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What changed in INGLES MARKETS INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of INGLES MARKETS INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+161 added−177 removedSource: 10-K (2023-11-29) vs 10-K (2022-11-23)

Top changes in INGLES MARKETS INC's 2023 10-K

161 paragraphs added · 177 removed · 141 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

45 edited+5 added−11 removed36 unchanged
Biggest changeInformation about the Company’s operations is as follows (for information regarding the Company’s industry segments, see Note 11, “Segment Information” to the Consolidated Financial Statements contained in this Annual Report on Form 10-K): Fiscal Year Ended September (dollars in millions) 2022 2021 2020 Revenues from unaffiliated customers: Grocery $ 1,940.4 $ 1,762.9 $ 1,694.0 Non-foods 1,204.5 1,136.3 1,067.0 Perishables 1,445.0 1,349.1 1,261.5 Gasoline 885.8 583.7 459.6 Total retail 5,475.7 96.4% 4,832.0 96.9% 4,482.1 97.2% Other 203.1 3.6% 156.0 3.1% 128.5 2.8% $ 5,678.8 100.0% $ 4,988.0 100.0% $ 4,610.6 100.0% Income from operations: Retail $ 353.0 93.7% $ 327.6 93.6% $ 264.4 94.1% Other 23.9 6.3% 22.5 6.4% 16.5 5.9% 376.9 100.0% 350.1 100.0% 280.9 100.0% Other income, net 5.9 2.9 1.7 Interest expense 21.5 24.3 40.5 Loss on early extinguishment of debt — 1.1 7.1 Income before income taxes $ 361.3 $ 327.6 $ 235.0 “Other” consists of fluid dairy operations and shopping center rentals.
Biggest changeInformation about the Company’s operations is as follows (for information regarding the Company’s industry segments, see Note 11, “Segment Information” to the Consolidated Financial Statements contained in this Annual Report on Form 10-K): Fiscal Year Ended September (dollars in millions) 2023 2022 2021 Revenues from unaffiliated customers: Grocery $ 2,062.4 $ 1,940.4 $ 1,762.9 Non-foods 1,326.9 1,204.5 1,136.3 Perishables 1,482.1 1,445.0 1,349.1 Fuel 792.5 885.8 583.7 Total retail 5,663.9 96.1% 5,475.7 96.4% 4,832.0 96.9% Other 228.9 3.9% 203.1 3.6% 156.0 3.1% $ 5,892.8 100.0% $ 5,678.8 100.0% $ 4,988.0 100.0% Income from operations: Retail $ 263.2 90.0% $ 353.0 93.7% $ 327.6 93.6% Other 29.1 10.0% 23.9 6.3% 22.5 6.4% 292.3 100.0% 376.9 100.0% 350.1 100.0% Other income, net 8.3 5.9 2.9 Interest expense 22.1 21.5 24.3 Loss on early extinguishment of debt — — 1.1 Income before income taxes $ 278.5 $ 361.3 $ 327.6 The “Grocery” category includes grocery, dairy and frozen foods.
The Company intends to file all renewals timely. Each of the Company’s trademark license agreements has a one year term which, with respect to one license, is automatically renewed annually, unless the owner of the trademark provides notice of termination prior to the expiration date and, with respect to the other licenses, are renewed periodically by letter from the licensor.
The Company intends to timely file all renewals. Each of the Company’s trademark license agreements has a one year term which, with respect to one license, is automatically renewed annually, unless the owner of the trademark provides notice of termination prior to the expiration date and, with respect to the other licenses, are renewed periodically by letter from the licensor.
Many stores offer daily selections of home meal replacement items, such as rotisserie chicken and pork, international foods, fried chicken and other entrees, sandwiches, pre-packaged salads, sushi, cut fruit and prepared fresh vegetables. The bakery offers an expanded selection of baked goods and self-service selections.
Many stores offer daily selections of home meal replacement items, such as rotisserie chicken and pork, international foods, fried chicken and other entrees, sandwiches, pre-packaged salads, sushi, cut fruit and prepared fresh vegetables. The bakery offers an expanded selection of baked goods and self-service options.
These service marks and the trademarks are federally registered in the United States pursuant to applicable intellectual property laws and are the property of Ingles. The Company believes it has all material licenses and permits necessary to conduct its business.
These service 9 marks and the trademarks are federally registered in the United States pursuant to applicable intellectual property laws and are the property of Ingles. The Company believes it has all material licenses and permits necessary to conduct its business.
Environmental Matters Under applicable environmental laws, the Company may be responsible for remediation of environmental conditions and may be subject to associated liabilities relating to its stores and other buildings and the land on which such stores and other buildings are situated (including responsibility and liability related to its operation of its gas stations and the storage of gasoline in underground storage tanks), regardless of whether the Company leases or owns the stores, other buildings or land in question and regardless of whether such environmental conditions were created by the Company or by a prior owner or tenant.
Environmental Matters Under applicable environmental laws, the Company may be responsible for remediation of environmental conditions and may be subject to associated liabilities relating to its stores and other buildings and the land on which such stores and other buildings are situated (including responsibility and liability related to its operation of its gas stations and the storage of fuel in underground storage tanks), regardless of whether the Company leases or owns the stores, other buildings or land in question and regardless of whether such environmental conditions were created by the Company or by a prior owner or tenant.
Visitors to our website can also register to receive financial information press releases. Information contained on, or accessible through, our website is not a part of and is not incorporated by reference into this Annual Report on Form 10-K. 4 Business The Company operates one primary business segment, retail grocery.
Visitors to our website can also register to receive financial information press releases. Information contained on, or accessible through, our website is not a part of and is not incorporated by reference into this Annual Report on Form 10-K. 5 Business The Company operates one primary business segment, retail grocery.
To further ensure product quality, the Company also owns and operates a milk processing and packaging plant that supplies approximately 73% of the milk products sold by the Company’s supermarkets as well as a variety of organic milk, fruit juices and bottled water products.
To further ensure product quality, the Company also owns and operates a milk processing and packaging plant that supplies approximately 72% of the milk products sold by the Company’s supermarkets as well as a variety of organic milk, fruit juices and bottled water products.
During fiscal year 2022, the Company slowed some of its new store and remodeling plans due to inflation and supply chain issues in building materials and equipment, as well as due to the tight labor market conditions for construction labor.
During fiscal year 2023, the Company slowed some of its new store and remodeling plans due to inflation and supply chain issues in building materials and equipment, as well as due to the tight labor market conditions for construction labor.
The remaining 45% is purchased from third parties and is generally delivered directly to the stores. The close proximity of the Company’s purchasing and distribution operations to its stores facilitates the timely distribution of consistently high quality perishable and non-perishable items.
The remaining 43% is purchased from third parties and is generally delivered directly to the stores. The close proximity of the Company’s purchasing and distribution operations to its stores facilitates the timely distribution of consistently high quality perishable and non-perishable items.
Item 1. BUSINESS General Ingles Markets, Incorporated, a North Carolina corporation (collectively with its subsidiaries, (“Ingles,” or the “Company,” “we,” “us” or “our”), a leading supermarket chain in the southeast United States, operates 198 supermarkets in North Carolina (75), Georgia (65), South Carolina (35), Tennessee (21), Virginia (1) and Alabama (1).
Item 1. BUSINESS General Ingles Markets, Incorporated, a North Carolina corporation (collectively with its subsidiaries, “Ingles,” or the “Company,” “we,” “us” or “our”), is a leading supermarket chain in the southeast United States and operates a total of 198 supermarkets in North Carolina (75), Georgia (65), South Carolina (35), Tennessee (21), Virginia (1) and Alabama (1).
Substantially all of the Company’s stores are located within 280 miles of its warehouse and distribution facilities, near Asheville, North Carolina. The Company operates 1.65 million square feet of warehouse and distribution facilities. These facilities supply the Company’s supermarkets with approximately 55% of the goods the Company sells.
Substantially all of the Company’s stores are located within 280 miles of the Company’s warehouse and distribution facilities, near Asheville, North Carolina. The Company operates 1.65 million square feet of warehouse and distribution facilities. These facilities supply the Company’s supermarkets with approximately 57% of the goods the Company sells.
In addition, the milk processing and packaging plant sells approximately 78% of its products to other retailers, food service distributors and grocery warehouses in 17 states, which provides the Company with an additional source of revenue. The Company owns 164 of its supermarkets, either in free-standing stores or as the anchor tenant in an owned shopping center.
In addition, the milk processing and packaging plant sells approximately 81% of its products to other retailers, food service distributors and grocery warehouses in 17 states, which provides the Company with an additional source of revenue. The Company owns 167 of its supermarkets, either in free-standing stores or as the anchor tenant in an owned shopping center.
Number of Supermarkets Percentage of Total at Fiscal Net Sales for Fiscal Year Ended September Year Ended September 2022 2021 2020 2022 2021 2020 North Carolina 75 75 73 41% 41% 41% South Carolina 35 35 35 19% 19% 19% Georgia 65 65 66 32% 32% 32% Tennessee 21 21 21 8% 8% 8% Virginia 1 1 1 — — — Alabama 1 1 1 — — — 198 198 197 100% 100% 100% The Company believes that today’s supermarket customers focus on convenience, quality and value in an attractive store environment.
Number of Supermarkets Percentage of Total at Fiscal Net Sales for Fiscal Year Ended September Year Ended September 2023 2022 2021 2023 2022 2021 North Carolina 75 75 75 41% 41% 41% South Carolina 35 35 35 19% 19% 19% Georgia 65 65 65 32% 32% 32% Tennessee 21 21 21 8% 8% 8% Virginia 1 1 1 — — — Alabama 1 1 1 — — — 198 198 198 100% 100% 100% The Company believes that today’s supermarket customers focus on convenience, quality and value in an attractive store environment.
Goods from the warehouse and distribution facilities and the milk processing and packaging plant are distributed to the Company’s stores by a fleet of 190 tractors and 754 trailers that the Company owns, operates and maintains. The Company invests on an ongoing basis in the maintenance, upgrade and replacement of its tractor and trailer fleet.
Goods from the warehouse and distribution facilities and the milk processing and packaging plant are distributed to the Company’s stores by a fleet of 183 tractors and 864 trailers that the Company owns, operates and maintains. The Company invests on an ongoing basis in the maintenance, upgrade and replacement of its tractor and trailer fleet.
In addition, the Company’s expansion, remodeling and replacement plans are continually reviewed and are subject to change. See the “Liquidity and Capital Resources” section included in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s capital expenditures. Competition The supermarket industry is highly competitive and characterized by narrow profit margins.
In addition, the Company continually reviews its expansion, remodeling and replacement plans, which are subject to change. See the “Liquidity and Capital Resources” section included in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s capital expenditures. Competition The supermarket industry is highly competitive and characterized by narrow profit margins.
Supermarket Operations At September 24, 2022, the Company operated 189 supermarkets under the name “Ingles,” and nine supermarkets under the name “Sav-Mor” with locations in western North Carolina, western South Carolina, northern Georgia, eastern Tennessee, southwestern Virginia and northeastern Alabama.
Supermarket Operations At September 30, 2023, the Company operated 189 supermarkets under the name “Ingles,” and nine supermarkets under the name “Sav-Mor” with locations in western North Carolina, western South Carolina, northern Georgia, eastern Tennessee, southwestern Virginia and northeastern Alabama.
Ingle II, our Chairman, beneficially owned approximately 71% of the combined voting power and 23% of the total number of shares of the Company’s outstanding Class A and Class B Common Stock (in each case including stock held by the Company’s Investment/Profit Sharing Plan and Trust of which Mr. Ingle II serves as one of the trustees).
Ingle II, our Chairman, beneficially owned approximately 72.2% of the combined voting power and 22.9% of the total number of shares of the Company’s outstanding Class A and Class B Common Stock (in each case including stock held by the Company’s Investment/Profit Sharing Plan and Trust of which Mr. Ingle II serves as one of the trustees).
