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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D. C. 20549
FORM 10-K
[X] Annual report pursuant to SectionANNUAL REPORT PURSUANT TO SECTION 13 orOR 15(d) of the Securities
Exchange Act ofOF THE SECURITIES
EXCHANGE ACT OF 1934 (Fee Required)
For the fiscal year ended September 24, 199428, 1996
------------------
[ ] Transition report pursuant to SectionTRANSITION REPORT PURSUANT TO SECTION 13 orOR 15(d) of the Securities
Exchange Act ofOF THE SECURITIES
EXCHANGE ACT OF 1934 (No Fee Required)
For the transition period from _________________ to ___________________________________.
Commission File Number 0-14706
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INGLES MARKETS, INCORPORATED
- --------------------------------------------------------------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
North Carolina 56-0846267
- -------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer ID no.)
incorporation or organization)
P.O. Box 6676, Asheville, NC 28816
- -------------------------------- ------------------------
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (704) 669-2941
------------------------
North Carolina 56-0846267
- ------------------------------- ---------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 6676, Asheville, NC 28816
- ------------------------------- ---------------------------
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number,
including area code: (704) 669-2941
---------------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
- ------------------------------- ---------------------------
None None
- ------------------------------- ---------------------------
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, $0.05 par value
Class B Common Stock, $0.05 par value
-------------------------------------
Convertible Subordinated Debentures due October 2008
----------------------------------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO .
----- -------- ---
Exhibit Index is Located on pages 5247 - 54
---- ----48
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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. (X)( )
As of December 9, 1994,10, 1996, 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 theThe Nasdaq Stock Market's National Market (National Market) on December
9,
1994,10, 1996, was approximately $52,400,000.$91.0 million.
As of December 9, 1994,10, 1996, the registrant had 4,424,9926,500,917 shares of Class A
Common Stock outstanding and 13,479,15812,999,171 shares of Class B Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement to be used in connection with the
solicitation of proxies to be voted at the registrant's annual meeting of
stockholders to be held on February 21, 1995,18, 1997, to be filed with the Commission,
are incorporated by reference into Part III of this Report on Form 10-K.
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PART I
Item 1. BUSINESS
General
Ingles Markets, Incorporated ("Ingles" or the "Company") is a leading
regional
supermarket chain with operations in six southeastern states. At September 24,
1994,28,
1996, the Company, headquartered in Asheville, North Carolina, operated 175188
supermarkets in North Carolina, South Carolina, Georgia, Tennessee, Virginia
and Alabama. Ingles' strategy is to locate its supermarkets primarily in
suburban areas, small towns and rural communities, where management believes
the market may be underserved by existing supermarkets. The Company's existing
stores average approximately 32,00036,000 square feet.
The Company currently has
underway an on-goingresumed its new store opening, expansion, remodel and/or
replacement program to upgrade
certain existing supermarkets to ain fiscal 1994 and continued this program in fiscal 1995
and 1996. During fiscal 1996, seven new 52,000 square foot prototype store.
This is being done in selected markets,stores were opened, seven older stores
were remodeled and/or replaced and one store was closed. All of the stores
which were remodeled or replaced were enlarged, the results of which have been
excellent, as evidenced by increased sales and market share. Fiscal 1996
capital expenditures, including those relating to the expansion of the existing
warehouse facility, aggregated $107.3 million. The Company believes that its
new store opening, expansion, remodel and/or replacement program contributes to
the continuing success of the Company and should improve monetary returns and
build stockholder value over the long-term. It is the Company's aim to make
Ingles among the most modern supermarket chains in the industry.
During the past five years, the number of supermarkets operated by the Company
increased from 171 to 188. The aggregate sales area in all stores increased
from approximately 3.7 million square feet to approximately 4.7 million square
feet. In addition, weighted average annual sales per store increased from $6.0
million to $7.7 million.
Substantially all stores are located within 250 miles of the Company's 450,000760,000
square foot, state-of-the-art warehouse and distribution center located outside
of Asheville, North Carolina. This facility supplies approximately 62%67% of the
inventory requirements of the Company's supermarkets. Construction is currently underway
to add astores. A 310,000 square foot addition
to the existing warehouse facility which
will accommodatewas completed in October and November 1995.
The addition accommodates an expanded inventory of perishable goods and
increaseincreased dry grocery storage space. The new addition is scheduledenabled the Company to warehouse
and distribute produce for completionthe first time in September
1995.its 33-year history during fiscal
year 1996.
The Company's supermarkets, featuring brightly lit and spacious aisles, offer
the customer a broad selection of nationally advertised food and non-food
products as well as quality productsprivate label items, all at competitive prices with
an emphasis on convenient locations and superior customer service. Each store
is staffed with helpful, friendly employees who provide customers with fast
check-out and carry-out service. Ingles was one of the first supermarket
chains in its region to introduce higher margin specialty departments, such as
delicatessens and bakeries, as well as offering extended operating hours. All
stores are open seven days a week, withweek; many are open 24 hours a day.
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In conjunction with its supermarket activities,operations, the Company owns and operates
7074 neighborhood shopping centers, all but twothree of which contain an Ingles
supermarket. The Company also owns and holds for future development or sale
numerous outparcels and other acreage located adjacent to the shopping centers
whichand store properties it owns.
Ingles also owns and operates, as a wholly-owned subsidiary, a milk processing
and packaging plant which sells approximately 53%58% of its milk and related dairy
products to unaffiliated customers.
During the past five years, the number of supermarkets operated by the Company
increased from 156 to 175. The aggregate sales area in all stores increased
from approximately 3.2 million square feet to approximately 3.9 million square
feet. In addition, weighted average sales per store increased from $6.0
million to $6.9 million.
The Company was founded in 1963 by Robert P. Ingle, the Company's Chairman of the Board
and Chief Executive Officer. As of September 24, 1994,28, 1996, Mr. Ingle retains
approximately 89% of the combined voting power and 70%68% of the total number of
shares of the Company's outstanding Class A Common Stock and Class B Common
Stock (in each case including stock helddeemed to be beneficially owned by Mr.
Ingle as a trusteeone of the trustees of the Company's Investment/Profit Sharing Plan
and Trust). The Company became a publicly heldtraded company in September 1987.
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4Its Class A Common Stock is traded on the Nasdaq National Market tier of the
Nasdaq Stock Market under the symbol IMKTA.
The Company iswas incorporated in 1965 under the Lawslaws of the State of North
Carolina. Its principal executive offices are located at P. O. Box 6676,
Highway 70, Asheville, North Carolina 28816, and its telephone number is
704-669-2941.
Business
The Company operates in two lines of business: retail grocery and food sales
(principally retail sales) and shopping center rentals. ForInformation about the
Company's operations by lines of business (in millions) is as follows (for
information regarding the Company's industry segments, see Note 12 to the
Consolidated Financial Statements on page 4542 of this report on Form 10-K. Information about
the Company's operations by lines of business (in millions) follows:
Fiscal Year Ended September
--------------------------------------------------
1994 1993 1992
---------------- --------------- ---------------
Revenues from
unaffiliated customers:
Grocery and food sales $1,233.5 99.2% $1,141.8 99.3% $1,066.3 99.3%
Shopping center rentals 9.8 .8% 8.0 .7% 7.3 .7%
-------- ----- -------- ----- -------- -----
$1,243.3 100.0% $1,149.8 100.0% $1,073.6 100.0%
======== ===== ======== ===== ======== =====
Income before interest
and income taxes and
cumulative effect of
change in accounting
principle:
Grocery and food sales $ 37.1 85.3% $ 31.0 87.1% $ 23.1 93.9%
Shopping center rentals 6.4 14.7% 4.6 12.9% 1.5 6.1%
-------- ----- -------- ----- -------- -----
43.5 100.0% 35.6 100.0% 24.6 100.0%
===== ===== =====
Interest expense 17.3 17.3 16.2
-------- -------- --------
Total pretax10-K):
Fiscal Year Ended September
-------------------------------------------------
1996 1995 1994
---------------- --------------- --------------
Revenues from
unaffiliated customers:
Grocery and food sales $1,472.6 99.4% $1,385.1 99.4% $1,233.5 99.2%
Shopping center rentals 9.6 .6% 8.3 .6% 9.8 .8%
-------- ----- -------- ----- -------- -----
$1,482.2 100.0% $1,393.4 100.0% $1,243.3 100.0%
======== ===== ======== ===== ======== =====
Income from operations:
Grocery and food sales $ 54.4 91.4% $ 45.3 91.7% $ 35.2 84.6%
Shopping center rentals 5.1 8.6% 4.1 8.3% 6.4 15.4%
-------- ----- -------- ----- -------- -----
59.5 100.0% 49.4 100.0% 41.6 100.0%
===== ===== =====
Other income (expense),
net 3.1 1.9 1.9
Interest expense 29.0 24.7 17.3
-------- -------- --------
Income before income
taxes and cumulative
effect of change in
accounting principle $ 33.6 $ 26.6 $ 26.2 $ 18.3 $ 8.4
======== ======== ========
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Supermarket Operations
The Company follows the strategy of locating its supermarkets primarily in
small towns, rural communities and, in particular with respect to new stores,
suburban areas where management believes the market may be underserved by
existing stores.
At September 24, 1994,28, 1996, the Company operated 172185 supermarkets under the name
"Ingles" and three3 supermarkets under the name "Best Food" in western North
Carolina, western South Carolina, northern Georgia, eastern Tennessee,
southwestern Virginia and northeastern Alabama. The "Best Food" stores are a
newstore concept,
developed in 1994, to accommodateaccommodates a smaller shopping area in a 22,500 square foot
building. The store carryingcarries a full line of dry groceries, fresh meat and
produce, all of which are displayed in a modern readily accessible environment.
OneThe store is also operated in accordance with Ingles' high standards of
the "Best Food" stores replaced
the former "Fine Fare" store. The Company has followedcustomer service and quality products at a strategy of locating
its supermarkets primarily in small towns, rural communities and, particularly
with respect to new stores, suburban areas, where management believes the
market may be underserved by existing supermarkets.low price.
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
---------------------- --------------------
1994 1993 1992 1994 1993 1992
Number of Supermarkets Percentage of Total
at Fiscal Net Sales for Fiscal
Year Ended September Year Ended September
---------------------- --------------------
1996 1995 1994 1996 1995 1994
---- ---- ---- ---- ---- ----
North Carolina 59 57 57 35% 35% 35%
South Carolina 28 28 28 14% 14% 14%
Georgia 76 72 65 38% 38% 37%
Tennessee 21 21 21 11% 11% 12%
Virginia 3 3 3 2% 2% 2%
Alabama 1 1 1 0% 0% 0%
---- ---- ---- ---- ---- ----
North Carolina 57 56 56 35% 35% 35%
South Carolina 28 28 28 14% 15% 16%
Georgia 65 64 64 37% 37% 37%
Tennessee 21 19 19 12% 11% 11%
Virginia 3 3 3 2% 2% 1%
Alabama 1 0 0 0% 0% 0%
--- --- --- --- --- ---
188 182 175 170 170 100% 100% 100%
==== === === === === ===
===
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The Company's supermarkets, featuring brightly lit and spacious aisles, offer
the customer a full line of food items, including grocery, meat and dairy
products, produce and frozen foods, as well as a number of non-food items, such
as health and beauty care products, all at competitive prices with an emphasis
on convenient locations and superior customer service. All stores are open 7
days a week and many are open 24 hours a day. Most of the Company's stores
also contain specialty departments such as delicatessens and bakeries.
Management believes that specialty departments result in higher inventory
turnover than other departments and improve overall profit margins. As an
additional convenience to its customers, the Company leases space to local
banks who independently operate branch banksbranches in 1619 stores.
The Company sells nationala broad selection of nationally advertised brands of
merchandise and carries a wide variety of products under its "Laura Lynn"
private label. The private label products are packed to the Company's
specifications and are generally sold at prices lower than those of national
brands.
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Selected statistics on the Company's supermarket operations are shownpresented
below:
Fiscal Year Ended September
-------------------------------------------
1994 1993 1992 1991 1990
-------- ------- ------- ------- -------
Weighted Average Sales
Per Store (000's) $ 6,930 $ 6,495 $ 6,035 $ 5,990 $ 6,017
Total Square Feet at
End of Year (000's) 5,575 5,299 5,278 5,237 5,015
Average Total Square
Feet per Store 31,859 31,170 31,047 30,628 30,030
Average Square Feet of
Selling Space per Store (1) 22,301 21,819 21,733 21,439 21,021
Average Sales Per Square
Foot of Selling Space (1) $ 314 $ 299 $ 277 $ 282 $ 291
Number of Stores:
Opened 9 3 6 6 18
Closed 4 3 7 2 7
Size of Stores:
Less than 19,999 Sq Ft. 5 6 6 7 7
20,000 - 29,999 Sq Ft. 53 54 55 59 63
30,000 - 39,999 Sq. Ft. 91 92 93 92 89
Greater than 40,000 Sq Ft. 26 18 16 13
Fiscal Year Ended September
-------------------------------------------
1996 1995(1) 1994 1993 1992
------- ------- ------- ------- -------
Weighted Average Sales
Per Store (000's) $ 7,710 $ 7,445 $ 6,930 $ 6,495 $ 6,035
Total Square Feet at
End of Year (000's) 6,746 6,217 5,575 5,299 5,278
Average Total Square
Feet per Store 35,886 34,160 31,859 31,170 31,047
Average Square Feet of
Selling Space per Store (2) 25,120 23,912 22,301 21,819 21,733
Average Sales Per Square
Foot of Selling Space (2) $ 315 $ 321 $ 314 $ 299 $ 277
Stores:
Opened 14 25 9 3 6
Replaced and/or closed 8 18 4 3 7
Size of Stores:
Less than 29,999 Sq Ft. 44 47 58 60 61
30,000 - 41,999 Sq. Ft. 82 87 92 93 93
42,000 - 51,999 Sq. Ft. 36 36 24 16 15
Greater than 52,000 Sq Ft. 26 12 1 1 1
------- ------- ------- ------- -------
Total Stores Open at
End of Year 188 182 175 170 170 171 167
======= ======= ======= ======= =======
(1) Fiscal 1995 was a 53 week year.
(2) Selling space is estimated to be 70% of total store square footage.
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Merchandising
The Company's merchandising strategy is to provide convenient supermarket
locations which offer the customer a broad selection of quality products at
competitive prices with an emphasis on superior customer service. Customer
service includes, among other things, maintaining an awareness of customer
tastes and preferences and offering cut-to-order meat, carry-out service to the
customer's automobiles and Sunday hours.
The Company attempts to reinforce its quality and superior service image
through advertising, which is conducted primarily in newspapers, through the
distribution of circulars, and on radio and television. During fiscal 1994,
1993,1996,
1995, and 19921994 advertising and promotion expenditures, net were approximately
$17.8 million, $18.7 million, and $17.1 million, $17.3 million, and $18.1 million, or 1.2% of net sales in 1996,
1.4% of net sales in 1994,
1.5%1995 and 1.4% of net sales in 1993 and 1.7% of net sales in 1992.1994. The Company stresses
its American ownership in its merchandising and advertising programs as a contrast to the foreign ownership of several of its
principal competitors. From time to time, the Company uses special promotions
at many of its store locations as part of its promotional strategy. During the third quarter of
fiscal 1992, the Company began a new low price program on dry grocery items,
which is being emphasized in its advertising programs. The
Company also sponsors an annual "food show" in Asheville, North Carolina where food
vendors operate booths and provide
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information about and samples of products that are offered for sale in the
Company's stores. The net proceeds from the food show are donated to
charitable organizations.
Purchasing and Distribution
The Company supplies approximately 62%67% of its supermarkets' inventory
requirements from a 450,000760,000 square foot, "state-of-the-art" warehouse (with approximately 30,000
square feet of refrigerated space)and
distribution center located near Asheville, North Carolina. A 310,000 square
foot addition to the facility was completed in October and November 1995. The
new addition enabled the Company to warehouse and distribute produce for the
first time in its 33-year history during fiscal year 1996, as well as store
more dry goods, meat and dairy products. The warehouse services all of the
Company's stores and receives merchandise, principally by truck, from primary sources
located throughout the country. The
warehouseGoods from the facility is managed and operatedare distributed to the
Company's stores by Thomas & Howard Company of
Asheville, Inc. The Company distributes goods from this facility to its stores
using its fleet of 76103 tractors and 314438 trailers.
Thomas & Howard employs the
truck drivers.
Construction is currently underway to add a 310,000 square foot addition to the
existing warehouse facility which will accommodate an expanded inventory of
perishable goods (200,000 square feet) and increase dry grocery storage space
(110,000 square feet). The projected completion date is September 1995.
Approximately 21%15% of the Company's inventory requirements in fiscal 1996,
primarily
produce, frozen food and slower moving items thatwhich the Company doespreferred not
presentlyto stock, arewere purchased from Merchant Distributors, Inc. ("MDI"). MDI
is a wholesale grocery distributor and supermarket operator in Hickory, North
Carolina, with which the
Company has had a continuing relationship since 1963. Purchases from MDI by the
Companydistributor were approximately $168 million in 1996, $236 million in 1995 and
$207 million $179 million
and $162 million, in fiscal 1994, 1993 and 1992, respectively.1994. The Company believes that alternative sources of supply
are readily available for all
merchandise purchased from MDI.available. This distributor owned approximately 6%5% of the
Company's Class A Common Stock and approximately 1% of the Company's Class B
Common Stock at September 24, 1994.28, 1996.
The remaining 17%18% of the Company's inventory requirements, primarily beverages,
bread and snack foods, are supplied directly to the Company's supermarkets by
local distributors and manufacturers.
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The Company's centrally managed purchasing and distribution operations are centrally managed.
Individual stores order items electronically from the central warehouse or MDI.
Individual store shipments from the central warehouse are wrapped and sealed,
which reduces damage during shipment.
Management believes that centralization of the Company's purchasing and
distribution operations provides it withprovide
several advantages. Rapid inventory
turnover at the central warehouseThe Company: (1) is able to negotiate and the Company's relationship with MDI
enable Company stores to offer consistently fresh, high-quality meat and
produce items. Second, centralized purchasing and distribution reduce the
Company's cost
of merchandise and related transportation costs. Third, due to
frequent deliveries to stores, the Companyit purchases, (2) is able to reducedecrease overhead costs, (3) is
able to better manage its inventory at both warehouse and store level, (4) is
able to decrease in-store stock room space and increaseby making frequent deliveries, which
increases the square footage available for retail selling.selling space and (5) is able
to turn inventory rapidly which enables the Company to offer consistently high
quality meat and produce items in its stores.
Stores order merchandise electronically. Shipments from the warehouse to the
stores are wrapped which reduces damage during shipment.
The Company engages in forward purchasing arrangements on high turnover
inventory items in order to take advantage of special market prices offered by
manufacturers for limited periods. The ability to take advantage of forward
purchasing is limited by several factors including carrying costs and warehouse
space.
Forward purchasing also exposes the Company to the risk of significant
shifts in product pricing during the period that inventory is stocked.
In 1982, the Company purchased Milkco, Inc., an integrated milk processing and
packaging plant located in Asheville, North Carolina. The plant processes and
packages milk, fruit juices and spring water under the Sealtest, Pet and
Biltmore labels, as well as under the Company's own "Laura Lynn" private label.
The plant supplies 90% of the fluid milk needs
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of Ingles. Production from the plant has increased from a rate of 5 million
gallons per year at the time of acquisition to over 4045 million gallons per year
currently.
During fiscal 1994, such operations generated salesand is currently the second largest milk processing and packaging plant in
North Carolina. Sales to nonaffiliates in fiscal 1996 were approximately $52.1
million or 58% of approximately $36.9 million.its business.
Expansion and Store Development
From the beginning of fiscal 19901992 through the end of fiscal 1994,1996, the number of
supermarkets operated by the Company increased from 156171 to 175.188. During this
period, total supermarket square footage increased from 4.55.2 to 5.66.7 million
square feet and average square feet per store increased from 29,000approximately
31,000 to 32,000.36,000.
The Company uses independent contractors to construct its supermarkets from
prototype designs which include specialty service departments such as expanded
meat and produce sections, delicatessens, in-store bakeries, periodical and
greeting card departments, and, in some stores, branch banking and video
departments.designs. The two current prototype designs are for "Ingles" stores include
either approximately 42,000"MegaStores"
which contain 54,000 or 52,000 total59,000 square feet, depending on the market areastore location.
