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Item 2. Management’s Discussion and Analysis

2022-12-07 compared with 2022-06-08 · 80 added, 132 removed, 121 unchanged (64% of the section changed)

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Village Super Market, Inc.

(the “Company” or “Village”) operates a chain of twenty-nine ShopRite supermarkets, five Fairway Markets and four Gourmet Garage specialty markets located in New Jersey, New York, Pennsylvania and Maryland.

Village is the second largest member of Wakefern Food Corporation (“Wakefern”), the nation’s largest retailer-owned food cooperative and owner of the ShopRite, Fairway Market and Gourmet Garage names.

(the “Company” or “Village”) was founded in 1937.

Village operates a chain of 34 supermarkets in New Jersey (26), New York (6), Maryland (1) and Pennsylvania (1) under the ShopRite and Fairway banners and four Gourmet Garage specialty markets in New York City.

Village is the second largest member of Wakefern Food Corporation (“Wakefern”), the nation’s largest retailer-owned food cooperative and owner of the ShopRite, Fairway and Gourmet Garage names.

As further described in the Company’s Form 10-K, this ownership interest in Wakefern provides Village with many of the economies of scale in purchasing, distribution, advanced retail technology, marketing and advertising associated with chains of greater size and geographic coverage.

On April 29, 2022, Village opened a 14,600 sq.

Gourmet Garage in the West Village in Manhattan, NYC.

On February 22, 2021, Village closed the ShopRite store located in Silver Spring, Maryland.

Despite continued investment in marketing and promotional programs, the store was unable to generate sales at a level sufficient to maintain profitability, resulting in its closure.

The impacts associated with this closure were not material to the consolidated financial statements.

The supermarket industry is highly competitive and characterized by narrow profit margins.

The Company competes directly with multiple retail formats, both in-store and online, including national, regional and local supermarket chains as well as warehouse clubs, supercenters, drug stores, discount general merchandise stores, fast food chains, restaurants, dollar stores and convenience stores.

Village competes by using low pricing, providing a superior customer service experience and a broad range of consistently available quality products, including our own brands portfolio.

The ShopRite Price Plus preferred customer program enables Village to offer continuity programs, focus on target marketing initiatives and to offer discounts and attach digital coupons directly to a customer's Price Plus card.

The Company competes by providing a superior customer service experience, competitive pricing and a broad range of consistently available quality products.

The ShopRite Price Plus customer loyalty program enables Village to offer continuity programs, focus on target marketing initiatives and to offer discounts and attach digital coupons directly to a customer's Price Plus card.

Online grocery ordering for in-store pick up or home delivery is available in all of our ShopRite stores through shoprite.com, the ShopRite app or through third party service providers.

Additionally, the ShopRite Order Express app enables customers to pre-order deli, catering, specialty occasion cakes and other items.

Online ordering for home delivery is available in all Fairway and Gourmet Garage stores through third party service providers.

To promote production efficiency, product quality and consistency, the Company operates a centralized commissary supplying certain products in deli, bakery, prepared foods and other perishable product categories to all stores.

The Company also owns and operates an automated micro-fulfillment center to facilitate online order fulfillment for the south New Jersey stores.

The Company’s stores, seven of which are owned, average 54,000 total square feet.

These larger store sizes enable the Company’s stores to provide a “one-stop” shopping experience and to feature expanded higher margin specialty departments such as an onsite bakery, an expanded delicatessen, a variety of natural and organic foods, ethnic and international foods, prepared foods and pharmacies.

Many of our stores emphasize a Power Alley, which features high margin, fresh, convenience offerings in an area within the store that provides quick customer entry and exit for those customers shopping for today's lunch or dinner.

Certain of our stores include the Village Food Garden concept featuring a restaurant style kitchen, and several kiosks offering a wide variety of store prepared specialty foods for both take-home and in-store dining.

Online grocery ordering for in-store pick-up or home delivery is available in all of our ShopRite stores.

Customers can browse our circular, create and edit shopping lists and place orders for pick-up or delivery through shoprite.com or the ShopRite app.

Additionally, the ShopRite and Fairway Order Express apps enable customers to pre-order deli, catering, specialty occasion cakes and other items.

Online ordering for home delivery through third party services is available in all stores.

These larger store sizes enable the Company to offer a wide variety of national branded and locally sourced food products, including grocery, meat, produce, dairy, deli, seafood, prepared foods, bakery and frozen foods as well as non-food product offerings, including health and beauty care, general merchandise, liquor and 21 in-store pharmacies.

