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VILLAGE SUPER MARKET INC

VILLAGE SUPER MARKET INCVLGEAEarnings & Financial Report

Nasdaq · Consumer Staples · Retail-Grocery Stores

A supermarket is a self-service shop offering a wide variety of food, beverages and household products, organized into sections under one roof. The supermarket retail format first appeared around 1930 in the United States as the culmination of almost two decades of retail innovations to the grocery store, and began to spread to other countries after extensive worldwide publicity in 1956. In everyday American English usage, "grocery store" is often used interchangeably with "supermarket", whil...

What changed in VILLAGE SUPER MARKET INC's 10-K — 2022 vs 2023

Top changes in VILLAGE SUPER MARKET INC's 2023 10-K

104 paragraphs added · 112 removed · 92 edited across 5 sections

Item 2. Properties

Properties — owned and leased real estate

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The remaining 31 stores (containing 1,573,000 square feet of total space), the central commissary and the corporate headquarters are leased, with initial lease terms generally ranging from 20 to 30 years, usually with renewal options. Twenty-three of these leased stores are located in shopping centers or city storefronts and the remaining eight are freestanding stores.
The remaining 30 stores (containing 1,501,000 square feet of total space), the central commissary and the corporate headquarters are leased, with initial lease terms generally ranging from 20 to 30 years, usually with renewal options. The stores are freestanding or are located in shopping centers or city storefronts.
Village will fund its share of project costs estimated to be $15,000 to $20,000 over the two to three year life of the project. As of July 30, 2022, Village has invested $5,010 into the real estate partnership, which is accounted for as an equity method investment included in Investments in Real Estate Partnerships on the Consolidated Balance Sheet.
Village will fund its share of project costs estimated to be $15,000 to $20,000 over the two to three year life of the project. As of July 29, 2023, Village has invested $10,875 into the real estate partnership, which is accounted for as an equity method investment included in Investments in Real Estate Partnerships on the Consolidated Balance Sheet.
For additional information on lease obligations, see Note 7 to the consolidated financial statements. On April 28, 2022 the Company entered into a partnership agreement for a 30% interest in the development of a retail center in Old Bridge, New Jersey, which includes a Village replacement store with future lease obligations of $9,280.
For additional information on lease obligations, see Note 7 to the consolidated financial statements. On April 28, 2022 the Company entered into a partnership agreement for a 30% interest in the development of a retail center in Old Bridge, New Jersey, which includes a Village replacement store with an operating lease obligation of $4,127 as of July 29, 2023.
The Company owns all trade fixtures and equipment in its stores and several other properties including a shopping center and parcels of vacant land, which are available as locations for possible future stores or other development.
The Company owns all trade fixtures and equipment in its stores and several other properties including a shopping center and parcels of vacant land, which are available as locations for possible future stores or other development. On October 13, 2021, Village purchased the Galloway store shopping center for $9,800.
As of July 30, 2022, finance lease right-of-use assets of $11,859 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 30, 2022 was approximately $38,419.
As of July 29, 2023, finance lease right-of-use assets of $10,912 are included in property, equipment and fixtures, net in the Company's consolidated balance sheet. 5 The annual rental payment, including finance leases, for all of the Company's leased facilities for the year ended July 29, 2023 was approximately $37,131.
ITEM 2. PROPERTIES As of July 30, 2022, Village owns the sites of seven of its supermarkets (containing 467,000 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.
ITEM 2. PROPERTIES As of July 29, 2023, Village owns the sites of eight of its supermarkets (containing 539,000 square feet of total space) and the micro-fulfillment center in southern New Jersey.
Removed
On October 13, 2021, Village completed the acquisition of the Galloway store shopping center for $9,800. 5
Added
On January 27, 2023, Village purchased the Vineland store shopping center for $9,500.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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ITEM 3. LEGAL PROCEEDINGS 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 3. LEGAL PROCEEDINGS The Company is involved in 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 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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During fiscal 2022, Village paid cash dividends of $13,041. Dividends in fiscal 2022 consist of $1.00 per Class A common share and $.65 per Class B common share. During fiscal 2021, Village paid cash dividends of $13,050. Dividends in fiscal 2021 consist of $1.00 per Class A common share and $.65 per Class B common share. 7
During fiscal 2023, Village paid cash dividends of $13,193. Dividends in fiscal 2023 consist of $1.00 per Class A common share and $.65 per Class B common share. During fiscal 2022, Village paid cash dividends of $13,041. Dividends in fiscal 2022 consist of $1.00 per Class A common share and $.65 per Class B common share. 7
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. 2022 High Low 4th Quarter $24.25 $22.13 3rd Quarter $24.76 $22.21 2nd Quarter $23.64 $21.26 1st Quarter $22.87 $21.43 2021 High Low 4th Quarter $25.46 $22.55 3rd Quarter $26.19 $21.07 2nd Quarter $23.89 $21.56 1st Quarter $26.41 $23.19 As of October 13, 2022, there were approximately 266 holders of record of Class A common stock.
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. 2023 High Low 4th Quarter $23.74 $20.42 3rd Quarter $23.65 $21.69 2nd Quarter $24.10 $20.58 1st Quarter $22.97 $19.23 2022 High Low 4th Quarter $24.25 $22.13 3rd Quarter $24.76 $22.21 2nd Quarter $23.64 $21.26 1st Quarter $22.87 $21.43 As of October 11, 2023, there were approximately 237 holders of record of Class A common stock.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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(4) 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).
(5) 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).
(7) 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.
(7) New stores, replacement stores and stores with banner changes 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.
(2) Includes a $2,802 (net of tax) gain on the sale of the leasehold interest in a non-supermarket related parking lot lease obtained as part of the Fairway acquisition, a gain on the sale of a pharmacy prescription list related to the Silver Spring store, net of store closing costs of $276 (net of tax), non-cash impairment charges for the Fairway trade name and the long lived assets for one Gourmet Garage store of $2,010 (net of tax), pension settlement charges of $409 (net of tax) and estimated net income of $417 due to the fiscal year including a 53rd week. 8 (3) 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 (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).
(4) 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 (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).
