What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-03 compared with 2023-05-04 · 89 added, 98 removed, 158 unchanged (54% of the section changed)

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Coronavirus (COVID-19) Pandemic Impact

The effects of the COVID-19 pandemic, which began in March 2020, have eased considerably over the six months ended March 25, 2023, but the earlier portion of the pandemic substantially impacted supermarket operations, and some effects have continued through the six months ended March 25, 2023.

At the onset of the COVID-19 pandemic, the Company implemented several enhanced cleaning and social distancing protocols designed to keep our customers and our associates safe and has continued to monitor and update its protocols as the pandemic has evolved.

The effects of the COVID-19 pandemic, which began in March 2020, have eased considerably over the nine months ended June 24, 2023, but the earlier portion of the pandemic substantially impacted supermarket operations, and some effects have continued through the nine months ended June 24, 2023.

At the onset of the COVID-19 pandemic, the Company implemented several enhanced cleaning and social distancing protocols designed to keep our customers and our associates safe and continued to monitor and update its protocols as the pandemic evolved.

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

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Inflation impacts product costs, labor costs and the cost of other goods used by the Company, which could negatively impact our results of operation.

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

While the COVID-19 pandemic was officially declared to have ended in May 2023, at the present time, we do not know how long and to what extent the ongoing effects of the pandemic and inflation will impact our sales and financial performance.

Critical Accounting Policies and Estimates

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.

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.

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.

Management estimates, by their nature, involve judgments regarding future uncertainties, and actual results may therefore differ materially from these estimates.

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The estimates are based on data provided by the respective claims administrators.

These estimates can fluctuate if historical trends are not predictive of the future.

These estimates can fluctuate if historical trends are not accurately predictive of the future.

The majority of the Company’s properties are self-insured for casualty losses and business interruption;

however, the Company maintains liability coverage.

At March 25, 2023 the Company’s self-insurance reserves totaled $31.1 million.

At June 24, 2023 the Company’s self-insurance reserves totaled $30.9 million.

This amount was inclusive of $4.3 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 25, 2023.

There were no asset impairments during the nine-month period ended June 24, 2023.

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 $29.8 million and $26.2 million for the fiscal quarters ended March 25, 2023 and March 26, 2022, respectively.

For the six-month periods ended March 25, 2023 and March 26, 2022, vendor allowances applied as a reduction of merchandise costs totaled $64.6 million and $58.0 million, respectively.

Vendor allowances applied as a reduction of merchandise costs totaled $31.4 million and $25.4 million for the fiscal quarters ended June 24, 2023 and June 25, 2022, respectively.

For the nine-month periods ended June 24, 2023 and June 25, 2022, vendor allowances applied as a reduction of merchandise costs totaled $96.0 million and $83.5 million, respectively.

Vendor advertising allowances that represent a reimbursement of specific 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 $1.9 million and $1.7 million for the fiscal quarters ended March 25, 2023 and March 26, 2022, respectively.

For the six-month periods ended March 25, 2023 and March 26, 2022, vendor advertising allowances recorded as a reduction of advertising expense totaled $3.9 million and $3.7 million, respectively.

Overall, vendor allowances decreased significantly at the onset of the COVID-19 pandemic as vendors reduced support for promotional activities.

Vendor promotional support subsequently increased, but has not returned to pre-pandemic levels.

Vendor advertising allowances recorded as a reduction of advertising expense totaled $2.1 million and $1.6 million for the fiscal quarters ended June 24, 2023 and June 25, 2022, respectively.

For the nine-month periods ended June 24, 2023 and June 25, 2022, vendor advertising allowances recorded as a reduction of advertising expense totaled $6.0 million and $5.3 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.

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

The Condensed Consolidated Statements of Income for the three and six month periods ended March 25, 2023 and March 26, 2022 both include 13 and 26 weeks of operations, respectively.

The Condensed Consolidated Statements of Income for both the three- and nine-month periods ended June 24, 2023 and June 25, 2022 include 13 and 39 weeks of operations.

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 thereof.

A replacement store is a newly-opened store that replaces an existing nearby store that has 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 25, 2023, comparable store sales included 198 stores.

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

A major remodel entails

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

For the three- and nine-month periods ended June 24, 2023, comparable store sales included 198 stores.

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

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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Income tax expense

Three Months Ended March 25, 2023 Compared to the Three Months Ended March 26, 2022

Net income for the second quarter of fiscal 2023 totaled $40.5 million, compared with net income of $68.6 million for the second quarter of fiscal 2022.

