Disaggregated Revenues
The following table presents the Company's sales by product categories during each of the periods indicated:
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Years Ended
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July 31, 2021
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July 25, 2020
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Amount
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%
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Amount
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%
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Center Store (1)
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$
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1,218,550
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60.6
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%
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$
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1,111,751
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61.6
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%
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Fresh (2)
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736,657
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35.7
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%
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616,271
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34.2
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%
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Pharmacy
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67,048
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3.3
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%
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68,508
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3.8
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%
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Other (3)
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8,075
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0.4
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%
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8,064
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0.4
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%
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Total Sales
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$
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2,030,330
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100.0
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%
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$
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1,804,594
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|
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100.0
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%
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(1) Consists primarily of grocery, dairy, frozen, health and beauty care, general merchandise and liquor.
(2) Consists primarily of produce, meat, deli, seafood, bakery, prepared foods and floral.
(3) Consists primarily of sales related to other income streams, including service fees related to digital sales, gift card and lottery commissions and wholesale sales.
Cost of sales
Cost of sales consists of costs of inventory, inbound freight charges, and production costs at the Company's centralized commissary, including materials, labor and overhead.
The Company receives vendor allowances and rebates, including the patronage dividend and amounts received as a pass through from Wakefern, related to the Company’s buying and merchandising activities. Vendor allowances and rebates are recognized as a reduction in cost of sales when the related merchandise is sold or when the required contractual terms are completed.
Shipping and handling costs associated with the Company’s digital sales are included in operating and administrative expense.
Cash and cash equivalents
The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. Included in cash and cash equivalents are proceeds due from credit and debit card transactions, which typically settle within five business days, of $10,638 and $11,535 at July 31, 2021 and July 25, 2020, respectively. Included in cash and cash equivalents at July 31, 2021 and July 25, 2020 are $86,670 and $76,259, respectively, of demand deposits invested at Wakefern at overnight money market rates.
Merchandise inventories
Approximately 62% of merchandise inventories are stated at the lower of LIFO (last-in, first-out) cost or market. If the FIFO (first-in, first-out) method had been used, inventories would have been $15,321 and $15,101 higher than reported in fiscal 2021 and 2020, respectively. All other inventories are stated at the lower of FIFO cost or market.
Property, equipment and fixtures
Property, equipment and fixtures are recorded at cost. Interest cost incurred to finance construction is capitalized as part of the cost of the asset. Maintenance and repairs are expensed as incurred.
Depreciation is provided on a straight-line basis over estimated useful lives of thirty years for buildings, ten years for store fixtures and equipment, and three years for computer equipment, shopping carts and vehicles. Leasehold improvements are amortized over the shorter of the related lease terms or the estimated useful lives of the related assets.
When assets are sold or retired, their cost and accumulated depreciation are removed from the accounts, and any gain or loss is reflected in the consolidated financial statements.
Investments
The Company’s investments in its principal supplier, Wakefern, and a Wakefern affiliate, Insure-Rite, Ltd., are stated at cost (see Note 3). Village evaluates its investments in Wakefern and Insure-Rite, Ltd. for impairment through consideration of previous, current and projected levels of profit of those entities.
The Company’s 20%-50% investments in certain real estate partnerships are accounted for under the equity method. One of these partnerships is a variable interest entity which does not require consolidation as Village is not the primary beneficiary (see Note 7).
Store opening and closing costs
All store opening costs are expensed as incurred. The Company records a liability for the future minimum lease payments and related costs for closed stores from the date of closure to the end of the remaining lease term, net of estimated cost recoveries that may be achieved through subletting, discounted using a risk-adjusted interest rate.
Leases
On July 28, 2019, the Company adopted ASU 2016-02, “Leases.” This guidance requires lessees to recognize lease liabilities and a right-of-use asset for all leases with terms of more than 12 months on the balance sheet. The Company adopted the standard using the modified retrospective approach under which the cumulative effect of initially applying the standard was recognized as an adjustment to opening fiscal 2020 retained earnings, with no restatement of prior year amounts. In addition, the Company applied the transition package of practical expedients permitted within the standard, which allowed the carryforward of historical lease classification, and applied the transition option which does not require application of the guidance to comparative periods in the year of adoption.
The adoption of the standard resulted in the recognition of operating lease assets and operating lease liabilities of $99,415 and $111,139, respectively, as of the date of adoption. Included in the initial measurement of the new lease assets is the reclassification of certain prepaid and deferred rent balances. Additionally, the Company recorded an adjustment to reduce its opening retained earnings balance by $3,514, net of income taxes, as the Company derecognized the remaining financing obligations of $17,442 and related net assets of $12,543 for leases in which the Company was previously deemed to be the owner of the project for accounting purposes but did not qualify for sale-leaseback treatment. As such designation ended for these leases with adoption of the ASU, operating lease right-of-use asset and liability balances were established for these leases based on the Company's remaining fixed payment obligations under the leases and are included in the amounts described above. The adoption of this standard also resulted in a change in naming convention for leases classified historically as capital leases to finance leases.
The Company determines if an arrangement is a lease at inception, and recognizes a finance and operating lease liability and asset for all leases with terms of more than 12 months at the lease commencement date. Finance and operating lease liabilities represent the present value of minimum lease payments not yet paid. For purposes of measuring the present value of its fixed payment obligations for a given lease, the Company uses its incremental borrowing rate as the discount rate implicit within its leases is generally not determinable. The Company's incremental borrowing rate reflects the rate it would pay to borrow on a secured basis, and incorporates the term and economic environment of the lease. Each renewal option is evaluated when recognizing the lease right-of-use assets and liabilities, and the Company utilizes the lease term for which it is reasonably certain to use the underlying asset. The Company is obligated under all leases to pay for real estate taxes, utilities and liability insurance, and under certain leases to pay additional amounts based on maintenance and a percentage of sales in excess of stipulated amounts. The Company accounts for rent holidays, escalating rent provisions, and construction allowances related to operating leases in rent expense on a straight-line basis over the term of the lease. Finance lease payments are charged to interest expense and depreciation and amortization expense over the lease term. Additional information on leases is provided in Note 7.
Advertising
Advertising costs are expensed as incurred. Advertising expense was $12,268 and $10,904 in fiscal 2021 and 2020, respectively.
Income taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date.
The Company recognizes a tax benefit for uncertain tax positions if it is “more likely than not” that the position is sustainable, based on its technical merits. The tax benefit of a qualifying position is the largest amount of tax benefit that is greater than 50% likely of being realized upon effective settlement with a taxing authority having full knowledge of all relevant information.
Derivative Instruments and Hedging Activities
The Company records all derivatives on the balance sheet at fair value. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows are considered cash flow hedges. The Company records changes in the fair value of its interest rate swap contracts to Accumulated other comprehensive loss, net of taxes, as the Company has elected to designate its swaps as cash flow hedges and apply hedge accounting when the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Additional information on derivative and hedging activities is provided in Note 5.
