What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-02-02 compared with 2022-08-04 · 70 added, 168 removed, 292 unchanged (45% of the section changed)

5 unchanged sentences

Cash and cash equivalents

Short term investments

Receivables - net

28 unchanged sentences

150,000,000 shares authorized;

‎ 14,372,410 shares issued and outstanding June 25, 2022;

‎ 14,386,700 shares issued and outstanding December 24, 2022;

‎ 14,377,575 shares issued and outstanding at September 24, 2022

1 unchanged sentence

‎ 100,000,000 shares authorized;

‎ 4,621,966 shares issued and outstanding June 25, 2022;

‎ 4,607,676 shares issued and outstanding December 24, 2022;

‎ 4,616,801 shares issued and outstanding at September 24, 2022

Paid-in capital in excess of par value

Accumulated other comprehensive income (loss)

( 3,426,140 )

Accumulated other comprehensive income

Retained earnings

1,312,544,815

1,246,238,155

Total Stockholders’ Equity

1,324,750,578

1,259,594,425

Total Liabilities and Stockholders’ Equity

9 unchanged sentences

1,122,159,216

Operating and administrative expenses

Gain from sale or disposal of assets

Income from operations

Other income, net

Interest expense

Loss on early extinguishment of debt

Income before income taxes

Income tax expense

Other comprehensive income (loss):

Change in fair value of interest rate swap

Income tax (benefit) expense

1,040,985,244

Other comprehensive income (loss), 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 INCOME AND COMPREHENSIVE INCOME (UNAUDITED)

Nine Months Ended

4,226,814,981

3,652,463,010

Cost of goods sold

3,175,829,075

2,690,309,051

1,050,985,906

Operating and administrative expenses

Gain from sale or disposal of assets

Gain (loss) from sale or disposal of assets

Income from operations

1 unchanged sentence

Interest expense

Loss on early extinguishment of debt

Income before income taxes

Income tax expense

Other comprehensive income:

Other comprehensive (loss) income:

Change in fair value of interest rate swap

Income tax benefit

( 1,522,507 )

Income tax benefit (expense)

Other comprehensive (loss) income, net of tax

( 1,150,507 )

Other comprehensive income, net of tax

Comprehensive income

12 unchanged sentences

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

THREE AND NINE MONTHS ENDED JUNE 25, 2022 AND JUNE 26, 2021

THREE MONTHS ENDED DECEMBER 24, 2022 AND DECEMBER 25, 2021

Comprehensive

9 unchanged sentences

( 2,015,253 )

Other comprehensive income, net of income tax

Cash dividends

1,048,860,750

1,047,795,216

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 )

Other comprehensive loss, net of income tax

Cash dividends

( 3,062,957 )

Stock repurchases, at cost

Common stock conversions

Balance, June 26, 2021

( 3,710,997 )

Balance, September 24, 2022

1,246,238,155

Other comprehensive income, net of income tax

Cash dividends

1,259,594,425

( 3,063,227 )

Common stock conversions

Balance, December 25, 2021

( 2,015,253 )

1,048,860,750

1,047,795,216

Other comprehensive income, net of income tax

Cash dividends

( 1,150,507 )

Common stock conversions

Balance, March 26, 2022

1,114,438,370

1,120,851,249

Other comprehensive income, net of income tax

Cash dividends

2 unchanged sentences

Common stock conversions

Balance, June 25, 2022

Balance, December 24, 2022

1,312,544,815

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Nine Months Ended

Three Months Ended

Cash Flows from Operating Activities:

2 unchanged sentences

Non cash operating lease cost

Gain from sale or disposal of assets

( 1,235,886 )

( 3,644,501 )

Loss on early extinguishment of debt

Loss (gain) from sale or disposal of assets

Receipt of advance payments on purchases contracts

Recognition of advance payments on purchases contracts

( 2,239,005 )

( 2,203,915 )

Deferred income taxes

6 unchanged sentences

( 3,759,603 )

( 2,227,902 )

Operating lease liabilities

7 unchanged sentences

( 110,007,106 )

( 295,000,000 )

Proceeds from sales of property and equipment

6 unchanged sentences

Cash Flows from Financing Activities:

Proceeds from short-term borrowings

Payments on short-term borrowings

Principal payments on long-term borrowings

( 7,625,680 )

Proceeds from issuance of bonds

Debt issuance costs

( 3,459,139 )

Principal payments on long-term borrowings

Dividends paid

( 3,064,821 )

( 3,063,227 )

Stock repurchases

Net Cash Used by Financing Activities

( 10,690,501 )

Dividends paid

( 6,522,366 )

Net Decrease in Cash and Cash Equivalents

( 11,617,859 )

Net Cash (Used) Provided by Financing Activities

( 42,669,131 )

Net Increase in Cash and Cash Equivalents

Cash and cash equivalents at beginning of period

3 unchanged sentences

NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS

Three Months and Nine Months Ended June 25, 2022 and June 26, 2021

Three Months Ended December 24, 2022 and December 25, 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 June 25, 2022, and the results of operations and changes in stockholders’ equity for the three-month and nine-month periods ended June 25, 2022 and June 26, 2021, and cash flows for the nine months ended June 25, 2022 and June 26, 2021.

In the opinion of management, the accompanying unaudited interim financial statements contain all adjustments necessary to present fairly the financial position as of December 24, 2022 and the results of operations, changes in stockholders’ equity and cash flows of Ingles Markets, Incorporated, a North Carolina corporation (“Ingles”, the “Company”, “we”, “us”, or “our”),

‎ for the three months ended December 24, 2022 and December 25, 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.

Certain information and footnote disclosures 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 24, 2022, filed by the Company under the Securities Exchange Act of 1934, on November 23, 2022.

The results of operations for the three-month and nine-month periods ended June 25, 2022 are not necessarily indicative of the results to be expected for the full fiscal year.

The results of operations for the three months ended December 24, 2022 are not necessarily indicative of the results to be expected for the full fiscal year.

NEW ACCOUNTING PRONOUNCEMENTS

4 unchanged sentences

Entities are permitted to apply the amendments to all contracts, cash flow and net investment hedge relationships that exist as of March 12, 2020.

The relief provided in this ASU is only available for a limited time, generally through December 31, 2022.

The relief provided in this ASU has been extended through December 31, 2024.

The Company’s debt agreements and interest rate swaps that utilize LIBOR have not yet discontinued the use of LIBOR and, therefore, this ASU is not yet effective for us.

To the extent our debt and interest rate swap arrangements change to another accepted rate, we will utilize the relief in this ASU to continue hedge accounting.

To the extent our debt and interest rate swap arrangements change to another accepted rate within the timeline provided by this ASU, we will utilize the relief in this ASU to continue hedge accounting.

SHORT TERM INVESTMENTS

The Company purchases financial products that can be readily converted into cash, and the Company accounts for such financial products as short-term investments.

From time to time, the Company purchases financial products that can be readily converted into cash, and the Company accounts for such financial products as short-term investments.

The financial products include money market funds, bonds and mutual funds.

1 unchanged sentence

ALLOWANCE FOR DOUBTFUL ACCOUNTS

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

Receivables are presented net of an allowance for doubtful accounts of $ 382,683 at December 24, 2022 and $ 382,657 at September 24, 2022.

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 $ 475,000 per covered person for medical care benefits for a policy year.

The Company’s self-insurance reserves totaled $ 31.0 million and $ 32.1 million at June 25, 2022 and September 25, 2021, respectively.

Of this amount, $ 13.1 million is accounted for as a current liability and $ 17.9 million as a long-term liability, which is inclusive of $ 4.0 million of expected self-insurance recoveries from excess cost insurance or other sources that are recorded as a receivable at June 25, 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 $ 7.9 million and $ 7.8 million for the three-month periods ended June 25, 2022 and June 26, 2021, respectively.

For both the nine-month periods ended June 25, 2022 and June 26, 2021, employee insurance expense, net of employee contributions totaled $ 28.2 million.

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

The Company reviewed FASB Accounting Standards Codification Topic 410 (“FASB ASC 410”) and determined we have a legal obligation to remove tanks at a point in the future and accordingly determined we have met the requirements of an asset retirement obligation.

