INGLES MARKETS INC 10-Q

Item 1. FINANCIAL STATEMENTS INGLES MARKETS, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) March 30, September 30, 2024 2023 ASSETS Current Assets: Cash and cash equivalents $ 302,017,848 $ 328,539,922 Receivables - net 109,444,276 107,570,690 Inventories 479,129,835 493,859,775 Other current assets 26,530,028 22,585,958 Total Current Assets 917,121,987 952,556,345 Property and Equipment - Net 1,480,037,502 1,431,872,289 Operating lease right of use assets 37,738,468 39,602,202 Other Assets 51,409,736 49,814,897 Total Assets $ 2,486,307,693 $ 2,473,845,733 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Current portion of long-term debt $ 17,520,876 $ 17,526,289 Current portion of operating lease liabilities 6,748,263 7,594,971 Current portion of finance lease liabilities 654,866 635,559 Accounts payable - trade 181,624,886 204,040,546 Accrued expenses and current portion of other long-term liabilities 80,412,186 100,735,784 Total Current Liabilities 286,961,077 330,533,149 Deferred Income Taxes 63,561,000 67,187,000 Long-Term Debt 521,597,008 532,631,960 Noncurrent operating lease liabilities 32,999,189 34,016,670 Noncurrent finance lease liabilities 2,727,606 3,059,938 Other Long-Term Liabilities 53,019,344 47,444,876 Total Liabilities 960,865,224 1,014,873,593 Stockholders’ Equity Preferred stock, $ 0.05 par value; 10,000,000 shares authorized; no shares issued — — Common stocks: Class A, $ 0.05 par value; 150,000,000 shares authorized; ‎ 14,536,700 shares issued and outstanding March 30, 2024; ‎ 14,497,075 shares issued and outstanding at September 30, 2023 726,835 724,854 Class B, convertible to Class A, $ 0.05 par value; ‎ 100,000,000 shares authorized; ‎ 4,457,676 shares issued and outstanding March 30, 2024; ‎ 4,497,301 shares issued and outstanding at September 30, 2023 222,884 224,865 Paid-in capital in excess of par value — — Accumulated other comprehensive income 10,545,546 13,233,631 Retained earnings 1,513,947,204 1,444,788,790 Total Stockholders’ Equity 1,525,442,469 1,458,972,140 Total Liabilities and Stockholders’ Equity $ 2,486,307,693 $ 2,473,845,733 See notes to unaudited condensed consolidated financial statements. ‎ 3 INGLES MARKETS, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED) Three Months Ended March 30, March 25, 2024 2023 Net sales $ 1,367,479,701 $ 1,380,604,140 Cost of goods sold 1,045,594,741 1,054,664,179 Gross profit 321,884,960 325,939,961 Operating and administrative expenses 284,762,087 268,890,164 Gain from sale or disposal of assets 7,686,184 597,218 Income from operations 44,809,057 57,647,015 Other income, net 3,381,398 1,734,456 Interest expense 5,587,829 5,344,666 Income before income taxes 42,602,626 54,036,805 Income tax expense 10,704,000 13,497,000 Net income $ 31,898,626 $ 40,539,805 Other comprehensive income (loss): Change in fair value of interest rate swap $ 1,510,471 $ ( 2,671,226 ) Income tax (expense) benefit ( 369,000 ) 652,000 Other comprehensive income (loss), net of tax 1,141,471 ( 2,019,226 ) Comprehensive income $ 33,040,097 $ 38,520,579 Per share amounts: Class A Common Stock Basic earnings per common share $ 1.72 $ 2.18 Diluted earnings per common share $ 1.68 $ 2.13 Class B Common Stock Basic earnings per common share $ 1.56 $ 1.98 Diluted earnings per common share $ 1.56 $ 1.98 Cash dividends per common share Class A Common Stock $ 0.165 $ 0.165 Class B Common Stock $ 0.150 $ 0.150 See notes to unaudited condensed consolidated financial statements. ‎ 4 INGLES MARKETS, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED) Six Months Ended March 30, March 25, 2024 2023 Net sales $ 2,848,541,531 $ 2,873,918,247 Cost of goods sold 2,177,855,492 2,176,823,396 Gross profit 670,686,039 697,094,851 Operating and administrative expenses 574,588,617 545,069,422 Gain from sale or disposal of assets 8,339,044 1,377,302 Income from operations 104,436,466 153,402,731 Other income, net 6,987,947 3,176,063 Interest expense 11,294,186 10,691,508 Income before income taxes 100,130,227 145,887,286 Income tax expense 24,838,000 35,976,000 Net income $ 75,292,227 $ 109,911,286 Other comprehensive loss: Change in fair value of interest rate swap $ ( 3,557,085 ) $ ( 4,193,733 ) Income tax benefit 869,000 1,024,000 Other comprehensive loss, net of tax ( 2,688,085 ) ( 3,169,733 ) Comprehensive income $ 72,604,142 $ 106,741,553 Per share amounts: Class A Common Stock Basic earnings per common share $ 4.05 $ 5.92 Diluted earnings per common share $ 