VILLAGE SUPER MARKET INC 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA VILLAGE SUPER MARKET, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands) July 30, 2022 July 31, 2021 ASSETS Current Assets Cash and cash equivalents $ 134,832 $ 116,314 Merchandise inventories 44,190 42,633 Patronage dividend receivable 12,239 11,860 Notes receivable from Wakefern 28,627 — Income taxes receivable 631 5,111 Other current assets 17,446 20,398 Total current assets 237,965 196,316 Property, equipment and fixtures, net 265,333 256,154 Operating lease assets 293,295 289,461 Notes receivable from Wakefern 29,157 55,295 Investment in Wakefern 33,004 33,004 Investments in Real Estate Partnerships 7,162 1,970 Goodwill 24,190 24,190 Other assets 34,342 32,614 Total assets $ 924,448 $ 889,004 LIABILITIES and SHAREHOLDERS’ EQUITY Current Liabilities Operating lease obligations $ 20,351 $ 21,627 Finance lease obligations 596 531 Notes payable to Wakefern 1,134 632 Current portion of debt 7,466 6,976 Accounts payable to Wakefern 77,037 70,792 Accounts payable and accrued expenses 24,266 25,098 Accrued wages and benefits 27,221 25,036 Income taxes payable 98 1,601 Total current liabilities 158,169 152,293 Long-term debt Operating lease obligations 284,300 278,135 Finance lease obligations 21,510 22,325 Notes payable to Wakefern 1,961 2,791 Long-term debt 66,264 66,827 Total long-term debt 374,035 370,078 Pension liabilities 4,569 10,182 Other liabilities 15,566 14,978 Commitments and Contingencies (Notes 3, 4, 5, 6, 7, 9 and 10) 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 10,971 shares at July 30, 2022 and 10,978 shares at July 31, 2021 72,891 70,594 Class B common stock, no par value: Authorized 20,000 shares; issued and outstanding 4,294 shares at July 30, 2022 and July 31, 2021 697 697 Retained earnings 306,974 293,185 Accumulated other comprehensive income (loss) 6,135 ( 9,064 ) Less treasury stock, Class A, at cost: 752 shares at July 30, 2022 and 726 shares at July 31, 2021 ( 14,588 ) ( 13,939 ) Total shareholders’ equity 372,109 341,473 Total liabilities and shareholders' equity $ 924,448 $ 889,004 See notes to consolidated financial statements. 22 VILLAGE SUPER MARKET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) Years ended July 30, 2022 July 31, 2021 (52 Weeks) (53 Weeks) Sales $ 2,061,084 $ 2,030,330 Cost of sales 1,481,417 1,465,286 Gross profit 579,667 565,044 Operating and administrative expense 507,597 498,786 Depreciation and amortization 33,122 34,195 Impairment of assets — 2,900 Operating income 38,948 29,163 Interest expense ( 3,907 ) ( 3,943 ) Interest income 4,023 3,633 Income before income taxes 39,064 28,853 Income taxes 12,234 8,859 Net income $ 26,830 $ 19,994 Net income per share: Class A common stock: Basic $ 2.06 $ 1.53 Diluted $ 1.84 $ 1.37 Class B common stock: Basic $ 1.34 $ 1.00 Diluted $ 1.34 $ 1.00 See notes to consolidated financial statements. 23 VILLAGE SUPER MARKET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) Years ended July 30, 2022 July 31, 2021 (52 Weeks) (53 Weeks) Net income $ 26,830 $ 19,994 Other comprehensive income (loss): Unrealized gain on interest rate swaps, net of tax (1) 3,398 1,428 Amortization of pension actuarial loss, net of tax (2) 233 409 Pension remeasurement, net of tax (3) 3,012 ( 2,559 ) Pension settlement loss, net of tax (4) 8,556 409 Total other comprehensive income (loss) 15,199 ( 313 ) Comprehensive income $ 42,029 $ 19,681 (1) Amounts are net of tax of $ 1,505 and $ 604 for 2022 and 2021, respectively. (2) Amounts are net of tax of $ 102 and $ 179 for 2022 and 2021, respectively. All amounts are reclassified from accumulated other comprehensive loss to operating and administrative expense. (3) Amounts are net of tax of $ 1,349 and $ 1,484 for 2022 and 2021, respectively. (4) Amounts are net of tax of $ 3,785 and $ 178 for 2022 and 2021, respectively. All amounts are reclassified from accumulated other comprehensive loss to operating and administrative expense. See notes to consolidated financial statements. 24 VILLAGE SUPER MARKET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (In thousands) Years ended July 30, 2022 and July 31, 2021 Accumulated Other Comprehensive Income (Loss) Total Shareholders' Equity Class A Common Stock Class B Common Stock Treasury Stock Class A 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 — — — — 19,994 — — — 19,994 Other comprehensive loss, net of tax of $ 523 — — — — — ( 313 ) — — ( 313 ) Dividends — — — — ( 13,050 ) — — — ( 13,050 ) Restricted shares forfeited ( 15 ) ( 71 ) — — — — — — ( 71 ) Share-based compensation expense 8 2,593 — — — — — — 2,593 Balance, July 31, 2021 10,978 $ 70,594 4,294 $ 697 $ 293,185 $ ( 9,064 ) 726 $ ( 13,939 ) $ 341,473 Net income — — — — 26,830 — — — 26,830 Other comprehensive income, net of tax of $ 6,741 — — — — — 15,199 — — 15,199 Dividends — — — — ( 13,041 ) — — — ( 13,041 ) Treasury stock purchases — — — — — — 26 ( 649 ) ( 649 ) Restricted shares forfeited ( 16 ) ( 198 ) — — — — — — ( 198 ) Share-based compensation expense 9 2,495 — — — — — — 2,495 Balance, July 30, 2022 10,971 $ 72,891 4,294 $ 697 $ 306,974 $ 6,135 752 $ ( 14,588 ) $ 372,109 See notes to consolidated financial statements. 25 VILLAGE SUPER MARKET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Years ended July 30, 2022 July 31, 2021 (52 Weeks) (53 Weeks) CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 26,830 $ 19,994 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 34,705 35,701 Non-cash share-based compensation 2,297 2,522 Non-cash pension settlement charges 10,856 587 Deferred taxes ( 5,093 ) ( 2,542 ) Provision to value inventories at LIFO 3,295 220 Impairment of assets — 2,900 Gain on sale of assets ( 346 ) ( 5,103 ) Changes in assets and liabilities: Merchandise inventories ( 4,852 ) ( 718 ) Patronage dividend receivable ( 379 ) ( 656 ) Accounts payable to Wakefern 6,550 ( 10,645 ) Accounts payable and accrued expenses ( 1,759 ) ( 3,741 ) Accrued wages and benefits 2,185 1,387 Income taxes receivable / payable 2,976 9,291 Other assets and liabilities 2,360 3,495 Net cash provided by operating activities 79,625 52,692 CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures ( 43,270 ) ( 25,233 ) Proceeds from the sale of assets 4,352 1,147 Investment in notes receivable from Wakefern ( 2,489 ) ( 2,287 ) Investment in real estate partnerships ( 5,010 ) — Net cash used in investing activities ( 46,417 ) ( 26,373 ) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of long-term debt 7,350 50,000 Principal payments of long-term debt ( 8,299 ) ( 8,414 ) Payments on revolving line of credit — ( 50,000 ) Debt issuance costs ( 51 ) ( 222 ) Dividends ( 13,041 ) ( 13,050 ) Treasury stock purchases, including shares surrendered for withholding taxes ( 649 ) — Net cash used in financing activities ( 14,690 ) ( 21,686 ) NET INCREASE IN CASH AND CASH EQUIVALENTS 18,518 4,633 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 116,314 111,681 CASH AND CASH EQUIVALENTS, END OF YEAR $ 134,832 $ 116,314 SUPPLEMENTAL DISCLOSURES OF CASH PAYMENTS MADE FOR: Interest $ 3,907 $ 3,943 Income taxes 20,685 1,475 NONCASH SUPPLEMENTAL DISCLOSURES: Investment in Wakefern and increase in notes payable to Wakefern $ — $ 2,872 Capital expenditures included in accounts payable and accrued expenses 3,784 3,162 See notes to consolidated financial statements. 