VILLAGE SUPER MARKET INC - Quarter Report: 2022 October (Form 10-Q)

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 October 29, 2022

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:

		December 7, 2022

	Class A Common Stock, No Par Value	10,218,646 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			13

Item 3. Quantitative & Qualitative Disclosures about Market Risk			20

Item 4. Controls and Procedures			20

PART II

OTHER INFORMATION



Item 6. Exhibits			21

Signatures			22

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


VILLAGE SUPER MARKET, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited)
	October 29, 2022		July 30, 2022
ASSETS
Current assets
Cash and cash equivalents	$	119,247	$	134,832
Merchandise inventories	48,545		44,190
Patronage dividend receivable	16,984		12,239
Notes receivable from Wakefern	—		28,627

Income taxes receivable	425		631
Other current assets	18,126		17,446
Total current assets	203,327		237,965

Property, equipment and fixtures, net	267,839		265,333
Operating lease assets	287,113		293,295
Notes receivable from Wakefern	88,701		29,157
Investment in Wakefern	33,107		33,004
Investments in Real Estate Partnerships	8,438		7,162
Goodwill	24,190		24,190
Other assets	38,650		34,342

Total assets	$	951,365	$	924,448
LIABILITIES and SHAREHOLDERS' EQUITY
Current liabilities
Operating lease obligations	$	20,570	$	20,351
Finance lease obligations	613		596
Notes payable to Wakefern	1,187		1,134
Current portion of debt	8,895		7,466
Accounts payable to Wakefern	80,594		77,037
Accounts payable and accrued expenses	29,501		24,266
Accrued wages and benefits	26,524		27,221
Income taxes payable	4,384		98
Total current liabilities	172,268		158,169
Long-term debt
Operating lease obligations	278,382		284,300
Finance lease obligations	21,295		21,510
Notes payable to Wakefern	1,842		1,961
Long-term debt	72,797		66,264
Total long-term debt	374,316		374,035
Pension liabilities	4,654		4,569
Other liabilities	16,912		15,566
Commitments and contingencies (Note 6)
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 10,971 shares at October 29, 2022 and July 30, 2022	73,499		72,891
Class B common stock, no par value: Authorized 20,000 shares; issued and outstanding 4,294 shares at October 29, 2022 and July 30, 2022	697		697
Retained earnings	314,803		306,974
Accumulated other comprehensive income	8,804		6,135
Less treasury stock, Class A, at cost: 752 shares at October 29, 2022 and July 30, 2022	(14,588)		(14,588)
Total shareholders’ equity	383,215		372,109

Total liabilities and shareholders’ equity	$	951,365	$	924,448

See notes to consolidated financial statements.


VILLAGE SUPER MARKET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited)
	13 Weeks Ended
		October 29, 2022		October 30, 2021
Sales		$	519,689	$	494,211

Cost of sales		370,404		354,031

Gross profit		149,285		140,180

Operating and administrative expense		125,562		121,283

Depreciation and amortization		8,547		8,335

Operating income		15,176		10,562



Interest expense		(1,087)		(970)

Interest income		1,968		976

Income before income taxes		16,057		10,568

Income taxes		4,976		3,240

Net income		$	11,081	$	7,328

Net income per share:
Class A common stock:
Basic		$	0.85	$	0.56
Diluted		$	0.76	$	0.50

Class B common stock:
Basic		$	0.55	$	0.37
Diluted		$	0.55	$	0.37

See notes to consolidated financial statements.


VILLAGE SUPER MARKET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) (Unaudited)
	13 Weeks Ended
		October 29, 2022		October 30, 2021
Net income		$	11,081	$	7,328

Other comprehensive income:
Unrealized gains on interest rate swaps, net of tax (1)		2,765		791
Amortization of pension actuarial loss, net of tax (2)		(96)		88




Comprehensive income		$	13,750	$	8,207

(1)Amount is net of tax of $1,242 and $339 for the 13 weeks ended October 29, 2022 and October 30, 2021, respectively.

