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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 23, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 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 Number)
733 Mountain Avenue, Springfield, New Jersey 07081
(Address of principal executive offices) (Zip Code)
(201 467-2200
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(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 the number of shares outstanding of the issuer's classes
of common stock as of the latest practicable date.
June 1, 1994
Class A, Common Stock, No Par Value 1,315,800 Shares
Class B, Common Stock, No Par Value 1,594,076 Shares
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VILLAGE SUPER MARKET, INC.
INDEX
Part I Page No.
Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheets -
April 23, 1994 and July 31, 1993 . . . . . . . . . . . 3
Consolidated Condensed Statements of
Income - Thirty-eight and Thirteen Weeks Ended
April 23, 1994 and April 17, 1993. . . . . . . . . . . 4
Consolidated Condensed Statements of
Cash Flows - Thirty-eight Weeks
Ended April 23, 1994 and April 17, 1993 . . . . . . . 5
Notes to Consolidated Condensed Financial
Statements . . . . . . . . . . . . . . . . . . . . . . 6
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . 7-9
Part II
Other Information
Item 2. Change in Securities . . . . . . . . . . . . . . 10
Item 3. Defaults upon Senior Securities. . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . 10
Signatures . . . . . . . . . . . . . . . . . . . . . . . 11
Exhibit 99(a). . . . . . . . . . . . . . . . . . . . . . 12
Exhibit 99(b). . . . . . . . . . . . . . . . . . . . . . 13
Exhibit 4(a) . . . . . . . . . . . . . . . . . . . . . . 14
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Part I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
VILLAGE SUPER MARKET,INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
April 23, 1994 July 31, 1993
ASSETS
Current assets
Cash and cash equivalents $ 1,540 $ 6,619
Merchandise inventories 26,715 26,246
Patronage dividend receivable 2,449 2,950
Miscellaneous receivables 3,715 4,852
Prepaid expenses 490 569
Total current assets 34,909 41,236
Property, equipment and fixtures,net 71,496 74,131
Investment in related party 9,396 9,055
Goodwill, net 11,226 11,404
Other intangibles, net 3,112 3,299
Other assets 1,622 2,262
Total assets $131,761 $ 141,387
======== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt $ 5,300 $ 5,179
Long term debt reclassified current 22,100 --
Accounts payable to related party 23,566 23,400
Accounts payable and accrued exp 11,803 14,522
Deferred income taxes 535 438
Total current liabilities 63,304 43,539
Long-term debt, less current portion 11,399 39,470
Deferred income taxes 4,386 5,148
Shareholders' equity
Class A common stock - no par value,
issued 1,762,800 shares (including
447,000 in treasury at April 23, 1994
and July 31, 1993) 18,127 18,127
Class B common stock - no par value
1,594,076 shares issued and
outstanding 1,037 1,037
Retained earnings 39,693 40,251
Less cost of treasury shares (6,185) (6,185)
Total shareholders' equity 52,672 53,230
Total liabilities and
shareholders' equity $ 131,761 $ 141,387
========= =========
See accompanying notes to consolidated condensed financial statements.
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VILLAGE SUPER MARKET, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Dollars in Thousands Execpt Per Share Amounts)
13 Week End 13 Week End 38 Week End 38 Week End
Apr 23,1994 Apr 17,1993 Apr 23 1994 Apr 17,1993
Sales $ 171,776 $ 169,431 $ 507,228 $ 510,056
Cost of sales 129,930 128,190 383,545 386,088
Gross margin 41,846 41,241 123,683 123,968
Operating and
administrative expense 40,402 37,698 115,663 113,232
Depreciation and
amortization expense 2,098 2,200 6,420 6,613
Operating income (loss) ( 654) 1,343 1,600 4,123
Interest expense 931 1,041 2,815 3,223
Gain (loss) on disposal
of assets (300) --- (381) 1,703
Income (loss) before
provision for income
taxes and cumlative
efffect of accounting
change (1,885) 302 (1,596) 2,603
Provision for income tax
expense (benefit) (754) 120 (638) 1,040
Income (loss) before
cumulative effect of
acccounting change (1,131) 182 (958) 1,563
Cumulative effect as of July
31, 1993 of change in method
of accounting for income
taxes --- --- 400 ---
Net income (loss) $ (1,131) $ 182 $ (558) $ 1,563
========== ========= ========== =========
Net income (loss) per share:
Weighted average
number of common shares
outstanding 2,909,876 2,909,876 2,909,876 2,909,876
Income (loss) before
cumulative effect
of accounting change $ (.39) $ .06 $ (.33) $ .54
Cumulative effect of
accounting change --- --- .14 ---
Net income (loss) $ (.39) $ .06 $ (.19) $ .54
========== ========== =========== =========
See accompanying notes to consolidated condensed financial statements.
