What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-02-05 compared with 2025-08-07 · 79 added, 122 removed, 126 unchanged (61% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Ingles, a leading supermarket chain in the Southeast, operates 197 supermarkets in North Carolina (75), Georgia (64), South Carolina (35), Tennessee (21), Virginia (1) and Alabama (1).

At June 28, 2025, three of the four stores temporarily closed due to damage sustained in Hurricane Helene remained closed, but they are expected to reopen at various times during late 2025 or 2026.

Ingles, a leading supermarket chain in the Southeast, currently operates 194 supermarkets in North Carolina (72), Georgia (64), South Carolina (35), Tennessee (21), Virginia (1) and Alabama (1), excluding three stores that remain temporarily closed due to damage sustained during Hurricane Helene.

Ingles supermarkets offer customers a wide variety of nationally advertised food products, including grocery, meat and dairy products, produce, frozen foods and other perishables and non-food products.

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On September 27, 2024, Hurricane Helene severely impacted western North Carolina, including the area where the Company’s headquarters are located, resulting in catastrophic flooding and destruction, power and communication outages, water outages, major road closures, and loss of life.

For the year ended September 28, 2024, the Company recognized an impairment loss of $30.4 million related to inventory damaged or destroyed by Hurricane Helene.

The Company received insurance proceeds of $4.2 million during the three months ended June 28, 2025 as a partial payment for inventory loss while the Company continues to work with its insurance carriers to reach final determinations with respect to its inventory loss claims.

Additionally, the Company recognized a property and equipment impairment loss of $4.5 million for the year ended September 28, 2024 pertaining to the same storm, for which the Company received insurance proceeds of $2.0 million during the nine months ended June 28, 2025.

For the year ended September 28, 2024, the Company recognized an impairment loss of $30.4 million

related to inventory damaged or destroyed by Hurricane Helene.

Additionally, the Company recognized a property and equipment impairment loss of $4.5 million for the year ended September 28, 2024 pertaining to the same storm, for which insurance proceeds of $1.0 million were received during October 2024.

These recorded losses did not include future repairs and rebuilds, nor did they account for revenue lost due to store closures or electronic payment disruptions.

As of the date of this Quarterly Report on Form 10-Q, one of the four stores temporarily closed due to hurricane impacts has reopened, and the three remaining stores are currently expected to reopen at various times during late 2025 or in 2026.

In addition, during the nine months ended June 28, 2025, the Company incurred approximately $6.9 million in cleanup and repair costs as a result of Hurricane Helene.

The Company’s properties, including its distribution center, were impacted;

however, the distribution center returned to full operation within two weeks following the storm.

Four stores sustained damage that required that they be temporarily closed.

As of the date of this Quarterly Report on Form 10-Q, three stores remain closed and are expected to reopen at various times during 2026 and 2027.

In addition, during the quarter ended December 27, 2025, the Company incurred approximately $5.4 million in cleanup and repair costs as a result of Hurricane Helene.

Legislative Update

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The OBBBA includes a broad range of tax reform provisions with multiple effective dates.

We are currently assessing the OBBBA’s impact on our consolidated financial statements.

The Company has determined that the impact of the OBBBA is not material to the Company’s consolidated financial statements.

Critical Accounting Policies and Estimates

Critical accounting policies are those 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.

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.

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The estimates are based on data provided by the respective claims administrators which is then applied to appropriate actuarial methods.

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 June 28, 2025, the Company’s self-insurance reserves totaled $36.8 million.

At December 27, 2025, the Company’s self-insurance reserves totaled $36.8 million.

This amount included $3.1 million of expected self-insurance recoveries from excess cost insurance or other sources that were 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 nine-month period ended June 28, 2025.

There were no asset impairments during the three-month period ended December 27, 2025.

Vendor Allowances

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The purpose of these incentives and allowances is generally to help defray the costs incurred by the Company for stocking, advertising, promoting and selling the applicable vendor’s products.

These allowances generally relate to short term arrangements with vendors, often relating to a period of one month or less, and are negotiated on a

purchase-by-purchase or transaction-by-transaction basis.

These allowances generally relate to short term arrangements with vendors, often relating to a period of one month or less, and are negotiated on a purchase-by-purchase or transaction-by-transaction basis.

Whenever practical, vendor discounts and allowances that relate to buying and merchandising activities are recorded as a component of item cost in inventory and recognized in merchandise costs when the item is sold.

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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 $42.0 million and $34.3 million for the fiscal quarters ended June 28, 2025 and June 29, 2024, respectively.

