Village Super Market, Inc.
10-K on 10/08/2020   Download
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UNITED STATES
SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D. C. 20549 
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934.
For the fiscal year ended July 25, 2020
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

COMMISSION FILE NUMBER:   0-33360
VILLAGE SUPER MARKET, INC.
(Exact name of registrant as specified in its charter) 
New Jersey22-1576170
(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 valueVLGEAThe 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 if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes    No  ý
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No  ý
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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  ý   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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  ý   No 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§299.405 of this chapter) is not contained herein, and will not be contained, to the best of the 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. ý
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and " emerging growth company" in Rule 12b-2 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report.  




Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes    No  ý
The aggregate market value of the Class A common stock of Village Super Market, Inc. held by non-affiliates was approximately $186.7 million and the aggregate market value of the Class B common stock held by non-affiliates was approximately $0.3 million based upon the closing price of the Class A shares on the NASDAQ on January 25, 2020, the last business day of the second fiscal quarter.  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
ClassOctober 7, 2020
  
Class A common stock, no par value10,259,192 Shares
Class B common stock, no par value4,293,748 Shares
DOCUMENTS INCORPORATED BY REFERENCE
Information contained in the 2020 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 11, 2020 are incorporated by reference into this Form 10-K at Part II, Item 5 and Part III.
PART I
(All dollar amounts are in thousands, except per share and per square foot data).

ITEM I.   BUSINESS
 
GENERAL
 
Village Super Market, Inc. (the “Company” or “Village”) was founded in 1937.  Village operates a chain of thirty ShopRite supermarkets, five Fairway Markets and three Gourmet Garage specialty markets located in New Jersey, New York, Pennsylvania and Maryland. Village competes by using low pricing, providing a superior customer experience and a broad range of consistently available quality products, including store and own brands.

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

The Company is a member of Wakefern Food Corporation ("Wakefern"), the nation's largest retailer-owned food cooperative and owner of the ShopRite, Fairway and Gourmet Garage names.  This relationship provides Village many of the economies of scale in purchasing, distribution, own branded products, advanced retail technology, marketing and advertising associated with chains of greater size and geographic coverage. The ShopRite Price Plus preferred customer program enables Village to offer continuity programs, focus on target marketing initiatives and to offer discounts and attach digital coupons directly to a customer's Price Plus card. 

During fiscal 2020, sales per store were $53,284 and sales per average square foot of selling space were $1,275, excluding the acquired Fairway stores.  The Company gives ongoing attention to the décor and format of its stores and tailors each store's product mix to the preferences of the local community.  











Below is a summary of the range of store sizes at July 25, 2020:
Total Square FeetNumber of Stores
  
Greater than 60,00017
50,001 to 60,0009
40,001 to 50,0005
20,000 to 40,0004
Less than 20,0003
Total38
 
These larger store sizes enable the Company’s stores to provide a “one-stop” shopping experience and to feature expanded higher margin specialty departments such as an on-site bakery, an expanded delicatessen, a variety of natural and organic foods, ethnic and international foods, prepared foods and pharmacies.  Our stores emphasize a Power Alley, which features high margin, fresh, convenience offerings, including store prepared specialty foods for both take-home and in-store dining, in an area within the store that provides quick customer entry and exit.

Online grocery ordering for in-store pick up or home delivery through ShopRite from Home is available in twenty-six stores. Customers can browse our circular, create and edit shopping lists and use ShopRite from Home through shoprite.com or the ShopRite app.  Additionally, the ShopRite Order Express app enables customers to pre-order deli, catering, specialty occasion cakes and other items. Online ordering for home delivery through third party services is available in all Fairway and Gourmet Garage stores. In April 2020 we also added online ordering for home delivery through third party services in all ShopRite stores.

The following table shows the percentage of the Company's sales allocated to various product categories during each of the periods indicated:
 
Product Categories 
 20202019
Groceries35.9 %35.9 %
Dairy and Frozen17.1 16.9 
Produce11.9 12.0 
Meats9.9 9.5 
Non-Foods7.9 8.2 
Deli and Prepared Food7.4 7.7 
Pharmacy3.8 4.2 
Seafood2.9 2.6 
Bakery2.1 2.2 
Liquor0.7 0.5 
Other0.4 0.3 
 100 %100 %
 
A variety of factors affect the profitability of each of the Company's stores, including competition, size, access and parking, lease terms, management supervision, and the strength of the applicable banner in the local community.  Village continually evaluates individual stores to determine if they should be closed, remodeled or replaced.
 
ACQUISITIONS, DEVELOPMENT AND EXPANSION
 
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.


2


Fiscal 2020

On May 14, 2020, Village completed its acquisition of certain assets, including five supermarkets averaging 52,000 sq. ft. (30,000 selling sq. ft.), the PDC and the intellectual property of Fairway, including the names “Fairway” and “Fairway Markets.” Four of the supermarkets are in Manhattan, specifically the Upper West Side, Upper East Side, Kips Bay and Chelsea locations, and a fifth store is located in Pelham, NY. The acquisition was effectuated pursuant to the Asset Purchase Agreement (the "APA"), entered into on January 20, 2020, revised on March 25, 2020 and approved by the United States Bankruptcy Court for the Southern District of New York through a Sale Order entered on April 20, 2020. Village paid $73,622 for the Fairway assets, net of cash acquired, and assumed certain liabilities, consisting primarily of those arising from acquired leases. Additionally, at the time of closing Village received a $2,035 credit arising from the breakup of Village’s initial “stalking horse” bid under the January 20, 2020 Asset Purchase Agreement. The credit was recognized as a reduction in operating and administrative expense in the fourth quarter of fiscal 2020.

Fiscal 2020 capital expenditures include costs associated with the opening of an 82,000 sq. ft. (52,000 selling sq. ft.) store in Stroudsburg, Pennsylvania that replaced our existing 53,000 sq. ft. store, expansion of ShopRite from Home, including the opening of an automated micro-fulfillment center in southern New Jersey, one major store remodel, several smaller remodels and equipment upgrades, including those in the integration of the Fairway acquisition.

Fiscal 2019

On June 24, 2019, Village acquired the assets and certain liabilities of Gourmet Garage for $5,267, net of cash acquired. Gourmet Garage operates three specialty markets averaging 11,000 sq. ft. (5,800 selling sq. ft.) in Manhattan, New York City.

Fiscal 2019 capital expenditures include costs associated with the beginning of construction of a replacement store in Stroudsburg, Pennsylvania, expanded self-checkout across most of our stores, several smaller remodels and small equipment purchases.

We have budgeted $35,000 for capital expenditures in fiscal 2021.  Planned expenditures include two major remodels, several smaller store remodels, continued expansion of ShopRite from Home and self-checkout, and various merchandising, technology, equipment and facility upgrades.
 
Additional store remodels and sites for new stores are in various stages of development.  Village will also consider additional acquisitions should appropriate opportunities arise.
 
WAKEFERN FOOD CORPORATION
 
The Company is the second largest member of Wakefern and owns 12.5% of Wakefern’s outstanding stock as of July 25, 2020.  Wakefern, which was organized in 1946, is the nation’s largest retailer-owned food cooperative.  Wakefern and its 49 shareholder members operate 362 supermarkets and other retail formats, including 94 stores operated by Wakefern.  Only Wakefern and its members are entitled to use the ShopRite, Fairway and Gourmet Garage names and trademarks, and to participate in related advertising and promotional programs.

The principal benefits to the Company from its relationship with Wakefern are the use of the ShopRite, Fairway and Gourmet Garage names and trademarks, volume purchasing, store and own branded products, distribution and warehousing economies of scale, advertising and promotional programs (including the ShopRite Price Plus card) and the development of advanced retail technology.  The Company believes that the ShopRite and Fairway names are widely recognized by its customers and is a factor in their decisions about where to shop. Store and own branded products accounted for approximately 12.6% of ShopRite sales in fiscal 2020.
 
