-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LzDZmGEAGN8DQQYiW9I6wMpTXkFlLL/27o2ZSXIUbXtevCMWJCual2zcmuetQZN9 +NHKThH6A8Fgc7FK+QwBmg== /in/edgar/work/0000103595-00-000014/0000103595-00-000014.txt : 20001026 0000103595-00-000014.hdr.sgml : 20001026 ACCESSION NUMBER: 0000103595-00-000014 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000729 FILED AS OF DATE: 20001025 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VILLAGE SUPER MARKET INC CENTRAL INDEX KEY: 0000103595 STANDARD INDUSTRIAL CLASSIFICATION: [5411 ] IRS NUMBER: 221576170 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-02633 FILM NUMBER: 745542 BUSINESS ADDRESS: STREET 1: 733 MOUNTAIN AVE CITY: SPRINGFIELD STATE: NJ ZIP: 07081 BUSINESS PHONE: 2014672200 MAIL ADDRESS: STREET 1: 733 MOUNTAIN AVE CITY: SPRINGFIELD STATE: NJ ZIP: 07081 10-K 1 0001.txt SECURITIES & EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-K (Mark One) [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 29, 2000. [ ] 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 (I.R.S. Employer of 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: (973)467-2200 Securities registered pursuant to 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 $12,296,000 and the aggregate market value of the Class B common stock held by non-affiliates was approximately $3,654,000 (based upon the closing price of the Class A shares on the Over the Counter Market on October 2, 2000). There are no other classes of voting stock outstanding. Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of latest practicable date. Outstanding at Class October 20, 2000 Class A common stock, no par value 1,419,400 Shares Class B common stock, no par value 1,594,076 Shares DOCUMENTS INCORPORATED BY REFERENCE Information contained in the 2000 Annual Report to Shareholders and the 2000 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 8, 2000 are incorporated by reference into this Form 10-K at Part II, Items 5, 6, 7 and 8 and Part III. PART I ITEM I. BUSINESS FORWARD-LOOKING STATEMENTS All statements, other than statements of historical fact, included in this Form 10-K are or may be considered forward- looking statements within the meaning of federal securities law. The Company cautions the reader that there is no assurance that actual results or business conditions will not differ materially from future results, whether expressed, suggested or implied by such forward-looking statements. Such potential risks and uncertainties include, without limitation, local business conditions, competitive pressures from the Company's operating environment, the ability of the Company to maintain and improve its sales and margins, the ability to attract and retain associates, the availability of new store locations, the liquidity of the Company on a cash flow basis, the success of operating initiatives, results of ongoing litigation and other risk factors detailed herein and in other filings of the Company. GENERAL The Company operates a chain of 22 ShopRite supermarkets, 15 of which are located in northern New Jersey, one of which is in northeastern Pennsylvania and six of which are in the southern shore area of New Jersey. In addition, the Company operates one former ShopRite store under a "Village Market" format as described below, which is expected to close in fiscal 2001. The Company is a member of Wakefern Food Corporation ("Wakefern"), the nation's largest retailer owned food cooperative and owner of the ShopRite name. This relationship provides the Company many of the economies of scale in purchasing, distribution, advanced retail technology 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 the development of superstores which average 58,000 total square feet, compared with an average of 30,000 total square feet for conventional supermarkets. Several of the Company's recent remodels have expanded superstores to 65,000 square feet These larger store sizes enable the Company to feature expanded higher margin specialty service departments such as home meal replacement, an on-site bakery, an expanded delicatessen including prepared foods, and a fresh seafood section. Superstores also offer an expanded selection of non-food items such as cut flowers, health and beauty aids, greeting cards, videocassette rentals, small appliances and in most cases, a pharmacy. Two superstores also include a warehouse section featuring products in giant sizes. Recently remodeled superstores emphasize a Power Alley, which features high margin convenience offerings such as salad bars, bakery and home meal replacement in an area within the store that provides quick customer entry and exit for those customers shopping for today's lunch or dinner. 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:
Product Categories Fiscal Year Ended In July 1998 1999 2000 Groceries 41.6% 41.2% 41.1% Dairy and Frozen 15.9 16.1 16.0 Meats 9.9 9.6 9.7 Non-Foods 10.4 10.8 10.4 Produce 10.2 10.0 10.0 Deli and prepared 4.6 4.6 4.5 Seafood 2.1 2.0 2.0 Pharmacy 3.6 4.0 4.5 Bakery 1.6 1.6 1.6 Other .1 .1 .2 100.0% 100.0% 100.0% Number of superstores 19 20 20 Selling square feet represented by superstores 90% 92% 92%
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, Easton and Florham Park stores have been closed since December 1991. 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. In fiscal 2000, the Company purchased land in Garwood, N.J., the site of a future superstore, and substantially remodeled the interior of the Vineland store. In fiscal 1999, the Company completed the 22,000 square foot expansion and remodel of the Livingston store. In addition, the Company acquired a leased 67,000 square foot store in Vineland, New Jersey in May 1999 from Wakefern. The Company has budgeted $16,000,000 for capital expenditures in fiscal 2001. The major planned expenditures are the replacement of the West Orange store, (completed in August 2000) and the construction of the Garwood store. In the last five years, the Company has completed five remodels and one store acquisition. 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 and the general difficulty in developing retail properties in the Company's primary trading area 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. WAKEFERN The Company is the second largest member of Wakefern (owning 14.7% of Wakefern's outstanding stock) and one of the Company's principal shareholders was a founder of Wakefern. Wakefern, which was organized in 1946, is the nation's largest retailer-owned food cooperative. There are presently 42 individual member companies and 205 supermarkets which comprise the Wakefern cooperative. Only Wakefern and member companies are entitled to use the ShopRite name and trademark, and participate in ShopRite advertising and promotional programs. 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 economies of scale, ShopRite advertising and promotional programs including the ShopRite Price Plus card and the development of shared, advanced retail technology. 