For year July 30, 2022 July 31, 2021 July 25, 2020 July 27, 2019 July 28, 2018 Sales $ 2,061,084 $ 2,030,330 $ 1,804,594 $ 1,643,502 $ 1,612,015 Net income 26,830 (1) 19,994 (2) 24,939 (3) 25,539 (4) 25,080 (5) Net income as a % of sales 1.30 % 0.98 % 1.38 % 1.55 % 1.56 % Net income per share: Class A common stock: Basic $ 2.06 $ 1.53 $ 1.93 $ 1.98 $ 1.95 Diluted 1.84 1.37 1.72 1.77 1.74 Class B common stock: Basic 1.34 1.00 1.25 1.29 1.27 Diluted 1.34 1.00 1.25 1.29 1.27 Cash dividends per share: Class A 1.00 1.00 1.00 1.00 1.00 Class B 0.65 0.65 0.65 0.65 0.65 At year-end Total assets (6) $ 924,448 $ 889,004 $ 915,546 $ 502,289 $ 481,590 Long-term debt (6) 374,035 370,078 396,181 47,725 48,186 Working capital 79,796 44,023 34,522 56,307 89,201 Shareholders’ equity 372,109 341,473 332,320 318,672 303,145 Book value per share 25.64 23.48 22.84 22.15 21.08 Other data Same store sales trend (7) 4.1 % 2.3 % 5.3 % (0.5) % 0.2 % Total square feet 2,040,000 2,026,000 2,091,000 1,804,000 1,770,000 Average total sq. ft. per store 54,000 55,000 55,000 55,000 59,000 Selling square feet 1,488,000 1,481,000 1,529,000 1,401,000 1,384,000 Sales per average square foot of selling space (8) $ 1,390 $ 1,349 $ 1,275 $ 1,186 $ 1,188 Number of stores 38 37 38 33 30 Sales per average number of stores (8) $ 55,635 $ 52,713 $ 53,284 $ 54,715 $ 55,450 Capital expenditures and acquisitions $ 43,270 $ 25,233 $ 54,495 $ 27,988 $ 35,464 (1) Includes pension settlement charges of $8,556 (net of tax) including the result of the termination of the Village Super Market, Inc.
For year July 29, 2023 July 30, 2022 July 31, 2021 July 25, 2020 July 27, 2019 Sales $ 2,166,654 $ 2,061,084 $ 2,030,330 $ 1,804,594 $ 1,643,502 Net income 49,716 (1) 26,830 (2) 19,994 (3) 24,939 (4) 25,539 (5) Net income as a % of sales 2.29 % 1.30 % 0.98 % 1.38 % 1.55 % Net income per share: Class A common stock: Basic $ 3.78 $ 2.06 $ 1.53 $ 1.93 $ 1.98 Diluted 3.38 1.84 1.37 1.72 1.77 Class B common stock: Basic 2.45 1.34 1.00 1.25 1.29 Diluted 2.45 1.34 1.00 1.25 1.29 Cash dividends per share: Class A 1.00 1.00 1.00 1.00 1.00 Class B 0.65 0.65 0.65 0.65 0.65 At year-end Total assets (6) $ 967,706 $ 924,448 $ 889,004 $ 915,546 $ 502,289 Long-term debt (6) 361,418 374,035 370,078 396,181 47,725 Working capital 67,714 79,796 44,023 34,522 56,307 Shareholders’ equity 410,166 372,109 341,473 332,320 318,672 Book value per share 27.61 25.64 23.48 22.84 22.15 Other data Same store sales trend (7) 3.5 % 4.1 % 2.3 % 5.3 % (0.5) % Total square feet 2,040,000 2,040,000 2,026,000 2,091,000 1,804,000 Average total sq. ft. per store 54,000 54,000 55,000 55,000 55,000 Selling square feet 1,488,000 1,488,000 1,481,000 1,529,000 1,401,000 Sales per average square foot of selling space (8) $ 1,460 $ 1,390 $ 1,349 $ 1,275 $ 1,186 Number of stores 38 38 37 38 33 Sales per average number of stores (8) $ 57,017 $ 55,635 $ 52,713 $ 53,284 $ 54,715 Capital expenditures and acquisitions $ 46,400 $ 43,270 $ 25,233 $ 54,495 $ 27,988 (1) Includes litigation settlement gains related to claims associated with the Fairway acquisition and liabilities associated thereto of $828 (net of tax) and a $276 (net of tax) loss on an equity investment.
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 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. 9 Unaudited Quarterly Financial Data (Dollars in thousands except per share amounts).
Employees’ Retirement Plan, and a $342 (net of tax) gain on the sale of an equity investment.
(2) Includes pension settlement charges of $8,556 (net of tax) including the result of the termination of the Village Super Market, Inc. Employees’ Retirement Plan, and a $342 (net of tax) gain on the sale of an equity investment.
First Quarter Second Quarter Third Quarter Fourth Quarter Fiscal Year 2022 Sales $ 494,211 $ 537,408 $ 501,962 $ 527,503 $ 2,061,084 Gross profit 140,180 149,611 141,591 148,285 579,667 Net income (loss) 7,328 10,129 (3,231) 12,603 26,830 Net income per share: Class A common stock: Basic 0.56 0.78 (0.25) 0.97 2.06 Diluted 0.50 0.69 (0.22) 0.87 1.84 Class B common stock: Basic 0.37 0.50 (0.16) 0.63 1.34 Diluted 0.37 0.50 (0.16) 0.63 1.34 2021 Sales $ 490,136 $ 522,818 $ 481,093 $ 536,283 $ 2,030,330 Gross profit 137,963 141,845 133,422 151,814 565,044 Net income 3,360 4,555 2,574 9,500 19,994 Net income per share: Class A common stock: Basic 0.26 0.35 0.20 0.73 1.53 Diluted 0.23 0.31 0.18 0.65 1.37 Class B common stock: Basic 0.17 0.23 0.13 0.47 1.00 Diluted 0.17 0.23 0.13 0.47 1.00
First Quarter Second Quarter Third Quarter Fourth Quarter Fiscal Year 2023 Sales $ 519,689 $ 563,866 $ 529,294 $ 553,806 $ 2,166,654 Gross profit 149,285 154,879 151,223 161,063 616,450 Net income 11,081 12,322 11,017 15,296 49,716 Net income per share: Class A common stock: Basic 0.85 0.95 0.84 1.15 3.78 Diluted 0.76 0.85 0.75 1.03 3.38 Class B common stock: Basic 0.55 0.62 0.54 0.74 2.45 Diluted 0.55 0.62 0.54 0.74 2.45 2022 Sales $ 494,211 $ 537,408 $ 501,962 $ 527,503 $ 2,061,084 Gross profit 140,180 149,611 141,591 148,285 579,667 Net income (loss) 7,328 10,129 (3,231) 12,603 26,830 Net income (loss) per share: Class A common stock: Basic 0.56 0.78 (0.25) 0.97 2.06 Diluted 0.50 0.69 (0.22) 0.87 1.84 Class B common stock: Basic 0.37 0.50 (0.16) 0.63 1.34 Diluted 0.37 0.50 (0.16) 0.63 1.34
Removed
(5) 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.
