10-Q 1 villagesuper10q.htm VILLAGE SUPER MARKET, INC. 10Q villagesuper10q.htm


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)

[x]          QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended:  October 29, 2011

OR

[ ]           TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

Commission File No. 0-2633

VILLAGE SUPER MARKET, INC.
(Exact name of registrant as specified in its charter)

NEW JERSEY
22-1576170
(State or other jurisdiction of incorporation or organization)
(I. R. S. Employer Identification No.)
 
 
   
733 MOUNTAIN AVENUE, SPRINGFIELD, NEW JERSEY
07081
(Address of principal executive offices)
(Zip Code)
   
(973) 467-2200
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X      No __

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).       
 Yes X     No __

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12-b2 of the Exchange Act.

Large accelerated filer  
Accelerated filer   S
Non-accelerated filer   (Do not check if a smaller reporting company)
Smaller reporting company  

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes _____    No __X__

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
 
 
December 6, 2011
   
Class A Common Stock, No Par Value
7,317,610 Shares
Class B Common Stock, No Par Value
6,362,390 Shares


 
 

 


VILLAGE SUPER MARKET, INC.

INDEX



PART I
 
PAGE NO.
     
FINANCIAL INFORMATION
 
     
Item 1.
Financial Statements (Unaudited)
 
     
 
Consolidated Condensed Balance Sheets
3
     
 
Consolidated Condensed Statements of Operations
4
     
 
Consolidated Condensed Statements of Cash Flows
5
     
 
Notes to Consolidated Condensed Financial Statements
6-8
     
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
9-15
 
   
Item 3.
Quantitative & Qualitative Disclosures about Market Risk
15
     
Item 4.
Controls and Procedures
15
     
PART II
   
     
OTHER INFORMATION
 
     
Item 6.
Exhibits
16
     
Signatures
16

 
 
2

 

 
PART I - FINANCIAL INFORMATION
 
Item 1. Financial Statements
 
VILLAGE SUPER MARKET, INC.
 
CONSOLIDATED CONDENSED BALANCE SHEETS
 
(In Thousands) (unaudited)
 
             
   
October 29,
2011
   
July 30,
2011
 
ASSETS
           
Current assets
           
Cash and cash equivalents
  $ 89,321     $ 91,362  
Merchandise inventories
    39,857       38,547  
Patronage dividend receivable
    12,380       9,018  
Other current assets
    15,616       13,407  
     Total current assets
    157,174       152,334  
                 
Note receivable from Wakefern
    19,856       19,512  
Property, equipment and fixtures, net
    176,113       174,530  
Investment in Wakefern
    22,730       22,461  
Goodwill
    10,605       10,605  
Other assets
    6,632       6,748  
                 
 
  $ 393,110     $ 386,190  
                 
LIABILITIES AND SHAREHOLDERS' EQUITY
               
Current liabilities
               
Current portion of capital and financing lease obligations
  $ ---     $ ---  
Current portion of notes payable to Wakefern
    1,029       487  
Accounts payable to Wakefern
    53,182       55,409  
Accounts payable and accrued expenses
    33,510       34,111  
Income taxes payable
    21,144       17,879  
     Total current liabilities
    108,865       107,886  
                 
Capital and financing lease obligations
    40,624       40,570  
Notes payable to Wakefern
    2,150       2,577  
Other liabilities
    26,712       27,000  
                 
Commitments and contingencies
               
                 
Shareholder's Equity
               
Class A common stock - no par value, issued 7,847 shares at October 29, 2011 and 7,833 shares at July 30, 2011
    36,191       35,385  
Class B common stock - no par value, issued and outstanding 6,362 shares at October 29, 2011 and 6,376 shares at July 30, 2011
    1,032       1,035  
Retained earnings
    193,277       187,686  
Accumulated other comprehensive loss
    (10,943 )     (11,142 )
Less cost of Class A treasury shares (529 at October 29, 2011 and 530 at July 30, 2011)
    (4,798 )     (4,807 )
     Total shareholders’ equity
    214,759       208,157  
                 
    $ 393,110     $ 386,190  
                 
See accompanying Notes to Consolidated Condensed Financial Statements
               


 
3

 


VILLAGE SUPER MARKET, INC.
 
