village10q042807.htm

SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
 
FORM 10-Q
(Mark One)

[x]
QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended: April 28, 2007

OR

[  ]
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

Commission File No. 0-33360

VILLAGE SUPER MARKET, INC.
(Exact name of registrant as specified in its charter)

NEW JERSEY
22-1576170
(State of other jurisdiction of incorporation or organization)
(I. R. S. Employer Identification No.)
   
733 MOUNTAIN AVENUE, SPRINGFIELD, NEW JERSEY
07081
(Address of principal executive offices)
(Zip Code)

(973) 467-2200
(Registrant's telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes X      No __ 
 
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12-b2 of the Exchange Act. (Check one):

Large accelerated filer ____     Accelerated filer _____     Non-accelerated filer _X_

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes __     No X 
 
Indicate the number of shares outstanding of the issuer's classes of common stock as of the latest practicable date:
       June 5, 2007     
   
Class A Common Stock, No Par Value
3,313,886 Shares
Class B Common Stock, No Par Value
3,188,152 Shares

 

VILLAGE SUPER MARKET, INC.

INDEX
 
PART I
  
PAGE NO.
     
FINANCIAL INFORMATION
  
     
Item 1.
Financial Statements (Unaudited)
  
     
 
Consolidated Condensed Balance Sheets
3
     
 
Consolidated Condensed Statements of Operations
4
     
 
Consolidated Condensed Statements of Cash Flows
5
     
 
Notes to Consolidated Condensed Financial Statements
6-10
     
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
10-15
     
Item 3.
Quantitative & Qualitative Disclosures about Market Risk
16
     
Item 4.
Controls and Procedures
16-17
     
PART II
    
     
OTHER INFORMATION
  
     
Item 6.
Exhibits
17
     
Signatures
  
17




 
 
 
 

 

2

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

VILLAGE SUPER MARKET, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in Thousands)(Unaudited)
   
April 28,
  
July 29,
  
   
2007
  
2006
  
ASSETS
          
Current assets
          
Cash and cash equivalents
  
$
51,424
  
$
74,711
  
Merchandise inventories
    
30,573
    
29,523
  
Patronage dividend receivable
    
4,319
    
5,740
  
Other current assets
    
8,461
    
9,809
  
Total current assets
    
94,777
    
119,783
  
               
Notes receivable from Wakefern
    
28,739
    
---
  
Property, equipment and fixtures, net
    
123,082
    
122,539
  
Investment in Wakefern, at cost
    
16,391
    
15,670
  
Goodwill
    
10,605
    
10,605
  
Other assets
    
2,922
    
2,878
  
               
TOTAL ASSETS
  
$
276,516
  
$
271,475
  
               
LIABILITIES AND SHAREHOLDERS’ EQUITY
              
               
Current liabilities
              
Current portion of long-term debt
  
$
5,617
  
$
5,845
  
Current portion of notes payable to Wakefern
    
256
    
580
  
Accounts payable to Wakefern
    
40,085
    
43,791
  
Accounts payable and accrued expenses
    
26,820
    
25,471
  
Total current liabilities
    
72,778
    
75,687
  
               
Long-term debt
    
21,675
    
26,892
  
Notes payable to Wakefern
    
246
    
218
  
Other liabilities
    
18,216
    
18,173
  
               
Shareholders' equity
              
Class A common stock - no par value, issued 3,636 shares
    
22,227
    
20,909
  
Class B common stock - no par value, 3,188 shares issued and outstanding
    
1,035
    
1,035
  
Retained earnings
    
145,399
    
133,818
  
Accumulated other comprehensive loss
    
(2,801
)
  
(2,801
)
Less cost of Class A treasury shares (322 at April 28, 2007 and 350 at July 29, 2006)
    
(2,259
)
   (2,456 )
               
Total shareholders’ equity
    
163,601
    
150,505
  
               
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY
  
$
276,516
  
$
271,475
  
 
See accompanying Notes to Consolidated Condensed Financial Statements



3

VILLAGE SUPER MARKET, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in Thousands Except Per Share Amounts)(Unaudited)
 
