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 30, 1999 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 (I.R.S. Employer incorporation 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 2, 1999 <S> <C> Class A Common Stock, No Par Value 1,396,700 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 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7-9 PART II OTHER INFORMATION Item 1. Legal Proceedings 10 Item 6. Exhibits and Reports on Form 8-K 10 Signatures 11 Exhibit 28(a) 12-13 <TABLE> <CAPTION> VILLAGE SUPER MARKET, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (Dollars in Thousands) October 30, July 31, 1999 1999 ASSETS <S> <C> <C> Current assets Cash and cash equivalents $ 21,448 $ 9,771 Merchandise inventories 30,643 29,923 Patronage dividend receivable 2,963 1,728 Miscellaneous receivables 4,848 3,729 Other current assets 1,191 1,119 Total current assets 61,093 46,270 Property, equipment and fixtures, net 74,895 75,307 Investment in related party, at cost 10,783 10,698 Goodwill, net 11,202 11,287 Other intangibles, net 1,713 1,776 Other assets 4,961 4,217 TOTAL ASSETS $ 164,647 $ 149,555 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Current portion of long-term debt $ 1,713 $ 2,149 Accounts payable to related party 26,009 27,086 Accounts payable and accrued expenses 20,650 23,496 Income taxes payable 1,660 736 Total current liabilities 50,032 53,467 Long-term debt, less current portion 43,778 27,204 Deferred income taxes 2,307 2,407 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 54,431 52,409 Less cost of treasury shares - (366,100 shares at October 30, 1999 and 368,300 shares at July 31, 1999) (5,065) (5,096) Total shareholders' equity 68,530 66,477 TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $164,647 $149,555 </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) 13 Weeks Ended 13 Weeks Ended October 30, 1999 October 24, 1998 <S> <C> <C> Sales $ 195,413 $ 178,058 Cost of sales 144,202 132,941 Gross margin 51,211 45,117 Operating and administrative expense 45,080 40,374 Depreciation and amortization expense 1,914 1,929 Operating income 4,217 2,814 Interest expense, net 847 779 Income before income taxes 3,370 2,035 Provision for income taxes 1,340 855 Net income $ 2,030 $ 1,180 Net income per share: Basic $ .68 $ .40 Diluted $ .67 $ .39 </TABLE> See accompanying Notes to Consolidated Condensed Financial Statements. <TABLE> <CAPTION> VILLAGE SUPER MARKET, INC. CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (Dollars in Thousands) 13 Wks. Ended 13 Wks. Ended Oct. 30, 1999 Oct. 24, 1998 CASH FLOWS FROM OPERATING ACTIVITIES: <S> <C> <C> Net income $ 2,030 $ 1,180 Adjustments to reconcile net income to net cash used by operating activities: Depreciation and amortization 1,914 1,929 Deferred taxes ( 100) ( 75) Provision to value inventories at LIFO 150 125 Changes in assets and liabilities: (Increase) in inventory ( 870) ( 1,903) (Increase) in patronage dividend receivable ( 1,235) ( 1,103) (Increase) in misc. receivables ( 1,119) ( 1,045) (Increase) in other current assets ( 72) ( 39) (Increase) in other assets ( 744) ( 14) (Decrease) in accounts payable to related party ( 1,077) ( 379) (Decrease) in accounts payable and accrued expenses ( 2,846) ( 1,598) Increase in income taxes payable 924 842 Net cash used by operating activities ( 3,045) ( 2,080) CASH FLOW FROM INVESTING ACTIVITIES: Capital expenditures ( 1,353) ( 3,105) Investment in related party ( 85) ( 2) Net cash used by investing activities ( 1,438) ( 3,107) CASH FLOW FROM FINANCING ACTIVITIES: Proceeds from issuance of long-term debt 30,000 5,000 Proceeds from exercise of stock options 22 -- Principal payments of long-term debt (13,862) ( 343) Net cash provided by financing activities 16,160 4,657 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 11,677 ( 530) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 9,771 5,679 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 21,448 $ 5,149 </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 30, 1999 and the consolidated results of operations and cash flows for the periods ended October 30, 1999 and October 24, 1998. The significant accounting policies followed by the Company are set forth in Note 1 to the Company's consolidated financial statements in the July 31, 1999 Village Super Market, Inc. Annual Report. 