Most product departments include high-quality, competitively priced own-brand offerings under the Wholesome Pantry, Bowl & Basket, Paperbird and Fairway brands.

Our Fairway Markets offer a one-stop destination shopping experience with an emphasis on fresh, unique, and high quality offerings paired with an expansive variety of natural, organic, specialty and gourmet products.

Our Gourmet Garage specialty markets offer organic produce, signature soups and prepared foods, high-quality meat and seafood, charcuterie and gourmet cheeses, artisan baked bread and pastries, chef-prepared meals to go and pantry staples.

The Company has an ongoing program to upgrade and expand its supermarket chain.

This program has included store remodels as well as the opening or acquisition of additional stores.

When remodeling, Village has sought, whenever possible, to increase the amount of selling space in its stores.

On August 14, 2022, we converted the Pelham, NY store from the Fairway banner to the ShopRite banner and a major remodel of the store was completed in late October 2022.

On April 29, 2022, Village opened a 14,600 sq.

Gourmet Garage in the West Village in Manhattan, NYC.

We consider a variety of indicators to evaluate our performance, such as same store sales;

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and hourly labor rates.

NON-GAAP MEASURES

The accompanying Consolidated Financial Statements, including the related notes, are presented in accordance with generally accepted accounting principles ("GAAP").

We provide non-GAAP measures, including Adjusted net income and Adjusted operating and administrative expenses as management believes these supplemental measures are useful to investors and analysts.

These non-GAAP financial measures should not be reviewed in isolation or considered as a substitute for our financial results as reported in accordance with GAAP, nor as an alternative to net income, operating and administrative expense or any other GAAP measure of performance.

Adjusted net income and Adjusted operating and administrative expense are useful to investors because they provide supplemental measures that exclude the financial impact of certain items that affect period-to-period comparability.

Management and the Board of Directors use these measures as they provide greater transparency in assessing ongoing operating performance on a period-to-period basis.

Other companies may have different definitions of Non-GAAP Measures and provide for different adjustments, and comparability to the Company's results of operations may be impacted by such differences.

The Company's presentation of Non-GAAP Measures should not be construed as an implication that its future results will be unaffected by unusual or non-recurring items.

The following tables reconciles Net (loss) income to Adjusted net income and Operating and administrative expenses to Adjusted operating and administrative expenses:

13 Weeks Ended 39 Weeks Ended

2022 April 24,

2021 April 30,

2022 April 24,

Net (loss) income $ (3,231) $ 2,574 $ 14,227 $ 10,490

Adjustments to Operating and administrative expense:

Gain on sale of assets (1) — (724) — (724)

Pension termination and settlement charges (2) 12,296 — 12,296 —

Store closure costs (3) — 325 — 325

Adjustments to Income taxes:

Tax impact of adjustments (3,780) 122 (3,780) 122

Adjusted net income $ 5,285 $ 2,297 $ 22,743 $ 10,213

Operating and administrative expense $ 137,751 $ 121,156 $ 385,521 $ 371,968

Total adjustments to operating administrative expense (12,296) 399 (12,296) 399

Adjusted operating and administrative expense $ 125,455 $ 121,555 $ 373,225 $ 372,367

Adjusted operating and administrative expense as a % of sales 24.99 % 25.27 % 24.34 % 24.92 %

(1) The 13 and 39 weeks ended April 24, 2021 includes a $724 gain on the sale of the pharmacy prescription list related to the closure of the Silver Spring, Maryland store.

(2) The 13 and 39 weeks ended April 30, 2022 includes pension termination charges of $12,296 related to the Village Super Market Inc.

Employees' Retirement Plan.

(3) The 13 and 39 weeks ended April 24, 2021 includes $325 of costs related to the closure of the Silver Spring, Maryland store.

RESULTS OF OPERATIONS

The following table sets forth the major components of the Consolidated Statements of Operations as a percentage of sales:

13 Weeks Ended 39 Weeks Ended

April 30, 2022 April 24, 2021 April 30, 2022 April 24, 2021

13 Weeks Ended

October 29, 2022 October 30, 2021

Sales 100.00 % 100.00 %

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Depreciation and amortization 1.65 1.68

Operating (loss) income (0.84) 0.81 1.37 1.02

Operating income 2.92 2.14

Interest expense (0.21) (0.20)

Interest income 0.38 0.20

(Loss) income before income taxes (0.85) 0.79 1.36 1.00

Income before income taxes 3.09 2.14

Income taxes 0.96 0.66

Net (loss) income (0.63) % 0.54 % 0.93 % 0.70 %

Sales were $501,962 in the 13 weeks ended April 30, 2022, an increase of 4.3% compared to the 13 weeks ended April 24, 2021.