Fair value
Fair value is defined as the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Fair value is a market-based measurement that should be determined using assumptions that market participants would use in pricing an asset or liability. The fair value guidance establishes a three-level hierarchy to prioritize the inputs used in measuring fair value. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly, such as quoted prices for similar assets or liabilities in active markets observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability.
Cash and cash equivalents, patronage dividend receivable, income taxes receivable/payable, accounts payable and accrued expenses are reflected in the consolidated financial statements at carrying value, which approximates fair value because of the short-term maturity of these instruments. The carrying values of the Company’s notes receivable from Wakefern approximate their fair value as interest is earned at variable market rates. As the Company’s investment in Wakefern can only be sold to Wakefern at amounts that approximate the Company’s cost, it is not practicable to estimate the fair value of such investment.
Long-lived assets
The Company reviews long-lived assets, such as property, equipment and fixtures and operating lease assets on an individual store basis for impairment when circumstances indicate the carrying amount of an asset group may not be recoverable. Such review analyzes the undiscounted estimated future cash flows from such assets to determine if the carrying value of such assets are recoverable from their respective cash flows. If impairment is indicated, it is measured by comparing the fair value of the long-lived assets to their carrying value. For the year ended July 31, 2021 the Company recorded an impairment of long-lived assets for one Gourmet Garage store of $514.
Goodwill and indefinite-lived intangible assets
Goodwill and indefinite-lived intangible assets are tested at the end of each fiscal year, or more frequently if circumstances dictate, for impairment. The Company's indefinite-lived intangible assets balance of $13,299 and $15,685 as of July 31, 2021 and July 25, 2020, respectively, are related to the Fairway and Gourmet Garage trade names. An impairment loss is recognized to the extent that the carrying amount of goodwill and indefinite-lived intangible assets exceeds its implied fair value. Village considers earnings multiples and other valuation techniques to measure fair value at the reporting unit level, in addition to the value of the Company’s stock. The fair value of trade names are estimated based on the discounted cash flow model using the relief from royalty method.
Manhattan store sales have been impacted by localized residential population migration out of Manhattan and less commuter and tourist traffic during the COVID-19 pandemic. Due to uncertainty regarding the duration and extent of the impact of the COVID-19 pandemic on Manhattan, the Company recognized an impairment charge related to the Fairway trade name of $2,386 for year ended July 31, 2021.
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.
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 tables below reconcile the numerators and denominators of basic and diluted net income per share for all periods presented.
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2021
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2020
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Class A
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Class B
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Class A
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Class B
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Numerator:
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Net income allocated, basic
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$
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15,095
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$
|
4,273
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$
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18,857
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|
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$
|
5,363
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|
Conversion of Class B to Class A shares
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4,273
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|
|
—
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|
|
5,363
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|
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—
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|
Net income allocated, diluted
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$
|
19,368
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$
|
4,273
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|
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$
|
24,220
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|
$
|
5,363
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Denominator:
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Weighted average shares outstanding, basic
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9,853
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|
4,294
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9,794
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|
4,294
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Conversion of Class B to Class A shares
|
4,294
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—
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|
4,294
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—
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|
Weighted average shares outstanding, diluted
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14,147
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4,294
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|
|
14,088
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|
4,294
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Net income per share is as follows:
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|
2021
|
|
2020
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|
|
|
Class A
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Class B
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Class A
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Class B
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Basic
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$
|
1.53
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|
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$
|
1.00
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|
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$
|
1.93
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|
|
$
|
1.25
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|
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|
Diluted
|
$
|
1.37
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|
|
$
|
1.00
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|
|
$
|
1.72
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|
|
$
|
1.25
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|
|
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|
Outstanding stock options to purchase Class A shares of 102 and 154 were excluded from the calculation of diluted net income per share at July 31, 2021 and July 25, 2020, respectively, as a result of their anti-dilutive effect. In addition, 392 and 413 non-vested restricted Class A shares, which are considered participating securities, and their allocated net income were excluded from the diluted net income per share calculation at July 31, 2021 and July 25, 2020, respectively, due to their anti-dilutive effect.
Share-based compensation
All share-based payments to employees are recognized in the financial statements as compensation costs based on the fair market value on the date of the grant.
Benefit plans
The Company recognizes the funded status of its Company sponsored retirement plans on the consolidated balance sheet. Actuarial gains or losses, curtailments, prior service costs or credits, and transition obligations not previously recognized are recorded as a component of Accumulated Other Comprehensive Loss. The Company uses July 31 as the measurement date for these plans.
The Company also contributes to several multi-employer pension plans under the terms of collective bargaining agreements that cover certain union-represented employees. Pension expense for these plans is recognized as contributions are made.
Recently issued accounting standards
In March 2020 and January 2021, the FASB issued ASU 2020-04, "Facilitation of the Effects of Reference Rate Reform on Financial Reporting" and ASU 2021-01, "Reference Rate Reform: Scope", respectively. These standards provide temporary optional expedients and exceptions for the application of GAAP to certain contract modifications, hedging relationships, and other arrangements that are expected to be impacted by the global transition away from certain reference rates, such as LIBOR. The guidance was effective upon issuance and, once adopted, may be applied prospectively to contract modifications and hedging relationships through December 31, 2022. The Company is currently assessing the potential impact of these standards on its consolidated financial statements and related disclosures, if adopted.
NOTE 2 — PROPERTY, EQUIPMENT and FIXTURES
Property, equipment and fixtures are comprised as follows:
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|
July 31,
2021
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|
July 25,
2020
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Land and buildings
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$
|
105,325
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$
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101,099
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Store fixtures and equipment
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329,454
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|
321,746
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Leasehold improvements
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178,062
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174,198
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Leased property under finance leases
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25,211
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25,211
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Construction in progress
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5,535
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|
4,777
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Vehicles
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3,494
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|
4,369
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|
Total property, equipment and fixtures
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647,081
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|
631,400
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Accumulated depreciation
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(378,522)
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|
|
(350,201)
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Accumulated amortization of property under finance leases
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(12,405)
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|
(11,458)
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|
|
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|
Property, equipment and fixtures, net
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$
|
256,154
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$
|
269,741
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|
Amortization of leased property under finance leases is included in depreciation and amortization expense.
NOTE 3 — RELATED PARTY INFORMATION - WAKEFERN
The Company’s ownership interest in its principal supplier, Wakefern, which is operated on a cooperative basis for its stockholder members, is 12.2% of the outstanding shares of Wakefern at July 31, 2021. The investment is stated at cost and is pledged as collateral for any obligations to Wakefern. In addition, all obligations to Wakefern are personally guaranteed by certain shareholders of Village.
The Company is obligated to purchase 85% of its primary merchandise requirements from Wakefern until ten years from the date that stockholders representing 75% of Wakefern sales notify Wakefern that those stockholders request that the Wakefern Stockholder Agreement be terminated. If this purchase obligation is not met, Village is required to pay Wakefern’s profit contribution shortfall attributable to this failure. Similar payments are due if Wakefern loses volume by reason of the sale of Company stores or a merger with another entity. Village fulfilled the above obligation in fiscal 2021 and 2020. The Company also has an investment of approximately 9.3% in Insure-Rite, Ltd., a Wakefern affiliated company, which provides Village with workers' compensation, liability and property insurance coverage.
