Village Super Market, Inc. and Subsidiaries
The Company
Village Super Market, Inc. operates a chain of 23 ShopRite supermarkets,
17 of which are located in northern New Jersey, 1 in northeastern Pennsylvania
and 5 in the southern shore area of New Jersey.
Village is a member of Wakefern Food Corporation, the largest retailer owned
food cooperative in the United States.
Village's business was founded in 1937 by Nicholas and Perry Sumas and has
continued to be principally owned and operated under the active management of
the Sumas family.
Contents
Letter to Shareholders................................................2
Management's Discussion and Analysis of
Financial Condition and Results of Operations........................4
Financial Statements..................................................6
Independent Auditors' Report.........................................16
Stock Price and Dividend Information.................................16
Corporate Directory...................................INSIDE BACK COVER
Village Super Market, Inc. and Subsidiaries
Selected Financial Data
(Dollars in thousands except per share and per sq. ft. data)
JULY 29, JULY 30, JULY 31, JULY 25, JULY 27,
1995 1994 1993 1992 1991
FOR YEAR
Sales $677,322 $695,070 $713,856 $715,059 $686,002
Net income
(loss) 578 (807) 1,437 487 1,908
Net income
(loss) per share .20 (.28) .49 .17 .64
Cash dividends
per share
Class A -- -- -- .075 .15
Class B -- -- -- .05 .10
AT YEAR END
Total assets 135,575 134,793 141,387 145,668 141,847
Long term
obligations
including capital
leases 34,853 36,933 39,470 45,699 40,328
Working capital
(deficit) (3,755) (4,100) (2,303) (3,617) (2,651)
Shareholders'
equity 53,001 52,423 53,230 51,793 51,485
Book value
per share 18.21 18.01 18.29 17.80 17.69
OTHER DATA
Selling sq ft 842,000 845,000 874,000 930,000 881,000
Number of stores 23 24 25 27 27
Sales per average
number of stores 29,449 28,370 27,456 26,484 25,407
Sales per average
sq ft of
selling space 803 809 791 790 814
Capital
expenditures 6,588 5,974 1,977 14,494 18,963
Unaudited Quarterly Financial Data
(Dollars in thousands except per share amounts)
FIRST SECOND THIRD FOURTH FISCAL
QUARTER QUARTER QUARTER QUARTER YEAR
1995
SALES $167,366 $171,804 $164,453 $173,699 $677,322
GROSS MARGIN 40,626 41,840 40,494 42,911 165,871
NET INCOME (LOSS) 83 436 (293) 352 578
NET INCOME (LOSS)
PER SHARE $ .03 $ .15 $ (.10) $ .12 $ .20
1994
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)
Village Super Market, Inc. and Subsidiaries
Dear Fellow Shareholders
We are pleased to report net income of $578,000, or $.20 per share, in
fiscal 1995. This compares with a net loss before an accounting change of
$1,207,000 in 1994. Sales decreased 2.6% to $677,322,000 due to the closing of
the Easton store and a same store sales decline of .7%.
A year ago we expressed how disappointed we were with the 1994
results and explained the corrective actions we were taking. Happily, we
achieved the expense reductions we expected. Payroll costs declined due to
more efficient use of hours worked and promotional costs were also reduced.
These improvements and an increase in gross margins resulted in the
turnaround in 1995, despite lower same store sales.
Our marketing areas continue to experience increased competition.
During 1995 four competitors opened stores in markets we serve. We expect
this trend to continue, resulting in limited improvement in same store sales.
Our focus will remain on updating our store base, reducing our cost structure
and satisfying our customers' needs.
We completed an expansion of the Chester store this year. The Chester
store and the three stores remodeled in 1994 are meeting our performance
expectations. We recently began a major expansion of the Absecon store. The
Livingston store is scheduled for a major remodel next spring. We also
continue to pursue approval of a new store in Garwood/Westfield.
As part of ShopRite's continuing commitment to customer satisfaction,
comprehensive consumer marketing surveys were performed this year by a
consultant. The information obtained from these surveys has been used to
improve training programs and to enhance employees' and management's
understanding of customer needs and priorities.
Customer needs and thus the supermarket have continued to change over
the years. With the prevalence of two-income families and the struggle to
find enough time in the day, we have responded by increasing our offerings of
foods to go and packaged salads. We expect these and similar responses to
changing customer needs to be growth areas.
