What changed in this filing

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Item 1. Financial Statements

2023-08-03 compared with 2023-05-04 · 86 added, 70 removed, 367 unchanged (30% of the section changed)

31 unchanged sentences

no shares issued

Common stocks:

Common stock:

Class A, $ 0.05 par value;

150,000,000 shares authorized;

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

‎ 14,415,250 shares issued and outstanding June 24, 2023;

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

1 unchanged sentence

‎ 100,000,000 shares authorized;

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

‎ 4,579,126 shares issued and outstanding June 24, 2023;

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

26 unchanged sentences

Income tax expense

Other comprehensive (loss) income:

Other comprehensive income:

Change in fair value of interest rate swap

( 2,671,226 )

Income tax benefit (expense)

( 2,418,000 )

Other comprehensive (loss) income, net of tax

Income tax expense

( 1,060,000 )

Other comprehensive income, net of tax

Comprehensive income

12 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)

Six Months Ended

Nine Months Ended

4,307,786,852

3 unchanged sentences

3,175,829,075

1,035,195,465

1,050,985,906

Operating and administrative expenses

26 unchanged sentences

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

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

THREE AND NINE MONTHS ENDED JUNE 24, 2023 AND JUNE 25, 2022

Comprehensive

19 unchanged sentences

1,120,851,249

Other comprehensive income, net of income tax

Cash dividends

( 3,064,036 )

Common stock conversions

Balance, June 25, 2022

1,179,137,242

1,188,831,243

Balance, September 24, 2022

21 unchanged sentences

1,360,206,197

Other comprehensive income, net of income tax

Cash dividends

( 3,064,961 )

Common stock conversions

Balance, June 24, 2023

1,395,214,242

1,407,318,576

See notes to unaudited condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Six Months Ended

Nine Months Ended

Cash Flows from Operating Activities:

18 unchanged sentences

( 21,746,318 )

( 2,227,902 )

Operating lease liabilities

3 unchanged sentences

( 13,495,969 )

( 15,861,984 )

Net Cash Provided by Operating Activities

19 unchanged sentences

( 24,099,134 )

Net Decrease in Cash and Cash Equivalents

( 16,894,841 )

( 4,689,059 )

Net Increase in Cash and Cash Equivalents

Cash and cash equivalents at beginning of period

3 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED UNAUDITED INTERIM FINANCIAL STATEMENTS

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

Three Months and Nine Months Ended June 24, 2023 and June 25, 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 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.

In the opinion of management, the accompanying unaudited interim financial statements contain all adjustments necessary to present fairly the financial position as of June 24, 2023, and the results of operations and changes in stockholders’ equity for the three-month and nine-month periods ended June 24, 2023 and June 25, 2022, and cash flows of Ingles Markets, Incorporated, a North Carolina corporation (“Ingles”, the “Company”, “we”, “us”, or “our”), for the nine months ended June 24, 2023 and June 25, 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-month and six-month periods ended March 25, 2023 are not necessarily indicative of the results to be expected for the full fiscal year.

The results of operations for the three-month and nine-month periods ended June 24, 2023 are not necessarily indicative of the results to be expected for the full fiscal year.

NEW ACCOUNTING PRONOUNCEMENTS

3 unchanged sentences

The ASU generally allows for hedge accounting to continue if the hedge was highly effective or met other standards prior to reference rate reform.

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 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 within the timeline provided by this ASU, we will utilize the relief in this ASU to continue hedge accounting.

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

The relief provided in this ASU extends through December 31, 2024.

Dollar LIBOR panel ceased following June 30, 2023, and the Company’s debt agreements and interest rate swaps that utilized LIBOR discontinued the use of LIBOR and adopted the Secured Overnight Financing Rate (“SOFR”), which did not materially impact our condensed consolidated unaudited interim financial statements.

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.

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

The carrying values of the Company’s short-term investments approximate fair value because of their liquidity.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

Receivables are presented net of an allowance for doubtful accounts of $ 120,060 at March 25, 2023 and $ 382,657 at September 24, 2022.

Receivables are presented net of an allowance for doubtful accounts of $ 537,930 at June 24, 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.

The Company has unrecognized tax benefits and could incur interest and penalties related to uncertain tax positions.

These amounts are insignificant and are not expected to significantly increase or decrease within the next twelve months.

The Company has unrecognized tax benefits and could incur interest and penalties related to uncertain tax positions, all of which are insignificant and are not expected to significantly increase or decrease within the next twelve months.

ACCRUED EXPENSES AND CURRENT PORTION OF OTHER LONG-TERM LIABILITIES

7 unchanged sentences

The Company is currently insured for covered costs in excess of $ 1.0 million per occurrence for workers’ compensation and for general liability and $ 500,000 per covered person for medical care benefits for a policy year.

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 $ 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 self-insurance reserves totaled $ 30.9 million at June 24, 2023, of which $ 13.1 million was accounted for as a current liability and $ 17.8 million as a long-term liability, which includes $ 4.3 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 includes $ 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 $ 8.6 million and $ 7.9 million for the three-month periods ended June 24, 2023 and June 25, 2022, respectively.

