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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
or
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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(Zip Code) |
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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The
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer ¨ |
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Non-accelerated filer ¨ |
Smaller reporting company
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Emerging growth company
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
¨
No
As of August 5, 2025, the registrant had
INGLES MARKETS, INCORPORATED
INDEX
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Page No.
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Part I – Financial Information |
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Item 1. Financial Statements (Unaudited) |
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Condensed Consolidated Balance Sheets as of June 28, 2025 and September 28, 2024 |
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3 |
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Condensed Consolidated Statements of Income and Comprehensive Income for the |
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Three Months Ended June 28, 2025 and June 29, 2024 |
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4 |
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Nine Months Ended June 28, 2025 and June 29, 2024 |
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5 |
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Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three Months and Nine Months Ended June 28, 2025 and June 29, 2024 |
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6 |
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Condensed Consolidated Statements of Cash Flows for the Nine Months Ended June 28, 2025 and June 29, 2024 |
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7 |
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Notes to Unaudited Interim Financial Statements |
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8 |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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14 |
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Item 3. Quantitative and Qualitative Disclosures About Market Risk |
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21 |
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Item 4. Controls and Procedures |
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21 |
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Part II – Other Information |
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Item 5. Other Information |
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22 |
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Item 6. Exhibits |
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22 |
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Signatures |
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23 |
Part I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
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June 28, |
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September 28, |
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2025 |
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2024 |
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ASSETS |
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Current Assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Receivables - net |
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Inventories |
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Other current assets |
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Total Current Assets |
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Property and Equipment - Net |
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Operating lease right of use assets |
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Other Assets |
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Total Assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current Liabilities: |
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Current portion of long-term debt |
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$ |
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$ |
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Current portion of operating lease liabilities |
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Current portion of finance lease liabilities |
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Accounts payable - trade |
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Accrued expenses and current portion of other long-term liabilities |
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Total Current Liabilities |
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Deferred Income Taxes |
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Long-Term Debt |
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Noncurrent operating lease liabilities |
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Noncurrent finance lease liabilities |
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Other Long-Term Liabilities |
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Total Liabilities |
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Stockholders’ Equity |
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Preferred stock, $
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Common stocks: |
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Class A, $
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Class B, convertible to Class A, $
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Paid-in capital in excess of par value |
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Accumulated other comprehensive income |
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Retained earnings |
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Total Stockholders’ Equity |
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Total Liabilities and Stockholders’ Equity |
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$ |
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$ |
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See notes to unaudited condensed consolidated financial statements.
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)
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Three Months Ended |
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June 28, |
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June 29, |
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2025 |
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2024 |
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Net sales |
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$ |
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$ |
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Cost of goods sold |
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Gross profit |
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Operating and administrative expenses |
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Gain from sale or disposal of assets |
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Income from operations |
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Other income, net |
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Interest expense |
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Income before income taxes |
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Income tax expense |
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Net income |
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$ |
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$ |
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Other comprehensive loss: |
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Change in fair value of interest rate swap |
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$ |
(
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$ |
(
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Income tax benefit |
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Other comprehensive loss, net of tax |
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(
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(
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Comprehensive income |
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$ |
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$ |
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Per share amounts: |
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Class A Common Stock |
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Basic earnings per common share |
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$ |
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$ |
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Diluted earnings per common share |
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$ |
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$ |
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Class B Common Stock |
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Basic earnings per common share |
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$ |
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$ |
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Diluted earnings per common share |
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$ |
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$ |
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Cash dividends per common share |
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Class A Common Stock |
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$ |
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$ |
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Class B Common Stock |
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$ |
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$ |
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See notes to unaudited condensed consolidated financial statements.
