10-Q

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 March29,  2014

☐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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 or a smaller reporting company.  See definitions of “large accelerated filer,”“accelerated filer” and “smaller reporting 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 ☐

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

As of May 5, 2014 the Registrant had 13,513,983 shares of Class A Common Stock, $0.05 par value per share, outstanding and9,245,793 shares of Class B Common Stock, $0.05 par value per share, outstanding.

1

INGLES MARKETS, INCORPORATED

INDEX

	Page No.
Part I — Financial Information
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of March 29, 2014 and September 28, 2013	3
Condensed Consolidated Statements of Income for the
Three Months Ended March 29, 2014 and March 30, 2013	4
Six Months Ended March 29, 2014 and March 30, 2013	5
Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Six Months Ended March 29, 2014 and March 30, 2013	6
Condensed Consolidated Statements of Cash Flows for the Six Months Ended March 29, 2014 and March 30, 2013	7
Notes to Unaudited Interim Financial Statements	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3. Quantitative and Qualitative Disclosures About Market Risk	23
Item 4. Controls and Procedures	23
Part II – Other Information
Item 6. Exhibits	23
Signatures	26

2

Part I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

INGLES MARKETS, INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

	March 29,		September 28,
	2014		2013
ASSETS
Current Assets:
Cash and cash equivalents	$	7,387,333	$	16,844,007
Receivables - net		64,923,793		59,929,491
Inventories		333,423,272		329,691,256
Other current assets		25,110,990		28,075,314
Total Current Assets		430,845,388		434,540,068
Property and Equipment – Net		1,205,951,284		1,212,132,055
Other Assets		23,654,647		22,655,614
Total Assets	$	1,660,451,319	$	1,669,327,737
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Current portion of long-term debt	$	13,814,664	$	18,956,761
Accounts payable - trade		151,851,736		160,314,263
Accrued expenses and current portion of other long-term liabilities		61,970,660		72,002,983
Total Current Liabilities		227,637,060		251,274,007
Deferred Income Taxes		83,550,000		86,082,000
Long-Term Debt		897,318,379		893,514,238
Other Long-Term Liabilities		28,549,670		27,818,217
Total Liabilities		1,237,055,109		1,258,688,462
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; 13,468,537 shares issued and outstanding March 29, 2014; 13,437,975 shares issued and outstanding at September 28, 2013		673,427		671,899
Class B, convertible to Class A, $0.05 par value; 100,000,000 shares authorized; 9,291,239 shares issued and outstanding March 29, 2014; 9,321,801 shares issued and outstanding at September 28, 2013		464,562		466,090
Paid-in capital in excess of par value		77,186,249		77,186,249
Retained earnings		345,071,972		332,315,037
Total Stockholders’ Equity		423,396,210		410,639,275
Total Liabilities and Stockholders’ Equity	$	1,660,451,319	$	1,669,327,737

See notes to unaudited condensed consolidated financial statements.

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INGLES MARKETS, INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

	Three Months Ended
	March 29,		March 30,
	2014		2013
Net sales	$	947,760,587	$	920,694,264
Cost of goods sold		741,636,640		722,048,693
Gross profit		206,123,947		198,645,571
Operating and administrative expenses		178,402,604		174,977,866
Gain from sale or disposal of assets		83,283		4,054,095
Income from operations		27,804,626		27,721,800
Other income, net		737,862		739,704
Interest expense		11,698,560		15,720,348
Income  before income taxes		16,843,928		12,741,156
Income tax expense		6,389,000		4,651,000
Net income	$	10,454,928	$	8,090,156
Per share amounts:
Class A Common Stock
Basic earnings  per common share	$	0.47	$	0.35
Diluted earnings  per common share	$	0.46	$	0.33
Class B Common Stock
Basic earnings  per common share	$	0.43	$	0.32
Diluted earnings  per common share	$	0.43	$	0.32
Cash dividends per common share
Class A Common Stock	$	0.165	$	—
Class B Common Stock	$	0.150	$	—

See notes to unaudited condensed consolidated financial statements.

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INGLES MARKETS, INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

	Six Months Ended
	March 29,		March 30,
	2014		2013
Net sales	$	1,892,885,457	$	1,855,671,791
Cost of goods sold		1,483,255,844		1,448,820,979
Gross profit		409,629,613		406,850,812
Operating and administrative expenses		355,832,785		349,823,648
Gain from sale or disposal of assets		208,156		4,175,642
Income from operations		54,004,984		61,202,806
Other income, net		1,577,865		1,303,894
Interest expense		23,480,791		31,279,897
Income before income taxes		32,102,058		31,226,803
Income tax expense		12,114,000		11,569,000
Net income	$	19,988,058	$	19,657,803
Per share amounts:
Class A Common Stock
Basic earnings per common share	$	0.91	$	0.85
Diluted earnings per common share	$	0.88	$	0.81
Class B Common Stock
Basic earnings per common share	$	0.83	$	0.77
Diluted earnings per common share	$	0.83	$	0.77
Cash dividends per common share
Class A Common Stock	$	0.33	$	0.99
Class B Common Stock	$	0.30	$	0.90

See notes to unaudited condensed consolidated financial statements.

