What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-08-04 compared with 2022-05-05 · 103 added, 105 removed, 170 unchanged (55% of the section changed)

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In addition, the Company focuses on selling high-growth, high-margin products to its customers through the development of certified organic products, bakery departments and prepared foods including delicatessen sections.

As of March 26, 2022, the Company operated 111 in-store pharmacies and 107 fuel centers.

As of June 25, 2022, the Company operated 111 in-store pharmacies and 107 fuel centers.

Coronavirus (COVID-19) Pandemic Impact

The COVID-19 pandemic which began in March 2020 and has continued through the six months ended March 26, 2022, has impacted supermarket operations, as the Company implemented several enhanced cleaning and social distancing protocols designed to keep our customers and our associates safe.

The COVID-19 pandemic which began in March 2020 and has continued through the nine months ended June 25, 2022, has impacted supermarket operations, as the Company implemented several enhanced cleaning and social distancing protocols designed to keep our customers and our associates safe.

Since March 2020, the Company’s stores have experienced increased customer traffic and have experienced occasional product shortages due to supply chain issues.

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At the present time, we do not know how long and to what extent the pandemic could impact our sales and financial performance.

Critical Accounting Policies and Estimates

Critical accounting policies and estimates are those accounting policies and estimates that management believes are important to the presentation of the Company’s financial condition and results of operations, and require management’s most difficult, subjective or complex judgments, often as a result of the need to estimate the effect of matters that are inherently uncertain.

Critical Accounting Policies

Critical accounting policies are those accounting policies that management believes are important to the presentation of the Company’s financial condition and results of operations, and require management’s most difficult, subjective or complex judgments, often as a result of the need to estimate the effect of matters that are inherently uncertain.

Estimates are based on historical experience and other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

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however, liability coverage is maintained.

At March 26, 2022 the Company’s self-insurance reserves totaled $32.3 million.

At June 25, 2022 the Company’s self-insurance reserves totaled $31.0 million.

This amount is inclusive of $4.0 million of expected self-insurance recoveries from excess cost insurance or other sources that are recorded as a receivable.

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The Company monitors the carrying value of long-lived assets for potential impairment each quarter based on whether any indicators of impairment have occurred.

There were no asset impairments during the six-month period ended March 26, 2022.

There were no asset impairments during the nine-month period ended June 25, 2022.

Vendor Allowances

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In those instances, the allowances are applied as a reduction of merchandise costs using a rational and systematic methodology, which results in the recognition of these incentives when the inventory related to the vendor consideration received is sold.

Vendor allowances applied as a reduction of merchandise costs totaled $26.2 million and $28.9 million for the fiscal quarters ended March 26, 2022 and March 27, 2021, respectively.

For the six-month periods ended March 26, 2022 and March 27, 2021, vendor allowances applied as a reduction of merchandise costs totaled $58 million and $58.6 million, respectively.

Vendor advertising allowances that represent a reimbursement of specifically identifiable incremental

costs of advertising the vendor’s specific products are recorded as a reduction to the related expense in the period in which the related expense is incurred.

Vendor advertising allowances recorded as a reduction of advertising expense totaled $1.7 million and $2.1 million for the fiscal quarters ended March 26, 2022 and March 27, 2021, respectively.

For the six-month periods ended March 26, 2022 and March 27, 2021, vendor advertising allowances recorded as a reduction of advertising expense totaled $3.7 million and $4.0 million, respectively.

Overall, v endor allowances have been lower since the COVID-19 pandemic began.

Vendor allowances applied as a reduction of merchandise costs totaled $25.4 million and $30.0 million for the fiscal quarters ended June 25, 2022 and June 26, 2021, respectively.

For the nine-month periods ended June 25, 2022 and June 26, 2021, vendor allowances applied as a reduction of merchandise costs totaled $83.5 million and $88.7 million, respectively.

Vendor advertising allowances that represent a reimbursement of specifically identifiable incremental costs of advertising the vendor’s specific products are recorded as a reduction to the related expense in the period in which the related expense is incurred.

Vendor advertising allowances recorded as a reduction of advertising expense totaled $1.6 million and $2.0 million for the fiscal quarters ended June 25, 2022 and June 26, 2021, respectively.

For the nine-month periods ended June 25, 2022 and June 26, 2021, vendor advertising allowances recorded as a reduction of advertising expense totaled $5.3 million and $6.0 million, respectively.