Wakefern has increased from time to time the required investment in its common stock for each supermarket owned by a member, with the exact amount per store computed based on the amount of each store’s purchases from Wakefern. At July 31, 2021, the Company’s indebtedness to Wakefern for the outstanding amount of these stock subscriptions was $3,423. Installment payments are due as follows: 2022 - $632; 2023 - $844; 2024 - $512; 2025 - $512; 2026 - $511; and $412 thereafter. The maximum per store investment increased from $950 to $975 in fiscal 2021, resulting in an additional $670 capital pledge, which was paid in fiscal 2021. Village receives additional shares of common stock to the extent paid for at the end of each fiscal year (which ends on or about September 30) of Wakefern calculated at the then book value per share. The payments, together with any stock issued thereunder, at the option of Wakefern, may be null and void and all payments on this subscription shall become the property of Wakefern in the event the Company does not complete the payment of this subscription in a timely manner.
Village purchases substantially all of its merchandise from Wakefern. As a stockholder of Wakefern, Village earns a share of Wakefern’s earnings, which are distributed as a “patronage dividend.” This dividend is based on a distribution of substantially all of Wakefern’s operating profits for its fiscal year in proportion to the dollar volume of purchases by each member from Wakefern during that fiscal year. Patronage dividends are recorded as a reduction of cost of sales as merchandise is sold. Village accrues estimated patronage dividends due from Wakefern quarterly based on an estimate of the annual Wakefern patronage dividend and an estimate of Village’s share of this annual dividend based on Village’s estimated proportional share of the dollar volume of business transacted with Wakefern that year. Patronage dividends and other vendor allowances and rebates amounted to $43,003 and $33,151 in fiscal 2021 and 2020, respectively.
Wakefern provides the Company with support services in numerous areas including advertising, workers' compensation, liability and property insurance, supplies, certain equipment purchasing, coupon processing, certain financial accounting applications, retail technology support, and other store services. Village incurred charges of $47,462 and $33,303 from Wakefern in fiscal 2021 and 2020, respectively, for non-merchandise products and services, which are reflected in operating and administrative expense in the consolidated statements of operations. Additionally, the Company has certain related party leases (see Note 7) with Wakefern.
At July 31, 2021, the Company held variable rate notes receivable due from Wakefern of $27,325 that earn interest at the prime rate plus 1.25% and mature on August 15, 2022 and $27,970 that earn interest at the prime rate plus .75% and mature on February 15, 2024. Wakefern has the right to prepay these notes at any time. Under certain conditions, the Company can require Wakefern to prepay the notes, although interest earned since inception would be reduced as if it was earned based on overnight money market rates as paid by Wakefern on demand deposits.
At July 31, 2021, the Company had demand deposits invested at Wakefern in the amount of $86,670. These deposits earn overnight money market rates.
Interest income earned on investments with Wakefern was $3,522 and $3,992 in fiscal 2021 and 2020, respectively.
NOTE 4 — DEBT
Long-term debt consists of:
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
July 31,
2021
|
|
July 25,
2020
|
Unsecured revolving line of credit
|
|
$
|
—
|
|
|
$
|
50,000
|
|
Secured term loan
|
|
47,025
|
|
$0
|
—
|
|
Unsecured term loan
|
|
21,104
|
|
|
24,694
|
|
New Market Tax Credit Financing
|
|
5,674
|
|
|
5,921
|
|
|
|
|
|
|
Total debt, excluding obligations under leases
|
|
73,803
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|
|
80,615
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|
Less current portion
|
|
6,976
|
|
|
6,421
|
|
|
|
|
|
|
Total long-term debt, excluding obligations under leases
|
|
$
|
66,827
|
|
|
$
|
74,194
|
|
Credit Facility
On May 6, 2020, Village entered into a credit agreement (the “Credit Facility”) with Wells Fargo National Bank, National Association (“Wells Fargo”) that supersedes in its entirety the prior credit agreement with Wells Fargo dated November 9, 2017. The principal purpose of the Credit Facility is to finance general corporate and working capital requirements and Village’s acquisition of certain Fairway assets. Among other things, the Credit Facility provides for a maximum loan amount of $150,500 as further set forth below:
•An unsecured revolving line of credit providing a maximum amount available for borrowing of $125,000. Indebtedness under this agreement bears interest at the applicable LIBOR rate plus 1.10% and expires on May 6, 2025.
•An unsecured term loan with a maximum loan amount of $25,500. On May 12, 2020, Village executed a $25,500 term note, repayable in equal monthly installments based on a seven-year amortization schedule through May 4, 2027 and bearing interest at the applicable LIBOR rate plus 1.35%. Additionally, Village executed an interest rate swap for a notional amount equal to the term loan amount that fixes the base LIBOR rate at .41% per annum through May 4, 2027, resulting in a fixed effective interest rate of 1.76% on the term note.
•On September 1, 2020, Village converted $50,000 of its revolving line of credit to a secured converted term loan. The conversion reduced the maximum amount available for borrowing under the revolving line of credit from $125,000 to $75,000. The term loan bears interest at the applicable LIBOR rate plus 1.50% and is repayable in equal monthly installments based on a fifteen-year amortization schedule beginning on the conversion date. Additionally, Village previously executed a forward interest rate swap, effective on the conversion date, for a notional amount equal to the term loan amount that fixes the base LIBOR rate at .69% per annum for 15 years, resulting in a fixed effective interest rate of 2.19% on the converted 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.
The Credit Facility also provides for up to $25,000 of letters of credit ($7,336 outstanding at July 31, 2021), which secure obligations for store leases and construction performance guarantees to municipalities. The Credit Facility contains covenants that, among other conditions, require a minimum tangible net worth, a minimum fixed charge coverage ratio and a maximum adjusted debt to EBITDAR ratio. The Company was in compliance with all covenants of the credit agreement at July 31, 2021.
The carrying values of the Company’s long-term debt related to the Company's Credit Facility approximate their fair value as interest is charged at variable market rates. The estimated fair values of the Company's long-term debt are based on Level 2 inputs.
New Markets Tax Credit
On December 29, 2017, the Company entered into a financing transaction with Wells Fargo Community Investment Holdings, LLC (“Wells Fargo”) under a qualified New Markets Tax Credit (“NMTC”) program related to the construction of a new store in the Bronx, New York. The NMTC program was provided for in the Community Renewal Tax Relief Act of 2000 (the “Act”) and is intended to induce capital investment in qualified lower income communities. The Act permits taxpayers to claim credits against their Federal income taxes for up to 39% of qualified investments in the equity of community development entities (“CDEs”). CDEs are privately managed investment institutions that are certified to make qualified low-income community investments.
