UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March ~~30, 2019~~28, 2020

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

For the transition period from to

Commission file number 0-14706.

INGLES MARKETS, INCORPORATED

(Exact name of registrant as specified in its charter)


North Carolina		56-0846267
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
P.O. Box 6676, Asheville NC		28816
(Address of principal executive offices)		(Zip Code)

(828) 669-2941

Registrant’s telephone number, including area code

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes☒ No ☐.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See ~~the~~ definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☐	Accelerated filer ☒
Non-accelerated filer ☐~~(Do not check if a smaller reporting company.)~~	Smaller reporting company ☐
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒.

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


Title of each class	Trading Symbol	Name of each exchange on which registered
Class A Common Stock, $0.05 par value per share	IMKTA	The NASDAQ Global Select Market

As of May ~~6, 2019~~5, 2020, the Registrant had ~~14,177,335~~14,196,360 shares of Class A Common Stock, $0.05 par value per share, outstanding and ~~6,082,441~~6,063,416 shares of Class B Common Stock, $0.05 par value per share, outstanding.

INGLES MARKETS, INCORPORATED

INDEX



		Page No.
Part I —– Financial Information

Item 1. Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets as of March ~~30, 2019~~28, 2020 and September ~~29, 2018~~ 28, 2019		3

Condensed Consolidated Statements of Income and Comprehensive Income for the
Three Months Ended March ~~30, 2019~~28, 2020 and March ~~31, 2018~~30, 2019		4
Six Months Ended March ~~30, 2019~~28, 2020 and March ~~31, 2018~~30, 2019		5

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three Months and Six Months Ended March ~~30, 2019~~28, 2020 and March ~~31, 2018~~30, 2019		6

Condensed Consolidated Statements of Cash Flows for the Six Months Ended March ~~30, 2019~~28, 2020 and March ~~31, 2018~~30, 2019		7

Notes to Unaudited Interim Financial Statements		8

Item 1A. Risk Factors		14

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		1315

Item 3. Quantitative and Qualitative Disclosures About Market Risk		2223

Item 4. Controls and Procedures		2223

Part II – Other Information


Item 6. Exhibits		2224

Signatures		2526

Part I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

INGLES MARKETS, INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)



	March 30,		September 29,		March 28,		September 28,
	2019		2018		2020		2019
ASSETS
Current Assets:
Cash and cash equivalents	$	16,680,700	$	10,537,303	$	144,972,233	$	42,125,105
Receivables - net		73,588,532		70,056,909		82,273,244		71,951,303
Inventories		365,755,190		372,195,421		315,268,498		374,129,060
Other current assets		24,895,776		43,953,483		13,522,582		8,897,903
Total Current Assets		480,920,198		496,743,116		556,036,557		497,103,371
Property and Equipment – Net		1,333,891,905		1,303,044,370
Property and Equipment - Net						1,342,672,327		1,344,267,315
Operating lease right of use assets						39,683,044		—
Other Assets		27,685,779		25,123,334		25,838,322		25,957,682
Total Assets	$	1,842,497,882	$	1,824,910,820	$	1,964,230,250	$	1,867,328,368

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Current portion of long-term debt	$	12,835,969	$	12,848,013	$	38,078,268	$	12,600,131
Current portion of operating lease liabilities						7,678,403		—
Accounts payable - trade		162,982,107		165,165,312		168,260,158		151,329,975
Accrued expenses and current portion of other long-term liabilities		72,705,188		82,124,766		80,850,156		83,649,283
Total Current Liabilities		248,523,264		260,138,091		294,866,985		247,579,389
Deferred Income Taxes		81,566,382		74,461,000		73,294,000		75,499,000
Long-Term Debt		844,633,616		852,739,760		803,977,294		839,637,691
Noncurrent operating lease liabilities						34,949,649		—
Other Long-Term Liabilities		41,829,844		42,158,161		51,317,259		41,889,682
Total Liabilities		1,216,553,106		1,229,497,012		1,258,405,187		1,204,605,762
Stockholders’ Equity
Preferred stock, $0.05 par value; 10,000,000 shares authorized; no shares issued		—		—		—		—
Common stocks:
Class A, $0.05 par value; 150,000,000 shares authorized; 14,177,335 shares issued and outstanding March 30, 2019 and 14,145,385 shares issued and outstanding at September 29, 2018		708,867		707,269
Class B, convertible to Class A, $0.05 par value; 100,000,000 shares authorized; 6,082,441 shares issued and outstanding March 30, 2019 and 6,114,391 shares issued and outstanding September 29, 2018		304,122		305,720
Class A, $0.05 par value; 150,000,000 shares authorized; 14,193,360 shares issued and outstanding March 28, 2020; 14,180,485 shares issued and outstanding at September 28, 2019						709,668		709,024
Class B, convertible to Class A, $0.05 par value; 100,000,000 shares authorized; 6,066,416 shares issued and outstanding March 28, 2020; 6,079,291 shares issued and outstanding at September 28, 2019						303,321		303,965
Paid-in capital in excess of par value		12,311,249		12,311,249		12,311,249		12,311,249
Accumulated other comprehensive income		(119,109)		—		(9,639,291)		(1,265,650)
Retained earnings		612,739,647		582,089,570		702,140,116		650,664,018
Total Stockholders’ Equity		625,944,776		595,413,808		705,825,063		662,722,606
Total Liabilities and Stockholders’ Equity	$	1,842,497,882	$	1,824,910,820	$	1,964,230,250	$	1,867,328,368

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)



	Three Months Ended
	March 30,		March 31,		Three Months Ended
	2019		2018		March 28,		March 30,
					2020		2019
Net sales	$	1,001,843,929	$	984,562,174	$	1,145,482,049	$	1,001,843,929
Cost of goods sold		757,543,262		749,374,530		853,894,303		757,543,262
Gross profit		244,300,667		235,187,644		291,587,746		244,300,667
Operating and administrative expenses		216,466,382		211,641,694		228,395,420		216,466,382
Gain from sale or disposal of assets		2,911,704		8,223		108,352		2,911,704
Income from operations		30,745,989		23,554,173		63,300,678		30,745,989
Other income, net		447,914		864,480		207,441		447,914
Interest expense		11,996,863		12,212,865		10,183,839		11,996,863
Income before income taxes		19,197,040		12,205,788		53,324,280		19,197,040
Income tax expense (benefit)		4,197,000		2,911,000
Income tax expense						13,032,000		4,197,000
Net income	$	15,000,040	$	9,294,788	$	40,292,280	$	15,000,040

Other comprehensive (expense) income:
Other comprehensive expense:
Change in fair value of interest rate swap	$	(598,764)	$	—	$	(13,926,534)	$	(598,764)
Income tax benefit		139,316		—		3,401,000		139,316
Other comprehensive (expense) income, net of tax		(459,448)		—
Other comprehensive expense, net of tax						(10,525,534)		(459,448)
Comprehensive income	$	14,540,592	$	9,294,788	$	29,766,746	$	14,540,592

Net income per share amounts:
Per share amounts:
Class A Common Stock
Basic earnings per common share	$	0.76	$	0.47	$	2.04	$	0.76
Diluted earnings per common share	$	0.74	$	0.46	$	1.99	$	0.74
Class B Common Stock
Basic earnings per common share	$	0.69	$	0.43	$	1.86	$	0.69
Diluted earnings per common share	$	0.69	$	0.43	$	1.86	$	0.69
Cash dividends per common share
Class A Common Stock	$	0.165	$	0.165	$	0.165	$	0.165
Class B Common Stock	$	0.150	$	0.150	$	0.150	$	0.150

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

THREE AND SIX MONTHS ENDED MARCH ~~30, 2019~~28, 2020 AND MARCH ~~31, 2018~~ 30, 2019



							Paid-in		Accumulated												Paid-in		Accumulated
	Class A			Class B			Capital in		Other						Class A			Class B			Capital in		Other
	Common Stock			Common Stock			Excess of		Comprehensive		Retained				Common Stock			Common Stock			Excess of		Comprehensive		Retained
	Shares	Amount		Shares	Amount		Par Value		Income		Earnings		Total		Shares	Amount		Shares	Amount		Par Value		Income (Loss)		Earnings		Total

Balance, September 30, 2017	14,084,044	$	704,202	6,175,732	$	308,787	$	12,311,249	$	—	$	497,727,765	$	511,052,003
Net income	—		—	—		—		—		—		45,146,740		45,146,740
Cash dividends	—		—	—		—		—		—		(3,250,228)		(3,250,228)
Common stock conversions	34,200		1,710	(34,200)		(1,710)		—		—		—		—
Balance, December 30, 2017	14,118,244	$	705,912	6,141,532	$	307,077	$	12,311,249	$	—	$	539,624,277	$	552,948,515
Net income	—		—	—		—		—		—		9,294,788		9,294,788
Cash dividends	—		—	—		—		—		—		(3,250,742)		(3,250,742)
Common stock conversions	7,800		390	(7,800)		(390)		—		—		—		—
Balance, March 31, 2018	14,126,044	$	706,302	6,133,732	$	306,687	$	12,311,249	$	—	$	545,668,323	$	558,992,561
Balance, September 29, 2018	14,145,385	$	707,269	6,114,391	$	305,720	$	12,311,249	$	—	$	582,089,570	$	595,413,808	14,145,385	$	707,269	6,114,391	$	305,720	$	12,311,249	$	—	$	582,089,570	$	595,413,808
Net income	—		—	—		—		—		—		22,152,337		22,152,337	—		—	—		—		—		—		22,152,337		22,152,337
Other comprehensive (expense) income, net of income tax	—		—	—		—		—		340,339		—		340,339	—		—	—		—		—		340,339		—		340,339
Cash dividends	—		—	—		—		—		—		(3,251,148)		(3,251,148)	—		—	—		—		—		—		(3,251,148)		(3,251,148)
Common stock conversions	—		—	—		—		—		—		—		—	—		—	—		—		—		—		—		—
Balance, December 29, 2018	14,145,385	$	707,269	6,114,391	$	305,720	$	12,311,249	$	340,339	$	600,990,759	$	614,655,336	14,145,385	$	707,269	6,114,391	$	305,720	$	12,311,249	$	340,339	$	600,990,759	$	614,655,336
Net income	—		—	—		—		—		—		15,000,040		15,000,040	—		—	—		—		—		—		15,000,040		15,000,040
Other comprehensive (expense) income, net of income tax	—		—	—		—		—		(459,448)		—		(459,448)	—		—	—		—		—		(459,448)		—		(459,448)
Cash dividends	—		—	—		—		—		—		(3,251,152)		(3,251,152)	—		—	—		—		—		—		(3,251,152)		(3,251,152)
Common stock conversions	31,950		1,598	(31,950)		(1,598)		—		—		—		—	31,950		1,598	(31,950)		(1,598)		—		—		—		—
Balance, March 30, 2019	14,177,335	$	708,867	6,082,441	$	304,122	$	12,311,249	$	(119,109)	$	612,739,647	$	625,944,776	14,177,335	$	708,867	6,082,441	$	304,122	$	12,311,249	$	(119,109)	$	612,739,647	$	625,944,776

