UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549



FORM 10-K



ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 28, 2019



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.)



 

2913 U.S. Hwy. 70 West, Black Mountain, NC

28711

(Address of principal executive offices)

(Zip Code)



Registrant’s telephone number including area code: (828) 669-2941



Securities registered pursuant to Section 12(b) of the Act:



 

Title of each class

 

Name of each exchange on which registered

 

Class A Common Stock, $0.05 par value

The NASDAQ Global Market LLC

 Securities registered pursuant to Section 12(g) of the Act:

None

(Title of Class)



Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  YES NO .



Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  YES NO .



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 NO .  



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). YES NO NOT APPLICABLE .



Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  



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.  (Check one):



 

 

 

 

Large accelerated filer

Accelerated filer

Non-accelerated filer   

Smaller reporting company

Emerging growth company



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 .



Securities registered pursuant to Section 12(b) of the Act:





 

 

Title of each class

 Trading Symbol

Name of each exchange on which registered

Class A Common Stock, $0.05 par value per share

IMKTA

The NASDAQ Global Select Market



As of March 30, 2019, the aggregate market value of voting stock held by non-affiliates of the registrant, based on the closing sales price of the Class A Common Stock on The NASDAQ Global Select Market on March 30, 2019, was approximately $398 million. As of December 5, 2019, the registrant had 14,180,485 shares of Class A Common Stock outstanding and 6,079,291 shares of Class B Common Stock outstanding.



Certain information required in Part III hereof is incorporated by reference to the Proxy Statement for the registrant’s 2020 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission pursuant to Regulation 14A no later than 120 days after the end of the fiscal year covered by this report.



 

1


 

Ingles Markets, Incorporated



Annual Report on Form 10-K



September 28, 2019





 

 



 

Page



PART I

 

Item 1.

Business

Item 1A.

Risk Factors

Item 1B.

Unresolved Staff Comments

12 

Item 2.

Properties

12 

Item 3.

Legal Proceedings

12 



PART II

 

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities

13 

Item 6.

Selected Financial Data

15 

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

16 

Item 7A.

Quantitative and Qualitative Disclosures About Market Risks

26 

Item 8.

Financial Statements and Supplementary Data

26 

Item 9A.

Controls and Procedures

26 

Item 9B.

Other Information

27 



PART III

 

Item 10.

Directors, Executive Officers and Corporate Governance

27 

Item 11.

Executive Compensation

28 

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

28 

Item 13.

Certain Relationships and Related Transactions, and Director Independence

28 

Item 14.

Principal Accountant Fees and Services

28 



PART IV

 

Item 15.

Exhibits and Financial Statement Schedules

28 

 



 

 

2


 

This Annual Report of Ingles Markets, Incorporated (“Ingles” or the “Company”) contains certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  All statements other than statements of historical fact included in this Annual Report, including the statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business” and elsewhere regarding the Company’s strategy, future operations, financial position, estimated revenues, projected costs, projections, prospects, plans and objectives of management, are forward‑looking statements. The words “expect,” “anticipate,” “intend,” “plan,” “likely,” “goal,” “believe,” “seek” 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 herein.  Such statements are based upon a number of assumptions and estimates that 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, growth strategies, future 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:

·

business and economic conditions generally in the Company’s operating area, including inflation or deflation;

·

the Company’s ability to successfully implement our expansion and operating strategies;

·

pricing pressures and other competitive factors, including online-based procurement of products the Company sells;

·

sudden or significant changes in the availability of gasoline and retail gasoline prices;

·

the maturation of new and expanded stores;

·

general concerns about food safety;

·

the Company’s ability to manage technology and data security;

·

the availability and terms of financing;

·

increases in costs, including food, utilities, labor and other goods and services significant to the Company’s operations;

·

success or failure in the ownership and development of real estate;

·

changes in the laws and government regulations applicable to the Company;

·

other risks and uncertainties, including those described under the caption “Risk Factors.”



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 Annual Report. Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements.  The forward-looking statements included in this Annual Report are made only as of the date hereof.  The Company does not undertake and specifically declines any obligation to update any such statements or to publicly announce the results of any revisions to any of such statements to reflect future events or developments.



 

3


 

PART I



Item 1. BUSINESS 



General



Ingles Markets, Incorporated (“Ingles” or the “Company”), a leading supermarket chain in the southeast United States, operates 198 supermarkets in North Carolina (73), Georgia (66), South Carolina (36), Tennessee (21), Virginia (1) and Alabama (1).



The Company’s strategy is to locate its supermarkets primarily in suburban areas, small towns and neighborhood shopping centers.  The Company remodels, expands and relocates stores in these communities and builds stores in new locations to retain and grow its customer base while retaining a high level of customer service and convenience.  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 and beauty care products and general merchandise.  The Company also offers quality private label items and locally-sourced items throughout its market areas.



The Company believes that customer service and convenience, modern stores and competitive prices on a broad selection of quality merchandise are essential to developing and retaining a loyal customer base.  The Company has an ongoing renovation and expansion plan to add stores in its target market and modernize the appearance and layout of its existing stores.  The Company’s new and remodeled supermarkets provide an enhanced level of customer convenience in order to accommodate the lifestyle of today’s shoppers.  Design features of the Company’s modern stores focus on selling high-growth, high-margin products including perishable departments featuring local organic and home meal replacement items, in-store pharmacies, on-premises fuel centers, and an expanded selection of food and non-food items.



Substantially all of the Company’s stores are located within 280 miles of its warehouse and distribution facilities, near Asheville, North Carolina.  The Company operates 1.65 million square feet of warehouse and distribution facilities.  These facilities supply the company’s supermarkets with approximately 59% of the goods the Company sells.  The remaining 41% is purchased from third parties and is generally delivered directly to the stores.  The close proximity of the Company’s purchasing and distribution operations to its stores facilitates the timely distribution of consistently high quality perishable and non-perishable items.



To further ensure product quality, the Company also owns and operates a milk processing and packaging plant that supplies approximately 81% of the milk products sold by the Company’s supermarkets as well as a variety of organic milk, fruit juices and bottled water products.  In addition, the milk processing and packaging plant sells approximately 73% of its products to other retailers, food service distributors and grocery warehouses in 16 states, which provides the Company with an additional source of revenue. 



The Company owns 162 of its supermarkets, either in free-standing stores or as the anchor tenant in an owned shopping center.  The Company also owns 21 undeveloped sites suitable for a free-standing store or development by the Company or a third party.  The Company’s owned real estate is generally located in the same geographic region as its supermarkets.  During fiscal years 2019 and 2018, the Company purchased a total of four shopping centers which contained Ingles stores that had been leased from third-party landlords.



The Company was founded by Robert P. Ingle, who served as the Company’s Chief Executive Officer until his death in March 2011.  His son, Robert P. Ingle II is Chairman of the Board and remains actively involved in the Company’s daily operations.



As of September 28, 2019, Mr. Ingle II owned beneficially (as defined by the Exchange Act) approximately 76% of the combined voting power and 29% of the total number of shares of the Company’s outstanding Class A and Class B Common Stock (in each case including stock held by the Company’s Investment/Profit Sharing Plan and Trust of which Mr. Ingle II serves as one of the trustees).  The Company became a publicly traded company in September 1987.  The Company’s Class A Common Stock is traded on The NASDAQ Global Select Market under the symbol “IMKTA.”  The Company’s Class B Common Stock is not publicly traded.



The Company was incorporated in 1965 under the laws of the State of North Carolina.  Its principal mailing address is P.O. Box 6676, Asheville, North Carolina 28816, and its telephone number is 828-669-2941.  The Company’s website is www.ingles-markets.com.  Information on the Company’s website is not a part of and is not incorporated by reference into this Annual Report on Form 10-K.  The Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments and supplements to these reports are available on the Company’s website as soon as reasonably practicable after they are filed with or furnished to the Securities and Exchange Commission.



 

4


 

Business



The Company operates one primary business segment, retail grocery.  Information about the company’s operations is as follows (for information regarding the Company’s industry segments, see Note 11, “Segment Information” to the Consolidated Financial Statements of this Annual Report on Form 10-K):









 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Fiscal Year Ended September



 

(dollars in millions)



 

2019

 

2018

 

2017

Revenues from unaffiliated customers:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grocery

 

$

1,443.4 

 

 

 

$

1,413.1 

 

 

 

$

1,424.9 

 

 

Non-foods

 

 

936.2 

 

 

 

 

874.7 

 

 

 

 

858.4 

 

 

Perishables

 

 

1,110.7 

 

 

 

 

1,078.7 

 

 

 

 

1,061.6 

 

 

Gasoline

 

 

581.1 

 

 

 

 

604.9 

 

 

 

 

515.8 

 

 

Total retail

 

 

4,071.4 

 

96.9% 

 

 

3,971.4 

 

97.0% 

 

 

3,860.7 

 

96.5% 

Other

 

 

130.6 

 

3.1% 

 

 

121.4 

 

3.0% 

 

 

142.0 

 

3.5% 



 

$

4,202.0 

 

100.0% 

 

$

4,092.8 

 

100.0% 

 

$

4,002.7 

 

100.0% 

Income from operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail

 

$

135.4 

 

89.0% 

 

$

111.2 

 

89.1% 

 

$

112.0 

 

87.6% 

Other

 

 

16.8 

 

11.0% 

 

 

13.6 

 

10.9% 

 

 

15.9 

 

12.4% 



 

 

152.2 

 

100.0% 

 

 

124.8 

 

100.0% 

 

 

127.9 

 

100.0% 

Other income, net

 

 

1.8 

 

 

 

 

3.1 

 

 

 

 

3.8 

 

 

Interest expense

 

 

47.4 

 

 

 

 

47.6 

 

 

 

 

47.4 

 

 

Income before income taxes

 

$

106.6 

 

 

 

$

80.3 

 

 

 

$

84.3 

 

 



“Other” consists of fluid dairy operations and shopping center rentals. 





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.



Supermarket Operations



The Company’s strategy is to locate its supermarkets primarily in suburban areas, small towns and neighborhood shopping centers.  At September 28, 2019, the Company operated 188 supermarkets under the name “Ingles,” and 10 supermarkets under the name “Sav-Mor” with locations in western North Carolina, western South Carolina, northern Georgia, eastern Tennessee, southwestern Virginia and northeastern Alabama.  The “Sav-Mor” store concept accommodates smaller shopping areas and carries dry groceries, dairy, fresh meat and produce, all of which are displayed in a modern, readily accessible environment.



The following table sets forth certain information with respect to the Company’s supermarket operations.







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Number of Supermarkets

 

Percentage of Total



 

at Fiscal

 

Net Sales for Fiscal



 

Year Ended September

 

Year Ended September



 

2019

 

2018

 

2017

 

2019

 

2018

 

2017

North Carolina

 

73 

 

72 

 

70 

 

41% 

 

42% 

 

41% 

South Carolina

 

36 

 

36 

 

36 

 

19% 

 

18% 

 

18% 

Georgia

 

66 

 

69 

 

70 

 

32% 

 

32% 

 

33% 

Tennessee

 

21 

 

21 

 

21 

 

8% 

 

8% 

 

8% 

Virginia

 

 

 

 

 

 

Alabama

 

 

 

 

 

 



 

198 

 

200 

 

199 

 

100% 

 

100% 

 

100% 



The Company believes that today’s supermarket customers are focused on convenience, quality and value in an attractive store environment. As a result, the Company’s shopping experience combines a high level of customer service, convenience-oriented quality product offerings and low overall pricing. The Company’s modern stores provide products and services such as home meal replacement items, delicatessens, bakeries, floral departments, greeting cards and broad selections of local organic, beverage and health-related items. At September 28, 2019, the Company operated 108 pharmacies and 104 fuel stations.  The Company plans to continue to incorporate these departments in substantially all future new and remodeled stores.  The Company trains its employees to provide friendly service and to actively address the needs of customers. These employees reinforce the Company’s distinctive service-oriented image.



 

5


 

Selected statistics on the Company’s supermarket operations are presented below:







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Fiscal Year Ended September



 

2019

 

2018

 

2017

 

2016

 

2015

Weighted Average Sales Per Store (000’s) (1)

 

$

20,189 

 

$

19,674 

 

$

19,133 

 

$

18,107 

 

$

18,003 

Total Square Feet at End of Year (000’s)

 

 

11,247 

 

 

11,329 

 

 

11,173 

 

 

11,117 

 

 

11,049 

Average Total Square Feet per Store

 

 

56,806 

 

 

56,643 

 

 

56,146 

 

 

55,310 

 

 

54,974 

Average Square Feet of Selling Space per Store (2)

 

 

39,765 

 

 

39,650 

 

 

39,302 

 

 

38,717 

 

 

38,482 

Weighted Average Sales per Square Foot of
  Selling Space (1) (2)

 

 

516 

 

 

502 

 

 

494 

 

 

471 

 

 

470 



(1)

Weighted average sales per store include the effects of increases in square footage due to the opening of replacement stores and the expansion of stores through remodeling during the periods indicated, and gasoline sales. 

(2)

Selling space is estimated to be 70% of total interior store square footage.



Merchandising



The Company’s merchandising strategy is designed to create a comprehensive and satisfying shopping experience that blends value and customer service with variety, quality and convenience.  Management believes that this strategy fosters a loyal customer base by establishing a reputation for providing high quality products and a variety of specialty departments.



The Company’s stores carry broad selections of quality meats, produce and other perishables.  The Company offers a wide variety of fresh and non-perishable organic products, including organic milk produced by the Company’s fluid dairy plant.  The Company’s market areas contain numerous providers of quality local products, which is in line with current customer preferences for goods produced where they live.  Management believes that supermarkets offering a broad array of products and time-saving services are perceived by customers as part of a solution to today’s lifestyle demands.  Accordingly, a principal component of the Company’s merchandising strategy is to design stores that enhance the shopping experience.  The Company operates fuel stations at 104 of its store locations. 



A selection of prepared foods and home meal replacements are featured throughout Ingles’ deli, bakery, produce and meat departments to provide customers with easy meal alternatives that they can eat at home or in the store.  Many stores offer daily selections of home meal replacement items, such as rotisserie chicken and pork, international foods, fried chicken and other entrees, sandwiches, pre-packaged salads, sushi, cut fruit and prepared fresh vegetables.  The bakery offers an expanded selection of baked goods and self-service selections.  Ingles bakes most of its items on site, including bread baked daily, cakes made to order in various sizes, donuts and other pastries.  The deli offers salad, chicken wing and olive bars, an expanded offering of cheeses, gourmet items and home meal replacement items.  The Company also provides its customers with an expanded selection of frozen food items (including organics) to meet the increasing demands of its customers.



Ingles intends to continue to increase sales of its private label brands, which typically carry higher margins than comparable branded products.  Ingles’ private labels cover a broad range of products throughout the store, such as milk, bread, organic products, soft drinks and canned goods.  In addition to increasing margins, Ingles believes that private label sales help promote customer loyalty and provide a value-priced alternative to national brands.  



The Company seeks to maintain a reputation for providing friendly service, quality merchandise and customer value and for its commitment to locally-sourced product and community involvement.  The Company employs various advertising and promotional strategies to reinforce the quality and value of its products.  The Company promotes these attributes using traditional advertising vehicles including radio, television, direct mail and newspapers, as well as electronic and social media.  The Ingles Advantage Card is designed to foster customer loyalty by providing information to better understand the Company’s customers’ shopping patterns.  The Ingles Advantage Card provides customers with special discounts throughout the Company’s stores and fuel stations.



Purchasing and Distribution



The Company currently supplies approximately 59% of its supermarkets’ inventory requirements from its modern warehouse and distribution facilities.  The Company has 1.65 million square feet of office, warehouse and distribution facilities at its headquarters near Asheville, North Carolina.  The Company believes that its warehouse and distribution facilities contain sufficient capacity for the continued expansion of its store base for the foreseeable future.



The Company’s centrally managed purchasing and distribution operations provide several advantages, including the ability to negotiate and reduce the cost of merchandise, decrease overhead costs and better manage its inventory at both the warehouse and store level.  From time to time, the Company engages in advance purchasing on high-turnover inventory items to take advantage of special prices offered by manufacturers for limited periods, or to ensure adequate product supply during tight distribution market conditions.



The remaining 41% of the Company’s inventory requirements, primarily beverages, gasoline, bread and snack foods, are supplied directly to the Company’s supermarkets by local distributors and manufacturers.

 

6


 



Goods from the warehouse and distribution facilities and the milk processing and packaging plant are distributed to the Company’s stores by a fleet of 193 tractors and 799 trailers that the Company owns, operates and maintains.  The Company invests on an ongoing basis in the maintenance, upgrade and replacement of its tractor and trailer fleet.  The Company also operates truck servicing and fuel storage facilities at its warehouse and distribution facilities.  The Company reduces its overall distribution costs by capitalizing on back-haul opportunities (contracting to transport merchandise on trucks that would otherwise be empty).



The Company receives product recall information from various subscription, government and vendor sources.  Upon receipt of recall information, the Company immediately contacts each of its stores to have the recalled product removed from the shelves, and disposes of the product as instructed.  The Company may also use social media to communicate product recall information to the public.  The Company has a policy of refunding and/or replacing any goods returned by customers.  The details of this policy are posted inside each of the Company’s stores. 



Store Development, Expansion and Remodeling



The Company believes that the appearance and design of its stores are integral components of its customers’ shopping experience and aims to develop one of the most modern supermarket chains in the industry.  The ongoing modernization of the Company’s store base involves (i) the construction of new stores with continuously updated designs, and (ii) the replacement, remodeling or expansion of existing stores.  The Company’s goal is to maintain clean, well-lit stores with attractive architectural and display features that enhance the image of its stores as catering to the changing lifestyle needs of quality-conscious consumers who demand increasingly diverse product offerings.  The construction of new stores by independent contractors is closely monitored and controlled by the Company.  Recently, the Company has had a greater number of circumstances where an existing store was closed in order to build a new store building on the same site that reflects the Company’s current marketing strategies.



The Company renovates and remodels stores in order to increase customer traffic and sales, respond to existing customer demand, compete effectively against new stores opened by competitors and support its quality image merchandising strategy.  The Company decides to complete a remodel of an existing store based on its evaluation of the competitive landscape of the local marketplace.  A remodel or expansion provides the quality of facilities and product offerings identical to that of a new store, capitalizing upon the existing customer base.  The Company retains the existing customer base by keeping the store in operation during the entire remodeling process.  The Company may elect to relocate, rather than remodel, certain stores where relocation provides a more convenient location for its customers.



The following table sets forth, for the periods indicated, the Company’s new store development and store remodeling activities and the effect this program has had on the average size of its stores:







 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 



 

2019

 

2018

 

2017

 

2016

 

2015

Number of Stores:

 

 

 

 

 

 

 

 

 

 

Opened (1)

 

 

 

 

 

Closed (1)

 

 

 

 

 

Stores open at end of period

 

198 

 

200 

 

199 

 

201 

 

201 

Size of Stores:

 

 

 

 

 

 

 

 

 

 

Less than 42,000 sq. ft.

 

48 

 

49 

 

50 

 

53 

 

54 

42,000 up to 51,999 sq. ft.

 

22 

 

22 

 

22 

 

24 

 

24 

52,000 up to 61,999 sq. ft.

 

47 

 

48 

 

50 

 

51 

 

51 

At least 62,000 sq. ft.

 

81 

 

81 

 

77 

 

73 

 

72 

Average store size (sq. ft.)

 

56,806 

 

56,643 

 

56,146 

 

55,310 

 

54,974 



(1)

Excludes new stores opened to replace existing stores.



The Company’s ability to open new stores is subject to many factors, including the acquisition of satisfactory sites and may be limited by zoning and other governmental regulation.  In addition, the Company’s expansion, remodeling and replacement plans are continually reviewed and are subject to change.  See the “Liquidity and Capital Resources” section included in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s capital expenditures.



Competition



The supermarket industry is highly competitive and characterized by narrow profit margins. The degree of competition the Company’s stores encounter varies by location, primarily based on the size of the community in which the store is located and its proximity to other communities.  The Company’s principal competitors are, in alphabetical order, Aldi, Inc., Bi-Lo, LLC., Earth Fare, Inc, Food City (K-VA-T Food Stores, Inc.), Food Lion (Koninlijke Ahold Delhaize America N.V..), The Fresh Market, Inc., Harris Teeter (owned by The Kroger Co.), The Kroger Co., Lidl (Lidl Stiftung & Co. KG), Publix Super Markets, Inc., Sprouts Farmers Market, Inc., Target Corporation, Whole Foods Market, and Wal-Mart Stores, Inc.  Increasingly over the last few years, competition for

 

7


 

consumers’ food dollars has intensified due to the addition of, or increase in, food sections by many types of retailers (physical and online) and by restaurants.



Supermarket chains generally compete on the basis of location, quality of products, service, price, convenience, product variety and store condition.



The Company believes its competitive advantages include convenient locations, the quality of service it provides its customers, competitive pricing, product variety, quality and a pleasant shopping environment, which is enhanced by its ongoing modernization program.



By concentrating its operations within a relatively small geographic region, the Company is also positioned to more carefully monitor its markets, and the needs of its customers within those markets.  The Company’s senior executives live and work in the Company’s operating region, thereby allowing management to quickly identify changes in needs and customer preference.  Because of the Company’s size, store managers have direct access to corporate management and are able to receive quick decisions regarding requested changes in operations.  The Company can then move quickly to make adjustments in its business in response to changes in the market and customer needs. 



The Company’s management monitors competitive activity and regularly reviews and periodically adjusts the Company’s marketing and business strategies as management deems appropriate in light of existing conditions in the Company’s region.  The Company’s ability to remain competitive in its changing markets will depend in part on its ability to pursue its expansion and renovation programs and its response to remodeling and new store openings by its competitors.



Seasonality



Sales in the grocery segment of the Company’s business are subject to a slight seasonal variance due to holiday related sales and due to 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.  The Company’s second fiscal quarter traditionally has the lowest sales of the year, unless Easter falls in that quarter.  In the third and fourth quarters, sales are affected by the return of customers to seasonal homes in the Company’s market area.  The Company’s fluid dairy operations have a slight seasonal variation to the extent of its sales into the grocery industry.  The Company’s real estate operations are not subject to seasonal variations.



Employees and Labor Relations



At September 28, 2019, the Company had approximately 27,000 non-union employees, of which 92% were supermarket personnel.  Approximately 62% of these employees work on a part-time basis.  Management considers employee relations to be good.  The Company values its employees and believes that employee loyalty and enthusiasm are key elements of its operating performance.  Recently, competition for labor has been more intense resulting in higher costs to attract and retain associates.  The Company has responded by increasing resources devoted to employee recruitment and retention, and has expanded the ways in which it markets itself to prospective employees.



Trademarks and Licenses



The Company employs various trademarks and service marks in its business, the most important of which are its own “Laura Lynn” and “Harvest Farms” private label trademarks, “The Ingles Advantage” service mark, and the “Ingles” service mark. These service marks and the trademarks are federally registered in the United States pursuant to applicable intellectual property laws and are the property of Ingles.  The Company believes it has all material licenses and permits necessary to conduct its business.



The current expiration dates for significant trade and service marks are as follows: “Ingles” – December 9, 2025; “Laura Lynn” – March 13, 2024; “Harvest Farms” – August 5, 2024; and “The Ingles Advantage” – August 30, 2025.  Each registration may be renewed for an additional ten-year term prior to its expiration.  The Company intends to file all renewals timely.  Each of the Company’s trademark license agreements has a one year term which, with respect to one license, is automatically renewed annually, unless the owner of the trademark provides notice of termination prior to the expiration date and, with respect to the other licenses, are renewed periodically by letter from the licensor.  The Company currently has three pending applications for additional trademarks or service marks.



Environmental Matters



Under applicable environmental laws, the Company may be responsible for remediation of environmental conditions and may be subject to associated liabilities relating to its stores and other buildings and the land on which such stores and other buildings are situated (including responsibility and liability related to its operation of its gas stations and the storage of gasoline in underground storage tanks), regardless of whether the Company leases or owns the stores, other buildings or land in question and regardless of whether such environmental conditions were created by the Company or by a prior owner or tenant.  The presence of contamination from hazardous or toxic substances, or the failure to properly remediate such contaminated property, may adversely affect the Company’s ability to sell or rent such real property or to borrow using such real property as collateral.  The Company typically conducts an environmental review prior to acquiring or leasing new stores, other buildings or raw land.

 

8


 



Federal, state and local governments could enact laws or regulations concerning environmental matters that affect the Company’s operations or facilities or increase the cost of producing or distributing the Company’s products.  The Company believes that it currently conducts its operations, and in the past has conducted its operations, in substantial compliance with applicable environmental laws.  The Company, however, cannot predict the environmental liabilities that may result from legislation or regulations adopted in the future, the effect of which could be retroactive.  Nor can the Company predict how existing or future laws and regulations will be administered or interpreted or what environmental conditions may be found to exist at its facilities or at other properties where the Company or its predecessors have arranged for the disposal of hazardous substances.



The Company strives to employ sound environmental operating policies, including recycling packaging, recycling wooden pallets, and re-circulating some water used in its car washes.  The Company offers reusable shopping bags to its customers and will pack groceries in bags brought in by its customers.  The Company’s store modernization plans include energy efficient lighting and refrigeration equipment.



Government Regulation



The Company is subject to regulation by a variety of governmental agencies, including, but not limited to, the U.S. Food and Drug Administration, the U.S. Department of Agriculture, the Occupational Health and Safety Administration and other federal, state and local agencies.  The Company’s stores are also subject to local laws regarding zoning, land use and the sale of alcoholic beverages.  The Company believes that its locations are in material compliance with such laws and regulations.



Item 1A. RISK FACTORS



Below is a series of risk factors that may affect the Company's business, financial condition and/or results of operations. Other risk factors are contained in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Notes to the Consolidated Financial Statements of this Annual Report on Form 10-K.   The Company operates in a continually changing business environment, and new risk factors emerge from time to time.  Management cannot predict such new risk factors, nor can it assess the impact, if any, of these risk factors on the Company's business, financial condition and/or results of operations or the extent to which any factor or combination of factors may impact any of these areas.



The Company’s expansion and renovation plans may not be successful which may adversely affect the Company’s business and financial condition due to the capital expenditures and management resources required to carry out the Company’s plans.



The Company has spent, and intends to continue to spend, significant capital and management resources on the development and implementation of the Company’s expansion and renovation plans.  These plans, if implemented, may not be successful, may not improve operating results and may have an adverse effect on cash flow and management resources due to the significant amount of capital invested and management time expended.



The level of sales and profit margins in the Company’s existing stores may not be duplicated in the Company’s new stores, depending on factors such as prevailing competition, development cost, and the Company’s market position in the surrounding community. 



The Company’s warehouse and distribution center and milk processing and packaging plant, as well as all of the Company’s stores, are concentrated in the Southeastern United States, which makes it vulnerable to economic downturns, natural disasters and other adverse conditions or other catastrophic events in this region.



The Company operates in the Southeastern United States, and its performance is therefore heavily influenced by economic developments in the Southeast region.  The Company’s headquarters, warehouse and distribution center and milk processing and packaging plant are located in North Carolina and all of the Company’s stores are located in the Southeast region.  As a result, the Company’s business may be more susceptible to regional factors than the operations of more geographically diversified competitors.  These factors include, among others, changes in the economy, weather conditions, demographics and population.



The Company has, and expects to continue to have, a significant amount of indebtedness.



At September 28, 2019, the Company had total consolidated indebtedness for borrowed money of $852.2 million and $166.0 million available under a $175.0 million of committed line of credit.  A portion of the Company’s cash flow is used to service such indebtedness.  The Company owns a significant amount of real estate, which has been and will continue to be a factor in the Company’s overall level of indebtedness.  Real estate can be used as collateral for indebtedness and can be sold to reduce indebtedness.  The Company’s significant indebtedness could have important consequences, including the following:

·

it may be difficult for the Company to satisfy its obligations under its existing credit facilities and its other indebtedness and commitments;

·

the Company is required to use a portion of its cash flow from operations to pay interest and principal on its current and future indebtedness, which may require the Company to reduce funds available for other purposes;

·

the Company may have to use a greater portion of its cash flow from operations to pay interest, if interest rates increase;

 

9


 

·

the Company may have a limited ability to obtain additional financing, if needed, to fund additional projects, working capital requirements, capital expenditures, debt service, general corporate or other obligations, and;

·

the Company may be placed at a competitive disadvantage to its competitors that are not as highly leveraged.



The Company’s principal stockholder, Robert P. Ingle II, has the ability to elect a majority of the Company’s directors, appoint new members of management and approve many actions requiring stockholder approval.



Mr. Ingle II’s beneficial ownership (as defined by the Exchange Act) represents approximately 76% of the combined voting power of all classes of the Company’s capital stock as of September 28, 2019.  As a result, Mr. Ingle II has the power to elect a majority of the Company’s directors and approve any action requiring the approval of the holders of the Company’s Class A Common Stock and Class B Common Stock, including adopting certain amendments to the Company’s charter and approving mergers or sales of substantially all of the Company’s assets.

 

The Company is a Controlled Company under the NASDAQ Marketplace Rules.  As a result, the Company is exempt from certain of NASDAQ’s corporate governance policies, including the requirements that the majority of Directors be independent (as defined in NASDAQ rules), and that the Company have a nominating committee for Director candidates.



If the Company loses the services of its key personnel, the Company’s business could suffer. 



The Company’s continued success depends upon the availability and performance of the Company’s executive officers, who possess unique and extensive industry knowledge and experience.  The loss of the services of any of the Company’s executive officers or other key employees could adversely affect the Company’s business.

 

Various aspects of the Company’s business are subject to federal, state and local laws and various operating regulations.  The Company’s compliance with these regulations may require additional capital expenditures and could adversely affect the Company’s ability to conduct the Company’s business as planned.



The Company is subject to federal, state and local laws and regulations relating to zoning, land use, work place safety, public health, community right-to-know, beer and wine sales, country of origin labeling of food products, pharmaceutical sales and gasoline station operations.  Furthermore, the Company’s business is regulated by a variety of governmental agencies, including, but not limited to, the U.S. Food and Drug Administration, the U.S. Department of Agriculture, and the Occupational Safety and Health Administration.  Employers are also subject to laws governing their relationship with employees, including minimum wage requirements, overtime, working conditions, insurance coverage, disabled access and work permit requirements.  Recent and proposed regulation has had or may have a future impact on the cost of insurance benefits for employees and on the cost of processing debit and credit card transactions.  Compliance with, or changes in, these laws could reduce the revenue and profitability of the Company’s supermarkets and could otherwise adversely affect the Company’s business, financial condition or results of operations.



The Company is affected by certain operating costs which could increase or fluctuate considerably.



The Company depends on qualified employees to operate the Company’s stores and have been affected by recent tight labor markets.  A shortage of qualified employees could require the Company to enhance the Company’s wage and benefit package in order to better compete for and retain qualified employees, and the Company may not be able to recover these increased labor costs through price increases charged to customers, which could significantly increase the Company’s operating costs.



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.  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 and analyses performed by actuaries engaged by the Company.  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, liability coverage is maintained.



Energy and utility costs have been volatile in recent years, during which time the Company has expanded its store square footage.  The Company attempts to increase its energy efficiency during store construction and remodeling through the use of energy-saving equipment and construction.



The Company is subject to risks related to information systems and data security.



The Company’s business is dependent on information technology systems.  These complex systems are an important part of ongoing operations.  If the Company were to experience disruption in these systems, did not maintain existing systems properly, or did not implement new systems appropriately, operations could suffer.  The Company is currently undergoing a systematic program to enhance its information technology abilities.



The Company has implemented procedures to protect its information technology systems and data necessary to conduct ongoing operations.  The Company cannot however, be certain that all of these systems and data are entirely free from vulnerability to attack.



 

10


 

Compliance with tougher privacy and information security laws and standards, including protection of customer debit and credit card information, may result in higher investments in technology and changes to operational processes. 



In recent years, more industry transactions have been online for ordering and fulfillment.  This trend places a higher reliance on effective and efficient information systems.



The Company is affected by the availability and wholesale price of gasoline and retail gasoline prices, all of which can fluctuate quickly and considerably.



The Company operates fuel stations at 104 of its store locations.  While the Company obtains gasoline and diesel fuel from a number of different suppliers, long-term disruption in the availability and wholesale price of gasoline for resale could have a material adverse effect on the Company’s business, financial condition and/or results of operations. 



Fluctuating fuel costs could adversely affect the Company’s operating costs which depend on fuel for the Company’s fleet of tractors and trailers which distribute goods from the Company’s distribution facility and for the Company’s fluid dairy operations.



Furthermore, fluctuating fuel costs could have an adverse effect on the Company’s total gasoline sales (both in terms of dollars and gallons sold), the profitability of gasoline sales, and the Company’s plans to develop additional fuel centers.  Also, retail gas price volatility could diminish customer usage of fueling centers and, thus, adversely affect customer traffic at the Company’s stores.



The Company’s industry is highly competitive.  If the Company is unable to compete effectively, the Company’s financial condition and results of operations could be materially affected.



The supermarket industry is highly competitive and continues to be characterized by intense price competition, increasing fragmentation of retail formats, entry of non-traditional competitors (both physical and online) and market consolidation.  Furthermore, some of the Company’s competitors have greater financial resources and could use these financial resources to take measures, such as altering product mix, reducing prices, home/in-store fulfillment, or online ordering which could adversely affect the Company’s competitive position.



Disruptions in the efficient distribution of food products to the Company’s warehouse and stores may adversely affect the Company’s business.



The Company’s business could be adversely affected by disruptions in the efficient distribution of food products to the Company’s warehouse and stores.  Such disruptions could be caused by, among other things, adverse weather conditions, fuel availability, shortage of truck drivers, food contamination recalls and civil unrest in foreign countries in which the Company’s suppliers do business.



The Company’s operations are subject to economic conditions that impact consumer spending.



The Company’s results of operations are sensitive to changes in overall economic conditions that impact consumer spending, including discretionary spending.  Future economic conditions such as employment levels, business conditions, interest rates, energy and fuel costs and tax rates could reduce consumer spending or change consumer purchasing habits.  A general reduction in the level of consumer spending or the Company’s inability to respond to shifting consumer attitudes regarding products, store location and other factors could adversely affect the Company’s business, financial condition and/or results of operations.