26 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (All amounts are in thousands, except per share data). NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of operations Village Super Market, Inc. (the “Company” or “Village”) operates a chain of 34 supermarkets under the ShopRite and Fairway names in New Jersey, Maryland, New York and eastern Pennsylvania and four specialty markets under the Gourmet Garage name in New York City. The Company is a member of Wakefern Food Corporation ("Wakefern"), the nation's largest retailer-owned food cooperative and owner of the ShopRite, Fairway and Gourmet Garage names. This relationship provides Village many of the economies of scale in purchasing, distribution, store and own branded products, advanced retail technology, marketing and advertising associated with chains of greater size and geographic coverage. Principles of consolidation The consolidated financial statements include the accounts of Village Super Market, Inc. and its subsidiaries, which are wholly owned. Intercompany balances and transactions have been eliminated. Fiscal year The Company and its subsidiaries utilize a 52-53 week fiscal year ending on the last Saturday in the month of July. Fiscal 2022 contains 52 weeks and fiscal 2021 contains 53 weeks. Use of estimates In conformity with U.S. generally accepted accounting principles, management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Some of the more significant estimates are patronage dividends, pension accounting assumptions, accounting for contingencies, accounting for derivative instruments and hedging activities, and the impairment of long-lived assets, goodwill and indefinite-lived intangible assets. Actual results could differ from those estimates. Industry segment The Company consists of one operating segment, the retail sale of food and nonfood products. Revenue recognition Revenue is recognized at the point of sale to the customer, including Pharmacy sales. Digital channel sales are recognized either upon pickup in-store or upon delivery to the customer, including any related service revenues. Sales tax is excluded from revenue. Discounts provided to customers through store coupons and loyalty programs are recognized as a reduction of sales as products are sold. Discounts provided to customers by vendors are not recognized as a reduction in sales. Rather, the Company records a receivable from the vendor for the difference in sales price and payment received from the customer. The Company does not recognize revenue when it sells gift cards redeemable at Wakefern member stores. Payment collected from customers for sale of these gift cards is passed on to Wakefern as they can be redeemed at other locations, including those operated by Wakefern or other Wakefern members. Revenue is recognized and a receivable from Wakefern is recorded when a customer redeems these gift cards to purchase products or services. 27 Disaggregated Revenues The following table presents the Company's sales by product categories during each of the periods indicated: Years Ended July 30, 2022 July 31, 2021 Amount % Amount % Center Store (1) $ 1,229,336 59.7 % $ 1,218,550 60.6 % Fresh (2) 757,383 36.7 % 736,657 35.7 % Pharmacy 67,780 3.3 % 67,048 3.3 % Other (3) 6,585 0.3 % 8,075 0.4 % Total Sales $ 2,061,084 100.0 % $ 2,030,330 100.0 % (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. Cost of sales Cost of sales consists of costs of inventory, inbound freight charges, and production costs at the Company's centralized commissary, including materials, labor and overhead. The Company receives vendor allowances and rebates, including the patronage dividend and amounts received as a pass through from Wakefern, related to the Company’s buying and merchandising activities. Vendor allowances and rebates are recognized as a reduction in cost of sales when the related merchandise is sold or when the required contractual terms are completed. Shipping and handling costs associated with the Company’s digital sales are included in operating and administrative expense. Operating and administrative expense Operating and administrative expenses consists primarily of store and corporate costs, including employee salaries, wages, company-sponsored and multi-employer health and welfare, pension, and defined contribution benefits, supplies, advertising, utilities, facility repairs and maintenance, rent, occupancy costs and administrative expenses. Cash and cash equivalents The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. Included in cash and cash equivalents are proceeds due from credit and debit card transactions, which typically settle within five business days, of $ 11,653 and $ 10,638 at July 30, 2022 and July 31, 2021, respectively. Included in cash and cash equivalents at July 30, 2022 and July 31, 2021 are $ 110,739 and $ 86,670 , respectively, of demand deposits invested at Wakefern at overnight money market rates. Merchandise inventories Approximately 61 % of merchandise inventories are stated at the lower of LIFO (last-in, first-out) cost or market. If the FIFO (first-in, first-out) method had been used, inventories would have been $ 18,616 and $ 15,321 higher than reported in fiscal 2022 and 2021, respectively. All other inventories are stated at the lower of FIFO cost or market. 28 Property, equipment and fixtures Property, equipment and fixtures are recorded at cost. Interest cost incurred to finance construction is capitalized as part of the cost of the asset. Maintenance and repairs are expensed as incurred. Depreciation is provided on a straight-line basis over estimated useful lives of thirty years for buildings, ten years for store fixtures and equipment, and three years for computer equipment, shopping carts and vehicles. Leasehold improvements are amortized over the shorter of the related lease terms or the estimated useful lives of the related assets. When assets are sold or retired, their cost and accumulated depreciation are removed from the accounts, and any gain or loss is reflected in the consolidated financial statements. Investments The Company’s investments in its principal supplier, Wakefern, and a Wakefern affiliate, Insure-Rite, Ltd., are stated at cost (see Note 3). Village evaluates its investments in Wakefern and Insure-Rite, Ltd. for impairment through consideration of previous, current and projected levels of profit of those entities. The Company’s 20%-50% investments in certain real estate partnerships are accounted for under the equity method. One of these partnerships is a