In connection with the financing, the Company loaned $4,835 to VSM Investment Fund, LLC (the "Investment Fund") at an interest rate of 1.403% per year and with a maturity date of December 31, 2044. Repayments on the loan commence in March 2025. Wells Fargo contributed $2,375 to the Investment Fund and, by virtue of such contribution, is entitled to substantially all of the tax benefits derived from the NMTC. The Investment Fund is a wholly owned subsidiary of Wells Fargo. The loan to the Investment Fund is recorded in other assets in the consolidated balance sheets.
The Investment Fund then contributed the proceeds to a CDE, which, in turn, loaned combined funds of $6,563, net of debt issuance costs, to Village Super Market of NY, LLC, a wholly-owned subsidiary of the Company, at an interest rate of 1.000% per year with a maturity date of December 31, 2051. These loans are secured by the leasehold improvements and equipment related to the construction of the Bronx store. Repayment of the loans commences in March 2025. The proceeds of the loans from the CDE were used to partially fund the construction of the Bronx store. The Notes payable related to New Markets Tax Credit, net of debt issuance costs, are recorded in long-term debt in the consolidated balance sheets.
The NMTC is subject to 100% recapture for a period of seven years. The Company is required to be in compliance with various regulations and contractual provisions that apply to the New Markets Tax Credit arrangement. Noncompliance could result in Wells Fargo's projected tax benefits not being realized and, therefore, require the Company to indemnify Wells Fargo for any loss or recapture of NMTCs. The Company does not anticipate any credit recapture will be required in connection with this financing arrangement. The transaction includes a put/call provision whereby the Company may be obligated or entitled to repurchase Wells Fargo's interest in the Investment Fund. The value attributed to the put/call is de minimis. We believe that Wells Fargo will exercise the put option in December 2024, at the end of the recapture period, that will result in a net benefit to the Company of $1,728. The Company is recognizing the net benefit over the seven-year compliance period in operating and administrative expense.
NOTE 5 — DERIVATIVES AND HEDGING ACTIVITIES
The Company is exposed to interest rate risk arising from fluctuations in LIBOR 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.
In 2020, the Company executed two interest rate swaps with an aggregate notional value of $75,500 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 LIBOR. The swaps replaced the applicable LIBOR 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 loss and subsequently reclassified into interest expense in the same period during which the hedged transaction affects earnings. Amounts reported in Accumulated other comprehensive loss related to derivatives will be reclassified to interest expense as interest payments are made on the variable-rate loans. The Company reclassified $328 and $12 from Accumulated other comprehensive loss to Interest expense during fiscal 2021 and 2020, respectively.
The notional value of the interest rate swaps were $68,472 as of July 31, 2021. The fair value of interest rate swaps are included in the following captions on the consolidated balance sheets at July 31, 2021 and July 25, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
Other assets (liabilities)
|
1,111
|
|
|
(921)
|
|
The fair values of the Company’s interest rate swaps are based on Level 2 inputs, including the present value of estimated future cash flows based on market expectations of the yield curve on variable interest rates.
NOTE 6 — INCOME TAXES
The components of the provision for income taxes are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
Federal:
|
|
|
|
|
|
Current
|
$
|
7,172
|
|
|
$
|
(8,023)
|
|
|
|
Deferred
|
(2,037)
|
|
|
10,846
|
|
|
|
|
|
|
|
|
|
State:
|
|
|
|
|
|
Current
|
4,229
|
|
|
3,627
|
|
|
|
Deferred
|
(505)
|
|
|
344
|
|
|
|
|
|
|
|
|
|
|
$
|
8,859
|
|
|
$
|
6,794
|
|
|
|
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31,
2021
|
|
July 25,
2020
|
Deferred tax assets:
|
|
|
|
Lease liabilities
|
$
|
106,615
|
|
|
$
|
98,149
|
|
Tax credit carryforward
|
—
|
|
|
508
|
|
Compensation related costs
|
4,377
|
|
|
2,945
|
|
Pension costs
|
3,248
|
|
|
1,881
|
|
Other
|
552
|
|
|
752
|
|
|
|
|
|
Total deferred tax assets
|
114,792
|
|
|
104,235
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
Tax over book depreciation
|
22,653
|
|
|
23,626
|
|
Lease assets
|
98,994
|
|
|
92,021
|
|
Patronage dividend receivable
|
4,162
|
|
|
3,133
|
|
Investment in partnerships
|
1,162
|
|
|
1,076
|
|
Other
|
611
|
|
|
178
|
|
|
|
|
|
Total deferred tax liabilities
|
127,582
|
|
|
120,034
|
|
|
|
|
|
Net deferred tax liability
|
$
|
(12,790)
|
|
|
$
|
(15,799)
|
|
Deferred income tax assets (liabilities) are included in the following captions on the consolidated balance sheets at July 31, 2021 and July 25, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
Other assets
|
1,642
|
|
|
702
|
|
Other liabilities
|
(14,432)
|
|
|
(16,501)
|
|
A valuation allowance is provided when it is more likely than not that some portion of the deferred tax assets will not be realized. In management’s opinion, in view of the Company’s previous, current and projected taxable income and reversal of deferred tax liabilities, such tax assets will more likely than not be fully realized. Accordingly, no valuation allowance was deemed to be required at July 31, 2021 and July 25, 2020.
The effective income tax rate differs from the statutory federal income tax rate as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
Statutory federal income tax rate
|
21.0
|
%
|
|
21.0
|
%
|
|
|
State income taxes, net of federal tax benefit
|
10.3
|
%
|
|
9.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal net operating loss carryback
|
—
|
%
|
|
(7.9)
|
%
|
|
|
Other
|
(0.6)
|
%
|
|
(1.6)
|
%
|
|
|
|
|
|
|
|
|
Effective income tax rate
|
30.7
|
%
|
|
21.4
|
%
|
|
|
Fiscal 2020 includes a $2,512 incremental benefit from a federal net operating loss carryback at a rate higher than the current statutory tax rate.
The Company is not currently under audit by any tax authorities, but is open to examination with varying statutes of limitations, generally ranging from three to four years.
NOTE 7 — LEASES
Description of leasing arrangements
The Company leases 32 retail stores, as well as a production distribution center (the "PDC"), the corporate headquarters and equipment at July 31, 2021. The majority of initial lease terms range from 20 to 30 years. Most of the Company’s leases contain renewal options at increased rents of five years each at the Company’s sole discretion. These options enable Village to retain the use of facilities in desirable operating areas.
