What changed in this filing

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Item 1. Financial Statements

2022-05-05 compared with 2022-02-03 · 132 added, 43 removed, 307 unchanged (36% of the section changed)

36 unchanged sentences

150,000,000 shares authorized;

‎ 14,304,635 shares issued and outstanding December 25, 2021;

‎ 14,325,235 shares issued and outstanding March 26, 2022;

‎ 14,271,335 shares issued and outstanding at September 25, 2021

1 unchanged sentence

‎ 100,000,000 shares authorized;

‎ 4,689,741 shares issued and outstanding December 25, 2021;

‎ 4,669,141 shares issued and outstanding March 26, 2022;

‎ 4,723,041 shares issued and outstanding at September 25, 2021

2 unchanged sentences

( 3,426,140 )

Retained earnings

14 unchanged sentences

Operating and administrative expenses

(Loss) gain from sale or disposal of assets

Gain from sale or disposal of assets

Income from operations

6 unchanged sentences

Income tax expense

( 2,418,000 )

( 1,650,000 )

Other comprehensive income, net of tax

10 unchanged sentences

Class B Common Stock

See notes to unaudited condensed consolidated financial statements.

INGLES MARKETS, INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)

Six Months Ended

2,768,648,179

2,374,997,878

Cost of goods sold

2,069,541,379

1,750,309,345

Operating and administrative expenses

Gain from sale or disposal of assets

Income from operations

Other income, net

Interest expense

Income before income taxes

Income tax expense

Other comprehensive income:

Change in fair value of interest rate swap

Income tax expense

( 2,874,000 )

( 2,325,000 )

Other comprehensive income, net of tax

Comprehensive income

Per share amounts:

Class A Common Stock

Basic earnings per common share

Diluted earnings per common share

Class B Common Stock

Basic earnings per common share

Diluted earnings per common share

Cash dividends per common share

Class A Common Stock

Class B Common Stock

See notes to unaudited condensed consolidated financial statements.

INGLES MARKETS, INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

THREE MONTHS ENDED DECEMBER 25, 2021 AND DECEMBER 26, 2020

THREE AND SIX MONTHS ENDED MARCH 26, 2022 AND MARCH 27, 2021

Comprehensive

9 unchanged sentences

( 8,162,558 )

Other comprehensive income, net of income tax

Cash dividends

( 3,252,276 )

Stock repurchases, at cost

( 1,265,400 )

( 12,311,249 )

( 67,624,069 )

( 79,998,588 )

Common stock conversions

Balance, March 27, 2021

( 3,056,682 )

Balance, September 25, 2021

9 unchanged sentences

1,047,795,216

Other comprehensive income, net of income tax

Cash dividends

( 3,063,727 )

Common stock conversions

Balance, March 26, 2022

1,114,438,370

1,120,851,249

See notes to unaudited condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Three Months Ended

Six Months Ended

Cash Flows from Operating Activities:

2 unchanged sentences

Non cash operating lease cost

Loss (gain) from sale or disposal of assets

Gain from sale or disposal of assets

( 1,209,226 )

( 1,114,997 )

Receipt of advance payments on purchases contracts

Recognition of advance payments on purchases contracts

( 1,494,340 )

( 1,511,486 )

Deferred income taxes

5 unchanged sentences

( 19,763,979 )

( 8,462,044 )

( 1,415,060 )

Operating lease liabilities

2 unchanged sentences

Accounts payable and accrued expenses

( 15,861,984 )

( 21,731,932 )

Net Cash Provided by Operating Activities

16 unchanged sentences

( 12,317,464 )

Stock repurchases

( 79,998,588 )

Dividends paid

11 unchanged sentences

NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS

Three Months Ended December 25, 2021 and December 26, 2020

Three Months and Six Months Ended March 26, 2022 and March 27, 2021

BASIS OF PREPARATION

In the opinion of management, the accompanying unaudited interim financial statements contain all adjustments necessary to present fairly the Company’s financial position as of December 25, 2021 and the results of operations and changes in stockholders’ equity and cash flows for the three months ended December 25, 2021 and December 26, 2020.

