INGLES MARKETS INC 10-Q

Item 1. FINANCIAL STATEMENTS INGLES MARKETS, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) December 27, September 27, 2025 2025 ASSETS Current Assets: Cash and cash equivalents $ 361,682,782 $ 366,245,951 Receivables - net 109,330,219 106,355,244 Inventories 485,290,479 482,979,330 Other current assets 20,813,045 19,976,402 Total Current Assets 977,116,525 975,556,927 Property and Equipment - Net 1,518,643,870 1,515,070,221 Operating lease right of use assets 23,910,151 25,139,210 Other Assets 51,057,818 50,288,285 Total Assets $ 2,570,728,364 $ 2,566,054,643 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Current portion of long-term debt $ 17,478,595 $ 17,477,241 Current portion of operating lease liabilities 4,896,248 4,968,121 Current portion of finance lease liabilities 727,176 716,377 Accounts payable - trade 169,454,459 179,226,467 Accrued expenses and current portion of other long-term liabilities 98,417,500 100,514,387 Total Current Liabilities 290,973,978 302,902,593 Deferred Income Taxes 60,366,000 65,040,000 Long-Term Debt 494,051,592 497,289,417 Noncurrent operating lease liabilities 20,394,587 21,549,312 Noncurrent finance lease liabilities 1,482,908 1,668,802 Other Long-Term Liabilities 62,996,290 61,672,942 Total Liabilities 930,265,355 950,123,066 Stockholders’ Equity Preferred stock, $ 0.05 par value per share; 10,000,000 shares authorized; no shares issued — — Common stocks: Class A, $ 0.05 par value per share; 150,000,000 shares authorized; ‎ 14,548,611 shares issued and outstanding at December 27, 2025 and at ‎ September 27, 2025 727,431 727,431 Class B, convertible to Class A, $ 0.05 par value per share; ‎ 100,000,000 shares authorized; ‎ 4,445,765 shares issued and outstanding at December 27, 2025 and at September 27, 2025 222,288 222,288 Paid-in capital in excess of par value — — Accumulated other comprehensive income 5,067,472 5,597,024 Retained earnings 1,634,445,818 1,609,384,834 Total Stockholders’ Equity 1,640,463,009 1,615,931,577 Total Liabilities and Stockholders’ Equity $ 2,570,728,364 $ 2,566,054,643 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 December 27, December 28, 2025 2024 Net sales $ 1,372,977,567 $ 1,288,114,667 Cost of goods sold 1,038,419,863 986,979,951 Gross profit 334,557,704 301,134,716 Operating and administrative expenses 295,415,927 280,708,974 (Loss) gain from sale or disposal of assets ( 6,654 ) 3,146,202 Income from operations 39,135,123 23,571,944 Other income, net 2,917,320 3,297,385 Interest expense 4,607,073 5,010,989 Income before income taxes 37,445,370 21,858,340 Income tax expense 9,317,000 5,270,000 Net income $ 28,128,370 $ 16,588,340 Other comprehensive (loss) income: Change in fair value of interest rate swap $ ( 698,552 ) $ 3,089,737 Income tax benefit (expense) 169,000 ( 752,000 ) Other comprehensive (loss) income, net of tax ( 529,552 ) 2,337,737 Comprehensive income $ 27,598,818 $ 18,926,077 Per share amounts: Class A Common Stock Basic earnings per common share $ 1.51 $ 0.89 Diluted earnings per common share $ 1.48 $ 0.87 Class B Common Stock Basic earnings per common share $ 1.38 $ 0.81 Diluted earnings per common share $ 1.38 $ 0.81 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 CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED) THREE MONTHS ENDED DECEMBER 27, 2025 AND DECEMBER 28, 2024 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 28, 2024 14,544,925 $ 727,247 4,449,451 $ 222,472 $ — $ 6,737,631 $ 1,538,061,740 $ 1,545,749,090 Net income — — — — — — 16,588,340 16,588,340 Other comprehensive income, net of income tax — — — — — 2,337,737 — 2,337,737 Cash dividends — — — — — — ( 3,067,331 ) ( 3,067,331 ) Common stock conversions 825 41 ( 825 ) ( 41 ) — — — — Balance, December 28, 2024 14,545,750 $ 727,288 4,448,626 $ 222,431 $ — $ 9,075,368 $ 1,551,582,749 $ 1,561,607,836 Balance, September 27, 2025 14,548,611 $ 727,431 4,445,765 $ 222,288 $ — $ 5,597,024 $ 1,609,384,834 $ 1,615,931,577 Net income — — — — — — 28,128,370 28,128,370 Other comprehensive loss, net of income tax benefit — — — — — ( 529,552 ) — ( 529,552 ) Cash dividends — — — — — — ( 3,067,386 ) ( 3,067,386 ) Common stock conversions — — — — — — — — Balance, December 27, 2025 14,548,611 $ 727,431 4,445,765 $ 222,288 $ — $ 5,067,472 $ 1,634,445,818 $ 1,640,463,009 See notes to unaudited condensed consolidated financial statements. ‎ 5 INGLES