VILLAGE SUPER MARKET INC 10-Q

Item 1. Financial Statements VILLAGE SUPER MARKET, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) April 24, 2021 July 25, 2020 ASSETS Current assets Cash and cash equivalents $ 112,677 $ 111,681 Merchandise inventories 44,972 42,135 Patronage dividend receivable 7,740 11,204 Income taxes receivable 8,190 12,801 Other current assets 19,803 19,499 Total current assets 193,382 197,320 Property, equipment and fixtures, net 255,648 269,741 Operating lease assets 297,256 309,756 Notes receivable from Wakefern 54,716 53,008 Investment in Wakefern 30,483 29,462 Goodwill 24,190 24,190 Other assets 34,403 32,069 Total assets $ 890,078 $ 915,546 LIABILITIES and SHAREHOLDERS' EQUITY Current liabilities Operating lease obligations $ 21,199 $ 19,121 Finance lease obligations 515 466 Notes payable to Wakefern 521 303 Current portion of debt 6,976 6,421 Accounts payable to Wakefern 75,626 83,045 Accounts payable and accrued expenses 24,705 29,793 Accrued wages and benefits 23,147 23,649 Total current liabilities 152,689 162,798 Long-term debt Operating lease obligations 285,883 298,027 Finance lease obligations 22,518 23,078 Notes payable to Wakefern 413 882 Long-term debt 68,614 74,194 Total long-term debt 377,428 396,181 Pension liabilities 6,146 6,166 Other liabilities 16,547 18,081 Commitments and contingencies Shareholders' equity Preferred stock, no par value: Authorized 10,000 shares, none issued — — Class A common stock, no par value: Authorized 20,000 shares; issued 10,985 shares at April 24, 2021 and July 25, 2020 69,964 68,072 Class B common stock, no par value: Authorized 20,000 shares; issued and outstanding 4,294 shares at April 24, 2021 and July 25, 2020 697 697 Retained earnings 286,946 286,241 Accumulated other comprehensive loss ( 6,400 ) ( 8,751 ) Less treasury stock, Class A, at cost: 726 shares at April 24, 2021 and July 25, 2020 ( 13,939 ) ( 13,939 ) Total shareholders’ equity 337,268 332,320 Total liabilities and shareholders’ equity $ 890,078 $ 915,546 See notes to consolidated financial statements. 3 VILLAGE SUPER MARKET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited) 13 Weeks Ended 39 Weeks Ended April 24, 2021 April 25, 2020 April 24, 2021 April 25, 2020 Sales $ 481,093 $ 458,292 $ 1,494,047 $ 1,303,116 Cost of sales 347,671 328,391 1,080,817 941,722 Gross profit 133,422 129,901 413,230 361,394 Operating and administrative expense 121,156 106,987 371,968 317,861 Depreciation and amortization 8,418 7,678 25,925 22,914 Operating income 3,848 15,236 15,337 20,619 Interest expense ( 994 ) ( 563 ) ( 2,963 ) ( 1,698 ) Interest income 904 910 2,670 3,199 Income before income taxes 3,758 15,583 15,044 22,120 Income taxes 1,184 4,431 4,554 6,396 Net income $ 2,574 $ 11,152 $ 10,490 $ 15,724 Net income per share: Class A common stock: Basic $ 0.20 $ 0.86 $ 0.80 $ 1.22 Diluted $ 0.18 $ 0.77 $ 0.72 $ 1.09 Class B common stock: Basic $ 0.13 $ 0.56 $ 0.52 $ 0.79 Diluted $ 0.13 $ 0.56 $ 0.52 $ 0.79 See notes to consolidated financial statements. 4 VILLAGE SUPER MARKET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) (Unaudited) 13 Weeks Ended 39 Weeks Ended April 24, 2021 April 25, 2020 April 24, 2021 April 25, 2020 Net income $ 2,574 $ 11,152 $ 10,490 $ 15,724 Other comprehensive income: Unrealized gains on interest rate swaps, net of tax (1) 953 — 2,047 — Amortization of pension actuarial loss, net of tax (2) 101 100 304 303 Pension settlement loss, net of tax (3) — 83 — 954 Pension remeasurement, net of tax (4) — 323 — ( 381 ) Comprehensive income $ 3,628 $ 11,658 $ 12,841 $ 16,600 (1) Amount is net of tax of $ 417 and $ 896 for the 13 and 39 weeks ended April 24, 2021, respectively. (2) Amounts are net of tax of $ 46 and $ 44 for the 13 weeks April 24, 2021 and April 25, 2020, respectively, and $ 137 and $ 132 for the 39 weeks ended April 24, 2021 and April 25, 2020, respectively. All amounts are reclassified from accumulated other comprehensive loss to operating and administrative expense. (3) Amounts are net of tax of $ 33 and $ 408 for the 13 and 39 weeks ended April 25, 2020. All amounts are reclassified from accumulated other comprehensive loss to operating and administrative expense. (4) Amounts are net of tax of $ 139 and $ 164 for the 13 and 39 weeks ended April 25, 2020. See notes to consolidated financial statements. 