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INGLES MARKETS, INCORPORATED AND SUBSIDIARIES

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

SIXMONTHS ENDED MARCH 29, 2014 AND MARCH 30, 2013

							Paid-in
	Class A			Class B			Capital in
	Common Stock			Common Stock			Excess of		Retained
	Shares	Amount		Shares	Amount		Par Value		Earnings		Total
Balance, September 29, 2012	12,953,635	$	647,682	11,306,141	$	565,307	$	114,236,249	$	341,964,231	$	457,413,469
Net income	—		—	—		—		—		19,657,803		19,657,803
Cash dividends	—		—	—		—		—		(22,999,892)		(22,999,892)
Common stock conversions	19,665		983	(19,665)		(983)		—		—		—
Balance, March 30, 2013	12,973,300	$	648,665	11,286,476	$	564,324	$	114,236,249	$	338,622,142	$	454,071,380
Balance, September 28, 2013	13,437,975	$	671,899	9,321,801	$	466,090	$	77,186,249	$	332,315,037	$	410,639,275
Net income	—		—	—		—		—		19,988,058		19,988,058
Cash dividends	—		—	—		—		—		(7,231,123)		(7,231,123)
Common stock conversions	30,562		1,528	(30,562)		(1,528)		—		—		—
Balance, March 29, 2014	13,468,537	$	673,427	9,291,239	$	464,562	$	77,186,249	$	345,071,972	$	423,396,210

See notes to unaudited condensed consolidated financial statements.

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INGLES MARKETS, INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Six Months Ended
	March 29,		March 30,
	2014		2013
Cash Flows from Operating Activities:
Net income	$	19,988,058	$	19,657,803
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense		48,113,901		47,128,497
Gain on disposals of property and equipment		(208,156)		(4,175,642)
Receipt of advance payments on purchases contracts		2,516,458		3,015,720
Recognition of advance payments on purchases contracts		(1,632,251)		(1,754,024)
Deferred income taxes		(3,271,000)		(1,278,000)
Changes in operating assets and liabilities:
Receivables		(4,994,302)		(3,182,573)
Inventory		(3,732,015)		(640,035)
Other assets		2,064,706		(1,131,736)
Accounts payable and accrued expenses		(8,095,489)		(12,616,141)
Net Cash Provided by Operating Activities		50,749,910		45,023,869
Cash Flows from Investing Activities:
Proceeds from sales of property and equipment		200,804		7,679,488
Capital expenditures		(51,838,307)		(47,046,109)
Net Cash Used by Investing Activities		(51,637,503)		(39,366,621)
Cash Flows from Financing Activities:
Proceeds from short-term borrowings		297,451,513		411,598,618
Payments on short-term borrowings		(297,451,513)		(389,719,260)
Proceeds from other long-term borrowings		14,000,000		8,000,000
Principal payments on long-term borrowings		(15,337,958)		(5,037,754)
Dividends paid		(7,231,123)		(22,999,892)
Net Cash (Used) Provided by Financing Activities		(8,569,081)		1,841,712
Net (Decrease) Increase in Cash and Cash Equivalents		(9,456,674)		7,498,960
Cash and cash equivalents at beginning of period		16,844,007		4,683,410
Cash and Cash Equivalents at End of Period	$	7,387,333	$	12,182,370

See notes to unaudited condensed consolidated financial statements.

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INGLES MARKETS, INCORPORATED AND SUBSIDIARIES

NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS

SixMonths Ended March 29, 2014 and March 30, 2013

A. BASIS OF PREPARATION

In the opinion of management, the accompanying unaudited interim financial statements contain all adjustments necessary to present fairly the financial position of Ingles Markets, Incorporated and Subsidiaries (the “Company”)  as of March 29, 2014, the results of operations for the three-month and six-month periods ended March 29, 2014 and March 30, 2013, and the changes in stockholders’ equity and cash flows for the six-month periods ended March 29, 2014 and March 30, 2013. 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 28, 2013 filed by the Company under the Securities Exchange Act of 1934 on December 12,2013.  

The results of operations for the three-month and six-month periods ended March 29, 2014 are not necessarily indicative of the results to be expected for the full fiscal year.

B. NEW ACCOUNTING PRONOUNCEMENTS

There were no new accounting standards adopted in the six-month period ended March 29, 2014.

C. ALLOWANCE FOR DOUBTFUL ACCOUNTS

Receivables are presented net of an allowance for doubtful accounts of $764,000 at March 29, 2014 and $733,000 at September 28, 2013, respectively.  