The composition of total lease cost is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended
|
|
Consolidated Statement of Operations Classification
|
|
July 31,
2021
|
|
July 25,
2020
|
Operating lease cost
|
Operating and administrative expense
|
|
$
|
37,677
|
|
|
$
|
22,911
|
|
Finance lease cost
|
|
|
|
|
|
Amortization of leased assets
|
Depreciation and amortization
|
|
947
|
|
|
947
|
|
Interest on lease liabilities
|
Interest expense
|
|
2,000
|
|
|
2,059
|
|
Variable lease cost
|
Operating and administrative expense
|
|
19,479
|
|
|
16,473
|
|
|
|
|
|
|
|
Total lease cost
|
|
|
$
|
60,103
|
|
|
$
|
42,390
|
|
As of July 31, 2021 and July 25, 2020, finance lease right-of-use assets of $12,806 and $13,753, respectively, are included in property, equipment and fixtures, net in the Company's consolidated balance sheet. Maturities of operating and finance lease liabilities, including options to extend lease terms that are reasonably certain of being exercised, are as follows as of July 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases
|
|
Finance leases
|
|
Total
|
2022
|
|
$
|
32,984
|
|
|
$
|
2,470
|
|
|
$
|
35,454
|
|
2023
|
|
35,988
|
|
|
2,689
|
|
|
38,677
|
|
2024
|
|
34,005
|
|
|
2,689
|
|
|
36,694
|
|
2025
|
|
32,563
|
|
|
2,820
|
|
|
35,383
|
|
2026
|
|
31,758
|
|
|
2,893
|
|
|
34,651
|
|
Thereafter
|
|
214,944
|
|
|
26,187
|
|
|
241,131
|
|
Total lease payments
|
|
382,242
|
|
|
39,748
|
|
|
421,990
|
|
Less amount representing interest
|
|
82,480
|
|
|
16,892
|
|
|
99,372
|
|
|
|
|
|
|
|
|
Present value of lease liabilities
|
|
$
|
299,762
|
|
|
$
|
22,856
|
|
|
$
|
322,618
|
|
The Company has approximately $9,280 of future payment obligations related to lease agreements that have not yet commenced but have been executed as of July 31, 2021.
As of July 31, 2021, the Company's lease terms and discount rates are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31,
2021
|
|
July 25,
2020
|
Weighted-average remaining lease term (years)
|
|
|
|
Operating leases
|
12.5
|
|
13.3
|
Finance leases
|
14.4
|
|
15.4
|
Weighted-average discount rate
|
|
|
|
Operating leases
|
3.9
|
%
|
|
3.9
|
%
|
Finance leases
|
8.5
|
%
|
|
8.5
|
%
|
Supplemental cash flow information related to leases is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
Cash paid for amounts in the measurement of lease liabilities
|
|
|
|
|
Operating cash flows from operating leases
|
|
$
|
34,768
|
|
|
$
|
21,287
|
|
Operating cash flows from finance leases
|
|
2,000
|
|
|
2,059
|
|
Financing cash flows from finance leases
|
|
689
|
|
|
572
|
|
|
|
|
|
|
|
|
|
|
|
Related party leases
The Company leases a supermarket from a realty firm 30% owned by certain officers of Village. The Company paid rent to related parties under this lease of $704 and $688 in fiscal 2021 and 2020, respectively, and has a related lease obligation of $3,227 at July 31, 2021. This lease expires in fiscal 2026 with options to extend at increasing annual rent.
The Company has ownership interests in three real estate partnerships. Village paid aggregate rents to two of these partnerships for leased stores of $1,579 and $1,556 in fiscal 2021 and 2020, respectively, and has related aggregate lease obligations of $12,781 at July 31, 2021.
One of these partnerships is a variable interest entity, which is not consolidated as Village is not the primary beneficiary. This partnership owns one property, a stand-alone supermarket leased to the Company since 1974. Village is a general partner entitled to 33% of the partnership's profits and losses.
The Company subleases the Galloway and Vineland stores from Wakefern under sublease agreements which provided for combined annual rents of $1,355 in both fiscal 2021 and 2020, and has related aggregate lease obligations of $2,276 at July 31, 2021. Both leases contain normal periodic rent increases and options to extend the lease.
NOTE 8 — SHAREHOLDERS’ EQUITY
The Company has two classes of common stock. Class A common stock is entitled to one vote per share and to cash dividends as declared 54% greater than those paid on Class B common stock. Class B common stock is entitled to 10 votes per share. Class A and Class B common stock share equally on a per share basis in any distributions in liquidation. Shares of Class B common stock are convertible on a share-for-share basis for Class A common stock at any time. Class B common stock is not transferable except to another holder of Class B common stock or by will or under the laws of intestacy or pursuant to a resolution of the Board of Directors of the Company approving the transfer. As a result of this voting structure, the holders of the Class B common stock control greater than 50% of the total voting power of the shareholders of the Company and control the election of the Board of Directors.
The Company has authorized 10,000 shares of preferred stock. No shares have been issued. The Board of Directors is authorized to designate series, preferences, powers and participations of any preferred stock issued.
The Company maintains share repurchase programs that comply with Rule 10b5-1 under the Securities Exchange Act of 1934. Repurchases of Village Class A common stock may be made from time to time through a variety of methods, including open market purchases and other negotiated transactions. In September 2019, the Company's Board of Directors authorized an incremental $5,000 share repurchase program, supplementing the existing authorization. The Company made open market purchases totaling $2,482 under this repurchase program in fiscal 2020 and an additional $1,907 in shares of Class A Common Stock were surrendered in satisfaction of withholding taxes in connection with the vesting of restricted shares in fiscal 2020. The Company's share repurchase program had $3,203 remaining at July 31, 2021 and July 25, 2020.
Village has two share-based compensation plans, which are described below. The compensation cost charged against income for these plans was $2,522 and $2,958 in fiscal 2021 and 2020, respectively. Total income tax benefit recognized in the consolidated statements of operations for share-based compensation arrangements was $633 and $202 in fiscal 2021 and 2020, respectively.
On December 16, 2016, the shareholders of the Company approved the Village Super Market, Inc. 2016 Stock Plan (the “2016 Plan”) under which awards of incentive and non-qualified stock options and restricted stock may be made. There are 1,200 shares of Class A common stock authorized for issuance to employees and directors under the 2016 Plan. Terms and conditions of awards are determined by the Board of Directors. Restricted stock awards primarily cliff vest three years from the date of grant. There are 1,078 shares remaining for future grants under the 2016 Plan.
The following table summarizes option activity under all plans for the following years:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
Shares
|
|
Weighted-average
exercise price
|
|
Shares
|
|
Weighted-average
exercise price
|
|
|
|
|
Outstanding at beginning of year
|
156
|
|
|
$
|
28.43
|
|
|
245
|
|
|
$
|
28.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
Forfeited
|
(54)
|
|
|
27.40
|
|
|
(89)
|
|
|
28.42
|
|
|
|
|
|
Expired
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of year
|
102
|
|
|
$
|
28.98
|
|
|
156
|
|
|
$
|
28.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at end of year
|
102
|
|
|
$
|
28.98
|
|
|
156
|
|
|
$
|
28.43
|
|
|
|
|
|
As of July 31, 2021, the weighted-average remaining contractual term of options outstanding and options exercisable was 2.6 years. As of July 31, 2021, the aggregate intrinsic value was $0 for both options outstanding and options exercisable. The fair value of each option award is estimated on the date of grant using the Black-Scholes Option Pricing Model. The Company uses historical data for similar groups of employees in order to estimate the expected life of options granted. Expected volatility is based on the historical volatility of the Company’s stock for a period of years corresponding to the expected life of the option. The risk-free interest rate is based on the U.S. Treasury yield curve at the time of grant for securities with a maturity period similar to the expected life of the option.