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VILLAGE SUPER MARKET, INC.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
38 Weeks Ended 38 Weeks Ended
April 23, 1994 April 17, 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (558) $ 1,563
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Cumulative effect of accounting change (400) ---
Depreciation and amortization 6,420 6,613
Provision to value inventories at LIFO 500 300
(Gain) loss on disposal of assets 381 (1,703)
Changes in assets and liabilities:
(Increase) decrease in inventory (969) 697
Decrease in patronage dividend receivable 501 707
Increase(decrease in misc. receivables 1,137 (1,300)
Decrease in prepaid expenses 79 ---
Decrease in other assets 640 266
Increase (decrease) in accounts payable to
related party 166 (1,330)
(Decrease) in accounts payable
and accrued expenses (2,719) (766)
(Decrease) in income taxes payable ( 265) (240)
Net cash provided by operating activities 4,913 4,807
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (3,859) (1,302)
Investment in related party (341) (450)
Proceeds from sale of asssets, net 58 2,235
Net cash provided (used)
in investing activities (4,142) 483
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 10,000 ---
Principal payments of long-term debt (15,850) (3,853)
Net cash used by financing activities ( 5,850) (3,853)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS ( 5,079) 1,437
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 6,619 5,324
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,540 $ 6,761
========= =========
See accompanying notes to consolidated condensed financial statements.
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VILLAGE SUPER MARKET, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of normal
and recurring accruals) necessary to present fairly the financial position as
of April 23, 1994 and July 31, 1993 and the results of operations and cash
flows for the thirty-eight and thirteen weeks ended April 23, 1994 and April
17, 1993.
The significant accounting policies followed by the Company are set forth
in Note 1 to the Company's financial statements in the July 31, 1993 Village
Super Market, Inc. Annual Report.
Effective August 1, 1993, the Company adoped FASB Statement No. 109,
"Accounting for Income Taxes." Under Statement 109, the liability method is
used in accounting for income taxes. Under this method, deferred tax assets
and liabilities are determinded based on differences between financial
reporting and tax bases of assets and liabilties and are measured using the
enacted tax rates and laws that will be in effect when the differences are
expected to reverse.
As permitted by Statement 109, the Company has elected not to restate the
financial statements of any prior years. There was no effect from the change
in accounting on pretax income for the thirty-eight and thirteen weeks ended
April 23, 1994. The cumulative effect of the change increased net income by
$400,000 ($.14 per share) in the quarter ended October 23, 1993.
2. The results of operations for the thirty-eight weeks ended April 23, 1994
are not necessarily indicative of the results to be expected for the full
year.
3. At both April 23, 1994 and July 31, 1993 approximately 66% of the
merchandise inventories are valued by the LIFO method while the balance is
valued by FIFO. If the FIFO method had been used for the entire inventory,
inventories would have been $6,311,000 and $5,811,000 higher than reported
at April 23, 1994 and July 31, 1993, respectively.
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Item 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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RESULTS OF OPERATIONS
Sales for the third quarter of fiscal 1994 were $171,776,000, an increase
of 1.4% from the third quarter of the prior year. Same store sales increased
2.8% this quarter, which was partially offset by lower sales from closed
stores. 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 thirty-eight weeks ended April 23, 1994 were
$507,228,000, a slight decrease from the prior year. Same store sales
increased 1.7% in this period, which was offset by stores closed since a year
ago.