MARKETS, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Three Months Ended December 27, December 28, 2025 2024 Cash Flows from Operating Activities: Net income $ 28,128,370 $ 16,588,340 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expense 30,293,021 30,938,524 Non-cash operating lease cost 1,229,059 1,244,823 Loss (gain) from sale or disposal of assets 6,654 ( 3,146,202 ) Deferred income taxes ( 4,505,000 ) ( 463,000 ) Changes in operating assets and liabilities: Receivables ( 2,974,974 ) ( 26,443,851 ) Inventory ( 2,311,148 ) ( 28,707,463 ) Other assets ( 2,304,728 ) 6,034,986 Operating lease liabilities ( 1,226,597 ) ( 1,908,239 ) Accounts payable, accrued expenses and other liabilities ( 7,929,334 ) ( 37,785,212 ) Net Cash Provided (Used) by Operating Activities 38,405,324 ( 43,647,293 ) Cash Flows from Investing Activities: Proceeds from sales of property and equipment 63,742 3,916,693 Capital expenditures ( 36,352,254 ) ( 37,776,087 ) Net Cash Used by Investing Activities ( 36,288,512 ) ( 33,859,394 ) Cash Flows from Financing Activities: Principal payments on long-term borrowings ( 3,437,500 ) ( 3,439,212 ) Repayment of finance lease ( 175,095 ) ( 164,922 ) Dividends paid ( 3,067,386 ) ( 3,067,331 ) Net Cash Used by Financing Activities ( 6,679,981 ) ( 6,671,465 ) Net Decrease in Cash and Cash Equivalents ( 4,563,169 ) ( 84,178,152 ) Cash and cash equivalents at beginning of period 366,245,951 353,687,911 Cash and Cash Equivalents at End of Period $ 361,682,782 $ 269,509,759 See notes to unaudited condensed consolidated financial statements. ‎ 6 INGLES MARKETS, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED UNAUDITED INTERIM FINANCIAL STATEMENTS Three Months Ended December 27, 2025 and December 28, 2024 A. BASIS OF PREPARATION In the opinion of management, the accompanying condensed consolidated unaudited interim financial statements contain all adjustments necessary to present fairly the financial position as of December 27, 2025, and the results of operations, changes in stockholders’ equity and cash flows of Ingles Markets, Incorporated, a North Carolina corporation (“Ingles”, the “Company”, “we”, “us”, or “our”), for the three months ended December 27, 2025 and December 28, 2024. The adjustments made are of a normal recurring nature. Certain information and footnote disclosures included in our 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 condensed consolidated 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 27, 2025, filed by the Company under the Securities Exchange Act of 1934, as amended, on November 26, 2025, as amended on January 22, 2026. The results of operations for the three months ended December 27, 2025 are not necessarily indicative of the results to be expected for the full fiscal year. B. NEW ACCOUNTING PRONOUNCEMENTS In March 2020, the Financial Accounting Standards Board (“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 extended 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 consolidated audited financial statements, nor 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 impact 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 was permitted. The Company adopted this guidance for the fiscal year ended September 27, 2025 and determined that the impact was not material to the Company’s consolidated financial statements. In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses (DISE), which requires disclosures about specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses. The new guidance is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. The requirements apply prospectively with the option for retrospective application. The Company is currently evaluating the impact that the adoption of this accounting standard will have on the Company’s consolidated financial statements. In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which modernizes the accounting for internal-use software costs by removing all references to prescriptive and sequential software development stages. The new standard requires entities to consider whether significant development uncertainty has been resolved before starting to capitalize software costs and aligns disclosure requirements with ASC 360, Property, Plant, and Equipment. The ASU is effective for annual and interim reporting periods beginning 7 after December 15, 2027, and can be applied prospectively, retrospectively, or using a modified transition method, with early adoption permitted. The Company is currently evaluating the impact 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 $ 512,685 at December 27, 2025 and $ 512,680 at September 27, 2025. 