(2)Amounts are net of tax of $43 and $38 for the 13 weeks ended October 29, 2022 and October 30, 2021, respectively. All amounts are reclassified from accumulated other comprehensive income to operating and administrative expense.

See notes to consolidated financial statements.


VILLAGE SUPER MARKET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (In thousands) (Unaudited)
	13 Weeks Ended October 29, 2022 and October 30, 2021
	Class A Common Stock			Class B Common Stock					Accumulated Other Comprehensive Income		Treasury Stock Class A			Total Shareholders' Equity
	Shares Issued	Amount		Shares Issued	Amount		Retained Earnings				Shares	Amount
Balance, July 30, 2022	10,971	$	72,891	4,294	$	697	$	306,974	$	6,135	752	$	(14,588)	$	372,109
Net income	—	—		—	—		11,081		—		—	—		11,081
Other comprehensive income, net of tax of $1,199	—	—		—	—		—		2,669		—	—		2,669
Dividends	—	—		—	—		(3,252)		—		—	—		(3,252)



Share-based compensation expense	—	608		—	—		—		—		—	—		608


Balance, October 29, 2022	10,971	$	73,499	4,294	$	697	$	314,803	$	8,804	752	$	(14,588)	$	383,215

Balance, July 31, 2021	10,978	$	70,594	4,294	$	697	$	293,185	$	(9,064)	726	$	(13,939)	$	341,473
Net income	—	—		—	—		7,328		—		—	—		7,328
Other comprehensive income, net of tax of $377	—	—		—	—		—		879		—	—		879
Dividends	—	—		—	—		(3,264)		—		—	—		(3,264)

Treasury stock purchases	—	—		—	—		—		—		4	(89)		(89)

Share-based compensation expense	9	644		—	—		—		—		—	—		644

Balance, October 30, 2021	10,987	$	71,238	4,294	$	697	$	297,249	$	(8,185)	730	$	(14,028)	$	346,971

See notes to consolidated financial statements.


VILLAGE SUPER MARKET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
	13 Weeks Ended
	October 29, 2022		October 30, 2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	11,081	$	7,328
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	8,950		8,712
Non-cash share-based compensation	608		644

Deferred taxes	103		(600)
Provision to value inventories at LIFO	538		250

Gain on sale of property, equipment and fixtures	(17)		(166)
Changes in assets and liabilities:
Merchandise inventories	(4,893)		(3,638)
Patronage dividend receivable	(4,745)		(4,641)
Accounts payable to Wakefern	3,760		5,634
Accounts payable and accrued expenses	3,389		(1,655)
Accrued wages and benefits	(697)		(1,764)
Income taxes receivable / payable	4,492		(1,210)
Other assets and liabilities	(550)		(1,007)
Net cash provided by operating activities	22,019		7,887
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(9,813)		(13,343)
Proceeds from the sale of assets	17		173
Investment in notes receivable from Wakefern	(59,767)		(592)
Maturity of notes receivable from Wakefern	28,850		—


Investment in real estate partnership	(1,276)		—

Net cash used in investing activities	(41,989)		(13,762)
CASH FLOWS FROM FINANCING ACTIVITIES


Proceeds from issuance of long-term debt	10,000		—
Principal payments of long-term debt	(2,352)		(1,999)


Debt issuance costs	(11)		—
Dividends	(3,252)		(3,264)
Treasury stock purchases, including shares surrendered for withholding taxes	—		(89)
Net cash provided by (used in) financing activities	4,385		(5,352)

NET DECREASE IN CASH AND CASH EQUIVALENTS	(15,585)		(11,227)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	134,832		116,314

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	119,247	$	105,087

SUPPLEMENTAL DISCLOSURES OF CASH PAYMENTS MADE FOR:
Interest	$	1,087	$	970
Income taxes	$	380	$	5,050

NONCASH SUPPLEMENTAL DISCLOSURES:

Capital expenditures included in accounts payable and accrued expenses	$	5,427	$	3,693

See notes to consolidated financial statements.