The Company’s self-insurance reserves totaled $ 31.1 million at December 24, 2022.

Of this amount, $ 12.9 million is accounted for as a current liability and $ 18.2 million as a long-term liability, which is inclusive of $ 4.1 million of expected self-insurance recoveries from excess cost insurance or other sources that are recorded as a receivable.

At September 24, 2022, the Company’s self-insurance reserves totaled $ 31.0 million of which $ 13.2 million was accounted for as a current liability and $ 17.8 million as a long-term liability, which is inclusive of $ 4.0 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 $ 10.8 million and $ 13.4 million for the three months ended December 24, 2022 and December 25, 2021, respectively.

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

The Company reviewed FASB Accounting Standards Codification Topic 410 (“FASB ASC 410”) and determined we have a legal obligation to remove tanks at various points in the future and accordingly determined we have met the requirements of an asset retirement obligation.

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 June 25, 2022 and September 25, 2021.

The amounts recorded were immaterial for each fuel center as well as in the aggregate, at December 24, 2022 and September 24, 2022.

LONG-TERM DEBT

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

In June 2021, the Company issued at par $ 350.0 million aggregate principal amount of 4.00 % senior notes due 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.

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 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 none were issued at June 25, 2022.

The Line allows the Company to issue up to $ 10.0 million in letters of credit, of which none were issued at December 24, 2022.

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

At June 25, 2022, the Company had no borrowings outstanding under the Line.

At December 24, 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 $ 59.0 million as of June 25, 2022.

The outstanding balance of the Bonds was $ 59.0 million as of December 24, 2022.

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

The Covenant Agreement was amended during the quarter ended December 25, 2021, to extend the holding period and reduce the interest rate on the Bonds.

The Covenant Agreement was amended during the quarter ended December 25, 2021 to extend the holding period from September 2026 to December 2029 and reduce the interest rate on the Bonds.

Interest earned by bondholders on the Bonds is exempt from Federal and North Carolina income taxation.

2 unchanged sentences

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

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

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

The Company has an interest rate swap agreement for a current notional amount of $ 29.0 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.

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

The Company has an interest rate swap agreement for a current notional amount of $ 130.5 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- and nine-month periods ended June 25, 2022, the Company recorded $ 3.3 million and $ 12.2 million of other comprehensive income, net of income taxes, respectively, in its Consolidated Statements of Comprehensive Income.

Unrealized gains of $ 11.6 million are recorded as an asset at fair value in the line “Other Assets” on the Consolidated Balance Sheet as of June 25, 2022.

For the three- and nine-month periods ended June 26, 2021, the Company recorded $ 0.7 million of other comprehensive loss and $ 6.5 million of other comprehensive income, net of income taxes, respectively, in its Consolidated Statements of Comprehensive Income.

Unrealized losses of $ 4.9 million are recorded as a liability at fair value in the line “Other Long Term Liabilities” on the Consolidated Balance Sheet as of June 26, 2021.

For the three months ended December 24, 2022, the Company recorded $ 1.2 million of other comprehensive loss, net of income taxes, in its Consolidated Statements of Comprehensive Income.

Unrealized gains of $ 14.9 million are included as an asset at fair value in the line “Other Assets” on the Consolidated Balance Sheet as of December 24, 2022.

For the three-month period 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.

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 June 25, 2022.

The Company was in compliance with all financial covenants at December 24, 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 June 25, 2022, property and equipment with an undepreciated cost of approximately $ 271.5 million was pledged as collateral for long-term debt.

At December 24, 2022, property and equipment with an undepreciated cost of approximately $ 260.0 million were 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 June 25, 2022, the Company had excess net worth totaling $ 340.0 million calculated under covenants in the Notes, the Bonds, the Loan, and the Line.

At December 24, 2022, the Company had excess net worth totaling $ 406.1 million calculated under covenants in the Bonds, various floating rate loans (the “Loans”), 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 13, 2022 to stockholders of record on October 6, 2022 .

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 .

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 April 14, 2022 to stockholders of record on April 7, 2022 .

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 under the Securities Exchange Act of 1934, on November 23, 2022.

