SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (Mark One) [x] QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended: October 27, 2001 ------------------------------------------------- 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 of other jurisdiction of incorporation (I. R. S. Employer - --------------------------------------------- ------------------ or organization) Identification No.) 733 MOUNTAIN AVENUE, SPRINGFIELD, NEW JERSEY 07081 - ------------------------------------------------------ (Address of principal executive offices) (Zip Code) (973) 467-2200 - --------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days Yes X No Indicate the number of shares outstanding of the issuer's classes of common stock as of the latest practicable date: <TABLE> <CAPTION> December 1, 2001 ---------------- <S> <C> Class A Common Stock, No Par Value 1,452,000 Shares Class B Common Stock, No Par Value 1,594,076 Shares </TABLE> The Registrant was not involved in bankruptcy proceedings during the preceding five years or any time prior thereto. VILLAGE SUPER MARKET, INC. ------------------------- INDEX ----- PART I PAGE NO. - ------ ------- FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Condensed Balance Sheets. . . 3 Consolidated Condensed Statements of Income. 4 Consolidated Condensed Statements of Cash Flows 5 Notes to Consolidated Condensed Financial Statements 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-10 PART II - ------- OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 11 Signatures 11 Exhibit 28(a) 12 PART I - FINANCIAL INFORMATION ------------------------------- Item 1. Financial Statements - ----------------------------- <TABLE> <CAPTION> VILLAGE SUPER MARKET, INC. CONSOLIDATED CONDENSED BALANCE SHEETS ------------------------------------ (Dollars in Thousands) October 27, July 28, 2001 2001 ---------- -------- ASSETS (Unaudited) - ----- <S> <C> <C> Current assets Cash and cash equivalents $ 32,024 $ 31,156 Merchandise inventories 32,112 30,468 Patronage dividend receivable 3,008 2,145 Other current assets 6,454 5,274 -------- -------- Total current assets 73,598 69,043 Property, equipment and fixtures, net 89,435 86,508 Investment in related party, at cost 13,648 13,113 Goodwill, less accumulated amortization of $4,307 at July 28, 2001 10,605 10,605 Other assets 3,809 4,077 ------- ------- TOTAL ASSETS $191,095 $183,346 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Current portion of long-term debt $ 2,772 $ 2,727 Accounts payable to related party 31,531 28,364 Accounts payable and accrued expenses 22,649 20,865 ------- ------- Total current liabilities 56,952 51,956 Long-term debt 43,159 43,363 Other liabilities 3,430 3,257 Shareholders' equity Class A common stock - no par value, issued 1,762,800 shares 18,129 18,129 Class B common stock - no par value, issued & outstanding 1,594,076 shares 1,035 1,035 Retained earnings 72,690 70,116 Less cost of Class A treasury shares - (310,800 shares at October 27, 2001 and 326,000 shares at July 28, 2001) (4,300) (4,510) ------- ------- Total shareholders' equity 87,554 84,770 ------- ------- TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $191,095 $183,346 ======= ======= </TABLE> See accompanying Notes to Consolidated Condensed Financial Statements. <TABLE> <CAPTION> VILLAGE SUPER MARKET, INC. CONSOLIDATED CONDENSED STATEMENTS OF INCOME ------------------------------------------- (Dollars in Thousands Except Per Share Amounts) (Unaudited) 13 Weeks Ended 13 Weeks Ended October 27, 2001 October 28, 2000 ---------------- ---------------- <S> <C> <C> Sales $ 210,831 $ 198,033 Cost of sales 158,315 150,114 ---------- ---------- Gross profit 52,516 47,919 Operating and administrative expense 45,186 41,737 Depreciation and amortization 1,837 1,954 Non-cash impairment charge 640 ---- ---------- ---------- Operating income 4,853 4,228 Interest expense, net 645 745 ---------- ---------- Income before income taxes 4,208 3,483 Income taxes 1,587 1,263 ---------- --------- Net income $ 2,621 $ 2,220 ========== ========== Net income per share: Basic $ .86 $ .74 Diluted $ .84 $ .73 </TABLE> See accompanying Notes to Consolidated Condensed Financial Statements. <TABLE> <CAPTION> VILLAGE SUPER MARKET, INC. CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS ---------------------------------------------- (Dollars in Thousands) (Unaudited) 13 Wks. Ended 13 Wks. Ended Oct. 27, 2001 Oct. 28, 2000 ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: <S> <C> <C> Net income $ 2,621 $ 