UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| For the quarterly period ended June 28, 2003 | ||
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| For the transition period from | to | . | |||||
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| Commission file number | 0-14706. | |
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INGLES MARKETS, INCORPORATED
| North Carolina (State or other jurisdiction of incorporation or organization) |
56-0846267 (I.R.S. Employer Identification No.) |
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| P.O. Box 6676, Asheville NC (Address of principal executive offices) |
28816 (Zip Code) |
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(828) 669-2941
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 o.
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No o .
As of August 1, 2003, the Registrant had 10,500,748 shares of Class A Common Stock, $.05 par value per share, outstanding and 12,391,216 shares of Class B Common Stock, $.05 par value per share, outstanding.
1
INGLES MARKETS, INCORPORATED
INDEX
Part I — Financial Information |
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Item 1. Financial Statements (Unaudited) |
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Condensed Consolidated Balance Sheets |
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June 28, 2003 and September 28, 2002 |
3 | |||||||
Condensed Consolidated Statements of Income |
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Three Months Ended June 28, 2003 and June 29, 2002 |
5 | |||||||
Nine Months Ended June 28, 2003 and June 29, 2002 |
6 | |||||||
Condensed Consolidated Statements of Changes in Stockholders’ Equity |
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Nine Months Ended June 28, 2003 and June 29, 2002 |
7 | |||||||
Condensed Consolidated Statements of Cash Flows |
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Nine Months Ended June 28, 2003 and June 29, 2002 |
8 | |||||||
Notes to Unaudited Interim Financial Statements |
9 | |||||||
Item 2. Management’s Discussion and Analysis of Financial Condition |
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and Results of Operations |
14 | |||||||
Item 3. Quantitative and Qualitative Disclosures About Market Risk |
23 | |||||||
Item 4. Controls and Procedures |
23 | |||||||
Part II — Other Information |
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Item 6. Exhibits and Reports on Form 8-K |
23 | |||||||
Signatures |
24 | |||||||
Certifications |
25 | |||||||
2
Part I. Financial Information
Item 1. Financial Statements
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
| June 28, | September 28, | |||||||||
| 2003 | 2002 | |||||||||
| (Unaudited) | (Note) | |||||||||
Current Assets: |
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Cash |
$ | 71,370,360 | $ | 46,900,305 | ||||||
Receivables |
31,297,637 | 34,822,934 | ||||||||
Inventories |
200,073,852 | 190,399,350 | ||||||||
Other |
4,869,855 | 5,706,754 | ||||||||
Total Current Assets |
307,611,704 | 277,829,343 | ||||||||
Property and Equipment – Net |
743,345,269 | 723,219,548 | ||||||||
Other Assets |
14,608,461 | 13,342,315 | ||||||||
Total Assets |
$ | 1,065,565,434 | $ | 1,014,391,206 | ||||||
| Note: | The balance sheet at September 28, 2002 has been derived from the audited financial statements at that date. |
See notes to unaudited interim financial statements.
3
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (CONCLUDED)
LIABILITIES AND STOCKHOLDERS’ EQUITY
| June 28, | September 28, | |||||||||||
| 2003 | 2002 | |||||||||||
| (Unaudited) | (Note) | |||||||||||
Current Liabilities: |
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Short-term loans and current portion of
long-term debt |
$ | 40,875,212 | $ | 47,307,046 | ||||||||
Accounts payable, accrued expenses and
current portion of other long-term liabilities |
132,368,459 | 139,123,085 | ||||||||||
Total Current Liabilities |
173,243,671 | 186,430,131 | ||||||||||
Deferred Income Taxes |
34,414,578 | 36,914,578 | ||||||||||
Long-Term Debt |
616,661,926 | 549,324,487 | ||||||||||
Other Long-Term Liabilities |
2,188,868 | 3,163,162 | ||||||||||
Total Liabilities |
826,509,043 | 775,832,358 | ||||||||||
Stockholders’ Equity |
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Preferred stock, $.05 par value; 10,000,000
shares authorized; no shares issued |
— | — | ||||||||||
Common stocks: |
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Class A, $.05 par value; 150,000,000 shares
authorized; 10,500,748 shares issued
and outstanding June 28, 2003;
10,189,807 shares issued and outstanding
September 28, 2002 |
525,037 | 509,490 | ||||||||||
Class B, $.05 par value; 100,000,000 shares
authorized; 12,391,216 shares issued
and outstanding June 28, 2003;
12,597,932 shares issued and outstanding
September 28, 2002 |
619,561 | 629,897 | ||||||||||
Paid-in capital in excess of par value |
101,164,536 | 100,148,857 | ||||||||||
Retained earnings |
136,747,257 | 137,270,604 | ||||||||||
Total Stockholders’ Equity |
239,056,391 | 238,558,848 | ||||||||||
Total Liabilities and Stockholders’ Equity |
$ | 1,065,565,434 | $ | 1,014,391,206 | ||||||||
| Note: | The balance sheet at September 28, 2002 has been derived from the audited financial statements at that date. |
See notes to unaudited interim financial statements.