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)
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Nine Months Ended |
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June 28, |
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June 29, |
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2025 |
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2024 |
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Net sales |
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$ |
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$ |
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Cost of goods sold |
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Gross profit |
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Operating and administrative expenses |
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Gain from sale or disposal of assets |
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Income from operations |
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Other income, net |
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Interest expense |
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Income before income taxes |
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Income tax expense |
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Net income |
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$ |
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$ |
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Other comprehensive loss: |
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Change in fair value of interest rate swap |
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$ |
(
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$ |
(
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Income tax benefit |
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Other comprehensive loss, net of tax |
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(
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(
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Comprehensive income |
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$ |
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$ |
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Per share amounts: |
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Class A Common Stock |
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Basic earnings per common share |
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$ |
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$ |
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Diluted earnings per common share |
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$ |
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$ |
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Class B Common Stock |
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Basic earnings per common share |
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$ |
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$ |
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Diluted earnings per common share |
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$ |
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$ |
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Cash dividends per common share |
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Class A Common Stock |
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$ |
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$ |
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Class B Common Stock |
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$ |
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$ |
|
See notes to unaudited condensed consolidated financial statements.
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
THREE AND NINE MONTHS ENDED JUNE 28, 2025 AND JUNE 29, 2024
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Paid-in |
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Accumulated |
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Class A |
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Class B |
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Capital in |
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Other |
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Common Stock |
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Common Stock |
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Excess of |
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Comprehensive |
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Retained |
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Shares |
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Amount |
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Shares |
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Amount |
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Par Value |
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Income (Loss) |
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Earnings |
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Total |
||||||
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Balance, September 30, 2023 |
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$ |
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$ |
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$ |
— |
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$ |
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$ |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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— |
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— |
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Other comprehensive loss, net of income tax |
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— |
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— |
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— |
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— |
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— |
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(
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|
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— |
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(
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Cash dividends |
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— |
|
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— |
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— |
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— |
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— |
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— |
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(
|
|
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(
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Common stock conversions |
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(
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(
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— |
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— |
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— |
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— |
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Balance, December 30, 2023 |
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|
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$ |
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$ |
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$ |
— |
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$ |
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$ |
|
|
$ |
|
|
Net income |
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— |
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— |
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— |
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|
— |
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— |
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— |
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|
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|
Other comprehensive income, net of income tax |
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— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
— |
|
|
|
|
Cash dividends |
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— |
|
|
— |
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— |
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— |
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— |
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— |
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(
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(
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Common stock conversions |
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(
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(
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— |
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— |
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— |
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— |
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Balance, March 30, 2024 |
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|
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$ |
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$ |
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$ |
— |
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$ |
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$ |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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— |
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— |
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Other comprehensive loss, net of income tax |
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— |
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— |
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— |
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— |
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— |
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(
|
|
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— |
|
|
(
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|
Cash dividends |
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— |
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— |
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— |
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— |
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— |
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— |
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(
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(
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Common stock conversions |
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(
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(
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— |
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— |
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— |
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|
— |
|
Balance, June 29, 2024 |
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$ |
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$ |
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$ |
— |
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$ |
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$ |
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$ |
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Balance, September 28, 2024 |
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|
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$ |
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$ |
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|
$ |
— |
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$ |
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|
$ |
|
|
$ |
|
|
Net income |
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— |
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— |
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— |
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|
— |
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|
— |
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— |
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|
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|
Other comprehensive income, net of income tax |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
— |
|
|
|
|
Cash dividends |
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— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(
|
|
|
(
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|
Common stock conversions |
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|
|
|
|
|
(
|
|
|
(
|
|
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— |
|
|
— |
|
|
— |
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|
— |
|
Balance, December 28, 2024 |
|
|
|
$ |
|
|
|
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$ |
|
|
$ |
— |
|
$ |
|
|
$ |
|
|
$ |
|
|
Net income |
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— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
Other comprehensive loss, net of income tax |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
(
|
|
|
— |
|
|
(
|
|
Cash dividends |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(
|
|
|
(
|
|
Common stock conversions |
|
|
|
|
|
|
(
|
|
|
(
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Balance, March 29, 2025 |
|
|
|
$ |
|
|
|
|
$ |
|
|
$ |
— |
|
$ |
|
|
$ |
|
|
$ |
|
|
Net income |
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— |
|
|
— |
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— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
Other comprehensive loss, net of income tax |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
(
|
|
|
— |
|
|
(
|
|
Cash dividends |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(
|
|
|
(
|
|
Common stock conversions |
|
|
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|
|
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(
|
|
|
(
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Balance, June 28, 2025 |
|
|
|
$ |
|
|
|
|
$ |
|
|
$ |
— |
|
$ |
|
|
$ |
|
|
$ |
|
See notes to unaudited condensed consolidated financial statements.
