10-K 1 village.txt VILLAGE SUPER MARKET, INC. 10-K FOR JULY 28, 2001 SECURITIES & EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-K (Mark One) [x] Annual Report Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 (Fee Required). For the fiscal year ended: July 28, 2001. [ ] 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 incorporation (I. R. S. Employer or organization) Identification No.) 733 MOUNTAIN AVENUE, SPRINGFIELD, NEW JERSEY 07081 (Address of principal executive offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (973)467-2200 Securities registered pursuant to Section 12(b) of the Act: TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED None None Securities registered pursuant to Section 12(g) of the Act: CLASS A COMMON STOCK, NO PAR VALUE (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),and (2) has been subject to such filing requirements for the past 90 days. Yes X No . Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [x] The aggregate market value of the Class A common stock of Village Super Market, Inc. held by non-affiliates was approximately $5,416,000 and the aggregate market value of the Class B common stock held by non-affiliates was approximately $17,934,000 (based upon the closing price of the Class A shares on the Over the Counter Market on October 1, 2001). There are no other classes of voting stock outstanding. Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of latest practicable date.
Outstanding at Class October 22, 2001 Class A common stock, no par value 1,436,800 Shares Class B common stock, no par value 1,594,076 Shares
DOCUMENTS INCORPORATED BY REFERENCE Information contained in the 2001 Annual Report to Shareholders and the 2001 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 7, 2001 are incorporated by reference into this Form 10-K at Part II, Items 5, 6, 7 and 8 and Part III. PART I ITEM I. BUSINESS FORWARD-LOOKING STATEMENTS All statements, other than statements of historical fact, included in this Form 10-K are or may be considered forward- looking statements within the meaning of federal securities law. The Company cautions the reader that there is no assurance that actual results or business conditions will not differ materially from future results, whether expressed, suggested or implied by such forward-looking statements. Such potential risks and uncertainties include, without limitation, local business conditions, competitive pressures from the Company's operating environment, the ability of the Company to maintain and improve its sales and margins, the ability to attract and retain associates, the availability of new store locations, availability of capital, the liquidity of the Company on a cash flow basis, the success of operating initiatives, results of ongoing litigation and other risk factors detailed herein and in other filings of the Company. GENERAL Village Super Market, Inc. operates a chain of 23 (including the recently opened Garwood store) ShopRite supermarkets, 16 of which are located in northern New Jersey, one of which is in northeastern Pennsylvania and six of which are in the southern shore area of New Jersey. The Company is a member of Wakefern Food Corporation ("Wakefern"), the nation's largest retailer owned food cooperative and owner of the ShopRite name. This relationship provides the Company many of the economies of scale in purchasing, distribution, advanced retail technology and advertising associated with chains of greater size and geographic reach. The Company believes that the regional nature of its business and the continuity of its management under the leadership of its founding family have permitted the Company to operate with greater flexibility and responsiveness to the demographic characteristics of the communities served by its stores. The Company seeks to generate high sales volume by offering a wide variety of high quality products at consistently low prices. The Company attempts to efficiently utilize its selling space, gives continuing attention to the decor and format of its stores and tailors each store's product mix to the preferences of the local community. The Company concentrates on the development of superstores, which average 59,000 total square feet, compared with an average of 30,000 total square feet for conventional supermarkets. Several of the Company's recent remodels have expanded superstores to 65,000 square feet. These larger store sizes enable the Company to feature expanded higher margin specialty service departments such as home meal replacement, an on-site bakery, an expanded delicatessen including prepared foods, and a fresh seafood section. Superstores also offer an expanded selection of non-food items such as cut flowers, health and beauty aids, greeting cards, videocassette rentals, small appliances and in most cases, a pharmacy. Two superstores also include a warehouse section featuring products in giant sizes. Recently remodeled and new superstores emphasize a Power Alley, which features high margin convenience offerings such as salad bars, bakery and home meal replacement in an area within the store that provides quick customer entry and exit for those customers shopping for today's lunch or dinner. The following table shows the percentage of the Company's sales allocable to various product categories during each of the periods indicated as well as the number of the Company's superstores and percentage of selling square feet allocable to these stores during each of these periods:
Product Categories Fiscal Year Ended In July 1999 2000 2001 Groceries 41.2% 41.1% 40.7% Dairy and Frozen 16.1 16.0 15.9 Meats 9.6 9.7 9.5 Non-Foods 10.8 10.4 10.3 Produce 10.0 10.0 10.3 Deli and prepared 4.6 4.5 4.6 Seafood 2.0 2.0 2.1 Pharmacy 4.0 4.5 4.8 Bakery 1.6 1.6 1.6 Other .1 .2 .2 ----- ----- ----- 100.0% 100.0% 100.0% Number of superstores 20 20 20 Selling square feet represented by superstores 92% 92% 94%
A variety of factors affect the profitability of each of the Company's stores including local competitors, size, access and parking, lease terms, management supervision, and the strength of the ShopRite trademark in the local community. The Company continually evaluates individual stores to decide whether they should be closed. Accordingly, the Orange, Maplewood, Kingston, Morristown, Easton, Florham Park and South Orange stores have been closed since December 1991. The Company operates one liquor store. 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. In fiscal 2001, the Company opened a 67,000 sq. ft. store in West Orange to replace its older, smaller store. In fiscal 2000, the Company purchased land in Garwood, N.J. and substantially remodeled the interior of the Vineland store. In fiscal 1999, the Company completed the 22,000 square foot expansion and remodel of the Livingston store. In addition, the Company acquired a leased 67,000 square foot store in Vineland, New Jersey in May 1999 from Wakefern. The Company has budgeted $20,000,000 for capital expenditures in fiscal 2002. The major planned expenditures are the completion of construction and equipment for a new superstore in Garwood and construction and equipment of a new superstore in Hammonton, N.J. In the last five years, the Company has completed four remodels, two new stores and one store acquisition. The Company's goal has been to open an average of one new superstore and conduct a major remodel of one store each year. However, because of delays associated with increased governmental regulations and the general difficulty in developing retail properties in the Company's primary trading area the Company has, at times, 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 third largest member of Wakefern (owning 14.2% of Wakefern's outstanding stock) and one of the Company's principal shareholders was a founder of Wakefern. Wakefern, which was organized in 1946, is the nation's largest retailer-owned food cooperative. There are presently 41 individual member companies and 203 supermarkets including 21 operated by Wakefern, which comprise the Wakefern cooperative. Only Wakefern and member companies are entitled to use the ShopRite name and trademark, and participate in ShopRite advertising and promotional programs. The principal benefits to the Company from its relationship with Wakefern are the use of the ShopRite name and trademark, volume purchasing, ShopRite private label products, distribution and warehousing economies of scale, ShopRite advertising and promotional programs including the ShopRite Price Plus card and a co-branded credit card and the development of shared, advanced retail technology. The Company believes that the ShopRite name is widely recognized by its customers and is a factor in those customers' decisions about where to shop. In addition, Wakefern can purchase large quantities and varieties of products at favorable prices which it can then pass onto its members. These benefits are important to the Company's success. ShopRite private label products accounted for approximately 18% of sales in fiscal 2001. Wakefern distributes as a "patronage dividend" to each of its stockholders a share of earnings of Wakefern in proportion to the dollar volume of business done by the stockholder with Wakefern during each fiscal year. While Wakefern has a substantial professional staff, it operates as a member owned cooperative. Executives of most members make contributions of time to the business of Wakefern. Senior executives of the Company spend a significant amount of their time working on various Wakefern committees which oversee and direct Wakefern purchases and other programs. Most of the Company's advertising is developed and placed by Wakefern's professional advertising staff. Wakefern is responsible for all television, radio and major newspaper advertisements. Wakefern bills its members by various formulas which distribute advertising costs in accordance with the estimated proportional benefits to each member from such advertising. The Company also places Wakefern developed materials with local newspapers. In addition, Wakefern provides the Company with other services including insurance, equipment purchasing and retail technology support. Wakefern operates warehouses and distribution facilities in Elizabeth, New Jersey; Wallkill, New York; and South Brunswick, New Jersey. The Company and all other members of Wakefern are parties to the Wakefern Stockholder's Agreement which provides for certain commitments by, and restrictions on all shareholders of Wakefern. This agreement extends 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. Each member is obligated to purchase from Wakefern a minimum of 85% of its requirements for products offered by Wakefern. If this purchase obligation is not met, the member is required to pay Wakefern's profit contribution shortfall attributable to this failure. This agreement also requires that in the event of unapproved changes in control of the Company or a sale of the Company or of individual Company stores, except to a qualified successor, the Company in such cases must pay Wakefern an amount equal to the annual profit contribution shortfall attributable to the sale of store or change in control. No payments are required if the volume lost by a shareholder as a result of the sale of a store is replaced by such shareholder by increased volume in existing or in new stores. 