately $1,065,000 over approximately the next four years.
TECHNOLOGY
The Company considers automation and computerization important to its
operations and competitive position. All stores have scanning checkout
systems that improve pricing accuracy, enhance productivity and reduce
checkout time for customers. Over the last three years, the company
installed IBM RS/6000 computers and satellite communications in each
store. Using the RS/6000 system, the Company offers customers debit and
credit card payment options in all stores. In addition, the Company is
utilizing a computer generated ordering system in ten stores, which is
designed to reduce inventory levels and out of stock conditions, enhance
shelf space utilization, and reduce labor costs.
The Company's commitment to advanced scanning systems has enabled it
to participate in Price Plus, ShopRite's preferred customer program.
Customers receive electronic discounts by presenting a scanable Price
Plus card. In addition, the Company began using Clip Less coupons in
1994. Customers need only present their Price Plus card to receive the
value of our in-ad coupons. Also, target marketing programs using this
technology are presently being developed. The Company is currently in
the process of converting our customers separate Price Plus and check
cashing cards to a single universal card. In addition to customer
convenience, the new card provides the Company with improved ability to
limit the acceptance of bad checks.
The Company utilizes a direct store delivery system, consisting of
personal computers and hand held scanners, for most items not purchased
through Wakefern in order to provide equivalent cost and retail price
control over these products. Six stores have implemented CAO (Computer
Assisted Ordering), which uses hand held terminals to read UPC codes on
shelf tags to re-order products. In addition, certain in-store
department records are computerized, including the records of all
pharmacy departments. In certain stores, meat, seafood and delicatessen
prices are maintained on computer for automatic weighing and pricing.
Furthermore, a substantial majority of the Company's stores have
computerized time and attendance and work scheduling systems and several
also have computerized energy management systems. The Company seeks to
design its stores to use energy efficiently, including recycling waste
<PAGE 7>
heat generated by refrigeration equipment for heating and other
purposes.
COMPETITION
The supermarket business is highly competitive. Industry profit
margins are narrow, consequently earnings are dependent on high sales
volume and operating efficiency. The Company is in direct competition
with national, regional and local chains as well as independent
supermarkets, warehouse clubs, drug stores, discount department stores
and convenience stores. The principal methods of competition utilized
by the Company are low pricing, courteous, quick service to the
customer, quality products and consistent availability of a wide variety
of merchandise including the ShopRite private label. The Company
believes its regional focus and the continuity of its management by the
Sumas family permit it to operate with greater flexibility in tailoring
the products offered in each store to the demographics of the
communities they serve as compared to national and larger regional
chains. The Company's principal competitors are Pathmark, A & P,
Foodtown, King's, Grand Union and Acme. Many of the Company's
competitors have financial resources substantially greater than those of
the Company.
LABOR
As of October 6, 1994, the Company employed approximately 3,800
persons, of whom approximately 2,300 worked part-time. Approximately
85% of the Company's employees are covered by collective bargaining
agreements. The Company was affected by a labor dispute with its
largest union in fiscal 1993 which was settled with a new four year
contract. A contract with one large union expires December 31, 1994.
Most of the Company's competitors in New Jersey are similarly unionized.
REGULATORY ENVIRONMENT
While the Company must secure a variety of health and food
distribution permits for the conduct of its business, it does not
believe that such regulation is material to its operations. The
Company's pharmacy departments are subject to state regulation and
licensed pharmacists must be on duty at all times. The Company's liquor
operation is also subject to regulation by state and municipal
administrative authorities. The Company does not presently anticipate
expanding its liquor operations. Compliance with statutes regulating
the discharge of materials into the environment is not expected to have
a material effect on capital expenditures, earnings and competitive
position in fiscal 1995 and 1996.
ITEM 2. PROPERTIES
The Company owns the sites of five of its supermarkets (containing
304,000 square feet of total space), all of which are free-standing
stores, except the Egg Harbor store, which is part of a shopping center.
The Company also owns the site of the former Easton and Maplewood
stores. The Maplewood property is leased to another operator and the
<PAGE 8>
Easton store is currently being marketed. The remaining eighteen
supermarkets (containing 792,000 square feet of total space) are leased,
with initial lease terms generally ranging from 20 to 30 years, usually
with renewal options. Eleven of these leased stores are located in
strip shopping centers and the remaining seven are free-standing stores.
Except with respect to one lease between the Company and certain related
parties, none of the Company's leases expire before 1997. The annual
rent, including capitalized leases, for all of the Company's leased
facilities for the year ended July 30, 1994 was approximately
$6,100,000. The Company is a limited partner in two partnerships, each
of which owns a shopping center in which one of the Company's leased
supermarkets is located. The Company also is a general partner in a
general partnership that is a lessor of one of the Company's free-
standing supermarkets.
ITEM 3. LEGAL PROCEEDINGS
No material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters submitted to shareholders in the fourth quarter.
ITEM X. EXECUTIVE OFFICERS OF THE REGISTRANT
In addition to the information regarding directors incorporated by
reference to the Company's definitive Proxy Statement in Part III, Item
10, the following is provided with respect to executive officers who are
not directors:
NAME AGE POSITION WITH THE COMPANY
Carol Lawton 51 Vice President and Assistant Secretary since
1983; responsible for administration of
headquarters staff.
Frank Sauro 36 General Counsel since April 1988.
Mr. Sauro is a member of the New Jersey
Bar.
Kevin Begley 36 Chief Financial Officer since December 1988.
Mr. Begley is a Certified Public Accountant.
<PAGE 9>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS
The information required by this Item is incorporated by reference
from Information appearing on Page 16 in the Company's Annual Report to
Shareholders for the fiscal year ended July 30, 1994.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is incorporated by reference
from Information appearing on Page 3 in the Company's Annual Report to
Shareholders for the fiscal year ended July 30, 1994.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this Item is incorporated by reference
from Information appearing on Pages 4 and 5 in the Company's Annual
Report to Shareholders for the fiscal year ended July 30, 1994.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is incorporated by reference
from Information appearing on Page 3 and Pages 6 to 16 in the Company's
Annual Report to Shareholders for the fiscal year ended July 30, 1994.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
<PAGE 10>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item 10 is incorporated by
reference from the Company's definitive Proxy Statement to be filed on
or before November 7, 1994, in connection with its Annual Meeting
scheduled to be held on December 9, 1994.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item 11 is incorporated by
reference from the Company's definitive Proxy Statement to be filed on
or before November 7, 1994, in connection with its Annual Meeting
scheduled to be held on December 9, 1994.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item 12 is incorporated by
reference from the Company's definitive Proxy Statement to be filed on
or before November 7, 1994, in connection with its annual meeting
scheduled to be held on December 9, 1994.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item 13 is incorporated by
reference from the Company's definitive Proxy Statement to be filed on
or before November 7, 1994, in connection with its annual meeting
scheduled to be held on December 9, 1994.
<PAGE 11>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a) 1. Financial Statements
Consolidated Balance Sheets - July 30, 1994 and July 31, 1993
Consolidated Statements of Operations - years ended
July 30, 1994; July 31, 1993 and July 25, 1992
Consolidated Statements of Shareholders' Equity - years ended
July 30, 1994; July 31, 1993 and July 25, 1992
Consolidated Statements of Cash Flows - years ended
July 30, 1994; July 31, 1993 and July 25, 1992
Notes to consolidated financial statements
The financial statements above and Independent Auditors' Report
have been incorporated by reference from the Company's Annual
Report to Shareholders for the fiscal year ended July 30, 1994.
<TABLE>
<CAPTION>
PAGE
2. Financial Statement Schedules
<S> <C>
Independent Auditors' Report on Schedules . . . . . . . 13
Schedule V - Property, Equipment and Fixtures. . . . . 14
Schedule VI - Accumulated depreciation and
amortization of property,
equipment and fixtures. . . . . . . . . . 15
</TABLE>
All other schedules are omitted because they are not applicable, or not
required, or because the required information is included in the consolidated
financial statements or notes thereto.
<PAGE 12>
3. Exhibits
EXHIBIT INDEX
Exhibit No. 3 - Certificate of Incorporation and By-Laws *
Exhibit No. 4 - Instruments defining the rights of security
holders;
4.1 Note Purchase Agreement dated August 20, 1987 *
4.2 Loan Agreement dated March 29, 1994*
4.3 Amendment No. 1 to Loan Agreement
Exhibit No. 10 - Material Contracts:
10.1 Wakefern By-Laws *
10.2 Stockholders Agreement dated February 20, 1992
between the Company and Wakefern Food Corp. *
10.3 Voting Agreement dated March 4, 1987 *
10.4 1987 Incentive and Nonstatutory Stock Option Plan *
Exhibit No. 13 - Annual Report to Security Holders
Exhibit No. 28 a - Press release dated October 6, 1994
Exhibit No. 28 b - Third Quarter Report to Shareholders
Exhibit No. 22 - Subsidiaries of Registrant
Exhibit No. 23 - Consent of KPMG Peat Marwick LLP
* The following exhibits are incorporated by reference from the following
previous filings:
Form 10-K for 1993: 3, 4.1, 10.1, 10.2, 10.3 and 10.4
Form 10-Q for April 23, 1994: 4.2
(b) No reports on Form 8-K were filed during the fourth quarter
of fiscal 1994.
<PAGE 13>
Independent Auditor's Report on
Financial Statement Schedules
The Board of Directors
Village Super Market, Inc.:
Under date of September 30, 1994, except as to note 5, which is as of
October 21, 1994, we reported on the consolidated balance sheets of
Village Super Market, Inc. as of July 30, 1994 and July 31, 1993, and the
related consolidated statements of operations, shareholders' equity, and
cash flows for each of the years in the three-year period ended July 30,
1994 as contained in the 1994 annual report to shareholders. These
consolidated financial statements and our report thereon are incorporated
by reference in the annual report on Form 10-K for the year 1994. In
connection with our audits of the aforementioned consolidated financial
statements, we also have audited the related financial statement schedules
as listed in the accompanying index. These financial statement schedules
are the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statement schedules based on our
audits.
