-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, WsGzOvHkxrJ2KqlHzuVsorr6UjinXbjjaIKKKsis7fBSfQkvozSij8lmWK4SZjsG wzcpTrzNprktN4erLJQ/og== 0000103595-94-000011.txt : 19941215 0000103595-94-000011.hdr.sgml : 19941215 ACCESSION NUMBER: 0000103595-94-000011 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19940730 FILED AS OF DATE: 19941028 SROS: NONE 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: 1934 Act SEC FILE NUMBER: 000-02633 FILM NUMBER: 94555795 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 VILLAGE SUPER MARKET, INC. FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 [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 30, 1994. [ ] 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 of (I.R.S. Employer 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 (201)-467-2200 Securities registered pursuant of 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 $8,129,296, and the aggregate market value of the Class B common stock held by non-affiliates was approximately $1,200,376 (based upon the closing price of the Class A shares on the Over the Counter Market on October 11, 1994). 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 24, 1994 Class A common stock, no par value 1,315,800 Shares Class B common stock, no par value 1,594,076 Shares
DOCUMENTS INCORPORATED BY REFERENCE Information contained in the 1994 Annual Report to Shareholders and the 1994 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 9,1994 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 GENERAL The Company operates a chain of 21 ShopRite supermarkets, 15 of which are located in northern New Jersey, 1 of which is in northeastern Pennsylvania and 5 of which are in the southern shore area of New Jersey. In addition, the Company operates two former ShopRite stores under a "Village Market" format as described below. The Company's membership in Wakefern Food Corporation ("Wakefern"), the nation's largest retailer owned food cooperative and owner of the ShopRite name, provides the Company many of the economies of scale in purchasing, distribution 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 development of superstores, which, in addition to their larger size (an average of 50,000 total square feet, including office and storage space, compared with an average of 30,000 total square feet for conventional supermarkets), feature such higher margin specialty service departments as an on-site bakery, an expanded delicatessen, a fresh seafood section and, in most cases, a prescription pharmacy. Superstores also offer an expanded selection of higher margin non-food items such as cut flowers, health and beauty aids, greeting cards, videocassette rentals and small appliances. The two most recent superstores also include a warehouse section featuring products in giant sizes. 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 1992 1993 1994 Groceries 44.4% 44.2% 44.0% Dairy and Frozen 15.5 15.8 15.7 Meats 11.2 11.1 11.1 Non-Foods 9.4 9.2 9.2 Produce 9.1 9.4 9.3 Delicatessen 4.5 4.1 4.1 Seafood 1.9 2.0 1.9 Pharmacy 2.3 2.5 2.8 Bakery 1.4 1.6 1.6 Other .3 .1 .3 100.0% 100.0% 100.0% Number of superstores 20 19 18 Selling square feet represented by superstores 80% 82% 82%
Because of its increased size and broader product mix, a superstore can satisfy a greater percentage of a customer's weekly shopping needs and, as a result, the typical superstore generally has a higher volume of sales per square foot and sales per customer than a conventional supermarket. In addition, because of their greater total sales volume and increased percentage of their sales allocable to higher margin items, superstores generally operate more profitably than conventional supermarkets. 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 and Easton stores have been sold since December 1991. In addition, two stores were converted to a "Village Market" format designed to reduce costs and increase margins in lower volume locations. 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. The Company completed one major expansion and remodel in fiscal 1994 and two smaller expansions. The Company has budgeted $8,000,000 for capital expenditures in fiscal 1995. The major planned expenditures are the expansion and remodel of the Chester store and the beginning of the expansion of the Absecon store. In the last five years, the Company has added one new store and completed five remodels. 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, including sewage moratoriums and environmental cleanup regulations effecting sites and the lack of recent activity by real estate developers, 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 17.2% of Wakefern's outstanding stock) and two of the Company's principal shareholders were founders of Wakefern. Wakefern, which was organized in 1946, is the nation's largest retailer-owned food cooperative. There are presently 30 individual member companies and 180 supermarkets which comprise the Wakefern cooperative. Only Wakefern and member companies are entitled to use the ShopRite name and trademark, purchase their product requirements and participate in ShopRite advertising and promotional programs and its computerized purchasing, warehousing and distribution services. 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 on a cooperative basis, and ShopRite advertising and promotional programs. 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 on to 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 the 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 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; Dayton, 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 makes unapproved changes in control of the Company and sale of the Company or of individual Company stores, except to a qualified successor, financially prohibitive by requiring the Company in such cases to pay Wakefern 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 23 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 name 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 six 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 (including the Company), additional capital must be contributed by it to Wakefern. On occasion, as its business needs have required, Wakefern has increased the per-store capital contributions 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. The Company is required to invest approximately $1,065,000 over approximately the next four years. TECHNOLOGY The Company considers automation and computerization important to its operations and competitive position. All stores have scanning checkout systems that improve pricing accuracy, enhance productivity and reduce checkout time for customers. Over the last three years, the company installed IBM RS/6000 computers and satellite communications in each store. Using the RS/6000 system, the Company offers customers debit and credit card payment options in all stores. In addition, the Company is utilizing a computer generated ordering system in ten stores, 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 scanable Price Plus card. In addition, the Company began using Clip Less coupons in 1994. Customers need only present their Price Plus card to receive the value of our in-ad coupons. Also, target marketing programs using this technology are presently being developed. The Company is currently in the process of converting our customers separate Price Plus and check cashing cards to a single universal card. In addition to customer convenience, the new card provides the Company with improved ability to limit the acceptance of bad checks. 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. Six stores have implemented CAO (Computer Assisted Ordering), which uses hand held terminals to read UPC codes on shelf tags to re-order products. In addition, certain in-store department records are computerized, including the records of all pharmacy departments. In certain stores, meat, seafood and delicatessen prices are maintained on computer for automatic weighing and pricing. Furthermore, a substantial majority of the Company's stores have computerized time and attendance and work scheduling systems and several 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. 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, drug stores, discount department stores and convenience stores. The principal methods of competition utilized by the Company are low pricing, courteous, quick service to the customer, quality products and consistent availability of a wide variety of merchandise including the ShopRite private label. 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, Foodtown, King's, Grand Union and Acme. Many of the Company's competitors have financial resources substantially greater than those of the Company. LABOR As of October 6, 1994, the Company employed approximately 3,800 persons, of whom approximately 2,300 worked part-time. Approximately 85% 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 which was settled with a new four year contract. A contract with one large union expires December 31, 1994. 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 1995 and 1996. ITEM 2. PROPERTIES The Company owns the sites of five of its supermarkets (containing 304,000 square feet of total space), all of which are free-standing stores, except the Egg Harbor store, which is part of a shopping center. The Company also owns the site of the former Easton and Maplewood stores. The Maplewood property is leased to another operator and the Easton store is currently being marketed. The remaining eighteen supermarkets (containing 792,000 square feet of total space) are leased, with initial lease terms generally ranging from 20 to 30 years, usually with renewal options. Eleven of these leased stores are located in strip shopping centers and the remaining seven are free-standing stores. Except with respect to one lease between the Company and certain related parties, none of the Company's leases expire before 1997. The annual rent, including capitalized leases, for all of the Company's leased facilities for the year ended July 30, 1994 was approximately $6,100,000. The Company is a limited partner in two partnerships, each 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 free- standing 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 51 Vice President and Assistant Secretary since 1983; responsible for administration of headquarters staff. Frank Sauro 36 General Counsel since April 1988. Mr. Sauro is a member of the New Jersey Bar. Kevin Begley 36 Chief Financial Officer since December 1988. Mr. Begley is a Certified Public Accountant. PART II 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 16 in the Company's Annual Report to Shareholders for the fiscal year ended July 30, 1994. 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 30, 1994. 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 Pages 4 and 5 in the Company's Annual Report to Shareholders for the fiscal year ended July 30, 1994. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this Item is incorporated by reference from Information appearing on Page 3 and Pages 6 to 16 in the Company's Annual Report to Shareholders for the fiscal year ended July 30, 1994. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III 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 7, 1994, in connection with its Annual Meeting scheduled to be held on December 9, 1994. 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 7, 1994, in connection with its Annual Meeting scheduled to be held on December 9, 1994. 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 7, 1994, in connection with its annual meeting scheduled to be held on December 9, 1994. 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 7, 1994, in connection with its annual meeting scheduled to be held on December 9, 1994. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. Financial Statements Consolidated Balance Sheets - July 30, 1994 and July 31, 1993 Consolidated Statements of Operations - years ended July 30, 1994; July 31, 1993 and July 25, 1992 Consolidated Statements of Shareholders' Equity - years ended July 30, 1994; July 31, 1993 and July 25, 1992 Consolidated Statements of Cash Flows - years ended July 30, 1994; July 31, 1993 and July 25, 1992 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 30, 1994.