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 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. On November 22, 2000, Big V Supermarkets, Inc., the largest member of the Wakefern Food Cooperative, filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code. In addition, Big V announced its intention to depart from the Wakefern Cooperative. Wakefern has publicly stated that it will take all appropriate actions to enforce its rights under the Wakefern Stockholder's Agreement. A recent decision by the U.S. Bankruptcy Court has upheld that Big V would be required to pay substantial withdrawal fees to Wakefern to make up for the loss of volume to the cooperative in the event Big V departs from the Wakefern Cooperative. These matters are subject to further legal proceedings. At this time, the ultimate impact, if any, on Wakefern and the Company from these proceedings cannot be ascertained, although any significant loss of volume from a termination of the Wakefern supply agreement by Big V without payment of the aforementioned withdrawal fees, could result in increased costs to the Company for product purchases and services. Wakefern does not prescribe geographical franchise areas to its members. The specific locations at which the Company, other members of Wakefern or Wakefern itself may open new units under the ShopRite names are, however, subject to the approval of Wakefern's Site Development Committee. This committee is composed of persons who are not employees or members of Wakefern and from whose decision to deny a site application may be appealed to the Wakefern Board of Directors. Wakefern assists its members in their site selection by providing appropriate demographic data, volume projections and projections of the impact of the proposed market on existing member supermarkets in the area. Each member's Wakefern stock (including the Company's) is pledged to Wakefern to secure all of that member's obligations to Wakefern. Moreover, every owner of 5% or more of the voting stock of a member (including five members of the Sumas family) must personally guarantee prompt payment of all amounts due Wakefern from that member. Wakefern does not own any securities of the Company or its subsidiaries. Each of Wakefern's members is required to make capital contributions to Wakefern based on the number of stores operated by that member and the purchases generated by those stores. As additional stores are opened or acquired by a member, additional capital must be contributed by it to Wakefern. On occasion, as its business needs have required, Wakefern has increased the maximum per-store capital contributions (currently $550,000) required of its members. Wakefern has in the past permitted these increases in required capital to be paid in installments over a period of time. As a result, the Company is required to invest $1,491,000 over the next six years. TECHNOLOGY The Company considers automation and computerization important to its operations and competitive position. All stores have IBM 4690 software for the scanning check-out systems. These systems improve pricing accuracy, enhance productivity and reduce checkout time for customers. The hardware for these point of sale systems was replaced in fiscal 2000. The Company utilizes IBM RS/6000 computers and satellite communications in each store to, among other things, offer customers debit and credit card payment options. The Company's commitment to advanced scanning systems has enabled it to participate in Price Plus, ShopRite's preferred customer program. Customers receive electronic discounts by presenting a scannable Price Plus card. This technology has also enabled the Company to focus on target marketing initiatives. The Company utilizes a computer generated ordering system, which is designed to reduce inventory levels and out of stock conditions, enhance shelf space utilization, and reduce labor costs. The Company utilizes a direct store delivery system, consisting of personal computers and hand held scanners, for most items not purchased through Wakefern in order to provide equivalent cost and retail price control over these products. In addition, certain in-store department records are computerized, including the records of all pharmacy departments. In all stores, meat, seafood and delicatessen prices are maintained on computer for automatic weighing and pricing. Furthermore, all stores have computerized time and attendance systems and most also have computerized energy management systems. The Company seeks to design its stores to use energy efficiently, including recycling waste heat generated by refrigeration equipment for heating and other purposes. The Company has installed computer based training systems in all stores. In fiscal 2002, a frame relay communications network will be installed to replace the current satellite communications network. This new network will provide improved reliability and capacity in handling consumer based transactions and interactive retail applications. Wakefern and the Company have responded to our customers increased use of the internet by creating shoprite.com to provide weekly advertising and other shopping information. In addition, an on-line shopping and pick-up service is being tested by Wakefern at this time. COMPETITION The supermarket business is highly competitive. Industry profit margins are narrow, consequently earnings are dependent on high sales volume and operating efficiency. The Company is in direct competition with national, regional and local chains as well as independent supermarkets, warehouse clubs, super centers, drug stores, discount department stores, fast food chains and convenience stores. The Company competes by using low pricing, courteous, quick, service to the customer, and a broad range of consistently available quality products including the ShopRite private label. The ShopRite Price Plus card and the co-branded ShopRite credit card also create significant customer loyalty. The Company believes its regional focus and the continuity of its management by the Sumas family permit it to operate with greater flexibility in tailoring the products offered in each store to the demographics of the communities they serve as compared to national and larger regional chains. The Company's principal competitors are Pathmark, A&P, Stop & Shop, Foodtown, Acme and King's. Many of the Company's competitors have financial resources substantially greater than those of the Company. In the last year, several competitive developments occurred in our marketplace. One of our principal competitors, Pathmark, completed a restructuring which substantially reduced its previously high debt levels. In addition, another competitor, Stop & Shop changed the name and format of all of its stores. The future impact of these recent developments on our already highly competitive marketplace is unknown at this time. LABOR As of October 1, 2001, the Company employed approximately 3,850 persons of whom approximately 66% worked part-time. Approximately 89% of the Company's employees are covered by collective bargaining agreements. The Company was affected by a labor dispute with its largest union in fiscal 1993. Contracts with the Company's six unions expire between November 2001 and April 2005. 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 2002 and 2003. ITEM 2. PROPERTIES The Company owns the sites of six (including the recently opened Garwood store) of its supermarkets (containing 389,000 square feet of total space), all of which are freestanding stores, except the Egg Harbor store, which is part of a shopping center. The remaining 17 supermarkets (containing 854,000 square feet of total space) are leased, with initial lease terms generally ranging from 20 to 30 years, usually with renewal options. Ten of these leased stores are located in strip shopping centers and the remaining seven are freestanding stores. The lease for the Morris Plains store expires in June 2002. The Company is currently negotiating with the landlord for a new lease for an expanded store. The Company is a sublessee of the Ventnor store location. The sublessor of the property rejected its lease in March 2001 pursuant to the U.S. Bankruptcy Code. The Company is currently negotiating with the property owner to remain in this location under new lease terms. With the exception of the above two situations, none of the Company's store leases expire before 2008. The annual rent, including capitalized leases, for all of the Company's leased facilities for the year ended July 28, 2001 was approximately $8,190,000. The Company is a limited partner in two partnerships, one of which owns a shopping center in which one of the Company's leased supermarkets is located. The Company also is a general partner in a partnership that is a lessor of one of the Company's freestanding supermarkets. ITEM 3. LEGAL PROCEEDINGS No material legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters submitted to shareholders in the fourth quarter. ITEM X. EXECUTIVE OFFICERS OF THE REGISTRANT In addition to the information regarding directors incorporated by reference to the Company's definitive Proxy Statement in Part III, Item 10, the following is provided with respect to executive officers who are not directors: NAME AGE POSITION WITH THE COMPANY Carol Lawton 58 Vice President and Assistant Secretary since 1983; responsible for administration of headquarters staff. Kevin Begley 43 Chief Financial Officer since 1987. Mr. Begley is a Certified Public Accountant. ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS The information required by this Item is incorporated by reference from Information appearing on Page 20 in the Company's Annual Report to Shareholders for the fiscal year ended July 28, 2001. 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 28, 2001. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this Item is incorporated by reference from Information appearing on Page 4 through 6 in the Company's Annual Report to Shareholders for the fiscal year ended July 28, 2001. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this Item is incorporated by reference from Information appearing on Page 3 and Page 7 to 20 in the Company's Annual Report to Shareholders for the fiscal year ended July 28, 2001. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this Item 10 is incorporated by reference from the Company's definitive Proxy Statement to be filed on or before November 9, 2001, in connection with its Annual Meeting scheduled to be held on December 7, 2001. 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 9, 2001, in connection with its Annual Meeting scheduled to be held on December 7, 2001. 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 9, 2001, in connection with its annual meeting scheduled to be held on December 7, 2001. 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 9, 2001, in connection with its annual meeting scheduled to be held on December 7, 2001. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K (a) 1. Financial Statements: Consolidated Balance Sheets - July 28, 2001 and July 29, 2000; Consolidated Statements of Operations - years ended July 28, 2001, July 29, 2000 and July 31, 1999; Consolidated Statements of Shareholders' Equity - years ended July 28, 2001; July 29, 2000 and July 31, 1999; Consolidated Statements of Cash Flows - years ended July 28, 2001; July 29, 2000 and July 31, 1999. Notes to consolidated financial statements. The consolidated 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 28, 2001. 2. Financial Statement Schedules: All schedules are omitted because they are not applicable, or not required, or because the required information is included in the consolidated financial statements or notes thereto. 3. Exhibits EXHIBIT INDEX Exhibit No. 3 Certificate of Incorporation and By-Laws* Exhibit No. 4 Instruments defining the rights of security holders; 4.4 Loan Agreement dated May 30, 1997* 4.5 Note Purchase Agreement dated September 16, 1999* 4.6 Loan Agreement dated September 16, 1999* Exhibit No. 10 Material Contracts: 10.1 Wakefern By-Laws* 10.2 Stockholders Agreement dated February 20, 1992 between the Company and Wakefern Food Corp.* 10.3 Voting Agreement dated March 4, 1987* 10.5 1997 Incentive and Non-Statutory Stock Option Plan* Exhibit No. 13 Annual Report to Security Holders Exhibit No. 21 Subsidiaries of Registrant Exhibit No. 23 Consent of KPMG LLP Exhibit No. 99 Press Release dated October 2, 2001 * The following exhibits are incorporated by reference from the following previous filings: Form 10-K for 1999: 4.5, 4.6 Form 10-K for 1997: 4.4, 10.5 Form 10-K for 1993: 3, 10.1, 10.2 and 10.3 (b) No reports on Form 8-K were filed during the fourth quarter of fiscal 2001. The Company Village Super Market, Inc. operates a chain of 23 ShopRite supermarkets, 16 of which are located in northern New Jersey, 1 in northeastern Pennsylvania and 6 in the southern shore area of New Jersey. Village is a member of Wakefern Food Corporation, the largest retailer-owned food cooperative in the United States. Village's business was founded in 1937 by Nicholas and Perry Sumas and has continued to be principally owned and operated under the active management of the Sumas family. Contents Letter to Shareholders 2 Selected Financial Data 3 Unaudited Quarterly Financial Data 3 Management's Discussion and Analysis of Financial Condition and Results of Operations 4 Consolidated Balance Sheets 7 Consolidated Statements of Operations 8 Consolidated Statements of Shareholders' Equity 9 Consolidated Statements of Cash Flows 10 Notes to Consolidated Financial Statements 11 Independent Auditors' Report 20 Stock Price and Dividend Information 20 Corporate Directory Inside back cover Dear Fellow Shareholders Village continued to perform exceptionally well this year. Net income, excluding a nonrecurring charge, exceeded $10 million for the first time. Sales reached a record $800 million. Our customers responded enthusiastically to our new store in West Orange, and we recently opened a store in Garwood. Net income, excluding a nonrecurring charge, increased 21% to $10,163,000, or $3.31 per share in fiscal 2001. Sales increased 4.5% to $820,627,000. The substantial improvement in net income was due to a comparable store sales increase of 3.6%, increased gross profits and a lower effective tax rate, partially offset by increased operating costs. Capital expenditures were $15,070,000 in fiscal 2001. In August 2000, we opened a 67,000 square feet store in West Orange. The customer response and the performance of this replacement store have exceeded our expectations. On September 26, 2001, we opened a 59,000 square feet store in Garwood. This is the fifth store to include our full Power Alley. This format features a wide assortment of perishable products, including an expanded fresh bakeshop, sushi bar, salad bar and Bistro Street; our chef prepared home meal replacement section. Our business demands a continuing focus on customers. In response to our customers changing needs, the "Natural Choice at ShopRite" program was introduced this year to communicate and merchandise our expanded selection of natural and organic foods. We also have increased our emphasis on international foods. For example, the new Garwood store includes a "Kosher Village". We continue to invest in advanced retail technology. We recently installed several self-checkout systems in our Chester and Garwood stores. Based on the enthusiastic customer response, we plan to make self-checkout available in most stores in the future. During fiscal 2002, with Wakefern's assistance, we will install a frame relay communications network in all stores. This network will provide more reliable, higher speed communications for customer transactions, as well as provide a vehicle for enhanced retail applications on a Wakefern intranet in the near future. Over the last five years, our net income has grown on average 37% a year. This success is a direct result of our management team and associates commitment to executing our priorities. These priorities remain offering high quality products at consistently low prices, providing outstanding service, creating unique marketing initiatives, and expanding and remodeling our store base. Thank you for your support as fellow shareholders and customers. James Sumas, Perry Sumas, Chairman of the Board President
Selected Financial Data (Dollars in thousands except per share and square feet data) July 28, July 29, July 31, July 25, July 26, 2001 2000 1999 1998 1997 For year Sales (1) $820,627 $784,995 $750,680 $693,667 $679,944 Net income 9,443 8,426 4,722 4,007 2,074 Net income per share - basic 3.13 2.81 1.59 1.36 .71 Net income per share - diluted 3.08 2.76 1.55 1.34 .71 Cash dividends per share Class A - - - - - Class B - - - - - At year end Total assets 183,346 175,987 149,555 138,508 132,764 Long-term debt 43,363 43,998 27,204 25,700 24,027 Working capital (deficit) 17,087 10,690 (7,197) (9,682) (12,607) Shareholders' equity 84,770 75,152 66,477 61,568 57,081 Book value per share 27.97 24.94 22.24 20.73 19.62 Other data Same store sales increase 3.6% 2.9% 6.0% 2.4% 1.0% Total square feet 1,184,000 1,182,000 1,182,000 1,093,000 1,093,000 Average total sq. ft. per store 54,000 51,000 51,000 50,000 50,000 Selling square feet 935,000 934,000 934,000 866,000 866,000 Sales per average square foot of selling space 874 840 846 801 792 Number of stores 22 23 23 22 22 Sales per average number of stores 37,156 34,080 33,722 31,530 30,767 Capital expenditures 15,070 13,312 7,084 9,956 8,593
Unaudited Quarterly Financial Data (Dollars in thousands except per share amounts) First Second Third Fourth Fiscal Quarter Quarter Quarter Quarter Year 2001 Sales $198,033 $212,920 $199,008 $210,666 $820,627 Gross profit 47,919 50,934 48,952 53,168 200,973 Net income 2,220 2,582 1,085 3,556 9,443 Net income per share - diluted $.73 $.84 $.35 $1.15 $3.08 2000 Sales $191,292 $204,982 $188,876 $199,845 $784,995 Gross profit 47,090 49,320 45,164 49,550 191,124 Net income 2,030 2,529 1,079 2,788 8,426 Net income per share - diluted $.67 $.83 $.35 $.91 $2.76
(1) As a result of adopting Emerging Issues Task Force Issue No. 00-14, "Accounting For Certain Sales Incentives," the Company reclassified prior period coupon expense from marketing expenses to sales. These reclassifications had no effect on previously reported operating profit or net income. For further information see note 1 to the consolidated financial statements. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS The following table sets forth the major components of the Consolidated Statements of Operations of the Company as a percentage of sales:
July 28, July 29, July 31, 2001 2000 1999 Sales 100.00% 100.00% 100.00% Cost of sales 75.51 75.65 76.16 ----- ----- ----- Gross profit 24.49 24.35 23.84 Operating and administrative expense 21.26 21.18 20.99 Depreciation and amortization .96 1.05 1.02 Non-cash impairment and special charges .14 - .35 ---- ---- ---- Operating income 2.13 2.12 1.48 Interest expense (net) .33 .42 .41 Gain (loss) on disposal of assets (.01) .06 - ---- ---- ---- Income before income taxes 1.79 1.76 1.07 Income taxes .64 .69 .44 ---- ---- ---- Net income 1.15% 1.07% .63% ==== ==== =====