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
 
(in Thousands except Per Share Amounts) (Unaudited)
 
             
   
13 Weeks
Ended
   
13 Weeks
Ended
 
   
October 29,
2011
   
October 30,
2010
 
   
 
       
Sales
  $ 342,737     $ 307,397  
                 
Cost of sales
    249,861       226,470  
                 
Gross profit
    92,876       80,927  
                 
Operating and administrative expense
    75,901       69,077  
                 
Depreciation and amortization
    4,773       4,536  
                 
Operating income
    12,202       7,314  
                 
Interest expense
    (1,184 )     (1,068 )
                 
Interest income
    625       524  
                 
Income before income taxes
    11,643       6,770  
                 
Income taxes
    4,907       2,836  
                 
Net income
  $ 6,736     $ 3,934  
                 
Net income per share:
               
Class A common stock:
               
  Basic
  $ .59     $ .35  
  Diluted
  $ .49     $ .29  
 
               
Class B common stock:
               
  Basic
  $ .38     $ .23  
  Diluted
  $ .38     $ .23  
                 
See accompanying Notes to Consolidated Condensed Financial Statements.
         


 
4

 

VILLAGE SUPER MARKET, INC.
 
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
 
(in Thousands) (Unaudited)
 
             
 
 
13 Wks.
Ended
   
13 Wks.
Ended
 
   
October 29,
2011
   
October 30,
2010
 
CASH FLOWS FROM OPERATING ACTIVITIES
           
  Net income
  $ 6,736     $ 3,934  
  Adjustments to reconcile net income to net cash provided by operating activities:
               
     Depreciation and amortization
    4,773       4,536  
     Deferred taxes
    (960 )     (536 )
     Provision to value inventories at LIFO
    360       75  
     Non-cash share-based compensation
    797       684  
 
               
   Changes in assets and liabilities:
               
     Merchandise inventories
    (1,670 )     (220 )
     Patronage dividend receivable
    (3,362 )     (3,091 )
     Accounts payable to Wakefern
    (2,227 )     (2,833 )
     Accounts payable and accrued expenses
    (601 )     (1,165 )
     Income taxes payable
    3,265       3,228  
     Other assets and liabilities
    (1,322 )     72  
 Net cash provided by operating activities
    5,789       4,684  
                 
CASH FLOWS FROM INVESTING ACTIVITIES
               
  Capital expenditures
    (6,257 )     (2,456 )
  Investment in notes receivable from Wakefern
    (344 )     (321 )
 Net cash used in investing activities
    (6,601 )     (2,777 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES
               
  Proceeds from exercise of stock options
    11       157  
  Excess tax benefit related to share-based compensation
    5       113  
  Principal payments of long-term debt
    (100 )     (28 )
  Dividends
    (1,145 )     (2,793 )
 Net cash used in financing activities
    (1,229 )     (2,551 )
                 
NET DECREASE IN CASH AND
               
  CASH EQUIVALENTS
    (2,041 )     (644 )
                 
CASH AND CASH EQUIVALENTS,
               
  BEGINNING OF PERIOD
    91,362       69,043  
                 
CASH AND CASH EQUIVALENTS, END OF PERIOD
  $ 89,321     $ 68,399  
                 
SUPPLEMENTAL DISCLOSURES OF CASH PAYMENTS MADE FOR:
               
  Interest
  $ 1,184     $ 1,068  
  Income taxes
  $ 2,597     $ 31  
NONCASH SUPPLEMENTAL DISCLOSURES:
               
  Investment in Wakefern
  $ 269     $ 613  
 
               
See accompanying Notes to Consolidated Condensed Financial Statements.
         
 

 
5

 

VILLAGE SUPER MARKET, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(in Thousands) (Unaudited)

1.           In the opinion of management, the accompanying unaudited consolidated condensed financial statements contain all adjustments (consisting of normal and recurring accruals) necessary to present fairly the consolidated financial position as of October 29, 2011 and the consolidated results of operations and cash flows for the thirteen week periods ended October 29, 2011 and October 30, 2010 of Village Super Market, Inc. (“Village” or the “Company”).
 
