UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
	For the quarterly period ended January 23, 2021
OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
Commission File No. 0-2633

VILLAGE SUPER MARKET, INC.

(Exact name of registrant as specified in its charter)

New Jersey		22-1576170
(State or other jurisdiction of incorporation or organization)		(I. R. S. Employer Identification No.)
733 Mountain Avenue, Springfield, New Jersey, 07081
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:		(973) 467-2200
Securities registered pursuant to Section 12(b) of the Act:
Class A common stock, no par value	VLGEA	The NASDAQ Stock Market
(Title of Class)	(Trading Symbol)	(Name of exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:  None

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 ☒   No ☐

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

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

Large accelerated filer  ☐	Accelerated filer  ☒
Non-accelerated filer    ☐  (Do not check if a smaller reporting company)	Smaller reporting company  ☒
	Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒.

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
		March 4, 2021
	Class A Common Stock, No Par Value	10,259,088 Shares
	Class B Common Stock, No Par Value	4,293,748 Shares

VILLAGE SUPER MARKET, INC.

INDEX

PART I	PAGE NO.
FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets	3
Consolidated Statements of Operations	4
Consolidated Statements of Comprehensive Income	5
Consolidated Statements of Shareholders' Equity	6
Consolidated Statements of Cash Flows	7
Notes to Consolidated Financial Statements	8
Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.  Quantitative & Qualitative Disclosures about Market Risk	23
Item 4.  Controls and Procedures	23
PART II
OTHER INFORMATION
Item 6.  Exhibits	24
Signatures	25

2

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

VILLAGE SUPER MARKET, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited)
	January 23, 2021		July 25, 2020
ASSETS
Current assets
Cash and cash equivalents	$	114,764	$	111,681
Merchandise inventories	47,108		42,135
Patronage dividend receivable	4,396		11,204
Income taxes receivable	9,078		12,801
Other current assets	23,612		19,499
Total current assets	198,958		197,320
Property, equipment and fixtures, net	261,542		269,741
Operating lease assets	303,440		309,756
Notes receivable from Wakefern	54,149		53,008
Investment in Wakefern	30,202		29,462
Goodwill	24,190		24,190
Other assets	33,124		32,069
Total assets	$	905,605	$	915,546
LIABILITIES and SHAREHOLDERS' EQUITY
Current liabilities
Operating lease obligations	$	20,462	$	19,121
Finance lease obligations	500		466
Notes payable to Wakefern	369		303
Current portion of debt	6,976		6,421
Accounts payable to Wakefern	81,083		83,045
Accounts payable and accrued expenses	28,562		29,793
Accrued wages and benefits	22,692		23,649
Income taxes payable	112		—
Total current liabilities	160,756		162,798
Long-term debt
Operating lease obligations	292,151		298,027
Finance lease obligations	22,707		23,078
Notes payable to Wakefern	734		882
Long-term debt	70,401		74,194
Total long-term debt	385,993		396,181
Pension liabilities	6,152		6,166
Other liabilities	16,442		18,081
Commitments and contingencies
Shareholders' equity
Preferred stock, no par value: Authorized 10,000 shares, none issued	—		—
Class A common stock, no par value: Authorized 20,000 shares; issued 10,985 shares at January 23, 2021 and July 25, 2020	69,324		68,072
Class B common stock, no par value: Authorized 20,000 shares; issued and outstanding 4,294 shares at January 23, 2021 and July 25, 2020	697		697
Retained earnings	287,634		286,241
Accumulated other comprehensive loss	(7,454)		(8,751)
Less treasury stock, Class A, at cost: 726 shares at January 23, 2021 and July 25, 2020	(13,939)		(13,939)
Total shareholders’ equity	336,262		332,320
Total liabilities and shareholders’ equity	$	905,605	$	915,546

See notes to consolidated financial statements.

3

VILLAGE SUPER MARKET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited)
	13 Weeks Ended				26 Weeks Ended
	January 23, 2021		January 25, 2020		January 23, 2021		January 25, 2020
Sales	$	522,818	$	437,422	$	1,012,954	$	844,824
Cost of sales	380,973		319,475		733,146		613,331
Gross profit	141,845		117,947		279,808		231,493
Operating and administrative expense	126,449		107,734		250,812		210,874
Depreciation and amortization	8,793		7,798		17,507		15,237
Operating income	6,603		2,415		11,489		5,382
Interest expense	(982)		(568)		(1,969)		(1,135)
Interest income	874		1,030		1,766		2,289
Income before income taxes	6,495		2,877		11,286		6,536
Income taxes	1,940		872		3,370		1,964
Net income	$	4,555	$	2,005	$	7,916	$	4,572
Net income per share:
Class A common stock:
Basic	$	0.35	$	0.16	$	0.61	$	0.35
Diluted	$	0.31	$	0.14	$	0.54	$	0.32
Class B common stock:
Basic	$	0.23	$	0.10	$	0.39	$	0.23
Diluted	$	0.23	$	0.10	$	0.39	$	0.23

See notes to consolidated financial statements.

4

VILLAGE SUPER MARKET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) (Unaudited)
	13 Weeks Ended				26 Weeks Ended
	January 23, 2021		January 25, 2020		January 23, 2021		January 25, 2020
Net income	$	4,555	$	2,005	$	7,916	$	4,572
Other comprehensive income:
Unrealized gains on interest rate swaps, net of tax (1)	501		—		1,094		—
Amortization of pension actuarial loss, net of tax (2)	101		102		203		203
Pension settlement loss, net of tax (3)	—		871		—		871
Pension remeasurement, net of tax (4)	—		(704)		—		(704)
Comprehensive income	$	5,157	$	2,274	$	9,213	$	4,942

(1)Amount is net of tax of $218 and $479 for the 13 and 26 weeks ended January 23, 2021, respectively.

(2)Amounts are net of tax of $45 and $44 for the 13 weeks January 23, 2021 and January 25, 2020, respectively, and $91 and $88 for the 26 weeks ended January 23, 2021 and January 25, 2020, respectively. All amounts are reclassified from accumulated other comprehensive loss to operating and administrative expense.

(3)Amounts are net of tax of $375 for the 13 and 26 weeks ended January 25, 2020. All amounts are reclassified from accumulated other comprehensive loss to operating and administrative expense.

(4)Amounts are net of tax of $303 for the 13 and 26 weeks ended January 25, 2020.

See notes to consolidated financial statements.

