<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D. C. 20549
FORM 10-Q
__
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 25, 1993
__
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to _________________ .
Commission File Number 0-14706
INGLES MARKETS, INCORPORATED
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
North Carolina 56-0846267
- ------------------------------- ---------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
P.O. Box 6676, Asheville, NC 28816
- ------------------------------- ---------------------------
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number,
including area code: (704) 669-2941
---------------------------
</TABLE>
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. YES X NO___.
As of January 28, 1994, the registrant had 4,365,971 shares of Class A Common
Stock, $.05 par value per share, and 13,537,729 shares of Class B Common Stock,
$.05 par value per share, outstanding.
1
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INGLES MARKETS, INCORPORATED
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I - Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets -
December 25, 1993 and
September 25, 1993 3
Consolidated Statements of Income -
Three Months Ended
December 25, 1993 and
December 26, 1992 5
Consolidated Statements of Changes in
Stockholders' Equity
Three Months Ended
December 25, 1993 and
December 26, 1992 6
Consolidated Statements of Cash Flows -
Three Months Ended
December 25, 1993 and
December 26, 1992 7
Notes to Unaudited Interim Financial Statements 8
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial
Condition 11
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
Exhibits
11 Computation of Earnings Per Common Share 17
</TABLE>
2
<PAGE> 3
Part I. Financial Information
Item 1. Financial Statements
INGLES MARKETS, INCORPORATED
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 25, SEPTEMBER 25,
1993 1993
(UNAUDITED) (NOTE)
------------ -------------
<S> <C> <C>
CURRENT ASSETS
--------------
Cash $ 17,747,395 $ 17,720,151
Receivables 14,161,370 14,043,992
Inventories 100,323,842 101,718,841
Other 2,912,638 2,833,268
------------- -------------
TOTAL CURRENT ASSETS 135,145,245 136,316,252
PROPERTY AND EQUIPMENT - Net 318,131,261 312,516,161
----------------------
OTHER ASSETS 7,603,489 7,716,358
------------ ------------- -------------
TOTAL ASSETS $ 460,879,995 $ 456,548,771
============= =============
</TABLE>
NOTE: The balance sheet at September 25, 1993 has been derived from the
audited financial statements at that date.
See notes to unaudited interim financial statements.
3
<PAGE> 4
INGLES MARKETS, INCORPORATED
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONCLUDED)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 25, SEPTEMBER 25,
1993 1993
(UNAUDITED) (NOTE)
------------ -------------
<S> <C> <C>
CURRENT LIABILITIES
-------------------
Short-term loans and current
portion of long-term liabilities $ 46,115,700 $ 43,832,239
Accounts payable and accrued
expenses 78,589,363 80,049,770
------------ ------------
TOTAL CURRENT LIABILITIES 124,705,063 123,882,009
DEFERRED GAINS ON SALE LEASEBACKS 144,243 148,486
---------------------------------
DEFERRED INCOME TAXES 18,126,161 21,815,873
---------------------
LONG-TERM LIABILITIES 167,160,987 163,013,274
--------------------- ------------ ------------
TOTAL LIABILITIES 310,136,454 308,859,642
------------ ------------
STOCKHOLDERS' EQUITY
--------------------
Preferred stock, $.05 par value;
10,000,000 shares authorized;
no shares issued
Common stocks:
Class A, $.05 par value; 150,000,000
shares authorized; 4,327,346
shares issued and outstanding
December 25, 1993; 4,310,855 shares
issued and outstanding
September 25, 1993 216,367 215,543
Class B, $.05 par value; 100,000,000
shares authorized; 13,576,354
shares issued and outstanding
December 25, 1993; 13,592,845 shares
issued and outstanding
September 25, 1993 678,818 679,642
Paid-in capital in excess of
par value 48,594,115 48,594,115
Retained earnings 101,254,241 98,199,829
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 150,743,541 147,689,129
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $460,879,995 $456,548,771
============ ============
</TABLE>
NOTE: The balance sheet at September 25, 1993 has been derived from the
audited financial statements at that date.
See notes to unaudited interim financial statements.
4
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INGLES MARKETS, INCORPORATED
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------
DECEMBER 25, DECEMBER 26,
1993 1992
------------ ------------
<S> <C> <C>
NET SALES $297,874,598 $276,556,843
COST OF GOODS SOLD 232,497,536 216,263,793
------------ ------------
GROSS PROFIT 65,377,062 60,293,050
OPERATING AND ADMINISTRATIVE
EXPENSES 57,110,310 53,107,665
RENTAL INCOME, NET 1,835,339 1,108,603
------------ ------------
INCOME FROM OPERATIONS 10,102,091 8,293,988
OTHER INCOME, NET 339,238 118,848
------------ ------------
INCOME BEFORE INTEREST
AND INCOME TAXES 10,441,329 8,412,836
INTEREST EXPENSE 4,296,200 4,500,912
------------ ------------
INCOME BEFORE
INCOME TAXES 6,145,129 3,911,924
------------ ------------
INCOME TAXES:
Current 3,000,000 1,400,000
Deferred (700,000) -
------------ ------------
2,300,000 1,400,000
------------ ------------
INCOME BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE 3,845,129 2,511,924
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE FOR INCOME TAXES 3,334,860 -
------------ ------------
NET INCOME $ 7,179,989 $ 2,511,924
============ ============
PER-SHARE AMOUNTS:
Earnings per common share:
Primary earnings per common
share before cumulative effect
of change in accounting principle $ .21 $ .14
Cumulative effect of change in
accounting principle for income taxes .18 -
------------ ------------
Primary earnings per common share $ .39 $ .14
============ ============
Fully diluted earnings per common
share before cumulative effect of
change in accounting principle $ .20 $ .14
Cumulative effect of change in
accounting principle for income taxes .15 -
------------ ------------
Fully diluted earnings per common share $ .35 $ .14
============ ============
Cash dividends per common share:
Class A $ .2475 $ .11
------------ ------------
Class B $ .2250 $ .10
------------ ------------
</TABLE>
See notes to unaudited interim financial statements.
5
<PAGE> 6
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
_____________________________________________
<TABLE>
<CAPTION>
PAID-IN
CLASS A CLASS B CAPITAL IN
...COMMON STOCK... ...COMMON STOCK... EXCESS OF RETAINED
SHARES AMOUNT SHARES AMOUNT PAR VALUE EARNINGS TOTAL
--------- -------- ---------- -------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
SEPTEMBER 26, 1992. 4,292,747 $214,637 13,610,953 $680,548 $48,594,115 $ 90,623,702 $140,113,002
NET INCOME . . . . . - - - - - 2,511,924 2,511,924
CASH DIVIDENDS . . . - - - - - (1,833,315) (1,833,315)
COMMON STOCK
CONVERSIONS . . . . 3,263 163 (3,263) (163) - - -
--------- -------- ---------- -------- ----------- ------------ ------------
BALANCE,
DECEMBER 26, 1992 . 4,296,010 $214,800 13,607,690 $680,385 $48,594,115 $ 91,302,311 $140,791,611
========= ======== ========== ======== =========== ============ ============
BALANCE,
SEPTEMBER 25, 1993. 4,310,855 $215,543 13,592,845 $679,642 $48,594,115 $ 98,199,829 $147,689,129
NET INCOME . . . . . - - - - - 7,179,989 7,179,989
CASH DIVIDENDS . . . - - - - - (4,125,577) (4,125,577)
COMMON STOCK
CONVERSIONS . . . . 16,491 824 (16,491) (824) - - -
--------- -------- ---------- -------- ----------- ------------ ------------
BALANCE,
DECEMBER 25,1993. . 4,327,346 $216,367 13,576,354 $678,818 $48,594,115 $101,254,241 $150,743,541
========= ======== ========== ======== =========== ============ ============
</TABLE>
See notes to unaudited interim financial statements.
6
<PAGE> 7
INGLES MARKETS, INCORPORATED
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------
DECEMBER 25, DECEMBER 26,
1993 1992
------------ ------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 7,179,989 $ 2,511,924
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization expense 5,443,092 5,332,850
Recognition of advance payment on purchases
contract (295,075) (250,000)
Amortization of deferred gains (4,243) (14,605)
(Gains) losses on disposals of property and
equipment (8,520) 72,514
Deferred income taxes (700,000) -
Cumulative effect of change in accounting
principle for income taxes (3,334,860) -
Increase in receivables (117,378) (1,288,960)
Decrease (increase) in inventory 1,394,999 (780,584)
Decrease in other assets 337,929 189,820
(Decrease) increase in accounts payable
and accrued expenses (1,460,407) 8,567,468
------------ ------------
Net Cash Provided by Operating Activities 8,435,526 14,340,427
------------ -------------
Cash Flows From Investing Activities:
Proceeds from sales of property and
equipment 17,650 24,800
Capital expenditures (11,026,604) (58,506,673)
------------ ------------
Net Cash (Used) by Investing Activities (11,008,954) (58,481,873)
------------ ------------
Cash Flows From Financing Activities:
Proceeds from issuance of long-term debt 12,000,000 -
Principal payments of long-term debt (5,273,751) (2,525,949)
Proceeds from short-term borrowings, net - 41,000,000
Dividends paid (4,125,577) (1,833,315)
------------ ------------
Net Cash Provided By Financing Activities 2,600,672 36,640,736
------------ ------------
Net Increase (Decrease) in Cash 27,244 (7,500,710)
Cash at Beginning of Period 17,720,151 24,743,544
------------ ------------
Cash at End of Period $ 17,747,395 $ 17,242,834
============ ============
</TABLE>
See notes to unaudited interim financial statements.
7
<PAGE> 8
INGLES MARKETS, INCORPORATED
AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
December 25, 1993
A. BASIS OF PREPARATION
In the opinion of management, the accompanying unaudited interim
financial statements contain all adjustments necessary to present fairly
the Company's financial position as of December 25, 1993 and September 25,
1993, and the results of operations, changes in stockholders' equity and
cash flows for the three months ended December 25, 1993 and December 26,
1992. The adjustments made are of a normal recurring nature. Certain
information and footnote disclosures normally included in the annual
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the rules
and regulations of the Securities and Exchange Commission for Form 10-Q.
It is suggested that these unaudited interim financial statements be read
in conjunction with the audited financial statements and the notes thereto
included in the 1993 Annual Report on Form 10-K filed by the Company under
the Securities Exchange Act of 1934 on December 20, 1993.
The results of operations for the three month period ended December 25,
1993 are not necessarily indicative of the results to be expected for the
full fiscal year.
Certain amounts for the three month period ended December 26, 1992 have
been reclassified for comparative purposes.
B. EARNINGS PER COMMON SHARE
Primary earnings per common share is computed by dividing consolidated
net income by the weighted average number of shares of common stock and
dilutive common stock equivalent shares outstanding during the period
(18,309,901 and 17,903,700 for the three months ended December 25, 1993
and December 26, 1992, respectively). Shares used to compute primary
earnings per common share for the three months ended December 25, 1993
included stock options converted to equivalent shares. These stock
options were not included in the computation for the three months ended
December 26, 1992, as they were antidilutive.
Fully diluted earnings per common share gives effect to the assumed
conversion, if dilutive, of the Convertible Subordinated Debentures, after
elimination of related interest expense, net of the bonus and income tax
effect. The weighted average number of shares used to compute fully
diluted earnings per common share were 21,784,949 for the three months
ended December 25, 1993. The effect for the three months ended December
26, 1992 of the conversion of the Convertible Subordinated Debentures was
anti-dilutive and therefore the conversion was not assumed in the fully
diluted calculation for this period.
C. ALLOWANCE FOR DOUBTFUL ACCOUNTS
Receivables are presented net of an allowance for doubtful accounts of
$100,000 at December 25, 1993 and September 25, 1993.
8
<PAGE> 9
D. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
December 25, September 25,
1993 1993
------------ -------------
<S> <C> <C>
Accounts payable-trade $ 55,764,984 $ 57,679,269
Property, payroll, and
other taxes payable 6,700,668 6,526,695
Income taxes payable 3,445,970 1,428,220
Salaries, wages and
bonuses payable 4,356,510 5,765,393
Interest payable 1,661,848 2,525,586
Self-insurance reserves 4,290,000 4,260,000
Other 2,369,383 1,864,607
------------ -------------
$ 78,589,363 $ 80,049,770
============ =============
</TABLE>
E. LONG-TERM DEBT
On September 30, 1993, the Company obtained a $12 million loan from an
insurance company. The loan is secured by store equipment and is payable
in sixty monthly installments of $226,730 including interest at a rate
equal to the average weekly yield of thirty day Commercial Paper plus 190
basis points (5.0% at December 25, 1993). Proceeds of the loan were used
to reduce long-term debt and fund capital expenditures.
F. DIVIDENDS
The Company paid cash dividends of $.0825 for each share of Class A
Common Stock and $.075 for each share of Class B Common Stock on October
8, 1993 to stockholders of record on September 28, 1993. The Company paid
cash dividends of $.165 for each share of Class A Common Stock and $.15
for each share of Class B Common Stock on December 27, 1993 to
stockholders of record on December 17, 1993.
G. SUPPLEMENTARY CASH FLOW INFORMATION
Cash paid for interest and taxes is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------
December 25, December 26,
1993 1992
------------ ------------
<S> <C> <C>
Interest (net of
amount capitalized) $ 5,159,938 $ 5,419,258
Income taxes 982,250 467,600
</TABLE>
H. CHANGE IN METHOD OF ACCOUNTING FOR INCOME TAXES
Effective September 26, 1993, the Company adopted FASB Statement No.
109, "Accounting of Income Taxes". Under Statement 109, the liability
method is used in accounting for income taxes. Under this method,
deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and
are measured using the currently enacted tax rates. Prior to the adoption
of Statement 109, income tax expense was determined using the deferred
method. Deferred tax expense was based on items of income and expense
that were reported in different years in the financial statements and tax
returns and were measured at the tax rate in effect in the year the
difference originated.
9
<PAGE> 10
As permitted by Statement 109, the Company has elected not to restate the
financial statements of any prior years. The effect of the change on pre-tax
income for the three months ended December 25, 1993 was not material; however,
the cumulative effect of the change increased net income by $3,334,860 or $.18
per common share.
Significant components of the Company's deferred tax liabilities and assets as
of September 26, 1993 were as follows (in thousands):
<TABLE>
<S> <C>
Deferred tax liabilities:
Tax over book depreciation $22,203
Property tax method 272
-------
Total deferred tax liabilities 22,475
-------
Deferred tax assets:
Excess of tax basis over financial reporting
basis of property and equipment 3,977
Insurance reserves 1,619
Other 414
-------
Total deferred tax assets 6,010
-------
Net deferred tax liabilities $16,465
=======
</TABLE>
10
<PAGE> 11
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition.
THREE MONTHS ENDED DECEMBER 25, 1993 COMPARED
WITH THE THREE MONTHS ENDED DECEMBER 26, 1992
NET SALES
Net sales for the three months ended December 25, 1993 increased $21.3 million
to $297.9 million, up 7.7% over sales of $276.6 million last year. Growth in
identical store sales (grocery stores open for the entire duration of the
previous fiscal year) were 7.3%. Sales benefited primarily from the
continuation of the lower price strategy on dry grocery goods which the Company
commenced during the third quarter of fiscal 1992. Since implementing this
strategy, the Company has reported increases in net sales, from the comparable
quarter of the prior fiscal year, of $10.6, $15.4, $17.0, $22.1, $16.5, $19.9
and $21.3 million in the third and fourth quarters of fiscal 1992, the first,
second, third and fourth quarters of fiscal 1993 and the first quarter of
fiscal 1994, respectively. The Company plans to continue this pricing strategy
for the balance of fiscal 1994 and beyond.
During the first quarter of fiscal 1994, one new store was opened and two older
stores were replaced. At December 25, 1993, the Company operated 171
supermarkets in North Carolina, South Carolina, Georgia, Tennessee and
Virginia.
GROSS PROFIT
Gross profit for the three month period ended December 25, 1993 increased 8.4%
to $65.4 million, or 21.9% of sales, compared with $60.3 million, or 21.8% of
sales, last year. Grocery gross profit, as a percentage of sales, was
negatively impacted by the lower price strategy on dry grocery goods. Meat,
produce and frozen food gross profit, as a percentage of sales, improved due to
better buying, better merchandising and better control of shrink. The
Company's wholly owned subsidiary, Milkco, Inc., expanded and increased its
business in areas that produced higher profit margins, primarily supplying
institutional food jobbers. Total gross profit, as a percentage of sales,
increased slightly.
OPERATING AND ADMINISTRATIVE EXPENSES
Operating and administrative expenses increased 7.5% to $57.1 million this year
compared with $53.1 million last year. Due to good expense control as well as
the ability to spread expenses over a higher sales volume, operating and
administrative expenses, as a percentage of sales, were 19.2% in both fiscal
1994 and fiscal 1993. In addition, increases in the cost of labor, as a
percentage of sales, were principally offset by a decrease, as a percentage of
sales, in advertising and promotional expenditures.
RENTAL INCOME, NET
Rental income, net increased from $1.1 million last year to $1.8 million this
year. Fiscal 1994 includes a payment of $.6 million for the termination of two
leases on premises which were occupied by a tenant.
11
<PAGE> 12
INCOME FROM OPERATIONS
Income from operations increased 21.8% to $10.1 million, or 3.4% of sales,
compared with $8.3 million, or 3.0% of sales, the prior year. The increase was
due to the increase in sales and the increase in rental income, net.
OTHER INCOME, NET
Other income, net increased from $.1 million last year to $.3 million this year
primarily due to an increase in miscellaneous other income.
INCOME BEFORE INTEREST AND INCOME TAXES
Income before interest and income taxes was $10.4 million, or 3.5% of sales, in
fiscal 1994 compared with $8.4 million, or 3.0% of sales, last year.
INTEREST EXPENSE
Despite an increase in debt this quarter, compared to the comparable quarter
last year, interest expense decreased from $4.5 million in 1993 to $4.3 million
in 1994, due to lower interest rates.
INCOME BEFORE INCOME TAXES
Income before income taxes increased $2.2 million to $6.1 million, or 2.1% of
sales, this year compared to $3.9 million, or 1.4% of sales, last year.
INCOME TAX EXPENSE
Income tax expense, as a percentage of pre-tax income, was 37.4% this year
compared with 35.8% last year due primarily to the increase in the federal
income tax rate.
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
Income before the cumulative effect of the change in accounting principle for
the three months ended December 25, 1993 increased $1.3 million, to $3.8
million, up 53.1% over income of $2.5 million last year. Primary earnings per
common share before the cumulative effect of the change in accounting principle
rose from $.14 last year to $.21 this year.
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE FOR INCOME TAXES
In February 1992, the Financial Accounting Standards Board issued a new
standard (SFAS 109), "Accounting for Income Taxes". A significant feature of
the standard is the use of an approach under which recorded deferred taxes are
adjusted for changes in tax rates. Under prior rules (APB 11), deferred taxes
were provided at current tax rates and were not adjusted for subsequent changes
in these rates. The new standard was adopted by the Company at the beginning
of the current quarter. The cumulative effect of adopting the standard
resulted in a non-cash credit to net earnings in the first quarter of fiscal
1994 of $3.3 million, or $.18 per common share.
12
<PAGE> 13
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES
Net cash provided by operating activities for the three month period ended
December 25, 1993 totalled $8.4 million. Depreciation and amortization expense
was $5.4 million. The cumulative effect of the change in accounting principle
that resulted from the Company's adoption of the Financial Accounting Standards
Board (FASB) Statement Number 109, "Accounting for Income Taxes" was $3.3
million (See page 12). Accounts payable and accrued expenses decreased $1.5
million and inventory decreased $1.4 million.
INVESTING ACTIVITIES
Net cash used by investing activities during fiscal 1994 totalled $11.0
million. Capital expenditures aggregated $11.0 million. The Company's capital
expenditure program was devoted primarily to construction of new facilities,
renovation and modernization of existing stores and remodels expected to become
operational in fiscal 1994.
FINANCING ACTIVITIES
Net cash provided by financing activities totalled $2.6 million. The Company
paid cash dividends of $4.1 million. Proceeds from the issuance of long-term
debt were $12.0 million. Principal payments of long-term debt totalled $5.3
million.
ACTIVITY RATIOS
The following activity ratios are calculated by annualizing the quarterly
results.
Favorable inventory turnover rates (cost of sales/inventory) in 1994 of 9.3
(compared with 8.3 in 1993) helped generate cash flow from operations. Return
on assets (income before the cumulative effect of the change in accounting
principle/total assets) increased from 2.3% in 1993 to 3.3% in 1994. Return on
investment (income before the cumulative effect of the change in accounting
principle/average stockholders' equity) improved significantly to 10.3%
compared to 7.2% the prior year.
FINANCIAL STRENGTH
The Company remains in sound financial condition. At December 25, 1993, total
assets were $460.1 million and stockholders' equity was $150.7 million.
CAPITAL REQUIREMENTS
The Company has resumed its store expansion program in fiscal 1994. We expect
to open 8 to 10, net new stores, one of which will be located in Centre,
Alabama - our first venture into this state. The Company expects to invest
approximately $40-$50 million in new stores, the expansion and/or remodeling of
existing stores, replacing equipment, installing electronic scanning systems in
new and existing stores and securing sites for future expansion.
13
<PAGE> 14
FINANCIAL RESOURCES
Available lines of credit at December 25, 1993 with four banks totalled $41.5
million. Most of the lines carry interest rates below prime. The Company is
not required to maintain compensating balances in connection with these lines
of credit. The Company has unencumbered property with a net book value of
approximately $185 million which is available to collateralize additional debt.
The Company believes that long-term bank financing is available as well as
sale/leaseback arrangements.
On October 1, 1992, the Company purchased twenty-two shopping center properties
and one free standing store containing approximately 1.7 million square feet of
retail space which were leased to Ingles and anchored by supermarkets operated
by the Company. These properties were previously sold by the Company in
December 1986 for $58.3 million, in connection with a sale/leaseback
transaction.
The purchase price for these properties, $55.6 million, was paid with existing
cash ($10.6 million) and by short-term borrowings under existing bank lines of
credit ($45.0 million) at interest rates below the prime rate. The Company
plans to pursue long-term financing in fiscal 1994 to replace short-term
borrowings, currently outstanding, used to finance this transaction.
The Company believes that the financial resources available, including amounts
available under long-term financing arrangements, existing bank lines of credit
and internally generated funds, will be sufficient to meet planned capital
expenditures and working capital requirements for the foreseeable future,
including any debt servicing required by additional borrowings.
At their quarterly meeting on December 3, 1993, the Company's Board of
Directors voted to increase the Company's regular quarterly cash dividends
100%. Effective with dividends paid December 27, 1993, the dividends were
increased from $.0825 (eight and one-quarter cents) per share on Class A
Common Stock to $.165 (sixteen and one-half cents) per share and from $.075
(seven and one-half cents) per share on Class B Common Stock to $.15 (fifteen
cents) per share for an annual rate of $.66 and $.60 per share, respectively.
The Company expects to continue the payment of regular dividends on a quarterly
basis at the rates approved December 3, 1993. The Board of Directors, however,
reconsiders the declaration of dividends periodically, and there can be no
assurance as to the declaration of or the amount of dividends to be paid. The
payment of dividends is subject to the discretion of the Board of Directors and
will depend upon the results of operations, the financial condition of the
Company and other factors which the Board of Directors deems relevant.
14
<PAGE> 15
Part II. Other Information.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibit is filed as part of this report. The
exhibit number refers to Item 601 of Regulation S-K.
Exhibit 11 - Computation of Earnings Per Common Share.
(b) Reports on Form 8-K. There were no reports on Form 8-K filed
for the quarter ended December 25, 1993.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused the report to be signed on its behalf by the
undersigned thereunto duly authorized.
INGLES MARKETS, INCORPORATED
<TABLE>
<S> <C> <C>
Date: February 7, 1994 /s/ Robert P. Ingle
----------------------------
Robert P. Ingle
Chairman of the Board and
Chief Executive Officer
Date: February 7, 1994 /s/ Jack R. Ferguson
----------------------------
Jack R. Ferguson
Vice President-Finance and
Chief Financial Officer
</TABLE>
16
<PAGE> 1
INGLES MARKETS, INCORPORATED EXHIBIT 11
AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE *
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
DECEMBER 25, DECEMBER 26,
1993 1992
------------ ------------
<S> <C> <C>
PRIMARY:
Income before cumulative effect of
change in accounting principle $ 3,845,129 $ 2,511,924
Cumulative effect of change in accounting
for income taxes 3,334,860 -
----------- -----------
Net Income $ 7,179,989 $ 2,511,924
=========== ===========
Shares
Weighted average number of common shares
and common stock equivalent shares
outstanding 18,309,901 17,903,700
=========== ===========
Primary earnings per common share before
cumulative effect of change in accounting
principle $ .21 $ .14
Cumulative effect of change in accounting
for income taxes .18 -
----------- -----------
Primary earnings per common share $ .39 $ .14
=========== ===========
FULLY DILUTED:
Income before cumulative effect of
change in accounting principle $ 3,845,129 $ 2,511,924
Add after tax and bonus effect of interest
expense applicable to Convertible
Subordinated Debentures 520,547 527,820
----------- -----------
Fully diluted earnings before cumulative
effect of change in accounting principle 4,365,676 3,039,744
Cumulative effect of change in accounting
for income taxes 3,334,860 -
----------- -----------
Fully diluted earnings $ 7,700,536 $ 3,039,744
=========== ===========
Shares
Weighted average number of common
shares and common stock equivalent
shares outstanding 18,409,814 17,903,700
Additional shares assuming conversion
of Convertible Subordinated Debentures 3,375,135 3,375,135
----------- -----------
Weighted average number of common
shares outstanding as adjusted 21,784,949 21,278,835
=========== ===========
Fully diluted earnings per common share
before cumulative effect of change in
accounting principle ** $ .20 $ .14
Cumulative effect of change in accounting
for income taxes .15 -
----------- -----------
Fully diluted earnings per common share ** $ .35 $ .14
=========== ===========
</TABLE>
* See note B of the notes to unaudited interim financial statements.
** The effect for the three months ended December 26, 1992 of the
conversion of the Convertible Subordinated Debentures was
anti-dilutive and therefore the conversion was not assumed in the
fully diluted calculation for this period.
17