In the opinion of management, the accompanying unaudited interim financial statements contain all adjustments necessary to present fairly the Company’s financial position as of March 26, 2022, and the results of operations and changes in stockholders’ equity for the three-month and six-month periods ended March 26, 2022 and March 27, 2021, and cash flows for the six months ended March 26, 2022 and March 27, 2021.

The adjustments made are of a normal recurring nature.

Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission for Form 10-Q.

It is suggested that these unaudited interim financial statements be read in conjunction with the audited financial statements and the notes thereto included in the Annual Report on Form 10-K for the year ended September 25, 2021, filed by the Company with the Securities and Exchange Commission on November 24, 2021.

The results of operations for the three months ended December 25, 2021 are not necessarily indicative of the results to be expected for the full fiscal year.

It is suggested that these unaudited interim financial statements be read in conjunction with the audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended September 25, 2021, filed with the Securities Exchange Commission on November 24, 2021.

The results of operations for the three-month and six-month periods ended March 26, 2022 are not necessarily indicative of the results to be expected for the full fiscal year.

NEW ACCOUNTING PRONOUNCEMENTS

12 unchanged sentences

ALLOWANCE FOR DOUBTFUL ACCOUNTS

Receivables are presented net of an allowance for doubtful accounts of $ 302,000 at December 25, 2021 and $ 157,000 at September 25, 2021.

Receivables are presented net of an allowance for doubtful accounts of $ 602,000 at March 26, 2022 and $ 157,000 at September 25, 2021.

The Company’s effective tax rate differs from the federal statutory rate primarily as a result of state income taxes and tax credits.

8 unchanged sentences

Interest payable

Income taxes payable

Self-insurance liabilities are established for general liability claims, workers’ compensation and employee group medical and dental benefits based on claims filed and estimates of claims incurred but not reported.

The Company is currently insured for covered costs in excess of $ 1.0 million per occurrence for workers’ compensation and for general liability and $ 450,000 per covered person for medical care benefits for a policy year.

The Company’s self-insurance reserves totaled $ 32.1 million at both December 25, 2021 and September 25, 2021.

Of this amount, $ 13.4 million is accounted for as a current liability and $ 18.7 million as a long-term liability, which is inclusive of $ 4.2 million of expected self-insurance recoveries from excess cost insurance or other sources that are recorded as a receivable at December 25, 2021.

The Company’s self-insurance reserves totaled $ 32.3 million and $ 32.1 million at March 26, 2022 and September 25, 2021, respectively.

Of this amount, $ 13.3 million is accounted for as a current liability and $ 19.0 million as a long-term liability, which is inclusive of $ 4.2 million of expected self-insurance recoveries from excess cost insurance or other sources that are recorded as a receivable at March 26, 2022.

At September 25, 2021, $ 13.3 million was accounted for as a current liability and $ 18.8 million as a long-term liability, which is inclusive of $ 4.2 million of expected self-insurance recoveries from excess cost insurance or other sources that are recorded as a receivable.

Employee insurance expense, including workers’ compensation and medical care benefits, net of employee contributions, totaled $ 13.4 million and $ 12.3 million for the three months ended December 25, 2021 and December 26, 2020, respectively.

Employee insurance expense, including workers’ compensation and medical care benefits, net of employee contributions, totaled $ 7.0 million and $ 8.2 million for the three-month periods ended March 26, 2022 and March 27, 2021, respectively.

For the six-month periods ended March 26, 2022 and March 27, 2021, employee insurance expense, net of employee contributions totaled $ 20.3 million and $ 20.5 million, respectively.

The Company’s fuel operations contain underground tanks for the storage of gasoline and diesel fuel.