Three Months Ended June 24, 2023 Compared to the Three Months Ended June 25, 2022

Net income for the third quarter of fiscal 2023 totaled $48.3 million compared with net income of $67.8 million for the third quarter of fiscal 2022.

The decrease primarily resulted from significant inventory cost increases and higher costs to retain and keep associates.

Net sales increased by $3.5 million, or 0.25%, to $1.381 billion for the three months ended March 25, 2023 compared with $1.377 billion for the three months ended March 26, 2022.

Net sales decreased by $24.3 million, or 1.7%, to $1.43 billion for the three months ended June 24, 2023 compared with $1.46 billion for the three months ended June 25, 2022, which was driven primarily by a reduction in fuel sales, partially offset by an increase in grocery, non-foods and perishables sales, as set forth in the table below .

Excluding fuel sales, total grocery comparable store sales increased 3.8% over the comparative fiscal quarter.

Ingles operated 198 stores at both March 25, 2023 and March 26, 2022.

Ingles operated 198 stores at both June 24, 2023 and June 25, 2022.

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 25, 2023 are summarized as follows (in thousands):

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

Changes in retail grocery sales for the quarter ended June 24, 2023 are summarized as follows (in thousands):

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

Comparable store sales decrease (including fuel)

Total retail sales for the three months ended March 25, 2023

Total retail sales for the three months ended June 24, 2023

Gross Profit.

Gross profit for the three-month period ended March 25, 2023 totaled $325.9 million, a decrease of $22.6 million, or 6.5%, compared with gross profit of $348.6 million for the three-month period ended March 26, 2022.

Gross profit as a percentage of sales was 23.6% and 25.3% for the three months ended March 25, 2023 and March 26, 2022, respectively.

Gross profit for the three-month period ended June 24, 2023 totaled $338.1 million, a decrease of $13.8 million, or 3.9%, compared with gross profit of $351.9 million for the three-month period ended June 25, 2022.

Gross profit as a percentage of sales was 23.6% and 24.1% for the three months ended June 24, 2023 and June 25, 2022, respectively.

The decrease in gross profit as a percentage of sales resulted primarily from inflation and raw material shortages, which have increased the cost of products.

Operating and Administrative Expenses.

Operating and administrative expenses increased $14.2 million, or 5.6%, to $268.9 million for the three months ended March 25, 2023, from $254.7 million for the three months ended March 26, 2022.

As a percentage of sales, operating and administrative expenses were 19.5% and 18.5% for the March 2023 and March 2022 quarters, respectively.

Excluding fuel sales and associated fuel operating expenses (primarily payroll), operating expenses were 21.6% of sales for the second fiscal quarter of 2023 compared with 21.5% for the second fiscal quarter of 2022.

Operating and administrative expenses increased $13.6 million, or 5.3%, to $270.9 million for the three months ended June 24, 2023, from $257.3 million for the three months ended June 25, 2022.

As a percentage of sales, operating and administrative expenses were 18.9% and 17.7% for the June 2023 and June 2022 quarters, respectively.

Excluding fuel sales and associated fuel operating expenses (primarily payroll), operating expenses were 21.7% of sales for the third fiscal quarter of 2023 compared with 21.4% for the third fiscal quarter of 2022.

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

(Decrease) as a

Salaries and wages

Taxes and licenses

Repairs and maintenance

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Salaries and wages increased in dollars due to increased labor market competition, which has increased the Company’s cost to attract and retain associates in the Company’s market area .

Taxes and licenses expense increased due to system improvements that provided us the ability to separately account for use tax during invoice processing.

Repairs and maintenance increased due to higher refrigerant costs and the cost of other supply items, as well as increased wear and tear on equipment to accommodate sales volume.

Advertising and promotion costs decreased due to absorbing some of the activity in-house and movement towards lower-cost types of advertising.

Advertising and promotion costs decreased due to absorbing some of the activity in-house and moving towards lower-cost types of advertising .

Gain from Sale or Disposal of Assets.

Gain from the sale or disposal of assets totaled $0.6 million for the three months ended March 25, 2023.

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

Gain from the sale or disposal of assets totaled $116.2 thousand for the three months ended June 24, 2023.

During the quarter ended June 25, 2022, the gain from the sale or disposal of assets was $26.7 thousand.

Interest Expense.

Interest expense totaled $5.3 million for the three-month period ended March 25, 2023 compared with $5.4 million for the three-month period ended March 26, 2022.

Total debt at March 2023 was $556.7 million compared with $578.5 million at March 2022.