The following table summarizes restricted stock activity under all plans for the following years:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
Shares
|
|
Weighted-average
grant date
fair value
|
|
Shares
|
|
Weighted-average
grant date
fair value
|
|
|
|
|
Nonvested at beginning of year
|
413
|
|
|
$
|
19.40
|
|
|
323
|
|
|
$
|
27.02
|
|
|
|
|
|
Granted
|
8
|
|
|
25.06
|
|
|
412
|
|
|
19.40
|
|
|
|
|
|
Vested
|
(14)
|
|
|
18.98
|
|
|
(302)
|
|
|
27.14
|
|
|
|
|
|
Forfeited
|
(15)
|
|
|
18.98
|
|
|
(20)
|
|
|
25.59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested at end of year
|
392
|
|
|
$
|
19.55
|
|
|
413
|
|
|
$
|
19.40
|
|
|
|
|
|
The total fair value of restricted shares vested during fiscal 2021 and 2020 was $363 and $5,968, respectively.
As of July 31, 2021, there was $4,172 of total unrecognized compensation costs related to nonvested restricted stock granted under the above plans. That cost is expected to be recognized over a weighted-average period of 1.6 years.
The Company declared and paid cash dividends on common stock as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
Per share:
|
|
|
|
|
|
Class A common stock
|
$
|
1.00
|
|
|
$
|
1.00
|
|
|
|
Class B common stock
|
0.65
|
|
|
0.65
|
|
|
|
|
|
|
|
|
|
Aggregate:
|
|
|
|
|
|
Class A common stock
|
$
|
10,259
|
|
|
$
|
10,174
|
|
|
|
Class B common stock
|
2,791
|
|
|
2,791
|
|
|
|
|
|
|
|
|
|
|
$
|
13,050
|
|
|
$
|
12,965
|
|
|
|
NOTE 9 — PENSION PLANS
Company-Sponsored Pension Plans
The Company sponsored four defined benefit pension plans. One of the plans was terminated in fiscal 2020, and two of the plans are frozen and participants no longer earn service credit. Two are tax-qualified plans covering members of unions. Benefits under these two plans are based on a fixed amount for each year of service. One is a tax-qualified plan covering nonunion associates. Benefits under this plan are based upon percentages of annual compensation. Funding for these plans is based on an analysis of the specific requirements and an evaluation of the assets and liabilities of each plan. The fourth plan is an unfunded, nonqualified plan providing supplemental pension benefits to certain executives.
Net periodic pension cost for the plans include the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
Service cost
|
$
|
216
|
|
|
$
|
202
|
|
|
|
Interest cost on projected benefit obligation
|
1,689
|
|
|
2,154
|
|
|
|
Expected return on plan assets
|
(1,932)
|
|
|
(2,792)
|
|
|
|
Loss on settlement
|
587
|
|
|
1,604
|
|
|
|
Amortization of gains and losses
|
588
|
|
|
555
|
|
|
|
|
|
|
|
|
|
Net periodic pension cost
|
$
|
1,148
|
|
|
$
|
1,723
|
|
|
|
On December 23, 2019, the Company terminated the Village Super Market, Inc. Retail Clerks Employees’ Retirement Plan. All participants of the plan were former employees of a store previously closed in 1994. An annuity contract totaling $1,302 was purchased with an insurance company for all participants who did not elect a lump sum distribution. Additionally, lump sum distributions related to the termination totaled $451. The plan had sufficient assets to satisfy all termination transaction obligations, and no benefit obligation or plan assets related to the Village Super Market, Inc. Retail Clerks Employees’ Retirement Plan remained as of the termination date. As a result of this termination, the Company recognized a non-cash pre-tax settlement charge totaling $669 during fiscal 2020. This settlement charge represents the plan’s remaining unrecognized losses within accumulated other comprehensive loss as of the termination date.
Additionally, the Company recognized a settlement loss of $587 and $935 in fiscal 2021 and 2020, respectively, for plans where benefits paid exceeded the sum of the service cost and interest cost components of net periodic pension cost.
The changes in benefit obligations and the reconciliation of the funded status of the Company’s plans to the consolidated balance sheets were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
Changes in Benefit Obligation:
|
|
|
|
Benefit obligation at beginning of year
|
$
|
76,849
|
|
|
$
|
69,932
|
|
Service cost
|
216
|
|
|
202
|
|
Interest cost
|
1,689
|
|
|
2,154
|
|
Benefits paid
|
(796)
|
|
|
(887)
|
|
|
|
|
|
Settlement
|
(2,563)
|
|
|
(6,733)
|
|
Actuarial loss
|
(2,166)
|
|
|
12,181
|
|
Benefit obligation at end of year
|
$
|
73,229
|
|
|
$
|
76,849
|
|
|
|
|
|
Changes in Plan Assets:
|
|
|
|
Fair value of plan assets at beginning of year
|
$
|
70,683
|
|
|
$
|
65,173
|
|
Actual return on plan assets
|
(4,277)
|
|
|
13,130
|
|
Employer contributions
|
—
|
|
|
—
|
|
Benefits paid
|
(796)
|
|
|
(887)
|
|
Settlements paid
|
(2,563)
|
|
|
(6,733)
|
|
Fair value of plan assets at end of year
|
63,047
|
|
|
70,683
|
|
|
|
|
|
Funded status at end of year
|
$
|
10,182
|
|
|
$
|
6,166
|
|
|
|
|
|
Amounts recognized in the consolidated balance sheets:
|
|
|
|
|
|
|
|
Pension liabilities
|
10,182
|
|
|
6,166
|
|
Accumulated other comprehensive loss, net of income taxes
|
9,833
|
|
|
8,092
|
|
|
|
|
|
Amounts included in Accumulated other comprehensive loss (pre-tax):
|
|
|
|
Net actuarial loss
|
$
|
14,167
|
|
|
$
|
11,299
|
|
Company expects approximately $504 of the net actuarial loss, excluding the impact of any potential plan settlements, to be recognized as a component of net periodic benefit costs in fiscal 2022.
