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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended
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Jul. 25, 2020
Accounting Policies [Abstract] |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of operations Village Super Market, Inc. (the “Company” or “Village”) operates a chain of 35 supermarkets under the ShopRite and Fairway names in New Jersey, Maryland, New York and eastern Pennsylvania and three specialty markets under the Gourmet Garage name in New York City. The Company is a member of Wakefern Food Corporation ("Wakefern"), the nation's largest retailer-owned food cooperative and owner of the ShopRite, Fairway and Gourmet Garage names. This relationship provides Village many of the economies of scale in purchasing, distribution, store and own branded products, advanced retail technology, marketing and advertising associated with chains of greater size and geographic coverage. Principles of consolidation The consolidated financial statements include the accounts of Village Super Market, Inc. and its subsidiaries, which are wholly owned. Intercompany balances and transactions have been eliminated. Fiscal year The Company and its subsidiaries utilize a 52-53 week fiscal year ending on the last Saturday in the month of July. Fiscal 2020 and 2019 contain 52 weeks. Use of estimates In conformity with U.S. generally accepted accounting principles, management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Some of the more significant estimates are patronage dividends, pension accounting assumptions, accounting for contingencies, accounting for derivative instruments and hedging activities, purchase accounting and the impairment of long-lived assets and goodwill. Actual results could differ from those estimates. Industry segment The Company consists of one operating segment, the retail sale of food and nonfood products. Revenue recognition Revenue is recognized at the point of sale to the customer, including Pharmacy sales. Digital channel sales are recognized either upon pickup in-store or upon delivery to the customer, including any related service revenues. Sales tax is excluded from revenue. Discounts provided to customers through ShopRite coupons and loyalty programs are recognized as a reduction of sales as products are sold. Discounts provided by vendors are not recognized as a reduction in sales. Rather, the Company records a receivable from the vendor for the difference in sales price and payment received from the customer. The Company does not recognize revenue when it sells gift cards redeemable at Wakefern member stores. Payment collected from customers for sale of these gift card is passed on to Wakefern as they can be redeemed at other locations, including those operated by Wakefern or other Wakefern members. Revenue is recognized and a receivable from Wakefern is recorded when a customer redeems these gift cards to purchase products or services. Disaggregated Revenues The following table presents the Company's sales by product categories during each of the periods indicated:
|  |  |  |  |  |  |  |  | Years Ended |  |  |  |  |  |
|  |  |  |  |  |  |  |  | July 25, 2020 |  |  |  | July 27, 2019 |  |
|  |  |  |  |  |  |  |  | Amount |  | % |  | Amount |  | %
Center Store (1) |  |  |  |  |  |  |  |  | $ | 1,111,751 |  |  | 61.6 | % |  | $ | 1,011,232 |  |  | 61.5 | %
Fresh (2) |  |  |  |  |  |  |  |  | 616,271 |  |  | 34.2 | % |  | 558,245 |  |  | 34.0 | %
Pharmacy |  |  |  |  |  |  |  |  | 68,508 |  |  | 3.8 | % |  | 69,404 |  |  | 4.2 | %
Other (3) |  |  |  |  |  |  |  |  | 8,064 |  |  | 0.4 | % |  | 4,621 |  |  | 0.3 | %
Total Sales |  |  |  |  |  |  |  |  | $ | 1,804,594 |  |  | 100.0 | % |  | $ | 1,643,502 |  |  | 100.0 | %