If vendor advertising allowances were substantially reduced or eliminated, the Company would likely consider other methods of advertising, as well as the volume and frequency of the Company’s product advertising, which could increase or decrease the Company’s expenditures.

Additionally, the Company is not able to assess the impact of vendor advertising allowances on the creation of additional revenue, as such allowances do not directly generate revenue for the Company’s stores.

Additionally, the Company is not able to assess the impact of vendor advertising allowances on creating additional revenue, as such allowances do not directly generate revenue for the Company’s stores.

Results of Operations

Ingles operates on a 52 or 53-week fiscal year ending on the last Saturday in September.

There are 13 and 26 weeks of operations included in the Unaudited Condensed Consolidated Statements of Income for the three- and six-month periods ended March 26, 2022 and March 27, 2021, respectively.

There are 13 and 39 weeks of operations included in the Unaudited Condensed Consolidated Statements of Income for the three- and nine-month periods ended June 25, 2022 and June 26, 2021, respectively.

Comparable store sales are defined as sales by retail stores in operation for five full fiscal quarters.

Sales from replacement stores, major remodels and the addition of fuel stations to existing stores are included in the comparable store sales calculation from the date thereof.

Sales from replacement stores, major remodels and the addition of fuel stations to existing stores are included in the comparable store sales calculation from the date of replacement, completion of the remodel or date of addition of fuel station, respectively.

A replacement store is a newly opened store that replaces an existing nearby store that is closed.

A major remodel entails substantial remodeling of an existing store and includes additional retail square footage.

For the three- and six-month periods ended March 26, 2022, comparable store sales included 196 stores.

For the three- and six-month periods ended March 27, 2021, comparable store sales included 197 stores.

A major remodel entails substantial

remodeling of an existing store and includes additional retail square footage.

For both the three- and nine-month periods ended June 25, 2022 and June 26, 2021, comparable store sales included 196 and 197 stores, respectively.

The following table sets forth, for the periods indicated, selected financial information as a percentage of net sales.

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Three Months Ended

Six Months Ended

Nine Months Ended

Operating and administrative expenses

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Interest expense

Loss on early extinguishment of debt

Income tax expense

Three Months Ended March 26, 2022 Compared to the Three Months Ended March 27, 2021

Net income for the second quarter of fiscal 2022 totaled $68.6 million, compared with net income of $52.2 million for the second quarter of fiscal 2021.While the Company has incurred significant inventory cost increases and volatility, expenses did not increase as much as sales, resulting in higher pre-tax income.

Net sales increased by $193.0 million, or 16.3%, to $1.38 billion for the three months ended March 26, 2022 compared with $1.18 billion for the three months ended March 27, 2021.

Comparing the second quarter of fiscal 2022 with the second quarter of fiscal 2021, gasoline sales dollars and gallons sold were higher due to increased travel and an increase in market prices for fuel.

Three Months Ended June 25, 2022 Compared to the Three Months Ended June 26, 2021

Net income for the third quarter of fiscal 2022 totaled $67.8 million, compared with net income of $72.0 million earned for the third quarter of fiscal 2021.

Net sales increased by $180.7 million, or 14.2%, to $1.46 billion for the three months ended June 25, 2022 compared with $1.28 billion for the three months ended June 26, 2021.

Comparing the third quarter of fiscal 2022 with the third quarter of fiscal 2021, gasoline sales dollars and gallons sold were higher due to increased travel and an increase in market prices for fuel.

Excluding gasoline sales, total grocery comparable store sales increased 5.7% over the comparative fiscal quarter.

Comparing the second quarters of fiscal years 2022 and 2021 (and excluding gasoline), the number of customer transactions increased 5.3% and the average transaction size increased 5.0%.

Ingles operated 198 stores at both March 26, 2022 and March 27, 2021.

Retail square feet totaled approximately 11.3 million square feet at both March 26, 2022 and at March 27, 2021.

During the twelve months ended March 26, 2022, the Company opened one store and closed one store.

Comparing the third quarters of fiscal years 2022 and 2021 (and excluding gasoline), the number of customer transactions increased 2.3% and the average transaction size increased 3.4%.

Ingles operated 198 stores at June 25, 2022 and June 26, 2021.

Retail square feet totaled approximately 11.3 million square feet at June 25, 2022 and at June 26, 2021.