Balance, September 28, 2019															14,180,485	$	709,024	6,079,291	$	303,965	$	12,311,249	$	(1,265,650)	$	650,664,018	$	662,722,606
Net income															—		—	—		—		—		—		17,687,353		17,687,353
Other comprehensive (expense) income, net of income tax															—		—	—		—		—		2,151,893		��		2,151,893
Cash dividends															—		—	—		—		—		—		(3,251,673)		(3,251,673)
Common stock conversions															12,500		625	(12,500)		(625)		—		—		—		—
Balance, December 28, 2019															14,192,985	$	709,649	6,066,791	$	303,340	$	12,311,249	$	886,243	$	665,099,698	$	679,310,179
Net income															—		—	—		—		—		—		40,292,280		40,292,280
Other comprehensive (expense) income, net of income tax															—		—	—		—		—		(10,525,534)		—		(10,525,534)
Cash dividends															—		—	—		—		—		—		(3,251,862)		(3,251,862)
Common stock conversions															375		19	(375)		(19)		—		—		—		—
Balance, March 28, 2020															14,193,360	$	709,668	6,066,416	$	303,321	$	12,311,249	$	(9,639,291)	$	702,140,116	$	705,825,063



	Six Months Ended				Six Months Ended
	March 30,		March 31,		March 28,		March 30,
	2019		2018		2020		2019
Cash Flows from Operating Activities:
Net income	$	37,152,377	$	54,441,527	$	57,979,633	$	37,152,377
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense		55,607,103		56,209,696		57,357,438		55,607,103
Non cash operating lease cost						5,332,302		—
Gain from sale or disposal of assets		(2,649,113)		(65,493)		(3,072,837)		(2,649,113)
Loss on early extinguishment of debt						3,719,209		—
Receipt of advance payments on purchases contracts		1,000,000		1,170,000		500,000		1,000,000
Recognition of advance payments on purchases contracts		(1,265,788)		(998,075)		(1,309,835)		(1,265,788)
Deferred income taxes		7,141,000		(22,995,000)		499,000		7,141,000
Changes in operating assets and liabilities:
Receivables		(3,531,623)		(7,397,619)		(10,321,941)		(3,531,623)
Inventory		6,440,232		(9,498,849)		58,860,562		6,440,232
Other assets		16,359,326		(10,272,641)		(4,505,320)		16,359,326
Operating lease liabilities						(5,516,359)		—
Accounts payable and accrued expenses		(8,041,671)		7,211,031		15,836,348		(8,041,671)
Net Cash Provided by Operating Activities		108,211,843		67,804,577		175,358,200		108,211,843
Cash Flows from Investing Activities:
Proceeds from sales of property and equipment		7,283,055		93,811		5,321,389		7,283,055
Capital expenditures		(94,219,647)		(88,821,335)		(56,824,266)		(94,219,647)
Net Cash Used by Investing Activities		(86,936,592)		(88,727,524)		(51,502,877)		(86,936,592)
Cash Flows from Financing Activities:
Proceeds from short-term borrowings		300,186,059		291,840,172		—		300,186,059
Payments on short-term borrowings		(299,504,655)		(272,660,862)		—		(299,504,655)
Debt issuance costs						(854,793)		—
Proceeds from new long term debt						155,000,000		—
Principal payments on long-term borrowings		(9,310,958)		(8,736,518)		(165,678,517)		(9,310,958)
Prepayment penalties on debt extinguishment						(2,971,350)		—
Dividends paid		(6,502,300)		(6,500,969)		(6,503,535)		(6,502,300)
Net Cash (Used) Provided by Financing Activities		(15,131,854)		3,941,823
Net Increase (Decrease) in Cash and Cash Equivalents		6,143,397		(16,981,124)
Net Cash Used by Financing Activities						(21,008,195)		(15,131,854)
Net Increase in Cash and Cash Equivalents						102,847,128		6,143,397
Cash and cash equivalents at beginning of period		10,537,303		23,912,100		42,125,105		10,537,303
Cash and Cash Equivalents at End of Period	$	16,680,700	$	6,930,976	$	144,972,233	$	16,680,700

Three Months and Six Months Ended March ~~30, 2019~~28, 2020 and March ~~31, 2018~~30, 2019

In the opinion of management, the accompanying unaudited interim financial statements contain all adjustments necessary to present fairly the Company’s financial position ~~of Ingles Markets, Incorporated and Subsidiaries (the “Company”)~~ as of March ~~30, 2019,~~28, 2020, and the results of operations and changes in stockholders’ equity for the three-month and six-month periods ended March ~~30, 2019~~28, 2020 and March ~~31, 2018, and the changes in stockholders’ equity~~30, 2019, and cash flows for the ~~six-month periods~~six months ended March ~~30, 2019~~28, 2020 and March ~~31, 2018.~~30, 2019. The adjustments made are of a normal recurring nature. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission for Form 10-Q. It is suggested that these unaudited interim financial statements be read in conjunction with the audited financial statements and the notes thereto included in the Annual Report on Form 10-K for the year ended September ~~29, 2018~~28, 2019, filed by the Company under the Securities Exchange Act of 1934 on December ~~7, 2018.~~ 10, 2019.

The results of operations for the three-month and six-month periods ended March ~~30, 2019~~28, 2020 are not necessarily indicative of the results to be expected for the full fiscal year.

~~In February 2016,~~On September 29, 2019, the Company adopted Financial Accounting Standards Board ~~(“FASB”) issued~~ Accounting Standards Update ASU 2016-02, “Leases” (ASU 2016-02)~~. ASU 2016-02~~, which requires ~~lessees~~the Company as lessee to recognize ~~lease~~most leases on the balance sheet thereby resulting in the recognition of right of use assets and lease liabilities ~~on the balance sheet~~ for those leases ~~previously~~currently classified as operating leases. ~~This ASU is effective~~The accounting for ~~fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. The Company will adopt~~leases where the ~~standard in the first quarter of fiscal 2020. The~~ Company is ~~currently evaluating~~ the ~~impact of adopting this ASU on its consolidated financial statements.~~

~~In May 2014,~~lessor remains largely unchanged. As both lessee and lessor, the FASB issued Accounting Standards Update ASU 2014-09 “Revenue from Contracts with Customers” (ASU 2014-09). ASU 2014-09 is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. In August 2015, the FASB issued ASU 2015-14 which deferred the effective date of the ASU to fiscal years beginning after December 15, 2017 and interim periods within those fiscal years, with early adoption permitted. The Company adopted the standard atutilizing the ~~beginning of the current fiscal year, and determined~~transition election to not restate comparative periods for the impact of adopting the ~~new guidance was immaterial~~standard. The Company elected the practical expedient related to ~~its annual~~leases of twelve months or less. The Company elected the package of transition expedients available for expired or existing contracts, which allowed the carryforward of historical assessments of (1) whether contracts are or contain leases, (2) lease classification and ~~interim financial statements.~~ (3) initial direct costs.

The ~~Company’s assessment included a detailed review~~adoption of ~~contracts for each~~ASU 2016-02 resulted in the recognition of ~~its disaggregated revenue streams~~operating lease assets of $45.0 million and ~~a comparison~~operating lease liabilities of ~~its historical accounting policies and practices to~~$48.1 million, respectively as of September 29, 2019. Included in the measurement of the new ~~standard.~~lease assets is the reclassification of certain balances historically recorded as deferred rent and lease obligations for closed stores. The adoption of ASU 2016-02 did not materially affect the Company’s consolidated net income or cash flows.

Receivables are presented net of an allowance for doubtful accounts of ~~$104,409~~$325,000 at March ~~30, 2019~~28, 2020 and ~~$433,000~~$156,000 at September ~~29, 2018.~~28, 2019.

The Company’s effective tax rate differs from the federal statutory rate primarily as a result of state income taxes and tax credits.

In December 2017, the Tax Cuts and Jobs Act (the “Tax Act”) became law. Among other things, the Tax Act reduced the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018, and allowed full expensing of qualified property when placed into service.

For the fiscal years ended September 28, 2019 and September 29, 2018 the Company has a blended federal corporate tax rate of 21.0% and 24.5%, respectively, based on the effective date of the tax rate reduction. As a result of the decrease in the federal rate, the Company recorded in the fiscal quarter ended December 30, 2017 a decrease in its net deferred tax liabilities of $26.7 million, with a corresponding reduction to deferred income tax expense.

The Company has unrecognized tax benefits and could incur interest and penalties related to uncertain tax positions. These amounts are insignificant and are not expected to significantly increase or decrease within the next twelve months.

Accrued expenses and current portion of other long-term liabilities consist of the following:



	March 30,		September 29,		March 28,		September 28,
	2019		2018		2020		2019
Property, payroll and other taxes payable	$	14,389,387	$	22,327,253	$	16,195,765	$	20,273,626
Salaries, wages and bonuses payable		26,813,446		29,583,266		35,907,085		31,861,220
Self-insurance liabilities		13,378,097		13,576,329		13,620,261		13,146,292
Interest payable		13,405,553		13,397,615		11,011,503		13,342,260
Other		4,718,705		3,240,303		4,115,542		5,025,885
	$	72,705,188	$	82,124,766	$	80,850,156	$	83,649,283

Self-insurance liabilities are established for general liability claims, workers’ compensation and employee group medical and dental benefits based on claims filed and estimates of claims incurred but not reported. ~~The~~Effective October 1, 2019, the Company is insured for covered costs in excess of ~~$750,000~~$1.0 million per occurrence for workers’ compensation ~~$500,000~~and for general liability and $450,000 per covered person for medical care benefits for a policy year. The Company’s self-insurance reserves totaled ~~$33.7~~$33.6 million and $31.0 million at March ~~30,~~28, 2020 and September 28, 2019, ~~and $34.7 million at September 29, 2018,~~ respectively. Of this amount, ~~$13.4~~$13.6 million is accounted for as a current liability and ~~$20.3~~$20.0 million as a long-term liability, which is inclusive of ~~$3.9~~$5.4 million of expected self-insurance recoveries from excess cost insurance or other sources that are recorded as a receivable at March ~~30, 2019. As of~~28, 2020. At September ~~29, 2018, $13.6~~28, 2019, $13.1 million ~~was~~is accounted for as a current liability and ~~$21.1~~$17.9 million as a long-term liability, which is inclusive of ~~$4.6~~$3.6 million of expected self-insurance recoveries from excess cost insurance or other sources that are recorded as a receivable. Employee insurance expense, including workers’ compensation and medical care benefits, net of employee contributions, totaled ~~$9.4~~$7.8 million and ~~$10.4~~$9.4 million for the three-month periods ended March ~~30, 2019~~28, 2020 and March ~~31, 2018,~~30, 2019, respectively. For the six-month periods ended March ~~30, 2019~~28, 2020 and March ~~31, 201~~8,30, 2019 employee insurance expense, net of employee contributions totaled $18.3 million and $19.6 million, ~~and $19.0 million,~~ respectively.

The Company’s fuel operations contain underground tanks for the storage of gasoline and diesel fuel. The Company reviewed FASB Accounting Standards Codification Topic ~~ASC~~ 410 (“FASB ASC 410”) and determined we have a legal obligation to remove ~~the~~ tanks at a point in the future and accordingly determined we have met the requirements of an asset retirement obligation. The Company followed the FASB ~~Topic~~ ASC 410 model for determining the asset retirement cost and asset retirement obligation. The amounts recorded are immaterial for each fuel center as well as in the aggregate at March ~~30, 2019~~28, 2020 and September ~~29, 2018.~~28, 2019.