Sales increased due to an increase in same store sales of 4.6% partially offset by the closure of the Silver Spring, Maryland store in February 2021.

Same store sales increased due primarily to increased sales in New York City stores, inflation and continued growth in Supplemental Nutrition Assistance Program ("SNAP") benefit redemptions.

Increases in transaction counts were partially offset by decreased basket sizes and same store digital sales were flat.

Sales were $1,533,581 in the 39 weeks ended April 30, 2022, an increase of 2.6% compared to the 39 weeks ended April 24, 2021.

Sales increased due to an increase in same store sales of 3.7% partially offset by the closure of the Silver Spring, Maryland store in February 2021.

Same store sales increased due primarily to increased sales in New York City stores, inflation and continued growth in SNAP benefit redemptions.

Increases in transaction counts were partially offset by decreased basket sizes and same store digital sales were flat.

On a two-year stacked basis, same store sales decreased 1.6% and increased 6.0% in the 13 and 39 weeks ended April 30, 2022, respectively.

Same store digital sales increased 106% and 135% on a two-year stacked basis for the 13 and 39 weeks ended April 30, 2022, respectively.

New stores and replacement stores are included in same store sales in the quarter after the store has been in operation for four full quarters.

Net income 2.13 % 1.48 %

Sales were $519,689 in the 13 weeks ended October 29, 2022, an increase of 5.2% compared to the 13 weeks ended October 30, 2021.

Sales increased due to an increase in same store sales of 4.3%, the opening of a Gourmet Garage in the West Village in Manhattan, NY on April 29, 2022 and increased sales due to the remodel and conversion of the Pelham, NY Fairway to the ShopRite banner on August 15, 2022.

Same store sales increased due primarily to retail price inflation.

New stores, replacement stores and stores with banner changes are included in same store sales in the quarter after the store has been in operation for four full quarters.

Store renovations and expansions are included in same store sales immediately.

Gross Profit .

Gross profit as a percentage of sales increased .48% in the 13 weeks ended April 30, 2022 compared to the 13 weeks ended April 24, 2021 due primarily to increased departmental gross margin percentages (.70%), decreased warehouse assessment charges from Wakefern (.21%), and a favorable change in product mix (.05%), partially offset by higher LIFO charges (.18%), decreased patronage dividends and rebates received from Wakefern (.16%) and higher promotional spending (.14%).

Department gross margins increased due primarily to pricing initiatives and improvements in commissary operations.

Gross profit as a percentage of sales increased .47% in the 39 weeks ended April 30, 2022 compared to the 39 weeks ended April 24, 2021 due primarily to increased departmental gross margin percentages (.71%) and a favorable change in product mix (.09%), partially offset by higher LIFO charges (.09%), increased warehouse assessment charges from Wakefern (.05%), decreased patronage dividends and rebates received from Wakefern (.13%) and higher promotional spending (.05%).

Department gross margins increased due primarily to pricing initiatives and improvements in commissary operations.

Gross profit as a percentage of sales increased .37% in the 13 weeks ended October 29, 2022 compared to the 13 weeks ended October 30, 2021 due primarily to increased departmental gross margin percentages (.17%), decreased warehouse assessment charges from Wakefern (.21%) due primarily to sales leverage, a favorable change in product mix (.07%) and lower promotional spending (.06%), partially offset by higher LIFO charges (.05%) and decreased patronage dividends and rebates received from Wakefern (.10%).

Operating and Administrative Expense.

Operating and administrative expense as a percentage of sales increased 2.26% in the 13 weeks ended April 30, 2022 compared to the 13 weeks ended April 24, 2021.

The 13 weeks ended April 30, 2022 includes a $12.3 million (2.45% as a percentage of sales) settlement charge as a result of the termination of the Village Super Market, Inc.

Employees’ Retirement Plan.

The Company contributed cash of $1.5 million to fully fund the plan and the

remaining $10.8 million represents non-cash charges for unrecognized losses within accumulated other comprehensive loss as of the termination date.