3.96 $ 5.79 Class B Common Stock Basic earnings per common share $ 3.68 $ 5.38 Diluted earnings per common share $ 3.68 $ 5.38 Cash dividends per common share Class A Common Stock $ 0.33 $ 0.33 Class B Common Stock $ 0.30 $ 0.30 See notes to unaudited condensed consolidated financial statements. ‎ 5 INGLES MARKETS, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED) THREE AND SIX MONTHS ENDED MARCH 30, 2024 AND MARCH 25, 2023 Paid-in Accumulated Class A Class B Capital in Other Common Stock Common Stock Excess of Comprehensive Retained Shares Amount Shares Amount Par Value Income (Loss) Earnings Total Balance, September 24, 2022 14,377,575 $ 718,879 4,616,801 $ 230,840 $ — $ 12,406,551 $ 1,246,238,155 $ 1,259,594,425 Net income — — — — — — 69,371,481 69,371,481 Other comprehensive loss, net of income tax — — — — — ( 1,150,507 ) — ( 1,150,507 ) Cash dividends — — — — — — ( 3,064,821 ) ( 3,064,821 ) Common stock conversions 9,125 456 ( 9,125 ) ( 456 ) — — — — Balance, December 24, 2022 14,386,700 $ 719,335 4,607,676 $ 230,384 $ — $ 11,256,044 $ 1,312,544,815 $ 1,324,750,578 Net income — — — — — — 40,539,805 40,539,805 Other comprehensive loss, net of income tax — — — — — ( 2,019,226 ) — ( 2,019,226 ) Cash dividends — — — — — — ( 3,064,960 ) ( 3,064,960 ) Common stock conversions 225 11 ( 225 ) ( 11 ) — — — — Balance, March 25, 2023 14,386,925 $ 719,346 4,607,451 $ 230,373 $ — $ 9,236,818 $ 1,350,019,660 $ 1,360,206,197 Balance, September 30, 2023 14,497,075 $ 724,854 4,497,301 $ 224,865 $ — $ 13,233,631 $ 1,444,788,790 $ 1,458,972,140 Net income — — — — — — 43,393,601 43,393,601 Other comprehensive loss, net of income tax — — — — — ( 3,829,556 ) — ( 3,829,556 ) Cash dividends — — — — — — ( 3,066,613 ) ( 3,066,613 ) Common stock conversions 39,100 1,955 ( 39,100 ) ( 1,955 ) — — — — Balance, December 30, 2023 14,536,175 $ 726,809 4,458,201 $ 222,910 $ — $ 9,404,075 $ 1,485,115,778 $ 1,495,469,572 Net income — — — — — — 31,898,626 31,898,626 Other comprehensive income, net of income tax — — — — — 1,141,471 — 1,141,471 Cash dividends — — — — — — ( 3,067,200 ) ( 3,067,200 ) Common stock conversions 525 26 ( 525 ) ( 26 ) — — — — Balance, March 30, 2024 14,536,700 $ 726,835 4,457,676 $ 222,884 $ — $ 10,545,546 $ 1,513,947,204 $ 1,525,442,469 See notes to unaudited condensed consolidated financial statements. ‎ 6 INGLES MARKETS, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Six Months Ended March 30, March 25, 2024 2023 Cash Flows from Operating Activities: Net income $ 75,292,227 $ 109,911,286 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expense 58,022,599 57,969,652 Non cash operating lease cost 3,363,519 3,841,608 Gain from sale or disposal of assets ( 8,339,044 ) ( 1,377,302 ) Receipt of advance payments on purchases contracts 1,150,677 1,582,490 Recognition of advance payments on purchases contracts ( 1,529,141 ) ( 1,430,226 ) Deferred income taxes ( 2,757,000 ) ( 2,842,000 ) Changes in operating assets and liabilities: Receivables ( 1,837,366 ) 312,669 Inventory 14,729,941 ( 16,302,309 ) Other assets ( 9,112,237 ) ( 19,145,618 ) Operating lease liabilities ( 3,363,973 ) ( 3,838,850 ) Accounts payable and accrued expenses ( 39,646,215 ) ( 34,267,784 ) Net Cash Provided by Operating Activities 85,973,987 94,413,616 Cash Flows from Investing Activities: Purchase of short term investments — — Proceeds from sales of property and equipment 3,711,585 1,766,849 Capital expenditures ( 98,355,767 ) ( 91,352,345 ) Net Cash Used by Investing Activities ( 94,644,183 ) ( 89,585,496 ) Cash Flows from Financing Activities: Principal payments on long-term borrowings ( 11,405,040 ) ( 15,593,180 ) Repayment of finance lease ( 313,025 ) Dividends paid ( 6,133,813 ) ( 6,129,781 ) Net Cash Used by Financing Activities ( 17,851,878 ) ( 21,722,961 ) Net Decrease in Cash and Cash Equivalents ( 26,522,074 ) ( 16,894,841 ) Cash and cash equivalents at beginning of period 328,539,922 267,198,517 Cash and Cash Equivalents at End of Period $ 302,017,848 $ 250,303,676 See notes to unaudited condensed consolidated financial statements. ‎ 7 INGLES MARKETS, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED UNAUDITED INTERIM FINANCIAL STATEMENTS Three Months and Six Months Ended March 30, 2024 and March 25, 2023 A. 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 30, 2024 and the results of operations and changes in stockholders’ equity for the three-month and six-month periods ended March 30, 2024 and March 25, 2023, and cash flows of Ingles Markets, Incorporated, a North Carolina corporation (“Ingles”, the “Company”, “we”, “us”, or “our”), for the six months ended March 30, 2024 and March 25, 2023. The adjustments made are of a normal recurring nature. 