The Company also operates truck servicing and fuel storage facilities at its warehouse and distribution facilities. The Company reduces its overall distribution costs by capitalizing on back-haul opportunities (contracting to transport merchandise on trucks that would otherwise be empty).
The Company also operates truck servicing and fuel storage facilities at its warehouse and distribution facilities. The Company reduces its overall distribution costs by capitalizing on back-haul opportunities (contracting with third parties to transport their merchandise on our trucks that would otherwise be empty).
Design features of the Company’s modern stores focus on selling high-growth, high-margin products including perishable departments featuring local organic and home meal replacement items, in-store pharmacies, on-premises fuel centers, and an expanded selection of food and non-food items. The Company offers on-line ordering of its products for pickup at its stores.
Design features of the Company’s modern stores focus on selling products in perishable departments featuring local organic and home meal replacement items, in-store pharmacies, on-premises fuel centers, and an expanded selection of food and non-food items. The Company offers online ordering of its products for pickup at its stores.
The Company also owns 25 undeveloped sites suitable for a free-standing store or development by the Company or a third party. The Company’s owned real estate is generally located in the same geographic region as its supermarkets. As of September 24, 2022, Mr. Robert P.
The Company also owns 29 undeveloped sites suitable for a free-standing store or development by the Company or a third party. The Company’s owned real estate is generally located in the same geographic region as its supermarkets. As of September 30, 2023, Mr. Robert P.
The following table sets forth, for the fiscal years indicated, the Company’s new store development and store remodeling activities and the effect this program has had on the average size of its stores: 2022 2021 2020 2019 2018 Number of Stores: Opened — 2 — 1 5 Closed — 1 1 3 4 Stores open at end of period 198 198 197 198 200 Size of Stores: Less than 42,000 sq. ft. 46 46 46 48 49 42,000 up to 51,999 sq. ft. 22 22 22 22 22 52,000 up to 61,999 sq. ft. 47 47 47 47 48 At least 62,000 sq. ft. 83 83 82 81 81 Average store size (sq. ft.) 57,281 57,281 57,138 56,806 56,643 7 The Company’s ability to open new stores is subject to many factors, including the acquisition of satisfactory sites, as well as zoning limitations and other governmental regulation.
The following table sets forth, for the fiscal years indicated, the Company’s new store development and store remodeling activities and the effect this program has had on the average size of its stores: 2023 2022 2021 2020 2019 Number of Stores: Opened — — 2 — 1 Closed — — 1 1 3 Stores open at end of period 198 198 198 197 198 Size of Stores: Less than 42,000 sq. ft. 45 46 46 46 48 42,000 up to 51,999 sq. ft. 22 22 22 22 22 52,000 up to 61,999 sq. ft. 47 47 47 47 47 At least 62,000 sq. ft. 84 83 83 82 81 Average store size (sq. ft.) 57,589 57,281 57,281 57,138 56,806 8 The Company’s ability to open new stores is subject to many factors, including the acquisition of satisfactory sites, as well as zoning limitations and other government regulations.
At September 24, 2022, the Company operated 112 pharmacies and 107 fuel stations, in each case at the Company’s grocery store locations. The Company plans to continue to incorporate these departments in substantially all future new and remodeled stores. The 5 Company trains its associates to provide friendly service and to actively address the needs of customers.
At September 30, 2023, the Company operated 114 pharmacies and 108 fuel stations, in each case at the Company’s grocery store locations. The Company plans to continue to incorporate these departments in substantially all future new and remodeled stores. The Company trains its associates to provide friendly service and to actively address the needs of customers.
Store Development, Expansion and Remodeling The Company believes that the appearance and design of its stores are integral components of its customers’ shopping experience and aims to develop one of the most modern supermarket chains in the industry.
The details of this policy are posted inside each of the Company’s stores. Store Development, Expansion and Remodeling The Company believes that the appearance and design of its stores are integral components of its customers’ shopping experience and aims to develop one of the most modern supermarket chains in the industry.
Selected statistics on the Company’s supermarket operations are presented below: Fiscal Year Ended September 2022 2021 2020 2019 2018 Weighted Average Sales Per Store (000’s) (1) $ 27,622 $ 23,926 $ 22,215 $ 20,189 $ 19,674 Total Square Feet at End of Year (000’s) 11,342 11,342 11,256 11,247 11,329 Average Total Square Feet per Store 57,281 57,281 57,138 56,806 56,643 Average Square Feet of Selling Space per Store (2) 40,097 40,097 39,997 39,765 39,650 Weighted Average Sales per Square Foot of ‎ Selling Space (1) (2) 689 609 568 516 502 (1) Weighted average sales per store include the effects of increases in square footage due to the opening of replacement stores and the expansion of stores through remodeling during the periods indicated, and gasoline sales.
These associates reinforce the Company’s distinctive service-oriented image. 6 Selected statistics on the Company’s supermarket operations are presented below: Fiscal Year Ended September 2023 2022 2021 2020 2019 Weighted Average Sales Per Store (000’s) (1) $ 28,565 $ 27,622 $ 23,926 $ 22,215 $ 20,189 Total Square Feet at End of Year (000’s) 11,403 11,342 11,342 11,256 11,247 Average Total Square Feet per Store 57,589 57,281 57,281 57,138 56,806 Average Square Feet of Selling Space per Store (2) 40,313 40,097 40,097 39,997 39,765 Weighted Average Sales per Square Foot of ‎ Selling Space (1) (2) 709 689 609 568 516 (1) Weighted average sales per store include the effects of increases in square footage due to the opening of replacement stores and the expansion of stores through remodeling during the periods indicated, and fuel sales.
The Company’s second fiscal quarter traditionally has the lowest sales of the year, unless Easter falls in that quarter. In the third and fourth quarters, sales are affected by the return of customers to seasonal homes in the Company’s market area. During fiscal years 2020, 2021 and 2022, typical seasonality was disrupted by the COVID-19 pandemic.
The Company’s second fiscal quarter traditionally has the lowest sales of the year, unless Easter falls in that quarter. In the third and fourth quarters, sales are affected by the return of customers to seasonal homes in the Company’s market area.
At the present time, we do not know how long these conditions will persist, but the Company has continued to build and remodel stores albeit at what management believes will be a temporarily slower pace.
As described above, we cannot currently predict how long these conditions will persist, but the Company has continued to build and remodel stores albeit at what management believes will be a temporarily slower pace.
The Company values its associates and believes that associate loyalty and enthusiasm are key elements of its operating performance.
Management considers labor relations to be good. The Company values its associates and believes that associate loyalty and enthusiasm are key elements of its operating performance.
The Company believes that its warehouse and distribution facilities contain sufficient capacity for the continued expansion of its store base for the foreseeable future. 6 The Company’s centrally managed purchasing and distribution operations provide several advantages, including the ability to negotiate and reduce the cost of merchandise, decrease overhead costs and better manage its inventory at both the warehouse and store level.
The Company’s centrally managed purchasing and distribution operations provide several advantages, including the ability to negotiate and reduce the cost of merchandise, decrease overhead costs and better manage its inventory at both the warehouse and store level.
The Company believes that its locations are in material compliance with such laws and regulations. The Company is not aware of any proposed regulations that would materially affect the Company’s business, financial condition, or results of operations.
The Company’s stores are also subject to local laws regarding zoning, land use and the sale of alcoholic beverages and tobacco products. The Company believes that its locations are in material compliance with such laws and regulations. The Company is not aware of any proposed regulations that would materially affect the Company’s business, financial condition, or results of operations.
Management believes that this strategy fosters a loyal customer base by establishing a reputation for providing high quality products and a variety of specialty departments. The Company’s stores carry broad selections of quality meats, produce and other perishables. The Company offers a wide variety of fresh and non-perishable organic products, including organic milk produced by the Company’s fluid dairy plant.
Management believes that this strategy fosters a loyal customer base by establishing a reputation for providing high quality products and a variety of specialty departments. The Company’s stores carry a broad selection of quality meats, produce and other perishables.
From time to time, the Company engages in advance purchasing on high-turnover inventory items to take advantage of special prices offered by manufacturers for limited periods, or to ensure adequate product supply during tight distribution market conditions.
From time to time, the Company engages in advance purchasing on high-turnover inventory items to take advantage of special prices offered by manufacturers for limited periods, or to ensure adequate product supply during tight distribution market conditions. 7 The remaining 43% of the Company’s inventory requirements, primarily beverages, pharmacy, fuel, bread and snack foods, are supplied directly to the Company’s supermarkets by local distributors and manufacturers.
The Company receives product recall information from various subscription, government and vendor sources. Upon receipt of recall information, the Company immediately contacts each of its stores to have the recalled product removed from the shelves and disposed of as instructed. The Company may also use social media to communicate product recall information to the public.
Upon receipt of recall information, the Company immediately contacts each of its stores to have the recalled product removed from the shelves and disposed of as instructed. The Company may also use social media to communicate product recall information to the public. The Company has a policy of refunding and/or replacing any goods returned by customers.
Government Regulation The Company is subject to regulation by a variety of governmental agencies, including, but not limited to, the U.S. Food and Drug Administration, the U.S. Department of Agriculture, OSHA, and other federal, state and local agencies. The Company’s stores are also subject to local laws regarding zoning, land use and the sale of alcoholic beverages and tobacco products.
Government Regulation The Company is subject to regulation by a variety of governmental agencies, including, but not limited to, the U.S. Food and Drug Administration, the U.S. Department of Agriculture, the Occupational Safety and Health Administration, and other federal, state and local agencies.
The Company’s real estate operations are not subject to seasonal variations. Human Capital At September 24, 2022, the Company had approximately 26,000 associates, of which 93% were supermarket personnel. Approximately 58% of supermarket personnel work on a part-time basis. Management considers labor relations to be good.
The Company’s fluid dairy operations have a slight seasonal variation to the extent of its sales into the grocery industry. The Company’s real estate operations are not subject to seasonal variations. Human Capital At September 30, 2023, the Company had approximately 26,420 associates, of which 93% were supermarket personnel. Approximately 56% of supermarket personnel work on a part-time basis.
The Company has made technology investments to allow efficient remote work environments for associates that do not work in our stores or distribution center.
We provide flexible scheduling to accommodate the needs of our full and part-time associates, and we also provide incentives for associates based on the achievement of operating and safety goals. The Company has made technology investments to allow efficient remote work environments for associates that do not work in our stores or distribution center.
Accordingly, a principal component of the Company’s merchandising strategy is to design stores that enhance the shopping experience. The Company operates fuel stations at 107 of its store locations.
Management believes that customers perceive supermarkets offering a broad array of products and time-saving services as part of a solution to today’s lifestyle demands. Accordingly, a principal component of the Company’s merchandising strategy is to design stores that enhance the shopping experience. The Company operates fuel stations at 108 of its store locations.
The grocery category includes grocery, dairy and frozen foods. The non-foods category includes alcoholic beverages, tobacco, pharmacy, and health/beauty/cosmetic products. The perishables category includes meat, produce, deli and bakery.
The “Non-foods” category includes alcoholic beverages, tobacco, pharmacy, and health/beauty/cosmetic products. The “Perishables” category includes meat, produce, deli and bakery. The “Other” category consists of fluid dairy operations and shopping center rentals.
The Company seeks to maintain a reputation for providing friendly service, quality merchandise and customer value and for its commitment to locally-sourced product and community involvement. The Company employs various advertising and promotional strategies to reinforce the quality and value of its products.
Ingles believes that private label sales help promote customer loyalty and provide a value-priced alternative to national brands. The Company seeks to maintain a reputation for providing friendly service, quality merchandise and customer value and for its commitment to locally-sourced products and community involvement.