Wakefern distributes as a "patronage dividend" to each of its stockholders a share of substantially all of its earnings in proportion to the dollar volume of purchases by the stockholder from Wakefern during each fiscal year.
 
While Wakefern has a substantial professional staff, it operates as a member owned cooperative.  Executives of most members make contributions of time to the business of Wakefern.  Executives of the Company spend a significant amount of their time working on various Wakefern committees, which oversee and direct Wakefern purchasing, merchandising and other programs.  In addition, Nicholas Sumas, the Company’s Co-President, is a member of the Wakefern Board of Directors.
 
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 using various formulas
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which allocate advertising costs in accordance with the estimated proportional benefits to each member from such advertising.  The Company also places Wakefern developed materials with local newspapers.  In addition, Wakefern and its affiliates provide the Company with other services including liability and property insurance, supplies, certain equipment purchasing, coupon processing, certain financial accounting applications, retail technology support, including shoprite.com, fairway.com, branded apps and other store services.
 
Wakefern operates warehouses and distribution facilities in Elizabeth, Keasbey, Whitehouse, Dayton, Newark and Jamesburg, New Jersey and Gouldsboro and Breinigsville, Pennsylvania.  The Company and all other members of Wakefern are parties to the Wakefern Stockholders' Agreement which provides for certain commitments by, and restrictions on, all shareholders of Wakefern.  This agreement extends until ten years from the date that stockholders representing 75% of Wakefern sales notify Wakefern that those stockholders request the Wakefern Stockholders' Agreement be terminated.  Each member is obligated to purchase from Wakefern a minimum of 85% of its requirements for products offered by Wakefern.  If this purchase obligation is not met, the member is required to pay Wakefern's profit contribution shortfall attributable to this failure.  The Company fulfilled this obligation in fiscal 2020 and 2019.  This agreement also requires that in the event of unapproved changes in control of the Company or a sale of the Company or of individual Company stores, except to a qualified successor, the Company in such cases must pay Wakefern an amount equal to the annual profit contribution shortfall attributable to the sale of a store or change in control.  No payments are required if the volume lost by a shareholder as a result of the sale of a store is replaced by such shareholder by increased volume in existing or new stores.  A "qualified successor" must be, or agree to become, a member of Wakefern, and may not own or operate any supermarkets, other than ShopRite, PriceRite, The Fresh Grocer, Fairway, Gourmet Garage or Dearborn Market supermarkets, in the states of New York, New Jersey, Pennsylvania, Delaware, Maryland, Virginia, Connecticut, Massachusetts, Rhode Island, Vermont, New Hampshire, Maine or the District of Columbia, or own or operate more than 25 non-ShopRite supermarkets in any other locations in the United States.
 
Wakefern, under circumstances specified in its bylaws, may refuse to sell merchandise to, and may repurchase the Wakefern stock of, any member.  Such circumstances include a member's bankruptcy filing, certain unapproved transfers by a member of its supermarket business or its capital stock in Wakefern, unapproved acquisition by a member of certain supermarket or grocery wholesale supply businesses, the material breach by a member of any provision of the bylaws of Wakefern or any agreement with Wakefern, or a failure to fulfill financial obligations to Wakefern.
 
Any material change in Wakefern's method of operation or a termination or material modification of the Company's relationship with Wakefern following termination of the above agreements, or otherwise, might have an adverse impact on the conduct of the Company's business and could involve additional expense for the Company.  The failure of any Wakefern member to fulfill its obligations under these agreements or a member's insolvency or withdrawal from Wakefern could result in increased costs to remaining members.
 
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, PriceRite, The Fresh Grocer, Fairway, Gourmet Garage or Dearborn Market names are, however, subject to the approval of Wakefern's Site Development Committee.  This committee is composed of persons who are not employees or members of Wakefern.  Committee decisions 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 estimates of the impact of the proposed store on existing member supermarkets in the area.
 
Each of Wakefern's members is required to make capital contributions to Wakefern based on the number of stores operated by that member and the purchases from Wakefern generated by those stores.  As additional stores are opened or acquired by a member, additional capital must be contributed by it to Wakefern.  The Company’s investment in Wakefern and affiliates was $29,462 at July 25, 2020.  The total amount of debt outstanding from all capital pledges to Wakefern is $1,185 at July 25, 2020.  The maximum per store investment, which is currently $950, did not change in fiscal 2020.

As required by the Wakefern bylaws, the Company’s investment in Wakefern is pledged to Wakefern to secure the Company’s obligations to Wakefern.  In addition, five members of the Sumas family have guaranteed the Company’s obligations to Wakefern.  These personal guarantees are required of any 5% shareholder of the Company who is active in the operation of the Company.  Wakefern does not own any securities of the Company or its subsidiaries.  The Company’s investment in Wakefern entitles the Company to enough votes to elect one member to the Wakefern Board of Directors due to cumulative voting rights.

LABOR
 
As of July 25, 2020, the Company employed approximately 8,713 persons with approximately 75% working part-time.  Approximately 90% of the Company’s employees are covered by collective bargaining agreements. Contracts with the
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Company’s seven unions have expiration dates between March 2020 and May 2025.  Approximately 31% of our associates are represented by unions whose contracts have expired or will expire within one year.  Many of the Company’s competitors are similarly unionized.
 
SEASONALITY
The majority of our revenues are generally not seasonal in nature. However, revenues tend to be higher during the major holidays throughout the year.

REGULATORY ENVIRONMENT
 
The Company’s business requires various licenses and the registration of facilities with state and federal health and drug regulatory agencies.  These licenses and registration requirements obligate the Company to observe certain rules and regulations, and a violation of these rules and regulations could result in a suspension or revocation of licenses or registrations and fines or penalties.  In addition, most licenses require periodic renewals.  The Company has not experienced material difficulties with respect to obtaining or retaining licenses and registrations. 

COMPETITION
 
The supermarket business is highly competitive and characterized by narrow profit margins.  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 the Company's principal competitors include Acme, Aldi, Amazon/Whole Foods, BJs, Costco, Foodtown, Giant, Kings, Lidl, Safeway, Stop & Shop, Target, Trader Joe's, Wal-Mart, Wegmans and Weis. Competition with these outlets is based on price, store location, convenience, promotion, product assortment, quality and service.  Some of these competitors have greater financial resources, lower merchandise acquisition costs and lower operating expenses than we do.

AVAILABLE INFORMATION
 
As a member of the Wakefern cooperative, Village relies upon our customer focused websites, shoprite.com, gourmetgarage.com and fairway.com, for interaction with customers and prospective employees.  This website is maintained by Wakefern for the benefit of all ShopRite supermarkets, and therefore does not contain any financial information related to the Company.
 
The Company will provide paper copies of the annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and press releases free of charge upon request to any shareholder.  In addition, electronic copies of these filings can be obtained at sec.gov.
 

ITEM 1A.   RISK FACTORS
 
Not applicable.
 
ITEM 1B.   UNRESOLVED STAFF COMMENTS
 
Not applicable.
 
ITEM 2.   PROPERTIES

As of July 25, 2020, Village owns the sites of six of its supermarkets (containing 412,000 square feet of total space), all of which are freestanding stores, except the Egg Harbor store, which is part of a shopping center, and the micro-fulfillment center in southern New Jersey.  The remaining 32 stores (containing 1,679,000 square feet of total space), PDC and the corporate headquarters are leased, with initial lease terms generally ranging from 20 to 30 years, usually with renewal options.  Twenty-four of these leased stores are located in shopping centers or city storefronts and the remaining eight are freestanding stores. Most of the Company’s leases contain renewal options at increased rents of five years each at the Company’s sole discretion. These options enable Village to retain the use of facilities in desirable operating areas. Each renewal option is evaluated when recognizing the lease right-of-use assets and liabilities, and the Company utilizes the lease term for which it is reasonably certain to use the underlying asset. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company is obligated under all leases to pay for real estate taxes, utilities and liability insurance, and under certain leases to pay
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additional amounts based on maintenance and a percentage of sales in excess of stipulated amounts. The Company accounts for rent holidays, escalating rent provisions, and construction allowances on a straight-line basis over the term of the lease.

