VILLAGE SUPER MARKET, INC.
733 MOUNTAIN AVENUE
SPRINGFIELD, NEW JERSEY 07081
PHONE: (973) 467-2200
FAX: (973) 467-6582
April 5, 2007
Mr. Michael Moran
Branch Chief Accountant
U.S. Securities and Exchange Commission
Division of Corporation Finance
Washington, DC 20549-0404
Re: Village Super Market, Inc.
Form 10-K for the year ended July 29, 2006
Filed October 23, 2006
File Number 0-2633
Dear Mr. Moran:
Thank you for your comments regarding the above referenced filing. We
appreciate your assistance in ensuring our filings comply with the
applicable disclosure requirements. The following sets forth the comment
made in your letter dated March 23, 2007 and our response thereto:
1. Comment: We note your response to comment 2 of our letter dated
March 1, 2007. SFAS No. 128 has always required the use of the two-class
method of computing basic and diluted EPS for those companies with
multiple classes of common stock with differing dividend rates. We
consider your Class B common stock to be an additional class of common
stock under paragraph 60.b. of SFAS 128. As such we would expect you
to calculate basic and diluted EPS using the two-class method in
accordance with paragraph 61 of SFAS 128. With respect to your belief
that it is unreasonable to assume a disproportionate allocation of
undistributed earnings due to the control of the Board of Directors by the
Class B stockholders, it is our understanding that the Class A shares are
entitled to dividends 54% greater than that paid on the Class B shares. In
this regard, it would appear appropriate to use the contractually
established ratio in determining the allocation of undistributed earnings to
the individual classes of common stock in applying the two-class method.
Please revise your financial statements to present both basic and diluted
earnings per share for each class of common stock consistent with the
requirement of paragraph 61(d) of SFAS No. 128.
2. Response. As noted in the December 11, 2006 speech by the
Associate Chief Accountant at the 2006 AICPA National Conference on Current
SEC and PCAOB Developments, "Neither Statement 128 nor EITF 03-6
directly addresses how to handle a class of common stock that is
convertible into another class of common stock. Further, it is not clear
whether the guidance in EITF 03-6 is applicable to multiple classes of
common stock, as opposed to securities that participate with common
stock, but that are not themselves common stock." This December 11,
2006 speech also states that "the SEC staff believes that the EITF
consensus was generally written in the context of classes of participating
securities that do not control the Company" and the speech indicates that
applying the EITF guidance in certain cases does not produce the most
transparent reporting.
The Company utilizes the if-converted method of calculating net
income per share, as the dilutive effect on net income per share using the
if-converted method is greater than that which would result from the
application of the two-class method. The if-converted method assumes
the conversion of Class B common stock to Class A common stock. The
Company believes the if-converted method results in a more meaningful
presentation of earnings per share based on the rights and privileges of the
two classes of common stock, including the control of the Board of
Directors by the Class B stockholders.
Through control of the Board of Directors, the Class B
stockholders control the dividend amount, if any, that will be paid to
stockholders each period. The Class B common stockholders may convert
their shares to Class A common stock on a share for share basis at any time
and then participate equally in dividends, including any large, one-time
dividends. Additionally, the Class B stockholders share equally on a per
share basis in any distributions in liquidation. Accordingly, the Company
believes it is unreasonable to assume that the controlling Class B
stockholders would pay out 100% of earnings as dividends each year in
accordance with the contractual dividend ratio. This position is supported
by the fact that no dividends were declared by the Company between fiscal 1992
and fiscal 2002 and dividends declared since fiscal 2003 have represented a
small portion of the Company's earnings, ranging from 6% to 18% of net income.
The Company does not believe a strict application of SFAS No. 128
and EITF 03-6 that computes basic and diluted earnings per share using the
contractually established ratio is appropriate in the Company's
circumstances. The Company believes that utilization of the two-class
method of allocating undistributed earnings based on the contractually
established ratio would be misleading to stockholders of the Company and
other financial statement users. It is unreasonable to believe that the Class
B common stockholders that control the Board of Directors would allow
the Board to pay a meaningful dividend unless the Class B stockholders
converted into Class A to capture any differential dividend, after it was
declared. The if-converted method presents a greater dilutive effect on
earnings per share and management of the Company believes it is the most
meaningful and transparent presentation for both Class A and Class B
stockholders and other financial statement users. The Company's Audit
Committee and independent auditors, who have discussed this matter with
their national office, concur with the Company's position.
The Company acknowledges, as does the December 11, 2006 speech by
the Associate Chief Accountant referred to above, that the presentation of
earnings per share for companies having two classes of common stock
requires careful consideration of all the rights and privileges of the classes,
including the issue of control. In that regard, the Company respectfully
requests that the Company's position be shared with the Chief Accountant
of the Division of Corporation Finance.
The Company acknowledges that:
- The Company is responsible for the adequacy and accuracy of
the disclosure in the filing;
- Staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any
action with respect to the filing; and
- The Company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
We appreciate your assistance in ensuring that the Company provides
appropriate disclosures in its public filings. Should you have any questions
about the above response, please feel free to contact the undersigned at
(973) 467-2200.
Very truly yours,
VILLAGE SUPER MARKET, INC.
Kevin R. Begley
Chief Financial Officer
KRB/sw