VILLAGE SUPER MARKET INC 10-Q

Item 1. Financial Statements VILLAGE SUPER MARKET, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) April 30, 2022 July 31, 2021 ASSETS Current assets Cash and cash equivalents $ 119,915 $ 116,314 Merchandise inventories 46,429 42,633 Patronage dividend receivable 8,366 11,860 Notes receivable from Wakefern 28,262 — Income taxes receivable 5,011 5,111 Other current assets 17,077 20,398 Total current assets 225,060 196,316 Property, equipment and fixtures, net 267,910 256,154 Operating lease assets 293,501 289,461 Notes receivable from Wakefern 28,821 55,295 Investment in Wakefern 33,004 33,004 Goodwill 24,190 24,190 Other assets 41,292 34,584 Total assets $ 913,778 $ 889,004 LIABILITIES and SHAREHOLDERS' EQUITY Current liabilities Operating lease obligations $ 20,856 $ 21,627 Finance lease obligations 579 531 Notes payable to Wakefern 675 632 Current portion of debt 7,466 6,976 Accounts payable to Wakefern 72,591 70,792 Accounts payable and accrued expenses 24,078 25,098 Accrued wages and benefits 26,090 25,036 Income taxes payable 385 1,601 Total current liabilities 152,720 152,293 Long-term debt Operating lease obligations 283,578 278,135 Finance lease obligations 21,720 22,325 Notes payable to Wakefern 2,486 2,791 Long-term debt 68,173 66,827 Total long-term debt 375,957 370,078 Pension liabilities 6,519 10,182 Other liabilities 17,007 14,978 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 10,975 shares at April 30, 2022 and 10,978 shares at July 31, 2021 72,351 70,594 Class B common stock, no par value: Authorized 20,000 shares; issued and outstanding 4,294 shares at April 30, 2022 and July 31, 2021 697 697 Retained earnings 297,625 293,185 Accumulated other comprehensive income (loss) 5,490 ( 9,064 ) Less treasury stock, Class A, at cost: 752 shares at April 30, 2022 and 726 shares at July 31, 2021 ( 14,588 ) ( 13,939 ) Total shareholders’ equity 361,575 341,473 Total liabilities and shareholders’ equity $ 913,778 $ 889,004 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 30, 2022 April 24, 2021 April 30, 2022 April 24, 2021 Sales $ 501,962 $ 481,093 $ 1,533,581 $ 1,494,047 Cost of sales 360,371 347,671 1,102,199 1,080,817 Gross profit 141,591 133,422 431,382 413,230 Operating and administrative expense 137,751 121,156 385,521 371,968 Depreciation and amortization 8,130 8,418 24,925 25,925 Operating (loss) income ( 4,290 ) 3,848 20,936 15,337 Interest expense ( 991 ) ( 994 ) ( 2,923 ) ( 2,963 ) Interest income 950 904 2,831 2,670 (Loss) income before income taxes ( 4,331 ) 3,758 20,844 15,044 Income taxes ( 1,100 ) 1,184 6,617 4,554 Net (loss) income $ ( 3,231 ) $ 2,574 $ 14,227 $ 10,490 Net (loss) income per share: Class A common stock: Basic $ ( 0.25 ) $ 0.20 $ 1.09 $ 0.80 Diluted $ ( 0.22 ) $ 0.18 $ 0.97 $ 0.72 Class B common stock: Basic $ ( 0.16 ) $ 0.13 $ 0.71 $ 0.52 Diluted $ ( 0.16 ) $ 0.13 $ 0.71 $ 0.52 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 30, 2022 April 24, 2021 April 30, 2022 April 24, 2021 Net (loss) income $ ( 3,231 ) $ 2,574 $ 14,227 $ 10,490 Other comprehensive income: Unrealized gains on interest rate swaps, net of tax (1) 2,572 953 4,122 2,047 Amortization of pension actuarial loss, net of tax (2) 89 101 265 304 Pension settlement loss, net of tax (3) 8,525 — 8,525 — Pension remeasurement, net of tax (4) 1,642 — 1,642 — Comprehensive income $ 9,597 $ 3,628 $ 28,781 $ 12,841 (1) Amount is net of tax of $ 1,104 and $ 417 for the 13 weeks April 30, 2022 and April 24, 2021, respectively, and $ 1,767 and $ 896 for the 39 weeks ended April 30, 2022 and April 24, 2021, respectively. (2) Amounts are net of tax of $ 37 and $ 46 for the 13 weeks April 30, 2022 and April 24, 2021, respectively, and $ 113 and $ 137 for the 39 weeks ended April 30, 2022 and April 24, 2021, respectively. All amounts are reclassified from accumulated other comprehensive loss to operating and administrative expense. (3) Amounts are net of tax of $ 3,780 . All amounts are reclassified from accumulated other comprehensive loss to operating and administrative expense. (4) Amounts are net of tax of $ 702 . 