Item 1. Financial Statements
ITEM 1. FINANCIAL STATEMENTS
VILLAGE SUPER MARKET, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands) (Unaudited)
January 27,
2024 July 29,
2023
ASSETS
Current assets
Cash and cash equivalents $ 133,346 $ 140,910
Merchandise inventories 45,705 44,515
Patronage dividend receivable 5,857 12,466
Notes receivable from Wakefern 32,962 31,483
Income taxes receivable 647 —
Other current assets 17,905 17,313
Total current assets 236,422 246,687
Property, equipment and fixtures, net 292,828 277,310
Operating lease assets 262,624 274,100
Notes receivable from Wakefern 65,592 62,726
Investment in Wakefern 33,145 33,107
Investments in Real Estate Partnerships 16,980 13,155
Goodwill 24,190 24,190
Other assets 38,639 36,431
Total assets $ 970,420 $ 967,706
LIABILITIES and SHAREHOLDERS' EQUITY
Current liabilities
Operating lease obligations $ 21,455 $ 20,389
Finance lease obligations 734 667
Notes payable to Wakefern 754 737
Current portion of debt 9,370 9,370
Accounts payable to Wakefern 84,076 77,033
Accounts payable and accrued expenses 32,458 31,441
Accrued wages and benefits 27,256 29,853
Income taxes payable 258 9,483
Total current liabilities 176,361 178,973
Long-term debt
Operating lease obligations 255,980 266,683
Finance lease obligations 20,123 20,623
Notes payable to Wakefern 1,438 1,686
Long-term debt 67,652 72,426
Total long-term debt 345,193 361,418
Pension liabilities 5,116 4,893
Other liabilities 14,605 12,256
Commitments and contingencies (Note 5)
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 11,556 shares at January 27, 2024 and 11,563 shares at July 29, 2023
78,000 76,179
Class B common stock, no par value: Authorized 20,000 shares; issued and outstanding 4,204 shares at January 27, 2024 and July 29, 2023
683 683
Retained earnings 362,862 343,497
Accumulated other comprehensive income 7,285 8,134
Less treasury stock, Class A, at cost: 968 shares at January 27, 2024 and 912 shares at July 29, 2023
( 19,685 ) ( 18,327 )
Total shareholders’ equity 429,145 410,166
Total liabilities and shareholders’ equity $ 970,420 $ 967,706
See notes to consolidated financial statements.
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VILLAGE SUPER MARKET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts) (Unaudited)
13 Weeks Ended 26 Weeks Ended
January 27,
2024 January 28,
2023 January 27,
2024 January 28,
2023
Sales $ 575,579 $ 563,866 $ 1,111,933 $ 1,083,555
Cost of sales 412,137 408,987 795,542 779,391
Gross profit 163,442 154,879 316,391 304,164
Operating and administrative expense 136,477 130,103 266,769 255,665
Depreciation and amortization 8,523 8,659 17,029 17,205
Operating income 18,442 16,117 32,593 31,294
Interest expense ( 1,046 ) ( 966 ) ( 2,110 ) ( 2,052 )
Interest income 3,743 2,679 7,568 4,647
Income before income taxes 21,139 17,830 38,051 33,889
Income taxes 6,659 5,508 11,985 10,484
Net income $ 14,480 $ 12,322 $ 26,066 $ 23,405
Net income per share:
Class A common stock:
Basic $ 1.09 $ 0.95 $ 1.95 $ 1.80
Diluted $ 0.97 $ 0.85 $ 1.75 $ 1.61
Class B common stock:
Basic $ 0.71 $ 0.62 $ 1.27 $ 1.17
Diluted $ 0.71 $ 0.62 $ 1.27 $ 1.17
See notes to consolidated financial statements.