PAGE 2. Financial Statement Schedules Independent Auditors' Report on Schedules . . . . . . . 13 Schedule V - Property, Equipment and Fixtures. . . . . 14 Schedule VI - Accumulated depreciation and amortization of property, equipment and fixtures. . . . . . . . . . 15
All other 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; 4.1 Note Purchase Agreement dated August 20, 1987 * 4.2 Loan Agreement dated March 29, 1994* 4.3 Amendment No. 1 to Loan Agreement Exhibit No. 10 - Material Contracts: 10.1 Wakefern By-Laws * 10.2 Stockholders Agreement dated February 20, 1992 between the Company and Wakefern Food Corp. * 10.3 Voting Agreement dated March 4, 1987 * 10.4 1987 Incentive and Nonstatutory Stock Option Plan * Exhibit No. 13 - Annual Report to Security Holders Exhibit No. 28 a - Press release dated October 6, 1994 Exhibit No. 28 b - Third Quarter Report to Shareholders Exhibit No. 22 - Subsidiaries of Registrant Exhibit No. 23 - Consent of KPMG Peat Marwick LLP * The following exhibits are incorporated by reference from the following previous filings: Form 10-K for 1993: 3, 4.1, 10.1, 10.2, 10.3 and 10.4 Form 10-Q for April 23, 1994: 4.2 (b) No reports on Form 8-K were filed during the fourth quarter of fiscal 1994. Independent Auditor's Report on Financial Statement Schedules The Board of Directors Village Super Market, Inc.: Under date of September 30, 1994, except as to note 5, which is as of October 21, 1994, we reported on the consolidated balance sheets of Village Super Market, Inc. as of July 30, 1994 and July 31, 1993, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the years in the three-year period ended July 30, 1994 as contained in the 1994 annual report to shareholders. These consolidated financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the year 1994. In connection with our audits of the aforementioned consolidated financial statements, we also have audited the related financial statement schedules as listed in the accompanying index. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statement schedules based on our audits. In our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. KPMG Peat Marwick LLP Short Hills, New Jersey September 30, 1994, except as to note 5, which is as of October 21, 1994
VILLAGE SUPER MARKET, INC. AND SUBSIDIARIES SCHEDULE V - PROPERTY, EQUIPMENT AND FIXTURES Col. A Col. B Col. C Col. D Col. E Balance at Balance Beginning Additions at end Classification of Period at Cost Retirements of Period Fifty-two weeks ended July 30, 1994 Land $ 7,928,028 $ 100,000 $ -- $ 8,028,028 Buildings 34,000,548 337,075 -- 34,337,623 Store Fixtures & equipment 55,024,926 2,978,566 1,107,894 56,895,598 Leasehold improvement 11,246,225 1,956,927 17,447 13,185,705 Leased property under capital lease 15,182,532 -- 1,481,933 13,700,599 Vehicles 883,644 101,910 133,458 852,096 Construction in progress 231,160 499,336 -- 730,496 $124,497,063 $5,973,814 $2,740,732 $127,730,145
Fifty-three weeks ended July 31, 1993 Land $ 7,878,028 $ 50,000 $ -- $ 7,928,028 Buildings 33,899,911 100,637 -- 34,000,548 Store fixtures & equipment 56,248,734 1,323,522 2,547,330 55,024,926 Leasehold improvements 11,355,257 146,436 255,468 11,246,225 Leased property under capital leases 15,182,532 -- -- 15,182,532 Vehicles 905,669 125,003 147,028 883,644 Construction in progress -- 231,160 -- 231,160 $125,470,131 $1,976,758 $2,949,826 $124,497,063
Fifty-two weeks ended July 25, 1992 Land $ 3,897,025 $3,981,003 $ -- $ 7,878,028 Buildings 25,157,367 8,837,299 94,755 33,899,911 Store Fixtures & equipment 54,734,365 6,116,977 4,602,608 56,248,734 Leasehold improvements 11,290,555 643,899 579,197 11,355,257 Leased property under capital lease 15,182,532 -- -- 15,182,532 Vehicles 920,169 116,212 130,712 905,669 Construction in progress 5,201,003 5,201,003 -- -- $116,383,016$14,494,387 $ 5,407,272 $125,470,131
VILLAGE SUPER MARKET, INC. AND SUBSIDIARIES SCHEDULE VI - ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, EQUIPMENT AND FIXTURES
Col. A Col. B Col. C Col. D Col. E Balance at Balance Beginning at end Classification of Period Additions Retirements of Period Fifty-two weeks ended July 30, 1994 Buildings $ 5,733,858 $1,170,926 $ -- $ 6,904,784 Store fixtures & equipment 30,136,690 5,354,389 970,264 34,520,815 Leasehold improvements 6,404,256 1,062,824 12,454 7,454,626 Leased property under capital leases 7,419,259 544,758 1,185,542 6,778,475 Vehicles 672,133 116,041 130,647 657,527 $50,366,196 $8,248,938 $2,298,907 $56,316,227
Fifty-three weeks ended July 31, 1993 Buildings $ 4,558,724 $1,175,134 $ -- $ 5,733,858 Store fixtures & equipment 26,876,142 5,277,908 2,017,360 30,136,690 Leasehold improvements 5,682,811 975,136 253,691 6,404,256 Leased property under capital leases 6,820,063 599,196 -- 7,419,259 Vehicles 658,907 153,866 140,640 672,133 $44,596,647 $8,181,240 $2,411,691 $50,366,196
Fifty-two weeks ended July 25, 1992 Buildings $ 3,590,020 $1,058,059 $ 89,355 $ 4,558,724 Store fixtures & equipment 25,967,780 5,362,514 4,454,152 26,876,142 Leasehold improvements 5,249,854 972,371 539,414 5,682,811 Leased property under capital leases 6,216,743 603,320 -- 6,820,063 Vehicles 596,013 188,950 126,056 658,907 $41,620,410 $8,185,214 $5,208,977 $44,596,647
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 27, 1994 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: /S/ Nicholas Sumas /S/ John P. Sumas Nicholas Sumas, October 27, 1994 John P. Sumas, October 27, 1994 (Director) (Director) /S/ Perry Sumas /S/ James Sumas Perry Sumas, October 27, 1994 James Sumas, October 27, 1994 (Director) (Director) /S/ William Sumas /S/ Robert Sumas William Sumas, October 27, 1994 Robert Sumas, October 27, 1994 (Director) (Director) /S/ John J. McDermott /S/ George Andresakes John McDermott, October 27, 1994 George Andresakes, October 27, 1994 (Director) (Director) /S/ Norman Crystal Norman Crystal, October 27, 1994 (Director) EXHIBIT NO. 22 SUBSIDIARIES OF REGISTRANT The Company currently has one wholly-owned subsidiary, Village Liquor, Inc. This corporation is organized under the laws of the State of New Jersey. The Financial statements of this subsidiary are included in the Company's consolidated financial statements. EXHIBIT NO. 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 reports dated September 30, 1994, except as to note 5, which is as of October 21, 1994, relating to the consolidated balance sheets of Village Super Market, Inc. and subsidiaries as of July 30, 1994 and July 31, 1993, and the related consolidated statements of operations, shareholders' equity, and cash flows and related schedules for each of the years in the three year period ended July 30, 1994, which reports appear in or are incorporated by reference in the July 30, 1994 annual report on Form 10-K of Village Super Market, Inc. KPMG Peat Marwick LLP Short Hills, New Jersey October 27, 1994 EXHIBIT NO. 28A Village Super Market, Inc., Reports Results For the Fourth Quarter and Year Ended July 30, 1994 Springfield, NJ - October 6, 1994 - Village Super Market, Inc. reported sales and a net loss for the fourth quarter ended July 30, 1994, Perry Sumas, President announced today. In the fourth quarter, sales decreased 7.8% to $187,842,000. The Company had a net loss of $249,000 compared to a net loss of $127,000 in the fourth quarter of the prior year. In reviewing the quarter, Mr. Sumas reported that the net loss for the quarter was due to flat same store sales, lower than expected gross margins and increased payroll costs. Sales decreased in the current quarter due to the prior year containing a fifteenth week as compared to the current year's fourteen weeks and the closing of a store in the current year. Same store sales were flat in the current quarter, despite a comparison to a year ago quarter that included a strike at six stores, due to the sluggish economy and competitive openings. For the full year, the net loss was $807,000, which includes an increase to net income of $400,000 for the cumulative effect of a change in the method of accounting for income taxes. This compares with net income in the prior year of $1,437,000, which included a $1,022,000 gain on the sale of a store. Sales for the full year decreased 2.6% to $695,070,000. The sales decrease is due to the prior year containing 53 weeks and the impact of closed stores. Same store sales for the year increased 1.3%. The net loss in fiscal 1994 compared to net income in the prior year is principally attributable to increased promotional spending, chiefly couponing, in the second and third quarter of this year. Although the additional promotional spending was partially responsible for increased same store sales in those quarters, a larger sales increase was expected in order to offset the costs of these coupons. In addition, gross margin percentages were lower than expected, fringe benefit and payroll costs increased and a loss was incurred on the sale of the Morristown store. At July 30, 1994, the Company was not in compliance with certain financial covenants in its bank agreement and its private placement agreement. The Company expects to receive a waiver of the financial covenant and an amendment of its loan agreement with the banks. The Company is also not in compliance with a financial covenant in a debt agreement with another lender. This does not constitute an event of default; however, until this ratio is met or a waiver obtained, the Company is prevented from borrowing additional funds, declaring dividends and executing new leases. With the closing in August 1994 of the Easton, Pa. store, Village Super Market now owns and operates a chain of 23 supermarkets under the ShopRite name in New Jersey and Eastern Pennsylvania. The following table summarizes results for the quarter and year ended July 30, 1994.