Added
(3) Includes a $2,802 (net of tax) gain on the sale of the leasehold interest in a non-supermarket related parking lot lease obtained as part of the Fairway acquisition, a gain on the sale of a pharmacy prescription list related to the Silver Spring store, net of store closing costs of $276 (net of tax), non-cash impairment charges for the Fairway trade name and the long lived assets 8 for one Gourmet Garage store of $2,010 (net of tax), pension settlement charges of $409 (net of tax) and estimated net income of $417 due to the fiscal year including a 53rd week.
Removed
Amounts for the year ended July 28, 2018 exclude results of the store opened in the Bronx, New York on June 28, 2018. 9 Unaudited Quarterly Financial Data (Dollars in thousands except per share amounts).

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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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. 19 • The Company could be adversely affected if consumers lose confidence in the safety and quality of the food supply chain.
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.
Most product departments include high-quality, competitively priced own-brand offerings under the Wholesome Pantry, Bowl & Basket, Paperbird and Fairway brands. Our Fairway 10 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.
Most product departments include high-quality, competitively priced own-brand offerings under the Wholesome Pantry, Bowl & Basket, Paperbird and Fairway brands. Our 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.
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. 20 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.
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.
The Company utilizes 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 Company utilizes a liability-driven investment ("LDI") 15 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.
Failure of our asset groups to achieve sufficient levels of cash flow could result in impairment charges on long-lived assets. • Our goodwill and indefinite-lived intangible assets are tested at the end of each fiscal year, or more frequently if circumstances dictate, for impairment.
Failure of our asset groups to achieve sufficient levels of cash flow could result in impairment charges on long-lived assets. 19 • Our goodwill and indefinite-lived intangible assets are tested at the end of each fiscal year, or more frequently if circumstances dictate, for impairment.
The change in cash flows from operating activities in fiscal 2022 was primarily due to changes in working capital and higher net income adjusted for non-cash items including depreciation and amortization, share-based compensation, deferred taxes, pension settlement charges, the provision to value inventories at LIFO, impairment charges and the gain on sale of property, equipment and fixtures.
The change in cash flows from operating activities in fiscal 2023 was primarily due to changes in working capital and higher net income adjusted for non-cash items including depreciation and amortization, share-based compensation, deferred taxes, pension settlement charges, the provision to value inventories at LIFO, impairment charges and the gain on sale of property, equipment and fixtures.
In addition, Wakefern provides the Company with support services in numerous areas including advertising, workers' compensation, 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.
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.
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 88% of our employees are covered by collective bargaining agreements.
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 92% of our employees are covered by collective bargaining agreements.
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, workers' compensation, liability and property insurance, technology support and other store services.
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.
The Credit Facility also provides for up to $25,000 of letters of credit ($7,336 outstanding at July 30, 2022), which secure obligations for store leases and construction performance guarantees to municipalities. The Credit Facility contains covenants 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 Credit Facility also provides for up to $25,000 of letters of credit ($7,336 outstanding at July 29, 2023), which secure obligations for store leases and construction performance guarantees to municipalities. The Credit Facility contains covenants that, among other conditions, require a minimum tangible net worth, a minimum fixed charge coverage ratio and a maximum adjusted debt to EBITDAR ratio.
Indebtedness under this agreement bears interest at the applicable SOFR plus 1.10% and expires on May 6, 2025. • An unsecured $25,500 term loan issued on May 12, 2020, repayable in equal monthly installments based on a seven-year amortization schedule through May 4, 2027 and bearing interest at the applicable SOFR plus 1.46%.
Indebtedness under this agreement bears interest at the applicable Secured Overnight Financing Rate ("SOFR") plus 1.10% and expires on May 6, 2025. • An unsecured $25,500 term loan issued on May 12, 2020, repayable in equal monthly installments based on a seven-year amortization schedule through May 4, 2027 and bearing interest at the applicable SOFR plus 1.46%.
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 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.
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 30, 2022.
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 29, 2023.
The Company undertakes no obligation to update forward-looking statements to reflect developments or information obtained after the date hereof. • We expect the increase in same store sales to range from 1.0% to 3.0% in fiscal 2023. • We have budgeted $70,000 for capital expenditures in fiscal 2023.
The Company undertakes no obligation to update forward-looking statements to reflect developments or information obtained after the date hereof. • We expect the increase in same store sales to range from 1.0% to 3.0% in fiscal 2024. • We have budgeted $85,000 for capital expenditures in fiscal 2024.
No benefit obligation or plan assets related to the Village Super Market, Inc. Employees’ Retirement Plan remain as of July 30, 2022. The Company recognized a $12,296 pre-tax settlement charge as a result of the termination, including a $10,856 non-cash charge for unrecognized losses within accumulated other comprehensive loss as of the termination date.
No benefit obligation or plan assets related to the Village Super Market, Inc. Employees’ Retirement Plan remain as of July 29, 2023. In fiscal 2022, the Company recognized a $12,296 pre-tax settlement charge as a result of the termination, including a 10,856 non-cash charge for unrecognized losses within accumulated other comprehensive loss as of the termination date.
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 5.25% in fiscal 2022.
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 5.75% in fiscal 2023.
The Company competes by providing a superior customer service experience, competitive pricing and a broad range of consistently available quality products. The ShopRite Price Plus customer loyalty 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.