The significant accounting policies followed by the Company are set forth in Note 1 to the Company's consolidated financial statements in the July 30, 2011 Village Super Market, Inc. Annual Report on Form 10-K, which should be read in conjunction with these financial statements.

2.           The results of operations for the period ended October 29, 2011 are not necessarily indicative of the results to be expected for the full year.

3.           At both October 29, 2011 and July 30, 2011, approximately 65% of merchandise inventories are valued by the LIFO method while the balance is valued by FIFO.  If the FIFO  method had been used for the entire inventory, inventories would have been $14,601 and  $14,241 higher than reported at October 29, 2011 and July 30, 2011, respectively.

4.           The Company computes net income per share using the two-class method, an earnings allocation formula that calculates basic and diluted net income per share for each class of common stock separately based on dividends declared and participation rights in  undistributed earnings.  Under the two-class method, our Class A common stock is assumed to receive a 54% greater participation in undistributed earnings than our Class B common stock, in accordance with the classes respective dividend rights.

Diluted net income per share for Class A common stock is calculated utilizing the if-converted method, which assumes the conversion of all shares of Class B common stock to shares of Class A common stock on a share-for-share basis, as this method is more dilutive than the two-class method.   Diluted net income per share for Class B common stock does not assume conversion of Class B common stock to shares of Class A common stock.


 
6

 

The tables below reconcile the numerators and denominators of basic and diluted net income per share for all periods presented.

   
13 Weeks Ended
 
   
October 29, 2011
 
   
Class A
   
Class B
 
Numerator:
           
Net income allocated, basic
  $ 4,128     $ 2,435  
Conversion of Class B to Class A shares
    2,435       ---  
Effect of share-based compensation on allocated net income
    24       (10 )
Net income allocated, diluted
  $ 6,587     $ 2,425  
                 
                 
Denominator:
               
Weighted average shares outstanding, basic
    7,017       6,373  
Conversion of Class B to Class A shares
    6,373       ---  
Dilutive effect of share-based compensation
    59       ---  
Weighted average shares outstanding, diluted
    13,449       6,373  
                 
   
13 Weeks Ended
 
   
October 30, 2010
 
   
Class A
   
Class B
 
Numerator:
               
Net income allocated, basic
  $ 2,385     $ 1,459  
Conversion of Class B to Class A shares
    1,459       ---  
Effect of share-based compensation on allocated net income
    4       (4 )
Net income allocated, diluted
  $ 3,848     $ 1,455  
                 
                 
Denominator:
               
Weighted average shares outstanding, basic
    6,776       6,376  
Conversion of Class B to Class A shares
    6,376       ---  
Dilutive effect of share-based compensation
    106       ---  
Weighted average shares outstanding, diluted
    13,258       6,376  


 
7

 

Outstanding stock options to purchase Class A shares of 418 and 36 were excluded from the calculation of diluted net income per share at October 29, 2011 and October 30, 2010, respectively, as a result of their anti-dilutive effect. In addition, 293 and 256 non-vested restricted Class A shares, which are considered participating securities, and their allocated net income were excluded from the diluted net income per share calculation at October 29, 2011 and October 30, 2010, respectively, due to their anti-dilutive effect.

5.           Comprehensive income was $6,935 and $4,169 for the quarters ended October 29, 2011 and October 30, 2010, respectively. Comprehensive income consists of net income and amortization of net losses on benefit plans, net of income taxes.

6.           The Company sponsors four defined benefit pension plans.  Net periodic pension costs for the four plans includes the following components:

   
13 Weeks
Ended
   
13 Weeks
Ended
 
   
October 29,
2011
   
October 30,
2010
 
             
Service cost
  $ 664     $ 724  
Interest cost on projected benefit obligations
    678       633  
Expected return on plan assets
    (631 )     (510 )
Amortization of gains and losses
    330       390  
Amortization of prior service costs
    2       2  
                 
Net Periodic pension cost
  $ 1,043     $ 1,239  
 
As of October 29, 2011, the Company has contributed $62 to its pension plans in fiscal 2012.  The Company expects to contribute an additional $2,938 during the remainder of fiscal 2012 to fund its pension plans.
 