In our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth
therein.
KPMG Peat Marwick LLP
Short Hills, New Jersey
September 30, 1994, except as
to note 5, which is as of
October 21, 1994
<PAGE 14>
<TABLE>
<CAPTION>
VILLAGE SUPER MARKET, INC. AND SUBSIDIARIES
SCHEDULE V - PROPERTY, EQUIPMENT AND FIXTURES
Col. A Col. B Col. C Col. D Col. E
Balance at Balance
Beginning Additions at end
Classification of Period at Cost Retirements of Period
Fifty-two weeks ended
July 30, 1994
<S> <C> <C> <C> <C>
Land $ 7,928,028 $ 100,000 $ -- $ 8,028,028
Buildings 34,000,548 337,075 -- 34,337,623
Store Fixtures &
equipment 55,024,926 2,978,566 1,107,894 56,895,598
Leasehold improvement 11,246,225 1,956,927 17,447 13,185,705
Leased property
under capital lease 15,182,532 -- 1,481,933 13,700,599
Vehicles 883,644 101,910 133,458 852,096
Construction in
progress 231,160 499,336 -- 730,496
$124,497,063 $5,973,814 $2,740,732 $127,730,145
</TABLE>
<TABLE>
<CAPTION>
Fifty-three weeks ended
July 31, 1993
<S> <C> <C> <C> <C>
Land $ 7,878,028 $ 50,000 $ -- $ 7,928,028
Buildings 33,899,911 100,637 -- 34,000,548
Store fixtures &
equipment 56,248,734 1,323,522 2,547,330 55,024,926
Leasehold improvements 11,355,257 146,436 255,468 11,246,225
Leased property
under capital leases 15,182,532 -- -- 15,182,532
Vehicles 905,669 125,003 147,028 883,644
Construction in
progress -- 231,160 -- 231,160
$125,470,131 $1,976,758 $2,949,826 $124,497,063
</TABLE>
<TABLE>
<CAPTION>
Fifty-two weeks ended
July 25, 1992
<S> <C> <C> <C> <C>
Land $ 3,897,025 $3,981,003 $ -- $ 7,878,028
Buildings 25,157,367 8,837,299 94,755 33,899,911
Store Fixtures &
equipment 54,734,365 6,116,977 4,602,608 56,248,734
Leasehold improvements 11,290,555 643,899 579,197 11,355,257
Leased property
under capital lease 15,182,532 -- -- 15,182,532
Vehicles 920,169 116,212 130,712 905,669
Construction in
progress 5,201,003 5,201,003 -- --
$116,383,016$14,494,387 $ 5,407,272 $125,470,131
</TABLE>
<PAGE 15>
VILLAGE SUPER MARKET, INC. AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION AND
AMORTIZATION OF PROPERTY, EQUIPMENT AND FIXTURES
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
Balance at Balance
Beginning at end
Classification of Period Additions Retirements of Period
Fifty-two weeks ended
July 30, 1994
<S> <C> <C> <C> <C>
Buildings $ 5,733,858 $1,170,926 $ -- $ 6,904,784
Store fixtures &
equipment 30,136,690 5,354,389 970,264 34,520,815
Leasehold improvements 6,404,256 1,062,824 12,454 7,454,626
Leased property
under capital leases 7,419,259 544,758 1,185,542 6,778,475
Vehicles 672,133 116,041 130,647 657,527
$50,366,196 $8,248,938 $2,298,907 $56,316,227
</TABLE>
<TABLE>
<CAPTION>
Fifty-three weeks ended
July 31, 1993
<S> <C> <C> <C> <C>
Buildings $ 4,558,724 $1,175,134 $ -- $ 5,733,858
Store fixtures &
equipment 26,876,142 5,277,908 2,017,360 30,136,690
Leasehold improvements 5,682,811 975,136 253,691 6,404,256
Leased property
under capital leases 6,820,063 599,196 -- 7,419,259
Vehicles 658,907 153,866 140,640 672,133
$44,596,647 $8,181,240 $2,411,691 $50,366,196
</TABLE>
<TABLE>
<CAPTION>
Fifty-two weeks ended
July 25, 1992
<S> <C> <C> <C> <C>
Buildings $ 3,590,020 $1,058,059 $ 89,355 $ 4,558,724
Store fixtures &
equipment 25,967,780 5,362,514 4,454,152 26,876,142
Leasehold improvements 5,249,854 972,371 539,414 5,682,811
Leased property
under capital leases 6,216,743 603,320 -- 6,820,063
Vehicles 596,013 188,950 126,056 658,907
$41,620,410 $8,185,214 $5,208,977 $44,596,647
</TABLE>
<PAGE 16>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
Village Super Market, Inc.
By: /S/ Kevin Begley By: /S/ Perry Sumas
Kevin Begley Perry Sumas
(Chief Financial & (Chief Executive Officer)
Principal Accounting Officer)
Date: October 27, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on dates indicated:
/S/ Nicholas Sumas /S/ John P. Sumas
Nicholas Sumas, October 27, 1994 John P. Sumas, October 27, 1994
(Director) (Director)
/S/ Perry Sumas /S/ James Sumas
Perry Sumas, October 27, 1994 James Sumas, October 27, 1994
(Director) (Director)
/S/ William Sumas /S/ Robert Sumas
William Sumas, October 27, 1994 Robert Sumas, October 27, 1994
(Director) (Director)
/S/ John J. McDermott /S/ George Andresakes
John McDermott, October 27, 1994 George Andresakes, October 27, 1994
(Director) (Director)
/S/ Norman Crystal
Norman Crystal, October 27, 1994
(Director)
<PAGE 17>
EXHIBIT NO. 22
SUBSIDIARIES OF REGISTRANT
The Company currently has one wholly-owned subsidiary, Village
Liquor, Inc. This corporation is organized under the laws of the State
of New Jersey. The Financial statements of this subsidiary are
included in the Company's consolidated financial statements.
<PAGE 18>
EXHIBIT NO. 23
Independent Auditors' Consent
The Board of Directors
Village Super Market, Inc.:
We consent to incorporation by reference in the Registration
Statement (No. 2-86320) on Form S-8 of Village Super Market, Inc. of
our reports dated September 30, 1994, except as to note 5, which is
as of October 21, 1994, relating to the consolidated balance sheets
of Village Super Market, Inc. and subsidiaries as of July 30, 1994
and July 31, 1993, and the related consolidated statements of
operations, shareholders' equity, and cash flows and related
schedules for each of the years in the three year period ended July
30, 1994, which reports appear in or are incorporated by reference in
the July 30, 1994 annual report on Form 10-K of Village Super Market,
Inc.
KPMG Peat Marwick LLP
Short Hills, New Jersey
October 27, 1994
<PAGE 19>
EXHIBIT NO. 28A
Village Super Market, Inc., Reports Results
For the Fourth Quarter and Year Ended July 30, 1994
Springfield, NJ - October 6, 1994 - Village Super Market, Inc. reported sales
and a net loss for the fourth quarter ended July 30, 1994, Perry Sumas,
President announced today.
In the fourth quarter, sales decreased 7.8% to $187,842,000. The Company had a
net loss of $249,000 compared to a net loss of $127,000 in the fourth quarter of
the prior year.
In reviewing the quarter, Mr. Sumas reported that the net loss for the quarter
was due to flat same store sales, lower than expected gross margins and
increased payroll costs. Sales decreased in the current quarter due to the
prior year containing a fifteenth week as compared to the current year's
fourteen weeks and the closing of a store in the current year. Same store
sales were flat in the current quarter, despite a comparison to a year ago
quarter that included a strike at six stores, due to the sluggish economy and
competitive openings.
For the full year, the net loss was $807,000, which includes an increase to net
income of $400,000 for the cumulative effect of a change in the method of
accounting for income taxes. This compares with net income in the prior year of
$1,437,000, which included a $1,022,000 gain on the sale of a store. Sales for
the full year decreased 2.6% to $695,070,000. The sales decrease is due to the
prior year containing 53 weeks and the impact of closed stores. Same store
sales for the year increased 1.3%.
The net loss in fiscal 1994 compared to net income in the prior year is
principally attributable to increased promotional spending, chiefly couponing,
in the second and third quarter of this year. Although the additional
promotional spending was partially responsible for increased same store sales
in those quarters, a larger sales increase was expected in order to offset the
costs of these coupons. In addition, gross margin percentages were lower than
expected, fringe benefit and payroll costs increased and a loss was incurred on
the sale of the Morristown store.
At July 30, 1994, the Company was not in compliance with certain financial
covenants in its bank agreement and its private placement agreement. The
Company expects to receive a waiver of the financial covenant and an amendment
of its loan agreement with the banks. The Company is also not in compliance
with a financial covenant in a debt agreement with another lender. This does
not constitute an event of default; however, until this ratio is met or a waiver
obtained, the Company is prevented from borrowing additional funds, declaring
dividends and executing new leases.
<PAGE 20>
With the closing in August 1994 of the Easton, Pa. store, Village Super Market
now owns and operates a chain of 23 supermarkets under the ShopRite name in New
Jersey and Eastern Pennsylvania. The following table summarizes results for the
quarter and year ended July 30, 1994.
<TABLE>
<CAPTION>
July 30, 1994 July 31,1993
Quarter Ended
<S> <C> <C>
Sales $187,842,000 $203,800,000
Net Income (Loss) $ (249,000) $ (127,000)
Net Income (Loss) Per Share $ (.09) $ (.05)
</TABLE>
<TABLE>
<CAPTION>
Year Ended
<S> <C> <C>
Sales $695,070,000 $713,856,000
Net Income (Loss) $ (807,000) $ 1,437,000
Net Income (Loss) Per Share $ (.28) $ .49
</TABLE>
<PAGE 21>
EXHIBIT NO. 28B
THIRD QUARTER REPORT
To our shareholders:
The Company had a net loss of $1,131,000 in the third quarter ended April 23,
1994. This compared with net income of $182,000 in the third quarter of the
prior year. The loss for the quarter was principally attributable to an
increase in promotional spending, chiefly couponing. Also contributing to the
loss in the third quarter were lower than expected gross margins, increased
fringe benefit costs and an increase in the loss recorded on the sale of the
Morristown store.