We thank our employees for their hard work in restoring profitability
after a difficult year and our shareholders for their patience and support.
James Sumas, Perry Sumas,
Chairman of the Board President
Village Super Market, Inc. and Subsidiaries
Nicholas J. Sumas
1903 - 1995
Village Supermarket lost its co-founder, Nicholas Sumas, this year.
Mr. Nick, as he was known to members of the Village family, served as Chairman
of the Board from its incorporation until 1989. He also served as President and
CEO until 1973.
Nick emigrated to the United States in 1920 from Vithos, Greece. In 1937,
with his brother Perry, he opened a small produce market that later became the
first Village Super Market in South Orange, New Jersey. A decade later they
joined several other small food markets to form the ShopRite food cooperative,
Wakefern Food Corporation. Nick served as President of Wakefern in 1954 and
1955.
Throughout his life Nick supported his church and community with the
same dedication and enthusiasm that he devoted to the company he founded. He
served as President of St. Constantine and Helen Church in Orange from 1956 to
1966. Nick created the Sumas Foundation, which funded a library for the
children of St. Basils Academy in Garrison, NY. His leadership and guidance
will be sorely missed by all of us at Village.
Village Super Market, Inc. and Subsidiaries
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:
JULY 29, July 30, July 31,
1995 1994 1993
Sales 100.00% 100.00% 100.00%
Cost of sales 75.51 75.67 75.80
Gross margin 24.49 24.33 24.20
Operating and
administrative expense 22.44 22.73 22.27
Depreciation and
amortization 1.28 1.26 1.22
Operating income .77 .34 .71
Interest (net) .60 .57 .62
Gain (loss) on disposal
of assets (.04) (.05) .24
Income (loss) before taxes
and cumulative effect of
accounting change .13% (.28)% .33%
Sales decreased $17,748,000 in fiscal 1995. The closing of the Easton
store in August 1994 decreased sales by $11,600,000. In addition, same store
sales decreased by .7% due to the effects of new competitive entries,
continued sluggishness in the economy and comparison to a prior year period
that included higher promotional spending. 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.
Gross margin as a percentage of sales increased in fiscal 1995
and 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.
Operating and administrative expenses in fiscal 1995 declined
by .3 as a percentage of sales. This improvement was due to lower payroll
and coupon costs, partially offset by increased supply costs. Payroll
costs declined, despite an increase in pay rate per hour, due to a
reduction in same store hours worked. Operating and administrative expenses
in fiscal 1994 were slightly lower due to store closings and one less week
of operations but increased .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. In addition, workers' compensation, health care
and payroll costs increased.
Interest expense increased in 1995 due to higher variable interest
rates. Interest expense decreased in 1994 due to declining debt levels and
lower interest rates.
Net income was $578,000 in fiscal 1995 compared to a net loss before
the cumulative effect of accounting change of $1,207,000 in fiscal 1994.
This improvement is primarily attributable to reductions in payroll and
coupon costs and improved gross margins.
The Easton store was closed on August 30, 1994. The Company is
pursuing selling or leasing this company owned property. A charge to
operations in the amount of $200,000 is included in the 1995 results from
the closing of the store. 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 and an additional loss of
$300,000 was recorded in fiscal 1995 for additional rent and disposal costs
that were incurred as a result of the sublessee's failure to make rent
payments.
Village Super Market, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Sales were not materially affected by inflation in 1995 and 1994.
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 have increased in some recent years
despite the lack of inflation in food prices. The competitive climate has
at times prevented the Company from increasing gross margins to compensate
for increased operating costs. As a result, the Company had experienced
declining profitability prior to 1995. A continuation of the recent 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 $3,755,000, $4,100,000
and $2,303,000 at the end of fiscal 1995, 1994, and 1993, respectively.
Working capital ratios at the same dates were .91, .90 and .95 to one,
respectively. The Company's working capital needs are reduced by its high rate
of inventory turnover (twenty-one times in fiscal 1995) and because the
warehousing and distribution arrangements accorded to the Company as a member
of Wakefern permit it to minimize inventory levels and sell most merchandise
before payment is required. 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 require-
ments throughout the year.