Interest expense totaled $5.4 million for the three-month period ended June 24, 2023 compared with $5.3 million for the three-month period ended June 25, 2022.

Total debt at June 2023 was $553.4 million compared with $575.2 million at June 2022.

Income Taxes.

Income tax expense totaled $13.5 million for the three months ended March 25, 2023, reflecting an effective tax rate of 25.0% of pretax income.

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

Net income totaled $40.5 million for the three-month period ended March 25, 2023 compared with $68.6 million for the three-month period ended March 26, 2022.

Basic and diluted earnings per share for Class A Common Stock were $2.18 and $2.13, respectively, for the March 2023 quarter, compared to $3.70 and $3.61, respectively, for the March 2022 quarter.

Basic and diluted earnings per share for Class B Common Stock were each $1.98 for the March 2023 quarter compared with $3.36 for the March 2022 quarter.

Six Months Ended March 25, 2023 Compared to the Six Months Ended March 26, 2022

Net income for the first half of fiscal 2023 totaled $109.9 million, compared with net income of $134.8 million for the first half of fiscal 2022.

Retail grocery sales increased, but inflation and the labor market increased salary and wage expense, resulting in lower pre-tax income.

Net sales increased by $105.3 million, or 3.8%, to $2.87 billion for the six months ended March 25, 2023 compared with $2.77 billion for the six months ended March 26, 2022.

Excluding fuel sales, total grocery comparable store sales increased 4.67% over the comparative six-month period.

Income tax expense totaled $15.7 million for the three months ended June 24, 2023 and $22.7 million for the three months ended June 25, 2022, reflecting effective income tax rates of 24.6% and 25.1%, respectively.

Net income totaled $48.3 million for the three-month period ended June 24, 2023 compared with $67.8 million for the three-month period ended June 25, 2022.

Basic and diluted earnings per share for Class A Common Stock were $2.60 and $2.54, respectively, for the June 2023 quarter, compared to $3.65 and $3.57, respectively, for the June 2022 quarter.

Basic and diluted earnings per share for Class B Common Stock were each $2.36 for the June 2023 quarter compared with $3.32 for the June 2022 quarter.

Nine Months Ended June 24, 2023 Compared to the Nine Months Ended June 25, 2022

Net income for the nine months ended June 24, 2023 totaled $158.2 million, compared with net income of $202.6 million for the first nine months of fiscal 2022.

The decrease primarily resulted from significant inventory cost increases and higher costs to retain and keep associates.

Net sales increased by $81.0 million, or 1.9%, to $4.31 billion for the nine months ended June 24, 2023 compared with $4.23 billion for the nine months ended June 25, 2022 , which was driven primarily by an increase in grocery, non-foods and perishables sales, partially offset by a decrease in fuel sales, as set forth in the table below.

Excluding fuel sales, total grocery comparable store sales increased 4.4% over the comparative nine-month period.

Ingles operated 198 stores at both June 24, 2023 and June 25, 2022.

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

Six Months Ended

Nine Months Ended

Total retail grocery

Changes in retail grocery sales for the quarter ended March 25, 2023 are summarized as follows (in thousands):

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

Changes in retail grocery sales for the nine months ended June 24, 2023 are summarized as follows (in thousands):

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

Comparable store sales increase (including fuel)

Total retail sales for the six months ended March 25, 2023

Total retail sales for the nine months ended June 24, 2023

The “Grocery” category includes grocery, dairy, and frozen foods.

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Gross Profit.

Gross profit for the six-month period ended March 25, 2023 totaled $697.1 million, a decrease of $2.0 million, or 0.3%, compared with gross profit of $699.1 million for the six-month period ended March 26, 2022.

Gross profit as a percentage of sales was 24.3% and 25.3% for the six months ended March 25, 2023 and March 26, 2022, respectively.

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

Gross profit for the nine-month period ended June 24, 2023 totaled $1.04 billion, a decrease of $15.8 million, or 1.5%, compared with gross profit of $1.05 billion for the nine-month period ended June 25, 2022.

Gross profit as a percentage of sales was 24.0% and 24.9% for the nine months ended June 24, 2023 and June 25, 2022, respectively.

The decrease in gross profit resulted primarily from the effects of inflation and supply chain pressures, which have increased the cost of goods sold.

Operating and Administrative Expenses.

Operating and administrative expenses increased $30.3 million, or 5.9%, to $545.1 million for the six months ended March 25, 2023, from $514.8 million for the six months ended March 26, 2022.

As a percentage of sales, operating and administrative expenses were 19.0% and 18.6% for the March 2023 and March 2022 six-month periods, respectively.