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 October 29, 2022 and the consolidated statements of operations, comprehensive income and cash flows for the 13 weeks ended October 29, 2022 and October 30, 2021 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 30, 2022 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 period ended October 29, 2022 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
		October 29, 2022	October 30, 2021
			Amount		%		Amount		%
Center Store (1)			$	311,824	60.0	%	$	295,974	59.9	%
Fresh (2)			189,008		36.4		179,823		36.4
Pharmacy			17,169		3.3		16,848		3.4
Other (3)			1,688		0.3		1,566		0.3

Total Sales			$	519,689	100.0	%	$	494,211	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 service fees related to digital sales, gift card and lottery commissions and wholesale sales.

2. MERCHANDISE INVENTORIES

At both October 29, 2022 and July 30, 2022, approximately 61% 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 $19,154 and $18,616 higher than reported at October 29, 2022 and July 30, 2022, respectively.

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.

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 table below reconciles Net income to Net income available to Class A and Class B shareholders:


	13 Weeks Ended
		October 29, 2022		October 30, 2021
Net income		$	11,081	$	7,328
Distributed and allocated undistributed Net income to unvested restricted shareholders		304		224
Net income available to Class A and Class B shareholders		$	10,777	$	7,104

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


	13 Weeks Ended
	October 29, 2022
		Class A		Class B
Numerator:
Net income allocated, basic		$	8,402	$	2,376
Conversion of Class B to Class A shares		2,376		—

Net income allocated, diluted		$	10,778	$	2,376

Denominator:
Weighted average shares outstanding, basic		9,863		4,294
Conversion of Class B to Class A shares		4,294		—

Weighted average shares outstanding, diluted		14,157		4,294

	13 Weeks Ended
	October 30, 2021
		Class A		Class B
Numerator:
Net income allocated, basic		$	5,538	$	1,566
Conversion of Class B to Class A shares		1,566		—

Net income allocated, diluted		$	7,104	$	1,566

Denominator:
Weighted average shares outstanding, basic		9,864		4,294
Conversion of Class B to Class A shares		4,294		—

Weighted average shares outstanding, diluted		14,158		4,294

Outstanding stock options to purchase Class A shares of 93 and 102 were excluded from the calculation of diluted net income per share at October 29, 2022 and October 30, 2021, respectively, as a result of their anti-dilutive effect. In addition, 363 and 388 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 October 29, 2022 and October 30, 2021, respectively, due to their anti-dilutive effect.

4. PENSION PLANS

Net periodic pension cost for the two defined benefit pension plans sponsored in fiscal 2023 and the three defined

benefit pension plans sponsored in fiscal 2022 includes the following components:


	13 Weeks Ended
		October 29, 2022		October 30, 2021
Service cost		$	34	$	47
Interest cost on projected benefit obligations		70		420
Expected return on plan assets		(19)		(409)

Amortization of net losses		(139)		126
Net periodic pension cost		$	(54)	$	184

In April 2022, the Company terminated the Village Super Market, Inc. Employees’ Retirement Plan. Prior to termination, the Company made a $1,485 contribution to fully fund the plan. Plan assets were liquidated to fund lump sum distributions to participants of $37,289 and purchase annuity contracts totaling $14,930 with an insurance company for all participants who did not elect a lump sum distribution. The Company recognized a $12,296 pre-tax settlement charge as a result of the termination, including a $10,856 non-cash charge for unrecognized losses within accumulated other comprehensive loss as of the termination date. No benefit obligation or plan assets related to the Village Super Market, Inc. Employees’ Retirement Plan remain as of October 29, 2022.

Contributions to the remaining plans are expected to be immaterial in fiscal 2023.

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 30, 2022.