During the twelve months ended June 25, 2022, the Company opened one store and closed one store.

Sales by product category (in thousands) were as follows:

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

Changes in retail grocery sales for the quarter ended March 26, 2022 are summarized as follows (in thousands):

Total retail sales for the three months ended March 27, 2021

Changes in retail grocery sales for the quarter ended June 25, 2022 are summarized as follows (in thousands):

Total retail sales for the three months ended June 26, 2021

Comparable store sales increase (including gasoline)

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Impact of stores closed in fiscal 2021

Total retail sales for the three months ended March 26, 2022

Total retail sales for the three months ended June 25, 2022

Gross Profit.

Gross profit for the three-month period ended March 26, 2022 totaled $348.6 million, an increase of $38.1 million, or 12.3%, compared with gross profit of $310.5 million for the three-month period ended March 27, 2021.

Gross profit as a percentage of sales was 25.3% and 26.2% for the three months ended March 26, 2022 and March 27, 2021, respectively.

Gross profit for the three-month period ended June 25, 2022 totaled $351.9 million, an increase of $14.4 million, or 4.3%, compared with gross profit of $337.5 million for the three-month period ended June 26, 2021.

Gross profit as a percentage of sales was 24.1% and 26.4% for the three months ended June 25, 2022 and June 26, 2021, respectively.

Retail grocery gross margin,

excluding gasoline, was 44 basis points lower for the three months ended June 25, 2022 compared with the three months ended June 26, 2021.

Operating and Administrative Expenses.

Operating and administrative expenses increased $17.8 million, or 7.6%, to $254.7 million for the three months ended March 26, 2022, from $236.9 million for the three months ended March 27, 2021.

As a percentage of sales, operating and administrative expenses were 18.5% and 20.0% for the March 2022 and March 2021 quarters, respectively.

Excluding gasoline sales and associated gasoline operating expenses (primarily payroll), operating expenses were 21.5% of sales for the second fiscal quarter of 2022 compared with 22.3% for the second fiscal quarter of 2021.

Operating and administrative expenses increased $17.9 million, or 7.5%, to $257.3 million for the three months ended June 25, 2022, from $239.4 million for the three months ended June 26, 2021.

As a percentage of sales, operating and administrative expenses were 17.7% and 18.7% for the June 2022 and June 2021 quarters, respectively.

Excluding gasoline sales and associated gasoline operating expenses (primarily payroll), operating expenses were 21.4% of sales for the third fiscal quarter of 2022 compared with 21.3% for the third fiscal quarter of 2021.

A breakdown of the major changes in operating and administrative expenses is as follows:

Salaries and wages

Depreciation and amortization

Repairs and maintenance

Professional fees

Salaries and wages increased in dollars due to higher sales volume requiring additional hours, as well as increased wages due to labor market competition.

Depreciation expense increased due to equipment purchased for store improvements, technology improvements and the distribution network.

Bank charges increased as a result of increased sales and higher card usage compared with cash or checks.

Salaries and wages increased in dollars due to additional labor hours required for increased sales volume as well as due to overall increases in wages due to the competitive labor market.

Repairs and maintenance expense increased due to sales volume, fuel surcharges and rising costs in refrigerant.

Professional fees increased in conjunction with improvements to the Company’s information technology platforms.

Bank charges increased as a result of increased sales and higher card usage compared to cash or checks.

Gain from Sale or Disposal of Assets.

Gain from the sale or disposal of assets totaled $1.3 million during the three months ended March 26, 2022, primarily from the sale of rolling stock.

During the quarter ended March 27, 2021, the gain from the sale or disposal of assets totaled $0.7 million.

During the quarter ended June 25, 2022, the gain from the sale or disposal of assets was insignificant.

Gain from the sale or disposal of assets totaled $2.5 million during the three months ended June 26, 2021, primarily from the sale of a former store property

Interest Expense.

Interest expense totaled $5.4 million for the three-month period ended March 26, 2022 compared with $6.2 million for the three-month period ended March 27, 2021.

Total debt at March 2022 was $578.5 million compared with $647.8 million at March 2021.

Over the past twelve months, the Company has reduced or refinanced higher rate debt to lower rates.

Interest expense totaled $5.3 million for the three-month period ended June 25, 2022 compared with $5.5 million for the three-month period ended June 26, 2021.