The “Sav-Mor” store concept accommodates smaller shopping areas and carries dry groceries, dairy, fresh meat and produce, all of which are displayed in a modern, readily accessible environment. Since March 2020, when the COVID 19 pandemic began, the Company’s stores have operated at an increased level and have experienced occasional product shortages.
The “Sav-Mor” store concept accommodates smaller shopping areas and carries dry groceries, dairy, fresh meat and produce, all of which are displayed in a modern, readily accessible environment. The following table sets forth certain information with respect to the Company’s supermarket operations.
Purchasing and Distribution The Company currently supplies approximately 55% of its supermarkets’ inventory requirements from its modern warehouse and distribution facilities. The Company has 1.65 million square feet of office, warehouse and distribution facilities at its headquarters near Asheville, North Carolina.
The Company has 1.65 million square feet of office, warehouse and distribution facilities at its headquarters near Asheville, North Carolina. The Company believes that its warehouse and distribution facilities contain sufficient capacity for the continued expansion of its store base for the foreseeable future.
Recently, an extremely tight labor market has impacted the Company’s ability to attract and retain qualified store personnel, but these impacts have not materially affected our operations. The following table sets forth certain information with respect to the Company’s supermarket operations.
The currently tight labor market has impacted the Company’s ability to attract and retain qualified store personnel, but these impacts have not materially affected our operations. The economy has continued to recover from the effects of the pandemic, which has included inflation not seen in decades.
The Company promotes these attributes using traditional advertising vehicles including radio, television, direct mail and newspapers, as well as electronic and social media. The Ingles Advantage Card is designed to foster customer loyalty by providing information to better understand the Company’s customers’ shopping patterns. The Ingles Advantage Card provides customers with special discounts throughout the Company’s stores and fuel stations.
The Ingles Advantage Card is designed to foster customer loyalty by providing information to better understand the Company’s customers’ shopping patterns. The Ingles Advantage Card provides customers with special discounts throughout the Company’s stores and fuel stations. Purchasing and Distribution The Company currently supplies approximately 57% of its supermarkets’ inventory requirements from its modern warehouse and distribution facilities.
The Company’s market areas contain numerous providers of quality local products, which is in line with current customer preferences for goods produced where they live. Management believes that customers perceive supermarkets offering a broad array of products and time-saving services as part of a solution to today’s lifestyle demands.
The Company offers a wide variety of fresh and non-perishable organic products, including organic milk produced by the Company’s fluid dairy plant. The Company’s market areas contain numerous providers of quality local products, which is in line with current customer preferences for goods produced where they live.
Ingles’ private labels cover a broad range of products throughout the store, such as milk, bread, organic products, soft drinks and canned goods. In addition to increasing margins, Ingles believes that private label sales help promote customer loyalty and provide a value-priced alternative to national brands.
This service is currently offered at 129 of the Company’s stores, with additional stores expected to be added each month. Ingles’ private labels cover a broad range of products throughout the store, such as milk, bread, organic products, soft drinks and canned goods.
The foregoing factors have resulted in a reduction in the number of our associates since the beginning of fiscal 2021, but we have been able to continue operations without material disruption. 8 The Company has various programs to ensure adequate store staffing levels at any given time during the week.
The Company has various programs to ensure adequate store staffing levels at any given time during the week. Store managers are given tools to assist in scheduling and levels of staffing.
Removed
These associates reinforce the Company’s distinctive service-oriented image.
Added
The Company employs various advertising and promotional strategies to reinforce the quality and value of its products. The Company promotes these attributes using traditional advertising vehicles including radio, television, direct mail and newspapers, as well as electronic and social media.
Removed
This service is currently offered at 84 of the Company’s stores, with additional stores expected to be added each month. Ingles intends to continue to increase sales of its private label brands, which typically carry higher margins than comparable branded products.
Added
The effects of the COVID-19 pandemic, which began in March 2020, have eased considerably over the fiscal year ended September 30, 2023, but the earlier portion of the pandemic substantially impacted supermarket operations, and some effects have continued through the fiscal year ended September 30, 2023.
Removed
The remaining 45% of the Company’s inventory requirements, primarily beverages, pharmacy, gasoline, bread and snack foods, are supplied directly to the Company’s supermarkets by local distributors and manufacturers.
Added
At the onset of the COVID-19 pandemic, the Company implemented several enhanced cleaning and social distancing protocols designed to keep our customers and our associates safe and continued to monitor and update its protocols as the pandemic evolved. Since March 2020, the Company’s stores have experienced increased customer traffic and occasional product shortages due to supply chain issues.
Removed
During fiscal year 2022, the ongoing impact of the pandemic, tight labor market and inflation contributed to disruption in the receipt of some products and our distribution system encountered difficulty in getting product to our stores to meet spikes in customer demand.
Added
Inflation impacts product costs, labor costs and the cost of other goods used by the Company, which could negatively impact our results of Operations.
Removed
There is currently a nationwide shortage of truck drivers and warehouse workers, which has negatively impacted the Company’s distribution operations. At the present time, we do not know how long these current conditions will persist, but we do not anticipate that they will materially affect our overall operations.
Added
While the COVID-19 pandemic was officially declared to have ended in May 2023, at the present time, we cannot predict how long and to what extent the ongoing effects of the pandemic and inflation will impact our sales and financial performance. The Company receives product recall information from various subscription, government and vendor sources.
Removed
The Company has a policy of refunding and/or replacing any goods returned by customers. The details of this policy are posted inside each of the Company’s stores.
Removed
Recently, the Company has had a greater number of circumstances where an existing store was closed in order to build a new store building on the same site that reflects the Company’s current marketing strategies.
Removed
Beginning in March 2020, the general population began to spend more time at home working remotely and, in some cases, providing more childcare and education support from home. As the pandemic has eased, the tight labor market slowed the return to full capacity by certain restaurants.
Removed
These factors contributed to increased sales in the Company’s supermarkets in excess of typical seasonal patterns. We currently expect that, as the pandemic eases over time, traditional seasonal patterns will resume. The Company’s fluid dairy operations have a slight seasonal variation to the extent of its sales into the grocery industry.
Removed
Additionally, there is currently a nationwide shortage of truck drivers, warehouse workers and labor in general.
Removed
Store managers are given tools to assist in scheduling and levels of staffing. We provide flexible scheduling to accommodate the needs of our full and part-time associates, and we also provide incentives for associates based on the achievement of operating and safety goals.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

18 edited+5 added−6 removed14 unchanged
Biggest changeIf the Company were to experience disruption in these systems, did not maintain existing systems properly, or did not 10 implement new systems appropriately, operations could suffer. The Company is currently undergoing a systematic program to enhance its information technology abilities. The Company has implemented procedures to protect its information technology systems and data necessary to conduct ongoing operations.
Biggest changeThe Company is subject to risks related to information systems and data security. The Company’s business is dependent on information technology systems. These complex systems are an important part of ongoing operations. If the Company were to experience disruption in these systems, did not maintain existing systems properly, or did not implement new systems appropriately, operations could suffer.
While the Company obtains gasoline and diesel fuel from several different suppliers, long-term disruption in the availability and wholesale price of gasoline for resale could have a material adverse effect on the Company’s business, financial condition and/or results of operations.
While the Company obtains gasoline and diesel fuel from several different suppliers, long-term disruption in the availability and wholesale price of fuel for resale could have a material adverse effect on the Company’s business, financial condition and/or results of operations.
Furthermore, fluctuating fuel costs could have an adverse effect on the Company’s total gasoline sales (both in terms of dollars and gallons sold), the profitability of gasoline sales, and the Company’s plans to develop additional fuel centers. Also, retail gas price volatility could diminish customer usage of fueling centers and, thus, adversely affect customer traffic at the Company’s stores.
Furthermore, fluctuating fuel costs could have an adverse effect on the Company’s total fuel sales (both in terms of dollars and gallons sold), the profitability of fuel sales, and the Company’s plans to develop additional fuel centers. Also, retail gas price volatility could diminish customer usage of fueling centers and, thus, adversely affect customer traffic at the Company’s stores.
As a result, the Company’s business may be more susceptible to regional factors than the operations of more geographically diversified competitors. These factors include, among others, changes in the economy, weather conditions, demographics and population. Various aspects of the Company’s business are subject to federal, state and local laws and various operating regulations.
As a result, the Company’s business may be more susceptible to regional factors than the operations of more geographically diversified competitors. These factors include, among others, changes in the economy, weather conditions, demographics and population. 10 Various aspects of the Company’s business are subject to federal, state and local laws and various operating regulations.
The Company is subject to federal, state and local laws and regulations relating to zoning, land use, workplace safety, public health, community right-to-know, beer and wine sales, country of origin labeling of food products, pharmaceutical sales and gasoline station operations. Furthermore, the Company’s business is regulated by a variety of governmental agencies, including, but not limited to, the U.S.
The Company is subject to federal, state and local laws and regulations relating to zoning, land use, workplace safety, public health, community right-to-know, beer and wine sales, country of origin labeling of food products, pharmaceutical sales and fuel station operations. Furthermore, the Company’s business is regulated by a variety of governmental agencies, including, but not limited to, the U.S.
Beneficial ownership is calculated in accordance with Rule 13d-3 promulgated under the Exchange Act. The Company is a controlled company under NASDAQ Rules.
Beneficial ownership is calculated in accordance with Rule 13d-3 promulgated under the Exchange Act. 12 The Company is a controlled company under NASDAQ Rules.
The following information should be read together with other information contained in this Annual Report on Form 10-K, including the consolidated financial statements and the notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following information should be read together with other information contained in this Annual Report on Form 10-K, including the consolidated financial statements and the notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.
A general reduction in the level of consumer spending or the Company’s inability to respond to shifting consumer attitudes regarding products, store location and other factors could adversely affect the Company’s business, financial condition and/or results of operations.
A general reduction in the level of consumer spending or the Company’s inability to respond to shifting consumer attitudes regarding products, store location and other factors could adversely affect the Company’s business, financial condition and/or results of operations. Inflation could impact the Company’s operations.
Food and Drug Administration, the U.S. Department of Agriculture, and OSHA. Employers are also subject to laws governing their relationship with employees, including minimum wage requirements, overtime, working conditions, insurance coverage, disabled access, and work permit requirements.
Food and Drug Administration, the U.S. Department of Agriculture, and the Occupational Safety and Health Administration. Employers are also subject to laws governing their relationship with employees, including minimum wage requirements, overtime, working conditions, insurance coverage, disabled access, and work permit requirements.
As a result, the Company is exempt from certain of NASDAQ’s corporate governance policies, including the requirements that the majority of Directors be independent (as defined in NASDAQ Rules), and that the Company have a nominating committee for Director candidates. Item 1B. UNRESOLVED STAFF COMMENTS None.
As a result, the Company is exempt from certain of NASDAQ’s corporate governance policies, including the requirements that the majority of Directors be independent (as defined in NASDAQ Rules), and that the Company have a nominating committee for Director candidates. Item 1B. UNRESOLVED STAFF COMMENTS None. Item 1C. CYBERSECURITY Not currently applicable.
Ingle II, has the ability to elect a majority of the Company’s directors, appoint new members of management and approve many actions requiring stockholder approval. Mr. Ingle II’s beneficial ownership represented approximately 71% of the combined voting power of all classes of the Company’s capital stock as of September 24, 2022. As a result, Mr.
Ingle II, has the ability to elect a majority of the Company’s directors, appoint new members of management and approve many actions requiring stockholder approval. Mr. Ingle II’s beneficial ownership represented approximately 72.2% of the combined voting power of all classes of the Company’s capital stock as of September 30, 2023. As a result, Mr.
Twelve Months Ended September 24, September 25, 2022 2021 All items 8.2 % 5.4 % Food at home 13.0 % 4.5 % Energy 19.8 % 24.8 % Risk Related to Ownership of Our Common Stock The Company’s principal stockholder, Robert P.