Sales were $820,627,000 in fiscal 2001, an increase of $35,632,000, or 4.5% from the prior year. On August 10, 2000, the Company opened a 67,000 sq. ft. superstore to replace its smaller, older store in West Orange. Also, the Company closed the under facilitated South Orange store on October 28, 2000. Excluding these two stores, comparable store sales increased 3.6% in fiscal 2001. Sales were $784,995,000 in fiscal 2000, an increase of $34,315,000, or 4.6% from the prior year. Fiscal 2000 sales were $28,376,000 higher due to the acquisition of the Vineland store during the fourth quarter of fiscal 1999. Same store sales increased 2.9% in fiscal 2000. Partially offsetting these increases was a reduction in sales of approximately $14,000,000 as fiscal 2000 contained 52 weeks compared to 53 weeks in fiscal 1999. Gross profit as a percentage of sales increased in fiscal 2001 due to improved sales in higher margin departments and a reduction in promotional coupons, partially offset by increased LIFO charges. Gross profit as a percentage of sales increased in fiscal 2000 in most selling departments. In addition, gross profit improved in fiscal 2000 due to rebates received for the acquired Vineland store. Operating and administrative expense increased as a percentage of sales in fiscal 2001 due to increased occupancy, fringe benefit and credit card processing costs, partially offset by reduced advertising costs. Operating and administrative expense increased as a percentage of sales in fiscal 2000 due to increased credit card processing costs, professional fees and a charge to account for the anticipated disposal of the South Orange store. Depreciation and amortization declined in fiscal 2001 (and increased in fiscal 2000) primarily due to fiscal 2000 including accelerated depreciation of the old West Orange store, which was replaced in August 2000. Fiscal 2001 results include a non-cash impairment charge of $1,122,000 to write off the book value of a favorable sublease on the Ventnor store. The sublessor of the property rejected its lease in March 2001 pursuant to the U.S. Bankruptcy Code. The Company is currently negotiating with the property owner to remain in this location under new lease terms. The Company continues to operate the store during these negotiations. Should the Company be unsuccessful in negotiating a new lease, the remaining book value of the assets of the Ventnor store of $641,000 may be written off. Interest expense decreased in fiscal 2001 primarily due to interest costs capitalized in the amount of $389,000 related to the construction of a new superstore in Garwood. Interest expense increased in fiscal 2000 due to higher debt levels outstanding, partially offset by increased interest income earned on higher cash balances. Fiscal 2000 results include a gain on the sale of real estate of a previously closed store in Easton, PA in the amount of $492,000. Fiscal 1999 results include a special charge in the amount of $2,600,000 related to litigation in connection with a contract to purchase property for a new superstore. (See note 10). The Company's effective income tax rate was 35.9%, 39.0% and 41.2% in fiscal 2001, 2000 and 1999, respectively. The effective income tax rate declined in fiscal 2001 and fiscal 2000 due to tax planning initiatives begun in the second half of fiscal 2000. Due to recent tax law changes enacted in New Jersey, the Company expects its effective income tax rate to be approximately 38.3% in fiscal 2002. LIQUIDITY AND CAPITAL RESOURCES Current assets exceeded current liabilities by $17,087,000 at July 28, 2001 compared to $10,690,000 at July 29, 2000 and compared to current liabilities exceeding current assets by $7,197,000 at July 31, 1999. Working capital ratios at the same dates were 1.33, 1.20, and .87 to one, respectively. The Company's working capital needs are reduced since inventory is generally sold by the time payment to Wakefern and other suppliers are due. During fiscal 2001, operating cash flow of $19,653,000 was used to fund capital expenditures of $15,070,000 and to increase cash on hand by $5,435,000. The major capital expenditures were equipment and leasehold improvements for the replacement store in West Orange, remodel costs for the Vineland store and site work and construction costs for a new store in Garwood, New Jersey, which opened on September 26, 2001. During fiscal 2000, operating cash flow of $13,634,000 and net borrowings of $14,506,000 were used to fund capital expenditures of $13,312,000 and to increase cash balances by $15,950,000. The principal capital expenditure projects were the purchase of land in Garwood, the remodel of the Vineland store and a portion of the cost of the replacement store in West Orange. On September 16, 1999, the Company completed the sale of $30,000,000 of 8.12% unsecured Senior Notes. At the same time, the Company entered into a $15,000,000 unsecured revolving credit agreement. These two debt agreements replaced the $6,667,000 term loan and a $24,000,000 revolving credit facility, both of which were secured by substantially all of the Company's assets. The Company has budgeted approximately $20 million for capital expenditures in fiscal 2002. Planned expenditures include the completion of construction and equipment for a new superstore in Garwood (opened September 26, 2001), the construction and equipment for a new superstore in Hammonton, New Jersey and the start of two major remodels. The Company's primary sources of liquidity in fiscal 2002 are expected to be cash on hand at July 28, 2001, operating cash flow and equipment financing. Adoption of New Accounting Standard In fiscal 2001, the Company adopted the provisions of the Financial Accounting Standards Boards (FASB) Emerging Issues Task Force Issue No. 00-14, "Accounting For Certain Sales Incentives." This pronouncement requires the value of certain sales incentives that result in a reduction of the price paid by the customer, such as discounts, coupons, rebates and free products, be netted against revenue and not classified as a marketing expense. Accordingly, the Company has classified coupon expense as a reduction of sales. Previously, the Company recorded coupons as marketing expenses. Prior year amounts have been reclassified to conform to the current year presentation. This reclassification had no effect on the Company's operating income or net income. The amount of such sales incentives included as a reduction in sales were $18,457,000, $18,365,000 and $17,459,000 in fiscal 2001, 2000 and 1999, respectively. Impact of Recently Issued Accounting Standards In July 2001, the FASB issued Statement No. 141, "Business Combinations", and Statement No. 142, "Goodwill and Other Intangible Assets". Statement 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Statement 141 also specifies criteria that intangible assets acquired in a purchase method business combination must meet to be recognized and reported apart from goodwill. Statement 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually. Statement 142 also requires that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment. The Company is required to adopt the provisions of Statement 141 immediately and to adopt Statement 142 effective the first day of fiscal 2003. Goodwill and intangible assets acquired in business combinations completed before July 1, 2001 will continue to be amortized prior to the adoption of Statement 142. The Company will early adopt Statement 142 effective July 29, 2001 Statement 141 requires that, upon adoption of Statement 142, the Company evaluate existing intangible assets and goodwill that were acquired in a purchase business combination effective prior to June 30, 2001, and to make any necessary reclassifications in order to conform with the new criteria in Statement 141. Upon adoption of Statement 142, the Company will be required to reassess the useful lives and residual values of all intangible assets acquired in purchase business combinations, and make any necessary amortization period adjustments by the end of the first interim period after adoption. In connection with the transitional goodwill impairment evaluation, Statement 142 requires the Company to perform, within six months, an assessment of whether there is an indication that goodwill is impaired as of the date of adoption. If such indication exists, the Company must perform the second step of the transitional impairment test by comparing the implied fair value of goodwill to its carrying amount, both of which would be measured as of the date of adoption. This second step is required to be completed as soon as possible, but no later than the end of the year of adoption. Any transitional impairment loss will be recognized as the cumulative effect of a change in accounting principle in the Company's consolidated statement of operations. As of the date of adoption, the Company has unamortized goodwill in the amount of $10,605,000 and unamortized identifiable intangible assets in the amount of $200,000, both of which will be subject to the transition provisions of Statements 141 and 142. Amortization expense related to goodwill was $341,000 for the year ended July 28, 2001. Because of the extensive effort needed to comply with adopting Statements 141 and 142, it is not practicable to reasonably estimate the impact of adopting these Statements on the Company's consolidated financial statements at the date of this report, including whether any transitional impairment losses will be required to be recognized as the cumulative effect of a change in accounting principle. Other Matters On November 22, 2000, Big V Supermarkets, Inc., the largest member of the Wakefern Food Cooperative, filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code. In addition, Big V announced its intention to depart from the Wakefern Cooperative. Wakefern has publicly stated that it will take all appropriate actions to enforce its rights under the Wakefern Stockholder's Agreement. The Company's Form 10-K includes a comprehensive description of the Company's relationship with Wakefern and the rights and obligations of the Company and other members under the Wakefern Stockholder's Agreement. A recent decision by the U.S. Bankruptcy Court has upheld that Big V would be required to pay substantial withdrawal fees to Wakefern to make up for the loss of volume to the cooperative in the event Big V departs from the Wakefern Cooperative. These matters are subject to further legal proceedings. At this time, the ultimate impact, if any, on Wakefern and the Company from these proceedings cannot be ascertained, although any significant loss of volume from a termination of the Wakefern supply agreement by Big V, without payment of the aforementioned withdrawal fees, could result in increased costs to the Company for product purchases and services. Impact of Inflation and Changing Prices Although the Company cannot accurately determine the precise effect of inflation on its operations, it does not believe inflation has had a material effect on sales or results of operations. Forward-Looking Statements This annual report to shareholders contains "forward-looking statements" within the meaning of federal securities law. The Company cautions the reader that there is no assurance that actual results or business conditions will not differ materially from future results, whether expressed, suggested or implied by such forward-looking statements. Such potential risks and uncertainties include, without limitation, local economic conditions, competitive pressures from the Company's operating environment, the ability of the Company to maintain and improve its sales and margins, the ability to attract and retain qualified associates, the availability of new store locations, availability of capital, the liquidity of the Company on a cash flow basis, and other risk factors detailed herein and in other filings of the Company.