Adjusted operating and administrative expense as a percentage of sales decreased .28% due primarily to lower labor costs and fringe benefits (.29%) and less advertising spending (.09%), partially offset by increased external fees and transportation costs associated with digital sales (.12%).

Labor costs decreased due to productivity initiatives, labor shortages and sales leverage partially offset by minimum wage and demand driven pay rate increases.

Operating and administrative expense as a percentage of sales increased .24% in the 39 weeks ended April 30, 2022 compared to the 39 weeks ended April 24, 2021.

Adjusted operating and administrative expense as a percentage of sales decreased .58% due primarily to lower labor costs and fringe benefits (.61%) and less advertising spending (.11%), partially offset by increased external fees and transportation costs associated with digital sales (.11%).

Labor costs decreased due to productivity initiatives, labor shortages and sales leverage partially offset by minimum wage and demand driven pay rate increases.

Operating and administrative expense as a percentage of sales decreased .38% in the 13 weeks ended October 29, 2022 compared to the 13 weeks ended October 30, 2021 due primarily to lower labor costs and fringe benefits (.21%) and decreased supply spending (.15%).

Labor costs and fringe benefits decreased due primarily to ongoing productivity initiatives and sales leverage partially offset by minimum wage and market-driven pay rate increases.

Depreciation and Amortization .

Depreciation and amortization expense decreased in both the 13 and 39 weeks ended April 30, 2022 compared to the 13 and 39 weeks ended April 24, 2021 due primarily to the closure of the Silver Spring, Maryland ShopRite in February 2021 and the timing of capital expenditures.

Depreciation and amortization expense increased in the 13 weeks ended October 29, 2022 compared to the 13 weeks ended October 30, 2021 due primarily to capital expenditures.

Interest Expense .

Interest expense decreased in both the 13 and 39 weeks ended April 30, 2022 compared to the 13 and 39 weeks ended April 24, 2021 due to lower average outstanding borrowings.

Interest expense increased in the 13 weeks ended October 29, 2022 compared to the 13 weeks ended October 30, 2021 due primarily to interest related to the $10,000 unsecured term loan executed on September 1, 2022.

Interest Income .

Interest income increased in both the 13 and 39 weeks ended April 30, 2022 compared to the 13 and 39 weeks ended April 24, 2021 due primarily to higher interest rates and larger amounts invested in variable rate notes receivable from Wakefern and demand deposits invested at Wakefern.

Interest income increased in the 13 weeks ended October 29, 2022 compared to the 13 weeks ended October 30, 2021 due primarily to higher interest rates and larger amounts invested in variable rate notes receivable from Wakefern and demand deposits at Wakefern.

Income Taxes.

The effective income tax rate was 25.4% in the 13 weeks ended April 30, 2022 compared to 31.5% in the 13 weeks ended April 24, 2021.

The 13 weeks ended April 30, 2022 includes the recognition of a discrete tax benefit related to the pension termination settlement charge recognized in the quarter.

Excluding the impact of the pension termination settlement charge and related discrete tax benefit, the effective income tax rate was 33.7% in the 13 weeks ended April 30, 2022.

The increase in the effective income tax rate is due primarily to greater apportionment in higher state tax rate jurisdictions and unfavorable return to provision adjustments in the 13 weeks ended April 30, 2022 as a result of receiving less work opportunity tax credits than estimated.

The effective income tax rate was 31.7% in the 39 weeks ended April 30, 2022 compared to 30.3% in the 39 weeks ended April 24, 2021.

The increase in the effective income tax rate is due primarily to greater apportionment in higher state tax rate jurisdictions and unfavorable return to provision adjustments as a result of receiving less work opportunity tax credits than estimated.

Net (Loss) Income .

Net loss was $3,231 in the 13 weeks ended April 30, 2022 compared to net income of $2,574 in the 13 weeks ended April 24, 2021.

Adjusted net income was $5,285 in the 13 weeks ended April 30, 2022 compared to $2,297 in the 13 weeks ended April 24, 2021.

Adjusted net income increased 130% due primarily to the 4.6% increase in same store sales, higher gross profit margins and lower payroll costs.

Net income was $14,227 in the 39 weeks ended April 30, 2022 compared to $10,490 in the 39 weeks ended April 24, 2021.

Adjusted net income was $22,743 in the 39 weeks ended April 30, 2022 compared to $10,213 in the 39 weeks ended April 24, 2021.