   
13 Wks. Ended
  
13 Wks. Ended
  
39 Wks. Ended
  
39 Wks. Ended
  
   
Apr. 28, 2007
  
Apr. 29, 2006
  
Apr. 28, 2007
  
Apr. 29, 2006
  
                   
                   
Sales
  
$
255,314
  
$
244,873
  
$
777,179
  
$
754,356
  
                           
Cost of sales
    
185,635
    
178,090
    
568,550
    
555,232
  
                           
Gross profit
    
69,679
    
66,783
    
208,629
    
199,124
  
                           
Operating and administrative expense
   
58,487
    
56,716
    
175,603
    
169,897
  
                           
Depreciation and amortization expense
    
3,137
    
2,957
    
9,211
    
8,622
  
                           
                           
Operating income
    
8,055
    
7,110
    
23,815
    
20,605
  
                           
Interest expense
    
655
    
776
    
2,036
    
2,370
  
                           
Interest income
    
(1,013
)
  
(612
)
  
(2,612
)
  
(1,428
)
                           
Income before income taxes
    
8,413
    
6,946
    
24,391
    
19,663
  
                           
Income taxes
    
3,525
    
2,897
    
10,220
    
8,200
  
                           
Net income
  
$
4,888
  
$
4,049
  
$
14,171
  
$
11,463
  
                           
Net income per share:
                          
 
          
Revised
          
Revised
  
Class A common stock:
                          
Basic
  
$
.93
  
$
.77
  
$
2.70
  
$
2.18
  
Diluted
  
$
.75
  
$
.63
  
$
2.17
  
$
1.77
  
                           
Class B common stock:
                          
Basic
  
$
.60
  
$
.50
  
$
1.75
  
$
1.42
  
Diluted
  
$
.59
  
$
.49
  
$
1.71
  
$
1.40
  

See accompanying Notes to Consolidated Condensed Financial Statements.



4

VILLAGE SUPER MARKET, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in Thousands) (Unaudited)
 
   
39 Weeks Ended
  
39 Weeks Ended
  
   
April 28, 2007
  
April 29, 2006
  
CASH FLOWS FROM OPERATING ACTIVITIES:
          
Net income
  
$
14,171
  
$
11,463
  
Adjustments to reconcile net income to net cash provided by operating activities:
              
Gain on sale of assets
    
---
    
( 459
)
Depreciation and amortization
    
9,211
    
8,622
  
Deferred taxes
    
( 675
)
  
900
  
Provision to value inventories at LIFO
    
700
    
600
  
Non-cash share-based compensation
    
833
    
814
  
               
Changes in assets and liabilities:
              
Merchandise inventories
    
( 1,750
)
  
( 256
)
Patronage dividend receivable
    
1,421
    
1,502
  
Accounts payable to Wakefern
    
( 3,706
)
  
( 4,342
)
Accounts payable and accrued expenses
    
1,349
    
1,922
  
Other assets and liabilities
    
2,022
    
1,009
  
Net cash provided by operating activities
    
23,576
    
21,775
  
               
CASH FLOWS FROM INVESTING ACTIVITIES:
              
Investment in notes receivable from Wakefern
    
( 28,739
)
  
---
  
Capital expenditures
    
(9,754
)
  
(10,380
)
Proceeds from sale of assets
    
---
    
480
  
Net cash used in investing activities
    
( 38,493
)
  
( 9,900
)
               
CASH FLOWS FROM FINANCING ACTIVITIES:
              
Proceeds from exercise of stock options
    
216
    
----
  
Tax benefit related to share-based compensation
    
452
    
----
  
Principal payments of long-term debt and notes payable
    
( 6,462
)
  
( 6,309
)
Dividends
    
( 2,576
)
  
( 2,342
)
Net cash used in financing activities
    
(8,370
)
  
( 8,651
)
               
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
( 23,287
)
  
3,224
  
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
74,711
    
62,842
  
CASH AND CASH EQUIVALENTS, END OF PERIOD
  
$
51,424
  
$
66,066
  
               
SUPPLEMENTAL DISCLOSURE OF CASH PAYMENTS FOR:
              
Interest
  
$
2,445
  
$
2,837
  
Income taxes
  
$
10,452
  
$
7,226
  
               
NON-CASH SUPPLEMENTAL DISCLOSURE:
              
Investment in Wakefern
  
$
721
  
$
---
  

See accompanying Notes to Consolidated Condensed Financial Statements.