For the first nine months of fiscal 1994, the net loss was $558,000, which
includes an increase to net income of $400,000 for the cumulative effect of the
change in the method of accounting for income taxes. This compares with net
income in the prior year of $1,563,000, which includes a gain, net of tax, of
$1,022,000 on the sale of a store.
Sales for the third quarter were $171,776,000, an increase of 1.4% from the
prior year. Same store sales increased 2.8% this quarter, which was partially
offset by lower sales from stores closed since one year ago. Same store sales
increased in the third quarter as a result of additional promotional spending
and possibly some improvement in the local economy. Sales for the nine month
period were $507,228,000, a slight decrease from the prior year. Same store
sales increased 1.7% for the nine months, which was offset by stores closed
since a year ago.
Gross margins as a percentage of sales for both the quarter and nine month
period were 24.4% compared with 24.3% in both corresponding prior year periods.
High levels of sale item penetration and price competition in the marketplace
have prevented further increases in gross margins.
Operating and administrative expenses as a percentage of sales for the quarter
and nine month period were 23.5% and 22.8%, respectively, compared with 22.2%
in both corresponding prior year periods. The principal reason for these
increases was the higher level of promotional spending, chiefly couponing,
which began in the second quarter and increased further in the third quarter.
Although the additional promotional spending was partially responsible for the
increase in same store sales, a larger sales increase was expected in order to
offset the costs of these coupons. Inclement weather contributed to the lower
than expected sales and also increased snow removal costs. In addition,
fringe benefit costs increased.
A loss of $81,000 on the sale of the Morristown store was recorded in the first
quarter of fiscal 1994. An additional loss of $300,000 was recorded in the
current quarter due to the failure of the Company's former sub-lessee to make
required rent payments.
On March 29, 1994 the Company replaced its expired $20,000,000 revolving/term
loan agreement with a new $30,000,000 loan agreement with two banks. The new
agreement consists of a $10,000,000 term loan, a $12,000,000 revolving loan and
a $8,000,000 convertible revolving loan. At April 23, 1994 the only balance
outstanding on this facility was the $10,000,000 term loan. The $12,000,000
revolving loan, which can be used for any purpose except new store
construction, matures March 31, 1997. The $8,000,000 convertible revolving
loan is to be used only for capital expenditures and can be used through
December 31, 1995.
<PAGE 22>
At April 23, 1994, the Company did not meet financial ratios required by the
above debt agreement and an additional debt agreement with a total of three
lenders. This constitutes and event of default under these agreements. The
Company is engaged in discussions with these lenders regarding this situation.
Without the consent of the two banks, the Company will not be allowed to borrow
under the $8,000,000 convertible revolving loan portion of the credit facility
described above. Without a waiver from another lender, the Company would be pre
vented from borrowing additional funds, executing new leases or declaring
dividends.
As a result of the events of default described above, the Company has
reclassified $22,100,000 of long-term debt as a current liability in the April
23, 1994 balance sheet. There is no indication at this time that any of the
three lenders intend to request immediate payment of these amounts.
The Company is currently in the process of remodeling two stores. A remodel and
expansion of an additional store is planned to begin shortly. A planned
expenditure for 1994 had been the purchase of land for a new superstore.
As this store has not yet received planning board approval, this expenditure has
been rescheduled for fiscal 1995.
Respectfully,
Perry Sumas James Sumas
President Chairman of the Board
June 13, 1994
<TABLE>
<CAPTION>
STATEMENT OF INCOME
(For Three Months Ended) (For Nine Months Ended)
April 23,1994 April 17,1993 April 23,1994 April 17,1993
<S> <C> <C> <C> <C>
Sales $171,776,000 $169,431,000 $507,228,000 $510,056,000
NetIncome(loss) $ (1,131,000) $ 182,000 $ (558,000) $ 1,563,000
Per Share $ (.39) $ .06 $ (.19) $ .54
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET COMPARISONS
April 23,1994 July 31, 1993
<S> <C> <C>
Current Assets $ 34,909,000 $ 41,236,000
Current Liabilities 63,304,000 43,539,000
Net Working Capital (Deficit) (28,395,000) (2,303,000)
Long Term Debt 11,399,000 39,470,000
Stockholders' Equity 52,672,000 53,230,000
</TABLE>
<PAGE 1>
Village Super Market Annual Report 1994
Village Super Market, Inc. and Subsidiaries
Contents
Letter to Shareholders 2
Selected Financial Data 3
Quarterly Financial Data 3
Management's Discussion and Analysis of
Financial Condition and Results of Operations 4
Consolidated Balance Sheets 6
Consolidated Statements of Operations 7
Consolidated Statements of Shareholders' Equity 8
Consolidated Statements of Cash Flows 9
Notes to Consolidated Financial Statements 10
Independent Auditors' Report 16
Stock Price and Dividend Information 16
Corporate Directory Inside back cover
<PAGE 2>
Dear Fellow Shareholders
Fiscal 1994 was a disappointment. We suffered a net loss before an
accounting change of $1,206,690, or $.42 per share. Sales decreased 2.6% to
$695,070,272 due to two store closings and one less week in this fiscal year.
A major portion of the loss was attributable to increased promotional
spending, mostly coupons, in the second and third quarters. Although this
spending increase was partly responsible for increased same store sales in those
quarters, a larger sales increase was expected to offset the coupon costs. The
sluggish economy, new competitive entries and inclement weather last winter
limited the annual same store sales increase to 1.3% despite the higher
promotional spending. Also contributing to the net loss for the year were lower
than expected gross margins, increased fringe benefit and payroll costs and a
loss on closing the Morristown store.
We expect a slight decline in same store sales in fiscal 1995 due to
current and anticipated competitive openings. Despite this, we intend to
improve our performance in 1995. We are reviewing all of our business activities
in an effort to reduce our cost structure and increase customer satisfaction.
What have we done so far? We closed our Easton store in August. This is the
fifth underfacilitated, unprofitable store we have closed in three years. We
re-evaluated the effectiveness of our advertising and coupon programs and made
adjustments where appropriate to reduce our overall promotional costs. We
recently reduced our supervisory headcount. We have redeployed floor space in
two stores by closing unprofitable departments and are evaluating several
departments in other stores. We continue to seek more effective utilization of
store hours worked to satisfy customer needs, and have seen some improvement in
operating efficiencies in recent months.
We continue to utilize our investment in technology to better satisfy
customers as well as to achieve efficiencies. We completed the rollout of debit
and credit card payment options at all of our ShopRite stores this year. Over
10% of our sales dollars are now paid for by customers with the convenience of a
credit or debit card.
ShopRite began using Clip Less coupons this spring. Customers need only
present their free Price Plus card to receive the value of our coupons no more
cutting out coupons. In addition to being more customer friendly, Clip Less
coupons are more efficient for us to process.
We are currently in the process of converting our customers' separate Price
Plus and check-cashing cards to a single, more convenient Universal card. In
addition to customer convenience, the new Universal card provides us with
improved ability to limit the acceptance of bad checks. Ten stores have begun to
use computer generated ordering, which is designed to reduce inventory levels
and out of stock conditions, enhance shelf space utilization and reduce labor
costs.
We recently completed a major expansion and remodel of the Stirling store
and smaller improvements at the Hillsborough and Somers Point stores. Major
expansions of the Chester and Absecon stores are scheduled for fiscal 1995.
We thank our employees for their efforts in working through our current
problems and we thank our shareholders for their support.