variable interest entity which does not require consolidation as Village is not the primary beneficiary (see Note 7). Store opening and closing costs All store opening costs are expensed as incurred. The Company records a liability for the future minimum lease payments and related costs for closed stores from the date of closure to the end of the remaining lease term, net of estimated cost recoveries that may be achieved through subletting, discounted using a risk-adjusted interest rate. Leases The Company determines if an arrangement is a lease at inception, and recognizes a finance and operating lease liability and asset for all leases with terms of more than 12 months at the lease commencement date. Finance and operating lease liabilities represent the present value of minimum lease payments not yet paid. For purposes of measuring the present value of its fixed payment obligations for a given lease, the Company uses its incremental borrowing rate as the discount rate implicit within its leases is generally not determinable. The Company's incremental borrowing rate reflects the rate it would pay to borrow on a secured basis, and incorporates the term and economic environment of the lease. Each renewal option is evaluated when recognizing the lease right-of-use assets and liabilities, and the Company utilizes the lease term for which it is reasonably certain to use the underlying asset. The Company is obligated under all leases to pay for real estate taxes, utilities and liability insurance, and under certain leases to pay additional amounts based on maintenance and a percentage of sales in excess of stipulated amounts. The Company accounts for rent holidays, escalating rent provisions, and construction allowances related to operating leases in rent expense on a straight-line basis over the term of the lease. Finance lease payments are charged to interest expense and depreciation and amortization expense over the lease term. Additional information on leases is provided in Note 7. Advertising Advertising costs are expensed as incurred. Advertising expense was $ 10,320 and $ 12,268 in fiscal 2022 and 2021, respectively. Income taxes Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. 29 The Company recognizes a tax benefit for uncertain tax positions if it is “more likely than not” that the position is sustainable, based on its technical merits. The tax benefit of a qualifying position is the largest amount of tax benefit that is greater than 50% likely of being realized upon effective settlement with a taxing authority having full knowledge of all relevant information. Derivative Instruments and Hedging Activities The Company records all derivatives on the balance sheet at fair value. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows are considered cash flow hedges. The Company records changes in the fair value of its interest rate swap contracts to Accumulated other comprehensive income (loss), net of taxes, as the Company has elected to designate its swaps as cash flow hedges and apply hedge accounting when the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Additional information on derivative and hedging activities is provided in Note 5. Fair value Fair value is defined as the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Fair value is a market-based measurement that should be determined using assumptions that market participants would use in pricing an asset or liability. The fair value guidance establishes a three-level hierarchy to prioritize the inputs used in measuring fair value. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly, such as quoted prices for similar assets or liabilities in active markets observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability. Cash and cash equivalents, patronage dividend receivable, income taxes receivable/payable, accounts payable and accrued expenses are reflected in the consolidated financial statements at carrying value, which approximates fair value because of the short-term maturity of these instruments. The carrying values of the Company’s notes receivable from Wakefern approximate their fair value as interest is earned at variable market rates. As the Company’s investment in Wakefern can only be sold to Wakefern at amounts that approximate the Company’s cost, it is not practicable to estimate the fair value of such investment. Long-lived assets The Company reviews the carrying values of its long-lived assets, such as property, equipment and fixtures and operating lease assets on an individual store basis for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Factors considered by the Company that could result in an impairment triggering event include a current period operating or cash flow loss, underperformance of a store relative to historical or expected operating results, and significant negative industry or economic trends. If an impairment triggering event is identified, the Company analyzes the undiscounted estimated future net cash flows from asset groups at the store level to determine if the carrying value of such assets are recoverable from their respective cash flows. If impairment is indicated, it is measured by comparing the fair value of the long-lived asset groups to their carrying value. For the year ended July 31, 2021 the Company recorded an impairment of long-lived assets for one Gourmet Garage store of $ 514 . Goodwill and indefinite-lived intangible assets Goodwill and indefinite-lived intangible assets are tested at the end of each fiscal year, or more frequently if circumstances dictate, for impairment. The Company's indefinite-lived intangible assets balance of $ 13,299 as of July 30, 2022 and July 31, 2021 are related to the Fairway and Gourmet Garage trade names. An impairment loss is recognized to the extent that the carrying amount of goodwill and indefinite-lived intangible assets exceeds its implied fair value. Village considers earnings multiples and other valuation techniques to measure fair value of goodwill at the reporting unit level, in addition to the value of the Company’s stock. The fair value of trade names are estimated based on the discounted cash flow model using the relief from royalty method. For the year ended July 31, 2021 the Company recorded an impairment of the Fairway trade name of $ 2,386 . 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. 30 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. 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 income to Net income available to Class A and Class B shareholders: Years ended July 30, 2022 July 31, 2021 July 25, 2020 (52 Weeks) (53 Weeks) (53 Weeks) Net income $ 26,830 $ 19,994 Distributed and allocated undistributed Net (loss) income to unvested restricted shareholders 777 626 Net income income available to Class A and Class B shareholders $ 26,053 $ 19,368 The tables below reconcile the numerators and denominators of basic and diluted net income per share for all periods presented. 