D.  INCOME TAXES

The Company’s continuing practice is to recognize interest and penalties related to uncertain tax positions and related matters in income tax expense. As of March 29, 2014, the Company had approximately $51,000 accrued for interest and penalties.

The Company’s effective tax rate differs from the federal statutory rate primarily as a result of state income taxes and tax credits.  As of March 29, 2014, the Company had gross unrecognized tax benefits of approximately $130,000, all of which, if recognized, would affect the effective tax rate.  The Company does not expect that the total amounts of unrecognized tax benefits will significantly increase or decrease within the next twelve months.

The Company files income tax returns with federal and various state jurisdictions.  With few exceptions, the Company is no longer subject to state income tax examinations by tax authorities for the years before 2009. Additionally, the Internal Revenue Service has completed its examination of the Company’s U.S. Federal income tax returns filed through fiscal 2008.

The Company had approximately$9.7 million and $13.8 million of refundable income taxes included in the caption “Other current assets” in the Condensed Consolidated Balance Sheets at March 29, 2014 and September 28, 2013, respectively.

On September 13, 2013, the IRS released final tangible property regulations under Sections 162(a) and 263(a) of the Internal Revenue Code regarding the deduction and capitalization of expenditures related to tangible property as well as dispositions of tangible property.  These regulations will be effective for the Company’s fiscal year ending September 26, 2015.  Taxpayers may elect to apply them to tax years beginning on or after January 1, 2012.  The Company does not anticipate that the regulations will have a material impact on the Company’s consolidated results of operations, cash flows or financial position.

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E. ACCRUED EXPENSES AND CURRENT PORTION OF OTHER LONG-TERM LIABILITIES

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

	March 29,		September 28,
	2014		2013
Property, payroll and other taxes payable	$	11,423,655	$	16,771,941
Salaries, wages and bonuses payable		21,246,096		25,129,025
Self-insurance liabilities		12,136,910		12,844,143
Interest payable		12,551,936		12,993,252
Other		4,612,063		4,264,622
	$	61,970,660	$	72,002,983

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 Company is insured for covered costs in excess of $750,000 per occurrence for workers’ compensation, $500,000 for general liability and $325,000 per covered person for medical care benefits for a policy year. At March 29, 2014, the Company’s self-insurance reserves totaled $29.4 million.  Of this amount, $12.1 millionis accounted for as a current liability and $17.3 million as a long-term liability. Employee insurance expense, including workers’ compensation and medical care benefits, net of employee contributions, totaled $3.5 million and $9.3 million for each of the three-month periods ended March 29, 2014 and March 30, 2013, respectively. For the six-month periods ended March 29, 2014 and March 30, 2013, employee insurance expense, net of employee contributions, totaled $12.0 million and $17.8 million, respectively.

F. LONG-TERM DEBT

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 5.750% per annum and were issued at par. Note proceeds were used to repay $575.0 million aggregate principal amount of senior notes maturing in 2017,  $52.0 million of indebtedness outstanding under the Company’s line of credit, and to pay costs related to the offering of the Notes.  Remaining Note proceeds will be used for general corporate purposes, including future capital expenditures.

The Company filed a registration statement with the Securities and Exchange Commission to exchange the private placement notes with registered notes. The exchange has been completed.

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:

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

In connection with the offering of the Notes, the Company extended the maturity date of its $175.0 million line of credit from December 29, 2015 to June 12, 2018 and modified certain interest rate options and covenants.  There were no outstanding borrowings under the line of credit at March 29, 2014 or at September 28, 2013.

The line of credit provides the Company with various interest rate options based on the prime rate, the Federal Funds Rate, or the London Interbank Offering Rate. The line allows the Company to issue up to $30.0 million in unused letters of credit, of which $9.7 million of unused letters of credit were issued at March 29, 2014.  The Company is not required to maintain compensating balances in connection with the line of credit.

On December 29, 2010, the Company completed the funding of $99.7 million of Recovery Zone Facility Bonds (the “Bonds”) for:  (A) acquisition, construction and equipping of an approximately 830,000 square foot new warehouse and distribution center located in Buncombe County, North Carolina (the “Project”), and (B) the payment of certain expenses incurred in connection with the issuance of the Bonds.  The final maturity date of the Bonds is January 1, 2036.

The Bonds were issued by the Buncombe County Industrial Facilities and Pollution Control Financing Authority and were purchased by certain financial institutions.  Under a Continuing Covenant and Collateral Agency Agreement (the “Covenant Agreement”) between the financial institutions and the Company, the financial institutions would hold the Bonds until January 2, 2018, subject to certain events.   Mandatory redemption of the Bonds by the Company in the annual amount of $4,530,000 began on January 1, 2014. 

