Ingles Markets, Incorporated Announces Increased Sales and Net Income for Third Quarter and Nine Months of Fiscal 2012

  Ingles Markets, Incorporated Announces Increased Sales and Net Income for
  Third Quarter and Nine Months of Fiscal 2012

Business Wire

ASHEVILLE, N.C. -- July 30, 2012

Ingles Markets, Incorporated (NASDAQ:IMKTA) today reported increased sales
and net income for the three and nine month periods ended June23,2012,
compared with the same periods of the previous year. Third quarter 2012 net
sales rose to $917.8 million, compared with $911.0 million for the previous
year. Net income totaled $13.1 million for the third quarter of fiscal year
2012, compared with $12.7 million for the same period of last fiscal year.
Included in last year’s quarterly net income was a $2.8 million pre-tax gain
on a property disposal. If that gain is excluded, pre-tax income increased
18.2% for the comparative third quarters. For the first nine months of fiscal
2012, net sales rose 2.4% to $2.72 billion and net income increased 7.4% to
$30.2 million compared with the first nine months of fiscal 2011.

Robert P. Ingle II, chief executive officer, stated, “We opened our new
distribution center in June and we are pleased with the initial results. We
are also pleased with our sales and profit growth for the third quarter and
the first nine months of fiscal year 2012.”

Third Quarter Results

Net sales rose 0.7% to $917.8 million for the three months ended June 23,
2012, compared with $911.0million for the three months ended June 25, 2011.
Ingles operated 203 stores and 11.0million retail square feet at the end of
both June 2012 and June 2011. Excluding gasoline, where retail prices were
approximately ten cents per gallon lower in the June 2012 quarter compared
with the June 2011 quarter, grocery segment comparable store sales increased
2.1%.

Gross profit for the June 2012 quarter increased 2.3% to $205.9 million, an
increase of $4.6million compared with the third quarter of last fiscal year.
The increase in gross profit dollars is attributable to increased sales and an
increase in gross profit margin. Gross profit, as a percentage of sales, rose
to 22.4% for the June 2012 quarter compared with 22.1% for the June 2011
quarter. Excluding gasoline sales, grocery segment gross profit as a
percentage of sales was level over the comparative three-month periods at
26.1% for the three months ended June 23, 2012, compared with 26.0% for the
same quarter of last fiscal year.

Operating and administrative expenses for the June 2012 quarter totaled $172.3
million, an increase of $2.5 million, or 1.5% over the June 2011 quarter.
Excluding gasoline sales and associated operating expenses (primarily
payroll), operating and administrative expenses as a percentage of sales
remained level at 22.0% for the three months ended June 2012 compared with
22.1% for the three months ended June 2011.

During the third quarter of fiscal 2011, the Company was granted $3.1 million
in an eminent domain proceeding related to an owned land parcel and recognized
a gain of approximately $2.8 million. There were no other significant sale or
disposal transactions in the third quarter of either fiscal 2012 or 2011.

Interest expense decreased $0.4 million for the three-month period ended June
23,2012, to $14.9 million from $15.3 million for the three-month period ended
June 25, 2011. Total debt at June 23, 2012, was $846.1 million compared with
$857.1million at June 25, 2011. Interest on the $99.7 million of bonds issued
in December 2010 to fund the new distribution center was capitalized as part
of the project cost up until June 2012, when the facility began operation.

Income tax expense as a percentage of pre-tax income decreased to 37.0% in the
June 2012 quarter compared with 37.7% in the June 2011 quarter due to higher
tax credits partially offset by higher state income taxes.

Net income totaled $13.1 million, or 1.4% of sales, for the three-month period
ended June23,2012, compared with $12.7 million, also 1.4% of sales, for the
three-month period ended June 25, 2011. Basic and diluted earnings per share
for publicly traded Class A Common Stock were $0.56 and $0.54 for the June
2012 quarter compared with $0.54 and $0.52, respectively, for the June 2011
quarter. Basic and diluted earnings per share for Class B Common Stock were
each $0.51 for the June 2012 quarter compared with $0.49 of basic and diluted
earnings per share for the June2011 quarter.

Nine Months Results

Net sales increased 2.4%, to $2.72 billion for the nine months ended June2012
compared with the same period in the prior fiscal year. Excluding gasoline,
where retail prices were higher in the June 2012 nine-month period compared
with the June 2011 nine-month period, grocery segment comparable store sales
increased 1.8%. The number of customer transactions (excluding gasoline)
increased 1.4%, while the comparable average transaction size increased 0.4%
compared with the nine month period of last year.

Gross profit dollars for the June 2012 nine-month period increased $10.7
million, or 1.8%, to $600.1million, compared with $589.5 million for the same
period of fiscal 2011. Gross profit as a percentage of sales was 22.1% and
22.2% for the nine months ended June23,2012 and June25,2011, respectively.
The decline in gross profit margin was due primarily to gasoline sales.
Excluding gasoline sales, grocery segment gross profit as a percentage of
sales rose to 25.8% for the nine months ended June23, 2012, compared with
25.7% for the same period of last fiscal year.