Twelve Months Ended September 30, September 24, 2023 2022 All items 3.7 % 8.2 % Food at home 2.4 % 13.0 % Energy (0.5) % 19.8 % Risk Related to Ownership of Our Common Stock The Company’s principal stockholder, Robert P.
In recent years, more industry transactions have been online for ordering and fulfillment. This trend places a higher reliance on effective and efficient information systems. The Company is affected by the availability and wholesale price of gasoline and retail gasoline prices, all of which can fluctuate quickly and considerably. The Company operates fuel stations at 107 of its store locations.
This trend places a higher reliance on effective and efficient information systems. 11 The Company is affected by the availability and wholesale price of fuel and retail fuel prices, all of which can fluctuate quickly and considerably. The Company operates fuel stations at 108 of its store locations.
Food and energy costs have increased, reflecting a tight labor market and supply chain/transportation issues. 11 The following table from the United States Bureau of Labor Statistics lists annualized changes in the Consumer Price Index that could have an effect on the Company’s operations. One of the Company’s significant costs is labor, which increases with general inflation.
The following table from the United States Bureau of Labor Statistics lists annualized changes in the Consumer Price Index that could have an effect on the Company’s operations. One of the Company’s significant costs is labor, which increases with general inflation. Inflation or deflation in energy costs affects the Company’s fuel sales, distribution expenses and plastic supply costs.
Any of the foregoing factors, or other effects of the pandemic that are not currently foreseeable, may materially increase costs, negatively impact sales and adversely affect the Company’s financial condition, results of operations, cash flows and its liquidity position Risks Related to Our Business and Industry The Company’s warehouse and distribution center and milk processing and packaging plant, as well as all of the Company’s stores, are concentrated in the Southeastern United States, which makes it vulnerable to economic downturns, natural disasters and other adverse conditions or other catastrophic events in this region.
Risks Related to Our Business and Industry The Company’s warehouse and distribution center and milk processing and packaging plant, as well as all of the Company’s stores, are concentrated in the Southeastern United States, which makes it vulnerable to economic downturns, natural disasters and other adverse conditions or other catastrophic events in this region.
Inflation or deflation in energy costs affects the Company’s gasoline sales, distribution expenses and plastic supply costs. During fiscal year 2022, inflation reached its highest level in a number of years, impacting food costs, transportation costs, and labor costs.
During fiscal year 2023, inflation reached its highest level in a number of years, impacting food costs, transportation costs, and labor costs.
The Company cannot however, be certain that all of these systems and data are entirely free from vulnerability to attack. Compliance with tougher privacy and information security laws and standards, including protection of customer debit and credit card information, may result in higher investments in technology and changes to operational processes.
Compliance with tougher privacy and information security laws and standards, including protection of customer debit and credit card information, may result in higher investments in technology and changes to operational processes. In recent years, more industry transactions have been online for ordering and fulfillment.
Energy and utility costs have been volatile in recent years. The Company attempts to increase its energy efficiency during store construction and remodeling using energy-saving equipment and construction. The Company is subject to risks related to information systems and data security. The Company’s business is dependent on information technology systems. These complex systems are an important part of ongoing operations.
Energy and utility costs have been volatile in recent years. The Company attempts to increase its energy efficiency during store construction and remodeling using energy-saving equipment and construction. Our business, financial condition and results of operations may be materially adversely affected by a resurgence of the COVID-19 pandemic.
Removed
Coronavirus (COVID-19) Pandemic Impact We are unable to predict the ongoing impact of the coronavirus (COVID-19) pandemic on Company traffic, sales and profitability. 9 The coronavirus (COVID-19) pandemic was declared a national emergency on March 13, 2020 and the Company was classified as an essential business.
Added
The unprecedented global outbreak of the novel coronavirus (COVID-19) that began in the first quarter of 2020 has adversely impacted economic activity and conditions worldwide, including workforces, liquidity, capital markets, consumer behavior, supply chains and macroeconomic conditions.
Removed
Since that time the Company has had to continuously alter certain operating procedures to accommodate isolation/social distancing, school and restaurant closures, reduced leisure travel, and increased remote work.
Added
While the COVID-19 pandemic was officially declared to have ended in May 2023,and while the direct effects of the COVID-19 pandemic on our business have significantly lessened during the fiscal year ended September 30, 2023, some effects have continued through the fiscal year ended September 30, 2023, and we may continue to be impacted by the continuing effects of the COVID-19 pandemic, including resurgences and variants of COVID-19 or outbreaks of any new viruses or contagions.
Removed
At times, some of the Company’s stores were subject to capacity limits, masking requirements, and social distancing measures that incorporated enhanced cleaning, additional protective equipment and the closure of self-service food bars plus in-house dining. During fiscal year 2021, vaccines became widely available and are currently administered in all our pharmacies.
Added
These impacts may include difficulties and delays in sourcing, transporting and stocking products: inabilities to staff our stores and warehouse and distribution facilities at adequate levels to conduct our operations, resulting in store closures or operating hour reductions; and incurring significant costs in support of our front-line store team members for enhanced benefits, safety measures and government-mandated wage increases.
Removed
As the economy began to recover, we have experienced labor shortages in our stores and distribution center. Truck driver shortages and supply chain disruptions have resulted in occasional product shortages in our stores. Inflation in food and fuel costs have reached levels not experienced in many years. Our sales continue to be above pre-pandemic levels.
Added
The extent to which a future COVID-19 outbreak could impact our business and operating results in the future depends on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19 and variants of the virus and the actions to contain or treat their impact, as well as the impact of any new federal, state and local mandates or other regulations associated with COVID-19.
Removed
At the present time, we do not know how long the ongoing impact of the pandemic will influence our daily operations.
Added
The Company is currently undergoing a systematic program to enhance its information technology abilities. The Company has implemented procedures to protect its information technology systems and data necessary to conduct ongoing operations. The Company cannot, however, be certain that all these systems and data are entirely free from vulnerability to attack.
Removed
Inflation could impact the Company’s operations As the economy recovers from the initial impact of the COVID-19 pandemic, inflation has recently reached levels not experienced in decades.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following table summarizes lease expiration dates as of September 24, 2022, with respect to the initial and any renewal option terms of leased supermarkets properties: Year of Expiration Number of (Including Renewal Terms) Leases Expiring 2022-2033 5 2034-2048 1 2049 or after 29 Management believes that the long-term rent stability provided by these leases is a valuable asset of the Company.
Biggest changeThe following table summarizes lease expiration dates as of September 30, 2023, with respect to the initial and any renewal option terms of leased supermarkets properties: Year of Expiration Number of (Including Renewal Terms) Leases Expiring 2023-2034 5 2035-2049 1 2050 or after 26 Management believes that the long-term rent stability provided by these leases is a valuable asset of the Company. ‎ 13
The Company leases one other former supermarket location, which is subleased to a third party. 12 The majority of these leases require the Company to pay property taxes, utilities, insurance, repairs and certain other expenses incidental to occupation of the premises.
The Company leases one other former supermarket location, which is subleased to a third party. The majority of these leases require the Company to pay property taxes, utilities, insurance, repairs and certain other expenses incidental to occupation of the premises.
See Note 7, “Long-Term Debt” to the Consolidated Financial Statements of this Annual Report on Form 10-K for further details. Leased Properties The Company operates supermarkets at 34 locations leased from various unaffiliated third parties. The Company has six owned store buildings that are on ground leases.
See Note 7, “Long-Term Debt” to the Consolidated Financial Statements of this Annual Report on Form 10-K for further details. Leased Properties The Company operates supermarkets at 31 locations leased from various unaffiliated third parties. The Company has six owned store buildings that are on ground leases.
In addition to base rent, most leases contain provisions that require the Company to pay additional percentage rent (ranging from 0.75% to 1.50%) if sales exceed a specified amount. Rental rates generally range from $3.00 to $7.68 per square foot.
In addition to base rent, most leases contain provisions that require the Company to pay additional percentage rent (ranging from 0.75% to 1.50%) if sales exceed a specified amount. Rental rates generally range from $3.00 to $7.77 per square foot.
A breakdown by size of the shopping centers owned and operated by the Company is as follows: Size Number Less than 50,000 square feet 15 50,000 – 100,000 square feet 33 More than 100,000 square feet 37 Total 85 The Company owns a 1,649,000 square foot facility, which is strategically located between Interstate 40 and Highway 70 near Asheville, North Carolina, as well as the 119 acres of land on which it is situated.
A breakdown by size of the shopping centers owned and operated by the Company is as follows: Size Number Less than 50,000 square feet 19 50,000 – 100,000 square feet 37 More than 100,000 square feet 37 Total 93 The Company owns a 1,649,000 square foot facility, which is strategically located between Interstate 40 and Highway 70 near Asheville, North Carolina, as well as the 119 acres of land on which it is situated.
Item 2. PROPERTIES Owned Properties The Company owns 164 of its supermarkets either as free-standing locations or in shopping centers where it is the anchor tenant. The Company also owns 25 undeveloped sites which are suitable for a free-standing store or shopping center development.
Item 2. PROPERTIES Owned Properties The Company owns 167 of its supermarkets either as free-standing locations or in shopping centers where it is the anchor tenant. The Company also owns 29 undeveloped sites which are suitable for a free-standing store or shopping center development.
The shopping centers owned by the Company contain an aggregate of 8.2 million square feet of leasable space, of which 4.0 million square feet is used by the Company’s supermarkets. The remainder of the leasable space in these shopping centers is leased or held for lease by the Company to third-party tenants.
The shopping centers owned by the Company contain an aggregate of 8.6 million square feet of leasable space, of which 4.1 million square feet is used by the Company’s supermarkets. The remainder of the leasable space in these shopping centers is leased or held for lease by the Company to third-party tenants.
During fiscal 2022, 2021 and 2020, the Company paid cash supermarket rent of $10.0 million, $10.3 million and $10.2 million, respectively. These amounts exclude property taxes, utilities, insurance, repairs, other expenses, and non-cash rent adjustments.
During fiscal 2023, 2022 and 2021, the Company paid cash supermarket rent of $9.4 million, $10.0 million and $10.3 million, respectively. These amounts exclude property taxes, utilities, insurance, repairs, other expenses, and non-cash rent adjustments.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSuch restrictions are summarized in Note 7, “Long-Term Debt” to the Consolidated Financial Statements of this Annual Report on Form 10-K. 13 Stock Performance Graph Set forth below are a graph and accompanying table comparing the five-year cumulative total stockholder return on the Class A Common Stock with the five-year cumulative total return of (i) the S&P 500 Comprehensive-Last Trading Day Index and (ii) a peer group of companies in the Company's line of business.
Biggest changeRepurchase of Equity Securities None. 14 Stock Performance Graph Set forth below are a graph and accompanying table comparing the five-year cumulative total stockholder return on the Class A Common Stock with the five-year cumulative total return of (i) the S&P 500 Comprehensive-Last Trading Day Index and (ii) a peer group of companies in the Company's line of business.
During both fiscal 2022 and fiscal 2021, the Company paid annual dividends totaling $0.66 per share of Class A Common Stock and $0.60 per share of Class B Common Stock, paid in quarterly installments of $0.165 and $0.15 per share, respectively.
During both fiscal 2023 and fiscal 2022, the Company paid annual dividends totaling $0.66 per share of Class A Common Stock and $0.60 per share of Class B Common Stock, paid in quarterly installments of $0.165 and $0.15 per share, respectively.
The 2022 peer group consists of the following companies: Koninklijke Ahold Delhaize N.V., Weis Markets, Inc., The Kroger Co., Supervalu Inc., SpartanNash Co., Sprouts Farmers Markets, Inc., and Village Super Market, Inc.