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
|
|
|
|
|
|
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|
Nine Months Ended |
||||
|
|
|
June 28, |
|
June 29, |
||
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|
|
2025 |
|
2024 |
||
|
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
Net income |
|
$ |
|
|
$ |
|
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
Depreciation and amortization expense |
|
|
|
|
|
|
|
Non cash operating lease cost |
|
|
|
|
|
|
|
Gain from sale or disposal of assets |
|
|
(
|
|
|
(
|
|
Receipt of advance payments |
|
|
|
|
|
|
|
Recognition of advance payments |
|
|
(
|
|
|
(
|
|
Deferred income taxes |
|
|
|
|
|
(
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
Receivables |
|
|
(
|
|
|
|
|
Inventory |
|
|
(
|
|
|
|
|
Other assets |
|
|
|
|
|
(
|
|
Operating lease liabilities |
|
|
(
|
|
|
(
|
|
Accounts payable and accrued expenses |
|
|
(
|
|
|
(
|
|
Net Cash Provided by Operating Activities |
|
|
|
|
|
|
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
Proceeds from sales of property and equipment |
|
|
|
|
|
|
|
Capital expenditures |
|
|
(
|
|
|
(
|
|
Net Cash Used by Investing Activities |
|
|
(
|
|
|
(
|
|
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
Principal payments on long-term borrowings |
|
|
(
|
|
|
(
|
|
Debt issuance costs |
|
|
(
|
|
|
— |
|
Repayment of finance lease |
|
|
(
|
|
|
(
|
|
Dividends paid |
|
|
(
|
|
|
(
|
|
Net Cash Used by Financing Activities |
|
|
(
|
|
|
(
|
|
Net (Decrease) Increase in Cash and Cash Equivalents |
|
|
(
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
|
|
|
|
|
|
Cash and Cash Equivalents at End of Period |
|
$ |
|
|
$ |
|
See notes to unaudited condensed consolidated financial statements.
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED UNAUDITED INTERIM FINANCIAL STATEMENTS
Three Months and Nine Months Ended June 28, 2025 and June 29, 2024
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 June 28, 2025 and the results of operations and changes in stockholders’ equity for the three-month and nine-month periods ended June 28, 2025 and June 29, 2024, and cash flows of Ingles Markets, Incorporated, a North Carolina corporation (“Ingles”, the “Company”, “we”, “us”, or “our”), for the nine months ended June 28, 2025 and June 29, 2024. The adjustments made are of a normal recurring nature. Certain information and footnote disclosures included in our audited 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 28, 2024, filed by the Company under the Securities Exchange Act of 1934, as amended, on December 27, 2024 .
The results of operations for the three-month and nine-month periods ended June 28, 2025 are not necessarily indicative of the results to be expected for the full fiscal year.
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 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.
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.
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 $
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.
Accrued expenses and current portion of other long-term liabilities consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 28, |
|
September 28, |
||
|
|
|
2025 |
|
2024 |
||
|
Property, payroll and other taxes payable |
|
$ |
|
|
$ |
|
|
Salaries, wages and bonuses payable |
|
|
|
|
|
|
|
Self-insurance liabilities |
|
|
|
|
|
|
|
Interest payable |
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
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 $
Employee insurance expense, including workers’ compensation and medical care benefits, net of employee contributions, totaled $
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 June 28, 2025 and September 28, 2024.
In June 2021, the Company issued at par $
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 |
|
|
2027 |
|
|
2028 |
|
|
2029 and thereafter |
|
The Company has a $
In December 2010, the Company completed the funding of $
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 $
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 $
In December 2019, the Company entered into a $
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 and nine months ended June 28, 2025, the Company recorded $
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 June 28, 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.
The Company paid cash dividends of $
The Company paid cash dividends of $
The Company paid cash dividends of $
The Company paid cash dividends of $
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 December 27, 2024.