Consolidated Balance Sheets July 28, July 29, 2001 2000 ASSETS CURRENT ASSETS Cash and cash equivalents $ 31,155,564 $ 25,721,033 Merchandise inventories 30,468,377 31,032,737 Patronage dividend receivable 2,144,993 2,200,646 Other current assets 5,274,198 5,905,609 ---------- ---------- Total current assets 69,043,132 64,860,025 PROPERTY, EQUIPMENT AND FIXTURES, net 86,508,372 80,628,090 OTHER ASSETS Investment in related party, at cost 13,113,449 13,113,449 Goodwill, net 10,605,021 10,946,301 Other intangibles, net 200,000 1,522,501 Other assets 3,875,842 4,916,228 ---------- ---------- Total other assets 27,794,312 30,498,479 $183,345,816 $175,986,594 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Notes payable $ 1,661,359 $ 1,272,686 Capitalized lease obligations 463,138 432,412 Notes payable to related party 602,414 571,614 Accounts payable to related party 28,364,268 28,633,470 Accounts payable and accrued expenses 20,864,959 23,259,794 ---------- ---------- Total current liabilities 51,956,138 54,169,976 LONG-TERM DEBT Notes payable 36,031,432 34,746,847 Capitalized lease obligations 6,443,071 7,760,163 Notes payable to related party 888,605 1,491,019 ---------- ---------- Total long-term debt 43,363,108 43,998,029 Other Liabilities 3,256,979 2,666,300 COMMITMENTS AND CONTINGENCIES (notes 6 and 9) SHAREHOLDERS' EQUITY Preferred stock, no par value: Authorized 10,000,000 shares, none issued- Class A common stock, no par value: Authorized 10,000,000 shares, issued 1,762,800 shares 18,129,472 18,129,472 Class B common stock, no par value: Authorized 10,000,000 shares, issued and outstanding 1,594,076 shares 1,034,679 1,034,679 Retained earnings 70,115,802 60,739,316 Less treasury stock, Class A, at cost(326,000 shares at July 28, 2001 and 343,400 shares at July 29, 2000) ( 4,510,362) (4,751,178) ---------- ---------- Total shareholders' equity 84,769,591 75,152,289 $183,345,816 $175,986,594 =========== ===========
See notes to consolidated financial statements.
Consolidated Statements of Operations Years Ended July 28, July 29, July 31, 2001 2000 1999 Sales $820,627,178 $784,994,578 $750,679,864 Cost of Sales 619,654,196 593,870,652 571,684,669 ----------- ----------- ----------- Gross Profit 200,972,982 191,123,926 178,995,195 Operating and administrative expense 174,489,515 166,254,778 157,601,122 Depreciation and amortization 7,875,059 8,204,456 7,648,644 Non-Cash Impairment and Special Charges 1,122,000 - 2,600,000 ---------- ---------- ---------- Operating Income 17,486,408 16,664,692 11,145,429 Interest expense, net of interest income of $1,007,511, $797,688 and $55,812 2,725,021 3,333,114 3,116,442 Gain (Loss) on Disposal of Assets (35,973) 492,155 - ---------- ---------- --------- Income Before Income Taxes 14,725,414 13,823,733 8,028,987 Income Taxes 5,282,112 5,397,487 3,307,010 ---------- ---------- ---------- Net Income $ 9,443,302 $ 8,426,246 $ 4,721,977 ========== ========== ========= Net Income Per Share: Basic $3.13 $2.81 $1.59 Diluted $3.08 $2.76 $1.55
See notes to consolidated financial statements.
Consolidated Statements of Shareholders' Equity Years Ended July 28, 2001, July 29, 2000 and July 31, 1999 Class A Class B Common Stock Common Stock Retained Treasury Shares Amount Shares Amount Earnings Stock Balance, July 25, 1998 1,762,800 $18,129,472 1,594,076 $1,034,679 $47,758,531 $(5,354,603) Net Income - - - - 4,721,977 - Exercise of stock options - - - - (71,808) 258,808 ------- ---------- --------- --------- ---------- ---------- Balance, July 31, 1999 1,762,800 18,129,472 1,594,076 1,034,679 52,408,700 (5,095,795) Net Income - - - - 8,426,246 - Exercise of stock options - - - - (95,630) 344,617 -------- ---------- --------- --------- ---------- --------- Balance, July 29, 2000 1,762,800 18,129,472 1,594,076 1,034,679 60,739,316 (4,751,178) Net Income - - - - 9,443,302 - Exercise of stock options - - - - (66,816) 240,816 -------- ---------- --------- --------- --------- -------- Balance, July 28, 2001 1,762,800 $18,129,472 1,594,076 $1,034,679 $70,115,802 $(4,510,362) ========= ========== ========= ========= ========== ==========
See notes to consolidated financial statements.
Consolidated Statements of Cash Flows Years Ended July 28, July 29, July 31, 2001 2000 1999 CASH FLOWS FROM OPERATING ACTIVITIES Net income $9,443,302 $8,426,246 $4,721,977 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 7,875,059 8,204,456 7,648,644 Non-cash impairment charge 1,122,000 - - Deferred taxes 308,664 359,654 (975,857) Provision to value inventories at LIFO 806,993 193,758 593,182 (Gain) loss on disposal of assets 35,973 (492,155) - Changes in assets and liabilities: (Increase) in merchandise inventories (242,633) (1,303,189) (2,667,901) (Increase) decrease in patronage dividend receivable 55,653 (472,570) 240,595 (Increase) decrease in other current assets 631,411 (1,580,630) (276,174) (Increase) in other assets (454,049) (699,157) (1,500) Increase (decrease) in accounts payable to related party (269,202) 1,547,445 (284,317) Increase (decrease) in accounts payable and accrued expenses (39,377) (587,547) 6,198,611 Increase in other liabilities 379,390 37,599 - ---------- ---------- ---------- Net cash provided by operating activities 19,653,184 13,633,910 15,197,260 CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (15,069,721)(13,312,329) (7,084,284) Acquisition of Vineland store - - (4,800,000) Proceeds from disposal of assets - 872,855 - ---------- ---------- ---------- Net cash used in investing activities (15,069,721)(12,439,474)(11,884,284) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of long-term debt 3,000,000 30,000,000 5,931,000 Proceeds from exercise of stock options 174,000 248,987 187,000 Principal payments of long-term debt (2,322,932)(15,493,812) (5,338,405) --------- ---------- --------- Net cash provided by financing Activities 851,068 14,755,175 779,595 NET INCREASE IN CASH AND CASH EQUIVALENTS 5,434,531 15,949,611 4,092,571 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 25,721,033 9,771,422 5,678,851 ---------- ---------- --------- CASH AND CASH EQUIVALENTS, END OF YEAR $31,155,564 $25,721,033 $9,771,422 ========== ========== ========= SUPPLEMENTAL DISCLOSURES OF CASH PAYMENTS MADE FOR: Interest (net of amounts capitalized) $3,748,819 $3,315,784 $3,163,477 Income taxes $5,233,766 $5,248,456 $4,080,631 NONCASH SUPPLEMENTAL DISCLOSURES: Investment in related party - $1,120,000 $1,178,000
See notes to consolidated financial statements. Notes to Consolidated Financial Statements NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of operations Village Super Market, Inc. (the "Company") operates a chain of 22 ShopRite supermarkets in New Jersey and eastern Pennsylvania. The Company is a member of Wakefern Food Corporation ("Wakefern"), the largest retailer-owned food cooperative in the United States. On May 9, 1999, the Company acquired all the assets of an existing supermarket in Vineland, New Jersey from Wakefern for $3,500,000 plus the cost of inventory. The transaction was financed in part by a $3,500,000 loan. The acquisition has been accounted for using the purchase method and, accordingly, the assets acquired, liabilities assumed, and results of operations are included in the consolidated financial statements from the date of acquisition. The purchase price was allocated to the underlying assets and liabilities based on their fair values, with the excess recorded as goodwill. Principles of consolidation The consolidated financial statements include the accounts of Village Super Market, Inc. and its subsidiaries, which are wholly owned. Inter-company balances and transactions have been eliminated. Fiscal year The Company and its subsidiaries utilize a 52-53 week fiscal year ending on the last Saturday in the month of July. Fiscal 1999 contains 53 weeks. Fiscal 2001 and 2000 contain 52 weeks. Reclassifications Certain amounts have been reclassified in the fiscal 2000 and 1999 consolidated financial statements to conform to the fiscal 2001 presentation. Industry segment The Company consists of one operating segment, the retail sale of food and non-food products. Revenue recognition Merchandise sales are recognized at the point of sale to the customer. Cash and cash equivalents The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. Included in cash at July 28, 2001 and July 29, 2000 are $20,926,000 and $15,291,000, respectively, of demand deposits invested at Wakefern. Merchandise inventories Approximately 65% of merchandise inventories are stated at the lower of LIFO (last-in, first-out) cost or market. If the FIFO (first-in, first-out) method had been used, inventories would have been $9,309,000 and $8,502,000 higher than reported in fiscal 2001 and 2000, respectively. All other inventories are stated at the lower of FIFO cost or market. Property, equipment and fixtures Property, equipment and fixtures are recorded at cost. Interest cost incurred to finance construction is capitalized as part of such cost. Renewals and betterments are capitalized. Maintenance and repairs are expensed as incurred. Depreciation is provided on a straight-line basis over estimated useful lives of thirty years for buildings, ten years for store fixtures and equipment, and