1 unchanged sentence

The Company followed the FASB ASC 410 model for determining the asset retirement cost and asset retirement obligation.

The amounts recorded are immaterial for each fuel center as well as in the aggregate at December 25, 2021 and September 25, 2021.

The amounts recorded are immaterial for each fuel center as well as in the aggregate at March 26, 2022 and September 25, 2021.

LONG-TERM DEBT

In June 2021, the Company issued at par $ 350.0 million aggregate principal amount of 4.00 % senior notes due 2031 (the “Notes”).

In June 2021, the Company issued at par $ 350.0 million aggregate principal amount of 4.00 % senior notes due in 2031 (the “Notes”).

The Company may redeem all or a portion of the Notes at any time at the following redemption prices (expressed as percentages of the principal amount), if redeemed during the 12-month period beginning June 15 of the years indicated below:

2029 and thereafter

The Company had a $ 175.0 million line of credit that was scheduled to mature in September 2022 .

The Company had a $ 175.0 million line of credit that was scheduled to mature in S eptember 2022 .

In June 2021, the Company replaced that line by entering into a $ 150.0 million line of credit (the “Line”) that matures in June 2026.

The Line provides the Company with various interest rate options based on the prime rate, the Federal Funds Rate, or LIBOR.

The Line allows the Company to issue up to $ 10.0 million in letters of credit, of which none were issued at December 25, 2021.

The Line allows the Company to issue up to $ 10.0 million in letters of credit, of which none were issued at March 26, 2022.

The Company is not required to maintain compensating balances in connection with the Line.

At December 25, 2021, the Company had no borrowings outstanding under the Line.

At March 26, 2022, the Company had no borrowings outstanding under the Line.

In December 2010, the Company completed the funding of $ 99.7 million of bonds (the “ Bonds”) for construction of new warehouse and distribution space adjacent to its existing space in Buncombe County, North Carolina (the “Project”).

2 unchanged sentences

Mandatory redemption of the Bonds by the Company in the annual amount of $ 4.5 million began on January 1, 2014 .

The outstanding balance of the Bonds was $ 63.5 million as of December 25, 2021.

The outstanding balance of the Bonds was $ 59.0 million as of March 26, 2022.

The Company may redeem the Bonds without penalty or premium at any time prior to December 17, 2029 .

4 unchanged sentences

The Covenant Agreement incorporates substantially all financial covenants included in the Line.

In September 2017, the Company refinanced approximately $ 60 million secured borrowing obligations with a LIBOR-based amortizing floating rate loan secured by real estate maturing in October 2027 .

The Company has an interest rate swap agreement for a current notional amount of $ 33.5 million at a fixed rate of 3.92 %.

2 unchanged sentences

Both the floating rate debt and the interest rate swap have monthly principal amortization of $ 0.5 million and mature October 1, 2027 .

In December 2019, the Company closed a $ 155 million LIBOR-based amortizing floating rate loan secured by real estate maturing in January 2030.

The Company has an interest rate swap agreement for a current notional amount of $ 136.3 million at a fixed rate of 2.95 %.

4 unchanged sentences

The Company has designated the swaps as cash flow hedges and records the changes in the estimated fair value of the swaps to other comprehensive income each period.

For the three months ended December 25, 2021, the Company recorded $ 1.4 million of other comprehensive income, net of income taxes, in its Consolidated Statements of Comprehensive Income.

Unrealized losses of $ 2.7 million are included as a liability at fair value in the line “Other Long Term Liabilities” on the Consolidated Balance Sheet as of December 25, 2021.

For the three-month period ended December 26, 2020, the Company recorded $ 2.1 million of other comprehensive income, net of income taxes, in its Consolidated Statements of Comprehensive Income.

For the three- and six-month periods ended March 26, 2022, the Company recorded $ 7.5 million and $ 8.9 million of other comprehensive income, respectively, net of income taxes, in its Consolidated Statements of Comprehensive Income.

