-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q5obLDYRmiEIXqwzSZsttAjN7ZsFVx/iNY/mfgOAHHdyhNdX5JjCzLNAPoY9/a0B 9wjRtHxf0wGfL0pleWERYw== 0000103595-96-000006.txt : 19961027 0000103595-96-000006.hdr.sgml : 19961027 ACCESSION NUMBER: 0000103595-96-000006 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960727 FILED AS OF DATE: 19961024 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: VILLAGE SUPER MARKET INC CENTRAL INDEX KEY: 0000103595 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 221576170 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-02633 FILM NUMBER: 96647454 BUSINESS ADDRESS: STREET 1: 733 MOUNTAIN AVE CITY: SPRINGFIELD STATE: NJ ZIP: 07081 BUSINESS PHONE: 2014672200 MAIL ADDRESS: STREET 1: 733 MOUNTAIN AVE CITY: SPRINGFIELD STATE: NJ ZIP: 07081 10-K 1 VILLAGE SUPER MARKET,INC. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [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 27, 1996. [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 [Fee Required] for the transition period from ____________ to _____________. Commission file Number 0-2633 VILLAGE SUPER MARKET, INC. (Exact name of registrant as specified in its charter) New Jersey 22-1576170 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 733 Mountain Avenue, Springfield, New Jersey 07081 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (201)-467-2200 Securities registered pursuant of Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered None None Securities registered pursuant to Section 12(g) of the Act: CLASS A COMMON STOCK, NO PAR VALUE (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No___. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [x] The aggregate market value of the Class A common stock of Village Super Market, Inc. held by non-affiliates was approximately $10,399,322 and the aggregate market value of the Class B common stock held by non-affiliates was approximately $1,764,507 (based upon the closing price of the Class A shares on the Over the Counter Market on October 9, 1996). 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 23, 1996 Class A common stock, no par value 1,315,800 Shares Class B common stock, no par value 1,594,076 Shares
DOCUMENTS INCORPORATED BY REFERENCE Information contained in the 1996 Annual Report to Shareholders and the 1996 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 6, 1996 are incorporated by reference into this Form 10-K at Part II, Items 5, 6, 7 and 8 and Part III. Part I ITEM I. BUSINESS GENERAL The Company operates a chain of 21 ShopRite supermarkets, 15 of which are located in northern New Jersey, 1 of which is in northeastern Pennsylvania and 5 of which are in the southern shore area of New Jersey. In addition, the Company operates two former ShopRite stores under a "Village Market" format as described below. The Company is a member in 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 and advertising associated with chains of greater size and geographic reach. The Company believes that the regional nature of its business and the continuity of its management under the leadership of its founding family have permitted the Company to operate with greater flexibility and responsiveness to the demographic characteristics of the communities served by its stores. The Company seeks to generate high sales volume by offering a wide variety of high quality products at consistently low prices. The Company attempts to efficiently utilize its selling space, gives continuing attention to the decor and format of its stores and tailors each store's product mix to the preferences of the local community. The Company concentrates on development of superstores, which, in addition to their larger size (an average of 50,000 total square feet, including office and storage space, compared with an average of 30,000 total square feet for conventional super- markets), feature such higher margin specialty service departments as an on-site bakery, an expanded delicatessen including prepared foods, a fresh seafood section and, in most cases, a prescription pharmacy. Superstores also offer an expanded selection of higher margin non-food items such as cut flowers, health and beauty aids, greeting cards, video cassette rentals and small appliances. Two superstores also include a warehouse section featuring products in giant sizes. The following table shows the percentage of the Company's sales allocable to various product categories during each of the periods indicated as well as the number of the Company's superstores and percentage of selling square feet allocable to these stores during each of these periods:
Product Categories Fiscal Year Ended In July 1994 1995 1996 Groceries 44.0% 44.1% 43.8% Dairy and Frozen 15.7 15.6 15.6 Meats 11.1 10.6 10.3 Non-Foods 9.2 9.5 9.8 Produce 9.3 9.6 9.8 Delicatessen 4.1 4.1 4.3 Seafood 1.9 1.9 1.9 Pharmacy 2.8 2.9 2.9 Bakery 1.6 1.6 1.5 Other .3 .1 .1 100.0% 100.0% 100.0% Number of superstores 18 19 19 Selling square feet represented by superstores 82% 88% 88%
Because of increased size and broader product mix, a superstore can satisfy a greater percentage of a customer's weekly shopping needs and, as a result, the typical superstore generally has a higher volume of sales per square foot and sales per customer than a conventional supermarket. In addition, because of their greater total sales volume and increased percentage of their sales allocable to higher margin items, superstores generally operate more profitably than conventional supermarkets. A variety of factors affect the profitability of each of the Company's stores including local competitors, size, access and parking, lease terms, management supervision, and the strength of the ShopRite trademark in the local community. The Company continually evaluates individual stores to decide whether they should be closed. Accordingly, the Orange, Maplewood, Kingston, Morristown and Easton stores have been closed since December 1991. In addition, two stores were converted to a "Village Market" format designed to reduce costs and increase margins in lower volume locations. The Company operates a separate liquor store adjacent to one Company supermarket. DEVELOPMENT AND EXPANSION The Company is engaged in a continuing program to upgrade and expand its supermarket chain. This program has included major store remodelings as well as the opening or acquisition of additional stores. When remodeling, the Company has sought, whenever possible, to increase the amount of selling space in its stores and, where feasible within existing site limitations, to convert conventional supermarkets to superstores. The Company completed one major expansion and remodel in fiscal 1996. The Company has budgeted $17,000,000 for capital expenditures in fiscal 1997. The major planned expenditures are the expansion and remodel of the Livingston, Chester and Stroudsburg stores and the acquisition of property for a future store. In the last five years, the Company has added one new store and completed five remodels. The Company's goal has been to open an average of one new superstore and conduct a major remodel of one store each year. However, because of delays associated with increased governmental regulations, including sewage moratoriums and environmental cleanup regulations effecting sites, the Company has been unable to open the desired number of new stores. Additional store remodelings and sites for new stores are in various stages of development. The Company will also consider additional acquisitions should appropriate opportunities arise. WAKEFERN The Company is the second largest member of Wakefern (owning 16.5% of Wakefern's outstanding stock) and two of the Company's principal shareholders were founders of Wakefern. Wakefern, which was organized in 1946, is the nation's largest retailer-owned food cooperative. There are presently 37 individual member companies and 188 supermarkets which comprise the Wakefern cooperative. Only Wakefern and member companies are entitled to use the ShopRite name and