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 30, 2022 and April 24, 2021 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 29, 2022 10,981 $ 71,808 4,294 $ 697 $ 304,117 $ ( 7,338 ) 730 $ ( 14,028 ) $ 355,256 Net loss — — — — ( 3,231 ) — — — ( 3,231 ) Other comprehensive income, net of tax of $ 5,623 — — — — — 12,828 — — 12,828 Dividends — — — — ( 3,261 ) — — — ( 3,261 ) Treasury stock purchases — — — — — — 22 ( 560 ) ( 560 ) Restricted shares forfeited ( 6 ) ( 73 ) — — — — — — ( 73 ) Share-based compensation expense — 616 — — — — — — 616 Balance, April 30, 2022 10,975 $ 72,351 4,294 $ 697 $ 297,625 $ 5,490 752 $ ( 14,588 ) $ 361,575 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 39 Weeks Ended April 30, 2022 and April 24, 2021 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 31, 2021 10,978 $ 70,594 4,294 $ 697 $ 293,185 $ ( 9,064 ) 726 $ ( 13,939 ) $ 341,473 Net income — — — — 14,227 — — — 14,227 Other comprehensive income, net of tax of $ 6,362 — — — — — 14,554 — — 14,554 Dividends — — — — ( 9,787 ) — — — ( 9,787 ) Treasury stock purchases — — — — — — 26 ( 649 ) ( 649 ) Restricted shares forfeited ( 12 ) ( 129 ) — — — — — — ( 129 ) Share-based compensation expense 9 1,886 — — — — — — 1,886 Balance, April 30, 2022 10,975 $ 72,351 4,294 $ 697 $ 297,625 $ 5,490 752 $ ( 14,588 ) $ 361,575 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 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 30, 2022 April 24, 2021 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 14,227 $ 10,490 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 26,060 27,003 Non-cash share-based compensation 1,757 1,892 Non-cash pension settlement charges 10,811 — Deferred taxes ( 3,674 ) ( 1,539 ) Provision to value inventories at LIFO 1,462 — Gain on sale of property, equipment and fixtures ( 220 ) ( 1,031 ) Changes in assets and liabilities: Merchandise inventories ( 5,258 ) ( 2,837 ) Patronage dividend receivable 3,494 3,464 Accounts payable to Wakefern 1,538 ( 6,485 ) Accounts payable and accrued expenses ( 1,747 ) ( 4,076 ) Accrued wages and benefits 1,054 ( 502 ) Income taxes receivable / payable ( 1,116 ) 4,611 Other assets and liabilities 3,314 2,005 Net cash provided by operating activities 51,702 32,995 CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures ( 36,834 ) ( 14,901 ) Proceeds from the sale of assets 4,225 1,076 Investment in notes receivable from Wakefern ( 1,788 ) ( 1,708 ) Investment in real estate partnership ( 4,393 ) — Net cash used in investing activities ( 38,790 ) ( 15,533 ) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of long-term debt 7,350 50,000 Principal payments of long-term debt ( 6,174 ) ( 6,459 ) Payments on revolving line of credit — ( 50,000 ) Debt issuance costs ( 51 ) ( 222 ) Dividends ( 9,787 ) ( 9,785 ) Treasury stock purchases, including shares surrendered for withholding taxes ( 649 ) — Net cash used in financing activities ( 9,311 ) ( 16,466 ) NET INCREASE IN CASH AND CASH EQUIVALENTS 3,601 996 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 116,314 111,681 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 119,915 $ 112,677 SUPPLEMENTAL DISCLOSURES OF CASH PAYMENTS MADE FOR: Interest $ 2,923 $ 2,963 Income taxes $ 17,740 $ 1,475 NONCASH SUPPLEMENTAL DISCLOSURES: Investment in Wakefern and increase in notes payable to Wakefern $ — $ 351 Capital expenditures included in accounts payable and accrued expenses $ 4,152 $ 3,779 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 30, 2022 and the consolidated statements of operations, comprehensive income and cash flows for the 13 and 39 weeks ended April 30, 2022 and April 24, 2021 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 31, 2021 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 30, 2022 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 30, 2022 April 24, 2021 April 30, 2022 April 24, 2021 Amount % Amount % Amount % Amount % Center Store (1) $ 297,892 59.4 % $ 286,882 59.6 % $ 918,228 59.9 % $ 904,651 60.6 % Fresh (2) 185,757 37.0 176,013 36.6 559,909 36.5 533,622 35.7 Pharmacy 16,761 3.3 16,303 3.4 50,365 3.3 49,406 3.3 Other (3) 1,552 0.3 1,895 0.4 5,079 0.3 6,368 0.4 Total Sales $ 501,962 100.0 % $ 481,093 100.0 % $ 1,533,581 100.0 % $ 1,494,047 100.0 % (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 service fees related to digital sales, gift card and lottery commissions and wholesale sales. 2. MERCHANDISE INVENTORIES At both April 30, 2022 and July 31, 2021, approximately 62 % 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 $ 16,783 and $ 15,321 higher than reported at April 30, 2022 and July 31, 2021, respectively. 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 table below reconciles Net (loss) income to Net (loss) income available to Class A and Class B shareholders: 13 Weeks Ended 39 Weeks Ended April 30, 2022 April 24, 2021 April 30, 2022 April 24, 2021 Net (loss) income $ ( 3,231 ) $ 2,574 $ 14,227 $ 10,490 Distributed and allocated undistributed Net (loss) income to unvested restricted shareholders ( 93 ) 82 429 336 Net (loss) income available to Class A and Class B shareholders $ ( 3,138 ) $ 2,492 $ 13,798 $ 10,154 The tables below reconcile the numerators and denominators of basic and diluted Net (loss) income per share for all periods presented. 