5

VILLAGE SUPER MARKET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (In thousands) (Unaudited)
	13 Weeks Ended January 23, 2021 and January 25, 2020
	Class A Common Stock			Class B Common Stock					Accumulated Other Comprehensive Income (Loss)		Treasury Stock Class A			Total Shareholders' Equity
	Shares Issued	Amount		Shares Issued	Amount		Retained Earnings				Shares	Amount
Balance, October 24, 2020	10,988	$	68,695	4,294	$	697	$	286,344	$	(8,056)	726	$	(13,939)	$	333,741
Net income	—	—		—	—		4,555		—		—	—		4,555
Other comprehensive income, net of tax of $263	—	—		—	—		—		602		—	—		602
Dividends	—	—		—	—		(3,265)		—		—	—		(3,265)
Restricted shares forfeited	(3)	(12)		—	—		—		—		—	—		(12)
Share-based compensation expense	—	641		—	—		—		—		—	—		641
Balance, January 23, 2021	10,985	$	69,324	4,294	$	697	$	287,634	$	(7,454)	726	$	(13,939)	$	336,262
Balance, October 26, 2019	10,593	$	65,947	4,294	$	697	$	273,614	$	(8,241)	503	$	(9,570)	$	322,447
Net income	—	—		—	—		2,005		—		—	—		2,005
Other comprehensive income, net of tax of $116	—	—		—	—		—		269		—	—		269
Dividends	—	—		—	—		(3,218)		—		—	—		(3,218)
Exercise of stock options	—	—		—	—		—		—		—	—		—
Treasury stock purchases	—	—		—	—		—		—		10	(229)		(229)
Restricted shares forfeited	(7)	(150)		—	—		—		—		—	—		(150)
Share-based compensation expense	—	858		—	—		—		—		—	—		858
Balance, January 25, 2020	10,586	$	66,655	4,294	$	697	$	272,401	$	(7,972)	513	$	(9,799)	$	321,982
	26 Weeks Ended January 23, 2021 and January 25, 2020
	Class A Common Stock			Class B Common Stock					Accumulated Other Comprehensive Income (Loss)		Treasury Stock Class A			Total Shareholders' Equity
	Shares Issued	Amount		Shares Issued	Amount		Retained Earnings				Shares	Amount
Balance, July 25, 2020	10,985	$	68,072	4,294	$	697	$	286,241	$	(8,751)	726	$	(13,939)	$	332,320
Net income	—	—		—	—		7,916		—		—	—		7,916
Other comprehensive income, net of tax of $570	—	—		—	—		—		1,297		—	—		1,297
Dividends	—	—		—	—		(6,523)		—		—	—		(6,523)
Restricted shares forfeited	(8)	(24)		—	—		—		—		—	—		(24)
Share-based compensation expense	8	1,276		—	—		—		—		—	—		1,276
Balance, January 23, 2021	10,985	$	69,324	4,294	$	697	$	287,634	$	(7,454)	726	$	(13,939)	$	336,262
Balance, July 27, 2019	10,593	$	65,114	4,294	$	697	$	270,753	$	(8,342)	502	$	(9,550)	$	318,672
Net income	—	—		—	—		4,572		—		—	—		4,572
Other comprehensive income, net of tax of $160	—	—		—	—		—		370		—	—		370
Dividends	—	—		—	—		(6,438)		—		—	—		(6,438)
Treasury stock purchases	—	—		—	—		—		—		11	(249)		(249)
Restricted shares forfeited	(9)	(180)		—	—		—		—		—	—		(180)
Share-based compensation expense	2	1,721		—	—		—		—		—	—		1,721
Adjustment due to the adoption of ASU 2016-02, net of tax of $1,385	—	—		—	—		3,514		—		—	—		3,514
Balance, January 25, 2020	10,586	$	66,655	4,294	$	697	$	272,401	$	(7,972)	513	$	(9,799)	$	321,982

See notes to consolidated financial statements.

6

VILLAGE SUPER MARKET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
	26 Weeks Ended
	January 23, 2021		January 25, 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	7,916	$	4,572
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	18,222		15,237
Non-cash share-based compensation	1,252		1,541
Loss on pension settlements	—		1,246
Deferred taxes	(1,456)		(291)
Gain on sale of property, equipment and fixtures	(84)		—
Changes in assets and liabilities:
Merchandise inventories	(4,973)		(2,810)
Patronage dividend receivable	6,808		7,467
Accounts payable to Wakefern	(2,124)		10,109
Accounts payable and accrued expenses	(1,158)		(3,957)
Accrued wages and benefits	(957)		(1,043)
Income taxes receivable / payable	3,835		(1,880)
Other assets and liabilities	(2,370)		(2,430)
Net cash provided by operating activities	24,911		27,761
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(9,958)		(38,121)
Proceeds from the sale of assets	107		—
Investment in notes receivable from Wakefern	(1,141)		(1,546)
Acquisition deposit in escrow	—		(6,860)
Acquisition of Gourmet Garage, net of cash acquired	—		64
Net cash used in investing activities	(10,992)		(46,463)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt	50,000		—
Principal payments of long-term debt	(4,091)		(336)
Payments on revolving line of credit	(50,000)		—
Debt issuance costs	(222)		—
Dividends	(6,523)		(6,438)
Treasury stock purchases	—		(249)
Net cash used in financing activities	(10,836)		(7,023)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	3,083		(25,725)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	111,681		101,121
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	114,764	$	75,396
SUPPLEMENTAL DISCLOSURES OF CASH  PAYMENTS MADE FOR:
Interest	$	1,969	$	1,135
Income taxes	$	985	$	4,132
NONCASH SUPPLEMENTAL DISCLOSURES:
Investment in Wakefern and increase in notes payable to Wakefern	$	66	$	93
Capital expenditures included in accounts payable and accrued expenses	$	5,138	$	5,453

See notes to consolidated financial statements.

7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands) (Unaudited)

1. BASIS OF PRESENTATION and ACCOUNTING POLICIES

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal and recurring accruals) necessary to present fairly the consolidated financial position as of January 23, 2021 and the consolidated statements of operations, comprehensive income and cash flows for the 13 and 26 weeks ended January 23, 2021 and January 25, 2020 of Village Super Market, Inc. (“Village” or the “Company”).

The significant accounting policies followed by the Company are set forth in Note 1 to the Company's consolidated financial statements in the July 25, 2020 Village Super Market, Inc. Annual Report on Form 10-K, which should be read in conjunction with these financial statements.  The results of operations for the periods ended January 23, 2021 are not necessarily indicative of the results to be expected for the full year.

Disaggregated Revenues

The following table presents the Company's sales by product categories during each of the periods indicated:

	13 Weeks Ended								26 Weeks Ended
	January 23, 2021				January 25, 2020				January 23, 2021				January 25, 2020
	Amount		%		Amount		%		Amount		%		Amount		%
Center Store (1)	$	321,829	61.5	%	$	272,775	62.4	%	$	617,769	61.0	%	$	520,832	61.6	%
Fresh (2)	181,965		34.8		145,500		33.3		357,609		35.3		286,180		33.9
Pharmacy	16,671		3.2		17,710		4.0		33,103		3.3		35,234		4.2
Other (3)	2,353		0.5		1,437		0.3		4,473		0.4		2,578		0.3
Total Sales	$	522,818	100.0	%	$	437,422	100.0	%	$	1,012,954	100.0	%	$	844,824	100.0	%

(1) Consists primarily of grocery, dairy, frozen, health and beauty care, general merchandise and liquor.

(2) Consists primarily of produce, meat, deli, seafood, bakery, prepared foods and floral.

(3) Consists primarily of sales related to other income streams, including ShopRite from Home service fees, gift card and lottery commissions and wholesale sales.

2. MERCHANDISE INVENTORIES

    At both January 23, 2021 and July 25, 2020, approximately 63% of merchandise inventories are valued by the LIFO method while the balance is valued by FIFO.  If the FIFO method had been used for the entire inventory, inventories would have been $15,101 higher than reported at both January 23, 2021 and July 25, 2020.

3. NET INCOME PER SHARE

    The Company has two classes of common stock. Class A common stock is entitled to cash dividends as declared 54% greater than those paid on Class B common stock. Shares of Class B common stock are convertible on a share-for-share basis for Class A common stock at any time.

