Village Super Market - 10-Q quarterly report FY

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

(Mark One)

OR

(Exact name of registrant as specified in its charter)

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 a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12-b2 of the Exchange Act. (Check one):

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) (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)

 

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

(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.

 

        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 faced substantial increases in employee health and pension costs and in rates charged by utilities for electricity and gas. These trends are expected to continue in fiscal 2007.

 

 

       Gross Profit.Gross profit as a percentage of sales increased to 26.8% in the first quarter of fiscal 2007 compared to 26.0% in the first quarter of the prior year. As a percentage of sales, gross profit increased primarily due to higher gross margins in most departments (.36%), lower promotional spending (.27%) and improved product mix (.11%).

 

       Operating and Administrative Expense.Operating and administrative expense as a percentage of sales increased to 22.7% in the first quarter of fiscal 2007 compared to 22.6% in the first quarter of the prior year. As a percentage of sales, operating and administrative expense increased primarily due to increased repair and maintenance (.10%) and utility costs (.07%). These increases were partially offset by lower payroll costs (.11%).

 

        Depreciation and Amortization.Depreciation and amortization expense increased in the first quarter of fiscal 2007 compared to the first quarter of the prior year due to depreciation on fixed asset additions.

 

        Interest Expense.Interest expense decreased in the first quarter of fiscal 2007 compared to the first quarter of the prior year due to reductions in debt outstanding.

 

       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 29, 2006. As of October 28, 2006, 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 $3,905 in the first quarter of fiscal 2007 compared with $2,468 in the first quarter of the prior year. This increase is primarily attributable to higher net income in the current fiscal year.

        During the first quarter of fiscal 2007, the Company used cash on hand and operating cash flow of $3,905 to fund capital expenditures of $2,888, debt payments of $4,816 and dividends of $751. Debt payments made include the fourth installment of $4,286 on the Company’s unsecured Senior Notes. On September 29, 2006 the Company invested $27,762 in notes receivable from Wakefern. These funds were previously invested in demand deposits at Wakefern. The initial fifteen month term of these notes will automatically be extended for additional, recurring 90 day periods unless, not later than one year prior to the due date, the Company notifies Wakefern requesting payment on the due date. Approximately half of these notes earn interest at the prime rate less 1.25% and approximately half of the notes earn a fixed rate of 7%.

        Working capital was $15,020 at October 28, 2006 compared to $44,096 at July 29, 2006. The working capital ratio was 1.20 to 1 at October 28, 2006 compared to 1.58 to 1 at July 29, 2006. Working capital declined primarily due to the investment of excess cash in fifteen month notes receivable from Wakefern. 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 $14,000 for capital expenditures in fiscal 2007. The Rio Grande remodel was completed in the first quarter. The construction of a new store in Franklin, New Jersey is expected to begin during the second quarter of fiscal 2007. The Company’s primary sources of liquidity in fiscal 2007 are expected to be cash and cash equivalents on hand and operating cash flow generated in fiscal 2007. There have been no substantial changes as of October 28, 2006 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 29, 2006.

        A description of the Company’s transactions with Wakefern, its principal supplier, and with other related parties is included on pages 7, 8, 16 and 19 of the Company’s Annual Report on Form 10-K for the year ended July 29, 2006. There have been no significant changes in the Company’s relationship or nature of transactions with related parties during the first quarter of fiscal 2007 except for the investment in notes receivable from Wakefern described previously herein and an additional required investment in Wakefern common stock of $721.

        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.

        At October 28, 2006, the Company had demand deposits of $26,747 at Wakefern earning interest at overnight money market rates, which are exposed to the impact of interest rate changes. At October 28, 2006 the Company had $27,762 of fifteen month notes receivable due from Wakefern. Approximately half of these notes earn a fixed rate of interest of 7% and approximately half earn prime less 1.25%.

        As required by Rule 13a-15 under the Exchange Act, the Company carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures at the end of the period. This evaluation was carried out under the supervision, and with the participation, of the Company’s management, including the Company’s Chief Executive Officer along with the Company’s Chief Financial Officer. Based upon that evaluation, the Company’s Chief Executive Officer, along with the Company’s Chief Financial Officer, concluded that the Company’s disclosure controls and procedures are effective.

        Disclosure controls and procedures are 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.

         There have been no significant changes in internal controls over financial reporting during the first quarter of fiscal 2007.

 

        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.