13 Weeks Ended 39 Weeks Ended April 30, 2022 April 30, 2022 Class A Class B Class A Class B Numerator: Net (loss) income allocated, basic $ ( 2,447 ) $ ( 691 ) $ 10,757 $ 3,041 Conversion of Class B to Class A shares ( 691 ) — 3,041 — Effect of share-based compensation on allocated net (loss) income ( 19 ) ( 14 ) — — Net (loss) income allocated, diluted $ ( 3,157 ) $ ( 705 ) $ 13,798 $ 3,041 Denominator: Weighted average shares outstanding, basic 9,876 4,294 9,871 4,294 Conversion of Class B to Class A shares 4,294 — 4,294 — Weighted average shares outstanding, diluted 14,170 4,294 14,165 4,294 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 Outstanding stock options to purchase Class A shares of 102 and 156 were excluded from the calculation of diluted net income per share at April 30, 2022 and April 24, 2021, respectively, as a result of their anti-dilutive effect. In addition, 363 and 398 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 30, 2022 and April 24, 2021, 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 2022 and 2021 includes the following components: 13 Weeks Ended 39 Weeks Ended April 30, 2022 April 24, 2021 April 30, 2022 April 24, 2021 Service cost $ 47 $ 54 $ 140 $ 162 Interest cost on projected benefit obligations 420 422 1,261 1,266 Expected return on plan assets ( 409 ) ( 483 ) ( 1,227 ) ( 1,449 ) Loss on settlement 12,296 — 12,296 — Amortization of net losses 126 147 378 441 Net periodic pension cost $ 12,480 $ 140 $ 12,848 $ 420 In April 2022, the Company terminated the Village Super Market, Inc. Employees’ Retirement Plan. Prior to termination, the Company made a $ 1,485 contribution to fully fund the plan. Plan assets were liquidated to fund lump sum distributions to participants of $ 37,289 and purchase annuity contracts totaling $ 14,930 with an insurance company for all participants who did not elect a lump sum distribution. No benefit obligation or plan assets related to the Village Super Market, Inc. Employees’ Retirement Plan remain as of April 30, 2022. The Company recognized a $ 12,296 pre-tax settlement charge as a result of the termination, including a $ 10,811 non-cash charge for unrecognized losses within accumulated other comprehensive loss as of the termination date. Contributions to the remaining plans are expected to be immaterial in fiscal 2022. 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 31, 2021. Included in cash and cash equivalents at April 30, 2022 and July 31, 2021 are $ 96,918 and $ 86,670 , respectively, of demand deposits invested at Wakefern at overnight money market rates. On April 28, 2022 the Company entered into a partnership agreement for 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 . Village's share of project costs are estimated to be $ 15,000 to $ 20,000 . As of April 30, 2022, Village has invested $ 4,393 into the real estate partnership, which is accounted for as an equity method investment included in Other assets on the Consolidated Balance Sheet. 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 30, 2022. 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 30, 2022 July 31, 2021 Secured term loans $ 51,745 $ 47,025 Unsecured term loan 18,407 21,104 New Market Tax Credit Financing 5,487 5,674 Total debt, excluding obligations under leases 75,639 73,803 Less current portion 7,466 6,976 Total long-term debt, excluding obligations under leases $ 68,173 $ 66,827 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”). The notable changes from the previous agreement include: (1) Modification of the reference rate from the London Interbank Offered Rate ("LIBOR") to the Secured Overnight Financing Rate ("SOFR") as a result of the expected cessation of LIBOR, (2) The execution of a fifteen-year $ 7,350 secured term loan to finance the acquisition of the Galloway store shopping center and (3) Modification of the definition of Total Adjusted Debt for the purpose of determining the maximum adjusted debt to EBITDAR ratio financial covenant, as defined in the Credit Facility. Among other things, the Credit Facility provides for: • An unsecured revolving line of credit providing a maximum amount available for borrowing of $ 75,000 . 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 %. 