As of July 25, 2020, finance lease right-of-use assets of $13,753 are included in property, equipment and fixtures, net in the Company's consolidated balance sheet.

The annual rental payment, including finance leases, for all of the Company's leased facilities for the year ended July 25, 2020 was approximately $24,865. For additional information on lease obligations, see Note 7 to the consolidated financial statements.
 
Village is a limited partner in two partnerships, one of which owns a shopping center in which one of our leased stores is located.  The Company is also a general partner in a partnership that is a lessor of one of the Company's freestanding stores.
 
ITEM 3.   LEGAL PROCEEDINGS

Superstorm Sandy devastated Village's trade area on October 29, 2012 and resulted in the closure of almost all of our stores for periods of time ranging from a few hours to eight days. Village disposed of substantial amounts of perishable product and also incurred repair, labor and other costs as a result of the storm. Wakefern, as the policy holder, has pursued recovery of uncollected insurance claims on behalf of all Wakefern members through litigation against the insurance carrier and others since October 2013. Litigation over this matter has ended and the Company received an additional $2,733 in the 4th quarter of fiscal 2020 which was recognized as a reduction in operating and administrative expense. Village previously recognized $415 as a reduction in operating and administrative expense in the first quarter of fiscal 2019, and has received a total of $6,730 related to losses incurred as a result of Superstorm Sandy.

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.



ITEM 4. MINE SAFETY DISCLOSURES
 
Not applicable.

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PART II
 
ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
 
(All dollar amounts are in thousands, except per share data).
 
Stock Price and Dividend Information
 
The Class A common stock of Village Super Market, Inc. is traded on the NASDAQ Global Select Market under the symbol “VLGEA.” The table below sets forth the high and low last reported sales price for the fiscal quarter indicated.

2020HighLow
4th Quarter$27.72$22.43
3rd Quarter$24.58$17.10
2nd Quarter$28.40$22.46
1st Quarter$26.73$24.26
2019HighLow
4th Quarter$29.82$24.58
3rd Quarter$31.58$26.36
2nd Quarter$28.37$24.35
1st Quarter$29.36$23.94
 
As of October 1, 2020, there were approximately 282 holders of record of Class A common stock.
 
During fiscal 2020, Village paid cash dividends of $12,965.  Dividends in fiscal 2020 consist of $1.00 per Class A common share and $.65 per Class B common share.

During fiscal 2019, Village paid cash dividends of $12,890.  Dividends in fiscal 2019 consist of $1.00 per Class A common share and $.65 per Class B common share.


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ITEM 6.   SELECTED FINANCIAL DATA
 
Selected Financial Data
(Dollars in thousands, except per share data and per square foot data).
 
Fiscal 2016 contains 53 weeks, with the additional week included in the fourth quarter. All other fiscal years contain 52 weeks.
 
For yearJuly 25, 2020July 27, 2019July 28, 2018July 29,
2017
July 30,
2016
Sales$1,804,594 $1,643,502 $1,612,015 $1,604,574 $1,634,904 
Net income 24,939 (1)25,539 (2)25,080 (3)22,921 25,044 (4)
Net income as a % of sales1.38 %1.55 %1.56 %1.43 %1.53 %
Net income per share:  
Class A common stock:  
Basic$1.93 $1.98 $1.95 $1.80 $1.98 
Diluted1.72 1.77 1.74 1.60 1.77 
Class B common stock:  
Basic1.25 1.29 1.27 1.16 1.29 
Diluted1.25 1.29 1.27 1.16 1.29 
Cash dividends per share:  
Class A1.00 1.00 1.00 1.00 1.00 
Class B0.65 0.65 0.65 0.65 0.65 
At year-end  
Total assets (5) $915,546 $502,289 $481,590 $455,225 $450,254 
Long-term debt (5)396,181 47,725 48,186 42,646 43,561 
Working capital34,522 56,307 89,201 85,279 60,538 
Shareholders’ equity332,320 318,672 303,145 286,820 271,735 
Book value per share22.84 22.15 21.08 19.93 19.20 
Other data  
Same store sales trend (6)5.3 %(0.5)%0.2 %0.0 %1.4 %
Total square feet2,091,000 1,804,000 1,770,000 1,717,000 1,717,000 
Average total sq. ft. per store55,000 55,000 59,000 59,000 59,000 
Selling square feet1,529,000 1,401,000 1,384,000 1,353,000 1,353,000 
Sales per average square foot of selling space (7)$1,275 $1,186 $1,188 $1,186 $1,208 
Number of stores38 33 30 29 29 
Sales per average number of stores (7)$53,284 $54,715 $55,450 $55,330 $56,376 
Capital expenditures and acquisitions54,495 27,988 35,464 27,726 19,971 
 
(1) Includes a $1,911 (net of tax) gain for Superstorm Sandy insurance proceeds received, an $854 (net of tax) gain on the sale of pharmacy prescription lists related to three store pharmacies closed in March 2020, a $2,512 incremental benefit from a federal net operating loss carryback at a rate higher than the current statutory tax rate, a $1,423 (net of tax) gain arising from the breakup of Village’s initial “stalking horse” bid under the January 20, 2020 Fairway Asset Purchase Agreement, transaction costs incurred for the Fairway acquisition of $1,888 (net of tax), amortization of acquisition related inventory step-up of $355 (net of tax), a non-cash pension charge related to the termination of a company-sponsored pension plan and other pension settlement charges of $1,160 (net of tax), pre-opening costs related to the Stroudsburg, Pennsylvania replacement store of $891
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(net of tax) and store closure costs and charges to write off the lease asset and related obligations for the old Stroudsburg store of $557 (net of tax).
(2) Includes a $290 (net of tax) gain for Superstorm Sandy insurance proceeds received, a tax benefit of $777 related to the favorable settlement of a tax audit with the New Jersey Division of Taxation and a non-cash pension charge related to pension settlement charges of $308 (net of tax).
(3) Includes a $3,300 reduction in deferred tax expense as a result of the Tax Cuts and Jobs Act, an $822 (net of tax) non-recurring credit accrued related to multi-employer pension benefits, $877 (net of tax) in non-recurring assessments from Wakefern and $695 (net of tax) in pre-opening costs related to the Bronx, New York City store.
(4) Includes estimated net income of $280 due to the fiscal year including a 53rd week and a $545 (net of tax) gain due to the recovery of insurance receivables related to Superstorm Sandy.
(5) On July 28, 2019, the Company adopted ASU 2016-02, “Leases.” The adoption of the standard resulted in the recognition of operating lease assets and operating lease liabilities, included in long-term debt of $99,415 and $111,139, respectively, as of the date of adoption.
(6) New stores and replacement stores are included in same store sales in the quarter after the store has been in operation for four full quarters. Store renovations and expansions are included in same store sales immediately. The change in same store sales in fiscal 2017 and 2016 excludes the impact of the 53rd week in fiscal 2016.
(7) Amounts for the year ended July 25, 2020 exclude the results of the Fairway stores acquired on May 14, 2020, amounts for the year ended July 27, 2019 exclude the results of the Gourmet Garage stores acquired on June 24, 2019. Amounts for the year ended July 28, 2018 exclude results of the store opened in the Bronx, New York on June 28, 2018.

Unaudited Quarterly Financial Data
(Dollars in thousands except per share amounts).
 