2. The results of operations for the period ended October 30, 1999 are not necessarily indicative of the results to be expected for the full year. 3. At both October 30, 1999 and July 31, 1999, approximately 67% 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 $8,458,000 and $8,308,000 higher than reported at October 30, 1999 and July 31, 1999 respectively. 4 The number of common shares outstanding for calculation of net income per share is as follows: <TABLE> <CAPTION> October 30, October 24, 1999 1998 <S> <C> <C> Weighted average shares outstanding - basic 2,989,831 2,969,876 Dilutive effect of employee stock options 56,697 87,310 Weighted average shares outstanding - diluted 3,046,528 3,057,186 </TABLE> ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Sales in the first quarter were $195,413,000, which represents an increase of 9.7% from the prior year. Same store sales increased 4.9% from the prior year. The remainder of the sales increase was due to the acquisition of the Vineland store in May 1999. Same store sales increased, in part, due to all 13 weeks of the current year's quarter including double coupons in northern New Jersey compared with seven weeks in the prior year. Same store sales increases for the remainder of fiscal 2000 are expected to be substantially below this 6% same store sales increase during fiscal 1999 and the 4.9% same store sales increase that was achieved in the first quarter of fiscal 2000, as the comparisons for the remainder of fiscal 2000 are to fiscal 1999 periods that included the full impact of double coupons. Gross margin as a percentage of sales increased to 26.2% from 25.3% in the prior year. Gross margins percentages improved in most selling departments when compared to the prior year. In addition, a portion of the gross margin improvement was due to special rebates received for the new Vineland store. Operating and administrative expenses as a percentage of sales increased to 23.1% from 22.7% in the prior year. This increase was a result of the increased cost associated with the doubling of manufacturers coupons for a greater number of weeks in the current fiscal year. This increase was partially offset by lower payroll and fringe benefit costs as a percentage of sales. Interest expense increased in the current quarter compared to the prior year as a result of higher debt levels. The 72% increase in net income compared to the prior year is primarily attributable to the 4.9% same store sales increase and the substantially improved gross margin percentage, partially offset by increased coupon costs. LIQUIDITY AND FINANCIAL RESOURCES On September 16, 1999, the Company issued $30 million of 8.12% unsecured Senior Notes. At the same time, the Company entered into a $15 million unsecured revolving credit agreement. These two debt agreements replaced the $6,667,000 term loan and a $24,000,000 revolving credit facility, both of which were secured by substantially all of the Company's assets. The Company was in full compliance with all terms and restrictive covenants of all debt agreements at October 30, 1999. Current assets exceeded current liabilities by $11,061,000 at October 30, 1999 compared to current liabilities exceeding current assets by $7,197,000 at July 31, 1999. The working capital ratio increased to 1.22 at October 30, 1999 from .87 at July 31, 1999. These improvements were primarily due to the increase in cash resulting from the financing described above, less the $13,400,000 of long term debt that was paid off. The Company's working capital needs are reduced by its high rate of inventory turnover and because the warehousing the distribution arrangements accorded to the Company as a member of Wakefern permit it to minimize inventory levels and sell most merchandise before payment is required. During the quarter, the Company had capital expenditures of $1,353,000. The Company has budgeted approximately $19,000,000 for capital expenditures in fiscal 2000. Planned expenditures include the replacement of the West Orange store, the start of two major remodels, the purchase of land for a future store and technology upgrades. YEAR 2000: The Company has participated with Wakefern Food Corporation ("Wakefern"),the retailer owned food cooperative to which it belongs and its principal supplier, in a comprehensive assessment of its information technology systems ("IT Systems") and its process control and other systems that include micro-controllers ("Non-IT Systems") to identify the systems that could be affected by the Year 2000 ("Y2K") issue. The Company and Wakefern have assessed all systems for Y2K readiness, giving the highest priority to those IT Systems that are considered critical to its