The 2023 peer group consists of the following companies: Koninklijke Ahold Delhaize N.V., Weis Markets, Inc., The Kroger Co., Supervalu Inc., SpartanNash Co., Sprouts Farmers Markets, Inc., and Village Super Market, Inc.
Dividends The Company has paid cash dividends on its Common Stock in each of the past 38 fiscal years, except for the 1984 fiscal year when the Company paid a 3% stock dividend.
Dividends The Company has paid cash dividends on its Common Stock in each of the past 39 fiscal years, except for the 1984 fiscal year when the Company paid a 3% stock dividend.
The Company’s last dividend payment was made on October 13, 2022 to common stockholders of record on October 6, 2022. For additional information regarding the dividend rights of the Class A Common Stock and Class B Common Stock, please see Note 8, “Stockholders’ Equity” to the Consolidated Financial Statements of this Annual Report on Form 10-K.
The Company’s last dividend payment was made on October 19, 2023 to common stockholders of record on October 12, 2023. For additional information regarding the dividend rights of the Class A Common Stock and Class B Common Stock, please see Note 8, “Stockholders’ Equity” to the Consolidated Financial Statements of this Annual Report on Form 10-K.
The comparisons cover the five-years ended September 24, 2022 and assume that $100 was invested after the close of the market on September 30, 2017, and that dividends were reinvested quarterly.
The comparisons cover the five-years ended September 30, 2023 and assume that $100 was invested after the close of the market on September 29, 2018, and that dividends were reinvested quarterly.
As of November 21, 2022, there were approximately 331 holders of record of the Company’s Class A Common Stock and 99 holders of record of the Company’s Class B Common Stock.
As of November 27, 2023, there were approximately 315 holders of record of the Company’s Class A Common Stock and 90 holders of record of the Company’s Class B Common Stock.
INGLES MARKETS, INCORPORATED ‎ COMPARATIVE RETURN TO STOCKHOLDERS ‎ 14 INDEXED RETURNS OF INITIAL $100 INVESTMENT * Company/Index 2018 2019 2020 2021 2022 Ingles Markets, Incorporated Class A Common Stock $ 136.19 $ 157.84 $ 150.72 $ 274.22 $ 345.21 S&P 500 Comprehensive – Last Trading Day Index $ 117.91 $ 122.93 $ 141.55 $ 184.02 $ 155.55 Peer Group $ 134.27 $ 135.11 $ 173.10 $ 205.11 $ 202.09 *Assumes $100 invested in the Class A Common Stock of Ingles Markets, Incorporated after the close of the market on September 30, 2017.
INGLES MARKETS, INCORPORATED ‎ COMPARATIVE RETURN TO STOCKHOLDERS ‎ 15 INDEXED RETURNS OF INITIAL $100 INVESTMENT * Company/Index 2019 2020 2021 2022 2023 Ingles Markets, Incorporated Class A Common Stock $ 115.89 $ 110.67 $ 201.35 $ 253.47 $ 235.26 S&P 500 Comprehensive – Last Trading Day Index $ 104.25 $ 120.05 $ 156.07 $ 131.92 $ 160.44 Peer Group $ 100.62 $ 128.92 $ 152.76 $ 150.51 $ 168.35 *Assumes $100 invested in the Class A Common Stock of Ingles Markets, Incorporated after the close of the market on September 29, 2018.
Added
Such restrictions are summarized in Note 7, “Long-Term Debt” to the Consolidated Financial Statements of this Annual Report on Form 10-K.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeWe do not know how long and to what extent COVID-19 will impact our markets in fiscal year 2023. The Company has improved the interior layout and product offerings in a significant number of stores over the past few fiscal years. Economic conditions have remained favorable and the Company continues to increase and improve its total retail square footage.
Biggest changeWhile the effects of the pandemic on the Company have eased considerably over the fiscal year ended September 30, 2023, some effects have continued through the year ended September 30, 2023, and we do not know how long and to what extent COVID-19 will impact our markets in fiscal year 2024. 21 The Company continually assesses and modifies its business model to meet the changing needs and expectations of its customers.
Additional financing sources for capital expenditures could include borrowings under the Company’s $150 million of committed line of credit (described below), other borrowings that could be collateralized by unencumbered real property and equipment with a net book value of approximately $1.1 billion, and the public debt or equity markets.
Additional financing sources for capital expenditures could include borrowings under the Company’s $150 million of committed line of credit (described below), other borrowings that could be collateralized by unencumbered real property and equipment with a net book value of approximately $1.2 billion, and the public debt or equity markets.
Economic conditions may affect purchasing patterns with regard to meal replacement items, private label purchases, promotions and product variety. The Company and its customers will continue to become more environmentally aware, evidenced by the Company’s increased recycled waste paper and pallets and customers’ increased usage of reusable shopping bags. Volatile petroleum costs will impact utility and distribution costs, plastic supplies cost and may change customer shopping and dining behavior. Retail gasoline costs and retail prices will continue to be volatile, affecting the Company’s gasoline sales and gross margin.
Economic conditions may affect purchasing patterns with regard to meal replacement items, private label purchases, promotions and product variety. The Company and its customers will continue to become more environmentally aware, evidenced by the Company’s increased recycled waste paper and pallets and customers’ increased usage of reusable shopping bags. Volatile petroleum costs will impact utility and distribution costs, plastic supplies cost and may change customer shopping and dining behavior. Retail fuel costs and retail prices will continue to be volatile, affecting the Company’s fuel sales and gross margin.
Risks and uncertainties are associated with self-insurance; however, the Company has limited its exposure by maintaining excess liability coverage of $1,000,000 per occurrence for workers’ compensation and for general liability, and $475,000 per covered person for medical care benefits for a policy year. Self-insurance liabilities are established based on claims filed and estimates of claims incurred but not reported.
Risks and uncertainties are associated with self-insurance; however, the Company has limited its exposure by maintaining excess liability coverage of $1,000,000 per occurrence for workers’ compensation and for general liability, and $500,000 per covered person for medical care benefits for a policy year. Self-insurance liabilities are established based on claims filed and estimates of claims incurred but not reported.
Ingles supermarkets offer customers a wide variety of nationally advertised food products, including grocery, meat and dairy products, produce, frozen foods and other perishables and non-food products. Non-food products include fuel centers, pharmacies, health and beauty care products and general merchandise. The Company offers quality private label items in most of its departments.
Ingles supermarkets offer customers a wide variety of nationally advertised food products, including grocery, meat and dairy products, produce, frozen foods and other perishables and non-food products. Non-food products include fuel centers, pharmacies, health/beauty/cosmetic products and general merchandise. The Company offers quality private label items in most of its departments.
These estimates can fluctuate significantly due to changes in real estate market conditions, the economic environment, capital 15 spending decisions and inflation. The Company monitors the carrying value of long-lived assets for potential impairment each quarter based on whether any indicators of impairment have occurred.
These estimates can fluctuate significantly due to changes in real estate market conditions, the economic environment, capital 16 spending decisions and inflation. The Company monitors the carrying value of long-lived assets for potential impairment each quarter based on whether any indicators of impairment have occurred.
In addition to the direct 17 product cost, the cost of goods sold line item for the grocery segment includes inbound freight charges, which generally increased in fiscal year 2022 as compared to fiscal year 2021, and increased costs related to the Company’s distribution network, including the impact of higher diesel prices. Operating and Administrative Expenses.
In addition to the direct product cost, the cost of goods sold line item for the grocery segment includes inbound freight charges, which generally increased in fiscal year 2023 as compared to fiscal year 2022, and increased costs related to the Company’s distribution network, including the impact of higher diesel prices. Operating and Administrative Expenses.
The Company plans to continue to focus on balancing sales growth and gross margin maintenance (excluding the effect of gasoline sales) and will carefully monitor its product mix and customer trends.
The Company plans to continue to focus on balancing sales growth and gross margin maintenance (excluding the effect of fuel sales) and will carefully monitor its product mix and customer trends.
These factors may include, among others, resolution of the COVID-19 pandemic, increased competition, changing regional and national economic conditions, adverse climatic conditions affecting food production and 20 delivery and changing demographics as well as the additional factors discussed above and elsewhere under “Item 1A.
These factors may include, among others, resurgence of the COVID-19 pandemic virus, increased competition, changing regional and national economic conditions, adverse climatic conditions affecting food production and delivery and changing demographics as well as the additional factors discussed above and elsewhere under “Item 1A.
Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in Ingles Annual Report on Form 10-K for the year ended September 25, 2021, filed with the SEC on November 24, 2021, for a discussion of the year ended September 25, 2021 as compared to September 26, 2020.
Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in Ingles Annual Report on Form 10-K for the year ended September 24, 2022, filed with the SEC on November 23, 2022, for a discussion of the year ended September 24, 2022 as compared to September 25, 2021.
The Line allows the Company to issue up to $10.0 million in letters of credit, of which none were issued at September 24, 2022. The Company is not required to maintain compensating balances in connection with the Line. At September 24, 2022, the Company had no borrowings outstanding under the Line.
The Line allows the Company to issue up to $10.0 million in letters of credit, of which none were issued at September 30, 2023. The Company is not required to maintain compensating balances in connection with the Line. At September 30, 2023, the Company had no borrowings outstanding under the Line.
Major capital expenditures included the following: 2022 2021 New stores 0 2 Store sites/land parcels purchased 6 6 New fuel stations added 0 2 Capital expenditures include upgrading and replacing store equipment, technology investments, those related to the Company’s distribution operation and its milk processing plant, and expenditures for stores to open in subsequent fiscal years.
Major capital expenditures included the following: 2023 2022 New stores 0 0 Store sites/land parcels purchased 15 6 New fuel stations added 1 0 19 Capital expenditures include upgrading and replacing store equipment, technology investments, those related to the Company’s distribution operation and its milk processing plant, and expenditures for stores to open in subsequent fiscal years.
These amounts are inclusive of expected recoveries from excess cost insurance or other sources that are recorded as receivables of $4.0 million at September 24, 2022 and $4.2 million at September 25, 2021. Asset Impairments The Company accounts for the impairment of long-lived assets in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Topic 360.
These amounts were inclusive of expected recoveries from excess cost insurance or other sources that are recorded as receivables of $4.3 million at September 30, 2023 and $4.0 million at September 24, 2022. Asset Impairments The Company accounts for the impairment of long-lived assets in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Topic 360.
Risk Factors.” It is also possible, for such reasons, that the results of operations from the new, expanded, remodeled and/or replacement stores will not meet or exceed the results of operations from existing stores that are described in this report.
Risk Factors.” It is also possible, for such reasons, that the results of operations from the new, expanded, remodeled and/or replacement stores will not meet or exceed the results of operations from existing stores that are described in this Annual Report on Form 10-K.
The consolidated statements of income for the fiscal years ended September 24, 2022, September 25, 2021 and September 26, 2020, each consisted of 52 weeks of operations. Comparable Store Sales Comparable store sales are defined as sales by grocery stores in operation for five full fiscal quarters.
The consolidated statements of income for the fiscal year ended September 30, 2023 had 53 weeks. The consolidated statements of income for fiscal years September 24, 2022, and September 25, 2021 each consisted of 52 weeks of operations. Comparable Store Sales Comparable store sales are defined as sales by grocery stores in operation for five full fiscal quarters.
Comparable store sales for the fiscal year ended September 24, 2022 included 197 stores and, for the fiscal year ended September 25, 2021 comparable store sales included 196 stores. The following table sets forth, for the periods indicated, selected financial information as a percentage of net sales.
Comparable store sales for the fiscal year ended September 30, 2023, included 198 stores and, for the fiscal year ended September 24, 2022, comparable store sales included 197 stores. The following table sets forth, for the periods indicated, selected financial information as a percentage of net sales.