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 30, 2023, filed by the Company under the Securities Exchange Act of 1934, on November 29, 2023. The results of operations for the three-month and six-month periods ended March 30, 2024 are not necessarily indicative of the results to be expected for the full fiscal year. B. NEW ACCOUNTING PRONOUNCEMENTS In March 2020, the FASB issued ASU 2020-04, “ Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting .” The ASU provides optional guidance to ease the potential burden in accounting for reference rate reform on financial reporting in response to the risk of cessation of the London Interbank Offered Rate (“LIBOR”). This amendment provides for optional expedients and exceptions for applying generally accepted accounting principles to contracts and hedging relationships that are affected by LIBOR and other reference rates. 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 existed as of March 12, 2020. The relief provided in this ASU extends through December 31, 2024. The U.S. 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. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Taxes Disclosures , which requires greater disaggregation of income tax disclosures. The new standard requires additional information to be disclosed with respect to the income tax rate reconciliation and income taxes paid disaggregated by jurisdiction. This ASU should be applied prospectively for fiscal years beginning after December 15, 2024, with retrospective application permitted. The Company is currently evaluating the impacts of this guidance on the Company’s Consolidated Financial Statements. In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which requires companies to enhance the disclosures about segment expenses. The new standard requires the disclosure of the Company’s Chief Operating Decision Maker (“CODM”), expanded incremental line-item disclosures of significant segment expenses used by the CODM for decision-making, and the inclusion of previous annual only segment disclosure requirements on a quarterly basis. This ASU should be applied retrospectively for fiscal years beginning after December 15, 2023, and early adoption is permitted. The Company is currently evaluating the impacts of this guidance on the Company’s Consolidated Financial Statements. C. 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 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. D. ALLOWANCE FOR DOUBTFUL ACCOUNTS Receivables are presented net of an allowance for doubtful accounts of $ 294,085 at March 30, 2024 and $ 143,753 at September 30, 2023. E. INCOME TAXES The Company’s effective tax rate differs from the federal statutory rate primarily as a result of state income taxes and tax credits. 8 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. F. ACCRUED EXPENSES AND CURRENT PORTION OF OTHER LONG-TERM LIABILITIES Accrued expenses and current portion of other long-term liabilities consist of the following: March 30, September 30, 2024 2023 Property, payroll and other taxes payable $ 16,833,389 $ 25,203,091 Salaries, wages and bonuses payable 38,402,631 50,836,143 Self-insurance liabilities 15,064,285 13,974,358 Interest payable 5,077,451 5,111,666 Other 5,034,430 5,610,526 $ 80,412,186 $ 100,735,784 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 $ 500,000 per covered person for medical care benefits for a policy year. The Company’s self-insurance reserves totaled $ 34.6 million at March 30, 2024. Of this amount, $ 15.1 million was accounted for as a current liability and $ 19.5 million as a long-term liability, which included $ 4.6 million of expected self-insurance recoveries from excess cost insurance or other sources that were recorded as a receivable. At September 30, 2023, the Company’s self-insurance reserves totaled $ 32.9 million of which $ 14.0 million was accounted for as a current liability and $ 18.9 million as a long-term liability, which included $ 4.3 million of expected self-insurance recoveries from excess cost insurance or other sources that were recorded as a receivable. Employee insurance expense, including workers’ compensation and medical care benefits, net of employee contributions, totaled $ 9.4 million and $ 8.1 million for the three-month periods ended March 30, 2024 and March 25, 2023, respectively. For the six-month periods ended March 30, 2024 and March 25, 2023, employee insurance expense, net of employee contributions totaled $ 22.4 million and $ 19.0 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 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 30, 2024 and September 30, 2023. G. LONG-TERM DEBT The U.S. 