    The Company utilizes the two-class method of computing and presenting net income per share. The two-class method is an earnings allocation formula that calculates basic and diluted net income per share for each class of common stock separately based on dividends declared and participation rights in undistributed earnings. Under the two-class method, Class A common stock is assumed to receive a 54% greater participation in undistributed earnings than Class B common stock, in accordance with the classes' respective dividend rights. Unvested share-based payment awards that contain nonforfeitable rights to dividends are treated as participating securities and therefore included in computing net income per share using the two-class method.

8

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

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

	13 Weeks Ended				26 Weeks Ended
	January 23, 2021				January 23, 2021
	Class A		Class B		Class A		Class B
Numerator:
Net income allocated, basic	$	3,437	$	974	$	5,971	$	1,692
Conversion of Class B to Class A shares	974		—		1,692		—
Net income allocated, diluted	$	4,411	$	974	$	7,663	$	1,692
Denominator:
Weighted average shares outstanding, basic	9,850		4,294		9,850		4,294
Conversion of Class B to Class A shares	4,294		—		4,294		—
Weighted average shares outstanding, diluted	14,144		4,294		14,144		4,294
	13 Weeks Ended				26 Weeks Ended
	January 25, 2020				January 25, 2020
	Class A		Class B		Class A		Class B
Numerator:
Net income allocated, basic	$	1,521	$	435	$	3,461	$	993
Conversion of Class B to Class A shares	435		—		993		—
Effect of share-based compensation on allocated net income	(3)		(1)		(5)		(2)
Net income allocated, diluted	$	1,953	$	434	$	4,449	$	991
Denominator:
Weighted average shares outstanding, basic	9,768		4,294		9,769		4,294
Conversion of Class B to Class A shares	4,294		—		4,294		—
Weighted average shares outstanding, diluted	14,062		4,294		14,063		4,294

    Outstanding stock options to purchase Class A shares of 156 and 157 were excluded from the calculation of diluted net income per share at January 23, 2021 and January 25, 2020, respectively, as a result of their anti-dilutive effect. In addition, 413 and 316 non-vested restricted Class A shares, which are considered participating securities, and their allocated net income were excluded from the diluted net income per share calculation at January 23, 2021 and January 25, 2020, respectively, due to their anti-dilutive effect.

9

4. PENSION PLANS

Net periodic pension cost for the three defined benefit pension plans sponsored in fiscal 2021 and the four defined benefit pension plans sponsored in fiscal 2020 includes the following components:

	13 Weeks Ended				26 Weeks Ended
	January 23, 2021		January 25, 2020		January 23, 2021		January 25, 2020
Service cost	$	54	$	50	$	108	$	101
Interest cost on projected benefit obligations	422		566		844		1,131
Expected return on plan assets	(483)		(625)		(966)		(1,328)
Loss on settlement	—		1,246		—		1,246
Amortization of net losses	147		146		294		291
Net periodic pension cost	$	140	$	1,383	$	280	$	1,441

On December 23, 2019, the Company terminated the Village Super Market, Inc. Retail Clerks Employees’ Retirement Plan. All participants of the plan were former employees of a store previously closed in 1994. An annuity contract totaling $1,302 was purchased with an insurance company for all participants who did not elect a lump sum distribution. Additionally, lump sum distributions related to the termination totaled $451. The plan had sufficient assets to satisfy all termination transaction obligations, and no benefit obligation or plan assets related to the Village Super Market, Inc. Retail Clerks Employees’ Retirement Plan remained as of the termination date. As a result of this termination, the Company recognized a non-cash pre-tax settlement charge totaling $669 during the 13 weeks ended January 25, 2020. This settlement charge represents the plan’s remaining unrecognized losses within accumulated other comprehensive loss as of the termination date.

Additionally, the Company recognized a settlement loss of $577 in the 13 weeks ended January 25, 2020 for a plan where benefits paid exceeded the sum of the service cost and interest cost components of net periodic pension cost. Assumptions used in the related remeasurement include a discount rate of 3.00% and long term expected rate of return on plan assets of 5.00%.

    As of January 23, 2021, the Company has not made any contributions to its pension plans in fiscal 2021.  The Company expects contributions to its defined benefit pension plans to be immaterial in fiscal 2021.

5. RELATED PARTY INFORMATION

    A description of the Company’s transactions with Wakefern, its principal supplier, and with other related parties is included in the Company’s Annual Report on Form 10-K for the year ended July 25, 2020.  

    Included in cash and cash equivalents at January 23, 2021 and July 25, 2020 are $82,042 and $76,259, respectively, of demand deposits invested at Wakefern at overnight money market rates.

    There have been no other significant changes in the Company’s relationships or nature of transactions with related parties during the 26 weeks ended January 23, 2021.

6. COMMITMENTS and CONTINGENCIES

    The Company is involved in other 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.

10

7. DEBT

Long-term debt consists of:

	January 23, 2021		July 25, 2020
Unsecured revolving line of credit	$	—	$	50,000
Secured term loan	48,679		—
Unsecured term loan	22,900		24,694
New Market Tax Credit Financing	5,798		5,921
Total debt, excluding obligations under leases	77,377		80,615
Less current portion	6,976		6,421
Total long-term debt, excluding obligations under leases	$	70,401	$	74,194

Credit Facility

On May 6, 2020, Village entered into a credit agreement (the “Credit Facility”) with Wells Fargo National Bank, National Association (“Wells Fargo”) that supersedes in its entirety the prior credit agreement with Wells Fargo dated November 9, 2017. The principal purpose of the Credit Facility is to finance general corporate and working capital requirements and Village’s acquisition of certain Fairway assets. Among other things, the Credit Facility provides for a maximum loan amount of $150,500 as further set forth below:

•An unsecured revolving line of credit providing a maximum amount available for borrowing of $125,000. Indebtedness under this agreement bears interest at the applicable LIBOR rate plus 1.10% and expires on May 6, 2025.

•An unsecured term loan with a maximum loan amount of $25,500. On May 12, 2020, Village executed a $25,500 term note, repayable in equal monthly installments based on a seven-year amortization schedule through May 4, 2027 and bearing interest at the applicable LIBOR rate plus 1.35%. Additionally, Village executed an interest rate swap for a notional amount equal to the term loan amount that fixes the base LIBOR rate at .41% per annum through May 4, 2027, resulting in a fixed effective interest rate of 1.76% on the term note.

•On September 1, 2020, Village converted $50,000 of its revolving line of credit to a secured converted term loan. The conversion reduced the maximum amount available for borrowing under the revolving line of credit from $125,000 to $75,000. The term loan bears interest at the applicable LIBOR rate plus 1.50% and is repayable in equal monthly installments based on a fifteen-year amortization schedule beginning on the conversion date. Additionally, Village previously executed a forward interest rate swap, effective on the conversion date, for a notional amount equal to the term loan amount that fixes the base LIBOR rate at .69% per annum for 15 years, resulting in a fixed effective interest rate of 2.19% on the converted term loan. The term loan is secured by real properties of Village Super Market, Inc. and its subsidiaries, including the sites of three Village stores.

The Credit Facility also provides for up to $25,000 of letters of credit ($7,336 outstanding at January 23, 2021), which secure obligations for store leases and construction performance guarantees to municipalities. The Credit Facility contains covenants that, among other conditions, require a minimum tangible net worth, a minimum fixed charge coverage ratio and a maximum adjusted debt to EBITDAR ratio. The Company was in compliance with all covenants of the credit agreement at January 23, 2021.