9

In connection with the offering of the Notes, the Company extended the maturity date of the Covenant Agreement from January 2, 2018 to June 30, 2021 and modified certain interest rate options and covenants. The Company may redeem the Bonds without penalty or premium at any time prior to June 30, 2021.

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 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 of credit.

The Notes, the Bonds and the line of credit 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 of credit 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 29, 2014.  

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 of credit, Bond and Notes indenture in the event of default under any one instrument.

G. DIVIDENDS

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 24, 2013 to stockholders of record on October 10, 2013. 

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 23, 2014 to stockholders of record on January 9, 2014.  

On December 7, 2012, the Company declared a special dividend of $0.66 per share of Class A Common Stock and $0.60 per share of Class B Common Stock payable on December 31, 2012 to shareholders of record on December 21, 2012.  The Company also 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 December 31, 2012 to stockholders of record on December 21, 2012.

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 12,  2013.

H. EARNINGS PER COMMON SHARE

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. 

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The two-class method of computing basic earnings per share for each period reflects the cash dividends paid 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 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
	March 29, 2014				March 29, 2014
	Class A		Class B		Class A		Class B
Numerator: Allocated net income
Net income  allocated, basic	$	6,417,400	$	4,037,528	$	12,263,861	$	7,724,197
Conversion of Class B to Class A shares		4,037,528		—		7,724,197		—
Net income  allocated, diluted	$	10,454,928	$	4,037,528	$	19,988,058	$	7,724,197
Denominator: Weighted average shares outstanding
Weighted average shares outstanding, basic		13,456,262		9,303,514		13,447,893		9,311,883
Conversion of Class B to Class A shares		9,303,514		—		9,311,883		—
Weighted average shares outstanding, diluted		22,759,776		9,303,514		22,759,776		9,311,883
Earnings per share
Basic	$	0.47	$	0.43	$	0.91	$	0.83
Diluted	$	0.46	$	0.43	$	0.88	$	0.83

The per share amounts for the second quarter of fiscal 2013 and the six months ended March 30, 2013 are based on the following amounts:

	Three Months Ended				Six Months Ended
	March 30, 2013				March 30, 2013
	Class A		Class B		Class A		Class B
Numerator: Allocated net income
Net income allocated, basic	$	4,513,615	$	3,576,541	$	10,962,905	$	8,694,898
Conversion of Class B to Class A shares		3,576,541		—		8,694,898		—
Net income allocated, diluted	$	8,090,156	$	3,576,541	$	19,657,803	$	8,694,898
Denominator: Weighted average shares outstanding
Weighted average shares outstanding, basic		12,961,853		11,297,923		12,958,169		11,301,607
Conversion of Class B to Class A shares		11,297,923		—		11,301,607		—
Weighted average shares outstanding, diluted		24,259,776		11,297,923		24,259,776		11,301,607
Earnings per share
Basic	$	0.35	$	0.32	$	0.85	$	0.77
Diluted	$	0.33	$	0.32	$	0.81	$	0.77

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I. SEGMENT INFORMATION

The Company operates one primary business segment, retail grocery sales.   The “Other” activities include fluid dairy and shopping center rentals.  The Company previously presented the fluid dairy and shopping center rentals as separate segments; however, these have now been combined as neither meets the criteria for separate disclosure in any period presented.  Prior year data has been recast to reflect the current segment presentation.  In addition, the Company has historically presented the revenue and expense of the shopping center rental segment “net” on the condensed consolidated statements of income.  In 2013, the Company concluded that the income and expense amounts associated with shopping center rentals should be presented as “gross” rather than “net”.  Accordingly the prior period condensed consolidated statements of income have been revised to eliminate the amounts presented as rental income, net while increasing net sales by $2.1 million and cost of goods sold by $1.7  million for the three months ended March 30, 2013.  The increase to net sales was $4.2 million and to cost of goods sold was $3.6 million for the six months ended March 30, 2013.  Management does not believe that these corrections are material to the financial statements.  Information about the Company’s operations by lines of business (amounts in thousands) is as follows:

	Three Months Ended				Six Months Ended
	March 29,		March 30,		March 29,		March 30,
	2014		2013		2014		2013
Revenues from unaffiliated customers:
Grocery sales	$	908,448	$	886,374	$	1,818,534	$	1,786,170
Other		39,313		34,320		74,351		69,502
Total revenues from unaffiliated customers	$	947,761	$	920,694	$	1,892,885	$	1,855,672
Income from operations:
Grocery sales	$	24,284	$	24,415	$	48,449	$	55,256
Other		3,521		3,307		5,556		5,947
Total income from operations	$	27,805	$	27,722	$	54,005	$	61,203

	March 29,		September 28,
	2014		2013
Assets:
Grocery sales	$	1,516,206	$	1,528,483
Other		146,490		143,237
Elimination of intercompany receivable		(2,245)		(2,392)
Total assets	$	1,660,451	$	1,669,328

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Sales by product category (amounts in thousands) are as follows:

	Three Months Ended				Six Months Ended
	March 29,		March 30,		March 29,		March 30,
	2014		2013		2014		2013
Grocery	$	355,658	$	359,466	$	714,557	$	730,727
Non-foods		176,580		170,271		358,454		347,975
Perishables		230,450		218,433		457,052		438,381
Gasoline		145,760		138,204		288,471		269,087
Total grocery segment	$	908,448	$	886,374	$	1,818,534	$	1,786,170

The grocery category includes grocery, dairy, and frozen foods.