2022 2021 Class A Class B Class A Class B Numerator: Net income allocated, basic $ 20,311 $ 5,742 $ 15,095 $ 4,273 Conversion of Class B to Class A shares 5,742 — 4,273 — Net income allocated, diluted $ 26,053 $ 5,742 $ 19,368 $ 4,273 Denominator: Weighted average shares outstanding, basic 9,869 4,294 9,853 4,294 Conversion of Class B to Class A shares 4,294 — 4,294 — Weighted average shares outstanding, diluted 14,163 4,294 14,147 4,294 Net income per share is as follows: 2022 2021 Class A Class B Class A Class B Basic $ 2.06 $ 1.34 $ 1.53 $ 1.00 Diluted $ 1.84 $ 1.34 $ 1.37 $ 1.00 Outstanding stock options to purchase Class A shares of 97 and 102 were excluded from the calculation of diluted net income per share at July 30, 2022 and July 31, 2021, respectively, as a result of their anti-dilutive effect. In addition, 359 and 392 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 July 30, 2022 and July 31, 2021, respectively, due to their anti-dilutive effect. 31 Share-based compensation All share-based payments to employees are recognized in the financial statements as compensation costs based on the fair market value on the date of the grant. Benefit plans The Company recognizes the funded status of its Company sponsored retirement plans on the consolidated balance sheet. Actuarial gains or losses, curtailments, prior service costs or credits, and transition obligations not previously recognized are recorded as a component of Accumulated other comprehensive income (loss). The Company uses July 31 as the measurement date for these plans. The Company also contributes to several multi-employer pension plans under the terms of collective bargaining agreements that cover certain union-represented employees. Pension expense for these plans is recognized as contributions are made. Recently issued accounting standards The Company monitors accounting standards recently issued by the FASB to assess their impact on the consolidated financial statements, if any. There were no recently issued accounting standards that will have a material impact on our consolidated financial statements. NOTE 2 — PROPERTY, EQUIPMENT and FIXTURES Property, equipment and fixtures are comprised as follows: July 30, 2022 July 31, 2021 Land and buildings $ 129,103 $ 105,325 Store fixtures and equipment 341,924 329,454 Leasehold improvements 183,188 178,062 Leased property under finance leases 25,211 25,211 Construction in progress 8,054 5,535 Vehicles 2,746 3,494 Total property, equipment and fixtures 690,226 647,081 Accumulated depreciation ( 411,541 ) ( 378,522 ) Accumulated amortization of property under finance leases ( 13,352 ) ( 12,405 ) Property, equipment and fixtures, net $ 265,333 $ 256,154 Amortization of leased property under finance leases is included in depreciation and amortization expense. NOTE 3 — RELATED PARTY INFORMATION - WAKEFERN The Company’s ownership interest in its principal supplier, Wakefern, which is operated on a cooperative basis for its stockholder members, is 12.5 % of the outstanding shares of Wakefern at July 30, 2022. The investment is stated at cost and is pledged as collateral for any obligations to Wakefern. In addition, all obligations to Wakefern are personally guaranteed by certain shareholders of Village. The Company is obligated to purchase 85 % of its primary merchandise requirements from Wakefern until ten years from the date that stockholders representing 75 % of Wakefern sales notify Wakefern that those stockholders request that the Wakefern Stockholder Agreement be terminated. If this purchase obligation is not met, Village is required to pay Wakefern’s profit contribution shortfall attributable to this failure. Similar payments are due if Wakefern loses volume by reason of the sale of Company stores or a merger with another entity. Village fulfilled the above obligation in fiscal 2022 and 2021. The Company also has an investment of approximately 9.4 % in Insure-Rite, Ltd., a Wakefern affiliated company, which provides Village with workers' compensation, liability and property insurance coverage. 32 Wakefern has increased from time to time the required investment in its common stock for each supermarket owned by a member, with the exact amount per store computed based on the amount of each store’s purchases from Wakefern. At July 30, 2022, the Company’s indebtedness to Wakefern for the outstanding amount of these stock subscriptions was $ 3,095 . Installment payments are due as follows: 2023 - $ 1,134 ; 2024 - $ 522 ; 2025 - $ 512 ; 2026 - $ 511 ; 2027 - $ 372 ; and $ 44 thereafter. The maximum per store investment remained $ 975 in fiscal 2022. Village receives additional shares of common stock to the extent paid for at the end of each fiscal year (which ends on or about September 30) of Wakefern calculated at the then book value per share. The payments, together with any stock issued thereunder, at the option of Wakefern, may be null and void and all payments on this subscription shall become the property of Wakefern in the event the Company does not complete the payment of this subscription in a timely manner. Village purchases substantially all of its merchandise from Wakefern. As a stockholder of Wakefern, Village earns a share of Wakefern’s earnings, which are distributed as a “patronage dividend.” This dividend is based on a distribution of substantially all of Wakefern’s operating profits for its fiscal year in proportion to the dollar volume of purchases by each member from Wakefern during that fiscal year. Patronage dividends are recorded as a reduction of cost of sales as merchandise is sold. Village accrues estimated patronage dividends due from Wakefern quarterly based on an estimate of the annual Wakefern patronage dividend and an estimate of Village’s share of this annual dividend based on Village’s estimated proportional share of the dollar volume of business transacted with Wakefern that year. Patronage dividends and other vendor allowances and rebates amounted to $ 39,038 and $ 43,003 in fiscal 2022 and 2021, respectively. 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. Village incurred charges of $ 47,877 and $ 47,462 from Wakefern in fiscal 2022 and 2021, respectively, for non-merchandise products and services, which are reflected in operating and administrative expense in the consolidated statements of operations. Additionally, the Company has certain related party leases (see Note 7) with Wakefern. 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. 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 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. 