For the nine-month periods ended June 28, 2025 and June 29, 2024, vendor allowances applied as a reduction of merchandise costs totaled $113.5 million and $106.9 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 $2.2 million and $2.1 million for the fiscal quarters ended June 28, 2025 and June 29, 2024, respectively.

For the nine-month periods ended June 28, 2025 and June 29, 2024, vendor advertising allowances recorded as a reduction of advertising expense totaled $5.9 million and $6.3 million, respectively.

Vendor allowances applied as a reduction of merchandise costs totaled $38.4 million and $35.1 million for the fiscal quarters ended December 27, 2025 and December 28, 2024, 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 $2.4 million and $1.3 million for the fiscal quarters ended December 27, 2025 and December 28, 2024, 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 nine-month periods ended June 28, 2025 and June 29, 2024 each include 13 and 39 weeks of operations, respectively.

The Condensed Consolidated Statements of Income for the three-month periods ended December 27, 2025 and December 28, 2024 both include 13 weeks of operations.

Comparable store sales are defined as sales by retail stores in operation for five full fiscal quarters.

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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 28, 2025, comparable store sales included 194 stores, which excludes the three stores that remain closed due to the impact of Hurricane Helene.

For the three- and nine-month periods ended June 29, 2024, comparable store sales included 198 stores.

For the three-month period ended December 27, 2025, comparable store sales included 194 stores, which excludes the three stores that remained closed due to the impact of Hurricane Helene.

For the three-month period ended December 28, 2024, comparable store sales included 195 stores, which excluded the three stores that remained closed due to the impact of Hurricane Helene.

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

Nine Months Ended

Operating and administrative expenses

Gain from sale or disposal of assets

(Loss) gain from asset disposals

Income from operations

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Income tax expense

Three Months Ended June 28, 2025 Compared to the Three Months Ended June 29, 2024

Net income for the third quarter of fiscal 2025 totaled $26.2 million, compared with net income of $31.7 million for the third quarter of fiscal 2024.

The decrease related primarily to an increase in operating and administrative expenses as a percentage of sales.

Net sales decreased by $47.3 million, or 3.4%, to $1.35 billion for the three months ended June 28, 2025 compared with $1.39 billion for the three months ended June 29, 2024.

Three Months Ended December 27, 2025 Compared to the Three Months Ended December 28, 2024

Net income for the first quarter of fiscal 2026 totaled $28.1 million, compared with net income of $16.6 million for the first quarter of fiscal 2025.

The increase related primarily to an increase in net sales and an increase in gross profit as a percentage of net sales.

Net sales increased by $84.9 million, or 6.6%, to $1.37 billion for the three months ended December 27, 2025 compared with $1.29 billion for the three months ended December 28, 2024.

The Company estimated that approximately $55 to $65 million of revenue was lost during the first three-week period of fiscal year 2025 due to road and power outages that prevented some stores from opening or maintaining normal store hours, as well as due to electronic payment disruptions as a result of Hurricane Helene.

Excluding fuel sales, total grocery comparable store sales increased 6.2% over the comparative fiscal quarter.

Ingles operated 197 stores at June 28, 2025;

however, three stores damaged by Hurricane Helene remained closed at June 28, 2025.

Ingles operated 198 stores at June 29, 2024.

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

Three Months Ended

Total retail grocery

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.

Changes in retail grocery sales for the quarter ended June 28, 2025 are summarized as follows (in thousands):

Total retail sales for the three months ended June 29, 2024

Comparable store sales decrease (including fuel)

Impact of stores that remained closed

Impact of stores closed in fiscal 2025

Total retail sales for the three months ended June 28, 2025

Gross Profit.

Gross profit for the three-month period ended June 28, 2025 totaled $327.3 million, a decrease of $2.4 million, or 0.7%, compared with gross profit of $329.8 million for the three-month period ended June 29, 2024.

Gross profit as a percentage of sales was 24.3% and 23.7% for the three months ended June 28, 2025 and June 29, 2024, respectively.

Gross profit for the three-months ended June 28, 2025 included insurance proceeds of $4.2 million for inventory loss claims related to the impact of Hurricane Helene.

Operating and Administrative Expenses.

Operating and administrative expenses increased by $3.9 million, or 1.4%, to $290.1 million for the three months ended June 28, 2025, from $286.3 million for the three months ended June 29, 2024.

As a percentage of sales, operating and administrative expenses were 21.5% and 20.5% for the June 2025 and June 2024 quarters, respectively.

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

Depreciation and amortization

Repairs and maintenance

Insurance expense increased due to higher claim volume for the Company’s self-insured employee benefit plans.

Depreciation and amortization expense increased due to acquired property and the implementation of technology systems.

Repairs and maintenance increased due to a higher level of building maintenance and higher refrigerant costs and repairs.