The non-foods include alcoholic beverages, tobacco, pharmacy, health and video.

The perishables category includes meat, produce, deli and bakery.

For the three-month periods ended March 29, 2014 and March 30, 2013, respectively, the fluid dairy operation had $15.3 million and $14.8 million in sales to the grocery sales segment. The fluid dairy operation had $30.1 million and $30.7 million in sales to the grocery sales segment for the six-month periods ended March 29, 2014 and March 30, 2013, respectively. These sales have been eliminated in consolidation and are excluded from the amounts in the table above.

J. FAIR VALUES OF FINANCIAL INSTRUMENTS

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 is 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:

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.

The carrying amount and fair value of the Company’s debt at March 29, 2014 is as follows (in thousands):

	Carrying				Fair Value
	Amount		Fair Value		Measurements
Senior Notes	$	700,000	$	703,500	Level 2
Recovery Zone Facility Bonds		95,210		95,210	Level 2
Real estate and equipment notes payable		115,923		116,060	Level 2
Total debt	$	911,133	$	914,770

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

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K.  NONQUALIFIED INVESTMENT PLAN

The purpose of the Executive Nonqualified Excess Plan is to provide retirement benefits similar to the Company’s Investment/Profit Sharing Plan 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.  Participant retirement account balances are liabilities of the Company.  Assets of the plan are assets of the Company and are held in trust for employees and distributed upon retirement, death, disability, in-service distributions, or other termination of employment.  In accordance with the trust, the Company may not use these assets for general corporate purposes.  During the six months ended March 29, 2014and March 30, 2013, the Company invested a portion of the proceeds of liquidated life insurance policy assets in marketable securities.  These marketable securities will be liquidated and invested in other life insurance policies in future periods.  Life insurance policies and marketable securities held in the trust are included in the caption “Other assets” in the Condensed Consolidated Balance Sheets.

L. SUBSEQUENT EVENTS

We have evaluated subsequent events and transactions for potential recognition or disclosure in the financial statements through the day the financial statements were issued.

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

Overview

Ingles, a leading supermarket chain in the Southeast, operates 203 supermarkets in Georgia (73), North Carolina (70), South Carolina (36), Tennessee (21), Virginia (2) 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.  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 29, 2014, the Company operated 94 in-store pharmacies and 76 fuel centers.

Ingles also operates a fluid dairy and earns shopping center rentals. The fluid dairy processing operation sells approximately 30% of its products to the retail grocery segment and approximately 70% 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

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.

Self-Insurance

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 per occurrence for workers’ compensation, $500,000 for general liability, and $325,000 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 29, 2014, the Company’s self-insurance reserves totaled $29.4 million for employee group insurance, workers’ compensation insurance and general liability insurance.

Asset Impairments

The Company accounts for the impairment of long-lived assets in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Topic 360. Asset groups are primarily comprised of our individual store and shopping center properties. 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

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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 29, 2014.

Vendor Allowances

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 $32.3 million and $30.8 million for the fiscal quarters ended March 29, 2014 and March 30, 2013, respectively.  For the six-month periods ended March 29, 2014 and March 30, 2013, vendor allowances applied as a reduction of merchandise costs totaled $63.8 million and $63.7 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 $3.5 million and $3.6 million for the fiscal quarters ended March 29, 2014 and March 30, 2013, respectively.  For the six-month periods ended March 29, 2014 and March 30, 2013, vendor advertising allowances recorded as a reduction of advertising expense totaled $7.4 million and $7.5 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; as such allowances do not directly generate revenue for the Company’s stores.

Uncertain Tax Positions

Despite the Company’s belief that its tax positions are consistent with applicable tax laws, the Company believes that certain positions are likely to be challenged by taxing authorities. Settlement of any challenge can result in no change, a complete disallowance, or some partial adjustment reached through negotiations or litigation. Significant judgment is required in evaluating the Company’s tax positions. The Company’s positions are evaluated in light of changing facts and circumstances, such as the progress of its tax audits as well as evolving case law. Income tax expense includes the impact of provisions for and changes to uncertain tax positions as the Company considers appropriate. Unfavorable settlement of any particular position would require use of cash. Favorable resolution would be recognized as a reduction to income tax expense at the time of resolution.