The Company competes by providing a superior customer service experience, competitive pricing and a broad range of consistently available quality products. The ShopRite Price Plus and Fairway Insider customer loyalty programs enable Village to offer continuity programs, focus on target marketing initiatives and to offer discounts and attach digital coupons directly to a customer's loyalty card.
Fiscal 2022 contains 52 weeks and fiscal 2021 contains 53 weeks. NON-GAAP MEASURES The accompanying Consolidated Financial Statements, including the related notes, are presented in accordance with generally accepted accounting principles ("GAAP"). We provide non-GAAP measures, including Adjusted net income and Adjusted operating and administrative expenses as management believes these supplemental measures are useful to investors and analysts.
Both fiscal 2023 and 2022 contain 52 weeks. NON-GAAP MEASURES The accompanying Consolidated Financial Statements, including the related notes, are presented in accordance with generally accepted accounting principles ("GAAP"). We provide non-GAAP measures, including Adjusted net income and Adjusted operating and administrative expenses as management believes these supplemental measures are useful to investors and analysts.
Interest income increased in fiscal 2022 compared to fiscal 2021 due primarily to higher interest rates and larger amounts invested in variable rate notes receivable from Wakefern and demand deposits invested at Wakefern. INCOME TAXES The Company’s effective income tax rate was 31.3% and 30.7% in fiscal 2022 and 2021, respectively.
Interest income increased in fiscal 2023 compared to fiscal 2022 due primarily to higher interest rates and larger amounts invested in variable rate notes receivable from Wakefern and demand deposits invested at Wakefern. INCOME TAXES The Company’s effective income tax rate was 31.6% and 31.3% in fiscal 2023 and 2022, respectively.
The Company’s stores, seven of which are owned, average 54,000 total square feet.
The Company’s stores, eight of which are owned, average 54,000 total square feet.
Changes in the discount rate and updated assumptions on mortality tables and improvement scales resulted in a net decrease in the projected benefit obligation by approximately $2,017 at July 30, 2022. 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.
Changes in the discount rate and updated assumptions on mortality tables and improvement scales resulted in a net decrease in the projected benefit obligation by approximately $771 at July 29, 2023. 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.
The Company invested $28,850 of the proceeds received from the notes that matured on August 15, 2022 in variable rate notes receivable from Wakefern that earn interest at the prime rate plus .50% and mature on August 15, 2027.
On August 15, 2022, notes receivable due from Wakefern of $28,850 that earned interest at the prime rate plus 1.25% matured. The Company invested all of the proceeds received in variable rate notes receivable from Wakefern that earn interest at the prime rate plus .50% and mature on August 15, 2027.
Adjusted net income increased 85% compared to the prior year due primarily to the 4.1% increase in same store sales and improvements in gross profit and operating and administrative expense margins. 14 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.
Adjusted net income increased 40% compared to the prior year due primarily to the 3.5% increase in same store sales, improvements in gross profit and operating and administrative expense margins and increased interest income. 14 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.
The Company’s primary sources of liquidity in fiscal 2023 are expected to be cash and cash equivalents on hand at July 30, 2022 and operating cash flow generated in fiscal 2023.
The Company’s primary sources of liquidity in fiscal 2024 are expected to be cash and cash equivalents on hand at July 29, 2023 and operating cash flow generated in fiscal 2024.
The patronage dividend receivable based on these estimates was $12,239 and $11,860 at July 30, 2022 and July 31, 2021, respectively. 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.
The patronage dividend receivable based on these estimates was $12,466 and $12,239 at July 29, 2023 and July 30, 2022, respectively. 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.
Village will fund its share of project costs estimated to be $15,000 to $20,000 over the two to three year life of the project. As of July 30, 2022, Village has invested $5,010 into the real estate partnership, which is accounted for as an equity method investment included in Investments in Real Estate Partnerships on the Consolidated Balance Sheet.
Village will fund its share of project costs estimated to be $15,000 to $20,000 over the two to three year life of the project. As of July 29, 2023, Village has invested $10,875 into the real estate partnership, which is accounted for as an equity method investment included in Investments in Real Estate Partnerships on the Consolidated Balance Sheet.
The Company invested $28,850 of the proceeds received from the notes that matured on August 15, 2022 in variable rate notes receivable from Wakefern that earn interest at the prime rate plus .50% and mature on August 15, 2027.
The Company invested all of the proceeds received in variable rate notes receivable from Wakefern that earn interest at the prime rate plus .50% and mature on August 15, 2027.
Our methodology for selecting the discount rate as of July 30, 2022 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 3.77% at July 30, 15 2022 compared to 2.44% at July 31, 2021.
Our methodology for selecting the discount rate as of July 29, 2023 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 4.85% at July 29, 2023 compared to 3.77% at July 30, 2022.
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 % $ 665 $ (795) $ 32 $ (78) Expected return on assets + / - 1.0 % $ — — $ 29 $ (29) In April 2022, the Company terminated the Village Super Market, Inc.
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 % $ 638 $ (684) $ 34 $ (72) Expected return on assets + / - 1.0 % $ — — $ 21 $ (21) In April 2022, the Company terminated the Village Super Market, Inc.
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).
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 Super Market, Inc.
On September 28, 2022, the Company invested an additional $30,000 in variable rate notes receivable from Wakefern that earn interest at the prime rate plus .50% and mature on September 28, 2027. Wakefern has the right to prepay these notes at any time.
On September 28, 2022, the Company invested an additional $30,000 in variable rate notes receivable from Wakefern that earn interest at the prime rate plus .50% and mature on September 28, 2027.
In February 2022, the Company executed an amendment and restatement of the interest rate swap that fixes the base SOFR at .26% per annum through May 4, 2027, resulting in a fixed effective interest rate of 1.72% on the term loan. • A secured $50,000 term loan issued on September 1, 2020 repayable in equal monthly installments based on a fifteen-year amortization schedule through September 1, 2035 and bearing interest at the applicable SOFR plus 1.61%.
An interest rate swap with notional amounts equal to the term loan fixes the base SOFR at .26% per annum through May 4, 2027, resulting in a fixed effective interest rate of 1.72% on the term loan. • A secured $50,000 term loan issued on September 1, 2020 repayable in equal monthly installments based on a fifteen-year amortization schedule through September 01, 2035 and bearing interest at the applicable SOFR plus 1.61%.