trademark, purchase their product requirement and participate in ShopRite advertising and promotional programs and its computerized purchasing, warehousing and distribution services. The principal benefits to the Company from its relationship with Wakefern are the use of the ShopRite name and trademark, volume purchasing, ShopRite private label products, distribution and warehousing on a cooperative basis, and ShopRite advertising and promotional programs. The Company believes that the ShopRite name is widely recognized by its customers and is a factor in those customers' decisions about where to shop. In addition, Wakefern can purchase large quantities and varieties of products at favorable prices which it can then pass on to its members. These benefits are important to the Company's success. Wakefern distributes as a "patronage dividend" to each of its stockholders a share of the earnings of Wakefern in proportion to the dollar volume of business done by the stockholder with Wakefern during each fiscal year. While Wakefern has a substantial professional staff, it operates as a member cooperative. Executives of most members make contributions of time to the business of Wakefern. Senior executives of the Company spend a significant amount of their time working on various Wakefern committees which oversee and direct Wakefern purchases and other programs. Most of the Company's advertising is developed and placed by Wakefern's professional advertising staff. Wakefern is responsible for all television, radio and major newspaper advertisements. Wakefern bills its members by various formulas which distribute advertising costs in accordance with the estimated proportional benefits to each member from such advertising. The Company also places Wakefern developed materials with local newspapers. Wakefern operates warehouses and distribution facilities in Elizabeth, New Jersey; Dayton, New Jersey; Wallkill, New York; and South Brunswick, New Jersey. Each member is obligated to purchase from Wakefern a minimum of 85% of its requirements for products offered by Wakefern until ten years from the date that stockholders representing 75% of Wakefern sales notify Wakefern that those stockholders request the Wakefern Stockholder Agreement be terminated. If this purchase obligation is not met, the member is required to pay Wakefern's profit contribution shortfall attributable to this failure. This agreement also makes unapproved changes in control of the Company and sale of the Company or of individual Company stores, except to a qualified successor, financially prohibitive by requiring the Company in such cases to pay Wakefern a profit contribution shortfall attributable to the sale of store or change in control. Such payments were waived by Wakefern in connection with 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 supermarket 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 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 determination by Wakefern that the continued supplying of merchandise or services to such member would adversely effect Wakefern. Any material change in Wakefern's method of operation or a termination or material modification of the Company's relationship with Wakefern following expiration of the above agreements or otherwise (none of which are contemplated or considered likely) might have an adverse impact on the conduct of the Company's business and could involve additional expense for the Company. The failure of any Wakefern member to fulfill its obligations under these agreements or a member's insolvency or withdrawal from Wakefern could result in increased costs to remaining members. Wakefern owns and operates 18 supermarkets. The Company believes that Wakefern may consider purchasing additional stores in the future from non-members and from existing members who may desire to sell their stores for financial, estate planning or other reasons. The Company also understands that Wakefern may consider opening and operating new ShopRite supermarkets as well. Wakefern does not prescribe geographical franchise areas to its members. The specific locations at which the Company, other members of Wakefern or Wakefern itself may open new units under the ShopRite name are, however, subject to the approval of Wakefern's Site Development Committee. This committee is composed of persons who are not employees or members of Wakefern and from whose decision to deny a site application may be appealed to the Wakefern Board of Directors. Wakefern assists its members in their site selection by providing appropriate demographic data, volume projections and projections of the impact of the proposed market on existing member supermarkets in the area. Each member's Wakefern stock (including the Company's) is pledged to Wakefern to secure all of that member's obligations to Wakefern. Moreover, every owner of 5% or more of the voting stock of a member (including five members of the Sumas family) must personally guarantee prompt payment of all amounts due Wakefern from that member. Wakefern does not own any securities of the Company or its subsidiaries. Each of Wakefern's members is required to make capital contributions to Wakefern based on the number of stores operated by that member (and to a limited extent the sales volume generated by those stores). As additional stores are opened or acquired by a member (including the Company), additional capital must be contributed by it to Wakefern. On occasion, as its business needs have required, Wakefern has increased the per-store capital contributions required of its members. Wakefern has in the past permitted these increases in required capital to be paid in installments over a period of time. The Company is required to invest approximately $467,000 over approximately the next two years. TECHNOLOGY The Company considers automation and computerization important to its operations and competitive position. All stores have scanning checkout systems that improve pricing accuracy, enhance productivity and reduce checkout time for customers. Over the last several years, the company installed IBM RS/6000 computers and satellite communications in each store. Using the RS/6000 system, the Company offers customers debit and credit card payment options in all stores. In addition, the Company is utilizing a computer generated ordering system, which is designed to reduce inventory levels in out-of-stock conditions, enhance shelf space utilization, and reduce labor costs. The Company's commitment to advanced scanning systems has enabled it to participate in Price Plus, ShopRite's preferred customer program. Customers receive electronic discounts by presenting a scannable Price Plus card. In addition, the Company began using Clip Less coupons in 1994. Customers need only present their Price Plus card to receive the value of our in-ad coupons. 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 certain 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. COMPETITION The supermarket business is highly competitive. Industry profit margins are narrow, consequently earnings are dependent on high sales volume and operating efficiency. The Company is in direct competition with national, regional and local chains as well as independent supermarkets, warehouse clubs, drug stores, discount department stores and convenience stores. The principal methods of competition utilized by the Company are low pricing, courteous, quick service to the customer, quality products and consistent availability of a wide variety of merchandise including the ShopRite private label. The Company believes its 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 principle competitors are Pathmark, A&P, Foodtown, Edwards, King's, Grand Union and Acme. Many of the Company's competitors have financial resources substantially greater than those of the Company. LABOR As of October 7, 1996, the Company employed approximately 3,740 persons, of whom approximately 2,380 worked part-time. Approximately 83% of the Company's employees are covered by collective bargaining agreements. The Company was affected by a labor dispute with its largest union in fiscal 1993 which was settled with a new four year contract. That contract and one other contract expire in fiscal 1997. 