Results of Operations

Ingles operates on a 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 29, 2014 and March 30, 2013, respectively. Comparable store sales are now defined as sales by grocery 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 the three- and six-month periods ended March 29, 2014 and March 30, 2013, comparable store sales include 202 and 203 stores, respectively.

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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
	March 29,		March 30,		March 29,		March 30,
	2014		2013		2014		2013
Net sales	100.0	%	100.0	%	100.0	%	100.0	%
Gross profit	21.7	%	21.6	%	21.6	%	21.9	%
Operating and administrative expenses	18.8	%	19.0	%	18.8	%	18.9	%
Gain from sale or disposal of assets	—	%	0.4	%	—	%	0.2	%
Income from operations	2.9	%	3.0	%	2.8	%	3.3	%
Other income, net	0.1	%	0.1	%	0.1	%	0.1	%
Interest expense	1.2	%	1.7	%	1.2	%	1.7	%
Income tax expense	0.7	%	0.5	%	0.6	%	0.6	%
Net income	1.1	%	0.9	%	1.1	%	1.1	%

Three Months Ended March 29, 2014 Compared to the Three Months Ended March 30, 2013

Net income for the second quarter of fiscal 2014 totaled $10.5 million, compared with net income of $8.1 million earned for the second quarter of fiscal 2013.  Higher sales and gross profit, and lower interest expense in the current quarter more than offset $4.1 million of property sale gains recognized in last year’s second quarter.

Net Sales. Net sales increased by $27.1 million to $947.8 million for the three months ended March 29, 2014 from $920.7 million for the three months ended March 30, 2013, an increase of 2.9%. Ingles operated 203 stores at March 29, 2014 and March 30, 2013. Retail square footage increased slightly to 11.1 million at March 29, 2014.  During the twelve months ended March 29, 2014, the Company opened one new store and closed one store.  Excluding gasoline sales, total sales increased 2.5% over the comparative fiscal second quarter. 

Easter occurred during the second quarter of fiscal 2013 but will not occur until the third quarter of fiscal 2014.  Comparable store sales, excluding the effect of gasoline and the extra Easter sales in last year’s fiscal quarter, increased 2.5%.   Retail gasoline sales prices decreased and the number of gallons sold increased during the second quarter of fiscal 2014 compared with the second quarter of fiscal 2013.  The number of customer transactions (excluding gasoline) increased 0.5%, and the average transaction size (excluding gasoline) increased by 1.5%.

Sales by product category (amounts in thousands) are as follows:

	Three Months Ended
	March 29,		March 30,
	2014		2013
Grocery	$	355,658	$	359,466
Non-foods		176,580		170,271
Perishables		230,450		218,433
Gasoline		145,760		138,204
Total grocery segment	$	908,448	$	886,374

The grocery category includes grocery, dairy and frozen foods.

The non-foods category includes alcoholic beverages, tobacco, pharmacy, health and video.

The perishables category includes meat, produce, deli and bakery.

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Changes in grocery segment sales for the quarter ended March 29, 2014 are summarized as follows (in thousands):

Total grocery sales for the three months ended March 30, 2013	$	886,374
Comparable store sales increase (including gasoline)		22,499
Effect of Easter in second quarter of fiscal 2013		(8,176)
Impact of stores opened in fiscal 2013		9,182
Impact of stores closed in fiscal 2013		(1,309)
Other		(122)
Total grocery sales for the three months ended March 29, 2014	$	908,448

Gross Profit. Gross profit for the three-month period ended March 29, 2014 increased $7.5 million, or 3.8%, to $206.1 million, or 21.7% of sales, compared with gross profit $198.6 million, or 21.6% of sales, for the three-month period ended March 30, 2013.

Gross profit and gross margin are affected by lower gasoline gross profits, which were offset by higher margins in other areas.  During the late summer of 2013, the Company introduced an expanded fuel rewards program under which in-store purchases earned customers enhanced discounts at the Company’s fuel centers.  Excluding gasoline sales, grocery segment gross profit as a percentage of sales was 26.2% for the second quarter of fiscal 2014 compared with 25.5% for the same fiscal 2013 period.

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.

Operating and Administrative Expenses. Operating and administrative expenses increased $3.4 million, or 2.0%, to $178.4 million for the three months ended March 29, 2014, from $175.0 million for the three months ended March 30, 2013. As a percentage of sales, operating and administrative expenses were 18.8% for the three months ended March 29, 2014 compared with 19.0% for the three months ended March 30, 2013.  Excluding gasoline sales and associated gasoline operating expenses (primarily payroll), operating expenses were 22.1% of sales for the second fiscal 2014 quarter and 22.2% for the second fiscal 2013 quarter.