These larger stores, 14 of the site.which were opened in fiscal 1996, offer customers a
wider range of convenience and services, including a deli-bakery, sit-down
cafe, floral department and a video store. The prototype for a "Best Food" store includes
approximately 22,500 total square feet. Construction"MegaStores" also provide
greater selection in both food and non-food categories. The construction of
stores is closely monitored and controlled by the Company.
The Company remodels older stores on a regular basis, including minor remodels
("facelifts"), in order to increase customer traffic, compete effectively
against new store openings by competitors and support its "quality image"
merchandising strategy. The Company has elected to relocate, rather than
remodel, certain stores where relocation was more economical.economical and, in some
instances, provided a more convenient location. Most stores over ten years old
have been or are currently being remodeled. Inclusion of specialty departments
typically found in new stores is frequently a part of remodeling.
The Company spent an aggregate of approximately $19.0$294.4 million in capital
expenditures during the past three fiscal years, primarily on new stores, store
expansionexpansions and remodeling.
7
8remodeling, including equipment.
The Company plans to open 10 new stores, perform minor remodels ("facelifts")
at 20 existing store locations and replace eight stores in fiscal 1997. The
Company's ability to open new stores is subject to many factors, including the
acquisition of satisfactory sites and the successful negotiation of new leases,
and may be limited by zoning and other governmental regulation. In addition,
the Company's expansion, remodeling and remodelingreplacement plans are continually
reviewed and are subject to change.
Competition
The supermarket industry is highly competitive. The number and type of
competitors vary by location. Principal competitive factors include store
location, price, service, convenience, cleanliness, product quality and
variety.
The Company's principal competitors are Winn Dixie Stores, Inc., Kroger
Company, Food Lion, Inc. and BI-LO, Inc. The Company also competes with other
food store chains as well as local supermarkets, specialty and convenience food
stores and small chains that have significant market share
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in limited areas. The Company believes that its principal competitive
advantages are its storeclean stores, which feature brightly lit and spacious
aisles, their convenient locations, the Company's quality image, superior level
of customer service, including fast check-out and carry-out service, and broad
selection of nationally advertised food and non-food products as well as
quality private label items, all at competitive prices.
Employees
At September 24, 1994,28, 1996, the Company had approximately 9,95210,662 employees, including 165179
administrative and management personnel, 9,58110,254 supermarket personnel, and 206229
employees engaged in the milk processing and packaging operations.
Approximately 59%56% of these employees work on a part-time basis, substantially
all of whom are supermarket personnel. None of thesethe employees are represented
by a labor unions.union. Management considers employee relations to be excellent.
The Company pays monthly bonuses to certain managerial personnel based on the
performance of their
stores.store's performance. Annual bonuses based on pre-tax, pre-bonus income, as
defined, are paid to all eligible personnel. The Company believes that its
employee incentive compensation systemprogram is unusualunique in its industry, and
that such compensation program provides a
competitive advantage inby encouraging employees to respond to consumer
preferences and needs and results in improved employee morale and loyalty, thus
enhancing the Company's ability to retain experienced employees.personnel.
Insurance
The Company currently maintains general liability, and automobile insurance coverages with a $25,000 deductible per claim. Excessand excess
liability coverages are
also maintained.coverages. The Company maintainscarries $10 million liability insurance
coverage on four aircraft used in its business. 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, including four aircraft used in its business
which are not covered by casualty or liability insurance. The aircraft are
used for site selection and travel by management personnel, principally in the
Company's six state operating area.properties.
The Company is self-insured for workers' compensation and employee group
medical and dental benefits up to a maximum per occurrence of $300,000$350,000 for
workers' compensation and up to a maximum of $150,000 per covered person
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9 for
medical care benefits for a policy year. The Company is insured for covered
costs in excess of these limits.
Trademarks and Licenses
The Company employs various tradenamestrademarks and service marks in its business, the
most important of which are theits own "Laura Lynn" private label trademark and
the "Ingles" service mark. Each such mark is federally registered.registered and renewed when
required. In addition, the Company uses the "Sealtest", "Pet", and "Biltmore"
trademarks pursuant to agreements entered into in connection with its milk,
fruit juice and spring water processing and packaging operations. The Company
believes it has all licenses and permits necessary to conduct its business.
Item 2. PROPERTIES
At September 24, 1994,28, 1996, the Company owned and operated 7074 shopping centers, all
but twothree of which contained an Ingles supermarket. The shopping centers
contain an aggregate of 4.45.3 million square feet of leasable space, of which 2.22.7
million square feet is used by the Company's supermarkets. The remainder of
the leasable space in each center is leased by the Company
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to third party tenants. The Company also owns and holds for future development
or sale numerous outparcels and other acreage located adjacent to the shopping
centers.centers and store properties it owns.
A breakdown by size of the shopping centers operated by the Company is as
follows:
Less than 50,000 square feet 32
50,000-100,000 square feet 30
Over 100,000 square feet 8
---
70
Less than 50,000 square feet 25
50,000-100,000 square feet 35
Over 100,000 square feet 14
---
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===
In addition to an Ingles supermarket, mostmany shopping centers include a national
drug store chain as a tenant. ShoppingSeveral shopping centers containing more than 50,000
square feet typically include space leased or subleased to
a regional or national discount department store. In some instances, space is
also leased or
subleased to local tenants such as cleaners, restaurants and other service
businesses or specialty retailers. The Company believes that the businesses
operated by its tenants, combined with an Ingles supermarket, offer one-stop
shopping convenience and increase traffic for the supermarket.in its stores.
Typically, Ingles offers a drug store tenant a 20 year lease term with renewal
options for an average 40 year term. A department store tenant is typically
offered a 15 to 20 year lease term with renewal options for an average 30 to 40 year
term. Leases to local tenants have a maximum five year term. Most tenant
leases contain percentage rent provisions based on sales volume and are triple
net leases. None of the tenant leases provide for any purchase option.an option to purchase.
The Company manages the leasing of the shopping centers. It employs
maintenance workers and also engages local contractors to provide some of the
maintenance services formaintain the
properties. The vacancy rate for shopping centers operated by the Company was
approximately 18.0%, 20.1% and 18.5% as of September 24, 1994.at fiscal year-end 1996, 1995 and 1994,
respectively. The total annual rental income from third party tenants,
including leasepayments in connection with the early termination payments,of leases, was
approximately $9.8$9.6 million, $8.0$8.3 million and $7.3$9.8 million in fiscal 1996, 1995
and 1994, 1993 and 1992, respectively.
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10
In fiscal 1987, the Company sold 21 of its stores and related shopping center
properties in a sale-leaseback transaction. Robert P. Ingle sold three
additional shopping centers as a part of the transaction. The Company leased
back 23 of such shopping centers and 1 store. During fiscal 1991, the Company
repurchased one of the centers. On October 1, 1992 the Company repurchased the
remaining 23 store and shopping center properties.
Of the 107117 supermarket locations not included in shopping centers owned by the
Company, 1730 are owned by the Company and 9087 are leased from various
unaffiliated third parties. Most of the leases give the Company the right of
first refusal to purchase the entire shopping center in which the supermarkets
are located and have exclusivity clauses prohibiting the developer from renting
to another supermarket within a designated radius. The majority of leases
require that the Company pay property taxes, utilities, insurance, repairs and
certain other expenses incidental to occupation of the premises. In addition
to base rentals,rent, most leases require the Company to pay additional percentage rentalsrent
(ranging from .75% to 1%) for sales in excess of a specified amounts.amount.
Rental expensesrates range from $1.00 to $5.50 per square foot. During fiscal year
1994, 19931996, 1995 and 1992,1994, the Company paid a total of $12.0$11.7 million, $12.0$11.8 million
and $14.5$12.0 million, respectively, in supermarket rentals,rent, exclusive of property
taxes, utilities, insurance, repairs and other expenses. The following table
summarizes lease expiration dates as of September 24, 1994,28, 1996,
10
11
with respect to the initial and any renewal option terms of leases of
supermarkets not located in shopping centers operated by the Company.
Year of Expiration Number of Stores
(including renewal terms) With Leases Expiring
--------------------------- ----------------------
2000-2019 12
2020-2039 6
2040 or after 72
Year of Expiration Number of Stores
(including renewal terms) With Leases Expiring
--------------------------- ----------------------
2000-2019 11
2020-2039 5
2040 or after 71
Management believes that the long-term rent stability provided by these leases
is a valuable asset of the Company.
The Company owns a 500,000810,000 square foot facility which is strategically located
between Interstate 40 and Highway 70 near Asheville, North Carolina. The
facility includes the Company's principal executive offices and its 450,000760,000
square foot central"state-of-the-art" warehouse and distribution center, as well as
the 78 acres of land on which it is situated. The property also includes truck
servicing and fuel storage facilities.
The Company's milk processing and packaging subsidiary, Milkco, Inc., owns a
54,000 square foot manufacturing and storage facility in Asheville, North
Carolina. In addition to the plant itself, the property includes truck
servicing and fuel storage facilities.
Item 3. LEGAL PROCEEDINGS
The Company is involved in a number ofVarious legal proceedings with respect to
mattersand claims arising in the ordinary course of business
whichare pending against the Company believes,
inCompany. In the aggregate, willopinion of management, the ultimate
liability, if any, from all pending legal proceedings and claims would not
have a material impact onmaterially affect the Company's financial position or the results of operations,
financial condition or business of the Company.its
operations.
Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
No matters were submitted to the vote of the security holders during the fourth
quarter of the fiscal year covered by this report.
1011
1112
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Market Information
The Company has two classes of Common Stock: Class A and Class B. Class A
Common Stock is traded on the Nasdaq National Market tier of The Nasdaq Stock
Market (National 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 his shares of Class B Common Stock into an equal number of shares of
Class A Common Stock at any time. As of December 9, 1994,10, 1996, there were
approximately 1,4731,357 holders of record of the Company's Class A Common Stock
(approximately 4,800 beneficial holders) and 650275 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 period
indicated as reported in the National Market System. The quotations reflect
actual salesinter-dealer prices without retail mark-up, mark-down or commissions.
1994 Fiscal Year High Low
- ---------------- ---- ---
First Quarter (ended December 25, 1993)commission and
may not necessarily represent actual transactions.
1996 Fiscal Year High Low
- ----------------- ---- ---
First Quarter (ended December 30, 1995) $11-7/8 $ 9-5/8
Second Quarter (ended March 30, 1996) $12-3/4 $10-3/4
Third Quarter (ended June 29, 1996) $13-3/4 $11-3/4
Fourth Quarter (ended September 28, 1996) $16-1/8 $11-3/8
$ 8-3/8
Second Quarter (ended March 26, 1994) $12-3/4 $10-1/4
Third Quarter (ended June 25, 1994) $12-3/8 $10-1/8
Fourth Quarter (ended September 24, 1994) $12-1/4 $10-1/8
1993 Fiscal Year
- ----------------
First Quarter (ended December 26, 1992) $ 6-3/8 $ 5-1/2
Second Quarter (ended March 27, 1993) $ 7 $ 5-7/8
Third Quarter (ended June 26, 1993) $ 7-1/4 $ 5-5/8
Fourth Quarter (ended September 25, 1993) $ 9 $ 6-7/
1995 Fiscal Year High Low
- ---------------- ---- ---
First Quarter (ended December 24, 1994) $12 $ 9-3/4
Second Quarter (ended March 25, 1995) $10-1/2 $ 9-1/4
Third Quarter (ended June 24, 1995) $11 $ 8-7/8
Fourth Quarter (ended September 30, 1995) $11 $10
On December 9, 1994,10, 1996, the closing sales price of the Company's Class A Common
Stock on theThe Nasdaq Stock Market's National Market (National Market) was $10-1/8$13-3/4 per share.
Dividends
The Company has paid cash dividends on its Common Stock in each of the past
fifteenseventeen fiscal years, except for the 1984 fiscal year when the Company paid a
3% stock dividend. During both fiscal 19941996 and fiscal 1995 the Company paid
quarterly dividends totalling $.5775$.66 per share of Class A Common Stock and $.5250 per share of
Class B Common Stock. During fiscal 1993, the Company paid quarterly dividends
totalling $.2475 per share of Class A Common Stock and $.2250$.60
per share of Class B Common Stock.
The Company expects to continue the payment of regular dividends on a quarterly
basis. The Board of Directors, however, reconsiders the declaration of
dividends periodically, and there can be no assurance as to the declaration of
or the amount of dividends to be paid. The payment of dividends is subject to
the discretion of the Board of Directors and will depend upon the results of
operations, the financial condition of the Company and other factors which the
Board of Directors deems relevant. The payment of dividends is also subject to
restrictions contained in certain loan agreements entered into by the Company
and by the terms of the Debentures. Seefinancing arrangements. (See Note 7 to the
Consolidated Financial Statements on pages 3937 through 4139 of this report on Form
10-K.
1110-K).
12
1213
Item 6. SELECTED FINANCIAL DATA
The selected financial data set forth below havehas been derived from the Company's
consolidated financial statements. The information should be read in
conjunction with MANAGEMENT'Sthe information under the heading "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONCONDITION" and in the CONSOLIDATED FINANCIAL STATEMENTSCompany's
Consolidated Financial Statements and Notes thereto included elsewhere herein.
Selected Income Statement
Data for the Year Ended
September
(in thousands except
per share amounts) 1996 1995 1994 1993 1992 1991 1990
- -------------------- ---------- ---------- ---------- ---------- ----------
Net Sales $1,472,578 $1,385,127 $1,233,497 $1,141,800 $1,066,332 $1,044,452 $1,006,790
Gross Profit 345,648 317,239 275,062 250,592 235,039 236,374 225,607
Income Before
Cumulative Effect
of Change in
Accounting Principle 20,731 17,023 16,572 11,701 5,499 10,745 10,042
Primary Earnings per
Common Share Before
Cumulative Effect of
Change in Accounting
Principle 1.12 .93 .90 .65 .31 .60 .56
Cash Dividends Declared per
Common Share
Class A .66 .66 .5775 .2475 .22 .22 .22
Class B .60 .60 .5250 .2250 .20
.20 .20
Selected Balance Sheet
Data at September
(in thousands) 1994 1993 1992 1991 1990
- --------------------- ---------- ---------- ---------- ---------- ----------
Current Assets $ 141,500 $ 136,316 $ 141,453 $ 129,539 $ 152,882
Selected Balance Sheet
Data at September
(in thousands) 1996 1995 1994 1993 1992
- ---------------------- -------- -------- -------- -------- --------
Current Assets $169,915 $155,828 $141,500 $136,316 $141,453
Property and Equipment,
net 530,228 450,541 359,670 312,516 258,882 262,546 251,055
Total Assets 707,965 611,827 506,593 456,549 404,988 396,939 408,818
Current Liabilities,
including Current
Portion of Long-Term
Liabilities 161,409 135,019 115,938 123,882 72,375 78,130 75,430
Long-Term Liabilities,
net of Current Portion 349,511 292,765 214,057 163,013 162,581 149,815 172,621
Stockholders' Equity 175,010 163,816 157,972 147,689 140,113
138,280 131,153
12
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1314
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
The Company's fiscal year ends on the last Saturday in September.
Fiscal years 1994, 19931996 and 1992 each1994 consisted of 52 weeks.weeks, while fiscal year 1995 was a
53-week year.
During the past five years, the Company's sales grew at an average
annual compound rate of 6.4%7.1%. This growth is attributable to both the opening
of new stores and increased sales in existing stores. During the period, the
number of stores increased from 156171 to 175188 and weighted average sales per store
increased from $6.0 million to $6.9$7.7 million. Sales also benefited from modest
population growth in the Company's geographic markets and increased market
share resulting from the expansion, remodel and/or replacement of existing
stores and the addition of new stores. Sales are slightly seasonal with higher
volume in the summer months due to increased sales by stores located in
vacation and seasonal home areas.
The following table sets forth for the years indicated the percentage
which selected items in the consolidated statements of income bear to net sales
and the percentage changes in dollar amounts of such items as compared to the
indicated prior year.
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------
PERCENTAGE CHANGE
-----------------
PERCENTAGE OF NET SALES FISCAL YEAR
FISCAL YEAR -----------------
ENDED SEPTEMBER 1996 1995
----------------------- VS. VS.
1996 1995 1994 1995 1994
---- ---- ---- ---- ----
Net sales . . . . . . . . . . 100.0% 100.0% 100.0% 6.3% 12.3%
Cost of goods sold . . . . . 76.5 77.1 77.7 5.5 11.4
----- ----- -----
Gross profit . . . . . . . . 23.5 22.9 22.3 9.0 15.3
Operating and administrative
expenses . . . . . . . . . 19.8 19.6 19.4 7.1 13.4
Rental income, net. . . . . . .3 .3 .5 24.1 (35.6)
----- ----- -----
Income from operations. . . . 4.0 3.6 3.4 20.3 18.8
Other income (expense), net . .2 .1 .1 62.0 3.9
----- ----- -----
Income before interest and
income taxes and cumulative
effect of change in
accounting principle. . . . 4.2 3.7 3.5 21.9 18.2
Interest expense . . . . . . 1.9 1.8 1.4 17.1 43.0
----- ----- -----
Income before income taxes and
cumulative effect of change
in accounting principle . . 2.3 1.9 2.1 26.3 1.7
Income taxes . . . . . . . . .9 .7 .8 34.4 0.0
----- ----- -----
Income before cumulative
effect of change in
accounting principle. . . . 1.4% 1.2% 1.3% 21.8 2.7
===== ===== =====
- ---------------------------------------------------------------------------
FISCAL YEAR
FISCAL YEAR -----------------
ENDED SEPTEMBER 1994 1993
----------------------- VS. vs.
1994 1993 1992 1993 1992
---- ---- ---- ---- ----
Net sales . . . . . . . . . . 100.0% 100.0% 100.0% 8.0% 7.1%
Cost of goods sold . . . . . 77.7 78.1 78.0 7.5 7.2
----- ----- -----
Gross profit . . . . . . . . 22.3 21.9 22.0 9.8 6.6
Operating and administrative
expenses . . . . . . . . . 19.4 19.3 20.0 8.7 3.0
Rental income, net. . . . . . .5 .4 .1 38.2 210.3
----- ----- -----
Income from operations. . . . 3.4 3.0 2.1 20.6 55.0
Other income (expense), net . .1 .1 .2 71.0 (54.4)
----- ----- -----
Income before interest and
income taxes and cummulative
effect of change in accounting
principal . . . . . . . . . 3.5 3.1 2.3 22.1 44.5
Interest expense . . . . . . 1.4 1.5 1.5 .1 6.7
----- ----- -----
Income before income taxes
and cummulative effect of
change in accounting
principal . . . . . . . . . 2.1 1.6 .8 43.0 117.2
Income taxes . . . . . . . . .8 .6 .3 45.5 125.6
----- ----- -----
Income before cumulative
effect of change in
accounting principle. . . . 1.3% 1.0% .5% 41.6 112.8
===== ===== =====
- --------------------------------------------------------------------------------
FISCAL 19941996 COMPARED WITH FISCAL 19931995
NET SALES
Net sales for the year ended September 24, 199428, 1996 increased $91.7$87.5 million,
to $1.233$1.473 billion, up 8.0%6.3% over sales of $1.142$1.385 billion last year, which
14
15
was a 53-week year. Excluding the 53rd week of 1995, 1996 sales increased
8.3%. Growth in identical store sales (grocery stores open for the entire
duration of the previous fiscal year), on a comparable 52-week basis, was 7.0%5.0%.
The strong gain in sales was driven by the opening of new stores, the
expansion, remodel and/or replacement of existing stores and the increase in
identical store sales. The Company's continuing commitment to superior
customer service, its broad selection of quality food and non-food products,
including private label items, at competitive prices, and its effective
marketing and merchandising efforts also helped boost sales.
In fiscal 1996, the Company opened seven new stores; expanded, remodeled,
and/or replaced seven existing stores; and closed one older store. All seven
new stores and all seven expansions, remodels, and/or replacements in fiscal
1996 were "MegaStores". This new concept store offers the customer a wider
range of convenience and services, including a deli-bakery, sit-down cafe,
floral department and video store. The new "MegaStores" also provide greater
selection in both food and non-food products.
During the prior and current fiscal years, 14 new stores were opened, 25
older stores were expanded, remodeled and/or replaced and minor remodels
("face-lifts") were performed at 12 existing store locations. At September 28,
1996, the Company operated 188 supermarkets in six states: North Carolina
(59), South Carolina (28), Georgia (76), Tennessee (21), Virginia (3) and
Alabama (1).