4
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
| THREE MONTHS ENDED | |||||||||
| June 29, | |||||||||
| June 28, | 2002 | ||||||||
| 2003 | (Restated)* | ||||||||
Net sales |
$ | 503,630,936 | $ | 482,952,623 | |||||
Cost of goods sold |
372,659,527 | 353,780,308 | |||||||
Gross profit |
130,971,409 | 129,172,315 | |||||||
Operating and administrative expenses |
116,198,937 | 112,475,854 | |||||||
Rental income, net |
2,029,832 | 2,342,073 | |||||||
Income from operations |
16,802,304 | 19,038,534 | |||||||
Other income, net |
1,606,103 | 386,695 | |||||||
Income before interest and income taxes |
18,408,407 | 19,425,229 | |||||||
Interest expense |
12,838,129 | 13,736,893 | |||||||
Income before income taxes |
5,570,278 | 5,688,336 | |||||||
Income taxes: |
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Current |
1,500,000 | 620,000 | |||||||
Deferred |
500,000 | 1,500,000 | |||||||
| 2,000,000 | 2,120,000 | ||||||||
Net income |
$ | 3,570,278 | $ | 3,568,336 | |||||
Per share amounts: |
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Basic earnings per common share |
$ | .16 | $ | .16 | |||||
Diluted earnings per common share |
$ | .16 | $ | .16 | |||||
Cash dividends per common share: |
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Class A Common Stock |
$ | .165 | $ | .165 | |||||
Class B Common Stock |
$ | .150 | $ | .150 | |||||
*Certain amounts have been reclassified for the provisions of FAS 145. See Note J for further details.
See notes to unaudited interim financial statements.
5
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
| NINE MONTHS ENDED | |||||||||
| June 29, | |||||||||
| June 28, | 2002 | ||||||||
| 2003 | (Restated)* | ||||||||
Net sales |
$ | 1,488,130,084 | $ | 1,475,552,233 | |||||
Cost of goods sold |
1,097,171,475 | 1,085,869,119 | |||||||
Gross profit |
390,958,609 | 389,683,114 | |||||||
Operating and administrative expenses |
347,358,785 | 343,338,840 | |||||||
Rental income, net |
6,530,093 | 7,098,511 | |||||||
Income from operations |
50,129,917 | 53,442,785 | |||||||
Other income, net |
3,955,068 | 3,544,124 | |||||||
Income before interest and income taxes |
54,084,985 | 56,986,909 | |||||||
Interest expense |
38,081,394 | 39,456,009 | |||||||
Income before income taxes |
16,003,591 | 17,530,900 | |||||||
Income taxes: |
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Current |
6,800,000 | 7,750,000 | |||||||
Deferred |
(1,000,000 | ) | (1,200,000 | ) | |||||
| 5,800,000 | 6,550,000 | ||||||||
Net income |
$ | 10,203,591 | $ | 10,980,900 | |||||
Per share amounts |
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Basic earnings per common share |
$ | .45 | $ | .49 | |||||
Diluted earnings per common share |
$ | .44 | $ | .48 | |||||
Cash dividends per common share: |
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Class A Common Stock |
$ | .495 | $ | .495 | |||||
Class B Common Stock |
$ | .450 | $ | .450 | |||||
*Certain amounts have been reclassified for the provisions of FAS 145. See Note J for further details.