The major increases (decreases) in operating and administrative expenses were as follows:

	Increase		Increase
	(decrease)		(decrease) as
	in millions		a % of sales
Insurance	$	(3.3)	(0.34)	%
Salaries and wages	$	2.2	0.24	%
Taxes and licenses	$	0.9	0.10	%
Advertising and promotion	$	0.9	0.10	%
Utilities and fuel	$	0.9	0.09	%

Insurance expense decreased due to favorable claims experience under the Company’s self-insurance programs.

Salaries and wages expenses increased due to the additional labor hours required to support the increased sales volume.

Taxes and licenses increased due to increased property taxes and other taxes and fees charged by municipalities where the Company operates stores.

Advertising and promotional expense increased due to higher mailing costs incurred during the second quarter of fiscal year 2014.

Utilities and fuel increased due to higher energy costs and comparatively colder weather in the current year second fiscal quarter.

Gain from sale or disposal of assets.  During the second quarter of fiscal 2013, the Company sold a former store property for $7.5 million and recognized a pre-tax gain of $3.9 million.  There we no significant disposal transactions during the second quarter of fiscal year 2014.

Other Income, Net. Other income, net totaled $0.7 million for both the three month periods ended March 29, 2014 and March 30, 2013.  The principal component of other income is waste paper and packaging sales.

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Interest Expense. Interest expense decreased $4.0 million for the three-month period ended March 29, 2014 to $11.7 million from $15.7 million for the three-month period ended March 30, 2013. The decrease is attributable to the lower interest rate on Senior Notes that were refinanced during the third quarter of fiscal year 2013, partially offset by higher total debt.  Total debt at March 2014 was $911.1 million compared with $860.0 million at March 2013.

Income Taxes. Income tax expense as a percentage of pre-tax income was 37.9% for the quarter ended March 29, 2014 compared with 36.5% for the quarter ended March 30, 2013.  The increase in the effective rate is due primarily to the expiration of certain federal tax credits effective at the end of December 2013.  

Net Income. Net income totaled $10.5 million for the three-month period ended March 29, 2014 compared with $8.1 million for the three-month period ended March 30, 2013.   Net income, as a percentage of sales, was 1.1% for the quarter ended March 29, 2014 and 0.9% for the quarter ended March 30, 2013.  Basic and diluted earnings per share for Class A Common Stock were $0.47 and $0.46, respectively, for the quarter ended March 29, 2014 compared to $0.35 and $0.33, respectively, for the quarter ended March 30, 2013.  Basic and diluted earnings per share for Class B Common Stock were each $0.43 for the quarter ended March 29, 2014 compared to $0.32 of basic and diluted earnings per share for the quarter ended March 30, 2013.

Six Months Ended March 29, 2014 Compared to the Six Months Ended March 30, 2013

Net income for the first half of fiscal 2014 totaled $20.0 million compared with net income of $19.7 million earned for the comparable fiscal 2013 period.  Increased gross profit and decreased interest expense during the first half of fiscal 2014 were offset by lower operating expenses and a gain on a property sale during the first half of fiscal 2013.

Net Sales. Net sales increased by $37.2 million to $1.89 billion for the six months ended March 29, 2014 from $1.86 billion for the six months ended March 30, 2013.  Excluding gasoline, total sales increased 1.1% over the comparative six month 2014 and 2013 periods.

Grocery segment comparable store sales, excluding the effect of gasoline and the extra Easter sales in the first half of fiscal 2013, increased 0.8%.   The number of customer transactions (excluding gasoline) increased 0.3%, while the average transaction size (excluding gasoline) increased by 0.6%.

Sales by product category (amounts in thousands) are as follows:

	Six Months Ended
	March 29,		March 30,
	2014		2013
Grocery	$	714,557	$	730,727
Non-foods		358,454		347,975
Perishables		457,052		438,381
Gasoline		288,471		269,087
Total grocery segment	$	1,818,534	$	1,786,170

The grocery category includes grocery, dairy and frozen foods.

The non-foods category includes alcoholic beverages, tobacco, pharmacy, health and video.

The perishables category includes meat, produce, deli and bakery.

Changes in grocery segment sales for the six months ended March 29, 2014 are summarized as follows (in thousands):

Total grocery sales for the six months ended March 30, 2013	$	1,786,170
Comparable store sales increase (including gasoline)		25,225
Effect of Easter in second quarter of fiscal 2013		(8,176)
Impact of stores opened in fiscal 2013		18,032
Impact of stores closed in fiscal 2013		(2,661)
Other		(56)
Total grocery sales for the six months ended March 29, 2014	$	1,818,534

Sales growth for the remainder of fiscal 2014 will depend upon the pace of economic improvement, inflation and market prices for gasoline and raw milk.  In addition to a new store that opened in April 2013, the Company expects that the maturation of previous new

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and expanded stores will contribute to sales growth.  The Company continues to remodel existing stores in order to increase sales at a lower cost than additional square footage.