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, the Company had demand deposits invested at Wakefern in the amount of $ 110,739 . These deposits earn overnight money market rates. Interest income earned on investments with Wakefern was $ 3,953 and $ 3,522 in fiscal 2022 and 2021, respectively. NOTE 4 — DEBT Long-term debt consists of: July 30, 2022 July 31, 2021 Secured term loan $ 50,796 $ — $ 47,025 Unsecured term loan 17,507 21,104 New Market Tax Credit Financing 5,427 5,674 Total debt, excluding obligations under leases 73,730 73,803 Less current portion 7,466 6,976 Total long-term debt, excluding obligations under leases $ 66,264 $ 66,827 33 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 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, the purchase of the Galloway store shopping center and certain capital expenditure projects. 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 Company was in compliance with all covenants of the credit agreement at July 30, 2022. The carrying values of the Company’s long-term debt related to the Company's Credit Facility approximate their fair value as interest is charged at variable market rates. The estimated fair values of the Company's long-term debt are based on Level 2 inputs. New Markets Tax Credit 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 34 (“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. NOTE 5 — 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 July 30, 2022, the Company had four interest rate swaps with an aggregate initial notional value of $ 92,850 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 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 $ 262 and $ 328 during the fiscal years ended July 30, 2022 and July 31, 2021, respectively, from Accumulated other comprehensive income (loss) to Interest expense. 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. In 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 35 of these expedients preserves the presentation of derivatives consistent with past presentation. The adoption of this portion of the ASU did not have a material impact to our consolidated financial statements. 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 4). The modified rates did not have a material impact to the consolidated financial statements. The notional value of the interest rate swaps were $ 78,642 as of July 30, 2022. The fair value of interest rate swaps are included in the following captions on the consolidated balance sheets at July 30, 2022 and July 31, 2021: July 30, 2022 July 31, 2021 Other assets 6,020 1,111 The fair values of the Company’s interest rate swaps are based on Level 2 inputs, including the present value of estimated future cash flows based on market expectations of the yield curve on variable interest rates. NOTE 6 — INCOME TAXES The components of the provision for income taxes are: 2022 2021 Federal: Current $ 10,766 $ 7,172 Deferred ( 3,547 ) ( 2,037 ) State: Current 6,561 4,229 Deferred ( 1,546 ) ( 505 ) $ 12,234 $ 8,859 36 Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows: July 30, 2022 July 31, 2021 Deferred tax assets: Lease liabilities $ 100,275 $ 106,615 Compensation related costs 3,618 4,377 Pension costs 1,536 3,248 Other 710 552 Total deferred tax assets 106,139 114,792 Deferred tax liabilities: Tax over book depreciation 20,859 22,653 Lease assets 92,375 98,994 Patronage dividend receivable 3,950 4,162 Investment in partnerships 1,164 1,162 Other 2,206 611 Total deferred tax liabilities 120,554 127,582 Net deferred tax liability $ ( 14,415 ) $ ( 12,790 ) Deferred income tax assets (liabilities) are included in the following captions on the consolidated balance sheets at July 30, 2022 and July 31, 2021: July 30, 2022 July 31, 2021 Other assets 515 1,642 Other liabilities ( 14,930 ) ( 14,432 ) A valuation allowance is provided when it is more likely than not that some portion of the deferred tax assets will not be realized. In management’s opinion, in view of the Company’s previous, current and projected taxable income and reversal of deferred tax liabilities, such tax assets will more likely than not be fully realized. Accordingly, no valuation allowance was deemed to be required at July 30, 2022 and July 31, 2021. The effective income tax rate differs from the statutory federal income tax rate as follows: 2022 2021 Statutory federal income tax rate 21.0 % 21.0 % State income taxes, net of federal tax benefit 10.1 % 10.3 % Other 0.2 % ( 0.6 ) % Effective income tax rate 31.3 % 30.7 % The Company is not currently under audit by any tax authorities, but is open to examination with varying statutes of limitations, generally ranging from three to four years . 37 NOTE 7 — LEASES Description of leasing arrangements The Company leases 31 retail stores, as well as a commissary, the corporate headquarters and equipment at July 30, 2022. The majority of initial lease terms range from 20 to 30 years. Most of the Company’s leases contain renewal options at increased rents of five years each at the Company’s sole discretion. These options enable Village to retain the use of facilities in desirable operating areas. The composition of total lease cost is as follows: Years ended Consolidated Statement of Operations Classification July 30, 2022 July 31, 2021 Operating lease cost Operating and administrative expense $ 36,909 $ 37,677 Finance lease cost Amortization of leased assets Depreciation and amortization 947 947 Interest on lease liabilities Interest expense 1,939 2,000 Variable lease cost Operating and administrative expense 20,483 19,479 Total lease cost $ 60,278 $ 60,103 As of July 30, 2022 and July 31, 2021, finance lease right-of-use assets of $ 11,859 and $ 12,806 , respectively, are included in property, equipment and fixtures, net in the Company's consolidated balance sheet. Maturities of operating and finance lease liabilities, including options to extend lease terms that are reasonably certain of being exercised. The Company's lease liabilities mature as follows as of July 30, 2022: Operating leases Finance leases Total 2023 $ 32,455 $ 2,470 $ 34,925 2024 34,272 2,689 36,961 2025 33,206 2,820 36,026 2026 32,495 2,893 35,388 2027 31,809 2,893 34,702 Thereafter 233,521 23,294 256,815 Total lease payments 397,758 37,059 434,817 Less amount representing interest 93,107 14,953 108,060 Present value of lease liabilities $ 304,651 $ 22,106 $ 326,757 The Company has approximately $ 18,948 of future payment obligations related to lease agreements that have not yet commenced but have been executed as of July 30, 2022. As of July 30, 2022, the Company's lease terms and discount rates are as follows: July 30, 2022 July 31, 2021 Weighted-average remaining lease term (years) Operating leases 13.1 12.5 Finance leases 13.4 14.4 Weighted-average discount rate Operating leases 4.1 % 3.9 % Finance leases 8.5 % 8.5 % Supplemental cash flow information related to leases is as follows: 38 2022 2021 Cash paid for amounts in the measurement of lease liabilities Operating cash flows from operating leases $ 35,730 $ 34,768 Operating cash flows from finance leases 1,939 2,000 Financing cash flows from finance leases 750 689 Related party leases The Company leases a supermarket from a realty firm 30 % owned by certain officers of Village. 