 

11


 

Item 1B. UNRESOLVED STAFF COMMENTS



None.



Item 2. PROPERTIES 



Owned Properties



The Company owns 162 of its supermarkets either as free-standing or in shopping centers where it is the anchor tenant.  The Company also owns 21 undeveloped sites which are suitable for a free-standing store or shopping center development.  The Company owns numerous outparcels and other acreage located adjacent to the shopping centers and supermarkets it owns.  Real estate owned by the Company is generally located in the same geographic regions as its supermarkets.



The shopping centers owned by the Company contain an aggregate of 7.3 million square feet of leasable space, of which 3.8 million square feet is used by the Company’s supermarkets.  The remainder of the leasable space in these shopping centers is leased or held for lease by the Company to third-party tenants.  A breakdown by size of the shopping centers owned and operated by the Company is as follows:







 

 



 

 

Size

 

Number

Less than 50,000 square feet

 

15 

50,000 – 100,000 square feet

 

34 

More than 100,000 square feet

 

30 

Total

 

79 



The Company owns a 1,649,000 square foot facility, which is strategically located between Interstate 40 and Highway 70 near Asheville, North Carolina, as well as the 119 acres of land on which it is situated.  The facility includes the Company’s headquarters and its warehouse and distribution facility.  The property also includes truck servicing and fuel storage facilities.  The Company also owns a 139,000 square foot warehouse on 21 acres of land approximately one mile from its main warehouse and distribution facility. 



The Company’s milk processing and packaging subsidiary, Milkco, Inc., owns a 140,000 square foot manufacturing and storage facility in Asheville, North Carolina.  In addition to the plant, the 20-acre property includes truck cleaning and fuel storage facilities.



Certain long-term debt of the Company is secured by the owned properties.  See Note 7, “Long-Term Debt” to the Consolidated Financial Statements of this Annual Report on Form 10-K for further details.



Leased Properties



The Company operates supermarkets at 36 locations leased from various unaffiliated third parties.    The Company leases two other former supermarket locations, one of which is subleased to a third party.  The majority of these leases require the Company to pay property taxes, utilities, insurance, repairs and certain other expenses incidental to occupation of the premises.  In addition to base rent, most leases contain provisions that require the Company to pay additional percentage rent (ranging from 0.75% to 1.50%) if sales exceed a specified amount.



Rental rates generally range from $2.62 to $7.68  per square foot.  During fiscal 2019, 2018 and 2017, the Company paid a total of $11.4 million, $11.8 million and $12.6 million, respectively, in supermarket rent, exclusive of property taxes, utilities, insurance, repairs and other expenses.  The following table summarizes lease expiration dates as of September 28, 2019, with respect to the initial and any renewal option terms of leased supermarkets:









 

 



 

 

Year of Expiration

 

Number of

(Including Renewal Terms)

 

Leases Expiring

2019-2030

 

5

2031-2045

 

1

2046 or after

 

32



Management believes that the long-term rent stability provided by these leases is a valuable asset of the Company.



Item 3. LEGAL PROCEEDINGS 



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 would not materially affect the Company’s business, financial condition and/or the results of operations.



 

12


 

PART II



Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES



Market Information



The Company has two classes of Common Stock: Class A and Class B. Class A Common Stock is traded on The NASDAQ Global Select Market under the symbol IMKTA.  There is no public market for the Company’s Class B Common Stock.  However, under the terms of the Company’s Articles of Incorporation, any holder of Class B Common Stock may convert any portion or all of the holder’s shares of Class B Common Stock into an equal number of shares of Class A Common Stock at any time.  For additional information regarding the voting powers, preferences and relative rights of the Class A Common Stock and Class B Common Stock, please see Note 8, “Stockholders’ Equity” to the Consolidated Financial Statements of this Annual Report on Form 10-K.



As of December 5, 2019, there were approximately 385 holders of record of the Company’s Class A Common Stock and 116 holders of record of the Company’s Class B Common Stock.  The following table sets forth the reported high and low closing sales price for the Class A Common Stock during the periods indicated as reported by NASDAQ.  The quotations reflect actual inter-dealer prices without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.







 

 

 

 

 

 



 

 

 

 

 

 

2019 Fiscal Year

 

High

 

Low

First Quarter (ended December 29, 2018)

 

$

34.10 

 

$

25.95 

Second Quarter (ended March 30, 2019)

 

$

31.37 

 

$

27.22 

Third Quarter (ended June 29, 2019)

 

$

32.07 

 

$

26.10 

Fourth Quarter (ended September 28, 2019)

 

$

42.50 

 

$

30.32 



 

 

 

 

 

 

2018 Fiscal Year

 

High

 

Low

First Quarter (ended December 30, 2017)

 

$

36.35 

 

$

22.80 

Second Quarter (ended March 31, 2018)

 

$

36.50 

 

$

29.40 

Third Quarter (ended June 30, 2018)

 

$

35.10 

 

$

27.93 

Fourth Quarter (ended September 29, 2018)

 

$

36.80 

 

$

28.40 





On December 5, 2019, the closing sales price of the Company’s Class A Common Stock on The NASDAQ Global Select Market was $43.05 per share.

 

Dividends



The Company has paid cash dividends on its Common Stock in each of the past 35 fiscal years, except for the 1984 fiscal year when the Company paid a 3% stock dividend.  During both fiscal 2019 and fiscal 2018, the Company paid annual dividends totaling $0.66 per share of Class A Common Stock and $0.60 per share of Class B Common Stock, paid in quarterly installments of $0.165 and $0.15 per share, respectively.  The Company’s last dividend payment was made on October 17, 2019 to common stockholders of record on October 10, 2019.  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 of this Annual Report on Form 10-K.



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.  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 payment of cash dividends is also subject to restrictions contained in certain financing arrangements.  Such restrictions are summarized in Note 7, “Long-Term Debt” to the Consolidated Financial Statements of this Annual Report on Form 10-K.



Equity Compensation Plan Information



The Company does not have any equity compensation plans.



 

13


 

Stock Performance Graph



Set forth below are a graph and accompanying table comparing the five-year cumulative total stockholder return on the Class A Common Stock with the five-year cumulative total return of (i) the S&P 500 Comprehensive-Last Trading Day Index and (ii) a peer group of companies in the Company's line of business.  The 2019 peer group consists of the following companies: Koninklijke Ahold Delhaize N.V., Weis Markets, Inc., The Kroger Co., Supervalu Inc., SpartanNash Co., Sprouts Farmers Markets, Inc., and Village Super Market, Inc.  



The comparisons cover the five-years ended September 28, 2019 and assume that $100 was invested after the close of the market on September 27, 2014, and that dividends were reinvested quarterly.  Returns of the companies included in the peer group reflected below have been weighted according to each company’s stock market capitalization at the beginning of each section for which a return is presented. 



INGLES MARKETS, INCORPORATED
COMPARATIVE RETURN TO STOCKHOLDERS



Picture 2







 

14


 

INDEXED RETURNS OF INITIAL $100 INVESTMENT*







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company/Index

 

2015

 

2016

 

2017

 

2018

 

2019

Ingles Markets, Incorporated Class A Common Stock

 

$

187.71 

 

$

166.07 

 

$

112.43 

 

$

153.13 

 

$

177.47 

S&P 500 Comprehensive – Last Trading Day Index

 

$

99.39 

 

$

114.72 

 

$

136.07 

 

$

160.44 

 

$

167.27 

2017 Peer Group

 

$

126.62 

 

$

127.92 

 

$

96.40 

 

$

129.52 

 

$

130.25 



*Assumes $100 invested in the Class A Common Stock of Ingles Markets, Incorporated after the close of the market on September 27, 2014.



The foregoing stock performance information, including the graph, shall not be deemed to be “soliciting material” or to be filed with the Securities and Exchange Commission.



Item 6. SELECTED FINANCIAL DATA 



The selected financial data set forth below has been derived from the Company’s Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.  This financial data should be read in conjunction with Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements and Notes thereto.







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Selected Income Statement Data for the Years Ended September



 

(in thousands, except per share amounts)



 

2019

 

2018

 

2017

 

2016

 

2015

Net Sales

 

$

4,202,034 

 

$

4,092,805 

 

$

4,002,700 

 

$

3,794,977 

 

$

3,778,644 

Net Income

 

 

81,580 

 

 

97,365  (3)

 

53,874 

 

 

54,189 

 

 

59,353 

Diluted Earnings per Common Share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

$

4.03 

 

$

4.81 

 

$

2.66 

 

$

2.68 

 

$

2.93 

Class B

 

 

3.76 

 

 

4.49 

 

 

2.49 

 

 

2.50 

 

 

2.74 

Cash Dividends per Common Share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

$

0.66 

 

$

0.66 

 

$

0.66 

 

$

0.66 

 

$

0.66 

Class B

 

 

0.60 

 

 

0.60 

 

 

0.60 

 

 

0.60 

 

 

0.60 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Selected Balance Sheet Data at September



 

(in thousands)



 

2019

 

2018

 

2017

 

2016

 

2015(2)

Current Assets

 

$

497,103 

 

$

496,743 

 

$

445,840 

 

$

418,487 

 

$

423,746 

Property and Equipment, net

 

 

1,344,267 

 

 

1,303,044 

 

 

1,265,112 

 

 

1,247,882 

 

 

1,211,458 

Total Assets

 

 

1,867,328 

 

 

1,824,911 

 

 

1,733,306 

 

 

1,686,478 

 

 

1,654,828 

Current Liabilities, including Current
  Portion of Long-Term Debt

 

 

247,579 

 

 

260,138 

 

 

245,563 

 

 

241,605 

 

 

251,960 

Long-Term Liabilities, net of Current
  Portion (1)

 

 

881,527 

 

 

894,898 

 

 

906,772 

 

 

903,249 

 

 

909,247 

Stockholders’ Equity

 

 

662,723 

 

 

595,414 

 

 

511,052 

 

 

470,176 

 

 

428,978 



(1)

Excludes long-term deferred income tax liability.

(2)

Restated to reflect retrospective adoption of new accounting pronouncement affecting debt issuance costs and deferred tax assets.

(3)

Includes $37.3 million income tax benefit from tax law changes and adoption of a different tax depreciation calculation method.

 

15


 

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 



Overview



Ingles, a leading supermarket chain in the Southeast United States, operates 198 supermarkets in North Carolina (73), Georgia (66), South Carolina (36), Tennessee (21), Virginia (1) and Alabama (1).  The Company locates its supermarkets primarily in suburban areas, small towns and neighborhood shopping centers.  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 and beauty care products and general merchandise.  The Company offers quality private label items in most of its departments.  In addition, the Company focuses on selling high-growth, high-margin products to its customers through the development of certified organic products, bakery departments and prepared foods including delicatessen sections.  As of September 28, 2019, the Company operated 108 in-store pharmacies and 104 fuel centers.  Ingles also operates a fluid dairy and earns shopping center rentals.  



Critical Accounting Policies



Critical accounting policies are those accounting policies that management believes are important to the portrayal of Ingles’ financial condition and results of operations, and require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about 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 $1,000,000 per occurrence for workers’ compensation, $500,000 for general liability, and $450,000 per covered person for medical care benefits for a policy year.    Effective October 1, 2019 the excess liability limit was increased to $1,000,000 for general liability.  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, liability coverage is maintained.  The Company’s self-insurance reserves totaled $31.0 million and $34.7 million for employee group insurance, workers’ compensation insurance and general liability insurance at September 28, 2019 and September 29, 2018, respectively.  These amounts are inclusive of expected recoveries from excess cost insurance or other sources that are recorded as receivables of $3.6 million at September 28, 2019 and $4.6 million at September 29, 2018.



Asset Impairments



The Company accounts for the impairment of long-lived assets in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Topic 360.  Asset groups are primarily comprised of our individual store 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.



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 comprised 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 vendor’s products. These allowances generally relate to short term arrangements with vendors, often relating to a period of a month or less, and are negotiated on a purchase-by-purchase or transaction-by-transaction basis.  Whenever possible, vendor discounts and allowances that relate to buying and merchandising activities are recorded as a reduction of item cost in inventory and recognized in merchandise costs when the item is sold.  Due to system constraints 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

 

16


 

sold.  Vendor allowances applied as a reduction of merchandise costs totaled $111.7 million, $116.5 million and $116.6 million for the fiscal years ended September 28, 2019, September 29, 2018 and September 30, 2017, 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 that the related expense is incurred.  Vendor advertising allowances recorded as a reduction of advertising expense totaled $13.8 million, $14.1 million, and $13.8 million for the fiscal years ended September 28, 2019, September 29, 2018 and September 30, 2017, 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 consolidated statements of income for the fiscal years ended September 28, 2019, September 29, 2018 and September 30, 2017, consisted of 52, 52 and 53 weeks of operations, respectively.  



Comparable store sales are defined as sales by grocery stores in operation for five full fiscal quarters.  The Company has an ongoing renovation and expansion plan to modernize the appearance and layout of its existing stores.  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 of completion of the replacement, remodel or addition.  A replacement store is a new store that is opened to replace an existing nearby store that is closed.  A major remodel entails substantial remodeling of an existing store and may include additional retail square footage.  For the fiscal years ended September 28, 2019 and September 29, 2018 comparable store sales each included 196 stores.  Weighted average retail square footage added to comparable stores due to replacement and remodeled stores was approximately 300 for the fiscal year ended September 28, 2019 and 86,000 for the fiscal year ended September 29, 2018.



The following table sets forth, for the periods indicated, selected financial information as a percentage of net sales.









 

 

 

 

 

 



 

 

 

 

 

 



 

Fiscal Year Ended September



 

2019

 

2018

 

2017

Net sales

 

100.0%

 

100.0%

 

100.0%

Gross profit

 

24.3

 

24.0

 

24.1

Operating and administrative expenses

 

20.8

 

20.9

 

20.9

Gain from sale or disposal of assets

 

0.1

 

 —

 

 —

Income from operations

 

3.6

 

3.1

 

3.2

Other income, net

 

 —

 

0.1

 

0.1

Interest expense

 

1.1

 

1.2

 

1.2

Income before income taxes

 

2.5

 

2.0

 

2.1

Income tax expense (benefit)

 

0.6

 

(0.4)

 

0.8

Net income

 

1.9

 

2.4

 

1.3



Fiscal Year Ended September 28, 2019 Compared to the Fiscal Year Ended September 29, 2018



The Company’s fiscal year 2019 performance was strong, with increases in sales and gross margin driving increased pre-tax income.  Last year, in fiscal year 2018, income tax credits totaling $37.3 million resulted in higher net income when compared with the current fiscal year ended September 28, 2019.



Net income for the fiscal year ended September 28, 2019 was $81.6 million, compared with net income of $97.4 million for the fiscal year ended September 29, 2018, primarily due to the positive impact of the fiscal year 2018 deferred tax benefits.  Pretax income was $106.6 million for fiscal year 2019, an increase of 32.7% compared with pretax income of $80.3 million for fiscal year 2018.



Sales and gross margin increased in the retail segment, including increases in gasoline gross profit.  Expenses increased primarily as a result of continued tight labor conditions in the Company’s market area.  Fluid dairy income was level over the comparative fiscal years, and real estate income increased as the Company added tenants in existing shopping centers and in acquired shopping centers where the Company had previously leased a store.



Net Sales. Net sales for the fiscal year ended September 28, 2019 totaled $4.20 billion, compared with $4.09 billion for the fiscal year ended September 29, 2018. 



 

17


 

Retail comparable sales excluding gasoline increased 3.9% during fiscal 2019 compared with 2018.  The number of transactions (excluding gasoline) increased 0.9% while the average transaction size (excluding gasoline) increased by 2.8%.  Comparing fiscal 2019 with 2018, gasoline gallons sold decreased 0.5% and per gallon gasoline prices decreased 3.5%.



Sales by product category for the fiscal years ended September 28, 2019 and September 29, 2018, respectively, were as follows:







 

 

 

 

 

 



 

 

 

 

 

 



 

Fiscal Year Ended September



 

(dollars in thousands)



 

2019

 

2018

Grocery

 

$

1,443,394 

 

$

1,413,088 

Non-foods

 

 

936,173 

 

 

874,677 

Perishables

 

 

1,110,683 

 

 

1,078,693 

Gasoline

 

 

581,146 

 

 

604,897 

Total retail grocery

 

$

4,071,396 

 

$

3,971,355 



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 fiscal year ended September 28, 2019 are summarized as follows (in thousands):







 

 

 



 

 

 

Total grocery sales for the fiscal year ended September 29, 2018

 

$

3,971,355 

Comparable store sales increase

 

 

106,797 

Impact of stores closed in fiscal 2019 and 2018

 

 

(14,886)

Sales growth stores opened fiscal 2019 and 2018

 

 

7,433 

Other

 

 

697 

Total retail grocery sales for the fiscal year ended September 28, 2019

 

$

4,071,396 



Increased fiscal 2019 sales resulted from new and replacement store buildings, the introduction of new products and product presentation, especially in higher margin products, effective promotions and cost competitiveness.  General economic conditions were favorable in the Company’s market area. The Company increased its use of The Ingles Advantage Savings and Rewards Card (the “Ingles Advantage Card”) to increase net sales and comparable store sales through enhanced loyalty programs and special offers.  Information obtained from holders of the Ingles Advantage Card also assists the Company in optimizing product offerings and promotions specific to customer shopping patterns.



The Company expects non-gasoline sales will be higher in the 2020 fiscal year compared with fiscal 2019.  The Company anticipates adding new stores in fiscal 2020, expects to continue remodeling a significant number of existing stores, and plans to add more fuel stations and pharmacies.  Fiscal 2020 sales growth will also likely be influenced by market fluctuations in the per gallon price of gasoline and milk, changes in commodity food prices, general labor- and distribution-influenced economic conditions and changing customer preferences for purchasing items sold by the Company.



Gross Profit. Gross profit for the fiscal year ended September 28, 2019 increased $41.8 million, or 4.3%, to $1.02 billion compared with $980.2 million for the fiscal year ended September 29, 2018.  As a percentage of sales, gross profit totaled 24.3% for the fiscal year ended September 28, 2019 and 24.0% for the fiscal year ended September 29, 2018.  Gasoline gross profit increased $13.1 million for fiscal year 2019 compared with 2018.



Grocery segment gross profit as a percentage of total sales (excluding gasoline) decreased 19 basis points in fiscal 2019 compared with fiscal 2018.  The gross margin decrease was primarily due to market factors that adversely affected certain product lines



In addition to the direct product cost, the cost of goods sold line item for the grocery segment includes inbound freight charges and the costs related to the Company’s distribution network. 



Operating and Administrative Expenses. Operating and administrative expenses increased $17.8 million, or 2.1%, to $873.9 million for the fiscal year ended September 28, 2019, from $856.1 million for the fiscal year ended September 29, 2018.  As a percentage of sales, operating and administrative expenses were 20.8% and 20.9% for fiscal years 2019 and 2018, respectively.  Excluding gasoline, which does not have significant direct operating expenses, the ratio of operating expenses to sales was 23.9% for fiscal 2019 compared with 24.3% for fiscal 2018. Fiscal year 2019 sales growth resulted in operating expense leverage.



 

18


 

A breakdown of the major increases in operating and administrative expenses is as follows. 





 

 

 

 

 

 



 

 

 

 

 

 



 

 

 

Increase



 

Increase

 

as a % of



 

(in millions)

 

sales

Salaries and wages

 

$

16.0 

 

0.38 

%

Repairs and maintenance

 

$

3.5 

 

0.08 

%

Bank charges

 

$

2.7 

 

0.06 

%

Advertising and promotion

 

$

(2.6)

 

(0.06)

%

Insurance

 

$

(2.2)

 

(0.05)

%



Salaries and wages increased due to the addition of labor hours required for the increased sales volume and changes to the sales mix.  In general, the labor market in the Company’s market area has become more competitive.



Repairs and maintenance increased due to a higher level of maintenance required on more sophisticated equipment and updated lighting in our stores, and also due to a higher level of building maintenance.



Bank charges have increased as more sales transactions are being settled with debit and credit cards, and the per transaction card costs have increased.



Advertising and promotion expenses decreased as a result of more efficient usage of digital, broadcast, and print advertising programs.



Insurance expenses decreased due to lower claims experienced under its self-insurance programs.



Gain from Sale or Disposal of Assets. During the current fiscal year, the Company recognized a $3.2 million gain on the sale of a former store property.  There were no other significant sale/disposal transactions in either fiscal year 2019 or 2018. 



Other Income, Net. Other income, net totaled $1.8 million and $3.1 million for the fiscal years ended September 28, 2019 and September 29, 2018, respectively.  Other income consists primarily of sales of waste paper and packaging.



Interest Expense. Interest expense was relatively unchanged at $47.4 million for the fiscal year ended September 28, 2019 and $47.6 million for the fiscal year ended September 29, 2018.  Total debt was $852.2 million at the end of fiscal 2019 compared with $865.6 million at the end of fiscal 2018.  The Company had lower line of credit usage during the current fiscal year, and interest rates have been relatively stable.    



Income Taxes. Income tax expense totaled $25.0 million for fiscal year 2019, an effective tax rate of 23.5%.  This compares with an income tax benefit totaling $17.0 million for fiscal year 2018.



In December 2017, the Tax Cuts and Jobs Act (the “Tax Act”) became law.  Among other things, the Tax Act reduced the federal corporate tax rate from 35% to 21% and allowed for full depreciation expensing of qualified property when placed in service.



For the fiscal years ended September 28, 2019 and September 29, 2018 the Company has a blended federal corporate tax rate of 21.0% and 24.5%, respectively, based on the effective date of the tax rate reduction.  As a result of the decrease in the federal rate, the Company recorded in fiscal year 2018 a decrease in its net deferred tax liabilities of $26.7 million, with a corresponding reduction to deferred income tax expense.



Also during fiscal year 2018 the Company adopted a tax calculation method change that resulted in the accelerated deduction of certain property-related expenditures.  As a result of this change and the change in the federal statutory tax rate, the Company recorded a decrease in its net deferred tax liabilities of $10.6 million, with a corresponding reduction to deferred income tax expense.



Without the $37.3 million tax expense reductions, the Company’s effective tax rate would have been 25.2% for the fiscal year ended September 29, 2018.



Net Income. Net income totaled $81.6 million for the fiscal year ended September 28, 2019 compared with net income of $97.4 million for the fiscal year ended September 29, 2018.  Basic and diluted earnings per share for Class A Common Stock were $4.14 and $4.03, respectively, for the fiscal year ended September 28, 2019 compared with $4.94 and $4.81, respectively, for the fiscal year ended September 29, 2018.  Basic and diluted earnings per share for Class B Common Stock were each $3.76 for the fiscal year ended September 28, 2019 compared with $4.49 of basic and diluted earnings per share for the fiscal year ended September 29, 2018.   



 

19


 

Fiscal Year Ended September 29, 2018 Compared to the Fiscal Year Ended September 30, 2017



There are two significant occurrences that will affect many of the comparisons between the fiscal years ended September 29, 2018 and September 30, 2017.  First, fiscal year 2017 was a 53 week year, resulting generally in higher sales, operating expenses and operating income compared with the 52 weeks in fiscal year 2018.  In addition, changes to Federal tax laws and the Company’s adoption of a different tax calculation method resulted in significant deferred tax benefits totaling $37.3 million in fiscal year 2018.  The Company will cite these factors wherever they are relevant to the comparison of its results of operations for fiscal years 2018 with those of fiscal year 2017.



Net income for the fiscal year ended September 29, 2018 was $97.4 million, compared with net income of $53.9 million for the fiscal year ended September 30, 2017, primarily due to the positive impact of the fiscal year 2018 deferred tax benefits.  Pretax income was $80.3 million for fiscal year 2018, compared with pretax income of $84.3 million for fiscal year 2017, a decrease primarily attributable to fiscal year 2017’s extra week.



Sales and gross margin increased in the retail segment, including increases in gasoline margins.  Expenses increased primarily as a result of continued tight labor conditions in the Company’s market area.  Fluid dairy income decreased due to decreased overall milk demand, and real estate income increased as the Company added tenants in existing shopping centers and in acquired shopping centers where the Company had previously leased a store.



Net Sales. Net sales for the fiscal year ended September 29, 2018 totaled $4.09 billion, compared with $4.00 billion for the fiscal year ended September 30, 2017. 



Management analyzes comparable store sales for the 52 weeks of fiscal year 2018 with the corresponding 52 calendar weeks of fiscal year 2017.  On this basis, retail comparable sales excluding gasoline increased 2.0% during fiscal 2018 compared with 2017.  The number of transactions (excluding gasoline) increased 0.3% while the average transaction size (excluding gasoline) increased by 2.2%.  Comparing fiscal 2018 with 2017 on a 52-week basis, gasoline gallons increased 2.3% and per gallon gasoline prices increased 19.1%.



Sales by product category for the fiscal years ended September 29, 2018 and September 30, 2017, respectively, were as follows:







 

 

 

 

 

 



 

 

 

 

 

 



 

Fiscal Year Ended September



 

(dollars in thousands)



 

2018

 

2017

Grocery

 

$

1,413,088 

 

$

1,424,891 

Non-foods

 

 

874,677 

 

 

858,409 

Perishables

 

 

1,078,693 

 

 

1,061,560 

Gasoline

 

 

604,897 

 

 

515,857 

Total retail grocery

 

$

3,971,355 

 

$

3,860,717 



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 fiscal year ended September 29, 2018 are summarized as follows (in thousands):







 

 

 



 

 

 

Total grocery sales for the fiscal year ended September 30, 2017

 

$

3,860,717 

Comparable store sales increase

 

 

153,703 

Impact of stores closed in fiscal 2018 and 2017

 

 

(19,698)

Sales growth stores opened fiscal 2018 and 2017

 

 

44,094 

Effect of 53rd week in fiscal 2017

 

 

(71,883)

Other

 

 

4,422 

Total retail grocery sales for the fiscal year ended September 29, 2018

 

$

3,971,355 



Increased fiscal 2018 sales resulted from new and replacement store buildings, the introduction of new products and product presentation, especially in higher margin products, effective promotions and cost competitiveness.  The Company increased its use of The Ingles Advantage Savings and Rewards Card (the “Ingles Advantage Card”) to increase net sales and comparable store sales through enhanced loyalty programs and special offers.  Information obtained from holders of the Ingles Advantage Card also assists the Company in optimizing product offerings and promotions specific to customer shopping patterns.



Gross Profit. Gross profit for the 52 week fiscal year ended September 29, 2018 increased $16.6 million, or 1.7%, to $980.2 million compared with $963.6 million for the 53 week fiscal year ended September 30, 2017.  As a percentage of sales, gross profit totaled 24.0% for the fiscal year ended September 29, 2018 and 24.1% for the fiscal year ended September 30, 2017.



 

20


 

Grocery segment gross profit as a percentage of total sales (excluding gasoline) increased 31 basis points in fiscal 2018 compared with fiscal 2017.  The gross margin increase was primarily due to a favorable change in the mix of products sold, offset by a slightly lower dollar gross margin on gasoline sales. 



In addition to the direct product cost, the cost of goods sold line item for the grocery segment includes inbound freight charges and the costs related to the Company’s distribution network. 



Operating and Administrative Expenses. Operating and administrative expenses increased $19.0 million, or 2.3%, to $856.1 million for the 52 week fiscal year ended September 29, 2018, from $837.1 million for the 53 week fiscal year ended September 30, 2017.  As a percentage of sales, operating and administrative expenses were 20.9% for both fiscal years 2018 and 2017.  Excluding gasoline, which does not have significant direct operating expenses, the ratio of operating expenses to sales was 24.3% for fiscal 2018 compared with 23.8% for fiscal 2017.



A breakdown of the major increases in operating and administrative expenses is as follows.  Dollar increases are for the 52 weeks of fiscal year 2018 compared with the 53 weeks of fiscal year 2017.  On an equivalent week basis, the dollar increases would have been higher.





 

 

 

 

 

 



 

 

 

 

 

 



 

 

 

Increase



 

Increase

 

as a % of



 

(in millions)

 

sales

Salaries and wages

 

$

9.3 

 

0.23 

%

Insurance

 

$

3.8 

 

0.09 

%

Depreciation and amortization

 

$

3.1 

 

0.08 

%

Utilities and fuel

 

$

1.3 

 

0.03 

%

Bank charges

 

$

1.3 

 

0.03 

%



Salaries and wages increased due to the addition of labor hours required for the increased sales volume and changes to the sales mix.  In general the labor market in the Company’s market area has become more competitive.



Insurance expenses increased due to higher claims experienced under its self-insurance programs and increased market costs, including cost of the Affordable Care Act.



Depreciation and amortization increased as a result of the Company’s capital expenditures programs, including smaller remodeling projects that contain capital assets with shorter useful lives-compared with real restate.



Utilities and fuel increased due to increases in market energy costs and due to increases in store and shopping center square feet.



Bank charges have increased as more sales transactions are being settled with debit and credit cards, and the per transaction card costs have increased.



Gain from Sale or Disposal of Assets. Gains from sale or disposal of assets totaled $0.7 million for fiscal 2018 compared with gains of $1.5 million for fiscal 2017.  There were no individually significant transactions during either fiscal year.

 

Other Income, Net. Other income, net totaled $3.1 million and $3.8 million for the fiscal years ended September 29, 2018 and September 30, 2017, respectively.  Other income consists primarily of sales of waste paper and packaging.



Interest Expense. Interest expense was relatively unchanged at $47.6 million for the fiscal year ended September 29, 2018 and $47.4 million for the fiscal year ended September 30, 2017.  Total debt was $865.6 million at the end of fiscal 2018 compared with $877.9 million at the end of fiscal 2017.  Market interest rates increased during fiscal years 2017 and 2018, which affected interest expense on the Company’s floating rate debt.  During late fiscal year 2017 and early fiscal year 2018, the Company renegotiated or refinanced some of its debt at lower base rates and entered into an interest rate swap to fix the interest on certain debt.  These actions as well as a reduction in total debt reduced the impact of rising market interest rates.



Income Taxes. In December 2017, the Tax Cuts and Jobs Act (the “Tax Act”) became law.  Among other things, the Tax Act reduced the federal corporate tax rate from 35% to 21% and allowed for full depreciation expensing of qualified property when placed in service.



As a result of the decrease in the effective tax rate, the Company recorded a decrease in its net deferred tax liabilities of $26.7 million, with a corresponding reduction to deferred income tax expense.  During fiscal year 2018, the Company adopted a tax depreciation calculation method change that resulted in the accelerated deduction of certain property-related expenditures.  As a result of this change and the aforementioned change in the federal corporate tax rate, the Company recorded an additional decrease in its net deferred tax liabilities of $10.6 million, with a corresponding reduction to deferred income tax expense.



 

21


 

Without the $37.3 million tax expense reductions, the Company’s effective tax rate would have been 25.2% for the fiscal year ended September 29, 2018 compared with 36.1% for the fiscal year ended September 30, 2017.  This decrease is attributable to the aforementioned reduction in the federal corporate tax rate.



Net Income. Net income totaled $97.4 million for the fiscal year ended September 29, 2018 compared with net income of $53.9 million for the fiscal year ended September 30, 2017.  Basic and diluted earnings per share for Class A Common Stock were $4.94 and $4.81, respectively, for the fiscal year ended September 29, 2018 compared with $2.74 and $2.66, respectively, for the fiscal year ended September 30, 2017.  Basic and diluted earnings per share for Class B Common Stock were each $4.49 for the fiscal year ended September 29, 2018 compared with $2.49 of basic and diluted earnings per share for the fiscal year ended September 30, 2017.



Liquidity and Capital Resources



Capital Expenditures



The Company believes that a key to its ability to continue to increase sales and develop a loyal customer base is providing conveniently located, clean and modern stores which provide customers with good service and an increasingly diverse selection of competitively priced products.  As such, the Company has invested and will continue to invest significant amounts of capital toward the modernization of its store base.  The Company’s modernization program includes the opening of new stores, the completion of major remodels and expansion of selected existing stores, and the relocation of selected existing stores to larger, more convenient locations. 



Capital expenditures totaled $161.8 million and $150.5 million for fiscal 2019 and 2018, respectively.  Major capital expenditures include the following:









 

 

 

 



 

 

 

 



 

2019

 

2018

New stores

 

1

 

5

Store sites/land parcels purchased

 

4

 

4

New fuel stations added

 

3

 

5

(including those added at new or replacement stores)





During fiscal years 2019 and 2018, the Company purchased a total of four shopping centers which contained Ingles stores that had been leased from third-party landlords.



Capital expenditures also included upgrading and replacing store equipment, technology investments, capital expenditures related to the Company’s distribution operation and its milk processing plant, and expenditures for stores to open in subsequent fiscal years.



Ingles’ capital expenditure plans for fiscal 2020 include investments of approximately $120 to $160 million.  The majority of the Company’s fiscal 2020 capital expenditures will be dedicated to continued improvement of its store base and will include construction of one or more new/remodeled stores.  Fiscal 2020 capital expenditures will also include investments in stores expected to open in fiscal 2021, as well as technology improvements, upgrading and replacing existing store equipment and warehouse and transportation equipment and improvements to the Company’s milk processing plant.  The Company will also consider land acquisitions for future store development.



The Company expects that its net annual capital expenditures will be in the range of approximately $100 to $160 million going forward in order to maintain a modern store base.  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,  major store remodels/expansions, and build-out of tenant space under the long-term leases.  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.



In general, the Company finances its capital expenditures to the extent possible from cash on hand and cash flow from operations.  Additional financing sources for capital expenditures include borrowings under the $175 million of committed line of credit, other borrowings that could be collateralized by unencumbered real property and equipment with a net book value of approximately $1.15 billion, and the public debt or equity markets.  The Company has used each of these to finance past capital expenditures and expects to have them available in the future.



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.  Construction commitments at September 28, 2019 totaled $6.6 million.



 

22


 

Liquidity



The Company generated $211.5 million of cash from operations in fiscal 2019 compared with $161.2 million for fiscal 2018.  The increase is primarily due to higher pre-tax income and cash provided by income tax refunds collected in fiscal year 2019.