5

VILLAGE SUPER MARKET, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(in Thousands) (Unaudited)

1.         In the opinion of management, the accompanying unaudited consolidated condensed financial statements contain all adjustments (consisting of normal and recurring accruals) necessary to present fairly the consolidated financial position as of April 28, 2007 and the consolidated results of operations for the thirteen and thirty-nine week periods ended April 28, 2007 and April 29, 2006 and cash flows for the thirty-nine weeks ended April 28, 2007 and April 29, 2006.
The significant accounting policies followed by Village Super Market, Inc. (the “Company”) are set forth in Note 1 to the Company's consolidated financial statements in the July 29, 2006 Village Super Market, Inc. Annual Report on Form 10-K, which should be read in conjunction with these financial statements.
 
2.         The results of operations for the periods ended April 28, 2007 are not necessarily indicative of the expected results for the full year.

3.      At both April 28, 2007 and July 29, 2006, approximately 70% 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 $12,495 and $11,795 higher than reported at April 28, 2007 and July 29, 2006, respectively.

4.      On March 21, 2007 the Company’s Board of Directors declared a two-for-one stock split of the Class A and Class B common stock. Shares were distributed on April 26, 2007. All share and per share amounts have been adjusted for all periods to reflect the stock split.
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 stockholders of the Company and control the election of the Board of Directors.

6

During 2007, the staff of the Division of Corporation Finance of the SEC reviewed the Company’s Annual Report on Form 10-K for the fiscal year ended July 29, 2006. The Company considered this review and determined that the two-class method of computing and presenting net income per share was appropriate in accordance with FASB Statement No. 128, “Earnings Per Share,” and EITF Issue No. 03-6, “Participating Securities and the Two-Class Method under FASB Statement No. 128”. Net income per share for prior periods has been revised to reflect this change. 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, our Class A common stock is assumed to receive a 54% greater participation in undistributed earnings than our Class B common stock, in accordance with the classes respective dividend rights.
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 shares of 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.











 
 
 
 
 
 
 
 
 
 
 

 

7

The tables below reconcile the numerators and denominators of basic and diluted net income per share for all periods presented.
 
   
13 Weeks Ended
  
39 Weeks Ended
  
   
April 28, 2007
  
   
Class A
  
Class B
  
Class A
  
Class B
  
Numerator:
                  
Net income allocated, basic
  
$
2,966
  
$
1,922
  
$
8,591
  
$
5,580
  
Conversion of Class B to Class A shares
    
1,922
    
----
    
5,580
    
----
  
Effect of share-based compensation on allocated net income
    
----
    
 (47
)
$
----
  
$
(122
)
Net income allocated, diluted
  
$
4,888
  
$
1,875
  
$
14,171
  
$
5,458
  
                           
Denominator:
                          
Weighted average shares outstanding, basic
    
3,194
    
3,188
    
3,187
    
3,188
  
Conversion of Class B to Class A shares
    
3,188
    
----
    
3,188
    
----
  
Dilutive effect of share-based compensation
    
165
    
----
    
144
    
----
  
Weighted average shares outstanding, diluted
    
6,547
    
3,188
    
6,519
    
3,188
  


   
13 Weeks Ended
  
39 Weeks Ended
  
   
April 29, 2006 (Revised)
  
   
Class A
  
Class B
  
Class A
  
Class B
  
Numerator:
                  
Net income allocated, basic
  
$
2,452
  
$
1,597
  
$
6,942
  
$
4,521
  
Conversion of Class B to Class A shares
    
1,597
    
----
    
4,521
    
----
  
Effect of share-based compensation on allocated net income
    
----
    
(25
)
  
----
    
( 72
)
Net income allocated, diluted
  
$
4,049
  
$
1,572
  
$
11,463
  
$
4,449
  
                           
Denominator:
                          