On August 15, 2022, notes receivable due from Wakefern of $28,850 that earned interest at the prime rate plus 1.25% matured. The Company invested all of the proceeds received in variable rate notes receivable from Wakefern that earn interest at the prime rate plus .50% and mature on August 15, 2027. On September 28, 2022, the Company invested an additional $30,000 in variable rate notes receivable from Wakefern that earn interest at the prime rate plus .50% and mature on September 28, 2027. At October 29, 2022, the Company held variable rate notes receivable due from Wakefern of $29,606 that earn interest at the prime rate plus .75% and mature on February 15, 2024, $29,078 that earn interest at the prime rate plus .50% and mature on August 15, 2027 and $30,017 that earn interest at the prime rate plus .50% and mature on September 28, 2027. 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.

Included in cash and cash equivalents at October 29, 2022 and July 30, 2022 are $95,356 and $110,739, respectively, of demand deposits invested at Wakefern at overnight money market rates.

On April 28, 2022 the Company entered into a partnership agreement for 30% interest in the development of a retail center in Old Bridge, New Jersey, which includes a Village replacement store with future lease obligations of $$9,280. Village's share of project costs are estimated to be $15,000 to $20,000. As of October 29, 2022, Village has invested $6,286 into the real estate partnership, which is accounted for as an equity method investment.

There have been no other significant changes in the Company’s relationships or nature of transactions with related parties during the 13 weeks ended October 29, 2022.

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.

7. DEBT

Long-term debt consists of:


	October 29, 2022		July 30, 2022

Secured term loans	$	49,849	$	50,796
Unsecured term loan	26,477		17,507
New Market Tax Credit Financing	5,366		5,427

Total debt, excluding obligations under leases	81,692		73,730
Less current portion	8,895		7,466

Total long-term debt, excluding obligations under leases	$	72,797	$	66,264

Credit Facility

The Company has a $150,500 credit facility (the “Credit Facility”) with Wells Fargo National Bank, National Association (“Wells Fargo”). The principal purpose of the Credit Facility is to finance general corporate and working capital requirements, Village’s acquisition of certain Fairway assets, the purchase of the Galloway store shopping center and certain capital expenditure projects. Among other things, the Credit Facility provides for:

•An unsecured revolving line of credit providing a maximum amount available for borrowing of $75,000. Indebtedness under this agreement bears interest at the applicable Secured Overnight Financing Rate ("SOFR") plus 1.10% and expires on May 6, 2025.

•An unsecured $25,500 term loan issued on May 12, 2020, repayable in equal monthly installments based on a seven-year amortization schedule through May 4, 2027 and bearing interest at the applicable SOFR plus 1.46%. An interest rate swap with notional amounts equal to the term loan fixes the base SOFR at .26% per annum through May 4, 2027, resulting in a fixed effective interest rate of 1.72% on the term loan.

•A secured $50,000 term loan issued on September 1, 2020 repayable in equal monthly installments based on a fifteen-year amortization schedule through September 1, 2035 and bearing interest at the applicable SOFR plus 1.61%. An interest rate swap with notional amounts equal to the term loan fixes the base SOFR at .57% per annum through September 1, 2035, resulting in a fixed effective interest rate of 2.18% on the 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.

•A secured $7,350 term loan issued on January 28, 2022 repayable in equal monthly installments based on a fifteen-year amortization schedule through January 28, 2037 and bearing interest at the applicable SOFR plus 1.50%. An interest rate swap with notional amounts equal to the term loan fixes the base SOFR at 1.41% per annum through January 28, 2037, resulting in a fixed effective interest rate of 2.91% on the term loan. The term loan is secured by the Galloway store shopping center acquired in the first quarter of fiscal 2022.