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 rent. The Company has ownership interests in four real estate partnerships. 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 related aggregate lease obligations of $ 12,340 at July 30, 2022. One of these partnerships is a variable interest entity, which is not consolidated as Village is not the primary beneficiary. This partnership owns one property, a stand-alone supermarket leased to the Company since 1974. Village is a general partner entitled to 33 % of the partnership's profits and losses. The Company subleases the Galloway and Vineland stores from Wakefern under sublease agreements which provided for combined annual rents of $ 959 and $ 1,355 in fiscal 2022 and 2021, respectively, and has related aggregate lease obligations of $ 607 at July 30, 2022. 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 . NOTE 8 — SHAREHOLDERS’ EQUITY The Company has two classes of common stock. Class A common stock is entitled to one vote per share and to cash dividends as declared 54 % greater than those paid on Class B common stock. Class B common stock is entitled to 10 votes per share. Class A and Class B common stock share equally on a per share basis in any distributions in liquidation. Shares of Class B common stock are convertible on a share-for-share basis for Class A common stock at any time. Class B common stock is not transferable except to another holder of Class B common stock or by will or under the laws of intestacy or pursuant to a resolution of the Board of Directors of the Company approving the transfer. As a result of this voting structure, the holders of the Class B common stock control greater than 50 % of the total voting power of the shareholders of the Company and control the election of the Board of Directors. The Company has authorized 10,000 shares of preferred stock. No shares have been issued. The Board of Directors is authorized to designate series, preferences, powers and participation of any preferred stock issued. The Company maintains share repurchase programs that comply with Rule 10b5-1 under the Securities Exchange Act of 1934. Repurchases of Village Class A common stock may be made from time to time through a variety of methods, including open market purchases and other negotiated transactions. In September 2019, the Company's Board of Directors authorized an incremental $ 5,000 share repurchase program, supplementing the existing authorization. The Company made open market purchases totaling $ 2,482 under this repurchase program in fiscal 2021 and an additional $ 1,907 in shares of Class A Common Stock were surrendered in satisfaction of withholding taxes in connection with the vesting of restricted shares in fiscal 2021. The Company's share repurchase program had $ 3,203 remaining at July 30, 2022 and July 31, 2021. In fiscal 2022, the Company purchased 23 shares totaling $ 561 from the Village Super Market, Inc. Employees' Retirement Plan related to the termination and related liquidation of the plan's assets (see note 9 ). Village has two share-based compensation plans, which are described below. The compensation cost charged against income for these plans was $ 2,297 and $ 2,522 in fiscal 2022 and 2021, respectively. Total income tax benefit recognized in the consolidated statements of operations for share-based compensation arrangements was $ 532 and $ 633 in fiscal 2022 and 2021, respectively. On December 16, 2016, the shareholders of the Company approved the Village Super Market, Inc. 2016 Stock Plan (the “2016 Plan”) under which awards of incentive and non-qualified stock options and restricted stock may be made. There are 1,200 shares of Class A common stock authorized for issuance to employees and directors under the 2016 Plan. Terms and conditions 39 of awards are determined by the Board of Directors. Restricted stock awards primarily cliff vest three years from the date of grant. There are 1,090 shares remaining for future grants under the 2016 Plan. The following table summarizes option activity under all plans for the following years: 2022 2021 Shares Weighted-average exercise price Shares Weighted-average exercise price Outstanding at beginning of year 102 $ 28.98 156 $ 28.43 Exercised — — — — Forfeited ( 5 ) 28.83 ( 54 ) 27.40 Expired — $ — — $ — Outstanding at end of year 97 $ 28.98 102 $ 28.98 Options exercisable at end of year 97 $ 28.98 102 $ 28.98 As of July 30, 2022, the weighted-average remaining contractual term of options outstanding and options exercisable was 1.7 years. As of July 30, 2022, the aggregate intrinsic value was $ 0 for both options outstanding and options exercisable. The fair value of each option award is estimated on the date of grant using the Black-Scholes Option Pricing Model. The Company uses historical data for similar groups of employees in order to estimate the expected life of options granted. Expected volatility is based on the historical volatility of the Company’s stock for a period of years corresponding to the expected life of the option. The risk-free interest rate is based on the U.S. Treasury yield curve at the time of grant for securities with a maturity period similar to the expected life of the option. The following table summarizes restricted stock activity under all plans for the following years: 2022 2021 Shares Weighted-average grant date fair value Shares Weighted-average grant date fair value Nonvested at beginning of year 392 $ 19.55 413 $ 19.40 Granted 9 21.52 8 25.06 Vested ( 26 ) 21.92 ( 14 ) 18.98 Forfeited ( 16 ) 20.21 ( 15 ) 18.98 Nonvested at end of year 359 $ 19.40 392 $ 19.55 The total fair value of restricted shares vested during fiscal 2022 and 2021 was $ 588 and $ 363 , respectively. As of July 30, 2022, there was $ 1,603 of total unrecognized compensation costs related to nonvested restricted stock granted under the above plans. That cost is expected to be recognized over a weighted-average period of 0.6 years. The Company declared and paid cash dividends on common stock as follows: 40 2022 2021 Per share: Class A common stock $ 1.00 $ 1.00 Class B common stock 0.65 0.65 Aggregate: Class A common stock $ 10,250 $ 10,259 Class B common stock 2,791 2,791 $ 13,041 $ 13,050 NOTE 9 — PENSION PLANS Company-Sponsored Pension Plans The Company sponsored three defined benefit pension plans. Two of the plans are tax-qualified plans, one covering members of a union, which is frozen and participants no longer earn service credit, and the other covering nonunion associates, which was terminated in fiscal 2022. Benefits under the union plan are based on a fixed amount for each year of service, and benefits under the nonunion plan are based upon percentages of annual compensation. Funding for these plans is based on an analysis of the specific requirements and an evaluation of the assets and liabilities of each plan. The third plan is an unfunded, nonqualified plan providing supplemental pension benefits to certain executives. Net periodic pension