5 VILLAGE SUPER MARKET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (In thousands) (Unaudited) 13 Weeks Ended April 24, 2021 and April 25, 2020 Class A Common Stock Class B Common Stock Accumulated Other Comprehensive Income (Loss) Treasury Stock Class A Total Shareholders' Equity Shares Issued Amount Shares Issued Amount Retained Earnings Shares Amount Balance, January 23, 2021 10,985 $ 69,324 4,294 $ 697 $ 287,634 $ ( 7,454 ) 726 $ ( 13,939 ) $ 336,262 Net income — — — — 2,574 — — — 2,574 Other comprehensive income, net of tax of $ 463 — — — — — 1,054 — — 1,054 Dividends — — — — ( 3,262 ) — — — ( 3,262 ) Share-based compensation expense — 640 — — — — — — 640 Balance, April 24, 2021 10,985 $ 69,964 4,294 $ 697 $ 286,946 $ ( 6,400 ) 726 $ ( 13,939 ) $ 337,268 Balance, January 25, 2020 10,586 $ 66,655 4,294 $ 697 $ 272,401 $ ( 7,972 ) 513 $ ( 9,799 ) $ 321,982 Net income — — — — 11,152 — — — 11,152 Other comprehensive income, net of tax of $ 216 — — — — — 506 — — 506 Dividends — — — — ( 3,259 ) — — — ( 3,259 ) Treasury stock purchases — — — — — — 213 ( 4,140 ) ( 4,140 ) Restricted shares forfeited ( 1 ) ( 19 ) — — — — — — ( 19 ) Share-based compensation expense 385 786 — — — — — — 786 Balance, April 25, 2020 10,970 $ 67,422 4,294 $ 697 $ 280,294 $ ( 7,466 ) 726 $ ( 13,939 ) $ 327,008 39 Weeks Ended April 24, 2021 and April 25, 2020 Class A Common Stock Class B Common Stock Accumulated Other Comprehensive Income (Loss) Treasury Stock Class A Total Shareholders' Equity Shares Issued Amount Shares Issued Amount Retained Earnings Shares Amount Balance, July 25, 2020 10,985 $ 68,072 4,294 $ 697 $ 286,241 $ ( 8,751 ) 726 $ ( 13,939 ) $ 332,320 Net income — — — — 10,490 — — — 10,490 Other comprehensive income, net of tax of $ 1,033 — — — — — 2,351 — — 2,351 Dividends — — — — ( 9,785 ) — — — ( 9,785 ) Restricted shares forfeited ( 8 ) ( 24 ) — — — — — — ( 24 ) Share-based compensation expense 8 1,916 — — — — — — 1,916 Balance, April 24, 2021 10,985 $ 69,964 4,294 $ 697 $ 286,946 $ ( 6,400 ) 726 $ ( 13,939 ) $ 337,268 Balance, July 27, 2019 10,593 $ 65,114 4,294 $ 697 $ 270,753 $ ( 8,342 ) 502 $ ( 9,550 ) $ 318,672 Net income — — — — 15,724 — — — 15,724 Other comprehensive income, net of tax of $ 376 — — — — — 876 — — 876 Dividends — — — — ( 9,697 ) — — — ( 9,697 ) Treasury stock purchases — — — — — — 224 ( 4,389 ) ( 4,389 ) Restricted shares forfeited ( 10 ) ( 199 ) — — — — — — ( 199 ) Share-based compensation expense 387 2,507 — — — — — — 2,507 Adjustment due to the adoption of ASU 2016-02 , net of tax of $ 1,385 — — — — 3,514 — — — 3,514 Balance, April 25, 2020 10,970 $ 67,422 4,294 $ 697 $ 280,294 $ ( 7,466 ) 726 $ ( 13,939 ) $ 327,008 See notes to consolidated financial statements. 6 VILLAGE SUPER MARKET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) 39 Weeks Ended April 24, 2021 April 25, 2020 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 10,490 $ 15,724 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 27,003 22,914 Non-cash share-based compensation 1,892 2,308 Loss on pension settlements — 1,362 Deferred taxes ( 1,539 ) 983 Provision to value inventories at LIFO — 400 Gain on sale of property, equipment and fixtures ( 1,031 ) ( 1,252 ) Changes in assets and liabilities: Merchandise inventories ( 2,837 ) 5,490 Patronage dividend receivable 3,464 4,408 Accounts payable to Wakefern ( 6,485 ) 9,962 Accounts payable and accrued expenses ( 4,076 ) ( 3,153 ) Accrued wages and benefits ( 502 ) ( 982 ) Income taxes receivable / payable 4,611 1,278 Other assets and liabilities 2,005 ( 38 ) Net cash provided by operating activities 32,995 59,404 CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures ( 14,901 ) ( 47,812 ) Proceeds from the sale of assets 1,076 1,261 Investment in notes receivable from Wakefern ( 1,708 ) ( 2,243 ) Acquisition deposit in escrow — ( 7,600 ) Acquisition of Gourmet Garage, net of cash acquired — 64 Net cash used in investing activities ( 15,533 ) ( 56,330 ) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of long-term debt 50,000 — Principal payments of long-term debt ( 6,459 ) ( 507 ) Payments on revolving line of credit ( 50,000 ) — Debt issuance costs ( 222 ) — Dividends ( 9,785 ) ( 9,697 ) Treasury stock purchases — ( 4,389 ) Net cash used in financing activities ( 16,466 ) ( 14,593 ) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 996 ( 11,519 ) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 111,681 101,121 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 112,677 $ 89,602 SUPPLEMENTAL DISCLOSURES OF CASH PAYMENTS MADE FOR: Interest $ 2,963 $ 1,698 Income taxes $ 1,475 $ 4,132 NONCASH SUPPLEMENTAL DISCLOSURES: Investment in Wakefern and increase in notes payable to Wakefern $ 351 $ 93 Capital expenditures included in accounts payable and accrued expenses $ 3,779 $ 5,221 See notes to consolidated financial statements. 7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands) (Unaudited) 1. BASIS OF PRESENTATION and ACCOUNTING POLICIES In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal and recurring accruals) necessary to present fairly the consolidated financial position as of April 24, 2021 and the consolidated statements of operations, comprehensive income and cash flows for the 13 and 39 weeks ended April 24, 2021 and April 25, 2020 of Village Super Market, Inc. (“Village” or the “Company”). The significant accounting policies followed by the Company are set forth in Note 1 to the Company's consolidated financial statements in the July 25, 2020 Village Super Market, Inc. Annual Report on Form 10-K, which should be read in conjunction with these financial statements. The results of operations for the periods ended April 24, 2021 are not necessarily indicative of the results to be expected for the full year. Disaggregated Revenues The following table presents the Company's sales by product categories during each of the periods indicated: 13 Weeks Ended 39 Weeks Ended April 24, 2021 April 25, 2020 April 24, 2021 April 25, 2020 Amount % Amount % Amount % Amount % Center Store (1) $ 286,882 59.6 % $ 291,257 63.5 % $ 904,651 60.6 % $ 812,089 62.3 % Fresh (2) 176,013 36.6 148,489 32.4 533,622 35.7 434,669 33.4 Pharmacy 16,303 3.4 17,252 3.8 49,406 3.3 52,486 4.0 Other (3) 1,895 0.4 1,294 0.3 6,368 0.4 3,872 0.3 Total Sales $ 481,093 100.0 % $ 458,292 100.0 % $ 1,494,047 100.0 % $ 1,303,116 100.0 % (1) Consists primarily of grocery, dairy, frozen, health and beauty care, general merchandise and liquor. (2) Consists primarily of produce, meat, deli, seafood, bakery, prepared foods and floral. (3) Consists primarily of sales related to other income streams, including ShopRite from Home service fees, gift card and lottery commissions and wholesale sales. 2. MERCHANDISE INVENTORIES At both April 24, 2021 and July 25, 2020, approximately 63 % of merchandise inventories are valued by the LIFO method while the balance is valued by FIFO. If the FIFO method had been used for the entire inventory, inventories would have been $ 15,101 higher than reported at both April 24, 2021 and July 25, 2020. 3. NET INCOME PER SHARE The Company has two classes of common stock. Class A common stock is entitled to cash dividends as declared 54 % greater than those paid on Class B common stock. Shares of Class B common stock are convertible on a share-for-share basis for Class A common stock at any time. The Company utilizes the two-class method of computing and presenting net income per share. The two-class method is an earnings allocation formula that calculates basic and diluted net income per share for each class of common stock separately based on dividends declared and participation rights in undistributed earnings. Under the two-class method, Class A common stock is assumed to receive a 54 % greater participation in undistributed earnings than Class B common stock, in accordance with the classes' respective dividend rights. Unvested share-based payment awards that contain nonforfeitable rights to dividends are treated as participating securities and therefore included in computing net income per share using the two-class method. 