Adjusted net income increased 123% due primarily to the 3.7% increase in same store sales, higher gross profit margins and lower payroll costs.

The effective income tax rate was 31.0% in the 13 weeks ended October 29, 2022 compared to 30.7% in the 13 weeks ended October 30, 2021.

The increase in the effective income tax rate is due primarily to greater apportionment in higher state tax rate jurisdictions.

Net Income was $11,081 in the 13 weeks ended October 29, 2022 compared to net income of $7,328 in the 13 weeks ended October 30, 2021.

Net income increased 51% due primarily to the 4.3% increase in same store sales, higher gross profit margins and lower operating and administrative expenses.

CRITICAL ACCOUNTING POLICIES

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The Company’s critical accounting policies relating to the impairment of long-lived assets, goodwill and indefinite-lived intangible assets, accounting for patronage dividends earned as a stockholder of Wakefern and accounting for pension plans, are described in the Company’s Annual Report on Form 10-K for the year ended July 30, 2022.

A s of April 30, 2022, there have been no changes to the critical accounting policies contained therein.

A s of October 29, 2022, there have been no changes to the critical accounting policies contained therein.

The preparation of financial statements in conformity with U.S.

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LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities was $51,702 in the 39 weeks ended April 30, 2022 compared to $32,995 in the corresponding period of the prior year.

Net cash provided by operating activities was $22,019 in the 13 weeks ended October 29, 2022 compared to $7,887 in the corresponding period of the prior year.

The change in cash flows from operating activities in fiscal 2023 was primarily due to changes in working capital and higher net income adjusted for non-cash items.

Working capital changes, including Other assets and liabilities, increased cash flows from operating activities by $756 in fiscal 2023 compared to a decrease of $8,281 in fiscal 2022.

The change in impact of working capital is due primarily to an increase in accounts payable to Wakefern and partially offset by a decrease in income taxes payable and an increase in merchandise inventories due primarily to cost inflation.

During the 39 weeks ended April 30, 2022, Village used cash to fund capital expenditures of $36,834, dividends of $9,787, principal payments of long-term debt of $6,174, an investment in a real estate partnership for the development of a retail center in Old Bridge, New Jersey of $4,393 and additional investments of $1,788 in notes receivable from Wakefern.

Capital expenditures primarily include costs associated with the purchase of the Galloway store shopping center, the purchase of land in central New Jersey for a potential replacement store and other development, continued expansion of self-checkout, and various merchandising, technology, equipment and facility upgrades.

The change in impact of working capital is due primarily to the timing of tax payments, accounts payable and accrued expenses.

During the 13 weeks ended October 29, 2022, Village used cash to fund capital expenditures of $9,813, dividends of $3,252, principal payments of long-term debt of $2,352, an investment in a real estate partnership for the development of a retail center in Old Bridge, New Jersey of $1,276 and additional net investments of $30,917 in notes receivable from Wakefern.

Capital expenditures primarily include costs associated with the remodel and conversion of the Pelham, NY Fairway to the ShopRite banner, the new Gourmet Garage store in the West Village of New York City, continued expansion of self-checkout, and various merchandising, technology, equipment and facility upgrades.

We expect capital expenditures to approximate $70,000 in fiscal 2023.

Planned expenditures include store remodels, the purchase of the Galloway store shopping center, the purchase of the Vineland store shopping center, the purchase of land in central New Jersey for a potential replacement store and other development, the construction of a new Gourmet Garage in the West Village in Manhattan, continued expansion of self-checkout, and various merchandising, technology, equipment and facility upgrades.

Planned expenditures include costs for construction of three replacement stores scheduled to open in fiscal 2024, two major remodels, including the conversion of the Pelham, NY store from the Fairway to the ShopRite banner, the purchase of the Vineland store shopping center, several smaller store remodels and merchandising initiatives, installation of electronic shelf labels in six stores, continued expansion of self-checkout, and various technology, equipment and facility upgrades.

The Company’s primary sources of liquidity in fiscal 2023 are expected to be cash and cash equivalents on hand at October 29, 2022 and operating cash flow generated in fiscal 2023.

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 $18,948.

Village will fund its share of project costs estimated to be $15,000 to $20,000 over the two to three year life of the project.

As of 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.

At April 30, 2022, the Company held variable rate notes receivable due from Wakefern of $28,262 that earn interest at the prime rate plus 1.25% and mature on August 15, 2022 and $28,821 that earn interest at the prime rate plus .75% and mature on February 15, 2024.