Unrealized gains of $ 7.2 million were recorded as an asset at fair value in the line “Other Assets” on the Consolidated Balance Sheet as of March 26, 2022.

For the three- and six-month periods ended March 27, 2021, the Company recorded $ 5.1 million and $ 7.2 million of other comprehensive income, respectively, net of income taxes, in its Consolidated Statements of Comprehensive Income.

Unrealized losses of $ 4.0 million were recorded as a liability at fair value in the line “Other Long Term Liabilities” on the Consolidated Balance Sheet as of March 27, 2021.

The Company’s long-term debt agreements generally contain provisions that under certain circumstances would permit lending institutions to terminate or withdraw their respective extensions of credit to the Company.

Included among the triggering factors permitting the termination or withdrawal of the Line to the Company are certain events of default, including both monetary and non-monetary defaults, the initiation of bankruptcy or insolvency proceedings, and the failure of the Company to meet certain financial covenants designated in its respective loan documents.

The Company was in compliance with all financial covenants at December 25, 2021.

The Company was in compliance with all financial covenants at March 26, 2022.

The Company’s long-term debt agreements generally have cross-default provisions which could result in the acceleration of payments due under all long-term debt agreements in the event of default under any one instrument.

At December 25, 2021, property and equipment with an undepreciated cost of approximately $ 277.4 million were pledged as collateral for long-term debt.

At March 26, 2022, property and equipment with an undepreciated cost of approximately $ 274.4 million was pledged as collateral for long-term debt.

Long-term debt and Line agreements contain various restrictive covenants requiring, among other things, minimum levels of net worth and maintenance of certain financial ratios.

At December 25, 2021, the Company had excess net worth totaling $ 267.1 million calculated under covenants in the Bonds, the Loan, and the Line.

At March 26, 2022, the Company had excess net worth totaling $ 305.9 million calculated under covenants in the Notes, the Bonds, the Loan, and the Line.

This amount is available to pay dividends;

3 unchanged sentences

The Company paid cash dividends of $ 0.165 for each share of Class A Common Stock and $ 0.15 for each share of Class B Common Stock on October 14, 2021 to stockholders of record on October 7, 2021 .

For additional information regarding the dividend rights of the Class A Common Stock and Class B Common Stock, please see Note 8, “Stockholders’ Equity” to the Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K filed by the Company with the Securities and Exchange Commission on November 24, 2021.

The Company paid cash dividends of $ 0.165 for each share of Class A Common Stock and $ 0.15 for each share of Class B Common Stock on January 13, 2022 to stockholders of record on January 6, 2022 .

EARNINGS PER COMMON SHARE

10 unchanged sentences

Three Months Ended

Six Months Ended

March 26, 2022

Allocated net income

Net income allocated, basic

Conversion of Class B to Class A shares

Net income allocated, diluted

Weighted average shares outstanding

Weighted average shares outstanding, basic

Conversion of Class B to Class A shares

Weighted average shares outstanding, diluted

Earnings per share

Three Months Ended

December 25, 2021

December 26, 2020

Six Months Ended

March 27, 2021

Allocated net income

10 unchanged sentences

The initial terms of the leases are generally 20 years.

The majority of the leases include one or more renewal options and provide that the Company pay property taxes, utilities, repairs and certain other costs incidental to occupation of the premises.

The majority of the leases includes one or more renewal options and provide that the Company pay property taxes, utilities, repairs and certain other costs incidental to occupation of the premises.

Several leases contain clauses calling for percentage rentals based upon gross sales of the supermarket occupying the leased space.

Step rent provisions, escalation clauses and lease incentives are taken into account in computing minimum lease payments.

Operating lease cost for all operating leases totaled $ 2.6 million for the three months ended December 25, 2021.

Operating lease cost for all operating leases totaled $ 3.0 million for the three months ended March 26, 2022 and $ 5.6 million for the six months ended March 26, 2022.