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VILLAGE SUPER MARKET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands) (Unaudited)
13 Weeks Ended 26 Weeks Ended
January 27,
2024 January 28,
2023 January 27,
2024 January 28,
2023
Net income $ 14,480 $ 12,322 $ 26,066 $ 23,405
Other comprehensive income:
Unrealized (losses) gains on interest rate swaps, net of tax (1) ( 1,477 ) ( 1,203 ) ( 700 ) 1,562
Amortization of pension actuarial gain, net of tax (2) ( 74 ) ( 96 ) ( 149 ) ( 192 )
Comprehensive income $ 12,929 $ 11,023 $ 25,217 $ 24,775
(1) Amount is net of tax of $ 680 and $ 540 for the 13 weeks ended January 27, 2024 and January 28, 2023, respectively, and $ 323 and $ 702 for the 26 weeks ended January 27, 2024 and January 28, 2023, respectively.
(2) Amount is net of tax of $ 34 and $ 43 for the 13 weeks ended January 27, 2024 and January 28, 2023, respectively, and $ 69 and $ 86 for the 26 weeks ended January 27, 2024 and January 28, 2023, respectively. All amounts are reclassified from accumulated other comprehensive income to operating and administrative expense.
See notes to consolidated financial statements.
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VILLAGE SUPER MARKET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands) (Unaudited)
13 Weeks Ended January 27, 2024 and January 28, 2023
Class A
Common Stock Class B
Common Stock Accumulated
Other
Comprehensive
Income (Loss) Treasury Stock
Class A Total
Shareholders'
Equity
Shares Issued Amount Shares Issued Amount Retained Earnings Shares Amount
Balance, October 28, 2023
11,568 $ 77,103 4,204 $ 683 $ 351,732 $ 8,836 944 $ ( 19,109 ) $ 419,245
Net income — — — — 14,480 — — — 14,480
Other comprehensive loss, net of tax of $ 714
— — — — — ( 1,551 ) — — ( 1,551 )
Dividends — — — — ( 3,350 ) — — — ( 3,350 )
Treasury stock purchases — — — — — — 24 ( 576 ) ( 576 )
Restricted shares forfeited ( 12 ) ( 52 ) — — — — — — ( 52 )
Share-based compensation expense — 949 — — — — — — 949
Balance, January 27, 2024
11,556 $ 78,000 4,204 $ 683 $ 362,862 $ 7,285 968 $ ( 19,685 ) $ 429,145
Balance, October 29, 2022
10,971 $ 73,499 4,294 $ 697 $ 314,803 $ 8,804 752 $ ( 14,588 ) $ 383,215
Net income — — — — 12,322 — — — 12,322
Other comprehensive loss, net of tax of $ 583
— — — — — ( 1,299 ) — — ( 1,299 )
Dividends — — — — ( 3,253 ) — — — ( 3,253 )
Restricted shares forfeited (1) (41) — — — — — — ( 41 )
Share-based compensation expense — 641 — — — — — — 641
Balance, January 28, 2023
10,970 $ 74,099 4,294 $ 697 $ 323,872 $ 7,505 752 $ ( 14,588 ) $ 391,585
26 Weeks Ended January 27, 2024 and January 28, 2023
Class A
Common Stock Class B
Common Stock Accumulated
Other
Comprehensive
Income (Loss) Treasury Stock
Class A Total
Shareholders'
Equity
Shares Issued Amount Shares Issued Amount Retained Earnings Shares Amount
Balance, July 29, 2023
11,563 $ 76,179 4,204 $ 683 $ 343,497 $ 8,134 912 $ ( 18,327 ) $ 410,166
Net income — — — — 26,066 — — — 26,066
Other comprehensive loss, net of tax of $ 392
— — — — — ( 849 ) — — ( 849 )
Dividends — — — — ( 6,701 ) — — — ( 6,701 )
Treasury stock purchases — — — — — — 56 ( 1,358 ) ( 1,358 )
Restricted shares forfeited ( 21 ) ( 80 ) — — — — — — ( 80 )
Share-based compensation expense 14 1,901 — — — — — — 1,901
Balance, January 27, 2024
11,556 $ 78,000 4,204 $ 683 $ 362,862 $ 7,285 968 $ ( 19,685 ) $ 429,145
Balance, July 30, 2022
10,971 $ 72,891 4,294 $ 697 $ 306,974 $ 6,135 752 $ ( 14,588 ) $ 372,109
Net income — — — — 23,405 — — — 23,405
Other comprehensive income, net of tax of $ 616
— — — — — 1,370 — — 1,370
Dividends — — — — ( 6,507 ) — — — ( 6,507 )
Restricted shares forfeited ( 1 ) ( 41 ) — — — — — — ( 41 )
Share-based compensation expense — 1,249 — — — — — — 1,249
Balance, January 28, 2023
10,970 $ 74,099 4,294 $ 697 $ 323,872 $ 7,505 752 $ ( 14,588 ) $ 391,585
See notes to consolidated financial statements.