As of October 29, 2022, Village has invested $6,286 into the real estate partnership, which is accounted for as an equity method investment included in Investments in Real Estate Partnerships on the Consolidated Balance Sheet.

On August 15, 2022, notes receivable due from Wakefern of $28,850 that earned interest at the prime rate plus 1.25% matured.

The Company invested all of the proceeds received in variable rate notes receivable from Wakefern that earn interest at the prime rate plus .50% and mature on August 15, 2027.

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.

At October 29, 2022, the Company held variable rate notes receivable due from Wakefern of $29,606 that earn interest at the prime rate plus .75% and mature on February 15, 2024, $29,078 that earn interest at the prime rate plus .50% and mature on August 15, 2027 and $30,017 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.

Working capital was $72,340 at April 30, 2022 compared to $44,023 at July 31, 2021.

Working capital was $31,059 at October 29, 2022 compared to $79,796 at July 30, 2022.

Working capital ratios at the same dates were 1.18 and 1.50 to one, respectively.

The increase in working capital in fiscal 2022 compared to fiscal 2021 is due primarily to $28,262 in notes receivable from Wakefern that have been reclassified to current assets as they mature on August 15, 2022.

The decrease in working capital in fiscal 2023 compared to fiscal 2022 is due primarily to $28,850 in notes receivable from Wakefern that matured on August 15, 2022 and were reinvested in long-term

notes receivable from Wakefern and an additional $30,017 investment in long-term notes receivable from Wakefern.

The Company’s working capital needs are reduced, since inventories are generally sold by the time payments to Wakefern and other suppliers are due.

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 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.

The Company has a $150,500 credit facility (the “Credit Facility”) with Wells Fargo National Bank, National Association (“Wells Fargo”).

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.

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.

Indebtedness under this agreement bears interest at the applicable Secured Overnight Financing Rate ("SOFR") plus 1.10% and expires on May 6, 2025.

• An unsecured $25,500 term loan issued on May 12, 2020, repayable in equal monthly installments based on a seven-year amortization schedule through May 4, 2027 and bearing interest at the applicable SOFR plus 1.46%.

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 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.

An interest rate swap with notional amounts equal to the term loan fixes the base SOFR at .26% per annum through May 4, 2027, resulting in a fixed effective interest rate of 1.72% on the term loan.

• A secured $50,000 term loan issued on September 1, 2020 repayable in equal monthly installments based on a fifteen-year amortization schedule through September 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 fixes the base SOFR at .57% per annum through September 1, 2035, resulting in a fixed effective interest rate of 2.18% on the term loan.

An interest rate swap with notional amounts equal to the term loan fixes the base SOFR at .57% per annum through September 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.

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• 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.

An interest rate swap with notional amounts equal to the term loan fixes the base SOFR at 1.41% per annum through January 28, 2037, resulting in a fixed effective interest rate of 2.91% on the term loan.

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.

Based on current trends, the Company believes cash and cash equivalents on hand at April 30, 2022, operating cash flow and availability under our Credit Facility are sufficient to meet our liquidity needs for the next twelve months and for the foreseeable future beyond the next twelve months.

There have been no other substantial changes as of April 30, 2022 to the contractual obligations and commitments discussed in the Company’s Annual Report on Form 10-K for the year ended July 31, 2021.

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%.

Based on current trends, the Company believes cash and cash equivalents on hand at October 29, 2022, operating cash flow and availability under our Credit Facility are sufficient to meet our liquidity needs for the next twelve months and for the foreseeable future beyond the next twelve months.

There have been no other substantial changes as of October 29, 2022 to the contractual obligations and commitments discussed in the Company’s Annual Report on Form 10-K for the year ended July 30, 2022.

This Form 10-Q contains certain forward-looking statements about Village’s future performance.

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The Company undertakes no obligation to update forward-looking statements to reflect developments or information obtained after the date hereof.

• We expect same store sales to increase from 3.25% 4.25% in fiscal 2022.

• We expect capital expenditures to approximate $55,000 in fiscal 2022.

• We expect the increase in same store sales to range from 1.0% to 3.0% in fiscal 2023.

• We have budgeted $70,000 for capital expenditures in fiscal 2023.

• The Board’s current intention is to continue to pay quarterly dividends in 2023 at the most recent rate of $.25 per Class A and $.1625 per Class B share.