Cash used by investing activities for fiscal 2019 totaled $152.8 million compared with $148.1 million for fiscal 2018.  The Company’s most significant investing activity is capital expenditures. 



The Company’s net financing activities totaled $27.1 million and $26.5 million for fiscal years 2019 and 2018, respectively.  Financing activities primarily consisted of dividends and debt repayment.  



In June 2013, the Company issued $700.0 million aggregate principal amount of senior notes due in 2023 (the “Notes”).  The Notes bear an interest rate of 5.75% per annum and were issued at par. 



The Company has a $175.0 million line of credit (the “Line”) that matures in September 2022.  The Line provides the Company with various interest rate options based on the prime rate, the Federal Funds Rate, or the London Interbank Offering Rate.  The Line allows the Company to issue up to $20.0 million in unused letters of credit, of which $9.0 million of unused letters of credit were issued at September 28, 2019.  The Company is not required to maintain compensating balances in connection with the Line.  At September 28, 2019, the Company had no borrowing outstanding under the Line.



In December 2010, the Company completed the funding of $99.7 million of Recovery Zone Facility Bonds (the “Bonds”) for construction and equipping of an approximately 830,000 square foot new warehouse and distribution center located in Buncombe County, North Carolina (the “Project”).  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 would hold the Bonds until September 2026, subject to certain events.  Mandatory redemption of the Bonds by the Company in the annual amount of $4,530,000 began on January 1, 2014.  The Company may redeem the Bonds without penalty or premium at any time prior to September 2026. 



The Company has an interest rate swap agreement for a current notional amount of $48.5 million at a fixed rate of 3.92%.  Under this agreement, the Company pays monthly the fixed rate of 3.92% and receives the one-month LIBOR plus 1.65%.  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.  The fair market value of the interest rate swap 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 Company’s Line, Bond and Notes indenture in the event of default under any one instrument.



The Notes, the Bonds and the Line 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 to the Company 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 respective loan documents.  As of September 28, 2019, the Company was in compliance with these covenants by a significant margin.  Under the most restrictive of these covenants, the Company would be able to incur approximately $595 million of additional borrowings (including borrowings under the Line) as of September 28, 2019.



The Company’s principal sources of liquidity are expected to be cash flow from operations, borrowings under the Line and long-term financing.  The Company believes, based on its current results of operations and financial condition, that its financial resources, including cash balances, the existing Line, short- and long-term financing expected to be available to it and internally generated funds, 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 can be no assurance that any such sources of financing will be available to the Company 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 report based on a number of intangible factors.  These factors may include, among others, increased competition, changing regional and national economic conditions, adverse climatic conditions affecting food production and delivery and changing demographics as well as the additional factors discussed above and elsewhere under “Item 1A. Risk Factors.”  It is also possible, for such reasons, that the results of operations from the new, expanded, remodeled and/or replacement stores will not meet or exceed the results of operations from existing stores that are described in this report.



 

23


 

Contractual Obligations and Commercial Commitments



The Company has assumed various financial obligations and commitments in the normal course of its operations and financing activities.  Financial obligations are considered to represent known future cash payments that the Company is required to make under existing contractual arrangements, such as debt and lease arrangements.  The following table represents the scheduled maturities of the Company’s long-term contractual obligations as of September 28, 2019:



Payment Due by Period







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contractual Obligations

 

 

 

 

Less than

 

 

 

 

 

 

 

More than

(amounts in thousands)

 

Total

 

1 year

 

1-3 years

 

3-5 years

 

5 years

Long-term debt and line of credit

 

$

852,238 

 

$

12,600 

 

$

26,624 

 

$

728,885 

 

$

84,129 

Scheduled interest on long-term debt (1)

 

 

190,054 

 

 

45,804 

 

 

89,986 

 

 

47,527 

 

 

6,737 

Advance payments on purchase contracts

 

 

2,857 

 

 

1,134 

 

 

885 

 

 

85 

 

 

753 

Operating leases (2)

 

 

58,659 

 

 

9,756 

 

 

14,225 

 

 

7,491 

 

 

27,187 

Construction commitments

 

 

6,581 

 

 

6,581 

 

 

 —

 

 

 —

 

 

 —

Total

 

$

1,110,389 

 

$

75,875 

 

$

131,720 

 

$

783,988 

 

$

118,806 



(1)

Scheduled interest on floating rate debt calculated using rates in effect on September 28, 2019.

(2)

Operating lease obligations in the above table do not include common area maintenance, insurance, utility and tax payments for which the Company is obligated under certain operating leases.  These amounts are not significant compared with the operating lease payments listed in the above table.



The Company has entered supply contracts to provide approximately 82% of the fuel sold in its fuel centers.  Pricing is based on certain market indices at the time of purchase.  The suppliers can modify or terminate the contracts if the Company does not meet certain minimum monthly purchase requirements.



The Company is self-insured for workers’ compensation, general liability, and group medical and dental benefits.  The Company’s self-insurance reserves totaled $31.0 million at September 28, 2019 and  $34.7 million at September 29, 2018.  Self-insurance liabilities are based on estimates and actuarial assumptions and can fluctuate in both amount and in timing of cash settlement if historical trends are not predictive of the future.  For this reason they are not included in the above table.



The Company has a nonqualified investment plan to provide retirement benefits to certain of the Company’s management employees who are otherwise subject to limited participation in the 401(k) feature of the Company’s Investment/Profit Sharing Plan.  The liability to plan participants totaled $16.4 million at September 28, 2019 and $15.0 million at September 29, 2018.  The settlement of this obligation is dependent upon participant elections to withdraw funds, which cannot be predicted.  For this reason they are not included in the above table.



Amounts available to the Company under commercial commitments as of September 28, 2019, were as follows:



Amount of Commitment Expiration per Period







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Commercial Commitments

 

 

 

 

Less than

 

 

 

 

 

 

 

More than

(amounts in thousands)

 

Total

 

1 year

 

1-3 years

 

3-5 years

 

5 years

Available line of credit

 

$

166,027 

 

$

 —

 

$

166,027 

 

$

 —

 

$

 —

Letters of credit-standby

 

 

8,973 

 

 

8,973 

 

 

 —

 

 

 —

 

 

 —

Potential commercial commitments

 

$

175,000 

 

$

8,973 

 

$

166,027 

 

$

 —

 

$

 —



Off Balance Sheet Arrangements



The Company is not a party to any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on the Company’s financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources.



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.



Long-term debt and line of credit agreements contain various restrictive covenants requiring, among other things, minimum levels of net worth and maintenance of certain financial ratios.  These covenants have the effect of restricting certain types of transactions,

 

24


 

including the payment of cash dividends generally and in excess of current quarterly per share amounts.  Further, the Company is prevented from declaring dividends at any time that it is in default under the indenture governing the Notes.



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 gasoline sales, distribution expenses and plastic supply costs.









 

 

 

 

 

 



 

 

 

 

 

 



 

Twelve Months Ended



 

September 28,

 

September 29,



 

2019

 

2018

All items

 

1.7 

 %

 

2.3 

 %

Food and beverages

 

1.8 

 %

 

1.4 

 %

Energy

 

(4.8)

 %

 

4.8 

 %



New Accounting Pronouncements



For new accounting pronouncements, see Note 1 to the Consolidated Financial Statements included in this Annual Report on Form 10-K.



Outlook and Trends in the Company’s Markets



The Company has improved the interior layout and product offerings in a significant number of stores over the past few fiscal years.  Economic conditions have remained favorable and the Company continues to increase and improve its total retail square footage. 



The Company continually assesses and modifies its business model to meet the changing needs and expectations of its customers.  In connection with this review, the Company assesses the trends present in the markets in which it competes.  Generally, it is difficult to predict whether a trend will continue for a period of time and it is possible that new trends will develop which will affect an existing trend.  The Company believes that the following trends are likely to continue for at least the next fiscal year:

·

The supermarket industry will remain highly competitive and will be characterized by industry consolidation, fragmented food retail platforms, and continued competition from super centers and other non-supermarket operators.

·

Traditional supermarket products will be acquired by customers in new and diverse ways, including online ordering, home delivery and pre-picked for customer pickup.

·

Economic conditions will continue to affect customer behavior.  Economic conditions may affect purchasing patterns with regard to meal replacement items, private label purchases, promotions and product variety.

·

The Company and its customers will continue to become more environmentally aware, evidenced by the Company’s increased recycled waste paper and pallets and customers’ increased usage of reusable shopping bags.

·

Volatile petroleum costs will impact utility and distribution costs, plastic supplies cost and may change customer shopping and dining behavior.

·

Retail gasoline costs and retail prices will continue to be volatile, affecting the Company’s gasoline sales and gross margin.



The Company plans to continue to focus on balancing sales growth and gross margin maintenance (excluding the effect of gasoline sales) and will carefully monitor its product mix and customer trends.

 

25


 

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS 



The Company is exposed to changes in interest rates primarily as a result of its borrowing activities, which include borrowings under the line of credit, real estate and equipment financing, the Company’s 5.75% Senior Notes due 2023 and the Recovery Zone bonds.  The line of credit, along with cash flow from operations, is used to maintain liquidity and fund business operations.  The Company typically replaces borrowings under its variable rate line of credit, as necessary, with both long-term secured and unsecured financing.



The nature and amount of the Company’s debt may vary as a result of future business requirements, market conditions and other factors.  The definitive extent of the Company’s interest rate risk is not quantifiable or predictable because of the variability of future interest rates and business financing requirements, but the Company does not believe such risk is material.  The Company may consider use derivative instruments (such as interest swaps) to adjust the Company’s interest rate risk profile.



The table below presents principal amounts and related weighted average rates by year of maturity for the Company’s debt obligations at September 28, 2019 and September 29, 2018, respectively (in thousands):



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 28, 2019

 

2020

 

 

2021

 

 

2022

 

 

2023

 

 

2024

 

 

Thereafter

 

 

Total

 

 

Fair
Value

Line of credit

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

Average variable interest rate

 

 

%

 

 

%

 

 

%

 

 

%

 

 

%

 

 

%

 

 

%

 

 

 

Long-term debt, variable interest rate (1)

 

$

7,761 

 

 

$

7,840 

 

 

$

7,921 

 

 

$

8,005 

 

 

$

8,092 

 

 

$

25,147 

 

 

$

64,766 

 

 

$

64,766 

Average year-end interest rate (1)

 

 

3.79 

%

 

 

3.79 

%

 

 

3.80 

%

 

 

3.80 

%

 

 

3.80 

%

 

 

3.80 

%

 

 

3.80 

%

 

 

 

Long-term debt, fixed interest rate

 

$

1,996 

 

 

$

2,083 

 

 

$

2,174 

 

 

$

2,270 

 

 

$

2,369 

 

 

$

9,291 

 

 

$

20,183 

 

 

$

20,183 

Average interest rate

 

 

4.29 

%

 

 

4.29 

%

 

 

4.29 

%

 

 

4.29 

%

 

 

4.29 

%

 

 

4.29 

%

 

 

4.29 

%

 

 

 

Recovery Zone Bonds, variable interest rate

 

$

4,530 

 

 

$

4,530 

 

 

$

4,530 

 

 

$

4,530 

 

 

$

4,530 

 

 

$

49,910 

 

 

$

72,560 

 

 

$

72,560 

Average year-end interest rate

 

 

3.42 

%

 

 

3.42 

%

 

 

3.42 

%

 

 

3.42 

%

 

 

3.42 

%

 

 

3.42 

%

 

 

3.42 

%

 

 

 

Senior Notes, fixed interest rate

 

$

 

 

$

 

 

$

 

 

$

700,000 

 

 

$

 

 

$

 

 

$

700,000 

 

 

$

714,875 

Average interest rate

 

 

%

 

 

%

 

 

%

 

 

5.75 

%

 

 

%

 

 

%

 

 

5.75 

%

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 29, 2018

 

2019

 

 

2020

 

 

2021

 

 

2022

 

 

2023

 

 

Thereafter

 

 

Total

 

 

Fair
Value

Line of credit

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

Average variable interest rate

 

 

%

 

 

%

 

 

%

 

 

%

 

 

%

 

 

%

 

 

%

 

 

 

Long-term debt, variable interest rate (1)

 

$

7,688 

 

 

$

7,761 

 

 

$

7,840 

 

 

$

7,921 

 

 

$

8,005 

 

 

$

33,239 

 

 

$

72,454 

 

 

$

72,454 

Average year-end interest rate (1)

 

 

3.80 

%

 

 

3.80 

%

 

 

3.80 

%

 

 

3.80 

%

 

 

3.81 

%

 

 

3.81 

%

 

 

3.80 

%

 

 

 

Long-term debt, fixed interest rate

 

$

1,912 

 

 

$

1,996 

 

 

$

2,083 

 

 

$

2,174 

 

 

$

2,270 

 

 

$

11,647 

 

 

$

22,082 

 

 

$

22,082 

Average interest rate

 

 

4.29 

%

 

 

4.29 

%

 

 

4.29 

%

 

 

4.29 

%

 

 

4.29 

%

 

 

4.29 

%

 

 

4.29 

%

 

 

 

Recovery Zone Bonds, variable interest rate

 

$

4,530 

 

 

$

4,530 

 

 

$

4,530 

 

 

$

4,530 

 

 

$

4,530 

 

 

$

54,440 

 

 

$

77,090 

 

 

$

77,090 

Average year-end interest rate

 

 

3.37 

%

 

 

3.37 

%

 

 

3.37 

%

 

 

3.37 

%

 

 

3.37 

%

 

 

3.37 

%

 

 

3.37 

%

 

 

 

Senior Notes, fixed interest rate

 

$

 

 

$

 

 

$

 

 

$

 

 

$

700,000 

 

 

$

 

 

$

700,000 

 

 

$

710,500 

Average interest rate

 

 

%

 

 

%

 

 

%

 

 

%

 

 

5.75 

%

 

 

%

 

 

5.75 

%

 

 

 



(1)

Excludes interest rate swap that fixes at 3.92% the interest rate on $48.5 million of variable interest rate debt.



The Company will occasionally utilize financial or derivative instruments for interest rate risk management, but has typically not utilized highly leveraged financial instruments.  On the basis of the fair value of the Company’s market sensitive instruments at September 28, 2019, the Company does not consider the potential near-term losses in future earnings, fair values and cash flows from reasonably possible near-term changes in interest rates and exchange rates to be material.



Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 



The Company’s financial statements required by this item are set forth as a separate section of this Annual Report on Form 10-K.  See Part IV, Item 15 of this Annual Report on Form 10-K.



Item 9A. CONTROLS AND PROCEDURES 



Conclusion Regarding Disclosure Controls and Procedures



The Company maintains disclosure controls and procedures designed to provide reasonable assurance to achieve 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.  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 and procedures, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met.



As required by Rule 13a-15(b) under the Exchange Act, 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 September 28, 2019, the end of the period covered by this report.



 

26


 

Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at a reasonable level as of September 28, 2019.



Management’s Annual Report on Internal Control Over Financial Reporting



Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f).  Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.  The Company’s internal control over financial reporting includes those policies and procedures that:





 

 



(i)

pertain to the maintenance of records that, in a reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets;



 

 



(ii)

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of the Company’s management and directors; and



 

 



(iii)

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisitions, use or disposition of the Company’s assets that could have a material adverse effect on the financial statements.



Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.



The Company has assessed the effectiveness of its internal control over financial reporting as of September 28, 2019 using the criteria described in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). 



Based on its assessment of the design and related testing of the Company’s internal control over financial reporting management has concluded that, as of September 28, 2019, the Company maintained effective internal control over financial reporting based on the criteria set forth in the COSO framework.



The Company’s independent auditors, Deloitte & Touche LLP, a registered public accounting firm, are appointed by the Audit Committee of the Company’s Board of Directors.  Deloitte & Touche LLP has audited and reported on the consolidated financial statements of the Company and the Company’s internal control over financial reporting.  The reports of the independent auditors are contained in this Annual Report.



Changes in Internal Control Over Financial Reporting



There has been no change during the Company’s fiscal year ended September 28, 2019 in the Company’s internal control over financial reporting that was identified in connection with the evaluation required by Exchange Act Rule 13a-15(d) which has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.



As noted above, management has concluded that the Company’s disclosure controls and procedures were effective as of September 28, 2019.



Item 9B. OTHER INFORMATION 



None.





PART III



Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 



The information required by this Item, including the information concerning the Company’s directors and officers, audit committee, and compliance with Section 16 of the Exchange Act, is incorporated herein by reference to the information to be contained in the Company’s definitive Proxy Statement to be used in connection with the solicitation of proxies for the Company's 2020 annual meeting of stockholders.  The definitive Proxy Statement will be filed with the Securities and Exchange Commission (the “Commission”) pursuant to Regulation 14A no later than 120 days after September 28, 2019.



The Company has adopted a Code of Ethics that applies to its senior financial officers, including without limitation, its Chief Executive Officer, Chief Financial Officer and Controller.  The full text of the Code of Ethics is published on the Company’s website at www.ingles-markets.com under the caption “Corporate Information.”  In the event that the Company makes any amendments to, or grants any waivers of, a provision of the Code of Ethics applicable to its principal executive officer, principal financial officer or

 

27


 

principal accounting officer, the Company intends to disclose such amendment or waiver on its website.  Information on the Company’s website, however, does not form a part of this Annual Report on Form 10-K.



Item 11. EXECUTIVE COMPENSATION 



The information required by this Item is incorporated herein by reference to the information to be contained in the Company’s definitive Proxy Statement referred to above in “Item 10. Directors, Executive Officers and Corporate Governance.”



Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 



The information required by this Item is incorporated herein by reference to the information to be contained in the definitive Proxy Statement referred to above in “Item 10. Directors, Executive Officers and Corporate Governance.”



Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 



The information required by this Item is incorporated herein by reference to the information to be contained in the definitive Proxy Statement referred to above in “Item 10. Directors, Executive Officers and Corporate Governance.”



Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 



The information required by this Item is incorporated herein by reference to the information to be contained in the definitive Proxy Statement referred to above in “Item 10. Directors, Executive Officers and Corporate Governance.”



PART IV



Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 



(a)Documents filed as part of this report:



1. The following financial statements of the Registrant are included in response to Item 8 of this Annual Report on Form 10-K:



Consolidated Balance Sheets as of September 28, 2019 and September 29, 2018;

Consolidated Statements of Income and Other Comprehensive Income for the years ended September 28, 2019, September 29, 2018, and September 30, 2017;

Consolidated Statements of Changes in Stockholders’ Equity for the years ended September 28, 2019, September 29, 2018, and September 30, 2017;

Consolidated Statements of Cash Flows for the years ended September 28, 2019, September 29, 2018, and September 30, 2017;

Notes to Consolidated Financial Statements.



2. Exhibits



(b)Exhibits:















 

 

3.1 

 

Articles of Incorporation of Ingles Markets, Incorporated (included as Exhibit 3.1 to Ingles Markets, Incorporated’s Registration Statement on Form S-1, File No. 33-23919, previously filed with the Commission and incorporated herein by this reference).  (Filed on paper – hyperlink is not required pursuant to Rule 105 of Regulation S-T.)

3.2 

 

Articles of Amendment to Articles of Incorporation of Ingles Markets, Incorporated (included as Exhibit 3.3 to Ingles Markets, Incorporated’s Annual Report on Form 10-K for the fiscal year ended September 25, 2004, File No. 0-14706, previously filed with the Commission and incorporated herein by this reference).

3.3 

 

Articles of Amendment to Articles of Incorporation of Ingles Markets, Incorporated dated February 14, 2012 (included as Exhibit 3.3 to Ingles Markets, Incorporated Quarterly Report on Form 10-Q for the fiscal quarter ended March 24, 2012, File No. 0-14706, previously filed with the Commission and incorporated herein by this reference).

3.4 

 

Amended and Restated By-Laws of Ingles Markets, Incorporated (included as Exhibit 99.1 to Ingles Markets, Incorporated’s Current Report on Form 8-K, File No. 0-14706, previously filed with the Commission on August 30, 2007 and incorporated herein by this reference).

4.1 

 

Articles 4 and 9 of the Articles of Incorporation of Ingles Markets, Incorporated (included as Exhibit 3.1 to Ingles Markets, Incorporated’s Registration Statement on Form S-1, File No. 33-23919, (filed on paper – hyperlink is not required pursuant to Rule 105 of Regulation S-T) and Exhibit 3.3 to Ingles Markets, Incorporated’s Annual Report on Form 10-K for the fiscal year ended September 25, 2004, File No. 0-14706, respectively, each of which were previously filed with the Commission and are incorporated herein by this reference).

 

28


 

4.2 

 

Articles 2, 3, 10, 11 and 14 of the Amended and Restated By-Laws of Ingles Markets, Incorporated (included as Exhibit 99.1 to Ingles Markets, Incorporated’s Current Report on Form 8-K, File No. 0-14706, previously filed with the Commission on August 30, 2007 and incorporated herein by this reference).

4.3 

 

Indenture, dated as of June 12, 2013, between Ingles Markets, Incorporated and Branch Banking and Trust Company, as Trustee, governing the 5.75% Senior Notes Due 2023, including the form of unregistered 5.75% Senior Note Due 2023 (included as Exhibit 4.1 to Ingles Markets, Incorporated’s Current Report on Form 8-K, File No. 0-14706, previously filed with the Commission on June 12, 2013 and incorporated herein by this reference).

4.4 

 

Registration Rights Agreement, dated June 12, 2013, among the Company and Merrill Lynch, Pierce, Fenner and Smith Incorporated, Wells Fargo Securities, LLC, BB&T Capital Markets, a division of BB&T Securities, LLC and SunTrust Robinson Humphrey, Inc. (included as Exhibit 4.3 to Ingles Markets, Incorporated’s Current Report on Form 8-K, File No. 0-14706, previously filed with the Commission on June 12, 2013 and incorporated herein by this reference).

10.1 

 

Credit Agreement, dated as of May 12, 2009, among the Company and the lenders party thereto, Bank of America, as administrative agent, swing line lender and l/c issuer, Branch Banking and Trust Company, as syndication agent, Wachovia Bank, National Association, as documentation agent, and Banc of America Securities LLC, Branch Banking and Trust Company and Wachovia Capital Markets, LLC, as joint lead arrangers and joint book managers (included as Exhibit 10.1 to Ingles Markets, Incorporated’s Current Report on Form 8-K, File No. 0-14706, previously filed with the Commission on May 15, 2009 and incorporated herein by this reference).

10.2 

 

Waiver and First Amendment to the Credit Agreement dated as of July 31, 2009, among the Company the lenders from time to time party thereto, Bank of America, N.A., as administrative agent, swing line lender and l/c issuer, and the other agents, joint lead arrangers and joint book managers party thereto (included as Exhibit 10.3 to Ingles Markets, Incorporated’s Annual Report on Form 10-K for the fiscal year ended September 29, 2012, File No. 0-14706, previously filed with the Commission and incorporated herein by this reference).

10.3 

 

Second Amendment to the Credit Agreement dated as of December 29, 2010, among the Company the lenders from time to time party thereto, Bank of America, N.A., as administrative agent, swing line lender and l/c issuer, and the other agents, joint lead arrangers and joint book managers party thereto (included as Exhibit 10.1 to Ingles Markets, Incorporated’s Current Report on Form 8-K, File No. 0-14706, previously filed with the Commission on January 4, 2011 and incorporated herein by this reference).

10.4 

 

Third Amendment to the Credit Agreement dated as of September 6, 2012, among the Company the lenders from time to time party thereto, Bank of America, N.A., as administrative agent, swing line lender and l/c issuer, and the other agents, joint lead arrangers and joint book managers party thereto (included as Exhibit 10.5 to Ingles Markets, Incorporated’s Annual Report on Form 10-K for the fiscal year ended September 29, 2012, File No. 0-14706, previously filed with the Commission and incorporated herein by this reference).

10.5 

 

Fourth Amendment to the Credit Agreement dated as of June 12, 2013, among the Company the lenders from time to time party thereto, Bank of America, N.A., as administrative agent, swing line lender and l/c issuer, and the other agents, joint lead arrangers and joint book managers party thereto (included as Exhibit 10.6 to Ingles Markets, Incorporated’s Quarterly Report on Form 10-Q for the quarter ended June 29, 2013, File No. 0-14706, previously filed with the Commission and incorporated herein by this reference).

10.6 

 

Fifth Amendment to the Credit Agreement dated as of January 31, 2014, among the Company the lenders from time to time party thereto, Bank of America, N.A., as administrative agent, swing line lender and l/c issuer, and the other agents, joint lead arrangers and joint book managers party thereto (included as Exhibit 10.7 to Ingles Markets, Incorporated’s Quarterly Report on Form 10-Q for the quarter ended December 28, 2013, File No. 0-14706, previously filed with the Commission and incorporated herein by this reference).

10.7 

 

Sixth Amendment to the Credit Agreement dated as of June 23, 2014, among the Company the lenders from time to time party thereto, Bank of America, N.A., as administrative agent, swing line lender and l/c issuer, and the other agents, joint lead arrangers and joint book managers party thereto (included as Exhibit 10.1 to Ingles Markets, Incorporated’s Current Report on Form 8-K, File No. 0-14706, previously filed with the Commission on June 24, 2014 and incorporated herein by this reference).

10.8 

 

Seventh Amendment to the Credit Agreement dated as of September 27, 2017, among the Company the lenders from time to time party thereto, Bank of America, N.A., as administrative agent, swing line lender and l/c issuer, and the other agents, joint lead arrangers and joint book managers party thereto (included as Exhibit 10.13 to the Ingles Markets, Incorporated’s Annual Report on Form 10-K for the fiscal year ended September 30, 2017, File No. 0-14706, previously filed with the Commission and incorporated herein by this reference).

10.9 

 

Amended and Restated Ingles Markets, Incorporated Investment/Profit Sharing Plan effective September 29, 2002 (included as Exhibit 10.11 to Ingles Markets, Incorporated’s Annual Report on Form 10-K for the fiscal year ended September 28, 2002, File No. 0-14706, previously filed with the Commission and incorporated herein by this reference).



 

(Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Annual Report on Form 10-K pursuant to Item 15(b) of Form 10-K.)

10.10 

 

First Amendment to the Ingles Markets, Incorporated Investment/Profit Sharing Plan (included as Exhibit 10.3 to Ingles Markets, Incorporated’s Annual Report on Form 10-K for the fiscal year ended September 27, 2003, File No. 0-14706, previously filed with the Commission and incorporated herein by this reference).

 

29


 



 

(Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Annual Report on Form 10-K pursuant to Item 15(b) of Form 10-K.)

10.11 

 

Second Amendment to the Ingles Markets, Incorporated Investment/Profit Sharing Plan dated November 2, 2011 (included as Exhibit 10.5 to the Ingles Markets, Incorporated Annual Report on Form 10-K for the fiscal year ended September 24, 2011, File No. 0-14706, previously filed with the Commission and incorporated herein by this reference).



 

(Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Annual Report on Form 10-K pursuant to Item 15(b) of Form 10-K.)

10.12 

 

Ingles Markets, Incorporated Non-qualified Plan dated May 30, 2005 (included as Exhibit 10.5 to Ingles Markets, Incorporated’s Annual Report on Form 10-K for the fiscal year ended September 24, 2005, File No. 0-14706, previously filed with the Commission and incorporated herein by this reference).



 

(Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Annual Report on Form 10-K pursuant to Item 15(b) of Form 10-K.)

10.13 

 

Ingles Markets, Incorporated Executive Non-qualified Excess Plan amended and restated Effective January 1, 2013, dated November 1, 2012 (included as Exhibit 10.10 to Ingles Markets, Incorporated’s Annual Report on Form 10-K for the fiscal year ended September 29, 2012, File No. 0-14706, previously filed with the Commission and incorporated herein by this reference).



 

(Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Annual Report on Form 10-K pursuant to Item 15(b) of Form 10-K.)

10.14 

 

Ingles Markets, Incorporated Investment/Profit Sharing Plan (Amended and Restated effective January1, 2017) (included as Exhibit 10.9 to the Ingles Markets, Incorporated’s Quarterly Report on Form 10-Q for the quarter ended December 30, 2017, File No. 0-14706, previously filed with the Commission and incorporated herein by this reference).



 

(Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Annual Report on Form 10-K pursuant to Item 15(b) of Form 10-K.)

10.15 

 

Ingles Markets, Incorporated Investment/Profit Sharing Plan Description (included as Exhibit 10.10 to the Ingles Markets, Incorporated’s Quarterly Report on Form 10-Q for the quarter ended December 30, 2017, File No. 0-14706, previously filed with the Commission and incorporated herein by this reference).



 

(Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Annual Report on Form 10-K pursuant to Item 15(b) of Form 10-K.)

10.16 

 

Amendment to Investment/Profit Sharing Plan to Permit In-Plan Roth Transfers (included as Exhibit 10.11 to the Ingles Markets, Incorporated’s Quarterly Report on Form 10-Q for the quarter ended December 30, 2017, File No. 0-14706, previously filed with the Commission and incorporated herein by this reference).



 

(Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Annual Report on Form 10-K pursuant to Item 15(b) of Form 10-K.)

10.17 

 

Participation Agreement for Milkco, Inc. (Amended and Restated effective January 1, 2017) (included as Exhibit 10.12 to the Ingles Markets, Incorporated’s Quarterly Report on Form 10-Q for the quarter ended December 30, 2017, File No. 0-14706, previously filed with the Commission and incorporated herein by this reference).



 

(Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Annual Report on Form 10-K pursuant to Item 15(b) of Form 10-K.)

21.1 

 

Subsidiaries of Ingles Markets, Incorporated (included as Exhibit 21.1 to Ingles Markets, Incorporated’s Annual Report on Form 10-K for the fiscal year ended September 29, 2012, File No. 0-14706, previously filed with the Commission and incorporated herein by this reference).

31.1*

 

Certification of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.

31.2*

 

Certification of Chief Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.

32.1*

 

Certification by Chief Executive Officer Pursuant to Section 906 of Sarbanes-Oxley Act of 2002.

32.2*

 

Certification by Chief Financial Officer Pursuant to Section 906 of Sarbanes-Oxley Act of 2002.

101*

 

The following financial information from the Annual Report on Form 10-K for the fiscal year ended September 28, 2019, formatted in XBRL (Extensible Business Reporting Language) and furnished electronically herewith: (i) the Consolidated Statements of Income; (ii) the Consolidated Balance Sheets; (iii) the Consolidated Statements of Cash Flows; (iv) the Consolidated Statements of Changes in Stockholders’ Equity; and (v) the Notes to the Consolidated Financial Statements.

___________________________________

*  Filed herewith.

 

30


 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Stockholders and Board of Directors of Ingles Markets, Incorporated

Black Mountain, North Carolina



Opinion on the Financial Statements



We have audited the accompanying consolidated balance sheets of Ingles Markets, Incorporated and subsidiaries (the "Company") as of September 28, 2019 and September 29, 2018, the related consolidated statements of income and other comprehensive income, changes in stockholders’ equity, and cash flows for each of the three fiscal years in the period ended September 28, 2019 and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 28, 2019 and September 29, 2018, and the results of its operations and its cash flows for each of the three fiscal years in the period ended September 28, 2019, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of September 28, 2019, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated December 10, 2019, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion



These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.



/s/ DELOITTE & TOUCHE LLP

Charlotte,  North Carolina

December 10, 2019



We have served as the Company's auditor since 2012.

 

 

31


 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Stockholders and the Board of Directors of Ingles Markets, Incorporated



Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Ingles Markets, Incorporated and subsidiaries (the “Company”) as of September 28, 2019, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 28, 2019, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.



We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the fiscal year ended September 28, 2019, of the Company and our report dated December 10, 2019, expressed an unqualified opinion on those financial statements.



Basis for Opinion



The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.



We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.



Definition and Limitations of Internal Control over Financial Reporting



A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.



Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.





/s/ DELOITTE & TOUCHE LLP

Charlotte,  North Carolina

December 10, 2019

 

32


 

INGLES MARKETS, INCORPORATED AND SUBSIDIARIES



CONSOLIDATED BALANCE SHEETS



SEPTEMBER 28, 2019 AND SEPTEMBER 29, 2018







 

 

 

 

 

 



 

 

 

 

 

 



 

2019

 

2018

ASSETS

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

Cash and cash equivalents

 

$

42,125,105 

 

$

10,537,303 

Receivables (less allowance for doubtful accounts of  $156,145 – 2019 and

  $433,355 – 2018)

 

 

71,951,303 

 

 

70,056,909 

Inventories

 

 

374,129,060 

 

 

372,195,421 

Other

 

 

8,897,903 

 

 

43,953,483 

Total current assets

 

 

497,103,371 

 

 

496,743,116 

PROPERTY AND EQUIPMENT, NET

 

 

1,344,267,315 

 

 

1,303,044,370 

OTHER ASSETS

 

 

25,957,682 

 

 

25,123,334 

TOTAL ASSETS

 

$

1,867,328,368 

 

$

1,824,910,820 



See Notes to Consolidated Financial Statements.

 

 

33


 

INGLES MARKETS, INCORPORATED AND SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS

 

SEPTEMBER 28, 2019 AND SEPTEMBER 29, 2018







 

 

 

 

 

 



 

 

 

 

 

 



 

2019

 

2018

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

Current portion of long-term debt

 

$

12,600,131 

 

$

12,848,013 

Accounts payable - trade

 

 

151,329,975 

 

 

165,165,312 

Accrued expenses and current portion of other long-term liabilities

 

 

83,649,283 

 

 

82,124,766 

Total current liabilities

 

 

247,579,389 

 

 

260,138,091 

DEFERRED INCOME TAXES

 

 

75,499,000 

 

 

74,461,000 

LONG-TERM DEBT

 

 

839,637,691 

 

 

852,739,760 

OTHER LONG-TERM LIABILITIES

 

 

41,889,682 

 

 

42,158,161 

Total liabilities

 

 

1,204,605,762 

 

 

1,229,497,012 

COMMITMENTS AND CONTINGENCIES

 

 

 —

 

 

 —

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;  issued and outstanding,
  14,180,485 shares in 2019, 14,145,385 shares in 2018

 

 

709,024 

 

 

707,269 

Class B, convertible to Class A, $0.05 par value; 100,000,000 shares authorized;

  issued and outstanding, 6,079,291 shares in 2019, 6,114,391 shares in 2018

 

 

303,965 

 

 

305,720 

Paid-in capital in excess of par value

 

 

12,311,249 

 

 

12,311,249 

Accumulated other comprehensive income

 

 

(1,265,650)

 

 

 —

Retained earnings

 

 

650,664,018 

 

 

582,089,570 

Total stockholders’ equity

 

 

662,722,606 

 

 

595,413,808 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

1,867,328,368 

 

$

1,824,910,820 



See Notes to Consolidated Financial Statements. 