cost for the plans include the following components: 2022 2021 Service cost $ 187 $ 216 Interest cost on projected benefit obligation 1,306 1,689 Expected return on plan assets ( 1,258 ) ( 1,932 ) Loss on settlement 12,341 587 Amortization of gains and losses 335 588 Net periodic pension cost $ 12,911 $ 1,148 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 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. Additionally, the Company recognized a settlement loss of $ 45 and $ 587 in fiscal 2022 and 2021, respectively, for plans where benefits paid exceeded the sum of the service cost and interest cost components of net periodic pension cost. 41 The changes in benefit obligations and the reconciliation of the funded status of the Company’s plans to the consolidated balance sheets were as follows: 2022 2021 Changes in Benefit Obligation: Benefit obligation at beginning of year $ 73,229 $ 76,849 Service cost 187 216 Interest cost 1,306 1,689 Benefits paid ( 676 ) ( 796 ) Settlement ( 54,742 ) ( 2,563 ) Actuarial loss ( 11,791 ) ( 2,166 ) Benefit obligation at end of year $ 7,513 $ 73,229 Changes in Plan Assets: Fair value of plan assets at beginning of year $ 63,047 $ 70,683 Actual return on plan assets ( 6,170 ) ( 4,277 ) Employer contributions 1,485 — Benefits paid ( 676 ) ( 796 ) Settlements paid ( 54,742 ) ( 2,563 ) Fair value of plan assets at end of year 2,944 63,047 Funded status at end of year $ 4,569 $ 10,182 Amounts recognized in the consolidated balance sheets: Pension liabilities 4,569 10,182 Accumulated other comprehensive loss (income), net of income taxes ( 1,962 ) 9,833 Amounts included in Accumulated other comprehensive income (loss) (pre-tax): Net actuarial loss $ ( 2,872 ) $ 14,167 The Company expects approximately $ 557 of the net actuarial gain, excluding the impact of any potential plan settlements, to be recognized as a component of net periodic benefit costs in fiscal 2023. The accumulated benefit obligations of the plans were $ 7,513 and $ 71,931 at July 30, 2022 and July 31, 2021, respectively. The following information is presented for those plans with an accumulated benefit obligation in excess of plan assets: 2022 2021 Projected benefit obligation $ 7,513 $ 73,229 Accumulated benefit obligation 7,513 71,931 Fair value of plan assets 2,944 63,047 Weighted average assumptions used to determine benefit obligations and net periodic pension cost for the Company’s defined benefit plans were as follows: 2022 2021 Assumed discount rate — net periodic pension cost 2.44 % 2.26 % Assumed discount rate — benefit obligation 3.77 % 2.44 % Assumed rate of increase in compensation levels 4.50 % 4.50 % Expected rate of return on plan assets 5.25 % 3.36 % 42 Investments in the pension trusts are overseen by the trustees of the plans, who are officers of Village. 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 investment allocation to fixed income instruments will increase as each plans' funded status increases. The target allocations for plan assets are 30 - 50 % equity securities, 50 - 70 % fixed income securities and 0 - 10 % cash. Asset allocations are reviewed periodically and appropriate rebalancing is performed. Equity securities include investments in large-cap, small-cap and mid-cap companies located both in and outside the United States. Fixed income securities include U.S. treasuries, mortgage-backed securities and corporate bonds of companies from diversified industries. Investments in securities are made through mutual funds. In addition, the terminated Village Super Market, Inc. Employees’ Retirement Plan plan held Class A common stock of Village in the amount of $ 512 at July 31, 2021. Risk management is accomplished through diversification across asset classes and fund strategies, multiple investment portfolios and investment guidelines. The plans do not allow for investments in derivative instruments. The fair value of the pension assets were as follows: July 30, 2022 July 31, 2021 Asset Category Assets Measured at NAV Total Level 1 Assets Measured at NAV Total Cash $ — $ — $ 83 $ — $ 83 Equity securities: Company stock — — 512 — 512 Mutual/Collective Trust Funds - U.S. (1) 915 915 — 1,174 1,174 Mutual/Collective Trust Funds - International (1) 301 301 — 387 387 Fixed income securities: Mutual/Collective Trust Funds - Fixed Income (1) 1,728 1,728 — 60,891 60,891 Total $ 2,944 $ 2,944 $ 595 $ 62,452 $ 63,047 (1) Includes pools of investments that are measured at fair value using the Net Asset Value (NAV) per share (or its equivalent) practical expedient. The NAV is based on the underlying net assets owned by the fund and the relative interest of each participating investor in the fair value of the underlying assets. The underlying investments are classified as either level 1 or 2 of the fair value hierarchy. Based on actuarial assumptions, estimated future defined benefit payments, which may be significantly impacted by participant elections related to retirement dates and forms of payment, are as follows: Fiscal Year 2023 $ 170 2024 180 2025 160 2026 190 2027 6,080 2028 - 2031 930 The Company expects contributions to its defined benefit pension plans to be immaterial in fiscal 2023. 43 Multi-Employer Plans The Company contributes to three multi-employer pension plans under collective bargaining agreements covering union-represented employees. These plans provide benefits to participants that are generally based on a fixed amount for each year of service. Based on the most recent information available, certain of these multi-employer plans are underfunded. The amount of any increase or decrease in Village’s required contributions to these multi-employer pension plans will depend upon the outcome of collective bargaining, actions taken by trustees who manage the plans, government regulations and the actual return on assets held in the plans, among other factors. The risks of participating in multi-employer pension plans are different from the risks of participating in single-employer pension plans in the following respects: • Assets contributed to a multi-employer plan by one employer may be used to provide benefits to employees of other participating employers. • If a participating employer stops contributing to the plan, the unfunded obligations of the plan allocable to such withdrawing employer may be borne by the remaining participating employers. • If the Company stops participating in some of its multi-employer pension plans, the Company may be required to pay those plans an amount based on its allocable share of the underfunded status of the plan, referred to as a withdrawal liability. The Company’s participation in these plans is outlined in the following tables. The “EIN / Pension Plan Number” column provides the Employer Identification Number (“EIN”) and the three-digit pension plan number. The most recent “Pension Protection Act Zone Status” available in 2021 and 2020 is for the plan’s year-end at December 31, 2021 and