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Fiscal
Year
2020     
Sales$407,402 $437,422 $458,292 $501,478 $1,804,594 
Gross profit113,546 117,947 129,901 145,081 506,475 
Net income2,567 2,005 11,138 9,229 24,939 
Net income per share:     
Class A common stock:     
Basic0.20 0.16 0.86 0.71 1.93 
Diluted0.18 0.14 0.77 0.63 1.72 
Class B common stock:     
Basic0.13 0.10 0.56 0.46 1.25 
Diluted0.13 0.10 0.56 0.46 1.25 
2019     
Sales$401,550 $428,128 $395,458 $418,366 $1,643,502 
Gross profit112,113 117,736 110,611 116,256 456,716 
Net income6,269 7,571 4,970 6,729 25,539 
Net income per share:  
Class A common stock:  
Basic0.49 0.59 0.39 0.52 1.98 
Diluted0.43 0.53 0.35 0.47 1.77 
Class B common stock:  
Basic0.32 0.38 0.25 0.34 1.29 
Diluted0.32 0.38 0.25 0.34 1.29 






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ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
(Dollars in thousands, except per share and per square foot data).
 
OVERVIEW
 
Village operates a chain of thirty ShopRite supermarkets, five Fairway Markets and three Gourmet Garage specialty markets located in New Jersey, New York, Pennsylvania and Maryland. Village is the second largest member of Wakefern Food Corporation (“Wakefern”), the nation’s largest retailer-owned food cooperative and owner of the ShopRite, Fairway and Gourmet Garage names. 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 larger chains.

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

On November 1, 2019, Village opened an 82,000 sq. ft. (52,000 selling sq. ft.) ShopRite in Stroudsburg, Pennsylvania and replaced our existing 53,000 sq. ft. store. On June 24, 2019, Village acquired the assets and certain liabilities of Gourmet Garage for $5,267. Gourmet Garage operates three specialty markets averaging 11,000 sq. ft. (5,800 selling sq. ft.) in Manhattan, New York City.

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

In November 2019, ShopRite launched the Bowl & Basket and Paperbird store brands. Bowl & Basket foods pair thoughtfully selected ingredients at a budget friendly price and Paperbird offers a line of newly designed household products.  More than 100 newly branded items, including packaged salads, salty snacks, cooking oils, bottled water and paper goods, were introduced in early November 2019. ShopRite expects to add nearly 3,500 Bowl & Basket foods and Paperbird household products through fiscal 2021. The introduction of Bowl & Basket and Paperbird follows the 2016 launch of ShopRite’s Wholesome Pantry brands, which include the Wholesome Pantry Organic line as well as a range of products free from 110 ingredients and artificial additives and preservatives.

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

Online grocery ordering for in-store pick up or home delivery through ShopRite from Home is available in twenty-six stores. Customers can browse our circular, create and edit shopping lists and use ShopRite from Home through shoprite.com or the
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ShopRite app.  Additionally, the ShopRite Order Express app enables customers to pre-order deli, catering, specialty occasion cakes and other items. Online ordering for home delivery through third party services is available in all Fairway and Gourmet Garage stores. In April 2020 we also added online ordering for home delivery through third party services in all ShopRite stores.

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

The Company utilizes a 52 - 53 week fiscal year, ending on the last Saturday in the month of July. Fiscal 2020 and 2019 contain 52 weeks.

COVID-19

The Company was significantly impacted by the COVID-19 outbreak as it operates in and around one of the early U.S. epicenters of the health crisis with much of our trade area under stay-at-home orders from mid-March 2020 through June 2020. The Company is classified as an essential business and has remained open to serve our customers and the communities in which we operate.

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

Associate Support. We paid temporary wage premiums up to $2 per hour above the standard wage rate for hourly front-line associates and weekly premiums for salaried front-line associates from March 22nd through August 3rd, provided Emergency Paid Leave to associates affected by COVID-19, supplied meals to our associates on duty through our Feeding Our Village Heroes Program, expanded remote work capabilities, limited travel of regional supervision teams, created a centralized call center and real-time alert text communication platform.

Responding to the needs of our Customers and Communities. Expanded digital capabilities, including expansion of stores offering ShopRite from Home, expanded the ShopRite Order Express app to provide pre-ordering capabilities in the deli and other areas, contactless pickup, prescription drug pickup and delivery, launched partnerships with online grocery picking and delivery services to better support our customers increased demand for these services, expanded mobile scan to an additional 10 stores, donated and supplied masks to local hospitals and reserved the first hour of business each day for elderly and at-risk customers.

Village incurred incremental operating expenses of over $13,500 in the second half of fiscal 2020 for these programs and initiatives implemented to support and protect our associates, customers and the communities we serve.

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RESULTS OF OPERATIONS
 
The following table sets forth the components of the consolidated statements of operations of the Company as a percentage of sales:
 
 July 25, 2020July 27, 2019
Sales100.00 %100.00 %
Cost of sales71.93 %72.21 %
Gross profit28.07 %27.79 %
Operating and administrative expense24.65 %24.02 %
Depreciation and amortization1.74 %1.66 %
Operating income1.68 %2.11 %
Interest expense(0.14)%(0.27)%
Interest income0.22 %0.32 %
Income before income taxes1.76 %2.16 %
Income taxes0.38 %0.61 %
Net income1.38 %1.55 %
 
SALES
 
Sales were $1,804,594 in fiscal 2020, an increase of $161,092, or 9.8% from fiscal 2019. Sales increased due to the Fairway acquisition completed on May 14, 2020, the opening of the Stroudsburg replacement store on November 1, 2019, the Gourmet Garage acquisition on June 24, 2019 and a same store sales increase of 5.3%. Same store sales increased due primarily to increased customer demand across most stores due to the impact of the COVID-19 pandemic, most significantly in March where sales reached unprecedented levels. Following the outbreak, average basket sizes increased and transaction counts decreased as customers consolidated shopping trips. Digital sales growth accelerated through both ShopRite from Home and partnerships with online grocery picking and delivery services, increasing 83% in fiscal 2020 compared to fiscal 2019. Sales in Gourmet Garage and Fairway have declined significantly compared to historical levels due primarily to population migration out of Manhattan during the pandemic.

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

GROSS PROFIT
 
Gross profit as a percentage of sales increased .28% in fiscal 2020 compared to fiscal 2019 due primarily to higher margins associated with the acquisitions of Gourmet Garage and Fairway, net of amortization of the acquisition related inventory step-up (.03%). Excluding the impact of acquired stores, gross profit as a percentage of sales decreased .23% due primarily to decreased departmental gross margin percentages (.31%), decreased patronage dividends and rebates received from Wakefern (.08%) and an unfavorable change in product mix (.12%) partially offset by lower promotional spending (.15%) and increased leverage on warehouse assessment charges from Wakefern (.13%).

Departmental gross profits, excluding the impact of acquired stores, decreased in fiscal 2020 compared to fiscal 2019 due primarily to price investments, including ShopRite's Right Price Promise pricing strategy introduced in October 2019, a commitment to everyday low prices on the items customers purchase most frequently. Departmental gross profits also decreased as pharmacy margins declined due primarily to continued downward pressure on prescription reimbursement rates from third party providers. Both product mix and departmental gross margin percentages were also impacted by limitations in service departments and product availability as a result of the COVID-19 pandemic in the second half of the year.