Total debt at June 2022 was $575.2 million compared with $901.2 million at June 2021.

Excluding the $350.0 million aggregate principle of the Notes due in 2031 issued in June 2021, debt would total $551.2 million at June 26, 2021.

Income Taxes.

Income tax expense totaled $22.4 million for the three months ended March 26, 2022, an effective tax rate of 24.6% of pretax income.

Income tax expense totaled $16.6 million for the three months ended March 27, 2021, an effective tax rate of 24.1% of pretax income.

Net income totaled $68.6 million for the three-month period ended March 26, 2022 compared with $52.2 million for the three-month period ended March 27, 2021.

Basic and diluted earnings per share for Class A Common Stock were $3.70 and $3.61, respectively, for the March 2022 quarter, compared to $2.65 and $2.58, respectively, for the March 2021 quarter.

Basic and diluted earnings per share for Class B Common Stock were each $3.36 for the March 2022 quarter compared with $2.41 for the March 2021 quarter.

Six Months Ended March 26, 2022 Compared to the Six Months Ended March 27, 2021

Net income for the first half of fiscal 2022 totaled $134.8 million, compared with net income of $106.0 million earned for the first half of fiscal 2021.

Income tax expense totaled $22.7 million for the three months ended June 25, 2022 and June 26,2021, with an effective tax rate of 25.1% and 24.0% of pretax income, respectively.

Net income totaled $67.8 million for the three-month period ended June 25, 2022 compared with $72.0 million for the three-month period ended June 26, 2021.

Basic and diluted earnings per share for Class A Common Stock were $3.65 and $3.57, respectively, for the June 2022 quarter, compared to $3.88 and $3.79, respectively, for the June 2021 quarter.

Basic and diluted earnings per share for Class B Common Stock were each $3.32 for the June 2022 quarter compared with $3.52 for the June 2021 quarter.

Nine Months Ended June 25, 2022 Compared to the Nine Months Ended June 26, 2021

Net income for the nine months ended June 25, 2022 totaled $202.6 million, compared with net income of $178.0 million earned for the first nine months of fiscal 2021.

Retail grocery sales increased due to continued consumer trends seen since the beginning of the COVID-19 pandemic as well as the effects of inflation.

Corresponding operating expenses did not increase as much, resulting in higher pre-tax income.

Net sales increased by $393.7 million, or 16.6%, to $2.77 billion for the six months ended March 26, 2022 compared with $2.37 billion for the six months ended March 27, 2021.

Comparing the first half of fiscal 2022 with the first half of fiscal 2021, gasoline sales dollars and gallons sold were higher.

Excluding gasoline sales, total grocery comparable store sales increased 10.2% over the comparative six-month period.

Comparing the first halves of fiscal years 2022 and 2021 (and excluding gasoline), the number of customer transactions increased 6.3% and the average transaction size increased 4.2%.

Net sales increased by $574.4 million, or 15.7%, to $4.23 billion for the nine months ended June 25, 2022 compared with $3.65 billion for the nine months ended June 26, 2021.

Comparing the first nine months of fiscal 2022 with the first nine months of fiscal 2021, gasoline sales dollars and gallons sold were higher as market prices increased and travel increased.

Excluding gasoline sales, total grocery comparable store sales increased 8.6% over the comparative nine-month period.

Comparing the first nine months of fiscal years 2022 and 2021 (and excluding gasoline), the number of customer transactions increased 1.5% and the average transaction size increased 7.0%.

Sales by product category (in thousands) are as follows:

Six Months Ended

Nine Months Ended

Total retail grocery

Changes in retail grocery sales for the quarter ended March 26, 2022 are summarized as follows (in thousands):

Total retail sales for the six months ended March 27, 2021

Changes in retail grocery sales for the nine months ended June 25, 2022 are summarized as follows (in thousands):

Total retail sales for the nine months ended June 26, 2021

Comparable store sales increase (including gasoline)

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Impact of stores closed in fiscal 2021

Total retail sales for the six months ended March 26, 2022

Total retail sales for the nine months ended June 25, 2022

The grocery category includes grocery, dairy, and frozen foods.

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Gross Profit.

Gross profit for the six-month period ended March 26, 2022 totaled $699.1 million, an increase of $74.4 million, or 11.9%, compared with gross profit of $624.7 million for the six-month period ended March 27, 2021.