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• We expect our effective income tax rate in fiscal 2023 to be in the range of 31.0% - 32.0%.

• We expect approximately $12,900 of net periodic pension costs in fiscal 2022 related to the three Company sponsored defined benefit pension plans, including a $12,296 pre-tax settlement charge as a result of the termination of the Village Super Market, Inc.

Employees’ Retirement Plan.

The Company contributed cash of $1,485 to fully fund the plan and the remaining $10,811 represents non-cash charges 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.

Various uncertainties and other factors could cause actual results to differ from the forward-looking statements contained in this report.

These include:

• The Company operates in and around one of the epicenters of the COVID-19 health crisis.

The Company is classified as an essential business and has remained open to serve our customers and the communities in which we operate.

The continuing impact on our business, including the length and impact of stay-at-home orders and/or regional quarantines, labor shortages and employment trends, disruptions to supply chains, higher operating costs, the form and impact of economic stimulus and general overall economic instability, is uncertain at this time and could have a material adverse effect on our business, results of operations, financial condition and cash flows.

• The COVID-19 pandemic created significant volatility and uncertainty in our business since the first outbreak in our trade area in March 2020.

Its continuing impact and the impact of new virus variants and the measures taken in response could adversely impact our business, financial condition and results of operations.

We continue to monitor and adjust the safety measures we have implemented since the beginning of the pandemic.

Our business may be affected by uncertain or changing economic and market conditions arising in connection with and in response to the COVID-19 pandemic, including labor shortages, inflation, disruptions to supply chains, higher operating and/or compliance costs, changes in customer trends and consumer demand, changes in federal, state and local laws, regulations and community response measures, the form and impact of economic stimulus, our customers access to and the continued availability of government benefit programs through the Supplemental Nutrition Assistance Program ("SNAP") and general overall economic instability.

It is unclear whether and to what extent sales, consumer behavior, general economic and business activity will return to pre-pandemic levels and its impact on our business.

Furthermore, the impact of the COVID-19 health crisis may exacerbate other risks and uncertainties included herein, which could have a material effect on the Company.

• The Fairway acquisition involves a number of risks, uncertainties and challenges, including under-performance relative to our expectations, additional capital requirements, unforeseen expenses or delays, imprecise assumptions or our inability to achieve projected cost savings or other synergies, competitive factors in the marketplace and difficulties integrating the business, including merging company cultures, cultivating brand strategy, expansion of food production and conforming the acquired company's technology, standards, processes, procedures and controls.

Sales and operating profits have underperformed compared to initial expectations due primarily to residential population migration out of Manhattan and less commuter and tourist traffic during the COVID-19 pandemic.

Sales and operating profits have underperformed in Manhattan due primarily to less residential, commuter and tourist traffic during the COVID-19 pandemic.

Many of these potential circumstances are outside of our control and any of them could result in an adverse impact on our results of operations, financial condition and cash flows and the diversion of management time and resources.

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• Village purchases substantially all of its merchandise from Wakefern.

In addition, Wakefern provides the Company with support services in numerous areas including advertising, liability and property insurance, supplies, certain equipment purchasing, coupon processing, certain financial accounting applications, retail technology support, and other store services.

In addition, Wakefern provides the Company with support services in numerous areas including advertising, workers' compensation, liability and property insurance, supplies, certain equipment purchasing, coupon processing, certain financial accounting applications, retail technology

support, and other store services.

Further, Village receives patronage dividends and other product incentives from Wakefern and also has demand deposits and notes receivable due from Wakefern.

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The failure of any Wakefern member to fulfill its obligations to Wakefern or a member’s insolvency or withdrawal from Wakefern could result in increased costs to the Company.

Additionally, an adverse change in Wakefern’s results of operations or solvency could have an adverse effect on Village’s results of operations.

Additionally, an adverse change in Wakefern’s results of operations could have an adverse effect on Village’s results of operations.

• Approximately 88% of our employees are covered by collective bargaining agreements.

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The amount of any increase or decrease in our 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, withdrawals by other participating employers and the actual return on assets held in the plans, among other factors.

• The Company uses a combination of insurance and self-insurance to provide for potential liability for workers’ compensation, automobile and general liability, property, director and officers’ liability, and certain employee health care benefits.

• The Company uses a combination of insurance and self-insurance to provide for potential liability for workers’ compensation, automobile, general liability, property, director and officers’ liability, and certain employee health care benefits.

Any projection of losses is subject to a high degree of variability.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis