Village Super Market - 10-Q quarterly report FY

Washington, D. C. 20549

 

(Mark One)

OR

(Exact name of registrant as specified in its charter)

(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.

 

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

 

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

 

 

 

VILLAGE SUPER MARKET, INC.

(in Thousands)

(Unaudited)

 

See accompanying Notes to Consolidated Condensed Financial Statements.

VILLAGE SUPER MARKET, INC.

(in Thousands Except Per Share Amounts)

(Unaudited)

 

See accompanying Notes to Consolidated Condensed Financial Statements.

 

 

 

VILLAGE SUPER MARKET, INC.

(in Thousands)

(Unaudited)

 

 

See accompanying Notes to Consolidated Condensed Financial Statements.

VILLAGE SUPER MARKET, INC.

(in Thousands)

(Unaudited)

 

The significant accounting policies followed by Village Super Market, Inc. (the “Company”) are set forth in Note 1 to the Company's consolidated financial statements in the July 30, 2005 Village Super Market, Inc. Annual Report on Form 10-K, which should be read in conjunction with these financial statements.

No securities were excluded from the calculation of diluted net income per share.

As of October 29, 2005, the Company has contributed $63 to its pension plans in fiscal 2006. The Company expects to contribute an additional $1,937 during the remainder of fiscal 2006 to fund its pension plans.

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

(Dollars in Thousands)

The Company operates a chain of 23 ShopRite supermarkets in New Jersey and eastern Pennsylvania. The Company is the second largest member of Wakefern Food Corporation (“Wakefern”), the nation’s largest retailer-owned food cooperative. As further described in the Company’s Form 10-K, this ownership interest in Wakefern provides the Company many of the economies of scale in purchasing, distribution, advanced retail technology and advertising associated with larger chains.

The Company’s stores, five of which are owned, average 55,000 total square feet. Larger store sizes enable the Company to offer the specialty departments that customers desire for one-stop shopping, including pharmacies, natural and organic departments, ethnic and international foods, and home meal replacement. On October 27, 2004, the Company opened an 80,000 square foot store in Somers Point, New Jersey to replace a smaller store.

We consider a variety of indicators to evaluate our performance, such as same store sales; sales per store; percentage of total sales by department (mix); shrink; departmental gross profit percentage; sales per labor hour; and hourly labor rates. In recent years, the Company, as well as many of our competitors, has experienced increases in employee health and pension costs under union contracts and for non-union associates. In addition, rates charged by utilities for electricity and gas increased in fiscal 2005 and 2004, and that trend continues in fiscal 2006.

Critical accounting policies are those accounting policies that management believes are important to the portrayal of the Company’s financial condition and results of operations. These policies require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. The Company’s critical accounting policies relating to the impairment of long-lived assets and goodwill, accounting for patronage dividends earned as a stockholder of Wakefern, and accounting for pension plans are described in the Company’s Annual Report on Form 10-K for the year ended July 30, 2005. As of October 29, 2005, there have been no changes to any of the critical accounting policies contained therein.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Net cash provided by operating activities was $2,468 in the first quarter of fiscal 2006 compared with $847 in the first quarter of the prior fiscal year. This increase is primarily attributable to a smaller increase in other current assets in the current fiscal year, increased depreciation and amortization, increased deferred taxes and increased non-cash share-based compensation expense.

During the first quarter of fiscal 2006, the Company used cash on hand and operating cash flow of $2,468 to fund capital expenditures of $3,072, debt payments of $5,035 and dividends of $841. Major capital expenditures were the ongoing expansion and remodel of the Springfield store and smaller remodels of the Elizabeth and Chester stores. Debt payments made include the third installment of $4,286 on the Company’s unsecured Senior Notes.

Working capital was $34,868 at October 29, 2005 compared to $36,314 at July 30, 2005. The working capital ratio was 1.51 to 1 at October 29, 2005 compared to 1.52 to 1 at July 30, 2005. Working capital declined slightly primarily due to reduced levels of cash resulting from capital expenditures and debt payments during the first quarter of fiscal 2006. The Company’s working capital needs are reduced, since inventory is generally sold by the time payments to Wakefern and other suppliers are due.

The Company has budgeted approximately $12,000 for capital expenditures in fiscal 2006. Planned expenditures include the completion of the expansion and remodel of the Springfield store and the beginning of remodels of the Morris Plains and Rio Grande stores. The Company’s primary sources of liquidity in fiscal 2006 are expected to be cash and cash equivalents on hand and operating cash flow generated in fiscal 2006.