 
8

 

ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 

(Dollars in Thousands)

OVERVIEW

The Company operates a chain of 28 ShopRite supermarkets in New Jersey, Maryland and northeastern Pennsylvania. Village is the second largest member of Wakefern Food Corporation (“Wakefern”), the nation’s largest retailer-owned food cooperative and owner of the ShopRite name. As further described in the Company’s Form 10-K, this ownership interest in Wakefern provides the Company many of the economies of scale in purchasing, distribution, advanced retail technology, marketing and advertising associated with larger chains. On July 7, 2011, Village acquired the store fixtures, leases and pharmacy lists of locations in Silver Spring, Maryland (64,000 sq.ft.) and Timonium, Maryland (57,000 sq.ft.) for $6,595 from Super Fresh. Village began operating pharmacies at these locations on July 7, 2011. These stores opened as ShopRites on July 28, 2011 after minor remodeling.
 
The Company’s stores, five of which are owned, average 57,000 total square feet. Larger store sizes enable the Company to offer the specialty departments that customers desire for one-stop shopping, including pharmacies, natural and organic departments, ethnic and international foods, and home meal replacement.

The supermarket industry is highly competitive.  The Company competes directly with multiple retail formats, including national, regional and local supermarket chains as well as warehouse clubs, supercenters, drug stores, discount general merchandise stores, fast food chains, dollar stores and convenience stores.  Village competes by using low pricing, superior customer service, and a broad range of consistently available quality products, including ShopRite private labeled products.  The ShopRite Price Plus card and the co-branded ShopRite credit card also strengthen customer loyalty.

We consider a variety of indicators to evaluate our performance, such as same store sales; percentage of total sales by department (mix); shrink; departmental gross profit percentage; sales per labor hour; and hourly labor rates.

During fiscal 2011 and the first quarter of fiscal 2012, the supermarket industry was impacted by changing consumer behavior due to the weak economy and high unemployment.  Consumers are increasingly cooking meals at home, but spending cautiously by trading down to lower priced items, including private label, and concentrating their buying on sale items.  Also, the Company estimates that product prices overall experienced inflation in the first quarter of fiscal 2012 and in the second half of fiscal 2011. Further, the Company’s sales and net income benefited in the fourth quarter of fiscal 2011 and the first quarter of fiscal 2012 from store closings by competitors.

 
9

 

RESULTS OF OPERATIONS

The following table sets forth the major components of the Consolidated Condensed Statements of Operations as a percentage of sales:
 
   
13 Weeks Ended
 
   
October 29,
2011
   
October 30,
2010
 
Sales
    100.00 %     100.00 %
Cost of sales
    72.90       73.67  
Gross profit
    27.10       26.33  
Operating and administrative expense
    22.15       22.47  
Depreciation and amortization
    1.39       1.48  
Operating income
    3.56       2.38  
Interest expense
    (.34 )     (.35 )
Interest income
    .18       .17  
Income before taxes
    3.40       2.20  
Income taxes
    1.43       0.92  
Net income
    1.97 %     1.28 %


Sales. Sales were $342,737 in the first quarter of fiscal 2012, an increase of 11.5% compared to the first quarter of the prior year. Sales increased due to the opening of the two new stores in Maryland and a same store sales increase of 8.1%. Same store sales increased due to higher sales in six stores due to store closings by competitors during fiscal 2011, increased transaction size due to inflation, increased customer counts, and improved sales in the Washington and Marmora stores, which opened in recent fiscal years. Sales continue to be impacted by changing consumer behavior due to economic weakness and high unemployment, which has resulted in increased sale item penetration and trading down. Village expects same store sales in fiscal 2012 to increase from 4.0% to 6.0%, with larger increases in the first half of the year. The impact of the competitive store closings that occurred in fiscal 2011 and inflation are expected to moderate in the second half of fiscal 2012. New stores and replacement stores are included in same store sales in the quarter after the store has been in operation for four full quarters. Store renovations are included in same store sales immediately.

 
Gross Profit. Gross profit as a percentage of sales increased .77% in the first quarter of fiscal 2012 compared to the first quarter of the prior year due to decreased warehouse assessment charges from Wakefern (.46%), increased departmental gross margin percentages (.21%), improved product mix (.11%) and lower promotional spending (.09%). These improvements were partially offset by an increased LIFO charge (.09%).