Fiscal 19941996 was the 30th32nd consecutive year Ingles has achieved an increase in
net sales.
GROSS PROFIT
Gross profit for the year was $345.7 million, or 23.5% of sales, compared
with $317.2 million, or 22.9% of sales, a year ago - an increase of 9.0%. A
larger percentage of sales came from higher margin perishable departments,
increasing gross profit overall. Grocery gross profit, as a percentage of
sales, was positively impacted by effective buying, an aggressive merchandising
and pricing program, good promotional strategy and improved product mix. Meat,
produce and deli gross profit, as a percentage of sales, improved due to better
merchandising, effective purchasing and pricing programs and reduced shrinkage
of inventory.
OPERATING AND ADMINISTRATIVE EXPENSES
Operating and administrative expenses, as a percentage of sales, increased
from 19.6% last year to 19.8% this year. The cost of labor at store level,
depreciation and amortization expense and repairs and maintenance, as a
percentage of sales, increased. The increase in depreciation and amortization
expense results from the Company's aggressive capital expenditure program last
year and this year. The cost of supplies at store level, advertising and
promotional expenses, rent expense and the cost of insurance, as a percentage
of sales, decreased.
RENTAL INCOME, NET
Rental income, net was $4.1 million in 1995 - $5.1 million this year. The
increase is due to an increase in gross rental income, $1.3 million,
15
16
net of increased expenses, $.3 million, associated with the remodeling of
shopping centers.
INCOME FROM OPERATIONS
Income from operations increased 20.3% to $59.5 million, or 4.0% of sales,
this year compared with $49.4 million, or 3.6% of sales, last year. The
increase in operating income is due to the increase in sales, the related
increase in gross profit and the increase in net rental income.
OTHER INCOME (EXPENSE), NET
Other income (expense), net was $3.1 million in 1996 - $1.9 million in
1995. Fiscal 1996 includes gains of $2.4 million on the sale of seven
outparcels of land located adjacent to shopping centers owned by the Company;
fiscal 1995 includes gains of $.6 million on the sale of two outparcels. Other
miscellaneous income decreased $.6 million.
INCOME BEFORE INTEREST AND INCOME TAXES
Income before interest and income taxes increased 21.9% to $62.6 million,
or 4.3% of sales, this year compared with $51.4 million, or 3.7% of sales, last
year.
INTEREST EXPENSE
Interest expense increased from $24.7 million last year to $29.0 million
this year due to an overall increase in debt levels to fund the Company's
aggressive capital expenditure program.
INCOME BEFORE INCOME TAXES
Income before income taxes was $33.6 million, or 2.3% of sales, this year
compared with $26.6 million, or 1.9% of sales, the prior year.
INCOME TAXES
The elimination of the targeted jobs tax credit and higher state income
taxes resulted in a higher effective income tax rate in fiscal 1996 of 38.4%
compared to an effective rate of 36.1% in fiscal 1995.
NET INCOME
Net income for fiscal 1996 was $20.7 million, or 1.4% of sales, compared
with $17.0 million, or 1.2% of sales, a year ago - an increase of 21.8%.
Primary earnings per common share rose from $.93 last year to $1.12 this year.
FISCAL 1995 COMPARED WITH FISCAL 1994
FISCAL YEAR
The Company's fiscal year ends on the last Saturday in September. Fiscal
year 1995 was a 53-week year, while fiscal 1994 consisted of 52 weeks.
16
17
NET SALES
Net sales for the year ended September 30, 1995 increased $151.6 million,
to $1.385 billion, up 12.3% over sales of $1.233 billion the prior year. The
Company estimates approximately 2% of the 12.3% increase in sales was related
to the additional week's operations. Approximately one-half68% of the dollar increase
in sales resulted from an 13
14
increase in grocery sales, -while the other halfbalance resulted
substantially from increased sales in the perishable departments. In addition to continuingThe
continuation by the Company of its lower price strategy on dry grocery goods,
commenced during the third quarter of fiscal 1992, the
Company has pursued an aggressive merchandising, andaggressive pricing strategy to boost
sales in its perishable departments, has conducted a moreand effective advertising campaign and hashelped
boost sales. Sales also benefited by increased varietyvolume in its grocery department. The fourth
quarterstores that were
expanded, remodeled and/or replaced. Growth in identical store sales (grocery
stores open for the entire duration of the previous fiscal 1994year), on a
comparable 52 week basis, was 6.5%. Fiscal 1995 was the tenth quarter in a row the Company has reported31st consecutive year
Ingles achieved an increase in sales over the prior comparable quarter (on average $19.3
million per quarter).net sales.
During fiscal 1994, nine1995, seven, net new stores were opened and foureighteen older
stores were closed.remodeled and/or replaced. All of the stores which were remodeled
and/or replaced were enlarged, the results of which were excellent, as
evidenced by increased sales and market share. At September 24, 1994,30, 1995, the
Company operated 175182 supermarkets in six states: North Carolina (57), South
Carolina (28), Georgia (65)(72), Tennessee (21), Virginia (3) and Alabama (1).
GROSS PROFIT
Gross profit for the year ended September 24, 1994 increased 9.8%fiscal 1995 was $317.2 million, or 22.9% of sales,
compared to $275.1 million, or 22.3% of sales, compared to $250.6 million, or 21.9%the prior year - an increase of
sales, last year.15.3%. Grocery gross profit, as a percentage of sales, this year
was the same as last year. Lower gross margins on dry grocery goods due to
reduced pricing were compensated for byincreased primarily
because of an aggressive purchasing program. Meat, produce and frozen food
gross profit, as a percentage of sales, improved due to better merchandising
and aggressive purchasing and pricing and more effective advertising.programs.
OPERATING AND ADMINISTRATIVE EXPENSES
Operating and administrative expenses, as a percentage of sales, were
19.4% this year19.6% in 1995 compared to 19.3% last19.4% the prior year. IncreasesThe percentage increase was
primarily due to increases in the cost of labor warehouseat the store level, increased
depreciation and transportationamortization expense resulting from the Company's aggressive
new store opening, expansion, remodel and/or replacement program and higher
expense associated with repairs and maintenance, as a
percentage of sales,maintenance. These increases were
partially offset by a decrease, as a percentage of sales, in advertising and promotional expenditures, rent expense and utilities.
Insurance expense, as a percentage of sales, increased slightly this
year. Approximately 71% of insurance costs relate to expenses of the
self-insured group medical and workers' compensation coverages. The Company is
insured for covered costs in excess of certain limits.expense.
RENTAL INCOME, NET
Rental income, net increased from $4.6 million last year towas $6.4 million this year.in 1994 - $4.1 million in 1995.
Fiscal 1994 includesincluded gains of $1.5 million in connection with the early
termination by tenants of three leases of premises in shopping centers owned by
the Company.
INCOME FROM OPERATIONS
Income from operations increased 20.6% toin fiscal 1995 was $49.4 million, or 3.6% of sales,
compared with $41.6 million, or 3.4% of sales, compared to $34.5 million, or 3.0% of sales, lastthe prior year. The increase in
operating income was due to the increase in sales and the related increase in
gross profit and the increase in rental income, net.
14profit.
17
1518
OTHER INCOME (EXPENSE), NET
Other income (expense), net increased $.8 million. The increase is
primarily due to an increasewas $1.8 million in miscellaneous other income.1994 - $1.9 million in
1995.
INCOME BEFORE INTEREST AND INCOME TAXES
AND CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE
Income before interest and income taxes and the cumulative effectincreased 18.2% to $51.4 million,
or 3.7% of the changesales, in accounting principle was1995, compared to $43.5 million, or 3.5% of sales, this
year compared with $35.6 million, or 3.1% of sales, lastthe
prior year.
INTEREST EXPENSE
DespiteInterest expense was $17.3 million in fiscal 1994 - $24.7 million in
fiscal 1995. The increase in interest expense was due to an increase in debt
this year versus last year, interest
expense was $17.3 million both years due to lower borrowing rates in fiscal
1994 andfund the Company's aggressive new store opening, expansion, remodel and/or
replacement program coupled with an increase in the capitalization of construction period interest.interest rates.
INCOME BEFORE INCOME TAXES
AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE
Income before income taxes and the cumulative effectin 1995 was $26.6 million, or 1.9% of the change in
accounting principle increased $7.9 million tosales,
compared with $26.2 million, or 2.1% of sales, this year compared to $18.3 million, or 1.6% of sales, lastthe prior year.
INCOME TAXES
Income tax expense, as a percentage of pre-tax income, was 36.7% this
year36.1% in 1995
compared with 36.1% last year due primarily to an increase36.7% in the federal
income tax rate.1994.
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE
Income before the cumulative effect of the change in accounting principle
for the year ended September 24, 1994 increased $4.9was $17.0 million in 1995 compared to $16.6 million up 41.6% over income of $11.7 million lastthe prior year. Primary
earnings per common share before the cumulative effect of the change in
accounting principle rose from $.65 last year to $.90 this year.
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE FOR INCOME TAXES
In February 1992, the Financial Accounting Standards Board issued a
new standard (SFAS 109), "Accounting for Income Taxes". A significant feature
of the standard is the use of an approach under which recorded deferred taxes
are adjusted for changes in tax rates. Under prior rules (APB 11), deferred
taxes were provided at current tax rates and were not adjusted for subsequent
changes in these rates. The new standard was adopted by the Company at the
beginning of the current fiscal year. The cumulative effect of adopting the
standard resulted in a non-cash credit to income for the year ended September
24, 1994 of $3.3 million, or $.18 per common share.
NET INCOME
Net income for the year ended September 24, 1994 was $19.9 million
compared to $11.7 million last year. Primary earnings per common share rose
from $.65 last year to $1.08 this year.
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16
FISCAL 1993 COMPARED WITH FISCAL 1992
NET SALES
Net sales for the year ended September 25, 1993 increased $75.5
million, to $1.142 billion, up 7.1% over sales of $1.066 billion the prior
year. Growth in identical store sales (grocery stores open for the entire
duration of the previous fiscal year) was 7.4%. Sales benefited primarily from
the continuation of the lower price strategy on dry grocery goods which the
Company commenced during the third quarter of fiscal 1992.
Three new stores were opened during fiscal 1993 and three older stores
were closed. At September 25, 1993, the Company operated 170 supermarkets in
North Carolina, South Carolina, Georgia, Tennessee, and Virginia.
GROSS PROFIT
Gross profit for the year ended September 25, 1993 increased 6.6% to
$250.6 million, or 21.9% of sales, compared with $235.0 million, or 22.0% of
sales, the prior year. Grocery gross profit, as a percentage of sales, was
negatively impacted by the reduced pricing strategy on dry grocery goods. Meat
and deli/bakery gross profit, as a percentage of sales, improved due to better
merchandising and better control of shrink. The Company's wholly owned
subsidiary, Milkco, Inc., expanded and increased its business in areas that
produced higher profit margins, primarily supplying institutional food jobbers.
As a percentage of net sales, total gross profit was down only slightly.
OPERATING AND ADMINISTRATIVE EXPENSES
Operating and administrative expenses in fiscal 1993 increased 3.0%1994 to $220.7 million, or 19.3% of sales, compared with $214.3 million, or 20.0% of
sales, the prior year. The decrease, as a percentage of sales, was primarily
due to the increase in sales, effective control over increases in the cost of
labor and decreases in advertising and promotional expense and the cost of
utilities, partially offset by an increase in the cost of store supplies.
Insurance expense, as a percentage of sales, decreased slightly$.93 in fiscal 1993. Approximately 69% of insurance costs relate to expenses of the
self-insured group medical and workers' compensation coverages. The Company is
insured for covered costs in excess of certain limits.
On October 1, 1992, the Company purchased twenty-two shopping center
properties and one free standing store (discussed more fully in the "Liquidity
and Capital Resources" section of this report under the caption Fiscal 1993).
The effect of this transaction decreased real property rental costs $2.7
million and increased depreciation expense $.7 million during fiscal 1993.
RENTAL INCOME, NET
Rental income, net in fiscal 1993 was $4.6 million compared with $1.5
million the prior year. The increase was principally due to the
16
17
elimination of that portion of the rent paid ($3.7 million) on the properties
purchased, October 1, 1992, which was allocated to and offset rental income,
net the prior year. Depreciation expense allocated to rental income, net
increased approximately $.7 million in fiscal 1993, due to the purchase of
these properties.
INCOME FROM OPERATIONS
Income from operations for the year ended September 25, 1993 increased
55.0% to $34.5 million, or 3.0% of sales, compared with $22.3 million, or 2.1%
of sales, the prior year. The increase was due to the increase in sales
combined with lower operating and administrative expenses (as a percentage of
sales) and the increase in rental income, net.
OTHER INCOME (EXPENSE), NET
Other income (expense), net decreased from $2.4 million in fiscal 1992
to $1.1 million in fiscal 1993 due primarily to the loss of the amortization of
the deferred gain ($.7 million) as a result of the real estate transaction
referred to above. In addition, gains on the sale of assets in fiscal 1992
were $.8 million; gains in fiscal 1993 were $.6 million.
INCOME BEFORE INTEREST AND INCOME TAXES
Income before interest and income taxes was $35.6 million, or 3.1% of
sales, in fiscal 1993 compared with $24.6 million, or 2.3% of sales, the prior
year.
INTEREST EXPENSE
Interest expense increased from $16.2 million in fiscal 1992 to $17.3
million in fiscal 1993 primarily due to an increase in debt to finance the
purchase of the properties referred to above. The expense associated with the
increase in debt was somewhat offset by lower interest rates in fiscal 1993
versus the prior fiscal year.
INCOME BEFORE INCOME TAXES
Income before income taxes increased $9.9 million to $18.3 million, or
1.6% of sales, in fiscal 1993 compared with $8.4 million, or .8% of sales, the
prior year.
INCOME TAXES
Income tax expense, as a percentage of pre-tax income, was 36.1% in
1993 compared with 34.7% in 1992 due primarily to the increase in the federal
income tax rate.
NET INCOME
Net income for the year ended September 25, 1993 increased $6.2
million, to $11.7 million, up 112.8% over income of $5.5 million the prior
year. Primary earnings per common share rose from $.31 to $.65.
17
181995.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
FISCAL 19941996
OPERATING ACTIVITIES
Net cash provided by operating activities for the year ended September 24, 199428,
1996 totalled $40.3$42.3 million. DepreciationNet income for the year was $20.7 million and
depreciation and amortization expense was $22.5$32.9 million. AccountsInventory increased
$11.5 million, receivables $2.5 million and accounts payable and accrued
expenses $2.9 million. The receipt of advance payments on purchases contracts
was $3.2 million, recognition of advance payments on purchases contracts was
$2.8 million and gains on disposals of property and equipment were $2.4
million.
The increase in inventory occurred at both store and warehouse levels and
is the result of seven new store openings, seven store expansions, remodels
and/or replacements, an expanded warehouse facility, increased $6.2 million.variety and the
Company's desire to maintain inventory levels to support
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19
increased sales volume. The increase in receivables is principally due to an
increase in rebates and allowances due from suppliers. Accounts payable-trade,
accounted for $4.4excluding non-cash additions of property and equipment ($6.0 million) increased
$2.0 million of this increase.due primarily to the increase in inventory. Accrued expenses
increased $.9 million. Salaries, wages and bonuses payable increased $1.1were $1.7 million
more, income tax payable was $1.7 million less and miscellaneous other accrued
expenses were up $.9 million. In addition to the normal
annual increase in salaries and wages,Annual bonuses accrued this year were more because the Company had
a more profitable year. Certain executive bonuses were accrued in accordance
with the terms of the respective employment/bonus agreements. The accrual of
salaries and wages increased. Income tax payable was less due to estimated
payments made during the fiscal year.
INVESTING ACTIVITIES
Net cash used by investing activities - primarily expenditures for capital
assets - during fiscal 1994 totalled
$67.6 million. Capital expenditures aggregated $68.91996 was $103.9 million. The Company's capital
expenditure program was devoted primarily to obtaining land for new store
locations, the construction of new facilities including the expansion of the
existing warehouse facility, the renovation, and
modernization and/or expansion of
existing stores and the installation of electronic scanning systems in 2339
stores. Proceeds from salesA portion of property and equipment (primarily
the sale of outparcels of land located adjacentthese expenditures were for new stores, store expansions,
remodels and/or replacements expected to shopping centers owned by
the Company) were $1.3 million.become operational in fiscal 1997.
FINANCING ACTIVITIES
Net cash provided by financing activities totalled $28.1$63.9 million.
Proceeds from the issuance of long-term debt were $51.7in fiscal 1996 aggregated
$130.2 million. The Company
obtained four loans: two from an insurance company in the principal amounts of
$12.0 million and $5.5 million on September 30, 1993 and June 30, 1994,
respectively; one from a bank in the principal amount of $13.0 million on July
21, 1994; and a loan from a credit corporation in the principal amount of $21.0
million on September 23, 1994. The proceeds of the loansthis debt were used to reduce short-term
borrowings outstanding under existing bank lines of credit, which were usedcredit. Additional
short-term debt was subsequently incurred to finance the purchase on October 1, 1992, of twenty-two (22) shopping center
properties and one (1) free standing store which were previously subject to a
sale-leaseback arrangement, to financepay for capital expenditures and
for general corporate purposes. Proceeds fromPayments on short-term loans,borrowings, net totalled $7.0were
$20.0 million. Principal payments of long-term debt were $21.0$36.4 million. The
Company paid cash dividends of $9.6$11.1 million.
ACTIVITY/PROFITABILITY RATIOSFINANCIAL STRENGTH
At September 28, 1996, the Company remained in sound financial condition.
Total assets were $708.0 million and stockholders' equity was $175.0 million
compared with $611.8 million and $163.8 million, respectively, at year-end,
September 30, 1995. Favorable inventory turnover rates (cost of
sales/inventory) in 19941996 of 9.2 (compared with 8.8 in 1993) helped generate cash flow from operations.
Return on assets (income before the cumulative effect of the change in
accounting principle/(net income/total assets) increased from 2.6%2.8% in 19931995 to 3.3%2.9%
in 1994.1996. Return on investment (income before the cumulative effect of the change in
accounting principle/(net income/average stockholders' equity)
improved significantlyfrom 10.6% in fiscal 1995 to 10.8% compared to 8.1% the prior year.
FINANCIAL STRENGTH
The Company remains12.2% in sound financial condition. At September 24,
1994, total assets were $506.6 million and stockholders' equity was $158.0
million compared with $456.5 million and $147.7 million, respectively, at
year-end, September 25, 1993. Working capital at September 24, 1994
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totalled $25.6 million.fiscal 1996.
CAPITAL REQUIREMENTS
The Company resumed itsCompany's new store opening, expansion, remodel and/or replacement
program in fiscal 1994plans are continually reviewed and are subject to change. The Company's
ability to open new stores and expand, remodel and/or replace existing stores is
subject to several factors, including the acquisition of satisfactory sites and
the successful negotiation of new leases, and may be effected by zoning and
other governmental regulation.
The 1997 capital expenditures budget includes plans to continue this program in fiscal 1995.
During fiscal 1995, the Company expects to open seven10 new stores,
perform minor remodels ("face-lifts") at 20 existing store
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locations and replace eight stores. Currently,
nineteen stores are in the process of being expanded, remodeled and/or
replaced - sixteen of which are expected toAdditional capital expenditures will be
completed in fiscal 1995. The
Company expects to invest approximately $28 million in these projects.
Construction is currently underway to add a 310,000 square foot
addition to the Company's existing warehouse facility which will accommodate an
expanded inventory of perishable goods (200,000 square feet)made to: (1) upgrade and increase dry
grocery storage space (110,000 square feet). The projected completion date is
September 1995. The total cost of the site work and building is expected to be
approximately $12 million.
The Company expects to invest an additional $10 million in upgrading
and replacingreplace existing store equipment, installing(2) install
electronic scanning systems in new and existing stores purchasing additional equipment required in
connection with the expansion of the existing warehouse facility and securing(3) secure sites for
future store locations.expansion. Fiscal 19951997 capital expenditures, in the aggregate,
are expected to be approximately $50$100 million. Some of the expenditures that
will be incurred toward fiscal year-end will relate to assets that will be
placed in service in fiscal 1996.1998.
