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Ingles Markets, Incorporated Reports Increased Sales and Net Income for Third Quarter and Nine Months of Fiscal 2018

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Ingles Markets, Incorporated (NASDAQ: IMKTA) today reported increased
sales and net income for the three and nine months ended June 30, 2018.
Net sales totaled $1.03 billion and net income totaled $24.5 million for
the third quarter ended June 30, 2018, compared with $984.4 million and
$11.5 million, respectively, for the third quarter of fiscal year 2017.

Net sales totaled $3.03 billion and net income totaled $78.9 million for
the nine months ended June 30, 2018, compared with $2.91 billion and
$34.5 million, respectively, for the nine months ended June 24, 2017.
Fiscal year 2018 third quarter and nine month net income was positively
impacted by the passage of the Tax Cuts and Jobs Act of 2017 (Tax Act).

Last year's third fiscal quarter period ended June 2017 benefitted from
extra Easter sales. This year, Easter occurred in the March quarter and
benefitted fiscal second quarter 2018 sales.

Robert P. Ingle II, Chairman of the Board, stated, "This past quarter's
concentration on increasing sales showed positive results. Our
associates have worked very hard to improve the product and service
offering in our stores."

Third Quarter Results

Net sales increased by $50.4 million, or 5.1%, to $1.03 billion for the
three months ended June 30, 2018, from $984.4 million for the three
months ended June 24, 2017. Sales increased in every retail product
category. Excluding gasoline sales and the effect of last year's extra
Easter sales, retail grocery comparable store sales increased 1.8% over
the comparative fiscal third quarter. The number of customer
transactions (excluding gasoline) and the average transaction size
(excluding gasoline) both increased. Gasoline sales (both in dollars and
gallons) increased compared with the prior year's third quarter.

Gross profit for the June 2018 quarter increased 2.8% to $243.9 million,
compared with $237.1 million for the third quarter of last fiscal year.
Gross profit, as a percentage of sales, was 23.6% for the June 2018
quarter compared with 24.1% for the June 2017 quarter. Excluding
gasoline sales, retail grocery gross margin increased 34 basis points
comparing the June 2018 and June 2017 fiscal quarters.

Operating and administrative expenses for the June 2018 quarter totaled
$214.7 million, compared with $207.6 million for the June 2017 quarter.
Most of the increase was due to higher personnel and other costs
incurred to support increased sales.

Interest expense totaled $12.0 million for the three-month period ended
June 30, 2018, and $11.7 million for the three-month period ended June
24, 2017. Total debt at the end of June 2018 was $887.8 million,
compared with $870.7 million at the end of June 2017. Interest rates
have increased over the past twelve months, resulting in higher interest
expense on the Company's floating rate debt. Total debt is slightly
higher this year primarily as a result of increased capital expenditures.

Net income totaled $24.5 million for the three-month period ended June
30, 2018, compared with $11.5 million for the three-month period ended
June 24, 2017. Third quarter 2018 net income was positively impacted by
$10.6 million related to the Tax Act, resulting in an income tax benefit
of $6.0 million for the quarter. Basic and diluted earnings per share
for Class A Common Stock were $1.24 and $1.21, respectively, for the
quarter ended June 30, 2018, compared with $0.58 and $0.57,
respectively, for the quarter ended June 24, 2017. Basic and diluted
earnings per share for Class B Common Stock were each $1.13 for the
quarter ended June 30, 2018, and $0.53 for the quarter ended June 24,
2017.

Nine Month Results

Nine month fiscal 2018 and 2017 sales totaled $3.03 billion and $2.91
billion, respectively. The sales increase was broad-based across all
retail product categories. Retail grocery comparable store sales,
excluding the effect of gasoline increased 1.9%. The number of customer
transactions and the average transaction size (both excluding gasoline)
both increased.

Gross profit for the nine months ended June 30, 2018, increased 3.1% and
totaled $723.7 million, compared with $702.3 million for the first nine
months of last fiscal year. Gross profit, as a percentage of sales, was
23.9% for the June 2018 nine-month period compared with 24.1% for the
June 2017 nine-month period. Retail grocery segment gross profit as a
percentage of sales, excluding gasoline sales, increased 17 basis points
comparing the first nine months of fiscal 2018 with the same fiscal 2017
period. Gasoline gross profit dollars were higher for the nine months
ended June 30, 2018, compared with the nine months ended June 24, 2017.

Operating and administrative expenses totaled $635.2 million for the
nine months ended June 30, 2018, and $616.9 million for the nine months
ended June 24, 2017. As discussed in the quarterly results above, most
of the increase was due to higher personnel and other costs incurred to
support increased sales. Interest expense increased $0.8 million to
$35.6 million for the nine-month period ended June 30, 2018, compared
with $34.8 million for the nine-month period ended June 24, 2017.