December 31, 2020, respectively, unless otherwise noted. Among other factors, generally, plans in the red zone are less than 65 percent funded, plans in the yellow zone are between 65 and 80 percent funded and plans in the green zone are at least 80 percent funded. The “FIP/RP Status Pending / Implemented” column indicates plans for which a funding improvement plan (“FIP”) or a rehabilitation plan (“RP”) is either pending or has been implemented. Pension Protection Act Zone Status FIP/RP Status Pending / Implemented Contributions for the year ended (5) Expiration date of Collective- Bargaining Agreement Pension Fund EIN / Pension Plan Number 2021 2020 July 30, 2022 July 31, 2021 Surcharge Imposed (6) Pension Plan of Local 464A (1) 22-6051600-001 Green Green N/A $ 808 $ 874 N/A August 2025 UFCW Local 1262 & Employers Pension Fund (2), (4) 22-6074414-001 Red Red Implemented 2,745 2,721 No October 2023 UFCW Regional Pension Plan (3), (4) 16-6062287-074 Red Red Implemented $ 1,288 $ 1,260 No June 2024 Total Contributions $ 4,841 $ 4,855 (1) The information for this fund was obtained from the Form 5500 filed for the plan’s year-end at December 31, 2021 and December 31, 2020. (2) The information for this fund was obtained from the Form 5500 filed for the plan’s year-end at December 31, 2020 and December 31, 2019. (3) The information for this fund was obtained from the Form 5500 filed for the plan’s year-end at September 30, 2021 and September 30, 2020. (4) This plan has elected to utilize special amortization provisions provided under the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010. There were no changes to the plan’s zone status as a result of this election. (5) The Company’s contributions represent more than 5 % of the total contributions received by each applicable pension fund for all periods presented. 44 (6) Under the Pension Protection Act, a surcharge may be imposed when employers make contributions under a collective bargaining agreement that is not in compliance with a rehabilitation plan. As of July 30, 2022, the collective bargaining agreements under which the Company was making contributions were in compliance with rehabilitation plans adopted by each applicable pension fund. Other Multi-Employer Benefit Plans The Company also contributes to various other multi-employer benefit plans that provide health and welfare benefits to active and retired participants. Total contributions made by the Company to these other multi-employer benefit plans were $ 32,847 and $ 33,270 in fiscal 2022 and 2021, respectively. Defined Contribution Plans The Company sponsors a 401(k) savings plan for certain eligible associates. Company contributions under that plan, which are based on specified percentages of associate contributions, were $ 2,054 and $ 1,791 in fiscal 2022 and 2021, respectively. The Company also contributes to union sponsored defined contribution plans for certain eligible associates. Company contributions under these plans were $ 2,944 and $ 3,296 in fiscal 2022 and 2021, respectively. NOTE 10 — COMMITMENTS and CONTINGENCIES Approximately 88 % of our employees are covered by collective bargaining agreements. Contracts with the Company’s seven unions have or will expire between October 2023 and December 2026. None of our associates are represented by unions whose contracts have already expired or expire within one year . Any work stoppages could have an adverse impact on our financial results. 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. NOTE 11 — SUBSEQUENT EVENT 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 %. Village also executed an interest rate swap for a notional amount equal to the term loan amount that fixes the base SOFR at 2.95 %, resulting in a fixed effective rate of 4.30 %. This loan qualified for an interest rate subsidy program with Wakefern on financing related to certain capital expenditure projects. Net of the subsidy, the Company will pay interest at a fixed effective rate of 2.30 %. 45 Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors Village Super Market, Inc.: Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting We have audited the accompanying consolidated balance sheets of Village Super Market, Inc. and subsidiaries (the Company) as of July 30, 2022 and July 31, 2021, the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for the years then ended, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of July 30, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of July 30, 2022 and July 31, 2021, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of July 30, 2022 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. 46 Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Assessment of indicators of impairment of long-lived assets As discussed in Note 1 to the consolidated financial statements, the Company reviews its long-lived assets, such as property, equipment and fixtures and operating lease assets, for events or changes in circumstances that might indicate the carrying amount of an asset group may not be recoverable. The Company’s judgment regarding the identification of impairment indicators is based, in part, on operational performance at the store level. Factors considered by the Company that could result in an impairment triggering event include a current period operating or cash flow loss, underperformance of a store relative to historical or expected operating results, and significant negative industry or economic trends. At July 30, 2022, the Company had property, equipment and fixtures, net and operating lease assets of $265,333 thousand and $293,295 thousand, respectively. We identified the assessment of impairment triggering events related to long-lived assets as a critical audit matter. A high degree of auditor judgment was required to evaluate the Company’s assessment of whether any of the following were indicators of impairment: (1) stores with current period operating or cash flow losses, (2) underperforming stores based on current period operating or cash flow results relative to their respective historical and expected results, and (3) negative industry or economic trends. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s long-lived asset impairment process. This included a control related to the Company’s assessment of impairment triggering events. We assessed the Company’s identification and evaluation of potential impairment triggering events by: • inspecting operating results and cash flows by store to identify stores with current period losses • comparing actual operating and cash flow results to historical results, expected results, industry and economic trends, and to the net book value of store assets for a selection of stores • reading board of directors meeting minutes and available industry information. /s/ KPMG LLP We have served as the Company’s auditor since 1987. Short Hills, New Jersey October 13, 2022 47 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.