Operating expenses increased $7.6 million comparing the first nine months of
fiscal 2012 to thesame period of last fiscal year, and were 18.9% of sales
for the nine months ended June23,2012, compared with 19.1% of sales for the
nine months of fiscal 2011. Excluding gasoline sales and associated gasoline
operating expenses (primarily payroll), operating expenses were 22.0% of sales
for the nine-month fiscal 2012 period compared with 22.1% for the same period
of fiscal 2011. Operating expense increases were driven by sales growth and
store development activities, including higher personnel, repairs,
depreciation, and supply costs.

Interest expense totaled $44.8 million for the nine-month period ended June
23, 2012, a decrease of $2.1million from $46.9 million for the nine-month
period ended June25,2011. During the nine months ended June 23, 2012, net
principal debt reductions totaled $9.0 million.

Income tax expense as a percentage of pre-tax income was 35.5% for the
June2012 nine-month period compared with 36.5% for the comparable June 2011
period.

Net income totaled $30.2 million, or 1.1% of sales, for the nine-month period
ended June23,2012, compared with $28.1 million, also 1.1% of sales, for the
nine-month period ended June 25, 2011. Basic and diluted earnings per share
for publicly traded Class A Common Stock were $1.30 and $1.24 for the
June2012 nine-month period compared with $1.20 and $1.15, respectively, for
the June 2011 nine-month period. Basic and diluted earnings per share for
Class B Common Stock were each $1.18 for the fiscal June 2012 period compared
with $1.09of basic and diluted earnings per share for the same period of last
fiscal year.

During June 2012, the Company began operations in its newly constructed
836,000 square foot warehouse and distribution facility located adjacent to
its existing 919,000 square foot facility. When fully operational, the new
facility will distribute frozen, health/beauty/cosmetic and general
merchandise products previously distributed by third parties. The new facility
also produces ice, and provides expanded perishable distribution in a modern,
energy efficient building.

Capital expenditures totaled $144.9 million for the nine-month period ended
June 23, 2012. Approximately one half of this total was spent on construction
and equipment related to the new distribution facility. Another significant
component of the Company’s capital expenditures has been its ongoing program
of remodels to a larger number of stores which do not result in increased
square footage or new buildings. Capital expenditures are expected to be
approximately $170 million for the full fiscal year.

At June 23, 2012, the Company had $175 million of committed credit facilities,
of which $20million was outstanding. The Company believes, based on its
current results of operations and financial condition, that its financial
resources, including existing bank lines of credit, short- and long-term
financing expected to be available to it and internally generated funds, will
be sufficient to meet planned capital expenditures and working capital
requirements for the foreseeable future, including any debt service
requirements of additional borrowings.

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 2011 Form 10-K and 2012
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 203 supermarkets. In conjunction with its supermarket
operations, the Company also operates 71 neighborhood shopping centers, all
but 13 of which contain an Ingles supermarket. 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
                                                               
                         Three Months Ended        Nine Months Ended
                         June 23,    June 25,      June 23,        June 25,
                         2012        2011          2012            2011
                                                                   
Net sales                $ 917,756   $ 910,978     $  2,717,661    $ 2,654,102
Gross profit               205,952     201,340        600,116        589,456
Operating and
administrative             172,255     169,762        513,177        505,587
expenses
Rental income, net         515         575            1,311          1,443
Gain from sale or          514         2,656          680            2,677
disposal of assets
Income from                34,727      34,808         88,931         87,990
operations
Other income, net          891         945            2,696          3,146
Interest expense           14,896      15,344         44,850         46,912
Income taxes               7,663       7,685          16,609         16,125
Net income               $ 13,059    $ 12,725      $  30,168       $ 28,099
                                                                   
Basic earnings per
common share – Class     $ 0.56      $ 0.54        $  1.29         $ 1.20
A
Basic earnings per
common share – Class     $ 0.51      $ 0.49        $  1.18         $ 1.09
B
Diluted earnings per
common share – Class     $ 0.54      $ 0.52        $  1.24         $ 1.15
A
Diluted earnings per
common share – Class     $ 0.51      $ 0.49        $  1.18         $ 1.09
B
                         
Additional selected
information:
Depreciation and         $ 22,826    $ 21,498      $  66,875       $ 63,812
amortization expense
Rent expense             $ 3,541     $ 3,875       $  10,651       $ 11,418
                         
Condensed Consolidated Balance Sheets (Unaudited)
                         
                                     June 23,      September 24,
                                     2012          2011
ASSETS
Cash and cash                        $ 6,307       $  12,421
equivalents
Receivables-net                        56,819         56,841
Inventories                            316,340        303,166
Other current assets                   20,824         16,936
Property and                           1,193,000      1,133,204
equipment-net
Restricted                             —              75,731
investments
Other assets                          19,359        20,051
TOTAL ASSETS                         $ 1,612,649   $  1,618,350
                                                                   
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current maturities                   $ 33,523      $  34,376
of long-term debt
Accounts payable,
accrued expenses and
current portion of                     240,545        256,120
other long-term
liabilities
Deferred income                        69,865         67,939
taxes
Long-term debt                         812,547        820,744
Other long-term                       8,199         7,225
liabilities
Total Liabilities                      1,164,679      1,186,404
Stockholders' equity                  447,970       431,946
TOTAL LIABILITIES
AND STOCKHOLDERS’                    $ 1,612,649   $  1,618,350
EQUITY

Contact:

Ingles Markets, Incorporated
Ron Freeman, 828-669-2941 (Ext. 223)
Chief Financial Officer
 
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