Weighted average shares outstanding, basic
    
3,181
    
3,188
    
3,181
    
3,188
  
Conversion of Class B to Class A shares
    
3,188
    
----
    
3,188
    
----
  
Dilutive effect of share-based compensation
    
98
    
----
    
97
    
----
  
Weighted average shares outstanding, diluted
    
6,467
    
3,188
    
6,466
    
3,188
  

Net income per share for the prior year periods on a revised basis is as follows: 
 
   
13 Weeks Ended
  
39 Weeks Ended
  
   
April 29, 2006
  
   
Class A
  
Class B
  
Class A
  
Class B
  
Net income per share - as revised:
                  
Basic
  
$
.77
  
$
.50
  
$
2.18
  
$
1.42
  
Diluted
  
$
.63
  
$
.49
  
$
1.77
  
$
1.40
  



8

In previous periods, the Company utilized the if-converted method of calculating both basic and diluted net income per share, as that method resulted in greater dilution than the two-class method. Net income per share for the prior year periods as previously reported was as follows:
 
   
13 Weeks Ended
  
39 Weeks Ended
  
   
April 29, 2006
  
Net income per share - as previously reported:
          
Basic
  
$
.64
  
$
1.80
  
Diluted
  
$
.63
  
$
1.77
  


Options to purchase 6 and 10 Class A shares were excluded from the calculation of diluted net income per share at April 28, 2007 and April 29, 2006, respectively, as a result of their anti-dilutive effect.

5.         Comprehensive income was $4,888 and $14,171 for the quarter and nine-month periods ended April 28, 2007, and $4,049 and $11,463 for the quarter and nine-month periods ended April 29, 2006.

6.         The Company sponsors four defined benefit pension plans. Net periodic pension costs for the four plans include the following components:

   
13 Weeks
  
13 Weeks
  
39 Weeks
  
39 Weeks
  
   
Ended 4/28/07
  
Ended 4/29/06
  
Ended 4/28/07
  
Ended 4/29/06
  
                   
Service cost
  
$
480
  
$
524
  
$
1,440
  
$
1,572
  
Interest cost on projected benefit obligations
    
408
    
363
    
1,224
    
1,089
  
Expected return on plan assets
    
(310
)
  
(263
)
  
(930
)
  
(789
)
Amortization of gains and losses
    
181
    
265
    
543
    
795
  
Amortization of prior service costs
    
4
    
4
    
12
    
12
  
                           
Net periodic pension cost
  
$
763
  
$
893
  
$
2,289
  
$
2,679
  


As of April 28, 2007, the Company has contributed $674 to its pension plans in fiscal 2007. The Company expects to contribute an additional $1,326 in the fourth quarter of fiscal 2007 to fund its pension plans.




9

7.         On September 19, 2006 the Company invested $27,698 in notes receivable from Wakefern. As of April 28, 2007 the balance of this investment, including reinvested interest, was $28,739. These funds were previously invested in demand deposits at Wakefern. The initial fifteen-month term of these notes is automatically extended for additional, recurring 90-day periods unless, not later than one year prior to the due date, the Company notifies Wakefern requesting payment on the due date. As of April 28, 2007, the Company had not provided this notification. Therefore, these notes now mature on June 17, 2008. Approximately half of these notes earn interest at the prime rate less 1.25% and approximately half of the notes earn a fixed rate of 7%. In September 2006, the Company increased its investment in Wakefern common stock by $721.

ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in Thousands)
OVERVIEW

The Company operates a chain of 23 Shop Rite supermarkets in New Jersey and eastern Pennsylvania. The Company is the second largest member of Wakefern Food Corporation (“Wakefern”), the nation’s largest retailer-owned food cooperative. As further described in the Company’s Form 10-K, this ownership interest in Wakefern provides the Company many of the economies of scale in purchasing, distribution, advanced retail technology and advertising associated with larger chains.
The Company’s stores, five of which are owned, average 55,000 total square feet. Larger store sizes enable the Company to offer the specialty departments that customers desire for one-stop shopping, including pharmacies, natural and organic departments, ethnic and international foods, and home meal replacement.
We consider a variety of indicators to evaluate our performance, such as same store sales; sales per store; percentage of total sales by department (mix); shrink; departmental gross profit percentage; sales per labor hour; and hourly labor rates. In recent years, the Company, as well as many of our competitors, has faced increases in employee health and pension costs, and in rates charged by utilities for electric and gas. These trends continue in fiscal 2007.