In June 2013, the Company issued $700.0 million aggregate principal amount of senior notes due in 2023 (the “Notes”) ~~in a private placement.~~. The Notes bear an interest rate of ~~5.75%~~5.750% per annum and were issued at par.

The Company may redeem all or a portion of the Notes at any time ~~on or after June 15, 2018~~ at the following redemption prices (expressed as percentages of the principal amount), if redeemed during the 12-month period beginning June 15 of the years indicated below:

In November 2019, the Company closed a $155 million ten-year amortizing real estate loan (the “Loan”) and issued notice to redeem a like principal amount of the Notes. The Loan was funded and the Notes were redeemed thirty days after the redemption notice in December 2019. The Notes were redeemed at 101.917% of par value, and the Company recognized debt extinguishment costs of approximately $3.7 million during the quarter ended December 28, 2019. The Loan matures January 31, 2030 and has monthly principal payments of $0.65 million plus floating rate interest based on LIBOR.

The Company has a $175.0 million line of credit (the “Line”) that matures in September 2022. The Line provides the Company with various interest rate options based on the prime rate, the Federal Funds Rate, or the London Interbank Offering Rate (“LIBOR”). The Line allows the Company to issue up to $20.0 million in unused letters of credit, of which ~~$9.0~~$9.1 million of unused letters of credit were issued at March ~~30, 2019.~~28, 2020. The Company is not required to maintain compensating balances in connection with the Line. At March ~~30, 2019,~~28, 2020, the Company had ~~$0.7 million of~~no borrowings outstanding under the Line.

In December 2010, the Company completed the funding of $99.7 million of ~~Recovery Zone Facility Bonds~~bonds (the “Bonds”) for 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.

Under a Continuing Covenant and Collateral Agency Agreement (the “Covenant Agreement”) between ~~the~~certain financial institutions and the Company, the financial institutions would hold the Bonds until September ~~26,~~ 2026, subject to certain events. Mandatory redemption of the Bonds by the Company in the annual amount of $4.5 million began on January 1, 2014. The Company may redeem the Bonds without penalty or premium at any time prior to September 26, 2026.

Interest earned by bondholders on the Bonds is exempt from Federal and North Carolina income taxation. The interest rate on the Bonds is equal to ~~one month~~one-month LIBOR (adjusted monthly) plus a credit spread, adjusted to reflect the income tax exemption.

The Company’s obligation to repay the Bonds is collateralized by the Project. Additional collateral was required in order to meet certain loan to value criteria in the Covenant Agreement. The Covenant Agreement incorporates substantially all financial covenants included in the Line.

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 $0.5 million and mature October 1, 2027.

The Company has an interest rate swap agreement for a current notional amount of $151.8 million at a fixed rate of 2.95%. 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. Both the floating rate debt and the interest rate swap have monthly principal amortization of $0.65 million and mature in fiscal year 2030.

The Company recognizes differences between the variable rate interest payments and the fixed interest rate settlements with the swap counterparties as an adjustment to interest expense each period over the life of the ~~swap.~~swaps. The Company has designated the ~~swap~~swaps as a cash flow ~~hedge~~hedges and records the changes in the estimated fair value of the ~~swap~~swaps to other comprehensive income each period. For the three- and six-month periods ended March 28, 2020, the Company recorded $10.5 million and $8.4 million of other comprehensive expense, respectively, net of income taxes, in its Consolidated Statements of Comprehensive income. Unrealized losses of $12.8 million are recorded as a liability at fair value in the line “Other Long Term Liabilities” on the Consolidated Balance Sheet as of March 28, 2020. For the three- and six-month periods ended March 30, 2019, the Company recorded $0.5 million and $0.1 million of other comprehensive expense, respectively, net of income taxes, in its Consolidated Statements of Comprehensive income. Unrealized losses of $0.1 million are recorded as a liability at fair value in the line “Other Long Term Liabilities” on the Consolidated Balance Sheet as of March 30, 2019.

The ~~Notes, the Bonds and the Line~~Company’s long-term debt agreements generally contain provisions that under certain circumstances would permit lending institutions to terminate or withdraw their respective extensions of credit to the Company. Included among the triggering factors permitting the termination or withdrawal of the Line to the Company are certain events of default, including both monetary and non-monetary defaults, the initiation of bankruptcy or insolvency proceedings, and the failure of the Company to meet certain financial covenants designated in its respective loan documents. The Company was in compliance with all financial covenants ~~related to its borrowings~~ at March ~~30, 2019.~~28, 2020.

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 Notes indenture~~all long-term debt agreements in the event of default under any one instrument.

At March ~~30, 2019,~~28, 2020, property and equipment with an undepreciated cost of approximately ~~$202~~$363.5 million was pledged as collateral for long-term debt. Long-term debt and Line agreements contain various restrictive covenants requiring, among other things, minimum levels of net worth and maintenance of certain financial ratios. At March ~~30, 2019,~~28, 2020, the Company had excess net worth totaling ~~$126~~$143.4 million calculated under covenants in the Notes, the Bonds, the Loan, and the Line. This amount is available to pay dividends; however, certain loan agreements containing provisions outlining minimum tangible net worth requirements restrict the ability of the Company to pay cash dividends in excess of the current annual per share dividends paid on the Company’s Class A and Class B Common Stock. Further, the Company is prevented from paying cash dividends at any time that it is in default under the indenture governing the Notes. In addition, the terms of the indenture may restrict the ability of the Company to pay additional cash dividends based on certain financial parameters.

The Company paid cash dividends of $0.165 for each share of Class A Common Stock and $0.15 for each share of Class B Common Stock on October ~~18, 2018~~17, 2019 to stockholders of record on October ~~11, 2018.~~10, 2019.

The Company paid cash dividends of $0.165 for each share of Class A Common Stock and $0.15 for each share of Class B Common Stock on January ~~17, 2019~~16, 2020 to stockholders of record on January ~~10, 2019.~~ 9, 2020.

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 the Annual Report on Form 10-K filed by the Company under the Securities Exchange Act of 1934 on December ~~7, 2018.~~10, 2019.

The Company has two classes of common stock: Class A which is publicly traded, and Class B, which has no public market. The Class B Common Stock has restrictions on transfer; however, each share is convertible into one share of Class A Common Stock at any time. Each share of Class A Common Stock has one vote per share and each share of Class B Common Stock has ten votes per share. Each share of Class A Common Stock is entitled to receive cash dividends equal to 110% of any cash dividend paid on Class B Common Stock.

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

The two-class method of computing basic earnings per share for each period reflects the cash dividends ~~paid~~declared per share for each class of stock, plus ~~the amount of~~ allocated undistributed earnings per share computed using the participation percentage which reflects the dividend

rights of each class of stock. Diluted earnings per share is calculated assuming the conversion of all shares of Class B Common Stock to shares of Class A Common Stock on a share-for-share basis. The tables below reconcile the numerators and denominators of basic and diluted earnings per share for current and prior periods.



	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	March 30, 2019				March 30, 2019				March 28, 2020				March 28, 2020
	Class A		Class B		Class A		Class B		Class A		Class B		Class A		Class B
Numerator: Allocated net income
Net income allocated, basic	$	10,773,567	$	4,226,473	$	26,678,194	$	10,474,183	$	29,017,203	$	11,275,077	$	41,740,166	$	16,239,467
Conversion of Class B to Class A shares		4,226,473		—		10,474,183		—		11,275,077		—		16,239,467		—
Net income allocated, diluted	$	15,000,040	$	4,226,473	$	37,152,377	$	10,474,183	$	40,292,280	$	11,275,077	$	57,979,633	$	16,239,467

Denominator: Weighted average shares outstanding
Weighted average shares outstanding, basic		14,154,424		6,105,352		14,149,904		6,109,872		14,193,290		6,066,486		14,187,986		6,071,790
Conversion of Class B to Class A shares		6,105,352		—		6,109,872		—		6,066,486		—		6,071,790		—
Weighted average shares outstanding, diluted		20,259,776		6,105,352		20,259,776		6,109,872		20,259,776		6,066,486		20,259,776		6,071,790

Earnings per share
Basic	$	0.76	$	0.69	$	1.88	$	1.71	$	2.04	$	1.86	$	2.94	$	2.68
Diluted	$	0.74	$	0.69	$	1.83	$	1.71	$	1.99	$	1.86	$	2.86	$	2.68

~~The per share amounts for the second quarter of fiscal 2018 and the six months ended March 31, 2018 are based on the following amounts:~~

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

Operating lease cost for all operating leases totaled $2.3 million for the three months ended March 28,2020 and $5.0 million for the six- months ending March 28, 2020. This amount includes short-term (less than one year) leases, common area expenses and variable lease costs, which are insignificant. Sublease income of $0.2 million is included as a reduction of operating lease cost. Cash paid for lease liabilities in operating activities approximates operating lease cost.

The weighted average remaining lease term for the Company’s operating leases is 14.3 years. The weighted average discount rate used to determine lease liability balances as of March 28, 2020 is 3.51%, based on recent Company financings collateralized by store properties.

As a result of the adoption of ASU 2016-02 on September 29, 2019 the Company is required to present future minimum lease payments for operating leases having initial or remaining non-cancelable lease terms in excess of one year. These future minimum lease payments were previously disclosed in our 2019 Annual Report on Form 10-K and accounted for under previous lease guidance. Commitments as of September 28, 2019 were as follows:

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

Rental income is included in the line item “Net sales” on the Consolidated Statements of Income. Depreciation on owned properties leased to others and other shopping center expenses are included in the line item “Cost of goods sold” on the Consolidated Statements of Income.

As a result of the adoption of ASU 2016-02 on September 29, 2019 the Company is required to present future minimum operating lease income receipts for operating leases having initial or remaining non-cancelable lease terms in excess of one year. These future minimum lease payments were previously disclosed in our 2019 Annual Report on Form 10-K and accounted for under previous lease guidance. Future minimum operating lease receipts as of September 28, 2019 were as follows:

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



	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	March 30,		March 31,		March 30,		March 31,		March 28,		March 30,		March 28,		March 30,
	2019		2018		2019		2018		2020		2019		2020		2019
Revenues from unaffiliated customers:
Grocery	$	351,558	$	348,883	$	727,197	$	712,208	$	424,664	$	351,558	$	802,993	$	727,197
Non-foods		223,067		208,414		455,564		426,159		260,914		223,067		506,945		455,564
Perishables		267,565		261,385		542,960		526,679		304,105		267,565		584,910		542,960
Gasoline		127,985		136,538		274,496		273,213		121,932		127,985		261,044		274,496
Total retail		970,175		955,220		2,000,217		1,938,259
Total Retail									$	1,111,615	$	970,175	$	2,155,892	$	2,000,217
Other		31,669		29,342		63,464		60,089		33,867		31,669		67,945		63,464
Total revenues from unaffiliated customers	$	1,001,844	$	984,562	$	2,063,681	$	1,998,348	$	1,145,482	$	1,001,844	$	2,223,837	$	2,063,681

Income from operations:
Retail	$	26,434	$	20,385	$	62,051	$	53,288	$	58,069	$	26,434	$	92,290	$	62,051
Other		4,312		3,169		8,159		6,155		5,232		4,312		9,486		8,159
Total income from operations	$	30,746	$	23,554	$	70,210	$	59,443	$	63,301	$	30,746	$	101,776	$	70,210



	March 30,		September 29,		March 28,		September 28,
	2019		2018		2020		2019
Assets:
Retail	$	1,665,344	$	1,679,301	$	1,792,303	$	1,698,904
Other		178,700		147,988		175,195		170,720
Elimination of intercompany receivable		(1,546)		(2,378)		(3,268)		(2,296)
Total assets	$	1,842,498	$	1,824,911	$	1,964,230	$	1,867,328

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

For the three-month periods ended March ~~30, 2019~~28, 2020 and March ~~31, 2018,~~30, 2019, respectively, the fluid dairy operation had ~~$10.2~~$12.3 million and ~~$10.1~~$10.2 million in sales to the ~~retail~~ grocery sales segment. The fluid dairy had ~~$21.2~~$23.8 million and ~~$21.4~~$21.2 million in sales to the retail grocery segment for the six-month periods ended March ~~30, 2019~~28, 2020 and March ~~31, 2018,~~30, 2019, respectively. These sales have been eliminated in ~~consolidation.~~consolidation and are excluded from the amounts in the table above.