James Sumas, Perry Sumas,
Chairman of the Board President
<PAGE 3>
<TABLE>
<CAPTION>
Selected Financial Data
(Dollars in thousands except per share and per sq. ft. data)
July 30, July 31 , July 25, July 27, July 28,
For Year 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Sales $695,070 $713,856 $715,059 $686,002 $681,174
Net income (loss) (807) 1,437 487 1,908 4,294
Net income (loss)
per share (.28) .49 .17 .64 1.40
Cash dividends
per share
Class A -- -- .075 .15 .15
Class B -- -- .05 .10 .10
At year end
Total assets 134,793 141,387 145,668 141,847 132,518
Long term obligations
including capital
leases 36,933 39,470 45,699 40,328 38,276
Working capital
(deficit) (4,100) (2,303) (3,617) (2,651) 6,668
Shareholders'
equity 52,423 53,230 51,793 51,485 51,258
Book value per share 18.01 18.29 17.80 17.69 16.78
Other data
Selling square feet 845,000 874,000 930,000 881,000 835,000
Number of stores 24 25 27 27 27
Sales per average
number of stores 28,370 27,456 26,484 25,407 25,229
Sales per average
square foot of
selling space 809 791 790 814 816
Capital expenditures 5,974 1,977 14,494 18,963 5,337
</TABLE>
<TABLE>
<CAPTION>
Unaudited Quarterly Financial Data
(Dollars in thousands except per share amounts)
First Second Third Fourth Fiscal
Quarter Quarter Quarter Quarter Year
1994
<S> <C> <C> <C> <C> <C>
Sales $158,745 $176,707 $171,776 $187,842 $695,070
Gross margin 38,940 42,897 41,846 45,404 169,087
Income (loss) before
cumulative effect
of accounting change 16 157 (1,131) (249) (1,207)
Income (loss) per share
before cumulative effect
of accounting change -- $ .06 $ (.39) $ (.09) $ (.42)
Net income (loss) 416 157 (1,131) (249) (807)
Net income (loss)
per share $ .14 $ .06 $ (.39) $ (.09) $ (.28)
1993
Sales $165,572 $175,053 $169,431 $203,800 $713,856
Gross margin 40,568 42,159 41,241 48,768 172,736
Net income (loss) 169 1,213 182 (127) 1,437
Net income (loss)
per share $ .06 $ .42 $ .06 $ (.05) $ 49
</TABLE>
<PAGE 4>
Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
The following table sets forth the major components of the Consolidated
Statements of Operations of the Company as a percentage of sales:
<TABLE>
<CAPTION>
July 30, July 31, July 25,
1994 1993 1992
<S> <C> <C> <C>
Sales 100.00% 100.00% 100.00%
Cost of Sales 75.67 75.80 75.68
Gross margin 24.33 24.20 24.32
Operating and administrative expense 22.73 22.27 22.31
Depreciation and amortization 1.26 1.22 1.22
Operating income .34 .71 .79
Interest (net) .57 .62 .69
Gain (loss) on disposal of assets (.05) .24 .01
Income (loss) before taxes and
cumulative effect of accounting change (.28)% .33% .11%
</TABLE>
Sales decreased $18,786,000 in fiscal 1994. Sales decreased $13,100,000
as a result of the prior year containing 53 weeks. The sale of the Morristown
and Kingston stores caused decreased sales of $13,900,000. Offsetting these
declines, was a same store sales increase of 1.3%. Although same store sales
increased in the middle part of the fiscal year due to increased promotional
spending, the sluggish economy and new competitive entries held same store sales
flat in the fourth quarter. Sales decreased $1,200,000 in fiscal 1993. The sales
of the Kingston and Maplewood stores in early fiscal 1993 resulted in decreased
sales of $28,400,000. A two week labor dispute at six stores reduced sales by
approximately $2,300,000. These decreases were offset by an increase in sales
of $13,100,000 as fiscal year 1993 contained fifty-three weeks. In addition, a
full years operation of the Elizabeth store, opened in December 1991, resulted
in increased sales of $16,100,000. Same store sales were flat in 1993 due to the
sluggish economy and increased competition.
Gross margin as a percentage of sales increased slightly in fiscal 1994 as
a result of aggressive buying practices. High levels of sale item penetration
and price competition in the marketplace prevented further increases in gross
margins in fiscal 1994, and caused margins to decline in fiscal 1993.
Operating and administrative expenses in fiscal 1994 were slightly lower
due to store closings and one less week of operations but increased by .46 as a
percentage of sales. Approximately half of this increase was due to higher
levels of promotional spending, chiefly coupons, in the middle part of the year.
Although this additional promotional spending was partially responsible for the
increase in same store sales, a larger sales increase was expected in order to
offset the cost of these coupons. Inclement weather contributed to the lower
than expected sales and also increased snow removal costs. In addition, workers'
compensation, health care and payroll costs increased. Operating and
administrative expenses in fiscal 1993 were approximately the same as the prior
year in both dollar and percentage of sales terms. Increased costs for health
care, workers' compensation and costs associated with the labor dispute were
offset by reduced supply and rental costs. Payroll costs, excluding benefits,
were the same as the prior year as contractual increases under collective
bargain agreements were offset by reductions in hours worked due to operating
efficiencies.
Interest expense decreased in 1994 and 1993 due to declining debt levels
and lower interest rates.
The Company continuously reviews its portfolio of stores to determine which
should be improved upon and which no longer fit the Company's plans.
Accordingly, the equipment and leasehold of the Morristown store was sold on
October 6, 1993 for $87,000 plus the cost of inventory. A loss of $354,000 was
recorded in fiscal 1994 to reflect store operations through the date of closing,
the effect of the sale transaction and a reserve for estimated future rental
payments due as a result of the failure of the Company's former sublessee to
make required rent payments. The Easton store was closed on August 30, 1994. The
Company expects to sell or lease this Company owned property during fiscal
1995. The Kingston and Maplewood stores were sold in early fiscal 1993 for net
proceeds of $2,234,000, plus the cost of inventory. A gain in the amount of
$1,696,000 before taxes was realized on these transactions.
<PAGE 5>
Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Sales were not materially effected by inflation in 1994 and 1993. The
Company has historically been able to pass along inflationary increases in
its direct product costs through increased selling prices. However, operating
and administrative costs, particularly payroll and fringe benefits, have
continued to increase in recent years despite the lack of inflation in food
prices. The competitive climate has prevented the Company from increasing gross
margins to compensate for increased operating costs. As a result, the Company
has experienced declining profitability in the last few years. A continuation of
the current trend of increased price competition, higher wage and benefit
costs and a sluggish economy could prevent the Company from increasing its
operating margins and profitability.
LIQUIDITY AND CAPITAL RESOURCES
Current liabilities exceeded current assets by $4,100,000, $2,303,000 and
$3,617,000 at the end of fiscal 1994, 1993 and 1992, respectively. Working
capital ratios at the same dates were .90, .95 and .92 to one. The Company's
working capital needs are reduced by its high rate of inventory turnover
(twenty times in fiscal 1994) and because the warehousing and distribution
arrangements accorded to the Company as a member of Wakefern permit it to
minimize inventory levels. The Starn's stores generate greater sales during the
summer months due to their location in the southern shore region of New Jersey.
This seasonality serves to offset the slight decline in sales experienced
during the summer months by the majority of the Company's other stores,
resulting in a more level distribution of working capital requirements
throughout the year.
Capital expenditures in 1994 were $5,974,000. The major expenditure was the
expansion and remodel of the Stirling store. The remainder of capital
expenditures included smaller expansions of the Hillsborough and Somers Point
stores. The Company has budgeted approximately $8,000,000 for capital
expenditures in fiscal 1995. The major planned expenditures are the
expansion and remodel of the Chester store and the beginning of the expansion
of the Absecon store. The Company expects to finance these expenditures through
internally generated funds and borrowing under its credit facility.
The Company has historically financed capital expenditures through cash
provided by operations supplemented by bank borrowings. Aggregate capital
expenditures for the three years ended July 30, 1994 were $22,445,000. During
the same period of time, net long-term borrowings decreased by $2,615,000. The
ability to finance expansion through operational cash flow is reflected in the
ratio of long-term debt to total capitalization, which is currently 41.3%,
slightly lower than three years ago.
On March 29, 1994 the Company replaced its expired $20,000,000 revolving/
term loan agreement with a new loan agreement with two banks. The new
agreement consists of a $10,000,000 term loan and a $12,000,000 revolving loan.
At July 30, 1994 the Company did not meet the interest coverage ratio required
under this agreement. On October 21, 1994, the Company obtained a waiver of the
covenant violation and an amendment of the loan agreement. The Company believes
that it will be in compliance with these modified covenants for the remaining
term of the agreement.
At July 30, 1994, the Company did not meet a cash flow-to-fixed charge
coverage ratio contained in two other debt agreements with one lender. This does
not constitute an event of default. However, until this ratio is met or unless a
waiver is obtained, the agreements prevent the Company from borrowing additional
funds (other than the Company's revolving loan), declaring dividends and
executing new leases.
<PAGE 6>
<TABLE>
<CAPTION>
Consolidated Balance Sheets
July 30, July 31,
1994 1993
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 7,246,164 $ 6,619,455
Merchandise inventories 25,273,150 26,245,890
Patronage dividend receivable 2,782,470 2,950,263
Miscellaneous receivables 1,902,370 4,241,747
Income taxes receivable 356,814 610,272
Prepaid expenses 580,124 569,015
Total current assets 38,141,092 41,236,642
PROPERTY, EQUIPMENT AND FIXTURES,
at cost less accumulated
depreciation and amortization 71,413,918 74,130,867
OTHER ASSETS
Investment in related party, at cost 9,415,874 9,054,546
Goodwill, net 11,137,730 11,404,010
Other intangibles, net 3,045,001 3,298,751
Receivables and other assets 1,639,152 2,262,478
Total other assets 25,237,757 26,019,785
$134,792,767 $141,387,294
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
<S> <C> <C>
Current portion of long-term debt:
Mortgages and notes payable $ 4,764,650 $ 4,719,804
Capitalized lease obligations 383,926 458,721
Accounts payable to related party 23,947,383 23,400,532
Accounts payable and accrued
expenses 12,330,181 14,522,163
Deferred income taxes 814,737 438,000
Total current liabilities 42,240,877 43,539,220
LONG-TERM DEBT, less current portion:
Mortgages and notes payable 26,320,696 28,065,013
Capitalized lease obligations 10,612,232 11,405,278
Total long-term debt 36,932,928 39,470,291
DEFERRED INCOME TAXES 3,195,595 5,147,726
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stock, no par value:
Authorized 10,000,000 shares,
none issued --- ---
Class A common stock, no par value:
Authorized 10,000,000 shares,
issued 1,762,800 in 1994 and
1,758,800 in 1993 18,129,472 18,126,876
Class B common stock, no par
value: Authorized 10,000,000
shares, issued and outstanding
1,594,076 in 1994 and
1,598,076 in 1993 1,034,679 1,037,275
Retained earnings 39,444,219 40,250,909
Less treasury stock, Class A,
at cost (447,000 shares) (6,185,003) (6,185,003)
Total shareholders' equity 52,423,367 53,230,057
$134,792,767 $141,387,294
</TABLE>
See notes to consolidated financial statements.