Gross margins as a percentage of sales for both the quarter and thirty-
eight weeks ended April 23, 1994 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.
Store operating and administrative expenses as a percentage of sales for
the quarter and thirty-eight weeks ended April 23, 1994 were 23.5% and 22.8%,
respectively, compared with 22.2% in the 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 cost of these coupons. Inclement
weather contributed to the lower than expected sales and also increased snow
removal costs. In addition, fringe benefit costs increased.
Interest expense decreased in both the quarter and nine month period in
fiscal 1994 due to lower debt levels and lower interest rates.
A net 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. The prior year nine month results include a
pretax gain of $1,703,000 on the sale of the Kingston store.
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LIQUIDITY AND FINANCIAL RESOURSES
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
bearing interest at 8.49%, with monthly principal payments of $55,555 being
August 1, 1994 and a final principal payment of $5,555,556 due April 1, 2001.
The $12,000,000 revolving loan, which can be used for any purpose except
new store construction, matures March 31, 1997. Any balances outstanding
carry interest at prime or libor based interest rates at the Company's option.
The $8,000,000 convertible revolving loan is to be used only for capital
expenditures. Any amounts outstanding on this loan carry interest at either
fixed rates or prime or libor based interest rates at the Company's option.
Amounts may be borrowed through December 31, 1995. Principal repayments are
required based on the amounts borrowed with a loan maturity date of January 1,
2001.
At April 23, 1994 the Company does not meet the required interest coverage
ratio in this loan agreement. This constitutes an event of default under this
loan agreement. The Company is engaged in discussions with the two banks
regarding this situation. Without the further consent of the banks the
Company will not be allowed to borrow under the $8,000,000 convertible
revolving loan portion of the credit facility.
The Company also fails the current ratio required in another loan
agreement, which is an event of default. In addition the Company does not
meet a required coverage ratio in this agreement. Without a waiver, this
would prevent the Company from borrowing additional funds, executing new
leases or declaring dividends. Discussions are also underway with this
lender.
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.
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Current liabilities exceed current assets by $28,395,000 at April 23, 1994
as compared to $2,303,000 at July 31, 1993. The current ratio decreased to
.55 at April 23, 1994 compared to .95 at July 31, 1993. These two changes
are primarily attributable to the reclassification of long term debt to
current liabilities in the amount of $22,100,000 discussed above.
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.
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PART II
OTHER INFORMATION
Item 2. Changes in Securities.
On March 29, 1994 the Company entered into a $30,000,000 loan
agreement with two banks. The new bank agreement requires that the Company
maintain minimum levels of tangible net worth, interest and fixed charge
coverage ratios and maximum debt to tangible net worth ratios and capital
expenditure levels. Payment of dividends is also limited to 20% of the excess
of net income above $1,000,000 if all other financial covenants are met.
Item 3. Defaults Upon Senior Securities.
At April 23, 1994 the Company is not in compliance with the required
interest coverage ratio in the new loan agreement. This constitutes an event
of default. The Company is engaged in discussions with the two banks
regarding this situation.
The Company also fails the current ratio required in another loan
agreement, which is an event of default. In addition, the Company does not
meet a fixed charge coverage ratio in this agreement. Without a waiver, this
would prevent the Company from borrowing additional funds, executing new
leases or declaring dividends. Discussions are also underway with this
lender.
Each of these two agreements are cross defaulted with the other
agreement. There is no indication at this time that any of the three lenders
intend to request immediate payment of the loan amounts outstanding.
Item 6. Exhibits and Reports on Form 8-K
6(a)Exhibits:
Exhibit 4(a) Loan Agreement dated March 29, 1994
Exhibit 99(a) Press Release dated May 24, 1994.
Exhibit 99(b) Second Quarter Report to Shareholders
6(b) Reports on form 8-K.
None.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Village Super Market, Inc.
Registrant
Date: June 2, 1994 /s/ Perry Sumas
Perry Sumas (President)
Date: June 2, 1994 /s/ Kevin R. Begley
Kevin R. Begley
(Chief Financial Officer)