The carrying amounts for cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term maturity of these instruments.

The fair value of the Company’s debt isand interest rate swaps are estimated using valuation techniques under the accounting guidance related to fair value measurements based on observable and unobservable inputs. Observable inputs reflect readily available data from

independent sources, while unobservable inputs reflect the Company’s market assumptions. These inputs are classified into the following hierarchy:

The carrying amount and fair value of the Company’s debt, interest rate ~~swap,~~swaps, and non-qualified retirement plan assets at March ~~30, 2019 is~~28, 2020 are as follows (in thousands):



	Carrying				Fair Value	Carrying				Fair Value
	Amount		Fair Value		Measurements	Amount		Fair Value		Measurements
Senior Notes	$	700,000	$	713,125	Level 2	$	545,000	$	517,069	Level 2
Facility Bonds		72,560		72,560	Level 2		68,030		68,030	Level 2
Secured notes payable and other		84,228		84,228	Level 2		229,026		229,026	Level 2
Interest rate swap derivative contract liability		155		155	Level 2
Line of credit payable		681		681	Level 2
Interest rate swap derivative contracts							12,752		12,752	Level 2
Non-qualified retirement plan assets		14,527		14,527	Level 2		13,666		13,666	Level 2

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

Various legal proceedings and claims arising in the ordinary course of business are pending against the Company. In the opinion of management, the ultimate liability, if any, from all pending legal proceedings and claims will not materially affect the Company’s financial position, the results of its operations, or its cash flows.

In November 2019, the Company sold two land parcels for $4.3 million to a limited liability corporation having Robert P. Ingle II, the Company’s Chairman of the Board, as one of its principals with a financial interest in the transaction. In accordance with the Company’s Related Party Transaction policy, independent fair market value appraisals were obtained to determine the selling price, and the Company’s Audit Committee approved the transactions.

The following risk factor disclosure should be read in conjunction with the risk factors described in the Company’s Annual Report on Form 10-K

The coronavirus pandemic was declared a national emergency on March 13, 2020 and the Company was classified as an essential business. We remained open to safely serve the needs of our customers during various isolation measures imposed to reduce pandemic risks.

These measures closed schools, restaurants, and many businesses in the Company’s market area. Sales and customer traffic increased and the Company’s implemented numerous sanitation and social distancing protocols to keep our customers and our associates safe. These protocols included shortened operating hours, frequent extensive cleaning, personal protective equipment, and measures to maintain safe distances in our stores. We hired additional associates due to the increased demands on our stores and our distribution center.

At the present time, we do not know how long current national, state and local mandates related to the pandemic will continue, or how mandates will change in the future. We do not know how our customer base will be impacted by unemployment or various assistance programs. We do not know what risks may impact or suppliers as a result of plant closures or transportation disruptions. We do not know the longer-term impact on tenants in Company-owned shopping centers.

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Ingles, a leading supermarket chain in the Southeast, operates ~~200~~198 supermarkets in North Carolina ~~(72)~~(73), Georgia ~~(69)~~(66), South Carolina (36), Tennessee (21), Virginia (1) and Alabama (1). The Company locates its supermarkets primarily in suburban areas, small towns and rural communities. 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, as well as quality private label items. 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 March ~~30, 2019,~~28, 2020, the Company operated 108 in-store pharmacies and ~~102~~104 fuel centers.

Ingles also operates a fluid dairy and earns shopping center rentals. The fluid dairy processing operation sells approximately 27% of its products to the retail grocery segment and approximately 73% of its products to third parties. Real estate ownership is an important component of the Company’s operations, providing both operational and economic benefits.

Critical accounting policies are those accounting policies that management believes are important to the portrayal of the Company’s financial condition and results of operations, and require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Estimates are based on historical experience and other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management estimates, by their nature, involve judgments regarding future uncertainties, and actual results may therefore differ materially from these estimates.

The Company is self-insured for workers’ compensation and group medical and dental benefits. Risks and uncertainties are associated with self-insurance; however, the Company has limited its exposure by maintaining excess liability coverage of ~~$750,000~~$1.0 million per occurrence for workers’ compensation ~~$500,000~~and for general liability, and $450,000 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. The estimates are based on data provided by the respective claims administrators. These estimates can fluctuate if historical trends are not predictive of the future. The majority of the Company’s properties are self-insured for casualty losses and business interruption; however, liability coverage is maintained. At March ~~30, 2019,~~28, 2020 the Company’s self-insurance reserves totaled ~~$33.7~~$33.6 million. ~~Of this~~This amount ~~$13.4 million is accounted for as a current liability and $20.3 million as a long-term liability, which~~ is inclusive of ~~$3.9~~$5.4 million of expected self-insurance recoveries from excess cost insurance or other sources that are recorded as a ~~receivable at March 30, 2019.~~receivable.

The Company accounts for the impairment of long-lived assets in accordance with FASB ASC Topic 360. For assets to be held and used, the Company tests for impairment using undiscounted cash flows and calculates the amount of impairment using discounted cash flows. For assets held for sale, impairment is recognized based on the excess of remaining book value over expected recovery value. The recovery value is the fair value as determined by independent quotes or expected sales prices developed by internal associates. Estimates of future cash flows and expected sales prices are judgments based upon the Company’s experience and knowledge of local operations and cash flows that are projected for several years into the future. These estimates can fluctuate significantly due to changes in real estate market conditions, the economic environment, capital spending decisions and inflation. The Company monitors the carrying value of long-lived assets for potential impairment each quarter based on whether any indicators of impairment have occurred. There were no asset impairments during the six-month period ended March ~~30, 2019.~~28, 2020.

The Company receives funds for a variety of merchandising activities from the many vendors whose products the Company buys for resale in its stores. These incentives and allowances are primarily comprised of volume or purchase based incentives, advertising allowances, slotting fees, and promotional discounts. The purpose of these incentives and allowances is generally to help defray the costs incurred by the Company for stocking, advertising, promoting and selling the vendor’s products. These allowances generally relate to short term arrangements with vendors, often relating to a period of a month or less, and are negotiated on a purchase-by-purchase or transaction-by-transaction basis. Whenever possible, vendor discounts and allowances that relate to buying and merchandising activities are recorded as a component of item cost in inventory and recognized in merchandise costs when the item is sold. Due to system constraints and the nature of certain allowances, it is sometimes not practicable to apply allowances to the item cost of inventory. In those instances, the allowances are applied as a reduction of merchandise costs using a rational and systematic methodology, which results in the recognition of these incentives when the inventory related to the vendor consideration received is sold. Vendor allowances applied as a reduction of merchandise costs totaled ~~$28.3~~$27.3 million and ~~$30.4~~$28.3 million for the fiscal quarters ended March ~~30, 2019~~28, 2020 and March ~~31, 2018,~~30, 2019, respectively. For the six-month periods ended March ~~30, 2019~~28, 2020 and March ~~31, 2018,~~ 30, 2019,

vendor allowances applied as a reduction of merchandise costs totaled ~~$57.3~~$55.8 million and ~~$62.2~~$57.3 million, respectively. Vendor advertising allowances that represent a reimbursement of specific identifiable incremental costs of advertising the vendor’s specific products are recorded as a reduction to the related expense in the period in which the related expense is incurred. Vendor advertising allowances recorded as a reduction of advertising expense totaled ~~$3.3~~$2.3 million and ~~$3.5~~$3.3 million for the fiscal quarters ended March ~~30, 2019~~28, 2020 and March ~~31, 2018,~~30, 2019, respectively. For the six-month periods ended March ~~30, 2019~~28, 2020 and March ~~31, 2018,~~30, 2019, vendor advertising allowances recorded as a reduction of advertising expense totaled ~~$7.7~~$5.8 million and ~~$7.5~~$7.7 million, respectively.

If vendor advertising allowances were substantially reduced or eliminated, the Company would likely consider other methods of advertising, as well as the volume and frequency of the Company’s product advertising, which could increase or decrease the Company’s expenditures.

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

Ingles operates on a ~~52-~~52 or 53-week fiscal year ending on the last Saturday in September. There are 13 and 26 weeks of operations included in the Unaudited Condensed Consolidated Statements of Income for the three- and six-month periods ended March ~~30, 2019~~28, 2020 and March ~~31, 2018,~~30, 2019, respectively. Comparable store sales are defined as sales by ~~grocery~~retail stores in operation for five full fiscal quarters. Sales from replacement stores, major remodels and the addition of fuel stations to existing stores are included in the comparable store sales calculation from the date thereof. A replacement store is a new store that is opened to replace an existing nearby store that is closed. A major remodel entails substantial remodeling of an existing store and includes additional retail square footage. For both the three- and six-month periods ended March ~~30, 2019~~28, 2020 and March ~~31, 2018,~~30, 2019, comparable store sales ~~include~~included 197 stores.

The following table sets forth, for the periods indicated, selected financial information as a percentage of net sales. For information regarding the various segments of the business, see Note I “Segment Information” to the ~~Unaudited~~ Condensed Consolidated Financial Statements.



	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	March 30,		March 31,		March 30,		March 31,		March 28,		March 30,		March 28,		March 30,
	2019		2018		2019		2018		2020		2019		2020		2019
Net sales	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%
Gross profit	24.4	%	23.9	%	24.4	%	24.0	%	25.4	%	24.4	%	24.7	%	24.4	%
Operating and administrative expenses	21.6	%	21.5	%	21.1	%	21.0	%	19.9	%	21.6	%	20.3	%	21.1	%
Gain from sale or disposal of assets	0.3	%	—	%	0.1	%	—	%	—	%	0.3	%	0.1	%	0.1	%
Income from operations	3.1	%	2.4	%	3.4	%	3.0	%	5.5	%	3.1	%	4.6	%	3.4	%
Other income, net	—	%	—	%	0.1	%	0.1	%	—	%	—	%	—	%	0.1	%
Interest expense	1.2	%	1.2	%	1.2	%	1.2	%	0.9	%	1.2	%	1.0	%	1.2	%
Income tax expense (benefit)	0.4	%	0.3	%	0.5	%	(0.8)	%
Loss on early extinguishment of debt									—	%	—	%	0.2	%	—	%
Income tax expense									1.1	%	0.4	%	0.8	%	0.5	%
Net income	1.5	%	0.9	%	1.8	%	2.7	%	3.5	%	1.5	%	2.6	%	1.8	%

Three Months Ended March ~~30, 2019~~28, 2020 Compared to the Three Months Ended March ~~31, 2018~~30, 2019

Net income for the second quarter of fiscal ~~2019~~2020 totaled ~~$15.0~~$40.3 million, compared with net income of ~~$9.3~~$15.0 million earned for the second quarter of fiscal ~~2018. Easter occurred~~2019. The COVID-19 pandemic resulted in ~~March 2018, which provided increases in~~various stay-at-home measures, as well as the closing of most schools and restaurants. As a result, retail grocery sales ~~and gross profit~~increased for approximately the ~~second fiscal quarter of~~ last ~~year. This year, Easter occurs in April 2019, so the positive sales and gross profit impact will benefit the upcoming third quarter~~two weeks of the current fiscal year. Retail dollar sales and gross profit (both excluding gasoline) increased during the current quarter compared with the same quarter of last year, despite the positive Easter impact on last year’s results. The current quarter also had the benefit of a gain on the sale of a former store property. These positive factors were greater than anquarter. Corresponding operating expenses did not increase as much, resulting in ~~operating expenses.~~higher pre-tax income.