Gross profit as a percentage of sales was 25.3% and 26.3% for the six months ended March 26, 2022 and March 27, 2021, respectively.

Inflation and supply chain pressures have increased the cost of goods sold.

Gross profit for the nine-month period ended June 25, 2022 totaled $1.1 billion, an increase of $88.8 million, or 9.2%, compared with gross profit of $962.2 million for the nine-month period ended June 26, 2021.

Gross profit as a percentage of sales was 24.9% and 26.3% for the nine months ended June 25, 2022 and June 26, 2021, respectively.

Retail grocery gross margin, excluding gasoline, was one basis point higher for the nine months ended June 25, 2022 compared with the nine months ended June 26, 2021.

Operating and Administrative Expenses.

Operating and administrative expenses increased $39.8 million, or 8.4%, to $514.8 million for the six months ended March 26, 2022, from $475.0 million for the six months ended March 27, 2021.

As a percentage of sales, operating and administrative expenses were 18.6% and 20.0% for the March 2022 and March 2021 six-month periods, respectively.

Excluding gasoline sales and associated gasoline operating expenses (primarily payroll), operating expenses were 21.5% of sales for the first six months of 2022 compared with 22.1% for the first six months of 2021.

The fiscal 2022 first half expense percentages are lower due to additional pandemic-related sales during the first half of 2022.

Operating and administrative expenses increased $57.7 million, or 8.1%, to $772.2 million for the nine months ended June 25, 2022, from $714.5 million for the nine months ended June 26, 2021.

As a percentage of sales, operating and administrative expenses were 18.3% and 19.6% for the June 2022 and June 2021 nine-month periods, respectively.

Excluding gasoline sales and associated gasoline operating expenses (primarily payroll), operating expenses were 21.4% of sales for the first nine months of 2022 compared with 21.8% for the first nine months of 2021.

A breakdown of the major changes in operating and administrative expenses is as follows:

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Professional fees

Salaries and wages increased in dollars due to additional labor hours required for the increased sales volume and continued labor market pressures.

Depreciation expense increased due to equipment purchased for store improvements, technology and the distribution network.

Salaries and wages increased in dollars due to additional labor hours required for the increased sales volume, including extra labor needed in response to the COVID-19 pandemic .

Depreciation expense increased due to equipment purchased for store improvements, information technology, and the distribution network.

Bank charges increased as a result of increased sales and higher card usage compared with cash or checks.

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Gain from Sale or Disposal of Assets.

Gain from the sale or disposal of assets totaled $1.2 million during the six months ended March 26, 2022.

During the six-months ended March 27, 2021, the gain from the sale or disposal of assets totaled $1.1 million.

Gain from the sale or disposal of assets totaled $1.2 million during the nine months ended June 25, 2022, primarily from the rolling stock transactions.

During the nine months ended June 26, 2021, the gain from the sale or disposal of assets totaled $3.6 million primarily from the sale of a former store property.

Interest Expense.

Interest expense totaled $10.8 million for the six-month period ended March 26, 2022 compared with $12.6 million for the six -month period ended March 27, 2021.

Total debt at March 2022 was $578.5 million compared with $647.8 million at March 2021.

Over the past twelve months, the Company has reduced or refinanced higher rate debt to lower rates.

Interest expense totaled $16.1 million for the nine-month period ended June 25, 2022 compared with $18.1 million for the nine-month period ended June 26, 2021.

Over the past twelve months, the Company has reduced or refinanced its higher rate

Loss on Early Extinguishment of Debt.

During the nine-month June 2021 period, the Company wrote off $1.1 million of capitalized loan costs related to the retirement of the 2023 Notes and the Company’s former line of credit .

Income Taxes.

Income tax expense totaled $42.8 million for the six months ended March 26, 2022, an effective tax rate of 24.1% of pretax income.

Income tax expense totaled $33.5 million for the six months ended March 27, 2021, an effective tax rate of 24.0% of pretax income.

Net income totaled $134.8 million for the six-month period ended March 26, 2022 compared with $106.0 million for the six-month period ended March 27, 2021.

Basic and diluted earnings per share for Class A Common Stock were $7.26 and $7.10, respectively, for the six months ended March 26, 2022, compared to $5.38 and $5.24, respectively, for the six months ended March 27, 2021.

Basic and diluted earnings per share for Class B Common Stock were each $6.60 for the six-months ended March 26, 2022 compared with $4.89 for the six months ended March 27, 2021.