July 30, 1994 July 31,1993 Quarter Ended Sales $187,842,000 $203,800,000 Net Income (Loss) $ (249,000) $ (127,000) Net Income (Loss) Per Share $ (.09) $ (.05)
Year Ended Sales $695,070,000 $713,856,000 Net Income (Loss) $ (807,000) $ 1,437,000 Net Income (Loss) Per Share $ (.28) $ .49
EXHIBIT NO. 28B THIRD QUARTER REPORT To our shareholders: The Company had a net loss of $1,131,000 in the third quarter ended April 23, 1994. This compared with net income of $182,000 in the third quarter of the prior year. The loss for the quarter was principally attributable to an increase in promotional spending, chiefly couponing. Also contributing to the loss in the third quarter were lower than expected gross margins, increased fringe benefit costs and an increase in the loss recorded on the sale of the Morristown store. For the first nine months of fiscal 1994, the net loss was $558,000, which includes an increase to net income of $400,000 for the cumulative effect of the change in the method of accounting for income taxes. This compares with net income in the prior year of $1,563,000, which includes a gain, net of tax, of $1,022,000 on the sale of a store. Sales for the third quarter were $171,776,000, an increase of 1.4% from the prior year. Same store sales increased 2.8% this quarter, which was partially offset by lower sales from stores closed since one year ago. Same store sales increased in the third quarter as a result of additional promotional spending and possibly some improvement in the local economy. Sales for the nine month period were $507,228,000, a slight decrease from the prior year. Same store sales increased 1.7% for the nine months, which was offset by stores closed since a year ago. Gross margins as a percentage of sales for both the quarter and nine month period were 24.4% compared with 24.3% in both corresponding prior year periods. High levels of sale item penetration and price competition in the marketplace have prevented further increases in gross margins. Operating and administrative expenses as a percentage of sales for the quarter and nine month period were 23.5% and 22.8%, respectively, compared with 22.2% in both corresponding prior year periods. The principal reason for these increases was the higher level of promotional spending, chiefly couponing, which began in the second quarter and increased further in the third quarter. Although the additional promotional spending was partially responsible for the increase in same store sales, a larger sales increase was expected in order to offset the costs of these coupons. Inclement weather contributed to the lower than expected sales and also increased snow removal costs. In addition, fringe benefit costs increased. A loss of $81,000 on the sale of the Morristown store was recorded in the first quarter of fiscal 1994. An additional loss of $300,000 was recorded in the current quarter due to the failure of the Company's former sub-lessee to make required rent payments. On March 29, 1994 the Company replaced its expired $20,000,000 revolving/term loan agreement with a new $30,000,000 loan agreement with two banks. The new agreement consists of a $10,000,000 term loan, a $12,000,000 revolving loan and a $8,000,000 convertible revolving loan. At April 23, 1994 the only balance outstanding on this facility was the $10,000,000 term loan. The $12,000,000 revolving loan, which can be used for any purpose except new store construction, matures March 31, 1997. The $8,000,000 convertible revolving loan is to be used only for capital expenditures and can be used through December 31, 1995. At April 23, 1994, the Company did not meet financial ratios required by the above debt agreement and an additional debt agreement with a total of three lenders. This constitutes and event of default under these agreements. The Company is engaged in discussions with these lenders regarding this situation. Without the consent of the two banks, the Company will not be allowed to borrow under the $8,000,000 convertible revolving loan portion of the credit facility described above. Without a waiver from another lender, the Company would be pre vented from borrowing additional funds, executing new leases or declaring dividends. As a result of the events of default described above, the Company has reclassified $22,100,000 of long-term debt as a current liability in the April 23, 1994 balance sheet. There is no indication at this time that any of the three lenders intend to request immediate payment of these amounts. The Company is currently in the process of remodeling two stores. A remodel and expansion of an additional store is planned to begin shortly. A planned expenditure for 1994 had been the purchase of land for a new superstore. As this store has not yet received planning board approval, this expenditure has been rescheduled for fiscal 1995. Respectfully, Perry Sumas James Sumas President Chairman of the Board June 13, 1994
STATEMENT OF INCOME (For Three Months Ended) (For Nine Months Ended) April 23,1994 April 17,1993 April 23,1994 April 17,1993 Sales $171,776,000 $169,431,000 $507,228,000 $510,056,000 NetIncome(loss) $ (1,131,000) $ 182,000 $ (558,000) $ 1,563,000 Per Share $ (.39) $ .06 $ (.19) $ .54
BALANCE SHEET COMPARISONS April 23,1994 July 31, 1993 Current Assets $ 34,909,000 $ 41,236,000 Current Liabilities 63,304,000 43,539,000 Net Working Capital (Deficit) (28,395,000) (2,303,000) Long Term Debt 11,399,000 39,470,000 Stockholders' Equity 52,672,000 53,230,000
EX-13 2 Village Super Market Annual Report 1994 Village Super Market, Inc. and Subsidiaries Contents Letter to Shareholders 2 Selected Financial Data 3 Quarterly Financial Data 3 Management's Discussion and Analysis of Financial Condition and Results of Operations 4 Consolidated Balance Sheets 6 Consolidated Statements of Operations 7 Consolidated Statements of Shareholders' Equity 8 Consolidated Statements of Cash Flows 9 Notes to Consolidated Financial Statements 10 Independent Auditors' Report 16 Stock Price and Dividend Information 16 Corporate Directory Inside back cover Dear Fellow Shareholders Fiscal 1994 was a disappointment. We suffered a net loss before an accounting change of $1,206,690, or $.42 per share. Sales decreased 2.6% to $695,070,272 due to two store closings and one less week in this fiscal year. A major portion of the loss was attributable to increased promotional spending, mostly coupons, in the second and third quarters. Although this spending increase was partly responsible for increased same store sales in those quarters, a larger sales increase was expected to offset the coupon costs. The sluggish economy, new competitive entries and inclement weather last winter limited the annual same store sales increase to 1.3% despite the higher promotional spending. Also contributing to the net loss for the year were lower than expected gross margins, increased fringe benefit and payroll costs and a loss on closing the Morristown store. We expect a slight decline in same store sales in fiscal 1995 due to current and anticipated competitive openings. Despite this, we intend to improve our performance in 1995. We are reviewing all of our business activities in an effort to reduce our cost structure and increase customer satisfaction. What have we done so far? We closed our Easton store in August. This is the fifth underfacilitated, unprofitable store we have closed in three years. We re-evaluated the effectiveness of our advertising and coupon programs and made adjustments where appropriate to reduce our overall promotional costs. We recently reduced our supervisory headcount. We have redeployed floor space in two stores by closing unprofitable departments and are evaluating several departments in other stores. We continue to seek more effective utilization of store hours worked to satisfy customer needs, and have seen some improvement in operating efficiencies in recent months. We continue to utilize our investment in technology to better satisfy customers as well as to achieve efficiencies. We completed the rollout of debit and credit card payment options at all of our ShopRite stores this year. Over 10% of our sales dollars are now paid for by customers with the convenience of a credit or debit card. ShopRite began using Clip Less coupons this spring. Customers need only present their free Price Plus card to receive the value of our coupons no more cutting out coupons. In addition to being more customer friendly, Clip Less coupons are more efficient for us to process. We are currently in the process of converting our customers' separate Price Plus and check-cashing cards to a single, more convenient Universal card. In addition to customer convenience, the new Universal card provides us with improved ability to limit the acceptance of bad checks. Ten stores have begun to use computer generated ordering, which is designed to reduce inventory levels and out of stock conditions, enhance shelf space utilization and reduce labor costs. We recently completed a major expansion and remodel of the Stirling store and smaller improvements at the Hillsborough and Somers Point stores. Major expansions of the Chester and Absecon stores are scheduled for fiscal 1995. We thank our employees for their efforts in working through our current problems and we thank our shareholders for their support. James Sumas, Perry Sumas, Chairman of the Board President
Selected Financial Data (Dollars in thousands except per share and per sq. ft. data) July 30, July 31 , July 25, July 27, July 28, For Year 1994 1993 1992 1991 1990 Sales $695,070 $713,856 $715,059 $686,002 $681,174 Net income (loss) (807) 1,437 487 1,908 4,294 Net income (loss) per share (.28) .49 .17 .64 1.40 Cash dividends per share Class A -- -- .075 .15 .15 Class B -- -- .05 .10 .10 At year end Total assets 134,793 141,387 145,668 141,847 132,518 Long term obligations including capital leases 36,933 39,470 45,699 40,328 38,276 Working capital (deficit) (4,100) (2,303) (3,617) (2,651) 6,668 Shareholders' equity 52,423 53,230 51,793 51,485 51,258 Book value per share 18.01 18.29 17.80 17.69 16.78 Other data Selling square feet 845,000 874,000 930,000 881,000 835,000 Number of stores 24 25 27 27 27 Sales per average number of stores 28,370 27,456 26,484 25,407 25,229 Sales per average square foot of selling space 809 791 790 814 816 Capital expenditures 5,974 1,977 14,494 18,963 5,337