On September 28, 2022, the Company invested an additional $30,000 in variable rate notes receivable from Wakefern that earn interest at the prime rate plus .50% and mature on September 28, 2027. Wakefern has the right to prepay these notes at any time.
On September 28, 2022, the Company invested an additional $30,000 in variable rate notes receivable from Wakefern that earn interest at the prime rate plus .50% and mature on September 28, 2027.
As part of this agreement, Village is required to purchase certain amounts of Wakefern common stock. At July 30, 2022, the Company’s indebtedness to Wakefern for the outstanding amount of this stock subscription was $3,095. The maximum per store investment is currently $975.
As part of this agreement, Village is required to purchase certain amounts of Wakefern common stock. At July 29, 2023, the Company’s indebtedness to Wakefern for the outstanding amount of this stock subscription was $2,423. The maximum per store investment is currently $975.
Village made no contributions to the remaining plans in fiscal 2022 and no contributions were made in fiscal 2021 to Company-sponsored pension plans. Contributions to the remaining plans are expected to be immaterial in fiscal 2023. RECENTLY ISSUED ACCOUNTING STANDARDS For the disclosure related to recently issued accounting standards, see Note 1 to the consolidated financial statements.
Village made no contributions to the remaining plans in fiscal 2023 or fiscal 2022. Contributions to the remaining plans are expected to be immaterial in fiscal 2024. RECENTLY ISSUED ACCOUNTING STANDARDS For the disclosure related to recently issued accounting standards, see Note 1 to the consolidated financial statements.
The Company paid rent to related parties under this lease of $735 and $704 in fiscal 2022 and 2021, respectively, and has a related lease obligation of $2,545 at July 30, 2022. This lease expires in fiscal 2026 with options to extend at increasing annual rents. The Company has ownership interests in four real estate partnerships.
The Company paid rent to related parties under this lease of $735 in both fiscal 2023 and 2022, respectively, and has a related lease obligation of $1,851 at July 29, 2023. This lease expires in fiscal 2026 with options to extend at increasing annual rents. The Company has ownership interests in four real estate partnerships.
LIQUIDITY and CAPITAL RESOURCES CASH FLOWS Net cash provided by operating activities was $79,625 in fiscal 2022 compared to $52,692 in fiscal 2021.
LIQUIDITY and CAPITAL RESOURCES CASH FLOWS Net cash provided by operating activities was $104,513 in fiscal 2023 compared to $79,625 in fiscal 2022.
On September 1, 2022, the Company amended the Credit Facility due to the execution of a seven year $10,000 unsecured term loan. The unsecured term loan is repayable in equal monthly installments based on a seven year amortization schedule through September 4, 2029 and bears interest at the applicable SOFR plus 1.35%.
The unsecured term loan is repayable in equal monthly installments based on a seven year amortization schedule through September 4, 2029 and bears interest at the applicable SOFR plus 1.35%.
Village paid aggregate rents to two of these partnerships for leased stores of $1,556 and $1,579 in fiscal 2022 and 2021, respectively, and has aggregate lease obligations of $12,340 at July 30, 2022 related to these leases. 21
Village paid aggregate rents to two of these partnerships for leased stores of $1,568 and $1,556 in fiscal 2023 and 2022, respectively, and has aggregate lease obligations of $15,996 at July 29, 2023 related to these leases. 21
Our Gourmet Garage specialty markets offer organic produce, signature soups and prepared foods, high-quality meat and seafood, charcuterie and gourmet cheeses, artisan baked bread and pastries, chef-prepared meals to go and pantry staples.
Our Gourmet Garage specialty markets offer organic produce, signature soups and prepared foods, high-quality meat and seafood, charcuterie and gourmet cheeses, artisan baked bread and pastries, chef-prepared meals to go and pantry staples. The Company has an ongoing program to upgrade and expand its supermarket chain.
On April 28, 2022 the Company entered into a partnership agreement for a 30% interest in the development of a retail center in Old Bridge, New Jersey, which includes a Village replacement store with future lease obligations of $9,280.
On April 28, 2022 the Company entered into a partnership agreement for a 30% interest in the development of a retail center in Old Bridge, New Jersey, which includes a Village replacement store with an operating lease obligation of $4,127 as of July 29, 2023.
Department gross margins increased due primarily to pricing initiatives and improvements in commissary operations. OPERATING AND ADMINISTRATIVE EXPENSE Operating and administrative expense as a percentage of sales increased to 24.63% in fiscal 2022 compared to 24.57% in fiscal 2021.
Department gross margins increased due primarily to pricing initiatives and improvements in commissary operations partially offset by higher inventory shrink. OPERATING AND ADMINISTRATIVE EXPENSE Operating and administrative expense as a percentage of sales decreased to 23.86% in fiscal 2023 compared to 24.63% in fiscal 2022.
During fiscal 2021, Village used cash to fund capital expenditures of $25,233, dividends of $13,050, principal payments of long-term debt of $8,414 and additional investments of $2,287 in notes receivable from Wakefern.
During fiscal 2022, Village used cash to fund capital expenditures of $43,270, dividends of $13,041, principal payments of long-term debt of $8,299 and additional investments of $2,489 in notes receivable from Wakefern.
Labor costs decreased due to productivity initiatives, labor shortages and sales leverage partially offset by minimum wage and demand driven pay rate increases. DEPRECIATION AND AMORTIZATION Depreciation and amortization expense was $33,122 and $34,195 in fiscal 2022 and 2021, respectively.
Labor costs and fringe benefits decreased due primarily to sales leverage and ongoing productivity initiatives partially offset by minimum wage and market-driven pay rate increases. DEPRECIATION AND AMORTIZATION Depreciation and amortization expense was $34,002 and $33,122 in fiscal 2023 and 2022, respectively. Depreciation and amortization expense increased due primarily to capital expenditures.
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 30, 2022, Village had demand deposits invested at Wakefern in the amount of $110,739.
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.
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 30, 2022, Village had demand deposits invested at Wakefern in the amount of $110,739.
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.
Working capital changes, including other assets and other liabilities, increased net cash provided by operating activities by $7,081 in fiscal 2022 compared a decrease in net cash provided by operating activities of $1,587 in fiscal 2021.
Working capital changes, including other assets and other liabilities, increased net cash provided by operating activities by $15,021 in fiscal 2023 compared to $7,081 in fiscal 2022.