10

RESULTS OF OPERATIONS

The following table sets forth the major components of the Consolidated Condensed Statements of Operations as a percentage of sales:
 
 
13 Weeks Ended
  
39 Weeks Ended
 
4/28/07
  
4/29/06
  
4/28/07
  
4/29/06
               
Sales
100.00%
  
100.00%
  
100.00%
  
100.00%
Cost of sales
72.71 
 
72.73 
 
73.16 
 
73.60 
Gross profit
27.29 
 
27.27 
 
26.84 
 
26.40 
Operating and administrative expense
22.91 
 
23.16 
 
22.59 
 
22.52 
Depreciation and amortization expense
 1.23
  
 1.21
 
  1.19 
 
 1.15
Operating income
 3.15
  
 2.90
  
  3.06 
 
 2.73
Interest expense
 0.26
  
 0.32
  
 0.26
  
 0.31
Interest income
 (0.40)
  
 (0.25)
  
 (0.34)
  
 (0.19)
Income before taxes
 3.29
  
 2.83
  
 3.14
  
 2.61
Income taxes
 1.38
  
 1.18
  
 1.32
  
 1.09
Net income
     1.91%
  
     1.65%
  
    1.82%
  
    1.52%
 
 
Sales. Sales were $255,314 in the third quarter of fiscal 2007, an increase of 4.3% from the third quarter of the prior year. Same store sales also increased 4.3%. Improved sales in the recently remodeled Springfield and Bernardsville stores and the replacement store in Somers Point contributed to the sales increase. In addition, the third quarter of fiscal 2007 same store sales increase benefited from comparison to a year ago period that was soft due to the nature and timing of the customer loyalty program offered in the prior year. These improvements were partially offset by reduced sales in two stores due to two competitive store openings. An additional competitive store opening occurred in early May and is expected to impact the fourth quarter of fiscal 2007. 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. Store renovations are included in same store sales immediately.
Sales were $777,179 in the nine-month period of fiscal 2007, an increase of 3.0% from the prior year. Same store sales also increased 3.0%. Improved sales in the recently remodeled Springfield and Bernardsville stores and the replacement store in Somers Point contributed to the sales increase for the nine-month period. These improvements were partially offset by reduced sales in two stores due to competitive store openings.

Gross Profit. Gross profit as a percentage of sales increased .02% in the third quarter of fiscal 2007 compared to the third quarter of the prior year primarily due to higher gross margins in the meat, grocery and produce departments (.18%) and improved product mix (.05%). These improvements were offset by increased promotional spending (.21%) and increased LIFO charges in the current year (.08%).
 

11

    Gross profit as a percentage of sales increased .44% in the nine-month period of fiscal 2007 compared to the corresponding period of the prior year primarily due to higher gross margins in the grocery and meat departments (.28%), patronage dividends received from Wakefern in excess of amounts accrued (.08%) and improved product mix (.06%).

    Operating and Administrative Expense. Operating and administrative expense decreased .25% as a percentage of sales in the third quarter of fiscal 2007 compared to the third quarter of the prior year primarily due to lower payroll (.11%) and fringe benefit (.11%) costs, and amounts received from the national debit/credit card fee litigation (.08%). These decreases were partially offset by increased utility costs (.09%).
    Operating and administrative expense increased .07% as a percentage of sales in the nine-month period of fiscal 2007 compared to the corresponding period of the prior year primarily due to increased repair and maintenance (.08%) and utility (.06%) costs, and the prior year including a reversal of an accrual for future lease obligations of a closed drug store (.06%). These increases were partially offset by lower payroll costs (.05%) and amounts received from the national debit/credit card fee settlement (.03%).
 
    Depreciation and Amortization. Depreciation and amortization expense increased in the third quarter and nine-month periods of fiscal 2007 compared to the corresponding periods of the prior year due to depreciation on fixed asset additions.