There have been no substantial changes as of October 29, 2005 to the contractual obligations and commitments discussed on page 7 of the Company’s Annual Report on Form 10-K for the year ended July 30, 2005.

A description of the Company’s transactions with Wakefern, its principal supplier, and with other related parties is included on pages 7, 8, 16, 19 and 20 of the Company’s Annual Report on Form 10-K for the year ended July 30, 2005. There have been no significant changes in the Company’s relationship or nature of transactions with related parties during the first quarter of fiscal 2006.

All statements, other than statements of historical fact, included in this Form 10-Q are or may be considered 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. The Company undertakes no obligation to update forward-looking statements to reflect developments or information obtained after the date hereof. The following are among the principal factors that could cause actual results to differ from the forward-looking statements: 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; the success of operating initiatives; consumer spending patterns; the impact of higher energy prices; increased cost of goods sold, including increased costs from the Company’s principal supplier, Wakefern; the results of union contract negotiations; competitive store openings; the rate of return on pension assets; and other factors detailed herein and in other filings of the Company.

 

 

The Company is exposed to market risks arising from adverse changes in interest rates. As of October 29, 2005, the Company’s only variable rate borrowings relate to an interest rate swap agreement. On October 18, 2001, the Company entered into an interest rate swap agreement with a major financial institution pursuant to which the Company pays a variable rate of six-month LIBOR plus 3.36% (7.81% at October 29, 2005) on an initial notional amount of $10,000 expiring in September 2009 in exchange for a fixed rate of 8.12%. The swap agreement notional amount decreases in amounts and on dates corresponding to the fixed rate obligation it hedges. At October 29, 2005 the remaining notional amount of the swap agreement was $5,714. A 1% increase in interest rates, applied to the Company’s borrowings at October 29, 2005, would result in an annual increase in interest expense and a corresponding reduction in cash flow of approximately $57. The fair value of the Company’s fixed rate debt is also affected by changes in interest rates.

At October 29, 2005, the Company had demand deposits of $41,287 at Wakefern earning interest at prime less 2.5%, or overnight money market rates, which are exposed to the impact of interest rate changes.

As required by Rule 13a-15 under the Exchange Act, the Company carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures at the end of the period. This evaluation was carried out under the supervision, and with the participation, of the Company’s management, including the Company’s Chief Executive Officer along with the Company’s Chief Financial Officer. Based upon that evaluation, the Company’s Chief Executive Officer, along with the Company’s Chief Financial Officer, concluded that the Company’s disclosure controls and procedures are effective. There have been no significant changes in internal controls over financial reporting during the first quarter of fiscal 2006.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in Company reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in Company reports filed under the Exchange Act is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure.

 

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.

Exhibit 28(a)

Net income was $2,968,000 ($.92 per diluted share) in the first quarter of fiscal 2006, an increase of 10% from the first quarter of the prior year. Net income increased primarily due to improved sales and gross profit percentages, partially offset by increased operating expenses.

Sales were $243,445,000 in the first quarter of fiscal 2006, an increase of 2.6% from the first quarter of the prior year. Sales increased due to the opening of an 80,000 sq. ft. replacement store in Somers Point, New Jersey on October 27, 2004 and a same store sales increase of 2.0%. Same store sales increased due to improved sales in the recently remodeled Bernardsville and Springfield stores and improved sales in one store due to the closing of a competitor’s store. These same store sales improvements were partially offset by reduced sales in certain stores due to competitive store openings.

Village Super Market operates a chain of 23 supermarkets under the ShopRite name in New Jersey and eastern Pennsylvania.

All statements, other than statements of historical fact, included in this Press Release are or may be considered 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. The Company undertakes no obligation to update forward-looking statements to reflect developments or information obtained after the date hereof. The following are among the principal factors that could cause actual results to differ from the forward-looking statements: 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; the success of operating initiatives; consumer spending patterns; the impact of higher energy prices; increased cost of goods sold, including increased costs from the Company’s principal supplier, Wakefern; the results of union contract negotiations; competitive store openings; the rate of return on pension assets; and other factors detailed herein and in the Company’s filings with the SEC.

VILLAGE SUPER MARKET, INC.

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Dollars in Thousands Except Per Share Amounts)

(Unaudited)

I, James Sumas, certify that:

I, Kevin Begley, certify that:

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Village Super Market, Inc. (the “Company”) on Form 10-Q for the period ending October 29, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James Sumas, Chief Executive Officer of the Company certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

 

 

 

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Village Super Market, Inc. (the “Company”) on Form 10-Q for the period ending October 29, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kevin Begley Chief Financial Officer of the Company certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

 

 

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