At July 30, 2022, the Company held variable rate notes receivable due from Wakefern of $28,627 that earn interest at the prime rate plus 1.25% and matured on August 15, 2022 and $29,157 that earn interest at the prime rate plus .75% and mature on February 15, 2024.
At July 29, 2023, the Company held variable rate notes receivable due from Wakefern of $31,483 that earn interest at the prime rate plus .75% and mature on February 15, 2024, $30,865 that earn interest at the prime rate plus .50% and mature on August 15, 2027 and $31,861 that earn interest at the prime rate plus .50% and mature on September 28, 2027.
During fiscal 2021, Village paid cash dividends of $13,050. Dividends in fiscal 2021 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.
Dividends in fiscal 2023 consist of $1.00 per Class A common share and $.65 per Class B common share. During fiscal 2022, Village paid cash dividends of $13,041. Dividends in fiscal 2022 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.
Additional information is provided in Note 3 to the consolidated financial statements. At July 30, 2022, the Company held variable rate notes receivable due from Wakefern of $28,627 that earn interest at the prime rate plus 1.25% and matured on August 15, 2022 and $29,157 that earn interest at the prime rate plus .75% and mature on February 15, 2024.
Additional information is provided in Note 3 to the consolidated financial statements. On August 15, 2022, notes receivable due from Wakefern of $28,850 that earned interest at the prime rate plus 1.25% matured.
Planned expenditures include costs for construction of three replacement stores scheduled to open in fiscal 2024, two major remodels, including the conversion of the Pelham, NY store from the Fairway to the ShopRite banner, the purchase of the Vineland store shopping center, several smaller store remodels and merchandising initiatives, installation of electronic shelf labels in six stores, continued expansion of self-checkout, and various technology, equipment and facility upgrades. • The Board’s current intention is to continue to pay quarterly dividends in 2023 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. 18 • We expect our effective income tax rate in fiscal 2023 to be in the range of 31.0% - 32.0%.
Planned expenditures include costs for construction of the Old Bridge replacement store scheduled to open in fiscal 2024 and two other replacement stores scheduled to open in fiscal 2025, potential real estate purchases, several smaller store remodels and merchandising initiatives and various technology, equipment and facility upgrades. • The Board’s current intention is to continue to pay quarterly dividends in 2024 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 2024 to be in the range of 31.0% - 32.0%. 18 Various uncertainties and other factors could cause actual results to differ from the forward-looking statements contained in this report.
GROSS PROFIT Gross profit as a percentage of sales increased to 28.12% in fiscal 2022 compared to 27.83% in fiscal 2021 due primarily to increased departmental gross margin percentages (.57%) and a favorable change in product mix (.10%), partially offset by higher LIFO charges (.16%), decreased patronage dividends and rebates received from Wakefern (.09%) and higher promotional spending (.14%).
GROSS PROFIT Gross profit as a percentage of sales increased to 28.45% in fiscal 2023 compared to 28.12% in fiscal 2022 due primarily to increased departmental gross margin percentages (.23%), increased patronage dividends and rebates received from Wakefern (.08%), lower LIFO charges (.04%), a favorable change in product mix (.02%) and lower promotional spending (.03%) partially offset by increased warehouse assessment charges from Wakefern (.07%).
In February 2022, the Company executed an amendment and restatement of the interest rate swap related to the term loan that fixes the base SOFR at .57% per annum through September 1, 2035, resulting in a fixed effective interest rate of 2.18% on the term loan.
An interest rate swap with notional amounts equal to the term loan fixes the base SOFR at .57% per annum through September 4, 2035, resulting in a fixed effective interest rate of 2.18% on the term loan.
During fiscal 2022, Village used cash to fund capital expenditures of $43,270, dividends of $13,041, principal payments of long-term debt of $8,299, an investment in a real estate partnership for the development of a retail center in Old Bridge, New Jersey of $5,010 and additional investments of $2,489 in notes receivable from Wakefern.
During fiscal 2023, Village used cash to fund capital expenditures of $46,400, dividends of $13,193, principal payments of long-term debt of $10,446, treasury stock purchases of $3,739, an investment in a real estate partnership for the development of a retail center in Old Bridge, New Jersey of $5,865 and additional net investments of $36,425 in notes receivable from Wakefern.
Both leases contain normal periodic rent increases and options to extend the lease. On October 13, 2021, Village completed the acquisition of the Galloway store shopping center for $9,800. The Company leases a supermarket from a realty firm 30% owned by certain officers of Village.
Both leases contained normal periodic rent increases and 20 options to extend the lease. The sublease agreements were terminated upon the acquisition of the Galloway store shopping center in fiscal 2022 and Vineland store shopping center in fiscal 2023 for $9,800 and $9,500, respectively. The Company leases a supermarket from a realty firm 30% owned by certain officers of Village.
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.
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.
OVERVIEW Village Super Market operates a chain of 34 supermarkets in New Jersey (26), New York (6), Maryland (1) and Pennsylvania (1) under the ShopRite and Fairway banners and four Gourmet Garage specialty markets in New York City. On April 29, 2022, Village opened a 14,600 sq. ft. Gourmet Garage in the West Village in Manhattan, NYC.
(the “Company” or “Village”) operates a chain of 34 supermarkets in New Jersey (26), New York (6), Maryland (1) and Pennsylvania (1) under the ShopRite and Fairway banners and four Gourmet Garage specialty markets in New York City.
Same store sales increased due primarily to increased sales in New York City stores, higher transaction counts, inflation and continued growth in SNAP benefit redemptions. 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.
Same store sales increased due primarily to retail price inflation. New stores, replacement stores and stores with banner changes 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.
Prior to the January 28, 2022 amendment to the credit facility, interest accrued on the unsecured term loan at the applicable LIBOR plus 1.35%. An interest rate swap with notional amounts equal to the term loan fixed the base LIBOR at .41%, resulting in a fixed effective rate of 1.76%.
An interest rate swap with notional amounts equal to the term loan fixes the base SOFR at 1.41% per annum through January 28, 2037, resulting in a fixed effective interest rate of 2.91% on the term loan.
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 $959 and $1,355 during fiscal 2022 and 2021, respectively, and has related aggregate lease obligations of $607 at July 30, 2022.