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 onto 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 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 owned 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; 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 requires that in the event of unapproved changes in control of the Company or a sale of the Company or of individual Company stores, except to a qualified successor, the Company in such cases must pay Wakefern an amount equal to the present value of ten years of 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 17 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 names 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. Moreover, every owner of 5% or more of the voting stock of a member (including five 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, additional capital must be contributed by it to Wakefern. On occasion, as its business needs have required, Wakefern has increased the maximum per-store capital contributions (currently $550,000) 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. As a result, the Company is required to invest $2,235,000 over the next seven years. TECHNOLOGY The Company considers automation and computerization important to its operations and competitive position. All stores have IBM 4690 software for the scanning check-out systems. These systems improve pricing accuracy, enhance productivity and reduce checkout time for customers. The hardware for these point of sale systems was replaced in fiscal 2000. The Company utilizes IBM RS/6000 computers and satellite communications in each store to, among other things offer customers debit and credit card payment options.In addition, the Company utilizes a computer generated ordering system, 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 scannable Price Plus card. This technology has also enabled the Company to focus on target marketing initiatives. 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. In addition, certain in-store department records are computerized, including the records of all pharmacy departments. In all stores, meat, seafood and delicatessen prices are maintained on computer for automatic weighing and pricing. Furthermore, all stores have computerized time and attendance systems and most also have computerized energy management systems. The Company seeks to design its stores to use energy efficiently, including recycling waste heat generated by refrigeration equipment for heating and other purposes. The Company has installed computer based training systems in all stores. Wakefern and the Company have responded to our customers increased use of the internet by creating shoprite.com to provide weekly advertising and other shopping information. In addition, an on-line shopping and pick-up service is being tested by Wakefern at this time. 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, supercenters, drug stores, discount department stores, fast food chains and convenience stores. The Company competes by using low pricing, courteous, quick, service to the customer, and a broad range of consistently available quality products including the ShopRite private label. The ShopRite Price Plus card and the co-branded ShopRite credit card also create significant customer loyalty. 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, Edwards, Foodtown, Acme, King's and Grand Union. Many of the Company's competitors have financial resources substantially greater than those of the Company. Recently, one of our principal competitors completed a restructuring which substantially reduced its previously high debt levels. In addition, another competitor is in the process of changing the name and format of all of its stores. The impact of these recent developments on our already highly competitive marketplace is unknown at this time. LABOR As of October 1, 2000, the Company employed approximately 3,650 persons of whom approximately 2,350 worked part-time. Approximately 89% 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. Contracts with the Company's six unions expire between April 2001 and April 2003. 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 2001 and 2002. ITEM 2. PROPERTIES The Company owns the sites of five of its supermarkets (containing 330,000 square feet of total space), all of which are freestanding stores, except the Egg Harbor store, which is part of a shopping center. The remaining 18 supermarkets (containing 852,000 square feet of total space) are leased, with initial lease terms generally ranging from 20 to 30 years, usually with renewal options. Ten of these leased stores are located in strip shopping centers and the remaining eight are freestanding stores. Except with respect to one lease between the Company and certain related parties, none of the Company's leases expire before 2002. One lease does expire in June 2002 and does not contain a renewal option. The annual rent, including capitalized leases, for all of the Company's leased facilities for the year ended July 29, 2000 was approximately $7,352,000. The Company is a limited partner in two partnerships, one 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 freestanding 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 57 Vice President and Assistant Secretary since 1983; responsible for administration of headquarters staff. Kevin Begley 42 Chief Financial Officer since 1987. Mr. Begley is a Certified Public Accountant. 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 20 in the Company's Annual Report to Shareholders for the fiscal year ended July 29, 2000. 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 29, 2000. 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 Page 4 through 6 in the Company's Annual Report to Shareholders for the fiscal year ended July 29, 2000. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this Item is incorporated by reference from Information appearing on Page 3 and Page 7 to 20 in the Company's Annual Report to Shareholders for the fiscal year ended July 29, 2000. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 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 8, 2000, in connection with its Annual Meeting scheduled to be held on December 8, 2000. 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 8, 2000, in connection with its Annual Meeting scheduled to be held on December 8, 2000. 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 8, 2000, in connection with its annual meeting scheduled to be held on December 8, 2000. 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 8, 2000, in connection with its annual meeting scheduled to be held on December 8, 2000. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K (a) 1 Financial Statements: Consolidated Balance Sheets - July 29, 2000 and July 31, 1999; Consolidated Statements of Operations - years ended July 29, 2000, July 31, 1999 and July 25, 1998; Consolidated Statements of Shareholders' Equity - years ended July 29, 2000; July 31, 1999 and July 25, 1998; Consolidated Statements of Cash Flows - years ended July 29, 2000; July 31, 1999 and July 25, 1998. 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 29, 2000. 2. Financial Statement Schedules: All 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. 3. Exhibits EXHIBIT INDEX Exhibit No. 3 - Certificate of Incorporation and By-Laws* Exhibit No. 4 - Instruments defining the rights of security holders; 4.4 Loan Agreement dated May 30, 1997* 4.5 Note Purchase Agreement dated September 16, 1999* 4.6 Loan Agreement dated September 16, 1999* Exhibit No. 10 - Material Contracts: 10.1 - Wakefern By-Laws* 10.2 - Stockholders Agreement dated February 20, 1992 between between the Company and Wakefern Food Corp.