8 Diluted net income per share for Class A common stock is calculated utilizing the if-converted method, which assumes the conversion of all shares of Class B common stock to Class A common stock on a share-for-share basis, as this method is more dilutive than the two-class method. Diluted net income per share for Class B common stock does not assume conversion of Class B common stock to shares of Class A common stock. The tables below reconcile the numerators and denominators of basic and diluted net income per share for all periods presented. 13 Weeks Ended 39 Weeks Ended April 24, 2021 April 24, 2021 Class A Class B Class A Class B Numerator: Net income allocated, basic $ 1,943 $ 551 $ 7,914 $ 2,242 Conversion of Class B to Class A shares 551 — 2,242 — Net income allocated, diluted $ 2,494 $ 551 $ 10,156 $ 2,242 Denominator: Weighted average shares outstanding, basic 9,850 4,294 9,850 4,294 Conversion of Class B to Class A shares 4,294 — 4,294 — Weighted average shares outstanding, diluted 14,144 4,294 14,144 4,294 13 Weeks Ended 39 Weeks Ended April 25, 2020 April 25, 2020 Class A Class B Class A Class B Numerator: Net income allocated, basic $ 8,431 $ 2,398 $ 11,892 $ 3,390 Conversion of Class B to Class A shares 2,398 — 3,390 — Net income allocated, diluted $ 10,829 $ 2,398 $ 15,282 $ 3,390 Denominator: Weighted average shares outstanding, basic 9,789 4,294 9,775 4,294 Conversion of Class B to Class A shares 4,294 — 4,294 — Weighted average shares outstanding, diluted 14,083 4,294 14,069 4,294 Outstanding stock options to purchase Class A shares of 156 and 159 were excluded from the calculation of diluted net income per share at April 24, 2021 and April 25, 2020, respectively, as a result of their anti-dilutive effect. In addition, 398 and 397 non-vested restricted Class A shares, which are considered participating securities, and their allocated net income were excluded from the diluted net income per share calculation at April 24, 2021 and April 25, 2020, respectively, due to their anti-dilutive effect. 9 4. PENSION PLANS Net periodic pension cost for the three defined benefit pension plans sponsored in fiscal 2021 and the four defined benefit pension plans sponsored in fiscal 2020 includes the following components: 13 Weeks Ended 39 Weeks Ended April 24, 2021 April 25, 2020 April 24, 2021 April 25, 2020 Service cost $ 54 $ 51 $ 162 $ 152 Interest cost on projected benefit obligations 422 512 1,266 1,643 Expected return on plan assets ( 483 ) ( 733 ) ( 1,449 ) ( 2,061 ) Loss on settlement — 116 — 1,362 Amortization of net losses 147 144 441 435 Net periodic pension cost $ 140 $ 90 $ 420 $ 1,531 On December 23, 2019, the Company terminated the Village Super Market, Inc. Retail Clerks Employees’ Retirement Plan. All participants of the plan were former employees of a store previously closed in 1994. An annuity contract totaling $ 1,302 was purchased with an insurance company for all participants who did not elect a lump sum distribution. Additionally, lump sum distributions related to the termination totaled $ 451 . The plan had sufficient assets to satisfy all termination transaction obligations, and no benefit obligation or plan assets related to the Village Super Market, Inc. Retail Clerks Employees’ Retirement Plan remained as of the termination date. As a result of this termination, the Company recognized a non-cash pre-tax settlement charge totaling $ 669 during the 13 weeks ended January 25, 2020. This settlement charge represents the plan’s remaining unrecognized losses within accumulated other comprehensive loss as of the termination date. Additionally, the Company recognized a settlement loss of $ 116 and $ 693 in the 13 and 39 weeks ended April 25, 2020, respectively, for a plan where benefits paid exceeded the sum of the service cost and interest cost components of net periodic pension cost. Assumptions used in the related remeasurement include a discount rate of 2.85 % and long term expected rate of return on plan assets of 5.00 %. As of April 24, 2021, the Company has no t made any contributions to its pension plans in fiscal 2021. The Company expects contributions to its defined benefit pension plans to be immaterial in fiscal 2021. 