At July 29, 2023, Village had demand deposits invested at Wakefern in the amount of $122,028. These deposits earn overnight money market rates. The Company subleased the Galloway and Vineland stores from Wakefern under sublease agreements which provided for combined annual rents of $413 and $959 in fiscal 2023 and 2022.
Online ordering for home delivery is available in all Fairway and Gourmet Garage stores through third party service providers. The supermarket industry is highly competitive and characterized by narrow profit margins.
Online ordering for home delivery is available in all Fairway stores through fairwaymarket.com, the Fairway app or through third party service providers. Online ordering for home delivery 10 is available in all Gourmet Garage stores through gourmetgarage.com, the Gourmet Garage app or through third party service providers.
Excluding the impact of the 53rd week, sales increased 3.5% due primarily to an increase in same store sales of 4.1% and the opening of a Gourmet Garage in the West Village in Manhattan, NY on April 29, 2022, partially offset by the closure of the Silver Spring, Maryland store in February 2021.
Sales increased due primarily to an increase in same store sales of 3.5%, the opening of a Gourmet Garage in the West Village in Manhattan, NY on April 29, 2022 and increased sales due to the remodel and conversion of the Pelham, NY Fairway to the ShopRite banner on August 15, 2022.
Planned expenditures include costs for construction of three replacement stores scheduled to open in fiscal 2024, two major remodels, including the conversion of the Pelham, NY store from the Fairway to the ShopRite banner, the purchase of the Vineland store shopping center, several smaller store remodels and merchandising initiatives, installation of electronic shelf labels in six stores, continued expansion of self-checkout, and various technology, equipment and facility upgrades.
Capital expenditures primarily include costs associated with the remodel and conversion of the Pelham, NY Fairway to the ShopRite banner, the new Gourmet Garage store in the West Village of New York City, the purchase of the Vineland store shopping center, costs for construction of the Old Bridge replacement store, installation of electronic shelf labels, continued expansion of self-checkout, and various technology, equipment and facility upgrades.
To promote production efficiency, product quality and consistency, the Company operates a centralized commissary supplying certain products in deli, bakery, prepared foods and other perishable product categories to all stores. Production costs, including materials, labor and overhead, are included in Cost of sales.
To promote production efficiency, product quality and consistency, the Company operates a centralized commissary supplying certain products in deli, bakery, prepared foods and other perishable product categories to all stores. The Company also owns and operates an automated micro-fulfillment center to facilitate online order fulfillment for the south New Jersey stores.
Among other things, the Credit Facility provides for: • An unsecured revolving line of credit providing a maximum amount available for borrowing of $75,000.
The principal purpose of the Credit Facility is to finance general corporate and working capital requirements, Village’s fiscal 2020 acquisition of certain Fairway assets and certain capital expenditures. Among other things, the Credit Facility provides for: • An unsecured revolving line of credit providing a maximum amount available for borrowing of $75,000.
Additionally, Village executed an interest rate swap for a notional amount equal to the term loan amount that fixes the base SOFR at 1.41% per annum, resulting in a fixed effective interest rate of 2.91% on the term loan. The term loan is secured by the Galloway store shopping center acquired in the first quarter of fiscal 2022.
Village also executed an interest rate swap for a notional amount equal to the term loan amount that fixes the base SOFR at 3.59%, resulting in a fixed effective rate of 5.34%.
The Company's presentation of Non-GAAP Measures should not be construed as an implication that its future results will be unaffected by unusual or non-recurring items. 11 The following tables reconciles Net income to Adjusted net income and Operating and administrative expenses to Adjusted operating and administrative expenses: 52 Weeks Ended 53 Weeks Ended July 30, 2022 July 31, 2021 Net Income $ 26,830 $ 19,994 Adjustments to Operating Expenses: Gain on sale of assets (1) (494) (4,768) Pension termination and settlement charges 12,341 587 Store closure costs (2) — 325 Other Adjustments: Impairment of assets (3) — 2,900 Income from 53-week fiscal year (4) — (602) Adjustments to Income Taxes: Tax impact of adjustments to operating expenses (3,633) 478 Adjusted net income $ 35,044 $ 18,914 Operating and administrative expenses $ 507,597 $ 498,786 Adjustments to operating and administrative expenses (11,847) 3,856 Adjusted operating and administrative expenses $ 495,750 $ 502,642 Adjusted operating and administrative expenses as a % of sales 24.05 % 24.76 % (1) Fiscal 2022 includes a $494 gain on the sale of an equity investment and fiscal 2021 includes a $4,044 gain on the sale of the leasehold interest in a non-supermarket related parking lot obtained as part of the Fairway acquisition and a $724 gain on the sale of the pharmacy prescription list related to the Silver Spring, Maryland store.
The Company's presentation of Non-GAAP Measures should not be construed as an implication that its future results will be unaffected by unusual or non-recurring items. 11 The following tables reconciles Net income to Adjusted net income and Operating and administrative expenses to Adjusted operating and administrative expenses: July 29, 2023 July 30, 2022 Net Income $ 49,716 $ 26,830 Adjustments to Operating Expenses: Litigation settlement gain (1) $ (1,200) $ — Loss (gain) on non-operating investments (2) 400 (494) Pension termination and settlement charges (3) — 12,341 Adjustments to Income Taxes: Tax impact of adjustments to operating expenses 248 (3,633) Adjusted net income $ 49,164 $ 35,044 Operating and administrative expenses $ 516,902 $ 507,597 Adjustments to operating and administrative expenses 800 (11,847) Adjusted operating and administrative expenses 517,702 495,750 Adjusted operating and administrative expenses as a % of sales 23.89 % 24.05 % (1) Fiscal 2023 litigation settlement gains are related to claims associated with the Fairway acquisition and liabilities associated thereto.
Adjusted operating and administrative expense as a percentage of sales decreased to 24.05% in fiscal 2022 compared to 24.76% in fiscal 2021 due primarily to lower labor costs and fringe benefits (.61%) and less advertising spending (.10%), partially offset by increased external fees and transportation costs associated with digital sales (.08%).
Adjusted operating and administrative expense as a percentage of sales decreased to 23.89% in fiscal 2023 compared to 24.05% in fiscal 2022 due primarily to lower labor costs (.19%) and decreased supply spending (.12%) partially offset by increased self-insured claim costs (.09%) and higher facility repair and maintenance costs (.05%).