On September 1, 2022, the Company amended the Credit Facility due to the execution of a seven year $10,000 unsecured term loan. The unsecured term loan is repayable in equal monthly installments based on a seven year amortization schedule through September 4, 2029 and bears interest at the applicable SOFR plus 1.35%. Village also executed an interest rate swap for a notional amount equal to the term loan amount that fixes the base SOFR at 2.95%, resulting in a fixed effective rate of 4.30%. This loan qualified for an interest rate subsidy program with Wakefern on financing related to certain capital expenditure projects. Net of the subsidy, the Company will pay interest at a fixed effective rate of 2.30%.

The Credit Facility also provides for up to $25,000 of letters of credit ($7,336 outstanding at October 29, 2022), 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 October 29, 2022. As of October 29, 2022, $67,664 remained available under the unsecured revolving line of credit.

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.

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 SOFR 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.

As of October 29, 2022, the Company had four interest rate swaps with an aggregate initial notional value of $92,850 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 the reference rate. The swaps replaced the applicable reference rate 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 income and subsequently reclassified into interest expense in the same period during which the hedged transaction affects earnings. Amounts reported in Accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the variable-rate loans. The Company reclassified $243 and $88 during the 13 weeks ended October 29, 2022 and October 30, 2021, respectively, from Accumulated other comprehensive income to Interest expense.

The notional value of the interest rate swaps were $76,656 as of October 29, 2022. The fair value of interest rate swaps recorded in Other assets in the consolidated balance sheets is $10,019 as of October 29, 2022.

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”) was founded in 1937. Village operates a chain of 34 supermarkets in New Jersey (26), New York (6), Maryland (1) and Pennsylvania (1) under the ShopRite and Fairway banners and four Gourmet Garage specialty markets in New York City. 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.

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. The Company competes by providing a superior customer service experience, competitive pricing and a broad range of consistently available quality products. The ShopRite Price Plus customer loyalty 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.

Online grocery ordering for in-store pick up or home delivery is available in all of our ShopRite stores through shoprite.com, the ShopRite app or through third party service providers. Additionally, the ShopRite Order Express app enables customers to pre-order deli, catering, specialty occasion cakes and other items. Online ordering for home delivery is available in all Fairway and Gourmet Garage stores through third party service providers.

To promote production efficiency, product quality and consistency, the Company operates a centralized commissary supplying certain products in deli, bakery, prepared foods and other perishable product categories to all stores. The Company also owns and operates an automated micro-fulfillment center to facilitate online order fulfillment for the south New Jersey stores.

The Company’s stores, seven of which are owned, average 54,000 total square feet. These larger store sizes enable the Company to offer a wide variety of national branded and locally sourced food products, including grocery, meat, produce, dairy, deli, seafood, prepared foods, bakery and frozen foods as well as non-food product offerings, including health and beauty care, general merchandise, liquor and 21 in-store pharmacies. Most product departments include high-quality, competitively priced own-brand offerings under the Wholesome Pantry, Bowl & Basket, Paperbird and Fairway brands. Our 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. Our Gourmet Garage specialty markets offer organic produce, signature soups and prepared foods, high-quality meat and seafood, charcuterie and gourmet cheeses, artisan baked bread and pastries, chef-prepared meals to go and pantry staples.

The Company has an ongoing program to upgrade and expand its supermarket chain. This program has included store remodels as well as the opening or acquisition of additional stores. When remodeling, Village has sought, whenever possible, to increase the amount of selling space in its stores. On August 14, 2022, we converted the Pelham, NY store from the Fairway banner to the ShopRite banner and a major remodel of the store was completed in late October 2022. On April 29, 2022, Village opened a 14,600 sq. ft. Gourmet Garage in the West Village in Manhattan, NYC.

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.