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 1997 and 1998. ITEM 2. PROPERTIES The Company owns the sites of five of its supermarkets (containing 330,000 square feet of total space), all of which are free-standing stores, except the Egg Harbor store, which is part of a shopping center. The Company also owns the site of the former Easton store which is currently being marketed. The remaining eighteen supermarkets (containing 800,000 square feet of total space) are leased, with initial lease terms generally ranging from 20 to 30 years, usually with renewal options. Eleven of these leased stores are located in strip shopping centers and the remaining seven are free- standing stores. Except with respect to one lease between the Company and certain related parties, none of the Company's leases expire before 2001. The annual rent, including capitalized leases, for all of the Company's leased facilities for the year ended July 27, 1996 was approximately $5,920,000. The Company is a limited partner in two partnerships, each of which owns a shopping center in which one of the Company's leased supermarkets is located. The Company also is a general partner in a general partnership that is a lessor of one of the Company's free-standing supermarkets. ITEM 3. LEGAL PROCEEDINGS No material legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters submitted to shareholders in the fourth quarter. ITEM X. EXECUTIVE OFFICERS OF THE REGISTRANT In addition to the information regarding directors incorporated by reference to the Company's definitive Proxy Statement in Part III, Item 10, the following is provided with respect to executive officers who are not directors: NAME AGE POSITION WITH THE COMPANY Carol Lawton 53 Vice President and Assistant Secretary since 1983; responsible for administration of headquarters staff. Frank Sauro 38 General Counsel since April 1988. Mr. Sauro is a member of the New Jersey Bar. Kevin Begley 38 Chief Financial Officer since December 1988. Mr. Begley is a Certified Public Accountant. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS The information required by this Item is incorporated by reference from Information appearing on Page 16 in the Company's Annual Report to Shareholders for the fiscal year ended July 27, 1996. 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 27, 1996. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this Item is incorporated by reference from Information appearing on Pages 4 and 5 in the Company's Annual Report to Shareholders for the fiscal year ended July 27, 1996. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this Item is incorporated by reference from Information appearing on Page 3 and Pages 6 to 16 in the Company's Annual Report to Shareholders for the fiscal year ended July 27, 1996. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this Item 10 is incorporated by reference from the Company's definitive Proxy Statement to be filed on or before November 5, 1996, in connection with its Annual Meeting scheduled to be held on December 6, 1996. 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 5, 1996, in connection with its Annual Meeting scheduled to be held on December 6, 1996. 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 5, 1996, in connection with its annual meeting scheduled to be held on December 6, 1996. 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 5, 1996, in connection with its annual meeting scheduled to be held on December 6, 1996. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. Financial Statements: Consolidated Balance Sheets - July 27, 1996 and July 29, 1995; Consolidated Statements of Operations - years ended July 27, 1996; July 29, 1995 and July 30, 1994; Consolidated Statements of Shareholders' Equity - years ended July 27, 1996; July 29, 1995 and July 30, 1994; Consolidated Statements of Cash Flows - years ended July 27, 1996; July 29, 1995 and July 30, 1994; Notes to consolidated financial statements. The financial statements above and Independent Auditors' Report have been incorporated by reference from the Company's Annual Report to Shareholders for the fiscal year ended July 27, 1996. 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; 4.1 Note Purchase Agreement dated August 20, 1987* 4.2 Loan Agreement dated March 29, 1994* 4.3 Amendment No. 1 to Loan Agreement* Exhibit No. 10 - Material Contracts: 10.1 Wakefern By-Laws* 10.2 Stockholders Agreement dated February 20, 1992 between the Company and Wakefern Food Corp.* 10.3 Voting Agreement dated March 4, 1987* 10.4 1987 Incentive and 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 Peat Marwick LLP Exhibit No. 27 - Financial Data Schedule Exhibit No. 99 - Press release dated October 1, 1996 * The following exhibits are incorporated by reference from the following previous filings: Form 10-K for 1994: 4.3 Form 10-K for 1993: 3, 4.1, 10.1, 10.2, 10.3 and 10.4 Form 10-Q for April 23, 1994: 4.2 (b) No reports on Form 8-K were filed during the fourth quarter of fiscal 1996. 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 23, 1996 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, October 23, 1996 James Sumas, October 23, 1996 (Director) (Director) /s/ Robert Sumas /s/ William Sumas Robert Sumas, October 23, 1996 William Sumas, October, 23, 1996 (Director) (Director) /s/ John P. Sumas /s/ John J. McDermott John P. Sumas, October 23, 1996 John McDermott, October 23, 1996 (Director) (Director) /s/ George Andresakes /s/ Norman Crystal George Andresakes, October 23, 1996 Norman Crystal, October 23, 1996 (Director) (Director) SUBSIDIARIES OF REGISTRANT The Company currently has one wholly-owned subsidiary, Village Liquor, Inc. This corporation is organized under the laws of the State of New Jersey. The Financial statements of this subsidiary are included in the Company's consolidated financial statements. 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 September 30, 1996, relating to the consolidated balance sheets of Village Super Market, Inc. and subsidiary as of July 27, 1996 and July 29, 1995, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the years in the three year period ended July 27, 1996, which report is incorporated by reference in the July 27, 1996 annual report on Form 10-K of Village Super Market, Inc. Our report refers to a change in the method of accounting for income taxes. KPMG Peat Marwick LLP Short Hills, New Jersey October 23, 1996 VILLAGE SUPER MARKET, INC. REPORTS RESULTS FOR THE FOURTH QUARTER & YEAR ENDED JULY 27, 1996 Springfield, New Jersey - October 1, 1996. Village Super Market, Inc. reported sales and net income for the fourth quarter and year ended July 27, 1996, Perry Sumas, President announced today. Net income was $617,000 ($.21 per share) in the fourth quarter of fiscal 1996, an increase of 75% from net income of $352,000 ($.12 per share) in the prior year. Fourth quarter sales were $174,829,000, an increase of .7% from the prior year. The increase in fourth quarter net income was primarily the result of improved gross margin percentages and lower coupon costs. Net income for the full fiscal year was $2,006,000 ($.69 per share), an increase of 247% from net income of $578,000 ($.20 per share) in the prior year. Sales for the year were $688,632,000 an increase of 1.7% from the prior year. Fiscal 1996 results include a gain on the sale of real estate in the amount of $571,000 ($.20 per share). Excluding this gain, net income increased 148% from the prior year primarily due to improved gross margins and 1.7% higher same store sales. Village Super Market operates a chain of 23 supermarkets under the ShopRite name in New Jersey and eastern Pennsylvania. The following table summarizes Village's results for the quarter and year ended July 27, 1996.