Net Sales. Net sales increased by ~~$17.3~~$143.6 million, or ~~1.8%~~14.3%, to ~~$1.00~~$1.14 billion for the three months ended March 28, 2020 compared with $1.0 billion for the three months ended March 30, 2019. Comparing the second quarter of fiscal 2020 with the second quarter of fiscal 2019, ~~from $984.6 million for the three months ended March 31, 2018. Retail~~gasoline sales dollars and gallons sold were lower due to decreased travel and oversupply. Excluding gasoline sales, total grocery comparable store sales ~~excluding gasoline and~~increased 17.5% over the ~~impact of Easter increased 3.4%. Gasoline gallons sold increased 1.0% , while the average sales price per gallon decreased 7.2%.~~comparative fiscal quarters. Comparing the second quarters of fiscal ~~year~~years 2020 and 2019 ~~and 2018~~ (and excluding gasoline), the number of customer transactions increased ~~0.5%~~2.8% and the average transaction size increased ~~2.3%~~14.3%.

Ingles operated 198 stores at March 28, 2020 and 200 stores at March 30, ~~2019 and 201 stores at March 31, 2018.~~2019. Retail square feet totaled 11.3 million square feet at both March 28, 2020 and March 30, ~~2019 and 11.4 million square feet at March 31, 2018.~~2019. During the last twelve months the Company opened ~~two stores~~one store and closed three ~~stores, including the redevelopment of a store closed in fiscal year 2018 that will reopen later in fiscal year 2019.~~stores.



	Three Months Ended				Three Months Ended
	March 30,		March 31,		March 28,		March 30,
	2019		2018		2020		2019
Grocery	$	351,558	$	348,883	$	424,664	$	351,558
Non-foods		223,067		208,414		260,914		223,067
Perishables		267,565		261,385		304,105		267,565
Gasoline		127,985		136,538		121,932		127,985
Total retail grocery	$	970,175	$	955,220	$	1,111,615	$	970,175

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

Changes in retail grocery sales for the quarter ended March ~~30, 2019~~28, 2020 are summarized as follows (in thousands):

Gross Profit. Gross profit for the three-month period ended March ~~30, 2019 increased $9.1~~28, 2020 totaled $291.6 million, an increase of $47.3 million, or ~~3.9%~~19.4%, ~~to $244.3 million, or 24.4% of sales,~~ compared with gross profit of ~~$235.2~~$244.3 million ~~or 23.9% of sales,~~ for the three-month period ended March ~~31, 2018.~~

~~Excluding gasoline sales, retail grocery segment gross~~30, 2019. Gross profit as a percentage of sales ~~increased 22 basis points comparing the second quarter of fiscal 2019 with the same fiscal 2018 period. Gasoline gross profit dollars were higher~~was 25.5% and 24.4% for the ~~quarter~~three months ended March 28, 2020 and March 30, 2019, ~~compared with the quarter ended March 31, 2018.~~

In addition to the direct product cost, the cost of goods sold line item for the grocery segment includes inbound freight charges and the costs related to the Company’s distribution network. The fluid dairy is a manufacturing process; therefore, the costs mentioned above as well as purchasing, production costs, and internal transfer costs incurred by the fluid dairy processing operation are included in the cost of goods sold line item, while these items are included in operating and administrative expenses in the grocery segment.respectively.

Operating and Administrative Expenses. Operating and administrative expenses increased ~~$4.8~~$11.9 million, or ~~2.3%~~5.5%, to $228.4 million for the three months ended March 28, 2020, from $216.5 million for the three months ended March 30, ~~2019, from $211.6 million for the three months ended March 31, 2018.~~2019. As a percentage of sales, operating and administrative expenses were 19.9% and 21.6% for the ~~three months ended~~ March ~~30,~~2020 and March 2019 ~~and 21.5% for the three months ended March 31, 2018.~~quarters, respectively. Excluding gasoline sales and associated gasoline operating expenses (primarily payroll), operating expenses were ~~24.5%~~22.11% of sales for the second fiscal ~~2019~~ quarter ~~and 24.7%~~of 2020 compared with 24.5% for the second fiscal ~~2018~~quarter of 2019. The fiscal 2020 second quarter expense percentages are lower due to extra pandemic-related sales the last two weeks of the current fiscal quarter.

~~The~~A breakdown of the major ~~increases~~changes in operating and administrative expenses ~~were~~is as follows:



			Increase				Increase
	Increase		(Decrease)		Increase		(decrease)
	(Decrease)		as a % of		(decrease)		as a % of
	in millions		sales		in millions		sales
Salaries and wages	$	3.7	0.37	%	$	11.6	1.01	%
Advertising and promotion	$	(1.7)	(0.17)	%	$	3.2	0.28	%
Repairs and maintenance	$	1.3	0.13	%
Rent					$	(1.2)	(0.11)	%
Insurance	$	(1.1)	(0.11)	%	$	(1.1)	(0.10)	%

Salaries and wages ~~expenses~~ increased in dollars due to ~~the~~ additional labor hours required for the increased sales volume, including extra labor needed in ~~part~~response to ~~accommodate new stores and in-store merchandising changes. Competition for labor has also increased in~~ the ~~Company’s market area.~~pandemic.

Advertising and promotion expenses increased due to higher digital advertising expenses and lower income contributions from vendors.

Rent expense decreased due to ~~a decrease in paper-based advertisements in favor~~the closing of ~~expanded digital offerings.~~

~~Repair~~leased stores and ~~maintenance expense increased due to our store modernization programs that often include more sophisticated and specialized equipment.~~the purchase of formerly leased stores.

Insurance expense decreased due to ~~favorable rebates in our self-insured health plan.~~better claims experience under the Company’s self-insurance programs and the reduction of certain medical services as a result of the pandemic.

Gain ~~(Loss)~~(loss) from Sale or Disposal of ~~Assets~~Assets. Gain from the sale or disposal of assets totaled $0.1 million with no significant transactions during the three months ended March 28, 2020. During the ~~current~~ quarter ended March 30, 2019, the Company recognized a $3.2 million gain on the sale of a former store property. ~~There were no other significant sale/disposal transactions in either the quarter ended March 30, 2019 or March 31, 2018.~~

Interest Expense. Interest expense ~~decreased $0.2~~totaled $10.2 million for the three-month period ended March 28, 2020 compared with $12.0 million for the three-month period ended March 30, ~~2019 to $12.0 million from $12.2 million for the three-month period ended March 31, 2018. The decrease is attributable to lower debt.~~2019. Total debt at March ~~2019~~2020 was ~~$857.5~~$842.1 million compared with ~~$888.9~~$857.5 million at March ~~2018.~~2019. Over the past twelve months, the Company’s has reduced debt and line of credit usage, and refinanced approximately $155 million at significantly lower interest rates.

Income Taxes. Income tax expense ~~as a percentage of pre-tax income was 21.9%~~totaled $13.0 million for the ~~quarter~~three months ended March 28, 2020, an effective tax rate of 24.4% of pretax income. Income tax expense totaled $4.2 million for the three months ended March 30, 2019, ~~compared with 23.8% for the quarter ended March 31, 2018. The federal statutory tax rated decreased from 35% to 21% in December 2017,~~an effective ~~January 1, 2018, resulting in a blended federal corporate~~ tax rate of ~~21.0% and 24.5%, for fiscal years 2019 and 2018, respectively, based on the effective date~~21.9% of ~~the tax rate reduction.~~ pretax income.

Net Income. Net income totaled $40.3 million for the three-month period ended March 28, 2020 compared with $15.0 million for the three-month period ended March 30, 2019 compared with $9.3 million for the three-month period ended March 31, 2018. Net income, as a percentage of sales, was 1.5% for the quarter ended March 30, 2019 and 0.9% for the quarter ended March 31, 2018.2019. Basic and diluted earnings per share for Class A Common Stock were $2.04 and $1.99, respectively, for the March 2020 quarter, compared to $0.76 and $0.74,

respectively, for the ~~quarter ended~~ March ~~30,~~ 2019 ~~compared with $0.47 and $0.46, respectively, for the quarter ended March 31, 2018.~~quarter. Basic and diluted earnings per share for Class B Common Stock were each $1.86 for the March 2020 quarter compared with $0.69 for the ~~quarter ended~~ March ~~30,~~ 2019 ~~and $0.43 for the quarter ended March 31, 2018.~~quarter.

Six Months Ended March ~~30, 2019~~28, 2020 Compared to the Six Months Ended March ~~31, 2018~~30, 2019

Net income for the first half of fiscal ~~2019~~2020 totaled ~~$37.2~~$58.0 million, compared with net income of ~~$54.4~~$37.2 million earned for the ~~comparable~~first half of fiscal ~~2018 period. Total~~2019. As was the case with the second quarter fiscal year 2020, the COVID-19 pandemic resulted in various stay-at-home measures, as well as the closing of most schools and restaurants. As a result, retail grocery sales increased for approximately the last two weeks of the current fiscal quarter. Corresponding operating expenses did not increase as much, resulting in higher pre-tax income. Offsetting that, the Company incurred debt extinguishment costs of $3.7 million to refinance and ~~gross profit increased comparing the six month fiscal 2019 and fiscal 2018 periods to~~extend $155 million of debt at a greater extent than the increase in operating expenses. Changes to reduce federal income tax rates in December 2017 had a $26.7 million positive impact on the Company’s prior year six month tax expense and net income.substantially lower interest rate.

Net Sales. Net sales ~~totaled~~increased by $160.2 million, or 7.8%, to $2.22 billion for the six months ended March 28, 2020 compared with $2.06 billion for the ~~six-month period~~six months ended March 30, 2019. Comparing the first half of fiscal 2020 with the first half of fiscal 2019, ~~3.3% higher than the net~~gasoline sales ~~of $2.00 billion for the six-month period ended March 31, 2018. Retail sales during last fiscal year’s March six-month period~~dollars and gallons sold were ~~positively impacted~~lower due to ~~the presence of Easter in March 2018. In fiscal year 2019 Easter will occur in the June quarter.~~

~~Retail segment~~decreased travel and oversupply. Excluding gasoline sales, total grocery comparable store sales increased 9.7% over the comparative fiscal quarters. Comparing the first halves of fiscal years 2020 and 2019 (and excluding gasoline), the ~~effect of gasoline and extra Easter sales, increased 3.8%. The~~ number of customer transactions ~~(excluding gasoline)~~ increased ~~1.1%,~~1.5% and the average transaction size ~~(excluding gasoline)~~ increased ~~by 2.4%~~8.2%.