For the nine-month periods ended June 24, 2023 and June 25, 2022, employee insurance expense, net of employee contributions totaled $ 27.5 million and $ 28.2 million, 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 reviewed FASB Accounting Standards Codification Topic 410 (“FASB ASC 410”) and determined that we have a legal obligation to remove tanks at various times in the future and accordingly determined that we have met the requirements for 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 were immaterial for each fuel center as well as in the aggregate at March 25, 2023 and September 24, 2022.

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

LONG-TERM DEBT

Dollar LIBOR panel ceased following June 30, 2023, and the Company’s debt agreements and interest rate swaps that utilized LIBOR discontinued the use of LIBOR and adopted SOFR, which did not materially impact our condensed consolidated unaudited interim financial statements.

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:

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 respective 12-month periods beginning June 15 of the years indicated below:

2029 and thereafter

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 March 25, 2023.

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

The Line allows the Company to issue up to $ 10.0 million of letters of credit, of which none were issued at June 24, 2023.

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

At March 25, 2023, the Company had no borrowings outstanding under the Line.

At June 24, 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 $ 54.4 million as of March 25, 2023.

The outstanding balance of the Bonds was $ 54.4 million as of June 24, 2023.

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

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

The interest rate on the Bonds is equal to one-month LIBOR (adjusted monthly) plus a credit spread, adjusted to reflect the income tax exemption .

The interest rate on the Bonds is equal to one-month SOFR (adjusted monthly) plus a credit spread, adjusted to reflect the income tax exemption.

The Company’s obligation to repay the Bonds is collateralized by the Project.

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, which matures in October 2027 .

In September 2017, the Company refinanced approximately $ 60 million of secured borrowing obligations with a SOFR-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 $ 26.0 million at a fixed rate of 3.962 %.

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

Under this agreement, the Company pays monthly the fixed rate of 3.962 % and receives the one-month SOFR plus 1.75 %.

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

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, which matures in January 2030.

In December 2019, the Company closed a $ 155 million SOFR-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 $ 126.6 million at a fixed rate of 2.998 %.

Under this agreement, the Company pays monthly the fixed rate of 2.95 % and receives the one-month LIBOR plus 1.50 %.

Under this agreement, the Company pays monthly the fixed rate of 2.998 % and receives the one-month SOFR plus 1.60 %.

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

2 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 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.

For the three and nine months ended June 24, 2023, the Company recorded $ 1.9 million of other comprehensive income and $ 1.3 million of other comprehensive loss, respectively, net of income taxes, in its Consolidated Statements of Comprehensive Income.

Unrealized gains of $ 14.8 million were included as assets at fair value in the line “Other Assets” on the Consolidated Balance Sheet as of June 24, 2023.

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, 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 March 25, 2023.

The Company was in compliance with all financial covenants at June 24, 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 March 25, 2023, property and equipment with an undepreciated cost of approximately $ 257.6 million were pledged as collateral for long-term debt.

At June 24, 2023, property and equipment with an undepreciated cost of approximately $ 256.4 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 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.

At June 24, 2023, the Company had excess net worth totaling $ 444.3 million calculated under covenants in the Bonds, various floating rate loans (the “Loans”), and the Line.

This amount is available to pay dividends;

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

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, as well as Note I, Earnings Per Common Share below.

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 13, 2023 to stockholders of record on April 6, 2023 .

the Company under the Securities Exchange Act of 1934, on November 23, 2022, as well as Note I, “Earnings Per Common Share” below.

EARNINGS PER COMMON SHARE

10 unchanged sentences

Three Months Ended

Six Months Ended

March 25, 2023

Nine Months Ended

June 24, 2023

Allocated net income

8 unchanged sentences

Three Months Ended

Six Months Ended

March 26, 2022

Nine Months Ended

June 25, 2022

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 require 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 requires 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 $ 2.7 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.

Operating lease cost for all operating leases totaled $ 2.6 million for the three months ended June 24, 2023 and $ 7.9 million for the nine months ended June 24, 2023.

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

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

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

Maturities of operating lease liabilities as of June 24, 2023 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 2023 increased the line items “Operating lease right of use assets” and “Noncurrent operating lease liabilities” by $8.1 million each during the nine months ended June 24, 2023.

The weighted average remaining lease term for the Company’s operating leases is 12.4 years.

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.

The weighted average discount rate used to determine lease liability balances as of June 24, 2023 was 3.51 %, based on the most recent Company financings collateralized by store properties.

Leases as Lessor

At March 25, 2023, the Company owned and operated 92 shopping centers in conjunction with its supermarket operations.

At June 24, 2023, the Company owned and operated 94 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

Six Months Ended

March 25, 2023

Nine Months Ended

June 24, 2023

Rents earned on owned and subleased properties:

5 unchanged sentences

( 1,153,180 )

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

( 2,691,145 )

Future minimum operating lease receipts at June 24, 2023 were as follows:

Remainder of 2023

5 unchanged sentences

Three Months Ended

Six Months Ended

Nine 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 March 25, 2023 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 June 24, 2023 were as follows (in thousands):

Senior Notes due 2031

9 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 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.

During the nine months ended June 24, 2023, no such loans were made, repaid or outstanding.

During the nine months ended June 24, 2023, 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.

1 unchanged sentence

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