July 27, 1996 July 29, 1995 Quarter Ended Sales $174,829,000 $173,699,000 Net Income $ 617,000 $ 352,000 Net Income Per Share $ .21 $ .12 Year Ended Sales $688,632,000 $677,322,000 Net Income $ 2,006,000 $ 578,000 Net Income Per Share $ .69 $ .20
EX-13 2 ANNUAL REPORT The Company Village Super Market, Inc. operates a chain of 23 ShopRite supermarkets, 17 of which are located in northern New Jersey, 1 in northeastern Pennsylvania and 5 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 Quarterly Financial Data................................... 3 Management's Discussion and Analysis of Financial Condition and Results of Operations......... 4 Consolidated Balance Sheets................................ 6 Consolidated Statements of Operations...................... 7 Consolidated Statements of Shareholders' Equity............ 8 Consolidated Statements of Cash Flows...................... 9 Notes to Consolidated Financial Statements................ 10 Independent Auditors' Report.............................. 16 Stock Price and Dividend Information...................... 16 Corporate Directory Inside back cover
Dear Fellow Shareholders As fiscal 1996 began, our goal was to build on the improvements made in 1995. We are pleased to report a 247% increase in net income to $2,006,000, or $.69 per share. Sales increased 1.7% to $688,632,000. Results for 1996 include a $571,000 gain on the sale of real estate. Excluding this gain, net income increased 148% from the prior year. Net income increased primarily due to improved gross margins and 1.7% higher same store sales. This improvement was achieved despite the opening of six stores by competitors in our markets over the last two years. We will continue to improve our stores to better serve our customers. During 1996 we completed a major expansion and remodel of our Absecon store. In fiscal 1997, we plan to expand and remodel the Livingston, Chester and Stroudsburg stores. During the summer of 1996, ShopRite took another step in responding to customer needs by introducing a ShopRite MasterCard. Customers receive reward certificates redeemable for "free food" at ShopRite each month based on total purchases using their ShopRite MasterCard. For added customer convenience, this credit card also functions as a Price Plus discount card and a check cashing card. In October 1996, ShopRite began a new merchandising program - "What's for Dinner?". Each weeks advertising includes meal plans and recipes for easy meals, budget meals and healthy meals. This program, along with ShopRite's Chef's Express meals to go program improves our position in the increasing home meal replacement segment of the food marketplace. During 1996, ShopRite celebrated the 50th anniversary of the creation of the Wakefern cooperative. Although much has changed in our business over the years, the fundamentals remain the same - we must continue to provide value to our customers while responding to their changing needs. We thank our employees for their dedication in satisfying our customers needs and our shareholders for their continued support. James Sumas, Perry Sumas, Chairman of the Board President
Selected Financial Data (Dollars in thousands except per share and per sq. ft. data) July 27, July 29, July 30, July 31, July 25, 1996 1995 1994 1993 1992 For year Sales $688,632 $677,322 $695,070 $713,856 $715,059 Net income (loss) 2,006 578 (807) 1,437 487 Net income (loss) per share .69 .20 (.28) .49 .17 Cash dividends per share Class A - - - - .075 Class B - - - - .05 At year end Total assets 131,062 135,575 134,793 141,387 145,668 Long-term obligations including capital leases 26,815 34,853 36,933 39,470 45,699 Working capital (deficit) (10,885) (3,755) (4,100) (2,303) (3,617) Shareholders' equity 55,007 53,001 52,423 53,230 51,793 Book value per share 18.90 18.21 18.01 18.29 17.80 Other data Selling square feet 860,000 842,000 845,000 874,000 930,000 Number of stores 23 23 24 25 27 Sales per average number of stores 29,941 29,449 28,370 27,456 26,484 Sales per average square foot of selling space 809 803 809 791 790 Capital expenditures 9,754 6,588 5,974 1,977 14,494
Unaudited Quarterly Financial Data (Dollars in thousands except per share amounts) First Second Third Fourth Fiscal Quarter Quarter Quarter Quarter Year 1996 Sales $166,522 $178,002 $169,279 $174,829 $688,632 Gross margin 41,035 43,691 42,047 43,608 170,381 Net income 139 1,194 56 617 2,006 Net income per share $.05 $.41 $.02 $.21 $.69
1995 Sales $167,366 $171,804 $164,453 $173,699 $677,322 Gross margin 40,626 41,840 40,494 42,911 165,871 Net income (loss) 83 436 (293) 352 578 Net income (loss) per share $.03 $.15 $(.10) $.12 $.20
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 27, July 29, July 30, 1996 1995 1994 Sales 100.00% 100.00% 100.00% Cost of sales 75.26 75.51 75.67 Gross margin 24.74 24.49 24.33 Operating and admin expenses 22.63 22.44 22.73 Depreciation and amortization 1.24 1.28 1.26 Operating income .87 .77 .34 Interest expense (net) .53 .60 .57 Gain (loss) on disposal of assets .14 (.04) (.05) Income (loss) before taxes and cumulative effect of accounting change .48% .13% (.28)%
Sales increased $11,310,000 in fiscal 1996. As 23 stores were open in both years, this results in a same store sales increase of 1.7%. Same store sales improved in the two stores remodeled in fiscal 1995 and in most stores not affected by a competitive opening. These improvements were offset by reduced sales in stores that were impacted by the six competitors that opened in our trading area over the last two years. Sales decreased $17,748,000 in fiscal 1995. The closing of the Easton store in August 1994 decreased sales by $11,600,000. In addition, same store sales decreased by .7% due to the effects of new competitive entries, continued sluggishness in the economy and comparison to a prior year period that included higher promotional spending. Gross margin as a percentage of sales increased in fiscal 1996 and 1995 due to aggressive buying practices and an improved mix of sales in high margin departments. Operating and administrative expenses in fiscal 1996 increased by .2 as a percentage of sales. This increase was due to higher rent, snow removal and credit card processing costs. These increases were partially offset by a decline in payroll costs. Operating and administrative expenses in fiscal 1995 declined by .3 as a percentage of sales. This improvement was due to lower payroll and coupon costs, partially offset by increased supply costs. Payroll costs declined, despite an increase in pay rate per hour, due to a reduction in same store hours worked. Interest expense decreased in 1996 due to lower variable interest rates and lower average debt levels outstanding. Interest expense increased in 1995 due to higher variable interest rates. During fiscal 1996, the Company sold the property of a store previously closed in Maplewood for $1,238,000, net of certain costs. A gain before taxes in the amount of $952,000 was realized on this sale. Fiscal 1995 results include a charge to operations in the amount of $200,000 in connection with the closing of the Easton store and a loss of $300,000 for disposal costs in connection with the closing of the Morristown store. Net income was $2,006,000 in fiscal 1996 compared to $578,000 in fiscal 1995. This improvement is primarily attributable to the increase in gross margins in fiscal 1996 and the gain on the sale of the Maplewood store. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) LIQUIDITY AND CAPITAL RESOURCES Current liabilities exceeded current assets by $10,885,000, $3,755,000 and $4,100,000 at the end of fiscal 1996, 1995 and 1994, respectively. Working capital ratios at the same dates were .76, .91 and .90 to one, respectively. The decline in working capital at July 27, 1996 is primarily the result of the Company discontinuing its previous policy of borrowing funds at the end of each quarter to maintain the current ratio required in one of its debt agreements. That agreement has been amended to delete the current ratio maintenance requirement. The Company's working capital needs are reduced by its high rate of inventory turnover (twenty-one times in fiscal 1996) and because the warehousing and distribution arrangements accorded to the Company as a member of Wakefern permit it to minimize inventory levels and sell most merchandise before payment is required. Capital expenditures in 1996 were $9,754,000. The major expenditure was the expansion and remodeling of the Absecon store. The remainder of capital expenditures included the acquisition of land and soft costs expended for a future store. The Company has budgeted approximately $17,000,000 for capital expenditures in fiscal 1997. Planned expenditures include the expansion and remodeling of the Livingston, Chester and Stroudsburg stores and the purchase of land for a future store. The Company has historically financed capital expenditures through cash provided by operations supplemented by borrowings. Aggregate capital expenditures for the three years ended July 27, 1996 were $22,316,000. During the same period of time, net long-term borrowings decreased by $12,796,000. The ability to finance expansion through operational cash flow is reflected in the ratio of long-term debt to total capitalization which is currently 32.8% compared with 42.6% three years ago. The Company's primary source of liquidity during fiscal 1997 is expected to be operating cash flow, a mortgage from the seller of a property for a future store, equipment financing and borrowings under a credit facility. The Company is currently in the process of replacing its $12,000,000 revolving loan credit facility, which expires on March 31, 1997, with a larger facility. At July 27, 1996, the Company had borrowed $4,000,000 under the present facility. The Company was in full compliance with all terms and restrictive covenants of all debt agreements at July 27, 1996 and expects to be in compliance for the remaining term of these agreements. RECENT ACCOUNTING PRONOUNCEMENTS In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." This Statement establishes accounting standards for the impairment of long-lived assets, certain identifiable intangibles and goodwill related to those assets. This Statement requires that an asset to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Based on a preliminary review, the Company does not expect a material impact from adopting the provisions of SFAS No. 121 in the fiscal year ending July 26, 1997. In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation." This Statement establishes a method of accounting for stock compensation plans based on fair value of employee stock options and similar equity instruments. Companies are permitted to continue using the current method of accounting for stock compensation but are required to disclose pro forma net income and earnings per share as if the fair value method of SFAS No. 123 has been used to measure compensation cost. The Company is currently reviewing which method of adoption it will utilize in fiscal 1997. Consolidated Balance Sheets
July 27, July 29 1996 1995 ASSETS CURRENT ASSETS Cash and cash equivalents $ 3,244,139 $ 9,655,284 Merchandise inventories 25,118,238 24,179,034 Patronage dividend receivable 2,483,382 2,682,880 Miscellaneous receivables 2,946,577 2,677,519 Income taxes receivable -- 459,873 Prepaid expenses 615,943 629,639 Total current assets 34,408,279 40,284,229 PROPERTY, EQUIPMENT AND FIXTURES, at cost less accumulated depreciation and amortization 71,355,893 69,916,128 OTHER ASSETS Investment in related party, at cost 10,174,339 9,819,818 Goodwill, net 10,605,171 10,871,452 Other intangibles, net 2,537,501 2,791,250 Receivables and other assets 1,981,307 1,891,680 Total other assets 25,298,318 25,374,200 TOTAL ASSETS $131,062,490 $135,574,557
LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Current portion of long-term debt: Mortgages and notes payable $ 4,670,067 $ 4,711,734 Capitalized lease obligations 367,563 368,675 Accounts payable to related party 24,616,188 25,583,821 Accounts payable and accrued expenses 14,603,081 12,602,904 Deferred income taxes 442,529 771,948 Income taxes payable 593,836 -- Total current liabilities 45,293,264 44,039,082 LONG TERM DEBT, less current portion: Mortgages and notes payable 16,938,894 24,608,961 Capitalized lease obligations 9,875,994 10,243,557 Total long-term debt 26,814,888 34,852,518 DEFERRED INCOME TAXES 3,947,559 3,681,883 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY Preferred stock, no par value: Authorized 10,000,000 shares, none issued -- -- Class A common stock, no par value: Authorized 10,000,000 shares, issued 1,762,800 shares 18,129,472 18,129,472 Class B common stock, no par value: Authorized 10,000,000 shares, issued and outstanding 1,594,076 shares 1,034,679 1,034,679 Retained earnings 42,027,631 40,021,926 Less treasury stock, Class A, at cost (447,000 shares) (6,185,003) (6,185,003) Total shareholders' equity 55,006,779 53,001,074 TOTAL LIABILITY AND SHAREHOLDERS' EQUITY $131,062,490 $135,574,557
Consolidated Statements of Operations
Years Ended July 27, July 29, July 30, 1996 1995 1994 SALES $688,632,405 $677,321,821 $695,070,272 COST OF SALES 518,251,470 511,451,057 525,983,044 GROSS MARGIN 170,380,935 165,870,764 169,087,228 OPERATING AND ADMINISTRATIVE EXPENSE 155,846,171 152,008,710 157,983,230 DEPRECIATION AND AMORTIZATION EXPENSE 8,554,703 8,618,374 8,785,917 OPERATING INCOME 5,980,061 5,243,680 2,318,081 INTEREST EXPENSE, net of interest income of $88,574, $58,488 and $103,126 3,615,667 4,030,535 3,900,248 GAIN (LOSS) ON DISPOSAL OF ASSETS 942,125 (300,438) (354,523) INCOME (LOSS) BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE 3,306,519 912,707 (1,936,690) PROVISION (BENEFIT) FOR INCOME TAXES 1,300,814 335,000 (730,000) INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE 2,005,705 577,707 (1,206,690) CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES -- -- 400,000 NET INCOME (LOSS) $2,005,705 $ 577,707 $ (806,690) NET INCOME (LOSS) PER SHARE: INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE $.69 $.20 $(.42) CUMULATIVE EFFECT OF ACCOUNTING CHANGE -- -- .14 NET INCOME (LOSS) $.69 $.20 $(.28)
Consolidated Statements of Shareholders' Equity Years Ended July 27,1996, July 29,1995 and July 30,1994 Class A Class B Common Stock Common Stock Retained Treasury Shares Amount Shares Amount Earnings Stock Balance July 31,1993 1,758,800 $18,126,876 1,598,076 $1,037,275 $40,250,909 $(6,185,003) Net Loss -- -- -- -- (806,690) -- Conversion of shares 4,000 2,596 (4,000) (2,596) -- -- Balance July 30,1994 1,762,800 $18,129,472 1,594,076 $1,034,679 $39,444,219 $(6,185,003) Net Income -- -- -- -- 577,707 -- Balance July 29,1995 1,762,800 $18,129,472 1,594,076 $1,034,679 $40,021,926 $(6,185,003) Net Income -- -- -- -- 2,005,705 -- Balance July 27,1996 1,762,800 $18,129,472 1,594,076 $1,034,679 $42,027,631 $(6,185,003)