    Interest Expense. Interest expense decreased in the third quarter and nine-month periods of fiscal 2007 compared to the corresponding periods of the prior year primarily due to reductions in debt outstanding.

    Interest Income. Interest income increased in the third quarter and nine-month periods of fiscal 2007 compared to the corresponding periods of the prior year primarily due to higher rates received on excess cash invested at Wakefern and higher amounts invested.
 


12

    Income Taxes. The effective income tax rate was 41.9% in both the third quarter and nine-month periods of fiscal 2007 compared to 41.7% in the corresponding periods of the prior year.

CRITICAL ACCOUNTING POLICIES

    Critical accounting policies are those accounting policies that management believes are important to the portrayal of the Company’s financial condition and results of operations. These policies require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. The Company’s critical accounting policies relating to the impairment of long-lived assets and goodwill, 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 29, 2006. As of April 28, 2007, there have been no changes to any of the critical accounting policies contained therein.
    The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

LIQUIDITY AND CAPITAL RESOURCES

    Net cash provided by operating activities was $23,576 in the nine-month period ended April 28, 2007 compared with $21,775 in the corresponding period of the prior year. This increase is primarily attributable to higher net income in the current fiscal year.
    During the first nine months of fiscal 2007, the Company used cash on hand and operating cash flow of $23,576 to fund capital expenditures of $9,754, debt payments of $6,462 and dividends of $2,576. Debt payments made include the fourth installment of $4,286 on the Company’s unsecured Senior Notes. During fiscal 2007, the Company invested $27,698 in notes receivable from Wakefern. As of April 28, 2007 the balance of this investment, including reinvested interest, was $28,739. These funds were previously invested in demand deposits at Wakefern. The initial 15-month term of these notes began September 19, 2006 and is automatically extended for additional, recurring 90-day periods unless, not later than one year prior to the due date, the Company notifies Wakefern requesting payment on the due date. As of April 28, 2007, the Company had not provided this notification. Therefore, these notes now mature on June 17, 2008. Approximately half of these notes earn interest at the prime rate less 1.25% and approximately half of the notes earn a fixed rate of 7%.

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    Working capital was $21,999 at April 28, 2007 compared to $44,096 at July 29, 2006. The working capital ratio was 1.30 to 1 at April 28, 2007 compared to 1.58 to 1 at July 29, 2006. Working capital declined due to the investment in notes receivable from Wakefern. The Company’s working capital needs are reduced, since inventory is generally sold by the time payments to Wakefern and other suppliers are due.
    The Company has budgeted $19,000 for capital expenditures in fiscal 2007. The Rio Grande remodel was completed in the first quarter. The construction of a new, leased store in Franklin, New Jersey began during the second quarter of fiscal 2007. The Company is loaning the developer of the Franklin store a portion of the funds necessary to prepare the site and construct the store. The maximum amount of this loan, which is secured by a mortgage on the property, is approximately $6,700 ($1,513 outstanding at April 28, 2007). The Company expects the amount of this loan to increase each month through November 2007. This loan is due to be repaid upon the opening of the store, which is planned for November 2007. This loan to the developer is presented as capital expenditures in the financial statements in accordance with EITF Issue No. 97-10, “The Effect of Lessee Involvement in Asset Construction”. The Company’s primary sources of liquidity in fiscal 2007 are expected to be cash and cash equivalents on hand and operating cash flow generated in fiscal 2007.
    The Company has contributed $674 to Company-sponsored defined benefit pension plans as of April 28, 2007. The Company expects to contribute $1,326 in the remainder of fiscal 2007 to fund these plans. Funding beyond fiscal 2007 is uncertain as required minimum future contributions will be determined by, among other factors, actual investment performance of plan assets, the interest rates required to be used to calculate pension obligations, and changes in legislation. There have been no other substantial changes as of April 28, 2007 to the contractual obligations and commitments discussed on page 7 of the Company’s Annual Report on Form 10-K for the year ended July 29, 2006.
 