FINANCIAL RESOURCES
At September 24, 1994,28, 1996, the Company had lines of credit with sixseven banks
totalling $105$121 million; of this amount $55$43 million was unused. The Company
monitors its cash position daily and makes draws or repayments on its lines of
credit. The lines provide the Company with various interest rate options
of no
moregenerally at rates less than prime rate, LIBOR plus a specified margin or such lower pricing as
the bank may elect to bid from time to time.prime. The Company is not required to maintain
compensating balances in connection with these lines of credit. The Company
has unencumbered property with a net book value of approximately $200$220 million
which is available to collateralize additional debt.
During October 1994,On December 6, 1996, the Company obtained two long-term bank loans: a
$20 million loan at anannounced plans to redeem all its
outstanding Convertible Subordinated Debentures (the "Debentures") on January
20, 1997. Pursuant to the Indenture, the holders may convert their Debentures
into the Company's Class A Common Stock, $0.05 par value per share, before the
close of business on January 16, 1997. The current conversion price is $11.10.
Upon conversion, no payment will be made for interest rate of 8.9%accrued on the Debentures
between the October 15, 1996 interest payment date and a $10 million loan at an
interest rate of 7.95%. A portionthe redemption date. If
any Debentures are not converted before the redemption date, the Company would
be required to pay the holders of the proceeds from these loans was usedredeemed Debentures the redemption price
of 101.80% of the principal amount thereof, plus accrued interest to reduce short-term borrowings outstanding at September 24, 1994.the
redemption date. (See Note 17 of the Notes to Consolidated Financial
Statements.)
The Company believes, based on its current results of operations, and
financial condition, that the financial resources available, including amounts
available under long-term financing arrangements, existing bank lines of credit
and internally generated funds, will be sufficient to meet planned capital
expenditures and working capital requirements for the foreseeable future,
including any debt servicing required by additional borrowings. The Company
believes that its current new store opening, expansion, remodel and/or
replacement program will not have a material adverse effect on the availability
of these financial resources or on the sufficiency of these resources for the
purpose described. There can be no assurance, however, that the Company's
results of operations and financial condition will not change in the future
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. In addition, for such reasons, there can be no
assurance that the results of operations from the new, expanded, remodeled
and/or replacement stores will meet or exceed the results of operations of
existing stores.
QUARTERLY CASH DIVIDENDS
At their quarterly meeting on December 3, 1993, the Company's Board of
Directors voted to increase the Company's regular quarterly cash dividends
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20
100%. Effective with dividends paid December 27, 1993, the dividends were
increased from $.0825 (eight and one-quarter cents) per share on Class A
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21
Common Stock to $.165 (sixteen and one-half cents) per share and from $.075
(seven and one-half cents) per share on Class B Common Stock to $.15 (fifteen
cents) per share for an annual rate of $.66 and $.60 per share, respectively.
The Company expects to continue the payment of regular dividends on a
quarterly basis at the rates approved December 3, 1993. The Board of
Directors, however, reconsiders the declaration of dividends periodically, and
there can be no assurance as to the declaration of or the amount of dividends
to be paid. The payment of dividends is subject to the discretion of the Board
of Directors and will depend upon the results of operations, the financial
condition of the Company and other factors which the Board of Directors deems
relevant. FISCAL 1993
MAJOR ACQUISITION OF ASSETS
On October 1, 1992,The payment of dividends is also limited by various provisions in
certain financing arrangements. (See Note 7 of the Company purchased twenty-two shopping center
properties and one free standing store containing approximately 1.7 million
square feet of retail space which were leasedNotes to Ingles and anchored by
supermarkets operated by the Company. These properties were previously sold by
the Company in December 1986 for $58.3 million, in connection with a sale-
leaseback transaction.
The purchase price for these properties, $55.6 million, was paid with
existing cash ($10.6 million) and by short-term borrowings under existing bank
lines of credit ($45.0 million) at interest rates below the prime rate.Consolidated
Financial Statements.)
INSURANCE
The Company believed themaintains general liability, automobile and excess liability
coverages. The Company carries $10 million liability insurance coverage on
four aircraft used in its business. The Company carries casualty insurance
only on those properties were undervalued considering the
depressed real estate market at the time of purchase. Other factors considered
by the Company in connection with the purchase were the sales price of these
properties in 1986, anticipated cash flow, tenants and terms of leases in
place, occupancy rates, the physical condition and locationwhere it is required to do so.
Because of the properties
and the Company's desire to undertake a renovation and modernization program on
some of the locations which could best be accomplished through direct
ownership.
The unamortized portion of the deferred gain (approximately $10.0
million) that resulted from the 1986 sale-leaseback transaction reducedsharp escalation in the cost of insurance, the properties acquired for financial reporting purposes. The
transaction reduced the Company's rental expense $6.4 million, increased
interest expenseCompany has
elected to self-insure certain other costs representing approximately $2.5 million, increased depreciation expense
$1.4 million and decreased the amortization71% of
the deferred gaintotal cost of insurance. Risks and uncertainties are associated with self-
insurance; however, the Company has limited its exposure by maintaining excess
liability coverages. The Company believes that resulted
fromits mix between insurance and
self-insurance is prudent, is in accordance with general industry practice and
is in the 1986 transaction $.7 million. The net effect after income taxesbest interest of the transaction increased net income in fiscal 1993 approximately $1.1 million
or $.06Company.
Self-insurance reserves are established for workers' compensation and
employee group medical and dental benefits based on claims filed and claims
incurred but not reported, with a maximum per common share.
OPERATING ACTIVITIES
Net cash provided by operating activities in fiscal 1993 totalled
$49.5 million. Depreciationoccurrence of $350,000 for
workers' compensation and amortization expense was $20.8 million.
Accounts payable and accrued expenses increased $18.7 million. Of this amount,
accounts payable-trade accounted for $14.3 million of the increase. The
increase in accounts payable-trade was dueup to a substantial increase in
construction in progress toward year-end andmaximum of $150,000 per covered person for
medical care benefits for a substantial increase in
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warehouse inventory during the month of September 1993. Warehouse inventory
was reduced during the month of August 1993 to facilitate re-racking of a
portion of the warehouse facility. Accrued expenses increased $4.4 million
primarily due to: (a) an increase in salaries, wages and bonuses payable; (b)
an increase in property, payroll and other taxes payable and (c) an increase in
worker's compensation self-insurance reserves.policy year. The Company changed its pay
weekis insured for covered
costs in fiscal 1993 from Sunday through Saturday to Wednesday through Tuesday
which resulted in an increase in accrued salaries and wages at year-end.
Annual bonuses accrued were more because the Company hadexcess of these limits.
Insurance expense, as a more profitable
year. The increase in property, payroll and other taxes payable was due to the
increase in salaries, wages and bonuses payable and increases in property
taxes payable.
INVESTING ACTIVITIES
Net cash used by investing activities in fiscal 1993 totalled $86.4
million. Capital expenditures aggregated $87.3 millionpercentage of which $55.6 million
was used to purchase the shopping center properties discussed above. The
balance of the Company's capital expenditure program was devoted primarily to
construction of new facilities, renovation and modernization of existing
stores, the installation of electronic scanning systems in 21 stores and
expenditures on new stores and remodels which became operational in
fiscal 1994. Proceeds from sales, of property and equipment (primarily the sale
of outparcels of land located adjacent to shopping centers owned by the
Company) were $.9 million.
FINANCING ACTIVITIES
Net cash provided by financing activities totalled $29.9 million. The
Company paid cash dividends of $4.1 million. The Company borrowed $45.0
million under existing short-term bank lines of credit to finance the purchase
of the shopping center properties - $9.0 million of which was converted to
long-term debt in fiscal 1993. Duringfor the year ended September
25, 1993, the
Company repaid $1.0 million, net of the $45.0 million originally borrowed to
purchase the shopping center properties. Principal payments of long-term debt
totalled $10.1 million. During fiscal 1993, excluding borrowings under
existing bank lines of credit to finance the purchase of the properties
discussed above, the Company financed its capital expenditures, debt repayments
and the payment of cash dividends through internally generated funds.
ACTIVITY RATIOS
Favorable inventory turnover rates (cost of sales/inventory) in 1993
of 8.8 (compared with 8.1 in 1992) helped generate cash flow from operations.
Return on assets (net income/total assets) increased from 1.4% in 1992 to 2.6%
in 1993. Return on investment (net income/average stockholders' equity)
improved significantly to 8.1% compared to 4.0% the prior year.
FISCAL 1992
OPERATING ACTIVITIES
Net cash provided by operating activities totalled $23.1 million.
Depreciation and amortization expense was $19.6 million. In the fourth
quarter, the Company received an advance payment of $6.3 million on a purchases
contract (See Note 7 to the Consolidated Financial Statements)28, 1996, decreased .07%.
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INVESTING ACTIVITIES
Net cash used by investing activities totalled $15.0 million. Capital
expenditures were $16.4 million. The Company's capital expenditure program was
devoted primarily to construction of new facilities and renovation and
modernization of existing ones. During fiscal 1992, the Company opened six new
stores, closed six older stores and sold one store. Several existing stores
were remodeled or were in the process of being remodeled. Electronic scanning
systems were installed in seventeen stores. Proceeds from sales of property
and equipment of $1.4 million consisted primarily of the sale of outparcels of
land located adjacent to shopping centers operated by the Company.
FINANCING ACTIVITIES
Net cash provided by financing activities was $1.9 million. The
Company paid cash dividends of $3.7 million. The Company monitors its cash
position daily and makes draws or repayments on its lines of credit, as
required. The net increase in long-term debt and short-term loans was
comprised of the following:
Proceeds from an insurance company
loan, secured by store equipment. . . . . . . . . . $ 10.2 million
Proceeds from a bank loan, secured
by warehouse equipment. . . . . . . . . . . . . . . 10.0 million
Proceeds from long-term bank line
of credit . . . . . . . . . . . . . . . . . . . . . 165.0 million
Principal payments, under bank
line of credit. . . . . . . . . . . . . . . . . . . (167.5) million
Other principal payments of
long-term debt. . . . . . . . . . . . . . . . . . . (10.7) million
-------
$ 7.0 million
=======
IMPACT OF INFLATION
Inflation in food prices continuesduring fiscal years 1996, 1995 and 1994 continued
to be lower than the overall increase in the Consumer Price Index. Ingles
primary costs, inventory and labor, increase with inflation. Recovery of these
costs has to come from improved operating efficiencies and, to the extent
possible, through improved gross margins.
IMPACT OF SFAS 112
In November 1992, the121
The Financial Accounting Standards Board issued a new standard (SFAS 112)121),
"Employers' Accounting"Accounting for Post Employment Benefits".
The statement mustthe Impairment of Long-Lived Assets and for Long-Lived Assets
to be adopted by the Company no later thanDisposed Of" effective for the fiscal year endingended September 1995.1997. The
Company will adopt Statement 121 in the first quarter of 1997 and, based on
current circumstances, does not believe the effect of adopting the standard is not expected toadoption will be
material to the Company's financial position or results of operations.material.
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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of the Company are included on
pages 2826 through 4644 of this report on Form 10-K:
Report of Ernst & Young LLP, Independent Auditors;
Consolidated Balance Sheets as of September 24, 1994,28, 1996, and September 25, 1993;30,
1995;
Consolidated Statements of Income for the years ended September 24,
1994,28, 1996,
September 25, 1993,30, 1995, and September 26, 1992;24, 1994;
Consolidated Statements of Changes in Stockholders' Equity for the years
ended September 24, 1994,28, 1996, September 25, 1993,30, 1995, and September 26,
1992;24, 1994;
Consolidated Statements of Cash Flows for the years ended September 24, 1994,28,
1996, September 25, 1993,30, 1995, and September 26, 1992;24, 1994;
Notes to Consolidated Financial Statements;
Selected quarterly financial data required by this Item is included in
Note 13 on page 45 through 4643 of the Consolidated Financial Statements.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item is incorporated herein by reference from
the data under the heading "ELECTION OF DIRECTORS" in the Proxy Statement to be
used in connection with the solicitation of proxies for the Company's annual
meeting of stockholders to be held February 21, 1995,18, 1997, to be filed with the
Commission.
Item 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by reference from
the data under the heading "EXECUTIVE COMPENSATION" in the Proxy Statement to
be used in connection with the solicitation of proxies for the Company's annual
meeting of stockholders to be held February 21, 1995,18, 1997, to be filed with the
Commission.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated herein by reference from
the data under the heading "VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF" in
the Proxy Statement to be used in connection with the solicitation of proxies
for the Company's annual meeting of stockholders to be held February 21, 1995,18, 1997,
to be filed with the Commission.
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Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated herein by reference from
the data under the headings "EXECUTIVE COMPENSATION - Additional Information
with Respect to Compensation Committee Interlocks and Insider Participation in
Compensation Decisions" and "CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS" in the Proxy Statement to be used in connection with the
solicitation of proxies for the Company's annual meeting of stockholders to be
held February 21, 1995,18, 1997, to be filed with the Commission.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(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 10-K:
Consolidated Balance Sheets as of September 24, 1994,28, 1996, and
September 25, 1993;30, 1995;
Consolidated Statements of Income for the years ended
September 24,
1994,28, 1996, September 25, 1993,30, 1995, and September 26, 1992;24,
1994;
Consolidated Statements of Changes in Stockholders' Equity for
the years ended September 24, 1994,28, 1996, September 25, 1993,30, 1995, and
September 26,
1992;24,1994;
Consolidated Statements of Cash Flows for the years ended
September 24, 1994,28, 1996, September 25, 1993,30, 1995, and September 26, 1992;
24,
251994;
Notes to Consolidated Financial Statements.
2. The following financial statement schedulesschedule of the Registrant
required by Item 8 and Item 14(d) of Form 10-K areis included as pages
47 through 50page
45 of this report:
Schedule V - Supplemental schedule of consolidated property and
equipment;
Schedule VI - Supplemental schedule of consolidated accumulated
depreciation and amortization;
Schedule VIIIII - Supplemental schedule of valuation and qualifying
accounts; and
Schedule IX - Supplemental schedule of short-term borrowings.accounts.
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable and,
therefore, have been omitted.
3. The following exhibits required by Item 601 of Regulation S-K
and Item 14(c) of Form 10-K are filed herewith or incorporated by
reference as indicated.
EXHIBIT NUMBER AND DESCRIPTION
3.1 Articles of Incorporation of Ingles Markets, Incorporated, as amended.
(Included as Exhibit 3.1 to Registrant's S-1 Registration Statement, File
No. 33-23919, previously filed with the Commission and incorporated herein
by this reference.)
3.2 By-laws of Ingles Markets, Incorporated. (Included as Exhibit 3.2 to
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Registrant's Annual Report on Form 10-K for the fiscal year ended
September 24, 1988, File No. 0-14706, previously filed with the Commission
and incorporated herein by this reference.)
4.1 Indenture between Registrant and Connecticut National Bank (including
specimen Debenture as Exhibit A). (Included as Exhibit 4.1 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
September 24, 1988, File No. 0-14706, previously filed with the Commission
and incorporated herein by this reference.)
4.2 Letters dated October 11, 1990 to the Registrant's Board of Directors from
Kidder, Peabody & Co. Incorporated and Wheat First Butcher & Singer
relating to interest rate reset under Debentures. (Included as Exhibit
4.2 to Registrant's Annual Report on Form 10-K for the fiscal year ended
September 29, 1990, File No. 0-14706, previously filed with the Commission
and incorporated herein by this reference.)
4.3 See Exhibits 3.1 and 3.2 for provisions of Articles of Incorporation, as
amended and By-laws of Registrant defining rights of holders of capital
stock of Registrant.
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26
10.1 Amended and Restated Ingles Markets, Incorporated 1987 Employee Incentive
Stock Option Plan. (Incorporated by reference(Included as Exhibit 10.1 to Exhibit 10.7 from Registrant's Registration StatementAnnual
Report on Form S-1,10-K for the fiscal year ended September 30, 1995, File 33-16160, which wasNo.
0-14706, previously filed with the Commission and became effective on September 22, 1987.incorporated herein by
this reference.)
(MANAGEMENT CONTRACT OR COMPENSATORY PLAN OR ARRANGEMENT REQUIRED TO
BE FILED AS AN EXHIBIT TO THIS REPORT ON FORM 10-K PURSUANT TO ITEM
14(C) OF FORM 10-K.)
10.2 Restatement and Amendment by the Entirety of the Ingles Markets,
Incorporated Employee Investment/Profit Sharing Plan and Trust.
(Incorporated by referenceTrust effective September
26, 1993 (as amended through June 30, 1995). (Included as Exhibit 10.2 to
Exhibit 10.8 from Registrant's Registration StatementAnnual Report on Form S-1,10-K for the fiscal year ended September
30, 1995, File 33-16160, which wasNo. 0-14706, previously filed with the Commission and
became effective on September 22, 1987.incorporated herein by this reference.)
(MANAGEMENT CONTRACT OR COMPENSATORY PLAN OR ARRANGEMENT REQUIRED TO
BE FILED AS AN EXHIBIT TO THIS REPORT ON FORM 10-K PURSUANT TO ITEM
14(C) OF FORM 10-K.)
10.3 Restatement and Amendment by the Entirety of the 1983 Stock Option
Plan of Ingles Markets, Incorporated. (Incorporated by reference to
Exhibit 10.10 from Registrant's Registration Statement on Form S-1,
File 33-16160, which was filed with the Commission and became
effective on September 22, 1987.)
(MANAGEMENT CONTRACT OR COMPENSATORY PLAN OR ARRANGEMENT REQUIRED TO
BE FILED AS AN EXHIBIT TO THIS REPORT ON FORM 10-K PURSUANT TO ITEM
14(C) OF FORM 10-K.)
10.4 (Intentionally Deleted)
10.5 Loan Agreement between the Registrant and Metropolitan Life Insurance
Company dated March 21, 1990. (Included as Exhibit 19 to Registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1990, File
0-14706, previously filed with the Commission and incorporated herein by
this reference.)
10.610.4 Amended and Restated Ingles Markets, Incorporated 1991 Nonqualified Stock
Option Plan. (Included as Exhibit 10.710.4 to Registrant's Annual Report on
Form 10-K for the fiscal year ended September 28, 1991,30, 1995, 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 REPORT ON FORM 10-K PURSUANT TO ITEM
14(C) OF FORM 10-K.)
10.7 Amended and Restated Employment Agreement Between the Company and
Robert P. Ingle dated as of September 26, 1993. (Attached hereto as
Exhibit 10.7.)
(MANAGEMENT CONTRACT OR COMPENSATORY PLAN OR ARRANGEMENT REQUIRED TO
BE FILED AS AN EXHIBIT TO THIS REPORT ON FORM 10-K PURSUANT TO ITEM
14(C) OF FORM 10-K.)
26
27
10.810.5 Stock Option Agreement Between the Company and Robert P. Ingle,
Chairman of the Board of Directors and Chief Executive OfficerEdward J. Kolodzieski, Vice
President-Strategic Planning of the Company, dated as of July 21, 1993.August
24
25
2, 1995. (Included as Exhibit 10.810.9 to Registrant's Annual Report on Form
10-K for the fiscal year ended September 25, 1993,30, 1995, 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 REPORT ON FORM 10-K PURSUANT TO ITEM
14(C) OF FORM 10-K.)
10.9 Stock Option Agreement Between the Company and Landy B. Laney,
President and Chief Operating Officer of the Company, dated as of
July 21, 1993. (Included as Exhibit 10.9 to Registrant's Annual
Report on Form 10-K for the fiscal year ended September 25, 1993,
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 REPORT ON FORM 10-K PURSUANT TO ITEM
14(C) OF FORM 10-K.)
10.10 Letter of Understanding dated September 8, 1992 between the Company
and IRT. (Included as Exhibit B to Registrant's Current Report on
Form 8-K dated October 1, 1992, File No. 0-14706, previously filed
with the Commission and incorporated herein by this reference.)
11 Statement Regarding Computation of Earnings Per Common Share.
12 Statement Regarding Computation of Ratio of Earnings to Fixed Charges.
21 Subsidiaries of the Registrant.
23 Consent of Ernst & Young LLP.LLP, Independent Auditors.
27 Financial Data Schedule (for SEC use only).
- -------------------------------------_____________________________
(b) The Registrant did not file any current reports on Form 8-K
during the fourth quarter of its fiscal year ending September
24, 1994.28, 1996.
(c) Exhibits - The response to this portion of Item 14 is
submitted as a separate sectionin the response to Item 14(a)(3) of this report.
(d) Financial Statement Schedules - The response to this portion
of Item 14 is submitted as a separate sectionin the response to Item 14(a)(2) of
this report.