 
10

 

Operating and Administrative Expense.  Operating and administrative expense as a percentage of sales decreased .32% in the first quarter of fiscal 2012 compared to the first quarter of the prior year due to lower payroll and benefit costs (.35%) and operating leverage from the 8.1% same store sales increase.  These improvements were partially offset by higher advertising and store opening costs for the new Maryland stores.

 Depreciation and Amortization.  Depreciation and amortization expense increased in the first quarter of fiscal 2012 compared to the first quarter of the prior year due to depreciation related to fixed asset additions, including the new stores in Maryland.

Interest Expense.  Interest expense increased in the first quarter of fiscal 2012 compared to the first quarter of the prior year due to interest incurred on the $7,028 pension withdrawal liability recorded in the third quarter of fiscal 2011.
 
Interest Income.  Interest income increased in the first quarter of fiscal 2012 compared to the first quarter of the prior year due to higher amounts invested.

Income Taxes.  The effective income tax rate was 42.1% in the first quarter of fiscal 2012 compared to 41.9% in the first quarter of the prior year.

CRITICAL ACCOUNTING POLICIES

Critical accounting policies are those accounting policies that management believes are important to the portrayal of the Company’s financial condition and results of operations.  These policies require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.  The Company’s critical accounting policies relating to the impairment of long-lived assets and goodwill, accounting for patronage dividends earned as a stockholder of Wakefern,  accounting for pension plans, accounting for share-based compensation, and accounting for uncertain tax positions, are described in the Company’s Annual Report on Form 10-K for the year ended July 30, 2011.  As of October 29, 2011, there have been no changes to any of the critical accounting policies contained therein.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

 
11

 

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities was $5,789 in the first quarter of fiscal 2012 compared to $4,684 in the corresponding period of the prior year. This increase is primarily attributable to higher net income in the current fiscal year, partially offset by a larger increase in inventories in the current fiscal year. During the first quarter of fiscal 2012, Village used cash to fund capital expenditures of $6,257 and dividends of $1,145. Capital expenditures include remodeling and equipment costs for the acquired Maryland stores.

Village has budgeted approximately $20,000 for capital expenditures in fiscal 2012.   Planned expenditures include the beginning of construction of two replacement stores, several small remodels and the installation of solar panels in one store.  The Company’s primary sources of liquidity in fiscal 2012 are expected to be cash and cash equivalents on hand at October 29, 2011 and operating cash flow generated in fiscal 2012.

Working capital was $48,309 at October 29, 2011 compared to $44,448 at July 30, 2011. The working capital ratio was 1.4 to 1 at both October 29, 2011 and July 30, 2011. The Company’s working capital needs are reduced, since inventories are generally sold by the time payments to Wakefern and other suppliers are due.

There have been no substantial changes as of October 29, 2011 to the contractual obligations and commitments discussed on page 7 of the Company’s Annual Report on Form 10-K for the year ended July 30, 2011, except for an additional $269 required investment in Wakefern stock.
 
OUTLOOK

This Form 10-Q contains certain forward-looking statements about Village’s future performance. These statements are based on management’s assumptions and beliefs in light of information currently available.  Such statements relate to, for example:  economic conditions; expected pension plan contributions; projected capital expenditures; cash flow requirements; inflation expectations; and legal matters; and are indicated by words such as “will,” “expect,”  “should,” “intend,” “anticipates,” “believes” and similar words or phrases.  The Company cautions the reader that there is no assurance that actual results or business conditions will not differ materially from the results expressed, suggested or implied by such forward-looking statements.  The Company undertakes no obligation to update forward-looking statements to reflect developments or information obtained after the date hereof.