OPERATING AND ADMINISTRATIVE EXPENSE
 
Operating and administrative expense as a percentage of sales increased .63% in fiscal 2020 compared to fiscal 2019. Fiscal 2020 includes a gain on the sale of pharmacy prescription lists related to three store pharmacies closed in March 2020 (.07%), a gain for Superstorm Sandy insurance proceeds received (.15%), a gain arising from the breakup of Village’s initial “stalking
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horse” bid under the January 20, 2020 Fairway Asset Purchase Agreement (.11)%, transaction costs incurred for the Fairway acquisition (.15%), a non-cash pension charge related to the termination of a company-sponsored pension plan and other pension settlement charges (.09%) (see note 9 to the consolidated financial statements), pre-opening costs of the Stroudsburg, Pennsylvania replacement store (.07%), store closure costs and charges to write off the lease asset and related obligations for the old Stroudsburg store (.04%) and lease costs reclassified from depreciation and amortization and interest expense to operating and administrative expense (.14%) as a result of the adoption of ASU 2016-02, “Leases” (see note 1 to the consolidated financial statements). Fiscal 2019 includes a gain for Superstorm Sandy insurance proceeds received (.03%) and pension settlement charges (.03%). Excluding these items from both periods, operating and administrative expense as a percentage of sales increased .47% in fiscal 2020 compared to fiscal 2019 due primarily to incremental costs related to COVID-19, including enhanced wages and benefits and expanded safety and sanitation protocols (.76%), increased occupancy costs due primarily to the acquisitions of Fairway and Gourmet Garage (.33%) partially offset by reduced workers compensation expense (.23)% and increased leverage from higher sales.

DEPRECIATION AND AMORTIZATION
 
Depreciation and amortization expense was $31,358 and $27,290 in fiscal 2020 and 2019, respectively. Depreciation and amortization expense increased in fiscal 2020 compared to the prior year due to depreciation related to acquisitions of Fairway and Gourmet Garage and capital expenditures.
 
INTEREST EXPENSE
 
Interest expense was $2,611 and $4,436 in fiscal 2020 and 2019, respectively. Interest expense decreased in fiscal 2020 compared to fiscal 2019 due to lease costs reclassified to operating and administrative expenses as a result of the adoption of ASU 2016-02, “Leases” (see note 1 to the consolidated financial statements) partially offset by interest expense related to the credit agreement entered into on May 6, 2020 (see note 4 to the consolidated financial statements).
 
INTEREST INCOME
 
Interest income was $4,060 and $5,283 in fiscal 2020 and 2019, respectively. Interest income decreased in fiscal 2020 compared to fiscal 2019 due primarily to lower amounts invested in demand deposits at Wakefern and lower interest rates earned on variable rate notes receivable from Wakefern and demand deposits invested at Wakefern.
 
INCOME TAXES
 
The Company’s effective income tax rate was 21.4% and 28.1% in fiscal 2020 and 2019, respectively.

Fiscal 2020 includes a $2,512 benefit from a federal net operating loss carryback at a rate higher than the current statutory tax rate and fiscal 2019 includes a tax benefit of $777 related to the favorable settlement of a tax audit with the New Jersey Division of Taxation. Excluding the impact of these adjustments, the effective income tax rate was 29.3% and 30.3% in fiscal 2020 and 2019, respectively. The reduction in the effective tax rate in fiscal 2020 is due to increased work opportunity tax credits.

NET INCOME
 
Net income was $24,939 in fiscal 2020 compared to $25,539 in fiscal 2019.  Fiscal 2020 includes a $1,911 (net of tax) gain for Superstorm Sandy insurance proceeds received, an $854 (net of tax) gain on the sale of pharmacy prescription lists related to three store pharmacies closed in March 2020, a $2,512 benefit from a federal net operating loss carryback at a rate higher than the current statutory tax rate, a $1,423 (net of tax) gain arising from the breakup of Village’s initial “stalking horse” bid under the January 20, 2020 Fairway Asset Purchase Agreement, transaction costs incurred for the Fairway acquisition of $1,888 (net of tax), amortization of acquisition related inventory step-up of $355 (net of tax), a non-cash pension charge related to the termination of a company-sponsored pension plan and other pension settlement charges of $1,160 (net of tax), pre-opening costs related to the Stroudsburg, Pennsylvania replacement store of $891 (net of tax) and store closure costs and charges to write off the lease asset and related obligations for the old Stroudsburg store of $557 (net of tax). Fiscal 2019 includes a $290 (net of tax) gain for Superstorm Sandy insurance proceeds received, a tax benefit of $777 related to the favorable settlement of a tax audit with the New Jersey Division of Taxation and pension settlement charges of $302 (net of tax). Excluding these items from both periods, net income decreased 8% in fiscal 2020 compared to the prior year.



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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 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.
 
IMPAIRMENT
 
The Company reviews the carrying values of its long-lived assets, such as property, equipment and fixtures for possible impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. Such review analyzes the undiscounted estimated future net cash flows from asset groups at the store level to determine if the carrying value of such assets are recoverable from their respective cash flows. If impairment is indicated, it is measured by comparing the fair value of the long-lived asset groups, which include long-term leases, to their carrying value.
 
Goodwill is tested for impairment at the end of each fiscal year, or more frequently if circumstances dictate. The Company utilizes valuation techniques, such as earnings multiples, in addition to the Company’s market capitalization, to assess goodwill for impairment. Calculating the fair value of a reporting unit requires the use of estimates. Management believes the fair value of Village’s one reporting unit exceeds its carrying value at July 25, 2020. Should the Company’s carrying value of its one reporting unit exceed its fair value, the amount of any resulting goodwill impairment may be material to the Company’s financial position and results of operations.
 
PATRONAGE DIVIDENDS
 
As a stockholder of Wakefern, Village earns a share of Wakefern’s earnings, which are distributed as a “patronage dividend.” This dividend is based on a distribution of substantially all of Wakefern’s operating profits for its fiscal year (which ends on or about September 30) in proportion to the dollar volume of purchases by each member from Wakefern during that fiscal year. Patronage dividends are recorded as a reduction of cost of sales as merchandise is sold. Village accrues estimated patronage dividends due from Wakefern quarterly based on an estimate of the annual Wakefern patronage dividend and an estimate of Village’s share of this annual dividend based on Village’s estimated proportional share of the dollar volume of business transacted with Wakefern that year. The patronage dividend receivable based on these estimates was $11,204 and $11,908 at July 25, 2020 and July 27, 2019, respectively.

BUSINESS COMBINATIONS

We account for business combinations using the acquisition method of accounting, which requires that once control is obtained, all the assets acquired and liabilities assumed are recorded at their respective fair values at the date of acquisition. The determination of fair values of identifiable assets and liabilities requires estimates and the use of valuation techniques when market value is not readily available. For intangible assets acquired in a business combination, we typically determine the fair value based on the discounted cash flow model, specifically the relief from royalty method for intangible assets related to a trade name. Significant estimates in valuing certain intangible assets include, but are not limited to, the amount and timing of future revenues, cash flows, growth rates, discount rates and useful lives. The excess of the purchase price over fair values of identifiable assets and liabilities is recorded as goodwill.

PENSION PLANS
 
The determination of the Company’s obligation and expense for Company-sponsored pension plans is dependent, in part, on Village’s selection of assumptions used by actuaries in calculating those amounts. These assumptions are described in Note 9 to the consolidated financial statements and include, among others, the discount rate, the expected long-term rate of return on plan assets and the rate of increase in compensation costs. Actual results that differ from the Company’s assumptions are accumulated and amortized over future periods and, therefore, generally affect recognized expense in future periods. While management believes that its assumptions are appropriate, significant differences in actual experience or significant changes in the Company’s assumptions may materially affect cash flows, pension obligations and future expense.
 
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The objective of the discount rate assumption is to reflect the rate at which the Company’s pension obligations could be effectively settled based on the expected timing and amounts of benefits payable to participants under the plans. Our methodology for selecting the discount rate as of July 25, 2020 was to match the plans' cash flows to that of a yield curve on high-quality fixed-income investments. Based on this method, we utilized a weighted-average discount rate of 2.26% at July 25, 2020 compared to 3.41% at July 27, 2019. Changes in the discount rate and updated assumptions on mortality tables and improvement scales resulted in a net increase in the projected benefit obligation by approximately $12,599 at July 25, 2020. Village evaluated the expected increase in compensation costs of 4.50% and concluded no changes in this assumption was necessary in estimating pension plan obligations and expense. In fiscal 2018, the Company transitioned to a liability-driven investment ("LDI") strategy. A LDI strategy focuses on maintaining a close to fully-funded status over the long-term with minimal funded status risk.  This is achieved by investing more of the plan assets in fixed income instruments to more closely match the duration of the plan liability.  The investment allocation to fixed income instruments will increase as each plans' funded status increases.  Based on the Company’s LDI strategy, the Company assumed a weighted-average assumed long-term rate of return on plan assets of 4.82% in fiscal 2020.