New Markets Tax Credit Financing

On December 29, 2017, the Company entered into a financing transaction with Wells Fargo Community Investment Holdings, LLC (“Wells Fargo”) under a qualified New Markets Tax Credit (“NMTC”) program related to the construction of a new store in the Bronx, New York. The NMTC program was provided for in the Community Renewal Tax Relief Act of 2000 (the “Act”) and is intended to induce capital investment in qualified lower income communities. The Act permits taxpayers to claim credits against their Federal income taxes for up to 39% of qualified investments in the equity of community development entities (“CDEs”). CDEs are privately managed investment institutions that are certified to make qualified low-income community investments.

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In connection with the financing, the Company loaned $4,835 to VSM Investment Fund, LLC (the "Investment Fund") at an interest rate of  1.403% per year and with a maturity date of December 31, 2044.  Repayments on the loan commence in March 2025. Wells Fargo contributed $2,375 to the Investment Fund and, by virtue of such contribution, is entitled to substantially all of the tax benefits derived from the NMTC. The Investment Fund is a wholly owned subsidiary of Wells Fargo.  The loan to the Investment Fund is recorded in other assets in the consolidated balance sheets.

The Investment Fund then contributed the proceeds to a CDE, which, in turn, loaned combined funds of $6,563, net of debt issuance costs, to Village Super Market of NY, LLC, a wholly-owned subsidiary of the Company, at an interest rate of 1.000% per year with a maturity date of December 31, 2051. These loans are secured by the leasehold improvements and equipment related to the construction of the Bronx store. Repayment of the loans commences in March 2025. The proceeds of the loans from the CDE were used to partially fund the construction of the Bronx store. The Notes payable related to New Markets Tax Credit, net of debt issuance costs, are recorded in long-term debt in the consolidated balance sheets.

The NMTC is subject to 100% recapture for a period of seven years. The Company is required to be in compliance with various regulations and contractual provisions that apply to the New Markets Tax Credit arrangement. Noncompliance could result in Wells Fargo's projected tax benefits not being realized and, therefore, require the Company to indemnify Wells Fargo for any loss or recapture of NMTCs. The Company does not anticipate any credit recapture will be required in connection with this financing arrangement. The transaction includes a put/call provision whereby the Company may be obligated or entitled to repurchase Wells Fargo's interest in the Investment Fund. The value attributed to the put/call is de minimis. We believe that Wells Fargo will exercise the put option in December 2024, at the end of the recapture period, that will result in a net benefit to the Company of $1,728. The Company is recognizing the net benefit over the seven-year compliance period in operating and administrative expense.

8. DERIVATIVES AND HEDGING ACTIVITIES

The Company is exposed to interest rate risk arising from fluctuations in LIBOR related to the Company’s Credit Facility. The Company manages exposure to this risk and the variability of related cash flows primarily by the use of derivative financial instruments, specifically, interest rate swaps.

The Company’s objectives in using interest rate swaps are to add stability to interest expense and to manage its exposure to interest rate movements. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

In 2020, the Company executed two interest rate swaps with an aggregate notional value of $75,500 to hedge the variable cash flows associated with variable-rate loans under the Company's Credit Facility. The interest rate swaps were executed for risk management and are not held for trading purposes. The objective of the interest rate swaps is to hedge the variability of cash flows resulting from fluctuations in LIBOR. The swaps replaced the applicable LIBOR with fixed interest rates and payments are settled monthly when payments are made on the variable-rate loans. The Company's derivatives qualify and have been designated as cash flow hedges of interest rate risk. The gain or loss on the derivative is recorded in Accumulated other comprehensive loss and subsequently reclassified into interest expense in the same period during which the hedged transaction affects earnings. Amounts reported in Accumulated other comprehensive loss related to derivatives will be reclassified to interest expense as interest payments are made on the variable-rate loans. The Company reclassified $82 and $148 during the 13 and 26 weeks ended January 23, 2021, respectively, from Accumulated other comprehensive loss to Interest expense.

The notional value of the interest rate swaps were $71,960 as of January 23, 2021. The fair value of interest rate swaps recorded in other assets is $652 as of January 23, 2021.

9. BUSINESS ACQUISITION

On May 14, 2020, Village completed its acquisition of certain assets, including five supermarkets averaging 52,000 sq. ft. (30,000 selling sq. ft.), a production distribution center (the “PDC”) and the intellectual property of Fairway Group Holdings Corp. and certain of its subsidiaries (“Fairway”), including the names “Fairway” and “Fairway Markets.” Four of the supermarkets are in Manhattan, specifically the Upper West Side, Upper East Side, Kips Bay and Chelsea locations, and a fifth store is located in Pelham, NY. The acquisition was effectuated pursuant to the Asset Purchase Agreement (the "APA"), entered into on January 20, 2020, revised on March 25, 2020 and approved by the United States Bankruptcy Court for the Southern District of New York through a Sale Order entered on April 20, 2020. Village paid $73,622 for the Fairway assets, net

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of cash acquired, and assumed certain liabilities, consisting primarily of those arising from acquired leases. Additionally, at the time of closing Village received a $2,035 credit arising from the breakup of Village’s initial “stalking horse” bid under the January 20, 2020 Asset Purchase Agreement. The credit was recognized as a reduction in operating and administrative expense in the fourth quarter of fiscal 2020. The Fairway acquisition expands our presence in New York City under an iconic city brand and provides Village the ability to expand centralized food production to support stores under all of our banners.

Village accounted for this transaction as a business combination in accordance with the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed be recognized at their estimated fair values as of the acquisition date. In connection with this acquisition, the Company recorded $11,540 of goodwill attributable to the assembled workforce and cost synergies. The goodwill related to this acquisition is deductible for tax purposes. Additionally, the Company recorded a $14,200 indefinite-lived intangible asset related to the trade name. The fair value of the intangible asset was determined based on the discounted cash flow model using the relief from royalty method. The fair value of the property, equipment and fixtures were determined based on the indirect cost approach in which current costs that were not new were adjusted for all forms of depreciation. The Company also evaluated the fair value of the leases assumed in the acquisition, which evaluated comparable rents in the areas of the locations. Leases were determined to be at market apart from one location. For this location, the Company recorded a favorable lease of $4,360 within operating lease assets. The favorable lease is being amortized over the remaining duration of the lease. Transaction costs were expensed as incurred. The allocation of the purchase price consideration to the assets acquired and the liabilities assumed will be completed upon the finalization of working capital adjustments.

10. SUBSEQUENT EVENTS

On February 22, 2021, Village closed the ShopRite store located in Silver Spring, Maryland. Despite continued investment in marketing and promotional programs, the store was unable to generate sales at a level sufficient to maintain profitability, resulting in its closure. The impacts associated with this closure will not be material to the consolidated financial statements.

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

(Dollars in Thousands)

OVERVIEW

    Village Super Market, Inc. (the “Company” or “Village”) operates a chain of twenty-nine ShopRite supermarkets, five Fairway Markets and three Gourmet Garage specialty markets located in New Jersey, New York, Pennsylvania and Maryland. Village is the second largest member of Wakefern Food Corporation (“Wakefern”), the nation’s largest retailer-owned food cooperative and owner of the ShopRite, Fairway and Gourmet Garage names. As further described in the Company’s Form 10-K, this ownership interest in Wakefern provides Village with many of the economies of scale in purchasing, distribution, advanced retail technology, marketing and advertising associated with chains of greater size and geographic coverage.