 

34


 

INGLES MARKETS, INCORPORATED AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME

 

FISCAL YEARS ENDED SEPTEMBER 28, 2019,

SEPTEMBER 29, 2018 AND SEPTEMBER 30, 2017







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

2019

 

2018

 

2017

Net sales

 

$

4,202,033,610 

 

$

4,092,804,877 

 

$

4,002,699,727 

Cost of goods sold

 

 

3,180,033,398 

 

 

3,112,635,516 

 

 

3,039,106,724 

Gross profit

 

 

1,022,000,212 

 

 

980,169,361 

 

 

963,593,003 

Operating and administrative expenses

 

 

873,859,464 

 

 

856,074,106 

 

 

837,144,859 

Gain from sale or disposal of assets

 

 

4,052,387 

 

 

728,386 

 

 

1,464,600 

Income from operations

 

 

152,193,135 

 

 

124,823,641 

 

 

127,912,744 

Other income, net

 

 

1,814,971 

 

 

3,064,690 

 

 

3,806,869 

Interest expense

 

 

47,410,104 

 

 

47,569,703 

 

 

47,458,033 

Income before income taxes

 

 

106,598,002 

 

 

80,318,628 

 

 

84,261,580 

Income tax expense (benefit)

 

 

25,018,000 

 

 

(17,046,000)

 

 

30,388,000 

Net income

 

$

81,580,002 

 

$

97,364,628 

 

$

53,873,580 



 

 

 

 

 

 

 

 

 

Other comprehensive expense:

 

 

 

 

 

 

 

 

 

 Change in fair value of interest rate swap

 

$

(1,674,636)

 

$

 —

 

$

 —

 Income tax benefit

 

 

408,986 

 

 

 —

 

 

 —

Other comprehensive expense, net of tax

 

 

(1,265,650)

 

 

 —

 

 

 —

Comprehensive income

 

$

80,314,352 

 

$

 —

 

$

 —



 

 

 

 

 

 

 

 

 

Per-share amounts:

 

 

 

 

 

 

 

 

 

Class A Common Stock

 

 

 

 

 

 

 

 

 

Basic earnings per common share

 

$

4.14 

 

$

4.94 

 

$

2.74 

Diluted earnings per common share

 

$

4.03 

 

$

4.81 

 

$

2.66 

Class B Common Stock

 

 

 

 

 

 

 

 

 

Basic earnings per common share

 

$

3.76 

 

$

4.49 

 

$

2.49 

Diluted earnings per common share

 

$

3.76 

 

$

4.49 

 

$

2.49 

Cash dividends per common share:

 

 

 

 

 

 

 

 

 

Class A

 

$

0.66 

 

$

0.66 

 

$

0.66 

Class B

 

$

0.60 

 

$

0.60 

 

$

0.60 



See Notes to Consolidated Financial Statements.

 

 

35


 

INGLES MARKETS, INCORPORATED AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY



FISCAL YEARS ENDED SEPTEMBER 28, 2019,

SEPTEMBER 29, 2018 AND SEPTEMBER 30, 2017







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

PAID-IN

 

ACCUMULATED

 

 

 

 

 

 



 

CLASS A

 

CLASS B

 

CAPITAL IN

 

OTHER

 

 

 

 

 

 



 

COMMON STOCK

 

COMMON STOCK

 

EXCESS OF

 

COMPREHENSIVE

 

RETAINED

 

 

 



 

SHARES

 

AMOUNT

 

SHARES

 

AMOUNT

 

PAR VALUE

 

INCOME(LOSS)

 

EARNINGS

 

TOTAL

Balance, September 24, 2016

 

13,966,476 

 

$

698,324 

 

6,293,300 

 

$

314,665 

 

$

12,311,249 

 

$

 —

 

$

456,851,372 

 

$

470,175,610 

Net income

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

53,873,580 

 

 

53,873,580 

Cash dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(9,254,502)

 

 

(9,254,502)

Class B

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(3,742,685)

 

 

(3,742,685)

Common stock conversions

 

117,568 

 

 

5,878 

 

(117,568)

 

 

(5,878)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Balance, September 30, 2017

 

14,084,044 

 

$

704,202 

 

6,175,732 

 

$

308,787 

 

$

12,311,249 

 

$

 —

 

$

497,727,765 

 

$

511,052,003 

Net income

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

97,364,628 

 

 

97,364,628 

Other comprehensive income net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 —

 

 

 

 

 

 

Cash dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(9,316,501)

 

 

(9,316,501)

Class B

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(3,686,322)

 

 

(3,686,322)

Common stock conversions

 

61,341 

 

 

3,067 

 

(61,341)

 

 

(3,067)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Balance, September 29, 2018

 

14,145,385 

 

$

707,269 

 

6,114,391 

 

$

305,720 

 

$

12,311,249 

 

$

 —

 

$

582,089,570 

 

$

595,413,808 

Net income

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

81,580,002 

 

 

81,580,002 

Other comprehensive income net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,265,650)

 

 

 

 

 

(1,265,650)

Cash dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(9,346,549)

 

 

(9,346,549)

Class B

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(3,659,005)

 

 

(3,659,005)

Common stock conversions

 

35,100 

 

 

1,755 

 

(35,100)

 

 

(1,755)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Balance, September 28, 2019

 

14,180,485 

 

$

709,024 

 

6,079,291 

 

$

303,965 

 

$

12,311,249 

 

$

(1,265,650)

 

$

650,664,019 

 

$

662,722,606 



See Notes to Consolidated Financial Statements.

 

 

36


 

INGLES MARKETS, INCORPORATED AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CASH FLOWS



FISCAL YEARS ENDED SEPTEMBER 28, 2019,

SEPTEMBER 29, 2018 AND SEPTEMBER 30, 2017







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

2019

 

2018

 

2017

Cash Flows From Operating Activities:

 

 

 

 

 

 

 

 

 

Net income

 

$

81,580,002 

 

$

97,364,628 

 

$

53,873,580 

Adjustments to reconcile net income to net cash provided
  by operating activities:

 

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

112,520,100 

 

 

113,082,675 

 

 

110,929,378 

Gain from sale or disposal of assets

 

 

(4,052,387)

 

 

(728,386)

 

 

(1,464,600)

Receipt of advance payments on purchases contracts

 

 

2,284,000 

 

 

2,108,133 

 

 

3,736,862 

Recognition of advance payments on purchases contracts

 

 

(2,542,537)

 

 

(2,178,062)

 

 

(2,176,620)

Deferred income taxes

 

 

1,447,000 

 

 

4,543,000 

 

 

(1,531,000)

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

 

Receivables

 

 

(1,894,409)

 

 

(3,727,745)

 

 

(4,593,777)

Inventory

 

 

(1,933,639)

 

 

(22,862,408)

 

 

(5,451,936)

Other assets

 

 

33,689,037 

 

 

(40,549,644)

 

 

(1,566,670)

Accounts payable and accrued expenses

 

 

(9,593,939)

 

 

14,187,867 

 

 

4,585,074 

Net Cash Provided By Operating Activities

 

 

211,503,228 

 

 

161,240,058 

 

 

156,340,291 

Cash Flows From Investing Activities:

 

 

 

 

 

 

 

 

 

Proceeds from sales of property and equipment

 

 

8,958,466 

 

 

2,340,027 

 

 

2,335,726 

Capital expenditures

 

 

(161,751,023)

 

 

(150,486,508)

 

 

(127,695,650)

Net Cash Used By Investing Activities

 

 

(152,792,557)

 

 

(148,146,481)

 

 

(125,359,924)

Cash Flows From Financing Activities:

 

 

 

 

 

 

 

 

 

Proceeds from short-term borrowings

 

 

303,810,043 

 

 

515,395,546 

 

 

393,175,778 

Payments on short-term borrowings

 

 

(303,810,043)

 

 

(515,395,546)

 

 

(393,175,778)

Net proceeds from new long-term borrowings

 

 

 —

 

 

 —

 

 

59,737,147 

Principal payments on long-term borrowings

 

 

(14,117,316)

 

 

(13,465,551)

 

 

(59,487,736)

Dividends

 

 

(13,005,553)

 

 

(13,002,823)

 

 

(12,997,187)

Net Cash Used By Financing Activities

 

 

(27,122,869)

 

 

(26,468,374)

 

 

(12,747,776)

Increase (decrease) in Cash and Cash Equivalents

 

 

31,587,802 

 

 

(13,374,797)

 

 

18,232,591 

Cash and Cash Equivalents at Beginning of Year

 

 

10,537,303 

 

 

23,912,100 

 

 

5,679,509 

Cash and Cash Equivalents at End of Year

 

$

42,125,105 

 

$

10,537,303 

 

$

23,912,100 



See Notes to Consolidated Financial Statements.

 

 

37


 

Ingles Markets, Incorporated and Subsidiaries

Notes To Consolidated Financial Statements

Fiscal years ended September 28, 2019, September 29, 2018 and September 30, 2017

 

1. Summary of Significant Accounting Policies



Nature of Operations   Ingles Markets, Incorporated (“Ingles” or the “Company”), is a leading supermarket chain in the southeast United States, operates 198 supermarkets in North Carolina (73), Georgia (66), South Carolina (36), Tennessee (21), Virginia (1) and Alabama (1).



Principles of Consolidation – The consolidated financial statements include the accounts of Ingles Markets, Incorporated and its wholly-owned subsidiaries, Sky King, Inc., Ingles Markets Investments, Inc., Milkco, Inc., Land O Sky, LLC, Shopping Center Financing, LLC, and Shopping Center Financing II, LLC.  All significant inter-company balances and transactions are eliminated in consolidation.



Fiscal Year – The Company’s fiscal year ends on the last Saturday in September.    Fiscal years 2019 and 2018 each consisted of 52 weeks. Fiscal year 2017 consisted of 53 weeks.



Segment Information – The Company operates one primary business segment, retail grocery sales (representing the aggregation of individual retail stores).  The “Other” segment includes our remaining operations -- fluid dairy and shopping center rentals. 



New Accounting Pronouncements –  In February 2016 the Financial Accounting Standards Board (FASB) issued ASU 2016-02, "Leases" (ASU 2016-02), which requires the Company as lessee to recognize most leases on the balance sheet thereby resulting in the recognition of right of use assets and lease obligations for those leases currently classified as operating leases. The accounting for leases where the Company is the lessor remains largely unchanged. ASU 2016-02 became effective for the Company on September 29, 2019 and the Company elected the optional transition method which permits entities to change the date of initial application of the standard to the beginning of the year of adoption and to recognize the effects of applying ASU 2016-02 as a cumulative-effect adjustment to the opening balance of retained earnings.  Certain qualitative and quantitative disclosures are also required. While the Company is still finalizing our adoption procedures, the Company estimates the primary impact to the consolidated financial position upon adoption will be the recognition, on a discounted basis, of minimum commitments under noncancelable operating leases on the consolidated balance sheets resulting in the recording of right of use assets and lease obligations for approximately $45 to $55 million.  The Company does not expect a material impact to the Company’s consolidated statements of income, comprehensive income, stockholders’ equity, or cash flows.



In May 2014, the FASB issued Accounting Standards Update ASU 2014-09 “Revenue from Contracts with Customers” (ASU 2014-09).  ASU 2014-09 is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services.  In August 2015, the FASB issued ASU 2015-14 which deferred the effective date of the ASU to fiscal years beginning after December 15, 2017 and interim periods within those fiscal years, with early adoption permitted.  The Company adopted the standard in the first quarter of fiscal 2019, and determined the impact of adopting the new guidance was immaterial to its annual and interim financial statements.  The Company’s assessment included a detailed review of contracts for each of its disaggregated revenue streams and a comparison of its historical accounting policies and practices to the new standard.

 

Cash Equivalents – All highly liquid investments with a maturity of three months or less when purchased are considered cash.  Outstanding checks in excess of bank balances are included in the line item “Accounts payable – trade” on the Consolidated Balance Sheets.  There were no such balances at September 28, 2019 and September 29, 2018, respectively.



Financial Instruments – The Company at times has short-term investments and certificates of deposit with maturities of three months or less when purchased that are included in cash.  At September 28, 2019, the Company had no such investments.  The Company’s policy is to invest its excess cash either in money market accounts, reverse repurchase agreements or in certificates of deposit.  Money market accounts and certificates of deposit are not secured; reverse repurchase agreements are secured by government obligations.  At September 28, 2019 demand deposits of approximately $37.6 million in three banks exceed the $250,000 FDIC insurance limit per bank.



Interest Rate Swaps – The Company utilizes interest rate swap contracts to reduce its exposure to fluctuations in variable interest rates for future interest payments on some of its debt instruments.  For determining the fair value of the interest rate swap contract, the Company uses significant observable market data or assumptions about counterparty risk.  The fair value estimates reflect an income approach based on the terms of the interest rate swap contracts and inputs corroborated by observable market data including interest rate curves.  The Company has designated its swaps as cash flow hedges, for which the Company records the effective portions of changes in its fair value, net of tax, in other comprehensive income (loss).  To the extent interest rate swaps are determined to be ineffective, the Company recognizes the change in the estimated fair value of the swaps in earnings.



Allowance for Doubtful Accounts – Accounts receivable are primarily from vendor allowances, customer charges and pharmacy insurance company reimbursements.  Accounts receivable are stated net of an allowance for uncollectible accounts, which is

 

38


 

determined through analysis of the aging of accounts receivable at the date of the consolidated financial statements and assessments of the collectability based upon historical collection activity adjusted for current conditions.



Inventories – Substantially all of the Company’s inventory consists of finished goods.  Warehouse inventories are valued at the lower of average cost or market.  Store inventories are valued using the retail method under which inventories at cost (and the resulting gross margins) are determined by applying a calculated cost-to-retail ratio to the retail value of inventories.  As an integral part of valuing inventory at cost, management makes certain judgments and estimates for standard gross margins, allowances for vendor consideration, markdowns and shrinkage.  Warehousing and distribution costs are not included in the valuation of inventories.  The Company reviews its judgments and estimates regularly and makes adjustments where facts and circumstances dictate. 



Property, Equipment and Depreciation  Property and equipment are stated at cost and depreciated over the estimated useful lives by the straight-line method.  Buildings are generally depreciated over 30 years.  Store, office and warehouse equipment is generally depreciated over three to 10 years.  Transportation equipment is generally depreciated over three to five years.  Leasehold improvements are depreciated over the shorter of the subject lease term or the useful life of the asset, generally from three to 30 years.  Depreciation and amortization expense totaled $112.5 million, $113.1 million and $110.9 million for fiscal years 2019, 2018 and 2017, respectively.



Asset Impairments – The Company accounts for the impairment of long-lived assets in accordance with FASB Accounting Standards Codification (“FASB ASC”) Topic 360.  Asset groups are primarily comprised of individual store 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, less 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.



Nonqualified Investment Plan The purpose of the Executive Nonqualified Excess Plan is to provide retirement benefits similar to the Company’s Investment/Profit Sharing Plan to certain of the Company’s management employees who are otherwise subject to limited participation in the 401(k) feature of the Company’s Investment/Profit Sharing Plan.  Participant retirement account balances are liabilities of the Company.  Assets of the plan are assets of the Company and are held in trust for employees and distributed upon retirement, death, disability, in-service distributions, or termination of employment.  In accordance with the trust, the Company may not use these assets for general corporate purposes.  Life insurance policies and marketable securities held in the trust are included in the caption “Other assets” in the Consolidated Balance Sheets.



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 $1,000,000 per occurrence for workers’ compensation, $500,000 for general liability, and $450,000 per covered person for medical care benefits for a policy year.  Effective October 1, 2019 the excess liability limit was increased to $1,000,000 for general liability.  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 Company’s self-insurance reserves totaled $31.million and $34.7 million for employee group insurance, workers’ compensation insurance and general liability insurance at September 28, 2019 and September 29, 2018, respectively.  These amounts are inclusive of expected recoveries from excess cost insurance or other sources that are recorded as receivables of $3.6 at September 28, 2019 and $4.6 million at September 29, 2018.  The Company is required in certain cases to obtain letters of credit to support its self-insured status.  At fiscal year-end 2019, the Company’s self-insured liabilities were supported by a $2.6 million certificate of deposit and by $9.0 million of undrawn letters of credit which expire between September and October 2019.  The Company carries casualty insurance only on those properties where it is required to do so. The Company has elected to self-insure its other properties.



Income Taxes – The Company accounts for income taxes under FASB ASC Topic 740.  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.  The Company accounts for uncertainty in income taxes by prescribing a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken on a tax return.



The Company files income tax returns with federal and various state jurisdictions.  With few exceptions, the Company is no longer subject to federal or state income tax examinations by tax authorities for the years before tax year 2015.  Examinations may challenge certain of the Company’s tax positions.  Actual results could materially differ from these estimates and could significantly affect the effective tax rate and cash flows in the future years.

 

39


 



Valuation allowances are established when necessary to reduce deferred tax assets to the amount more likely than not expected to be realized.



Gross unrecognized tax benefits as well as interest and penalties related to uncertain tax positions could affect the Company’s effective tax rate.  These amounts are insignificant for fiscal years 2019, 2018, and 2017.



Pre-Opening Costs – Costs associated with the opening of new stores are expensed when incurred.



Per-Share Amounts – The Company calculates earnings per share using the two-class method in accordance with FASB ASC Topic 260.



Advertising – The Company expenses advertising as incurred.  Advertising and promotion expenses, net of vendor allowance reimbursements, totaled $10.0 million, $12.6 million and $12.5 million for fiscal years 2019, 2018 and 2017, respectively.



Use of Estimates – The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.  Although these estimates are based on management’s knowledge of current events and actions it may undertake in the future, they may ultimately differ from actual results.  Such estimates include the allowance for doubtful accounts, various inventory reserves, realizability of deferred tax assets, and self-insurance reserves.



Cost of Goods Sold –  In addition to the direct product cost, cost of goods sold for the grocery segment includes inbound freight charges and costs of the Company’s distribution network.  Milk processing is a manufacturing process.  Therefore, cost of goods sold include direct product and production costs, inbound freight, purchasing and receiving costs, inspection costs, warehousing costs, internal transfer costs, and other costs of distribution.  Depreciation expense included in costs of goods sold totaled $14.5 million, $14.4 million and $15.4 million for fiscal years 2019, 2018 and 2017, respectively.



Operating and Administrative Expenses –  Operating and administrative expenses include costs incurred for store and administrative labor, occupancy, depreciation (to the extent not included in Cost of Goods Sold), insurance and general administration.



Revenue Recognition – The Company recognizes revenues from grocery segment sales at the point of sale to its customers.  Sales taxes collected from customers are not included in reported revenues.  Discounts provided to customers by the Company at the point of sale, including discounts provided in connection with loyalty cards, are recognized as a reduction in sales as the products are sold.  Product returns are not significant.



The Company recognizes fluid dairy revenues at the time the risk of loss shifts to the customer pursuant to our terms of sale.  Therefore, approximately 54% of fluid dairy revenues are recognized when the product is picked up by the customer at our facility.  The remaining fluid dairy revenues are recognized when the product is received at the customer’s facility upon delivery via transportation arranged by the Company.



Rental income, including contingent rentals, is recognized on the accrual basis.  Upfront consideration paid by either the Company as lessor or by the lessee is recognized as an adjustment to net rental income using the straight line method over the term of the lease.



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 comprised 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 vendors’ products.  These allowances generally relate to short term arrangements with vendors, often relating to a period of a month or less, and are negotiated on a purchase-by-purchase or transaction-by-transaction basis.  Whenever possible, 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 system constraints 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 $111.7 million, $116.5 million, and $116.6 million for the fiscal years ended September 28, 2019, September 29, 2018 and September 30, 2017, 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 that the related expense is incurred.  Vendor advertising allowances recorded as a reduction of advertising expense totaled $13.8 million, $14.1 million, and $13.8 million for the fiscal years ended September 28, 2019, September 29, 2018 and September 30, 2017, 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 its product advertising, which could increase or decrease its expenditures.



Similarly, the Company is not able to assess the impact of vendor advertising allowances on the creation of additional revenue; as such allowances do not directly generate revenue for its stores. 

 

40


 

2. Income Taxes



Deferred Income Tax Liabilities and Assets – Deferred income taxes are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax laws and rates.  Significant components of the Company’s deferred tax liabilities and assets are as follows:





 

 

 

 

 

 



 

 

 

 

 

 



 

2019

 

2018

Deferred tax liabilities:

 

 

 

 

 

 

Property and equipment tax/book differences

 

$

88,151,000 

 

$

87,577,000 

Property tax method

 

 

1,228,000 

 

 

1,156,000 

Total deferred tax liabilities

 

 

89,379,000 

 

 

88,733,000 

Deferred tax assets:

 

 

 

 

 

 

Insurance reserves

 

 

4,280,000 

 

 

4,790,000 

Advance payments on purchases contracts

 

 

698,000 

 

 

761,000 

Vacation accrual

 

 

1,723,000 

 

 

1,652,000 

Inventory

 

 

1,086,000 

 

 

1,055,000 

Deferred compensation

 

 

4,002,000 

 

 

3,662,000 

Other

 

 

2,091,000 

 

 

2,352,000 

Total deferred tax assets

 

 

13,880,000 

 

 

14,272,000 

Net deferred tax liabilities

 

$

75,499,000 

 

$

74,461,000 



Refundable current income taxes totaling $1.0 million and $36.7 million at September 28,  2019 and September 29, 2018, respectively are included in the line item “Other current assets” on the Consolidated Balance Sheets.



Income Tax Expense - Income tax expense differs from the amounts computed by applying the statutory federal rates to income before income taxes. The reasons for the differences are as follows:







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

2019

 

2018

 

2017

Federal tax at statutory rate

 

$

22,386,000 

 

$

19,678,000 

 

$

29,492,000 

State income tax, net of federal tax benefits

 

 

3,726,000 

 

 

3,528,000 

 

 

2,774,000 

Federal tax credits

 

 

(1,184,000)

 

 

(1,052,000)

 

 

(1,024,000)

Tax rate change on deferred tax balance as of Federal law
  enactment date

 

 

 —

 

 

(26,680,000)

 

 

 —

Tax method change

 

 

 —

 

 

(10,606,000)

 

 

 —

Tax rate change effect of FY18 current deferred activity

 

 

 —

 

 

(2,124,000)

 

 

 —

Other

 

 

90,000 

 

 

210,000 

 

 

(854,000)

Total

 

$

25,018,000 

 

$

(17,046,000)

 

$

30,388,000 



Current and deferred income tax expense (benefit) is as follows:







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

2019

 

2018

 

2017

Current:

 

 

 

 

 

 

 

 

 

Federal

 

$

18,774,000 

 

$

(21,596,000)

 

$

26,994,000 

State

 

 

4,797,000 

 

 

7,000 

 

 

4,925,000 

Total current

 

 

23,571,000 

 

 

(21,589,000)

 

 

31,919,000 

Deferred:

 

 

 

 

 

 

 

 

 

Federal

 

 

1,510,000 

 

 

1,020,000 

 

 

(1,104,000)

State

 

 

(63,000)

 

 

3,523,000 

 

 

(427,000)

Total deferred

 

 

1,447,000 

 

 

4,543,000 

 

 

(1,531,000)

Total expense (benefit)

 

$

25,018,000 

 

$

(17,046,000)

 

$

30,388,000 



In December 2017, the Tax Cuts and Jobs Act (the “Tax Act”) became law.  Among other things, the Tax Act reduced the federal corporate tax rate from 35% to 21% and allowed for full depreciation expensing of qualified property when placed in service.



As a result of the decrease in the effective tax rate, the Company recorded a decrease in its net deferred tax liabilities of $26.7 million, with a corresponding reduction to deferred income tax expense.  During fiscal year 2018, the Company adopted a tax calculation method change that resulted in the accelerated deduction of certain property-related expenditures.  As a result of this change and the aforementioned change in the federal corporate tax rate, the Company recorded an additional decrease in its net deferred tax liabilities of $10.6 million, with a corresponding reduction to deferred income tax expense.

 

 

41


 

3. Property and Equipment



Property and equipment, net, consists of the following:







 

 

 

 

 

 



 

 

 

 

 

 



 

2019

 

2018

Land

 

$

373,434,259 

 

$

351,073,344 

Construction in progress

 

 

26,206,372 

 

 

12,393,293 

Buildings

 

 

1,212,984,091 

 

 

1,173,237,017 

Store, office and warehouse equipment

 

 

979,229,721 

 

 

946,026,834 

Transportation equipment

 

 

78,851,265 

 

 

75,919,047 

Leasehold improvements

 

 

56,455,431 

 

 

54,387,952 

Total

 

 

2,727,161,139 

 

 

2,613,037,487 

Less accumulated depreciation and amortization

 

 

1,382,893,824 

 

 

1,309,993,117 

Property and equipment - net

 

$

1,344,267,315 

 

$

1,303,044,370 

 

4. Property Held for Lease and Rental Income



At September 28, 2019, the Company owned and operated 79 shopping centers in conjunction with its supermarket operations. The Company leases to others a portion of its shopping center properties. The leases are non-cancelable operating lease agreements for periods ranging up to 20 years.



Rental income is included in the line item “Net sales” on the 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 Consolidated Statements of Income.





 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

2019

 

2018

 

2017

Rents earned on owned and subleased properties:

 

 

 

 

 

 

 

 

 

Base rentals including lease termination payments

 

$

14,821,734 

 

$

10,826,997 

 

$

8,847,035 

Contingent rentals

 

 

278,660 

 

 

249,965 

 

 

334,204 

Total

 

 

15,100,394 

 

 

11,076,962 

 

 

9,181,239 

Depreciation on owned properties leased to others

 

 

(5,183,712)

 

 

(5,132,805)

 

 

(5,255,719)

Other shopping center expenses

 

 

(3,640,110)

 

 

(2,967,860)

 

 

(2,654,976)

Total

 

$

6,276,572 

 

$

2,976,297 

 

$

1,270,544 



Owned properties leased or held for lease to others under operating leases by major classes are summarized as follows:







 

 

 

 

 

 



 

 

 

 

 

 



 

September 28,

 

September 29,



 

2019

 

2018

Land

 

$

57,568,972 

 

$

54,348,413 

Buildings

 

 

179,723,671 

 

 

170,700,496 

Total

 

 

237,292,643 

 

 

225,048,909 

Less accumulated depreciation

 

 

(97,321,740)

 

 

(108,754,494)

Total

 

$

139,970,903 

 

$

116,294,415 



The above amounts are included on the Consolidated Balance Sheets in the caption “Property and equipment, net.”



The following is a schedule of minimum future rental income on non-cancelable operating leases as of September 28, 2019:







 

 

 



 

 

 

Fiscal Year

 

 

 

2020

 

$

11,265,775 

2021

 

 

8,855,781 

2022

 

 

6,967,583 

2023

 

 

5,862,260 

2024

 

 

5,145,632 

Thereafter

 

 

13,723,315 

Total minimum future rental income

 

$

51,820,346 

 

 

42


 

5. Leases and Rental Expense



The Company conducts part of its retail operations from leased facilities. The initial terms of the leases are generally 20 years. The majority of the leases include one or more renewal options and provide that the Company pay property taxes, utilities, repairs and certain other costs incidental to occupation of the premises. Several leases contain clauses calling for percentage rentals based upon gross sales of the supermarket occupying the leased space.  Step rent provisions, escalation clauses, capital improvements and other lease concessions are taken into account in computing minimum lease payments, which are recognized on a straight-line basis over the minimum lease term.  



Operating Leases - Rent expense for all operating leases of $12.4 million, $12.8 million and $13.6 million for fiscal years 2019, 2018 and 2017, respectively, is included in operating and administrative expenses. Sub-lease rental income of $0.3 million for each of fiscal years 2019, 2018 and 2017, is included as a reduction of rental expense.



The components of aggregate minimum rental commitments under non-cancelable operating leases as of September 28, 2019 are as follows:







 

 

 



 

 

 

Fiscal Year

 

 

 

2020

 

$

9,756,136 

2021

 

 

7,532,373 

2022

 

 

6,692,661 

2023

 

 

4,907,148 

2024

 

 

2,583,629 

Thereafter

 

 

27,187,519 

Total minimum future rental commitments

 

$

58,659,466 

 

6. Supplementary Balance Sheet Information



Accrued Expenses and Current Portion of Other Long-Term Liabilities - Accrued expenses and current portion of other long-term liabilities are summarized as follows:







 

 

 

 

 

 



 

 

 

 

 

 



 

2019

 

2018

Property, payroll, and other taxes payable

 

$

20,273,626 

 

$

22,327,253 

Salaries, wages, and bonuses payable

 

 

31,861,220 

 

 

29,583,266 

Self-insurance liabilities:

 

 

 

 

 

 

Employee group insurance

 

 

5,704,565 

 

 

5,257,120 

Workers’ compensation insurance

 

 

4,287,445 

 

 

5,079,514 

General liability insurance

 

 

3,154,282 

 

 

3,239,695 

Interest

 

 

13,342,260 

 

 

13,397,615 

Other

 

 

5,025,885 

 

 

3,240,303 

Total accrued expenses and current portion of other long-term liabilities

 

$

83,649,283 

 

$

82,124,766 



Employee insurance expense, including workers’ compensation and medical care benefits, net of employee contributions, totaled $37.3 million, $37.7 million and $33.1 million for fiscal years 2019, 2018 and 2017, respectively.



Other Long-Term Liabilities - Other long-term liabilities are summarized as follows:





 

 

 

 

 

 



 

 

 

 

 

 



 

2019

 

2018

Advance payments on purchases contracts

 

$

2,856,569 

 

$

3,115,106 

Deferred lease expense

 

 

1,949,992 

 

 

1,941,708 

Nonqualified investment plan liability

 

 

16,446,037 

 

 

15,033,318 

Self-insurance liabilities:

 

 

 

 

 

 

Workers’ compensation insurance

 

 

13,814,615 

 

 

16,333,768 

General liability insurance

 

 

4,050,070 

 

 

4,776,234 

Other

 

 

3,906,319 

 

 

2,124,800 

Other long-term liabilities

 

 

43,023,602 

 

 

43,324,934 

Less current portion

 

 

1,133,920 

 

 

1,166,773 

Total other long-term liabilities

 

$

41,889,682 

 

$

42,158,161 



The Company’s fuel operations contain underground tanks for the storage of gasoline and diesel fuel.  The Company reviewed FASB Topic ASC 410 and determined we have a legal obligation to remove tanks at a point in the future and accordingly determined we have met the requirements of 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 are immaterial for each fuel center as well as in the aggregate at September 28, 2019 and September 29, 2018.

 

43


 



Advance Payments on Purchases Contracts - The Company has entered into agreements with suppliers whereby payment is received in advance and earned based on purchases of product from these suppliers in the future. The unearned portion, included in other long-term liabilities, will be recognized in the results of operations in accordance with the terms of the contract.

 

7. Long-Term Debt



Long-term debt and short-term loans are summarized as follows:







 

 

 

 

 

 



 

 

 

 

 

 



 

2019

 

2018

Bonds payable:

 

 

 

 

 

 

Senior notes, interest rate of 5.75%, maturing 2023

 

$

700,000,000 

 

$

700,000,000 

Recovery Zone Facility Bonds, maturing 2036

 

 

72,560,000 

 

 

77,090,000 

Outstanding line of credit, weighted average interest rate of 5.75% for 2019

 

 

 —

 

 

 —

Notes payable due to banks, weighted average interest rate of 4.43% for 2019

  and 3.68% for 2018

 

 

84,948,582 

 

 

94,535,898 

Less unamortized prepaid loan costs

 

 

(5,270,760)

 

 

(6,038,125)

Total long-term debt

 

 

852,237,822 

 

 

865,587,773 

Less current portion

 

 

12,600,131 

 

 

12,848,013 

Long-term debt, net of current portion

 

$

839,637,691 

 

$

852,739,760 



In June 2013, the Company issued $700.0 million aggregate principal amount of senior notes due in 2023 (the “Notes”) in a private placement.  The Notes bear an interest rate of 5.75% per annum and were issued at par. The Company filed a registration statement with the Securities and Exchange Commission and exchanged the private placement notes with registered notes.



The Company may redeem all or a portion of the Notes at any time on or after June 15, 2018 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

 

2018

102.875%

2019

101.917%

2020

100.958%

2021 and thereafter

100.000%



The Company has a $175.0 million line of credit (the “Line”) that matures in September 2022.  The Line provides the Company with various interest rate options based on the prime rate, the Federal Funds Rate, or the London Interbank Offering Rate. The Line allows the Company to issue up to $20.0 million in unused letters of credit, of which $9.0 million of unused letters of credit were issued at September 28, 2019.  The Company is not required to maintain compensating balances in connection with the Line.   At September 28, 2019, the Company had no borrowing outstanding under the Line.



In December 2010, the Company completed the funding of $99.7 million of Recovery Zone Facility Bonds (the “Bonds”) for construction and equipping of an approximately 830,000 square foot new warehouse and distribution center to be located in Buncombe County, North Carolina (the “Project”).  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 would hold the Bonds until September 2026, 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.  During fiscal year 2018, the Covenant Agreement was amended to change certain terms and to extend the maturity to September 2026. The Company may redeem the Bonds without penalty or premium at any time prior to September 26, 2026.



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 LIBOR (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.



The Notes, the Bonds and the Line 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 to the Company 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 respective loan documents.  The Company was in compliance with all financial covenants related to the Notes, the Bonds and Line at September 28, 2019.



 

44


 

The Company’s long-term debt agreements generally have cross-default provisions which could result in the acceleration of payments due under the Company’s line of credit, Bond and Notes indenture in the event of default under any one instrument.