Net income totaled $78.9 million for the nine-month period ended June
30, 2018, compared with $34.5 million for the nine-month period ended
June 24, 2017. Included in fiscal 2018 nine-month net income is an
income tax benefit of $22.9 million resulting from the Tax Act. Basic
and diluted earnings per share for Class A Common Stock were $4.00 and
$3.90, respectively, for the nine months ended June 30, 2018, compared
with $1.75 and $1.70, respectively, for the nine months ended June 24,
2017. Basic and diluted earnings per share for Class B Common Stock were
each $3.64 for the nine months ended June 30, 2018, compared with $1.59
of basic and diluted earnings per share for the nine months ended June
24, 2017.

Capital expenditures for the June 2018 nine-month period totaled $120.5
million, compared with $90.0 million for the June 2017 nine-month
period. Capital expenditures this year are focused on store buildings
opened this year (and scheduled to open early next year) as well as
ongoing improvements to the existing store base. Capital expenditures
for the entire fiscal year are expected to be approximately $140 million
to $180 million.

The Company currently has $145.4 million available under its
$175.0 million line of credit. The Company believes its financial
resources, including the line of credit and other internal and
anticipated external sources of funds, will be sufficient to meet
planned capital expenditures, debt service and working capital
requirements for the foreseeable future.

The comments in this press release contain certain forward-looking
statements. Ingles undertakes no obligation to publicly release any
revisions to any forward-looking statements contained herein to reflect
events or circumstances occurring after the date hereof or to reflect
the occurrence of unanticipated events, except as required by law.
Ingles'
actual results may differ materially from those projected in
forward-looking statements made by, or on behalf of, Ingles. Factors
that may affect results include changes in business and economic
conditions generally in Ingles' operating area, pricing pressures,
increased competitive efforts by others in Ingles' marketing areas and
the availability of financing for capital improvements. A more detailed
discussion of these factors may be found in reports filed by the Company
with the Securities and Exchange Commission including its 2017 Form 10-K
and 2018 Forms 10-Q.

Ingles Markets, Incorporated is a leading supermarket chain with
operations in six southeastern states. Headquartered in Asheville, North
Carolina, the Company operates 200 supermarkets. In conjunction with
its supermarket operations, the Company operates neighborhood shopping
centers, most of which contain an Ingles supermarket. The Company also
owns a fluid dairy facility that supplies Company supermarkets
and unaffiliated customers. The Company's Class A Common Stock is traded
on The NASDAQ Stock Market's Global Select Market under the symbol
IMKTA. For more information, visit Ingles' website at www.ingles-markets.com.

 

INGLES MARKETS, INCORPORATED

(Amounts in thousands except per share data)
 
Unaudited Financial Highlights
Condensed Consolidated Statements of Income (Unaudited)
   
Three Months Ended Nine Months Ended
June 30,   June 24, June 30,   June 24,

2018

2017

2018

2017

 
Net sales $ 1,034,769 $ 984,398 $ 3,033,117 $ 2,913,308
Gross profit 243,891 237,134 723,738 702,304
Operating and administrative expenses 214,718 207,595 635,188 616,915
Gain from sale or disposal of assets 605 125 671 1,493
Income from operations 29,778 29,664 89,221 86,882
Other income, net 648 1,030 2,466 2,470
Interest expense 11,956 11,729 35,621 34,762
Income tax (benefit) expense (6,014 ) 7,438 (22,859 ) 20,088
Net income $ 24,484 $ 11,527 $ 78,925 $ 34,502
 
Basic earnings per common share – Class A $ 1.24 $ 0.58 $ 4.00 $ 1.75
Diluted earnings per common share – Class A $ 1.21 $ 0.57 $ 3.90 $ 1.70
Basic earnings per common share – Class B $ 1.13 $ 0.53 $ 3.64 $ 1.59
Diluted earnings per common share – Class B $ 1.13 $ 0.53 $ 3.64 $ 1.59
 
Additional selected information:
Depreciation and amortization expense $ 28,418 $ 27,835 $ 84,628 $ 82,748
Rent expense $ 3,272 $ 3,535 $ 9,678 $ 10,344
 
Condensed Consolidated Balance Sheets (Unaudited)
 
June 30, Sept. 30,

2018

2017

ASSETS
Cash and cash equivalents $ 11,643 $ 23,912
Receivables-net 73,729 66,329
Inventories 363,514 349,333
Other current assets 40,172 6,266
Property and equipment-net 1,297,366 1,265,112
Other assets   24,129     22,354  
TOTAL ASSETS $ 1,810,553   $ 1,733,306  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current maturities of long-term debt $ 12,812 $ 12,211

Accounts payable, accrued expenses and current portion of other
long-term liabilities

236,374 233,353
Deferred income taxes 65,065 69,918
Long-term debt 874,944 865,660
Other long-term liabilities   41,133     41,112  
Total Liabilities 1,230,328 1,222,254
Stockholders' equity   580,225     511,052  

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$ 1,810,553   $ 1,733,306  

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