	Six Months Ended				Six Months Ended
	March 30,		March 31,		March 28,		March 30,
	2019		2018		2020		2019
Grocery	$	727,197	$	712,208	$	802,993	$	727,197
Non-foods		455,564		426,159		506,945		455,564
Perishables		542,960		526,679		584,910		542,960
Gasoline		274,496		273,213		261,044		274,496
Total grocery segment	$	2,000,217	$	1,938,259
Total retail grocery					$	2,155,892	$	2,000,217

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

Changes in retail grocery sales for the six months ended March ~~30, 2019~~28, 2020 are summarized as follows (in thousands):

Sales growth for the remainder of fiscal ~~2019~~2020 will depend ~~upon~~largely on the ~~pace~~duration of ~~economic improvement, inflation~~various pandemic stay-at-home measures, including restaurant and market prices for gasoline and raw milk. In addition to new stores opening in fiscal 2019, the Company expects that the maturation of previous new and expanded stores will contribute to sales growth. The Company continues to remodel existing stores in order to increase sales and gross profit at a lower cost compared with the construction cost of adding additional square footage.travel restrictions.

Gross Profit. Gross profit for the ~~six months~~six-month period ended March 28, 2020 totaled $549.1 million, an increase of $46.4 million, or 9.2%, compared with gross profit of $502.7 million for the six-month period ended March 30, ~~2019 increased $22.9 million, or 4.8%, to $502.7 million compared with $479.8 million, for the six months ended March 31, 2018. As~~2019. Gross profit as a ~~percent~~percentage of sales ~~gross profit~~ was 24.7% and 24.4% for the six months ended March 28, 2020 and March 30, 2019, ~~compared with 24.0% for the six months ended March 31, 2018.~~respectively. Gasoline gross profit dollars and margin were ~~significantly~~ higher ~~for the first six months of fiscal year 2019 compared with fiscal year 2018 due to market conditions.~~

~~Excluding gasoline sales, retail grocery segment gross profit as a percentage of sales decreased three basis points comparing~~during the first half of the current fiscal ~~2019 compared with~~year; retail gross margin excluding gas was stable over the ~~same fiscal 2018~~comparable six-month period.

Operating and Administrative Expenses. Operating and administrative expenses increased ~~$14.7~~$15.2 million, or 3.5%, to $450.4 million for the six months ended March 28, 2020, from $435.2 million for the six months ended March 30, ~~2019, from $420.5 million for the six months ended March 31, 2018.~~2019. As a percentage of sales, operating and administrative expenses were 20.3% for the six months ended March 2020 and 21.1% for the ~~six-month period~~six months ended March ~~30, 2019 compared with 21.0% for the six-month period ended March 31, 2018.~~2019. Excluding gasoline sales and associated gasoline operating expenses (primarily payroll), operating expenses were ~~each 24.1%~~22.7% of sales for the first ~~six-month periods~~six months of fiscal ~~2019 and~~2020 compared with 24.1% for the first six months of fiscal ~~2018.~~ 2019.

A breakdown of the major ~~increases~~changes in operating and administrative expenses ~~were~~is as follows:



			Increase				Increase
	Increase		(Decrease)		Increase		(decrease)
	(Decrease)		as a % of		(decrease)		as a % of
	in millions		sales		in millions		sales
Salaries and wages	$	9.3	0.45	%	$	13.7	0.62	%
Advertising and promotion	$	(1.5)	(0.07)	%	$	3.1	0.14	%
Rent					$	(1.6)	(0.07)	%
Repairs and maintenance	$	1.5	0.07	%	$	1.5	0.07	%
Bank charges	$	1.4	0.07	%

Advertising and promotion expenses increased due to higher digital advertising expenses and lower income contributions from vendors.

Rent expense decreased due to ~~a decrease in paper-based advertisements in favor~~the closing of ~~expanded digital offerings.~~leased stores and the purchase of formerly leased stores.

~~Repair~~Repairs and maintenance ~~expense increased due to our store modernization programs that often include more sophisticated and specialized equipment.~~

~~Bank charges~~ increased due to a higher ~~percentage~~level of ~~the Company’s sales settled with debit and credit card.~~maintenance required on more sophisticated equipment.

Gain ~~(Loss)~~(loss) from Sale or Disposal of ~~Assets~~Assets. Gain from the sale or disposal of assets totaled $3.1 million from the sale of land during the six months ended March 28, 2020. During the ~~current~~prior year six-month period, the Company recognized a $3.2 million gain on the sale of a former ~~store~~ property. There were no other significant sale/disposal transactions in either six-month period ended March ~~30, 2019~~28, 2020 or March ~~31, 2018.~~30, 2019.

Interest Expense. Interest expense totaled $22.1 million for the six-month period ended March 28, 2020 compared with $24.2 million for the six-month period ended March 30, ~~2019~~2019. Total debt at March 2020 was $842.1 million compared with ~~$23.7~~$857.5 million ~~for~~at March 2019. Over the ~~six-month period ended March 31, 2018. The~~past twelve months, the Company ~~had higher~~has reduced debt and line of credit usage, and refinanced approximately $155 million at significantly lower interest rates.

Loss on Early Extinguishment of Debt. In November 2019, the Company closed a $155 million ten-year amortizing real estate loan (the “Loan”) and issued notice to redeem a like principal amount of the Notes. The Loan was funded and the Notes redeemed thirty days after the redemption notice in December 2019. The Notes were redeemed at 101.917% of par value, and the Company recognized debt extinguishment costs of approximately $3.7 million during ~~this past holiday season~~the quarter ending December 28, 2019. The debt extinguishment costs were comprised of $3.0 million of redemption premium and a $0.7 million write off of capitalized loan costs related to ~~support a higher level of sales and inventory.~~ the redeemed Notes.

Income Taxes. Income tax expense ~~as a percentage of pre-tax income was 21.5%~~totaled $18.3 million for the ~~six-month period~~six months ended March 28, 2020, an effective tax rate of 24.0% of pretax income. Income tax expense totaled $10.2 million for the six months ended March 30, 2019, ~~compared with~~ an ~~income tax benefit as a percentage of pre-tax income of 44.8% for the six-month period ended March 31, 2018.~~

~~As a result of the Tax Act, for the fiscal years ended September 28, 2019 and September 29, 2018 the Company has a blended federal corporate~~effective tax rate of ~~21.0% and 24.5%, respectively, based on the January 1, 2018 effective date~~21.5% of the tax rate reduction. As a result of the decrease in the federal rate, the Company recorded in the fiscal quarter ended December 30, 2017 a decrease in its net deferred tax liabilities of $26.7 million, with a corresponding reduction to deferred income tax expense.pretax income.

Net Income. Net income totaled $58.0 million for the six-month period ended March 28, 2020 compared with $37.2 million for the six-month period ended March 30, 2019 compared with $54.4 million for the six-month period ended March 31, 2018. Net income, as a percentage of sales, was 1.8% for the six months ended March 30, 2019 compared with 2.7% for the six months ended March 31, 2018.2019. Basic and diluted earnings per share for Class A Common Stock were $2.94 and $2.86, respectively, for the six months ended March 28, 2020, compared to $1.88 and $1.83, respectively, for the six months ended March 30, ~~2019 compared to $2.76 and $2.69, respectively, for the six months ended March 31, 2018.~~2019. Basic and diluted earnings per share for Class B Common Stock were each $2.68 for the March 2020 six- month period compared with $1.71 for the ~~six months ended~~ March ~~30,~~ 2019 ~~compared with $2.51 of basic and diluted earnings per share for the six months ended March 31, 2018.~~six-month period.

The Company believes that a key to its ability to continue to develop a loyal customer base is providing conveniently located, clean and modern stores ~~that~~which provide customers with good service and a broad selection of competitively priced products. Therefore, the Company has invested and will continue to invest significant amounts of capital toward the modernization of its store base. The Company’s modernization program includes the opening of new stores, the completion of major remodels and expansion of selected existing stores, ~~and~~ the relocation of selected existing stores to larger, more convenient ~~locations. The Company will also add fuel centers, pharmacies~~locations and ~~other products complementary to grocery sales where market conditions and real estate considerations warrant.~~the completion of minor remodeling of its remaining existing stores.

Capital expenditures totaled ~~$94.2~~$56.8 million for the six-month period ended March ~~30, 2019, compared with $88.8 million for the six-month period ended March 31, 2018. The current year~~28, 2020. These capital expenditures focused on construction ofon stores ~~that opened or are~~ scheduled to open later in fiscal ~~2019,~~2020, site acquisition, and smaller-scale remodeling projects in a number of the Company’s stores. Capital expenditures also included the costs of upgrading and replacing store equipment, technology investments, rolling stock, and capital expenditures related to the Company’s milk processing plant. ~~The Company has also taken the opportunity to acquire shopping centers where the Company operated a leased store.~~

Ingles’ capital expenditure plans for fiscal ~~2019~~2020 include investments of approximately ~~$140~~$120 to ~~$180~~$160 million. At this time the Company does not anticipate the pandemic will have an adverse impact on its capital expenditure plans. The majority of the Company’s fiscal ~~2019~~2020 capital expenditures will be dedicated to continued improvement of its store base and also include ~~investment~~

investments in stores expected to open in fiscal ~~2019 or 2020. Additional capital expenditures will be used for~~2020 as well as technology improvements, upgrading and replacing existing ~~stores,~~store equipment and warehouse and transportation equipment ~~as well as~~and improvements to the Company’s milk processing plant.

The Company expects that its ~~net~~ annual capital expenditures will be in the range of approximately $100 to $160 million going forward in order to maintain a modern store base. Planned expenditures for any given future fiscal year will be affected by the availability of financing, which can affect both the number of projects pursued at any given time and the cost of those projects. The number of projects may also fluctuate due to the varying costs of the types of projects pursued including new stores and major ~~remodels/~~remodel/expansions. The Company makes decisions on the allocation of capital expenditure dollars based on many factors including the competitive environment, other Company capital initiatives and its financial condition.

The Company does not generally enter into commitments for capital expenditures other than on a store-by-store basis at the time it begins construction on a new store or begins a major or minor remodeling project. ~~Construction~~Outstanding construction commitments totaled $17.6 million at March ~~30, 2019 totaled $16.8 million.~~28, 2020.

The Company generated $175.4 million net cash from operations ofin the March 2020 six-month period compared with $108.2 million ~~for~~during the ~~six months ended~~ March ~~30,~~ 2019 ~~compared with $67.8 million for the comparable 2018~~six-month period. The increase is primarily attributable to higher ~~pre-tax~~net income and ~~cash provided~~lower inventory balances caused by ~~cash income tax refunds collected~~extra pandemic sales in the current fiscal ~~year.~~quarter.

Cash used by investing activities for the six-month ~~period~~periods ended March 28, 2020 and March 30, 2019 totaled $51.5 million and $86.9 million, ~~compared with $88.7 million for the comparable 2018 period.~~respectively, consisting primarily of capital expenditures offset by insignificant proceeds from property and equipment sales. Capital expenditures ~~and property sales are~~were higher induring the ~~current fiscal~~prior year six-month period ~~primarily~~ due to the ~~timing~~purchase of ~~expenditures on new buildings and store remodel projects, as well as~~a shopping center where the ~~acquisition of~~Company had previously leased ~~properties.~~ a store.