2,220 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,837 1,954 Non-cash impairment charge 640 ---- Deferred taxes 75 50 Provision to value inventories at LIFO 200 100 Changes in assets and liabilities: (Increase) decrease in merchandise inventories (1,844) 61 (Increase) in patronage dividend receivable ( 863) ( 1,399) (Increase) in other current assets ( 1,180) ( 553) Decrease in other assets 258 124 Increase (decrease) in accounts payable to related party 3,167 ( 967) Increase (decrease) in accounts payable and accrued expenses 1,784 ( 195) Increase in other liabilities 98 ---- -------- -------- Net cash provided by operating activities 6,793 1,395 -------- ------- CASH FLOW FROM INVESTING ACTIVITIES: Capital expenditures ( 5,394) ( 5,245) ------- ------- Net cash used in investing activities ( 5,394) ( 5,245) ------- ------- CASH FLOW FROM FINANCING ACTIVITIES: Proceeds from exercise of stock options 163 --- Principal payments of long-term debt ( 694) ( 534) ------- ------- Net cash used in financing activities ( 531) ( 534) ------- ------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 868 ( 4,384) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 31,156 25,721 ------- ------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 32,024 $ 21,337 ======= ======= NON-CASH SUPPLEMENTAL DISCLOSURES: Investment in related party $ 550 $ ----- SUPPLEMENTAL DISCLOSURES OF CASH PAYMENTS MADE FOR: Interest (net of amounts capitalized) $ 379 $ 378 Income taxes $ 30 $ 318 </TABLE> See accompanying Notes to Consolidated Condensed Financial Statements. VILLAGE SUPER MARKET, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS ---------------------------------------------------- 1. In the opinion of management, the accompanying unaudited consolidated condensed financial statements contain all adjustments (consisting of normal and recurring accruals) necessary to present fairly the consolidated financial position as of October 27, 2001 and the consolidated results of operations and cash flows for the periods ended October 27, 2001 and October 28, 2000. The significant accounting policies followed by the Company are set forth in Note 1 to the Company's consolidated financial statements in the July 28, 2001 Village Super Market, Inc. Annual Report on Form 10-K, which should be read in conjunction with this Form 10-Q. 2 The results of operations for the period ended October 27, 2001 are not necessarily indicative of the results to be expected for the full year. 3. At both October 27, 2001 and July 28, 2001, approximately 65% 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 $9,509,000 and $9,309,000 higher than reported at October 27, 2001 and July 28, 2001, respectively. 4. The number of common shares outstanding for calculation of net income per share is as follows: <TABLE> <CAPTION> October 27, October 28, 2001 2000 ---------- ---------- <S> <C> <C> Weighted average shares outstanding - basic 3,037,479 3,013,476 Dilutive effect of employee stock options 71,451 34,516 --------- --------- Weighted average shares outstanding - diluted 3,108,930 3,047,992 ========= ========= </TABLE> 5. Adoption of New Accounting Standards Effective July 29, 2001, the Company adopted the provisions of the Financial Accounting Standards Board's Statement No. 141, "Business Combinations", and Statement No. 142, "Goodwill and Other Intangible Assets". Statement 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Statement 141 also specifies criteria that intangible assets acquired in a purchase method business combination must meet to be recognized and reported apart from goodwill. Statement 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually. Statement 142 also requires that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment. The implementation of Statement 141 and 142 did not have a material impact on the consolidated financial statements since there was no indication of goodwill impairment, and no reclassifications or changes to the useful lives of intangibles were deemed necessary. As of the date of adoption, the Company had unamortized goodwill in the amount of $10,605,000 and unamortized identifiable intangible assets in the amount of $200,000. Amortization expense related to goodwill was $341,000 for the year ended July 28, 2001. As a result of adopting Statement 142, the Company no longer amortizes goodwill. The Company's net income for the thirteen weeks ended October 28, 2000 would have been $2,273,000 versus $2,220,000 as previously reported had this amortization expense not been reported in that period. The Company's basic and diluted earnings per share for the thirteen weeks ended October 28, 2000 would have been $.75 and $.75 versus $.74 and $.73 as previously reported had this amortization expense not been reported in that period. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ----------------------------------------------------------- RESULTS OF OPERATIONS - --------------------- Sales in the first quarter of fiscal 2002 were $210,831,000, an increase of 6.5% from the prior year. On September 26, 2001, the Company opened a 59,000 square foot store in Garwood, N.J. Excluding the new Garwood store and a store closed one year ago, sales increased 5.8%. Excluding the results of the replacement store in West Orange, which opened August 10, 2000, sales increased 4.0%. Gross profit as a percentage of sales increased to 24.9% in the first quarter from 24.2% in the prior year. Gross profit as a percentage of sales increased due to improved sales in higher margin departments, improved gross profit percentages in several departments and incentives received in connection with the opening of the new Garwood store. Operating and administrative expenses as a percentage of sales increased to 21.4% in the first quarter compared to 21.1% in the prior year. The increase was a result of higher fringe benefit and occupancy costs. The Company recorded a non-cash impairment charge of $640,000 in the first quarter to write off the book value of the equipment of the Ventnor store. The sublessor of this property rejected its lease in March 2001 pursuant to the U.S. Bankruptcy code. Since that time, the Company has negotiated with the property owner to remain in this location under new lease terms. The property owner recently ended negotiations for a new lease and notified the Company that the store location would need to be vacated sometime in early 2002. Accordingly, the Company has written off the remaining assets of this store. Depreciation and amortization expense declined in the first quarter of fiscal 2002 compared to the prior year as the company no longer amortizes goodwill in accordance with FASB 142. Interest expense declined in the first quarter due to interest cost capitalized in the current fiscal year relating to the construction of the Garwood store. Net income was $2,621,000 in the first quarter of fiscal 2002, an increase of 18% from the prior year. Excluding a non-cash impairment charge, net income was $3,020,000, an increase of 36%. This increase is attributable to the substantial sales increase and higher gross profit percentages, partially offset by increased operating expenses. LIQUIDITY AND FINANCIAL RESOURCES - --------------------------------- Working capital was $16,646,000 at October 27, 2001 compared to $17,087,000 at July 28, 2001. The working capital ratio was 1.29 to one at October 27, 2001 compared to 1.33 to one at July 28, 2001. The Company's working capital needs are reduced since inventory is generally sold by the time payments to Wakefern and other suppliers are due. During the quarter, the Company had capital expenditures of $5,394,000. The major expenditure was the completion of construction and equipment for the new store in Garwood. The Company has budgeted approximately $20 million for capital expenditures in fiscal 2002. The construction of a new superstore in Hammonton, N.J. began during the first quarter. The Company's primary sources of liquidity are expected to be cash on hand, operating cash flow and equipment financing. OTHER MATTERS - ------------- On November 22, 2000, Big V Supermarkets, Inc., the largest member of the Wakefern Food Cooperative, filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code. In addition, Big V announced its intention to depart from the Wakefern Cooperative. Wakefern has publicly stated that it will take all appropriate actions to enforce its rights under the Wakefern Stockholder's Agreement. The Company's Form 10-K includes a comprehensive description of the Company's relationship with Wakefern and the rights and obligations of the Company and other members under the Wakefern Stockholder's Agreement. A recent decision by the U.S. Bankruptcy Court has upheld that Big V would be required to pay substantial withdrawal fees to Wakefern to make up for the loss of volume to the cooperative in the event Big V departs from the Wakefern Cooperative. These matters are subject to further legal proceedings. At this time, the ultimate impact, if any, on Wakefern and the