The accumulated benefit obligations of the plans were $71,931 and $76,849 at July 31, 2021 and July 25, 2020, respectively. The following information is presented for those plans with an accumulated benefit obligation in excess of plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
Projected benefit obligation
|
$
|
73,229
|
|
|
$
|
11,465
|
|
Accumulated benefit obligation
|
71,931
|
|
|
11,465
|
|
Fair value of plan assets
|
63,047
|
|
|
4,068
|
|
Weighted average assumptions used to determine benefit obligations and net periodic pension cost for the Company’s defined benefit plans were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
Assumed discount rate — net periodic pension cost
|
2.26
|
%
|
|
3.41
|
%
|
|
|
Assumed discount rate — benefit obligation
|
2.44
|
%
|
|
2.26
|
%
|
|
|
Assumed rate of increase in compensation levels
|
4.50
|
%
|
|
4.50
|
%
|
|
|
Expected rate of return on plan assets
|
3.36
|
%
|
|
4.82
|
%
|
|
|
Investments in the pension trusts are overseen by the trustees of the plans, who are officers of Village. The Company utilizes a liability-driven investment ("LDI") strategy. A LDI strategy focuses on maintaining a close to fully-funded status over the long-term with minimal funded status risk. This is achieved by investing more of the plan assets in fixed income instruments to more closely match the duration of the plan liability. The investment allocation to fixed income instruments will increase as each plans' funded status increases. The target allocations for plan assets are 0-15% equity securities, 85-100% fixed income securities and 0-10% cash. Asset allocations are reviewed periodically and appropriate rebalancing is performed.
Equity securities include investments in large-cap, small-cap and mid-cap companies located both in and outside the United States. Fixed income securities include U.S. treasuries, mortgage-backed securities and corporate bonds of companies from diversified industries. Investments in securities are made through mutual funds. In addition, one plan held Class A common stock of Village in the amount of $512 and $573 at July 31, 2021 and July 25, 2020, respectively.
Risk management is accomplished through diversification across asset classes and fund strategies, multiple investment portfolios and investment guidelines. The plans do not allow for investments in derivative instruments.
The fair value of the pension assets were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2021
|
|
July 25, 2020
|
Asset Category
|
|
Level 1
|
|
Assets Measured at NAV
|
|
Total
|
|
Level 1
|
|
Assets Measured at NAV
|
|
Total
|
Cash
|
|
$
|
83
|
|
|
$
|
—
|
|
|
$
|
83
|
|
|
$
|
61
|
|
|
$
|
—
|
|
|
$
|
61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Company stock
|
|
512
|
|
|
—
|
|
|
512
|
|
|
573
|
|
|
—
|
|
|
573
|
|
Mutual/Collective Trust Funds -
U.S. (1)
|
|
—
|
|
|
1,174
|
|
|
1,174
|
|
|
—
|
|
|
1,214
|
|
|
1,214
|
|
Mutual/Collective Trust Funds - International (1)
|
|
—
|
|
|
387
|
|
|
387
|
|
|
—
|
|
|
396
|
|
|
396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual/Collective Trust Funds - Fixed Income (1)
|
|
—
|
|
|
60,891
|
|
|
60,891
|
|
|
—
|
|
|
68,439
|
|
|
68,439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
595
|
|
|
$
|
62,452
|
|
|
$
|
63,047
|
|
|
$
|
634
|
|
|
$
|
70,049
|
|
|
$
|
70,683
|
|
(1)Includes pools of investments that are measured at fair value using the Net Asset Value (NAV) per share (or its equivalent) practical expedient. The NAV is based on the underlying net assets owned by the fund and the relative interest of each participating investor in the fair value of the underlying assets. The underlying investments are classified as either level 1 or 2 of the fair value hierarchy.
Based on actuarial assumptions, estimated future defined benefit payments, which may be significantly impacted by participant elections related to retirement dates and forms of payment, are as follows:
|
|
|
|
|
|
Fiscal Year
|
|
2022
|
$
|
63,114
|
|
2023
|
180
|
|
2024
|
220
|
|
2025
|
170
|
|
2026
|
7,410
|
|
2027 - 2030
|
1,010
|
|
In fiscal 2020 the Company began the process of terminating the Village Super Market, Inc. Employees’ Retirement Plan. Upon satisfaction of all regulatory requirements, which is expected to occur during fiscal 2022, the Company will fully fund and liquidate all plan assets to purchase annuity contracts from an insurance company for all participants who do not elect a lump sum distribution. At the time of settlement, the Company will recognize a non-cash pre-tax charge representing the plan’s remaining unrecognized losses within accumulated other comprehensive loss as of the termination date. As of July 31, 2021,
the funded status of this plan is a net liability of $3,844 and the pre-tax amount included in Accumulated other comprehensive loss is $15,155. Contributions to the remaining plans are expected to be immaterial in fiscal 2022.
Multi-Employer Plans
The Company contributes to three multi-employer pension plans under collective bargaining agreements covering union-represented employees. These plans provide benefits to participants that are generally based on a fixed amount for each year of service. Based on the most recent information available, certain of these multi-employer plans are underfunded. The amount of any increase or decrease in Village’s required contributions to these multi-employer pension plans will depend upon the outcome of collective bargaining, actions taken by trustees who manage the plans, government regulations and the actual return on assets held in the plans, among other factors.
The risks of participating in multi-employer pension plans are different from the risks of participating in single-employer pension plans in the following respects:
•Assets contributed to a multi-employer plan by one employer may be used to provide benefits to employees of other participating employers.
•If a participating employer stops contributing to the plan, the unfunded obligations of the plan allocable to such withdrawing employer may be borne by the remaining participating employers.
•If the Company stops participating in some of its multi-employer pension plans, the Company may be required to pay those plans an amount based on its allocable share of the underfunded status of the plan, referred to as a withdrawal liability.
The Company’s participation in these plans is outlined in the following tables. The “EIN / Pension Plan Number” column provides the Employer Identification Number (“EIN”) and the three-digit pension plan number. The most recent “Pension Protection Act Zone Status” available in 2020 and 2019 is for the plan’s year-end at December 31, 2020 and December 31, 2019, respectively, unless otherwise noted. Among other factors, generally, plans in the red zone are less than 65 percent funded, plans in the yellow zone are between 65 and 80 percent funded and plans in the green zone are at least 80 percent funded. The “FIP/RP Status Pending / Implemented” column indicates plans for which a funding improvement plan (“FIP”) or a rehabilitation plan (“RP”) is either pending or has been implemented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Protection Act Zone Status
|
FIP/RP Status
Pending
/ Implemented
|
Contributions for the
year ended (5)
|
|
Expiration
date of
Collective-
Bargaining
Agreement
|
Pension Fund
|
EIN / Pension Plan Number
|
2020
|
2019
|
July 31,
2021
|
July 25,
2020
|
|
Surcharge
Imposed (6)
|
Pension Plan of Local 464A (1)
|
22-6051600-001
|
Green
|
Green
|
N/A
|
$
|
874
|
|
$
|
886
|
|
|
N/A
|
August 2025
|
UFCW Local 1262 & Employers Pension Fund (2), (4)
|
22-6074414-001
|
Red
|
Red
|
Implemented
|
2,721
|
|
2,789
|
|
|
No
|
October 2023
|
UFCW Regional Pension Plan (3), (4)
|
16-6062287-074
|
Red
|
Red
|
Implemented
|
$
|
1,260
|
|
$
|
1,231
|
|
|
No
|
June 2024
|
Total Contributions
|
|
|
|
|
$
|
4,855
|
|
$
|
4,906
|
|
|
|
|
(1)The information for this fund was obtained from the Form 5500 filed for the plan’s year-end at December 31, 2020 and December 31, 2019.