Consolidated Statements of Cash Flows Years Ended July 27,1996 July 29,1995 July 30,1994 CASH FLOWS FROM OPERATING ACTIVITIES Net Income (loss) $ 2,005,705 $ 577,707 $ (806,690) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Cumulative effect of accounting change -- -- (400,000) Depreciation and amortization 8,554,703 8,618,374 8,785,917 Deferred taxes (135,744) (71,000) (911,000) Provision to value inventories at LIFO 473,537 344,878 656,346 Gain (loss) on disposal of assets (942,125) 300,438 354,523 Changes in assets and liabilities: (Increase) decrease in merchandise inventories (1,412,741) 749,238 316,394 Decrease in patronage dividend receivable 199,498 99,590 167,793 (Increase) decrease in miscel- laneous receivables (269,058) (775,149) 2,339,377 (Increase) decrease in prepaid expenses 13,696 (49,515) (11,109) Decrease in income taxes receivable 459,873 411,440 253,458 (Increase) decrease in other assets (105,577) (269,478) 606,376 Increase (decrease) in accounts payable to related party (967,633) 1,636,438 546,851 Increase (decrease) in accounts payable and accrued expenses 2,000,177 272,723 (2,191,982) Increase (decrease) in income taxes payable 665,837 -- (264,394) Net cash provided by operating activities 10,540,148 11,845,684 9,441,860 CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (9,754,268) (6,588,356) (5,973,814) Investment in related party (354,521) (403,944) (361,328) Proceeds (expenditures) from disposal of assets 1,237,905 (295,687) 87,303 Net cash used in investing activities (8,870,884) (7,287,987) (6,247,839) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of long-term debt -- 3,000,000 14,000,000 Principal payments of long-term debt (8,080,409) (5,148,577) (16,567,312) Net cash used in financing activities (8,080,409) (2,148,577) (2,567,312) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (6,411,145) 2,409,120 626,709 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 9,655,284 7,246,164 6,619,455 CASH AND CASH EQUIVALENTS, END OF YEAR $ 3,244,139 $ 9,655,284 $ 7,246,164
Notes to Consolidated Financial Statements NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of operations Village Super Market, Inc. (the "Company") operates a chain of 23 ShopRite supermarkets in New Jersey and eastern Pennsylvania. The Company is a member of Wakefern Food Corporation ("Wakefern"), the largest retailer - owned food cooperative in the United States. Principles of consolidation The consolidated financial statements include the accounts of Village Super Market, Inc. and its subsidiary, which is wholly owned. Intercompany balances and transactions have been eliminated. Fiscal year The Company and its subsidiary utilize a 52-53 week fiscal year ending on the last Saturday in the month of July. Fiscal 1996, 1995 and 1994 contain 52 weeks. Industry segment The Company consists of one operating segment, the retail sale of food and non-food products. Reclassifications Certain amounts have been reclassified in the 1995 and 1994 consolidated financial statements to conform to the 1996 presentation. Cash and cash equivalents Cash and cash equivalents includes interest-bearing, overnight deposits with Wakefern in the amount of $6,900,000 at July 29, 1995. Merchandise inventories Merchandise inventories are carried at cost, which is not in excess of market. Cost is determined as follows: Grocery and non-foods -- last-in, first-out (LIFO) (retail less departmental gross profit mark-up). Meat and all other perishables -- first-in, first-out (FIFO). Dairy, frozen foods and liquor -- FIFO (retail less departmental gross profit mark-up). Property, equipment and fixtures Property, equipment and fixtures are recorded at cost. Interest cost incurred to finance construction is capitalized as part of such cost. Renewals and betterments are capitalized. Maintenance and repairs are 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 financial statements. Store opening and closing costs All store opening costs are expensed as incurred. Provisions are made for losses resulting from store closings at the time of closing. Leases Leases which meet certain criteria are classified as capital leases, and assets and liabilities are recorded at amounts equal to the lesser of the present value of the minimum lease payments or the fair value of the leased properties at the inception of the respective leases. Such assets are amortized on a straight-line basis over the shorter of the related lease terms or the economic lives of the related assets. Amounts representing interest expense relating to the lease obligations are recorded to affect constant rates of interest over the terms of the leases. Leases which do not qualify as capital leases are classified as operating leases, and related rentals are charged to expense as incurred. Goodwill Goodwill arising after October 31, 1970 is being amortized over forty years. The Company does not amortize goodwill amounting to approximately $2,900,000 acquired prior to October 31, 1970 since, in management's opinion, the value of such intangibles has not diminished. Accumulated amortization of goodwill amounted to $2,806,810 and $2,540,530 at July 27, 1996 and July 29, 1995, respectively. The Company regularly assesses the recoverability of unamortized amounts of goodwill utilizing relevant cash flow and profitability information. The assessment of the recoverability of unamortized amounts will be impacted if estimated future operating cash flows are not achieved. Other intangibles Other intangibles include the fair value of a favorable lease and trademarks acquired in a business acquisition. Other intangibles are being amortized over 20 years. Accumulated amortization of other intangibles amounted to $2,537,499 and $2,283,749 at July 27, 1996 and July 29, 1995, respectively. Income taxes Effective August 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," which requires an asset and liability approach for accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the tax rates in effect. NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Net income (loss) per share Net income (loss) per share is computed by dividing net income (loss) by the weighted average number of all common shares outstanding during the periods presented which was 2,909,876 in 1996, 1995 and 1994. Stock options are not included in the calculation as their inclusion would be anti-dilutive or would not result in a material dilution of net income (loss) per share. 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 to prepare these consolidated financial statements. Actual results could differ from those estimates. Fair value of financial instruments Statement of Financial Accounting Standards No. 107, "Disclosures About Fair Value Of Financial Instruments," requires disclosure of the fair value of certain financial instruments. Cash and cash equivalents, miscellaneous receivables, accounts payable and accrued expenses are reflected in the consolidated financial statements at carrying value which approximates fair value because of the short-term maturity of these instruments. The carrying value of the Company's short- and long-term mortgages and 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. NOTE 2 - INVENTORIES Merchandise inventories are comprised as follows:
July 27, July 29, 1996 1995 Last-in, first-out (LIFO) $16,688,387 $15,947,436 First-in, first-out (FIFO) 8,429,851 8,231,598 $25,118,238 $24,179,034
If the FIFO method of inventory accounting had been used rather than LIFO, inventories would have been $7,286,067 and $6,812,530 higher than reported in 1996 and 1995, respectively. NOTE 3 - PROPERTY, EQUIPMENT AND FIXTURES Property, equipment and fixtures are comprised as follows:
July 27, July 29, 1996 1995 Land and buildings $ 48,254,838 $ 42,905,665 Store fixtures and equipment 58,909,615 57,170,376 Leasehold improvements 16,018,075 15,628,759 Leased property under capital leases 13,024,838 13,700,599 Vehicles 845,942 780,925 Construction in progress 1,795,141 1,685,065 $138,848,449 $131,871,389 Less accumulated depreciation and amortization 67,492,556 61,955,261 Property, equipment and fixtures-net $ 71,355,893 $ 69,916,128
Notes to Consolidated Financial Statements (Continued) NOTE 4 - RELATED PARTY INFORMATION The Company's investment in its principal supplier, Wakefern, which is operated on a cooperative basis for its stockholder members, is less than 20% of the outstanding shares of Wakefern. The investment is pledged as collateral for any obligations to Wakefern. In addition, this obligation is personally guaranteed by the principal shareholders of the Company. The Company is obligated to purchase 85% of its primary merchandise requirements from Wakefern until ten years from the date that stockholders representing 75% of Wakefern sales notify Wakefern that those stockholders request the Wakefern Stockholder Agreement be terminated. The Company's merchandise payments to Wakefern approximated $498,982,000, $484,491,000 and $490,447,000 during fiscal years 1996, 1995 and 1994, respectively. Wakefern distributes as a "patronage dividend" to each member a share of earnings of Wakefern in proportion to the dollar volume of business done by the member with Wakefern during the year. Patronage dividends, which are recorded as a reduction of cost of sales, amounted to $7,500,000, $8,223,000 and $7,702,000 in 1996, 1995 and 1994, 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. As a result, the Company is required to invest approximately $467,000 over approximately the next two years. The Company will receive additional shares of common stock to the extent paid for at the end of each fiscal year (September 30) of Wakefern calculated at the then book value of such shares. The payments together with any stock issued thereunder, at the option of Wakefern, may be null and void and all payments on this subscription shall become the property of Wakefern in the event the Company does not complete the payment of this subscription in a timely manner. NOTE 5 - MORTGAGES AND NOTES PAYABLE
July 27, July 29, 1996 1995 Term loans, interest at 8.49% payable monthly, principal payable in monthly installments of $55,555 with a final principal payment of $5,555,556 due April 1, 2001 $ 8,666,667 $ 9,333,333 Revolving credit note 4,000,000 7,000,000 Senior unsecured notes, interest at 9.91% payable quarterly, due in annual installments through August 15, 1997 3,100,000 5,600,000 Mortgage note, interest at 10.19% payable semi-annually, due in three equal annual installments beginning December 1, 1997, collateralized by certain land and buildings 4,000,000 4,000,000 Notes payable, interest at prime minus 1.5%, payable in monthly installments through January 1998, collateralized by certain equipment 1,842,294 3,387,362 21,608,961 29,320,695 Less current portion 4,670,067 4,711,734 Noncurrent maturities $16,938,894 $24,608,961
Aggregate principal maturities of mortgages and notes as of July 27, 1996 are as follows:
Year ending July: 1997 $4,670,067 1998 2,938,891 1999 2,000,000 2000 6,000,000 2001 5,999,999
On March 29, 1994 the Company entered into a new loan agreement with two banks. The agreement consists of a $10,000,000 term loan and a $12,000,000 revolving loan. The $12,000,000 revolving loan, which can be used for any purpose except new store construction, matures March 31, 1997 and carries interest at prime plus .5 %. The $4,000,000 outstanding, at July 27, 1996 has been classified as long-term debt in accordance with the Company's intention to refinance this obligation on a long-term basis. At July 27, 1996 the Company was in compliance with all terms and restrictive covenants of all debt agreements. These agreements contain restrictive covenants which, among other matters, specify total debt levels, maintenance of net worth, interest coverage ratios, fixed charge coverage ratios, limitation on payment of dividends and limitation of capital expenditures. Interest paid amounted to $3,750,151, $4,073,646 and $4,095,616 in 1996, 1995 and 1994, respectively. Notes to Consolidated Financial Statements (Continued) NOTE 6 - INCOME TAXES The components of the provision (benefit) for income taxes are:
1996 1995 1994 Federal: Current $ 883,713 $ 175,000 $ 181,000 Deferred 119,653 69,000 (787,000) State: Current 552,845 231,000 - Deferred (255,397) (140,000) (124,000) $1,300,814 $ 335,000 $(730,000)
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets are as follows:
July 27, July 29, July 30, 1996 1995 1994 Deferred tax liabilities Tax over book depreciation $5,502,748 $5,794,712 $5,978,030 Patronage dividend receivable 991,863 1,071,542 1,118,205 Other 553,842 573,616 365,064 Total deferred tax liabilities 7,048,453 7,439,870 7,461,299 Deferred tax assets: Amortization of capital leases 1,747,238 1,684,158 1,637,252 Tax credits and loss carry forwards 202,035 858,503 1,381,647 Other 709,092 443,378 432,068 Total deferred tax assets 2,658,365 2,986,039 3,450,967 Net deferred tax liability $4,390,088 $4,453,831 $4,010,332
A valuation allowance is provided when it is more likely than not that some portion of the deferred tax assets will not be realized. In management's opinion, in view of the Company's previous, current and projected taxable income, such tax assets will more likely than not be fully realized. Accordingly, no valuation allowance was deemed to be required at July 27, 1996 and July 29, 1995. The effective income tax rate differs from the statutory federal income tax rate as follows:
1996 1995 1994 Statutory federal income tax rate 34.0% 34.0% (34.0%) Targeted jobs tax credit (3.3) (14.5) (4.2) Amortization of intangibles 2.7 10.6 4.7 State income taxes, net of federal tax benefit 5.9 6.6 (4.2) Effective income tax rate 39.3% 36.7% (37.7%)
The Company has approximately $242,000 of alternative minimum tax credits that may be carried forward indefinitely. Income taxes paid amounted to approximately $769,580 and $192,000 in 1996 and 1994, respectively. No income taxes were paid in 1995. Notes to Consolidated Financial Statements (Continued) NOTE 7 - LONG-TERM LEASES Description of leasing arrangements The Company conducts a major part of its operations from leased facilities, with the majority of initial lease terms ranging from 20 to 30 years. All of the Company's leases expire through fiscal 2059. Most of the Company's leases contain renewal options of five years each. These options enable the Company to retain the use of facilities in desirable operating areas. Management expects that in the normal course of business, leases will be renewed or replaced by other leases. The Company is obligated under all leases to pay for utilities and liability insurance, and under certain leases to pay additional amounts based on real estate taxes, maintenance, insurance and a percentage of sales in excess of stipulated amounts. Future minimum lease payments by year and in the aggregate for all non- cancelable leases with initial terms of one year or more consisted of the following at July 27, 1996:
Capital Operating Leases Leases 1997 $ 1,918,476 $ 3,498,503 1998 1,924,186 3,421,054 1999 1,932,180 3,428,342 2000 1,943,595 3,430,448 2001 1,858,744 3,310,660 Thereafter 16,458,304 28,829,248 Minimum lease payments 26,035,485 $45,918,255 Less amount representing interest 15,791,928 Present value of minimum lease payments $10,243,557
The following schedule shows the composition of total rental expense under operating leases for the following periods:
1996 1995 1994 Minimum rentals $3,429,223 $3,138,751 $3,353,487 Contingent rentals 537,593 533,774 750,728 $3,966,816 $3,672,525 $4,104,215
Related party leases The Company currently leases three supermarkets and its office facility from realty firms partly or wholly-owned by officers of the Company. The Company paid aggregate rentals under these leases, including minimum rent and contingent rent, of approximately $1,136,000, $1,128,000 and $1,215,000 for fiscal years 1996, 1995 and 1994, respectively. In addition, three supermarkets are leased from partnerships in which the Company is a partner. NOTE 8 - COMMON STOCK Class A common stock has one vote per share and is entitled to cash dividends as declared 54% greater than those paid on the Class B common stock. Class B common stock has ten votes per share. Class B common stock is not 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 Company has an Incentive and Nonstatutory Stock Option Plan under which both incentive and nonstatutory options to purchase up to 150,000 shares of the Company's Class A common stock may be granted to officers and employees of the Company as designated by the Board of Directors. The plan requires incentive stock options to be granted at an exercise price equalling 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 are at an exercise price equal to the fair value at the date of grant. All options outstanding at July 27, 1996 expire on December 6, 1997. There were no transactions in fiscal 1996, 1995 and 1994. There are 130,000 options outstanding and exercisable at an average price of $8.00 at July 27, 1996. Notes to Consolidated Financial Statements (Continued) NOTE 9 - PENSION PLANS The Company sponsors three defined benefit pension plans covering administrative personnel and members of two unions. Employees covered under the administrative pension benefit plan earn benefits based upon percentages of annual compensation. Employees covered under the union pension benefit plans earn benefits based on a fixed amount for each year of service. The Company's funding policy is to pay at least the minimum contribution required by the Employee Retirement Income Security Act of 1974. Net periodic pension cost for the three plans included the following components:
1996 1995 1994 Service cost $484,461 $486,332 $365,414 Interest cost on projected benefit obligation 466,819 402,909 380,587 Return on plan assets (637,724) (444,026) (152,604) Net amortization and deferral 157,823 7,836 (232,055) Net periodic pension cost $471,379 $453,051 $361,342
The funded status of the three pension plans is reconciled to accrue pension cost as follows:
July 27, July 29, 1996 1995 Plan assets at fair value $6,275,380 $5,303,778 Actuarial present value of benefit obligations: Vested benefits 5,570,363 4,301,071 Non-vested benefits 92,875 421,911 Accumulated benefit obligations 5,663,238 4,722,982 Effect of future increases in compensation levels 1,035,459 827,812 Projected benefit obligation 6,698,697 5,550,794 Projected benefit obligation in excess of plan assets (423,317) (247,016) Unrecognized prior service cost 348,021 390,987 Unrecognized net loss 523,478 307,465 Remaining unrecognized net asset at July 25, 1987 (amortized over 15 to 18 years) (373,424) (435,869) Additional liability (292,038) (296,318) Accrued pension cost $ (217,280) $ (280,751)
Plan assets are invested principally in government securities, common stocks and mutual funds. Assumptions used in determining the net fiscal 1996, 1995 and 1994 periodic pension cost were:
Assumed discount rate 8 to 8.5% Assumed rate of increase in compensation levels 4% Expected rate of return on plan assets 8 to 8.5%
The Company also participates in several multiemployer pension plans for which the 1996, 1995 and 1994 contributions were $1,748,000, $1,785,000 and $1,814,000, respectively. NOTE 10 - COMMITMENTS AND CONTINGENCIES The Company is under contract to purchase a tract of land on which it plans to construct a superstore. Costs incurred related to this project are included in construction in progress as the Company believes such costs will be recoverable from the development of the property. The Company's general liability insurer, InsureRite, Ltd., a Wakefern affiliated company, can make premium calls for premiums paid for the years ended December 1, 1993 and December 1, 1994. Based on advice from the insurer, the Company has recorded liabilities for the estimated premium calls. The Company is involved in litigation incidental to the normal course of business. Company management is of the opinion that insurance coverage is adequate and final disposition should not materially affect the consolidated financial position of the Company. Independent Auditors' Report The Board of Directors and Shareholders Village Super Market, Inc.: We have audited the accompanying consolidated balance sheets of Village Super Market, Inc. and subsidiary as of July 27, 1996 and July 29, 1995, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the years in the three-year period ended July 27, 1996. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Village Super Market, Inc. and subsidiary at July 27, 1996 and July 29, 1995, and the results of their operations and their cash flows for each of the years in the three-year period ended July 27, 1996 in conformity with generally accepted accounting principles. As discussed in Note 1 to the consolidated financial statements, the Company adopted the provisions of Financial Accounting Standards Board Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," as of August 1, 1993. KPMG PEAT MARWICK LLP Short Hills, New Jersey September 30, 1996 Stock Price and Dividend Information The Class A common stock of Village Super Market, Inc. is traded on the NASDAQ Stock Market under the symbol "VLGEA." The table below sets forth the high and low last reported sales price for the fiscal year indicated.
Class A Stock High Low 1996 4th Quarter 10 7-1/2 3rd Quarter 8-1/2 7 2nd Quarter 7-3/4 6-3/4 1st Quarter 8 6-7/8 1995 4th Quarter 8 6-3/4 3rd Quarter 7-3/4 6-3/4 2nd Quarter 8 6-3/4 1st Quarter 8-1/2 7
As of September 27, 1996, there were 525 holders of record of the Company's Class A common stock. No dividends were paid during fiscal 1996 and 1995. 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 FRANK SAURO General Counsel KEVIN BEGLEY Chief Financial Officer GEORGE J. ANDRESAKES Director JOHN J. McDERMOTT Director NORMAN CRYSTAL Director EXECUTIVE OFFICES 733 Mountain Avenue Springfield, New Jersey 07081 REGISTRAR AND TRANSFER AGENT Midlantic National Bank Edison, New Jersey AUDITORS KPMG Peat Marwick LLP 150 John F. Kennedy Parkway Short Hills, New Jersey FORM 10-K Copies of the Company's Form 10-K as filed with the Securities and Exchange Commission are available without charge upon written request to: Mr. Robert Sumas, Secretary Village Super Market, Inc. 733 Mountain Avenue Springfield, New Jersey 07081 EX-27 3
5 1,000 12-MOS JUL-29-1995 JUL-27-1996 3244 0 2947 0 25118 34408 138848 67492 131062 45421 26815 0 0 19164 35843 131062 688632 688632 518251 518251 163458 0 3616 3307 1301 2006 0 0 0 2006 .69 .69
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