Sensitivity to changes in the major assumptions used in the calculation of the Company’s pension plans is as follows:
 
Percentage
 point change
Projected benefit
 obligation
decrease
 (increase)
Expense
decrease
 (increase)
Discount rate+ / - 1.0 %$10,917 $(14,342)$274 $(949)
Expected return on assets+ / - 1.0 %$— — $688 $(688)

Village made no contributions in fiscal 2020 and $5,009 in fiscal 2019 to these Company-sponsored pension plans. Village expects contributions to its defined benefit pension plans to be immaterial in fiscal 2021. The 2019 contributions include $2,178 in benefit payments related to the unfunded, non-qualified supplemental benefit plan. Substantially all other contributions in 2019 were voluntary contributions.

RECENTLY ISSUED ACCOUNTING STANDARDS

For the disclosure related to recently issued accounting standards, see Note 1 to the consolidated financial statements.

LIQUIDITY and CAPITAL RESOURCES
 
CASH FLOWS
 
Net cash provided by operating activities was $83,948 in fiscal 2020 compared to $55,788 in fiscal 2019. Net cash provided by operating activities was generated primarily by changes in working capital and net income adjusted for non-cash items including depreciation and amortization, share-based compensation, deferred taxes, loss on pension settlements, the provision to value inventories at LIFO and the gain on sale of prescription lists and property, equipment and fixtures.

Working capital changes, including other assets and other liabilities, increased net cash provided by operating activities by $11,711 in fiscal 2020 compared to $1,127 in fiscal 2019. This change in impact of working capital is due primarily to higher accounts payable to Wakefern due to higher inventory turnover, changes in timing of payments of accounts payable and accrued expenses, increased accrued wages and benefits and a reduction in patronage dividend receivable partially offset by changes in timing of income tax payments.

During fiscal 2020, Village used cash to fund capital expenditures of $54,495, dividends of $12,965, treasury stock purchases of $4,389 and additional investments of $2,800 in notes receivable from Wakefern, net of proceeds received on matured notes. The $73,622 purchase price for the Fairway acquisition was funded by $50,000 drawn on the Company’s unsecured revolving line of credit and a $25,500 unsecured term loan pursuant to the Company's Credit Facility. Capital expenditures include costs associated with the opening of an 82,000 sq. ft. (52,000 selling sq. ft.) store in Stroudsburg, Pennsylvania that replaced our existing 53,000 sq. ft. store, expansion of ShopRite from Home, including the opening of an automated micro-fulfillment center in southern New Jersey, one major store remodel, several smaller remodels and equipment upgrades, including those in the integration of the Fairway acquisition.

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During fiscal 2019, Village used cash to fund capital expenditures of $27,988, dividends of $12,890, the acquisition of Gourmet Garage for $5,267, treasury stock purchases of $1,070 and additional investments of $3,127 in notes receivable from Wakefern, net of proceeds received on matured notes. Capital expenditures primarily include costs associated with the Bronx, New York store, the Stroudsburg replacement store, expansion of self-checkout, several smaller remodels and small equipment purchases.

LIQUIDITY and DEBT
 
Working capital was $34,522 and $56,307 at July 25, 2020 and July 27, 2019, respectively. Working capital ratios at the same dates were 1.21 and 1.50 to one, respectively. The decrease in working capital in fiscal 2020 compared to fiscal 2019 is due primarily to recognition of current operating lease obligations as a result of the adoption of ASU 2016-02, “Leases” and the current portion of long-term debt issued in conjunction with the Fairway acquisition. The Company’s working capital needs are reduced, since inventories are generally sold by the time payments to Wakefern and other suppliers are due.
 
We have budgeted $35,000 for capital expenditures in fiscal 2021.  Planned expenditures include two major remodels, several smaller store remodels, continued expansion of ShopRite from Home and self-checkout, and various merchandising, technology, equipment and facility upgrades. The Company’s primary sources of liquidity in fiscal 2021 are expected to be cash and cash equivalents on hand at July 25, 2020 and operating cash flow generated in fiscal 2021.
 
At July 25, 2020, the Company held variable rate notes receivable due from Wakefern of $26,130 that earn interest at the prime rate plus 1.25% and mature on August 15, 2022 and $26,878 that earn interest at the prime rate plus .75% and mature on February 15, 2024. Wakefern has the right to prepay these notes at any time. Under certain conditions, the Company can require Wakefern to prepay the notes, although interest earned since inception would be reduced as if it was earned based on overnight money market rates as paid by Wakefern on demand deposits.

At July 25, 2020, Village had demand deposits invested at Wakefern in the amount of $76,259. These deposits earn overnight money market rates.

Village had an unsecured revolving credit agreement dated November 9, 2017 providing a maximum amount available for borrowing of $25,000. The credit agreement provided for up to $3,000 of letters of credit, which secured obligations for construction performance guarantees to municipalities. There were no amounts outstanding at July 27, 2019 under the facility.

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

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

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

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

The Credit Facility also provides for up to $25,000 of letters of credit ($7,336 outstanding at July 25, 2020), which secure obligations for store leases and construction performance guarantees to municipalities. The Credit Facility contains covenants
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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 July 25, 2020. As of July 25, 2020, $67,664 remained available under the unsecured revolving line of credit.

During fiscal 2020, Village paid cash dividends of $12,965.  Dividends in fiscal 2020 consist of $1.00 per Class A common share and $.65 per Class B common share.

During fiscal 2019, Village paid cash dividends of $12,890.  Dividends in fiscal 2019 consist of $1.00 per Class A common share and $.65 per Class B common share.
 
OUTLOOK
 
This annual report 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: economic conditions; uninsured losses; expected pension plan contributions; projected capital expenditures; expected dividend payments; cash flow requirements; inflation expectations; public health conditions; and legal matters; and are indicated by words such as “will,” “expect,” “should,” “intend,” “anticipates,” “believes” and similar words or phrases. The Company cautions the reader that there is no assurance that actual results or business conditions will not differ materially from the results expressed, suggested or implied by such forward-looking statements. The Company undertakes no obligation to update forward-looking statements to reflect developments or information obtained after the date hereof.

We estimate that same store sales trends will be flat to slightly down in fiscal 2021 with positive trends in the first half of the year being offset by negative trends in the second half of the year as we recycle the impact of the COVID-19 health crisis.
Excluding the impact of acquired stores, we expect decreased gross profit margins due to continued investments in retail pricing through the Right Price Promise commitment to everyday low pricing on the items customers purchase most frequently that was introduced in October 2019.
We have budgeted $35,000 for capital expenditures in fiscal 2021.  Planned expenditures include two major remodels, several smaller store remodels, continued expansion of ShopRite from Home and self-checkout, and various merchandising, technology, equipment and facility upgrades.
The Board’s current intention is to continue to pay quarterly dividends in 2021 at the most recent rate of $.25 per Class A and $.1625 per Class B share.
We believe cash and cash equivalents on hand, operating cash flow and the Company's Credit Facility will be adequate to meet anticipated requirements for working capital, capital expenditures and debt payments for the foreseeable future.
We expect our effective income tax rate in fiscal 2021 to be in the range of 30.5% - 31.5%.
We expect approximately $1,400 of net periodic pension costs in fiscal 2021 related to the three Company sponsored defined benefit pension plans. The Company expects contributions to its defined benefit pension plans to be immaterial in fiscal 2021.
Various uncertainties and other factors could cause actual results to differ from the forward-looking statements contained in this report. These include:

The Company operates in and around one of the epicenters of the COVID-19 health crisis with much of our trade area under stay-at-home orders from mid-March 2020 through June 2020. The Company is classified as an essential business and has remained open to serve our customers and the communities in which we operate. The continuing impact on our business, including the length and impact of stay-at-home orders and/or regional quarantines, labor shortages and employment trends, disruptions to supply chains, higher operating costs, the form and impact of economic stimulus and general overall economic instability, is uncertain at this time and could have a material adverse effect on our business, results of operations, financial condition and cash flows. Furthermore, the impact of the COVID-19 health crisis may exacerbate other risks and uncertainties included herein, which could have a material effect on the Company.
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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 in the 4th quarter of fiscal 2020 have underperformed compared to projected amounts due primarily to population migration out of Manhattan during the COVID-19 pandemic. Many of these potential circumstances are outside of our control and any of them could result in an adverse impact on our results of operations, financial condition and cash flows and the diversion of management time and resources.
The supermarket business is highly competitive and characterized by narrow profit margins.  Results of operations may be materially adversely impacted by competitive pricing and promotional programs, industry consolidation and competitor store openings.  Village competes directly with multiple retail formats both in-store and online, including national, regional and local supermarket chains as well as warehouse clubs, supercenters, drug stores, discount general merchandise stores, fast food chains, restaurants, dollar stores and convenience stores. Some of these competitors have greater financial resources, lower merchandise acquisition costs and lower operating expenses than we do.  
The Company’s stores are concentrated in New Jersey, New York, Pennsylvania and Maryland. We are vulnerable to economic downturns in these states in addition to those that may affect the country as a whole. Economic conditions such as inflation, deflation, interest rate fluctuations, movements in energy costs, social programs, minimum wage legislation, unemployment rates, disturbances due to social unrest and changing demographics may adversely affect our sales and profits.
Village purchases substantially all of its merchandise from Wakefern. In addition, Wakefern provides the Company with support services in numerous areas including advertising, liability and property insurance, supplies, certain equipment purchasing, coupon processing, certain financial accounting applications, retail technology support, and other store services. Further, Village receives patronage dividends and other product incentives from Wakefern and also has demand deposits and notes receivable due from Wakefern.

Any material change in Wakefern’s method of operation or a termination or material modification of Village’s relationship with Wakefern could have an adverse impact on the conduct of the Company’s business and could involve additional expense for Village.  The failure of any Wakefern member to fulfill its obligations to Wakefern or a member’s insolvency or withdrawal from Wakefern could result in increased costs to the Company.  Additionally, an adverse change in Wakefern’s results of operations could have an adverse effect on Village’s results of operations.
Approximately 90% of our employees are covered by collective bargaining agreements. Any work stoppages could have an adverse impact on our financial results. If we are unable to control health care and pension costs provided for in the collective bargaining agreements, we may experience increased operating costs.
The Company could be adversely affected if consumers lose confidence in the safety and quality of the food supply chain.  The real or perceived sale of contaminated food products by us could result in a loss of consumer confidence and product liability claims, which could have a material adverse effect on our sales and operations.
Certain of the multi-employer plans to which we contribute are underfunded. As a result, we expect that contributions to these plans may increase. Additionally, the benefit levels and related items will be issues in the negotiation of our collective bargaining agreements. Under current law, an employer that withdraws or partially withdraws from a multi-employer pension plan may incur a withdrawal liability to the plan, which represents the portion of the plan’s underfunding that is allocable to the withdrawing employer under very complex actuarial and allocation rules. The failure of a withdrawing employer to fund these obligations can impact remaining employers. The amount of any increase or decrease in our required contributions to these multi-employer pension plans will depend upon the outcome of collective bargaining, actions taken by trustees who manage the plans, government regulations, withdrawals by other participating employers and the actual return on assets held in the plans, among other factors.
The Company uses a combination of insurance and self-insurance to provide for potential liability for workers’ compensation, automobile, 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.
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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 effective tax rate may be impacted by the results of tax examinations and changes in tax laws.
Wakefern provides all members of the cooperative with information system support that enables us to effectively manage our business data, customer transactions, ordering, communications and other business processes.  These information systems are subject to damage or interruption from power outages, computer or telecommunications failures, computer viruses and related malicious software, catastrophic weather events, or human error.  Any material interruption of our or Wakefern’s information systems could have a material adverse impact on our results of operations.
Due to the nature of our business, personal information about our customers, vendors and associates is received and stored in these information systems. In addition, confidential information is transmitted through our ShopRite from Home online business at shoprite.com and through the ShopRite app. Unauthorized parties may attempt to access information stored in or to sabotage or disrupt these systems. Wakefern and the Company maintain substantial security measures to prevent and detect unauthorized access to such information, including utilizing third-party service providers for monitoring our networks, security reviews, and other functions. It is possible that computer hackers, cyber terrorists and others may be able to defeat the security measures in place at the Company, Wakefern or those of third-party service providers.
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
 
The Company holds an investment in Wakefern, its principal supplier. Village purchases substantially all of its merchandise from Wakefern in accordance with the Wakefern Stockholder Agreement. As part of this agreement, Village is required to purchase certain amounts of Wakefern common stock. At July 25, 2020, the Company’s indebtedness to Wakefern for the outstanding amount of this stock subscription was $1,185. The maximum per store investment is currently $950. Wakefern distributes as a “patronage dividend” to each member a share of its earnings in proportion to the dollar volume of purchases by the member from Wakefern during the year. Wakefern provides the Company with support services in numerous areas including advertising, supplies, liability and property insurance, technology support and other store services. Additional information is provided in Note 3 to the consolidated financial statements.
 
At July 25, 2020, the Company held variable rate notes receivable due from Wakefern of $26,130 that earn interest at the prime rate plus 1.25% and mature on August 15, 2022 and $26,878 that earn interest at the prime rate plus .75% and mature on February 15, 2024. The Company invested $24,937 of the proceeds received from the notes that matured on February 15, 2019 in variable rate notes receivable from Wakefern that earn interest at the prime rate plus .75% and mature on February 15, 2024. Wakefern has the right to prepay these notes at any time. Under certain conditions, the Company can require Wakefern to prepay the notes, although interest earned since inception would be reduced as if it was earned based on overnight money market rates as paid by Wakefern on demand deposits.

At July 25, 2020, Village had demand deposits invested at Wakefern in the amount of $76,259. These deposits earn overnight money market rates.
 
The Company subleases the Galloway and Vineland stores from Wakefern under sublease agreements which provided for combined annual rents of $1,355 in both fiscal 2020 and 2019, and aggregate lease obligations of $3,521 at July 25, 2020. Both leases contain normal periodic rent increases and options to extend the lease.
 
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The Company leases a supermarket from a realty firm 30% owned by certain officers of Village. The Company paid rent to related parties under this lease of $688 in both fiscal 2020 and 2019, and has a related lease obligation of $3,772 at July 25, 2020. This lease expires in fiscal 2021 with options to extend at increasing annual rents.
 
The Company has ownership interests in three real estate partnerships. Village paid aggregate rents to two of these partnerships for leased stores of $1,556 and $1,455 in fiscal 2020 and 2019, respectively, and has aggregate lease obligations of $13,179 at July 25, 2020 related to these leases.
 




