2725
2826
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITOR'S REPORT
Report of Independent AuditorsAUDITORS
Stockholders and Board of Directors
Ingles Markets, Incorporated
We have audited the accompanying consolidated balance sheets of Ingles Markets,
Incorporated and subsidiaries as of September 24, 199428, 1996 and September 25, 1993,30, 1995,
and the related consolidated statements of income, changes in stockholders'
equity, and cash flows for each of the three years in the period ended
September 24, 1994.28, 1996. Our audits also included the financial statement schedulesschedule
listed in the Index at Item 14(a). These financial statements and schedulesschedule are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedulesschedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial possitionposition of Ingles
Markets, Incorporated and subsidiaries at September 24, 199428, 1996 and September 25, 1993,30,
1995, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended September 24, 1994,28, 1996, in conformity
with generally accepted accounting principles. Also, in our opinion, the
related financial statement schedules,schedule, when considered in relation to the basic
financial statements taken as a whole, presentpresents fairly in all material respects
the information set forth therein.
As discussed in Note 2 to the consolidated financial statements, in 1994 the
Company changed its method of accounting for income taxes.
ERNST/s/ Ernst & YOUNGYoung LLP
Greenville, South Carolina
November 8, 1996,
except for Note 17, 1994
28as to which the date is
December 6, 1996
26
2927
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 24, 199428, 1996 AND SEPTEMBER 25, 1993
- ---------------------------------------------
------------- -------------
ASSETS 1994 1993
------------- -------------
CURRENT ASSETS:
Cash . . . . . . . . . . . . . . . . . . . $ 18,471,011 $ 17,720,151
Receivables (less allowance for doubtful
accounts of $95,953 - 1994 and
$100,000 - 1993) . . . . . . . . . . . . . 16,663,805 14,043,992
Inventories . . . . . . . . . . . . . . . . 103,937,450 101,718,841
Other . . . . . . . . . . . . . . . . . . . 2,428,014 2,833,268
------------- -------------
Total current assets . . . . . . . . . . . 141,500,280 136,316,252
PROPERTY AND EQUIPMENT - Net . . . . . . . 359,670,105 312,516,161
OTHER ASSETS . . . . . . . . . . . . . . . 5,422,702 7,716,358
------------- -------------
TOTAL ASSETS . . . . . . . . . . . . . . . $ 506,593,087 $ 456,548,77130, 1995
_____________________________________________
------------- -------------
ASSETS
1996 1995
------------- -------------
CURRENT ASSETS:
Cash . . . . . . . . . . . . . . . . . . . $ 22,418,003 $ 20,120,776
Receivables (less allowance for doubtful
accounts of $106,073 - 1996 and
$85,490 - 1995). . . . . . . . . . . . . . 15,197,129 15,176,746
Inventories . . . . . . . . . . . . . . . . 128,364,435 116,863,588
Other . . . . . . . . . . . . . . . . . . . 3,935,825 3,667,010
------------- -------------
Total current assets . . . . . . . . . . . 169,915,392 155,828,120
PROPERTY AND EQUIPMENT - Net . . . . . . . 530,227,505 450,540,776
OTHER ASSETS . . . . . . . . . . . . . . . 7,821,820 5,458,358
------------- -------------
TOTAL ASSETS . . . . . . . . . . . . . . . $ 707,964,717 $ 611,827,254
============= =============
See notes to consolidated financial statements.
2927
3028
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
SEPTEMBER 24, 199428, 1996 AND SEPTEMBER 25, 1993
- ---------------------------------------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1993
------------ ------------
CURRENT LIABILITIES:
Short-term loans and current
portion of long-term liabilities. . . . . . $ 29,678,057 $ 43,832,239
Accounts payable and accrued expenses. . . . 86,259,579 80,049,770
------------ ------------
Total current liabilities . . . . . . . . . 115,937,636 123,882,009
DEFERRED GAINS ON SALE LEASEBACKS . . . . . - 148,486
DEFERRED INCOME TAXES . . . . . . . . . . . 18,626,161 21,815,873
LONG-TERM LIABILITIES. . . . . . . . . . . . 214,056,944 163,013,274
------------ ------------
Total liabilities . . . . . . . . . . . . . 348,620,741 308,859,642
------------ ------------
STOCKHOLDERS' EQUITY
- --------------------
Preferred stock, $.05 par value;
10,000,000 shares authorized;
no shares issued
Common stocks:
Class A, $.05 par value; 150,000,000
shares authorized;
1994-4,412,167 shares issued and
outstanding
1993-4,310,855 shares issued and
outstanding . . . . . . . . . . . . . . . 220,609 215,543
Class B, $.05 par value; 100,000,000
shares authorized;
1994-13,491,983 shares issued and
outstanding
1993-13,592,845 shares issued and
outstanding . . . . . . . . . . . . . . . 674,599 679,642
Paid-in capital in excess of par value . . . 48,599,088 48,594,115
Retained earnings. . . . . . . . . . . . . . 108,478,050 98,199,829
------------ ------------
Total stockholders' equity . . . . . . . . . 157,972,346 147,689,129
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY . . . . . . . . . . . . . . . . . . $506,593,087 $456,548,77130, 1995
_____________________________________________
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
1996 1995
------------ ------------
CURRENT LIABILITIES:
Short-term loans and current
portion of long-term liabilities. . . . . . $ 54,274,426 $ 36,899,696
Accounts payable and accrued expenses. . . . 107,134,357 98,119,632
------------ ------------
Total current liabilities . . . . . . . . . 161,408,783 135,019,328
DEFERRED INCOME TAXES . . . . . . . . . . . 22,034,578 20,226,161
LONG-TERM LIABILITIES. . . . . . . . . . . . 349,511,494 292,765,280
------------ ------------
Total liabilities . . . . . . . . . . . . . 532,954,855 448,010,769
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock, $.05 par value;
10,000,000 shares authorized;
no shares issued - -
Common stocks:
Class A, $.05 par value; 150,000,000
shares authorized;
1996-5,097,291 shares issued and
outstanding
1995-4,577,541 shares issued and
outstanding . . . . . . . . . . . . . . . 254,864 228,877
Class B, $.05 par value; 100,000,000
shares authorized;
1996-13,006,859 shares issued and
outstanding
1995-13,326,609 shares issued and
outstanding . . . . . . . . . . . . . . . 650,344 666,331
Paid-in capital in excess of par value . . . 50,139,088 48,599,088
Retained earnings. . . . . . . . . . . . . . 123,965,566 114,322,189
------------ ------------
Total stockholders' equity . . . . . . . . . 175,009,862 163,816,485
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY . . . . . . . . . . . . . . . . . . $707,964,717 $611,827,254
============ ============
See notes to consolidated financial statements.
3028
3129
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FISCAL YEARS ENDED SEPTEMBER 28, 1996,
SEPTEMBER 30, 1995 AND SEPTEMBER 24, 1994
SEPTEMBER 25, 1993 AND SEPTEMBER 26, 1992
- ---------------------------------------------_____________________________________________
-------------- -------------- --------------
1996 1995 1994 1993 1992
-------------- -------------- --------------
NET SALES $1,472,577,792 $1,385,127,130 $1,233,496,726 $1,141,800,153 $1,066,332,399
COST OF GOODS SOLD 1,126,929,804 1,067,888,239 958,434,847 891,208,237 831,292,968
-------------- -------------- --------------
GROSS PROFIT 345,647,988 317,238,891 275,061,879 250,591,916 235,039,431
OPERATING AND ADMINISTRATIVE
EXPENSES 291,266,074 271,912,200 239,834,915 220,714,164 214,274,180
RENTAL INCOME, NET 5,114,840 4,119,979 6,397,040 4,629,792 1,491,998
-------------- -------------- --------------
INCOME FROM OPERATIONS 59,496,754 49,446,670 41,624,004 34,507,544 22,257,249
OTHER INCOME (EXPENSE), NET 3,103,633 1,915,630 1,844,525 1,078,790 2,363,305
-------------- -------------- --------------
INCOME BEFORE INTEREST AND INCOME TAXES
AND CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 62,600,387 51,362,300 43,468,529 35,586,334 24,620,554
INTEREST EXPENSE 28,968,921 24,739,770 17,296,406 17,285,113 16,196,409
-------------- -------------- --------------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 33,631,466 26,622,530 26,172,123 18,301,221 8,424,145
-------------- -------------- --------------
INCOME TAXES:
Current 10,800,000 9,000,000 9,400,000
4,800,000 1,900,000
Deferred 2,100,000 600,000 200,000 1,800,000 1,025,000
-------------- -------------- --------------
12,900,000 9,600,000 6,600,000 2,925,0009,600,000
-------------- -------------- --------------
INCOME BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE 20,731,466 17,022,530 16,572,123 11,701,221 5,499,145
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE FOR INCOME TAXES 3,334,860 - - 3,334,860
-------------- -------------- --------------
NET INCOME $ 19,906,98320,731,466 $ 11,701,22117,022,530 $ 5,499,14519,906,983
============== ============== ==============
PER-SHARE AMOUNTS:
Earnings per common share:
Primary earnings per common
share before cumulative effect
of change in accounting principle $ .901.12 $ .65.93 $ .31.90
Cumulative effect of change in
accounting principle for income taxes .18 - - .18
-------------- -------------- --------------
Primary earnings per common share $ 1.081.12 $ .65.93 $ .311.08
============== ============== ==============
Fully diluted earnings per common
share before cumulative effect of
change in accounting principle $ .861.03 $ .64.88 $ .31.86
Cumulative effect of change in
accounting principle for income taxes .15 - - .15
-------------- -------------- --------------
Fully diluted earnings per common share $ 1.011.03 $ .64.88 $ .311.01
============== ============== ==============
Cash dividends per common share:
Class A $ .5775.66 $ .2475.66 $ .22.5775
-------------- -------------- --------------
Class B $ .5250.60 $ .2250.60 $ .20.5250
-------------- -------------- --------------
See notes to consolidated financial statements.
3129
3230
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FISCAL YEARS ENDED SEPTEMBER 24, 1994,28, 1996, SEPTEMBER 25, 199330, 1995
AND SEPTEMBER 26, 199224, 1994
PAID-IN
CLASS A CLASS B CAPITAL IN
...COMMON STOCK... ...COMMON STOCK... EXCESS OF RETAINED
SHARES AMOUNT SHARES AMOUNT PAR VALUE EARNINGS TOTAL
--------- -------- ---------- -------- ----------- ------------ ------------
BALANCE,
SEPTEMBER 28, 1991. 4,270,675 $213,534 13,633,025 $681,651 $48,594,115 $ 88,790,937 $138,280,237
NET INCOME . . . . . - - - - - 5,499,145 5,499,145
CASH DIVIDENDS . . . - - - - - (3,666,380) (3,666,380)
COMMON STOCK
CONVERSIONS . . . . 22,072 1,103 (22,072) (1,103) - - -
--------- -------- ---------- -------- ----------- ------------ ------------
BALANCE,
SEPTEMBER 26, 1992. 4,292,747 214,637 13,610,953 680,548 48,594,115 90,623,702 140,113,002
NET INCOME . . . . . - - - - - 11,701,221 11,701,221
CASH DIVIDENDS . . . - - - - - (4,125,094) (4,125,094)
COMMON STOCK
CONVERSIONS . . . . 18,108 906 (18,108) (906) - - -
--------- -------- ---------- -------- ----------- ------------ ------------
BALANCE,
SEPTEMBER 25, 1993. 4,310,855 215,543$215,543 13,592,845 679,642 48,594,115 98,199,829 147,689,129$679,642 $48,594,115 $98,199,829 $147,689,129
NET INCOME . . . . . - - - - - 19,906,983 19,906,983
CASH DIVIDENDS . . . - - - - - (9,628,762) (9,628,762)
CONVERSION OF
CONVERTIBLE SUBORDINATED
DEBENTURES. . . . . 450 23 - - 4,973 - 4,996
COMMON STOCK
CONVERSIONS . . . . 100,862 5,043 (100,862) (5,043) - - -
--------- -------- ---------- -------- ----------- ------------ ------------
BALANCE,
SEPTEMBER 24, 1994. 4,412,167 $220,609220,609 13,491,983 $674,599 $48,599,088 $108,478,050 $157,972,346674,599 48,599,088 108,478,050 157,972,346
NET INCOME . . . . . - - - - - 17,022,530 17,022,530
CASH DIVIDENDS . . . - - - - - (11,178,391) (11,178,391)
COMMON STOCK
CONVERSIONS . . . . 165,374 8,268 (165,374) (8,268) - - -
--------- -------- ---------- -------- ----------- ------------ ------------
BALANCE,
SEPTEMBER 30, 1995. 4,577,541 228,877 13,326,609 666,331 48,599,088 114,322,189 163,816,485
NET INCOME . . . . . - - - - - 20,731,466 20,731,466
CASH DIVIDENDS . . . - - - - - (11,088,089) (11,088,089)
EXERCISE OF STOCK
OPTIONS . . . . . . 200,000 10,000 - - 1,540,000 - 1,550,000
COMMON STOCK
CONVERSIONS . . . . 319,750 15,987 (319,750) (15,987) - - -
--------- ------- ----------- -------- ----------- ------------ -----------
BALANCE,
SEPTEMBER 28, 1996. 5,097,291 $254,864 13,006,859 $650,344 $50,139,088 $123,965,566 $175,009,862
========= ======== ========== ======== =========== ============ ============
See notes to consolidated financial statements.
3230
3331
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FISCAL YEARS ENDED SEPTEMBER 28, 1996, SEPTEMBER 30, 1995
AND SEPTEMBER 24, 1994
____________________________________
CONSOLIDATED STATEMENTS OF CASH FLOWS
FISCAL YEARS ENDED SEPTEMBER 24, 1994, SEPTEMBER 25, 1993
AND SEPTEMBER 26, 1992
- ---------------------------------------- ------------ ----------- ----------- -----------
1996 1995 1994
1993 1992
----------------------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $20,731,466 $17,022,530 $19,906,983 $11,701,221 $ 5,499,145
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization expense 32,880,525 26,852,645 22,496,341 20,838,311 19,577,367
Cumulative effect of change in
accounting principle for income taxes (3,334,860) - - (3,334,860)
Amortization of deferred gains - - (14,144) (27,334) (715,860)
Gains on disposals of property and
equipment (2,407,736) (181,070) (747,060)
(503,796) (758,887)
Loss on repurchase of Convertible
Subordinated Debentures - - 19,120
(Recognition) receiptReceipt of advance paymentpayments on
purchases contractcontracts 3,209,955 2,000,000 -
Recognition of advance payments on
purchases contracts (2,828,760) (943,106) (834,469) (823,050) 6,250,000
Deferred income taxes 2,100,000 600,000 200,000 1,800,000 1,025,000
Increase in receivables (2,577,393) (2,365,350) (1,302,901)
(Increase) decrease in receivables (2,473,628) 1,531,021 (2,577,393)
(Increase) in inventory (11,500,847) (12,926,138) (2,218,609)
1,112,913 (1,604,578)
Decrease (increase)(Increase) decrease in other assets (304,583) (548,301) 1,197,040
(997,289) (39,853)
Increase (decrease) in accounts payable
and accrued expenses 2,938,639 11,860,053 6,209,809 18,715,593 (4,817,842)
----------- ----------- ----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES-----------
Net Cash Provided By
Operating Activities 42,345,031 45,267,634 40,283,638 49,451,219 23,130,711
----------- ----------- ---------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of property and
equipment 3,425,913 869,520 1,288,904 897,887 1,404,511
Capital expenditures (107,325,377)(118,182,079) (68,921,873)
(87,293,822) (16,357,783)
----------------------- ----------- -----------
NET CASH (USED) BY
INVESTING ACTIVITIES (103,899,464)(117,312,559) (67,632,969) (86,395,935) (14,953,272)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term
debt 130,160,690 124,846,585 51,744,393
9,100,000 185,231,164
Proceeds (payments) of(Payments) proceeds on short-term
loans,borrowings, net (20,000,000) 15,000,000 7,000,000 35,000,000 (2,500,000)
Principal payments ofon long-term debt (36,420,941) (54,973,504) (21,020,436)
(10,053,583) (175,701,581)
Conversion of Convertible Subordinated
Debentures 4,996 - -
Repurchase of Convertible Subordinated
Debentures - - (1,421,000)4,996
Proceeds from exercise of stock options 1,200,000 - -
Dividends paid (11,088,089) (11,178,391) (9,628,762) (4,125,094) (3,666,380)
----------- ----------- -----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 63,851,660 73,694,690 28,100,191 29,921,323 1,942,203
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH 2,297,227 1,649,765 750,860 (7,023,393) 10,119,642
Cash at Beginning of Year 20,120,776 18,471,011 17,720,151 24,743,544 14,623,902
----------- ----------- -----------
CASH AT END OF YEAR $22,418,003 $20,120,776 $18,471,011 $17,720,151 $24,743,544
=========== =========== ===========
See notes to consolidated financial statements.
3331
3432
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal years ended September 24, 1994,28, 1996, September 25, 199330, 1995
and September 26, 199224, 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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. and Milkco, Inc. (collectively,
the "Company"). All significant intercompany balances and transactions have
been eliminated in consolidation.
FISCAL YEAR - The Company's fiscal year ends on the last Saturday in September.
Fiscal years 1994, 19931996 and 19921994 each consisted of 52 weeks.weeks, while fiscal year 1995
was a 53-week year.
CASH EQUIVALENTS - All highly liquid investments with a maturity of three
months or less when purchased are considered cash.
FINANCIAL INSTRUMENTS - The Company has overnight investments and short-term
certificates of deposit included in cash. The Company's policy is to invest
its excess cash nightly either in reverse repurchase agreements or in
commercial paper. Commercial paper is not secured; reverse repurchase
agreements are secured by government obligations. At September 24, 1994, all28, 1996,
investments were in certificates of deposit totaling $4,087,137.totaled $5.0 million and investments in
commercial paper totaled $3.6 million. Certificates of deposit, commercial
paper and demand deposits of approximately $12,500,000$15.2 million in 2224 banks exceed the
$100,000 insurance limit per bank.
INVENTORIES - Warehouse inventories are valued at the lower of average cost or
market. Store inventories are valued at FIFO using the retail method.
PROPERTY, EQUIPMENT AND DEPRECIATION - Property and equipment are stated at
cost and depreciated over the estimated useful lives (principally 5 to 30
years) of the various classes of assets by the straight-line method.
SELF-INSURANCE - Self-insurance reserves are established for workers'
compensation and employee group medical and dental benefits based on claims
filed and claims incurred but not reported. The Company is insured for covered
costs in excess of certain limits.
INCOME TAXES - Effective September 26, 1993, theThe Company adoptedaccounts for income taxes under FASB Statement No.
109, "Accounting for Income Taxes". Under Statement 109, the liability
method is used in accounting for income taxes. Under this method, deferred tax assets and
liabilities are determined based on differences between financial reporting and
tax bases of assets and liabilities and are measured using the currently
enacted tax rates.
PRE-OPENING COSTS - Costs associated with the opening of new stores are
expensed when the stores are opened.
DEFERRED GAIN AMORTIZATION - Deferred gains on sale leaseback transactions are
amortized and included in other income (expense), net using the straight-line
method over the lives of the respective leases.
RECLASSIFICATIONS - Certain amounts for 19931995 and 19921994 have been reclassified
for comparative purposes.
34
35
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal years ended September 24, 1994, September 25, 1993
and September 26, 1992
PER-SHARE AMOUNTS - Primary earnings per common share is computed by dividing
consolidated net income by the weighted average number of shares of common
stock and dilutive common stock equivalent shares outstanding during the
32
33
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal years ended September 28, 1996, September 30, 1995
and September 24, 1994
period. Fully diluted earnings per common share gives effect to the assumed
conversion, if dilutive, of the Convertible Subordinated Debentures, after
elimination of related interest expense, net of the bonus and income tax
effect.
2. INCOME TAXES
CHANGE IN METHODADVERTISING - The Company expenses the costs of advertising as incurred.
USE OF ACCOUNTING FOR INCOME TAXESESTIMATES - Effective September 26, 1993,The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the Company adopted FASB Statement No. 109, "Accounting for Income Taxes".
Under Statement 109, the liability method is used in accounting for income
taxes. Under this method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of assets and
liabilities and are measured using the currently enacted tax rates. Prior to
the adoption of Statement 109, income tax expense was determined using the
deferred method. Deferred tax expense was based on items of income and expense
that wereamounts reported in different years in the financial statements
and tax
returnsaccompanying notes. Although these estimates are based on management's
knowledge of current events and were measured at the tax rate in effectactions it may undertake in the yearfuture, they
may ultimately differ from actual results.