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. 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 consisted of the following: December 27, September 27, 2025 2025 Property, payroll and other taxes payable $ 10,065,756 $ 24,420,782 Salaries, wages and bonuses payable 34,983,816 46,997,042 Self-insurance liabilities 17,000,331 17,771,028 Interest payable 1,192,778 4,752,916 Income taxes payable 29,087,808 — Other 6,087,011 6,572,619 Total $ 98,417,500 $ 100,514,387 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 $ 36.8 million at December 27, 2025. Of this amount, $ 17.0 million was accounted for as a current liability and $ 19.8 million as a long-term liability, which included $ 3.1 million of expected self-insurance recoveries from excess cost insurance or other sources that was recorded as a receivable. At September 27, 2025, the Company’s self-insurance reserves totaled $ 38.3 million, of which $ 17.8 million was accounted for as a current liability and $ 20.5 million as a long-term liability, which included $ 3.3 million of expected self-insurance recoveries from excess cost insurance or other sources that was recorded as a receivable. Employee insurance expense, including workers’ compensation and medical care benefits, net of employee contributions, totaled $ 11.9 million and $ 11.2 million for the three months ended December 27, 2025 and December 28, 2024, 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 it had a legal obligation to remove tanks at various times in the future and accordingly determined that the Company had 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 December 27, 2025 and September 27, 2025. G. LONG-TERM DEBT 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 % 8 The Company has a $ 150.0 million line of credit (the “Line”) that, as amended in June 2025, matures in June 2030 . 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 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. 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 construction of new warehouse and distribution space adjacent to its existing 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 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 December 27, 2025. 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. 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 %. 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 entered into a $ 155 million SOFR-based amortizing floating rate loan secured by real estate, which matures in January 2030 . 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 %. 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 December 27, 2025, the Company recorded $ 0.5 million of other comprehensive loss, net of income tax benefits, in its Condensed Consolidated Statements of Comprehensive Income. Unrealized gains of $ 6.7 million were included as an asset at fair value in the line “Other Assets” on the Condensed Consolidated Balance Sheet as of December 27, 2025. 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, and the failure of the Company to meet certain financial covenants designated in its loan documents. The Company was in compliance with all financial covenants at December 27, 2025. The Company’s long-term debt agreements generally have cross-default provisions which could result in the acceleration of payments due under all long-term debt agreements in the event of default under any one instrument. At December 27, 2025, property and equipment with an undepreciated cost of approximately $ 239.3 million were pledged as collateral for long-term debt. Long-term debt and Line agreements contain various restrictive covenants requiring, among other things, maintenance of certain financial ratios. 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 terms of the indenture governing the Notes may restrict the ability of the Company to pay additional cash dividends based on certain financial parameters. 9 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 16, 2025 , to stockholders of record on October 9, 2025 . 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 15, 2026 , to stockholders of record on January 8, 2026 . 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 26, 2025, as amended on January 22, 2026. 