business operations. At present, the Company has implemented its cash and sales, payroll, general ledger and accounts payable applications. The Company believes all in-store IT Systems are currently Y2K compliant. The Company has completed an inventory of its Non-IT Systems, which includes those systems containing embedded chip technology commonly found in buildings and equipment connected with a building's infrastructure. The systems have been prioritized and assessed for compliance. Ongoing testing and implementation of any remediation required for the Non-IT Systems will be performed throughout the remainder of 1999. The Company and Wakefern have utilized the necessary internal and external resources to replace, upgrade or modify all significant systems affected by Y2K. The total estimated costs to remediate the Y2K issue have not had a significant adverse affect on continuing operations. All Y2K costs are being expensed as incurred. The Company has developed contingency plans for those areas which may be affected by Y2K. Although the full consequences are unknown, the failure of either the Company's critical systems or those of its material third parties, including Wakefern, to be Y2K compliant could result in the interruption of its business, which could have a material adverse affect on the results of operations or financial condition of the Company. FORWARD-LOOKING STATEMENTS: This Form 10-Q 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, competitive pressures from the Company's operating environment, the ability of the Company to maintain and improve its sales and margins, the liquidity of the Company on a cash flow basis, the success of operating initiatives, Y2K issues relating to computer applications, and other risk factors detailed herein and in other filings of the Company. PART II - OTHER INFORMATION Item 1. Legal Proceedings Footnote 11 to the Consolidated Financial Statements for fiscal 1999 includes a description of litigation decided against the Company on August 31, 1999. Item 6. Exhibits and Reports on Form 8-K 6(a) Exhibits Exhibit 28(a) - Press Release dated December 2, 1999. 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 7, 1999 /s/ Perry Sumas Perry Sumas (President) Date: December 7, 1999 /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 30, 1999 Contact: Kevin Begley, C.F.O. (973) 467-2200, Ext. 220 Springfield, New Jersey - December 2, 1999 - Village Super Market, Inc. reported sales and net income for the first quarter ended October 30, 1999, Perry Sumas, President announced today. Net income was $2,030,000 ($.67 per diluted share) in the first quarter of fiscal 2000, an increase of 72% from the first quarter of the prior year. Sales in the first quarter were $195,413,000, an increase of 9.7% from the prior year. Same store sales increased 4.9% in the first quarter. The remainder of the sales increase is due to the acquisition of a store in May 1999. Same store sales increased primarily due to all 13 weeks of the current year's quarter including the impact of double coupons as compared to only seven weeks in the first quarter of the prior year. The large increase in first quarter net income compared with the prior year is primarily a result of the improved same store sales and a substantial improvement in gross margin percentages, partially offset by increased costs from the doubling of manufacturer coupons. On September 16, 1999, the Company completed the sale of $30 million of 8.12% unsecured Senior Notes. At the same time, the Company entered into a $15 million unsecured revolving credit facility. These two agreements replace the $6,667,000 term loan and $24 million credit facilities previously available to the Company, both of which were secured. 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 30, 1999: <TABLE> <CAPTION> 13 Weeks Ended 13 Weeks Ended October 30, 1999 October 24, 1998 <S> <C> <C> Sales $ 195,413,000 $ 178,058,000 Net Income $ 2,030,000 $ 1,180,000 Net Income Per Share - Basic $ .68 $ .40 Net Income Per Share - Diluted $ .67 $ .39 </TABLE> FORWARD-LOOKING STATEMENTS: This Press Release 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, competitive pressures from the Company's operating environment, the ability of the Company to maintain and improve its sales and margins, the liquidity of the Company on a cash flow basis, the success of operating initiatives, Y2K issues relating to computer applications, results of litigation and other risk factors detailed in the Company's filings with the SEC.