Income tax expense totaled $65.5 million for the nine months ended June 25, 2022, an effective tax rate of 24.4% of pretax income.

Income tax expense totaled $56.2 million for the nine months ended June 26, 2021, an effective tax rate of 24.0% of pretax income.

Net income totaled $202.6 million for the nine-month period ended June 25, 2022 compared with $178.0 million for the nine-month period ended June 26, 2021.

Basic and diluted earnings per share for Class A Common Stock were $10.91 and $10.67, respectively, for the nine months ended June 25, 2022, compared to $9.22 and $8.98, respectively, for the nine months ended June 26, 2021.

Basic and diluted earnings per share for Class B Common Stock were each $9.92 for the nine-months ended June 25, 2022 compared with $8.38 for the nine months ended June 26, 2021.

Liquidity and Capital Resources

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The Company’s modernization program includes the opening of new stores, the completion of major remodels and expansion of selected existing stores, the relocation of selected existing stores to larger, more convenient locations and the completion of minor remodeling of its remaining existing stores.

Capital expenditures totaled $34.1 million for the six-month period ended March 26, 2022.

These capital expenditures focused on construction on stores opened or scheduled to open in fiscal 2022, site acquisition, and smaller-scale remodeling projects in a number of the Company’s stores.

Capital expenditures totaled $73.2 million for the nine-month period ended June 25, 2022.

These capital expenditures focused on construction of stores scheduled to open in fiscal 2023, site acquisition, and smaller-scale remodeling projects in a number of the Company’s stores.

Capital expenditures also included the costs of upgrading and replacing store equipment, technology investments, rolling stock, and capital expenditures related to the Company’s milk processing plant.

Capital expenditures were lower this quarter as compared to the same quarter in 2021 due to both increased costs and reduced availability of labor and materials.

The Company expects to increase capital expenditures when labor and material costs normalize.

Ingles’ capital expenditure plans for fiscal 2022 currently include investments of approximately $100 to $120 million.

The Company currently plans to dedicate the majority of its fiscal 2022 capital expenditures to continued improvement of its store base and also include investments in stores expected to open in fiscal 2022, as well as technology improvements, upgrading and replacing existing store equipment and warehouse and transportation equipment and improvements to the Company’s milk processing plant.

The Company currently plans to dedicate the remainder of its fiscal 2022 capital expenditures to continued improvement of its store base, technology improvements, upgrading and replacing existing store equipment and warehouse and transportation equipment and improvements to the Company’s milk processing plant.

The Company currently expects that its annual capital expenditures will be in the range of approximately $100 to $160 million going forward in order to maintain a modern store base.

Among other things, planned expenditures for any given future fiscal year will be affected by the availability of financing, which can affect both the number of projects pursued at any given time and the cost of those projects.

The number of projects may also fluctuate due to the varying costs of the types of projects pursued including new stores and

major remodel/expansions.

The number of projects may also fluctuate due to the varying costs of the types of projects pursued including new stores and major remodel/expansions.

The Company makes decisions on the allocation of capital expenditure dollars based on many factors including the competitive environment, other Company capital initiatives and its financial condition.

The Company does not generally enter into commitments for capital expenditures other than on a store-by-store basis at the time it begins construction on a new store or begins a major or minor remodeling project.

Outstanding construction commitments totaled $15.6 million at March 26, 2022.

The Company generated $155.5 million net cash from operations in the March 2022 six-month period compared with $114.7 million during the March 2021 six-month period.

Cash from operations increased by $40.1 million due to higher net income and less working capital needs during the March 2022 six-month period compared with the March 2021 six-month period.

Cash used by investing activities for the six-month periods ended March 26, 2022 and March 27, 2021 totaled $142.6 million and $68.1 million, respectively, consisting primarily of capital expenditures offset by proceeds from property and equipment sales.

Lower current year capital expenditures and increased purchases of short term investments as compared to the prior year period account for the difference in investing activities between the two six-month periods.

Cash used by financing activities totaled $17.6 million for the six-month period ended March 26, 2022, compared with $44.6 million for the six-month period ended March 27, 2021.

The decrease is primarily related to the repurchase of common stock during the prior fiscal year, part of which was funded with borrowings under the Line.

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

Outstanding construction commitments totaled $10.9 million at June 25, 2022.