Excluding fuel sales and associated fuel operating expenses (primarily payroll), operating expenses were 21.6% of sales for the first six months of 2023 compared with 21.5% for the first six months of 2022.

Operating and administrative expenses increased $43.8 million, or 5.7%, to $816.0 million for the nine months ended June 24, 2023, from $772.2 million for the nine months ended June 25, 2022.

As a percentage of sales, operating and administrative expenses were 18.9% and 18.3% for the June 2023 and June 2022 nine-month periods, respectively.

Excluding fuel sales and associated fuel operating expenses (primarily payroll), operating expenses were 21.6% of sales for the first nine months of 2023 compared with 21.4% for the first nine months of 2022.

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

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Repairs and maintenance

Utilities and fuel

Store supplies

Advertising and promotion

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

Repairs and maintenance expense increased due to higher refrigerant costs and the cost of other supply items, as well as increased wear and tear on equipment to accommodate sales volume.

Utilities and fuel expense increased due to higher costs of energy.

Store supplies are up for the year due to raw material shortages and inflation, especially in packaging materials.

Advertising and promotion costs decreased due to absorbing some of the activity in-house and moving towards lower-cost types of advertising .

Gain from Sale or Disposal of Assets.

Gain from the sale or disposal of assets totaled $1.4 million for the six months ended March 25, 2023.

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

During the nine months ended June 24, 2023, the gain from the sale or disposal of assets totaled $1.5 million compared to $1.2 million during the nine months ended June 25, 2022.

Interest Expense.

Interest expense totaled $10.7 million for the six-month period ended March 25, 2023 compared with $10.8 million for the six -month period ended March 26, 2022.

Total debt at March 2023 was $556.7 million compared with $578.5 million at March 2022.

Interest expense totaled $16.1 million for both the nine-month period ended June 24, 2023 and for the nine-month period ended June 25, 2022.

Income Taxes.

Income tax expense totaled $36.0 million for the six months ended March 25, 2023, reflecting an effective tax rate of 24.7% of pretax income.

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

Net income totaled $109.9 million for the six-month period ended March 25, 2023 compared with $134.8 million for the six-month period ended March 26, 2022.

Basic and diluted earnings per share for Class A Common Stock were $5.92 and $5.79, respectively, for the six months ended March 25, 2023, compared to $7.26 and $7.10, respectively, for the six months ended March 26, 2022.

Basic and diluted earnings per share for Class B Common Stock were each $5.38 for the six months ended March 25, 2023 compared with $6.60 for the six months ended March 26, 2022.

Income tax expense totaled $51.7 million for the nine months ended June 24, 2023 and $65.5 million for the nine months ended June 25, 2022, relecting an effective tax rate of 24.6% and 25.1%, respectively.

Net income totaled $158.2 million for the nine-month period ended June 24, 2023 compared with $202.6 million for the nine-month period ended June 25, 2022.

Basic and diluted earnings per share for Class A Common Stock were $8.51 and $8.33, respectively, for the nine months ended June 24, 2023, compared to $10.91 and $10.67, respectively, for the nine months ended June 25, 2022.

Basic and diluted earnings per share for Class B Common Stock were each $7.74 for the nine-months ended June 24, 2023 compared with $9.92 for the nine months ended June 25, 2022.

Liquidity and Capital Resources

Capital Expenditures

Capital expenditures totaled $91.4 million for the six-month period ended March 25, 2023.

The Company’s capital expenditures include the construction of new stores, the expansion and remodeling of existing stores, the acquisition of sites, new technology, and upgrades of the Company’s transportation fleet and facilities .

Capital expenditures totaled $137.1 million for the nine-month period ended June 24, 2023.

The Company’s capital expenditures included the construction of one new store, the expansion and remodeling of existing stores, the acquisition of sites, new technology, and upgrades of the Company’s transportation fleet and facilities.

The Company’s capital expenditure plans for fiscal 2023 currently include investments of approximately $170 to $190 million.

The Company currently plans to dedicate the majority of its fiscal 2023 capital expenditures to continued improvement of its store base and continued investment in one store expected to open in fiscal 2023, as well as technology improvements, upgrading and replacing existing store, warehouse and transportation equipment and improvements to the Company’s milk processing plant.

The Company currently plans to dedicate the remainder of its fiscal 2023 capital expenditures to continued improvement of its store base, as well as technology improvements, upgrading and replacing existing store, 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.

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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.

The Company generated $94.4 million net cash from operations for the March 2023 six-month period compared with $155.5 million for the March 2022 six-month period.