    On May 14, 2020, Village completed its acquisition of certain assets, including five supermarkets averaging 52,000 sq. ft. (30,000 selling sq. ft.), a production distribution center (the “PDC”) and the intellectual property of Fairway Group Holdings Corp. and certain of its subsidiaries (“Fairway”), including the names “Fairway” and “Fairway Markets” for $73,622, net of cash acquired. Four of the supermarkets are in Manhattan, specifically the Upper West Side, Upper East Side, Kips Bay and Chelsea locations, and a fifth store is located in Pelham, NY. Like Village, Fairway traces its roots back to a neighborhood market over 80 years ago. Fairway Markets offer a one-stop destination shopping experience with an emphasis on fresh, unique, and high quality offerings paired with an expansive variety of natural, organic, specialty and gourmet products. The PDC is a centralized commissary that promotes production efficiency, product quality and consistency in the bakery, prepared foods, meals to go and other perishable product categories. Production costs at the PDC, including materials, labor and overhead, are included in Cost of sales. The Fairway acquisition expands our presence in New York City under an iconic city brand and provides Village the ability to expand centralized food production to support stores under all of our banners.

On February 22, 2021, Village closed the ShopRite store located in Silver Spring, Maryland. Despite continued investment in marketing and promotional programs, the store was unable to generate sales at a level sufficient to maintain profitability, resulting in its closure. The impacts associated with this closure will not be material to the consolidated financial statements.

On November 1, 2019, Village opened an 82,000 sq. ft. (52,000 selling sq. ft.) ShopRite in Stroudsburg, Pennsylvania and replaced our existing 53,000 sq. ft. store.

    The supermarket industry is highly competitive and characterized by narrow profit margins. The Company competes directly with multiple retail formats, both in-store and online, including national, regional and local supermarket chains as well as warehouse clubs, supercenters, drug stores, discount general merchandise stores, fast food chains, restaurants, dollar stores and convenience stores. Village competes by using low pricing, providing a superior customer service experience and a broad range of consistently available quality products, including our own brands portfolio. In October 2019, ShopRite introduced the Right Price Promise pricing strategy, a commitment to everyday low prices on the items customers purchase most frequently. The ShopRite Price Plus preferred customer program enables Village to offer continuity programs, focus on target marketing initiatives and to offer discounts and attach digital coupons directly to a customer's Price Plus card.

In November 2019, ShopRite launched the Bowl & Basket and Paperbird own brands. Bowl & Basket foods pair thoughtfully selected ingredients at a budget friendly price and Paperbird offers a line of newly designed household products. ShopRite expects to add nearly 3,500 Bowl & Basket foods and Paperbird household products from their launch in November 2019 through fiscal 2021. The introduction of Bowl & Basket and Paperbird follows the 2016 launch of ShopRite’s Wholesome Pantry brands, which include the Wholesome Pantry Organic line as well as a range of products free from 110 ingredients and artificial additives and preservatives.

The Company’s stores, six of which are owned, average 55,000 total square feet. These larger store sizes enable the Company’s stores to provide a “one-stop” shopping experience and to feature expanded higher margin specialty departments such as an onsite bakery, an expanded delicatessen, a variety of natural and organic foods, ethnic and international foods, prepared foods and pharmacies. Many of our stores emphasize a Power Alley, which features high margin, fresh, convenience offerings in an area within the store that provides quick customer entry and exit for those customers shopping for today's lunch or dinner. Certain of our stores include the Village Food Garden concept featuring a restaurant style kitchen, and several kiosks offering a wide variety of store prepared specialty foods for both take-home and in-store dining.

    Online grocery ordering for in-store pick up or home delivery through ShopRite from Home is available in twenty-seven stores. Customers can browse our circular, create and edit shopping lists and use ShopRite from Home through

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shoprite.com or the ShopRite app. Additionally, the ShopRite Order Express app enables customers to pre-order deli, catering, specialty occasion cakes and other items. Online ordering for home delivery through third party services is available in all Fairway and Gourmet Garage stores. In April 2020 we also added online ordering for home delivery through third party services in all ShopRite stores.

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

COVID-19

The Company was significantly impacted by the COVID-19 outbreak as it operates in and around one of the early U.S. epicenters of the health crisis with much of our trade area under stay-at-home orders from mid-March 2020 through June 2020. The Company is classified as an essential business and has remained open to serve our customers and the communities in which we operate. We continue to experience significant sales volatility, changes in customer shopping habits, shifts in product mix and increased demand through digital channels as a result of the COVID-19 pandemic. Demand remains high in most stores, however sales at Fairway and Gourmet Garage locations in Manhattan have been negatively impacted by localized residential population migration out of the city and less commuter and tourist traffic. We expect continued uncertainty in our business as well as the local and regional economies in which we operate depending on the duration and intensity of the COVID-19 pandemic (see the "Outlook" section below for further discussion of risks and uncertainties).

Safety. Our first priority has and will continue to be the safety of our associates and our customers. We implemented enhanced sanitation programs, including hourly cleaning of high touch point areas throughout our stores, nightly deep cleaning and biweekly disinfectant fogging in every store, reduced store hours to allow appropriate time for cleaning, limited the number of customers allowed in each store at a time, reduced service department offerings including the sale of bulk self-service merchandise and closure of in-store restaurants and dining areas, instituted a personal protective equipment program, required temperature checks for associates and installed Plexiglas shields, floor markers and additional signage in high traffic areas to signify six-foot distances to encourage proper social distancing.

Associate Support. We paid temporary wage premiums up to $2 per hour above the standard wage rate for hourly front-line associates and weekly premiums for salaried front-line associates from late March through mid-August, provided Emergency Paid Leave to associates affected by COVID-19, supplied meals or meal coupons to our associates on duty through our Feeding Our Village Heroes Program, expanded remote work capabilities, limited travel of regional supervision teams, created a centralized call center and real-time alert text communication platform.

Responding to the needs of our Customers and Communities. Expanded digital capabilities, including expansion of stores offering ShopRite from Home, expanded the ShopRite Order Express app to provide pre-ordering capabilities in the deli and other areas, contactless pickup, prescription drug pickup and delivery, launched partnerships with online grocery picking and delivery services to better support our customers increased demand for these services and expanded mobile scan to an additional 10 stores. In December 2020, we began administering COVID-19 vaccinations at certain of our retail pharmacies in New Jersey.

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RESULTS OF OPERATIONS

    The following table sets forth the major components of the Consolidated Statements of Operations as a percentage of sales:

	13 Weeks Ended				26 Weeks Ended
	January 23, 2021		January 25, 2020		January 23, 2021		January 25, 2020
Sales	100.00	%	100.00	%	100.00	%	100.00	%
Cost of sales	72.87		73.04		72.38		72.60
Gross profit	27.13		26.96		27.62		27.40
Operating and administrative expense	24.19		24.63		24.76		24.96
Depreciation and amortization	1.68		1.78		1.73		1.80
Operating income	1.26		0.55		1.13		0.64
Interest expense	(0.19)		(0.13)		(0.19)		(0.13)
Interest income	0.17		0.24		0.17		0.27
Income before taxes	1.24		0.66		1.11		0.78
Income taxes	0.37		0.20		0.33		0.23
Net income	0.87	%	0.46	%	0.78	%	0.55	%

    Sales.  Sales were $522,818 in the 13 weeks ended January 23, 2021, an increase of 19.5% compared to the 13 weeks ended January 25, 2020. 