The Company has
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 |
|
Nine Months Ended |
||||||||
|
|
|
June 28, 2025 |
|
June 28, 2025 |
||||||||
|
|
|
Class A |
|
Class B |
|
Class A |
|
Class B |
||||
|
Numerator: Allocated net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income allocated, basic |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Conversion of Class B to Class A shares |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
Net income allocated, diluted |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: Weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of Class B to Class A shares |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
Weighted average shares outstanding, diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Diluted |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||
|
|
|
June 29, 2024 |
|
June 29, 2024 |
||||||||
|
|
|
Class A |
|
Class B |
|
Class A |
|
Class B |
||||
|
Numerator: Allocated net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income allocated, basic |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Conversion of Class B to Class A shares |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
Net income allocated, diluted |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: Weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of Class B to Class A shares |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
Weighted average shares outstanding, diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Diluted |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
J. LEASES
Leases as Lessee
The Company conducts part of its retail operations from leased facilities. The initial terms of the leases are generally
Operating
Leases –
Rent expense for all operating leases totaled $
Finance
Leases –
Finance lease cost of $
Future maturities of lease liabilities as of June 28, 2025 were as follows:
|
|
|
|
|
|
|
|
Fiscal Year |
|
Operating Leases |
|
|
Finance Leases |
|
Remainder of 2025 |
$ |
|
|
$ |
|
|
2026 |
|
|
|
|
|
|
2027 |
|
|
|
|
|
|
2028 |
|
|
|
|
|
|
2029 |
|
|
|
|
|
|
Thereafter |
|
|
|
|
|
|
Total lease payments |
$ |
|
|
$ |
|
|
Less amount representing interest |
|
|
|
|
|
|
Present value of lease liabilities |
$ |
|
|
$ |
|
Lease extensions exercised during the nine months ended June 28, 2025 increased the line items “Operating lease right of use assets” and “Noncurrent operating lease liabilities” by $
Leases as Lessor
At June 28, 2025, the Company owned and operated
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 |
|
|
Nine Months Ended |
|
|
|
June 28, 2025 |
|
|
June 28, 2025 |
|
Rents earned on owned and subleased properties: |
|
|
|
|
|
|
Base rentals |
$ |
|
|
$ |
|
|
Variable rentals |
|
|
|
|
|
|
Total |
|
|
|
|
|
|
Depreciation on owned properties leased to others |
|
(
|
|
|
(
|
|
Other shopping center expenses |
|
(
|
|
|
(
|
|
Total |
$ |
|
|
$ |
|
Future minimum operating lease receipts at June 28, 2025 were as follows:
|
|
|
|
|
Fiscal Year |
|
|
|
Remainder of 2025 |
$ |
|
|
2026 |
|
|
|
2027 |
|
|
|
2028 |
|
|
|
2029 |
|
|
|
Thereafter |
|
|
|
Total minimum future rental income |
$ |
|
The Company operates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||
|
|
|
June 28, |
|
June 29, |
|
June 28, |
|
June 29, |
||||
|
|
|
2025 |
|
2024 |
|
2025 |
|
2024 |
||||
|
Revenues from unaffiliated customers: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Grocery |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Non-foods |
|
|
|
|
|
|
|
|
|
|
|
|
|
Perishables |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuel |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Retail |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues from unaffiliated customers |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income from operations |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 28, |
|
September 28, |
||
|
|
|
2025 |
|
2024 |
||
|
Assets: |
|
|
|
|
|
|
|
Retail |
|
$ |
|
|
$ |
|
|
Other |
|
|
|
|
|
|
|
Elimination of intercompany receivable |
|
|
(
|
|
|
(
|
|
Total assets |
|
$ |
|
|
$ |
|
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 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. |
The carrying amount and fair value of the Company’s debt, interest rate swaps, and non-qualified retirement plan assets at June 28, 2025 were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying |
|
|
|
|
Fair Value |
|
|
|
|
Amount |
|
Fair Value |
|
Measurements |
||
|
Senior Notes due 2031 |
|
$ |
|
|
$ |
|
|
Level 2 |
|
Facility Bonds due 2036 |
|
|
|
|
|
|
|
Level 2 |
|
Secured notes payable and other |
|
|
|
|
|
|
|
Level 2 |
|
Interest rate swap derivative contracts asset |
|
|
|
|
|
|
|
Level 2 |
|
Non-qualified retirement plan assets |
|
|
|
|
|
|
|
Level 2 |
The carrying amount and fair value of the Company’s debt, interest rate swaps, and non-qualified retirement plan assets at September 28, 2024 were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying |
|
|
|
|
Fair Value |
|
|
|
|
Amount |
|
Fair Value |
|
Measurements |
||
|
Senior Notes due 2031 |
|
$ |
|
|
$ |
|
|
Level 2 |
|
Facility Bonds due 2036 |
|
|
|
|
|
|
|
Level 2 |
|
Secured notes payable and other |
|
|
|
|
|
|
|
Level 2 |
|
Interest rate swaps derivative contract assets |
|
|
|
|
|
|
|
Level 2 |
|
Non-qualified retirement plan assets |
|
|
|
|
|
|
|
Level 2 |
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 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 nine months ended June 28, 2025,
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
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 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. Non-food products include fuel centers, pharmacies, health/beauty/cosmetic products and general merchandise, as well as quality private label items. In addition, the Company focuses on selling products to its customers through the development of certified organic products, bakery departments and prepared foods including delicatessen sections .