(1) Consists primarily of grocery, dairy, frozen, health and beauty care, general merchandise and liquor. (2) Consists primarily of produce, meat, deli, seafood, bakery, prepared foods and floral. (3) Consists primarily of sales related to other income streams, including ShopRite from Home service fees, gift card and lottery commissions and wholesale sales. Cash and cash equivalents The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. Included in cash and cash equivalents are proceeds due from credit and debit card transactions, which typically settle within five business days, of $11,535 and $8,061 at July 25, 2020 and July 27, 2019, respectively. Included in cash and cash equivalents at July 25, 2020 and July 27, 2019 are $76,259 and $73,879, respectively, of demand deposits invested at Wakefern at overnight money market rates. Merchandise inventories Approximately 63% 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 $15,101 and $14,512 higher than reported in fiscal 2020 and 2019, respectively. All other inventories are stated at the lower of FIFO cost or market. Vendor allowances and rebates 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. 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. Accordingly, the fixed lease payments related to these leases will be recognized as an operating lease cost on a straight-line basis over the lease term, and eliminated depreciation and interest expense in the fiscal 2020 consolidated statement of operations. The Company recognized expense related to these leases in fiscal 2020 and 2019 as follows:
|  |  |  |  |  | 52 Weeks Ended |  |
Consolidated Statement of Operations Classification |  |  |  |  |  | July 25, 2020 |  | July 27, 2019
Operating and administrative expense |  |  |  |  |  | $ | 2,708 |  |  | $ | — |
Depreciation and amortization |  |  |  |  |  | — |  |  | 396 |
Interest expense |  |  |  |  |  | — |  |  | 2,145 |
|  |  |  |  |  | $ | 2,708 |  |  | $ | 2,541 |
The adoption of this standard also resulted in a change in naming convention for leases classified historically as capital leases to finance leases. The adoption of the new standard did not have a material impact on the consolidated statement of cash flows. Additional information on leases is provided in Note 7. Advertising Advertising costs are expensed as incurred. Advertising expense was $10,904 and $11,705 in fiscal 2020 and 2019, 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. 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. 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. 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.
| 2020 |  |  |  | 2019 |  |  |  |  |  |
| Class A |  | Class B |  | Class A |  | Class B |  |  |  |
Numerator: |  |  |  |  |  |  |  |  |  |  |
Net income allocated, basic | $ | 18,857 |  |  | $ | 5,363 |  |  | $ | 19,341 |  |  | $ | 5,538 |  |  |  |  |
Conversion of Class B to Class A shares | 5,363 |  |  | — |  |  | 5,538 |  |  | — |  |  |  |  |
Effect of share-based compensation on allocated net income | — |  |  | — |  |  | — |  |  | (1) |  |  |  |  |
Net income allocated, diluted | $ | 24,220 |  |  | $ | 5,363 |  |  | $ | 24,879 |  |  | $ | 5,537 |  |  |  |  |
Denominator: |  |  |  |  |  |  |  |  |  |  |
Weighted average shares outstanding, basic | 9,794 |  |  | 4,294 |  |  | 9,747 |  |  | 4,296 |  |  |  |  |
Conversion of Class B to Class A shares | 4,294 |  |  | — |  |  | 4,296 |  |  | — |  |  |  |  |
Dilutive effect of share-based compensation | — |  |  | — |  |  | — |  |  | — |  |  |  |  |
Weighted average shares outstanding, diluted | 14,088 |  |  | 4,294 |  |  | 14,043 |  |  | 4,296 |  |  |  |  |
Net income per share is as follows:
| 2020 |  |  |  | 2019 |  |  |  |  |  |
| Class A |  | Class B |  | Class A |  | Class B |  |  |  |
Basic | $ | 1.93 |  |  | $ | 1.25 |  |  | $ | 1.98 |  |  | $ | 1.29 |  |  |  |  |
Diluted | $ | 1.72 |  |  | $ | 1.25 |  |  | $ | 1.77 |  |  | $ | 1.29 |  |  |  |  |
Outstanding stock options to purchase Class A shares of 154 and 241 were excluded from the calculation of diluted net income per share at July 25, 2020 and July 27, 2019, respectively, as a result of their anti-dilutive effect. In addition, 413 and 323 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 25, 2020 and July 27, 2019, 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 August 2018, the FASB issued ASU 2018-14, "Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans." The guidance modifies disclosure requirements for defined benefit plans. This guidance is effective for fiscal years ending after December 15, 2020, and early adoption is permitted. The Company is currently assessing the potential impact of ASU 2018-14 on its consolidated financial statement disclosures.

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