Unaudited Quarterly Financial Data (Dollars in thousands except per share amounts) First Second Third Fourth Fiscal Quarter Quarter Quarter Quarter Year 1994 Sales $158,745 $176,707 $171,776 $187,842 $695,070 Gross margin 38,940 42,897 41,846 45,404 169,087 Income (loss) before cumulative effect of accounting change 16 157 (1,131) (249) (1,207) Income (loss) per share before cumulative effect of accounting change -- $ .06 $ (.39) $ (.09) $ (.42) Net income (loss) 416 157 (1,131) (249) (807) Net income (loss) per share $ .14 $ .06 $ (.39) $ (.09) $ (.28) 1993 Sales $165,572 $175,053 $169,431 $203,800 $713,856 Gross margin 40,568 42,159 41,241 48,768 172,736 Net income (loss) 169 1,213 182 (127) 1,437 Net income (loss) per share $ .06 $ .42 $ .06 $ (.05) $ 49
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 30, July 31, July 25, 1994 1993 1992 Sales 100.00% 100.00% 100.00% Cost of Sales 75.67 75.80 75.68 Gross margin 24.33 24.20 24.32 Operating and administrative expense 22.73 22.27 22.31 Depreciation and amortization 1.26 1.22 1.22 Operating income .34 .71 .79 Interest (net) .57 .62 .69 Gain (loss) on disposal of assets (.05) .24 .01 Income (loss) before taxes and cumulative effect of accounting change (.28)% .33% .11%
Sales decreased $18,786,000 in fiscal 1994. Sales decreased $13,100,000 as a result of the prior year containing 53 weeks. The sale of the Morristown and Kingston stores caused decreased sales of $13,900,000. Offsetting these declines, was a same store sales increase of 1.3%. Although same store sales increased in the middle part of the fiscal year due to increased promotional spending, the sluggish economy and new competitive entries held same store sales flat in the fourth quarter. Sales decreased $1,200,000 in fiscal 1993. The sales of the Kingston and Maplewood stores in early fiscal 1993 resulted in decreased sales of $28,400,000. A two week labor dispute at six stores reduced sales by approximately $2,300,000. These decreases were offset by an increase in sales of $13,100,000 as fiscal year 1993 contained fifty-three weeks. In addition, a full years operation of the Elizabeth store, opened in December 1991, resulted in increased sales of $16,100,000. Same store sales were flat in 1993 due to the sluggish economy and increased competition. Gross margin as a percentage of sales increased slightly in fiscal 1994 as a result of aggressive buying practices. High levels of sale item penetration and price competition in the marketplace prevented further increases in gross margins in fiscal 1994, and caused margins to decline in fiscal 1993. Operating and administrative expenses in fiscal 1994 were slightly lower due to store closings and one less week of operations but increased by .46 as a percentage of sales. Approximately half of this increase was due to higher levels of promotional spending, chiefly coupons, in the middle part of the year. Although this additional promotional spending was partially responsible for the increase in same store sales, a larger sales increase was expected in order to offset the cost of these coupons. Inclement weather contributed to the lower than expected sales and also increased snow removal costs. In addition, workers' compensation, health care and payroll costs increased. Operating and administrative expenses in fiscal 1993 were approximately the same as the prior year in both dollar and percentage of sales terms. Increased costs for health care, workers' compensation and costs associated with the labor dispute were offset by reduced supply and rental costs. Payroll costs, excluding benefits, were the same as the prior year as contractual increases under collective bargain agreements were offset by reductions in hours worked due to operating efficiencies. Interest expense decreased in 1994 and 1993 due to declining debt levels and lower interest rates. The Company continuously reviews its portfolio of stores to determine which should be improved upon and which no longer fit the Company's plans. Accordingly, the equipment and leasehold of the Morristown store was sold on October 6, 1993 for $87,000 plus the cost of inventory. A loss of $354,000 was recorded in fiscal 1994 to reflect store operations through the date of closing, the effect of the sale transaction and a reserve for estimated future rental payments due as a result of the failure of the Company's former sublessee to make required rent payments. The Easton store was closed on August 30, 1994. The Company expects to sell or lease this Company owned property during fiscal 1995. The Kingston and Maplewood stores were sold in early fiscal 1993 for net proceeds of $2,234,000, plus the cost of inventory. A gain in the amount of $1,696,000 before taxes was realized on these transactions. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Sales were not materially effected by inflation in 1994 and 1993. The Company has historically been able to pass along inflationary increases in its direct product costs through increased selling prices. However, operating and administrative costs, particularly payroll and fringe benefits, have continued to increase in recent years despite the lack of inflation in food prices. The competitive climate has prevented the Company from increasing gross margins to compensate for increased operating costs. As a result, the Company has experienced declining profitability in the last few years. A continuation of the current trend of increased price competition, higher wage and benefit costs and a sluggish economy could prevent the Company from increasing its operating margins and profitability. LIQUIDITY AND CAPITAL RESOURCES Current liabilities exceeded current assets by $4,100,000, $2,303,000 and $3,617,000 at the end of fiscal 1994, 1993 and 1992, respectively. Working capital ratios at the same dates were .90, .95 and .92 to one. The Company's working capital needs are reduced by its high rate of inventory turnover (twenty times in fiscal 1994) and because the warehousing and distribution arrangements accorded to the Company as a member of Wakefern permit it to minimize inventory levels. The Starn's stores generate greater sales during the summer months due to their location in the southern shore region of New Jersey. This seasonality serves to offset the slight decline in sales experienced during the summer months by the majority of the Company's other stores, resulting in a more level distribution of working capital requirements throughout the year. Capital expenditures in 1994 were $5,974,000. The major expenditure was the expansion and remodel of the Stirling store. The remainder of capital expenditures included smaller expansions of the Hillsborough and Somers Point stores. The Company has budgeted approximately $8,000,000 for capital expenditures in fiscal 1995. The major planned expenditures are the expansion and remodel of the Chester store and the beginning of the expansion of the Absecon store. The Company expects to finance these expenditures through internally generated funds and borrowing under its credit facility. The Company has historically financed capital expenditures through cash provided by operations supplemented by bank borrowings. Aggregate capital expenditures for the three years ended July 30, 1994 were $22,445,000. During the same period of time, net long-term borrowings decreased by $2,615,000. The ability to finance expansion through operational cash flow is reflected in the ratio of long-term debt to total capitalization, which is currently 41.3%, slightly lower than three years ago. On March 29, 1994 the Company replaced its expired $20,000,000 revolving/ term loan agreement with a new loan agreement with two banks. The new agreement consists of a $10,000,000 term loan and a $12,000,000 revolving loan. At July 30, 1994 the Company did not meet the interest coverage ratio required under this agreement. On October 21, 1994, the Company obtained a waiver of the covenant violation and an amendment of the loan agreement. The Company believes that it will be in compliance with these modified covenants for the remaining term of the agreement. At July 30, 1994, the Company did not meet a cash flow-to-fixed charge coverage ratio contained in two other debt agreements with one lender. This does not constitute an event of default. However, until this ratio is met or unless a waiver is obtained, the agreements prevent the Company from borrowing additional funds (other than the Company's revolving loan), declaring dividends and executing new leases.
Consolidated Balance Sheets July 30, July 31, 1994 1993 ASSETS CURRENT ASSETS Cash and cash equivalents $ 7,246,164 $ 6,619,455 Merchandise inventories 25,273,150 26,245,890 Patronage dividend receivable 2,782,470 2,950,263 Miscellaneous receivables 1,902,370 4,241,747 Income taxes receivable 356,814 610,272 Prepaid expenses 580,124 569,015 Total current assets 38,141,092 41,236,642 PROPERTY, EQUIPMENT AND FIXTURES, at cost less accumulated depreciation and amortization 71,413,918 74,130,867 OTHER ASSETS Investment in related party, at cost 9,415,874 9,054,546 Goodwill, net 11,137,730 11,404,010 Other intangibles, net 3,045,001 3,298,751 Receivables and other assets 1,639,152 2,262,478 Total other assets 25,237,757 26,019,785 $134,792,767 $141,387,294
LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Current portion of long-term debt: Mortgages and notes payable $ 4,764,650 $ 4,719,804 Capitalized lease obligations 383,926 458,721 Accounts payable to related party 23,947,383 23,400,532 Accounts payable and accrued expenses 12,330,181 14,522,163 Deferred income taxes 814,737 438,000 Total current liabilities 42,240,877 43,539,220 LONG-TERM DEBT, less current portion: Mortgages and notes payable 26,320,696 28,065,013 Capitalized lease obligations 10,612,232 11,405,278 Total long-term debt 36,932,928 39,470,291 DEFERRED INCOME TAXES 3,195,595 5,147,726 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 in 1994 and 1,758,800 in 1993 18,129,472 18,126,876 Class B common stock, no par value: Authorized 10,000,000 shares, issued and outstanding 1,594,076 in 1994 and 1,598,076 in 1993 1,034,679 1,037,275 Retained earnings 39,444,219 40,250,909 Less treasury stock, Class A, at cost (447,000 shares) (6,185,003) (6,185,003) Total shareholders' equity 52,423,367 53,230,057 $134,792,767 $141,387,294
See notes to consolidated financial statements.