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: Year 2026 102.000 % 2027 101.333 % 2028 100.667 % 2029 and thereafter 100.000 % 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 SOFR. The Line allows the Company to issue up to $ 10.0 million of letters of credit, of which none were issued at March 30, 2024. The Company is not required to maintain compensating balances in connection with the Line. At March 30, 2024, 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”). The final maturity date of the Bonds is January 1, 2036 . Under a Continuing Covenant and Collateral Agency Agreement (the “Covenant Agreement”) between certain financial institutions and the Company, the financial institutions would hold the Bonds until December 2029, subject to certain events. Mandatory 9 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 $ 49.9 million as of March 30, 2024. 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 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 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 $ 21.5 million at a fixed rate of 3.962 %. 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 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 $ 120.8 million at a fixed rate of 2.998 %. 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. Both the floating rate debt and the interest rate swap have monthly principal amortization of $ 0.65 million and mature in fiscal year 2030. The Company recognizes differences between the variable rate interest payments and the fixed interest rate settlements with the swap counterparties as an adjustment to interest expense each period over the life of the swaps. 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 March 30, 2024, the Company recorded $ 1.1 million of other comprehensive income and for the six months ended March 30, 2024, the Company recorded $ 2.7 million of other comprehensive loss, net of income taxes, in its Condensed Consolidated Statements of Comprehensive Income. Unrealized gains of $ 14.0 million were included as an asset at fair value in the line “Other Assets” on the Condensed Consolidated Balance Sheet as of March 30, 2024. 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 Condensed 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 Condensed Consolidated Balance Sheet as of March 25, 2023. 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 30, 2024. 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 30, 2024, property and equipment with an undepreciated cost of approximately $ 252.2 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 30, 2024, the Company had excess net worth totaling $ 498.5 million calculated under covenants in the Bonds, various floating rate 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 Common Stock 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. In addition, the terms of the indenture may restrict the ability of the Company to pay additional cash dividends based on certain financial parameters. 10 H. DIVIDENDS 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 19, 2023 to stockholders of record on October 12, 2023 . 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 19, 2024 to stockholders of record on January 12, 2024 . 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 29, 2023, as well as Note I, “Earnings Per Common Share” below. I. EARNINGS PER COMMON SHARE The Company has two classes of common stock: 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; however, each share is convertible into one share of Class A Common Stock at any time at the election of the holder . Each share of Class A Common Stock has one vote per share and each share of Class B Common Stock has ten votes per share . Each share of Class A Common Stock is entitled to receive cash dividends equal to 110 % of any cash dividend paid on Class B Common Stock. The Company calculates earnings per share using the two-class method in accordance with FASB ASC Topic 260. The two-class method of computing basic earnings per share for each period reflects the cash dividends declared per share for each class of stock, plus allocated undistributed