* 10.3 - Voting Agreement dated March 4, 1987* 10.4 - 1987 Incentive and Non-Statutory Stock Option Plan* 10.5 - 1997 Incentive and Non-Statutory Stock Option Plan* Exhibit No. 13 - Annual Report to Security Holders Exhibit No. 21 - Subsidiaries of Registrant Exhibit No. 23 - Consent of KPMG LLP Exhibit No. 99 - Press Release dated October 3, 2000 * The following exhibits are incorporated by reference from the following previous filings: Form 10-K for 1999: 4.5, 4.6 Form 10-K for 1997: 4.4, 10.5 Form 10-K for 1993: 3, 10.1, 10.2, 10.3 and 10.4 (b) No reports on Form 8-K were filed during the fourth quarter of fiscal 2000. Exhibit 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 report dated October 3, 2000, relating to the consolidated balance sheets of Village Super Market, Inc. and subsidiaries as of July 29, 2000 and July 31, 1999 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, 2000, which report is incorporated by reference in the July 29, 2000 annual report on Form 10-K of Village Super Market, Inc. KPMG LLP Short Hills, New Jersey October 25, 2000 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 26, 2000 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: Village Super Market, Inc. /s/ Perry Sumas /s/ James Sumas Perry Sumas, Director James Sumas, Director October 26, 2000 October 26, 2000 /s/ Robert Sumas /s/ William Sumas Robert Sumas, Director William Sumas, Director October 26, 2000 October 26, 2000 /s/ John P. Sumas /s/ John J. McDermott John P. Sumas, Director John J. McDermott, Director October 26, 2000 October 26, 2000 /s/ George Andresakes /s/ Norman Crystal George Andresakes, Director Norman Crystal, Director October 26, 2000 October 26, 2000 Exhibit 21 SUBSIDIARIES OF REGISTRANT The Company has two wholly-owned subsidiaries at July 29, 2000. Village Super Market of PA, Inc., which is organized under the laws of Pennsylvania and Village Super Market of NJ, L.P., which is organized under the laws of New Jersey. In addition, the Company had a wholly-owned subsidiary, Village Liquor, Inc. until fiscal 1998 when it was merged into Village Super Market, Inc. This corporation was organized under the laws of the State of New Jersey. The financial statements of all subsidiaries are included in the Company's consolidated financial statements. Exhibit 99 VILLAGE SUPER MARKET, INC. REPORTS RESULTS FOR THE FOURTH QUARTER & YEAR ENDED JULY 29, 2000 Contact: Kevin Begley, C.F.O. (973) 467-2200, Ext. 220 Springfield, New Jersey - October 3, 2000 - Village Super Market, Inc. reported sales and net income for the fourth quarter and year ended July 29, 2000, Perry Sumas, President announced today. Net income for the fiscal year was $8,426,000 ($2.76 per diluted share), an increase of 78% from the prior year. Excluding a special charge in the prior year, net income increased 35%. Sales for the year were $803,360,000, an increase of 4.6%. Same store sales increased 2.9% in the fiscal year. In addition, sales increased due to a full year's operation of the Vineland store acquired in May 1999. Partially offsetting this sales increase was one less sales week in fiscal 2000. The substantial increase in net income for the year was primarily attributable to the same store sales increase and improved gross margin percentages. Net income was $2,788,000 ($.91 per diluted share) in the fourth quarter of fiscal 2000, an increase of 95% from the prior year. Excluding a pre-tax charge of $2,600,000 ($.52 per share) in the prior year, net income declined 7%. Sales in the fourth quarter were $203,611,000, a decrease of 5.5% from the prior year. Sales decreased due to fiscal 2000's fourth quarter containing 13 weeks compared with 14 weeks in fiscal 1999. Same store sales increased .6% in the fourth quarter of fiscal 2000. The slight decrease in net income in the fourth quarter compared to the prior year, excluding the special charge, was due to the current year containing one less sales week. This negative impact was partially offset by improved gross margin percentages and lower promotional costs compared to the prior year. Village Super Market operates a chain of 23 supermarkets under the ShopRite name in New Jersey and eastern Pennsylvania. The following table summarizes the results for the quarter and year ended July 29, 2000:
July 29, 2000 July 31, 1999 Quarter Ended Sales $203,611,000 $215,352,000 Net Income $ 2,788,000 $ 1,432,000 Net Income Per Share - Basic $ .93 $ .48 Net Income Per Share - Diluted $ .91 $ .47 Year Ended Sales $803,360,000 $768,139,000 Net Income $ 8,426,000 $ 4,722,000 Net Income Per Share - Basic $ 2.81 $ 1.59 Net Income Per Share - Diluted $ 2.76 $ 1.55
FORWARD-LOOKING STATEMENTS: This Press Release contains "forward-looking statements" within the meaning of federal securities law. The Company cautions the reader that there is no assurance that actual results or business conditions will not differ materially from future results, whether expressed, suggested or implied by such forward-looking statements. Such potential risks and uncertainties include, without limitation, local economic conditions, competitive pressures from the Company's operating environment, the ability of the Company to maintain and improve its sales and margins, the ability to attract and retain qualified associates, the availability of new store locations, the liquidity of the Company on a cash flow basis, the success of operating initiatives, and other risk factors detailed in the Company's filings with the SEC.
EX-13 2 0002.txt The Company Village Super Market, Inc. operates a chain of 23 ShopRite supermarkets, 16 of which are located in northern New Jersey, 1 in northeastern Pennsylvania and 6 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 Selected Financial Data 3 Unaudited Quarterly Financial Data 3 Management's Discussion and Analysis of Financial Condition and Results of Operations 4 Consolidated Balance Sheets 7 Consolidated Statements of Operations 8 Consolidated Statements of Shareholders' Equity 9 Consolidated Statements of Cash Flows 10 Notes to Consolidated Financial Statements 11 Independent Auditors' Report 20 Stock Price and Dividend Information 20 Corporate Directory Inside back cover Dear Fellow Shareholders Our goal when this year began was to build on the achievements of the previous few years. We are pleased to report Village Super Market once again achieved record sales and net income in fiscal 2000. Sales increased 4.6% to $803 million. Net income was $8.4 million, a 35% increase, excluding a special charge in fiscal 1999. Net income per diluted share was $2.76. The substantial increase in net income was due to a 2.9% increase in same store sales and improved gross margin percentages. Capital expenditures were $13.3 million in fiscal 2000. We remodeled the recently acquired Vineland store, purchased land for a store in Garwood and purchased equipment for a replacement store in West Orange. The 67,000 square feet West Orange superstore opened on August 10, 2000. Our West Orange customers now enjoy our Power Alley format, which features a wide assortment of perishable products, including our Bistro Street prepared food kiosks. In September 1999, Village issued $30 million of unsecured notes at 8.12% and also obtained a $15 million revolving credit facility. The strength of Village's balance sheet and the cash raised from these financings provide us with adequate resources for the planned investments of the next