<PAGE 7>
<TABLE>
<CAPTION>
Consolidated Statements of Operations
Years Ended
July 30, July 31, July 25,
1994 1993 1992
<S> <C> <C> <C>
SALES $695,070,272 $713,856,206 $715,059,074
COST OF SALES 525,983,044 541,120,690 541,172,839
GROSS MARGIN 169,087,228 172,735,516 173,886,235
Operating and administrative
expense 157,983,230 158,943,214 159,532,355
Depreciation and amortization
expense 8,785,917 8,718,220 8,722,193
Operating Income 2,318,081 5,074,082 5,631,687
Interest expense, net of interest
income of $103,126, $27,459
and $54,992 3,900,248 4,404,606 4,934,046
Gain (loss) on disposal of assets (354,523) 1,696,174 100,506
INCOME (Loss) BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE(1,936,690) 2,365,650 798,147
PROVISION (BENEFIT) FOR INCOME TAXES (730,000) 929,000 311,000
INCOME (LOSS) BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE (1,206,690) 1,436,650 487,147
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR INCOME TAXES 400,000 -- --
NET INCOME (LOSS) $ (806,690) $1,436,650 $ 487,147
NET INCOME (LOSS) PER SHARE:
INCOME (LOSS) BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE $ (.42) $ .49 $ .17
CUMULATIVE EFFECT OF ACCOUNTING CHANGE .14 -- --
NET INCOME (LOSS) PER SHARE $ (.28) $ .49 $ .17
</TABLE>
See notes to consolidated financial statements.
<PAGE 8>
<TABLE>
<CAPTION>
Consolidated Statements of Shareholders' Equity
Years Ended July 30, 1994,
July 31, 1993 and July 25, 1992
No Par Value No Par Value
Class A, Class B,
Common Stock Common Stock
Retained Treasury
Shares Amount Shares Amount Earnings Stock
<S> <C> <C> <C> <C> <C> <C>
Balance,
July 27,
1991 1,758,800 $18,126,876 1,598,076 $1,037,275 $38,505,399 $(6,185,003)
Net
income _ _ _ _ 487,147 _
Dividends
on common
stock
($.075 per
Class
A share and
$.05 per
Class B
share) _ _ _ _ (178,287) _
Balance,
July 25,
1992 1,758,800 $18,126,876 1,598,076 $1,037,275 $38,814,259 $(6,185,003)
Net
Income _ _ _ _ 1,436,650 _
Balance,
July 31,
1993 1,758,800 $18,126,876 1,598,076 $1,037,275 $40,250,909 $(6,185,003)
Net Loss _ _ _ _ (806,690) _
Conversion
of shares 4,000 2,596 (4,000) (2,596) _ _
Balance,
July 30,
1994 1,762,800 $18,129,472 1,594,076 $1,034,679 $39,444,219 $(6,185,003)
</TABLE>
See notes to consolidated financial statements.
<PAGE 9>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
Years Ended
July 30, 1994 July 31, 1993 July 25, 1992
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income (loss) $(806,690) $1,436,650 $ 487,147
Adjustments to reconcile
net income (loss) to net cash
provided by operating activities:
Cumulative effect of accounting
change (400,000) _ _
Depreciation and
amortization 8,785,917 8,718,220 8,722,193
Deferred taxes (911,000) (138,000) (654,000)
Provision to value inventories
at LIFO 656,346 212,380 (193,762)
(Gain) loss on disposal of
assets 354,523 (1,696,174) (100,506)
Changes in assets and liabilities:
(Increase) decrease in
merchandise inventories 316,394 252,033 (2,427,568)
(Increase) decrease in
patronage dividend
receivables 167,793 (29,710) 245,744
(Increase) decrease in
miscellaneous receivables 2,339,377 (601,755) 280,925
(Increase) decrease in
prepaid expenses (11,109) (118,037) 87,675
(Increase) decrease in
income taxes receivable 253,458 (610,272) _
(Increase) decrease in
other assets 606,376 (265,924) (11,870)
Increase (decrease) in
accounts payable to
related party 546,851 (288,519) (399,889)
Increase (decrease) in
accounts payable and
accrued expenses (2,191,982) 308,445 (705,254)
(Decrease) in income
taxes payable (264,394) (239,920) (40,113)
Net cash provided by
operating activities 9,441,860 6,939,417 5,290,722
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (5,973,814) (1,976,758) (14,494,387)
Investment in related party (361,328) (542,403) (845,486)
Proceeds from sale of assets 87,303 2,234,309 298,800
Net cash used in investing
activities (6,247,839) (284,852) (15,041,073)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of
long-term debt 14,000,000 _ 9,680,270
Principal payments of
long-term debt (16,567,312) (5,359,109) (4,369,409)
Dividends paid _ _ (178,287)
Net cash provided (used) by
financing activities (2,567,312) (5,359,109) 5,132,574
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 626,709 1,295,456 (4,617,777)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 6,619,455 5,323,999 9,941,776
CASH AND CASH EQUIVALENTS,
END OF YEAR $7,246,164 $6,619,455 $ 5,323,999
</TABLE>
See notes to consolidated financial statements.
<PAGE 10>
Notes to Consolidated Financial Statements
NOTE 1 _ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The consolidated financial statements include the accounts of Village
Super Market, Inc. and its subsidiaries, all of which are wholly owned.
Intercompany balances and transactions have been eliminated.
Fiscal year
The Company and its subsidiaries utilize a 52-53 week fiscal year ending on
the last Saturday in the month of July. Fiscal 1993 contains 53 weeks. Fiscal
1994 and 1992 contain 52 weeks.
Industry segment
The Company consists of one operating segment, the retail sale of food and
non-food products.
Reclassifications
Certain amounts have been reclassified in the 1993 and 1992 financial
statements to conform to the 1994 financial statement presentation.
Cash and cash equivalents
Cash and cash equivalents includes interest bearing, overnight deposits
with Wakefern in the amount of $5,200,000 and $4,800,000 at July 30, 1994 and
July 31,1993, respectively.
Merchandise inventories
Merchandise inventories are carried at cost, which is not in excess of
market. Cost is determined as follows:
Grocery and non-foods _ last-in, first-out (LIFO) (retail less departmental
gross profit mark-up).
Meat and all other perishables _ first-in, first-out (FIFO).
Dairy, frozen foods and liquor _ FIFO (retail less departmental gross
profit mark-up).
Property, equipment and fixtures
Property, equipment and fixtures are recorded at cost. Interest cost
incurred to finance construction is capitalized as part of such cost.
Renewals and betterments are capitalized. Maintenance and repairs are expenses
as incurred.
Depreciation is provided on a straight-line basis over estimated useful
lives of thirty years for buildings, ten years for store fixtures and equipment,
and three years for vehicles. Leasehold improvements are amortized over ten
years. Capital leases are amortized on a straight-line basis over the shorter of
the related lease term or the economic lives of the related assets.
When assets are sold or retired, their cost and accumulated depreciation
are removed from the accounts, and any gain or loss is reflected in the
financial statements.
Store opening and closing costs
All store opening costs are expensed as incurred. Provisions are made for
losses resulting from store closings at the time of closing.
Leases
Leases which meet certain criteria are classified as capital leases, and
assets and liabilities are recorded at amounts equal to the lesser of the
present value of the minimum lease payments or the fair value of the leased
properties at the inception of the respective leases. Such assets are amortized
on a straight-line basis over the shorter of the related lease terms or the
economic lives of the related assets. Amounts representing interest expense
relating to the lease obligations are recorded to affect constant rates of
interest over the terms of the leases. Leases which do not qualify as capital
leases are classified as operating leases, and related rentals are charged to
expense as incurred.
Goodwill
Goodwill arising after October 31, 1970 is being amortized over forty
years. The Company does not amortize goodwill amounting to approximately
$2,900,000 acquired prior to October 31, 1970 since, in management's opinion,
the value of such intangibles has not diminished. Accumulated amortization of
goodwill amounted to $2,274,250 and $2,007,970 at July 30, 1994 and July 31,
1993, respectively.
Other intangibles
Other intangibles include the fair value of a favorable lease and
trademarks acquired in a business acquisition. Other intangibles are being
amortized over 20 years. Accumulated amortization of other intangibles amounted
to $2,029,999 and $1,776,249 at July 30, 1994 and July 31, 1993, respectively.
Income taxes
Effective August 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," (SFAS 109) which
requires an asset and liability approach for accounting for income taxes. Under
this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates in effect. As permitted by SFAS
109, the Company has elected not to restate the financial statements of any
prior periods.
<PAGE 11>
Notes to Consolidated Financial Statements
(Continued)
NOTE 1 _ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Net income (loss) per share
Net income (loss) per share is computed by dividing net income (loss) by
the weighted average number of all common shares outstanding during the periods
presented which was 2,909,876 in 1994, 1993 and 1992. Stock options are not
included in the calculation as their inclusion would be anti-dilutive or would
not result in a material dilution of net income (loss) per share.
NOTE 2 _ INVENTORIES
Merchandise inventories are comprised as follows:
<TABLE>
<CAPTION>
July 30, July 31,
1994 1993
<S> <C> <C>
Last-in, first-out (LIFO) $17,084,096 $17,825,707
First-in, first-out (FIFO) 8,189,054 8,420,183
$25,273,150 $26,245,890
</TABLE>
If the FIFO method of inventory accounting had been used rather than LIFO,
inventories would have been $6,467,653 and $5,811,307 higher than reported in
1994 and 1993, respectively.
NOTE 3 _ PROPERTY, EQUIPMENT AND FIXTURES
Property, equipment and fixtures are comprised as follows:
<TABLE>
<CAPTION>
July 30, July 31,
1994 1993
<S> <C> <C>
Land and buildings $42,365,651 $41,928,576
Store fixtures and equipment 56,895,598 55,024,926
Leasehold improvements 13,185,705 11,246,225
Leased property under capital
leases 13,700,599 15,182,532
Vehicles 852,096 883,644
Construction in progress 730,496 231,160
127,730,145 124,497,063
Less accumulated depreciation
and amortization 56,316,227 50,366,196
Property, equipment and fixtures,
net $71,413,918 $74,130,867
</TABLE>
Interest cost capitalized amounted to $200,000 in 1992 (none in 1994 and
1993).
NOTE 4 _ RELATED PARTY INFORMATION
The Company's investment in its principal supplier, Wakefern Food Corp.