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VILLAGE SUPER MARKET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) (Unaudited)
26 Weeks Ended
January 27,
2024 January 28,
2023
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 26,066 $ 23,405
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 17,962 18,026
Non-cash share-based compensation 1,821 1,208
Deferred taxes ( 468 ) 218
Provision to value inventories at LIFO 916 1,288
Gain on sale of property, equipment and fixtures ( 174 ) ( 63 )
Changes in assets and liabilities:
Merchandise inventories ( 2,106 ) ( 5,487 )
Patronage dividend receivable 6,609 7,189
Accounts payable to Wakefern 7,118 3,012
Accounts payable and accrued expenses 2,258 1,488
Accrued wages and benefits ( 2,597 ) ( 707 )
Income taxes receivable / payable ( 9,872 ) ( 324 )
Other assets and liabilities 1,141 ( 896 )
Net cash provided by operating activities 48,674 48,357
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures ( 34,783 ) ( 28,550 )
Proceeds from the sale of assets 161 63
Investment in notes receivable from Wakefern ( 4,345 ) ( 61,423 )
Maturity of notes receivable from Wakefern — 28,850
Investment in real estate partnership ( 3,825 ) ( 3,319 )
Net cash used in investing activities ( 42,792 ) ( 64,379 )
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt — 17,125
Principal payments of long-term debt ( 5,387 ) ( 4,903 )
Debt issuance costs — ( 33 )
Dividends ( 6,701 ) ( 6,507 )
Treasury stock purchases ( 1,358 ) —
Net cash (used in) provided by financing activities ( 13,446 ) 5,682
NET DECREASE IN CASH AND CASH EQUIVALENTS ( 7,564 ) ( 10,340 )
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 140,910 134,832
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 133,346 $ 124,492
SUPPLEMENTAL DISCLOSURES OF CASH PAYMENTS MADE FOR:
Interest $ 2,110 $ 2,052
Income taxes $ 22,325 $ 10,590
NONCASH SUPPLEMENTAL DISCLOSURES:
Investment in Wakefern and increase in notes payable to Wakefern $ 38 $ —
Capital expenditures included in accounts payable and accrued expenses $ 4,275 $ 2,806
Lease obligations obtained in exchange for right-of-use assets $ 908 $ —
See notes to consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands) (Unaudited)
1. BASIS OF PRESENTATION and ACCOUNTING POLICIES
In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal and recurring accruals) necessary to present fairly the consolidated financial position as of January 27, 2024 and the consolidated statements of operations, comprehensive income and cash flows for the 13 and 26 weeks ended January 27, 2024 and January 28, 2023 of Village Super Market, Inc. (“Village” or the “Company”).
The significant accounting policies followed by the Company are set forth in Note 1 to the Company's consolidated financial statements in the July 29, 2023 Village Super Market, Inc. Annual Report on Form 10-K, which should be read in conjunction with these financial statements. The results of operations for the periods ended January 27, 2024 are not necessarily indicative of the results to be expected for the full year.
Disaggregated Revenues
The following table presents the Company's sales by product categories during each of the periods indicated:
13 Weeks Ended 26 Weeks Ended
January 27, 2024 January 28, 2023 January 27, 2024 January 28, 2023
Amount % Amount % Amount % Amount %
Center Store (1) $ 350,573 60.9 % $ 343,818 61.0 % $ 671,497 60.5 % $ 655,642 60.6 %
Fresh (2) 202,610 35.2 200,503 35.6 396,130 35.6 389,511 35.9
Pharmacy 20,337 3.5 17,621 3.1 40,548 3.6 34,790 3.2
Other (3) 2,059 0.4 1,924 0.3 3,758 0.3 3,612 0.3
Total Sales $ 575,579 100.0 % $ 563,866 100.0 % $ 1,111,933 100.0 % $ 1,083,555 100.0 %
(1) Consists primarily of grocery, dairy, frozen, health and beauty care, general merchandise and liquor.