Gain from Sale or Disposal of Assets.

Gain from the sale or disposal of assets totaled $143.2 thousand for the three months ended June 28, 2025.

During the quarter ended June 29, 2024, the gain from the sale or disposal of assets was $643.0 thousand.

Interest Expense.

Interest expense totaled $4.9 million for the three-month period ended June 28, 2025 and $5.4 million for the three month period ended June 29, 2024.

Total debt at June 2025 was $518.0 million compared with $535.9 million at June 2024.

Income Taxes.

Income tax expense totaled $9.1 million for the three months ended June 28, 2025 and $10.6 million for the three months ended June 29, 2024, reflecting effective tax rates of 25.7% and 25.1%, respectively.

Net income totaled $26.2 million for the three-month period ended June 28, 2025 compared with $31.7 million for the three-month period ended June 29, 2024.

Basic and diluted earnings per share for Class A Common Stock were $1.41 and $1.38, respectively, for the June 2025 quarter, compared to $1.71 and $1.67, respectively, for the June 2024 quarter.

Basic and diluted earnings per share for Class B Common Stock were each $1.28 for the June 2025 quarter compared with $1.55 for the June 2024 quarter.

Nine Months Ended June 28, 2025 Compared to the Nine Months Ended June 29, 2024

Net income for the nine months ended June 28, 2025 totaled $57.9 million, compared with net income of $107.0 million for the nine months ended June 29, 2024.

Net sales decreased by $276.5 million, or 6.5%, to $3.97 billion for the nine months ended June 28, 2025 compared with $4.24 billion for the nine months ended June 29, 2024 .

Hurricane Helene severely impacted western North Carolina at the end of September 2024, and the Company estimates that approximately $55 to $65 million of revenue was lost during the three-week period immediately following the storm due to road and power outages which prevented some stores from opening or maintaining normal store hours, as well as due to electronic payment disruptions as a result of Hurricane Helene.

Excluding fuel sales, total grocery comparable store sales decreased 2.7% over the comparative nine-month period.

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

Nine Months Ended

Total retail grocery

Changes in retail grocery sales for the nine months ended June 28, 2025 are summarized as follows (in thousands):

Total retail sales for the nine months ended June 29, 2024

Comparable store sales decrease (including fuel)

Impact of stores that remained closed

Ingles operated 194 stores at December 27, 2025, excluding three stores that remained closed after Hurricane Helene and 195 stores at December 28, 2024, excluding three stores damaged by Hurricane Helene.

Changes in retail grocery sales for the quarter ended December 27, 2025 as compared to the quarter ended December 28, 2024 are summarized as follows (in thousands):

Total retail sales for the three months ended December 28, 2024

Comparable store sales increase (including fuel)

Impact of stores closed in fiscal 2025

Total retail sales for the nine months ended June 28, 2025

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 .

Total retail sales for the three months ended December 27, 2025

Gross Profit.

Gross profit for the nine-month period ended June 28, 2025 totaled $939.4 million, a decrease of $61.0 million, or 6.1%, compared with gross profit of $1.0 billion for the nine-month period ended June 29, 2024.

Gross profit as a percentage of sales was 23.7% and 23.6% for the nine months ended June 28, 2025 and June 29, 2024, respectively.

Gross profit for the three-month period ended December 27, 2025 totaled $334.6 million, an increase of $33.4 million, or 11.1%, compared with gross profit of $301.1 million for the three-month period ended December 28, 2024.

Gross profit as a

percentage of sales was 24.4% for the three months ended December 27, 2025 as compared to 23.4% for the three months ended December 28, 2024.

Retail segment gross profit, excluding fuel increased 76 basis points for the quarter ended December 27, 2025 as compared with the quarter ended December 28, 2024.

Operating and Administrative Expenses.

Operating and administrative expenses decreased by $0.9 million, or 0.1%, to $860.0 million for the nine months ended June 28, 2025, from $860.8 million for the nine months ended June 29, 2024.

As a percentage of sales, operating and administrative expenses were 21.7% and 20.3% for the June 2025 and June 2024 nine-month periods, respectively.

Operating and administrative expenses increased by $14.7 million, or 5.2%, to $295.4 million for the three months ended December 27, 2025, as compared to $280.7 million for the three months ended December 28, 2024.

Operating expenses were lower than normal for the three months ended December 28, 2024 as a result of Hurricane Helene.

As a percentage of sales, operating and administrative expenses were 21.5% and 21.8% for the December 2025 and December 2024 quarters, respectively.