("Wakefern"), which is operated on a cooperative basis for its stockholder
members, is less than 20% of the outstanding shares of Wakefern. The investment
is pledged as collateral for any obligations to Wakefern. In addition, this
obligation is personally guaranteed by the principal shareholders of the
Company. The Company is obligated to purchase 85% of its primary merchandise
requirements from Wakefern until ten years from the date that stockholders
representing 75% of Wakefern sales notify Wakefern that those stockholders
request the Wakefern Stockholder Agreement be terminated.
The Company's merchandise purchases from Wakefern approximated
$490,447,000, $489,658,000 and $484,516,000 during fiscal years 1994, 1993 and
1992, respectively. Wakefern distributes as a "patronage dividend" to each
member a share of earnings of Wakefern in proportion to the dollar volume of
business done by the member with Wakefern during the year. Patronage dividends,
which are recorded as a reduction of cost of sales, amounted to approximately
1.1% of sales in 1994, 1.0% in 1993 and .9% in 1992.
<PAGE 12>
Notes to Consolidated Financial Statements
(Continued)
NOTE 4 _ RELATED PARTY INFORMATION (continued)
Wakefern has increased from time to time the required investment in its
common stock for each supermarket owned by a member, with the exact amount per
store computed in accordance with a formula based on the volume of each store's
purchases from Wakefern. As a result, the Company is required to invest
approximately $1,065,000 over approximately the next four years. The Company
will receive additional shares of common stock to the extent paid for at the
end of each fiscal year (September 30) of Wakefern calculated at the then book
value of such shares. The payments together with any stock issued thereunder,
at the option of Wakefern, may be null and void and all payments on this
subscription shall become the property of Wakefern in the event the Company
does not complete the payment of this subscription in a timely manner.
NOTE 5 _ MORTGAGES AND NOTES PAYABLE
<TABLE>
<CAPTION>
July 30, July 31,
1994 1993
<S> <C> <C>
Term loans, interest at 8.49% payable monthly,
principal payable in monthly installments of
$55,555 beginning August 1, 1994 with a final
principal payment of $5,555,556 due
April 1, 2001 $10,000,000 _
Revolving credit note 4,000,000 9,000,000
Senior unsecured notes, interest at 9.91%
payable quarterly, due in equal annual
installments through August 15, 1997 8,100,000 12,500,000
Mortgage note, interest at 10.19% payable
semi-annually, due in three equal annual
installments beginning December 1, 1997,
collateralized by certain land and building 4,000,000 4,000,000
Notes payable, interest at prime minus 1.5%,
payable in monthly installments through
January 1998, collateralized by certain
equipment 4,932,430 6,138,603
Other notes payable 52,916 1,146,214
31,085,346 32,784,817
Less current portion 4,764,650 4,719,804
Noncurrent maturities $26,320,696 $28,065,013
</TABLE>
Aggregate principal maturities of notes and mortgages as of July 30, 1994 are as
follows:
<TABLE>
<CAPTION>
Year ending July:
<S> <C>
1995 $4,764,650
1996 4,711,734
1997 8,670,067
1998 2,938,894
1999 2,000,000
</TABLE>
On March 29, 1994 the Company entered into a new loan agreement with two
banks. The agreement consists of a $10,000,000 term loan and a $12,000,000
revolving loan. The $12,000,000 revolving loan, which can be used for any
purpose except new store construction, matures March 31, 1997 and carries
interest at prime plus .5%.
At July 30, 1994 the Company did not meet the interest coverage ratio
required under this agreement. However, on October 21, 1994 the covenant
violation was waived and the agreement amended to lower the covenant
requirements for the remainder of the agreement. In addition to interest
coverage requirements, this agreement also contains restrictive covenants
which, among other matters, specify total debt levels, maintenance of net
worth, cash flow coverage ratios, limitation on payment of dividends and
limitation of capital expenditures.
At July 30, 1994 the Company did not meet a cash flow-to-fixed charge
coverage ratio contained in two other debt agreements with one lender. This
does not constitute an event of default. However, until this ratio is met or
unless a waiver is obtained, the agreements prevent the Company from borrowning
additional funds (other than under the Company's revolving loan), declaring
dividends and executing new leases.
Interest paid amounted to $4,095,616, $4,496,835 and $5,212,971 in 1994,
1993 and 1992, respectively.
<PAGE 13>
Notes to Consolidated Financial Statements
(Continued)
NOTE 6 _ INCOME TAXES
Effective August 1, 1993, the Company adopted SFAS No. 109 (see note 1).
The cumulative effect of adopting SFAS 109 as of August 1, 1993 was to
decrease net loss by $400,000 ($.14 per share). There was no effect of the
change in accounting on pretax income for the year ended July 30, 1994. The
components of the provision (benefit) for income taxes are:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Federal:
Current $ 181,000 $ 733,000 $ 808,000
Deferred (787,000) (89,000) (627,000)
State:
Current _ 334,000 157,000
Deferred (124,000) (49,000) (27,000)
$(730,000) $ 929,000 $ 311,000
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilites and assets as of July 30, 1994 are as
follows:
<TABLE>
<CAPTION>
Deferred tax liabilities:
<S> <C>
Tax over book depreciation $5,978,030
Patronage dividend receivable 1,118,205
Other 365,064
Total deferred tax liabilities 7,461,299
Deferred tax assets:
Amortization of capital leases 1,637,252
Tax credits and loss carry forwards 1,381,647
Other 432,068
Total deferred tax assets 3,450,967
Net deferred tax liability $4,010,332
</TABLE>
A valuation allowance is provided when it is more likely than not that
some portion of the deferred tax assets will not be realized. In management's
opinion, in view of the Company's previous, current and projected taxable
income, such tax assets will more likely than not be fully realized.
Accordingly, no valuation allowance was deemed to be required upon adoption and
at July 30, 1994.
The effective income tax rate differs from the statutory federal income tax
rate as follows:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Statutory federal income tax rate (34.0%) 34.0% 34.0%
Targeted jobs tax credit (4.2) (7.0) (20.0)
Amortization of intangibles 4.7 4.4 14.3
State income taxes, net of federal
tax benefit (4.2) 7.9 10.7
Effective income tax rate (37.7%) 39.3% 39.0%
</TABLE>
During 1993 and 1992, deferred income taxes were provided for significant
timing differences in the recognition of expenses for tax and financial
statement purposes. The principal components of deferred tax expense (benefit)
in 1993 and 1992 are depreciation 1993_$(354,000) and 1992_$(250,000) and
accrued liabilities 1993_$128,000 and 1992_$(374,000).
The Company has approximately $900,000 of alternative minimum tax credits
that may be carried forward indefinitely. The Company has approximately
$200,000 of targeted jobs tax credits and $275,000 of net operating losses
that can be carried forward fifteen years.
Income taxes paid amounted to approximately $192,000, $1,917,000 and
$1,005,000 in 1994, 1993 and 1992, respectively.
<PAGE 14>
Notes to Consolidated Financial Statements
(Continued)
NOTE 7 _ LONG-TERM LEASES
Description of leasing arrangements
The Company conducts a major part of its operations from leased facilities,
with the majority of initial lease terms ranging from 20 to 30 years. All of the
Company's leases expire through fiscal 2059.
Most of the Company's leases contain renewal options of five years each.
These options enable the Company to retain the use of facilities in desirable
operating areas. Management expects that in the normal course of business,
leases will be renewed or replaced by other leases. The Company is obligated
under all leases to pay for utilities and liability insurance, and under
certain leases to pay additional rentals based on real estate taxes,
maintenance, insurance and a percentage of sales in excess of stipulated
amounts.
Future minimum lease payments by year and in the aggregate for all
non-cancelable leases with initial terms of one year or more consisted of the
following at July 30, 1994:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
<S> <C> <C>
1995 $ 2,046,452 $ 2,728,318
1996 1,965,389 2,641,717
1997 1,918,476 2,647,896
1998 1,924,186 2,517,246
1999 1,932,180 2,519,334
Thereafter 20,260,643 16,762,237
Minimum lease payments $30,047,326 $29,816,748
Less amount representing interest 19,051,168
Present value of minimum lease payments $10,996,158
</TABLE>
The following schedule shows the composition of total rental expense under
operating leases for the following periods:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Minimum rentals $3,353,487 $3,149,108 $3,368,766
Contingent rentals 750,728 892,112 957,037
Less sub-lease rentals _ (80,880) (65,100)
$4,104,215 $3,960,340 $4,260,703
</TABLE>
Related party leases
The Company currently leases three supermarkets and its office facility
from realty firms partly or wholly-owned by officers of the Company. The
Company paid aggregate rentals under these leases, including minimum rent and
contingent rent, of approximately $1,215,000, $1,039,000 and $1,249,000 for
fiscal years 1994, 1993 and 1992, respectively. In addition, three supermarkets
are leased from partnerships in which the Company is a partner.
NOTE 8 _ COMMON STOCK
Class A common stock has one vote per share and is entitled to cash
dividends as declared 54% greater than those paid on the Class B common stock.
Class B common stock has ten votes per share. Class B common stock is not
transferable except to another holder of Class B common stock or by will or
under the laws of intestacy or pursuant to a resolution of the Board of
Directors of the Corporation approving the transfer. Shares of Class B common
stock are convertible on a share-for-share basis for Class A common stock.
The Company has an Incentive and Nonstatutory Stock Option Plan under which
both incentive and nonstatutory options to purchase up to 150,000 shares of the
Company's Class A common stock may be granted to officers and employees of the
Company as designated by the Board of Directors. The plan requires incentive
stock options to be granted at an exercise price equaling the fair market
value of the Company's stock at the date of grant (110% if the optionee holds
more than 10% of the voting stock of the Company), while nonstatutory options
may be granted at an exercise price less than market value. All options granted
to date are at an exercise price equal to the fair value at the date of grant.