In September 2017, the Company refinanced approximately $60 million secured borrowing obligations that were scheduled to mature in fiscal years 2018-2020 with a LIBOR-based floating rate loan maturing in October 2027.  In December 2017, the Company entered into an interest rate swap contract to convert the variable interest rate on this loan to a fixed interest rate.  The notional amount of the interest rate swap at inception was $58.5 million and declines each month by $0.5 million, consistent with the required principal payments of the loan.   The interest rate swap has a fixed interest rate leg of 3.92% and a variable interest rate leg based on 1-month LIBOR. 



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 swap.  The Company has designated the swap as a cash flow hedge and records the changes in the estimated fair value of the swap to other comprehensive income each period.  For the year ended September 28, 2019 the Company recorded $1.3 million of other comprehensive expense, respectively, net of income taxes, in its Consolidated Statements of Comprehensive income.  Unrealized losses of $1.7 million are recorded as a liability at fair value in the line “Other Long Term Liabilities” on the Consolidated Balance Sheet as of September 28, 2019 



Failure of the swap counterparty to make payments would result in the loss of any potential benefit to the Company under the swap agreement.  In this case, the Company would still be obligated to pay the variable interest payments underlying the debt agreements.  Additionally, failure of the swap counterparty would not eliminate the Company’s obligation to continue to make payments under the existing swap agreement if it continues to be in a net pay position. 



At September 28, 2019, property and equipment with an undepreciated cost of approximately $198.2 million was pledged as collateral for long-term debt.  Long-term debt and Line agreements contain various restrictive covenants requiring, among other things, minimum levels of net worth and maintenance of certain financial ratios.  In addition, certain loan agreements containing provisions outlining minimum tangible net worth requirements restrict the ability of the Company to pay cash dividends in excess of the current annual per share dividends paid on the Company’s Class A and Class B Common Stock.  Further, the Company is prevented from paying cash dividends at any time that it is in default under the indenture governing the Notes.  In addition, the terms of the indenture may restrict the ability of the Company to pay additional cash dividends based on certain financial parameters.



Components of interest costs are as follows:







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

2019

 

2018

 

2017

Total interest costs

 

$

48,675,993 

 

$

48,707,921 

 

$

48,675,895 

Interest capitalized

 

 

(1,265,889)

 

 

(1,138,218)

 

 

(1,217,862)

Interest expense

 

$

47,410,104 

 

$

47,569,703 

 

$

47,458,033 



Maturities of long-term debt at September 28, 2019 are as follows:







 

 

 



 

 

 

Fiscal Year

 

 

 

2020

 

$

14,286,665 

2021

 

 

14,453,256 

2022

 

 

14,625,277 

2023

 

 

714,804,840 

2024

 

 

14,991,327 

Thereafter

 

 

84,347,217 

Less unamortized prepaid loan costs

 

 

(5,270,760)

Total

 

$

852,237,822 

 

8. Stockholders’ Equity



The Company has two classes of Common Stock: Class A and Class B. Class A Common Stock is traded on The NASDAQ Global Select Market under the symbol IMKTA.  There is no public market for the Company’s Class B Common Stock. However, each share of Class B Common Stock is convertible at any time, at the option of the holder, into one share of Class A Common Stock.  Upon any transfers of Class B Common Stock (other than to immediate family members and participants in the Investment/Profit Sharing Plan), such stock is automatically converted into Class A Common Stock.



The holders of the Class A Common Stock and Class B Common Stock are entitled to dividends and other distributions when declared out of assets legally available therefore, subject to the dividend rights of any preferred stock that may be issued in the future.  Each share of Class A Common Stock is entitled to receive a cash dividend and liquidation payment in an amount equal to 110% of any cash dividend or liquidation payment on Class B Common Stock.  Any stock dividend must be paid in shares of Class A Common Stock with respect to Class A Common Stock and in shares of Class B Common Stock with respect to Class B Common Stock.



 

45


 

The voting powers, preferences and relative rights of Class A Common Stock and Class B Common Stock are identical in all respects, except that the holders of Class A Common Stock have one vote per share and the holders of Class B Common Stock have ten votes per share.  In addition, holders of Class A Common Stock, as a separate class, are entitled to elect 25% of all directors constituting the Board of Directors (rounded to the nearest whole number).  As long as the Class B Common Stock represents at least 12.5% of the total outstanding Common Stock of both classes, holders of Class B Common Stock, as a separate class, are entitled to elect the remaining directors.  The Company’s Articles of Incorporation and Bylaws provide that the Board of Directors can set the number of directors between five and eleven.

 

9. Earnings Per Common Share



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 paid per share for each class of stock, plus the amount of 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.





 

 

 

 

 

 



 

 

 

 

 

 



 

Year Ended



  

September 28, 2019



 

Class A

 

Class B

Numerator: Allocated net income

 

 

 

 

 

 

Net income allocated, basic

  

$

58,635,758 

  

$

22,944,244 

Conversion of Class B to Class A shares

  

 

22,944,244 

  

 

 —

Net income allocated, diluted

  

$

81,580,002 

  

$

22,944,244 

Denominator: Weighted average shares outstanding

  

 

 

  

 

 

Weighted average shares outstanding, basic

  

 

14,163,776 

  

 

6,096,000 

Conversion of Class B to Class A shares

  

 

6,096,000 

  

 

 —

Weighted average shares outstanding, diluted

  

 

20,259,776 

  

 

6,096,000 

Earnings per share

 

 

 

 

 

 

Basic

  

$

4.14 

  

$

3.76 

Diluted

  

$

4.03 

  

$

3.76 







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Year Ended

 

Year Ended



 

September 29, 2018

 

September 30, 2017



  

Class A

 

Class B

  

Class A

  

Class B

Numerator: Allocated net income

 

 

 

 

 

 

 

 

 

 

 

 

Net income allocated, basic

  

$

69,790,716 

  

$

27,573,912 

  

$

38,393,384 

  

$

15,480,196 

Conversion of Class B to Class A shares

  

 

27,573,912 

  

 

 —

  

 

15,480,196 

  

 

 —

Net income allocated, diluted

  

$

97,364,628 

  

$

27,573,912 

  

$

53,873,580 

  

$

15,480,196 

Denominator: Weighted average
  shares outstanding

  

 

 

  

 

 

  

 

 

  

 

 

Weighted average shares outstanding, basic

  

 

14,123,182 

  

 

6,136,594 

  

 

14,039,125 

  

 

6,220,651 

Conversion of Class B to Class A shares

  

 

6,136,594 

  

 

 —

  

 

6,220,651 

  

 

 —

Weighted average shares outstanding, diluted

  

 

20,259,776 

  

 

6,136,594 

  

 

20,259,776 

  

 

6,220,651 

Earnings per share

 

 

 

 

 

 

 

 

 

 

 

 

Basic

  

$

4.94 

  

$

4.49 

  

$

2.74 

  

$

2.49 

Diluted

  

$

4.81 

  

$

4.49 

  

$

2.66 

  

$

2.49 

 

10. Employee Benefit Plans



Investment/Profit Sharing Plan - The purpose of the qualified investment/profit sharing plan is to provide retirement benefits to eligible employees.  Assets of the plan, including the Company’s Class B Common Stock, are held in trust for employees and distributed upon retirement, death, disability or termination of employment. Company contributions are discretionary and are determined quarterly by the Board of Directors.  The plan includes a 401(k) feature. Company contributions to the plan, included in operating and administrative expenses, were approximately $2.9 million, $2.8 million and $2.4 million for fiscal years 2019, 2018 and 2017, respectively.



Nonqualified Investment Plan - The purpose of the Executive Nonqualified Excess Plan is to provide benefits similar to the Company’s Investment/Profit Sharing Plan to certain of the Company’s management employees who are otherwise subject to limited participation in the 401(k) feature of the Company’s Investment/Profit Sharing Plan.  Company contributions to the plan, included in

 

46


 

operating and administrative expenses, were approximately $224,000, $215,000 and $159,000 for fiscal years 2019, 2018 and 2017, respectively.



Cash Bonuses - The Company pays monthly bonuses to various managerial personnel based on performance of the operating units managed by these personnel.  The Company pays discretionary annual bonuses to certain employees who do not receive monthly performance bonuses.  The Company pays discretionary bonuses to certain executive officers based on Company performance.  Operating and administrative expenses include bonuses of approximately $11.9 million, $11.9 million and $10.6 million for fiscal years 2019, 2018 and 2017, respectively.



Medical Care Plan - Medical and dental benefits are provided to qualified employees under a self-insured plan.  Expenses under the plan include claims paid, administrative expenses and an estimated liability for claims incurred but not yet paid.

 

11. Segment Information



The Company operates one primary business segment, retail grocery sales (representing the aggregation of individual retail stores).  “Other” includes the Company’s remaining operations -- fluid dairy and shopping center rentals.  Information about the Company’s operations by lines of business (amounts in thousands) is as follows:







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

2019

 

2018

 

2017

Revenues from unaffiliated customers:

 

 

 

 

 

 

 

 

 

Grocery

 

$

1,443,394 

 

$

1,413,088 

 

$

1,424,891 

Non-foods

 

 

936,173 

 

 

874,677 

 

 

858,409 

Perishables

 

 

1,110,684 

 

 

1,078,693 

 

 

1,061,560 

Gasoline

 

 

581,146 

 

 

604,897 

 

 

515,857 

Total retail

 

 

4,071,397 

 

 

3,971,355 

 

 

3,860,717 

Other

 

 

130,637 

 

 

121,450 

 

 

141,983 

Total revenues from unaffiliated customers

 

$

4,202,034 

 

$

4,092,805 

 

$

4,002,700 

Income before income taxes:

 

 

 

 

 

 

 

 

 

Retail

 

$

135,395 

 

$

111,165 

 

$

112,017 

Other

 

 

16,798 

 

 

13,659 

 

 

15,896 

Total income from operations

 

 

152,193 

 

 

124,824 

 

 

127,913 

Other income, net

 

 

1,815 

 

 

3,065 

 

 

3,807 

Interest expense

 

 

47,410 

 

 

47,570 

 

 

47,458 

Income before income taxes

 

$

106,598 

 

$

80,319 

 

$

84,262 

Assets:

 

 

 

 

 

 

 

 

 

Retail

 

$

1,698,904 

 

$

1,679,301 

 

$

1,600,699 

Other

 

 

170,720 

 

 

147,988 

 

 

135,076 

Elimination of intercompany receivable

 

 

(2,296)

 

 

(2,378)

 

 

(2,469)

Total assets

 

$

1,867,328 

 

$

1,824,911 

 

$

1,733,306 

Capital expenditures:

 

 

 

 

 

 

 

 

 

Retail

 

$

155,215 

 

$

147,851 

 

$

125,866 

Other

 

 

6,536 

 

 

2,636 

 

 

1,830 

Total capital expenditures

 

$

161,751 

 

$

150,487 

 

$

127,696 

Depreciation and amortization:

 

 

 

 

 

 

 

 

 

Retail

 

$

104,970 

 

$

105,564 

 

$

103,304 

Other

 

 

7,550 

 

 

7,519 

 

 

7,625 

Total depreciation and amortization

 

$

112,520 

 

$

113,083 

 

$

110,929 



The grocery category includes grocery, dairy, and frozen foods.

The non-foods category includes alcoholic beverages, tobacco, pharmacy, and health/beauty/cosmetic products.

The perishable category includes meat, produce, deli and bakery.



The fluid dairy operation, included in “Other”, had $42.1 million, $41.1 million and $45.9 million in sales to the grocery sales segment in fiscal 2019, 2018 and 2017, respectively.  These sales were eliminated in consolidation.

 

 

47


 

12. Selected Quarterly Financial Data (Unaudited)



The following is a summary of unaudited financial data regarding the Company’s quarterly results of operations.  Each of the quarters in the two fiscal years presented contains thirteen weeks.





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

1st

 

2nd

 

3rd

 

4th

 

 

 



 

Quarter

 

Quarter

 

Quarter

 

Quarter

 

Total



 

(amounts in thousands except earnings per common share)

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

1,061,837 

 

$

1,001,844 

 

$

1,062,262 

 

$

1,076,091 

 

$

4,202,034 

Gross profit

 

 

258,411 

 

 

244,301 

 

 

258,940 

 

 

260,348 

 

 

1,022,000 

Net income

 

 

22,152 

 

 

15,000 

 

 

23,510 

 

 

20,918 

 

 

81,580 

Basic earnings per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

 

1.12 

 

 

0.76 

 

 

1.19 

 

 

1.07 

 

 

4.14 

Class B

 

 

1.02 

 

 

0.69 

 

 

1.08 

 

 

0.97 

 

 

3.76 

Diluted earnings per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

 

1.09 

 

 

0.74 

 

 

1.16 

 

 

1.04 

 

 

4.03 

Class B

 

 

1.02 

 

 

0.69 

 

 

1.08 

 

 

0.97 

 

 

3.76 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

1,013,786 

 

$

984,562 

 

$

1,034,769 

 

$

1,059,688 

 

$

4,092,805 

Gross profit

 

 

244,660 

 

 

235,188 

 

 

243,891 

 

 

256,430 

 

 

980,169 

Net income

 

 

45,147  (1)

 

9,295 

 

 

24,484  (2)

 

18,439 

 

 

97,365 

Basic earnings per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

 

2.29 

 

 

0.47 

 

 

1.24 

 

 

0.94 

 

 

4.94 

Class B

 

 

2.08 

 

 

0.43 

 

 

1.13 

 

 

0.85 

 

 

4.49 

Diluted earnings per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

 

2.23 

 

 

0.46 

 

 

1.21 

 

 

0.91 

 

 

4.81 

Class B

 

 

2.08 

 

 

0.43 

 

 

1.13 

 

 

0.85 

 

 

4.49 





(1)

Includes $26.7 million income tax benefit from the Tax Act.

(2)

Includes $10.6 million income tax benefit from the Tax Act.

 

13. Commitments and Contingencies



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 will not materially affect the Company’s financial position, the results of its operations or its cash flows.  



Construction commitments at September 28, 2019 totaled $6.6 million.  The Company expects these commitments to be fulfilled during fiscal year 2020. 

 

14. Fair Values of Financial Instruments



The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments:



Cash and cash equivalents: The carrying amounts reported in the Consolidated Balance Sheets for cash and cash equivalents approximate their fair values.



Receivables: The carrying amounts reported in the Consolidated Balance Sheets for receivables approximate their fair values.



The fair value of the Company’s debt is 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.

 

48


 



The carrying amount and fair value of the Company’s debt, interest rate swap, and non-qualified plan assets at September 28, 2019 is as follows (in thousands):







 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



 

Carrying

 

 

 

 

 



 

Amount

 

Fair Value

 

Fair Value Measurements

Senior Notes

  

$

700,000 

  

$

714,875 

 

Level 2

Facility Bonds

  

 

72,560 

  

  

72,560 

 

Level 2

Secured notes payable and other

  

 

79,678 

  

  

79,678 

 

Level 2

Interest rate swap derivative contract liability

 

 

1,675 

 

 

1,675 

 

Level 2

Non-qualified retirement plan assets

  

 

15,493 

  

 

15,493 

 

Level 2



The fair values for Level 2 measurements were determined primarily using market yields and taking into consideration the underlying terms of the debt.

 

15. Cash Flow Information



Supplemental disclosure of cash flow information is as follows:







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

2019

 

2018

 

2017

Cash paid during the year for:

 

 

 

 

 

 

 

 

 

Interest (net of amounts capitalized)

 

$

47,465,459 

 

$

47,347,470 

 

$

46,689,266 

Income taxes

 

 

(11,697,668)

 

 

13,672,964 

 

 

28,415,489 

Non cash items:

 

 

 

 

 

 

 

 

 

Property and equipment additions included in accounts payable

 

 

8,007,879 

 

 

8,161,384 

 

 

7,213,949 

 

16. Related Party Transactions



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 was prohibited from selling shares of the Company’s Class A common stock.  There were no such loans outstanding at September 28, 2019 and September 29, 2018. 

 

17. Subsequent Events



In November, 2019 The Company closed a $155 million ten-year amortizing real estate loan (the “Loan”) and issued notice to redeem a like principal amount of 5.75% senior notes due in 2023 (the “Notes”).  The Loan will be funded and the Notes will be redeemed thirty days after the redemption notice in December, 2019.  The Notes will be redeemed at 101.917% of par value, and the Company will recognize debt extinguishment costs of approximately $3.0 million during the quarter ending December 28, 2019.    The Loan matures January 31, 2030 and has monthly principal payments of $0.65 million plus floating rate interest based on LIBOR.  Additionally, effective October 1, 2019, the Company entered into a notional amount $155 million interest rate swap contract to convert the variable rate on the Loan to a fixed interest rate of 2.95%.  The notional amount of the swap declines each month by $0.65 million, consistent with the required principal payments of the loan.   







 

49


 

SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) 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.







 

 



INGLES MARKETS, INCORPORATED



 

 



By:

/s/ James W. Lanning



James W. Lanning



Chief Executive Officer, President



   and Chief Operating Officer



 

 



Date: December 10, 2019



Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

 



 

 

/s/ Robert P. Ingle, II

 

December 10, 2019

Robert P. Ingle, II, Chairman and Director

 

 



 

 

/s/ James W. Lanning

 

December 10, 2019

James W. Lanning, CEO, President,

 

 

Chief Operating Officer and Director

 

 



 

 

/s/ Ronald B. Freeman

 

December 10, 2019

Ronald B. Freeman, CPA, Vice

 

 

President-Finance, Chief Financial Officer and Director

 

 



 

 

/s/ Patricia E. Jackson

 

December 10, 2019

Patricia E. Jackson, CPA, Secretary and Controller

 

 



 

 

/s/ John R. Lowden

 

December 10, 2019

John R. Lowden, Director

 

 



 

 

/s/ Fred D. Ayers

 

December 10, 2019

Fred D. Ayers, Director

 

 



 

 

/s/ Laura Sharp

 

December 10, 2019

Laura Sharp, Director

 

 



 

 

/s/ Brenda S. Tudor

 

December 10, 2019

Brenda S. Tudor, Director

 

 



 

 

/s/ Ernest E. Ferguson

 

December 10, 2019

Ernest E. Ferguson, Director

 

 







 

50


Exhibit 31.1 10K

Exhibit 31.1

 

CERTIFICATION PURSUANT TO 17 CFR 240.13a-14

PROMULGATED UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, James W. Lanning, certify that:

 

1.I have reviewed this annual report on Form 10-K of Ingles Markets, Incorporated;

 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15 (e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d – 15(f)) for the registrant and have:

 

(a)

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;



(c)

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and



(d)

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):  



(a)

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 





Date: December 10,  2019



/s/ James W. Lanning

 

James W. Lanning

Chief Executive Officer and President



 

 


Exhibit 31.2 10K

Exhibit 31.2

 

CERTIFICATION PURSUANT TO 17 CFR 240.13a-14

PROMULGATED UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Ronald B. Freeman, certify that:

 

1.I have reviewed this annual report on Form 10-K of Ingles Markets, Incorporated;

 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15 (e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d – 15(f)) for the registrant and have:

 

(a)

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;



(c)

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and



(d)

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):  



(a)

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



6



Date: December 10,  2019



/s/ Ronald B. Freeman

 

Ronald B. Freeman

Chief Financial Officer



 

 


Exhibit 32.1 10K

Exhibit 32.1

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Annual Report of Ingles Markets, Incorporated (the “Company”) on Form 10-K for the period ending September 28,  2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James W. Lanning, Chief Executive Officer and President of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.





/s/ James W. Lanning

 

James W. Lanning

Chief Executive Officer and President

December 10,  2019





The foregoing certification is being furnished as an exhibit of the Report pursuant to Item 601(b)(32) of Regulation S-K and Section 906 of the Sarbanes-Oxley Act of 2002 and, accordingly, is not being filed with the Securities and Exchange Commission as part of the Report and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities and Exchange Act of 1934, as amended (whether made before or after the date of the Report, irrespective of any general incorporation language contained in such filing).

 

 


Exhibit 32.2 10K

Exhibit 32.2

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Annual Report of Ingles Markets, Incorporated (the “Company”) on Form 10-K for the period ending September 28,  2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ronald B. Freeman, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 







/s/ Ronald B. Freeman

 

Ronald B. Freeman

Chief Financial Officer

December 10,  2019





The foregoing certification is being furnished as an exhibit of the Report pursuant to Item 601(b)(32) of Regulation S-K and Section 906 of the Sarbanes-Oxley Act of 2002 and, accordingly, is not being filed with the Securities and Exchange Commission as part of the Report and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities and Exchange Act of 1934, as amended (whether made before or after the date of the Report, irrespective of any general incorporation language contained in such filing).

 

 


v3.19.3.a.u2
Property Held For Lease And Rental Income (Tables)
12 Months Ended
Sep. 28, 2019
Property Held For Lease And Rental Income [Abstract]  
Schedule Of Rental Income



 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

2019

 

2018

 

2017

Rents earned on owned and subleased properties:

 

 

 

 

 

 

 

 

 

Base rentals including lease termination payments

 

$

14,821,734 

 

$

10,826,997 

 

$

8,847,035 

Contingent rentals

 

 

278,660 

 

 

249,965 

 

 

334,204 

Total

 

 

15,100,394 

 

 

11,076,962 

 

 

9,181,239 

Depreciation on owned properties leased to others

 

 

(5,183,712)

 

 

(5,132,805)

 

 

(5,255,719)

Other shopping center expenses

 

 

(3,640,110)

 

 

(2,967,860)

 

 

(2,654,976)

Total

 

$

6,276,572 

 

$

2,976,297 

 

$

1,270,544 



Schedule Of Owned Properties Under Operating Leases By Major Classes



 

 

 

 

 

 



 

 

 

 

 

 



 

September 28,

 

September 29,



 

2019

 

2018

Land

 

$

57,568,972 

 

$

54,348,413 

Buildings

 

 

179,723,671 

 

 

170,700,496 

Total

 

 

237,292,643 

 

 

225,048,909 

Less accumulated depreciation

 

 

(97,321,740)

 

 

(108,754,494)

Total

 

$

139,970,903 

 

$

116,294,415 



Schedule Of Minimum Future Rental Income



 

 

 



 

 

 

Fiscal Year

 

 

 

2020

 

$

11,265,775 

2021

 

 

8,855,781 

2022

 

 

6,967,583 

2023

 

 

5,862,260 

2024

 

 

5,145,632 

Thereafter

 

 

13,723,315 

Total minimum future rental income

 

$

51,820,346 



v3.19.3.a.u2
Subsequent Events
12 Months Ended
Sep. 28, 2019
Subsequent Events [Abstract]  
Subsequent Events

17. Subsequent Events



In November, 2019 The Company closed a $155 million ten-year amortizing real estate loan (the “Loan”) and issued notice to redeem a like principal amount of 5.75% senior notes due in 2023 (the “Notes”).  The Loan will be funded and the Notes will be redeemed thirty days after the redemption notice in December, 2019.  The Notes will be redeemed at 101.917% of par value, and the Company will recognize debt extinguishment costs of approximately $3.0 million during the quarter ending December 28, 2019.  The Loan matures January 31, 2030 and has monthly principal payments of $0.65 million plus floating rate interest based on LIBOR.  Additionally, effective October 1, 2019, the Company entered into a notional amount $155 million interest rate swap contract to convert the variable rate on the Loan to a fixed interest rate of 2.95%.  The notional amount of the swap declines each month by $0.65 million, consistent with the required principal payments of the loan.   

v3.19.3.a.u2
Property Held For Lease And Rental Income (Narrative) (Details)
12 Months Ended
Sep. 28, 2019
item
Property Held For Lease And Rental Income [Abstract]  
Number of shopping centers 79
Maximum period for non-cancelable operating lease agreements 20 years
v3.19.3.a.u2
Leases and Rental Expense (Narrative) (Details) - USD ($)
$ in Millions
12 Months Ended
Sep. 28, 2019
Sep. 29, 2018
Sep. 30, 2017
Leases And Rental Expense [Abstract]      
Lease term 20 years    
Rent expense for all operating leases $ 12.4 $ 12.8 $ 13.6
Operating sub-lease rental income $ 0.3 $ 0.3 $ 0.3
v3.19.3.a.u2
Related Party Transactions (Narrative) (Details) - USD ($)
Sep. 28, 2019
Sep. 29, 2018
Related Party Transactions [Abstract]    
Short-term non-interest bearing loans outstanding to investment/profit sharing plan $ 0 $ 0
v3.19.3.a.u2
Selected Quarterly Financial Data (Summary Of Unaudited Selected Quarterly Financial Data) (Details) - USD ($)
3 Months Ended 12 Months Ended
Sep. 28, 2019
Jun. 29, 2019
Mar. 30, 2019
Dec. 29, 2018
Sep. 29, 2018
Jun. 30, 2018
Mar. 31, 2018
Dec. 30, 2017
Sep. 28, 2019
Sep. 29, 2018
Sep. 30, 2017
Class of Stock [Line Items]                      
Net sales $ 1,076,091,000 $ 1,062,262,000 $ 1,001,844,000 $ 1,061,837,000 $ 1,059,688,000 $ 1,034,769,000 $ 984,562,000 $ 1,013,786,000 $ 4,202,033,610 $ 4,092,804,877 $ 4,002,699,727
Gross profit 260,348,000 258,940,000 244,301,000 258,411,000 256,430,000 243,891,000 235,188,000 244,660,000 1,022,000,212 980,169,361 963,593,003
Net income $ 20,918,000 $ 23,510,000 $ 15,000,000 $ 22,152,000 $ 18,439,000 24,484,000 [1] $ 9,295,000 45,147,000 [2] $ 81,580,002 $ 97,364,628 $ 53,873,580
Income tax benefit from Tax Act           $ 10,600,000   $ 26,700,000      
Class A Common Stock [Member]                      
Class of Stock [Line Items]                      
Basic earnings per common share $ 1.07 $ 1.19 $ 0.76 $ 1.12 $ 0.94 $ 1.24 $ 0.47 $ 2.29 $ 4.14 $ 4.94 $ 2.74
Diluted earnings per common share 1.04 1.16 0.74 1.09 0.91 1.21 0.46 2.23 4.03 4.81 2.66
Class B Common Stock [Member]                      
Class of Stock [Line Items]                      
Basic earnings per common share 0.97 1.08 0.69 1.02 0.85 1.13 0.43 2.08 3.76 4.49 2.49
Diluted earnings per common share $ 0.97 $ 1.08 $ 0.69 $ 1.02 $ 0.85 $ 1.13 $ 0.43 $ 2.08 $ 3.76 $ 4.49 $ 2.49
[1] Includes $10.6 million income tax benefit from the Tax Act.
[2] Includes $26.7 million income tax benefit from the Tax Act.
v3.19.3.a.u2
Earnings Per Common Share (Reconciliation Of Numerators And Denominators Of Basic And Diluted Earnings Per Share) (Details) - USD ($)
3 Months Ended 12 Months Ended
Sep. 28, 2019
Jun. 29, 2019
Mar. 30, 2019
Dec. 29, 2018
Sep. 29, 2018
Jun. 30, 2018
Mar. 31, 2018
Dec. 30, 2017
Sep. 28, 2019
Sep. 29, 2018
Sep. 30, 2017
Class A Common Stock [Member]                      
Schedule Of Calculation Of Numerator And Denominator In Earnings Per Share [Line Items]                      
Net income allocated, basic                 $ 58,635,758 $ 69,790,716 $ 38,393,384
Conversion of Class B to Class A shares                 22,944,244 27,573,912 15,480,196
Net income allocated, diluted                 $ 81,580,002 $ 97,364,628 $ 53,873,580
Weighted average shares outstanding, basic                 14,163,776 14,123,182 14,039,125
Conversion of Class B to Class A shares                 6,096,000 6,136,594 6,220,651
Weighted average shares outstanding, diluted                 20,259,776 20,259,776 20,259,776
Earnings per share, Basic $ 1.07 $ 1.19 $ 0.76 $ 1.12 $ 0.94 $ 1.24 $ 0.47 $ 2.29 $ 4.14 $ 4.94 $ 2.74
Earnings per share, Diluted 1.04 1.16 0.74 1.09 0.91 1.21 0.46 2.23 $ 4.03 $ 4.81 $ 2.66
Class B Common Stock [Member]                      
Schedule Of Calculation Of Numerator And Denominator In Earnings Per Share [Line Items]                      
Net income allocated, basic                 $ 22,944,244 $ 27,573,912 $ 15,480,196
Net income allocated, diluted                 $ 22,944,244 $ 27,573,912 $ 15,480,196
Weighted average shares outstanding, basic                 6,096,000 6,136,594 6,220,651
Weighted average shares outstanding, diluted                 6,096,000 6,136,594 6,220,651
Earnings per share, Basic 0.97 1.08 0.69 1.02 0.85 1.13 0.43 2.08 $ 3.76 $ 4.49 $ 2.49
Earnings per share, Diluted $ 0.97 $ 1.08 $ 0.69 $ 1.02 $ 0.85 $ 1.13 $ 0.43 $ 2.08 $ 3.76 $ 4.49 $ 2.49
v3.19.3.a.u2
Long-Term Debt (Schedule Of Redemption Prices Of Senior Notes) (Details)
12 Months Ended
Sep. 28, 2019
2018  
Debt instrument, redemption price as percentage of principal amount 102.875%
2019  
Debt instrument, redemption price as percentage of principal amount 101.917%
2020  
Debt instrument, redemption price as percentage of principal amount 100.958%
2021 and thereafter  
Debt instrument, redemption price as percentage of principal amount 100.00%
v3.19.3.a.u2
Commitments And Contingencies
12 Months Ended
Sep. 28, 2019
Commitments And Contingencies [Abstract]  
Commitments And Contingencies

13. Commitments and Contingencies



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 will not materially affect the Company’s financial position, the results of its operations or its cash flows.  



Construction commitments at September 28, 2019 totaled $6.6 million.  The Company expects these commitments to be fulfilled during fiscal year 2020. 

 

v3.19.3.a.u2
Earnings Per Common Share
12 Months Ended
Sep. 28, 2019
Earnings Per Common Share [Abstract]  
Earnings Per Common Share

9. Earnings Per Common Share



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 paid per share for each class of stock, plus the amount of 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.





 

 

 

 

 

 



 

 

 

 

 

 



 

Year Ended



  

September 28, 2019



 

Class A

 

Class B

Numerator: Allocated net income

 

 

 

 

 

 

Net income allocated, basic

  

$

58,635,758 

  

$

22,944,244 

Conversion of Class B to Class A shares

  

 

22,944,244 

  

 

 —

Net income allocated, diluted

  

$

81,580,002 

  

$

22,944,244 

Denominator: Weighted average shares outstanding

  

 

 

  

 

 

Weighted average shares outstanding, basic

  

 

14,163,776 

  

 

6,096,000 

Conversion of Class B to Class A shares

  

 

6,096,000 

  

 

 —

Weighted average shares outstanding, diluted

  

 

20,259,776 

  

 

6,096,000 

Earnings per share

 

 

 

 

 

 

Basic

  

$

4.14 

  

$

3.76 

Diluted

  

$

4.03 

  

$

3.76 







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Year Ended

 

Year Ended



 

September 29, 2018

 

September 30, 2017



  

Class A

 

Class B

  

Class A

  

Class B

Numerator: Allocated net income

 

 

 

 

 

 

 

 

 

 

 

 

Net income allocated, basic

  

$

69,790,716 

  

$

27,573,912 

  

$

38,393,384 

  

$

15,480,196 

Conversion of Class B to Class A shares

  

 

27,573,912 

  

 

 —

  

 

15,480,196 

  

 

 —

Net income allocated, diluted

  

$

97,364,628 

  

$

27,573,912 

  

$

53,873,580 

  

$

15,480,196 

Denominator: Weighted average
  shares outstanding

  

 

 

  

 

 

  

 

 

  

 

 

Weighted average shares outstanding, basic

  

 

14,123,182 

  

 

6,136,594 

  

 

14,039,125 

  

 

6,220,651 

Conversion of Class B to Class A shares

  

 

6,136,594 

  

 

 —

  

 

6,220,651 

  

 

 —

Weighted average shares outstanding, diluted

  

 

20,259,776 

  

 

6,136,594 

  

 

20,259,776 

  

 

6,220,651 

Earnings per share

 

 

 

 

 

 

 

 

 

 

 

 

Basic

  

$

4.94 

  

$

4.49 

  

$

2.74 

  

$

2.49 

Diluted

  

$

4.81 

  

$

4.49 

  

$

2.66 

  

$

2.49 

 

v3.19.3.a.u2
Leases And Rental Expense
12 Months Ended
Sep. 28, 2019
Leases And Rental Expense [Abstract]  
Leases And Rental Expense

5. Leases and Rental Expense



The Company conducts part of its retail operations from leased facilities. The initial terms of the leases are generally 20 years. The majority of the leases include one or more renewal options and provide that the Company pay property taxes, utilities, repairs and certain other costs incidental to occupation of the premises. Several leases contain clauses calling for percentage rentals based upon gross sales of the supermarket occupying the leased space.  Step rent provisions, escalation clauses, capital improvements and other lease concessions are taken into account in computing minimum lease payments, which are recognized on a straight-line basis over the minimum lease term.  



Operating Leases - Rent expense for all operating leases of $12.4 million, $12.8 million and $13.6 million for fiscal years 2019, 2018 and 2017, respectively, is included in operating and administrative expenses. Sub-lease rental income of $0.3 million for each of fiscal years 2019, 2018 and 2017, is included as a reduction of rental expense.