Capital expenditures in 1995 were $6,588,000. The major expenditure
was the expansion and remodeling of the Chester store. The remainder of
capital expenditures included the start of the expansion of the Absecon store
and amounts expended in an effort to obtain approvals for a new store. The
Company has budgeted approximately $8,000,000 for capital expenditures in
fiscal 1996. The major planned expenditures are the expansion and remodeling
of the Absecon store and the beginning of the expansion of the Livingston
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 29, 1995 were $14,539,000.
During the same period of time, net long-term borrowings decreased by
$10,075,000. The ability to finance expansion through operational cash flow
is reflected in the ratio of long-term debt to total capitalization, which
is currently 39.7% compared with 46.8% three years ago.
In addition to operating cash flow, the Company's primary source of
liquidity during 1996 is expected to be borrowings under the $12,000,000
revolving loan credit facility. At July 29, 1995, the Company had borrowed
$7,000,000 under this facility. The Company was in full compliance with all
terms and restrictive covenants of this debt agreement, as amended, during
fiscal 1995 and expects to be in compliance for the remaining term of the
agreement.
At July 29, 1995, 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.
Village Super Market, Inc. and Subsidiaries
Consolidated Balance Sheets
JULY 29, JULY 30,
1995 1994
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 9,655,284 $ 7,246,164
Merchandise inventories 24,179,034 25,273,150
Patronage dividend receivable 2,682,880 2,782,470
Miscellaneous receivables 2,677,519 1,902,370
Income taxes receivable 459,873 356,814
Prepaid expenses 629,639 580,124
Total current assets 40,284,229 38,141,092
PROPERTY, EQUIPMENT AND FIXTURES,
at cost less accumulated depreciation
and amortization 69,916,128 71,413,918
OTHER ASSETS
Investment in related party, at cost 9,819,818 9,415,874
Goodwill, net 10,871,452 11,137,730
Other intangibles, net 2,791,250 3,045,001
Receivables and other assets 1,891,680 1,639,152
Total other assets 25,374,200 25,237,757
$135,574,557 $134,792,767
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt:
Mortgages and notes payable $ 4,711,734 $ 4,764,650
Capitalized lease obligations 368,675 383,926
Accounts payable to related party 25,583,821 23,947,383
Accounts payable and accrued
expenses 12,602,904 12,330,181
Deferred income taxes 771,948 814,737
Total current liabilities 44,039,082 42,240,877
LONG-TERM DEBT, less current portion:
Mortgages and notes payable 24,608,961 26,320,696
Capitalized lease obligations 10,243,557 10,612,232
Total long-term debt 34,852,518 36,932,928
DEFERRED INCOME TAXES 3,681,883 3,195,595
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 shares 18,129,472 18,129,472
Class B common stock, no par value:
Authorized 10,000,000 shares,
issued and outstanding
1,594,076 shares 1,034,679 1,034,679
Retained earnings 40,021,926 39,444,219
Less treasury stock,
Class A, at cost (447,000 shares) (6,185,003) (6,185,003)
Total shareholders' equity 53,001,074 52,423,367
$135,574,557 $134,792,767
See notes to consolidated financial statements.
Village Super Market, Inc. and Subsidiaries
Consolidated Statements of Operations
YEARS ENDED
JULY 29, JULY 30, JULY 31,
1995 1994 1993
SALES $677,321,821 $695,070,272 $713,856,206
COST OF SALES 511,451,057 525,983,044 541,120,690
GROSS MARGIN 165,870,764 169,087,228 172,735,516
Operating and
administrative expense 152,008,710 157,983,230 158,943,214
Depreciation and
amortization expense 8,618,374 8,785,917 8,718,220
Operating Income 5,243,680 2,318,081 5,074,082
Interest expense, net of
interest income of $58,488,
$103,126 and $27,459 4,030,535 3,900,248 4,404,606
Gain (loss) on disposal
of assets (300,438) (354,523) 1,696,174
INCOME (Loss) BEFORE INCOME
TAXES AND CUMULATIVE EFFECT
OF ACCOUNTING CHANGE 912,707 (1,936,690) 2,365,650
PROVISION (BENEFIT) FOR
INCOME TAXES 335,000 (730,000) 929,000
INCOME (LOSS) BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 577,707 (1,206,690) 1,436,650
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR INCOME TAXES -- 400,000 --
NET INCOME (LOSS) $ 577,707 $ (806,690) $ 1,436,650
NET INCOME (LOSS) PER SHARE:
INCOME (LOSS) BEFORE
CUMULATIVE EFFECT OF
ACCOUNTING CHANGE $ .20 $ (.42) $ .49
CUMULATIVE EFFECT OF
ACCOUNTING CHANGE -- .14 --
NET INCOME (LOSS) $ .20 $ (.28) $ .49
See notes to consolidated financial statements.
