What changed in this filing

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Item 1. Financial Statements

2023-05-04 compared with 2023-02-02 · 117 added, 42 removed, 320 unchanged (33% of the section changed)

27 unchanged sentences

1,035,916,300

Stockholders’ Equity

5 unchanged sentences

150,000,000 shares authorized;

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

‎ 14,386,925 shares issued and outstanding March 25, 2023;

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

1 unchanged sentence

‎ 100,000,000 shares authorized;

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

‎ 4,607,451 shares issued and outstanding March 25, 2023;

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

20 unchanged sentences

Operating and administrative expenses

Gain (loss) from sale or disposal of assets

Gain from sale or disposal of assets

Income from operations

7 unchanged sentences

Income tax benefit (expense)

( 2,418,000 )

Other comprehensive (loss) income, net of tax

13 unchanged sentences

INGLES MARKETS, INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)

Six Months Ended

2,873,918,247

2,768,648,179

Cost of goods sold

2,176,823,396

2,069,541,379

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 (loss) income:

Change in fair value of interest rate swap

( 4,193,733 )

Income tax benefit (expense)

( 2,874,000 )

Other comprehensive (loss) income, net of tax

( 3,169,733 )

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 24, 2022 AND DECEMBER 25, 2021

THREE AND SIX MONTHS ENDED MARCH 25, 2023 AND MARCH 26, 2022

Comprehensive

11 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

Balance, September 24, 2022

1 unchanged sentence

1,259,594,425

Other comprehensive income, net of income tax

Other comprehensive loss, net of income tax

( 1,150,507 )

7 unchanged sentences

1,324,750,578

Other comprehensive loss, net of income tax

( 2,019,226 )

Cash dividends

( 3,064,960 )

Common stock conversions

Balance, March 25, 2023

1,350,019,660

1,360,206,197

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

( 1,377,302 )

( 1,209,226 )

Receipt of advance payments on purchases contracts

Recognition of advance payments on purchases contracts

( 1,430,226 )

( 1,494,340 )

Deferred income taxes

6 unchanged sentences

( 19,145,618 )

( 8,462,044 )

Operating lease liabilities

3 unchanged sentences

( 34,267,784 )

( 15,861,984 )

Net Cash Provided by Operating Activities

26 unchanged sentences

INGLES MARKETS, INCORPORATED AND SUBSIDIARIES

NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS

Three Months Ended December 24, 2022 and December 25, 2021

NOTES TO CONDENSED CONSOLIDATED UNAUDITED INTERIM FINANCIAL STATEMENTS

Three Months and Six Months Ended March 25, 2023 and March 26, 2022

BASIS OF PREPARATION

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.

In the opinion of management, the accompanying unaudited interim financial statements contain all adjustments necessary to present fairly the financial position as of March 25, 2023 and the results of operations and changes in stockholders’ equity for the three-month and six-month periods ended March 25, 2023 and March 26, 2022, and cash flows of Ingles Markets, Incorporated, a North Carolina corporation (“Ingles”, the “Company”, “we”, “us”, or “our”), for the six months ended March 25, 2023 and March 26, 2022.

The adjustments made are of a normal recurring nature.

1 unchanged sentence

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

The results of operations for the three-month and six-month periods ended March 25, 2023 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 $ 382,683 at December 24, 2022 and $ 382,657 at September 24, 2022.

Receivables are presented net of an allowance for doubtful accounts of $ 120,060 at March 25, 2023 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 $ 31.1 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.

The Company’s self-insurance reserves totaled $ 31.1 million and $ 31.0 million at March 25, 2023 and September 24, 2022, respectively.

Of this amount, $ 13.0 million was accounted for as a current liability and $ 18.1 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 25, 2023.

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.

Employee insurance expense, including workers’ compensation and medical care benefits, net of employee contributions, totaled $ 8.1 million and $ 7.0 million for the three-month periods ended March 25, 2023 and March 26, 2022, respectively.

For the six-month periods ended March 25, 2023 and March 26, 2022, employee insurance expense, net of employee contributions totaled $ 19.0 million and $ 20.3 million, respectively.

The Company’s fuel operations use 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 were immaterial for each fuel center as well as in the aggregate, at December 24, 2022 and September 24, 2022.

The amounts recorded were immaterial for each fuel center as well as in the aggregate at March 25, 2023 and September 24, 2022.

LONG-TERM DEBT

4 unchanged sentences

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 24, 2022.

The Line allows the Company to issue up to $ 10.0 million in letters of credit, of which none were issued at March 25, 2023.

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

At December 24, 2022, the Company had no borrowings outstanding under the Line.

At March 25, 2023, 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 December 24, 2022.

The outstanding balance of the Bonds was $ 54.4 million as of March 25, 2023.

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 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 .

14 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 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.

For the three and six months ended March 25, 2023, the Company recorded $ 2.0 million and $ 3.2 million of other comprehensive loss, respectively, net of income taxes, in its Consolidated Statements of Comprehensive Income.

Unrealized gains of $ 12.2 million were included as an asset at fair value in the line “Other Assets” on the Consolidated Balance Sheet as of March 25, 2023.

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.

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 24, 2022.

The Company was in compliance with all financial covenants at March 25, 2023.

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 24, 2022, property and equipment with an undepreciated cost of approximately $ 260.0 million were pledged as collateral for long-term debt.

At March 25, 2023, property and equipment with an undepreciated cost of approximately $ 257.6 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 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.

At March 25, 2023, the Company had excess net worth totaling $ 421.3 million calculated under covenants in the Bonds, various floating rate loans (the “Loans”), and the Line.

This amount is available to pay dividends;

however, certain loan agreements containing provisions outlining minimum tangible net worth requirements restrict the ability of the Company to pay cash dividends in excess of the current annual per share dividends paid on the Company’s Class A and Class B Common Stock.

Further, the Company is prevented from paying cash dividends at any time that it is in default under the indenture governing the Notes.

1 unchanged sentence

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 .

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.

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 12, 2023 to stockholders of record on January 6, 2023 .

EARNINGS PER COMMON SHARE

10 unchanged sentences

Three Months Ended

Six Months Ended

March 25, 2023

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 24, 2022

December 25, 2021

Six Months Ended

March 26, 2022

Allocated net income

13 unchanged sentences

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 24, 2022.

Operating lease cost for all operating leases totaled $ 2.7 million for the three months ended March 25, 2023 and $ 5.3 million for the six months ended March 25, 2023.

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 December 24, 2022 were as follows:

Maturities of operating lease liabilities as of March 25, 2023 were as follows:

Remainder of 2023

3 unchanged sentences

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 24, 2022 was 3.51 %, based on our incremental borrowing rate.

The weighted average discount rate used to determine lease liability balances as of March 25, 2023 was 3.51 %, based on our incremental borrowing rate.

Leases as Lessor

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

At March 25, 2023, the Company owned and operated 92 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 24, 2022

Six Months Ended

March 25, 2023

Rents earned on owned and subleased properties:

2 unchanged sentences

( 1,754,831 )

( 3,334,553 )

Other shopping center expenses

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

( 1,537,965 )

Future minimum operating lease receipts at March 25, 2023 were as follows:

Remainder of 2023

5 unchanged sentences

Three Months Ended

Six Months Ended

Revenues from unaffiliated customers:

22 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 24, 2022 were 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 25, 2023 were as follows (in thousands):

Senior Notes due 2031

1 unchanged sentence

Secured notes payable and other

Interest rate swap derivative assets

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 24, 2022, there were no such loans made, repaid or outstanding.

During the three months ended March 25, 2023, there were no such loans made, repaid or outstanding.

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

2 unchanged sentences

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