UNITED STATES
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 27, 2003
| ¨ | 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)
| North Carolina | 56-0846267 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| P.O. Box 6676, Asheville NC | 28816 | |
| (Address of principal executive offices) | (Zip Code) |
(828) 669-2941
Registrant’s telephone number, including area code
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 þ No ¨.
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes þ No ¨.
As of January 21, 2004, the Registrant had 10,764,514 shares of Class A Common Stock, $.05 par value per share, outstanding and 12,383,641 shares of Class B Common Stock, $.05 par value per share, outstanding.
INGLES MARKETS, INCORPORATED
| Page No. | ||||
| Part I - Financial Information |
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| Item 1. |
Financial Statements (Unaudited) |
|||
| Condensed Consolidated Balance Sheets December 27, 2003 and September 27, 2003 |
3 | |||
| 5 | ||||
| 6 | ||||
| 7 | ||||
| 8 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
11 | ||
| Item 3. |
18 | |||
| Item 4. |
18 | |||
| Part II - Other Information |
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| Item 6. |
19 | |||
| 20 | ||||
2
Part I. Financial Information
| Item 1. | Financial Statements |
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
| DECEMBER 27, (UNAUDITED) |
SEPTEMBER 27, (NOTE) | |||||
| Current Assets: |
||||||
| Cash |
$ | 47,331,393 | $ | 80,865,318 | ||
| Receivables |
35,894,367 | 31,014,026 | ||||
| Inventories |
195,366,657 | 194,834,781 | ||||
| Other |
7,681,134 | 8,351,169 | ||||
| Total Current Assets |
286,273,551 | 315,065,294 | ||||
| Property and Equipment – Net |
750,272,847 | 740,834,467 | ||||
| Other Assets |
15,764,382 | 15,759,680 | ||||
| Total Assets |
$ | 1,052,310,780 | $ | 1,071,659,441 | ||
NOTE: The balance sheet at September 27, 2003 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
| DECEMBER 27, 2003 (UNAUDITED) |
SEPTEMBER 27, 2003 (NOTE) | |||||
| Current Liabilities: |
||||||
| Short-term loans and current portion of long-term debt |
$ | 34,867,694 | $ | 38,032,125 | ||
| Accounts payable, accrued expenses and current portion of other long-term liabilities |
137,475,363 | 144,587,717 | ||||
| Total Current Liabilities |
172,343,057 | 182,619,842 | ||||
| Deferred Income Taxes |
39,379,578 | 40,614,578 | ||||
| Long-Term Debt |
595,626,865 | 602,932,198 | ||||
| Other Long-Term Liabilities |
2,353,309 | 1,929,709 | ||||
| Total Liabilities |
809,702,809 | 828,096,327 | ||||
| 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; 10,730,614 shares issued and outstanding December 27, 2003; 10,635,419 shares issued and outstanding September 27, 2003 |
536,530 | 531,770 | ||||
| Class B, $.05 par value; 100,000,000 shares authorized; 12,384,391 shares issued and outstanding December 27, 2003; 12,391,216 shares issued and outstanding September 27, 2003 |
619,220 | 619,561 | ||||
| Paid-in capital in excess of par value |
103,321,242 | 102,465,443 | ||||
| Retained earnings |
138,130,979 | 139,946,340 | ||||
| Total Stockholders’ Equity |
242,607,971 | 243,563,114 | ||||
| Total Liabilities and Stockholders’ Equity |
$ | 1,052,310,780 | $ | 1,071,659,441 | ||
NOTE: The balance sheet at September 27, 2003 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 |
||||||||
| DECEMBER 27, 2003 |
DECEMBER 28, 2002 |
|||||||
| Net sales |
$ | 534,334,437 | $ | 495,116,191 | ||||
| Cost of goods sold |
402,424,569 | 364,771,106 | ||||||
| Gross profit |
131,909,868 | 130,345,085 | ||||||
| Operating and administrative expenses |
118,125,853 | 115,336,828 | ||||||
| Rental income, net |
1,513,715 | 2,151,181 | ||||||
| Income from operations |
15,297,730 | 17,159,438 | ||||||
| Other income, net |
1,337,444 | 497,919 | ||||||
| Interest expense |
13,857,593 | 12,732,128 | ||||||
| Income before income taxes |
2,777,581 | 4,925,229 | ||||||
| Income taxes: |
||||||||
| Current |
2,090,000 | 2,150,000 | ||||||
| Deferred |
(1,110,000 | ) | (400,000 | ) | ||||
| 980,000 | 1,750,000 | |||||||
| Net income |
$ | 1,797,581 | $ | 3,175,229 | ||||
| Per share amounts: |
||||||||
| Basic earnings per common share |
$ | 0.08 | $ | 0.14 | ||||
| Diluted earnings per common share |
$ | 0.08 | $ | 0.14 | ||||
| Cash dividends per common share: |
||||||||
| Class A Common Stock |
$ | 0.165 | $ | 0.165 | ||||
| Class B Common Stock |
$ | 0.150 | $ | 0.150 | ||||
See notes to unaudited interim financial statements.