RECENT PRONOUNCEMENTS - In March 1995, the difference
originated.
As permittedFASB issued Statement no. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of" which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amounts. Statement 109,121 also addresses the
accounting for long-lived assets that are expected to be disposed of. The
Company has electedwill adopt Statement 121 in the first quarter of 1997 and, based on
current circumstances, does not to restatebelieve the
financial statements of any prior years. The effect of the change on pre-tax
income for the year ended September 24, 1994 was not material; however, the
cumulative effect of the change increased net income by $3,334,860 or $.18 per
common share.adoption will be
material.
2. INCOME TAXES
DEFERRED INCOME TAX LIABILITIES AND ASSETS - Significant components of the
Company's deferred tax liabilities and assets as
of September 24, 1994 wereare as follows:
Deferred tax liabilities:
Tax over book depreciation . . . . . . . . . . . . . $22,652,000
Property tax method. . . . . . . . . . . . . . . . . 243,000
-----------
Total deferred tax liabilities . . . . . . . . . . 22,895,000
-----------
Deferred tax assets:
Excess of tax basis over financial reporting
basis of property and equipment. . . . . . . . . . 3,971,000
Insurance reserves . . . . . . . . . . . . . . . . . 1,605,000
Other. . . . . . . . . . . . . . . . . . . . . . . . 629,000
-----------
Total deferred tax assets. . . . . . . . . . . . . 6,205,000
-----------
Net deferred tax liabilities . . . . . . . . . . . $16,690,000
===========
-------------- -------------
SEPTEMBER 28, September 30,
1996 1995
-------------- -------------
Deferred tax liabilities:
Tax over book depreciation . . . . . . . . $ 27,181,000 $ 24,123,000
Property tax method. . . . . . . . . . . . 261,000 203,000
-------------- -------------
Total deferred tax liabilities. . . . . . 27,442,000 24,326,000
-------------- -------------
Deferred tax assets:
Excess of tax basis over financial
reporting basis of property and equipment 3,971,000 3,971,000
Insurance reserves . . . . . . . . . . . . 2,287,000 2,192,000
Advance payments on purchases contracts. . 1,125,000 -
Other. . . . . . . . . . . . . . . . . . . 1,145,000 898,000
-------------- -------------
Total deferred tax assets . . . . . . . . 8,528,000 7,061,000
-------------- -------------
Net deferred tax liabilities. . . . . . . $ 18,914,000 $ 17,265,000
============== =============
INCOME TAX EXPENSE - Income tax expense is different from the amounts computed
by applying the statutory federal rates to income before income taxes. The
reasons for the differences are as follows:
LIABILITY METHOD Deferred Method
---------------- ------------------------
1994 1993 1992
---------- ---------- ----------
Federal tax at statutory rate . . $9,160,243 $6,405,427 $2,864,209
State income tax, net of
federal tax benefits . . . . . 685,377 360,475 93,378
Other . . . . . . . . . . . . . . (245,620) (165,902) (32,587)
---------- ---------- ----------
Total . . . . . . . . . . . . . . $9,600,000 $6,600,000 $2,925,000
========== ========== ==========
3533
3634
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal years ended September 28, 1996, September 30, 1995
and September 24, 1994
September 25, 1993
and September 26, 1992
Income tax payments of $9,769,130, $4,194,801 and $2,189,481 were made during
fiscal years 1994, 1993 and 1992, respectively.
1996 1995 1994
----------- ---------- ----------
Federal tax at statutory rate . $11,771,000 $9,318,000 $9,160,000
State income tax, net of
federal tax benefits . . . . 1,015,000 715,000 685,000
Other . . . . . . . . . . . . . 114,000 (433,000) (245,000)
---------- ---------- ----------
Total . . . . . . . . . . . . . $12,900,000 $9,600,000 $9,600,000
=========== ========== ==========
Income taxes payable of $1,059,090$1,175,131 at September 24, 199428, 1996 and $1,428,220$2,872,093 at
September 25, 199330, 1995 are included in the accompanying balance sheets in accounts
payable and accrued expenses.
Current and deferred income tax expense are as follows:
---------- ---------- ----------
1994 1993 1992
---------- ---------- ----------
Current:
Federal . . . . . . . . . . . . $8,400,000 $4,300,000 $1,725,000
State . . . . . . . . . . . . . 1,000,000 500,000 175,000
----------- ---------- ----------
Total current . . . . . . 9,400,000 4,800,000 1,900,000
---------- ---------- ----------
Deferred:
Depreciation . . . . . . . . . 355,000 1,730,000 237,000
Deferred gains . . . . . . . . 48,000 130,000 601,000
Self-insurance reserves . . . . 12,000 (251,000) 35,000
Property taxes. . . . . . . . . (26,000) 423,000 357,000
Other . . . . . . . . . . . . . (189,000) (232,000) (205,000)
---------- ---------- ----------
Total deferred . . . . . 200,000 1,800,000 1,025,000
---------- ---------- ----------
Total expense . . . . . . . . . $9,600,000 $6,600,000 $2,925,000
---------- ---------- ----------
1996 1995 1994
---------- ---------- ----------
Current:
Federal . . . . . . . . . . . . $9,600,000 $8,000,000 $8,400,000
State . . . . . . . . . . . . . 1,200,000 1,000,000 1,000,000
----------- ---------- ----------
Total current . . . . . . 10,800,000 9,000,000 9,400,000
---------- ---------- ----------
Deferred:
Depreciation . . . . . . . . . 2,965,000 1,184,000 355,000
Deferred gains . . . . . . . . - - 48,000
Self-insurance reserves . . . . (102,000) (213,000) 12,000
Property taxes. . . . . . . . . 62,000 (37,000) (26,000)
Advance payments on purchases
contracts . . . . . . . . . . (390,000) - -
Other . . . . . . . . . . . . . (435,000) (334,000) (189,000)
---------- ---------- ----------
Total deferred . . . . . 2,100,000 600,000 200,000
---------- ---------- ----------
Total expense . . . . . . . . . $12,900,000 $9,600,000 $9,600,000
=========== ========== ==========
==========
Current deferred income tax benefits of $1,960,690$3,120,690 and $2,015,542$2,960,690 for 19941996 and
1993,1995, respectively, included in other current assets, result from timing
differences arising from vacation pay, bad debts and self-insurance reserves
and from capitalization of certain overhead costs in inventory for tax
purposes.
3. PROPERTY AND EQUIPMENT
Property and equipment, net consistCHANGE IN METHOD OF ACCOUNTING FOR INCOME TAXES - Effective September 26, 1993,
the Company adopted FASB Statement No. 109, "Accounting for Income Taxes". As
permitted by Statement 109, the Company elected not to restate the financial
statements of any prior years. The cumulative effect of the following:
------------- -------------
SEPTEMBERchange increased
net income for the year ended September 24, September 25,
1994 1993
------------- -------------
Land . . . . . . . . . . . . . . . . $ 74,303,692 $ 64,153,586
Construction in progress . . . . . . 24,402,728 6,399,813
Buildings . . . . . . . . . . . . . 190,585,670 169,912,445
Store, office and warehouse
equipment . . . . . . . . . . . . 176,245,189 157,132,479
Transportation equipment . . . . . . 10,499,783 10,070,641
Property under capital leases. . . . 151,264 402,084
Leasehold improvements . . . . . . . 33,737,527 33,863,864
------------- -------------
Total. . . . . . . . . . . . . . . . 509,925,853 441,934,912
Less accumulated depreciation and
amortization. . . . . . . . . . . . 150,255,748 129,418,751
------------- -------------
Property and equipment,net . . . . . $ 359,670,105 $ 312,516,161
============= =============
On October 1, 1992, the Company purchased twenty-two shopping center properties
and one free-standing store, all of which were leased to the Company and
contained supermarkets operated by the Company. These properties were
36$3,334,860 or $.18 per
common share.
34
3735
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal years ended September 28, 1996, September 30, 1995
and September 24, 1994
September 25, 19933. PROPERTY AND EQUIPMENT
Property and September 26, 1992
previously sold by the Company in December 1986, in connection with a
sale-leaseback transaction. The purchase price was approximately $56,000,000.
The unamortized portionequipment, net consist of the deferred gain of approximately $10,000,000 that
resulted from the 1986 sale-leaseback transaction reduced the cost of the
properties acquired for financial reporting purposes.following:
------------- -------------
SEPTEMBER 28, September 30,
1996 1995
------------- -------------
Land . . . . . . . . . . . . . . . . $ 107,965,769 $ 93,915,087
Construction in progress . . . . . . 23,621,825 30,347,722
Buildings . . . . . . . . . . . . . 301,822,944 237,241,858
Store, office and warehouse
equipment . . . . . . . . . . . . 249,294,101 213,156,608
Transportation equipment . . . . . . 16,453,550 13,922,509
Property under capital leases. . . . 151,264 151,264
Leasehold improvements . . . . . . . 35,573,043 35,977,020
------------- -------------
Total. . . . . . . . . . . . . . . . 734,882,496 624,712,068
Less accumulated depreciation and
amortization. . . . . . . . . . . . 204,654,991 174,171,292
------------- -------------
Property and equipment,net . . . . . $ 530,227,505 $ 450,540,776
============= =============
The Company currently maintains general liability, and automobile insurance coverages with a $25,000 deductible per claim. Excessand
excess liability coverages are
also maintained.coverages. The Company maintains $10 million liability
insurance coverage on four aircraft used in its business. The Company
maintains casualty insurance only on those properties where it is required to
do so. The Company has elected to self-insure its other properties, including four aircraft used in its business,
which are not covered by casualty or liability insurance.properties.
4. PROPERTY HELD FOR LEASE AND RENTAL INCOME
At September 24, 1994,28, 1996, the Company owned and operated 7074 shopping centers in
conjunction with its supermarket activities.operations. The Company leases to others a
portion of its shopping center properties. The leases are noncancelable
operating lease agreements for periods ranging up to twenty-five years.
Substantially all leases covering retail properties provide for one or more
renewal periods and for percentage rentalsrent based uponon gross sales of the lessee.
Rental income, net included in the accompanying consolidated statements of
income consists of the following:
----------- ----------- -----------
1994 1993 1992
----------- ----------- -----------
Rents earned on owned and
subleased properties:
Base rentals including lease
termination payments.
----------- ----------- -----------
1996 1995 1994
----------- ----------- -----------
Rents earned on owned and
subleased properties:
Base rentals including lease
termination payments . . . . . $ 9,002,824 $ 7,705,645 $ 9,398,680 $ 7,576,190 $ 6,948,242
Contingent rentals. . . . . . . 577,379 596,154 428,712 382,919 389,268
----------- ----------- -----------
Total. . . . . . . . . . . 9,580,203 8,301,799 9,827,392 7,959,109 7,337,510
Depreciation on owned
properties leased to others . . (3,236,144) (3,027,886) (2,438,373) (2,402,905) (1,456,776)
Rent expense on subleased
properties . . . . . . . . . . . - - (3,591,886)
Other shopping center expenses . . (1,229,219) (1,153,934) (991,979) (926,412) (796,850)
----------- ----------- -----------
Total. . . . . . . . . . . . . $ 5,114,840 $ 4,119,979 $ 6,397,040 $ 4,629,792 $ 1,491,998
=========== =========== ===========
Owned properties leased to others under operating leases by major classes is as
follows:
--------------
September 24,
1994
--------------
Land . . . . . . . . . . . . . . . . . . . . . . . $ 24,947,248
Buildings . . . . . . . . . . . . . . . . . . . . . 66,760,409
------------
Total . . . . . . . . . . . . . . . . . . . . . . 91,707,657
Less accumulated depreciation . . . . . . . . . . . 14,059,098
------------
Property leased to others, net . . . . . . . . . . $ 77,648,559
============
37
35
3836
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal years ended September 28, 1996, September 30, 1995
and September 24, 1994
September 25, 1993
and September 26, 1992Owned properties leased to others under operating leases by major classes are
summarized as follows:
------------
SEPTEMBER 28,
1996
------------
Land . . . . . . . . . . . . . . . . . . . . . . . $ 27,499,000
Buildings . . . . . . . . . . . . . . . . . . . . . 90,279,000
------------
Total . . . . . . . . . . . . . . . . . . . . . . 117,778,000
Less accumulated depreciation . . . . . . . . . . . 21,071,000
------------
Property leased to others, net . . . . . . . . . . $ 96,707,000
============
The above amounts are included in the respective captions at Note 3.
The following is a schedule of minimum future rental income on noncancelable
operating leases as of September 24, 1994:
FISCAL YEAR
-----------
1995 . . . . . . . . . . . . . . . . . . . . . . . $ 6,567,648
1996 . . . . . . . . . . . . . . . . . . . . . . . 5,833,939
1997 . . . . . . . . . . . . . . . . . . . . . . . 4,981,816
1998 . . . . . . . . . . . . . . . . . . . . . . . 4,213,093
1999 . . . . . . . . . . . . . . . . . . . . . . . 3,345,829
Thereafter . . . . . . . . . . . . . . . . . . . . 19,359,046
-----------
Total minimum future rental income . . . . . . . . . $44,301,37128, 1996:
FISCAL YEAR
-----------
1997 . . . . . . . . . . . . . . . . . . . . . . . $ 8,059,099
1998 . . . . . . . . . . . . . . . . . . . . . . . 7,000,593
1999 . . . . . . . . . . . . . . . . . . . . . . . 5,639,225
2000 . . . . . . . . . . . . . . . . . . . . . . . 4,662,929
2001 . . . . . . . . . . . . . . . . . . . . . . . 3,458,127
Thereafter . . . . . . . . . . . . . . . . . . . . 16,990,268
----------
Total minimum future rental income . . . . . . . . . $45,810,241
===========
5. LEASES AND RENTAL EXPENSE
The Company conducts part of its retail operations from leased facilities. The
initial terms of the leases expire at various times over the next twenty 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.
OPERATING LEASES - The following schedule shows the composition of total rentalRent expense for all operating leases:
----------- ----------- -----------leases of $11,741,462,
$11,796,628 and $12,016,352 for fiscal years 1996, 1995 and 1994, 1993 1992
----------- ----------- -----------
Base rentals . . . . . . . . . . . $11,891,759 $11,823,460 $17,892,170
Contingent rentals . . . . . . . . 124,593 148,274 201,033
Rent expense on property
subleased to others . . . . . . . - - (3,591,886)
----------- ----------- -----------
Total. . . . . . . . . . . . . . . $12,016,352 $11,971,734 $14,501,317
=========== =========== ===========
Rent expense, excluding rent expense on properties subleased to others,respectively
is included in operating and administrative expenses. Rent expense on properties
subleased to others reduces net rental income (Note 4).
The aggregate minimum rental commitments under noncancelable operating leases
as of September 24, 199428, 1996 are as follows:
FISCAL YEAR
-----------
1995 . . . . . . . . . . . . . . . . . . . . . . . . $ 11,454,149
1996 . . . . . . . . . . . . . . . . . . . . . . . . 11,537,749
1997 . . . . . . . . . . . . . . . . . . . . . . . . 11,400,924
1998 . . . . . . . . . . . . . . . . . . . . . . . . 11,275,291
1999 . . . . . . . . . . . . . . . . . . . . . . . . 11,133,789
Thereafter . . . . . . . . . . . . . . . . . . . . . 89,406,792
------------
Total minimum future rental commitments. . . . . . . . $146,208,694
FISCAL YEAR
-----------
1997 . . . . . . . . . . . . . . . . . . . . . . . . $ 11,494,574
1998 . . . . . . . . . . . . . . . . . . . . . . . . 11,319,125
1999 . . . . . . . . . . . . . . . . . . . . . . . . 11,107,881
2000 . . . . . . . . . . . . . . . . . . . . . . . . 10,815,527
2001 . . . . . . . . . . . . . . . . . . . . . . . . 10,749,730
Thereafter . . . . . . . . . . . . . . . . . . . . . 68,608,906
------------
Total minimum future rental commitments. . . . . . . . $124,095,743
============
38
36
3937
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal years ended September 24, 1994,28, 1996, September 25, 199330, 1995
and September 26, 199224, 1994
6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
SEPTEMBER 24,
------------- -------------
SEPTEMBER 28, September 30,
1996 1995
------------- -------------
Accounts payable-trade . . . . . . . . . $ 74,850,388 $ 66,815,027
Property, payroll, and
other taxes payable . . . . . . . . . 8,694,621 9,363,814
Salaries, wages, and bonuses payable . . 9,696,321 7,970,396
Other . . . . . . . . . . . . . . . . . . 9,378,027 9,620,395
Self-insurance reserves . . . . . . . . . 4,515,000 4,350,000
------------- -------------
Total . . . . . . . . . . . . . . . . . . $ 107,134,357 $ 98,119,632
============= =============
Self-insurance reserves are established for workers' compensation and employee
group medical and dental benefits based on claims filed and claims incurred but
not reported. The Company is insured for covered costs in excess of $350,000
per occurrence for workers' compensation and $150,000 per covered person for
medical care benefits for a policy year. Employee insurance expense, including
workers' compensation and medical care benefits, net of employee contributions,
totalled $8,362,306 and $8,627,447 for the year ended September 25,
1994 1993
------------- -------------
Accounts payable-trade . . . . . . . . . $ 62,135,297 $ 57,679,269
Property, payroll,28, 1996 and
other taxes payable . . . . . . . . . 7,189,278 6,526,695
Salaries, wages, and bonuses payable . . 6,825,605 5,765,393
Other . . . . . . . . . . . . . . . . . . 10,109,399 10,078,413
------------- -------------
Total . . . . . . . . . . . . . . . . . . $ 86,259,579 $ 80,049,770
============= =============September 30, 1995, respectively.
7. LONG-TERM LIABILITIES AND SHORT-TERM LOANS
Long-term liabilities and short-term loans are summarized as follows:
SEPTEMBER 24, September 25,
1994 1993
------------- -------------
SEPTEMBER 28, September 30,
1996 1995
------------- -------------
Long-term debt:
10% Convertible Subordinated
Debentures, maturing 2008. . . . . . . . $ 37,459,000 $ 37,459,000
------------- -------------
Notes payable:
Real estate and equipment:
Weighted average interest rate of 9.06%,
maturing 1997-2015 . . . . . . . . . . 231,056,171 180,607,382
Interest rate at the average weekly yield
of one month commercial paper plus 1.9%,
maturing 1997-2000 . . . . . . . . . . 29,552,394 39,575,832
Other:
Weighted average interest rate of 6.93%,
maturing 1998. . . . . . . . . . . . . 68,000,000 10,000,000
Interest at 8.9%, secured by stock of
Milkco, Inc., maturing 2002. . . . . . 15,000,005 17,857,145
Other. . . . . . . . . . . . . . . . . . 6,166,682 8,166,674
------------- -------------
349,775,252 256,207,033
------------- -------------
Long-term debt:
10% Convertible Subordinated
Debentures, maturing 2008. . . . . . . . $ 37,459,000 $ 37,464,000
------------- -------------
Notes payable:
Real estate:
Weighted average interest rate of 9.98%,
maturing 1995-2015 . . . . . . . . . . 94,276,011 98,313,487
Equipment:
Interest rate of 8.41%,
maturing 1999 . . . . . . . . . . . . 21,000,000 -
Interest rate at the average weekly yield
of one month commercial paper plus 1.9%,
maturing 1997-1999 . . . . . . . . . . 21,907,040 8,381,504
Interest at the prime rate less 1/2%,
with a maximum rate of 8.75% over the
life of the loan, maturing 1997. . . . 5,333,324 7,333,328
Other:
Interest at certain LIBOR rates plus
1-1/8% to 1-1/4%, maturing 1996 . . . . 30,000,000 -
Interest at the prime rate less 1/2%,
maturing 1995. . . . . . . . . . . . . - 9,000,000
Interest rate at 8.65%, maturing 1995. . 3,750,000 5,625,000
------------- -------------
176,266,375 128,653,319
------------- -------------
Short-term loans, interest rates at less
than the prime rate. . . . . . . . . . . . 25,000,000 35,000,000
------------- -------------
Other long-term liabilities:
Advance payment received on purchases
contract . . . . . . . . . . . . . . . . 4,592,481 5,426,950
Other. . . . . . . . . . . . . . . . . . . 417,145 301,244
------------- -------------
Total . . . . . . . . . . . . . . . . . . 5,009,626 5,728,194
------------- -------------
Total long-term liabilities and short-term
loans . . . . . . . . . . . . . . . . . . 243,735,001 206,845,513
Less current portion . . . . . . . . . . . . 29,678,057 43,832,239
------------- -------------
Long-term liabilities, net of current
portion . . . . . . . . . . . . . . . . . $ 214,056,944 $ 163,013,274
============= =============
39
37
4038
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal years ended September 28, 1996, September 30, 1995
and September 24, 1994
September 25, 1993
and September 26, 1992
Short-term loans, interest rates at less
than the prime rate. . . . . . . . . . . . 10,000,000 30,000,000
------------- -------------
Other long-term liabilities:
Advance payments on purchases contracts. . 6,030,570 5,649,375
Other. . . . . . . . . . . . . . . . . . . 521,098 349,568
------------- -------------
Total . . . . . . . . . . . . . . . . . . 6,551,668 5,998,943
------------- -------------
Total long-term liabilities and short-term
loans . . . . . . . . . . . . . . . . . . 403,785,920 329,664,976
Less current portion . . . . . . . . . . . . 54,274,426 36,899,696
------------- -------------
Long-term liabilities, net of current
portion . . . . . . . . . . . . . . . . . $ 349,511,494 $ 292,765,280
============= =============
The Company has repurchased $14,771,000 of the Convertible Subordinated Debentures (the "Debentures") and $5,000 of the Debentures have been converted
into Class A Common Stock of the Company as of September 24, 1994.