The Company generated $261.6 million net cash from operations in the June 2022 nine-month period compared with $213.9 million during the June 2021 nine-month period.

Net income was higher for the nine-month 2022 period compared with the prior year, and the nine-month 2021 year had higher working capital needs to maintain and build inventory levels back to more normal levels following the beginning of the COVID-19 Pandemic.

Cash used by investing activities for the nine-month periods ended June 25, 2022 and June 26, 2021 totaled $181.8 million and $396.4 million, respectively.

The decrease for the nine-month period ended June 2022 compared to the nine-month period ended June 2021, was primarily related to the $295.0 million of proceeds invested in short-term investments from the Company’s issuance of $350.0 million aggregate principal amount of 4.00% senior notes (the “2031 Notes”) prior to the redemption of the 2023 Notes in July 2021.

The decrease was offset by $110 million purchases of short-term investments in 2022.

Cash used by financing activities totaled $24.1 million for the nine-month period ended June 25, 2022, compared with cash provided by financing activities of $200.1 million for the nine-month period ended June 26, 2021.

The decrease is primarily related to the issuance of the 2031 Notes, offset by the repurchase of common stock and the net repayments of short-term borrowings during the 2021 period.

In June 2021, the Company issued the 2031 Notes.

The 2031 Notes bear an interest rate of 4.00% per annum and were issued at par.

Upon issuance of the Notes, the Company issued an irrevocable notice to redeem the remaining $295.0 million aggregate principle amount of the Company’s 5.75% senior notes due 2023, which the Company redeemed at par value on July 16, 2021.

Upon issuance of the 2031 Notes, the Company issued an irrevocable notice to redeem the remaining $295.0 million principal amount of the 2023 Notes, which the Company redeemed at par value on July 16, 2021.

The Company has 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 no letters of credit were issued at March 26, 2022.

The Line allows the Company to issue up to $10.0 million in letters of credit, of which none were issued at June 25, 2022.

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

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

At June 25, 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 the construction of new warehouse and distribution space adjacent to its existing space in Buncombe County, North Carolina (the “Project”).

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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 is $59.0 million as of March 26, 2022.

The outstanding balance of the Bonds is $59.0 million as of June 25, 2022.

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

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Under this agreement, the Company pays monthly the fixed rate of 3.92% and receives the one-month LIBOR plus 1.65%.

The interest rate swap effectively hedges floating rate debt in the same amount as the current notional amount of the interest swap.

The interest rate swap effectively hedges floating rate debt in the same amount as the current notional amount of the interest rate swap.

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

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Both the floating rate debt and the interest rate swap have monthly principal amortization of $0.65 million and mature in fiscal year 2030.

The fair market value of the interest rate swaps are measured quarterly with adjustments recorded in other comprehensive income.

The fair market value of the interest rate swaps is measured quarterly with adjustments recorded in other comprehensive income.

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

1 unchanged sentence

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.

As of March 26, 2022, the Company was in compliance with these covenants.

Under the most restrictive of these covenants, the Company would be able to incur approximately $2.3 billion of additional borrowings (including borrowings under the Line) as of March 26, 2022.

As of June 25, 2022, the Company was in compliance with these covenants.

Under the most restrictive of these covenants, the Company would be able to incur approximately $2.3 billion of additional borrowings (including borrowings under the Line) as of June 25, 2022.

The Company’s principal sources of liquidity are expected to be cash flow from operations, borrowings under the Line and long-term debt financing.

21 unchanged sentences

One of the Company’s significant costs is labor, which increases with general increases in inflation.

Inflation or deflation in energy costs affects the Company’s gasoline sales, distribution expenses and plastic supply costs.

Inflation and deflation in energy costs affects the Company’s gasoline sales, distribution expenses and plastic supply costs.

Twelve Months Ended

19 unchanged sentences

Consequently, actual events affecting the Company and the impact of such events on the Company’s operations may vary significantly from those described in this report or contemplated or implied by statements in this report.

The Company does not undertake and specifically denies any obligation to update any such statements or to publicly announce the results of any revisions to any such statements to reflect future events or developments, except to the extent required by applicable law.

The Company does not undertake and

specifically denies any obligation to update any such statements or to publicly announce the results of any revisions to any such statements to reflect future events or developments, except to the extent required by applicable law.

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 2. Management’s Discussion and Analysis