VILLAGE SUPER MARKET INC - Quarter Report: 2011 October (Form 10-Q)

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

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

 

	December 6, 2011
Class A Common Stock, No Par Value	7,317,610 Shares
Class B Common Stock, No Par Value	6,362,390 Shares

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

 

 

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

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

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

 

 

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

		13 Weeks Ended				13 Weeks Ended
		October 29, 2011				October 30, 2010
Service cost		$	664			$	724
Interest cost on projected benefit obligations			678				633
Expected return on plan assets			(631	)			(510	)
Amortization of gains and losses			330				390
Amortization of prior service costs			2				2
Net Periodic pension cost		$	1,043			$	1,239

 

 

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		13 Weeks Ended
		October 29, 2011				October 30, 2010
Sales			100.00	%			100.00	%
Cost of sales			72.90				73.67
Gross profit			27.10				26.33
Operating and administrative expense			22.15				22.47
Depreciation and amortization			1.39				1.48
Operating income			3.56				2.38
Interest expense			(.34	)			(.35	)
Interest income			.18				.17
Income before taxes			3.40				2.20
Income taxes			1.43				0.92
Net income			1.97	%			1.28	%

 

 

 

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

·	The supermarket business is highly competitive and characterized by narrow profit margins.  Results of operations may be materially adversely impacted by competitive pricing and promotional programs, industry consolidation and competitor store openings.  Village competes with national and regional supermarkets, local supermarkets, warehouse club stores, supercenters, drug stores, convenience stores, dollar stores, discount merchandisers, restaurants and other local retailers. Some of these competitors have greater financial resources, lower merchandise acquisition cost and lower operating expenses than we do.
·	The Company’s stores are concentrated in New Jersey, with one store in northeastern Pennsylvania and two in Maryland.  We are vulnerable to economic downturns in New Jersey in addition to those that may affect the country as a whole.  Economic conditions such as inflation, deflation, interest rates, energy costs and unemployment rates may adversely affect our sales and profits.
·	Village acquired two stores in July 2011 in Maryland, a new market for Village where the ShopRite name is less known than in New Jersey.  As the Company begins operating in this new market, marketing and other costs will likely be higher than in established markets as Village attempts to build market share and brand awareness.  In addition, sales for these two stores are initially expected to be lower than the typical Company store.  Potentially higher costs and sales results lower than the Company’s expectations could have a material adverse effect on Village’s results of operations.
·	Village purchases substantially all of its merchandise from Wakefern.  In addition, Wakefern provides the Company with support services in numerous areas including supplies, advertising, liability and property insurance, technology support and other store services.  Further, Village receives patronage dividends and other product incentives from Wakefern.  Any material change in Wakefern’s method of operation or a termination or material modification of Village’s relationship with Wakefern could have an adverse impact on the conduct of the Company’s business and could involve additional expense for Village.  The failure of any Wakefern member to fulfill its obligations to Wakefern or a member’s insolvency or withdrawal from Wakefern could result in increased costs to the Company.  Additionally, an adverse change in Wakefern’s results of operations could have an adverse affect on Village’s results of operations.

·	Approximately 92% of our employees are covered by collective bargaining agreements.  Any work stoppages could have an adverse impact on our financial results. If we are unable to control health care and pension costs provided for in the collective bargaining agreements, we may experience increased operating costs.
·	Village could be adversely affected if consumers lose confidence in the safety and quality of the food supply chain. The real or perceived sale of contaminated food products by us could result in a loss of consumer confidence and product liability claims, which could have a material adverse effect on our sales and operations.
·	On April 15, 2011, Village, along with all of the other individual employers trading as ShopRite, permanently withdrew from participating in the United Food and Commercial Workers Local 152 Retail Meat Pension Fund (“the Fund”), effective the end of April 2011.  The Fund is a multi-employer defined benefit plan that includes other supermarket operators. Village, along with the other affiliated ShopRite operators, determined to withdraw from the Fund due to exposures to market risks associated with all defined benefit plans and the inability to partition ShopRite’s liabilities from those of the other participating supermarket operators.  Village now provides affected associates with a defined contribution plan for future service, which eliminates market risks and the exposure to shared liabilities of other operators, and is estimated to be less costly than the defined benefit plan in the future, while ensuring that our associates are provided a secure benefit. The Company recorded a pre-tax charge of $7,028 in fiscal 2011 for this withdrawal liability, which represents our estimate of the liability based on calculations provided by the Fund actuary. Village remains liable for potential additional withdrawal liabilities to the Fund in the event a mass withdrawal, as defined by statute, occurs within two plan years after the plan year of Village’s withdrawal.  Such liabilities could be material to the Company’s consolidated financial statements.

 

 

·	Our effective tax rate may be impacted by the results of tax examinations and changes in tax laws, including the disputes with the state of New Jersey described in note 5 of the Company’s Annual report on Form 10-K for the year ended July 30, 2011.

 

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

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

 

 

 

 

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