Consolidated Statements of Operations Years Ended July 30, July 31, July 25, 1994 1993 1992 SALES $695,070,272 $713,856,206 $715,059,074 COST OF SALES 525,983,044 541,120,690 541,172,839 GROSS MARGIN 169,087,228 172,735,516 173,886,235 Operating and administrative expense 157,983,230 158,943,214 159,532,355 Depreciation and amortization expense 8,785,917 8,718,220 8,722,193 Operating Income 2,318,081 5,074,082 5,631,687 Interest expense, net of interest income of $103,126, $27,459 and $54,992 3,900,248 4,404,606 4,934,046 Gain (loss) on disposal of assets (354,523) 1,696,174 100,506 INCOME (Loss) BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE(1,936,690) 2,365,650 798,147 PROVISION (BENEFIT) FOR INCOME TAXES (730,000) 929,000 311,000 INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE (1,206,690) 1,436,650 487,147 CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES 400,000 -- -- NET INCOME (LOSS) $ (806,690) $1,436,650 $ 487,147 NET INCOME (LOSS) PER SHARE: INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE $ (.42) $ .49 $ .17 CUMULATIVE EFFECT OF ACCOUNTING CHANGE .14 -- -- NET INCOME (LOSS) PER SHARE $ (.28) $ .49 $ .17
See notes to consolidated financial statements.
Consolidated Statements of Shareholders' Equity Years Ended July 30, 1994, July 31, 1993 and July 25, 1992 No Par Value No Par Value Class A, Class B, Common Stock Common Stock Retained Treasury Shares Amount Shares Amount Earnings Stock Balance, July 27, 1991 1,758,800 $18,126,876 1,598,076 $1,037,275 $38,505,399 $(6,185,003) Net income _ _ _ _ 487,147 _ Dividends on common stock ($.075 per Class A share and $.05 per Class B share) _ _ _ _ (178,287) _ Balance, July 25, 1992 1,758,800 $18,126,876 1,598,076 $1,037,275 $38,814,259 $(6,185,003) Net Income _ _ _ _ 1,436,650 _ Balance, July 31, 1993 1,758,800 $18,126,876 1,598,076 $1,037,275 $40,250,909 $(6,185,003) Net Loss _ _ _ _ (806,690) _ Conversion of shares 4,000 2,596 (4,000) (2,596) _ _ Balance, July 30, 1994 1,762,800 $18,129,472 1,594,076 $1,034,679 $39,444,219 $(6,185,003)
See notes to consolidated financial statements.
Consolidated Statements of Cash Flows Years Ended July 30, 1994 July 31, 1993 July 25, 1992 CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $(806,690) $1,436,650 $ 487,147 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Cumulative effect of accounting change (400,000) _ _ Depreciation and amortization 8,785,917 8,718,220 8,722,193 Deferred taxes (911,000) (138,000) (654,000) Provision to value inventories at LIFO 656,346 212,380 (193,762) (Gain) loss on disposal of assets 354,523 (1,696,174) (100,506) Changes in assets and liabilities: (Increase) decrease in merchandise inventories 316,394 252,033 (2,427,568) (Increase) decrease in patronage dividend receivables 167,793 (29,710) 245,744 (Increase) decrease in miscellaneous receivables 2,339,377 (601,755) 280,925 (Increase) decrease in prepaid expenses (11,109) (118,037) 87,675 (Increase) decrease in income taxes receivable 253,458 (610,272) _ (Increase) decrease in other assets 606,376 (265,924) (11,870) Increase (decrease) in accounts payable to related party 546,851 (288,519) (399,889) Increase (decrease) in accounts payable and accrued expenses (2,191,982) 308,445 (705,254) (Decrease) in income taxes payable (264,394) (239,920) (40,113) Net cash provided by operating activities 9,441,860 6,939,417 5,290,722 CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (5,973,814) (1,976,758) (14,494,387) Investment in related party (361,328) (542,403) (845,486) Proceeds from sale of assets 87,303 2,234,309 298,800 Net cash used in investing activities (6,247,839) (284,852) (15,041,073) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of long-term debt 14,000,000 _ 9,680,270 Principal payments of long-term debt (16,567,312) (5,359,109) (4,369,409) Dividends paid _ _ (178,287) Net cash provided (used) by financing activities (2,567,312) (5,359,109) 5,132,574 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 626,709 1,295,456 (4,617,777) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 6,619,455 5,323,999 9,941,776 CASH AND CASH EQUIVALENTS, END OF YEAR $7,246,164 $6,619,455 $ 5,323,999
See notes to consolidated financial statements. Notes to Consolidated Financial Statements NOTE 1 _ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of consolidation The consolidated financial statements include the accounts of Village Super Market, Inc. and its subsidiaries, all of 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 1993 contains 53 weeks. Fiscal 1994 and 1992 contain 52 weeks. Industry segment The Company consists of one operating segment, the retail sale of food and non-food products. Reclassifications Certain amounts have been reclassified in the 1993 and 1992 financial statements to conform to the 1994 financial statement presentation. Cash and cash equivalents Cash and cash equivalents includes interest bearing, overnight deposits with Wakefern in the amount of $5,200,000 and $4,800,000 at July 30, 1994 and July 31,1993, respectively. Merchandise inventories Merchandise inventories are carried at cost, which is not in excess of market. Cost is determined as follows: Grocery and non-foods _ last-in, first-out (LIFO) (retail less departmental gross profit mark-up). Meat and all other perishables _ first-in, first-out (FIFO). Dairy, frozen foods and liquor _ FIFO (retail less departmental gross profit mark-up). Property, equipment and fixtures Property, equipment and fixtures are recorded at cost. Interest cost incurred to finance construction is capitalized as part of such cost. Renewals and betterments are capitalized. Maintenance and repairs are expenses as incurred. Depreciation is provided on a straight-line basis over estimated useful lives of thirty years for buildings, ten years for store fixtures and equipment, and three years for vehicles. Leasehold improvements are amortized over ten years. Capital leases are amortized on a straight-line basis over the shorter of the related lease term or the economic lives of the related assets. When assets are sold or retired, their cost and accumulated depreciation are removed from the accounts, and any gain or loss is reflected in the financial statements. Store opening and closing costs All store opening costs are expensed as incurred. Provisions are made for losses resulting from store closings at the time of closing. Leases Leases which meet certain criteria are classified as capital leases, and assets and liabilities are recorded at amounts equal to the lesser of the present value of the minimum lease payments or the fair value of the leased properties at the inception of the respective leases. Such assets are amortized on a straight-line basis over the shorter of the related lease terms or the economic lives of the related assets. Amounts representing interest expense relating to the lease obligations are recorded to affect constant rates of interest over the terms of the leases. Leases which do not qualify as capital leases are classified as operating leases, and related rentals are charged to expense as incurred. Goodwill Goodwill arising after October 31, 1970 is being amortized over forty years. The Company does not amortize goodwill amounting to approximately $2,900,000 acquired prior to October 31, 1970 since, in management's opinion, the value of such intangibles has not diminished. Accumulated amortization of goodwill amounted to $2,274,250 and $2,007,970 at July 30, 1994 and July 31, 1993, respectively. Other intangibles Other intangibles include the fair value of a favorable lease and trademarks acquired in a business acquisition. Other intangibles are being amortized over 20 years. Accumulated amortization of other intangibles amounted to $2,029,999 and $1,776,249 at July 30, 1994 and July 31, 1993, respectively. Income taxes Effective August 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," (SFAS 109) which requires an asset and liability approach for accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates in effect. As permitted by SFAS 109, the Company has elected not to restate the financial statements of any prior periods. Notes to Consolidated Financial Statements (Continued) NOTE 1 _ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Net income (loss) per share Net income (loss) per share is computed by dividing net income (loss) by the weighted average number of all common shares outstanding during the periods presented which was 2,909,876 in 1994, 1993 and 1992. Stock options are not included in the calculation as their inclusion would be anti-dilutive or would not result in a material dilution of net income (loss) per share. NOTE 2 _ INVENTORIES Merchandise inventories are comprised as follows:
July 30, July 31, 1994 1993 Last-in, first-out (LIFO) $17,084,096 $17,825,707 First-in, first-out (FIFO) 8,189,054 8,420,183 $25,273,150 $26,245,890
If the FIFO method of inventory accounting had been used rather than LIFO, inventories would have been $6,467,653 and $5,811,307 higher than reported in 1994 and 1993, respectively. NOTE 3 _ PROPERTY, EQUIPMENT AND FIXTURES Property, equipment and fixtures are comprised as follows:
July 30, July 31, 1994 1993 Land and buildings $42,365,651 $41,928,576 Store fixtures and equipment 56,895,598 55,024,926 Leasehold improvements 13,185,705 11,246,225 Leased property under capital leases 13,700,599 15,182,532 Vehicles 852,096 883,644 Construction in progress 730,496 231,160 127,730,145 124,497,063 Less accumulated depreciation and amortization 56,316,227 50,366,196 Property, equipment and fixtures, net $71,413,918 $74,130,867