Impact of Hurricane Helene
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. 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.
Legislative Update
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into law. 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.
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. Estimates are based on historical experience and other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management estimates, by their nature, involve judgments regarding future uncertainties, and actual results may therefore differ materially from these estimates.
Self-Insurance
The Company is self-insured for workers’ compensation, general liability and group medical and dental benefits. Risks and uncertainties are associated with self-insurance; however, the Company has limited its exposure by maintaining excess liability coverage 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. Self-insurance liabilities are established based on claims filed and estimates of claims incurred but not reported. 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. 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. This amount included $3.9 million of expected self-insurance recoveries from excess cost insurance or other sources that were recorded as a receivable.
Asset Impairments
The Company accounts for the impairment of long-lived assets in accordance with FASB ASC Topic 360. Asset groups are primarily composed of our individual stores and shopping center properties. For assets to be held and used, the Company tests for impairment using undiscounted cash flows and calculates the amount of impairment using discounted cash flows. For assets held for sale, impairment is recognized based on the excess of remaining book value over expected recovery value. The recovery value is the fair value as determined by independent quotes or expected sales prices developed by internal associates, net of costs to sell. Estimates of future cash flows and expected sales prices are judgments based upon the Company’s experience and knowledge of local operations and cash flows that are projected for several years into the future. These estimates can fluctuate significantly due to changes in real estate market conditions, the economic environment, capital spending decisions and inflation. 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.
Vendor Allowances
The Company receives funds for a variety of merchandising activities from the many vendors whose products the Company buys for resale in its stores. These incentives and allowances are primarily composed of volume or purchase based incentives, advertising allowances, slotting fees, and promotional discounts. 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. 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. Due to the use of the retail method of store inventory and the nature of certain allowances, it is sometimes not practicable to apply allowances to the item cost of inventory. 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.
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.
Similarly, the Company is not able to assess the impact of vendor advertising allowances on creating additional revenue, as such allowances do not directly generate revenue for the Company’s stores .
Results of Operations
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. Comparable store sales are defined as sales by retail stores in operation for five full fiscal quarters. Sales from replacement stores, major remodels and the addition of fuel stations to existing stores are included in the comparable store sales calculation from the date thereof. A replacement store is a newly-opened store that replaces an existing nearby store that has closed. A major remodel entails substantial remodeling of an existing store and includes additional retail square footage. For the three- and 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.
The following table sets forth, for the periods indicated, selected financial information as a percentage of net sales. For information regarding the business’ segments, see Note K “Segment Information” to the Condensed Consolidated Financial Statements .
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Three Months Ended |
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Nine Months Ended |
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June 28, |
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June 29, |
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June 28, |
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June 29, |
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2025 |
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2024 |
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2025 |
|
2024 |
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Net sales |
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100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
|
Gross profit |
|
24.3 |
% |
|
23.7 |
% |
|
23.7 |
% |
|
23.6 |
% |
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Operating and administrative expenses |
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21.5 |
% |
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20.5 |
% |
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21.7 |
% |
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20.3 |
% |
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Gain from sale or disposal of assets |
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— |
% |
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— |
% |
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0.1 |
% |
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0.2 |
% |
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Income from operations |
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2.8 |
% |
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3.2 |
% |
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2.1 |
% |
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3.5 |
% |
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Other income, net |
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0.2 |
% |
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0.3 |
% |
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0.3 |
% |
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0.2 |
% |
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Interest expense |
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0.4 |
% |
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0.4 |
% |
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0.4 |
% |
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0.4 |
% |
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Income tax expense |
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0.7 |
% |
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0.8 |
% |
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0.5 |
% |
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0.8 |
% |
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Net income |
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1.9 |
% |
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2.3 |
% |
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1.5 |
% |
|
2.5 |
% |
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. Net sales decreased by $47.3 million, or 3.4%, to $1.35 billion for the three months ended June 28, 2025 compared with $1.39 billion for the three months ended June 29, 2024. Excluding fuel sales, total grocery comparable store sales increased 1.2% over the comparative fiscal quarter. Ingles operated 197 stores at June 28, 2025; however, three stores damaged by Hurricane Helene remained closed at June 28, 2025. Ingles operated 198 stores at June 29, 2024.
