To Our Shareholders: The Company had net income of $436,000 in the second quarter ended January 28, 1995 compared to $157,000 in the prior year second quarter. For the six month period, net income increased to $519,000 compared to income before the cumulative effect of an accounting change of $173,000 in the prior year. Net income increased, despite lower sales, due to more efficient use of labor and reduced promotional costs, particularly coupons. Sales in the second quarter decreased 2.8% from the prior year to $171,804,000. Same store sales decreased 1.7% in the second quarter. Sales were also lower due to the closing of the Easton store in August 1994. Same store sales declined due to the effects of new competitive entries, comparison to a prior year number that was inflated by higher promotional spending, and continued sluggishness in the economy. Sales for the six month period were $339,170,000, an increase of 1.1% from the prior year. Sales for the six month period increased due to the current year containing an additional week compared to the prior year. This increase was partially offset by lower sales due to stores closed and lower same store sales of .9%. Gross margins as a percentage of sales for the quarter and six month period were 24.4% and 24.3%, respectively, compared with 24.3% and 24.4%, respectively, in the corresponding prior year periods. Price competition in the marketplace and continued high levels of sale item penetration have prevented increases in gross margin percentages. Operating and administrative expenses as a percentage of sales for the quarter and six month periods decreased to 22.0% and 22.1%, respectively, compared with 22.4% in both corresponding prior year periods. These improvements were due to lower promotional costs and lower store payroll costs than one year ago, partially offset by higher fringe benefit and supply costs. The Company completed remodels of its Stirling and Hillsborough stores earlier this fiscal year. A remodel and expansion of the Chester store will be completed during the third quarter. The following table summarizes Village's results for the quarter and six month periods ended January 28, 1995. Respectfully, Perry Sumas, President James Sumas, Chairman of the Board March 10, 1995 INCOME STATEMENT DATA January 28,1995 January 22,1994 13 Weeks Ended Sales $171,804,000 $176,707,000 Net Income $ 436,000 $ 157,000 Net Income Per Share $ .15 $ .06 26 Weeks Ended 25 Weeks Ended Sales $339,170,000 $335,452,000 Income before accounting change $ 519,000 $ 173,000 Cumulative effect of accounting change $ --- $ 400,000 Net Income $ 519,000 $ 573,000 Net Income per share: Income before accounting change $ .18 $ .06 Cumulative effect of accounting change $ --- $ .14 Net Income $ .18 $ .20 BALANCE SHEET COMPARISONS January 28, 1995 July 30, 1994 Current Assets $ 40,520,000 $ 38,141,000 Current Liabilities 44,817,000 42,241,000 Net Working Capital (Deficit) (4,297,000) (4,100,000) Long Term Debt 36,088,000 36,933,000 Stockholders' Equity 52,942,000 52,423,000