Village Super Market, Inc. and Subsidiaries
Consolidated Statements of Shareholders' Equity
YEARS ENDED JULY 29, 1995
JULY 30, 1994 AND JULY 31, 1993
NO PAR VALUE NO PAR VALUE
CLASS A, CLASS B,
COMMON STOCK COMMON STOCK
RETAINED TREASURY
SHARES AMOUNT SHARES AMOUNT EARNINGS STOCK
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)
NET INCOME -- -- -- -- 577,707 --
BALANCE,
JULY 29,
1995 1,762,800 $18,129,472 1,594,076 $1,034,679 $40,021,926 $(6,185,003)
See notes to consolidated financial statements.
Village Super Market, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
YEARS ENDED
JULY 29, 1995 JULY 30, 1994 JULY 31, 1993
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss) $ 577,707 $(806,690) $1,436,650
Adjustments to reconcile net
income (loss) to net cash
provided by operating activities:
Cumulative effect of
accounting change -- (400,000) --
Depreciation and amortization 8,618,374 8,785,917 8,718,220
Deferred taxes (71,000) (911,000) (138,000)
Provision to value inventories
at LIFO 344,878 656,346 212,380
(Gain) loss on disposal of
assets 300,438 354,523 (1,696,174)
Changes in assets and liabilities:
Decrease in merchandise
inventories 749,238 316,394 252,033
(Increase) decrease in patronage
dividend receivable 99,590 167,793 (29,710)
(Increase) decrease in
miscellaneous receivables (775,149) 2,339,377 (601,755)
(Increase) in prepaid expenses (49,515) (11,109) (118,037)
(Increase) decrease in income
taxes receivable 411,440 253,458 (610,272)
(Increase) decrease in other
assets (269,478) 606,376 (265,924)
Increase (decrease) in accounts
payable to related party 1,636,438 546,851 (288,519)
Increase (decrease) in accounts
payable and accrued expenses 272,723 (2,191,982) 308,445
(Decrease) in income taxes
payable -- (264,394) (239,920)
Net cash provided by operating
activities 11,845,684 9,441,860 6,939,417
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (6,588,356) (5,973,814) (1,976,758)
Investment in related party (403,944) (361,328) (542,403)
Proceeds (expenditures) from
disposal of assets (295,687) 87,303 2,234,309
Net cash used in investing
activities (7,287,987) (6,247,839) (284,852)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of
long-term debt 3,000,000 14,000,000 --
Principal payments of
long-term debt (5,148,577) (16,567,312) (5,359,109)
Net cash used in financing
activities (2,148,577) (2,567,312) (5,359,109)
NET INCREASE IN CASH AND
CASH EQUIVALENTS 2,409,120 626,709 1,295,456
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 7,246,164 6,619,455 5,323,999
CASH AND CASH EQUIVALENTS,
END OF YEAR $9,655,284 $7,246,164 $6,619,455
See notes to consolidated financial statements.
Village Super Market, Inc. and Subsidiaries
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 subsidiary, which is 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 1995 and 1994 contain 52
weeks. Fiscal 1993 contained 53 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 1994 and 1993 financial
statements to conform to the 1995 financial statement presentation.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes interest bearing, overnight deposits
with Wakefern in the amount of $6,900,000 and $5,200,000 at July 29, 1995
and July 30, 1994, 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
expensed 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 to twenty 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 $2,540,530 and $2,274,250 at July 29, 1995 and
July 30, 1994, respectively. The Company regularly assesses the
recoverability of unamortized amounts of goodwill utilizing relevant cash
flow and profitability information.
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 $2,283,749 and $2,029,999 at July 29, 1995 and July 30, 1994,
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 tax rates in effect. As permitted by
SFAS 109, the Company has elected not to restate the financial statements of
any prior periods.