See notes to unaudited interim financial statements.
6
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
| CLASS A | CLASS B | PAID-IN | ||||||||||||||||||||||||||
| COMMON STOCK | COMMON STOCK | CAPITAL IN | ||||||||||||||||||||||||||
| EXCESS OF | RETAINED | |||||||||||||||||||||||||||
| SHARES | AMOUNT | SHARES | AMOUNT | PAR VALUE | EARNINGS | TOTAL | ||||||||||||||||||||||
Balance, September 29, 2001 |
10,005,107 | $ | 500,255 | 12,634,432 | $ | 631,722 | $ | 98,595,411 | $ | 136,772,824 | $ | 236,500,212 | ||||||||||||||||
Net income |
— | — | — | — | — | 10,980,900 | 10,980,900 | |||||||||||||||||||||
Cash dividends |
— | — | — | — | — | (10,664,265 | ) | (10,664,265 | ) | |||||||||||||||||||
Exercise of stock options |
148,200 | 7,409 | — | — | 1,553,446 | — | 1,560,855 | |||||||||||||||||||||
Common stock conversions |
26,200 | 1,311 | (26,200 | ) | (1,311 | ) | — | — | — | |||||||||||||||||||
Balance, June 29, 2002 |
10,179,507 | $ | 508,975 | 12,608,232 | $ | 630,411 | $ | 100,148,857 | $ | 137,089,459 | $ | 238,377,702 | ||||||||||||||||
Balance, September 28, 2002 |
10,189,807 | $ | 509,490 | 12,597,932 | $ | 629,897 | $ | 100,148,857 | $ | 137,270,604 | $ | 238,558,848 | ||||||||||||||||
Net income |
— | — | — | — | — | 10,203,591 | 10,203,591 | |||||||||||||||||||||
Cash dividends |
— | — | — | — | — | (10,726,938 | ) | (10,726,938 | ) | |||||||||||||||||||
Exercise of stock options |
104,225 | 5,211 | 1,015,679 | — | 1,020,890 | |||||||||||||||||||||||
Common stock conversions |
206,716 | 10,336 | (206,716 | ) | (10,336 | ) | — | — | — | |||||||||||||||||||
Balance, June 28, 2003 |
10,500,748 | $ | 525,037 | 12,391,216 | $ | 619,561 | $ | 101,164,536 | $ | 136,747,257 | $ | 239,056,391 | ||||||||||||||||
See notes to unaudited interim financial statements.
7
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
| NINE MONTHS ENDED | |||||||||
| June 28, | June 29, | ||||||||
| 2003 | 2002 | ||||||||
Cash Flows from Operating Activities: |
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Net income |
$ | 10,203,591 | $ | 10,980,900 | |||||
Adjustments to reconcile net income to net cash provided by
operating activities: |
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Depreciation and amortization expense |
38,183,369 | 36,072,091 | |||||||
Amortization of deferred gain on sale/leasebacks |
(761,026 | ) | (635,386 | ) | |||||
Gains on disposals of property and equipment |
(2,181,958 | ) | (1,275,168 | ) | |||||
Receipt of advance payments on purchases contracts |
530,546 | 2,756,871 | |||||||
Recognition of advance payments on purchases contracts |
(2,562,439 | ) | (2,586,069 | ) | |||||
Decrease in deferred income taxes |
(1,000,000 | ) | (1,200,000 | ) | |||||
Decrease in receivables |
3,525,297 | 1,700,497 | |||||||
(Increase) decrease in inventory |
(9,674,502 | ) | 810,739 | ||||||
Increase in other assets |
(1,796,335 | ) | (324,726 | ) | |||||
Decrease in accounts payable and
accrued expenses |
(5,451,671 | ) | (9,307,227 | ) | |||||
Net Cash Provided by Operating Activities |
29,014,872 | 36,992,522 | |||||||
Cash Flows from Investing Activities: |
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Proceeds from sales of property and equipment |
3,433,386 | 7,031,083 | |||||||
Capital expenditures |
(58,119,635 | ) | (26,227,924 | ) | |||||
Net Cash Used by Investing Activities |
(54,686,249 | ) | (19,196,841 | ) | |||||
Cash Flows from Financing Activitie | |||||||||