The components of aggregate minimum rental commitments under non-cancelable operating leases as of September 28, 2019 are as follows:







 

 

 



 

 

 

Fiscal Year

 

 

 

2020

 

$

9,756,136 

2021

 

 

7,532,373 

2022

 

 

6,692,661 

2023

 

 

4,907,148 

2024

 

 

2,583,629 

Thereafter

 

 

27,187,519 

Total minimum future rental commitments

 

$

58,659,466 

 

v3.19.3.a.u2
Segment Information (Tables)
12 Months Ended
Sep. 28, 2019
Segment Information [Abstract]  
Operations By Lines Of Business



 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

2019

 

2018

 

2017

Revenues from unaffiliated customers:

 

 

 

 

 

 

 

 

 

Grocery

 

$

1,443,394 

 

$

1,413,088 

 

$

1,424,891 

Non-foods

 

 

936,173 

 

 

874,677 

 

 

858,409 

Perishables

 

 

1,110,684 

 

 

1,078,693 

 

 

1,061,560 

Gasoline

 

 

581,146 

 

 

604,897 

 

 

515,857 

Total retail

 

 

4,071,397 

 

 

3,971,355 

 

 

3,860,717 

Other

 

 

130,637 

 

 

121,450 

 

 

141,983 

Total revenues from unaffiliated customers

 

$

4,202,034 

 

$

4,092,805 

 

$

4,002,700 

Income before income taxes:

 

 

 

 

 

 

 

 

 

Retail

 

$

135,395 

 

$

111,165 

 

$

112,017 

Other

 

 

16,798 

 

 

13,659 

 

 

15,896 

Total income from operations

 

 

152,193 

 

 

124,824 

 

 

127,913 

Other income, net

 

 

1,815 

 

 

3,065 

 

 

3,807 

Interest expense

 

 

47,410 

 

 

47,570 

 

 

47,458 

Income before income taxes

 

$

106,598 

 

$

80,319 

 

$

84,262 

Assets:

 

 

 

 

 

 

 

 

 

Retail

 

$

1,698,904 

 

$

1,679,301 

 

$

1,600,699 

Other

 

 

170,720 

 

 

147,988 

 

 

135,076 

Elimination of intercompany receivable

 

 

(2,296)

 

 

(2,378)

 

 

(2,469)

Total assets

 

$

1,867,328 

 

$

1,824,911 

 

$

1,733,306 

Capital expenditures:

 

 

 

 

 

 

 

 

 

Retail

 

$

155,215 

 

$

147,851 

 

$

125,866 

Other

 

 

6,536 

 

 

2,636 

 

 

1,830 

Total capital expenditures

 

$

161,751 

 

$

150,487 

 

$

127,696 

Depreciation and amortization:

 

 

 

 

 

 

 

 

 

Retail

 

$

104,970 

 

$

105,564 

 

$

103,304 

Other

 

 

7,550 

 

 

7,519 

 

 

7,625 

Total depreciation and amortization

 

$

112,520 

 

$

113,083 

 

$

110,929 



v3.19.3.a.u2
Consolidated Balance Sheets (Parenthetical) - USD ($)
Sep. 28, 2019
Sep. 29, 2018
Allowance for doubtful accounts receivable $ 156,145 $ 433,355
Preferred stock, par value $ 0.05 $ 0.05
Preferred stock, shares authorized 10,000,000 10,000,000
Preferred stock, shares issued 0 0
Class A Common Stock [Member]    
Common stock, par value $ 0.05 $ 0.05
Common stock, shares authorized 150,000,000 150,000,000
Common stock, shares issued 14,180,485 14,145,385
Common stock, shares outstanding 14,180,485 14,145,385
Class B Common Stock [Member]    
Common stock, par value $ 0.05 $ 0.05
Common stock, shares authorized 100,000,000 100,000,000
Common stock, shares issued 6,079,291 6,114,391
Common stock, shares outstanding 6,079,291 6,114,391
v3.19.3.a.u2
Summary Of Significant Accounting Policies
12 Months Ended
Sep. 28, 2019
Summary Of Significant Accounting Policies [Abstract]  
Summary Of Significant Accounting Policies

1. Summary of Significant Accounting Policies



Nature of Operations   Ingles Markets, Incorporated (“Ingles” or the “Company”), is a leading supermarket chain in the southeast United States, operates 198 supermarkets in North Carolina (73), Georgia (66), South Carolina (36), Tennessee (21), Virginia (1) and Alabama (1).



Principles of Consolidation – The consolidated financial statements include the accounts of Ingles Markets, Incorporated and its wholly-owned subsidiaries, Sky King, Inc., Ingles Markets Investments, Inc., Milkco, Inc., Land O Sky, LLC, Shopping Center Financing, LLC, and Shopping Center Financing II, LLC.  All significant inter-company balances and transactions are eliminated in consolidation.



Fiscal Year – The Company’s fiscal year ends on the last Saturday in September.    Fiscal years 2019 and 2018 each consisted of 52 weeks. Fiscal year 2017 consisted of 53 weeks.



Segment Information – The Company operates one primary business segment, retail grocery sales (representing the aggregation of individual retail stores).  The “Other” segment includes our remaining operations -- fluid dairy and shopping center rentals. 



New Accounting Pronouncements –  In February 2016 the Financial Accounting Standards Board (FASB) issued ASU 2016-02, "Leases" (ASU 2016-02), which requires the Company as lessee to recognize most leases on the balance sheet thereby resulting in the recognition of right of use assets and lease obligations for those leases currently classified as operating leases. The accounting for leases where the Company is the lessor remains largely unchanged. ASU 2016-02 became effective for the Company on September 29, 2019 and the Company elected the optional transition method which permits entities to change the date of initial application of the standard to the beginning of the year of adoption and to recognize the effects of applying ASU 2016-02 as a cumulative-effect adjustment to the opening balance of retained earnings.  Certain qualitative and quantitative disclosures are also required. While the Company is still finalizing our adoption procedures, the Company estimates the primary impact to the consolidated financial position upon adoption will be the recognition, on a discounted basis, of minimum commitments under noncancelable operating leases on the consolidated balance sheets resulting in the recording of right of use assets and lease obligations for approximately $45 to $55 million.  The Company does not expect a material impact to the Company’s consolidated statements of income, comprehensive income, stockholders’ equity, or cash flows.



In May 2014, the FASB issued Accounting Standards Update ASU 2014-09 “Revenue from Contracts with Customers” (ASU 2014-09).  ASU 2014-09 is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services.  In August 2015, the FASB issued ASU 2015-14 which deferred the effective date of the ASU to fiscal years beginning after December 15, 2017 and interim periods within those fiscal years, with early adoption permitted.  The Company adopted the standard in the first quarter of fiscal 2019, and determined the impact of adopting the new guidance was immaterial to its annual and interim financial statements.  The Company’s assessment included a detailed review of contracts for each of its disaggregated revenue streams and a comparison of its historical accounting policies and practices to the new standard.

 

Cash Equivalents – All highly liquid investments with a maturity of three months or less when purchased are considered cash.  Outstanding checks in excess of bank balances are included in the line item “Accounts payable – trade” on the Consolidated Balance Sheets.  There were no such balances at September 28, 2019 and September 29, 2018, respectively.



Financial Instruments – The Company at times has short-term investments and certificates of deposit with maturities of three months or less when purchased that are included in cash.  At September 28, 2019, the Company had no such investments.  The Company’s policy is to invest its excess cash either in money market accounts, reverse repurchase agreements or in certificates of deposit.  Money market accounts and certificates of deposit are not secured; reverse repurchase agreements are secured by government obligations.  At September 28, 2019 demand deposits of approximately $37.6 million in three banks exceed the $250,000 FDIC insurance limit per bank.



Interest Rate Swaps – The Company utilizes interest rate swap contracts to reduce its exposure to fluctuations in variable interest rates for future interest payments on some of its debt instruments.  For determining the fair value of the interest rate swap contract, the Company uses significant observable market data or assumptions about counterparty risk.  The fair value estimates reflect an income approach based on the terms of the interest rate swap contracts and inputs corroborated by observable market data including interest rate curves.  The Company has designated its swaps as cash flow hedges, for which the Company records the effective portions of changes in its fair value, net of tax, in other comprehensive income (loss).  To the extent interest rate swaps are determined to be ineffective, the Company recognizes the change in the estimated fair value of the swaps in earnings.



Allowance for Doubtful Accounts – Accounts receivable are primarily from vendor allowances, customer charges and pharmacy insurance company reimbursements.  Accounts receivable are stated net of an allowance for uncollectible accounts, which is determined through analysis of the aging of accounts receivable at the date of the consolidated financial statements and assessments of the collectability based upon historical collection activity adjusted for current conditions.



Inventories – Substantially all of the Company’s inventory consists of finished goods.  Warehouse inventories are valued at the lower of average cost or market.  Store inventories are valued using the retail method under which inventories at cost (and the resulting gross margins) are determined by applying a calculated cost-to-retail ratio to the retail value of inventories.  As an integral part of valuing inventory at cost, management makes certain judgments and estimates for standard gross margins, allowances for vendor consideration, markdowns and shrinkage.  Warehousing and distribution costs are not included in the valuation of inventories.  The Company reviews its judgments and estimates regularly and makes adjustments where facts and circumstances dictate. 



Property, Equipment and Depreciation  Property and equipment are stated at cost and depreciated over the estimated useful lives by the straight-line method.  Buildings are generally depreciated over 30 years.  Store, office and warehouse equipment is generally depreciated over three to 10 years.  Transportation equipment is generally depreciated over three to five years.  Leasehold improvements are depreciated over the shorter of the subject lease term or the useful life of the asset, generally from three to 30 years.  Depreciation and amortization expense totaled $112.5 million,  $113.1 million and $110.9 million for fiscal years 2019, 2018 and 2017, respectively.



Asset Impairments – The Company accounts for the impairment of long-lived assets in accordance with FASB Accounting Standards Codification (“FASB ASC”) Topic 360.  Asset groups are primarily comprised of individual store 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, less 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.



Nonqualified Investment Plan The purpose of the Executive Nonqualified Excess Plan is to provide retirement benefits similar to the Company’s Investment/Profit Sharing Plan to certain of the Company’s management employees who are otherwise subject to limited participation in the 401(k) feature of the Company’s Investment/Profit Sharing Plan.  Participant retirement account balances are liabilities of the Company.  Assets of the plan are assets of the Company and are held in trust for employees and distributed upon retirement, death, disability, in-service distributions, or termination of employment.  In accordance with the trust, the Company may not use these assets for general corporate purposes.  Life insurance policies and marketable securities held in the trust are included in the caption “Other assets” in the Consolidated Balance Sheets.



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 $1,000,000 per occurrence for workers’ compensation, $500,000 for general liability, and $450,000 per covered person for medical care benefits for a policy year.  Effective October 1, 2019 the excess liability limit was increased to $1,000,000 for general liability.  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 Company’s self-insurance reserves totaled $31.0 million and $34.7 million for employee group insurance, workers’ compensation insurance and general liability insurance at September 28, 2019 and September 29, 2018, respectively.  These amounts are inclusive of expected recoveries from excess cost insurance or other sources that are recorded as receivables of $3.6 at September 28, 2019 and $4.6 million at September 29, 2018.  The Company is required in certain cases to obtain letters of credit to support its self-insured status.  At fiscal year-end 2019, the Company’s self-insured liabilities were supported by a $2.6 million certificate of deposit and by $9.0 million of undrawn letters of credit which expire between September and October 2019.  The Company carries casualty insurance only on those properties where it is required to do so. The Company has elected to self-insure its other properties.



Income Taxes – The Company accounts for income taxes under FASB ASC Topic 740.  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.  The Company accounts for uncertainty in income taxes by prescribing a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken on a tax return.



The Company files income tax returns with federal and various state jurisdictions.  With few exceptions, the Company is no longer subject to federal or state income tax examinations by tax authorities for the years before tax year 2015.  Examinations may challenge certain of the Company’s tax positions.  Actual results could materially differ from these estimates and could significantly affect the effective tax rate and cash flows in the future years.



Valuation allowances are established when necessary to reduce deferred tax assets to the amount more likely than not expected to be realized.



Gross unrecognized tax benefits as well as interest and penalties related to uncertain tax positions could affect the Company’s effective tax rate.  These amounts are insignificant for fiscal years 2019, 2018, and 2017.



Pre-Opening Costs – Costs associated with the opening of new stores are expensed when incurred.



Per-Share Amounts – The Company calculates earnings per share using the two-class method in accordance with FASB ASC Topic 260.



Advertising – The Company expenses advertising as incurred.  Advertising and promotion expenses, net of vendor allowance reimbursements, totaled $10.0 million, $12.6 million and $12.5 million for fiscal years 2019, 2018 and 2017, respectively.



Use of Estimates – The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.  Although these estimates are based on management’s knowledge of current events and actions it may undertake in the future, they may ultimately differ from actual results.  Such estimates include the allowance for doubtful accounts, various inventory reserves, realizability of deferred tax assets, and self-insurance reserves.



Cost of Goods Sold –  In addition to the direct product cost, cost of goods sold for the grocery segment includes inbound freight charges and costs of the Company’s distribution network.  Milk processing is a manufacturing process.  Therefore, cost of goods sold include direct product and production costs, inbound freight, purchasing and receiving costs, inspection costs, warehousing costs, internal transfer costs, and other costs of distribution.  Depreciation expense included in costs of goods sold totaled $14.5 million, $14.4 million and $15.4 million for fiscal years 2019, 2018 and 2017, respectively.



Operating and Administrative Expenses –  Operating and administrative expenses include costs incurred for store and administrative labor, occupancy, depreciation (to the extent not included in Cost of Goods Sold), insurance and general administration.



Revenue Recognition – The Company recognizes revenues from grocery segment sales at the point of sale to its customers.  Sales taxes collected from customers are not included in reported revenues.  Discounts provided to customers by the Company at the point of sale, including discounts provided in connection with loyalty cards, are recognized as a reduction in sales as the products are sold.  Product returns are not significant.



The Company recognizes fluid dairy revenues at the time the risk of loss shifts to the customer pursuant to our terms of sale.  Therefore, approximately 54% of fluid dairy revenues are recognized when the product is picked up by the customer at our facility.  The remaining fluid dairy revenues are recognized when the product is received at the customer’s facility upon delivery via transportation arranged by the Company.



Rental income, including contingent rentals, is recognized on the accrual basis.  Upfront consideration paid by either the Company as lessor or by the lessee is recognized as an adjustment to net rental income using the straight line method over the term of the lease.



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 comprised 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 vendors’ products.  These allowances generally relate to short term arrangements with vendors, often relating to a period of a month or less, and are negotiated on a purchase-by-purchase or transaction-by-transaction basis.  Whenever possible, 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 system constraints 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 $111.7 million, $116.5 million, and $116.6 million for the fiscal years ended September 28, 2019, September 29, 2018 and September 30, 2017, 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 that the related expense is incurred.  Vendor advertising allowances recorded as a reduction of advertising expense totaled $13.8 million, $14.1 million, and $13.8 million for the fiscal years ended September 28, 2019, September 29, 2018 and September 30, 2017, 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 its product advertising, which could increase or decrease its expenditures.



Similarly, the Company is not able to assess the impact of vendor advertising allowances on the creation of additional revenue; as such allowances do not directly generate revenue for its stores

v3.19.3.a.u2
Summary Of Significant Accounting Policies (Details)
12 Months Ended
Sep. 28, 2019
USD ($)
segment
item
Sep. 29, 2018
USD ($)
Sep. 30, 2017
USD ($)
Oct. 01, 2019
USD ($)
Sep. 29, 2019
USD ($)
Summary Of Significant Accounting Policies [Line Items]          
Number of locations | item 198        
Number of operating segments | segment 1        
Outstanding checks in excess of bank balances $ 0 $ 0      
Short-term investments and certificates of deposit 0        
Demand deposits $ 37,600,000        
Number of banks | item 3        
FDIC insurance limit per bank $ 250,000        
Total depreciation expense 112,500,000 113,100,000 $ 110,900,000    
Liability coverage per occurrence for workers compensation 1,000,000        
Liability coverage for general liability 500,000        
Liability coverage per covered person for medical care benefits 450,000        
Company's self insurance reserves 31,000,000 34,700,000      
Expected self-insurance recoveries from excess cost insurance 3,600,000 4,600,000      
Certificate of deposit 2,600,000        
Undrawn letters of credit 9,000,000        
Advertising and promotion expenses, net of vendor allowances 10,000,000 12,600,000 12,500,000    
Depreciation expense included in costs of goods sold totaled $ 14,500,000 14,400,000 15,400,000    
Fluid dairy revenues recognition 54.00%        
Vendor allowances applied as a reduction of merchandise costs $ 111,700,000 116,500,000 116,600,000    
Vendor advertising allowances recorded as a reduction of advertising expense $ 13,800,000 $ 14,100,000 $ 13,800,000    
Subsequent Event [Member]          
Summary Of Significant Accounting Policies [Line Items]          
Liability coverage for general liability       $ 1,000,000  
Undrawn Letters Of Credit [Member]          
Summary Of Significant Accounting Policies [Line Items]          
Expiry date of undrawn letters of credit, End Oct. 31, 2019        
Accounting Standards Update 2016-02 [Member] | Subsequent Event [Member]          
Summary Of Significant Accounting Policies [Line Items]          
Right of use assets         $ 45,000,000
Lease obligations         $ 55,000,000
Buildings [Member]          
Summary Of Significant Accounting Policies [Line Items]          
Useful life of property, plant and equipment 30 years        
Minimum [Member] | Store, Office and Warehouse Equipment [Member]          
Summary Of Significant Accounting Policies [Line Items]          
Useful life of property, plant and equipment 3 years        
Minimum [Member] | Transportation Equipment [Member]          
Summary Of Significant Accounting Policies [Line Items]          
Useful life of property, plant and equipment 3 years        
Minimum [Member] | Leasehold Improvements [Member]          
Summary Of Significant Accounting Policies [Line Items]          
Useful life of property, plant and equipment 3 years        
Maximum [Member] | Store, Office and Warehouse Equipment [Member]          
Summary Of Significant Accounting Policies [Line Items]          
Useful life of property, plant and equipment 10 years        
Maximum [Member] | Transportation Equipment [Member]          
Summary Of Significant Accounting Policies [Line Items]          
Useful life of property, plant and equipment 5 years        
Maximum [Member] | Leasehold Improvements [Member]          
Summary Of Significant Accounting Policies [Line Items]          
Useful life of property, plant and equipment 30 years        
North Carolina [Member]          
Summary Of Significant Accounting Policies [Line Items]          
Number of locations | item 73        
Georgia [Member]          
Summary Of Significant Accounting Policies [Line Items]          
Number of locations | item 66        
South Carolina [Member]          
Summary Of Significant Accounting Policies [Line Items]          
Number of locations | item 36        
Tennessee [Member]          
Summary Of Significant Accounting Policies [Line Items]          
Number of locations | item 21        
Virginia [Member]          
Summary Of Significant Accounting Policies [Line Items]          
Number of locations | item 1        
Alabama [Member]          
Summary Of Significant Accounting Policies [Line Items]          
Number of locations | item 1        
v3.19.3.a.u2
Stockholder's Equity (Narrative) (Details)
12 Months Ended
Sep. 28, 2019
item
Class of Stock [Line Items]  
Percentage of cash dividend or liquidation payment based on Class B common stock 110.00%
Minimum [Member]  
Class of Stock [Line Items]  
Number of directors that can be set by board of directors 5
Maximum [Member]  
Class of Stock [Line Items]  
Number of directors that can be set by board of directors 11
Class A Common Stock [Member]  
Class of Stock [Line Items]  
Number of votes per share held by common stock holders 1
Percentage of directors to be elected by holders of common stock 25.00%
Class B Common Stock [Member]  
Class of Stock [Line Items]  
Number of votes per share held by common stock holders 10
Minimum percentage of outstanding common stock of both classes represented by common stock 12.50%
v3.19.3.a.u2
Long-Term Debt (Schedule of Long-Term Debt And Short-Term Loans) (Details) - USD ($)
Sep. 28, 2019
Sep. 29, 2018
Debt Instrument [Line Items]    
Less unamortized prepaid loan costs $ (5,270,760) $ (6,038,125)
Total long-term debt 852,237,822 865,587,773
Less current portion 12,600,131 12,848,013
Long-term debt, net of current portion 839,637,691 852,739,760
Senior Notes, Interest Rate of 5.75%, Maturing 2023 [Member]    
Debt Instrument [Line Items]    
Bonds payable $ 700,000,000 $ 700,000,000
Interest rate 5.75% 5.75%
Recovery Zone Facility Bonds [Member]    
Debt Instrument [Line Items]    
Bonds payable $ 72,560,000 $ 77,090,000
Line of Credit Payable [Member]    
Debt Instrument [Line Items]    
Weighted average interest rate 5.75%  
Notes payable due to banks, weighted average interest rate of 4.43% for 2019    
Debt Instrument [Line Items]    
Notes payable $ 84,948,582 $ 94,535,898
Weighted average interest rate 4.43% 3.68%
v3.19.3.a.u2
Stockholders' Equity
12 Months Ended
Sep. 28, 2019
Stockholder's Equity [Abstract]  
Stockholders' Equity

8. Stockholders’ Equity



The Company has two classes of Common Stock: Class A and Class B. Class A Common Stock is traded on The NASDAQ Global Select Market under the symbol IMKTA.  There is no public market for the Company’s Class B Common Stock. However, each share of Class B Common Stock is convertible at any time, at the option of the holder, into one share of Class A Common Stock.  Upon any transfers of Class B Common Stock (other than to immediate family members and participants in the Investment/Profit Sharing Plan), such stock is automatically converted into Class A Common Stock.



The holders of the Class A Common Stock and Class B Common Stock are entitled to dividends and other distributions when declared out of assets legally available therefore, subject to the dividend rights of any preferred stock that may be issued in the future.  Each share of Class A Common Stock is entitled to receive a cash dividend and liquidation payment in an amount equal to 110% of any cash dividend or liquidation payment on Class B Common Stock.  Any stock dividend must be paid in shares of Class A Common Stock with respect to Class A Common Stock and in shares of Class B Common Stock with respect to Class B Common Stock.



The voting powers, preferences and relative rights of Class A Common Stock and Class B Common Stock are identical in all respects, except that the holders of Class A Common Stock have one vote per share and the holders of Class B Common Stock have ten votes per share.  In addition, holders of Class A Common Stock, as a separate class, are entitled to elect 25% of all directors constituting the Board of Directors (rounded to the nearest whole number).  As long as the Class B Common Stock represents at least 12.5% of the total outstanding Common Stock of both classes, holders of Class B Common Stock, as a separate class, are entitled to elect the remaining directors.  The Company’s Articles of Incorporation and Bylaws provide that the Board of Directors can set the number of directors between five and eleven.  

 

v3.19.3.a.u2
Property Held For Lease And Rental Income
12 Months Ended
Sep. 28, 2019
Property Held For Lease And Rental Income [Abstract]  
Property Held For Lease And Rental Income

4. Property Held for Lease and Rental Income



At September 28, 2019, the Company owned and operated 79 shopping centers in conjunction with its supermarket operations. The Company leases to others a portion of its shopping center properties. The leases are non-cancelable operating lease agreements for periods ranging up to 20 years.



Rental income is included in the line item “Net sales” on the 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 Consolidated Statements of Income.





 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

2019

 

2018

 

2017

Rents earned on owned and subleased properties:

 

 

 

 

 

 

 

 

 

Base rentals including lease termination payments

 

$

14,821,734 

 

$

10,826,997 

 

$

8,847,035 

Contingent rentals

 

 

278,660 

 

 

249,965 

 

 

334,204 

Total

 

 

15,100,394 

 

 

11,076,962 

 

 

9,181,239 

Depreciation on owned properties leased to others

 

 

(5,183,712)

 

 

(5,132,805)

 

 

(5,255,719)

Other shopping center expenses

 

 

(3,640,110)

 

 

(2,967,860)

 

 

(2,654,976)

Total

 

$

6,276,572 

 

$

2,976,297 

 

$

1,270,544 



Owned properties leased or held for lease to others under operating leases by major classes are summarized as follows:







 

 

 

 

 

 



 

 

 

 

 

 



 

September 28,

 

September 29,



 

2019

 

2018

Land

 

$

57,568,972 

 

$

54,348,413 

Buildings

 

 

179,723,671 

 

 

170,700,496 

Total

 

 

237,292,643 

 

 

225,048,909 

Less accumulated depreciation

 

 

(97,321,740)

 

 

(108,754,494)

Total

 

$

139,970,903 

 

$

116,294,415 



The above amounts are included on the Consolidated Balance Sheets in the caption “Property and equipment, net.”



The following is a schedule of minimum future rental income on non-cancelable operating leases as of September 28, 2019:







 

 

 



 

 

 

Fiscal Year

 

 

 

2020

 

$

11,265,775 

2021

 

 

8,855,781 

2022

 

 

6,967,583 

2023

 

 

5,862,260 

2024

 

 

5,145,632 

Thereafter

 

 

13,723,315 

Total minimum future rental income

 

$

51,820,346 

 

v3.19.3.a.u2
Selected Quarterly Financial Data
12 Months Ended
Sep. 28, 2019
Selected Quarterly Financial Data [Abstract]  
Selected Quarterly Financial Data

12. Selected Quarterly Financial Data (Unaudited)



The following is a summary of unaudited financial data regarding the Company’s quarterly results of operations.  Each of the quarters in the two fiscal years presented contains thirteen weeks.





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

1st

 

2nd

 

3rd

 

4th

 

 

 



 

Quarter

 

Quarter

 

Quarter

 

Quarter

 

Total



 

(amounts in thousands except earnings per common share)

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

1,061,837 

 

$

1,001,844 

 

$

1,062,262 

 

$

1,076,091 

 

$

4,202,034 

Gross profit

 

 

258,411 

 

 

244,301 

 

 

258,940 

 

 

260,348 

 

 

1,022,000 

Net income

 

 

22,152 

 

 

15,000 

 

 

23,510 

 

 

20,918 

 

 

81,580 

Basic earnings per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

 

1.12 

 

 

0.76 

 

 

1.19 

 

 

1.07 

 

 

4.14 

Class B

 

 

1.02 

 

 

0.69 

 

 

1.08 

 

 

0.97 

 

 

3.76 

Diluted earnings per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

 

1.09 

 

 

0.74 

 

 

1.16 

 

 

1.04 

 

 

4.03 

Class B

 

 

1.02 

 

 

0.69 

 

 

1.08 

 

 

0.97 

 

 

3.76 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

1,013,786 

 

$

984,562 

 

$

1,034,769 

 

$

1,059,688 

 

$

4,092,805 

Gross profit

 

 

244,660 

 

 

235,188 

 

 

243,891 

 

 

256,430 

 

 

980,169 

Net income

 

 

45,147  (1)

 

9,295 

 

 

24,484  (2)

 

18,439 

 

 

97,365 

Basic earnings per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

 

2.29 

 

 

0.47 

 

 

1.24 

 

 

0.94 

 

 

4.94 

Class B

 

 

2.08 

 

 

0.43 

 

 

1.13 

 

 

0.85 

 

 

4.49 

Diluted earnings per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

 

2.23 

 

 

0.46 

 

 

1.21 

 

 

0.91 

 

 

4.81 

Class B

 

 

2.08 

 

 

0.43 

 

 

1.13 

 

 

0.85 

 

 

4.49 





(1)

Includes $26.7 million income tax benefit from the Tax Act.

(2)

Includes $10.6 million income tax benefit from the Tax Act.

 

v3.19.3.a.u2
Selected Quarterly Financial Data (Tables)
12 Months Ended
Sep. 28, 2019
Selected Quarterly Financial Data [Abstract]  
Summary Of Unaudited Selected Quarterly Financial Data



 

1st

 

2nd

 

3rd

 

4th

 

 

 



 

Quarter

 

Quarter

 

Quarter

 

Quarter

 

Total



 

(amounts in thousands except earnings per common share)

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

1,061,837 

 

$

1,001,844 

 

$

1,062,262 

 

$

1,076,091 

 

$

4,202,034 

Gross profit

 

 

258,411 

 

 

244,301 

 

 

258,940 

 

 

260,348 

 

 

1,022,000 

Net income

 

 

22,152 

 

 

15,000 

 

 

23,510 

 

 

20,918 

 

 

81,580 

Basic earnings per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

 

1.12 

 

 

0.76 

 

 

1.19 

 

 

1.07 

 

 

4.14 

Class B

 

 

1.02 

 

 

0.69 

 

 

1.08 

 

 

0.97 

 

 

3.76 

Diluted earnings per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

 

1.09 

 

 

0.74 

 

 

1.16 

 

 

1.04 

 

 

4.03 

Class B

 

 

1.02 

 

 

0.69 

 

 

1.08 

 

 

0.97 

 

 

3.76 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

1,013,786 

 

$

984,562 

 

$

1,034,769 

 

$

1,059,688 

 

$

4,092,805 

Gross profit

 

 

244,660 

 

 

235,188 

 

 

243,891 

 

 

256,430 

 

 

980,169 

Net income

 

 

45,147  (1)

 

9,295 

 

 

24,484  (2)

 

18,439 

 

 

97,365 

Basic earnings per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

 

2.29 

 

 

0.47 

 

 

1.24 

 

 

0.94 

 

 

4.94 

Class B

 

 

2.08 

 

 

0.43 

 

 

1.13 

 

 

0.85 

 

 

4.49 

Diluted earnings per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

 

2.23 

 

 

0.46 

 

 

1.21 

 

 

0.91 

 

 

4.81 

Class B

 

 

2.08 

 

 

0.43 

 

 

1.13 

 

 

0.85 

 

 

4.49 





(1)

Includes $26.7 million income tax benefit from the Tax Act.

(2)

Includes $10.6 million income tax benefit from the Tax Act.

v3.19.3.a.u2
Consolidated Balance Sheets - USD ($)
Sep. 28, 2019
Sep. 29, 2018
Current Assets:    
Cash and cash equivalents $ 42,125,105 $ 10,537,303
Receivables - net 71,951,303 70,056,909
Inventories 374,129,060 372,195,421
Other current assets 8,897,903 43,953,483
Total Current Assets 497,103,371 496,743,116
Property and Equipment – Net 1,344,267,315 1,303,044,370
Other Assets 25,957,682 25,123,334
Total Assets 1,867,328,368 1,824,910,820
Current Liabilities:    
Current portion of long-term debt 12,600,131 12,848,013
Accounts payable - trade 151,329,975 165,165,312
Accrued expenses and current portion of other long-term liabilities 83,649,283 82,124,766
Total Current Liabilities 247,579,389 260,138,091
Deferred Income Taxes 75,499,000 74,461,000
Long-Term Debt 839,637,691 852,739,760
Other Long-Term Liabilities 41,889,682 42,158,161
Total Liabilities 1,204,605,762 1,229,497,012
Commitments and Contingencies
Stockholders’ Equity    
Preferred stock, $0.05 par value; 10,000,000 shares authorized; no shares issued
Paid-in capital in excess of par value 12,311,249 12,311,249
Accumulated other comprehensive income (1,265,650)  
Retained earnings 650,664,018 582,089,570
Total Stockholders’ Equity 662,722,606 595,413,808
Total Liabilities and Stockholders’ Equity 1,867,328,368 1,824,910,820
Class A Common Stock [Member]    
Stockholders’ Equity    
Common stocks 709,024 707,269
Class B Common Stock [Member]    
Stockholders’ Equity    
Common stocks $ 303,965 $ 305,720
v3.19.3.a.u2
Consolidated Statements Of Cash Flows - USD ($)
12 Months Ended
Sep. 28, 2019
Sep. 29, 2018
Sep. 30, 2017
Cash Flows From Operating Activities:      
Net income $ 81,580,002 $ 97,364,628 $ 53,873,580
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization expense 112,520,100 113,082,675 110,929,378
Gain from sale or disposal of assets (4,052,387) (728,386) (1,464,600)
Receipt of advance payments on purchases contracts 2,284,000 2,108,133 3,736,862
Recognition of advance payments on purchases contracts (2,542,537) (2,178,062) (2,176,620)
Deferred income taxes 1,447,000 4,543,000 (1,531,000)
Changes in operating assets and liabilities:      
Receivables (1,894,409) (3,727,745) (4,593,777)
Inventory (1,933,639) (22,862,408) (5,451,936)
Other assets 33,689,037 (40,549,644) (1,566,670)
Accounts payable and accrued expenses (9,593,939) 14,187,867 4,585,074
Net Cash Provided By Operating Activities 211,503,228 161,240,058 156,340,291
Cash Flows From Investing Activities:      
Proceeds from sales of property and equipment 8,958,466 2,340,027 2,335,726
Capital expenditures (161,751,023) (150,486,508) (127,695,650)
Net Cash Used By Investing Activities (152,792,557) (148,146,481) (125,359,924)
Cash Flows From Financing Activities:      
Proceeds from short-term borrowings 303,810,043 515,395,546 393,175,778
Payments on short-term borrowings (303,810,043) (515,395,546) (393,175,778)
Net proceeds from new long-term borrowings     59,737,147
Principal payments on long-term borrowings (14,117,316) (13,465,551) (59,487,736)
Dividends (13,005,553) (13,002,823) (12,997,187)
Net Cash Used By Financing Activities (27,122,869) (26,468,374) (12,747,776)
Increase (decrease) in Cash and Cash Equivalents 31,587,802 (13,374,797) 18,232,591
Cash and cash equivalents at beginning of year 10,537,303 23,912,100 5,679,509
Cash and Cash Equivalents at end of year $ 42,125,105 $ 10,537,303 $ 23,912,100
v3.19.3.a.u2
Income Taxes (Narrative) (Details) - USD ($)
$ in Millions
3 Months Ended 12 Months Ended
Jan. 01, 2018
Dec. 31, 2017
Dec. 30, 2017
Sep. 29, 2018
Sep. 28, 2019
Income Taxes [Abstract]          
Federal corporate tax rate 21.00% 35.00%      
Decrease in net deferred tax liabilities as a result of the decrease in the federal rate     $ 26.7 $ 10.6  
Refundable current income taxes       $ 36.7 $ 1.0
v3.19.3.a.u2
Property And Equipment (Tables)
12 Months Ended
Sep. 28, 2019
Property And Equipment [Abstract]  
Schedule Of Property And Equipment



 

 

 

 

 

 



 

 

 

 

 

 



 

2019

 

2018

Land

 

$

373,434,259 

 

$

351,073,344 

Construction in progress

 

 

26,206,372 

 

 

12,393,293 

Buildings

 

 

1,212,984,091 

 

 

1,173,237,017 

Store, office and warehouse equipment

 

 

979,229,721 

 

 

946,026,834 

Transportation equipment

 

 

78,851,265 

 

 

75,919,047 

Leasehold improvements

 

 

56,455,431 

 

 

54,387,952 

Total

 

 

2,727,161,139 

 

 

2,613,037,487 

Less accumulated depreciation and amortization

 

 

1,382,893,824 

 

 

1,309,993,117 

Property and equipment - net

 

$

1,344,267,315 

 

$

1,303,044,370 



v3.19.3.a.u2
Related Party Transactions
12 Months Ended
Sep. 28, 2019
Related Party Transactions [Abstract]  
Related Party Transactions

16. Related Party Transactions



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 was prohibited from selling shares of the Company’s Class A common stock.  There were no such loans outstanding at September 28, 2019 and September 29, 2018. 