Interest cost capitalized amounted to $200,000 in 1992 (none in 1994 and 1993). NOTE 4 _ RELATED PARTY INFORMATION The Company's investment in its principal supplier, Wakefern Food Corp. ("Wakefern"), which is operated on a cooperative basis for its stockholder members, is less than 20% of the outstanding shares of Wakefern. The investment is pledged as collateral for any obligations to Wakefern. In addition, this obligation is personally guaranteed by the principal shareholders of the Company. The Company is obligated to purchase 85% of its primary merchandise requirements from Wakefern until ten years from the date that stockholders representing 75% of Wakefern sales notify Wakefern that those stockholders request the Wakefern Stockholder Agreement be terminated. The Company's merchandise purchases from Wakefern approximated $490,447,000, $489,658,000 and $484,516,000 during fiscal years 1994, 1993 and 1992, respectively. Wakefern distributes as a "patronage dividend" to each member a share of earnings of Wakefern in proportion to the dollar volume of business done by the member with Wakefern during the year. Patronage dividends, which are recorded as a reduction of cost of sales, amounted to approximately 1.1% of sales in 1994, 1.0% in 1993 and .9% in 1992. Notes to Consolidated Financial Statements (Continued) NOTE 4 _ RELATED PARTY INFORMATION (continued) Wakefern has increased from time to time the required investment in its common stock for each supermarket owned by a member, with the exact amount per store computed in accordance with a formula based on the volume of each store's purchases from Wakefern. As a result, the Company is required to invest approximately $1,065,000 over approximately the next four years. The Company will receive additional shares of common stock to the extent paid for at the end of each fiscal year (September 30) of Wakefern calculated at the then book value of such shares. The payments together with any stock issued thereunder, at the option of Wakefern, may be null and void and all payments on this subscription shall become the property of Wakefern in the event the Company does not complete the payment of this subscription in a timely manner. NOTE 5 _ MORTGAGES AND NOTES PAYABLE
July 30, July 31, 1994 1993 Term loans, interest at 8.49% payable monthly, principal payable in monthly installments of $55,555 beginning August 1, 1994 with a final principal payment of $5,555,556 due April 1, 2001 $10,000,000 _ Revolving credit note 4,000,000 9,000,000 Senior unsecured notes, interest at 9.91% payable quarterly, due in equal annual installments through August 15, 1997 8,100,000 12,500,000 Mortgage note, interest at 10.19% payable semi-annually, due in three equal annual installments beginning December 1, 1997, collateralized by certain land and building 4,000,000 4,000,000 Notes payable, interest at prime minus 1.5%, payable in monthly installments through January 1998, collateralized by certain equipment 4,932,430 6,138,603 Other notes payable 52,916 1,146,214 31,085,346 32,784,817 Less current portion 4,764,650 4,719,804 Noncurrent maturities $26,320,696 $28,065,013
Aggregate principal maturities of notes and mortgages as of July 30, 1994 are as follows:
Year ending July: 1995 $4,764,650 1996 4,711,734 1997 8,670,067 1998 2,938,894 1999 2,000,000
On March 29, 1994 the Company entered into a new loan agreement with two banks. The agreement consists of a $10,000,000 term loan and a $12,000,000 revolving loan. The $12,000,000 revolving loan, which can be used for any purpose except new store construction, matures March 31, 1997 and carries interest at prime plus .5%. At July 30, 1994 the Company did not meet the interest coverage ratio required under this agreement. However, on October 21, 1994 the covenant violation was waived and the agreement amended to lower the covenant requirements for the remainder of the agreement. In addition to interest coverage requirements, this agreement also contains restrictive covenants which, among other matters, specify total debt levels, maintenance of net worth, cash flow coverage ratios, limitation on payment of dividends and limitation of capital expenditures. At July 30, 1994 the Company did not meet a cash flow-to-fixed charge coverage ratio contained in two other debt agreements with one lender. This does not constitute an event of default. However, until this ratio is met or unless a waiver is obtained, the agreements prevent the Company from borrowning additional funds (other than under the Company's revolving loan), declaring dividends and executing new leases. Interest paid amounted to $4,095,616, $4,496,835 and $5,212,971 in 1994, 1993 and 1992, respectively. Notes to Consolidated Financial Statements (Continued) NOTE 6 _ INCOME TAXES Effective August 1, 1993, the Company adopted SFAS No. 109 (see note 1). The cumulative effect of adopting SFAS 109 as of August 1, 1993 was to decrease net loss by $400,000 ($.14 per share). There was no effect of the change in accounting on pretax income for the year ended July 30, 1994. The components of the provision (benefit) for income taxes are:
1994 1993 1992 Federal: Current $ 181,000 $ 733,000 $ 808,000 Deferred (787,000) (89,000) (627,000) State: Current _ 334,000 157,000 Deferred (124,000) (49,000) (27,000) $(730,000) $ 929,000 $ 311,000
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilites and assets as of July 30, 1994 are as follows:
Deferred tax liabilities: Tax over book depreciation $5,978,030 Patronage dividend receivable 1,118,205 Other 365,064 Total deferred tax liabilities 7,461,299 Deferred tax assets: Amortization of capital leases 1,637,252 Tax credits and loss carry forwards 1,381,647 Other 432,068 Total deferred tax assets 3,450,967 Net deferred tax liability $4,010,332
A valuation allowance is provided when it is more likely than not that some portion of the deferred tax assets will not be realized. In management's opinion, in view of the Company's previous, current and projected taxable income, such tax assets will more likely than not be fully realized. Accordingly, no valuation allowance was deemed to be required upon adoption and at July 30, 1994. The effective income tax rate differs from the statutory federal income tax rate as follows:
1994 1993 1992 Statutory federal income tax rate (34.0%) 34.0% 34.0% Targeted jobs tax credit (4.2) (7.0) (20.0) Amortization of intangibles 4.7 4.4 14.3 State income taxes, net of federal tax benefit (4.2) 7.9 10.7 Effective income tax rate (37.7%) 39.3% 39.0%
During 1993 and 1992, deferred income taxes were provided for significant timing differences in the recognition of expenses for tax and financial statement purposes. The principal components of deferred tax expense (benefit) in 1993 and 1992 are depreciation 1993_$(354,000) and 1992_$(250,000) and accrued liabilities 1993_$128,000 and 1992_$(374,000). The Company has approximately $900,000 of alternative minimum tax credits that may be carried forward indefinitely. The Company has approximately $200,000 of targeted jobs tax credits and $275,000 of net operating losses that can be carried forward fifteen years. Income taxes paid amounted to approximately $192,000, $1,917,000 and $1,005,000 in 1994, 1993 and 1992, respectively. Notes to Consolidated Financial Statements (Continued) NOTE 7 _ LONG-TERM LEASES Description of leasing arrangements The Company conducts a major part of its operations from leased facilities, with the majority of initial lease terms ranging from 20 to 30 years. All of the Company's leases expire through fiscal 2059. Most of the Company's leases contain renewal options of five years each. These options enable the Company to retain the use of facilities in desirable operating areas. Management expects that in the normal course of business, leases will be renewed or replaced by other leases. The Company is obligated under all leases to pay for utilities and liability insurance, and under certain leases to pay additional rentals based on real estate taxes, maintenance, insurance and a percentage of sales in excess of stipulated amounts. Future minimum lease payments by year and in the aggregate for all non-cancelable leases with initial terms of one year or more consisted of the following at July 30, 1994:
Capital Operating Leases Leases 1995 $ 2,046,452 $ 2,728,318 1996 1,965,389 2,641,717 1997 1,918,476 2,647,896 1998 1,924,186 2,517,246 1999 1,932,180 2,519,334 Thereafter 20,260,643 16,762,237 Minimum lease payments $30,047,326 $29,816,748 Less amount representing interest 19,051,168 Present value of minimum lease payments $10,996,158
The following schedule shows the composition of total rental expense under operating leases for the following periods:
1994 1993 1992 Minimum rentals $3,353,487 $3,149,108 $3,368,766 Contingent rentals 750,728 892,112 957,037 Less sub-lease rentals _ (80,880) (65,100) $4,104,215 $3,960,340 $4,260,703
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 $1,215,000, $1,039,000 and $1,249,000 for fiscal years 1994, 1993 and 1992, respectively. In addition, three supermarkets are leased from partnerships in which the Company is a partner. NOTE 8 _ COMMON STOCK Class A common stock has one vote per share and is entitled to cash dividends as declared 54% greater than those paid on the Class B common stock. Class B common stock has ten votes per share. Class B common stock is not transferable 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 Corporation approving the transfer. Shares of Class B common stock are convertible on a share-for-share basis for Class A common stock. The Company has an Incentive and Nonstatutory Stock Option Plan under which both incentive and nonstatutory options to purchase up to 150,000 shares of the Company's Class A common stock may be granted to officers and employees of the Company as designated by the Board of Directors. The plan requires incentive stock options to be granted at an exercise price equaling the fair market value of the Company's stock at the date of grant (110% if the optionee holds more than 10% of the voting stock of the Company), while nonstatutory options may be granted at an exercise price less than market value. All options granted to date are at an exercise price equal to the fair value at the date of grant. All options outstanding at July 30, 1994 expire on December 6, 1997. There were no transactions in fiscal 1994, 1993 and 1992. There are 130,000 options outstanding and exercisable at an average price of $8.00 at July 30, 1994. Notes to Consolidated Financial Statements (Continued) NOTE 9 _ PENSION PLANS The Company sponsors three defined benefit pension plans covering administrative personnel and members of two unions. Employees covered under the administrative pension benefit plan earn benefits based upon percentages of annual compensation. Employees covered under the union pension benefit plans earn benefits based on a fixed amount for each year of service. The Company's funding policy is to pay at least the minimum contribution required by the Employee Retirement Income Security Act of 1974. Net periodic pension cost for the three plans included the following components:
1994 1993 1992 Service cost $365,414 $384,307 $376,443 Interest cost on projected benefit obligation 380,587 329,340 298,502 Return on plan assets (152,604) (124,179) (336,233) Amortization of unrecognized net assets at transition (232,055) (223,508) 29,399 Net periodic pension cost $361,342 $365,960 $368,111
The funded status of the three pension plans is reconciled to accrued pension cost as follows:
July 30, July 31, 1994 1993 Plan assets at fair value $4,768,284 $3,916,640 Actuarial present value of benefit obligations: Vested benefits 4,220,550 3,391,226 Non-vested benefits 99,212 70,784 Accumulated benefit obligations 4,319,762 3,462,010 Effect of future increases in compensation levels 908,207 1,116,746 Projected benefit obligation 5,227,969 4,578,756 Projected benefit obligation in excess of plan assets (459,685) (662,116) Unamortized prior service cost 529,845 456,698 Unrecognized net loss 298,317 124,777 Remaining unrecognized net asset at July 25, 1987 (amortized over 15 years) (498,314) (560,759) Additional liability (168,523) _ Accrued pension cost $(298,360) $(641,400)
Plan assets are invested principally in government securities, common stocks and mutual funds. Assumptions used in determining the net fiscal 1994, 1993 and 1992 periodic pension cost were: Assumed discount rate 8 to 8.5% Assumed rate of increase in compensation levels 4% Expected rate of return on plan assets 8 to 8.5% The Company also participates in several multi-employer pension plans for which the 1994, 1993 and 1992 contributions were $1,814,000, $1,822,000 and $1,873,000, respectively. NOTE 10 _ COMMITMENTS AND CONTINGENCIES The Company is under contract to purchase a tract of land, contingent upon receiving all approvals, on which it plans to construct a superstore. The Company is involved in litigation incidental to the normal course of business. Company management is of the opinion that insurance coverage is adequate and final disposition should not materially affect the consolidated financial position of the Company. 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 30, 1994 and July 31, 1993, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the years in the three-year period ended July 30, 1994. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Village Super Market, Inc. and subsidiaries at July 30, 1994 and July 31, 1993, and the results of their operations and their cash flows for each of the years in the three-year period ended July 30, 1994 in conformity with generally accepted accounting principles. As discussed in Notes 1 and 6 to the consolidated financial statements, the Company adopted the provisions of Financial Accounting Standards Board Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," as of August 1, 1993. KPMG PEAT MARWICK LLP Short Hills, New Jersey September 30, 1994, except as to Note 5, which is as of October 21, 1994. Stock Price and Dividend Information The Class A common Stock of Village Super Market, Inc. is traded on the NASDAQ Stock Market under the symbol "VLGEA." The table below sets forth the high and low last reported sales price for the fiscal year indicated.
Class A Stock High Low 1994 4th Quarter 9 7-1/2 3rd Quarter 9 7-1/2 2nd Quarter 9-3/4 7-1/2 1st Quarter 9-3/4 8-1/4 1993 4th Quarter 9-3/4 8-1/4 3rd Quarter 9-1/4 7 2nd Quarter 8 6-1/4 1st Quarter 7-1/4 6-1/4
As of October 1, 1994, there were 556 holders of record of the Company's Class A common stock. No dividends were paid during fiscal 1994 and 1993. Village Super Market Inc. CORPORATE DIRECTORY OFFICERS AND DIRECTORS NICHOLAS SUMAS Chairman of the Board _ Emeritus PERRY SUMAS Chief Executive Officer and President; Director JAMES SUMAS Chairman of the Board; Chief Operating Officer and Treasurer; Director ROBERT SUMAS Executive Vice President and Secretary; Director WILLIAM SUMAS Executive Vice President; Director JOHN SUMAS Executive Vice President; Director CAROL LAWTON Vice President and Assistant Secretary FRANK SAURO General Counsel KEVIN BEGLEY Chief Financial Officer GEORGE J. ANDRESAKES Director JOHN J. McDERMOTT Director NORMAN CRYSTAL Director EXECUTIVE OFFICES 733 Mountain Avenue Springfield, New Jersey 07081 REGISTRAR AND TRANSFER AGENT Midlantic National Bank Edison, New Jersey AUDITORS KPMG Peat Marwick LLP 150 John F. Kennedy Parkway Short Hills, New Jersey FORM 10-K Copies of the Company's Form 10-K as filed with the Securities and Exchange Commission are available without charge upon written request to: Mr. Robert Sumas, Secretary Village Super Market, Inc. 733 Mountain Avenue Springfield, New Jersey 07081 EX-4.3 3 AMENDMENT NO. 1 TO LOAN AGREEMENT AMENDMENT NO. 1 TO LOAN AGREEMENT This Amendment No. 1 to Loan Agreement ("Amendment") is made as of October 21, 1994 by and among NEW JERSEY NATIONAL BANK, a New Jersey banking corporation having its principal place of business at 51 John F. Kennedy Parkway, Short Hills, New Jersey 07078 ("NJNB"), CHEMICAL BANK NEW JERSEY, NATIONAL ASSOCIATION, a national banking association having an office at East 36 Midland Avenue, Paramus, New Jersey 07652 ("CBNJ", each of CBNJ and NJNB individually a "Bank" and collectively the "Banks"); NJNB, as agent for the Banks (the "Agent") and VILLAGE SUPER MARKET, INC., a New Jersey corporation having its principal place of business at 733 Mountain Avenue, Springfield, New Jersey 07081 (the "Borrower"). WITNESSETH: Background and Purpose. Pursuant to a Loan Agreement dated March 29, 1994 (the "Original Agreement", the Original Agreement as the Letter Agreement and this Amendment No. 1 is referred to as the "Loan Agreement"), the Banks agreed to provide to the Borrower a Revolving Loan, a Team Loan and a Convertible Revolving Loan in the original aggregate principal am of up to $30,000,000, all as further described in the Original Agreement Borrower has defaulted under the Loan Agreement, entitling the Banks payment of the Loan. Borrower has now requested that the Bank waive such defaults and amend the Original Agreement, as the Borrower is currently projecting additional breaches absent this Amendment. The Banks are willing to amend the Original Agreement as requested by Borrower on the terms set forth herein. Section 12.2 of the Loan Agreement provides that any amendment thereto must be in writing and signed by a duly authorized officer of each Bank. NOW, THEREFORE, in consideration of the premises and the mutual covenants and representation herein contained, the parties hereto agree to modify and amend the Original Agreement as follows: 1. DEFINITIONS. The following definitions set forth in Section I of the Original Agreement are hereby amended and restated in their entirety as follows: (a) "Loan Agreement" shall mean the Original Agreement, as it may be amended or supplemented from time to time, including but not limited to the amendment set forth in the Letter Agreement and this Amendment No. 1. (b) "Loan Document(s)" mean the Loan Agreement (including the Letter Agreement and this Amendment No. 1 and any other amendments thereto) and all documents, notes, assignments, certificates and agreements of any kind listed, described or referenced by the Closing Memorandum annexed to the Original Agreement as Exhibit A, or in this Amendment No. 1 or otherwise executed in connection with the Original Agreement, this Amendment or any future amendment. For purposes of this Amendment No. 1, "Letter Agreement" means the letter agreement among the Borrower and the Banks dated July 7, 1994 arising from defaults by Borrower in the April 1994 Fiscal Quarter. 2. WAIVERS. The Banks hereby waive the following known defaults of Borrower: (a) a breach of the Tangible Net Worth covenant as at October 1994 provided for at Section 7.11(b) of the Loan Agreement (based upon the Borrower's representation to the Banks and the Agent that its Tangible Net Worth at the end of October 1994 will be approximately $38,000,000), (b) a breach of the EBIT/Interest Ratio Covenant as of April and July 1994 provided for in Section 7.13 of the Loan Agreement, PROVIDED HOWEVER, the Banks do not hereby waive and do not hereby make any commitment to waive, any other default (if any) of the terms and conditions of the Original Agreement as amended by this Amendment No. 1 nor as to any time period subsequent to the period ending October 29, 1994 and the Borrower has no expectation of any such waiver. The Borrower acknowledges and agrees that any prior waivers by the Banks of Events of Default by Borrower shall afford the Borrower no expectation whatsoever that the Banks will be willing to waive or to consider the waiver of any Events of Default arising after the date hereof. 3. AMENDED COVENANTS. (a) Section 7.13 of the Original Agreement is hereby amended by modifying and restating that section of the Original Agreement in its entirety as follows: "7.13 EBIT to Interest Ratio. As to the Companies on a consolidated basis, maintain an EBIT to Interest Ratio measured as of the end of each Fiscal Quarter of at least the following ratio for the Fiscal Quarters listed below: Fiscal Quarter End Ratio (A) April 1994 One and Fifteen Hundredths to One (1:15:1); (B) July 1994 One and Twenty Five Hundredths to One (1.25:1); (C) October 1994 Fifty Five Hundredths to One (0.55:1); (D) January 1995 Sixty Eight Hundredths to One (0.68:1); (E) April 1995 Eighty Seven Hundredths to One (0.87:1); (F) July 1995 One and Seven Hundredths to One (1.07:1); (G) October 1995 One and Nine Hundredths to One (1.09:1); (H) January 1996 One and Eleven Hundredths to One (1:11:1); (I) April 1996 One and Thirteen Hundredths to One (1:13:1); (J) July and October 1996 and January and April 1997 One and Fifteen Hundredths to One (1:15:1); (K) July and October 1997 and January and April 1998 One and Twenty Two Hundredths to One (1:22:1); (L) July 1998 and each Fiscal Quarter thereafter One and Twenty Five Hundredths to One (1.25:1)." (b) Section 8.13 of the Original Agreement is hereby amended by modifying and restating that section of the Original Agreement in its entirety as follows: "8.13 Capital Expenditures. Permit the aggregate sum of the consolidated Capital Expenditures of the Companies made in any Fiscal Year listed below to exceed the following amounts:
Maximum Amount of Aggregate Capital Expenditures for Fiscal Year Ending for Fiscal Year July 1994 $12,500,000 July 1995 8,000,000 July 1996 7,000,000 July 1997 6,000,000 July 1998 or thereafter 6,000,000
provided, however, that for Fiscal Year 1997 and thereafter, the Borrower may submit a Capital Expenditure budget for more than $6 million to the Banks, which may become the Capital Expenditure Budget for such Fiscal Year after approval by the Banks in their absolute and unfettered discretion. Furthermore, to the extent that the Companies' Capital Expenditures in any Fiscal Year, commencing with the Fiscal Year ending July 1995, are less than the amounts set forth above, the "unused amounts" (the excess of the permitted amount of Capital Expenditures for such Fiscal Year above the Companies' actual Capital Expenditures for such Fiscal Year) may be rolled over into the next Fiscal Year only, thereby increasing the Capital Expenditures permitted for the next Fiscal Year (but not for any other subsequent Fiscal Year). (c) The Borrower has been negotiating to acquire a certain property in Westfield, New Jersey (the "Westfield Property"). At the Borrower's request, the Banks agree that, if the Borrower acquires the Westfield Property on terms previously disclosed to the Banks, the amount paid for the acquisition of the Westfield Property will not be counted or included for purposes of determining compliance with the Capital Expenditure covenant of Section 8.13, as amended herein. The Borrower agrees that capital expenditures related to the Westfield Property, if any, other than the initial acquisition of the real estate, would be subject to the Capital Expenditure limitations of Section 8.13. 4. ADDITIONAL AGREEMENTS. (a) Section 2.12 of the Original Agreement is hereby amended to increase the interest rate on the Revolving Loan by twenty-five (25) Basis Points by modifying and restating that section of the Original Agreement in its entirety as follows: "2.12 Interest Rates For Revolving Loan. The Borrower agrees to pay interest on the unpaid portion of Revolving Loans as follows: (A) for Prime Loans at a fluctuating rate equal to the Prime Rate in effect from time to time plus Fifty (50) Basis Points. The increased interest rate shall be effective immediately as of the date of this Amendment No. 1. (b) Pursuant to the Letter Agreement, the Borrower agreed that its right to request Convertible Revolving Loans, and the Banks' obligation to make advances under Section IV of the Original Agreement, was terminated. The Borrower and the Banks hereby reconfirm that Section IV of the Original Agreement is deleted and of no further force or effect. (c) Notwithstanding anything in the Original Agreement to the contrary, including but not limited to Sections 2.1, 2.6, 2.7, 2.12, or 5.8, the use by Borrower of the Eurodollar Rate is suspended, the Borrower shall have no right and no ability to make Eurodollar Loans or to elect to have the Eurodollar Rate apply to any loan or borrowing without the prior written consent of both Banks, which consent may be given or denied at the sole and unfettered discretion of each Bank. The Borrower understands and agrees that neither Bank expects to consent to any Eurodollar Loan or to the use of the Eurodollar Rate in the foreseeable future. (d) Within ten (10) days of the date hereof, the Company shall deliver to the Agent and the Banks the Company's audited financial statements for the year ended July 29, 1994. The Company represents and warrants to the Agent and the Banks that such audited financial statements shall be consistent with estimates of the Company's net income and net worth previously given to the Agent and the Banks. 5. CONDITIONS PRECEDENT. This Amendment shall become effective on the date that the Agent and Banks shall have received each of the following, in form and substance satisfactory to the Banks, the Agent and its counsel: (a) The Amendment. The Amendment duly executed, and delivered to the Agent and the Banks; (b) Professional Fees. Reimbursement to the Agent for all legal fees and other costs incurred by the Agent in connection with the investigation of the Borrower and the negotiation, preparation and review of this Amendment, and as required by Section 7.15 of the Original Agreement; (c) Waiver Fee. Payment of a waiver fee of $20,000 to the Agent (which fee shall be paid by the Agent $10,000 to NJNB and $10,000 to CBNJ); (d) Traveler's. A letter from the chief financial officer of the Borrower confirming that, following execution and delivery of this Amendment, there will be no events of default under the Note Purchase Agreement between the Borrower and Traveler's Insurance Company. (e) A certified copy of resolutions of the Borrower authorizing execution and delivery of this Amendment; and (f) Such other documents as the Banks may reasonably require. 6. REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants to the Agent and the Banks that, except as disclosed on Schedule I annexed hereto (if any) all representations and warranties set forth in the Original Agreement remain accurate and complete as of the date hereof as though made on and as of the date hereof. The Borrower further represents and warrants to the Agent and the Banks that (a) it and the other Companies are in compliance with all of the affirmative and negative covenants set forth in the Original Agreement, as amended by this Amendment, as of the date hereof, (b) all financial statements delivered to the Banks through the date hereof pursuant to Section 7.3 of the Original Agreement or otherwise have been complete and correct in all material respects and fairly represented the financial condition of the Borrower as at such dates and the results of its operations for the periods covered thereby, all in accordance with GAAP consistently applied, (c) on the date hereof, except for the defaults identified and waived pursuant to Section 2 hereof, no Event of Default or event that, with the passage of time or the giving of notice or both would be an Event of Default has occurred, (d) it has no counterclaim, setoff or right to deduct against any amounts due to the Banks at the date of execution of this Amendment, (e) the execution and delivery by the Borrower of this Amendment has been duly authorized by all requisite corporate action, and (f) this Amendment and the Original Agreement as amended hereby each constitutes a valid and binding obligation of the Borrower enforceable against it in accordance with its terms. 7. NO OTHER CHANGES. Except as specifically amended hereby, the Original Agreement is and shall remain in full force and effect and is hereby ratified and confirmed. Capitalized terms defined in the Original Agreement and not otherwise defined herein shall have the same meaning herein except as the context otherwise requires. Each of the Notes and the Guaranty are modified and amended to refer to the Original Agreement as modified by this Amendment No. 1, as it may be further modified from time to time in the future. Such documents otherwise shall remain unchanged and in full force and effect. 8. ENTIRE AGREEMENT. The Loan Agreement, as hereby amended, and the instruments and certificates referred to in, or delivered in connection with, the Loan Agreement, including this Amendment No. 1, constitute the entire agreement of the parties with respect to the subject matter hereof, and supersede all other, prior or contemporaneous agreements or understandings. 9. COUNTERPARTS. This Amendment No. 1 may be executed in one or more counterparts, each of which shall be deemed an original agreement, but all of which together shall constitute one and the same instrument. This Amendment shall be deemed executed and delivered when telecopied signature pages have been exchanged. IN WITNESS WHEREOF, the Borrower, the Agent and the Banks have caused this Amendment No. 1 to the Loan Agreement to be duly executed by their duly authorized officers as of the 21st day of October, 1994. ATTEST: VILLAGE SUPER MARKET, INC. ________________________ By:___________________________________ Robert Sumas Perry Sumas, President Executive Vice President BANKS: NEW JERSEY NATIONAL BANK By:____________________________________ Stephen F. Rooney, Assistant Vice President CHEMICAL BANK NEW JERSEY, NATIONAL ASSOCIATION By:____________________________________ John Morgan, Vice President AGENT: NEW JERSEY NATIONAL BANK By:_____________________________________ Stephen F. Rooney, Assistant Vice President The undersigned hereby consents to this Amendment No. 1 and agrees that its Guaranty of Borrower's Obligations to the Banks pursuant to the Continuing Guaranty Agreement dated March 29, 1994 shall remain in full force and effect. ATTEST: VILLAGE LIQUOR SHOP, INC. __________________________ By:__________________________________ Robert Sumas, Secretary Perry Sumas, President -----END PRIVACY-ENHANCED MESSAGE-----