Excluding fuel sales and associated fuel operating expenses (primarily payroll), operating expenses were 24.0% of sales for the first fiscal quarter of 2026 compared with 24.3% for the first fiscal quarter of 2025.

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

Salaries and wages

Repairs and maintenance

Depreciation and amortization

Professional fees

Salaries and wages decreased due to the impact of Hurricane Helene, including the temporary closure of four stores, of which three currently remain closed, disruption at other stores due to storm-related power losses and difficulties for associates to get to work due to the damages caused by Hurricane Helene .

Repairs and maintenance expense increased due to the cleanup and repairs required by Hurricane Helene.

Depreciation and amortization increased due to acquired property and implementation of information technology systems and upgrades.

Professional fees increased due to professional services required as a result of Hurricane Helene and investments the Company has made in its information technology systems and in technology transformation projects.

Gain from Sale or Disposal of Assets.

During the nine months ended June 28, 2025, the gain from the sale or disposal of assets totaled $3.1 million, compared to $9.0 million during the nine months ended June 29, 2024.

The decrease related primarily to the exchange of adjacent properties during the nine months ended June 29, 2024.

Miscellaneous

Salaries and wages increased in dollars for the three months ended December 27, 2025 compared to the three months ended December 28, 2024 due to the impact of Hurricane Helene in the prior year which included disruption at stores due to storm-related power losses and difficulties for associates to get to work due to the damage caused by Hurricane Helene.

Insurance expense increased due to the increased claim volume and higher number of covered members reaching stop loss limits.

Bank charges increased due to decreased activity in the prior year related to loss of internet connectivity after the storm, which temporarily disrupted the ability to accept credit and debit cards.

Miscellaneous expense increased due to straight line rent credits from the purchase of a ground lease and insurance proceeds of $1.0 million received in the prior year.

Other Income.

Other income totaled $2.9 million for the three months ended December 27, 2025 compared with $3.3 million for the three months ended December 28, 2024.

Interest Expense.

Interest expense totaled $14.7 million for the nine-month period ended June 28, 2025 compared with $16.7 million for the nine-month period ended June 29, 2024.

Interest expense totaled $4.6 million for the three months ended December 27, 2025 compared with $5.0 million for the three months ended December 28, 2024.

Total debt at December 27, 2025 was $511.5 million compared with $529.4 million at December 28, 2024.

Income Taxes.

Income tax expense totaled $18.8 million for the nine months ended June 28, 2025, and $35.5 million for the nine months ended June 29, 2024, reflecting effective tax rates of 24.5% and 24.9%, respectively.

Net income totaled $57.9 million for the nine-month period ended June 28, 2025 compared with $107.0 million for the nine-month period ended June 29, 2024.

Basic and diluted earnings per share for Class A Common Stock were $3.11 and $3.05, respectively, for the nine months ended June 28, 2025, compared to $5.76 and $5.63, respectively, for the nine months ended June 29, 2024.

Basic and diluted earnings per share for Class B Common Stock were each $2.83 for the nine months ended June 28, 2025 compared with $5.23 for the nine months ended June 29, 2024.

Income tax expense totaled $9.3 million for the three months ended December 27, 2025, reflecting an effective tax rate of 24.9% of pretax income.

Income tax expense totaled $5.3 million for the three months ended December 28, 2024, reflecting an effective tax rate of 24.1% of pretax income.

Net income totaled $28.1 million for the three months ended December 27, 2025 compared with $16.6 million for the three months ended December 28, 2024.

Basic and diluted earnings per share for Class A Common Stock were $1.51 and $1.48, respectively, for the December 2025 quarter, compared to $0.89 and $0.87, respectively, for the December 2024 quarter.

Basic and diluted earnings per share for Class B Common Stock were each $1.38 for the December 2025 quarter compared with $0.81 for the December 2024 quarter.

Liquidity and Capital Resources

Capital Expenditures

Capital expenditures totaled $91.4 million for the nine-month period ended June 28, 2025.

The Company’s capital expenditures included the continued construction of a new store opening in 2025, restoration repairs to reopen one store, and restoration work on the three remaining stores temporarily closed due to Hurricane Helene, 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 $36.4 million for the three months ended December 27, 2025.

The Company’s capital expenditures included the continued construction of a new store expected to open in fiscal 2026, 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 2026 currently include investments of approximately $120 to $160 million.

The Company currently plans to dedicate the remainder of its fiscal 2025 capital expenditures to continued improvement of its store base, including the reopening of the stores temporarily closed due to Hurricane Helene, remodeling and continued investment in one store expected to open by the end of fiscal 2025, 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 $120 to $160 million going forward in order to maintain a modern store base and to reopen the remaining temporarily closed stores .