three years for vehicles. Leasehold improvements are amortized over the shorter of the related lease terms or the economic lives of the related assets. When assets are sold or retired, their cost and accumulated depreciation are removed from the accounts, and any gain or loss is reflected in the consolidated financial statements. Store opening and closing costs All store opening costs are expensed as incurred. Provisions are made for losses resulting from store closings at the time a decision to close a store is made. This includes items such as future lease payments, net of expected sublease recovery, and charges to reduce assets to net realizable value. Leases Leases which meet certain criteria are classified as capital leases, and assets and liabilities are recorded at amounts equal to the lesser of the present value of the minimum lease payments or the fair value of the leased properties at the inception of the respective leases. Such assets are amortized on a straight-line basis over the shorter of the related lease terms or the economic lives of the related assets. Amounts representing interest expense relating to the lease obligations are recorded to effect 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 resulting from the acquisition of the Vineland store in fiscal 1999 is being amortized over twenty years. Goodwill arising after October 31, 1970 and before fiscal 1999 is being amortized over forty years. The Company does not amortize goodwill amounting to approximately $2,900,000 acquired prior to October 31, 1970 since, in management's opinion, the value of such intangibles has not diminished. Accumulated amortization of goodwill amounted to $4,306,960 and $3,965,680 at July 28, 2001 and July 29, 2000, respectively. The Company regularly assesses the recoverability of unamortized amounts of goodwill utilizing relevant cash flow and profitability information. The assessment of the recoverability of unamortized amounts will be impacted if estimated future operating cash flows are not achieved. Other intangibles At July 28, 2001, other intangibles consists of trademarks acquired in a business acquisition. In previous fiscal years, other intangibles also included the fair value of a favorable sublease acquired in a business acquisition. The Company recorded a non-cash impairment charge of $1,122,000 in fiscal 2001 to write off the book value of that favorable sublease due to the bankruptcy of the sublessor, and its rejection of the sublease in bankruptcy court. Other intangibles are being amortized over 20 years. Accumulated amortization of other intangibles amounted to $600,000 and $3,552,499 at July 28, 2001 and July 29, 2000, respectively. Advertising Advertising costs are expensed as incurred. Advertising expense was $6,402,000, $7,011,000 and $6,501,000 in fiscal 2001, 2000 and 1999, respectively. Income taxes Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Use of estimates In conformity with generally accepted accounting principles, management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Fair value of financial instruments Cash and cash equivalents, accounts payable and accrued expenses are reflected in the consolidated financial statements at carrying value which approximates fair value because of the short-term maturity of these instruments. The carrying value of the Company's short-and long-term notes payable approximates the fair value based on the current rates available to the Company for similar instruments. As the Company's investments in Wakefern can only be sold to Wakefern at amounts that approximate the Company's cost, it is not practicable to estimate the fair value of such stock. Impairment of long-lived assets The Company reviews long-lived assets for impairment when circumstances indicate the carrying amount of an asset may not be recoverable. An impairment is recognized to the extent the sum of undiscounted estimated future cash flow expected to result from the use of the asset is less than the carrying value. Net income per share The number of common shares outstanding for calculation of net income per share is as follows:
2001 2000 1999 Weighted average shares outstanding - basic 3,017,862 3,001,493 2,975,233 Dilutive effect of employee stock options 50,056 49,905 63,789 --------- --------- --------- Weighted average shares outstanding - diluted 3,067,918 3,051,398 3,039,022 ========= ========= =========
Adoption of New Accounting Standard In fiscal 2001, the Company adopted the provisions of the Financial Accounting Standards Boards (FASB) Emerging Issues Task Force Issue No. 00-14, "Accounting For Certain Sales Incentives." This pronouncement requires the value of certain sales incentives that result in a reduction of the price paid by the customer, such as discounts, coupons, rebates and free products, be netted against revenue and not classified as a marketing expense. Accordingly, the Company has classified coupon expense as a reduction of sales. Previously, the Company recorded coupons as marketing expenses. Prior year amounts have been reclassified to conform to the current year presentation. This reclassification had no effect on the Company's operating income or net income. The amount of such sales incentives included as a reduction in sales were $18,457,000, $18,365,000 and $17,459,000 in fiscal 2001, 2000 and 1999, respectively. NOTE 2 - PROPERTY, EQUIPMENT AND FIXTURES Property, equipment and fixtures are comprised as follows:
July 28, July 29, 2001 2000 Land and buildings $52,798,551 $53,191,318 Store fixtures and equipment 62,162,318 66,087,959 Leasehold improvements 30,828,130 28,809,897 Leased property under capital leases 10,334,892 11,268,667 Construction in progress 5,350,765 1,667,345 Vehicles 1,430,969 1,202,773 ----------- ----------- 162,905,625 162,227,959 Less accumulated depreciation and amortization 76,397,253 81,599,869 ---------- ---------- Property, equipment and fixtures - net $86,508,372 $80,628,090 ========== ==========
Interest cost capitalized amounted to $389,000 in fiscal 2001 (none in fiscal 2000 and 1999). Amortization of leased property under capital leases is included in depreciation and amortization expense. NOTE 3 - RELATED PARTY INFORMATION The Company's ownership interest in its principal supplier, Wakefern, which is operated on a cooperative basis for its stockholder members, is less than 20% of the outstanding shares of Wakefern. The investment is pledged as collateral for any obligations to Wakefern. In addition, this obligation is personally guaranteed by the principal shareholders of the Company. The Company is obligated to purchase 85% of its primary merchandise requirements from Wakefern, until ten years from the date that stockholders representing 75% of Wakefern sales notify Wakefern that those stockholders request that the Wakefern Stockholder Agreement be terminated. The Company also has an investment of less than 20% in Insure-Rite, Ltd., a Wakefern affiliated company, that provides the Company with liability and property insurance coverage. The Company purchases substantially all of it's merchandise from Wakefern. Wakefern distributes as a "patronage dividend" to each member a share of earnings of Wakefern in proportion to the dollar volume of business done by the member with Wakefern during the year. Patronage dividends, which are recorded as a reduction of cost of sales, amounted to $8,551,000, $8,658,000 and $7,419,000 in fiscal 2001, 2000 and 1999, respectively. Wakefern has increased from time to time the required investment in its common stock for each supermarket owned by a member, with the exact amount per store computed in accordance with a formula based on the volume of each store's purchases from Wakefern up to a maximum of $550,000. At July 28, 2001, the Company's indebtedness to Wakefern for the outstanding amount of this stock subscription was $1,491,019. Installment payments are due as follows: 2002 - $602,414; 2003 - $396,760; 2004 - $299,845; 2005 - $91,000; 2006 - $91,000; and thereafter - $10,000. 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 4 - NOTES PAYABLE
July 28, July 29, 2001 2000 Senior notes payable (a) $30,000,000 $30,000,000 Notes payable, interest at 4.39% to 7.90%, payable in monthly installments through April 2008, collateralized by certain equipment 7,692,791 6,019,533 ---------- ---------- 37,692,791 36,019,533 Less current portion 1,661,359 1,272,686 ---------- ---------- $36,031,432 $34,746,847 ========== ==========
Aggregate principal maturities of notes payable as of July 28, 2001 are as follows:
Year ending July: 2002 $1,661,359 2003 1,741,251 2004 5,711,622 2005 5,559,160 2006 4,926,568 Thereafter 18,092,831