 

v3.19.3.a.u2
Property Held For Lease And Rental Income (Schedule Of Rental Income) (Details) - USD ($)
12 Months Ended
Sep. 28, 2019
Sep. 29, 2018
Sep. 30, 2017
Property Held For Lease And Rental Income [Abstract]      
Base rentals including lease termination payments $ 14,821,734 $ 10,826,997 $ 8,847,035
Contingent rentals 278,660 249,965 334,204
Total 15,100,394 11,076,962 9,181,239
Depreciation on owned properties leased to others (5,183,712) (5,132,805) (5,255,719)
Other shopping center expenses (3,640,110) (2,967,860) (2,654,976)
Total $ 6,276,572 $ 2,976,297 $ 1,270,544
v3.19.3.a.u2
Leases and Rental Expense (Components Of Aggregate Minimum Rental Commitments) (Details)
Sep. 28, 2019
USD ($)
Leases And Rental Expense [Abstract]  
Minimum future rental commitments 2020 $ 9,756,136
Minimum future rental commitments 2021 7,532,373
Minimum future rental commitments 2022 6,692,661
Minimum future rental commitments 2023 4,907,148
Minimum future rental commitments 2024 2,583,629
Minimum future rental commitments thereafter 27,187,519
Total minimum future rental commitments $ 58,659,466
v3.19.3.a.u2
Cash Flow Information (Supplemental Disclosure Of Cash Flow Information) (Details) - USD ($)
12 Months Ended
Sep. 28, 2019
Sep. 29, 2018
Sep. 30, 2017
Cash paid during the year for:      
Interest (net of amounts capitalized) $ 47,465,459 $ 47,347,470 $ 46,689,266
Income taxes (11,697,668) 13,672,964 28,415,489
Non cash items:      
Property and equipment additions included in accounts payable $ 8,007,879 $ 8,161,384 $ 7,213,949
v3.19.3.a.u2
Segment Information (Operations By Lines Of Business) (Details) - USD ($)
3 Months Ended 12 Months Ended
Sep. 28, 2019
Jun. 29, 2019
Mar. 30, 2019
Dec. 29, 2018
Sep. 29, 2018
Jun. 30, 2018
Mar. 31, 2018
Dec. 30, 2017
Sep. 28, 2019
Sep. 29, 2018
Sep. 30, 2017
Segment Reporting Information By Segment [Line Items]                      
Total revenues from unaffiliated customers $ 1,076,091,000 $ 1,062,262,000 $ 1,001,844,000 $ 1,061,837,000 $ 1,059,688,000 $ 1,034,769,000 $ 984,562,000 $ 1,013,786,000 $ 4,202,033,610 $ 4,092,804,877 $ 4,002,699,727
Total income from operations                 152,193,135 124,823,641 127,912,744
Other income, net                 1,814,971 3,064,690 3,806,869
Interest expense                 47,410,104 47,569,703 47,458,033
Income before income taxes                 106,598,002 80,318,628 84,261,580
Total assets 1,867,328,368       1,824,910,820       1,867,328,368 1,824,910,820 1,733,306,000
Total capital expenditures                 161,751,023 150,486,508 127,695,650
Depreciation and amortization expense                 112,520,100 113,082,675 110,929,378
Elimination of intercompany receivable [Member]                      
Segment Reporting Information By Segment [Line Items]                      
Total assets (2,296,000)       (2,378,000)       (2,296,000) (2,378,000) (2,469,000)
Grocery [Member]                      
Segment Reporting Information By Segment [Line Items]                      
Total revenues from unaffiliated customers                 1,443,394,000 1,413,088,000 1,424,891,000
Non-foods [Member]                      
Segment Reporting Information By Segment [Line Items]                      
Total revenues from unaffiliated customers                 936,173,000 874,677,000 858,409,000
Perishables [Member]                      
Segment Reporting Information By Segment [Line Items]                      
Total revenues from unaffiliated customers                 1,110,684,000 1,078,693,000 1,061,560,000
Gasoline [Member]                      
Segment Reporting Information By Segment [Line Items]                      
Total revenues from unaffiliated customers                 581,146,000 604,897,000 515,857,000
Retail [Member]                      
Segment Reporting Information By Segment [Line Items]                      
Total revenues from unaffiliated customers                 4,071,397,000 3,971,355,000 3,860,717,000
Total income from operations                 135,395,000 111,165,000 112,017,000
Total assets 1,698,904,000       1,679,301,000       1,698,904,000 1,679,301,000 1,600,699,000
Total capital expenditures                 155,215,000 147,851,000 125,866,000
Depreciation and amortization expense                 104,970,000 105,564,000 103,304,000
Other Segment [Member]                      
Segment Reporting Information By Segment [Line Items]                      
Total revenues from unaffiliated customers                 130,637,000 121,450,000 141,983,000
Total income from operations                 16,798,000 13,659,000 15,896,000
Total assets $ 170,720,000       $ 147,988,000       170,720,000 147,988,000 135,076,000
Total capital expenditures                 6,536,000 2,636,000 1,830,000
Depreciation and amortization expense                 $ 7,550,000 $ 7,519,000 $ 7,625,000
v3.19.3.a.u2
Employee Benefit Plans (Narrative) (Details) - USD ($)
$ in Thousands
12 Months Ended
Sep. 28, 2019
Sep. 29, 2018
Sep. 30, 2017
Investment/Profit Sharing Plan [Member]      
Postemployment and Postretirement Benefit Plans [Line Items]      
Operating and administrative expenses $ 2,900 $ 2,800 $ 2,400
Nonqualified Investment Plan [Member]      
Postemployment and Postretirement Benefit Plans [Line Items]      
Operating and administrative expenses 224 215 159
Cash Bonuses [Member]      
Postemployment and Postretirement Benefit Plans [Line Items]      
Operating and administrative expenses $ 11,900 $ 11,900 $ 10,600
v3.19.3.a.u2
Long-Term Debt (Schedule Of Components Of Interest Costs) (Details) - USD ($)
12 Months Ended
Sep. 28, 2019
Sep. 29, 2018
Sep. 30, 2017
Long-Term Debt [Abstract]      
Total interest costs $ 48,675,993 $ 48,707,921 $ 48,675,895
Interest capitalized (1,265,889) (1,138,218) (1,217,862)
Interest expense $ 47,410,104 $ 47,569,703 $ 47,458,033
v3.19.3.a.u2
Supplementary Balance Sheet Information (Schedule Of Other Long-Term Liabilities) (Details) - USD ($)
Sep. 28, 2019
Sep. 29, 2018
Supplementary Balance Sheet Information [Line Items]    
Advance payments on purchases contracts $ 2,856,569 $ 3,115,106
Deferred lease expense 1,949,992 1,941,708
Nonqualified investment plan liability 16,446,037 15,033,318
Other 3,906,319 2,124,800
Other long-term liabilities 43,023,602 43,324,934
Less current portion 1,133,920 1,166,773
Other long-term liabilities 41,889,682 42,158,161
Workers' Compensation Insurance [Member]    
Supplementary Balance Sheet Information [Line Items]    
Self-insurance liabilities 13,814,615 16,333,768
General Liability Insurance [Member]    
Supplementary Balance Sheet Information [Line Items]    
Self-insurance liabilities $ 4,050,070 $ 4,776,234
v3.19.3.a.u2
Earnings Per Common Share (Tables)
12 Months Ended
Sep. 28, 2019
Earnings Per Common Share [Abstract]  
Reconciliation Of Numerators And Denominators Of Basic And Diluted Earnings Per Share



 

 

 

 

 

 



 

 

 

 

 

 



 

Year Ended



  

September 28, 2019



 

Class A

 

Class B

Numerator: Allocated net income

 

 

 

 

 

 

Net income allocated, basic

  

$

58,635,758 

  

$

22,944,244 

Conversion of Class B to Class A shares

  

 

22,944,244 

  

 

 —

Net income allocated, diluted

  

$

81,580,002 

  

$

22,944,244 

Denominator: Weighted average shares outstanding

  

 

 

  

 

 

Weighted average shares outstanding, basic

  

 

14,163,776 

  

 

6,096,000 

Conversion of Class B to Class A shares

  

 

6,096,000 

  

 

 —

Weighted average shares outstanding, diluted

  

 

20,259,776 

  

 

6,096,000 

Earnings per share

 

 

 

 

 

 

Basic

  

$

4.14 

  

$

3.76 

Diluted

  

$

4.03 

  

$

3.76 







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Year Ended

 

Year Ended



 

September 29, 2018

 

September 30, 2017



  

Class A

 

Class B

  

Class A

  

Class B

Numerator: Allocated net income

 

 

 

 

 

 

 

 

 

 

 

 

Net income allocated, basic

  

$

69,790,716 

  

$

27,573,912 

  

$

38,393,384 

  

$

15,480,196 

Conversion of Class B to Class A shares

  

 

27,573,912 

  

 

 —

  

 

15,480,196 

  

 

 —

Net income allocated, diluted

  

$

97,364,628 

  

$

27,573,912 

  

$

53,873,580 

  

$

15,480,196 

Denominator: Weighted average
  shares outstanding

  

 

 

  

 

 

  

 

 

  

 

 

Weighted average shares outstanding, basic

  

 

14,123,182 

  

 

6,136,594 

  

 

14,039,125 

  

 

6,220,651 

Conversion of Class B to Class A shares

  

 

6,136,594 

  

 

 —

  

 

6,220,651 

  

 

 —

Weighted average shares outstanding, diluted

  

 

20,259,776 

  

 

6,136,594 

  

 

20,259,776 

  

 

6,220,651 

Earnings per share

 

 

 

 

 

 

 

 

 

 

 

 

Basic

  

$

4.94 

  

$

4.49 

  

$

2.74 

  

$

2.49 

Diluted

  

$

4.81 

  

$

4.49 

  

$

2.66 

  

$

2.49 



v3.19.3.a.u2
Consolidated Statements Of Income And Other Comprehensive Income - USD ($)
12 Months Ended
Sep. 28, 2019
Sep. 29, 2018
Sep. 30, 2017
Net sales $ 4,202,033,610 $ 4,092,804,877 $ 4,002,699,727
Cost of goods sold 3,180,033,398 3,112,635,516 3,039,106,724
Gross profit 1,022,000,212 980,169,361 963,593,003
Operating and administrative expenses 873,859,464 856,074,106 837,144,859
Gain from sale or disposal of assets 4,052,387 728,386 1,464,600
Income from operations 152,193,135 124,823,641 127,912,744
Other income, net 1,814,971 3,064,690 3,806,869
Interest expense 47,410,104 47,569,703 47,458,033
Income before income taxes 106,598,002 80,318,628 84,261,580
Income tax expense (benefit) 25,018,000 (17,046,000) 30,388,000
Net income 81,580,002 $ 97,364,628 $ 53,873,580
Other comprehensive expense:      
Change in fair value of interest rate swap (1,674,636)    
Income tax benefit 408,986    
Other comprehensive expense, net of tax (1,265,650)    
Comprehensive income $ 80,314,352    
Class A Common Stock [Member]      
Per share amounts:      
Basic earnings per common share $ 4.14 $ 4.94 $ 2.74
Diluted earnings per common share 4.03 4.81 2.66
Cash dividends per common share 0.66 0.66 0.66
Class B Common Stock [Member]      
Per share amounts:      
Basic earnings per common share 3.76 4.49 2.49
Diluted earnings per common share 3.76 4.49 2.49
Cash dividends per common share $ 0.60 $ 0.60 $ 0.60
v3.19.3.a.u2
Cash Flow Information (Tables)
12 Months Ended
Sep. 28, 2019
Cash Flow Information [Abstract]  
Supplemental Disclosure Of Cash Flow Information



 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

2019

 

2018

 

2017

Cash paid during the year for:

 

 

 

 

 

 

 

 

 

Interest (net of amounts capitalized)

 

$

47,465,459 

 

$

47,347,470 

 

$

46,689,266 

Income taxes

 

 

(11,697,668)

 

 

13,672,964 

 

 

28,415,489 

Non cash items:

 

 

 

 

 

 

 

 

 

Property and equipment additions included in accounts payable

 

 

8,007,879 

 

 

8,161,384 

 

 

7,213,949 



v3.19.3.a.u2
Income Taxes (Schedule Of Income Tax Expense Reconciliation) (Details) - USD ($)
12 Months Ended
Sep. 28, 2019
Sep. 29, 2018
Sep. 30, 2017
Income Taxes [Abstract]      
Federal tax at statutory rate $ 22,386,000 $ 19,678,000 $ 29,492,000
State income tax, net of federal tax benefits 3,726,000 3,528,000 2,774,000
Federal tax credits (1,184,000) (1,052,000) (1,024,000)
Tax rate change on deferred tax balance as of Federal law enactment date   (26,680,000)  
Tax method change   (10,606,000)  
Tax rate change effect of FY18 current deferred activity   (2,124,000)  
Other 90,000 210,000 (854,000)
Total expense (benefit) $ 25,018,000 $ (17,046,000) $ 30,388,000
v3.19.3.a.u2
Income Taxes
12 Months Ended
Sep. 28, 2019
Income Taxes [Abstract]  
Income Taxes

2. Income Taxes



Deferred Income Tax Liabilities and Assets – Deferred income taxes are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax laws and rates.  Significant components of the Company’s deferred tax liabilities and assets are as follows:





 

 

 

 

 

 



 

 

 

 

 

 



 

2019

 

2018

Deferred tax liabilities:

 

 

 

 

 

 

Property and equipment tax/book differences

 

$

88,151,000 

 

$

87,577,000 

Property tax method

 

 

1,228,000 

 

 

1,156,000 

Total deferred tax liabilities

 

 

89,379,000 

 

 

88,733,000 

Deferred tax assets:

 

 

 

 

 

 

Insurance reserves

 

 

4,280,000 

 

 

4,790,000 

Advance payments on purchases contracts

 

 

698,000 

 

 

761,000 

Vacation accrual

 

 

1,723,000 

 

 

1,652,000 

Inventory

 

 

1,086,000 

 

 

1,055,000 

Deferred compensation

 

 

4,002,000 

 

 

3,662,000 

Other

 

 

2,091,000 

 

 

2,352,000 

Total deferred tax assets

 

 

13,880,000 

 

 

14,272,000 

Net deferred tax liabilities

 

$

75,499,000 

 

$

74,461,000 



Refundable current income taxes totaling $1.0 million and $36.7 million at September 28, 2019 and September 29, 2018, respectively are included in the line item “Other current assets” on the Consolidated Balance Sheets.



Income Tax Expense - Income tax expense differs from the amounts computed by applying the statutory federal rates to income before income taxes. The reasons for the differences are as follows:







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

2019

 

2018

 

2017

Federal tax at statutory rate

 

$

22,386,000 

 

$

19,678,000 

 

$

29,492,000 

State income tax, net of federal tax benefits

 

 

3,726,000 

 

 

3,528,000 

 

 

2,774,000 

Federal tax credits

 

 

(1,184,000)

 

 

(1,052,000)

 

 

(1,024,000)

Tax rate change on deferred tax balance as of Federal law
  enactment date

 

 

 —

 

 

(26,680,000)

 

 

 —

Tax method change

 

 

 —

 

 

(10,606,000)

 

 

 —

Tax rate change effect of FY18 current deferred activity

 

 

 —

 

 

(2,124,000)

 

 

 —

Other

 

 

90,000 

 

 

210,000 

 

 

(854,000)

Total

 

$

25,018,000 

 

$

(17,046,000)

 

$

30,388,000 



Current and deferred income tax expense (benefit) is as follows:







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

2019

 

2018

 

2017

Current:

 

 

 

 

 

 

 

 

 

Federal

 

$

18,774,000 

 

$

(21,596,000)

 

$

26,994,000 

State

 

 

4,797,000 

 

 

7,000 

 

 

4,925,000 

Total current

 

 

23,571,000 

 

 

(21,589,000)

 

 

31,919,000 

Deferred:

 

 

 

 

 

 

 

 

 

Federal

 

 

1,510,000 

 

 

1,020,000 

 

 

(1,104,000)

State

 

 

(63,000)

 

 

3,523,000 

 

 

(427,000)

Total deferred

 

 

1,447,000 

 

 

4,543,000 

 

 

(1,531,000)

Total expense (benefit)

 

$

25,018,000 

 

$

(17,046,000)

 

$

30,388,000 



In December 2017, the Tax Cuts and Jobs Act (the “Tax Act”) became law.  Among other things, the Tax Act reduced the federal corporate tax rate from 35% to 21% and allowed for full depreciation expensing of qualified property when placed in service.



As a result of the decrease in the effective tax rate, the Company recorded a decrease in its net deferred tax liabilities of $26.7 million, with a corresponding reduction to deferred income tax expense.  During fiscal year 2018, the Company adopted a tax calculation method change that resulted in the accelerated deduction of certain property-related expenditures.  As a result of this change and the aforementioned change in the federal corporate tax rate, the Company recorded an additional decrease in its net deferred tax liabilities of $10.6 million, with a corresponding reduction to deferred income tax expense.

 

v3.19.3.a.u2
Employee Benefit Plans
12 Months Ended
Sep. 28, 2019
Employee Benefit Plans [Abstract]  
Employee Benefit Plans

10. Employee Benefit Plans



Investment/Profit Sharing Plan - The purpose of the qualified investment/profit sharing plan is to provide retirement benefits to eligible employees.  Assets of the plan, including the Company’s Class B Common Stock, are held in trust for employees and distributed upon retirement, death, disability or termination of employment. Company contributions are discretionary and are determined quarterly by the Board of Directors.  The plan includes a 401(k) feature. Company contributions to the plan, included in operating and administrative expenses, were approximately $2.9 million, $2.8 million and $2.4 million for fiscal years 2019, 2018 and 2017, respectively.



Nonqualified Investment Plan - The purpose of the Executive Nonqualified Excess Plan is to provide benefits similar to the Company’s Investment/Profit Sharing Plan to certain of the Company’s management employees who are otherwise subject to limited participation in the 401(k) feature of the Company’s Investment/Profit Sharing Plan.  Company contributions to the plan, included in operating and administrative expenses, were approximately $224,000,  $215,000 and $159,000 for fiscal years 2019, 2018 and 2017, respectively.



Cash Bonuses - The Company pays monthly bonuses to various managerial personnel based on performance of the operating units managed by these personnel.  The Company pays discretionary annual bonuses to certain employees who do not receive monthly performance bonuses.  The Company pays discretionary bonuses to certain executive officers based on Company performance.  Operating and administrative expenses include bonuses of approximately $11.9 million, $11.9 million and $10.6 million for fiscal years 2019, 2018 and 2017, respectively.



Medical Care Plan - Medical and dental benefits are provided to qualified employees under a self-insured plan.  Expenses under the plan include claims paid, administrative expenses and an estimated liability for claims incurred but not yet paid.

 

v3.19.3.a.u2
Supplementary Balance Sheet Information
12 Months Ended
Sep. 28, 2019
Supplementary Balance Sheet Information [Abstract]  
Supplementary Balance Sheet Information

6. Supplementary Balance Sheet Information



Accrued Expenses and Current Portion of Other Long-Term Liabilities - Accrued expenses and current portion of other long-term liabilities are summarized as follows:







 

 

 

 

 

 



 

 

 

 

 

 



 

2019

 

2018

Property, payroll, and other taxes payable

 

$

20,273,626 

 

$

22,327,253 

Salaries, wages, and bonuses payable

 

 

31,861,220 

 

 

29,583,266 

Self-insurance liabilities:

 

 

 

 

 

 

Employee group insurance

 

 

5,704,565 

 

 

5,257,120 

Workers’ compensation insurance

 

 

4,287,445 

 

 

5,079,514 

General liability insurance

 

 

3,154,282 

 

 

3,239,695 

Interest

 

 

13,342,260 

 

 

13,397,615 

Other

 

 

5,025,885 

 

 

3,240,303 

Total accrued expenses and current portion of other long-term liabilities

 

$

83,649,283 

 

$

82,124,766 



Employee insurance expense, including workers’ compensation and medical care benefits, net of employee contributions, totaled $37.3 million, $37.7 million and $33.1 million for fiscal years 2019, 2018 and 2017, respectively.



Other Long-Term Liabilities - Other long-term liabilities are summarized as follows:





 

 

 

 

 

 



 

 

 

 

 

 



 

2019

 

2018

Advance payments on purchases contracts

 

$

2,856,569 

 

$

3,115,106 

Deferred lease expense

 

 

1,949,992 

 

 

1,941,708 

Nonqualified investment plan liability

 

 

16,446,037 

 

 

15,033,318 

Self-insurance liabilities:

 

 

 

 

 

 

Workers’ compensation insurance

 

 

13,814,615 

 

 

16,333,768 

General liability insurance

 

 

4,050,070 

 

 

4,776,234 

Other

 

 

3,906,319 

 

 

2,124,800 

Other long-term liabilities

 

 

43,023,602 

 

 

43,324,934 

Less current portion

 

 

1,133,920 

 

 

1,166,773 

Total other long-term liabilities

 

$

41,889,682 

 

$

42,158,161 



The Company’s fuel operations contain underground tanks for the storage of gasoline and diesel fuel.  The Company reviewed FASB Topic ASC 410 and determined we have a legal obligation to remove tanks at a point in the future and accordingly determined we have met the requirements of 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 are immaterial for each fuel center as well as in the aggregate at September 28, 2019 and September 29, 2018.



Advance Payments on Purchases Contracts - The Company has entered into agreements with suppliers whereby payment is received in advance and earned based on purchases of product from these suppliers in the future. The unearned portion, included in other long-term liabilities, will be recognized in the results of operations in accordance with the terms of the contract.

 

v3.19.3.a.u2
Leases And Rental Expense (Tables)
12 Months Ended
Sep. 28, 2019
Leases And Rental Expense [Abstract]  
Components Of Aggregate Minimum Rental Commitments



 

 

 



 

 

 

Fiscal Year

 

 

 

2020

 

$

9,756,136 

2021

 

 

7,532,373 

2022

 

 

6,692,661 

2023

 

 

4,907,148 

2024

 

 

2,583,629 

Thereafter

 

 

27,187,519 

Total minimum future rental commitments

 

$

58,659,466 



v3.19.3.a.u2
Summary Of Significant Accounting Policies (Policy)
12 Months Ended
Sep. 28, 2019
Summary Of Significant Accounting Policies [Abstract]  
Nature of Operations

Nature of Operations   Ingles Markets, Incorporated (“Ingles” or the “Company”), is a leading supermarket chain in the southeast United States, operates 198 supermarkets in North Carolina (73), Georgia (66), South Carolina (36), Tennessee (21), Virginia (1) and Alabama (1).

Principles of Consolidation

Principles of Consolidation – The consolidated financial statements include the accounts of Ingles Markets, Incorporated and its wholly-owned subsidiaries, Sky King, Inc., Ingles Markets Investments, Inc., Milkco, Inc., Land O Sky, LLC, Shopping Center Financing, LLC, and Shopping Center Financing II, LLC.  All significant inter-company balances and transactions are eliminated in consolidation.

Fiscal Year

Fiscal Year – The Company’s fiscal year ends on the last Saturday in September.    Fiscal years 2019 and 2018 each consisted of 52 weeks. Fiscal year 2017 consisted of 53 weeks.



Segment Information

Segment Information – The Company operates one primary business segment, retail grocery sales (representing the aggregation of individual retail stores).  The “Other” segment includes our remaining operations -- fluid dairy and shopping center rentals. 

New Accounting Pronouncements

New Accounting Pronouncements –  In February 2016 the Financial Accounting Standards Board (FASB) issued ASU 2016-02, "Leases" (ASU 2016-02), which requires the Company as lessee to recognize most leases on the balance sheet thereby resulting in the recognition of right of use assets and lease obligations for those leases currently classified as operating leases. The accounting for leases where the Company is the lessor remains largely unchanged. ASU 2016-02 became effective for the Company on September 29, 2019 and the Company elected the optional transition method which permits entities to change the date of initial application of the standard to the beginning of the year of adoption and to recognize the effects of applying ASU 2016-02 as a cumulative-effect adjustment to the opening balance of retained earnings.  Certain qualitative and quantitative disclosures are also required. While the Company is still finalizing our adoption procedures, the Company estimates the primary impact to the consolidated financial position upon adoption will be the recognition, on a discounted basis, of minimum commitments under noncancelable operating leases on the consolidated balance sheets resulting in the recording of right of use assets and lease obligations for approximately $45 to $55 million.  The Company does not expect a material impact to the Company’s consolidated statements of income, comprehensive income, stockholders’ equity, or cash flows.



In May 2014, the FASB issued Accounting Standards Update ASU 2014-09 “Revenue from Contracts with Customers” (ASU 2014-09).  ASU 2014-09 is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services.  In August 2015, the FASB issued ASU 2015-14 which deferred the effective date of the ASU to fiscal years beginning after December 15, 2017 and interim periods within those fiscal years, with early adoption permitted.  The Company adopted the standard in the first quarter of fiscal 2019, and determined the impact of adopting the new guidance was immaterial to its annual and interim financial statements.  The Company’s assessment included a detailed review of contracts for each of its disaggregated revenue streams and a comparison of its historical accounting policies and practices to the new standard.

 

Cash Equivalents

Cash Equivalents – All highly liquid investments with a maturity of three months or less when purchased are considered cash.  Outstanding checks in excess of bank balances are included in the line item “Accounts payable – trade” on the Consolidated Balance Sheets.  There were no such balances at September 28, 2019 and September 29, 2018, respectively.

Financial Instruments

Financial Instruments – The Company at times has short-term investments and certificates of deposit with maturities of three months or less when purchased that are included in cash.  At September 28, 2019, the Company had no such investments.  The Company’s policy is to invest its excess cash either in money market accounts, reverse repurchase agreements or in certificates of deposit.  Money market accounts and certificates of deposit are not secured; reverse repurchase agreements are secured by government obligations.  At September 28, 2019 demand deposits of approximately $37.6 million in three banks exceed the $250,000 FDIC insurance limit per bank.

Interest Rate Swaps

Interest Rate Swaps – The Company utilizes interest rate swap contracts to reduce its exposure to fluctuations in variable interest rates for future interest payments on some of its debt instruments.  For determining the fair value of the interest rate swap contract, the Company uses significant observable market data or assumptions about counterparty risk.  The fair value estimates reflect an income approach based on the terms of the interest rate swap contracts and inputs corroborated by observable market data including interest rate curves.  The Company has designated its swaps as cash flow hedges, for which the Company records the effective portions of changes in its fair value, net of tax, in other comprehensive income (loss).  To the extent interest rate swaps are determined to be ineffective, the Company recognizes the change in the estimated fair value of the swaps in earnings.

Allowance for Doubtful Accounts

Allowance for Doubtful Accounts – Accounts receivable are primarily from vendor allowances, customer charges and pharmacy insurance company reimbursements.  Accounts receivable are stated net of an allowance for uncollectible accounts, which is determined through analysis of the aging of accounts receivable at the date of the consolidated financial statements and assessments of the collectability based upon historical collection activity adjusted for current conditions.

Inventories

Inventories – Substantially all of the Company’s inventory consists of finished goods.  Warehouse inventories are valued at the lower of average cost or market.  Store inventories are valued using the retail method under which inventories at cost (and the resulting gross margins) are determined by applying a calculated cost-to-retail ratio to the retail value of inventories.  As an integral part of valuing inventory at cost, management makes certain judgments and estimates for standard gross margins, allowances for vendor consideration, markdowns and shrinkage.  Warehousing and distribution costs are not included in the valuation of inventories.  The Company reviews its judgments and estimates regularly and makes adjustments where facts and circumstances dictate. 

Property, Equipment and Depreciation

Property, Equipment and Depreciation  Property and equipment are stated at cost and depreciated over the estimated useful lives by the straight-line method.  Buildings are generally depreciated over 30 years.  Store, office and warehouse equipment is generally depreciated over three to 10 years.  Transportation equipment is generally depreciated over three to five years.  Leasehold improvements are depreciated over the shorter of the subject lease term or the useful life of the asset, generally from three to 30 years.  Depreciation and amortization expense totaled $112.5 million,  $113.1 million and $110.9 million for fiscal years 2019, 2018 and 2017, respectively.

Asset Impairments

Asset Impairments – The Company accounts for the impairment of long-lived assets in accordance with FASB Accounting Standards Codification (“FASB ASC”) Topic 360.  Asset groups are primarily comprised of individual store 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, less 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.

Nonqualified Investment Plan

Nonqualified Investment Plan The purpose of the Executive Nonqualified Excess Plan is to provide retirement benefits similar to the Company’s Investment/Profit Sharing Plan to certain of the Company’s management employees who are otherwise subject to limited participation in the 401(k) feature of the Company’s Investment/Profit Sharing Plan.  Participant retirement account balances are liabilities of the Company.  Assets of the plan are assets of the Company and are held in trust for employees and distributed upon retirement, death, disability, in-service distributions, or termination of employment.  In accordance with the trust, the Company may not use these assets for general corporate purposes.  Life insurance policies and marketable securities held in the trust are included in the caption “Other assets” in the Consolidated Balance Sheets.

Self-Insurance

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 $1,000,000 per occurrence for workers’ compensation, $500,000 for general liability, and $450,000 per covered person for medical care benefits for a policy year.  Effective October 1, 2019 the excess liability limit was increased to $1,000,000 for general liability.  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 Company’s self-insurance reserves totaled $31.0 million and $34.7 million for employee group insurance, workers’ compensation insurance and general liability insurance at September 28, 2019 and September 29, 2018, respectively.  These amounts are inclusive of expected recoveries from excess cost insurance or other sources that are recorded as receivables of $3.6 at September 28, 2019 and $4.6 million at September 29, 2018.  The Company is required in certain cases to obtain letters of credit to support its self-insured status.  At fiscal year-end 2019, the Company’s self-insured liabilities were supported by a $2.6 million certificate of deposit and by $9.0 million of undrawn letters of credit which expire between September and October 2019.  The Company carries casualty insurance only on those properties where it is required to do so. The Company has elected to self-insure its other properties.

Income Taxes

Income Taxes – The Company accounts for income taxes under FASB ASC Topic 740.  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.  The Company accounts for uncertainty in income taxes by prescribing a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken on a tax return.



The Company files income tax returns with federal and various state jurisdictions.  With few exceptions, the Company is no longer subject to federal or state income tax examinations by tax authorities for the years before tax year 2015.  Examinations may challenge certain of the Company’s tax positions.  Actual results could materially differ from these estimates and could significantly affect the effective tax rate and cash flows in the future years.



Valuation allowances are established when necessary to reduce deferred tax assets to the amount more likely than not expected to be realized.



Gross unrecognized tax benefits as well as interest and penalties related to uncertain tax positions could affect the Company’s effective tax rate.  These amounts are insignificant for fiscal years 2019, 2018, and 2017.

Pre-Opening Costs

Pre-Opening Costs – Costs associated with the opening of new stores are expensed when incurred.

Per-Share Amounts

Per-Share Amounts – The Company calculates earnings per share using the two-class method in accordance with FASB ASC Topic 260.

Advertising

Advertising – The Company expenses advertising as incurred.  Advertising and promotion expenses, net of vendor allowance reimbursements, totaled $10.0 million, $12.6 million and $12.5 million for fiscal years 2019, 2018 and 2017, respectively.

Use of Estimates

Use of Estimates – The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.  Although these estimates are based on management’s knowledge of current events and actions it may undertake in the future, they may ultimately differ from actual results.  Such estimates include the allowance for doubtful accounts, various inventory reserves, realizability of deferred tax assets, and self-insurance reserves.

Cost of Goods Sold

Cost of Goods Sold –  In addition to the direct product cost, cost of goods sold for the grocery segment includes inbound freight charges and costs of the Company’s distribution network.  Milk processing is a manufacturing process.  Therefore, cost of goods sold include direct product and production costs, inbound freight, purchasing and receiving costs, inspection costs, warehousing costs, internal transfer costs, and other costs of distribution.  Depreciation expense included in costs of goods sold totaled $14.5 million, $14.4 million and $15.4 million for fiscal years 2019, 2018 and 2017, respectively.

Operating and Administrative Expenses

Operating and Administrative Expenses –  Operating and administrative expenses include costs incurred for store and administrative labor, occupancy, depreciation (to the extent not included in Cost of Goods Sold), insurance and general administration.

Revenue Recognition

Revenue Recognition – The Company recognizes revenues from grocery segment sales at the point of sale to its customers.  Sales taxes collected from customers are not included in reported revenues.  Discounts provided to customers by the Company at the point of sale, including discounts provided in connection with loyalty cards, are recognized as a reduction in sales as the products are sold.  Product returns are not significant.



The Company recognizes fluid dairy revenues at the time the risk of loss shifts to the customer pursuant to our terms of sale.  Therefore, approximately 54% of fluid dairy revenues are recognized when the product is picked up by the customer at our facility.  The remaining fluid dairy revenues are recognized when the product is received at the customer’s facility upon delivery via transportation arranged by the Company.



Rental income, including contingent rentals, is recognized on the accrual basis.  Upfront consideration paid by either the Company as lessor or by the lessee is recognized as an adjustment to net rental income using the straight line method over the term of the lease.

Vendor Allowances

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 comprised 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 vendors’ products.  These allowances generally relate to short term arrangements with vendors, often relating to a period of a month or less, and are negotiated on a purchase-by-purchase or transaction-by-transaction basis.  Whenever possible, 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 system constraints 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 $111.7 million, $116.5 million, and $116.6 million for the fiscal years ended September 28, 2019, September 29, 2018 and September 30, 2017, 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 that the related expense is incurred.  Vendor advertising allowances recorded as a reduction of advertising expense totaled $13.8 million, $14.1 million, and $13.8 million for the fiscal years ended September 28, 2019, September 29, 2018 and September 30, 2017, 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 its product advertising, which could increase or decrease its expenditures.