(2)The information for this fund was obtained from the Form 5500 filed for the plan’s year-end at December 31, 2019 and December 31, 2018.
(3)The information for this fund was obtained from the Form 5500 filed for the plan’s year-end at September 30, 2020 and September 30, 2019.
(4)This plan has elected to utilize special amortization provisions provided under the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010. There were no changes to the plan’s zone status as a result of this election.
(5)The Company’s contributions represent more than 5% of the total contributions received by each applicable pension fund for all periods presented.
(6)Under the Pension Protection Act, a surcharge may be imposed when employers make contributions under a collective bargaining agreement that is not in compliance with a rehabilitation plan. As of July 31, 2021, the collective bargaining agreements under which the Company was making contributions were in compliance with rehabilitation plans adopted by each applicable pension fund.
Other Multi-Employer Benefit Plans
The Company also contributes to various other multi-employer benefit plans that provide health and welfare benefits to active and retired participants. Total contributions made by the Company to these other multi-employer benefit plans were $33,270 and $29,965 in fiscal 2021 and 2020, respectively.
Defined Contribution Plans
The Company sponsors a 401(k) savings plan for certain eligible associates. Company contributions under that plan, which are based on specified percentages of associate contributions, were $1,791 and $1,765 in fiscal 2021 and 2020, respectively. The Company also contributes to union sponsored defined contribution plans for certain eligible associates. Company contributions under these plans were $3,296 and $2,296 in fiscal 2021 and 2020, respectively.
NOTE 10 — BUSINESS ACQUISITIONS
Fairway Acquisition
On May 14, 2020, Village completed its acquisition of certain assets, including five supermarkets averaging 52,000 sq. ft. (30,000 selling sq. ft.), a production distribution center (the “PDC”) and the intellectual property of Fairway Group Holdings Corp. and certain of its subsidiaries (“Fairway”), including the names “Fairway” and “Fairway Markets.” Four of the supermarkets are in Manhattan, specifically the Upper West Side, Upper East Side, Kips Bay and Chelsea locations, and a fifth store is located in Pelham, NY. The acquisition was effectuated pursuant to the Asset Purchase Agreement (the "APA"), entered into on January 20, 2020, revised on March 25, 2020 and approved by the United States Bankruptcy Court for the Southern District of New York through a Sale Order entered on April 20, 2020. Village paid $73,622 for the Fairway assets, net of cash acquired, and assumed certain liabilities, consisting primarily of those arising from acquired leases. Additionally, at the time of closing Village received a $2,035 credit arising from the breakup of Village’s initial “stalking horse” bid under the January 20, 2020 Asset Purchase Agreement. The credit was recognized as a reduction in operating and administrative expense in the fourth quarter of fiscal 2020. The Fairway acquisition expands our presence in New York City under an iconic city brand and provides Village the ability to expand centralized food production to support stores under all of our banners.
Village accounted for this transaction as a business combination in accordance with the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed be recognized at their estimated fair values as of the acquisition date. In connection with this acquisition, the Company recorded $11,540 of goodwill attributable to the assembled workforce and cost synergies. The goodwill related to this acquisition is deductible for tax purposes. Additionally, the Company recorded a $14,200 indefinite-lived intangible asset related to the trade name. The fair value of the intangible asset was determined based on the discounted cash flow model using the relief from royalty method. The fair value of the property, equipment and fixtures were determined based on the indirect cost approach in which current costs that were not new were adjusted for all forms of depreciation. The Company also evaluated the fair value of the leases assumed in the acquisition, which evaluated comparable rents in the areas of the locations. Leases were determined to be at market apart from one location. For this location, the Company recorded a favorable lease of $4,360 within Operating lease assets. The favorable lease is being amortized over the remaining duration of the lease. Transaction costs were expensed as incurred. The final allocation of the purchase price consideration to the assets acquired and the liabilities assumed has been completed.
The following table summarizes how the purchase price has been allocated to the assets acquired and liabilities assumed at the date of acquisition.
|
|
|
|
|
|
|
May 14,
2020
|
ASSETS
|
|
Current Assets
|
|
Cash and cash equivalents
|
$
|
257
|
|
Merchandise inventories
|
5,390
|
|
Other current assets
|
247
|
|
Total current assets
|
$
|
5,894
|
|
|
|
Property, equipment and fixtures, net
|
$
|
37,006
|
|
Operating lease assets
|
218,326
|
|
Trade name intangible asset
|
14,200
|
|
Other assets
|
271
|
|
Total assets
|
$
|
275,697
|
|
LIABILITIES
|
|
Accrued wages and benefits
|
$
|
623
|
|
Operating lease obligations
|
212,735
|
|
Total liabilities
|
$
|
213,358
|
|
|
|
Total Net Assets Acquired
|
$
|
62,339
|
|
Goodwill
|
11,540
|
|
Total Purchase Price
|
$
|
73,879
|
|
The pro forma information includes historical results of operations of the Fairway locations acquired but does not include efficiencies, cost reductions, synergies or investments for the Company’s customers expected to result from the acquisitions. The unaudited pro forma financial information in the table below is not necessarily indicative of the results that would have occurred had the Fairway locations been acquired at the beginning of fiscal year 2019.
|
|
|
|
|
|
|
|
|
Year ended
|
July 25,
2020
|
|
|
|
|
|
|
|
|
|
|
Sales
|
$
|
2,034,163
|
|
|
|
Net Income
|
30,313
|
|
|
|
NOTE 11 — COMMITMENTS and CONTINGENCIES
Superstorm Sandy devastated Village's trade area on October 29, 2012 and resulted in the closure of almost all of our stores for periods of time ranging from a few hours to eight days. Village disposed of substantial amounts of perishable product and also incurred repair, labor and other costs as a result of the storm. Wakefern, as the policy holder, has pursued recovery of uncollected insurance claims on behalf of all Wakefern members through litigation against the insurance carrier and others since October 2013. Litigation over this matter has ended and the Company received an additional $2,733 in fiscal 2020 which was recognized as a reduction in operating and administrative expense. Village has received a total of $6,730 related to losses incurred as a result of Superstorm Sandy.
Approximately 89% of our employees are covered by collective bargaining agreements. Contracts with the Company’s seven unions have or will expire between March 2020 and August 2025. Approximately 10% of our associates are represented by unions whose contracts have already expired or expire within one year. Any work stoppages could have an adverse impact on our financial results.
The Company is involved in other litigation incidental to the normal course of business. Company management is of the opinion that the ultimate resolution of these legal proceedings should not have a material adverse effect on the consolidated financial position, results of operations or liquidity of the Company.
NOTE 12 — SUBSEQUENT EVENTS
On October 13, 2021, Village completed the acquisition of the Galloway store shopping center for $9,800. As of July 31, 2021, the right-of-use asset and obligation related to the Galloway store's lease were $873 and $887, respectively.