All options outstanding at July 30, 1994 expire on December 6, 1997. There were
no transactions in fiscal 1994, 1993 and 1992. There are 130,000 options
outstanding and exercisable at an average price of $8.00 at July 30, 1994.
<PAGE 15>
Notes to Consolidated Financial Statements
(Continued)
NOTE 9 _ PENSION PLANS
The Company sponsors three defined benefit pension plans covering
administrative personnel and members of two unions. Employees covered under the
administrative pension benefit plan earn benefits based upon percentages of
annual compensation. Employees covered under the union pension benefit plans
earn benefits based on a fixed amount for each year of service. The Company's
funding policy is to pay at least the minimum contribution required by the
Employee Retirement Income Security Act of 1974.
Net periodic pension cost for the three plans included the following
components:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Service cost $365,414 $384,307 $376,443
Interest cost on projected
benefit obligation 380,587 329,340 298,502
Return on plan assets (152,604) (124,179) (336,233)
Amortization of unrecognized net
assets at transition (232,055) (223,508) 29,399
Net periodic pension cost $361,342 $365,960 $368,111
</TABLE>
The funded status of the three pension plans is reconciled to accrued
pension cost as follows:
<TABLE>
<CAPTION>
July 30, July 31,
1994 1993
<S> <C> <C>
Plan assets at fair value $4,768,284 $3,916,640
Actuarial present value of benefit
obligations:
Vested benefits 4,220,550 3,391,226
Non-vested benefits 99,212 70,784
Accumulated benefit obligations 4,319,762 3,462,010
Effect of future increases in
compensation levels 908,207 1,116,746
Projected benefit obligation 5,227,969 4,578,756
Projected benefit obligation in
excess of plan assets (459,685) (662,116)
Unamortized prior service cost 529,845 456,698
Unrecognized net loss 298,317 124,777
Remaining unrecognized net asset
at July 25, 1987 (amortized over
15 years) (498,314) (560,759)
Additional liability (168,523) _
Accrued pension cost $(298,360) $(641,400)
</TABLE>
Plan assets are invested principally in government securities, common
stocks and mutual funds.
Assumptions used in determining the net fiscal 1994, 1993 and 1992 periodic
pension cost were:
Assumed discount rate 8 to 8.5%
Assumed rate of increase in compensation levels 4%
Expected rate of return on plan assets 8 to 8.5%
The Company also participates in several multi-employer pension plans for
which the 1994, 1993 and 1992 contributions were $1,814,000, $1,822,000 and
$1,873,000, respectively.
NOTE 10 _ COMMITMENTS AND CONTINGENCIES
The Company is under contract to purchase a tract of land, contingent upon
receiving all approvals, on which it plans to construct a superstore.
The Company is involved in litigation incidental to the normal course of
business. Company management is of the opinion that insurance coverage is
adequate and final disposition should not materially affect the consolidated
financial position of the Company.
<PAGE 16>
Independent Auditors' Report
The Board of Directors and Shareholders
Village Super Market, Inc.:
We have audited the accompanying consolidated balance sheets of Village
Super Market, Inc. and subsidiaries as of July 30, 1994 and July 31, 1993, and
the related consolidated statements of operations, shareholders' equity and
cash flows for each of the years in the three-year period ended July 30, 1994.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Village
Super Market, Inc. and subsidiaries at July 30, 1994 and July 31, 1993, and the
results of their operations and their cash flows for each of the years in the
three-year period ended July 30, 1994 in conformity with generally accepted
accounting principles.
As discussed in Notes 1 and 6 to the consolidated financial statements, the
Company adopted the provisions of Financial Accounting Standards Board Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes," as of
August 1, 1993.
KPMG PEAT MARWICK LLP
Short Hills, New Jersey
September 30, 1994, except as to Note 5, which is as of October 21, 1994.
Stock Price and Dividend Information
The Class A common Stock of Village Super Market, Inc. is traded on the
NASDAQ Stock Market under the symbol "VLGEA." The table below sets forth the
high and low last reported sales price for the fiscal year indicated.
<TABLE>
<CAPTION>
Class A Stock
High Low
1994
<S> <C> <C>
4th Quarter 9 7-1/2
3rd Quarter 9 7-1/2
2nd Quarter 9-3/4 7-1/2
1st Quarter 9-3/4 8-1/4
1993
4th Quarter 9-3/4 8-1/4
3rd Quarter 9-1/4 7
2nd Quarter 8 6-1/4
1st Quarter 7-1/4 6-1/4
</TABLE>
As of October 1, 1994, there were 556 holders of record of the Company's
Class A common stock.
No dividends were paid during fiscal 1994 and 1993.
<PAGE 17>
Village Super Market Inc.
CORPORATE DIRECTORY
OFFICERS AND DIRECTORS
NICHOLAS SUMAS
Chairman of the Board _ Emeritus
PERRY SUMAS
Chief Executive Officer and President; Director
JAMES SUMAS
Chairman of the Board; Chief Operating Officer
and Treasurer; Director
ROBERT SUMAS
Executive Vice President and Secretary; Director
WILLIAM SUMAS
Executive Vice President; Director
JOHN SUMAS
Executive Vice President; Director
CAROL LAWTON
Vice President and Assistant Secretary
FRANK SAURO
General Counsel
KEVIN BEGLEY
Chief Financial Officer
GEORGE J. ANDRESAKES
Director
JOHN J. McDERMOTT
Director
NORMAN CRYSTAL
Director
EXECUTIVE OFFICES
733 Mountain Avenue
Springfield, New Jersey 07081
REGISTRAR AND TRANSFER AGENT
Midlantic National Bank
Edison, New Jersey
AUDITORS
KPMG Peat Marwick LLP
150 John F. Kennedy Parkway
Short Hills, New Jersey
FORM 10-K
Copies of the Company's Form 10-K as filed with the Securities
and Exchange Commission are available without charge upon written
request to:
Mr. Robert Sumas, Secretary
Village Super Market, Inc.
733 Mountain Avenue
Springfield, New Jersey 07081
<PAGE 1>
AMENDMENT NO. 1 TO LOAN AGREEMENT
This Amendment No. 1 to Loan Agreement ("Amendment") is made
as of October 21, 1994 by and among NEW JERSEY NATIONAL BANK, a New Jersey
banking corporation having its principal place of business at 51 John F. Kennedy
Parkway, Short Hills, New Jersey 07078 ("NJNB"), CHEMICAL BANK NEW JERSEY,
NATIONAL ASSOCIATION, a national banking association having an office at East 36
Midland Avenue, Paramus, New Jersey 07652 ("CBNJ", each of CBNJ and NJNB
individually a "Bank" and collectively the "Banks"); NJNB, as agent for the
Banks (the "Agent") and VILLAGE SUPER MARKET, INC., a New Jersey corporation
having its principal place of business at 733 Mountain Avenue, Springfield,
New Jersey 07081 (the "Borrower").
WITNESSETH:
Background and Purpose. Pursuant to a Loan Agreement dated March 29,
1994 (the "Original Agreement", the Original Agreement as the Letter Agreement
and this Amendment No. 1 is referred to as the "Loan Agreement"), the Banks
agreed to provide to the Borrower a Revolving Loan, a Team Loan and a
Convertible Revolving Loan in the original aggregate principal am of up to
$30,000,000, all as further described in the Original Agreement Borrower has
defaulted under the Loan Agreement, entitling the Banks payment of the Loan.
Borrower has now requested that the Bank waive such defaults and amend the
Original Agreement, as the Borrower is currently projecting additional breaches
absent this Amendment. The Banks are willing to amend the Original Agreement
as requested by Borrower on the terms set forth herein. Section 12.2 of the
Loan Agreement provides that any amendment thereto must be in writing and signed
by a duly authorized officer of each Bank.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and representation herein contained, the parties hereto
agree to modify and amend the Original Agreement as follows:
1. DEFINITIONS.
The following definitions set forth in Section I of the
Original Agreement are hereby amended and restated in their entirety as follows:
(a) "Loan Agreement" shall mean the
Original Agreement, as it may be amended or supplemented
from time to time, including but not limited to the
amendment set forth in the Letter Agreement and this
Amendment No. 1.
(b) "Loan Document(s)" mean the Loan
Agreement (including the Letter Agreement and this Amendment
No. 1 and any other amendments thereto) and all documents,
notes, assignments, certificates and agreements of any kind
listed, described or referenced by the Closing Memorandum
annexed to the Original Agreement as Exhibit A, or in this
Amendment No. 1 or otherwise executed in connection with the
Original Agreement, this Amendment or any future amendment.
<PAGE 2>
For purposes of this Amendment No. 1, "Letter Agreement" means the letter
agreement among the Borrower and the Banks dated July 7, 1994 arising from
defaults by Borrower in the April 1994 Fiscal Quarter.
2. WAIVERS. The Banks hereby waive the following known
defaults of Borrower: (a) a breach of the Tangible Net Worth covenant as at
October 1994 provided for at Section 7.11(b) of the Loan Agreement (based upon
the Borrower's representation to the Banks and the Agent that its Tangible Net
Worth at the end of October 1994 will be approximately $38,000,000), (b) a
breach of the EBIT/Interest Ratio Covenant as of April and July 1994 provided
for in Section 7.13 of the Loan Agreement, PROVIDED HOWEVER, the Banks do not
hereby waive and do not hereby make any commitment to waive, any other default
(if any) of the terms and conditions of the Original Agreement as amended by
this Amendment No. 1 nor as to any time period subsequent to the period
ending October 29, 1994 and the Borrower has no expectation of any such
waiver. The Borrower acknowledges and agrees that any prior waivers by the
Banks of Events of Default by Borrower shall afford the Borrower no
expectation whatsoever that the Banks will be willing to waive or to consider
the waiver of any Events of Default arising after the date hereof.