Sales were $1,012,954 in the in the 26 weeks ended January 23, 2021, an increase of 19.9% compared to the 26 weeks ended January 25, 2020.

Sales increased in both the 13 and 26 weeks ended January 23, 2021 due to the Fairway acquisition on May 14, 2020, the opening of the Stroudsburg replacement store on November 1, 2019 and a same store sales increase of 6.5%. Same store sales increased due primarily to increased customer demand across most stores due to the impact of the COVID-19 pandemic. We continue to experience higher average basket sizes and decreased transaction counts as customers consolidate shopping trips. Digital sales growth accelerated through both ShopRite from Home and partnerships with online grocery picking and delivery services, increasing 176% and 174% in the 13 and 26 weeks ended January 23, 2021, respectively, compared to the 13 and 26 weeks ended January 25, 2020. Demand remains high in most stores, however sales at Fairway and Gourmet Garage locations in Manhattan during the 13 and 26 weeks ended January 23, 2021 have been significantly negatively impacted due primarily to residential population migration out of the city and less commuter and tourist traffic during the COVID-19 pandemic.

New stores and replacement stores are included in same store sales in the quarter after the store has been in operation for four full quarters. Store renovations and expansions are included in same store sales immediately.

    Gross Profit.  Gross profit as a percentage of sales increased .17% in the 13 weeks ended January 23, 2021 compared to the 13 weeks ended January 25, 2020 due primarily to higher margins associated with Fairway despite higher costs as we transition and integrate commissary operations into our business. Excluding the impact of Fairway, gross profit as a percentage of sales decreased .15% due primarily to decreased departmental gross margin percentages (.15%), an unfavorable change in product mix (.05%) and increased warehouse assessment charges from Wakefern (.36%) partially offset by increased patronage dividends and rebates received from Wakefern (.15%) and lower promotional spending (.26%).

Gross profit as a percentage of sales increased .22% in the 26 weeks ended January 23, 2021 compared to the 26 weeks ended January 25, 2020 due primarily to higher margins associated with Fairway despite higher costs as we transition and integrate commissary operations into our business. Excluding the impact of Fairway, gross profit as a percentage of sales decreased .30% due primarily to decreased departmental gross margin percentages (.50%), increased warehouse assessment charges from Wakefern (.10%) and an unfavorable change in product mix (.04%) partially offset by lower promotional spending (.31%) and increased patronage dividends and rebates received from Wakefern (.03%).

Departmental gross profits, excluding the impact of Fairway, decreased in the 13 and 26 weeks ended January 23, 2021 compared to the 13 and 26 weeks ended January 25, 2020 due primarily to continued price investments resulting from

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ShopRite's Right Price Promise pricing strategy introduced in October 2019. Both product mix and departmental gross margin percentages were also impacted by limitations in service departments and product availability as a result of the COVID-19 pandemic.

    Operating and Administrative Expense.  Operating and administrative expense as a percentage of sales decreased .44% in the 13 weeks ended January 23, 2021 compared to the 13 weeks ended January 25, 2020. The 13 weeks ended January 25, 2020 includes a non-cash pension charge related to the termination of a company-sponsored pension plan and other pension settlement charges (.28%) (see note 4 to the consolidated financial statements), pre-opening costs of the Stroudsburg, Pennsylvania replacement store (.10%), store closure costs and charges to write off the variable lease obligations of the old Stroudsburg store (.12%). Excluding these items, operating and administrative expense as a percentage of sales increased .06% in the 13 weeks ended January 23, 2021 compared to the 13 weeks ended January 25, 2020 due primarily to increased occupancy costs as a result of the Fairway acquisition (.63%), increased external costs associated with digital sales (.45%) and incremental costs related to COVID-19, including enhanced wages and benefits and expanded safety and sanitation protocols, (.07%) partially offset by decreased payroll (.61%), other fringe benefits (.25%), maintenance costs (.12%) and legal and consulting fees (.07%). Payroll, other fringe benefits and maintenance costs decreased primarily due to leverage from higher sales and reductions in service department offerings partially offset by the addition of Fairway and growth of ShopRite from Home.

Operating and administrative expense as a percentage of sales decreased .20% in the 26 weeks ended January 23, 2021 compared to the 26 weeks ended January 25, 2020. The 26 weeks ended January 25, 2020 includes a non-cash pension charge related to the termination of a company-sponsored pension plan and other pension settlement charges (.15%) (see note 4 to the consolidated financial statements), pre-opening costs of the Stroudsburg, Pennsylvania replacement store (.15%), store closure costs and charges to write off the variable lease obligations of the old Stroudsburg store (.09%). Excluding these items, operating and administrative expense as a percentage of sales increased .19% in the 26 weeks ended January 23, 2021 compared to the 26 weeks ended January 25, 2020 due primarily to increased occupancy costs due primarily to the Fairway acquisition (.70%), increased external costs associated with digital sales (.42%) and incremental costs related to COVID-19, including enhanced wages and benefits and expanded safety and sanitation protocols, (.15%) partially offset by decreased payroll (.59%), other fringe benefits (.30%) and maintenance costs (.09%). Payroll, other fringe benefits and maintenance costs decreased primarily due to leverage from higher sales and reductions in service department offerings partially offset by the addition of Fairway and growth of ShopRite from Home.     

    Depreciation and Amortization.  Depreciation and amortization expense increased in the 13 and 26 weeks ended January 23, 2021 compared to the 13 and 26 weeks ended January 25, 2020 due primarily to depreciation related to the Fairway acquisition.

Interest Expense.  Interest expense increased in the 13 and 26 weeks ended January 23, 2021 compared to the 13 and 26 weeks ended January 25, 2020 due primarily to interest expense related to the credit agreement entered into on May 6, 2020 (see note 7 to the consolidated financial statements).

Interest Income.  Interest income decreased in the 13 and 26 weeks ended January 23, 2021 compared to the 13 and 26 weeks ended January 25, 2020 due primarily to lower interest rates for amounts invested in variable rate notes receivable from Wakefern and demand deposits invested at Wakefern.

Income Taxes.  The effective income tax rate was 29.9% in both the 13 and 26 weeks ended January 23, 2021, compared to 30.3% and 30.0% in the 13 and 26 weeks ended January 25, 2020, respectively.

Net Income.  Net income was $4,555 in the 13 weeks ended January 23, 2021 compared to $2,005 in the 13 weeks ended January 25, 2020. The 13 weeks ended January 25, 2020 includes a non-cash pension charge related to the termination of a company-sponsored pension plan and other pension settlement charges of $871 (net of tax), pre-opening costs related to the

Stroudsburg, Pennsylvania replacement store of $304 (net of tax) and store closure costs and charges to write off the variable lease obligations related to the old Stroudsburg store of $365 (net of tax). Excluding these items, net income increased 28% in the 13 weeks ended January 23, 2021 compared to the prior year. Net income increased due to increased same store sales partially offset by lower sales volumes in Manhattan and higher costs as we transition and integrate commissary operations into our business.