(2) Consists primarily of produce, meat, deli, seafood, bakery, prepared foods and floral.
(3) Consists primarily of sales related to other income streams, including service fees related to digital sales, gift card and lottery commissions and wholesale sales.
2. MERCHANDISE INVENTORIES
At January 27, 2024 and July 29, 2023, approximately 64 % of merchandise inventories are valued by the LIFO method while the balance is valued by FIFO. If the FIFO method had been used for the entire inventory, inventories would have been $ 22,154 and $ 21,238 higher than reported at January 27, 2024 and July 29, 2023, respectively.
3. NET INCOME PER SHARE
The Company has two classes of common stock. Class A common stock is entitled to cash dividends as declared 54 % greater than those paid on Class B common stock. Shares of Class B common stock are convertible on a share-for-share basis for Class A common stock at any time.
The Company utilizes the two-class method of computing and presenting net income per share. The two-class method is an earnings allocation formula that calculates basic and diluted net income per share for each class of common stock separately based on dividends declared and participation rights in undistributed earnings. Under the two-class method, Class A common stock is assumed to receive a 54 % greater participation in undistributed earnings than Class B common stock, in accordance with the classes' respective dividend rights. Unvested share-based payment awards that contain nonforfeitable rights to dividends are treated as participating securities and therefore included in computing net income per share using the two-class method.
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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:
13 Weeks Ended 26 Weeks Ended
January 27,
2024 January 28,
2023 January 27,
2024 January 28,
2023
Net income $ 14,480 $ 12,322 $ 26,066 $ 23,405
Distributed and allocated undistributed Net income to unvested restricted shareholders
542 339 983 644
Net income available to Class A and Class B shareholders $ 13,938 $ 11,983 $ 25,083 $ 22,761
The tables below reconcile the numerators and denominators of basic and diluted Net income per share for all periods presented.
13 Weeks Ended 26 Weeks Ended
January 27, 2024 January 27, 2024
Class A Class B Class A Class B
Numerator:
Net income allocated, basic
$ 10,972 $ 2,966 $ 19,752 $ 5,331
Conversion of Class B to Class A shares 2,966 — 5,331 —
Net income allocated, diluted
$ 13,938 $ 2,966 $ 25,083 $ 5,331
Denominator:
Weighted average shares outstanding, basic 10,099 4,204 10,123 4,204
Conversion of Class B to Class A shares 4,204 — 4,204 —
Weighted average shares outstanding, diluted 14,303 4,204 14,327 4,204
13 Weeks Ended 26 Weeks Ended
January 28, 2023 January 28, 2023
Class A Class B Class A Class B
Numerator:
Net income allocated, basic $ 9,342 $ 2,642 $ 17,743 $ 5,017
Conversion of Class B to Class A shares 2,642 — 5,017 —
Net income allocated, diluted $ 11,984 $ 2,642 $ 22,760 $ 5,017
Denominator:
Weighted average shares outstanding, basic 9,863 4,294 9,863 4,294
Conversion of Class B to Class A shares 4,294 — 4,294 —
Weighted average shares outstanding, diluted 14,157 4,294 14,157 4,294
Outstanding stock options to purchase Class A shares of 85 and 90 were excluded from the calculation of diluted net income per share at January 27, 2024 and January 28, 2023, respectively, as a result of their anti-dilutive effect. In addition, 496 and 358 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 January 27, 2024 and January 28, 2023, respectively, due to their anti-dilutive effect.
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4. RELATED PARTY INFORMATION
A description of the Company’s transactions with Wakefern, its principal supplier, and with other related parties is included in the Company’s Annual Report on Form 10-K for the year ended July 29, 2023.
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 January 27, 2024, the Company held variable rate notes receivable due from Wakefern of $ 32,962 that earned interest at the prime rate plus .75 % and matured on February 15, 2024, $ 32,275 that earn interest at the prime rate plus .50 % and mature on August 15, 2027 and $ 33,317 that earn interest at the prime rate plus .50 % and mature on September 28, 2027. The Company invested $ 33,338 of the proceeds received from the notes that matured on February 15, 2024 in variable rate notes receivable from Wakefern that earn interest at the SOFR plus 2.25 % and mature on February 15, 2029.