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
	October 29, 2022		October 30, 2021
Sales	100.00	%	100.00	%
Cost of sales	71.27		71.64
Gross profit	28.73		28.36
Operating and administrative expense	24.16		24.54
Depreciation and amortization	1.65		1.68
Operating income	2.92		2.14

Interest expense	(0.21)		(0.20)
Interest income	0.38		0.20
Income before income taxes	3.09		2.14
Income taxes	0.96		0.66
Net income	2.13	%	1.48	%

Sales. Sales were $519,689 in the 13 weeks ended October 29, 2022, an increase of 5.2% compared to the 13 weeks ended October 30, 2021. Sales increased due to an increase in same store sales of 4.3%, the opening of a Gourmet Garage in the West Village in Manhattan, NY on April 29, 2022 and increased sales due to the remodel and conversion of the Pelham, NY Fairway to the ShopRite banner on August 15, 2022. Same store sales increased due primarily to retail price inflation. New stores, replacement stores and stores with banner changes 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 .37% in the 13 weeks ended October 29, 2022 compared to the 13 weeks ended October 30, 2021 due primarily to increased departmental gross margin percentages (.17%), decreased warehouse assessment charges from Wakefern (.21%) due primarily to sales leverage, a favorable change in product mix (.07%) and lower promotional spending (.06%), partially offset by higher LIFO charges (.05%) and decreased patronage dividends and rebates received from Wakefern (.10%).

Operating and Administrative Expense. Operating and administrative expense as a percentage of sales decreased .38% in the 13 weeks ended October 29, 2022 compared to the 13 weeks ended October 30, 2021 due primarily to lower labor costs and fringe benefits (.21%) and decreased supply spending (.15%). Labor costs and fringe benefits decreased due primarily to ongoing productivity initiatives and sales leverage partially offset by minimum wage and market-driven pay rate increases.

Depreciation and Amortization. Depreciation and amortization expense increased in the 13 weeks ended October 29, 2022 compared to the 13 weeks ended October 30, 2021 due primarily to capital expenditures.

Interest Expense. Interest expense increased in the 13 weeks ended October 29, 2022 compared to the 13 weeks ended October 30, 2021 due primarily to interest related to the $10,000 unsecured term loan executed on September 1, 2022.

Interest Income. Interest income increased in the 13 weeks ended October 29, 2022 compared to the 13 weeks ended October 30, 2021 due primarily to higher interest rates and larger amounts invested in variable rate notes receivable from Wakefern and demand deposits at Wakefern.

Income Taxes. The effective income tax rate was 31.0% in the 13 weeks ended October 29, 2022 compared to 30.7% in the 13 weeks ended October 30, 2021. The increase in the effective income tax rate is due primarily to greater apportionment in higher state tax rate jurisdictions.

Net Income. Net Income was $11,081 in the 13 weeks ended October 29, 2022 compared to net income of $7,328 in the 13 weeks ended October 30, 2021. Net income increased 51% due primarily to the 4.3% increase in same store sales, higher gross profit margins and lower operating and administrative expenses.

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, goodwill and indefinite-lived intangible assets, 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 30, 2022. As of October 29, 2022, 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 $22,019 in the 13 weeks ended October 29, 2022 compared to $7,887 in the corresponding period of the prior year. The change in cash flows from operating activities in fiscal 2023 was primarily due to changes in working capital and higher net income adjusted for non-cash items. Working capital changes, including Other assets and liabilities, increased cash flows from operating activities by $756 in fiscal 2023 compared to a decrease of $8,281 in fiscal 2022. The change in impact of working capital is due primarily to the timing of tax payments, accounts payable and accrued expenses.

During the 13 weeks ended October 29, 2022, Village used cash to fund capital expenditures of $9,813, dividends of $3,252, principal payments of long-term debt of $2,352, an investment in a real estate partnership for the development of a retail center in Old Bridge, New Jersey of $1,276 and additional net investments of $30,917 in notes receivable from Wakefern. Capital expenditures primarily include costs associated with the remodel and conversion of the Pelham, NY Fairway to the ShopRite banner, the new Gourmet Garage store in the West Village of New York City, continued expansion of self-checkout, and various merchandising, technology, equipment and facility upgrades.