The Debentures are unsecured and
subordinated in right of payment to all existing and future Senior Indebtedness
(as defined by the Indenture) of the Company. Interest is payable
semi-annually on April 15 and October 15.
The Debentures are convertible into Class A Common Stock of the Company at any
time prior to maturity or redemption at $11.10 per share, subject to adjustment
under certain conditions. Mandatory annual redemption payments equal to 7% of the original principal
amount ($52,235,000) of the Debentures are required commencing October 15, 1998
and are calculated to retire 70% of the issue prior to maturity. The Company
may deliver Debentures, including converted and repurchased Debentures, in lieu
of cash as a credit against mandatory redemption payments.
The Debentures are redeemable at any time, in whole
or in part, at the option of the Company under certain conditions. (See Note
17 of the Notes to Consolidated Financial Statements regarding redemption of
all of the Company's outstanding Convertible Subordinated Debentures.)
During October 1994,1996, the Company obtained two long-terma $6 million bank loans: a
$20,000,000 loan at an interest
rate of 8.90% and a $10,000,000 loan at an
interest rate of 7.95%. A portion of the7.15% maturing in December 1997. The proceeds from these loans wasthe loan were used
to reduce short-term borrowings outstanding at September 24, 1994.28, 1996. Short-term
borrowings under lines of credit totalling $15,000,000 have been reclassified to long-term liabilities at September 24, 199428,
1996 pursuant to this refinancing.
At September 24, 1994,28, 1996, property and equipment with an undepreciated cost of
approximately $124$273 million was pledged as collateral for long-term debt. Loan
agreements relating to certain debt contain various provisions which, among
other things, set minimum stockholders' equity balances. The most
restrictive of these provisions at September 24, 1994,28, 1996, has the effect of
restricting funds available for dividends to approximately $13.0$20.0 million.
At September 24, 1994,28, 1996, the Company had unused lines of credit of $55$43 million.
The lines provide the Company with various interest rate options, of no moregenerally at
rates less than prime rate, LIBOR plus a specified margin or such lower pricing as the
bank may elect to bid from time to time.prime.
Components of interest costs are as follows:
----------- ----------- -----------
1994 1993 1992
----------- ----------- -----------
Total interest costs . . . . $18,184,443 $17,535,853 $16,496,628
Interest capitalized . . . . 888,037 250,740 300,219
----------- ----------- -----------
1996 1995 1994
----------- ----------- -----------
Total interest costs . . . . $31,338,464 $26,501,706 $18,184,443
Interest capitalized . . . . (2,369,543) (1,761,936) (888,037)
----------- ----------- -----------
Interest expense . . . . . . $28,968,921 $24,739,770 $17,296,406 $17,285,113 $16,196,409
=========== =========== ===========
Interest payments (net of amounts capitalized) were $16,979,825
ADVANCE PAYMENTS ON PURCHASES CONTRACTS - The Company has entered into
agreements with suppliers whereby payment is received in advance for
1994,
$17,325,002 for 1993, and $16,338,563 for 1992.
40commitments to purchase product from these suppliers in the future. The
38
4139
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal years ended September 24, 1994,28, 1996, September 25, 199330, 1995
and September 26, 1992
ADVANCE PAYMENT RECEIVED ON PURCHASES CONTRACT - During fiscal 1992, the
Company entered into a contract to purchase certain products. Under the
contract, the supplier paid the Company $7,250,000 of which $1,000,000 was
earned upon contract signing. The remaining $6,250,000 is earned as product is
purchased. The24, 1994
unearned portion, included in other long-term liabilities, will be recognized
as product is purchased. Ifin accordance with the agreement is canceled, the
Company must refund the unearned portionterms of the payment.contract.
Maturities of long-term liabilities at September 24, 199428, 1996 are as follows:
FISCAL YEAR
-----------
1995 . . . . . . . . . . . . . . . . . . . . . . . $ 29,678,057
1996 . . . . . . . . . . . . . . . . . . . . . . . 50,040,101
1997 . . . . . . . . . . . . . . . . . . . . . . . 16,751,432
1998 . . . . . . . . . . . . . . . . . . . . . . . 13,001,768
1999 . . . . . . . . . . . . . . . . . . . . . . . 10,897,922
Thereafter . . . . . . . . . . . . . . . . . . . . 123,365,721
------------
Total $243,735,001
FISCAL YEAR
-----------
1997 . . . . . . . . . . . . . . . . . . . . . . . $ 54,274,426
1998 . . . . . . . . . . . . . . . . . . . . . . . 112,014,374
1999 . . . . . . . . . . . . . . . . . . . . . . . 43,594,246
2000 . . . . . . . . . . . . . . . . . . . . . . . 31,575,663
2001 . . . . . . . . . . . . . . . . . . . . . . . 18,893,282
Thereafter . . . . . . . . . . . . . . . . . . . . 143,433,929
------------
Total $403,785,920
============
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 National Market tier of the Nasdaq Stock
Market (National 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 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 as and when declared out of assets legally
available therefor, 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 75% of the directors.
41
42
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal years ended September 24, 1994, September 25, 1993
and September 26, 1992
The Preferred Stock may be issued by the Board of Directors from time to time,
without stockholder approval, in one or more series for such consideration and,
within certain limits, with such relative rights and preferences as the Board
may determine. Accordingly, the Board has the power to set the dividend rate
and to establish the provisions, if any, relating to voting rights, redemption
rates, sinking funds, liquidation preferences, and conversion rights for any
series of Preferred Stock issued in the future.
EARNINGS PER COMMON SHARE - Weighted average number of common shares used to
compute earnings per share is as follows:
---------- ---------- ----------
1994 1993 1992
---------- ---------- ----------
1996 1995 1994
---------- ---------- ----------
Primary . . . . . . . . . . 18,520,459 18,316,672 18,386,557 17,969,971 17,903,700
Fully diluted . . . . . . . 22,098,790 21,691,357 21,792,770
21,345,107 21,378,244
9. EMPLOYEE BENEFIT PLANS
EMPLOYEES'
INVESTMENT/PROFIT SHARING PLAN - The purpose of the qualified profit sharing
plan is to provide retirement benefits to eligible employees. Assets of the
39
40
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal years ended September 28, 1996, September 30, 1995
and September 24, 1994
plan, including the Company's Class B Common Stock, are held in trust for
employees and distributed upon retirement, death, disability or other
termination of employment. Company contributions are discretionary and are
determined annually by the Board of Directors. On February 2, 1994, a 401(k)
feature was added to the Profit Sharing Plan. The Profit Sharing Plan
including the 401(k) feature was renamed the Ingles Markets, Incorporated
Investment/Profit Sharing Plan. Company contributions for fiscal 1995 and 1994
were allocated only to employees participating in the 401(k) portion of the
plan.
Company contributions to the plan, included in operating and administrative
expenses, were $700,000 for 1996, $700,000 for 1995 and $452,195 for 1994, $775,000 for 1993, and $750,000 for 1992.1994.
CASH BONUS PLAN - The Company pays monthly bonuses to various managerial
personnel based on performance of the operating units controlled by these
personnel. Except for certain employees who receive monthly bonuses, annual
bonuses based on pre-tax, pre-bonus income are paid to all employees who worked
the entire fiscal year. The Company has a discretionary bonus plan for certain
executive officers providing for bonuses upon attainment of certain operating
goals. Operating and administrative expenses include bonuses of $5,398,478,
$4,241,183 and $3,602,687 $2,842,329for 1996, 1995 and $2,111,466 for 1994, 1993respectively.
BONUS AGREEMENT WITH PRESIDENT - On December 23, 1994, the Company entered into
an agreement with its President, whereby the Company agreed to pay a bonus that
will accrue in the amount of $300,000 per year during fiscal years 1995 through
1999 up to a maximum aggregate bonus of $1,500,000. The President will receive
the full amount of the bonus if he continues to be employed by the Company
through September 25, 1999, and 1992, respectively.prior to that date only if his employment is
terminated by the Company with or without cause, or if, in the event of the
sale of the Company or a change in control of the Company, the President should
terminate his employment with the Company. The President would be entitled to
a pro-rata portion of the full amount of the bonus in the event of his death or
disability prior to September 25, 1999.
STOCK OPTIONS PLANS - The Company has stock option plans under which options
may be issued to salaried employees who are officers or are employed in an
executive, administrative, managerial or professional capacity by the Company.
The Company's stock option plans provide that stock may be issued at a price of
not less than 100% of fair market value of the Company's Class A Common Stock
at the date of the grant of the option. The options may be exercised within a
period of three months after five years from the date of issue or upon death,
disability or retirement. Information with respect to each stock option plan
is as follows:
42
43
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal years ended September 24, 1994, September 25, 1993
and September 26, 1992
1983 NONQUALIFIED STOCK OPTION PLAN - The Company had a stock option plan under
which an aggregate of 750,000 shares of the Company's Class B Common Stock were
issuable to qualified employees as nonqualified stock options until December
22, 1988.
As of September 26, 1992, all of the outstanding options under this plan
expired and had been canceled. Information with respect to options canceled
and outstanding follows:
SHARES
UNDER OPTION PRICE
OPTION PER SHARE TOTAL
-------- ------------- ----------
Outstanding,
September 28, 1991 . . . 34,500 $10.00 $ 345,000
Canceled . . . . . . . . (34,500) 10.00 (345,000)
-------- ----------
Outstanding,
September 26, 1992 . . . 0 $ 0
======== ==========
1987 EMPLOYEE INCENTIVE STOCK OPTION PLAN - The Company has an incentive stock
option plan under which an aggregate of 250,000 shares of the Company's Class A
Common Stock may be issued to qualified employees from time to time on or
before September 8, 1997. No options may be granted to any employee who owns,
at the time of the proposed grant, stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company. Options that
lapse or are canceled may be reissued by the Company. As of September 24,
1994, 28,500 shares28,
1996, no options were exercisable under option are exercisable.this plan. Information with respect to
options granted, canceled and outstanding follows:
SHARES
UNDER OPTION PRICE
OPTION PER SHARE TOTAL
-------- ------------- ----------
Outstanding,40
41
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal years ended September 28, 1991 . . . 106,000 $6.88-$12.75 $1,063,750
Granted . . . . . . . . 88,500 7.00 619,500
Canceled . . . . . . . . (25,000) 7.00-12.75 (228,500)
-------- ----------
Outstanding,1996, September 26, 1992 . . . 169,500 6.88-12.75 1,454,750
Granted . . . . . . . . 40,000 6.13 245,000
Canceled . . . . . . . . (46,000) 6.13-12.75 (432,500)
-------- ----------
Outstanding,30, 1995
and September 25, 1993 . . . 163,500 6.13-10.00 1,267,250
Granted . . . . . . . . 27,000 8.63 232,875
Canceled . . . . . . . . (35,500) 6.13-10.00 (323,000)
-------- ----------
OUTSTANDING,
SEPTEMBER 24, 1994
. . . 155,000 $6.13-$10.00 $1,177,125
SHARES
UNDER OPTION PRICE
OPTION PER SHARE TOTAL
-------- ------------- ----------
Outstanding,
September 25, 1993 . . . 163,500 $6.13-$10.00 $1,267,250
Granted . . . . . . . . 27,000 8.63 232,875
Canceled . . . . . . . . (35,500) 6.13-10.00 (323,000)
-------- ----------
Outstanding,
September 24, 1994 . . . 155,000 6.13-10.00 1,177,125
Granted . . . . . . . . 27,000 11.38 307,125
Canceled . . . . . . . . (46,500) 6.13-11.38 (425,375)
-------- ----------
Outstanding,
September 30, 1995 . . . 135,500 6.13-11.38 1,058,875
Granted . . . . . . . . 53,000 10.00 530,000
Canceled . . . . . . . . (27,000) 6.13-11.38 (256,500)
-------- ----------
OUTSTANDING,
SEPTEMBER 28, 1996 . . . 161,500 $6.13-$11.38 $1,332,375
======== ==========
1991 NONQUALIFIED STOCK OPTION PLAN - The Company has a nonqualified stock
option plan under which an aggregate of 1,000,000 shares of the Company's Class
A Common Stock may be issuedwere issuable to qualified employees from time to time on or
beforeuntil August 6, 1996. Options that lapse or are cancelled may be reissued by
43
44
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal years endedAs
of September 24, 1994, September 25, 1993
and September 26, 1992
the Company. No28, 1996, no options arewere currently exercisable under this plan.
Information with respect to options granted, canceled and outstanding follows:
SHARES
UNDER OPTION PRICE
OPTION PER SHARE TOTAL
-------- ------------- ----------
Outstanding,
September 28, 1991 . . . 0 $ 0
Granted . . . . . . . . 499,000 $6.88 3,430,625
Canceled . . . . . . . . (3,000) 6.88 (20,625)
-------- ----------
Outstanding,
September 26, 1992 . . . 496,000 6.88 3,410,000
Granted . . . . . . . . 400,000 5.75- 6.00 2,350,000
-------- ----------
Outstanding,
September 25, 1993 . . . 896,000 5.75- 6.88 5,760,000
Granted . . . . . . . . 200,000 10.38-11.50 2,187,500
Canceled . . . . . . . . (100,000) 6.88 (687,500)
-------- ----------
OUTSTANDING,
SEPTEMBER 24, 1994 . . . 996,000 $5.75-$11.50 $7,260,000
SHARES
UNDER OPTION PRICE
OPTION PER SHARE TOTAL
-------- ------------- ----------
Outstanding,
September 25, 1993 . . . 896,000 $5.75-$6.88 $5,760,000
Granted . . . . . . . . 200,000 10.38-11.50 2,187,500
Canceled . . . . . . . . (100,000) 6.88 (687,500)
-------- -----------
Outstanding,
September 24, 1994 . . . 996,000 5.75-11.50 7,260,000
Granted . . . . . . . . - - -
Canceled . . . . . . . . - - -
-------- -----------
Outstanding,
September 30, 1995 . . . 996,000 5.75-11.50 7,260,000
Granted . . . . . . . . - - -
Canceled . . . . . . . . (5,000) 6.88 (34,375)
--------- ----------
OUTSTANDING,
SEPTEMBER 28, 1996. . 991,000 $5.75-$11.50 $7,225,625
======== ==========
STOCK OPTION AGREEMENTS WITH EXECUTIVE OFFICERS - On July 21, 1993,During the Company
entered into nonqualified stock option agreements with each ofyear ended
September 28, 1996, Robert P. Ingle, Chairman of the Board of Directors and
Chief Executive Officer of the Company, and Landy B. Laney, President and Chief
Operating Officer of the Company, each exercised their options to purchase
100,000 shares of the Company's Class A Common Stock at an option price of
$6.00 per share. The difference between the fair market value of the Class A
Common Stock at the date of the grant of the options ($7.75 per share) and the
option price ($6.00 per share) was previously expensed on the Company's books.
On August 2, 1995, the Company entered into a nonqualified stock option
agreement with one of its executive officers under which an aggregate of 100,000 shares of the
Company's Class A Common Stock may be issued to eachhim at $10.625 per share (the
41
42
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal years ended September 28, 1996, September 30, 1995
and September 24, 1994
fair market value of them. The options may be exercised from time to time
until July 20, 1998the stock at anthe date the option price of $6.00 per share.was granted). The option
may also
be exercised at any timeis exercisable within a period of three months after five years from the date
of issue or upon the death, of the optionee prior to July 20, 1998.disability, or retirement.
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.
10. MAJOR SUPPLIER
A large portion of inventory is purchased from a wholesale grocery distributor.
Purchases from the distributor were approximately $168 million in 1996, $236
million in 1995 and $207 million in 1994, $179
million in 1993 and $162 million in 1992.1994. This distributor owns approximately
6%5% of the Company's Class A Common Stock and approximately 1% of the Company's
Class B Common Stock at September 24, 1994.28, 1996. Amounts owed to this distributor,
included in accounts payable-trade, were $3.1$3.8 million and $2.8$4.6 million at
September 24, 199428, 1996 and September 25, 1993,30, 1995, respectively.
11. SUPPLEMENTARY INCOME STATEMENT DATA
Operating and administrative expenses include the following:
----------- ----------- -----------
1994 1993 1992
----------- ----------- -----------
Advertising and
promotion expense . . . .
----------- ----------- -----------
1996 1995 1994
----------- ----------- -----------
Advertising and promotion expense. . $17,849,164 $18,656,718 $17,129,161 $17,295,081 $18,054,830
=========== =========== ===========
44
45
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal years ended September 24, 1994, September 25, 1993
and September 26, 1992
12. LINES OF BUSINESS
The Company operates in two lines of business: retail grocery and food sales
(principally retail sales) and shopping center rentals. Information about the
Company's operations by lines of business (in thousands) is as follows:
----------- ----------- -----------
1996 1995 1994
----------- ----------- -----------
Revenues from unaffiliated
customers:
Grocery and food sales . . . $ 1,472,578 $ 1,385,127 $ 1,233,497
Shopping center rentals. . . 9,580 8,302 9,827
Income from operations:
Grocery and food sales . . . 54,382 45,327 35,227
Shopping center rentals. . . 5,115 4,120 6,397
Assets:
Grocery and food sales . . . 611,258 517,142 428,944
Shopping center rentals. . . 96,707 94,685 77,649
Capital expenditures:
Grocery and food sales . . . 104,212 104,527 65,012
Shopping center rentals. . . 9,087 13,655 3,910
Depreciation and amortization:
Grocery and food sales . . . 29,645 23,825 20,058
Shopping center rentals. . . 3,236 3,028 2,438
42
43
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal years ended September 28, 1996, September 30, 1995
and September 24, 1994 1993 1992
----------- ----------- -----------
Revenues from unaffiliated
customers:
Grocery and food sales . . . $ 1,233,497 $ 1,141,800 $ 1,066,332
Shopping center rentals. . . 9,827 7,959 7,338
Income before interest and income
taxes and cumulative effect of
change in accounting principle:
Grocery and food sales . . . 37,072 30,956 23,129
Shopping center rentals. . . 6,397 4,630 1,492
Assets:
Grocery and food sales . . . 428,944 377,242 354,672
Shopping center rentals. . . 77,649 79,307 50,316
Capital expenditures:
Grocery and food sales . . . 65,012 58,676 12,214
Shopping center rentals. . . 3,910 28,618 4,144
Depreciation and amortization:
Grocery and food sales . . . 20,058 18,435 18,120
Shopping center rentals. . . 2,438 2,403 1,457
13. 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 contain thirteen weeks, except for the fourth quarter of fiscal 1995
which contains fourteen weeks.