The Bonds and the Line contain provisions that under certain circumstances would permit lending institutions to terminate or withdraw their respective extensions of credit to the Company.
The Bonds and the Line contain provisions that under certain circumstances would permit the acceleration of the indebtedness under such instruments or would otherwise permit lending institutions to terminate or withdraw their respective extensions of credit to the Company.
Under a Continuing Covenant and Collateral Agency Agreement (the “Covenant Agreement”) between certain financial institutions and the Company, such financial institutions hold the Bonds until September 2026, subject to certain events. Mandatory redemption of the Bonds by the Company in the annual amount of $4,530,000 began on January 1, 2014.
Under a Continuing Covenant and Collateral Agency Agreement (the “Covenant Agreement”) between certain financial institutions and the Company, such financial institutions hold the Bonds until December 2029, subject to certain events. Mandatory redemption of the Bonds by the Company in the annual amount of $4.5 million began on January 1, 2014.
Excluding gasoline, which does not have significant direct operating expenses, the ratio of operating expenses to sales was 21.5% for fiscal year 2022 compared with 21.7% for fiscal year 2021. Fiscal year 2022 sales growth resulted in operating expense leverage. A breakdown of the major increases and (decreases) in operating and administrative expenses is as follows.
Excluding fuel, which does not have significant direct operating expenses, the ratio of operating expenses to sales was 21.7% for fiscal year 2023 compared with 21.5% for fiscal year 2022. 18 A breakdown of the major increases and (decreases) in operating and administrative expenses is as follows.
Basic and diluted earnings per share for Class B Common Stock were each $13.35 for the fiscal year ended September 24, 2022 compared with $11.87 of basic and diluted earnings per share for the fiscal year ended September 25, 2021. Fiscal Year Ended September 25, 2021 Compared to the Fiscal Year Ended September 26, 2020 See “Item 7.
Basic and diluted earnings per share for Class B Common Stock were each $10.32 for the fiscal year ended September 30, 2023 compared with $13.35 of basic and diluted earnings per share for the fiscal year ended September 24, 2022. Fiscal Year Ended September 24, 2022 Compared to the Fiscal Year Ended September 25, 2021 See “Item 7.
The Company’s self-insurance reserves totaled $31.0 million and $32.1 million for employee group insurance, workers’ compensation insurance and general liability insurance at September 24, 2022 and September 25, 2021, respectively.
The Company’s self-insurance reserves totaled $32.9 million and $31.0 million for employee group insurance, workers’ compensation insurance and general liability insurance at September 30, 2023 and September 24, 2022, respectively.
New Accounting Pronouncements For new accounting pronouncements, see Note 1 to the Consolidated Financial Statements included in this Annual Report on Form 10-K. Outlook and Trends in the Company’s Markets The COVID-19 pandemic that began in March 2020 has had a significant impact on the Company’s markets for fiscal years 2021 and 2022.
New Accounting Pronouncements For new accounting pronouncements, see Note 1 to the Consolidated Financial Statements included in this Annual Report on Form 10-K. Outlook and Trends in the Company’s Markets The COVID-19 pandemic that began in March 2020 substantially impacted supermarket operations during fiscal years 2020, 2021 and 2022.
Vendor allowances applied as a reduction of merchandise costs totaled $110.6 million, $116.3 million and $107.5 million for the fiscal years ended September 24, 2022, September 25, 2021 and September 26, 2020, respectively.
Vendor allowances applied as a reduction of merchandise costs totaled $128.9 million, $110.6 million and $116.3 million for the fiscal years ended September 30, 2023, September 24, 2022, and September 25, 2021, respectively.
Under this agreement, the Company pays monthly the fixed rate of 2.95% and receives the one-month LIBOR plus 1.50%. The interest rate swap effectively hedges floating rate debt in the same amount as the current notional amount of the interest swap.
Under this agreement, the Company pays monthly the fixed rate of 3.962% and receives the one-month SOFR plus 1.75%. The interest rate swap effectively hedges floating rate debt in the same 20 amount as the current notional amount of the interest swap.
In addition, the Company focuses on selling high-growth, high-margin products to its customers through the development of certified organic products, bakery departments and prepared foods including delicatessen sections. As of September 24, 2022, the Company operated 112 in-store pharmacies and 107 fuel centers. Ingles also operates a fluid dairy and earns shopping center rentals.
In addition, the Company focuses on selling products to its customers through the development of certified organic products, bakery departments and prepared foods including delicatessen sections. As of September 30, 2023, the Company operated 114 in-store pharmacies and 108 fuel stations. Ingles also operates a fluid dairy and earns shopping center rentals.
The interest rate swap effectively hedges floating rate debt in the same amount as the current notional amount of the interest rate swap. Both the floating rate debt and the interest rate swap have monthly principal amortization of $0.5 million and mature October 1, 2027.
The interest rate swap effectively hedges floating rate debt in the same amount as the current notional amount of the interest swap. Both the floating rate debt and the interest rate swap have monthly principal amortization of $0.65 million and mature in fiscal year 2030.
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview Ingles, a leading supermarket chain in the Southeast United States, operates 198 supermarkets in North Carolina (75), Georgia (65), South Carolina (35), Tennessee (21), Virginia (1) and Alabama (1). The Company locates its supermarkets primarily in suburban areas, small towns and neighborhood shopping centers.
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview Ingles is a leading supermarket chain in the Southeast United States and operates a total of 198 supermarkets in North Carolina (75), Georgia (65), South Carolina (35), Tennessee (21), Virginia (1) and Alabama (1).
Operating and administrative expenses increased $76.9 million, or 8.0%, to $1.0 billion for the fiscal year ended September 24, 2022, from $963.3 million for the fiscal year ended September 25, 2021. As a percentage of sales, operating and administrative expenses were 18.3% and 19.3% for fiscal years 2022 and 2021, respectively.
Operating and administrative expenses increased $75.2 million, or 7.2%, to $1.1 billion for the fiscal year ended September 30, 2023, from $1.0 billion for the fiscal year ended September 24, 2022. As a percentage of sales, operating and administrative expenses were 18.9% and 18.3% for fiscal years 2023 and 2022, respectively.
The non-foods category includes alcoholic beverages, tobacco, pharmacy, and health/beauty/cosmetic products. The perishables category includes meat, produce, deli and bakery.
The “Non-foods” category includes alcoholic beverages, tobacco, pharmacy, and health/beauty/cosmetic products. The “Perishables” category includes meat, produce, deli and bakery.
As a result, vendors offered the Company a lower level of incentives to sell their products. If vendor advertising allowances were substantially reduced or eliminated, the Company would likely consider other methods of advertising as well as the volume and frequency of the Company’s product advertising, which could increase or decrease the Company’s expenditures.
If vendor advertising allowances were substantially reduced or eliminated, the Company would likely consider other methods of advertising as well as the volume and frequency of the Company’s product advertising, which could increase or decrease the Company’s expenditures.
In December 2010, the Company completed the funding of $99.7 million of Recovery Zone Facility Bonds (the “Bonds”) for construction and equipping of an approximately 830,000 square foot new warehouse and distribution center located in Buncombe County, North Carolina (the “Project”). The final maturity date of the Bonds is January 1, 2036.
In December 2010, the Company completed the funding of $99.7 million of Recovery Zone Facility Bonds (the “Bonds”) for the construction of new warehouse and distribution space adjacent to its existing space in Buncombe County, North Carolina (the “Project”). The final maturity date of the Bonds is January 1, 2036.
Generally, it is difficult to predict whether a trend will continue for a period of time and it is possible that new trends will develop which will affect an existing trend.
In connection with this review, the Company assesses the trends present in the markets in which it competes. Generally, it is difficult to predict whether a trend will continue for a period of time and it is possible that new trends will develop which will affect an existing trend.
The Company has an interest rate swap agreement for a current notional amount of $30.5 million at a fixed rate of 3.92%. Under this agreement, the Company pays monthly the fixed rate of 3.92% and receives the one-month LIBOR plus 1.65%.
The Company has an interest rate swap agreement for a current notional amount of $124.6 million at a fixed rate of 2.998%. Under this agreement, the Company pays monthly the fixed rate of 2.998% and receives the one-month SOFR plus 1.60%.
This compares with an income tax expense totaling $77.9 million and an effective tax rate of 23.8% for fiscal year 2021. Net Income. Net income totaled $272.8 million for the fiscal year ended September 24, 2022 compared with net income of $249.7 million for the fiscal year ended September 25, 2021.
This compares with an income tax expense totaling $88.5 million and an effective tax rate of 24.5% for fiscal year 2022. Net Income. Net income totaled $210.8 million for the fiscal year ended September 30, 2023 compared with net income of $272.8 million for the fiscal year ended September 24, 2022.
Basic and diluted earnings per share for Class A Common Stock were 18 $14.69 and $14.36, respectively, for the fiscal year ended September 24, 2022 compared with $13.06 and $12.73, respectively, for the fiscal year ended September 25, 2021.
Basic and diluted earnings per share for Class A Common Stock were $11.35 and $11.10, respectively, for the fiscal year ended September 30, 2023 compared with $14.69 and $14.36, respectively, for the fiscal year ended September 24, 2022.
Vendor advertising allowances recorded as a reduction of advertising expense totaled $7.1 million, $8.1 million, and $8.0 million for the fiscal years ended September 24, 2022, September 25, 2021 and September 26, 2020, respectively. During fiscal years 2022, 2021 and 2020, the COVID-19 pandemic increased the Company’s sales.
Vendor advertising allowances recorded as a reduction of advertising expense totaled $8.5 million, $7.1 million, and $8.1 million for the fiscal years ended September 30, 2023, September 24, 2022, and September 25, 2021, respectively.
The 2023 Notes were redeemed at par value on July 16, 2021. The Company has a $150.0 million unsecured senior line of credit (the “Line”) that matures in June 2026. The Line provides the Company with various interest rate options based on the prime rate, the Federal Funds Rate, or the London Interbank Offering Rate (“LIBOR”).
The Company has a $150.0 million unsecured senior line of credit (the “Line”) that matures in June 2026. The Line provides the Company with various interest rate options based on the prime rate, the Federal Funds Rate, or SOFR.
The Company’s long-term debt agreements generally have cross-default provisions which could result in the acceleration of payments due under the Company’s Line, Bonds and 2031 Notes indenture in the event of default under any one instrument.
The fair market value of the interest rate swaps is measured quarterly with adjustments recorded in other comprehensive income. The Company’s long-term debt agreements generally have cross-default provisions which could result in the acceleration of payments due under the Company’s Line, Bonds and 2031 Notes indenture in the event of default under any one instrument.
Fiscal Year Ended September 2022 2021 2020 Net sales 100.0% 100.0% 100.0% Gross profit 24.9 26.1 26.0 Operating and administrative expenses 18.3 19.3 20.0 Gain from sale or disposal of assets — 0.2 0.1 Income from operations 6.6 7.0 6.1 Other income, net — 0.1 0.1 Interest expense 0.4 0.5 0.9 Loss on early extinguishment of debt 0.0 — 0.2 Income before income taxes 6.4 6.6 5.1 Income tax expense 1.6 1.6 1.2 Net income 4.8 5.0 3.9 16 Fiscal Year Ended September 24, 2022 Compared to the Fiscal Year Ended September 25, 2021 The Company’s performance for fiscal year 2021, which commenced in September 2020, was heavily influenced by the COVID-19 pandemic.
Fiscal Year Ended September 2023 2022 2021 Net sales 100.0% 100.0% 100.0% Gross profit 23.8 24.9 26.1 Operating and administrative expenses 18.9 18.3 19.3 Gain from sale or disposal of assets 0.1 — 0.2 Income from operations 5.0 6.6 7.0 Other income, net 0.2 — 0.1 Interest expense 0.4 0.4 0.5 Income before income taxes 4.8 6.4 6.6 Income tax expense 1.2 1.6 1.6 Net income 3.6 4.8 5.0 17 Fiscal Year Ended September 30, 2023 Compared to the Fiscal Year Ended September 24, 2022 Net income for the fiscal year ended September 30, 2023 was $210.8 million, compared with net income of $272.8 million for the fiscal year ended September 24, 2022.
