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 March 26, 2005
| ¨ | 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 x No ¨.
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨.
As of April 29, 2005, the Registrant had 11,787,470 shares of Class A Common Stock, $0.05 par value per share, outstanding and 12,366,791 shares of Class B Common Stock, $0.05 par value per share, outstanding.
INDEX
| Page No. | ||
| Part I — Financial Information |
||
| Item 1. Financial Statements (Unaudited) |
||
| Condensed Consolidated Balance Sheets as of March 26, 2005 and September 25, 2004 |
3 | |
| 4 | ||
| 5 | ||
| 6 | ||
| 7 | ||
| 8 | ||
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
11 | |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk |
18 | |
| Item 4. Controls and Procedures |
18 | |
| Part II — Other Information |
||
| Item 6. Exhibits and Reports on Form 8-K |
20 | |
| 21 | ||
2
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
| MARCH 26, 2005 |
SEPTEMBER 25, 2004 | |||||
| ASSETS | ||||||
| Current Assets: |
||||||
| Cash and Cash Equivalents |
$ | 52,840,676 | $ | 80,593,990 | ||
| Receivables |
38,086,071 | 34,449,988 | ||||
| Inventories |
199,136,538 | 189,431,944 | ||||
| Other Current Assets |
10,484,798 | 9,062,982 | ||||
| Total Current Assets |
300,548,083 | 313,538,904 | ||||
| Property and Equipment – Net |
735,295,405 | 738,218,926 | ||||
| Other Assets |
14,047,440 | 11,928,788 | ||||
| Total Assets |
$ | 1,049,890,928 | $ | 1,063,686,618 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||
| Current Liabilities: |
||||||
| Current portion of long-term debt |
$ | 25,699,699 | $ | 33,826,668 | ||
| Accounts payable - trade |
100,496,934 | 88,725,461 | ||||
| Accrued expenses and current portion of other long-term liabilities |
59,295,568 | 66,188,884 | ||||
| Total Current Liabilities |
185,492,201 | 188,741,013 | ||||
| Deferred Income Taxes |
35,325,578 | 40,885,578 | ||||
| Long-Term Debt |
560,818,943 | 568,607,606 | ||||
| Other Long-Term Liabilities |
3,336,705 | 4,235,245 | ||||
| Total Liabilities |
784,973,427 | 802,469,442 | ||||
| Stockholders’ Equity: |
||||||
| Preferred stock, $0.05 par value; 10,000,000 shares authorized; no shares issued |
— | — | ||||
| Common stocks: |
||||||
| Class A, $0.05 par value; 150,000,000 shares authorized; 11,767,418 shares issued and outstanding March 26, 2005; 11,697,868 shares issued and outstanding September 25, 2004 |
588,370 | 584,893 | ||||
| Class B, $0.05 par value; 100,000,000 shares authorized; 12,366,791 shares issued and outstanding March 26, 2005; 12,369,091 shares issued and outstanding September 25, 2004 |
618,340 | 618,455 | ||||
| Paid-in capital in excess of par value |
113,749,395 | 113,001,794 | ||||
| Retained earnings |
149,961,396 | 147,012,034 | ||||
| Total Stockholders’ Equity |
264,917,501 | 261,217,176 | ||||
| Total Liabilities and Stockholders’ Equity |
$ | 1,049,890,928 | $ | 1,063,686,618 | ||
See notes to unaudited interim financial statements.
3
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
| THREE MONTHS ENDED | |||||||
| MARCH 26, 2005 |
MARCH 27, 2004 | ||||||
| Net sales |
$ | 557,267,255 | $ | 520,792,146 | |||
| Cost of goods sold |
415,239,138 | 383,611,145 | |||||
| Gross profit |
142,028,117 | 137,181,001 | |||||
| Operating and administrative expenses |
121,582,533 | 118,036,841 | |||||
| Rental income, net |
1,081,189 | 1,746,876 | |||||
| Income from operations |
21,526,773 | 20,891,036 | |||||
| Other income, net |
238,525 | 4,183,422 | |||||
| Interest expense |
12,911,766 | 13,712,365 | |||||
| Income before income taxes |
8,853,532 | 11,362,093 | |||||
| Income tax expense (benefit): |
|||||||
| Current |
4,780,000 | 774,000 | |||||
| Deferred |
(1,400,000 | ) | 3,343,000 | ||||
| 3,380,000 | 4,117,000 | ||||||
| Net income |
$ | 5,473,532 | $ | 7,245,093 | |||
| Per share amounts: |
|||||||
| Basic earnings per common share |
$ | 0.23 | $ | 0.31 | |||
| Diluted earnings per common share |
$ | 0.23 | $ | 0.31 | |||
| 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.