Company from these proceedings cannot be ascertained, although any significant loss of volume from a termination of the Wakefern supply agreement by Big V, without payment of the aforementioned withdrawal fees, could result in increased costs to the Company for product purchases and services. In November 2001, it was publicly announced that Wakefern and Big V entered into a preliminary agreement for the purchase of substantially all of Big V's assets. This agreement requires the approval of the Bankruptcy Court. At this time, the outcome of this potential transaction is uncertain. FORWARD-LOOKING STATEMENTS: - -------------------------- This Form 10-Q contains "forward-looking statements" within the meaning of federal securities law. The Company cautions the reader that there is no assurance that actual results or business conditions will not differ materially from future results, whether expressed, suggested or implied by such forward-looking statements. Such potential risks and uncertainties include, without limitation, local economic conditions, competitive pressures from the Company's operating environment, the ability of the Company to maintain and improve its sales and margins, the ability to attract and retain qualified associates, the availability of new store locations, the availability of capital, the liquidity of the Company on a cash flow basis, and other risk factors detailed herein and in other filings of the Company. PART II - OTHER INFORMATION - --------------------------- Item 6. Exhibits and Reports on Form 8-K - ------------------------------------------- 6(a) Exhibits Exhibit 28(a) - Press Release dated November 30, 2001. 6(b) Reports on Form 8-K. None 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 Date: December 3, 2001 /s/ Perry Sumas --------------- Perry Sumas (President) Date: December 3, 2001 /s/ Kevin R. Begley ------------------ Kevin R. Begley (Chief Financial Officer) Exhibit 28(a) VILLAGE SUPER MARKET, INC. REPORTS RESULTS FOR THE FIRST QUARTER ENDED OCTOBER 27, 2001 ------------------------------------------- Contact: Kevin Begley, C.F.O. (973) 467-2200, Ext. 220 Springfield, New Jersey - November 30, 2001 - Village Super Market, Inc. (NSD - VLGEA) reported sales and net income for the first quarter ended October 27, 2001, Perry Sumas, President announced today. Net income was $2,621,000 ($.84 per diluted share) in the first quarter of fiscal 2002, an increase of 18% from the prior year. Excluding a non-cash impairment charge, net income was $3,020,000, an increase of 36% from the prior year. Sales in the first quarter were $210,831,000, an increase of 6.5% from the prior year. The Company opened a new store in Garwood, New Jersey on September 26, 2001. Excluding this new store and a store closed one year ago, sales increased 5.8%. Net income increased due to the substantial increase in sales and improved gross profit percentages, partially offset by increased operating costs. The company recorded a non-cash impairment charge of $640,000 in the first quarter of fiscal 2002 to write off the book value of fixed assets of a store expected to be closed later in the fiscal year. Village Super Market operates a chain of 23 supermarkets under the ShopRite name in New Jersey and eastern Pennsylvania. The following table summarizes the results for the quarter ended October 27, 2001: <TABLE> <CAPTION> 13 Weeks Ended 13 Weeks Ended October 27, 2001 October 28, 2000 ---------------- ---------------- <S> <C> <C> Sales $ 210,831,000 $ 198,033,000 Net Income $ 2,621,000 $ 2,220,000 Net Income Per Share - Basic $ .86 $ .74 Net Income Per Share - Diluted $ .84 $ .73 </TABLE> FORWARD-LOOKING STATEMENTS: - -------------------------- This Press Release to shareholders contains "forward-looking statements" within the meaning of federal securities law. The Company cautions the reader that there is no assurance that actual results or business conditions will not differ materially from future results, whether expressed, suggested or implied by such forward-looking statements. Such potential risks and uncertainties include, without limitation, local economic conditions, competitive pressures from the Company's operating environment, the ability of the Company to maintain and improve its sales and margins, the ability to attract and retain qualified associates, the availability of new store locations, the availability of capital, the liquidity of the Company on a cash flow basis, and other risk factors detailed herein and in the Company's filings with the SEC.