Sales by product category for the fiscal years ended September 24, 2022 and September 25, 2021 were as follows: Fiscal Year Ended September (dollars in thousands) 2022 2021 Grocery $ 1,940,414 $ 1,762,872 Non-foods 1,204,443 1,136,250 Perishables 1,445,042 1,349,081 Gasoline 885,801 583,749 Total retail grocery $ 5,475,700 $ 4,831,952 The grocery category includes grocery, dairy and frozen foods.
Sales by product category for the fiscal years ended September 30, 2023 and September 24, 2022 were as follows: Fiscal Year Ended September (dollars in thousands) 2023 2022 Grocery $ 2,062,416 $ 1,940,414 Non-foods 1,326,907 1,204,443 Perishables 1,482,089 1,445,042 Fuel 792,524 885,801 Total retail grocery $ 5,663,936 $ 5,475,700 The “Grocery” category includes grocery, dairy and frozen foods.
Construction commitments at September 24, 2022 totaled $6.5 million. Liquidity The Company generated $339.5 million of cash from operations in fiscal 2022 compared with $306.3 million for fiscal year 2021.
Construction commitments at September 30, 2023 totaled $3.0 million. Liquidity The Company generated $266.4 million of cash from operations in fiscal 2023 compared with $339.5 million for fiscal year 2022. The decrease resulted primarily from a $61.9 million decrease in net income for fiscal year 2023 compared with fiscal 2022.
As of September 24, 2022, the Company was in compliance with these covenants by a significant margin. Under the most restrictive of these covenants, the Company would be able to incur approximately $2.33 billion of additional borrowings (including borrowings under the Line) as of September 24, 2022.
As of September 30, 2023, the Company was in compliance with these covenants. Under the most restrictive of these covenants, the Company would have been permitted to incur approximately $1.8 billion of additional borrowings (including borrowings under the Line) as of September 30, 2023.
In June 2021, the Company issued $350.0 million aggregate principal amount of the 2031 Notes. The 2031 Notes bear an interest rate of 4.00% per annum and were issued at par. Upon issuance of the 2031 Notes, the Company issued an irrevocable notice to redeem the remaining $295.0 million principal amount outstanding of 5.75% 2023 Notes.
In June 2021, the Company issued at par $350.0 million aggregate principal amount of 4.00% senior notes due 2031 (the “2031 Notes”) and used a portion of the proceeds to redeem the remaining outstanding $295.0 million principal amount of the Company’s 5.75% senior notes due.
However, there can be no assurance that any such sources of financing will be available to the Company on acceptable terms, or at all. It is possible that, in the future, the Company’s results of operations and financial condition will be different from that described in this report based on a number of intangible factors.
It is possible that, in the future, the Company’s results of operations and financial condition will be different from that described in this Annual Report on Form 10-K based on a number of intangible factors.
Other Income, Net. Other income, net totaled $5.8 million and $2.9 million for the fiscal years ended September 24, 2022 and September 25, 2021, respectively. Other income consists primarily of sales of waste paper and packaging. The market cost for each of these increased during fiscal year 2022. Interest Expense.
Other income consists primarily of interest earned and sales of waste paper and packaging. Interest Expense. Interest expense totaled $22.1 million for the fiscal year ended September 30, 2023 and $21.5 million for the fiscal year ended September 24, 2022.
The Company’s most significant investing activity is capital expenditures, which decreased in fiscal year 2022 as compared to fiscal year 2021. The Company’s cash used by net financing activities totaled $30.6 million and $114.9 million for fiscal years 2022 and 2021, respectively. In fiscal year 2021 there were $80.0 million of stock repurchases compared with none in fiscal year 2022.
Cash used by investing activities for fiscal year 2023 totaled $170.1 million compared with $112.0 million for fiscal year 2022. The Company’s most significant investing activity is capital expenditures, which increased in fiscal year 2023 as compared to fiscal year 2022.
Increase Increase (decrease) (decrease) as a % of (in millions) sales Salaries and wages $ 38.2 0.67 % Store supplies $ 7.8 0.14 % Bank charges $ 7.5 0.13 % Repairs and maintenance $ 7.3 0.13 % Utilities and fuel $ 4.4 0.08 % Salaries and wages increased due to increased competition in the labor market in the Company’s market area.
Increase Increase (decrease) (decrease) as a % of (in millions) sales Salaries and wages $ 55.2 0.94 % Repairs and maintenance $ 11.6 0.20 % Advertising and promotion $ (6.3) (0.11) % Store supplies $ 5.7 0.10 % Salaries and wages increased due to increased competition in the labor market in the Company’s market area, in addition to the extra week of expense for the 53 rd week.
Additionally, the Company’s planned fiscal year 2023 capital expenditures include investments in stores expected to open in fiscal year 2024, as well as technology improvements, upgrading and replacing existing store equipment and warehouse and transportation equipment and improvements to the Company’s milk processing plant. The Company also plans to consider property acquisitions for future store development.
Ingles’ capital expenditure plans for fiscal year 2024 include investments of approximately $120 to $170 million. The Company currently plans to dedicate the majority of its fiscal 2024 capital expenditures to continued improvement of its store base, as well as technology improvements, upgrading and replacing existing store, warehouse and transportation equipment and improvements to the Company’s milk processing plant.
Gross profit for the fiscal year ended September 24, 2022 increased $112.3 million, or 8.6%, to $1.42 billion compared with $1.30 billion for the fiscal year ended September 25, 2021. As a percentage of sales, gross profit totaled 24.9% for the fiscal year ended September 24, 2022 as compared to 26.1% for the fiscal year ended September 25, 2021.
Gross Profit. Gross profit for the fiscal year ended September 30, 2023 decreased $10.9 million, or 0.77%, to $1.40 billion compared with $1.42 billion for the fiscal year ended September 24, 2022.
Interest expense totaled $21.5 million for the fiscal year ended September 24, 2022 and $24.3 million for the fiscal year ended September 25, 2021. Total debt was $571.9 million at the end of fiscal year 2022 compared with $589.5 million at the end of fiscal year 2021.
Total debt was $550.2 million at the end of fiscal year 2023 compared with $571.9 million at the end of fiscal year 2022. Income Taxes. Income tax expense totaled $67.7 million for fiscal year 2023, reflecting an effective tax rate of 24.3%.
In December 2019, the Company closed a $155 million LIBOR-based amortizing floating rate loan secured by real estate maturing in January 2030. The Company has an interest rate swap agreement for a current notional amount of $132.4 million at a fixed rate of 2.95%.
In September 2017, the Company refinanced approximately $60 million of secured borrowing obligations with a SOFR-based amortizing floating rate loan secured by real estate, which matures in October 2027. The Company has an interest rate swap agreement for a current notional amount of $24.5 million at a fixed rate of 3.962%.
Store supplies, which include customer packaging containers, increased as a result of increased sales, market costs of certain supplies, and supply chain issues for certain raw materials. The COVID-19 pandemic has resulted in higher usage of cleaning and packaging products to maintain product safety.
Advertising and promotion costs decreased due to absorbing some of the activity in-house and moving towards lower-cost types of advertising. Store supplies, which include customer packaging containers, increased as a result of increased sales, market costs of certain supplies, and supply chain issues for certain raw materials, in addition to the extra week of expense for the 53 rd week.
Gasoline gross profit increased $13.0 million for fiscal year 2022 compared with 2021. Grocery segment gross profit as a percentage of total sales (excluding gasoline) decreased 11 basis points in fiscal year 2022 compared with fiscal year 2021. The gross margin decrease was primarily due to inflation and supply chain factors that impacted prices and mix of products sold.
The gross margin decrease was primarily due to inflation and supply chain factors that impacted prices and mix of products sold.
Capital expenditures totaled $119.6 million and $140.6 million for fiscal years 2022 and 2021, respectively.
Capital expenditures totaled $173.6 million and $119.6 million for fiscal years 2023 and 2022, respectively, with the increase driven primarily by the purchase of new sites and land parcels.
Gain from Sale or Disposal of Assets. Gains on sale or disposal of assets totaled $1.4 million for fiscal year 2022 and $10.0 million for fiscal year 2021. During fiscal year 2021, the Company recognized $9.3 million from the sales of two former store properties. There were no other significant sale/disposal transactions in either fiscal year 2022 or 2021.
Gain from Sale or Disposal of Assets. Gains on sale or disposal of assets totaled $2.8 million for fiscal year 2023 and $1.4 million for fiscal year 2022. Other Income, Net. Other income, net totaled $8.3 million and $5.8 million for the fiscal years ended September 30, 2023 and September 24, 2022, respectively.
Comparing fiscal 2022 with 2021, gasoline gallons sold increased 5.0% and per gallon gasoline prices increased 44.9%.
The number of transactions (excluding fuel) increased 2.9% while the average transaction size (excluding fuel) increased by 0.9%. Comparing fiscal 2023 with 2022, fuel gallons sold decreased 0.4% and per gallon fuel prices decreased 10.2%.
Changes in retail grocery sales for the fiscal year ended September 24, 2022 are summarized as follows (in thousands): Total grocery sales for the fiscal year ended September 25, 2021 $ 4,831,952 Comparable store sales increase 623,666 Impact of stores closed in fiscal 2021 (10,366) Sales growth from stores opened fiscal 2021 29,162 Other 1,286 Total retail grocery sales for the fiscal year ended September 24, 2022 $ 5,475,700 Sales began to increase during fiscal year 2020 due to the COVID-19 pandemic and have continued through fiscal year 2022.During fiscal year 2022, inflation increased top-line sales, including sharp increases in the cost of gasoline.
Changes in retail grocery sales for the fiscal year ended September 30, 2023 are summarized as follows (in thousands): Total retail grocery sales for the fiscal year ended September 24, 2022 $ 5,475,700 Comparable store sales increase 75,615 Effect of 53rd week 106,715 Sales growth from stores opened fiscal 2023 3,099 Other 2,807 Total retail grocery sales for the fiscal year ended September 30, 2023 $ 5,663,936 Increased sales for fiscal year 2023 were due to comparable store sales through enhanced loyalty programs and special offers, as well as the additional 53 rd week in fiscal year 2023.
Net income for the fiscal year ended September 24, 2022 was $272.8 million, compared with net income of $249.7 million for the fiscal year ended September 25, 2021. Net income as a percentage of sales was 4.8% for fiscal year 2022 compared with 5.0% for fiscal year 2021.
Comparisons of fiscal year 2023 to fiscal year 2022 are affected by the difference in the number of weeks in each year. Fiscal year 2023 had 53 weeks and fiscal year 2022 had 52 weeks. Net income as a percentage of sales was 3.6% for fiscal year 2023 compared with 4.8% for fiscal year 2022.
Removed
Various stay-at-home measures were enacted, most schools closed to in-person learning, and restaurant dining was severely restricted. Many of these measures have been relaxed or eliminated, but retail grocery sales have remained higher throughout the United States, as compared to the pre-pandemic period.
Added
Inflation in the cost of goods and increases in operating expenses due to the competition in the labor market contributed to this decrease. Net Sales . Net sales for the fiscal year ended September 30, 2023 totaled $5.89 billion, compared with $5.68 billion for the fiscal year ended September 24, 2022.
Removed
Sales increased and gross margin decreased slightly in the retail segment, including increases in gasoline gross profit. Expenses increased primarily as a result of the tight labor market and increases in the cost of goods and supplies. Fluid dairy income increased 5.8% over the comparable fiscal year, and real estate income increased slightly. Net Sales .