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ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
VILLAGE SUPER MARKET, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
 July 25,
2020
July 27,
2019
ASSETS  
Current Assets  
Cash and cash equivalents$111,681 $101,121 
Merchandise inventories42,135 38,503 
Patronage dividend receivable11,204 11,908 
Income taxes receivable12,801 43 
Other current assets19,499 17,206 
Total current assets197,320 168,781 
Property, equipment and fixtures, net269,741 224,890 
Operating lease assets309,756 — 
Notes receivable from Wakefern53,008 50,208 
Investment in Wakefern29,462 28,644 
Goodwill24,190 12,650 
Other assets32,069 17,116 
Total assets$915,546 $502,289 
LIABILITIES and SHAREHOLDERS’ EQUITY  
Current Liabilities  
Operating lease obligations$19,121 $— 
Finance lease obligations466 1,022 
Notes payable to Wakefern303 43 
Current portion of debt6,421  
Accounts payable to Wakefern83,045 66,130 
Accounts payable and accrued expenses29,793 23,950 
Accrued wages and benefits23,649 20,259 
Income taxes payable 1,070 
Total current liabilities162,798 112,474 
Long-term debt  
Operating lease obligations298,027 — 
Finance lease obligations23,078 40,753 
Notes payable to Wakefern882 803 
Long-term debt74,194 6,169 
Total long-term debt396,181 47,725 
Pension liabilities6,166 4,759 
Other liabilities18,081 18,659 
Commitments and Contingencies (Notes 3, 4, 5, 6, 7, 9 and 11) 
Shareholders' Equity  
Preferred stock, no par value: Authorized 10,000 shares, none issued
  
Class A common stock, no par value: Authorized 20,000 shares; issued 10,985 shares at July 25, 2020 and 10,593 shares at July 27, 2019
68,072 65,114 
Class B common stock, no par value: Authorized 20,000 shares; issued and outstanding 4,294 shares at July 25, 2020 and July 27, 2019
697 697 
Retained earnings286,241 270,753 
Accumulated other comprehensive loss(8,751)(8,342)
Less treasury stock, Class A, at cost: 726 shares at July 25, 2020 and 502 shares at July 27, 2019
(13,939)(9,550)
Total shareholders’ equity332,320 318,672 
Total liabilities and shareholders' equity$915,546 $502,289 
 See notes to consolidated financial statements.
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VILLAGE SUPER MARKET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
 Years ended
July 25,
2020
July 27,
2019
Sales$1,804,594 $1,643,502 
Cost of sales1,298,119 1,186,786 
Gross profit506,475 456,716 
Operating and administrative expense444,833 394,750 
Depreciation and amortization31,358 27,290 
Operating income30,284 34,676 
Interest expense(2,611)(4,436)
Interest income4,060 5,283 
Income before income taxes31,733 35,523 
Income taxes6,794 9,984 
Net income$24,939 $25,539 
Net income per share:  
Class A common stock:  
Basic$1.93 $1.98 
Diluted$1.72 $1.77 
Class B common stock:  
Basic$1.25 $1.29 
Diluted$1.25 $1.29 
 
See notes to consolidated financial statements.

22



VILLAGE SUPER MARKET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
 Years ended
 July 25,
2020
July 27,
2019
Net income$24,939 $25,539 
Other comprehensive income (loss):  
Unrealized losses on interest rate swaps, net of tax (1)(659) 
Amortization of pension actuarial loss, net of tax (2)397 423 
Pension remeasurement, net of tax (3)(1,307)(888)
Pension settlement loss, net of tax (4)1,160 308 
Total other comprehensive loss(409)(157)
Comprehensive income$24,530 $25,382 

(1)Amount is net of tax of $262 for 2020.
(2)Amounts are net of tax of $158 and $182 for 2020 and 2019, respectively. All amounts are reclassified from accumulated other comprehensive loss to operating and administrative expense.
(3)Amounts are net of tax of $536 and $384 for 2020 and 2019, respectively.
(4)Amounts are net of tax of $444 and $133 for 2020 and 2019, respectively. All amounts are reclassified from accumulated other comprehensive loss to operating and administrative expense.
 
See notes to consolidated financial statements.

23



VILLAGE SUPER MARKET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands)
Years ended July 25, 2020 and July 27, 2019
    Accumulated
Other
Comprehensive
Loss
Total
Shareholders'
Equity
 Class A
Common Stock
Class B
Common Stock
Treasury Stock
Class A
 Shares IssuedAmountShares IssuedAmountRetained EarningsSharesAmount
Balance, July 28, 201810,575 $61,678 4,304 $699 $258,104 $(8,185)496 $(9,151)$303,145 
Net income— — — — 25,539 — — — 25,539 
Other comprehensive loss, net of tax of $69
— — — —  (157)— — (157)
Dividends— — — — (12,890)— — — (12,890)
Exercise of stock options— 336 — — — — (36)671 1,007 
Treasury stock purchases— — — — — — 42 (1,070)(1,070)
Restricted shares forfeited(15)(247)— — — — — — (247)
Share-based compensation expense23 3,345 — — — — — — 3,345 
Conversion of Class B shares to Class A shares10 2 (10)(2)— — — —  
Balance, July 27, 201910,593 $65,114 4,294 $697 $270,753 $(8,342)502 $(9,550)$318,672 
Net income— — — — 24,939 — — — 24,939 
Other comprehensive loss, net of tax of $196
— — — — — (409)— — (409)
Dividends— — — — (12,965)— — — (12,965)
Treasury stock purchases— — — — — — 224 (4,389)(4,389)
Restricted shares forfeited(20)(208)— — — — — — (208)
Share-based compensation expense412 3,166 — — — — — — 3,166 
Adjustment due to the adoption of ASU 2016-02, net of tax of $1,385
— — — — 3,514 — — — 3,514 
Balance, July 25, 202010,985 $68,072 4,294 $697 $286,241 $(8,751)726 $(13,939)$332,320 
 
See notes to consolidated financial statements.
24



VILLAGE SUPER MARKET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 Years ended
 July 25, 2020July 27, 2019
CASH FLOWS FROM OPERATING ACTIVITIES  
Net income$24,939 $25,539 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization31,701 27,290 
Non-cash share-based compensation2,958 3,098 
Loss on pension settlements1,604 441 
Deferred taxes11,190 (1,883)
Provision to value inventories at LIFO589 278 
Amortization of business acquisition inventory step-up508  
Gain on sale of prescription lists and property, equipment and fixtures(1,252)(102)
Changes in assets and liabilities:  
Merchandise inventories661 1,196 
Patronage dividend receivable704 29 
Accounts payable to Wakefern18,866 4,332 
Accounts payable and accrued expenses6,210 (2,430)
Accrued wages and benefits2,767 1,639 
Income taxes receivable / payable(13,828)(241)
Other assets and liabilities(3,669)(3,398)
Net cash provided by operating activities83,948 55,788 
CASH FLOWS FROM INVESTING ACTIVITIES  
Capital expenditures(54,495)(27,988)
Proceeds from the sale of assets1,261 102 
Investment in notes receivable from Wakefern(2,800)(28,064)
Maturity of notes receivable from Wakefern 24,937 
Business acquisitions, net of cash acquired(73,622)(5,267)
Net cash used in investing activities(129,656)(36,280)
CASH FLOWS FROM FINANCING ACTIVITIES  
Proceeds from exercise of stock options 1,007 
Excess tax benefit related to share-based compensation 34 
Proceeds from issuance of long-term debt25,500  
Principal payments of long-term debt(1,666)(1,576)
Proceeds from revolving line of credit61,915  
Payments on revolving line of credit(11,915) 
Debt issuance costs(212) 
Dividends(12,965)(12,890)
Treasury stock purchases, including shares surrendered for withholding taxes(4,389)(1,070)
Net cash provided by (used in) financing activities56,268 (14,495)
NET INCREASE IN CASH AND CASH EQUIVALENTS10,560 5,013 
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR101,121 96,108 
CASH AND CASH EQUIVALENTS, END OF YEAR$111,681 $101,121 
SUPPLEMENTAL DISCLOSURES OF CASH PAYMENTS MADE FOR:  
Interest$2,611 $4,436 
Income taxes