earnings per share computed using the participation percentage which reflects the dividend rights of each class of stock. Diluted earnings per share is calculated assuming the conversion of all shares of Class B Common Stock to shares of Class A Common Stock on a share-for-share basis. The tables below reconcile the numerators and denominators of basic and diluted earnings per share for current and prior periods. Three Months Ended Six Months Ended March 30, 2024 March 30, 2024 Class A Class B Class A Class B Numerator: Allocated net income Net income allocated, basic $ 24,944,280 $ 6,954,346 $ 58,839,087 $ 16,453,140 Conversion of Class B to Class A shares 6,954,346 — 16,453,140 — Net income allocated, diluted $ 31,898,626 $ 6,954,346 $ 75,292,227 $ 16,453,140 Denominator: Weighted average shares outstanding Weighted average shares outstanding, basic 14,536,449 4,457,927 14,527,072 4,467,304 Conversion of Class B to Class A shares 4,457,927 — 4,467,304 — Weighted average shares outstanding, diluted 18,994,376 4,457,927 18,994,376 4,467,304 Earnings per share Basic $ 1.72 $ 1.56 $ 4.05 $ 3.68 Diluted $ 1.68 $ 1.56 $ 3.96 $ 3.68 Three Months Ended Six Months Ended March 25, 2023 March 25, 2023 Class A Class B Class A Class B Numerator: Allocated net income Net income allocated, basic $ 31,398,357 $ 9,141,448 $ 85,111,213 $ 24,800,073 Conversion of Class B to Class A shares 9,141,448 — 24,800,073 — Net income allocated, diluted $ 40,539,805 $ 9,141,448 $ 109,911,286 $ 24,800,073 Denominator: Weighted average shares outstanding Weighted average shares outstanding, basic 14,386,862 4,607,514 14,384,087 4,610,289 Conversion of Class B to Class A shares 4,607,514 — 4,610,289 — Weighted average shares outstanding, diluted 18,994,376 4,607,514 18,994,376 4,610,289 Earnings per share Basic $ 2.18 $ 1.98 $ 5.92 $ 5.38 Diluted $ 2.13 $ 1.98 $ 5.79 $ 5.38 11 J. LEASES Leases as Lessee The Company conducts part of its retail operations from leased facilities. 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. 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 Leases – Rent expense for all operating leases totaled $ 2.7 million for the three months ended March 30, 2024 and $ 5.1 million for the six months ended March 30, 2024. 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. Finance Leases – Finance lease cost of $ 420.0 thousand included amortization expense of $ 357.0 thousand, which was included in operating and administrative expense, and $ 107.0 thousand of interest expense for the six months ended March 30, 2024. Future maturities of lease liabilities as of March 30, 2024 were as follows: Fiscal Year Operating Leases Finance Leases Remainder of 2024 $ 4,161,938 $ 420,000 2025 8,238,176 840,000 2026 7,076,845 840,000 2027 6,317,262 840,000 2028 4,775,296 840,000 Thereafter 20,409,830 101,500 Total lease payments $ 50,979,347 $ 3,881,500 Less amount representing interest 11,231,895 499,028 Present value of lease liabilities $ 39,747,452 $ 3,382,472 On the Condensed Consolidated Balance Sheets, lease extensions exercised during the six months ended March 30, 2024 increased the line items “Operating lease right of use assets” and “Noncurrent operating lease liabilities” by $ 1.5 million each. At March 30, 2024, the weighted average remaining lease term for the Company’s operating leases was 12.5 years. The weighted average discount rate used to determine operating lease liability balances as of March 30, 2024 was 5.6 %, and was 6.0 % for finance lease liability balances. Leases as Lessor At March 30, 2024, the Company owned and operated 96 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 terms ranging up to 20 years. Rental income is included in the line item “Net sales” on the Consolidated Statements of Income. Depreciation on owned properties leased to others and other shopping center expenses are included in the line item “Cost of goods sold” on the Consolidated Statements of Income. Three Months Ended Six Months Ended March 30, 2024 March 30, 2024 Rents earned on owned and subleased properties: Base rentals $ 6,821,138 $ 13,702,796 Variable rentals 50,956 101,912 Total 6,872,094 13,804,708 Depreciation on owned properties leased to others ( 2,037,120 ) ( 4,033,370 ) Other shopping center expenses ( 1,203,110 ) ( 1,992,714 ) Total $ 3,631,864 $ 7,778,624 12 Future minimum operating lease receipts at March 30, 2024 were as follows: Fiscal Year Remainder of 2024 $ 10,041,564 2025 18,463,750 2026 14,827,515 2027 11,596,313 