We expect capital expenditures to approximate $70,000 in fiscal 2023. Planned expenditures include costs for construction of three replacement stores scheduled to open in fiscal 2024, two major remodels, including the conversion of the Pelham, NY store from the Fairway to the ShopRite banner, the purchase of the Vineland store shopping center, several smaller store remodels and merchandising initiatives, installation of electronic shelf labels in six stores, continued expansion of self-checkout, and various technology, equipment and facility upgrades. The Company’s primary sources of liquidity in fiscal 2023 are expected to be cash and cash equivalents on hand at October 29, 2022 and operating cash flow generated in fiscal 2023.

On April 28, 2022 the Company entered into a partnership agreement for 30% interest in the development of a retail center in Old Bridge, New Jersey, which includes a Village replacement store with future lease obligations of $18,948. Village will fund its share of project costs estimated to be $15,000 to $20,000 over the two to three year life of the project. As of October 29, 2022, Village has invested $6,286 into the real estate partnership, which is accounted for as an equity method investment included in Investments in Real Estate Partnerships on the Consolidated Balance Sheet.

Working capital was $31,059 at October 29, 2022 compared to $79,796 at July 30, 2022. Working capital ratios at the same dates were 1.18 and 1.50 to one, respectively. The decrease in working capital in fiscal 2023 compared to fiscal 2022 is due primarily to $28,850 in notes receivable from Wakefern that matured on August 15, 2022 and were reinvested in long-term

notes receivable from Wakefern and an additional $30,017 investment in long-term notes receivable from Wakefern. 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

Based on current trends, the Company believes cash and cash equivalents on hand at October 29, 2022, operating cash flow and availability under our Credit Facility are sufficient to meet our liquidity needs for the next twelve months and for the foreseeable future beyond the next twelve months.

There have been no other substantial changes as of October 29, 2022 to the contractual obligations and commitments discussed in the Company’s Annual Report on Form 10-K for the year ended July 30, 2022.

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 expect the increase in same store sales to range from 1.0% to 3.0% in fiscal 2023.

•We have budgeted $70,000 for capital expenditures in fiscal 2023. Planned expenditures include costs for construction of three replacement stores scheduled to open in fiscal 2024, two major remodels, including the conversion of the Pelham, NY store from the Fairway to the ShopRite banner, the purchase of the Vineland store shopping center, several smaller store remodels and merchandising initiatives, installation of electronic shelf labels in six stores, continued expansion of self-checkout, and various technology, equipment and facility upgrades.

•The Board’s current intention is to continue to pay quarterly dividends in 2023 at the most recent rate of $.25 per Class A and $.1625 per Class B share.

•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 2023 to be in the range of 31.0% - 32.0%.

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

•The COVID-19 pandemic created significant volatility and uncertainty in our business since the first outbreak in our trade area in March 2020. Its continuing impact and the impact of new virus variants and the measures taken in response could adversely impact our business, financial condition and results of operations. We continue to monitor and adjust the safety measures we have implemented since the beginning of the pandemic. Our business may be affected by uncertain or changing economic and market conditions arising in connection with and in response to the COVID-19 pandemic, including labor shortages, inflation, disruptions to supply chains, higher operating and/or compliance costs, changes in customer trends and consumer demand, changes in federal, state and local laws, regulations and community response measures, the form and impact of economic stimulus, our customers access to and the continued availability of government benefit programs through the Supplemental Nutrition Assistance Program ("SNAP") and general overall economic instability. It is unclear whether and to what extent sales, consumer behavior, general economic and business activity will return to pre-pandemic levels and its impact on our business. 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 in Manhattan due primarily to less residential, 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, workers' compensation, 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 could have an adverse effect on Village’s results of operations.

•Approximately 88% 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, 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 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.

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.

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 October 29, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

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

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: December 7, 2022			/s/ Robert P. Sumas
			Robert P. Sumas
			(Chief Executive Officer)

Dated: December 7, 2022			/s/ John Van Orden
			John Van Orden
			(Chief Financial Officer)