few years. We recently started construction of a superstore in Garwood, New Jersey. We plan to build a superstore in Hammonton, New Jersey in 2001. Village's and Wakefern's continued investment in advanced retail technologies has enabled us to design and offer various target marketing programs. Two recent examples of using the ShopRite Price Plus card to reach specific customers and engender loyalty are our Baby Bucks and ShopRite Kid's Club programs. Baby Bucks is a customer loyalty program that rewards customers who purchase certain baby products. Accumulate 50 Baby Bucks and a $5 discount is automatically deducted from your order. This program has substantially increased sales of baby products to an important demographic group. Recently we introduced the ShopRite Kids Club for children ages 6 to 12. This vendor supported program creates a sweepstakes entry each time certain products are purchased. Monthly prizes include computers, big screen televisions and family vacations. Our markets have always been highly competitive and we expect that to continue. We intend to continue satisfying our customer's needs by offering high quality products at consistently low prices, providing outstanding service, creating unique marketing initiatives, and expanding and remodeling our stores. We feel this is the best way to continue our success and to serve our shareholders, customers and associates well in the years ahead. James Sumas, Perry Sumas, Chairman of the Board President
Selected Financial Data (Dollars in thousands except per share and sq. ft. data) July 29, July 31, July 25, July 26, July 27, 2000 1999 1998 1997 1996 For year Sales $803,360 $768,139 $703,684 $688,861 $688,632 Net income (1) 8,426 4,722 4,007 2,074 2,006 Net income per share - basic (1) 2.81 1.59 1.36 .71 .69 Net income per share - diluted (1) 2.76 1.55 1.34 .71 .69 Cash dividends per share Class A -- -- -- -- -- Class B -- -- -- -- -- At year end Total assets 173,924 149,555 138,508 132,764 131,062 Long-term obligations including capital leases 42,507 27,204 25,700 24,027 26,815 Working capital (deficit) 11,256 (7,197) (9,682) (12,607) (10,885) Shareholders' equity 75,152 66,477 61,568 57,081 55,007 Book value per share 24.94 22.24 20.73 19.62 18.90 Other data Same store sales increase 2.9% 6.0% 2.4% 1.0% 1.7% Total square feet 1,182,000 1,182,000 1,093,000 1,093,000 1,084,000 Average total sq. ft. per store 51,000 51,000 50,000 50,000 47,000 Selling square feet 934,000 934,000 866,000 866,000 860,000 Sales per average square foot of selling space 859 866 811 803 809 Number of stores 23 23 22 22 23 Sales per average number of stores 34,878 34,506 31,929 31,178 29,941 Capital expenditures 13,312 7,084 9,956 8,593 9,754
Unaudited Quarterly Financial Data (Dollars in thousands except per share amounts) First Second Third Fourth Fiscal Quarter Quarter Quarter Quarter Year 2000 Sales $195,413 $210,681 $193,655 $203,611 $803,360 Gross margin 51,211 55,019 49,943 53,316 209,489 Net income 2,030 2,529 1,079 2,788 8,426 Net income per share - diluted $.67 $.83 $.35 $.91 $2.76 1999 Sales $178,058 $192,633 $182,096 $215,352 $768,139 Gross margin 45,117 49,048 46,814 55,475 196,454 Net income 1,180 1,225 885 1,432 4,722 Net income per share - diluted $.39 $.40 $.29 $.47 $1.55
(1) Net income in fiscal 1999 is presented after giving effect to a special charge of $2,600,000 related to litigation. See Note 11 to the consolidated financial statements. 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 31, July 25, 2000 1999 1998 Sale 100.00% 100.00% 100.00% Cost of sales 73.92 74.42 75.04 Gross margin 26.08 25.58 24.96 Operating and administrative expense 22.98 22.79 22.45 Depreciation and amortization expense 1.02 1.00 1.07 Special charge -- .34 -- Operating income 2.07 1.45 1.44 Interest expense (net) .41 .41 .44 Gain on disposal of assets .06 -- -- Income before income taxes 1.72% 1.04% 1.00%
Sales were $803,360,000 in fiscal 2000, an increase of $35,221,000, or 4.6% from the prior year. Fiscal 2000 sales were $28,376,000 higher due to the acquisition of the Vineland store during the fourth quarter of fiscal 1999. Same store sales increased 2.9% in fiscal 2000. Offsetting these increases was a reduction in sales of approximately $14,000,000 as fiscal 2000 contained 52 weeks compared to 53 weeks in fiscal 1999. Sales were $768,139,000 in fiscal 1999, an increase of $64,454,000, or 9.2% from the prior year. Same store sales increased 6.0% in fiscal 1999. The primary reason for the substantial increase in same store sales was the introduction of double coupons in northern New Jersey on September 6, 1998. Sales increased by approximately $14,000,000 as fiscal 1999 contained 53 weeks. Also, the acquisition of a store in Vineland, New Jersey during the fourth quarter contributed $8,100,000 to fiscal 1999 sales. Gross margin as a percentage of sales increased in fiscal 2000 in most selling departments. In addition, gross margin improved due to rebates received for the acquired Vineland store. Gross margin as a percentage of sales increased in fiscal 1999 in most selling departments. This is in part due to a reduction in sale item penetration as a result of offering double coupons. Operating and administrative expenses increased as a percentage of sales in fiscal 2000. This increase is a result of increased credit card processing costs, professional fees and a charge to account for the anticipated disposal of a store. Operating and administrative expenses increased as a percentage of sales in fiscal 1999. This increase was a result of the increased costs associated with the doubling of manufacturer's coupons. These increases were partially offset by lower payroll and fringe benefit costs as a percentage of sales. Depreciation and amortization expense increased in fiscal 2000 primarily due to accelerated depreciation of the West Orange store assets as the store was replaced in August 2000. Interest expense (net) increased in fiscal 2000 due to higher debt levels outstanding partially offset by increased interest income earned on higher cash balances. Interest expense was similar in fiscal 1999 compared to fiscal 1998 as slightly higher debt levels were offset by slightly lower interest rates. Fiscal 2000 includes a gain on the sale of real estate of a previously closed store in Easton, PA in the amount of $492,000. Fiscal 1999 results include a special charge in the amount of $2,600,000 related to litigation in connection with a contract to purchase property for a new superstore. This is more fully described in footnote 11 to the consolidated financial statements. The Company reduced its effective income tax rate to 39.0% in fiscal 2000 as compared to 41.2% in fiscal 1999 through tax planning initiatives. LIQUIDITY AND CAPITAL RESOURCES Current assets exceeded current liabilities by $11,256,000 at July 29, 2000 compared to current liabilities exceeding current assets by $7,197,000 and $9,682,000 at the end of fiscal 1999 and 1998, respectively. Working capital ratios at the same dates were 1.21, .87 and .80 to one, respectively. The Company's working capital needs are reduced by its high rate of inventory turnover (twenty times in fiscal 2000) 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. On September 16, 1999, the Company completed the sale of $30,000,000 of 8.12% unsecured Senior Notes. At the same time, the Company entered into a $15,000,000 