Net income was $7,916 in the 26 weeks ended January 23, 2021 compared to $4,572 in the 26 weeks ended January 25, 2020. The 26 weeks ended January 25, 2020 includes a non-cash pension charge related to the termination of a company-sponsored pension plan and other pension settlement charges of $871 (net of tax), pre-opening costs related to the Stroudsburg, Pennsylvania replacement store of $891 (net of tax) and store closure costs and charges to write off the lease asset

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and related obligations for the old Stroudsburg store of $557 (net of tax). Excluding these items, net income increased 15% in the 26 weeks ended January 23, 2021 compared to the prior year. Net income increased due to increased same store sales partially offset by lower sales volumes in Manhattan and higher costs as we transition and integrate commissary operations into our business.

CRITICAL ACCOUNTING POLICIES

    Critical accounting policies are those accounting policies that management believes are important to the portrayal of the Company’s financial condition and results of operations.  These policies require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.  The Company’s critical accounting policies relating to the impairment of long-lived assets and goodwill, accounting for patronage dividends earned as a stockholder of Wakefern and accounting for pension plans, are described in the Company’s Annual Report on Form 10-K for the year ended July 25, 2020. As of January 23, 2021, there have been no changes to the critical accounting policies contained therein.

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

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities was $24,911 in the 26 weeks ended January 23, 2021 compared to $27,761 in the corresponding period of the prior year.  The change in cash flows from operating activities in fiscal 2021 was primarily due to changes in working capital partially offset by increased net income. Working capital changes, including Other assets and liabilities, decreased cash flows from operating activities by $939 in fiscal 2021 compared to an increase of $5,456 in fiscal 2020. The change in impact of working capital is due primarily to higher merchandise inventories and a decrease in accounts payable to Wakefern as stock levels and inventory turnover normalized in the first half of fiscal 2021 following the COVID outbreak.

During the 26 weeks ended January 23, 2021, Village used cash to fund capital expenditures of $9,958, dividends of $6,523, principal payment of long-term debt of $4,091 and additional investments of $1,141 in notes receivable from Wakefern.  Capital expenditures primarily include costs associated with the integration of Fairway stores, completion of one major remodel, continued expansion of self checkout and equipment purchases.

    Village has revised its budgeted capital expenditures lower than previously estimated to $25,000 in fiscal 2021 due primarily to shifts in timing of planned store remodels. Planned expenditures include several smaller store remodels, continued expansion of ShopRite from Home and self-checkout, and various merchandising, technology, equipment and facility upgrades. The Company’s primary sources of liquidity in fiscal 2021 are expected to be cash and cash equivalents on hand at January 23, 2021 and operating cash flow generated in fiscal 2021.

    At January 23, 2021, the Company held variable rate notes receivable due from Wakefern of $26,726 that earn interest at the prime rate plus 1.25% and mature on August 15, 2022 and $27,423 that earn interest at the prime rate plus .75% and mature on February 15, 2024. Wakefern has the right to prepay these notes at any time. Under certain conditions, the Company can require Wakefern to prepay the notes, although interest earned since inception would be reduced as if it was earned based on overnight money market rates as paid by Wakefern on demand deposits.

    Working capital was $38,202 at January 23, 2021 compared to $34,522 at July 25, 2020. Working capital ratios at the same dates were 1.24 and 1.21 to one, respectively.   The Company’s working capital needs are reduced, since inventories are generally sold by the time payments to Wakefern and other suppliers are due.

Credit Facility

On May 6, 2020, Village entered into a credit agreement (the “Credit Facility”) with Wells Fargo National Bank, National Association (“Wells Fargo”) that supersedes in its entirety the prior credit agreement with Wells Fargo dated November 9, 2017. The principal purpose of the Credit Facility is to finance general corporate and working capital

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requirements and Village’s acquisition of certain Fairway assets. Among other things, the Credit Facility provides for a maximum loan amount of $150,500 as further set forth below:

•An unsecured revolving line of credit providing a maximum amount available for borrowing of $125,000. Indebtedness under this agreement bears interest at the applicable LIBOR rate plus 1.10% and expires on May 6, 2025.

•An unsecured term loan with a maximum loan amount of $25,500. On May 12, 2020, Village executed a $25,500 term note, repayable in equal monthly installments based on a seven-year amortization schedule through May 4, 2027 and bearing interest at the applicable LIBOR rate plus 1.35%. Additionally, Village executed an interest rate swap for a notional amount equal to the term loan amount that fixes the base LIBOR rate at .41% per annum through May 4, 2027, resulting in a fixed effective interest rate of 1.76% on the term note.

•On September 1, 2020, Village converted $50,000 of its revolving line of credit to a secured converted term loan. The conversion reduced the maximum amount available for borrowing under the revolving line of credit from $125,000 to $75,000. The term loan bears interest at the applicable LIBOR rate plus 1.50% and is repayable in equal monthly installments based on a fifteen-year amortization schedule beginning on the conversion date. Additionally, Village previously executed a forward interest rate swap, effective on the conversion date, for a notional amount equal to the term loan amount that fixes the base LIBOR rate at .69% per annum for 15 years, resulting in a fixed effective interest rate of 2.19% on the converted term loan. The term loan is secured by real properties of Village Super Market, Inc. and its subsidiaries, including the sites of three Village stores.

The Credit Facility also provides for up to $25,000 of letters of credit ($7,336 outstanding at January 23, 2021), which secure obligations for store leases and construction performance guarantees to municipalities. The Credit Facility contains covenants that, among other conditions, require a minimum tangible net worth, a minimum fixed charge coverage ratio and a maximum adjusted debt to EBITDAR ratio. The Company was in compliance with all covenants of the credit agreement at January 23, 2021.

    There have been no other substantial changes as of January 23, 2021 to the contractual obligations and commitments discussed in the Company’s Annual Report on Form 10-K for the year ended July 25, 2020.

OUTLOOK

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

•We estimate that same store sales trends will be flat to slightly down in fiscal 2021 with positive trends in the first half of the year being offset by negative trends in the second half of the year as we recycle the impact of the COVID-19 health crisis.

•Excluding the impact of acquired stores, we expect decreased gross profit margins due to continued investments in retail pricing through the Right Price Promise commitment to everyday low pricing on the items customers purchase most frequently that was introduced in October 2019.

•We revised our budgeted capital expenditures lower than previously estimated to $25,000 in fiscal 2021 due primarily to shifts in timing of planned store remodels. Planned expenditures include several smaller store remodels, continued expansion of ShopRite from Home and self-checkout, and various merchandising, technology, equipment and facility upgrades.

•The Board’s current intention is to continue to pay quarterly dividends in 2021 at the most recent rate of $.25 per Class A and $.1625 per Class B share.

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•We believe cash and cash equivalents on hand, operating cash flow and the Company's Credit Facility will be adequate to meet anticipated requirements for working capital, capital expenditures and debt payments for the foreseeable future.

•We expect our effective income tax rate in fiscal 2021 to be in the range of 30.0% - 31.0%.

•We expect approximately $1,400 of net periodic pension costs in fiscal 2021 related to the three Company sponsored defined benefit pension plans. The Company expects contributions to its defined benefit pension plans to be immaterial in fiscal 2021.

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

•The Company operates in and around one of the epicenters of the COVID-19 health crisis with much of our trade area under stay-at-home orders from mid-March 2020 through June 2020. The Company is classified as an essential business and has remained open to serve our customers and the communities in which we operate. The continuing impact on our business, including the length and impact of stay-at-home orders and/or regional quarantines, labor shortages and employment trends, disruptions to supply chains, higher operating costs, the form and impact of economic stimulus and general overall economic instability, is uncertain at this time and could have a material adverse effect on our business, results of operations, financial condition and cash flows. Furthermore, the impact of the COVID-19 health crisis may exacerbate other risks and uncertainties included herein, which could have a material effect on the Company.