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 . 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 Three Months Ended December 27, 2025 December 28, 2024 Class A Class B Class A Class B Numerator: Allocated net income Net income allocated, basic $ 22,013,124 $ 6,115,246 $ 12,979,100 $ 3,609,240 Conversion of Class B to Class A shares 6,115,246 — 3,609,240 — Net income allocated, diluted $ 28,128,370 $ 6,115,246 $ 16,588,340 $ 3,609,240 Denominator: Weighted average shares outstanding Weighted average shares outstanding, basic 14,548,611 4,445,765 14,545,223 4,449,153 Conversion of Class B to Class A shares 4,445,765 — 4,449,153 — Weighted average shares outstanding, diluted 18,994,376 4,445,765 18,994,376 4,449,153 Earnings per share Basic $ 1.51 $ 1.38 $ 0.89 $ 0.81 Diluted $ 1.48 $ 1.38 $ 0.87 $ 0.81 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 occupying 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 considered in computing minimum lease payments. Operating Leases – Rent expense for all operating leases totaled $ 1.6 million for the three months ended December 27, 2025. This amount included short-term (less than one year) leases, common area expenses, and variable lease costs, all of which were insignificant. Cash paid for lease liabilities in operating activities approximates operating lease cost. Finance Leases – Finance lease cost of $ 210.0 thousand included amortization expense of $ 175.1 thousand, which was included in operating and administrative expense, and $ 34.9 thousand of interest expense for the three months ended December 27, 2025. 10 Future maturities of lease liabilities as of December 27, 2025 were as follows: Fiscal Year Operating Leases Finance Leases Remainder of 2026 $ 4,541,174 $ 630,000 2027 5,542,431 840,000 2028 3,958,840 840,000 2029 2,955,264 101,500 2030 1,576,004 — Thereafter 15,053,391 — Total lease payments $ 33,627,104 $ 2,411,500 Less amount representing interest 8,336,269 201,416 Present value of lease liabilities $ 25,290,835 $ 2,210,084 There were no lease extensions exercised during the three months ended December 27, 2025. At December 27, 2025, the weighted average remaining lease term for the Company’s operating leases was 14.6 years. As of December 27, 2025, the weighted average discount rates used to determine operating lease and finance lease liability were 4.2 % and 6.0 %, respectively. Leases as Lessor At December 27, 2025, the Company owned and operated 102 shopping centers in conjunction with its supermarket operations, including one of the three stores located in a shopping center that remains temporarily closed as a result of damage sustained during Hurricane Helene. 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 Condensed 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 Condensed Consolidated Statements of Income. Three Months Ended December 27, 2025 Rents earned on owned and subleased properties: Base rentals $ 7,364,090 Variable rentals 35,262 Total 7,399,352 Depreciation on owned properties leased to others ( 2,357,646 ) Other shopping center expenses ( 870,573 ) Total $ 4,171,133 Future minimum operating lease receipts at December 27, 2025 were as follows: Fiscal Year Remainder of 2026 $ 16,989,778 2027 19,642,788 2028 16,581,821 2029 13,079,857 2030 10,257,666 Thereafter 53,181,143 Total minimum future rental income $ 129,733,053 K. SEGMENT INFORMATION The reportable segments were determined based on information reviewed by the Company’s CODM for operational decision-making purposes, and the segment information is prepared on the same basis that the CODM reviews such financial information. The Company operates one primary business segment, retail grocery sales (representing the aggregation of individual retail stores) and includes four categories of product sales: grocery, non-foods, perishables and fuel. The “All Other” segment includes the results of non-reportable segments, fluid dairy and shopping center rentals, which do not meet both quantitative and qualitative criteria as defined under ASC 280, Segment Reporting. Beginning i n fiscal year 2025, expense allocation methodology changed to include direct and indirect costs associated with the shopping center rentals that were previously included in the retail segment. The results for the three months ended December 28, 2024 were recast to be comparable. The CODM utilizes operating income to assess the Company’s operating performance and to make decisions about allocating resources to each segment. The CODM does not review assets in evaluating results. Therefore, such information is not provided. The Company’s President and Chief Executive Officer is the CODM. The accounting policies are the same as those described in the summary of significant accounting policies. 