Sales by product category were as follows (in thousands):
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Three Months Ended |
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June 28, |
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June 29, |
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|
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2025 |
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2024 |
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Grocery |
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$ |
478,310 |
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$ |
478,099 |
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Non-foods |
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|
295,100 |
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303,619 |
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Perishables |
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357,752 |
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362,409 |
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Fuel |
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161,829 |
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194,695 |
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Total retail grocery |
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$ |
1,292,991 |
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$ |
1,338,822 |
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):
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Total retail sales for the three months ended June 29, 2024 |
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$ |
1,338,822 |
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Comparable store sales decrease (including fuel) |
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|
(16,206) |
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Impact of stores that remained closed |
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(26,777) |
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Impact of stores closed in fiscal 2025 |
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(2,072) |
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Other |
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(776) |
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Total retail sales for the three months ended June 28, 2025 |
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$ |
1,292,991 |
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 $286.3 million for the three months ended June 29, 2024. As a percentage of sales, operating and administrative expenses were 21.5% and 20.5% for the June 2025 and June 2024 quarters, respectively.
A breakdown of the major changes in operating and administrative expenses is as follows:
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Increase |
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Increase |
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as a % of |
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in millions |
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sales |
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Insurance |
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$ |
2.3 |
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0.17 |
% |
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Depreciation and amortization |
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$ |
1.9 |
|
0.14 |
% |
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Repairs and maintenance |
|
$ |
1.7 |
|
0.13 |
% |
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. 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. 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 $65 million of revenue was lost during the three-week period immediately following the storm due to road and power outages which prevented some stores from opening or maintaining normal store hours, as well as due to electronic payment disruptions as a result of Hurricane Helene. Excluding fuel sales, total grocery comparable store sales decreased 2.7% over the comparative nine-month period.
Sales by product category were as follows (in thousands):
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|
|
Nine Months Ended |
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|
|
June 28, |
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June 29, |
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|
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2025 |
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2024 |
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Grocery |
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$ |
1,447,893 |
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$ |
1,490,393 |
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Non-foods |
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|
870,717 |
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967,638 |
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Perishables |
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1,040,186 |
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|
1,079,528 |
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Fuel |
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|
456,263 |
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|
542,324 |
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Total retail grocery |
|
$ |
3,815,059 |
|
$ |
4,079,883 |
Changes in retail grocery sales for the nine months ended June 28, 2025 are summarized as follows (in thousands):
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|
|
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|
|
|
|
|
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Total retail sales for the nine months ended June 29, 2024 |
|
$ |
4,079,883 |
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Comparable store sales decrease (including fuel) |
|
|
(169,714) |
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Impact of stores that remained closed |
|
|
(84,350) |
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Impact of stores closed in fiscal 2025 |
|
|
(4,822) |
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Other |
|
|
(5,938) |
|
Total retail sales for the nine months ended June 28, 2025 |
|
$ |
3,815,059 |
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 .
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.
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.
A breakdown of the major changes in operating and administrative expenses is as follows:
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(Decrease) |
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(Decrease) |
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Increase |
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Increase |
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as a % of |
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|
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in millions |
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sales |
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|
Salaries and wages |
|
$ |
(11.1) |
|
(0.28) |
% |
|
Repairs and maintenance |
|
$ |
7.4 |
|
0.19 |
% |
|
Depreciation and amortization |
|
$ |
4.5 |
|
0.11 |
% |
|
Professional fees |
|
$ |
4.1 |
|
0.10 |
% |
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.