The Company currently plans to dedicate the majority of its fiscal 2026 capital expenditures to continued improvement of its store base, including the re-opening of the three stores temporarily closed due to the impact of Hurricane Helene, remodeling, and continued investment in one new store expected to open in fiscal 2026, 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 $120 to $160 million going forward 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.

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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 $94.2 million of net cash from operations for the nine-month period ended June 28, 2025 compared with $189.3 million for the nine-month period ended June 29, 2024.

Net cash from operations decreased due to lower net income and increases in working capital needs during the June 2025 nine-month period compared with the June 2024 nine-month period.

Cash used by investing activities for the nine-month periods ended June 28, 2025 and June 29, 2024 totaled $86.9 million and $138.5 million, respectively, consisting primarily of capital expenditures.

Cash used by financing activities totaled $24.9 million for the nine-month period ended June 28, 2025 compared with $24.5 million for the nine-month period ended June 29, 2024.

The Company provided $38.4 million net cash for operations for the three months ended December 27, 2025 compared with $43.6 million used for the three months ended December 28, 2024.

The increase was primarily attributable to higher net income and lower working capital needs .

Cash used by investing activities for the three-month periods ended December 27, 2025 and December 28, 2024 totaled $36.3 million and $33.9 million, respectively.

Cash used by financing activities totaled $6.7 million for both the three-month periods ended December 27, 2025 and December 28, 2024.

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

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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 a single letter of credit in the amount of $500,000 was outstanding at June 28, 2025.

The Line allows the Company to issue up to $10.0 million in letters of credit, of which a single letter of credit in the amount of $500,000 was issued at December 27, 2025.

The Company is not required to maintain compensating balances in connection with 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 which was completed in 2012.

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 agreed to hold the Bonds until December 17, 2029, subject to certain events.

At December 27, 2025, the Company had no other 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 in Buncombe County, North Carolina (the “Project”).

The Project was completed in 2012, and 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 have agreed to hold the Bonds until December 17, 2029, subject to certain events.

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 $45.4 million as of June 28, 2025.

The outstanding balance of the Bonds was $45.4 million as of December 27, 2025.

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 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 $14.0 million at a fixed rate of 3.962%.

As of December 27, 2025, the Company had an interest rate swap agreement for a current notional amount of $11.0 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%.

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In December 2019, the Company entered into 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 $111.1 million at a fixed rate of 2.998%.

As of December 27, 2025, the Company had an interest rate swap agreement for a current notional amount of $107.2 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%.

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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 are certain events of default, including both monetary and non-monetary defaults, the initiation of bankruptcy or insolvency proceedings, or the failure of the Company to meet certain financial covenants designated in its loan documents.

As of June 28, 2025, the Company was in compliance with these covenants.

Included among the triggering factors permitting the termination or withdrawal of the Line are certain events of default, including both monetary and non-monetary defaults,

the initiation of bankruptcy or insolvency proceedings, or the failure of the Company to meet certain financial covenants designated in its loan documents.

As of December 27, 2025, the Company was in compliance with these covenants.

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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The Company pays these dividends at the discretion of the Board of Directors and the continuation of these payments, the amount of such dividends, and the form in which the dividends are paid (cash or stock) depends upon the results of operations, the financial condition of the Company and other factors which the Board of Directors deems relevant.

The Line permits the Company to pay dividends on its common stock, as long as the Company is in compliance with certain financial covenants.

In addition, the Bonds and the Line contain provisions that restrict the ability of the Company to pay cash dividends in excess of two times the current quarterly per share amounts.

Grocery sales are subject to a slight seasonal variance due to both holiday related sales and sales in areas where seasonal homes are located.

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Twelve Months Ended

December 2025

Forward-Looking Statements

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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 public health emergencies and pandemics;

emergencies and pandemics;

economic conditions generally in the Company’s operating area;

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changes in accounting policies, standards, guidelines or principles as may be adopted by regulatory agencies as well as the Financial Accounting Standards Board;

and those factors contained under the heading “Risk Factors” in Item 1A of Part I of our most recent Annual Report on Form 10-K for the year ended September 28, 2024, filed by the Company under the Exchange Act, on December 27, 2024 .

and those factors contained under the heading “Risk Factors” in Item 1A of Part I of our most recent Annual Report on Form 10-K for the year ended September 27, 2025, filed by the Company under the Exchange Act, on November 26, 2025, as amended on January 22, 2026 .

Consequently, actual events affecting the Company and the impact of such events on the Company’s operations may vary significantly from those described in this Quarterly Report on Form 10-Q or contemplated or implied by statements in this Quarterly Report on Form 10-Q.

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 2. Management’s Discussion and Analysis