unsecured revolving credit agreement. These two debt agreements replaced the $6,667,000 term loan and a $24,000,000 revolving credit facility, both of which were secured by substantially all of the Company's assets. During fiscal 2000, operating cash flow of $13,634,000 and net borrowings of $14,859,000 were used to fund capital expenditures of $13,312,000 and to increase cash balances by $15,950,000. The principal capital expenditure projects were the purchase of land in Garwood, NJ for a new superstore, the remodel of the Vineland store and a portion of the cost of the replacement store in West Orange. During fiscal 1999, operating cash flow of $15,197,000 and additional borrowings of $5,931,000 were used to fund capital expenditures and an acquisition in the aggregate amount of $11,884,000, make debt principal payments of $5,108,000 and increase cash balances by $4,093,000. The Company acquired all the assets of an existing ShopRite in Vineland, NJ in May 1999 for $3,500,000 plus the cost of inventory. The acquisition of this 67,000 square foot leased store was financed in part by a $3,500,000 loan secured by the equipment and fixtures of the store. Capital expenditures in fiscal 1999 were $7,084,000. A substantial amount of capital expenditures related to the expansion and remodel of the Livingston store. The Company has budgeted approximately $16 million for capital expenditures in fiscal 2001. Planned expenditures include leasehold improvements and equipment for the replacement store in West Orange, NJ (opened in August 2000), the construction and equipment for a new superstore in Garwood, NJ and the start of a major remodel. The Company's primary sources of liquidity in fiscal 2001 are expected to be cash on hand at July 29, 2000 and operating cash flow. YEAR 2000 In prior years, the Company discussed its plans to become year 2000 ready. The Company experienced no material year 2000 system problems and anticipates no future problems. Recent Accounting Pronouncements At a recent FASB Emerging Issues Task Force ("EITF") meeting, a consensus was reached with respect to the issue "Accounting for Certain Sales Incentives" including point of sale coupons, rebates and free merchandise. The consensus included a conclusion that the value of such sales incentives that results in a reduction of the price paid by the customer should be netted against revenue and not classified as a marketing expense. The Company currently records coupons in operating and administrative expense, and upon implementation in fiscal 2001 will reclassify current and prior period coupon expense as a reduction of sales. Coupon expense was $18,365,000, $17,459,000 and $10,017,000 in fiscal 2000, 1999 and 1998, respectively. The implementation of this EITF consensus will affect classification in the consolidated statements of operations, but will not have any effect on the Company's net income. Impact of Inflation and changing prices Although the Company cannot accurately determine the precise effect of inflation on its operations, it does not believe inflation has had a material effect on sales or results of operations. Forward-Looking Statements This annual report to shareholders contains "forward-looking statements" within the meaning of federal securities law. The Company cautions the reader that there is no assurance that actual results or business conditions will not differ materially from future results, whether expressed, suggested or implied by such forward-looking statements. Such potential risks and uncertainties include, without limitation, local economic conditions, competitive pressures from the Company's operating environment, the ability of the Company to maintain and improve its sales and margins, the ability to attract and retain qualified associates, the availability of new store locations, the liquidity of the Company on a cash flow basis, and other risk factors detailed herein and in other filings of the Company.
Consolidated Balance Sheets July 29, July 31, 2000 1999 ASSETS CURRENT ASSETS Cash and cash equivalents $ 25,721,033 $ 9,771,422 Merchandise inventories 31,032,737 29,923,306 Patronage dividend receivable 2,200,646 1,728,076 Miscellaneous receivables 5,255,095 3,728,862 Deferred income taxes -- 522,243 Prepaid expenses 650,514 596,117 Total current assets 64,860,025 46,270,026 PROPERTY, EQUIPMENT AND FIXTURES, at cost less accumulated depreciation and amortization 80,628,090 75,306,887 OTHER ASSETS Investment in related party, at cost 11,050,816 10,698,402 Goodwill, net 10,946,301 11,286,581 Other intangibles, net 1,522,501 1,776,251 Receivables and other assets 4,916,228 4,217,071 Total other assets 28,435,846 27,978,305 $173,923,961 $149,555,218 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Current portion of long-term debt: Notes payable $ 1,272,686 $ 1,670,901 Capitalized lease obligations 432,412 478,744 Accounts payable to related party 28,633,470 27,086,025 Accounts payable and accrued expenses 23,156,465 23,495,791 Income taxes payable 109,200 735,822 Total current liabilities 53,604,233 53,467,283 LONG-TERM DEBT, less current portion: Notes payable 34,746,847 19,011,286 Capitalized lease obligations 7,760,163 8,192,575 Total long-term debt 42,507,010 27,203,861 DEFERRED INCOME TAXES 2,660,429 2,407,018 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 60,739,316 52,408,700 Less treasury stock, Class A, at cost (343,400 shares at July 29, 2000 and 368,300 shares at July 31, 1999) (4,751,178) (5,095,795) Total shareholders' equity 75,152,289 66,477,056 $173,923,961 $149,555,218
See notes to consolidated financial statements.
Consolidated Statements of Operations Years Ended July 29, July 31, July 25, 2000 1999 1998 SALES $803,359,626 $768,138,686 $703,684,315 COST OF SALES 593,870,652 571,684,669 528,076,028 GROSS MARGIN 209,488,974 196,454,017 175,608,287 Operating and administrative expense 184,619,826 175,059,944 157,953,508 Depreciation and amortization expense 8,204,456 7,648,644 7,516,182 SPECIAL CHARGE -- 2,600,000 -- Operating Income 16,664,692 11,145,429 10,138,597 Interest expense, net of interest income of $797,688, $55,812 and $20,817 3,333,114 3,116,442 3,122,199 Gain on Disposal of ASSETS 492,155 -- -- INCOME BEFORE INCOME TAXES 13,823,733 8,028,987 7,016,398 PROVISION FOR INCOME TAXES 5,397,487 3,307,010 3,009,032 NET INCOME $ 8,426,246 $ 4,721,977 $ 4,007,366 NET INCOME PER SHARE: Basic $2.81 $1.59 $1.36 Diluted $2.76 $1.55 $1.34
See notes to consolidated financial statements.
Consolidated Statements of Shareholders' Equity Years Ended July 29, 2000, July 31, 1999 and July 25, 1998 Class A Class B Common Stock Common Stock Retained Treasury Shares Amt Shares Amt Earnings Stock Balance, July 26, 1997 1,762,800 $18,129,472 1,594,076 $1,034,679 $44,101,565$(6,185,003) Net Income -- -- -- -- 4,007,366 -- Exercise of 60,000 stock options -- -- -- -- (350,400) 830,400 Balance, July 25, 1998 1,762,800 $18,129,472 1,594,076 $1,034,679 $47,758,531$(5,354,603) Net Income -- -- -- -- 4,721,977 -- Exercise of 18,700 stock options -- -- -- -- (71,808) 258,808 Balance, July 31, 1999 1,762,800 $18,129,472 1,594,076 $1,034,679 $52,408,700 $(5,095,795) Net Income -- -- -- -- 8,426,246 -- Exercise of 24,900 stock options -- -- -- -- (95,630) 344,617 Balance, July 29, 2000 1,762,800 $18,129,472 1,594,076 $1,034,679 $60,739,316 $(4,751,178)
See notes to consolidated financial statements.