 
12

 

· We expect same store sales to increase from 4.0% to 6.0% in fiscal 2012 with larger increases in the first half of the year. The impacts of inflation and the competitive store closings that occurred during fiscal 2011 are expected to moderate in the second half of fiscal 2012.
·
During fiscal 2011 and the first quarter of fiscal 2012, the supermarket industry was impacted by changing consumer behavior due to the weak economy and high unemployment.  Consumers are increasingly cooking meals at home, but spending cautiously by trading down to lower priced items, including private label, and concentrating their buying on sale items.  Management expects these trends to continue at least through fiscal 2012.
·
We expect retail price inflation in fiscal 2012, with larger increases in the first half of the year.
·
We have budgeted $20,000 for capital expenditures in fiscal 2012. This amount includes the beginning of construction of two replacement stores, several small remodels and solar panels for one store.
·
On December 28, 2010, the Company paid special dividends of $14,005. The Board of Directors declared these dividends to provide a return to shareholders in 2010, instead of 2011, while tax rates on dividends remained low. This action was taken before the 15% tax rate was extended. The Board’s current intention is to pay quarterly dividends in 2011 in a range of $.06 - $.12 per Class A share ($.039 - $.078 per Class B share).  The Board will reconsider dividend policy and other methods of providing returns to shareholders in 2012 based on a variety of factors, including tax rates on dividends and capital gains in effect at that time.
·
We believe cash flow from operations and other sources of liquidity will be adequate to meet anticipated requirements for working capital, capital expenditures and debt payments for the foreseeable future.
·
We expect our effective income tax rate in fiscal 2012 to be 41.5% - 42.5%.
·
We expect operating expenses will be affected by increased costs in certain areas, such as medical and pension costs.

Various uncertainties and other factors could cause actual results to differ from the forward-looking statements contained in this report.  These include:

 
13

 


·
The supermarket business is highly competitive and characterized by narrow profit margins.  Results of operations may be materially adversely impacted by competitive pricing and promotional programs, industry consolidation and competitor store openings.  Village competes with national and regional supermarkets, local supermarkets, warehouse club stores, supercenters, drug stores, convenience stores, dollar stores, discount merchandisers, restaurants and other local retailers. Some of these competitors have greater financial resources, lower merchandise acquisition cost and lower operating expenses than we do.
·
The Company’s stores are concentrated in New Jersey, with one store in northeastern Pennsylvania and two in Maryland.  We are vulnerable to economic downturns in New Jersey in addition to those that may affect the country as a whole.  Economic conditions such as inflation, deflation, interest rates, energy costs and unemployment rates may adversely affect our sales and profits.
·
Village acquired two stores in July 2011 in Maryland, a new market for Village where the ShopRite name is less known than in New Jersey.  As the Company begins operating in this new market, marketing and other costs will likely be higher than in established markets as Village attempts to build market share and brand awareness.  In addition, sales for these two stores are initially expected to be lower than the typical Company store.  Potentially higher costs and sales results lower than the Company’s expectations could have a material adverse effect on Village’s results of operations.
·
Village purchases substantially all of its merchandise from Wakefern.  In addition, Wakefern provides the Company with support services in numerous areas including supplies, advertising, liability and property insurance, technology support and other store services.  Further, Village receives patronage dividends and other product incentives from Wakefern.  Any material change in Wakefern’s method of operation or a termination or material modification of Village’s relationship with Wakefern could have an adverse impact on the conduct of the Company’s business and could involve additional expense for Village.  The failure of any Wakefern member to fulfill its obligations to Wakefern or a member’s insolvency or withdrawal from Wakefern could result in increased costs to the Company.  Additionally, an adverse change in Wakefern’s results of operations could have an adverse affect on Village’s results of operations.
·
Approximately 92% of our employees are covered by collective bargaining agreements.  Any work stoppages could have an adverse impact on our financial results. If we are unable to control health care and pension costs provided for in the collective bargaining agreements, we may experience increased operating costs.
·
Village could be adversely affected if consumers lose confidence in the safety and quality of the food supply chain. The real or perceived sale of contaminated food products by us could result in a loss of consumer confidence and product liability claims, which could have a material adverse effect on our sales and operations.
·
On April 15, 2011, Village, along with all of the other individual employers trading as ShopRite, permanently withdrew from participating in the United Food and Commercial Workers Local 152 Retail Meat Pension Fund (“the Fund”), effective the end of April 2011.  The Fund is a multi-employer defined benefit plan that includes other supermarket operators. Village, along with the other affiliated ShopRite operators, determined to withdraw from the Fund due to exposures to market risks associated with all defined benefit plans and the inability to partition ShopRite’s liabilities from those of the other participating supermarket operators.  Village now provides affected associates with a defined contribution plan for future service, which eliminates market risks and the exposure to shared liabilities of other operators, and is estimated to be less costly than the defined benefit plan in the future, while ensuring that our associates are provided a secure benefit. The Company recorded a pre-tax charge of $7,028 in fiscal 2011 for this withdrawal liability, which represents our estimate of the liability based on calculations provided by the Fund actuary. Village remains liable for potential additional withdrawal liabilities to the Fund in the event a mass withdrawal, as defined by statute, occurs within two plan years after the plan year of Village’s withdrawal.  Such liabilities could be material to the Company’s consolidated financial statements.