Village Super Market, Inc. and Subsidiaries
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 1995, 1994 and 1993. 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:
JULY 29, JULY 30,
1995 1994
Last-in, first-out (LIFO) $15,947,436 $17,084,096
First-in, first-out (FIFO) 8,231,598 8,189,054
$24,179,034 $25,273,150
If the FIFO method of inventory accounting had been used rather than LIFO,
inventories would have been $6,812,530 and $6,467,653 higher than reported
in 1995 and 1994, respectively.
NOTE 3 - PROPERTY, EQUIPMENT AND FIXTURES
Property, equipment and fixtures are comprised as follows:
JULY 29, JULY 30,
1995 1994
Land and buildings $42,905,665 $42,365,651
Store fixtures and equipment 57,170,376 56,895,598
Leasehold improvements 15,628,759 13,185,705
Leased property under capital
leases 13,700,599 13,700,599
Vehicles 780,925 852,096
Construction in progress 1,685,065 730,496
131,871,389 127,730,145
Less accumulated depreciation
and amortization 61,955,261 56,316,227
Property, equipment and
fixtures - net $69,916,128 $71,413,918
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
$484,491,000, $490,447,000 and $489,658,000 during fiscal years 1995, 1994
and 1993, 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 $8,223,000, $7,702,000 and $6,897,000 in 1995, 1994 and 1993,
respectively.
Village Super Market, Inc. and Subsidiaries
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 $820,000 over approximately the next three 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
JULY 29, JULY 30,
1995 1994
Term loans, interest at 8.49% payable
monthly, principal payable in monthly
installments of $55,555 with a final
principal payment of $5,555,556 due
April 1, 2001 $9,333,333 $10,000,000
Revolving credit note 7,000,000 4,000,000
Senior unsecured notes, interest at
9.91% payable quarterly, due in annual
installments through August 15, 1997 5,600,000 8,100,000
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 3,387,362 4,932,430
Other notes payable -- 52,916
29,320,695 31,085,346
Less current portion 4,711,734 4,764,650
Noncurrent maturities $24,608,961 $26,320,696
Aggregate principal maturities of mortgages and notes as of July 29, 1995
are as follows:
Year ending July:
1996 $ 4,711,734
1997 11,670,067
1998 2,938,894
1999 2,000,000
2000 2,000,000
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 29, 1995 the Company was in compliance with all terms and
restrictive covenants of this debt agreement, as amended. This agreement
contains restrictive covenants which, among other matters, specify total
debt levels, maintenance of net worth, interest coverage ratios, cash flow
coverage ratios, limitation on payment of dividends and limitation of capital
expenditures.
At July 29, 1995 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 under the Company's revolving loan), declaring
dividends and executing new leases.
Interest paid amounted to $4,073,646, $4,095,616 and $4,496,835 in 1995,
1994 and 1993, respectively.
Village Super Market, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
NOTE 6 - INCOME TAXES
The components of the provision (benefit) for income taxes are:
1995 1994 1993
Federal:
Current $175,000 $ 181,000 $733,000
Deferred 69,000 (787,000) (89,000)
State:
Current 231,000 -- 334,000
Deferred (140,000) (124,000) (49,000)
$335,000 $(730,000) $929,000
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 liabilities and assets are as
follows:
JULY 29, JULY 30,
1995 1994
Deferred tax liabilities:
Tax over book depreciation $5,794,712 $5,978,030
Patronage dividend receivable 1,071,542 1,118,205
Other 573,616 365,064
Total deferred tax liabilties 7,439,870 7,461,299
Deferred tax assets:
Amoritization of capital leases 1,684,158 1,637,252
Tax credits and loss carry forwards 858,503 1,381,647
Other 443,378 432,068
Total deferred tax assets 2,986,039 3,450,967
Net deferred tax liability $4,453,831 $4,010,332
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 at July 29,
1995 and July 30, 1994.
The effective income tax rate differs from the statutory federal income
tax rate as follows:
1995 1994 1993
Statutory federal income tax rate 34.0% (34.0%) 34.0%
Targeted jobs tax credit (14.5) (4.2) (7.0)
Amortization of intangibles 10.6 4.7 4.4
State income taxes, net of
federal tax benefit 6.6 (4.2) 7.9
Effective income tax rate 36.7% (37.7%) 39.3%
During 1993 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
are depreciation - $(354,000) and accrued liabilities - $128,000.