(in thousands except earnings per common share)
------------------------------------------------------
1ST 2ND 3RD 4TH
1994 QUARTER QUARTER QUARTER QUARTER TOTAL
- ---- ------- ------- ------- ------- ----------
NET SALES . . . . .$297,875 $301,532 $313,862 $320,228 $1,233,497
GROSS PROFIT. . . . 65,377 67,977 69,644 72,064 275,062
INCOME BEFORE
CUMULATIVE EFFECT
OF CHANGE IN
ACCOUNTING
PRINCIPLE. . . . . 3,845 3,859 4,562 4,306 16,572
NET INCOME. . . . . 7,180 3,859 4,562 4,306 19,907
PRIMARY EARNINGS
PER COMMON SHARE
BEFORE CUMULATIVE
EFFECT OF CHANGE
IN ACCOUNTING
PRINCIPLE. . . . . .21 .21 .25 .23 .90
PRIMARY EARNINGS
PER COMMON SHARE . .39 .21 .25 .23 1.08
45
46
Ingles Markets, Incorporated and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal years ended September 24, 1994, September 25, 1993
and September 26, 1992
(in thousands except earnings per common share)
-----------------------------------------------------
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Total
------- ------- ------- ------- ---------
1993
- ----
Net sales . . . . . $276,557 $280,774 $289,167 $295,302 $1,141,800
Gross profit. . . . 60,293 60,810 63,752 65,737 250,592
Net income. . . . . 2,512 2,523 3,018 3,648 11,701
Primary earnings
per common share . .14 .14 .17 .20 .65
(in thousands except earnings per common share)
-----------------------------------------------
1ST 2ND 3RD 4TH
1996 QUARTER QUARTER QUARTER QUARTER TOTAL
- ---- ------- ------- ------- ------- ----------
NET SALES . . . . . . . $357,406 $364,223 $370,352 $380,597 $1,472,578
GROSS PROFIT. . . . . . 82,368 84,324 87,518 91,438 345,648
NET INCOME. . . . . . . 4,722 4,431 5,897 5,681 20,731
PRIMARY EARNINGS
PER COMMON SHARE . . . .26 .24 .32 .30 1.12
1995
- ----
Net sales . . . . . . . $330,206 $327,950 $347,779 $379,192 $1,385,127
Gross profit. . . . . . 73,584 74,522 79,336 89,797 317,239
Net income. . . . . . . 3,838 2,187 4,543 6,455 17,023
Primary earnings per
common share . . . . . .21 .12 .25 .35 .93
14. LITIGATION
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 financial position or the results of its
operations.
15. 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 amount reported in the balance
sheet for cash and cash equivalents approximates its fair value.
Receivables: The carrying amount reported in the balance sheet for
receivables approximates its fair value.
Long and short-term debt:liabilities: The carrying amounts of the Company's
short-term borrowings approximate their fair value. The fair values of the
Company's long-term debtliabilities are based on quoted market prices, where
available, or discounted cash flow analyses, based on the Company's
current incremental borrowing rates for similar types of borrowing
arrangements.
The carrying amounts and fair values of the Company's financial instruments at
September 24, 199428, 1996 are as follows (amounts in thousands):
Carrying Amount Fair Value
--------------- ----------
Cash43
44
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal years ended September 28, 1996, September 30, 1995
and cash equivalents. . . . . . . . . . $ 18,471 $ 18,471
Receivables. . . . . . . . . . . . . . . . . 16,664 16,664
Short-term liabilities . . . . . . . . . . . 35,000 35,000September 24, 1994
Carrying Amount Fair Value
--------------- ----------
Cash and cash equivalents. . . . . . . . . . $ 22,418 $ 22,418
Receivables. . . . . . . . . . . . . . . . . 15,197 15,197
Short-term liabilities . . . . . . . . . . . 10,000 10,000
Long-term liabilities:
10% Convertible Subordinated Debentures . 37,459 53,513
Real estate and equipment . . . . . . . . 260,609 262,084
Other . . . . . . . . . . . . . . . . . . 95,718 95,718
16. CASH FLOW INFORMATION
Supplemental disclosure of cash flow information is as follows:
----------- ----------- -----------
1996 1995 1994
----------- ----------- -----------
Cash paid during the year for:
Interest (net of amounts
capitalized) . . . . . . . . . . . $28,570,394 $23,914,428 $16,979,825
Income taxes . . . . . . . . . . . . 12,948,545 7,186,997 9,769,130
Non cash item:
Property and equipment additions
included in accounts payable . . . 5,974,503 - -
17. SUBSEQUENT EVENT
On December 6, 1996, the Company announced its intention to redeem all its
outstanding Convertible Subordinated Debentures . 37,459 41,252
Real Estate . . . . . . . . . . . . . . . 94,276 100,875
Other . . . . . . . . . . . . . . . . . . 77,000 77,000
46("the Debentures") on January
20, 1997. As discussed in Note 7, the holders of the Debentures have the right
to convert their Debentures into shares of the Company's Class A Common Stock
at $11.10 per share prior to the redemption. In October and November 1996,
approximately $10.8 million of the Debentures were converted into approximately
970,000 shares of Class A Common Stock. Had the conversion of all of the
outstanding Debentures occurred at the beginning of fiscal year 1996, primary
earnings per common share for the year ended September 28, 1996 would have
decreased from $1.12 to $1.04.
44
4745
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES SEC SCHEDULE V
- ---------------------------------------------
SUPPLEMENTAL SCHEDULE OF CONSOLIDATED PROPERTY AND EQUIPMENT
- ------------------------------------------------------------
BALANCE AT BALANCE AT
BEGINNING ADDITIONS END
OF YEAR AT COST TRANSFERS RETIREMENTS OF YEAR
---------- ---------- --------- ----------- ----------
FISCAL YEAR ENDED SEPTEMBER 24, 1994
- ------------------------------------
Land $ 64,153,586 $ 8,937,006 $ 1,374,554 (1)(3) $ 161,454 $ 74,303,692
Construction in progress 6,399,813 33,665,225 (15,662,310)(1) 24,402,728
Buildings 169,912,445 4,629,969 16,125,412 (1)(3) 82,156 190,585,670
Store, office and warehouse equipment 157,132,479 21,137,651 2,024,941 176,245,189
Transportation equipment 10,070,641 539,504 110,362 10,499,783
Property under capital leases 402,084 250,820 151,264
Leasehold improvements 33,863,864 12,518 679,855 (1) 818,710 33,737,527
------------ ----------- ------------ ---------- ------------
TOTAL $441,934,912 $68,921,873 $ 2,517,511 (3) $3,448,443 $509,925,853
============ =========== ============ ========== ============
FISCAL YEAR ENDED SEPTEMBER 25, 1993
- ------------------------------------
Land $ 51,080,183 $13,809,657 $ (604,844)(1)(3) $ 131,410 $ 64,153,586
Construction in progress 373,791 12,393,081 (6,367,059)(1) 6,399,813
Buildings 123,484,463 37,360,508 9,067,474 (1)(2)(3) 169,912,445
Store, office and warehouse equipment 145,046,156 12,689,202 602,879 157,132,479
Transportation equipment 9,745,564 1,015,400 690,323 10,070,641
Property under capital leases 5,555,998 5,153,914 402,084
Leasehold improvements 38,356,720 (4,292,451)(1)(2) 200,405 33,863,864
------------ ----------- ------------ ---------- ------------
TOTAL $373,642,875 $77,267,848 $ (2,196,880)(3) $6,778,931 $441,934,912
============ =========== ============ ========== ============
FISCAL YEAR ENDED SEPTEMBER 26, 1992
- ------------------------------------
Land $ 49,057,629 $ 758,232 $ 1,531,561 (1)(3) $ 267,239 $ 51,080,183
Construction in progress 10,055,064 5,141,264 (14,822,537)(1) 373,791
Buildings 108,130,252 2,622,546 12,796,733 (1)(2)(3) 65,068 123,484,463
Store, office and warehouse equipment 140,692,386 6,891,231 2,537,461 145,046,156
Transportation equipment 9,856,461 928,885 1,039,782 9,745,564
Property under capital leases 6,344,681 788,683 5,555,998
Leasehold improvements 38,202,131 15,625 274,905 (1)(2) 135,941 38,356,720
------------ ----------- ------------ ---------- ------------
TOTAL $362,338,604 $16,357,783 $ (219,338)(3) $4,834,174 $373,642,875
============ =========== ============ ========== ============
(1) Transfers of completed projects from construction in progress.
(2) Transfers of assets resulting from purchase of leased store.
(3) Transfer of assets held for resale from (to) other assets.
(4) The annual provisions for depreciation have been computed principally
on a straight line basis in accordance with the following ranges of lives:
Buildings 20-30 years
Store, office and warehouse equipment 5-10 years
Transportation equipment 3-8 years
Leasehold improvements term of lease
47
48
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES SEC SCHEDULE VI
- ---------------------------------------------
SUPPLEMENTAL SCHEDULE OF CONSOLIDATED ACCUMULATED DEPRECIATION AND AMORTIZATION
- -------------------------------------------------------------------------------
BALANCE AT DEPRECIATION & BALANCE AT
BEGINNING AMORTIZATION END
OF YEAR EXPENSE TRANSFERS RETIREMENTS OF YEAR
----------- ----------- --------- ------------ -----------
FISCAL YEAR ENDED SEPTEMBER 24, 1994
- ------------------------------------
Buildings and leasehold improvements $ 43,660,440 $ 8,309,542 $1,253,267(1) $ 774,542 $ 52,448,707
Store, office and warehouse equipment 79,719,722 12,873,805 1,771,115 90,822,412
Transportation equipment 5,810,417 1,154,626 73,815 6,891,228
Property under capital leases 228,172 18,014 152,785 93,401
------------ ----------- ---------- ---------- ------------
TOTAL $129,418,751 $22,355,987 $1,253,267(1) $2,772,257 $150,255,748
============ =========== ========== ========== ============
FISCAL YEAR ENDED SEPTEMBER 25, 1993
- ------------------------------------
Buildings and leasehold improvements $ 36,122,636 $ 7,615,293 $ 0 $ 77,489 $ 43,660,440
Store, office and warehouse equipment 68,267,159 11,469,299 16,736 79,719,722
Transportation equipment 5,267,172 1,190,325 647,080 5,810,417
Property under capital leases 5,104,286 252,030 5,128,144 228,172
------------ ----------- ---------- ---------- ------------
TOTAL $114,761,253 $20,526,947 $ 0 $5,869,449 $129,418,751
============ =========== ========== ========== ============
FISCAL YEAR ENDED SEPTEMBER 26, 1992
- ------------------------------------
Buildings and leasehold improvements $ 30,337,892 $ 6,122,496 $ (155,083)(1) $ 182,669 $ 36,122,636
Store, office and warehouse equipment 59,561,026 10,987,124 2,280,991 68,267,159
Transportation equipment 5,091,349 1,112,029 936,206 5,267,172
Property under capital leases 4,802,648 1,090,321 788,683 5,104,286
------------ ----------- ---------- ---------- ------------
TOTAL $ 99,792,915 $19,311,970 $ (155,083)(1) $4,188,549 $114,761,253
============ =========== ========== ========== ============
(1) Transfer of assets held for resale from (to) other assets.
48
49
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES SEC SCHEDULE VIII
- ---------------------------------------------II
SUPPLEMENTAL SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS
- ----------------------------------------------------------
BALANCE AT
BEGINNING OF CHARGED TO BALANCE AT
DESCRIPTION YEAR COSTS & EXPENSES DEDUCTIONS END OF YEAR
- ----------------------------------------------------------------------- ------------ ---------------- ---------- -----------
Fiscal Yearyear ended September 24, 1994:28, 1996:
Deducted from asset accounts:
Allowance for doubtful accounts $ 100,00085,490 $ 4,04730,000 $ 9,417 (1) $ 95,953106,073
Fiscal Yearyear ended September 25, 1993:30, 1995:
Deducted from asset accounts:
Allowance for doubtful accounts $ 118,000 $18,00095,953 $10,463 (1) $ 100,00085,490
Fiscal Yearyear ended September 26, 1992:24, 1994:
Deducted from asset accounts:
Allowance for doubtful accounts $ 125,000100,000 $ 7,0004,047 (1) $ 118,00095,953
(1) Uncollectible accounts written off, net of recoveries.
4945
50
INGLES MARKETS, INCORPORATED AND SUBSIDIARIES SEC SCHEDULE IX
- ---------------------------------------------
SUPPLEMENTAL SCHEDULE OF SHORT-TERM BORROWINGS
- ----------------------------------------------
Maximum Average Weighted
Weighted Amount Amount Average
Balance Average Outstanding Outstanding Interest
at End of Interest During During Rate During
Period Rate Period Period Period
---------- -------- ----------- ----------- -----------
Fiscal year ended
September 24, 1994:
Notes payable to
banks [1][2] $25,000,000 5.69% $70,000,000 $50,945,833 5.29%
Fiscal year ended
September 25, 1993:
Notes payable to
banks [1][2] $35,000,000 4.73% $51,000,000 $42,300,000 5.18%
Fiscal year ended
September 26, 1992:
Notes payable to
banks [1][2] $ 0 -- $32,000,000 $15,179,167 6.08%
[1] Notes payable to banks represent borrowings under lines of credit
arrangements.
[2] Weighted average interest rates and amounts outstanding are computed using
daily rates and balances.
50
5146
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/ Robert P. Ingle
-------------------------
Robert P. Ingle
Chairman of the Board and
Chief Executive Officer
Date: December 21, 199423, 1996
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 December 21, 199423, 1996
- ---------------------------------------------------------------------
Robert P. Ingle, Chairman of the
Board, Chief Executive Officer
and Director
/s/ Landy B. Laney December 21, 199423, 1996
- ---------------------------------------------------------------------
Landy B. Laney, President, Chief
Operating Officer and Director
/s/ Jack R. Ferguson December 21, 199423, 1996
- ---------------------------------------------------------------------
Jack R. Ferguson, Vice President-
Finance, Chief Financial Officer
and Director
/s/ Vaughn C. Fisher December 21, 199423, 1996
- ---------------------------------------------------------------------
Vaughn C. Fisher, Vice President-
Sales Manager and Director
/s/ Anthony S. Federico December 21, 199423, 1996
- ---------------------------------------------------------------------
Anthony S. Federico, Vice President-
Non-Foods and Director
/s/ Brenda S. Tudor December 21, 199423, 1996
- ---------------------------------------------------------------------
Brenda S. Tudor, CPA
Secretary and Controller
5146
5247
EXHIBIT INDEX
3.1 Articles of Incorporation of Ingles Markets, Incorporated, as amended.
(Included as Exhibit 3.1 to Registrant's S-1 Registration Statement, File
No. 33-23919, previously filed with the Commission and incorporated herein
by this reference.)
3.2 By-laws of Ingles Markets, Incorporated. (Included as Exhibit 3.2 to
Registrant's Annual Report on Form 10-K for the fiscal year ended
September 24, 1988, File No. 0-14706, previously filed with the Commission
and incorporated herein by this reference.)
4.1 Indenture between Registrant and Connecticut National Bank (including
specimen Debenture as Exhibit A). (Included as Exhibit 4.1 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
September 24, 1988, File No. 0-14706, previously filed with the Commission
and incorporated herein by this reference.)
4.2 Letters dated October 11, 1990 to the Registrant's Board of Directors from
Kidder, Peabody & Co. Incorporated and Wheat First Butcher & Singer
relating to interest rate reset under Debentures. (Included as Exhibit
4.2 to Registrant's Annual Report on Form 10-K for the fiscal year ended
September 29, 1990, File No. 0-14706, previously filed with the Commission
and incorporated herein by this reference.)
4.3 See Exhibits 3.1 and 3.2 for provisions of Articles of Incorporation, as
amended and By-laws of Registrant defining rights of holders of capital
stock of Registrant.
10.1 Amended and Restated Ingles Markets, Incorporated 1987 Employee Incentive
Stock Option Plan. (Incorporated by reference(Included as Exhibit 10.1 to Exhibit 10.7 from Registrant's Registration StatementAnnual
Report on Form S-1,10-K for the fiscal year ended September 30, 1995, File 33-16160, which wasNo.
0-14706, previously filed with the Commission and became effective on September 22, 1987.incorporated herein by
this reference.)
(MANAGEMENT CONTRACT OR COMPENSATORY PLAN OR ARRANGEMENT REQUIRED TO
BE FILED AS AN EXHIBIT TO THIS REPORT ON FORM 10-K PURSUANT TO ITEM
14(C) OF FORM 10-K.)
10.2 Restatement and Amendment by the Entirety of the Ingles Markets,
Incorporated Employee Investment/Profit Sharing Plan and Trust.
(Incorporated by referenceTrust effective September
26, 1993 (as amended through June 30, 1995). (Included as Exhibit 10.2 to
Exhibit 10.8 from Registrant's Registration StatementAnnual Report on Form S-1,10-K for the fiscal year ended
September 30, 1995, File 33-16160, which wasNo. 0-14706, previously filed with the Commission
and became effective on September 22, 1987.incorporated herein by this reference.)
(MANAGEMENT CONTRACT OR COMPENSATORY PLAN OR ARRANGEMENT REQUIRED TO
BE FILED AS AN EXHIBIT TO THIS REPORT ON FORM 10-K PURSUANT TO ITEM
14(C) OF FORM 10-K.)
10.3 Restatement and Amendment by the Entirety of the 1983 Stock Option
Plan of Ingles Markets, Incorporated. (Incorporated by reference to
Exhibit 10.10 from Registrant's Registration Statement on Form S-1,
File 33-16160, which was filed with the Commission and became
effective on September 22, 1987.)
(MANAGEMENT CONTRACT OR COMPENSATORY PLAN OR ARRANGEMENT REQUIRED TO
BE FILED AS AN EXHIBIT TO THIS REPORT ON FORM 10-K PURSUANT TO ITEM
14(C) OF FORM 10-K.)
52
53
EXHIBIT INDEX (CONTINUED)
10.4 (Intentionally Deleted)
10.5 Loan Agreement between the Registrant and Metropolitan Life Insurance
Company dated March 21, 1990. (Included as Exhibit 19 to Registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1990, File
0-14706, previously filed with the Commission and incorporated herein by
this reference.)
10.647
48
10.4 Amended and Restated Ingles Markets, Incorporated 1991 Nonqualified Stock
Option Plan. (Included as Exhibit 10.710.4 to Registrant's Annual Report on
Form 10-K for the fiscal year ended September 28, 1991,30, 1995, 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 REPORT ON FORM 10-K PURSUANT TO ITEM
14(C) OF FORM 10-K.)
10.7 Amended and Restated Employment Agreement Between the Company and
Robert P. Ingle dated as of September 26, 1993. (Attached hereto as
Exhibit 10.7 on Page 55.)
(MANAGEMENT CONTRACT OR COMPENSATORY PLAN OR ARRANGEMENT REQUIRED TO
BE FILED AS AN EXHIBIT TO THIS REPORT ON FORM 10-K PURSUANT TO ITEM
14(C) OF FORM 10-K.)
10.810.5 Stock Option Agreement Between the Company and Robert P. Ingle,
Chairman of the Board of Directors and Chief Executive OfficerEdward J. Kolodzieski, Vice
President-Strategic Planning of the Company, dated as of July 21, 1993.August 2, 1995.
(Included as Exhibit 10.810.9 to Registrant's Annual Report on Form 10-K for
the fiscal year ended September 25, 1993,30, 1995, 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 REPORT ON FORM 10-K PURSUANT TO ITEM
14(C) OF FORM 10-K.)
10.9 Stock Option Agreement Between the Company and Landy B. Laney
President and Chief Operating Officer of the Company, dated as of July
21, 1993. (Included as Exhibit 10.9 to Registrant's Annual Report on
Form 10-K for the fiscal year ended September 25, 1993, 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 REPORT ON FORM 10-K PURSUANT TO ITEM
14(C) OF FORM 10-K.)
10.10 Letter of Understanding dated September 8, 1992 between the company
and IRT. (Included as Exhibit B to Registrant's Current Report on
Form 8-K dated October 1, 1992, File No. 0-14706, previously filed
with the Commission and incorporated herein by this reference.)
53
54
EXHIBIT INDEX (CONTINUED)
11 Statement Regarding Computation of Earnings Per Common ShareShare. (page 66).49)
(Edgar version only: See document number 2 of this Edgarized Report)
12 Statement Regarding Computation of Ratio of Earnings to Fixed ChargesCharges.
(page 67).50)(Edgar version only: See document Number 3 of this Edgarized
report)
21 Subsidiaries of the RegistrantRegistrant. (page 68).51)(Edgar version only: See document
Number 4 of this Edgarized report)
23 Consent of Ernst & Young LLP, Independent Auditors. (page 69).52)(Edgar
version only: See document Number 5 of this Edgarized report)
27 Financial Data Schedule (for SEC use only).
5448