Cash used by financing activities ~~during~~totaled $21.0 million for the six-month period ended March 28, 2020, compared with $15.1 million for the six-month period ended March 30, ~~2019 totaled $15.1~~2019. The increase is primarily related to the $3.0 million ~~compared with cash provided~~redemption premium paid on $155 million of ~~$3.9 million for~~ the comparable 2018 period. During the current fiscal year, more funds were used to pay off a higher level of line of credit borrowings incurred during the holiday season. Long-term debt repayments and dividends were substantially the same over both six month periods. Notes.

In June 2013, the Company issued $700.0 million aggregate principal amount of senior notes due in 2023 (the “Notes”). The Notes bear an interest rate of 5.750% per annum and were issued at par. In November 2019, the Company closed the $155 million Loan and issued notice to redeem a like principal amount of the Notes. The Loan was funded and the Notes were redeemed thirty days after the redemption notice in December 2019. The Notes were redeemed at 101.917% of par value, and the Company recognized debt extinguishment costs of approximately $3.7 million during the quarter ending December 28, 2019. The Loan matures January 31, 2030 and has monthly principal payments of $0.65 million plus floating rate interest based on the London Interbank Offering Rate (“LIBOR”).

The Company has a $175.0 million line of credit (the “Line”) that matures in September 2022. The Line provides the Company with various interest rate options based on the prime rate, the Federal Funds Rate, or ~~the London Interbank Offering Rate (“LIBOR”)~~“LIBOR”. The Line allows the Company to issue up to $20.0 million in unused letters of credit, of which ~~$9.0~~$9.1 million of unused letters of credit were issued at March ~~30, 2019.~~28, 2020. The Company is not required to maintain compensating balances in connection with the Line. At March ~~30, 2019,~~28, 2020, the Company had ~~$0.7 million of~~no borrowings outstanding under the Line.

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 ~~located~~ in Buncombe County, North ~~Carolina.~~Carolina (the “Project”). The final maturity date of the Bonds is January 1, 2036.

Under a Continuing Covenant and Collateral Agency Agreement (the “Covenant Agreement”) between certain financial institutions and the Company, the financial institutions would hold the Bonds until September 26, 2026, subject to certain events. Mandatory redemption of the Bonds by the Company in the annual amount of $4.5 million began on January 1, 2014. The Company may redeem the Bonds without penalty or premium at any time prior to September 26, 2026.

The Company has an interest rate swap agreement for a current notional amount of ~~$51.5~~$45.5 million at a fixed rate of 3.92%. Under this agreement, the Company pays monthly the fixed rate of 3.92% and receives the one-month LIBOR plus 1.65%. The interest rate swap effectively hedges floating rate debt in the same amount as the current notional amount of the interest rate swap. Both the floating rate debt and the interest rate swap have monthly principal amortization of $0.5 million and mature October 1, 2027.

The fair market value of the interest rate ~~swap is~~swaps are measured quarterly with adjustments recorded in other comprehensive income.

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

The ~~Notes, the Bonds and the Line~~Company’s long-term debt agreements generally contain provisions that under certain circumstances would permit lending institutions to terminate or withdraw their respective extensions of credit to the Company. Included among the triggering factors permitting the termination or withdrawal of the Line to the Company are certain events of default, including both monetary and non-monetary defaults, the initiation of bankruptcy or insolvency proceedings, and the failure of the Company to meet certain financial covenants designated in its respective loan documents. As of March ~~30, 2019,~~28, 2020, the Company was in compliance with these covenants. Under the most restrictive of these covenants, the Company would be able to incur approximately ~~$480~~$889.2 million of additional borrowings (including borrowings under the Line) as of March ~~30, 2019.~~28, 2020.

The Company’s principal sources of liquidity are expected to be cash flow from operations, borrowings under the Line and long-term financing. The Company believes, based on its current results of operations and financial condition, that its financial resources, including the Line, short- and long-term financing expected to be available to it and internally generated funds, will be sufficient to meet planned capital expenditures and working capital requirements for the foreseeable future, including any debt service requirements of additional borrowings. However, there is no assurance that any such sources of financing will be available to the Company when needed 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 factors. These factors may include, among others, increased competition, changing regional and national economic conditions, adverse climatic conditions affecting food production and delivery, ~~and~~ changing demographics, and the impact of the pandemic, as well as the additional factors discussed below under “Forward Looking Statements.” 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.

The Company has assumed various financial obligations and commitments in the normal course of its operations and financing activities. Financial obligations are considered to represent known future cash payments that the Company is required to make under existing contractual arrangements, such as debt and lease arrangements. The following table represents the scheduled maturities of the Company’s long-term contractual obligations as of March ~~30, 2019:~~28, 2020:


Contractual Obligations			Less than						More than				Less than		1-3		3-5		More than
(amounts in thousands)	Total		1 year		1-3 years		3-5 years		5 years		Total		1 year		years		years		5 years
Long-term debt and line of credit	$	857,470	$	12,909	$	26,403	$	728,799	$	89,359	$	842,056	$	38,079	$	38,200	$	585,165	$	180,612
Scheduled interest on long-term debt (1)		215,917		46,583		91,423		68,916		8,995		164,484		39,894		77,764		28,228		18,598
Advance payments on purchase contracts		2,849		1,068		870		270		641		3,416		1,914		686		84		732
Operating leases (2)		57,974		9,651		16,692		8,381		23,250		54,257		8,761		13,300		6,102		26,094
Construction commitments		16,841		16,841		—		—		—		17,640		17,640		—		—		—
Total	$	1,151,051	$	87,052	$	135,388	$	806,366	$	122,245	$	1,081,853	$	106,288	$	129,950	$	619,579	$	226,036

The Company has entered supply contracts to provide approximately ~~82%~~83% of the fuel sold in its fuel centers. Pricing is based on certain market indices at the time of purchase. The suppliers can modify or terminate the contracts if the Company does not meet certain minimum monthly purchase requirements.

The Company is self-insured for workers’ compensation, general liability, and group medical and dental benefits. The Company’s self-insurance reserves totaled ~~$33.7~~$33.6 million at March ~~30, 2019~~28, 2020 and ~~$34.7~~$31.0 million at September ~~29, 2018.~~28, 2019. Self-insurance liabilities are based on estimates and actuarial assumptions and can fluctuate in both amount and in timing of cash settlement if historical trends are not predictive of the future. For this reason they are not included in the above table.

The Company has a nonqualified investment plan to provide retirement benefits to certain of the Company’s management employees who are otherwise subject to limited participation in the 401(k) feature of the Company’s Investment/Profit Sharing Plan. The liability to plan participants totaled ~~$14.5~~$13.7 million at March ~~30, 2019~~28, 2020 and ~~$15.0~~$16.4 million at September ~~29, 2018.~~28, 2019. The settlement of this obligation is

dependent upon participant elections to withdraw funds, which cannot be predicted. For this reason they are not included in the above table.

There have been no other material changes in contractual obligations and commercial commitments subsequent to September ~~29, 2018~~28, 2019 other than as ~~disclosed~~described elsewhere in this Form 10-Q.

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

Since December 27, 1993, the Company has paid regular quarterly cash dividends of $0.165 (sixteen and one-half cents) per share on its Class A Common Stock and $0.15 (fifteen cents) per share on its Class B Common Stock for an annual rate of $0.66 and $0.60 per share, respectively.

The Company expects to continue paying regular cash dividends on a quarterly basis. However, the Board of Directors periodically reconsiders the declaration of dividends. The Company pays these dividends at the discretion of the Board of Directors and the continuation of these payments, the amount of such dividends, and the form in which the dividends are paid (cash or stock) depends upon the results of operations, the financial condition of the Company and other factors which the Board of Directors deems relevant. In addition, the Notes, the Bonds, ~~and~~ the Line, and other debt agreements contain provisions that, based on certain financial parameters, restrict the ability of the Company to pay additional cash dividends in excess of current quarterly per share amounts. Further, the Company is prevented from declaring dividends at any time that it is in default under the indenture governing the Notes.

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

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~~changes with general inflation. Inflation or deflation in energy costs affects the Company’s gasoline sales, distribution expenses, utility expenses and plastic supply costs.



	Six Months Ended				Six Months Ended
	March 30,		March 31,		March 28,		March 30,
	2019		2018		2020		2019
All items	0.2	%	0.2	%	0.1	%	0.2	%
Food and beverages	0.2	%	0.1	%	0.2	%	0.2	%
Energy	(0.4)	%	0.1	%	(0.7)	%	(0.4)	%

This Quarterly Report contains certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. The words “expect”, “anticipate”, “intend”, “plan”, “likely”, “goal”, “believe”, “seek” and similar expressions are intended to identify forward-looking statements. While these forward-looking statements and the related assumptions are made in good faith and reflect the Company’s current judgment regarding the direction of the Company’s business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Such statements are based upon a number of assumptions and estimates which are inherently subject to significant risks and uncertainties many of which are beyond the Company’s control. Some of these assumptions inevitably will not materialize, and unanticipated events will occur which will affect the Company’s results. Some important factors (but not necessarily all factors) that affect the Company’s revenues, growth strategies, future profitability and operating results, or that otherwise could cause actual results to differ materially from those expressed in or implied by any forward-looking statement, include business and economic conditions

generally in the Company’s operating area; the Company’s ability to successfully implement its expansion and operating strategies and to manage rapid expansion; pricing pressures and other competitive factors; reduction in per gallon retail gasoline prices; the maturation of new and expanded stores; the Company’s ability to reduce costs and achieve improvements in operating results; the availability and terms of financing; increases in labor and utility costs; success or failure in the ownership and development of real estate; changes in the laws and government regulations applicable to the Company; and changes in accounting policies, standards, guidelines or principles as may be adopted by regulatory agencies as well as the Financial Accounting Standards Board.

Consequently, actual events affecting the Company and the impact of such events on the Company’s operations may vary significantly from those described in this report or contemplated or implied by statements in this report. The Company does not undertake and specifically denies any obligation to update any such statements or to publicly announce the results of any revisions to any such statements to reflect future events or developments.

As previously mentioned, the Company is party to an interest rate swap ~~agreement~~agreements for a current notional amount of ~~$51.5 million at a fixed rate of 3.92%.~~$197.3 million. Otherwise, the Company does not typically utilize financial instruments for trading or other speculative purposes, nor does it typically utilize leveraged financial instruments. There have been no other material changes in the market risk factors from those disclosed in the Company’s Annual Report on Form 10-K for the year ended September ~~29, 2018.~~28, 2019.

The Company maintains disclosure controls and procedures designed to provide reasonable assurance of achieving the objective that information in its Exchange Act reports is recorded, processed, summarized and reported within the time periods specified and pursuant to the regulations of the Securities and Exchange Commission. Disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act, include controls and procedures designed to ensure the information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. It should be noted that the Company’s system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met.