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 %. In February 2022, the Company executed an amendment and restatement of the interest rate swap that changes the reference rate to SOFR and 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 %. Prior to the January 28, 2022 amendment to the credit facility, interest accrued on the secured term loan at the applicable LIBOR plus 1.50 %. An interest rate swap with notional amounts equal to the term loan fixed the base LIBOR at .69 %, resulting in a fixed effective rate of 2.19 %. In February 2022, the Company executed an amendment and restatement of the interest rate swap related to the term loan that changes the reference rate to SOFR and 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. The term loan is secured by real properties of Village Super Market, Inc. and its subsidiaries, including the sites of three Village stores. • A secured $ 7,350 term loan issued on January 28, 2022 repayable in equal monthly installments based on a fifteen-year amortization schedule through January 28, 2037 and bearing interest at the applicable SOFR plus 1.50 %. Additionally, Village executed an interest rate swap for a notional amount equal to the term loan amount that fixes the 11 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. The principal purpose of the Credit Facility is to finance general corporate and working capital requirements, Village’s acquisition of certain Fairway assets and the purchase of the Galloway store shopping center. The Credit Facility also provides for up to $ 25,000 of letters of credit ($ 7,336 outstanding at April 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 Company was in compliance with all covenants of the credit agreement at April 30, 2022. 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. 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 and SOFR 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. As of April 30, 2022, the Company had three interest rate swaps with an aggregate initial notional value of $ 82,850 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 the reference rate. The swaps replaced the applicable reference rate with fixed interest rates and payments are settled monthly when payments are made on the variable-rate loans. The Company's 12 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 income (loss) and subsequently reclassified into interest expense in the same period during which the hedged transaction affects earnings. Amounts reported in Accumulated other comprehensive income (loss) related to derivatives will be reclassified to interest expense as interest payments are made on the variable-rate loans. The Company reclassified $ 89 and $ 86 during the 13 weeks ended April 30, 2022 and April 24, 2021, respectively, and $ 262 and $ 234 during the 39 weeks ended April 30, 2022 and April 24, 2021, respectively, from Accumulated other comprehensive income (loss) to Interest expense. The notional value of the interest rate swaps were $ 70,508 as of April 30, 2022. The fair value of interest rate swaps recorded in other assets is $ 6,998 as of April 30, 2022. In March 2020 and January 2021, the FASB issued ASU 2020-04, "Facilitation of the Effects of Reference Rate Reform on Financial Reporting" and ASU 2021-01, "Reference Rate Reform: Scope", respectively. These standards provide temporary optional expedients and exceptions for the application of GAAP to certain contract modifications, hedging relationships, and other arrangements that are expected to be impacted by the global transition away from certain reference rates, such as LIBOR. The guidance was effective upon issuance and, once adopted, may be applied prospectively to contract modifications and hedging relationships through December 31, 2022. During the second quarter of fiscal 2022, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Additionally, we elected to apply expedients related to the modification of hedged transactions related to reference rate reform. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The adoption of this portion of the ASU is not expected to have a material impact to our consolidated financial statements. We continue to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur. In connection with the modification of the reference rate from LIBOR to SOFR in the Amended and Restated Credit Facility, in February 2022, the Company executed the amendment and restatement of two interest rate swaps (see note 7). The modified rates did not have a material impact to the consolidated financial statements. 13