 
 
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We believe a number of the multi-employer plans to which we contribute are underfunded.  As a result, we expect that contributions to these plans may increase.  Additionally, the benefit levels and related items will be issues in the negotiation of our collective bargaining agreements.  Under current law, an employer that withdraws or partially withdraws from a multi-employer pension plan may incur a withdrawal liability to the plan, which represents the portion of the plan’s underfunding that is allocable to the withdrawing employer under complex actuarial and allocation rules.  The failure of a withdrawing employer to fund these obligations can impact remaining employers.   The amount of any increase or decrease in our required contributions to these multi-employer pension plans will depend upon the outcome of collective bargaining, actions taken by trustees who manage the plans, government regulations and the actual return on assets held in the plans, among other factors.
 
·
Our effective tax rate may be impacted by the results of tax examinations and changes in tax laws, including the disputes with the state of New Jersey described in note 5 of the Company’s Annual report on Form 10-K for the year ended July 30, 2011.

RELATED PARTY TRANSACTIONS

A description of the Company’s transactions with Wakefern, its principal supplier, and with other related parties is included on pages 9, 18 and 21 of the Company’s Annual Report on Form 10-K for the year ended July 30, 2011.  There have been no significant changes in the Company’s relationship or nature of transactions with related parties during the first quarter of fiscal 2012 except for an additional required investment in Wakefern common stock of $269.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

At October 29, 2011, the Company had demand deposits of $71,209 at Wakefern earning interest at overnight money market rates, which are exposed to the impact of interest rate changes.

At October 29, 2011, the Company had a $19,856 15-month note receivable due from Wakefern earning a fixed rate of 7%. This note is automatically extended for additional, recurring 90-day periods, unless, not later than one year prior to the due date, the Company notifies Wakefern requesting payment on the due date. This note currently is scheduled to mature on November 22, 2012.

ITEM 4.  CONTROLS AND PROCEDURES

As required by Rule 13a-15 under the Exchange Act, the Company carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures at the end of the period.  This evaluation was carried out under the supervision, and with the participation, of the Company’s management, including the Company’s Chief Executive Officer along with the Company’s Chief Financial Officer.  Based upon that evaluation, the Company’s Chief Executive Officer, along with the Company’s Chief Financial Officer, concluded that the Company’s disclosure controls and procedures are effective.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in Company reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in Company reports filed under the Exchange Act is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure.

 
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There have been no significant changes in internal controls over financial reporting during the first quarter of fiscal 2012.
 
PART II - OTHER INFORMATION

Item 6.
Exhibits
 
     
 
Exhibit 31.1
Certification
     
 
Exhibit 31.2
Certification
     
 
Exhibit 32.1
Certification (furnished, not filed)
 
   
 
Exhibit 32.2
Certification (furnished, not filed)
 
   
 
Exhibit 99.1
Press Release dated December 7, 2011
     
 
101.ins
XBRL Instance
     
 
101.xsd
XBRL Schema
     
 
101.cal
XBRL Calculation
     
 
101.def
XBRL Definition
     
 
101.lab
XBRL Label
     
 
101.pre
XBRL Presentation


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

.
Village Super Market, Inc
 
Registrant
   
Date:  December 7, 2011
/s/ James Sumas
 
James Sumas
 
(Chief Executive Officer)
   
   
Date:  December 7, 2011
/s/ Kevin R. Begley
 
Kevin R. Begley
 
(Chief Financial Officer)
 
 

 
 
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