2028 8,869,669 Thereafter 31,408,311 Total minimum future rental income $ 95,207,122 K. SEGMENT INFORMATION The Company operates one primary business segment, retail grocery sales. “Other” includes our remaining operations – fluid dairy and shopping center rentals. Information about the Company’s operations by lines of business (amounts in thousands) is as follows: Three Months Ended Six Months Ended March 30, March 25, March 30, March 25, 2024 2023 2024 2023 Revenues from unaffiliated customers: Grocery $ 490,490 $ 492,553 $ 1,012,295 $ 1,033,411 Non-foods 305,921 308,684 664,018 636,039 Perishables 349,135 348,204 717,119 722,392 Fuel 169,742 175,551 347,629 368,023 Total Retail $ 1,315,288 $ 1,324,992 $ 2,741,061 $ 2,759,865 Other 52,192 55,612 107,481 114,053 Total revenues from unaffiliated customers $ 1,367,480 $ 1,380,604 $ 2,848,542 $ 2,873,918 Income from operations: Retail $ 38,732 $ 50,786 $ 92,123 $ 138,701 Other 6,076 6,861 12,313 14,702 Total income from operations $ 44,809 $ 57,647 $ 104,436 $ 153,403 March 30, September 30, 2024 2023 Assets: Retail $ 2,142,529 $ 2,159,883 Other 345,442 317,479 Elimination of intercompany receivable ( 1,664 ) ( 3,516 ) Total assets $ 2,486,308 $ 2,473,846 The “Grocery” category includes grocery, dairy, and frozen foods. The “Non-foods” category includes alcoholic beverages, tobacco, pharmacy, and health/beauty/cosmetic products. The “Perishables” category includes meat, produce, deli and bakery. 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. L. FAIR VALUES OF FINANCIAL INSTRUMENTS The carrying amounts for cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term maturity of these instruments. The fair value of the Company’s debt and interest rate swaps are estimated using valuation techniques under the accounting guidance related to fair value measurements based on observable and unobservable inputs. Observable inputs reflect readily available data from independent sources, while unobservable inputs reflect the Company’s market assumptions. These inputs are classified into the following hierarchy: Level 1 Inputs – Quoted prices for identical assets or liabilities in active markets. Level 2 Inputs – Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. 13 Level 3 Inputs – Pricing inputs are unobservable for the assets or liabilities and include situations where there is little, if any, market activity for the assets or liabilities. 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 30, 2024 were as follows (in thousands): Carrying Fair Value Amount Fair Value Measurements Senior Notes due 2031 $ 350,000 $ 305,375 Level 2 Facility Bonds due 2036 49,910 49,910 Level 2 Secured notes payable and other 139,208 139,208 Level 2 Interest rate swap derivative contracts asset 13,958 13,958 Level 2 Non-qualified retirement plan assets 24,780 24,780 Level 2 The carrying amount and fair value of the Company’s debt, interest rate swaps, and non-qualified retirement plan assets at September 30, 2023 were as follows (in thousands): Carrying Fair Value Amount Fair Value Measurements Senior Notes due 2031 $ 350,000 $ 287,875 Level 2 Facility Bonds due 2036 54,440 54,440 Level 2 Secured notes payable and other 145,718 145,718 Level 2 Interest rate swaps derivative contract assets 17,515 17,515 Level 2 Non-qualified retirement plan assets 20,074 20,074 Level 2 The fair values for Level 2 measurements were determined primarily using market yields and taking into consideration the underlying terms of the instrument. M. COMMITMENTS AND CONTINGENCIES Various legal proceedings and claims arising in the ordinary course of business are pending against the Company. In the opinion of management, the ultimate liability, if any, from all pending legal proceedings and claims is not expected to materially affect the Company’s financial position, the results of its operations, or its cash flows. N. RELATED PARTY TRANSACTIONS 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 six months ended March 30, 2024, there were $ 500,000 loans issued and outstanding. In January 2024, the Company and a limited liability company having Mr. Robert P. Ingle II, the Company’s Chairman of the Board, as one of its principals swapped adjoining properties. In accordance with the Company’s related party transaction policy, independent fair market value appraisals were obtained, and the transaction was approved by the Audit Committee. The Company received $ 2.3 million in addition to the swapped property based on these values.