Cash from operations decreased by $61.1 million due to lower net income and more working capital needs during the March 2023 six-month period compared with the March 2022 six-month period.

Cash used by investing activities for the six-month periods ended March 25, 2023 and March 26, 2022 totaled $89.6 million and $142.6 million, respectively, consisting primarily of capital expenditures and purchases of short term investments.

Higher current year capital expenditures and no purchases of short term investments as compared to the prior year period accounted for the difference in investing activities between the two six-month periods.

Cash used by financing activities totaled $21.7 million for the six-month period ended March 25, 2023, compared with $17.6 million for the six-month period ended March 26, 2022.

The Company generated $177.0 million net cash from operations for the nine-month period ended June 24, 2023 compared with $261.6 million for the nine-month period ended June 25, 2022.

Net cash from operations decreased due to lower net income and increased working capital needs during the 2023 period compared with the 2022 period.

Cash used by investing activities for the nine-month periods ended June 24, 2023 and June 25, 2022 totaled $135.2 million and $181.8 million, respectively, consisting primarily of capital expenditures and purchases of short term investments.

Increased current year capital expenditures and no purchases of short term investments as compared to the prior year period accounted for the difference in investing activities between the two nine-month periods.

Cash used by financing activities totaled $28.2 million for the nine-month period ended June 24, 2023 compared with $24.1 million for the nine-month period ended June 25, 2022.

The increase was primarily related to principal payments on long-term debt.

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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 in 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 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 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.

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

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

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

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 SOFR-based amortizing floating rate loan secured by real estate maturing in January 2030.

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

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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 25, 2023, the Company was in compliance with these covenants.

Under the most restrictive of these covenants, the Company would have been permitted to incur approximately $2.2 billion of additional borrowings (including borrowings under the Line) as of March 25, 2023.

As of June 24, 2023, the Company was in compliance with these covenants.

Under the most restrictive of these covenants, the Company would have been permitted to incur approximately $2.0 billion of additional borrowings (including borrowings under the Line) as of June 24, 2023.

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

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Quarterly Cash Dividends

Since December 27, 1993, the Company has paid regular quarterly cash dividends of $0.165 (sixteen and one-half cents) per share on its Class A Common Stock and $0.15 (fifteen cents) per share on its Class B Common Stock for an annual rate of $0.66 and $0.60 per share, respectively.

Since December 27, 1993, the Company has paid regular quarterly cash dividends of $0.165 per share on its Class A Common Stock and $0.15 per share on its Class B Common Stock for an annual rate of $0.66 and $0.60 per share, respectively.

The Company expects to continue paying regular cash dividends on a quarterly basis.

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

During the past twelve months, inflation has reached its highest level in a number of years, impacting food costs, transportation costs, and labor costs.

During the past twelve months, inflation has reached its highest level in a number of years, and, while inflation has moderated during the quarter ended June 24, 2023, it continues to impact food costs, transportation costs, and labor costs.

Twelve Months Ended

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The words “expect”, “anticipate”, “intend”, “plan”, “likely”, “goal”, “believe”, “seek”, “will”, “may”, “would”, “should” and similar expressions are intended to identify forward-looking statements.

While these forward-looking statements and the related assumptions are made in good faith and reflect the Company’s current judgment regarding the direction of the Company’s business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested or described by such forward-looking statements.

estimates, predictions, projections, assumptions or other future performance suggested or described by such forward-looking statements.

Such statements are based upon a number of assumptions and estimates which are inherently subject to significant risks and uncertainties many of which are beyond the Company’s control.

Some of these assumptions inevitably will not materialize, and unanticipated events will occur which will affect the Company’s results.

Some important factors (but not necessarily all factors) that affect the Company’s revenues, financial position, growth strategies, profitability and operating results, or that otherwise could cause actual results to differ materially from those expressed in or implied by any forward-looking statement, include the potential continued impact of the COVID-19 pandemic on our business and economic conditions generally in the Company’s operating area;

Some important factors (but not necessarily all factors) that affect the Company’s revenues, financial position, growth strategies, profitability and operating results, or that otherwise could cause actual results to differ materially from those expressed in or implied by any forward-looking statement, include the potential continued impact of the COVID-19 pandemic, a resurgence of the COVID-19 pandemic or variants of the virus on our business and economic conditions generally in the Company’s operating area;

the Company’s ability to successfully implement its expansion and operating strategies and to manage rapid expansion;

13 unchanged sentences

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What changed 10-Q

Item 2. Management’s Discussion and Analysis