5. RELATED PARTY INFORMATION A description of the Company’s transactions with Wakefern, its principal supplier, and with other related parties is included in the Company’s Annual Report on Form 10-K for the year ended July 25, 2020. Included in cash and cash equivalents at April 24, 2021 and July 25, 2020 are $ 82,651 and $ 76,259 , respectively, of demand deposits invested at Wakefern at overnight money market rates. There have been no other significant changes in the Company’s relationships or nature of transactions with related parties during the 39 weeks ended April 24, 2021. 6. COMMITMENTS and CONTINGENCIES 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. 10 7. DEBT Long-term debt consists of: April 24, 2021 July 25, 2020 Unsecured revolving line of credit $ — $ 50,000 Secured term loan 47,852 — Unsecured term loan 22,003 24,694 New Market Tax Credit Financing 5,735 5,921 Total debt, excluding obligations under leases 75,590 80,615 Less current portion 6,976 6,421 Total long-term debt, excluding obligations under leases $ 68,614 $ 74,194 Credit Facility On May 6, 2020, Village entered into a credit agreement (the “Credit Facility”) with Wells Fargo National Bank, National Association (“Wells Fargo”) that supersedes in its entirety the prior credit agreement with Wells Fargo dated November 9, 2017. The principal purpose of the Credit Facility is to finance general corporate and working capital requirements and Village’s acquisition of certain Fairway assets. Among other things, the Credit Facility provides for a maximum loan amount of $ 150,500 as further set forth below: • An unsecured revolving line of credit providing a maximum amount available for borrowing of $ 125,000 . Indebtedness under this agreement bears interest at the applicable LIBOR rate plus 1.10 % and expires on May 6, 2025. • An unsecured term loan with a maximum loan amount of $ 25,500 . On May 12, 2020, Village executed a $ 25,500 term note, repayable in equal monthly installments based on a seven-year amortization schedule through May 4, 2027 and bearing interest at the applicable LIBOR rate plus 1.35 %. Additionally, Village executed an interest rate swap for a notional amount equal to the term loan amount that fixes the base LIBOR rate at .41 % per annum through May 4, 2027, resulting in a fixed effective interest rate of 1.76 % on the term note. • On September 1, 2020, Village converted $ 50,000 of its revolving line of credit to a secured converted term loan. The conversion reduced the maximum amount available for borrowing under the revolving line of credit from $ 125,000 to $ 75,000 . The term loan bears interest at the applicable LIBOR rate plus 1.50 % and is repayable in equal monthly installments based on a fifteen-year amortization schedule beginning on the conversion date. Additionally, Village previously executed a forward interest rate swap, effective on the conversion date, for a notional amount equal to the term loan amount that fixes the base LIBOR rate at .69 % per annum for 15 years, resulting in a fixed effective interest rate of 2.19 % on the converted term loan. The term loan is secured by real properties of Village Super Market, Inc. and its subsidiaries, including the sites of three Village stores. The Credit Facility also provides for up to $ 25,000 of letters of credit ($ 7,336 outstanding at April 24, 2021), 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 