This amount includes short-term (less than one year) leases, common area expenses, and variable lease costs, all of which are insignificant.

Cash paid for lease liabilities in operating activities approximates operating lease cost.

Maturities of operating lease liabilities as of December 25, 2021 are as follows:

Maturities of operating lease liabilities as of March 26, 2022 were as follows:

Remainder of 2022

2 unchanged sentences

Present value of lease liabilities

On the Condensed Consolidated Balance Sheets, lease extensions exercised during fiscal year 2022 increased the line items “Operating lease right of use assets” and “Noncurrent operating lease liabilities” by $ 5.0 million each during the six months ended March 26, 2022.

The weighted average remaining lease term for the Company’s operating leases is 12.7 years.

The weighted average discount rate used to determine lease liability balances as of December 25, 2021 is 3.51 %, based on recent Company financings collateralized by store properties.

The weighted average discount rate used to determine lease liability balances as of March 26, 2022 was 3.51 %, based on recent Company financings collateralized by store properties.

Leases as Lessor

At December 25, 2021, the Company owned and operated 83 shopping centers in conjunction with its supermarket operations.

At March 26, 2022, the Company owned and operated 83 shopping centers in conjunction with its supermarket operations.

The Company leases to others a portion of its shopping center properties.

3 unchanged sentences

Three Months Ended

December 25, 2021

Six Months Ended

March 26, 2022

Rents earned on owned and subleased properties:

2 unchanged sentences

( 1,463,937 )

( 2,927,875 )

Other shopping center expenses

Future minimum operating lease receipts at December 25, 2021 are as follows:

( 1,318,152 )

Future minimum operating lease receipts at March 26, 2022 were as follows:

Remainder of 2022

5 unchanged sentences

Three Months Ended

Six Months Ended

Revenues from unaffiliated customers:

7 unchanged sentences

The perishables category includes meat, produce, deli and bakery.

For the three-month periods ended December 25, 2021 and December 26, 2020, respectively, the fluid dairy operation had $ 12.6 million and $ 12.3 million in sales to the grocery sales segment.

The fluid dairy operation had $ 13.1 million and $ 12.3 million in sales to the retail grocery segment for the three-month periods ended March 26, 2022 and March 27, 2021, respectively.

The fluid dairy had $ 25.6 million and $ 23.7 million in sales to the retail grocery segment for the six-month periods ended March 26, 2022 and March 27, 2021, respectively.

These sales have been eliminated in consolidation and are excluded from the amounts in the table above.

FAIR VALUES OF FINANCIAL INSTRUMENTS

The carrying amounts for cash and cash equivalents, short term investments, accounts receivable and accounts payable approximate fair value due to the short-term maturity of these instruments.

The carrying amounts for cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term maturity of these instruments.

The fair value of the Company’s debt and interest rate swaps are estimated using valuation techniques under the accounting guidance related to fair value measurements based on observable and unobservable inputs.

10 unchanged sentences

The inputs into the determination of fair value require significant management judgment or estimation.

The carrying amount and fair value of the Company’s debt, interest rate swaps, and non-qualified retirement plan assets at December 25, 2021 are as follows (in thousands):

The carrying amount and fair value of the Company’s debt, interest rate swaps, and non-qualified retirement plan assets at March 26, 2022 were as follows (in thousands):

Facility Bonds

Secured notes payable and other

Interest rate swap derivative contracts

Interest rate swap derivative contracts asset

Non-qualified retirement plan assets

5 unchanged sentences

The Company will from time to time make short-term non-interest bearing loans to the Company’s Investment/Profit Sharing Plan to allow the plan to meet distribution obligations during a time when the plan was prohibited from selling shares of the Company’s Class A Common Stock.

During the three months ended December 25, 2021, there were no such loans made, repaid or outstanding.

During the three months ended March 26, 2022, there were no such loans made, repaid or outstanding.

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

What changed 10-Q

Item 1. Financial Statements