The Company was in compliance with all covenants of the credit agreement at July 30, 2022. As of July 30, 2022, $67,664 remained available under the unsecured revolving line of credit. During fiscal 2022, Village paid cash dividends of $13,041. Dividends in fiscal 2022 consist of $1.00 per Class A common share and $.65 per Class B common share.
The Company was in compliance with all covenants of the credit agreement at July 29, 2023. As of July 29, 2023, $67,664 remained available under the unsecured revolving line of credit.
(4) Fiscal 2021 is a 53-week fiscal year, with the additional week included in the fourth quarter. 12 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 30, 2022 July 31, 2021 Sales 100.00 % 100.00 % Cost of sales 71.88 % 72.17 % Gross profit 28.12 % 27.83 % Operating and administrative expense 24.63 % 24.57 % Depreciation and amortization 1.61 % 1.69 % Impairment of assets — % 0.14 % Operating income 1.88 % 1.43 % Interest expense (0.19) % (0.19) % Interest income 0.20 % 0.18 % Income before income taxes 1.89 % 1.42 % Income taxes 0.59 % 0.44 % Net income 1.30 % 0.98 % SALES Sales were $2,061,084 in fiscal 2022, an increase of $30,754, or 1.5% from fiscal 2021.
The Company contributed cash of $1,440 to fully fund the plan and the remaining $10,901 represents non-cash charges for unrecognized losses within accumulated other comprehensive loss as of the termination date. 12 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 29, 2023 July 30, 2022 Sales 100.00 % 100.00 % Cost of sales 71.55 % 71.88 % Gross profit 28.45 % 28.12 % Operating and administrative expense 23.86 % 24.63 % Depreciation and amortization 1.58 % 1.61 % Operating income 3.01 % 1.88 % Interest expense (0.19) % (0.19) % Interest income 0.53 % 0.20 % Income before income taxes 3.35 % 1.89 % Income taxes 1.06 % 0.59 % Net income 2.29 % 1.30 % SALES Sales were $2,166,654 in fiscal 2023, an increase of $105,570, or 5.1% from fiscal 2022.
The increase in working capital in fiscal 2022 compared to fiscal 2021 is due primarily to $28,627 in notes receivable from Wakefern that have been reclassified to current assets as they matured on August 15, 2022. The Company’s working capital needs are reduced, since inventories are generally sold by the time payments to Wakefern and other suppliers are due.
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 $85,000 for capital expenditures in fiscal 2024.
INTEREST EXPENSE Interest expense was $3,907 and $3,943 in fiscal 2022 and 2021, respectively. INTEREST INCOME Interest income was $4,023 and $3,633 in fiscal 2022 and 2021, respectively.
INTEREST EXPENSE Interest expense was $4,220 and $3,907 in fiscal 2023 and 2022, respectively. Interest expense increased due primarily to higher average outstanding debt balances. 13 INTEREST INCOME Interest income was $11,399 and $4,023 in fiscal 2023 and 2022, respectively.
These deposits earn overnight money market rates. Credit Facility On January 28, 2022, the Company entered into an amended and restated credit agreement of the Company’s $150,500 credit facility (the “Credit Facility”) with Wells Fargo National Bank, National Association (“Wells Fargo”).
At July 29, 2023, Village had demand deposits invested at Wakefern in the amount of $122,028. These deposits earn overnight money market rates. Credit Facility The Company has a credit facility (the “Credit Facility”) with Wells Fargo National Bank, National Association (“Wells Fargo”).
The increase in the effective tax rate in fiscal 2022 is due primarily to increased state taxable income in higher tax rate jurisdictions. NET INCOME Net income was $26,830 in fiscal 2022 compared to $19,994 in fiscal 2021. Adjusted net income was $35,044 in fiscal 2022 compared to $18,914 in fiscal 2021.
NET INCOME Net income was $49,716 in fiscal 2023 compared to $26,830 in fiscal 2022. Adjusted net income was $49,164 in fiscal 2023 compared to $35,044 in fiscal 2022.
Net of the subsidy, the Company will pay interest at a fixed effective rate of 2.30%. The principal purpose of the Credit Facility is to finance general corporate and working capital requirements, Village’s acquisition of certain Fairway assets, the purchase of the Galloway store shopping center and certain capital expenditure projects.
Net of the subsidy, the Company will pay interest at a fixed effective rate of 2.30%. On January 27, 2023, the Company purchased the Vineland store shopping center for $9,500. As part of the purchase, the Company amended the Credit Facility due to the execution of a fifteen year $7,125 term loan secured by the Vineland store shopping center.
Capital expenditures include one major remodel, continued expansion of online order fulfillment and self-checkout, and various merchandising, technology, equipment and facility upgrades. 16 LIQUIDITY and DEBT Working capital was $79,796 and $44,023 at July 30, 2022 and July 31, 2021, respectively. Working capital ratios at the same dates were 1.50 and 1.29 to one, respectively.
LIQUIDITY and DEBT Working capital was $67,714 and $79,796 at July 29, 2023 and July 30, 2022, respectively. Working capital ratios at the same dates were 1.38 and 1.50 to one, respectively. The decrease in working capital in fiscal 2023 compared to fiscal 2022 is due 16 primarily to an additional $36,425 investment in long-term notes receivable from Wakefern.
Removed
On February 22, 2021, Village closed the ShopRite store located in Silver Spring, Maryland. Despite continued investment in marketing and promotional programs, the store was unable to generate sales at a level sufficient to maintain profitability, resulting in its closure. The impacts associated with this closure were not material to the consolidated financial statements.
Added
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.
Removed
(2) Fiscal 2021 includes costs associated with the closure of the Silver Spring, Maryland store on February 22, 2021. (3) Fiscal 2021 includes non-cash impairment charges for the Fairway trade name of $2,386 and the long-lived assets for one Gourmet Garage store of $514.
Added
On August 14, 2022, we converted the Pelham, NY store from the Fairway banner to the ShopRite banner and a major remodel of the store was completed in late October 2022. On April 29, 2022, Village opened a 14,600 sq. ft. Gourmet Garage in the West Village in Manhattan, NYC.

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