Similarly, the Company is not able to assess the impact of vendor advertising allowances on the creation of additional revenue; as such allowances do not directly generate revenue for its stores

v3.19.3.a.u2
Fair Values Of Financial Instruments
12 Months Ended
Sep. 28, 2019
Fair Values Of Financial Instruments [Abstract]  
Fair Values Of Financial Instruments

14. Fair Values of Financial Instruments



The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments:



Cash and cash equivalents: The carrying amounts reported in the Consolidated Balance Sheets for cash and cash equivalents approximate their fair values.



Receivables: The carrying amounts reported in the Consolidated Balance Sheets for receivables approximate their fair values.



The fair value of the Company’s debt is 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 swap, and non-qualified plan assets at September 28, 2019 is as follows (in thousands):







 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



 

Carrying

 

 

 

 

 



 

Amount

 

Fair Value

 

Fair Value Measurements

Senior Notes

  

$

700,000 

  

$

714,875 

 

Level 2

Facility Bonds

  

 

72,560 

  

  

72,560 

 

Level 2

Secured notes payable and other

  

 

79,678 

  

  

79,678 

 

Level 2

Interest rate swap derivative contract liability

 

 

1,675 

 

 

1,675 

 

Level 2

Non-qualified retirement plan assets

  

 

15,493 

  

 

15,493 

 

Level 2



The fair values for Level 2 measurements were determined primarily using market yields and taking into consideration the underlying terms of the debt.

 

v3.19.3.a.u2
Subsequent Events (Narrative) (Details) - USD ($)
3 Months Ended
Nov. 01, 2019
Dec. 28, 2019
Oct. 01, 2019
Sep. 28, 2019
Sep. 29, 2018
Dec. 31, 2017
Jun. 30, 2013
Interest Rate Swap [Member]              
Derivative notional amount           $ 58,500,000  
Derivative, fixed interest rate           3.92%  
Interest Rate Swap [Member] | Subsequent Event [Member]              
Derivative notional amount     $ 155,000,000        
Derivative, fixed interest rate     2.95%        
Senior Notes, Interest Rate of 5.75%, Maturing 2023 [Member]              
Debt instrument principal amount             $ 700,000,000
Debt instrument stated interest rate       5.75% 5.75%    
Senior Notes, Interest Rate of 5.75%, Maturing 2023 [Member] | Subsequent Event [Member]              
Loan redeption period after rdemption notice 30 days            
Senior Notes, Interest Rate of 5.75%, Maturing 2023 [Member] | Forecast [Member]              
Debt instrument, redemption price as percentage of principal amount   101.917%          
Loss on early extinguishment of debt   $ 3,000,000          
Real Estate Loan (the “Loan”) [Member] | Subsequent Event [Member]              
Debt instrument principal amount $ 155,000,000            
Debt instrument term 10 years            
Debt maturity date Jan. 31, 2030            
Debt instrument, periodic principal payment $ 650,000            
v3.19.3.a.u2
Commitments And Contingencies (Narrative) (Details)
$ in Millions
12 Months Ended
Sep. 28, 2019
USD ($)
Commitments And Contingencies [Abstract]  
Construction commitments $ 6.6
v3.19.3.a.u2
Property And Equipment (Schedule Of Property And Equipment) (Details) - USD ($)
Sep. 28, 2019
Sep. 29, 2018
Property, Plant and Equipment [Line Items]    
Total $ 2,727,161,139 $ 2,613,037,487
Less accumulated depreciation and amortization 1,382,893,824 1,309,993,117
Property and equipment - net 1,344,267,315 1,303,044,370
Land [Member]    
Property, Plant and Equipment [Line Items]    
Total 373,434,259 351,073,344
Construction In Progress [Member]    
Property, Plant and Equipment [Line Items]    
Total 26,206,372 12,393,293
Buildings [Member]    
Property, Plant and Equipment [Line Items]    
Total 1,212,984,091 1,173,237,017
Store, Office and Warehouse Equipment [Member]    
Property, Plant and Equipment [Line Items]    
Total 979,229,721 946,026,834
Transportation Equipment [Member]    
Property, Plant and Equipment [Line Items]    
Total 78,851,265 75,919,047
Leasehold Improvements [Member]    
Property, Plant and Equipment [Line Items]    
Total $ 56,455,431 $ 54,387,952
v3.19.3.a.u2
Property Held For Lease And Rental Income (Schedule Of Minimum Future Rental Income) (Details)
Sep. 28, 2019
USD ($)
Property Held For Lease And Rental Income [Abstract]  
2020 $ 11,265,775
2021 8,855,781
2022 6,967,583
2023 5,862,260
2024 5,145,632
Thereafter 13,723,315
Total minimum future rental income $ 51,820,346
v3.19.3.a.u2
Supplementary Balance Sheet Information (Accrued Expenses And Current Portion Of Other Long-Term Liabilities) (Details) - USD ($)
Sep. 28, 2019
Sep. 29, 2018
Supplementary Balance Sheet Information [Line Items]    
Property, payroll, and other taxes payable $ 20,273,626 $ 22,327,253
Salaries, wages and bonuses payable 31,861,220 29,583,266
Interest 13,342,260 13,397,615
Other 5,025,885 3,240,303
Total 83,649,283 82,124,766
Employee Group Insurance [Member]    
Supplementary Balance Sheet Information [Line Items]    
Self-insurance liabilities 5,704,565 5,257,120
Workers' Compensation Insurance [Member]    
Supplementary Balance Sheet Information [Line Items]    
Self-insurance liabilities 4,287,445 5,079,514
General Liability Insurance [Member]    
Supplementary Balance Sheet Information [Line Items]    
Self-insurance liabilities $ 3,154,282 $ 3,239,695
v3.19.3.a.u2
Income Taxes (Tables)
12 Months Ended
Sep. 28, 2019
Income Taxes [Abstract]  
Schedule Of Deferred Income Tax Liabilities And Assets



 

 

 

 

 

 



 

 

 

 

 

 



 

2019

 

2018

Deferred tax liabilities:

 

 

 

 

 

 

Property and equipment tax/book differences

 

$

88,151,000 

 

$

87,577,000 

Property tax method

 

 

1,228,000 

 

 

1,156,000 

Total deferred tax liabilities

 

 

89,379,000 

 

 

88,733,000 

Deferred tax assets:

 

 

 

 

 

 

Insurance reserves

 

 

4,280,000 

 

 

4,790,000 

Advance payments on purchases contracts

 

 

698,000 

 

 

761,000 

Vacation accrual

 

 

1,723,000 

 

 

1,652,000 

Inventory

 

 

1,086,000 

 

 

1,055,000 

Deferred compensation

 

 

4,002,000 

 

 

3,662,000 

Other

 

 

2,091,000 

 

 

2,352,000 

Total deferred tax assets

 

 

13,880,000 

 

 

14,272,000 

Net deferred tax liabilities

 

$

75,499,000 

 

$

74,461,000 



Schedule Of Income Tax Expense Reconciliation



 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

2019

 

2018

 

2017

Federal tax at statutory rate

 

$

22,386,000 

 

$

19,678,000 

 

$

29,492,000 

State income tax, net of federal tax benefits

 

 

3,726,000 

 

 

3,528,000 

 

 

2,774,000 

Federal tax credits

 

 

(1,184,000)

 

 

(1,052,000)

 

 

(1,024,000)

Tax rate change on deferred tax balance as of Federal law
  enactment date

 

 

 —

 

 

(26,680,000)

 

 

 —

Tax method change

 

 

 —

 

 

(10,606,000)

 

 

 —

Tax rate change effect of FY18 current deferred activity

 

 

 —

 

 

(2,124,000)

 

 

 —

Other

 

 

90,000 

 

 

210,000 

 

 

(854,000)

Total

 

$

25,018,000 

 

$

(17,046,000)

 

$

30,388,000 



Schedule Of Current And Deferred Income Tax Expense (Benefit)



 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

2019

 

2018

 

2017

Current:

 

 

 

 

 

 

 

 

 

Federal

 

$

18,774,000 

 

$

(21,596,000)

 

$

26,994,000 

State

 

 

4,797,000 

 

 

7,000 

 

 

4,925,000 

Total current

 

 

23,571,000 

 

 

(21,589,000)

 

 

31,919,000 

Deferred:

 

 

 

 

 

 

 

 

 

Federal

 

 

1,510,000 

 

 

1,020,000 

 

 

(1,104,000)

State

 

 

(63,000)

 

 

3,523,000 

 

 

(427,000)

Total deferred

 

 

1,447,000 

 

 

4,543,000 

 

 

(1,531,000)

Total expense (benefit)

 

$

25,018,000 

 

$

(17,046,000)

 

$

30,388,000 



v3.19.3.a.u2
Cash Flow Information
12 Months Ended
Sep. 28, 2019
Cash Flow Information [Abstract]  
Cash Flow Information

15. Cash Flow Information



Supplemental disclosure of cash flow information is as follows:







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

2019

 

2018

 

2017

Cash paid during the year for:

 

 

 

 

 

 

 

 

 

Interest (net of amounts capitalized)

 

$

47,465,459 

 

$

47,347,470 

 

$

46,689,266 

Income taxes

 

 

(11,697,668)

 

 

13,672,964 

 

 

28,415,489 

Non cash items:

 

 

 

 

 

 

 

 

 

Property and equipment additions included in accounts payable

 

 

8,007,879 

 

 

8,161,384 

 

 

7,213,949 

 

v3.19.3.a.u2
Supplementary Balance Sheet Information (Tables)
12 Months Ended
Sep. 28, 2019
Supplementary Balance Sheet Information [Abstract]  
Accrued Expenses and Current Portion of Other Long-Term Liabilities



 

 

 

 

 

 



 

 

 

 

 

 



 

2019

 

2018

Property, payroll, and other taxes payable

 

$

20,273,626 

 

$

22,327,253 

Salaries, wages, and bonuses payable

 

 

31,861,220 

 

 

29,583,266 

Self-insurance liabilities:

 

 

 

 

 

 

Employee group insurance

 

 

5,704,565 

 

 

5,257,120 

Workers’ compensation insurance

 

 

4,287,445 

 

 

5,079,514 

General liability insurance

 

 

3,154,282 

 

 

3,239,695 

Interest

 

 

13,342,260 

 

 

13,397,615 

Other

 

 

5,025,885 

 

 

3,240,303 

Total accrued expenses and current portion of other long-term liabilities

 

$

83,649,283 

 

$

82,124,766 



Schedule of Other Long-Term Liabilities



 

 

 

 

 

 



 

 

 

 

 

 



 

2019

 

2018

Advance payments on purchases contracts

 

$

2,856,569 

 

$

3,115,106 

Deferred lease expense

 

 

1,949,992 

 

 

1,941,708 

Nonqualified investment plan liability

 

 

16,446,037 

 

 

15,033,318 

Self-insurance liabilities:

 

 

 

 

 

 

Workers’ compensation insurance

 

 

13,814,615 

 

 

16,333,768 

General liability insurance

 

 

4,050,070 

 

 

4,776,234 

Other

 

 

3,906,319 

 

 

2,124,800 

Other long-term liabilities

 

 

43,023,602 

 

 

43,324,934 

Less current portion

 

 

1,133,920 

 

 

1,166,773 

Total other long-term liabilities

 

$

41,889,682 

 

$

42,158,161 



v3.19.3.a.u2
Fair Values Of Financial Instruments (Carrying Amount And Fair Value Of Debt, Interest Rate Swap And Non-Qualified Plan Assetst) (Details) - Level 2 [Member]
$ in Thousands
Sep. 28, 2019
USD ($)
Carrying Amount [Member] | Non-Qualified Retirement Plan [Member]  
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]  
Debt $ 15,493
Carrying Amount [Member] | Interest Rate Swap [Member]  
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]  
Debt 1,675
Fair Value [Member] | Non-Qualified Retirement Plan [Member]  
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]  
Debt 15,493
Fair Value [Member] | Interest Rate Swap [Member]  
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]  
Debt 1,675
Senior Notes [Member] | Carrying Amount [Member]  
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]  
Debt 700,000
Senior Notes [Member] | Fair Value [Member]  
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]  
Debt 714,875
Facility Bonds [Member] | Carrying Amount [Member]  
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]  
Debt 72,560
Facility Bonds [Member] | Fair Value [Member]  
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]  
Debt 72,560
Secured Notes Payable And Other [Member] | Carrying Amount [Member]  
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]  
Debt 79,678
Secured Notes Payable And Other [Member] | Fair Value [Member]  
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]  
Debt $ 79,678
v3.19.3.a.u2
Supplementary Balance Sheet Information (Narrative) (Details) - USD ($)
$ in Millions
12 Months Ended
Sep. 28, 2019
Sep. 29, 2018
Sep. 30, 2017
Supplementary Balance Sheet Information [Abstract]      
Employee insurance expense $ 37.3 $ 37.7 $ 33.1
v3.19.3.a.u2
Income Taxes (Schedule Of Current And Deferred Income Tax Expense (Benefit)) (Details) - USD ($)
12 Months Ended
Sep. 28, 2019
Sep. 29, 2018
Sep. 30, 2017
Income Taxes [Abstract]      
Federal, current $ 18,774,000 $ (21,596,000) $ 26,994,000
State, current 4,797,000 7,000 4,925,000
Total current 23,571,000 (21,589,000) 31,919,000
Federal, deferred 1,510,000 1,020,000 (1,104,000)
State, deferred (63,000) 3,523,000 (427,000)
Total deferred 1,447,000 4,543,000 (1,531,000)
Total expense (benefit) $ 25,018,000 $ (17,046,000) $ 30,388,000
v3.19.3.a.u2
Property Held For Lease And Rental Income (Schedule Of Owned Properties Under Operating Leases By Major Classes) (Details) - USD ($)
Sep. 28, 2019
Sep. 29, 2018
Property Subject to or Available for Operating Lease [Line Items]    
Property subject to operating lease, Gross $ 237,292,643 $ 225,048,909
Less accumulated depreciation (97,321,740) (108,754,494)
Total 139,970,903 116,294,415
Land [Member]    
Property Subject to or Available for Operating Lease [Line Items]    
Property subject to operating lease, Gross 57,568,972 54,348,413
Buildings [Member]    
Property Subject to or Available for Operating Lease [Line Items]    
Property subject to operating lease, Gross $ 179,723,671 $ 170,700,496
v3.19.3.a.u2
Long-Term Debt (Schedule Of Maturities Of Long-Term Debt) (Details) - USD ($)
Sep. 28, 2019
Sep. 29, 2018
Long-Term Debt [Abstract]    
2020 $ 14,286,665  
2021 14,453,256  
2022 14,625,277  
2023 714,804,840  
2024 14,991,327  
Thereafter 84,347,217  
Less unamortized prepaid loan costs (5,270,760) $ (6,038,125)
Total long-term debt $ 852,237,822 $ 865,587,773
v3.19.3.a.u2
Long-Term Debt (Narrative) (Details)
1 Months Ended 12 Months Ended
Dec. 31, 2010
USD ($)
ft²
Sep. 28, 2019
USD ($)
Sep. 29, 2018
USD ($)
Dec. 31, 2017
USD ($)
Sep. 30, 2017
USD ($)
Jun. 30, 2013
USD ($)
Debt Instrument [Line Items]            
Change in fair value of interest rate swap   $ (1,674,636)        
Other long-term liabilities   41,889,682 $ 42,158,161      
Property and equipment with undepreciated cost pledge as collateral for long term debt   198,200,000        
Interest Rate Swap [Member]            
Debt Instrument [Line Items]            
Derivative notional amount       $ 58,500,000    
Derivative, fixed interest rate       3.92%    
Change in fair value of interest rate swap   1,300,000        
Other long-term liabilities   $ 1,700,000        
Senior Notes, Interest Rate of 5.75%, Maturing 2023 [Member]            
Debt Instrument [Line Items]            
Debt instrument principal amount           $ 700,000,000
Maturity period of senior notes   2023        
Debt instrument stated interest rate   5.75% 5.75%      
Redemption period of senior notes description   redeem all or a portion of the Notes at any time on or after June 15, 2018        
Redemption of senior notes, date   Jun. 15, 2018        
Secured Debt [Member]            
Debt Instrument [Line Items]            
Debt instrument principal amount         $ 60,000,000  
Debt maturity date   Oct. 01, 2027        
Monthly principal amortization   $ 500,000        
Recovery Zone Facility Bonds [Member]            
Debt Instrument [Line Items]            
Debt maturity date Jan. 01, 2036          
Total amount of bonds funded $ 99,700,000          
Total area of new warehouse and distribution center | ft² 830,000          
Annual amount of redemption of bonds   4,500,000        
Credit Line [Member]            
Debt Instrument [Line Items]            
Line of credit facility borrowing capacity   175,000,000        
Borrowings outstanding   $ 0        
Line of credit facility expiration date   Sep. 30, 2022        
Credit Line [Member] | Unused Letters Of Credit [Member]            
Debt Instrument [Line Items]            
Line of credit facility borrowing capacity   $ 20,000,000        
Unused letters of credit issued   $ 9,000,000        
v3.19.3.a.u2
Segment Information (Narrative) (Details)
$ in Millions
12 Months Ended
Sep. 28, 2019
USD ($)
segment
Sep. 29, 2018
USD ($)
Sep. 30, 2017
USD ($)
Segment Reporting Information [Line Items]      
Number of operating segments | segment 1    
Fluid dairy [Member]      
Segment Reporting Information [Line Items]      
Sales eliminated in consolidation | $ $ 42.1 $ 41.1 $ 45.9
v3.19.3.a.u2
Income Taxes (Schedule Of Deferred Income Tax Liabilities And Assets) (Details) - USD ($)
Sep. 28, 2019
Sep. 29, 2018
Income Taxes [Abstract]    
Property and equipment tax/book differences $ 88,151,000 $ 87,577,000
Property tax method 1,228,000 1,156,000
Total deferred tax liabilities 89,379,000 88,733,000
Insurance reserves 4,280,000 4,790,000
Advance payments on purchases contracts 698,000 761,000
Vacation accrual 1,723,000 1,652,000
Inventory 1,086,000 1,055,000
Deferred compensation 4,002,000 3,662,000
Other 2,091,000 2,352,000
Total deferred tax assets 13,880,000 14,272,000
Net deferred tax liabilities $ 75,499,000 $ 74,461,000
v3.19.3.a.u2
Property And Equipment
12 Months Ended
Sep. 28, 2019
Property And Equipment [Abstract]  
Property And Equipment

3. Property and Equipment



Property and equipment, net, consists of the following:







 

 

 

 

 

 



 

 

 

 

 

 



 

2019

 

2018

Land

 

$

373,434,259 

 

$

351,073,344 

Construction in progress

 

 

26,206,372 

 

 

12,393,293 

Buildings

 

 

1,212,984,091 

 

 

1,173,237,017 

Store, office and warehouse equipment

 

 

979,229,721 

 

 

946,026,834 

Transportation equipment

 

 

78,851,265 

 

 

75,919,047 

Leasehold improvements

 

 

56,455,431 

 

 

54,387,952 

Total

 

 

2,727,161,139 

 

 

2,613,037,487 

Less accumulated depreciation and amortization

 

 

1,382,893,824 

 

 

1,309,993,117 

Property and equipment - net

 

$

1,344,267,315 

 

$

1,303,044,370 

 

v3.19.3.a.u2
Long-Term Debt (Tables)
12 Months Ended
Sep. 28, 2019
Long-Term Debt [Abstract]  
Schedule of Long-Term Debt And Short-Term Loans



 

 

 

 

 

 



 

 

 

 

 

 



 

2019

 

2018

Bonds payable:

 

 

 

 

 

 

Senior notes, interest rate of 5.75%, maturing 2023

 

$

700,000,000 

 

$

700,000,000 

Recovery Zone Facility Bonds, maturing 2036

 

 

72,560,000 

 

 

77,090,000 

Outstanding line of credit, weighted average interest rate of 5.75% for 2019

 

 

 —

 

 

 —

Notes payable due to banks, weighted average interest rate of 4.43% for 2019

  and 3.68% for 2018

 

 

84,948,582 

 

 

94,535,898 

Less unamortized prepaid loan costs

 

 

(5,270,760)

 

 

(6,038,125)

Total long-term debt

 

 

852,237,822 

 

 

865,587,773 

Less current portion

 

 

12,600,131 

 

 

12,848,013 

Long-term debt, net of current portion

 

$

839,637,691 

 

$

852,739,760 



Schedule Of Redemption Prices Of Senior Notes



 

Year

 

2018

102.875%

2019

101.917%

2020

100.958%

2021 and thereafter

100.000%



Schedule Of Components Of Interest Costs



 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

2019

 

2018

 

2017

Total interest costs

 

$

48,675,993 

 

$

48,707,921 

 

$

48,675,895 

Interest capitalized

 

 

(1,265,889)

 

 

(1,138,218)

 

 

(1,217,862)

Interest expense

 

$

47,410,104 

 

$

47,569,703 

 

$

47,458,033 



Schedule of Maturities of Long-Term Debt



 

 

 



 

 

 

Fiscal Year

 

 

 

2020

 

$

14,286,665 

2021

 

 

14,453,256 

2022

 

 

14,625,277 

2023

 

 

714,804,840 

2024

 

 

14,991,327 

Thereafter

 

 

84,347,217 

Less unamortized prepaid loan costs

 

 

(5,270,760)

Total

 

$

852,237,822 



v3.19.3.a.u2
Document And Entity Information - USD ($)
12 Months Ended
Sep. 28, 2019
Dec. 05, 2019
Mar. 30, 2019
Document Type 10-K    
Amendment Flag false    
Document Period End Date Sep. 28, 2019    
Document Fiscal Year Focus 2019    
Document Fiscal Period Focus FY    
Title of 12(b) Security Class A Common Stock, $0.05 par value per share    
Trading Symbol IMKTA    
Security Exchange Name NASDAQ    
Entity Registrant Name INGLES MARKETS INC    
Entity Central Index Key 0000050493    
Current Fiscal Year End Date --09-28    
Entity Filer Category Accelerated Filer    
Entity Current Reporting Status Yes    
Entity Voluntary Filers No    
Entity Well-known Seasoned Issuer No    
Entity Small Business false    
Entity Emerging Growth Company false    
Entity Shell Company false    
Entity Public Float     $ 398,000,000
Class A Common Stock [Member]      
Entity Common Stock, Shares Outstanding   14,180,485  
Class B Common Stock [Member]      
Entity Common Stock, Shares Outstanding   6,079,291  
v3.19.3.a.u2
Consolidated Statements Of Changes In Stockholders' Equity - USD ($)
Class A Common Stock [Member]
Common Stock [Member]
Class A Common Stock [Member]
Retained Earnings [Member]
Class A Common Stock [Member]
Class B Common Stock [Member]
Common Stock [Member]
Class B Common Stock [Member]
Retained Earnings [Member]
Class B Common Stock [Member]
Paid-in Capital in Excess of Par Value [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Retained Earnings [Member]
Total
Balance at Sep. 24, 2016 $ 698,324     $ 314,665     $ 12,311,249   $ 456,851,372 $ 470,175,610
Balance (in shares) at Sep. 24, 2016 13,966,476     6,293,300            
Net income                 53,873,580 53,873,580
Cash dividends   $ (9,254,502) $ (9,254,502)   $ (3,742,685) $ (3,742,685)        
Common stock conversions $ 5,878     $ (5,878)            
Common stock conversions (in shares) 117,568     (117,568)            
Balance at Sep. 30, 2017 $ 704,202     $ 308,787     12,311,249   497,727,765 511,052,003
Balance (in shares) at Sep. 30, 2017 14,084,044     6,175,732            
Net income                 97,364,628 97,364,628
Cash dividends   (9,316,501) (9,316,501)   (3,686,322) (3,686,322)        
Common stock conversions $ 3,067     $ (3,067)            
Common stock conversions (in shares) 61,341     (61,341)            
Balance at Sep. 29, 2018 $ 707,269     $ 305,720     12,311,249   582,089,570 595,413,808
Balance (in shares) at Sep. 29, 2018 14,145,385     6,114,391            
Net income                 81,580,002 81,580,002
Other comprehensive (expense) income, net of income tax               $ (1,265,650)   (1,265,650)
Cash dividends   $ (9,346,549) $ (9,346,549)   $ (3,659,005) $ (3,659,005)        
Common stock conversions $ 1,755     $ (1,755)            
Common stock conversions (in shares) (35,100)     35,100            
Balance at Sep. 28, 2019 $ 709,024     $ 303,965     $ 12,311,249 $ (1,265,650) $ 650,664,019 $ 662,722,606
Balance (in shares) at Sep. 28, 2019 14,180,485     6,079,291            
v3.19.3.a.u2
Fair Values Of Financial Instruments (Tables)
12 Months Ended
Sep. 28, 2019
Fair Values Of Financial Instruments [Abstract]  
Carrying Amount And Fair Value Of Debt, Interest Rate Swap And Non-Qualified Plan Assets



 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



 

Carrying

 

 

 

 

 



 

Amount

 

Fair Value

 

Fair Value Measurements

Senior Notes

  

$

700,000 

  

$

714,875 

 

Level 2

Facility Bonds

  

 

72,560 

  

  

72,560 

 

Level 2

Secured notes payable and other

  

 

79,678 

  

  

79,678 

 

Level 2

Interest rate swap derivative contract liability

 

 

1,675 

 

 

1,675 

 

Level 2

Non-qualified retirement plan assets

  

 

15,493 

  

 

15,493 

 

Level 2



v3.19.3.a.u2
Segment Information
12 Months Ended
Sep. 28, 2019
Segment Information [Abstract]  
Segment Information

11. Segment Information



The Company operates one primary business segment, retail grocery sales (representing the aggregation of individual retail stores).  “Other” includes the Company’s remaining operations -- fluid dairy and shopping center rentals.  Information about the Company’s operations by lines of business (amounts in thousands) is as follows:







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

2019

 

2018

 

2017

Revenues from unaffiliated customers:

 

 

 

 

 

 

 

 

 

Grocery

 

$

1,443,394 

 

$

1,413,088 

 

$

1,424,891 

Non-foods

 

 

936,173 

 

 

874,677 

 

 

858,409 

Perishables

 

 

1,110,684 

 

 

1,078,693 

 

 

1,061,560 

Gasoline

 

 

581,146 

 

 

604,897 

 

 

515,857 

Total retail

 

 

4,071,397 

 

 

3,971,355 

 

 

3,860,717 

Other

 

 

130,637 

 

 

121,450 

 

 

141,983 

Total revenues from unaffiliated customers

 

$

4,202,034 

 

$

4,092,805 

 

$

4,002,700 

Income before income taxes:

 

 

 

 

 

 

 

 

 

Retail

 

$

135,395 

 

$

111,165 

 

$

112,017 

Other

 

 

16,798 

 

 

13,659 

 

 

15,896 

Total income from operations

 

 

152,193 

 

 

124,824 

 

 

127,913 

Other income, net

 

 

1,815 

 

 

3,065 

 

 

3,807 

Interest expense

 

 

47,410 

 

 

47,570 

 

 

47,458 

Income before income taxes

 

$

106,598 

 

$

80,319 

 

$

84,262 

Assets:

 

 

 

 

 

 

 

 

 

Retail

 

$

1,698,904 

 

$

1,679,301 

 

$

1,600,699 

Other

 

 

170,720 

 

 

147,988 

 

 

135,076 

Elimination of intercompany receivable

 

 

(2,296)

 

 

(2,378)

 

 

(2,469)

Total assets

 

$

1,867,328 

 

$

1,824,911 

 

$

1,733,306 

Capital expenditures:

 

 

 

 

 

 

 

 

 

Retail

 

$

155,215 

 

$

147,851 

 

$

125,866 

Other

 

 

6,536 

 

 

2,636 

 

 

1,830 

Total capital expenditures

 

$

161,751 

 

$

150,487 

 

$

127,696 

Depreciation and amortization:

 

 

 

 

 

 

 

 

 

Retail

 

$

104,970 

 

$

105,564 

 

$

103,304 

Other

 

 

7,550 

 

 

7,519 

 

 

7,625 

Total depreciation and amortization

 

$

112,520 

 

$

113,083 

 

$

110,929 



The grocery category includes grocery, dairy, and frozen foods.

The non-foods category includes alcoholic beverages, tobacco, pharmacy, and health/beauty/cosmetic products.

The perishable category includes meat, produce, deli and bakery.



The fluid dairy operation, included in “Other”, had $42.1 million, $41.1 million and $45.9 million in sales to the grocery sales segment in fiscal 2019, 2018 and 2017, respectively.  These sales were eliminated in consolidation.

 

v3.19.3.a.u2
Long-Term Debt
12 Months Ended
Sep. 28, 2019
Long-Term Debt [Abstract]  
Long-Term Debt

7. Long-Term Debt



Long-term debt and short-term loans are summarized as follows:







 

 

 

 

 

 



 

 

 

 

 

 



 

2019

 

2018

Bonds payable:

 

 

 

 

 

 

Senior notes, interest rate of 5.75%, maturing 2023

 

$

700,000,000 

 

$

700,000,000 

Recovery Zone Facility Bonds, maturing 2036

 

 

72,560,000 

 

 

77,090,000 

Outstanding line of credit, weighted average interest rate of 5.75% for 2019

 

 

 —

 

 

 —

Notes payable due to banks, weighted average interest rate of 4.43% for 2019

  and 3.68% for 2018

 

 

84,948,582 

 

 

94,535,898 

Less unamortized prepaid loan costs

 

 

(5,270,760)

 

 

(6,038,125)

Total long-term debt

 

 

852,237,822 

 

 

865,587,773 

Less current portion

 

 

12,600,131 

 

 

12,848,013 

Long-term debt, net of current portion

 

$

839,637,691 

 

$

852,739,760 



In June 2013, the Company issued $700.0 million aggregate principal amount of senior notes due in 2023 (the “Notes”) in a private placement.  The Notes bear an interest rate of 5.75% per annum and were issued at par. The Company filed a registration statement with the Securities and Exchange Commission and exchanged the private placement notes with registered notes.



The Company may redeem all or a portion of the Notes at any time on or after June 15, 2018 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

 

2018

102.875%

2019

101.917%

2020

100.958%

2021 and thereafter

100.000%



The Company has a $175.0 million line of credit (the “Line”) that matures in September 2022.  The Line provides the Company with various interest rate options based on the prime rate, the Federal Funds Rate, or the London Interbank Offering Rate. The Line allows the Company to issue up to $20.0 million in unused letters of credit, of which $9.0 million of unused letters of credit were issued at September 28, 2019.  The Company is not required to maintain compensating balances in connection with the Line.   At September 28, 2019, the Company had no borrowing outstanding under the Line.



In December 2010, the Company completed the funding of $99.7 million of Recovery Zone Facility Bonds (the “Bonds”) for construction and equipping of an approximately 830,000 square foot new warehouse and distribution center to be located in Buncombe County, North Carolina (the “Project”).  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 would hold the Bonds until September 2026, 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.  During fiscal year 2018, the Covenant Agreement was amended to change certain terms and to extend the maturity to September 2026. The Company may redeem the Bonds without penalty or premium at any time prior to September 26, 2026.



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 LIBOR (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.



The Notes, the Bonds and the Line 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 to the Company 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 respective loan documents.  The Company was in compliance with all financial covenants related to the Notes, the Bonds and Line at September 28, 2019.



The Company’s long-term debt agreements generally have cross-default provisions which could result in the acceleration of payments due under the Company’s line of credit, Bond and Notes indenture in the event of default under any one instrument.



In September 2017, the Company refinanced approximately $60 million secured borrowing obligations that were scheduled to mature in fiscal years 2018-2020 with a LIBOR-based floating rate loan maturing in October 2027.  In December 2017, the Company entered into an interest rate swap contract to convert the variable interest rate on this loan to a fixed interest rate.  The notional amount of the interest rate swap at inception was $58.5 million and declines each month by $0.5 million, consistent with the required principal payments of the loan.   The interest rate swap has a fixed interest rate leg of 3.92% and a variable interest rate leg based on 1-month LIBOR. 



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 swap.  The Company has designated the swap as a cash flow hedge and records the changes in the estimated fair value of the swap to other comprehensive income each period.  For the year ended September 28, 2019 the Company recorded $1.3 million of other comprehensive expense, respectively, net of income taxes, in its Consolidated Statements of Comprehensive income.  Unrealized losses of $1.7 million are recorded as a liability at fair value in the line “Other Long Term Liabilities” on the Consolidated Balance Sheet as of September 28, 2019



Failure of the swap counterparty to make payments would result in the loss of any potential benefit to the Company under the swap agreement.  In this case, the Company would still be obligated to pay the variable interest payments underlying the debt agreements.  Additionally, failure of the swap counterparty would not eliminate the Company’s obligation to continue to make payments under the existing swap agreement if it continues to be in a net pay position. 



At September 28, 2019, property and equipment with an undepreciated cost of approximately $198.2 million was pledged as collateral for long-term debt.  Long-term debt and Line agreements contain various restrictive covenants requiring, among other things, minimum levels of net worth and maintenance of certain financial ratios.  In addition, certain loan agreements containing provisions outlining minimum tangible net worth requirements restrict the ability of the Company to pay cash dividends in excess of the current annual per share dividends paid on the Company’s Class A and Class B Common Stock.  Further, the Company is prevented from paying cash dividends at any time that it is in default under the indenture governing the Notes.  In addition, the terms of the indenture may restrict the ability of the Company to pay additional cash dividends based on certain financial parameters.



Components of interest costs are as follows:







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

2019

 

2018

 

2017

Total interest costs

 

$

48,675,993 

 

$

48,707,921 

 

$

48,675,895 

Interest capitalized

 

 

(1,265,889)

 

 

(1,138,218)

 

 

(1,217,862)

Interest expense

 

$

47,410,104 

 

$

47,569,703 

 

$

47,458,033 



Maturities of long-term debt at September 28, 2019 are as follows:







 

 

 



 

 

 

Fiscal Year

 

 

 

2020

 

$

14,286,665 

2021

 

 

14,453,256 

2022

 

 

14,625,277 

2023

 

 

714,804,840 

2024

 

 

14,991,327 

Thereafter

 

 

84,347,217 

Less unamortized prepaid loan costs

 

 

(5,270,760)

Total

 

$

852,237,822