(a) On September 16, 1999, the Company issued $30,000,000 of 8.12% unsecured Senior Notes. Interest on these notes is due semi-annually. The principal is due in equal annual installments beginning September 16, 2003. On September 16, 1999, the Company also entered into an unsecured revolving loan agreement in the amount of $15,000,000. This agreement expires September 16, 2003, with a one-year extension available if exercised by both parties. The revolving credit line can be used for any purpose except new store construction. Indebtedness under this agreement bears interest at the prime rate or at the Eurodollar rate, at the Company's option, plus applicable margins based on the Company's fixed charge coverage ratio. At July 28, 2001, the Company was in compliance with all terms and covenants of all debt agreements. These agreements contain restrictive covenants which, among other matters, specify total debt levels, maintenance of net worth, fixed charge coverage ratios, limitation on payment of dividends and limitation of capital expenditures. The revolving loan agreement provides a maximum commitment for letters of credit of $3,000,000 ($1,720,000 outstanding at July 28, 2001) to secure obligations for the Company's self-insured workers' compensation claims and for construction performance guarantees to municipalities. NOTE 5 - INCOME TAXES The components of the provision for income taxes are:
2001 2000 1999 Federal: Current $4,844,006 $4,653,754 $3,267,396 Deferred 241,443 196,583 (721,444) State: Current 129,442 384,079 1,015,471 Deferred 67,221 163,071 (254,413) --------- --------- --------- $5,282,112 $5,397,487 $3,307,010 ========= ========= =========
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets are as follows:
July 28, July 29, 2001 2000 Deferred tax liabilities: Tax over book depreciation $4,439,205 $4,455,098 Patronage dividend receivable 759,106 780,024 Other 591,339 613,862 --------- --------- Total deferred tax liabilities 5,789,650 5,848,984 Deferred tax assets: Amortization of capital leases 1,380,873 1,523,150 Accrual for special charges 830,000 830,000 Other 609,684 835,405 --------- --------- Total deferred tax assets 2,820,557 3,188,555 --------- --------- Net deferred tax liability $2,969,093 $2,660,429 ========= =========
Long-term deferred taxes of $2,839,990 and $2,628,701 are included in other long-term liabilities at July 28, 2001 and July 28, 2000, respectively. Current deferred taxes of $129,103 and $31,728 are included in accrued expenses at July 28, 2001 and July 29, 2000, respectively. A valuation allowance is provided when it is more likely than not that some portion of the deferred tax assets will not be realized. In management's opinion, in view of the Company's previous, current and projected taxable income, such tax assets will more likely than not be fully realized. Accordingly, no valuation allowance was deemed to be required at July 28, 2001 and July 29, 2000. The effective income tax rate differs from the statutory federal income tax rate as follows:
2001 2000 1999 Statutory federal income tax rate 35.0% 35.0% 34.0% Amortization of intangibles .6 .7 1.1 State income taxes, net of federal tax benef .9 2.6 6.3 Other (.6) .7 (.2) ----- ----- ----- Effective income tax rate 35.9% 39.0% 41.2% ===== ===== =====
NOTE 6 - LONG-TERM LEASES Description of leasing arrangements The Company conducts a major part of its operations from leased facilities, with the majority of initial lease terms ranging from 20 to 30 years. All of the Company's leases expire through fiscal 2059. Most of the Company's leases contain renewal options of five years each. These options enable the Company to retain the use of facilities in desirable operating areas. Management expects that in the normal course of business, most leases will be renewed or replaced by other leases. The Company is obligated under all leases to pay for real estate taxes, utilities and liability insurance, and under certain leases to pay additional amounts based on maintenance, insurance and a percentage of sales in excess of stipulated amounts. Future minimum lease payments by year and in the aggregate for all non-cancelable leases with initial terms of one year or more consisted of the following at July 28, 2001:
Capital Operating Leases Leases 2002 $ 1,603,380 $ 4,983,648 2003 1,603,380 4,763,750 2004 1,603,380 4,550,218 2005 1,614,800 4,370,404 2006 1,545,789 4,027,112 Thereafter 5,913,030 62,775,997 ---------- ---------- Minimum lease payments 13,883,759 $85,471,129 Less amount representing interest 6,977,550 ========== ---------- Present value of minimum lease payments 6,906,209 Less current portion 463,138 --------- $6,443,071 =========
The following schedule shows the composition of total rental expense under operating leases for the following periods:
2001 2000 1999 Minimum rentals $5,602,486 $4,554,604 $3,882,620 Contingent rentals 934,970 974,926 865,500 --------- --------- --------- $6,537,456 $5,529,530 $4,748,120 ========= ========= =========
Related party leases The Company currently leases two supermarkets, storage space 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 $1,152,000, $1,243,000 and $1,242,000 for fiscal years 2001, 2000 and 1999, respectively. In addition, two supermarkets are leased from partnerships in which the Company is a partner. The Company leases the Vineland store from Wakefern, the previous owner, under a sublease agreement which provides for annual rent of $650,000. NOTE 7 - COMMON STOCK Class A common stock has one vote per share and is entitled to cash dividends as declared 54% greater than those paid on the Class B common stock. Class B common stock has ten votes per share. Class B common stock is not transferrable except to another holder of Class B common stock or by will or under the laws of intestacy or pursuant to a resolution of the Board of Directors of the Company approving the transfer. Shares of Class B common stock are convertible on a share-for-share basis for Class A common stock. The 1997 Incentive and Non-Statutory Stock Option Plan provides for the granting of options or stock appreciation rights to purchase up to 250,000 shares of the Company's Class A common stock by officers, employees and directors of the Company as designated by the Board of Directors. The Plan requires incentive stock options to be granted at exercise prices equal to the fair market value of the Company's stock at the date of grant (110% if the optionee holds more than 10% of the voting stock of the Company), while non-statutory options may be granted at an exercise price less than market value. All options granted to date were at market value and are exercisable up to 10 years from the date of the grant. The following table summarizes option activity for the following periods:
2001 2000 1999 Shares Weighted Shares Weighted Shares Weighted average average average exercise exercise exercise price price price Outstanding at beginning of year 184,400 $10.14 205,300 $10.05 219,000 $10.00 Granted - - 4,000 13.00 5,000 12.85 Exercised (17,400) 10.00 (24,900) 10.00 (18,700) 10.00 Cancelled - - - - - - ------ ----- ------ ----- ------ ----- Outstanding at end of year 167,000 $10.13 184,400 $10.14 205,300 $10.05 ======= ===== ======= ===== ======= ===== Options exercisable at end of year 167,000 $10.13 180,400 $10.08 200,300 $10.00 ======= ===== ======= ===== ======= =====
At July 28, 2001 and July 29, 2000, the weighted-average remaining contractual life of outstanding options was 6.3 and 7.3 years, respectively, and the exercise prices ranged from $10.00 to $13.00. The Company has adopted the disclosure only provisions of SFAS No. 123, "Accounting for Stock-Based Compensation." In accordance with the provisions of SFAS No. 123, the Company applied APB Opinion 25's intrinsic value method of accounting for stock options. Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company's stock at the date of grant over the amount an employee may pay to acquire the stock. As all stock options have been granted at fair market value at the date of grant, no compensation expense has been recorded in the Company's consolidated financial statements. If the Company had elected to recognize compensation costs based on the fair value of the options granted as prescribed by SFAS No. 123, fiscal 2001, 2000 and 1999 results would be reduced to the following pro forma amounts: net income - $9,443,000, $8,412,000 and $4,604,000; net income per share, basic - $3.13, $2.80 and $1.55; and net income per share, diluted - $3.08, $2.76 and $1.51. The fair value of options granted was estimated at $3.57 using the Black-Scholes Option Pricing Model with the following assumptions used for fiscal 2000 and 1999 grants: risk-free interest rate of 6.0%; expected life of 6 years; expected dividend rate of zero; and expected volatility of 20.9%. NOTE 8 - 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:
2001 2000 1999 Service cost 624,916 $523,532 $610,517 Interest cost on projected benefit obligation 690,064 712,678 614,941 Expected return on plan assets (855,794) (881,218) (804,656) Net amortization and deferral (8,662) (12,052) (14,150) ------- ------- ------- Net periodic pension cost $450,524 $342,940 $406,652 ======= ======= =======
The changes in benefit obligations and the reconciliation of the funded status of the Company's plans to the consolidated balance sheets were as follows:
2001 2000 Change in Benefit Obligation: Benefit obligation at beginning of year $10,960,792 $9,614,137 Service cost 624,916 523,532 Interest cost 690,064 712,678 Benefits paid (425,333) (832,777) Actuarial (gain) loss (1,124,176) 943,222 ---------- ---------- Benefit obligation at end of year $10,726,263 $10,960,792 ========== ========== Change in Plan Assets: Fair value of plan at beginning of year $10,217,541 $10,087,841 Actual return on plan assets (430,372) 416,780 Employer contributions 76,462 545,697 Benefits paid (425,333) (832,777) --------- ---------- Fair value of plan assets at end of year $9,438,298 $10,217,541 ========= ========== Fair value of plan assets (less) than benefit obligation $(1,287,965) $(743,251) Unrecognized net loss 894,886 760,664 --------- ------- Prepaid (Accrued) pension cost $(393,079) $17,413 ======== ====== Change in Prepaid (Accrued) Pension Cost: Prepaid (Accrued) pension cost at beginning of year $17,413 $(125,450) Net periodic pension cost (450,524) (342,940) Additional liability (36,430) (59,894) Contributions 76,462 545,697 ------- ------- Prepaid (Accrued) pension cost at end of year $(393,079) $17,413 ======= ======
Plan assets are invested principally in government securities, common stocks and mutual funds. Assumptions used in determining the net fiscal 2001, 2000 and 1999 periodic pension cost were as follows: Assumed discount rate 7.25% Assumed rate of increase in compensation levels 4% Expected rate of return on plan assets 8.0 to 8.5% The Company also participates in several multiemployer pension plans for which the fiscal 2001, 2000 and 1999 contributions were $1,809,000, $1,737,000 and $1,586,000, respectively. NOTE 9 - COMMITMENTS AND CONTINGENCIES The Company is involved in litigation incidental to the normal course of business. Company management is of the opinion that the ultimate resolution of these legal proceedings should not have a material adverse effect on the consolidated financial position, results of operations or liquidity of the Company. NOTE 10 - SPECIAL CHARGE The Company recorded a charge to earnings of $2,600,000 in the fourth quarter of fiscal 1999 to reflect the impact of a court decision regarding the contract price of a property in Garwood and Westfield, New Jersey. This charge was taken as the Company did not believe the additions to the purchase price of the property as a result of the litigation were recoverable from the development of the superstore on this property. In March 2000, the Company acquired only the property in Garwood for $4,585,000 as a final settlement with the property owner. Construction of a new superstore commenced in October 2000 and was completed in September 2001. 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 28, 2001 and July 29, 2000, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the years in the three-year period ended July 28, 2001. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Village Super Market, Inc. and subsidiaries as of July 28, 2001 and July 29, 2000, and the results of their operations and their cash flows for each of the years in the three-year period ended July 28, 2001, in conformity with accounting principles generally accepted in the United States of America. KPMG LLP Short Hills, New Jersey October 2, 2001 Stock Price and Dividend Information The Class A common stock of Village Super Market, Inc. is traded on the NASDAQ National Market tier of the NASDAQ Stock Market under the symbol "VLGEA." The table below sets forth the high and low last reported sales price for the fiscal year indicated.
Class A Stock High Low 2001 4th Quarter 20.20 14.50 3rd Quarter 14.70 13.50 2nd Quarter 14.37 13.00 1st Quarter 13.00 11.75 2000 4th Quarter 14 12-1/2 3rd Quarter 14-3/4 12-3/4 2nd Quarter 14-1/4 12-7/8 1st Quarter 15-3/4 12-1/8
As of October 1, 2001, there were 493 holders of record of the Company's Class A common stock. No dividends were paid during fiscal 2001 and 2000. Village Super Market, Inc. CORPORATE DIRECTORY OFFICERS AND DIRECTORS PERRY SUMAS Chief Executive Officer and President; Director JAMES SUMAS Chairman of the Board; Chief Operating Officer and Treasurer; Director ROBERT SUMAS Executive Vice President and Secretary; Director WILLIAM SUMAS Executive Vice President; Director JOHN SUMAS Executive Vice President; Director CAROL LAWTON Vice President and Assistant Secretary KEVIN BEGLEY Chief Financial Officer GEORGE J. ANDRESAKES Director JOHN J. McDERMOTT Director NORMAN CRYSTAL Director EXECUTIVE OFFICES 733 Mountain Avenue Springfield, New Jersey 07081 REGISTRAR AND TRANSFER AGENT First City Transfer Company P.O. Box 170 Iselin, New Jersey 08330 AUDITORS KPMG LLP 150 John F. Kennedy Parkway Short Hills, New Jersey 07078 FORM 10-K Copies of the Company's Form 10-K as filed with the Securities and Exchange Commission are available without charge upon written request to: Mr. Robert Sumas, Secretary Village Super Market, Inc. 733 Mountain Avenue Springfield, New Jersey 07081 Exhibit 23 Independent Auditors' Consent The Board of Directors Village Super Market, Inc.: We consent to incorporation by reference in the Registration Statement (No. 2-86320) on Form S-8 of Village Super Market, Inc. of our report dated October 2, 2001, relating to the consolidated balance sheets of Village Super Market, Inc. and subsidiaries as of July 28, 2001 and July 29, 2000 and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the years in the three-year period ended July 28, 2001, which report is incorporated by reference in the July 28, 2001 annual report on Form 10-K of Village Super Market, Inc. KPMG LLP Short Hills, New Jersey October 24, 2001 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 24, 2001 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on dates indicated: Village Super Market, Inc. /s/ Perry Sumas /s/ James Sumas Perry Sumas, Director James Sumas, Director October 24, 2001 October 24, 2001 /s/ Robert Sumas /s/ William Sumas Robert Sumas, Director William Sumas, Director October 24, 2001 October 24, 2001 /s/ John P. Sumas /s/ John J. McDermott John P. Sumas, Director John J. McDermott, Director October 24, 2001 October 24, 2001 /s/ George Andresakes /s/ Norman Crystal George Andresakes, Director Norman Crystal, Director October 24, 2001 October 24, 2001 Exhibit 21 SUBSIDIARIES OF REGISTRANT The Company has two wholly-owned subsidiaries at July 28, 2001. Village Super Market of PA, Inc., which is organized under the laws of Pennsylvania and Village Super Market of NJ, L.P., which is organized under the laws of New Jersey. The financial statements of all subsidiaries are included in the Company's consolidated financial statements. Exhibit 99 VILLAGE SUPER MARKET, INC. REPORTS RECORD RESULTS FOR THE FOURTH QUARTER & YEAR ENDED JULY 28, 2001 Contact: Kevin Begley, C.F.O. (973) 467-2200, Ext. 220 Springfield, New Jersey - October 2, 2001 - Village Super Market, Inc. reported record sales and net income for the fourth quarter and year ended July 28, 2001, Perry Sumas, President announced today. Net income was a record $3,556,000 ($1.15 per diluted share) in the fourth quarter of fiscal 2001, an increase of 28% from the prior year. Sales in the fourth quarter were $210,666,000, an increase of 5.4% from the prior year. The net income improvement in the fourth quarter is attributable to a 4.0% increase in comparable store sales and higher gross profit percentages, partially offset by increased operating expenses. Net income for the fiscal year increased to a record $9,443,000 ($3.08 per diluted share), an increase of 12% from the prior year. Excluding a non-cash impairment charge in the current year, net income increased 21%. Sales for fiscal 2001 were $820,627,000, an increase of 4.5%. Comparable store sales increased 3.6% for the fiscal year. In addition, sales increased due to the opening of a replacement store in West Orange early in the fiscal year. The increase in net income for the fiscal year was primarily attributable to the increased comparable store sales, increased gross profit percentages and a lower effective tax rate, partially offset by increased operating costs. Village Super Market operates a chain of 23 supermarkets (including a store in Garwood, N.J. that opened September 26, 2001) under the ShopRite name in New Jersey and eastern Pennsylvania. The following table summarizes the results for the quarter and year ended July 28, 2001:
July 28, 2001 July 29, 2000 Quarter Ended Sales $210,666,000 $199,845,000 Net Income $ 3,556,000 $ 2,788,000 Net Income Per Share - Basic $ 1.17 $ .93 Net Income Per Share - Diluted $ 1.15 $ .91 Year Ended Sales $820,627,000 $784,995,000 Net Income $ 9,443,000 $ 8,426,000 Net Income Per Share - Basic $ 3.13 $ 2.81 Net Income Per Share - Diluted $ 3.08 $ 2.76
FORWARD-LOOKING STATEMENTS: This Press Release contains "forward-looking statements" within the meaning of federal securities law. The Company cautions the reader that there is no assurance that actual results or business conditions will not differ materially from future results, whether expressed, suggested or implied by such forward-looking statements. Such potential risks and uncertainties include, without limitation, local economic conditions, competitive pressures from the Company's operating environment, the ability of the Company to maintain and improve its sales and margins, the ability to attract and retain qualified associates, the availability of new store locations, availability of capital, the liquidity of the Company on a cash flow basis, the success of operating initiatives, and other risk factors detailed in the Company's filings with the SEC.