Company was in compliance with all covenants of the credit agreement at April 24, 2021. New Markets Tax Credit Financing On December 29, 2017, the Company entered into a financing transaction with Wells Fargo Community Investment Holdings, LLC (“Wells Fargo”) under a qualified New Markets Tax Credit (“NMTC”) program related to the construction of a new store in the Bronx, New York. The NMTC program was provided for in the Community Renewal Tax Relief Act of 2000 (the “Act”) and is intended to induce capital investment in qualified lower income communities. The Act permits taxpayers to claim credits against their Federal income taxes for up to 39% of qualified investments in the equity of community development entities (“CDEs”). CDEs are privately managed investment institutions that are certified to make qualified low-income community investments. 11 In connection with the financing, the Company loaned $ 4,835 to VSM Investment Fund, LLC (the "Investment Fund") at an interest rate of 1.403 % per year and with a maturity date of December 31, 2044. Repayments on the loan commence in March 2025. Wells Fargo contributed $ 2,375 to the Investment Fund and, by virtue of such contribution, is entitled to substantially all of the tax benefits derived from the NMTC. The Investment Fund is a wholly owned subsidiary of Wells Fargo. The loan to the Investment Fund is recorded in other assets in the consolidated balance sheets. The Investment Fund then contributed the proceeds to a CDE, which, in turn, loaned combined funds of $ 6,563 , net of debt issuance costs, to Village Super Market of NY, LLC, a wholly-owned subsidiary of the Company, at an interest rate of 1.000 % per year with a maturity date of December 31, 2051. These loans are secured by the leasehold improvements and equipment related to the construction of the Bronx store. Repayment of the loans commences in March 2025. The proceeds of the loans from the CDE were used to partially fund the construction of the Bronx store. The Notes payable related to New Markets Tax Credit, net of debt issuance costs, are recorded in long-term debt in the consolidated balance sheets. The NMTC is subject to 100% recapture for a period of seven years. The Company is required to be in compliance with various regulations and contractual provisions that apply to the New Markets Tax Credit arrangement. Noncompliance could result in Wells Fargo's projected tax benefits not being realized and, therefore, require the Company to indemnify Wells Fargo for any loss or recapture of NMTCs. The Company does not anticipate any credit recapture will be required in connection with this financing arrangement. The transaction includes a put/call provision whereby the Company may be obligated or entitled to repurchase Wells Fargo's interest in the Investment Fund. The value attributed to the put/call is de minimis. We believe that Wells Fargo will exercise the put option in December 2024, at the end of the recapture period, that will result in a net benefit to the Company of $ 1,728 . The Company is recognizing the net benefit over the seven-year compliance period in operating and administrative expense. 8. DERIVATIVES AND HEDGING ACTIVITIES The Company is exposed to interest rate risk arising from fluctuations in LIBOR related to the Company’s Credit Facility. The Company manages exposure to this risk and the variability of related cash flows primarily by the use of derivative financial instruments, specifically, interest rate swaps. The Company’s objectives in using interest rate swaps are to add stability to interest expense and to manage its exposure to interest rate movements. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. In 2020, the Company executed two interest rate swaps with an aggregate notional value of $ 75,500 to hedge the variable cash flows associated with variable-rate loans under the Company's Credit Facility. The interest rate swaps were executed for risk management and are not held for trading purposes. The objective of the interest rate swaps is to hedge the variability of cash flows resulting from fluctuations in LIBOR. The swaps replaced the applicable LIBOR with fixed interest rates and payments are settled monthly when payments are made on the variable-rate loans. The Company's derivatives qualify and have been designated as cash flow hedges of interest rate risk. The gain or loss on the derivative is recorded in Accumulated other comprehensive loss and subsequently reclassified into interest expense in the same period during which the hedged transaction affects earnings. Amounts reported in Accumulated other comprehensive loss related to derivatives will be reclassified to interest expense as interest payments are made on the variable-rate loans. The Company reclassified $ 86 and $ 234 during the 13 and 39 weeks ended April 24, 2021, respectively, from Accumulated other comprehensive loss to Interest expense. The notional value of the interest rate swaps were $ 70,216 as of April 24, 2021. The fair value of interest rate swaps recorded in other assets is $ 2,022 as of April 24, 2021. 9. BUSINESS ACQUISITION On May 14, 2020, Village completed its acquisition of certain assets, including five supermarkets averaging 52,000 sq. ft. ( 30,000 selling sq. ft.), a production distribution center (the “PDC”) and the intellectual property of Fairway Group Holdings Corp. and certain of its subsidiaries (“Fairway”), including the names “Fairway” and “Fairway Markets.” Four of the supermarkets are in Manhattan, specifically the Upper West Side, Upper East Side, Kips Bay and Chelsea locations, and a fifth store is located in Pelham, NY. The acquisition was effectuated pursuant to the Asset Purchase Agreement (the "APA"), entered into on January 20, 2020, revised on March 25, 2020 and approved by the United States Bankruptcy Court for the Southern District of New York through a Sale Order entered on April 20, 2020. Village paid $ 73,622 for the Fairway assets, net 12 of cash acquired, and assumed certain liabilities, consisting primarily of those arising from acquired leases. Additionally, at the time of closing Village received a $ 2,035 credit arising from the breakup of Village’s initial “stalking horse” bid under the January 20, 2020 Asset Purchase Agreement. The credit was recognized as a reduction in operating and administrative expense in the fourth quarter of fiscal 2020. The Fairway acquisition expands our presence in New York City under an iconic city brand and provides Village the ability to expand centralized food production to support stores under all of our banners. Village accounted for this transaction as a business combination in accordance with the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed be recognized at their estimated fair values as of the acquisition date. In connection with this acquisition, the Company recorded $ 11,540 of goodwill attributable to the assembled workforce and cost synergies. The goodwill related to this acquisition is deductible for tax purposes. Additionally, the Company recorded a $ 14,200 indefinite-lived intangible asset related to the trade name. The fair value of the intangible asset was determined based on the discounted cash flow model using the relief from royalty method. The fair value of the property, equipment and fixtures were determined based on the indirect cost approach in which current costs that were not new were adjusted for all forms of depreciation. The Company also evaluated the fair value of the leases assumed in the acquisition, which evaluated comparable rents in the areas of the locations. Leases were determined to be at market apart from one location. For this location, the Company recorded a favorable lease of $ 4,360 within operating lease assets. The favorable lease is being amortized over the remaining duration of the lease. Transaction costs were expensed as incurred. The final allocation of the purchase price consideration to the assets acquired and the liabilities assumed has been completed. 13