 
 
 
 
 
 
 
 
 
 
 
 

 
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RELATED PARTY TRANSACTIONS

    A description of the Company’s transactions with Wakefern, its principal supplier, and with other related parties is included on pages 7, 8, 16 and 20 of the Company’s Annual Report on Form 10-K for the year ended July 29, 2006. There have been no significant changes in the Company’s relationship or nature of the transactions with related parties during the nine months of fiscal 2007, except for the investment in notes receivable from Wakefern and an additional required investment in Wakefern stock of $721 described previously herein.

FORWARD-LOOKING STATEMENTS:

    All statements, other than statements of historical fact, included in this Form 10-Q are or may be considered forward-looking statements within the meaning of federal securities law. The Company cautions the reader that there is no assurance that actual results or business conditions will not differ materially from future results, whether expressed, suggested or implied by such forward-looking statements. The Company undertakes no obligation to update forward-looking statements to reflect developments or information obtained after the date hereof. The following are among the principal factors that could cause actual results to differ from the forward-looking statements: local economic conditions; competitive pressures from the Company’s operating environment; the ability of the Company to maintain and improve its sales and margins; the ability to attract and retain qualified associates; the availability of new store locations; the availability of capital; the liquidity of the Company; the success of operating initiatives; consumer spending patterns; the impact of higher energy prices; increased cost of goods sold, including increased costs from the Company’s principal supplier, Wakefern; the results of union contract negotiations; competitive store openings; the rate of return on pension assets; and other factors detailed herein and in other public filings of the Company.







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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    The Company is exposed to market risks arising from adverse changes in interest rates. As of April 28, 2007, the Company’s only variable rate borrowings relate to an interest rate swap agreement. On October 18, 2001, the Company entered into an interest rate swap agreement with a major financial institution pursuant to which the Company pays a variable rate of six-month LIBOR plus 3.36% (8.72% at April 28, 2007) on an initial notional amount of $10,000 expiring in September 2009 in exchange for a fixed rate of 8.12%. The swap agreement notional amount decreases in amounts and on dates corresponding to the fixed rate obligation it hedges. At April 28, 2007 the remaining notional amount of the swap agreement was $4,286. A 1% increase in interest rates, applied to the Company’s borrowings at April 28, 2007, would result in an annual increase in interest expense and a corresponding reduction in cash flow of approximately $43. The fair value of the Company’s fixed rate debt is also affected by changes in interest rates.
    At April 28, 2007, the Company had demand deposits of $38,035 at Wakefern earning interest at overnight money market rates, which are exposed to the impact of interest rate changes. At April 28, 2007, the Company had $28,739 of 15-month notes receivable due from Wakefern. Approximately half of these notes earn a fixed rate of 7% and approximately half earn prime less 1.25%.

ITEM 4. CONTROLS AND PROCEDURES

    As required by Rule 13a-15 under the Exchange Act, the Company carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures at the end of the period. This evaluation was carried out under the supervision, and with the participation, of the Company’s management, including the Company’s Chief Executive Officer along with the Company’s Chief Financial Officer. Based upon that evaluation, the Company’s Chief Executive Officer, along with the Company’s Chief Financial Officer, concluded that the Company’s disclosure controls and procedures are effective.
    Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in Company reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in Company reports filed under the Exchange Act is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure.

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    There have been no significant changes in internal controls over financial reporting during the third quarter of fiscal 2007.

PART II - OTHER INFORMATION
 
Item 6.    Exhibits

 
Exhibit 31.1-
Certification

 
Exhibit 31.2-
Certification

 
Exhibit 32.1-
Certification (furnished, not filed)

 
Exhibit 32.2-
Certification (furnished, not filed)

 
Exhibits 99.1-
Press Release dated June 6, 2007

 
Exhibit 99.2-
Second Quarter Report to Shareholders dated March 21, 2007


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
Village Super Market, Inc.___________
 
Registrant
   
   
Date: June 6, 2007
/s/ James Sumas________
 
James Sumas
 
(Chief Executive Officer)
   
   
Date: June 6, 2007
/s/ Kevin R. Begley_____
 
Kevin R. Begley
 
(Chief Financial Officer)





 
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