Consolidated Statements of Cash Flows Years Ended July 29, 2000 July 31, 1999 July 25, 1998 CASH FLOWS FROM OPERATING ACTIVITIES Net income $8,426,246 $4,721,977 $4,007,366 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 8,204,456 7,648,644 7,516,182 Deferred taxes 359,654 (975,857) (388,201) Provision to value inventories at LIFO 193,758 593,182 136,410 Gain on disposal of assets (492,155) -- -- Changes in assets and liabilities: (Increase) in merchandise inventories (1,303,189) (2,667,901) (1,849,047) (Increase) decrease in patronage dividend receivable (472,570) 240,595 80,025 (Increase) in miscellaneous receivables (1,526,233) (312,403) (147,786) (Increase) decrease in prepaid expenses (54,397) 36,229 6,479 (Increase) in receivables and other assets (699,157) (1,500) (69,117) Increase (decrease) in accounts payable to related party 1,547,445 (284,317) 229,635 Increase (decrease) in accounts payable and accrued expenses (339,326) 5,913,183 565,134 Increase (decrease) in income taxes payable (210,622) 285,428 (327,264) Net cash provided by operating activities 13,633,910 15,197,260 9,759,816 CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (13,312,329) (7,084,284) (9,956,270) Acquisition of Vineland store -- (4,800,000) -- Investment in related party (352,414) (230,785) (117,000) Proceeds from disposal of assets 872,855 -- -- Net cash used in investing activities (12,791,888) (12,115,069) (10,073,270) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of long-term debt 30,000,000 5,931,000 5,500,000 Proceeds from exercise of stock options 248,987 187,000 480,000 Principal payments of long-term debt (15,141,398) (5,107,620) (4,257,514) Net cash provided by financing activities 15,107,589 1,010,380 1,722,486 NET INCREASE IN CASH AND CASH EQUIVALENTS 15,949,611 4,092,571 1,409,032 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 9,771,422 5,678,851 4,269,819 CASH AND CASH EQUIVALENTS, END OF YEAR $25,721,033 $9,771,422 $5,678,851 Supplemental disclosures of cash payments made for: Interest $3,315,784 $3,163,477 $3,172,692 Income taxes $5,248,456 $4,080,631 $3,754,586
See notes to consolidated financial statements. Notes to Consolidated Financial Statements NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of operations Village Super Market, Inc. (the "Company") operates a chain of 23 ShopRite supermarkets in New Jersey and eastern Pennsylvania. The Company is a member of Wakefern Food Corporation ("Wakefern"), the largest retailer- owned food cooperative in the United States. On May 9, 1999, the Company acquired all the assets of an existing supermarket in Vineland, New Jersey from Wakefern for $3,500,000 plus the cost of inventory. The transaction was financed in part by a $3,500,000 loan. The acquisition has been accounted for using the purchase method and, accordingly, the assets acquired, liabilities assumed, and results of operations are included in the consolidated financial statements from the date of acquisition. The purchase price was allocated to the underlying assets and liabilities based on their fair values, with the excess recorded as goodwill. Principles of consolidation The consolidated financial statements include the accounts of Village Super Market, Inc. and its subsidiaries, 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 1999 contains 53 weeks. Fiscal 2000 and 1998 contain 52 weeks. Industry segment The Company consists of one operating segment, the retail sale of food and non-food products. Revenue recognition Merchandise sales are recognized at the point of sale. Cash and cash equivalents The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. Included in cash at July 29, 2000 is $15,291,000 of demand deposits invested at Wakefern. 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 and frozen foods -- 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 the shorter of the related lease terms 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 consolidated 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 a decision to close a store is made. This includes items such as future lease payments, net of expected sublease recovery, and charges to reduce assets to net realizable value. 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. NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Goodwill Goodwill resulting from the acquisition of the Vineland store in fiscal 1999 is being amortized over twenty years. Goodwill arising after October 31, 1970 and before fiscal 1999 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 $3,965,680 and $3,625,400 at July 29, 2000 and July 31, 1999, respectively. The Company regularly assesses the recoverability of unamortized amounts of goodwill utilizing relevant cash flow and profitability information. The assessment of the recoverability of unamortized amounts will be impacted if estimated future operating cash flows are not achieved. 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 $3,552,499 and $3,298,749 at July 29, 2000 and July 31, 1999, respectively. Income taxes Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Use of estimates In conformity with generally accepted accounting principles, management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Fair value of financial instruments Cash and cash equivalents, miscellaneous receivables, accounts payable and accrued expenses are reflected in the consolidated financial statements at carrying value which approximates fair value because of the short-term maturity of these instruments. The carrying value of the Company's short- and long-term notes payable approximates the fair value based on the current rates available to the Company for similar instruments. As the Company's investments in Wakefern can only be sold to Wakefern at amounts that approximate the Company's cost, it is not practicable to estimate the fair value of such stock. Impairment of long-lived assets The Company reviews long-lived assets for impairment when circumstances indicate the carrying amount of an asset may not be recoverable. An impairment is recognized to the extent the sum of undiscounted estimated future cash flow expected to result from the use of the asset is less than the carrying value. Net income per share During 1998, the Company adopted SFAS No. 128, "Earnings Per Share." This statement requires the presentation of both basic and diluted net income per share. The number of common shares outstanding for calculation of net income per share is as follows:
2000 1999 1998 Weighted average shares outstanding - basic 3,001,493 2,975,233 2,949,860 Dilutive effect of employee stock options 49,905 63,789 35,657 Weighted average shares outstanding - diluted 3,051,398 3,039,022 2,985,517
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Recent Accounting Pronouncements At a recent FASB Emerging Issues Task Force ("EITF") meeting, a consensus was reached with respect to the issue "Accounting for Certain Sales Incentives" including point of sale coupons, rebates and free merchandise. The consensus included a conclusion that the value of such sales incentives that results in a reduction of the price paid by the customer should be netted against revenue and not classified as a marketing expense. The Company currently records coupons in operating and administrative expense, and upon implementation in fiscal 2001 will reclassify current and prior period coupon expense as a reduction of sales. Coupon expense was $18,365,000, $17,459,000 and $10,017,000 in fiscal 2000, 1999 and 1998, respectively. The implementation of this EITF consensus will affect classification in the consolidated statements of operations, but will not have any effect on the Company's net income. NOTE 2 -- INVENTORIES Merchandise inventories are comprised as follows:
July 29, July 31, 2000 1999 Last-in, first-out (LIFO) $20,466,364 $19,920,327 First-in, first-out (FIFO) 10,566,373 10,002,979 $31,032,737 $29,923,306
If the FIFO method of inventory accounting had been used rather than LIFO, inventories would have been $8,501,980 and $8,308,222 higher than reported in fiscal 2000 and 1999, respectively. NOTE 3 -- PROPERTY, EQUIPMENT AND FIXTURES Property, equipment and fixtures are comprised as follows:
July 29, July 31, 2000 1999 Land and buildings $53,191,318 $49,410,698 Store fixtures and equipment 66,087,959 61,495,302 Leasehold improvements 28,809,897 26,544,421 Leased property under capital leases 11,268,667 11,268,667 Construction in progress 1,667,345 -- Vehicles 1,202,773 1,139,066 162,227,959 149,858,154 Less accumulated depreciation and amortization 81,599,869 74,551,267 Property, equipment and fixtures -- net $80,628,090 $75,306,887
NOTE 4 -- RELATED PARTY INFORMATION The Company's investment in its principal supplier, 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 that the Wakefern Stockholder Agreement be terminated. The Company also has an investment of less than 20% in Insure-Rite, Ltd., a Wakefern affiliated company, that provides the Company with liability and property insurance coverage. The Company purchases substantially all of it's merchandise from Wakefern. 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 $8,658,000, $7,419,000 and $7,489,000 in fiscal 2000, 1999 and 1998, respectively. 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 up to a maximum of $550,000. As a result, the Company is required to invest $2,235,000 in installments over approximately the next seven 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 -- NOTES PAYABLE
July 29, July 31, 2000 1999 Senior notes payable (a) $30,000,000 $ -- Notes payable, interest at 4.39% to 7.90%, payable in monthly Installments through December 2005, collateralized by certain equipment 6,019,533 7,282,189 Term loan, principal payable in monthly installments, interest at 8.35% (a) -- 6,666,666 Revolving credit notes (a) -- 6,400,000 Mortgage note, interest at 10.19% -- 333,332 36,019,533 20,682,187 Less current portion 1,272,686 1,670,901 Noncurrent maturities $34,746,847 $19,011,286
Aggregate principal maturities of notes payable as of July 29, 2000 are as follows:
Year ending July: 2001 $ 1,272,686 2002 1,322,894 2003 1,374,224 2004 5,314,843 2005 5,130,215
(a) On September 16, 1999, the Company issued $30,000,000 of 8.12% unsecured Senior Notes. Interest on these notes is due semi-annually. The principal is due in equal annual installments beginning September 16, 2003. On September 16, 1999, the Company also entered into an unsecured revolving loan agreement in the amount of $15,000,000. This agreement expires in three years, with two one-year extensions available if exercised by both parties. The revolving credit line can be used for any purpose except new store construction. Indebtedness under this agreement bears interest at the prime rate or at the Eurodollar rate, at the Company's option, plus applicable margins based on the Company's fixed charge coverage ratio. At July 29, 2000, the Company was in compliance with all terms and covenants of all debt agreements. These agreements contain restrictive covenants which, among other matters, specify total debt levels, maintenance of net worth, fixed charge coverage ratios, limitation on payment of dividends and limitation of capital expenditures. The revolving loan agreement provides a maximum commitment for letters of credit of $3,000,000 ($1,636,000 outstanding at July 29, 2000) to secure obligations for the Company's self-insured workers' compensation claims and for construction performance guarantees to municipalities. Concurrent with the closing of the above two loan agreements, the Company paid off the balances outstanding on the term loan and the revolving credit notes listed above and those loan agreements were terminated. The terminated loan agreements were secured by substantially all the Company's assets. At July 31, 1999, the interest rate on the revolving credit notes was 8.25%. NOTE 6 -- INCOME TAXES The components of the provision for income taxes are:
2000 1999 1998 Federal: Current $4,653,754 $3,267,396 $2,623,462 Deferred 196,583 (721,444) (282,065) State: Current 384,079 1,015,471 773,771 Deferred 163,071 (254,413) (106,136) $5,397,487 $3,307,010 $3,009,032
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 31, 2000 1999 Deferred tax liabilities: Tax over book depreciation $4,455,098 $4,528,034 Patronage dividend receivable 780,024 690,194 Other 613,862 553,387 Total deferred tax liabilities 5,848,984 5,771,615 Deferred tax assets: Amortization of capital leases 1,523,150 1,753,762 Accrual for special charges 830,000 1,020,000 Other 835,405 1,113,078 Total deferred tax assets 3,188,555 3,886,840 Net deferred tax liability $2,660,429 $1,884,775
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, 2000 and July 31, 1999. The effective income tax rate differs from the statutory federal income tax rate as follows:
2000 1999 1998 Statutory federal income tax rate 35.0% 34.0% 34.0% Amortization of intangibles .7 1.1 1.3 State income taxes, net of federal tax benefit 2.6 6.3 6.3 Other .7 (.2) 1.3 Effective income tax rate 39.0% 41.2% 42.9%
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, most leases will be renewed or replaced by other leases. The Company is obligated under all leases to pay for real estate taxes, utilities and liability insurance, and under certain leases to pay additional amounts based on 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, 2000:
Capital Operating Leases Leases 2001 $ 1,737,544 $ 5,184,649 2002 1,688,376 4,674,823 2003 1,688,376 4,412,084 2004 1,688,376 4,196,302 2005 1,699,796 4,014,214 Thereafter 9,349,980 63,813,813 Minimum lease payments 17,852,448 $86,295,885 Less amount representing interest 9,659,873 Present value of minimum lease payments $ 8,192,575
The following schedule shows the composition of total rental expense under operating leases for the following periods:
2000 1999 1998 Minimum rentals $4,554,604 $3,882,620 $3,795,635 Contingent rentals 974,926 865,500 670,337 $5,529,530 $4,748,120 $4,465,972
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 $1,243,000, $1,242,000 and $1,191,000 for fiscal years 2000, 1999 and 1998 respectively. In addition, two supermarkets are leased from partnerships in which the Company is a partner. The Company leases the Vineland store from Wakefern, the previous owner, under a sublease agreement which provides for annual rent of $650,000. 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 1987 Incentive and Non-Statutory Stock Option Plan authorized 150,000 shares of the Company's Class A common stock to be granted to officers and employees of the Company. All options granted under this plan were at an exercise price equal to the fair value at the date of grant. There are no options currently outstanding under this plan. The 1997 Incentive and Non-Statutory Stock Option Plan provides for the granting of options or stock appreciation rights to purchase up to 250,000 shares of the Company's Class A common stock by officers, employees and directors of the Company as designated by the Board of Directors. The Plan requires incentive stock options to be granted at exercise prices equal to 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 non-statutory options may be granted at an exercise price less than market value. All options granted to date were at market value and are exercisable up to 10 years from the date of the grant. The following table summarizes option activity for the following periods:
2000 1999 1998 Shares Wtd Avg Shares Wtd Avg Shares Wtd Avg Exercise Exercise Exercise Price Price Price Outstanding at begin of year 205,300 $10.05 219,000 $10.00 130,000 $8.00 Granted 4,000 13.00 5,000 12.85 219,000 10.00 Exercised (24,900) 10.00 (18,700) 10.00 (60,000) 8.00 Cancelled -- -- -- -- (70,000) 8.00 Outstanding at end of yr 184,400 $10.14 205,300 $10.05 219,000 $10.00 Options exercisable at end of year 180,400 $10.08 200,300 $10.00 103,000 $10.00
At July 29, 2000, the weighted-average remaining contractual life of outstanding options was 7.3 years and the exercise prices ranged from $10.00 to $13.00. The Company has adopted the disclosure only provisions of SFAS No. 123, "Accounting for Stock-Based Compensation." In accordance with the provisions of SFAS No. 123, the Company applied APB Opinion 25's intrinsic value method of accounting for stock options. Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company's stock at the date of grant over the amount an employee may pay to acquire the stock. As all stock options have been granted at fair market value at the date of grant, no compensation expense has been recorded in the Company's consolidated financial statements. If the Company had elected to recognize compensation costs based on the fair value of the options granted as prescribed by SFAS No. 123, fiscal 2000, 1999 and 1998 results would be reduced to the following pro forma amounts: net income - $8,412,000, $4,604,000 and $3,475,000; net income per share, basic - $2.80, $1.55 and $1.18; and net income per share, diluted - $2.76, $1.51 and $1.16. The fair value of options granted was estimated at $3.57 using the Black-Scholes Option Pricing Model with the following assumptions used for fiscal 2000, 1999 and 1998 grants: risk-free interest rate of 6.0%; expected life of 6 years; expected dividend rate of zero; and expected volatility of 20.9%. 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:
2000 1999 1998 Service cost $523,532 $610,517 $ 592,441 Interest cost on projected benefit obligation 712,678 614,941 562,615 Expected return on plan assets (881,218) (804,656) (1,441,535) Net amortization and deferral (12,052) (14,150) 755,835 Net periodic pension cost $342,940 $406,652 $469,356
The changes in benefit obligations and the reconciliation of the funded status of the Company's plans to the consolidated balance sheets were as follows:
2000 1999 Change in Benefit Obligation: Benefit obligation at beginning of year $9,614,137 $8,884,755 Service cost 523,532 610,517 Interest cost 712,678 614,941 Benefits paid (832,777) (745,212) Actuarial loss 943,222 249,136 Benefit obligation at end of year $10,960,792 $9,614,137 Change in Plan Assets: Fair value of plan at beginning of year $10,087,841 $9,074,481 Actual return on plan assets 416,780 1,140,863 Employer contributions 545,697 617,709 Benefits paid (832,777) (745,212) Fair value of plan assets at end of year $10,217,541 $10,087,841 Fair value of plan assets greater (less) than benefit obligation $(743,251) $473,704 Unrecognized net (gain) loss 760,664 (599,154) Prepaid (Accrued) pension cost $17,413 $(125,450) Change in Prepaid (Accrued) Pension Cost: Accrued pension cost at beginning of year $(125,450) $(191,474) Net periodic pension cost (342,940) (406,652) Additional liability (59,894) (145,033) Contributions 545,697 617,709 Prepaid (Accrued) pension cost at end of year $17,413 $(125,450)
Plan assets are invested principally in government securities, common stocks and mutual funds. Assumptions used in determining the net fiscal 2000, 1999 and 1998 periodic pension cost were as follows:
Assumed discount rate 7.25% Assumed rate of increase in compensation levels 4% Expected rate of return on plan assets 8.0 to 8.5%
The Company also participates in several multiemployer pension plans for which the fiscal 2000, 1999 and 1998 contributions were $1,737,000, $1,586,000 and $1,722,000, respectively. NOTE 10 -- COMMITMENTS AND CONTINGENCIES The Company is involved in litigation incidental to the normal course of business. Company management is of the opinion that the ultimate resolution of these legal proceedings should not have a material adverse effect on the consolidated financial position, results of operations or liquidity of the Company. NOTE 11 -- SPECIAL CHARGE The Company recorded a charge to earnings of $2,600,000 in the fourth quarter of fiscal 1999 to reflect the impact of a court decision regarding the contract price of a property in Garwood and Westfield, New Jersey. This charge was taken as the Company did not believe the additions to the purchase price of the property as a result of the litigation were recoverable from the development of the superstore on this property. In March 2000, the Company acquired only the property in Garwood for $4,585,000 as a final settlement with the property owner. Construction of a new superstore commenced in October 2000. 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, 2000 and July 31, 1999, 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, 2000. 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 auditing standards generally accepted in the United States of America. 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 as of July 29, 2000 and July 31, 1999, and the results of their operations and their cash flows for each of the years in the three-year period ended July 29, 2000 in conformity with accounting principles generally accepted in the United States of America. Short Hills, New Jersey October 3, 2000 Stock Price and Dividend Information The Class A common stock of Village Super Market, Inc. is traded on the NASDAQ National Market tier of 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 2000 4th Quarter 14 12-1/2 3rd Quarter 14-3/4 12-3/4 2nd Quarter 14-1/4 12-7/8 1st Quarter 15-3/4 12-1/8 1999 4th Quarter 13 12-1/2 3rd Quarter 14-1/2 12-1/2 2nd Quarter 17-1/2 13 1st Quarter 24-3/4 12-1/2
As of September 29, 2000, there were 477 holders of record of the Company's Class A common stock. No dividends were paid during fiscal 2000 and 1999. 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 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 First City Transfer Company P.O. Box 170 Iselin, New Jersey 08330 AUDITORS KPMG LLP 150 John F. Kennedy Parkway Short Hills, New Jersey 07078 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
EX-27 3 0003.txt
5 1,000 12-MOS JUL-29-2000 JUL-29-2000 25721 0 5255 0 3103 64860 162228 81600 173924 53604 42507 0 0 19164 55988 173924 803360 803360 593871 593871 192333 0 3333 13823 5397 8426 0 0 0 8426 2.81 2.76
-----END PRIVACY-ENHANCED MESSAGE-----