3. AMENDED COVENANTS. (a) Section 7.13 of the Original
Agreement is hereby amended by modifying and restating that section of the
Original Agreement in its entirety as follows:
"7.13 EBIT to Interest Ratio. As to the
Companies on a consolidated basis, maintain an EBIT to Interest Ratio
measured as of the end of each Fiscal Quarter of at least the following
ratio for the Fiscal Quarters listed below:
Fiscal Quarter End Ratio
(A) April 1994<PAGE>
One and Fifteen Hundredths to One
(1:15:1); (B) July 1994<PAGE>
One and Twenty Five Hundredths to One
(1.25:1); (C) October 1994 Fifty Five Hundredths to One
(0.55:1); (D) January 1995 Sixty Eight Hundredths to One
(0.68:1); (E) April 1995 Eighty Seven Hundredths to One
(0.87:1); (F) July 1995 One and Seven Hundredths to One
(1.07:1); (G) October 1995 One and Nine Hundredths to One
(1.09:1); (H) January 1996 One and Eleven Hundredths to One
(1:11:1); (I) April 1996 One and Thirteen Hundredths to One
<PAGE 3>
(1:13:1); (J) July and October 1996 and January and April 1997
One and Fifteen Hundredths to One
(1:15:1); (K) July and October 1997 and January and April 1998
One and Twenty Two Hundredths to One
(1:22:1); (L) July 1998 and each Fiscal Quarter thereafter
One and Twenty Five Hundredths to One (1.25:1)."
(b) Section 8.13 of the Original Agreement is hereby
amended by modifying and restating that section of the Original Agreement
in its entirety as follows:
"8.13 Capital Expenditures. Permit the
aggregate sum of the consolidated Capital Expenditures of the Companies
made in any Fiscal Year listed below to exceed the following amounts:
<TABLE>
<CAPTION>
Maximum Amount of
Aggregate Capital
Expenditures for
Fiscal Year Ending for Fiscal Year
<S> <C>
July 1994 $12,500,000
July 1995 8,000,000
July 1996 7,000,000
July 1997 6,000,000
July 1998 or thereafter 6,000,000
</TABLE>
provided, however, that for Fiscal Year 1997 and thereafter, the Borrower
may submit a Capital Expenditure budget for more than $6 million to the
Banks, which may become the Capital Expenditure Budget for such Fiscal Year
after approval by the Banks in their absolute and unfettered discretion.
Furthermore, to the extent that the Companies' Capital Expenditures in any
Fiscal Year, commencing with the Fiscal Year ending July 1995, are less
than the amounts set forth above, the "unused amounts" (the excess of the
permitted amount of Capital Expenditures for such Fiscal Year above the
Companies' actual Capital Expenditures for such Fiscal Year) may be rolled
over into the next Fiscal Year only, thereby increasing the Capital
Expenditures permitted for the next Fiscal Year (but not for any other
subsequent Fiscal Year).
(c) The Borrower has been negotiating to
acquire a certain property in Westfield, New Jersey (the "Westfield
Property"). At the Borrower's request, the Banks agree that, if the
Borrower acquires the Westfield Property on terms previously disclosed to
the Banks, the amount paid for the acquisition of the Westfield Property
will not be counted or included for purposes of determining compliance with
the Capital Expenditure covenant of Section 8.13, as amended herein. The
Borrower agrees that capital expenditures related to the Westfield
<PAGE 4>
Property, if any, other than the initial acquisition of the real estate,
would be subject to the Capital Expenditure limitations of Section 8.13.
4. ADDITIONAL AGREEMENTS. (a) Section 2.12 of the Original
Agreement is hereby amended to increase the interest rate on the Revolving Loan
by twenty-five (25) Basis Points by modifying and restating that section of the
Original Agreement in its entirety as follows:
"2.12 Interest Rates For Revolving Loan.
The Borrower agrees to pay interest on the unpaid portion of
Revolving Loans as follows:
(A) for Prime Loans at a fluctuating rate equal to the Prime
Rate in effect from time to time plus Fifty (50) Basis Points.
The increased interest rate shall be effective immediately as of the date of
this Amendment No. 1.
(b) Pursuant to the Letter Agreement, the Borrower agreed that its
right to request Convertible Revolving Loans, and the Banks' obligation to make
advances under Section IV of the Original Agreement, was terminated. The
Borrower and the Banks hereby reconfirm that Section IV of the Original
Agreement is deleted and of no further force or effect.
(c) Notwithstanding anything in the Original Agreement to the
contrary, including but not limited to Sections 2.1, 2.6, 2.7, 2.12, or 5.8, the
use by Borrower of the Eurodollar Rate is suspended, the Borrower shall have no
right and no ability to make Eurodollar Loans or to elect to have the Eurodollar
Rate apply to any loan or borrowing without the prior written consent of both
Banks, which consent may be given or denied at the sole and unfettered
discretion of each Bank. The Borrower understands and agrees that neither
Bank expects to consent to any Eurodollar Loan or to the use of the
Eurodollar Rate in the foreseeable future.
(d) Within ten (10) days of the date hereof, the Company shall
deliver to the Agent and the Banks the Company's audited financial statements
for the year ended July 29, 1994. The Company represents and warrants to the
Agent and the Banks that such audited financial statements shall be consistent
with estimates of the Company's net income and net worth previously given to the
Agent and the Banks.
5. CONDITIONS PRECEDENT. This Amendment shall become effective on
the date that the Agent and Banks shall have received each of the following, in
form and substance satisfactory to the Banks, the Agent and its counsel:
(a) The Amendment. The Amendment duly executed, and
delivered to the Agent and the Banks;
<PAGE 5>
(b) Professional Fees. Reimbursement to the Agent for all
legal fees and other costs incurred by the Agent in connection with the
investigation of the Borrower and the negotiation, preparation and review
of this Amendment, and as required by Section 7.15 of the Original
Agreement;
(c) Waiver Fee. Payment of a waiver fee of $20,000 to the
Agent (which fee shall be paid by the Agent $10,000 to NJNB and $10,000 to
CBNJ);
(d) Traveler's. A letter from the chief financial officer of
the Borrower confirming that, following execution and delivery of this
Amendment, there will be no events of default under the Note Purchase
Agreement between the Borrower and Traveler's Insurance Company.
(e) A certified copy of resolutions of the Borrower
authorizing execution and delivery of this Amendment; and
(f) Such other documents as the Banks may reasonably require.
6. REPRESENTATIONS AND WARRANTIES. The Borrower represents and
warrants to the Agent and the Banks that, except as disclosed on Schedule I
annexed hereto (if any) all representations and warranties set forth in the
Original Agreement remain accurate and complete as of the date hereof as though
made on and as of the date hereof. The Borrower further represents and warrants
to the Agent and the Banks that (a) it and the other Companies are in compliance
with all of the affirmative and negative covenants set forth in the Original
Agreement, as amended by this Amendment, as of the date hereof, (b) all
financial statements delivered to the Banks through the date hereof pursuant
to Section 7.3 of the Original Agreement or otherwise have been complete and
correct in all material respects and fairly represented the financial
condition of the Borrower as at such dates and the results of its operations
for the periods covered thereby, all in accordance with GAAP consistently
applied, (c) on the date hereof, except for the defaults identified and
waived pursuant to Section 2 hereof, no Event of Default or event that, with
the passage of time or the giving of notice or both would be an Event of
Default has occurred, (d) it has no counterclaim, setoff or right to deduct
against any amounts due to the Banks at the date of execution of this
Amendment, (e) the execution and delivery by the Borrower of this Amendment
has been duly authorized by all requisite corporate action, and (f) this
Amendment and the Original Agreement as amended hereby each constitutes a
valid and binding obligation of the Borrower enforceable against it in
accordance with its terms.
7. NO OTHER CHANGES. Except as specifically amended hereby, the
Original Agreement is and shall remain in full force and effect and is hereby
ratified and confirmed. Capitalized terms defined in the Original Agreement and
not otherwise defined herein shall have the same meaning herein except as the
context otherwise requires.
Each of the Notes and the Guaranty are modified and amended to refer
to the Original Agreement as modified by this Amendment No. 1, as it may be
further modified from time to time in the future. Such documents otherwise
shall remain unchanged and in full force and effect.
<PAGE 6>
8. ENTIRE AGREEMENT. The Loan Agreement, as hereby amended, and the
instruments and certificates referred to in, or delivered in connection with,
the Loan Agreement, including this Amendment No. 1, constitute the entire
agreement of the parties with respect to the subject matter hereof, and
supersede all other, prior or contemporaneous agreements or understandings.
9. COUNTERPARTS. This Amendment No. 1 may be executed in one or
more counterparts, each of which shall be deemed an original agreement, but all
of which together shall constitute one and the same instrument. This Amendment
shall be deemed executed and delivered when telecopied signature pages have been
exchanged.
IN WITNESS WHEREOF, the Borrower, the Agent and the Banks have caused
this Amendment No. 1 to the Loan Agreement to be duly executed by their duly
authorized officers as of the 21st day of October, 1994.
ATTEST: VILLAGE SUPER MARKET, INC.
________________________ By:___________________________________
Robert Sumas Perry Sumas, President
Executive Vice President
BANKS:
NEW JERSEY NATIONAL BANK
By:____________________________________
Stephen F. Rooney, Assistant Vice
President
CHEMICAL BANK NEW JERSEY,
NATIONAL ASSOCIATION
By:____________________________________
John Morgan, Vice President
AGENT:
NEW JERSEY NATIONAL BANK
By:_____________________________________
Stephen F. Rooney, Assistant Vice
President
<PAGE 7>
The undersigned hereby consents to this Amendment No. 1 and agrees
that its Guaranty of Borrower's Obligations to the Banks pursuant to the
Continuing Guaranty Agreement dated March 29, 1994 shall remain in full
force and effect.
ATTEST: VILLAGE LIQUOR SHOP, INC.
__________________________ By:__________________________________
Robert Sumas, Secretary Perry Sumas, President