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.
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. 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.
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.
The Company’s capital expenditure plans for fiscal 2025 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 . Among other things, planned expenditures for any given future fiscal year will be affected by the availability of financing, which can affect both the number of projects pursued at any given time and the cost of those projects. The number of projects may also fluctuate due to the varying costs of the types of projects pursued including new stores and major remodel/expansions. The Company makes decisions on the allocation of capital expenditure dollars based on many factors including the competitive environment, other Company capital initiatives and its financial condition.
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.
Liquidity
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.
In June 2021, the Company issued $350.0 million aggregate principal amount of senior notes due 2031 (the “Notes”). The Notes bear an interest rate of 4.00% per annum and were issued at par.
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 in letters of credit, of which a single letter of credit in the amount of $500,000 was outstanding at June 28, 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. 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 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%. Under this agreement, the Company pays monthly the fixed rate of 3.962% and receives the one-month SOFR plus 1.75%. The interest rate swap effectively hedges floating rate debt in the same amount as the current notional amount of the interest rate swap. Both the floating rate debt and the interest rate swap have monthly principal amortization of $0.5 million and mature October 1, 2027.
In December 2019, the Company 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%. 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 fair market value of the interest rate swaps is measured quarterly with adjustments recorded in other comprehensive income.
The Company’s long-term debt agreements generally have cross-default provisions which could result in the acceleration of payments due under the Line, Bonds and Notes indenture in the event of default under any one instrument.
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.
The Company’s principal sources of liquidity are expected to be cash flow from operations, borrowings under the Line and long-term debt financing. The Company believes, based on its current results of operations and financial condition, that its financial resources, including the Line, short- and long-term financing expected to be available to it and operating cash flow, will be sufficient to meet planned capital expenditures and working capital requirements for the foreseeable future, including any debt service requirements of additional borrowings. However, there is no assurance that any such sources of financing will be available to the Company when needed on acceptable terms, or at all.
It is possible that, in the future, the Company’s results of operations and financial condition will be different from that described in this Quarterly Report on Form 10-Q based on a number of factors. These factors may include, among others, increased competition, changing regional and national economic conditions, adverse climatic conditions affecting food production and delivery, natural disasters, changing demographics, and pandemics or other health emergencies, as well as the additional factors discussed below under “Forward-Looking Statements” and under the heading “Risk Factors” contained in our most recently filed Annual Report on Form 10-K, as well as under similar headings in our Quarterly Reports on Form 10-Q and our other filings with the Securities and Exchange Commission.
Quarterly Cash Dividends
Since December 27, 1993, the Company has paid regular quarterly cash dividends of $0.165 per share on its Class A Common Stock and $0.15 per share on its Class B Common Stock for an annual rate of $0.66 and $0.60 per share, respectively.
The Company expects to continue paying regular cash dividends on a quarterly basis. However, the Board of Directors periodically reconsiders the declaration of dividends. 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.
Seasonality
Grocery sales are subject to a slight seasonal variance due to both holiday related sales and sales in areas where seasonal homes are located. Sales are traditionally higher in the Company’s first fiscal quarter due to the inclusion of sales related to Thanksgiving and Christmas. Unless Easter falls within the quarter, the Company’s second fiscal quarter traditionally has the lowest sales of the year predominantly due to lower occupancy of seasonal homes. In the third and fourth quarters, sales are usually positively affected by the return of customers to seasonal homes in our market area .
Impact of Inflation
The following table from the United States Bureau of Labor Statistics lists annualized changes in the Consumer Price Index that could have an effect on the Company’s operations. One of the Company’s significant costs is labor, which increases with general inflation. Inflation or deflation in energy costs affects the Company’s fuel sales, distribution expenses and plastic supply costs.