The Company has approximately $500,000 of alternative minimum tax credits
that may be carried forward indefinitely. The Company has approximately
$400,000 of targeted jobs tax credits that can be carried forward fifteen
years.
No income taxes were paid in 1995. Income taxes paid amounted to
approximately $192,000 and $1,917,000 in 1994 and 1993, respectively.
Village Super Market, Inc. and Subsidiaries
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 amounts 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 29, 1995:
CAPITAL OPERATING
LEASES LEASES
1996 $ 1,953,229 $ 3,073,879
1997 1,918,476 3,053,808
1998 1,924,186 2,923,158
1999 1,932,180 2,925,246
2000 1,943,595 2,927,352
Thereafter 18,317,048 17,095,055
Minimum lease payments 27,988,714 $31,998,498
Less amount representing
interest 17,376,482
Present value of minimum
lease payments $10,612,232
The following schedule shows the composition of total rental expense
under operating leases for the following periods:
1995 1994 1993
Minimum rents $3,138,751 $3,353,487 $3,149,108
Contingent rentals 533,774 750,728 892,112
Less sub-lease rentals -- -- (80,880)
$3,672,525 $4,104,215 $3,960,340
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 $1,128,000, $1,215,000 and $1,039,000
for fiscal years 1995, 1994 and 1993, 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 transferrable 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 Company 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
equalling 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 29, 1995
expire on December 6, 1997. There were no transactions in fiscal 1995, 1994
and 1993. There are 130,000 options outstanding and exercisable at an average
price of $8.00 at July 29, 1995.
Village Super Market, Inc. and Subsidiaries
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:
1995 1994 1993
Service cost $486,332 $365,414 $384,307
Interest cost on projected
benefit obligation 402,909 380,587 329,340
Return on plan assets (444,026) (152,604) (124,179)
Amortization of unrecognized
net assets at transition 7,836 (232,055) (223,508)
Net periodic pension cost $453,051 $361,342 $365,960
The funded status of the three pension plans is reconciled to prepaid
(accrued) pension cost as follows:
JULY 29, JULY 30,
1995 1994
Plan assets at fair value $5,303,778 $4,768,284
Actuarial present value of benefit
obligations:
Vested benefits 4,301,071 4,220,550
Non-vested benefits 421,911 99,212
Accumulated benefit obligations 4,722,982 4,319,762
Effect of future increases in
compensation levels 827,812 908,207
Projected benefit obligation 5,550,794 5,227,969
Projected benefit obligation
in excess of plan assets (247,016) (459,685)
Unamortized prior service cost 390,987 529,845
Unrecognized net loss 307,465 298,317
Remaining unrecognized net asset
at July 25, 1987 (amortized
over 15 years) (435,869) (498,314)
Additional liability -- (168,523)
Prepaid (accrued) pension cost $ 15,567 $(298,360)
Plan assets are invested principally in government securities, common
stocks and mutual funds.
Assumptions used in determining the net fiscal 1995, 1994 and 1993 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 multiemployer pension plans for
which the 1995, 1994 and 1993 contributions were $1,785,000, $1,814,000 and
$1,822,000, 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. Costs
incurred related to this project are included in construction in progress as
the Company believes such costs will be recoverable from the development of
the property.
The Company's general liability insurer can make premium calls for premiums
paid for the years ended December 1, 1992 through December 1, 1994. Based on
advice from the insurer, the Company has recorded liabilities for the
estimated premium calls.
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.
Village Super Market, Inc. and Subsidiaries
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 29, 1995 and July 30, 1994,
and the related consolidated statements of operations, shareholders' equity
and cash flows for each of the years in the three-year period ended
July 29, 1995. 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 29, 1995 and July 30,
1994, and the results of their operations and their cash flows for each of
the years in the three-year period ended July 29, 1995 in conformity with
generally accepted accounting principles.
As discussed in Note 1 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 29, 1995
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.
CLASS A STOCK
High Low
1995
4th Quarter 8 6-3/4
3rd Quarter 7- 3/4 6-3/4
2nd Quarter 8 6-3/4
1st Quarter 8-1/2 7
1994
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
As of September 30, 1995, there were 521 holders of record of the Company's
Class A common stock.
No dividends were paid during fiscal 1995 and 1994.
Village Super Market, Inc. and Subsidiaries
Village Super Market Inc.
CORPORATE DIRECTORY
OFFICERS AND DIRECTORS
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