As required by SEC Rule 13a-15(b), the Company carried out an evaluation, under the supervision and with participation of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures as of March ~~30, 2019,~~28, 2020, the end of the period covered by this report. In making this evaluation, it considered matters previously identified and disclosed in connection with the filing of its Form 10-K for fiscal ~~2018.~~2019. After consideration of the matters discussed above and the changes in internal control over financial reporting discussed below, the Company has concluded that its controls and procedures were effective ~~at a reasonable assurance level~~ as of March ~~30, 2019.~~28, 2020.

The Company is currently planning and performing tests of internal controls over financial reporting for fiscal year ~~2019.~~2020.

No ~~other change~~changes in internal control over financial reporting occurred during the Company’s last fiscal quarter that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.



Year
2018	102.875%
2019	101.917%
2020	100.958%
2021 and thereafter	100.000%



Fiscal Year
Remainder of 2020	$	4,993,363
2021		7,820,804
2022		7,408,458
2023		5,302,279
2024		2,908,072
Thereafter		27,187,517
Total lease payments	$	55,620,493
Less amount representing interest		12,992,441
Present value of lease liabilities	$	42,628,052


Fiscal Year
2020	$	9,756,136
2021		7,532,373
2022		6,692,661
2023		4,907,148
2024		2,583,629
Thereafter		27,187,519
Total minimum future rental commitments	$	58,659,466


		Three Months Ended		Six Months Ended
		March 28, 2020		March 28, 2020
Rents earned on owned and subleased properties:
Base rentals	$	4,144,319	$	7,964,639
Variable rentals		69,665		139,330
Total		4,213,984		8,103,969
Depreciation on owned properties leased to others		(1,328,968)		(2,657,936)
Other shopping center expenses		(899,763)		(1,750,748)
Total	$	1,985,253	$	3,695,285


Fiscal Year
Remainder of 2020	$	5,880,856
2021		10,170,740
2022		8,279,676
2023		7,189,842
2024		6,369,072
Thereafter		15,419,999
Total minimum future rental income	$	53,310,185



	Three Months Ended				Six Months Ended
	March 31, 2018				March 31, 2018
	Class A		Class B		Class A		Class B
Numerator: Allocated net income
Net income (loss) allocated, basic	$	6,661,301	$	2,633,487	$	38,993,337	$	15,448,190
Conversion of Class B to Class A shares		2,633,487		—		15,448,190		—
Net income (loss) allocated, diluted	$	9,294,788	$	2,633,487	$	54,441,527	$	15,448,190

Denominator: Weighted average shares outstanding
Weighted average shares outstanding, basic		14,120,232		6,139,544		14,111,787		6,147,989
Conversion of Class B to Class A shares		6,139,544		—		6,147,989		—
Weighted average shares outstanding, diluted		20,259,776		6,139,544		20,259,776		6,147,989

Earnings (loss) per share
Basic	$	0.47	$	0.43	$	2.76	$	2.51
Diluted	$	0.46	$	0.43	$	2.69	$	2.51


Fiscal Year
2020	$	11,265,775
2021		8,855,781
2022		6,967,583
2023		5,862,260
2024		5,145,632
Thereafter		13,723,315
Total minimum future rental income	$	51,820,346

Level 1 Inputs –	Quoted prices for identical assets or liabilities in active markets.

Level 2 Inputs –	Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 Inputs –	Pricing inputs are unobservable for the assets or liabilities and include situations where there is little, if any, market activity for the assets or liabilities. The inputs into the determination of fair value require significant management judgment or estimation.


~~Total retail grocery sales for the three months ended March 31, 2018~~	$	~~955,220~~
~~Comparable store sales increase (including gasoline)~~		~~12,892~~
~~Effect of Easter in second quarter of fiscal 2018~~		~~(6,495)~~
~~Impact of stores opened in fiscal 2018 and 2019~~		~~4,379~~
~~Impact of stores closed in fiscal 2018~~		~~(3,537)~~
~~Other~~		~~7,716~~
Total retail ~~grocery~~ sales for the three months ended March 30, 2019	$	970,175
Comparable store sales increase (including gasoline)		140,523
Impact of stores opened in fiscal 2019		6,800
Impact of stores closed in fiscal 2019		(5,479)
Other		(404)
Total retail sales for the three months ended March 28, 2020	$	1,111,615


~~Total retail grocery sales for the six months ended March 31, 2018~~	$	~~1,938,259~~
~~Comparable store sales increase (including gasoline)~~		~~54,192~~
~~Effect of Easter in second quarter of fiscal 2018~~		~~(6,495)~~
~~Impact of stores opened in fiscal 2018 and 2019~~		~~13,840~~
~~Impact of stores closed in fiscal 2018~~		~~(7,276)~~
~~Other~~		~~7,697~~
Total retail ~~grocery~~ sales for the six months ended March 30, 2019	$	2,000,217
Comparable store sales increase (including gasoline)		154,335
Impact of stores opened in fiscal 2019		12,271
Impact of stores closed in fiscal 2019		(11,291)
Other		360
Total retail sales for the six months ended March 28, 2020	$	2,155,892


(1)	Scheduled interest on floating debt calculated using rates in effect on March ~~30, 2019.~~28, 2020.
(2)	Operating lease obligations in the above table do not include variable common area maintenance, insurance, utility and tax payments for which the Company is obligated under certain operating leases. These amounts are not significant compared with the operating lease payments listed in the above table.


~~(a)~~	~~Exhibits~~

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


3.2	~~3.2~~	Articles of Amendment to Articles of Incorporation of Ingles Markets, Incorporated (included as Exhibit 3.3 to Ingles Markets, Incorporated’s Annual Report on Form 10-K for the fiscal year ended September 25, 2004, File No. 0-14706, previously filed with the Commission and incorporated herein by this reference).


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

4
3.4	~~3.4~~	Amended and Restated By-Laws of Ingles Markets, Incorporated (included as Exhibit 99.1 to Ingles Markets, Incorporated’s Current Report on Form 8-K, File No. 0-14706, previously filed with the Commission on August 30, 2007 and incorporated herein by this reference).


4.1	~~4.1~~	Articles 4 and 9 of the Articles of Incorporation of Ingles Markets, Incorporated (included as Exhibit 3.1 to Ingles Markets, Incorporated’s Registration Statement on Form S-1, File No. 33-23919, (filed on paper – hyperlink is not required pursuant to Rule 105 of Regulation S-T) and Exhibit 3.3 to Ingles Markets, Incorporated’s Annual Report on Form 10-K for the fiscal year ended September 25, 2004, File No. 0-14706, respectively, each of which were previously filed with the Commission and are incorporated herein by this reference).

3
4.3	~~4.3~~	Indenture, dated as of June 12, 2013, between Ingles Markets, Incorporated and Branch Banking and Trust Company, as Trustee, governing the 5.75% Senior Notes Due 2023, including the form of unregistered 5.75% Senior Note Due 2023 (included as Exhibit 4.1 to Ingles Markets, Incorporated’s Current Report on Form 8-K, File No. 0-14706, previously filed with the Commission on June 12, 2013 and incorporated herein by this reference).


4.4	~~4.4~~	Registration Rights Agreement, dated June 12, 2013, among the Company and Merrill Lynch, Pierce, Fenner and Smith Incorporated, Wells Fargo Securities, LLC, BB&T Capital Markets, a division of BB&T Securities, LLC and SunTrust Robinson Humphrey, Inc. (included as Exhibit 4.3 to Ingles Markets, Incorporated’s Current Report on Form 8-K, File No. 0-14706, previously filed with the Commission on June 12, 2013 and incorporated herein by this reference).

10
10.1	~~10.1~~	Credit Agreement, dated May 12, 2009, among the Company and the lenders party thereto, Bank of America, as administrative agent, swing line lender and l/c issuer, Branch Banking and Trust Company, as syndication agent, Wachovia Bank, National Association, as documentation agent, and Banc of America Securities LLC, Branch Banking and Trust Company and Wachovia Capital Markets, LLC, as joint lead arrangers and book managers (included as Exhibit 10.1 to Ingles Markets, Incorporated’s Current Report on Form 8-K, File No. 0-14706, previously filed with the Commission on May 15, 2009 and incorporated herein by this reference).


10.2	~~10.2~~	Waiver and First Amendment to the Credit Agreement dated as of July 31, 2009, among the Company the lenders from time to time party thereto, Bank of America, N.A., as administrative agent, swing line lender and l/c issuer, and the other agents, joint lead arrangers and joint book managers party thereto (included as Exhibit 10.3 to Ingles Markets, Incorporated’s Annual Report on Form 10-K for the fiscal year ended September 29, 2012, File No. 0-14706, previously filed with the Commission and incorporated herein by this reference).


10.3	~~10.3~~	Second Amendment to the Credit Agreement dated as of December 29, 2010, among the Company the lenders from time to time party thereto, Bank of America, N.A., as administrative agent, swing line lender and l/c issuer, and the other agents, joint lead arrangers and joint book managers party thereto (included as Exhibit 10.1 to Ingles Markets, Incorporated’s Current Report on Form 8-K, File No. 0-14706, previously filed with the Commission on January 4, 2011 and incorporated herein by this reference).


10.5	~~10.5~~	Fourth Amendment to the Credit Agreement dated as of June 12, 2013, among the Company the lenders from time to time party thereto, Bank of America, N.A., as administrative agent, swing line lender and l/c issuer, and the other agents, joint lead arrangers and joint book managers party thereto (included as Exhibit 10.6 to Ingles Markets, Incorporated’s Quarterly Report on Form 10-Q for the quarter ended June 29, 2013, File No. 0-14706, previously filed with the Commission and incorporated herein by this reference).


10.6	~~10.6~~	Fifth Amendment to the Credit Agreement dated as of January 31, 2014, among the Company the lenders from time to time party thereto, Bank of America, N.A., as administrative agent, swing line lender and l/c issuer, and the other agents, joint lead arrangers and joint book managers party thereto (included as Exhibit 10.7 to Ingles Markets, Incorporated’s Quarterly Report on Form 10-Q for the quarter ended December 28, 2013, File No. 0-14706, previously filed with the Commission and incorporated herein by this reference).


10.7	~~10.7~~	Sixth Amendment to the Credit Agreement dated as of June 23, 2014, among the Company the lenders from time to time party thereto, Bank of America, N.A., as administrative agent, swing line lender and l/c issuer, and the other agents, joint lead arrangers and joint book managers party thereto (included as Exhibit 10.1 to Ingles Markets, Incorporated’s Current Report on Form 8-K, File No. 0-14706, previously filed with the Commission on June 24, 2014 and incorporated herein by this reference).


101	101**	The following financial information from the Quarterly Report on Form 10-Q for the fiscal quarter ended March ~~30, 2019,~~28, 2020, formatted in XBRL (Extensible Business Reporting Language) and furnished electronically herewith: (i) the Consolidated ~~Balance Sheets;~~Statements of Earnings; (ii) the Consolidated ~~Statements of Income;~~Balance Sheets; (iii) the Consolidated Statements of ~~Changes in Stockholders Equity;~~Cash Flows; (iv) the Consolidated Statements of ~~Cash Flows;~~Comprehensive Income; and (v) the Notes to the Consolidated Financial Statements.



		INGLES MARKETS, INCORPORATED

Date: May ~~8, 2019~~7, 2020		/s/ James W. Lanning
		James W. Lanning
		Chief Executive Officer and President

Date: May ~~8, 2019~~7, 2020		/s/ Ronald B. Freeman
		Ronald B. Freeman
		Vice President-Finance and Chief Financial Officer