•The Fairway acquisition involves a number of risks, uncertainties and challenges, including under-performance relative to our expectations, additional capital requirements, unforeseen expenses or delays, imprecise assumptions or our inability to achieve projected cost savings or other synergies, competitive factors in the marketplace and difficulties integrating the business, including merging company cultures, cultivating brand strategy, expansion of food production and conforming the acquired company's technology, standards, processes, procedures and controls. Sales and operating profits have underperformed compared to initial expectations due primarily to residential population migration out of Manhattan and less commuter and tourist traffic during the COVID-19 pandemic. Many of these potential circumstances are outside of our control and any of them could result in an adverse impact on our results of operations, financial condition and cash flows and the diversion of management time and resources.

•The supermarket business is highly competitive and characterized by narrow profit margins. Results of operations may be materially adversely impacted by competitive pricing and promotional programs, industry consolidation and competitor store openings. Village competes directly with multiple retail formats both in-store and online, including national, regional and local supermarket chains as well as warehouse clubs, supercenters, drug stores, discount general merchandise stores, fast food chains, restaurants, dollar stores and convenience stores. Some of these competitors have greater financial resources, lower merchandise acquisition costs and lower operating expenses than we do.

•The Company’s stores are concentrated in New Jersey, New York, Pennsylvania and Maryland. We are vulnerable to economic downturns in these states in addition to those that may affect the country as a whole. Economic conditions such as inflation, deflation, interest rate fluctuations, movements in energy costs, social programs, minimum wage legislation, unemployment rates, disturbances due to social unrest and changing demographics may adversely affect our sales and profits.

•Village purchases substantially all of its merchandise from Wakefern. In addition, Wakefern provides the Company with support services in numerous areas including advertising, liability and property insurance, supplies, certain equipment purchasing, coupon processing, certain financial accounting applications, retail technology support, and other store services. Further, Village receives patronage dividends and other product incentives from Wakefern and also has demand deposits and notes receivable due from Wakefern.

Any material change in Wakefern’s method of operation or a termination or material modification of Village’s relationship with Wakefern could have an adverse impact on the conduct of the Company’s business and could involve additional expense for Village.  The failure of any Wakefern member to fulfill its obligations to Wakefern or a member’s insolvency or withdrawal from Wakefern could result in increased costs to the Company.  Additionally, an adverse change in Wakefern’s results of operations or solvency could have an adverse effect on Village’s results of operations.

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•Approximately 90% of our employees are covered by collective bargaining agreements. Any work stoppages could have an adverse impact on our financial results. If we are unable to control health care and pension costs provided for in the collective bargaining agreements, we may experience increased operating costs.

•The Company could be adversely affected if consumers lose confidence in the safety and quality of the food supply chain.  The real or perceived sale of contaminated food products by us could result in a loss of consumer confidence and product liability claims, which could have a material adverse effect on our sales and operations.

•Certain of the multi-employer plans to which we contribute are underfunded. As a result, we expect that contributions to these plans may increase. Additionally, the benefit levels and related items will be issues in the negotiation of our collective bargaining agreements. Under current law, an employer that withdraws or partially withdraws from a multi-employer pension plan may incur a withdrawal liability to the plan, which represents the portion of the plan’s underfunding that is allocable to the withdrawing employer under very complex actuarial and allocation rules. The failure of a withdrawing employer to fund these obligations can impact remaining employers. The amount of any increase or decrease in our required contributions to these multi-employer pension plans will depend upon the outcome of collective bargaining, actions taken by trustees who manage the plans, government regulations, withdrawals by other participating employers and the actual return on assets held in the plans, among other factors.

•The Company uses a combination of insurance and self-insurance to provide for potential liability for workers’ compensation, automobile and general liability, property, director and officers’ liability, and certain employee health care benefits. Any projection of losses is subject to a high degree of variability. Changes in legal claims, trends and interpretations, variability in inflation rates, changes in the nature and method of claims settlement, benefit level changes due to changes in applicable laws, and insolvency of insurance carriers could all affect our financial condition, results of operations, or cash flows.

•Our long-lived assets, primarily store property, equipment and fixtures, are subject to periodic testing for impairment. Failure of our asset groups to achieve sufficient levels of cash flow could result in impairment charges on long-lived assets.

•Our goodwill and indefinite-lived intangible assets are tested at the end of each fiscal year, or more frequently if circumstances dictate, for impairment. Failure of acquired businesses to achieve their forecasted expectations could result in impairment charges to goodwill and indefinite-lived intangible assets.

•Our effective tax rate may be impacted by the results of tax examinations and changes in tax laws.

•Wakefern provides all members of the cooperative with information system support that enables us to effectively manage our business data, customer transactions, ordering, communications and other business processes.  These information systems are subject to damage or interruption from power outages, computer or telecommunications failures, computer viruses and related malicious software, catastrophic weather events, or human error.  Any material interruption of our or Wakefern’s information systems could have a material adverse impact on our results of operations.

Due to the nature of our business, personal information about our customers, vendors and associates is received and stored in these information systems. In addition, confidential information is transmitted through our ShopRite from Home online business at shoprite.com and through the ShopRite app. Unauthorized parties may attempt to access information stored in or to sabotage or disrupt these systems. Wakefern and the Company maintain substantial security measures to prevent and detect unauthorized access to such information, including utilizing third-party service providers for monitoring our networks, security reviews, and other functions. It is possible that computer hackers, cyber terrorists and others may be able to defeat the security measures in place at the Company, Wakefern or those of third-party service providers.

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Any breach of these security measures and loss of confidential information, which could be undetected for a period of time, could damage our reputation with customers, vendors and associates, cause Wakefern and Village to incur significant costs to protect any customers, vendors and associates whose personal data was compromised, cause us to make changes to our information systems and could result in government enforcement actions and litigation against Wakefern and/or Village from outside parties. Any such breach could have a material adverse impact on our operations, consolidated financial condition, results of operations, and liquidity if the related costs to Wakefern and Village are not covered or are in excess of carried insurance policies. In addition, a security breach could require Wakefern and Village to devote significant management resources to address problems created by the security breach and restore our reputation.

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RELATED PARTY TRANSACTIONS

    See note 5 to the unaudited consolidated financial statements for information on related party transactions.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4.  CONTROLS AND PROCEDURES

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

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

There have been no changes in the Company’s internal control over financial reporting during the quarter ended January 23, 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

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PART II - OTHER INFORMATION

Item 6.	Exhibits
Exhibit 31.1	Certification
Exhibit 31.2	Certification
Exhibit 32.1	Certification (furnished, not filed)
Exhibit 32.2	Certification (furnished, not filed)
Exhibit 99.1	Press Release
101 INS	XBRL Instance
101 SCH	XBRL Schema
101 CAL	XBRL Calculation
101 DEF	XBRL Definition
101 LAB	XBRL Label
101 PRE	XBRL Presentation

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SIGNATURES

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

	Village Super Market, Inc.
	Registrant
Dated: March 4, 2021	/s/ Robert P. Sumas
	Robert P. Sumas
	(Chief Executive Officer)
Dated: March 4, 2021	/s/ John Van Orden
	John Van Orden
	(Chief Financial Officer)

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