5
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
THREE MONTHS ENDED DECEMBER 27, 2003 AND DECEMBER 28, 2002
| CLASS A COMMON STOCK |
CLASS B COMMON STOCK |
PAID-IN CAPITAL IN EXCESS OF PAR VALUE |
RETAINED EARNINGS |
TOTAL |
|||||||||||||||||||
| SHARES |
AMOUNT |
SHARES |
AMOUNT |
||||||||||||||||||||
| 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 |
— | — | — | — | — | 3,175,229 | 3,175,229 | ||||||||||||||||
| Cash dividends |
— | — | — | — | — | (3,571,008 | ) | (3,571,008 | ) | ||||||||||||||
| Common stock conversions |
1,050 | 53 | (1,050 | ) | (53 | ) | — | — | — | ||||||||||||||
| Balance, December 28, 2002 |
10,190,857 | $ | 509,543 | 12,596,882 | $ | 629,844 | $ | 100,148,857 | $ | 136,874,825 | $ | 238,163,069 | |||||||||||
| Balance, September 27, 2003 |
10,635,419 | $ | 531,770 | 12,391,216 | $ | 619,561 | $ | 102,465,443 | $ | 139,946,340 | $ | 243,563,114 | |||||||||||
| Net income |
— | — | — | — | — | 1,797,581 | 1,797,581 | ||||||||||||||||
| Cash dividends |
— | — | — | — | — | (3,612,942 | ) | (3,612,942 | ) | ||||||||||||||
| Exercise of stock options |
88,370 | 4,419 | — | — | 855,799 | — | 860,218 | ||||||||||||||||
| Common stock conversions |
6,825 | 341 | (6,825 | ) | (341 | ) | — | — | — | ||||||||||||||
| Balance, December 27, 2003 |
10,730,614 | $ | 536,530 | 12,384,391 | $ | 619,220 | $ | 103,321,242 | $ | 138,130,979 | $ | 242,607,971 | |||||||||||
See notes to unaudited interim financial statements.
6
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
| THREE MONTHS ENDED |
||||||||
| DECEMBER 27, 2003 |
DECEMBER 28, 2002 |
|||||||
| Cash Flows from Operating Activities: |
||||||||
| Net income |
$ | 1,797,581 | $ | 3,175,229 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization expense |
13,980,572 | 12,409,305 | ||||||
| Amortization of deferred gain on sale/leasebacks |
(129,545 | ) | (211,795 | ) | ||||
| Gains on disposals of property and equipment |
(1,042,618 | ) | (35,246 | ) | ||||
| Receipt of advance payments on purchases contracts |
835,000 | 750,000 | ||||||
| Recognition of advance payments on purchases contracts |
(1,419,415 | ) | (881,458 | ) | ||||
| Deferred income taxes |
(1,110,000 | ) | (400,000 | ) | ||||
| (Increase) decrease in receivables |
(4,048,817 | ) | 377,896 | |||||
| Increase in inventory |
(531,876 | ) | (2,426,162 | ) | ||||
| Increase in other assets |
(527,812 | ) | (1,234,725 | ) | ||||
| Decrease in accounts payable and accrued expenses |
(1,908,725 | ) | (17,048,507 | ) | ||||
| Net Cash Provided (Used) by Operating Activities |
5,894,345 | (5,525,463 | ) | |||||
| Cash Flows from Investing Activities: |
||||||||
| Proceeds from sales of property and equipment |
1,196,948 | 42,977 | ||||||
| Capital expenditures |
(27,307,141 | ) | (19,971,748 | ) | ||||
| Net Cash Used by Investing Activities |
(26,110,193 | ) | (19,928,771 | ) | ||||
| Cash Flows from Financing Activities: |
||||||||
| Proceeds from issuance of long-term debt and advances on lines of credit |
— | 9,313,000 | ||||||
| Debt issuance costs |
(95,589 | ) | (24,937 | ) | ||||
| Principal payments on long-term debt |
(10,469,764 | ) | (12,434,372 | ) | ||||
| Proceeds from exercise of stock options |
860,218 | — | ||||||
| Dividends paid |
(3,612,942 | ) | (3,571,008 | ) | ||||
| Net Cash Used by Financing Activities |
(13,318,077 | ) | (6,717,317 | ) | ||||
| Net Decrease in Cash |
(33,533,925 | ) | (32,171,551 | ) | ||||
| Cash at beginning of period |
80,865,318 | 46,900,305 | ||||||