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.
Included in cash and cash equivalents at January 27, 2024 and July 29, 2023 are $ 114,033 and $ 122,028 , respectively, of demand deposits invested at Wakefern at overnight money market rates.
On April 28, 2022, the Company entered into a partnership agreement for 30 % interest in the development of a retail center in Old Bridge, New Jersey, which includes a Village replacement store with an operating lease obligation of $ 4,395 as of January 27, 2024. 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 January 27, 2024, Village has invested $ 14,700 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.
There have been no other significant changes in the Company’s relationships or nature of transactions with related parties during the 26 weeks ended January 27, 2024.
5. COMMITMENTS and CONTINGENCIES
The Company is involved in litigation incidental to the normal course of business. Company management is of the opinion that the ultimate resolution of these legal proceedings should not have a material adverse effect on the consolidated financial position, results of operations or liquidity of the Company.
6. DEBT
Long-term debt consists of:
January 27,
2024 July 29,
2023
Secured term loans $ 51,779 $ 53,912
Unsecured term loan 20,183 22,702
New Market Tax Credit Financing 5,060 5,182
Total debt, excluding obligations under leases 77,022 81,796
Less current portion 9,370 9,370
Total long-term debt, excluding obligations under leases $ 67,652 $ 72,426
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Credit Facility
The Company has a 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 fiscal 2020 acquisition of certain Fairway assets and certain capital expenditures. Among other things, the Credit Facility provides for:
• An unsecured revolving line of credit providing a maximum amount available for borrowing of $ 75,000 . 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 %. 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 %. 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. 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 %. 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.
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 %.
On January 27, 2023, the Company purchased the Vineland store shopping center for $ 9,500 . As part of the purchase, the Company amended the Credit Facility due to the execution of a fifteen year $ 7,125 term loan secured by the Vineland store shopping center. The secured term loan is repayable in equal monthly installments based on a fifteen year amortization schedule through January 27, 2038 and bears interest at the applicable SOFR plus 1.75 %. Village also executed an interest rate swap for a notional amount equal to the term loan amount that fixes the base SOFR at 3.59 %, resulting in a fixed effective rate of 5.34 %.
The Credit Facility also provides for up to $ 25,000 of letters of credit ($ 7,336 outstanding at January 27, 2024), 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 January 27, 2024. As of January 27, 2024, $ 67,664 remained available under the unsecured revolving line of credit.
New Markets Tax Credit Financing
On December 29, 2017, the Company entered into a financing transaction with Wells Fargo Community Investment Holdings, LLC (“Wells Fargo”) under a qualified New Markets Tax Credit (“NMTC”) program related to the construction of a new store in the Bronx, New York. The NMTC program was provided for in the Community Renewal Tax Relief Act of 2000 (the “Act”) and is intended to induce capital investment in qualified lower income communities. The Act permits taxpayers to claim credits against their Federal income taxes for up to 39% of qualified investments in the equity of community development entities (“CDEs”). CDEs are privately managed investment institutions that are certified to make qualified low-income community investments.
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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.
7. DERIVATIVES AND HEDGING ACTIVITIES
The Company is exposed to interest rate risk arising from fluctuations in 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 January 27, 2024, the Company had five interest rate swaps with an aggregate initial notional value of $ 99,975 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 and subsequently reclassified into interest expense in the same period during which the hedged transaction affects earnings. Amounts reported in Accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the variable-rate loans. The Company reclassified $ 775 and $ 506 during the 13 weeks ended January 27, 2024 and January 28, 2023, respectively, and $ 1,555 and $ 748 during the 26 weeks ended January 27, 2024 and January 28, 2023, respectively, from Accumulated other comprehensive income to Interest expense.
The notional value of the interest rate swaps were $ 72,227 as of January 27, 2024. The fair value of interest rate swaps recorded in Other assets in the consolidated balance sheets is $ 8,112 as of January 27, 2024.
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