4
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
| SIX MONTHS ENDED | |||||||
| MARCH 26, 2005 |
MARCH 27, 2004 | ||||||
| Net sales |
$ | 1,116,541,759 | $ | 1,055,098,583 | |||
| Cost of goods sold |
832,561,821 | 784,581,714 | |||||
| Gross profit |
283,979,938 | 270,516,869 | |||||
| Operating and administrative expenses |
244,290,070 | 236,568,694 | |||||
| Rental income, net |
2,551,098 | 3,237,591 | |||||
| Income from operations |
42,240,966 | 37,185,766 | |||||
| Other income, net |
685,115 | 5,520,866 | |||||
| Interest expense |
25,958,369 | 27,581,958 | |||||
| Income before income taxes |
16,967,712 | 15,124,674 | |||||
| Income tax expense (benefit): |
|||||||
| Current |
11,560,000 | 3,044,000 | |||||
| Deferred |
(5,130,000 | ) | 2,432,000 | ||||
| 6,430,000 | 5,476,000 | ||||||
| Net income |
$ | 10,537,712 | $ | 9,648,674 | |||
| Per share amounts: |
|||||||
| Basic earnings per common share |
$ | 0.44 | $ | 0.42 | |||
| Diluted earnings per common share |
$ | 0.44 | $ | 0.42 | |||
| Cash dividends per common share: |
|||||||
| Class A Common Stock |
$ | 0.33 | $ | 0.33 | |||
| Class B Common Stock |
$ | 0.30 | $ | 0.30 | |||
See notes to unaudited interim financial statements.
5
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
SIX MONTHS ENDED MARCH 26, 2005 AND MARCH 27, 2004
| 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 27, 2003 |
10,635,419 | $ | 531,770 | 12,391,216 | $ | 619,561 | $ | 102,465,443 | $ | 132,978,340 | $ | 236,595,114 | |||||||||||
| Net income |
— | — | — | — | — | 9,648,674 | 9,648,674 | ||||||||||||||||
| Cash dividends |
— | — | — | — | — | (7,246,559 | ) | (7,246,559 | ) | ||||||||||||||
| Exercise of stock options |
547,480 | 27,374 | — | — | 5,469,794 | — | 5,497,168 | ||||||||||||||||
| Common stock conversions |
21,375 | 1,069 | (21,375 | ) | (1,069 | ) | — | — | — | ||||||||||||||
| Balance, March 27, 2004 |
11,204,274 | $ | 560,213 | 12,369,841 | $ | 618,492 | $ | 107,935,237 | $ | 135,380,455 | $ | 244,494,397 | |||||||||||
| Balance, September 25, 2004 |
11,697,868 | $ | 584,893 | 12,369,091 | $ | 618,455 | $ | 113,001,794 | $ | 147,012,034 | $ | 261,217,176 | |||||||||||
| Net income |
— | — | — | — | — | 10,537,712 | 10,537,712 | ||||||||||||||||
| Cash dividends |
— | — | — | — | — | (7,588,350 | ) | (7,588,350 | ) | ||||||||||||||
| Exercise of stock options |
67,250 | 3,362 | — | — | 747,601 | — | 750,963 | ||||||||||||||||
| Common stock conversions |
2,300 | 115 | (2,300 | ) | (115 | ) | — | — | — | ||||||||||||||
| Balance, March 26, 2005 |
11,767,418 | $ | 588,370 | 12,366,791 | $ | 618,340 | $ | 113,749,395 | $ | 149,961,396 | $ | 264,917,501 | |||||||||||
See notes to unaudited interim financial statements.
6
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
| SIX MONTHS ENDED |
||||||||
| MARCH 26, 2005 |
MARCH 27, 2004 |
|||||||
| Cash Flows from Operating Activities: |
||||||||
| Net income |
$ | 10,537,712 | $ | 9,648,674 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization expense |
28,489,672 | 28,322,771 | ||||||
| Losses (gains) on disposals of property and equipment |
859,475 | (5,046,329 | ) | |||||
| Receipt of advance payments on purchase contracts |
1,084,699 | 1,438,000 | ||||||
| Recognition of advance payments on purchase contracts |
(3,224,549 | ) | (3,789,852 | ) | ||||
| Deferred income taxes |
(5,130,000 | ) | ||||||