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Twelve Months Ended |
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June 2025 |
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All items |
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2.7 |
% |
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Food at home |
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2.4 |
% |
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Energy |
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(0.8) |
% |
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Forward-Looking Statements
This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The words “expect”, “anticipate”, “intend”, “plan”, “likely”, “goal”, “believe”, “seek”, “will”, “may”, “would”, “should” and similar expressions are intended to identify forward-looking statements. While these forward-looking statements and the related assumptions are made in good faith and reflect the Company’s current judgment regarding the direction of the Company’s business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested or described by such forward-looking statements. Such statements are based upon a number of assumptions and estimates which are inherently subject to significant risks and uncertainties many of which are beyond the Company’s control. Some of these assumptions inevitably will not materialize, and unanticipated events will occur which will affect the Company’s results. Some important factors (but not necessarily all factors) that affect the Company’s revenues, financial position, growth strategies, profitability and operating results, or that otherwise could cause actual results to differ materially from those expressed in or implied by any forward-looking statement, include public health emergencies and pandemics; economic conditions generally in the Company’s operating area; the Company’s ability to successfully implement its expansion and operating strategies and to manage rapid expansion; pricing pressures and other competitive factors; reduction in per gallon retail fuel prices; the maturation of new and expanded stores; the Company’s ability to reduce costs and achieve improvements in operating results; the availability and terms of financing; increases in labor and utility costs; success or failure in the ownership and development of real estate; changes in the laws and government regulations applicable to the Company; disruptions in the efficient distribution of food products; 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 .
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. The Company does not undertake and specifically denies any obligation to update any such statements or to publicly announce the results of any revisions to any such statements to reflect future events or developments, except to the extent required by applicable law.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As disclosed under “Liquidity” in Part I Item 2 of this Quarterly Report on Form 10-Q, the Company is a party to interest rate swap agreements for a current aggregate notional amount of $125.1 million. Otherwise, the Company does not typically utilize financial instruments for trading or other speculative purposes, nor does it typically utilize highly leveraged financial instruments. There have been no other material changes in the market risk factors from those disclosed in the Company’s Annual Report on Form 10-K for the year ended September 28, 2024, filed by the Company with the Securities and Exchange Commission, on December 27, 2024 .
Item 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures designed to provide reasonable assurance of achieving the objective that information in its Exchange Act reports is recorded, processed, summarized and reported within the time periods specified and
pursuant to the regulations of the Securities and Exchange Commission (the “SEC”). Disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act, include controls and procedures designed to ensure the information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. It should be noted that the Company’s system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met.
As required by SEC Rule 13a-15(b), the Company carried out an evaluation, under the supervision and with participation of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures as of June 28, 2025, the end of the period covered by this Quarterly Report on Form 10-Q. In making this evaluation, it considered matters previously identified and disclosed in connection with the filing of its Annual Report on Form 10-K for fiscal 2024. After consideration of the matters discussed above, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of June 28, 2025.
(b) Changes in Internal Control over Financial Reporting
The Company is currently planning and performing tests of internal controls over financial reporting for fiscal year 2025.
No changes in internal control over financial reporting occurred during the Company’s last fiscal quarter that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Part II. OTHER INFORMATION
Item 5. OTHER INFORMATION
During the three months ended June 28, 2025, none of our officers or directors
Item 6. EXHIBITS
(a) Exhibits.
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31.1 |
* |
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31.2 |
* |
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101 |
* |
The following financial information from the Quarterly Report on Form 10-Q for the fiscal quarter ended June 28, 2025, formatted in iXBRL (Inline Extensible Business Reporting Language) and furnished electronically herewith: (i) the Consolidated Statements of Earnings; (ii) the Consolidated Balance Sheets; (iii) the Consolidated Statements of Cash Flows; (iv) the Consolidated Statements of Comprehensive Income; and (v) the Notes to the Consolidated Financial Statements. |
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104 |
* |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
________
* Filed herewith.
** Furnished herewith.
+ Pursuant to Item 601(a)(5) of Regulation S-K, schedules and similar attachments to this exhibit have been omitted because they do not contain information material to an investment or voting decision and such information is not otherwise disclosed in such exhibit. The Company will supplementally provide a copy of any omitted schedule or similar attachment to the U.S. Securities and Exchange Commission or its staff upon request.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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INGLES MARKETS, INCORPORATED |
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Date: August 7, 2025 |
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/s/ James W. Lanning
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James W. Lanning |
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President and Chief Executive Officer (principal executive officer) |
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Date: August 7, 2025 |
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/s/ Patricia E. Jackson
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Patricia E. Jackson, CPA |
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Vice President-Finance and Chief Financial Officer (principal financial and accounting officer) |