11 The significant expense categories and amounts align with the segment-level information that is regularly provided to the CODM. See below for a reconciliation of net income (amounts in thousands): Three Months Ended December 27, December 28, 2025 2024 Retail grocery revenue Grocery (1) $ 502,130 $ 477,535 Non-foods (2) 305,462 289,443 Perishables (3) 359,663 334,302 Fuel 152,135 143,785 Total retail grocery revenue $ 1,319,390 $ 1,245,065 All other revenue 53,588 43,050 Total revenues from unaffiliated customers $ 1,372,978 $ 1,288,115 Total retail grocery revenue $ 1,319,390 $ 1,245,065 Less retail grocery expenses: Merchandise costs (4) 1,002,634 953,108 Salary and wages 149,765 135,979 Insurance costs 15,920 13,595 Repair and maintenance 21,820 21,935 Bank charges 16,024 13,918 Depreciation and amortization 22,929 23,625 Utilities 14,646 14,808 Other retail grocery expenses (5) $ 40,928 $ 44,559 Retail grocery operating income 34,724 23,538 Other operating income (6) 4,411 34 Other income 2,917 3,297 Interest expense 4,607 5,011 Taxes 9,317 5,270 Net income $ 28,128 $ 16,588 (1) The “Grocery” category includes grocery, dairy, and frozen foods. (2) The “Non-foods” category includes alcoholic beverages, tobacco, pharmacy, and health/beauty/cosmetic products. (3) The “Perishables” category includes meat, produce, deli and bakery. (4) Merchandise costs include product costs, net of discounts and allowances, warehousing, distribution and freight. (5) Other retail grocery expenses includes supplies, taxes and licenses, advertising, professional fees and other expenses. (6) Other operating income includes operating income from shopping center rentals, fluid dairy and the gain or loss on the disposal of fixed assets. 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. 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. 12 The carrying amount and fair value of the Company’s debt, interest rate swaps, and non-qualified retirement plan assets at December 27, 2025 were as follows (in thousands): Carrying Fair Value Amount Fair Value Measurements Senior Notes due 2031 $ 350,000 $ 329,000 Level 2 Facility Bonds due 2036 45,380 45,380 Level 2 Secured notes payable and other 116,150 116,150 Level 2 Interest rate swaps derivative contract assets 6,717 6,717 Level 2 Non-qualified retirement plan assets 31,501 31,501 Level 2 The carrying amount and fair value of the Company’s debt, interest rate swaps, and non-qualified retirement plan assets at September 27, 2025 were as follows (in thousands): Carrying Fair Value Amount Fair Value Measurements Senior Notes due 2031 $ 350,000 $ 327,250 Level 2 Facility Bonds due 2036 45,380 45,380 Level 2 Secured notes payable and other 119,387 119,387 Level 2 Interest rate swaps derivative contract assets 7,416 7,416 Level 2 Non-qualified retirement plan assets 29,881 29,881 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, results of operations, or cash flows. The Company is currently working with its insurance carriers to reach final determinations with respect to inventory loss claims related to the impact of Hurricane Helene. During fiscal year 2025, the Company entered into an agreement and received a partial payment of $ 4.2 million towards the ultimate settlement of the inventory loss claims. The Company also received an additional $ 500 thousand from a different policy. The final amount of the claims is currently being assessed, and the timing and exact amount of insurance proceeds remain uncertain. The Company did no t recognize an asset for the insurance recovery receivable in the Consolidated Balance Sheet as of December 27, 2025, because recovery was not yet deemed probable. The Company will continue to monitor the claims process and will adjust its impact on the Company’s financial statements accordingly in future periods. 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 is prohibited from selling shares of the Company’s Class A Common Stock. During the three months ended December 27, 2025, no such loans were made, repaid or outstanding.