1 unchanged sentence

The Company has two classes of common stock:

Class A, which is publicly traded, and Class B, which has no public market.

Class A Common Stock which is publicly traded, and Class B Common Stock, which has no public market.

The Class B Common Stock has restrictions on transfer;

7 unchanged sentences

Three Months Ended

Nine Months Ended

June 25, 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

Nine Months Ended

June 26, 2021

December 24, 2022

December 25, 2021

Allocated net income

10 unchanged sentences

The initial terms of the leases are generally 20 years.

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.

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

Several leases contain clauses that require rental payments based on a percentage of 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 June 25, 2022 and $ 8.2 million for the nine months ended June 25, 2022.

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

Operating lease cost for all operating leases totaled $ 2.6 million for the three months ended December 24, 2022.

This amount included 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 June 25, 2022 were as follows:

Maturities of operating lease liabilities as of December 24, 2022 were as follows:

Remainder of 2023

2 unchanged sentences

Present value of lease liabilities

On the Condensed Consolidated Balance Sheets, lease extensions exercised less leased properties purchased during fiscal year 2022 increased the line items “Operating lease right of use assets” and “Noncurrent operating lease liabilities” by $ 3.1 million each during the nine months ended June 25, 2022.

The weighted average remaining lease term for the Company’s operating leases is 12.8 years.

The weighted average discount rate used to determine lease liability balances as of June 25, 2022 is 3.51 %, based on the most recent Company financings collateralized by store properties.

The weighted average discount rate used to determine lease liability balances as of December 24, 2022 was 3.51 %, based on our incremental borrowing rate.

Leases as Lessor

At June 25, 2022, the Company owned and operated 84 shopping centers in conjunction with its supermarket operations.

At December 24, 2022, the Company owned and operated 89 shopping centers in conjunction with its supermarket operations.

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

The leases are non-cancelable operating lease agreements for periods ranging up to 20 years.

The leases are non-cancelable operating lease agreements for terms ranging up to 20 years.

Rental income is included in the line item “Net sales” on the Consolidated Statements of Income.

1 unchanged sentence

Three Months Ended

Nine Months Ended

June 25, 2022

December 24, 2022

Rents earned on owned and subleased properties:

2 unchanged sentences

( 1,579,722 )

( 4,391,812 )

Other shopping center expenses

( 1,976,474 )

Future minimum operating lease receipts at June 25, 2022 are as follows:

Future minimum operating lease receipts at December 24, 2022 are as follows:

Remainder of 2023

5 unchanged sentences

Three Months Ended

Nine Months Ended

Revenues from unaffiliated customers:

7 unchanged sentences

The “Perishables” category includes meat, produce, deli and bakery.

For the three-month periods ended June 25, 2022 and June 26, 2021, the fluid dairy operation had $ 12.8 million and $ 11.1 million in sales, respectively to the grocery sales segment.

The fluid dairy operation had $ 38.5 million and $ 34.8 million in sales to the retail grocery segment for the nine-month periods ended June 25, 2022 and June 26, 2021, respectively.

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

The fluid dairy operation sales to the grocery sales segment have been eliminated in consolidation and are excluded from the amounts in the table above.

FAIR VALUES OF FINANCIAL INSTRUMENTS

12 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 June 25, 2022 were as follows (in thousands):

Facility Bonds

The carrying amount and fair value of the Company’s debt, interest rate swaps, and non-qualified retirement plan assets at December 24, 2022 were as follows (in thousands):

Senior Notes due 2031

Facility Bonds due 2036

Secured notes payable and other

Interest rate swap derivative contracts asset

Interest rate swap derivative assets

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 nine months ended June 25, 2022, no such loans were made, repaid or outstanding.

During the three months ended December 24, 2022, there were no such loans made, repaid or outstanding.

During the three months ended December 24, 2022, a limited liability corporation having Robert P.

Ingle II, the Company’s Chairman of the Board, as one of its principals, purchased a shopping center, from an unrelated party at which the Company has a long-term lease in place.

The Company’s lease was in place prior to such purchase, and the terms of the lease have not changed since it was originally negotiated.

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