Added
In fiscal years with 53 weeks, such as 2023, management analyzes comparable stores sales for the 53 weeks of the year with the corresponding 52 calendar weeks of the previous year plus one additional week. On this basis, retail grocery comparable store sales excluding fuel increased 4.0% for fiscal 2023 compared with 2022.
Removed
Net sales for the fiscal year ended September 24, 2022 totaled $5.68 billion, compared with $4.99 billion for the fiscal year ended September 25, 2021. Retail comparable store sales excluding gasoline increased 7.7% for fiscal 2022 compared with 2021. The number of transactions (excluding gasoline) increased 3.5% while the average transaction size (excluding gasoline) increased by 4.2%.
Added
As a percentage of sales, gross profit totaled 23.8% for the fiscal year ended September 30, 2023 as compared to 24.9% for the fiscal year ended September 24, 2022. Retail grocery gross profit as a percentage of total sales (excluding fuel) decreased 182 basis points in fiscal year 2023 compared with fiscal year 2022.
Removed
Increased sales were also from new and replacement stores, the introduction of new products and product presentation, especially in higher margin products, effective promotions and cost competitiveness.
Added
Repairs and maintenance increased due to higher refrigerant costs and the cost of other supply items, as well as increased wear and tear on equipment to accommodate sales volume, in addition to the extra week of expense for the 53 rd week.
Removed
We continued to improve our use of data gained from The Ingles Advantage Savings and Rewards Card (the “Ingles Advantage Card”) to increase net sales and comparable store sales through enhanced loyalty programs and special offers. Information obtained from holders of the Ingles Advantage Card also assists the Company in optimizing product offerings and promotions specific to customer shopping patterns.
Added
The Company’s cash used by net financing activities totaled $35.0 million and $30.6 million for fiscal years 2023 and 2022, respectively. The U.S. Dollar LIBOR panel ceased following June 30, 2023, and the Company’s debt agreements and interest rate swaps that utilized LIBOR discontinued the use of LIBOR and adopted the Secured Overnight Financing Rate (“SOFR”).
Removed
We expect that sales for the 2023 fiscal year compared with fiscal year 2022 will in large part depend upon the impact of inflation on food and gasoline prices, as well as on supply chain issues.
Added
The outstanding aggregate principal amount of the Bonds was $54.4 million at September 30, 2023. The Company may redeem the Bonds without penalty or premium at any time prior to December 17, 2029.
Removed
The Company anticipates adding new stores in fiscal year 2023, expects to continue remodeling a significant number of existing stores, and plans to add more fuel stations and pharmacies. Gross Profit.
Added
Both the floating rate debt and the interest rate swap have monthly principal amortization of $0.5 million and mature October 1, 2027. In December 2019, the Company closed a $155 million SOFR-based amortizing floating rate loan secured by real estate, which matures in January 2030.
Removed
In general, product cost inflation was incorporated into higher sales prices.
Added
However, there can be no assurance that any such sources of financing will be available to the Company when needed on acceptable terms, or at all.
Removed
Bank charges increased due to increased sales and a greater portion of sales settled with credit/debit cards instead of cash or check. Repairs and maintenance increased due to additional safety and sanitation equipment necessitated by COVID-19 and a higher level of maintenance required on more sophisticated equipment . Utilities and fuel costs increased due to the impact of energy inflation.
Removed
During fiscal year 2021, the Company redeemed $295 million aggregate principal amount of 5.75% Senior Notes, representing 100% of the aggregate principal amount such notes, using a portion of the proceeds from its issuance of the 2031 Notes (as defined below), which have an interest rate of 4.00%, and additionally used a portion of the proceeds of the 2031 notes to repay other debt.
Removed
Loss on Early Extinguishment of Debt. No losses on early extinguishment of debt were recognized in fiscal year 2022 compared to $1.1 million for the fiscal year ended September 25, 2021. In June 2021, the Company issued at par $350.0 million aggregate principal amount of 4.00% senior notes due in 2031 (the “2031 Notes”).
Removed
Upon issuance of the 2031 Notes, the Company issued an irrevocable notice to redeem the remaining $295.0 million aggregate principal amount outstanding of its 5.75% senior notes due in 2023 (the “2023 Notes”). The Company wrote off $1.1 million of capitalized loan costs related to this transaction.
Removed
During fiscal year 2020, the Company refinanced or repaid early $405 million of the 2023 Notes, incurring debt extinguishment costs totaling $7.1 million. Income Taxes. Income tax expense totaled $88.5 million for fiscal year 2022, an effective tax rate of 24.5%.
Removed
Ingles’ capital expenditure plans for fiscal year 2023 include investments of approximately $120 to $160 million. At this time, the Company does not anticipate that the COVID-19 pandemic or current labor shortages will have a long-term adverse impact on its capital expenditure plans.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe definitive extent of the Company’s interest rate risk is not quantifiable or predictable because of the variability of future interest rates and business financing requirements, but the Company does not believe such risk is material. 21 The table below presents principal amounts and related weighted average rates by year of maturity for the Company’s debt obligations at September 24, 2022 and September 25, 2021, respectively (in thousands): September 24, 2022 2023 2024 2025 2026 2027 Thereafter Total Fair ‎ Value Line of credit $ — $ — $ — $ — $ — $ — $ — $ — Average variable interest rate — % — % — % — % — % — % — % Long-term debt, variable interest rate (1)(2) $ 13,750 $ 13,750 $ 13,750 $ 13,750 $ 13,750 $ 96,083 $ 164,833 $ 164,833 Average year-end interest rate (1)(2) 4.13 % 4.13 % 4.13 % 4.13 % 4.13 % 4.06 % 4.09 % Long-term debt, fixed interest rate $ 91 $ 95 $ 4,002 $ — $ — $ — $ 4,188 $ 4,185 Average interest rate 4.40 % 4.40 % 4.40 % — % — % — % 4.40 % Recovery Zone Bonds, variable interest rate $ 4,530 $ 4,530 $ 4,530 $ 4,530 $ 4,530 $ 36,320 $ 58,970 $ 58,970 Average year-end interest rate 2.94 % 2.94 % 2.94 % 2.94 % 2.94 % 2.94 % 2.94 % Senior Notes, fixed interest rate $ — $ — $ — $ — $ — $ 350,000 $ 350,000 $ 292,250 Average interest rate — % — % — % — % — % 4.00 % 4.00 % September 25, 2021 2022 2023 2024 2025 2026 Thereafter Total Fair ‎ Value Line of credit $ — $ — $ — $ — $ — $ — $ — $ — Average variable interest rate — % — % — % — % — % — % — % Long-term debt, variable interest rate (1) $ 13,750 $ 13,750 $ 13,750 $ 13,750 $ 13,750 $ 109,833 $ 178,583 $ 178,583 Average year-end interest rate (1) 1.65 % 1.65 % 1.65 % 1.65 % 1.65 % 1.59 % 1.62 % Long-term debt, fixed interest rate $ 88 $ 91 $ 95 $ 4,002 $ — $ — $ 4,276 $ 4,184 Average interest rate 4.40 % 4.40 % 4.40 % 4.40 % — % — % 4.40 % Recovery Zone Bonds, variable interest rate $ 4,530 $ 4,530 $ 4,530 $ 4,530 $ 4,530 $ 40,850 $ 63,500 $ 63,500 Average year-end interest rate 1.58 % 1.58 % 1.58 % 1.58 % 1.58 % 1.58 % 1.58 % Senior Notes, fixed interest rate $ — $ — $ — $ — $ — $ 350,000 $ 350,000 $ 358,750 Average interest rate — % — % — % — % — % 4.00 % 4.00 % (1) Excludes interest rate swap that fixes at 3.92% the interest rate on $30.5 million of variable interest rate debt.
Biggest changeThe table below presents principal amounts and related weighted average rates by year of maturity for the Company’s debt obligations at September 30, 2023 and September 24, 2022, respectively (in thousands): September 30, 2023 2024 2025 2026 2027 2028 Thereafter Total Fair ‎ Value Line of credit $ — $ — $ — $ — $ — $ — $ — $ — Average variable interest rate — % — % — % — % — % — % — % Long-term debt, variable interest rate (1)(2) $ 13,750 $ 13,750 $ 13,750 $ 13,750 $ 8,237 $ 87,833 $ 151,070 $ 151,070 Average interest rate 6.99 % 6.99 % 6.99 % 6.99 % 6.94 % 6.93 % 6.95 % Recovery Zone Bonds, variable interest rate $ 4,530 $ 4,530 $ 4,530 $ 4,530 $ 4,530 $ 31,790 $ 54,440 $ 54,440 Average year-end interest rate 5.20 % 5.20 % 5.20 % 5.20 % 5.20 % 5.20 % 5.20 % Senior Notes, fixed interest rate $ — $ — $ — $ — $ — $ 350,000 $ 350,000 $ 287,875 Average interest rate — % — % — % — % — % 4.00 % 4.00 % September 24, 2022 2023 2024 2025 2026 2027 Thereafter Total Fair ‎ Value Line of credit $ — $ — $ — $ — $ — $ — $ — $ — Average variable interest rate — % — % — % — % — % — % — % Long-term debt, variable interest rate (1)(2) $ 13,750 $ 13,750 $ 13,750 $ 13,750 $ 13,750 $ 96,083 $ 164,833 $ 164,833 Average year-end interest rate (1)(2) 4.13 % 4.13 % 4.13 % 4.13 % 4.13 % 4.06 % 4.09 % Long-term debt, fixed interest rate $ 91 $ 95 $ 4,002 $ — $ — $ — $ 4,188 $ 4,185 Average interest rate 4.40 % 4.40 % 4.40 % — % — % — % 4.40 % Recovery Zone Bonds, variable interest rate $ 4,530 $ 4,530 $ 4,530 $ 4,530 $ 4,530 $ 36,320 $ 58,970 $ 58,970 Average year-end interest rate 2.94 % 2.94 % 2.94 % 2.94 % 2.94 % 2.94 % 2.94 % Senior Notes, fixed interest rate $ — $ — $ — $ — $ — $ 350,000 $ 350,000 $ 292,250 Average interest rate — % — % — % — % — % 4.00 % 4.00 % (1) Excludes interest rate swap that fixes at 3.962% the interest rate on $24.5 million of variable interest rate debt.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS The Company is exposed to changes in interest rates primarily as a result of its borrowing activities, which include borrowings under the Line, real estate and equipment financing, and the Recovery Zone bonds. The Line, along with cash flow from operations, is used to maintain liquidity and fund business operations.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS The Company is exposed to changes in interest rates primarily as a result of its borrowing activities, which include borrowings under the Line, real estate and equipment financing, and the bonds. The Line, along with cash flow from operations, is used to maintain liquidity and fund business operations.
On the basis of the fair value of the Company’s market sensitive instruments at September 24, 2022, the Company does not consider the potential near-term losses in future earnings, fair values and cash flows from reasonably possible near-term changes in interest rates and exchange rates to be material.
On the basis of the fair value of the Company’s market sensitive instruments at September 30, 2023, the Company does not consider the potential near-term losses in future earnings, fair values and cash flows from reasonably possible near-term changes in interest rates and exchange rates to be material.
(2) Excludes interest rate swap that fixes at 2.95% the interest rate on $132.4 million of variable interest rate debt. The Company will occasionally utilize financial or derivative instruments for interest rate risk management, but has typically not utilized highly leveraged financial instruments.
(2) Excludes interest rate swap that fixes at 2.998% the interest rate on $124.6 million of variable interest rate debt. The Company will occasionally utilize financial or derivative instruments for interest rate risk management but has typically not utilized highly leveraged financial instruments.
Added
The definitive extent of the Company’s interest rate risk is not quantifiable or predictable because of the variability of future interest rates and business financing requirements, but the Company does not believe such risk is material.

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