Gross Profit. Gross profit for the six months ended March 29, 2014 increased $2.8 million, or 0.7%, to $409.6 million compared with $406.9 million, for the six months ended March 30, 2013. As a percent of sales, gross profit was 21.6% for the six months ended March 29, 2014 compared with 21.9% for  the six months ended March 30, 2013. 

Gross profit dollars increased due to the higher sales volume.  Gross profit dollars contributed by gasoline was lower for the first half of fiscal 2014 compared with the first half of fiscal 2013.  Excluding gasoline sales, grocery segment gross profit as a percentage of sales was 25.9% for the first six months of fiscal 2014 compared with 25.7% for the same fiscal 2013 period.

Operating and Administrative Expenses. Operating and administrative expenses increased $6.0 million to $355.8 million for the six months ended March 29, 2014, from $349.8 million for the six months ended March 30, 2013. As a percentage of sales, operating and administrative expenses were 18.8% for the six-month period ended March 29, 2014 compared with 18.9% for the six-month period ended March 30, 2013. Excluding gasoline sales and associated gasoline operating expenses (primarily payroll), operating expenses were level at 22.0% of sales for the fiscal 2014 six month period compared with 21.9% for the first six months of fiscal 2013. 

The major increases (decreases) in operating and administrative expenses were as follows:

	Increase		Increase
	(decrease)		(decrease) as
	in millions		a % of sales
Salaries and wages	$	6.0	0.3	%
Insurance	$	(5.4)	(0.3)	%
Taxes and licenses	$	1.7	0.1	%
Utilities and fuel	$	1.4	0.1	%

Salaries and wages increased in dollars due to additional labor hours required for the increased sales volume.

Insurance expense decreased due to lower claims under the Company’s self-insurance programs.

Taxes and licenses increased due to increased property taxes and other taxes and fees charged by municipalities where the Company operates stores.

Utilities and fuel increased due to higher energy costs and comparatively colder weather in the current year second fiscal quarter.

Gain from sale or disposal of assets.  There were no significant sale or disposal transactions during the first six months of fiscal 2014.

During the second quarter of fiscal 2013, the Company sold a former store property for $7.5 million and recognized a pre-tax gain of $3.9 million. 

Other Income, Net. Other income, net totaled $1.6 million for the six-month period ended March 29, 2014 compared with $1.3 million for the six-month period ended March 30, 2013.  The principal component of other income is waste paper and packaging sales.

Interest Expense. Interest expense decreased $7.8 million for the six-month period ended March 29, 2014 to $23.5 million from $31.3 million for the six-month period ended March 30, 2013.  The decrease is attributable to the lower interest rate on Senior Notes that were refinanced during the third quarter of fiscal year 2013, partially offset by higher total debt.

Income Taxes. Income tax expense as a percentage of pre-tax income increased to 37.7 % for the six-month period ended March 29, 2014 compared to 37.0% for the six-month period ended March 30, 2013.  The effective tax rate increased primarily as a result of expiring tax credits.

Net Income. Net income totaled $20.0 million for the six-month period ended March 29, 2014 compared with $19.7 million for the six-month period ended March 30, 2013.   Net income, as a percentage of sales, was 1.1% for each of the six months ended March 29, 2014 and March 30, 2013.  Basic and diluted earnings per share for Class A Common Stock were $0.91 and $0.88, respectively, for the six months ended March 29, 2014 compared to $0.85 and $0.81, respectively, for the six months ended March 30, 2013.  Basic and diluted earnings per share for Class B Common Stock were each $0.83 for the six months ended March 29, 2014 compared to $0.77 of basic and diluted earnings per share for the six months ended March 30, 2013.

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Liquidity and Capital Resources

Capital Expenditures

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 provide customers with good service and a broad selection of competitively priced products. Therefore, the Company has invested and plans to 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 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 and other products complementary to grocery sales where market conditions and real estate considerations warrant. During June 2012, the Company began operations in its newly constructed 836,000 square foot warehouse and distribution facility located adjacent to its existing 919,000 square foot facility.

Capital expenditures totaled $51.8 million for the six-month period ended March 29, 2014.  Most of these capital expenditures were related to 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, capital expenditures related to its milk processing plant, and expenditures for stores scheduled to open in fiscal 2014 or 2015. 

Ingles’ capital expenditure plans for fiscal 2014 include investments of approximately $100 to $140 million. The majority of the Company’s fiscal 2014 capital expenditures will be dedicated to continued improvement of its store base and also include investments in stores expected to open in fiscal 2014 or 2015 as well as technology improvements, upgrading and replacing existing store equipment and warehouse and transportation equipment and improvements to the Company’s milk processing plant.

The Company 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 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 remodeling project. Construction commitments at March 29, 2014 totaled $5.7 million.

Liquidity

The Company generated net cash from operations of $50.7 million for the six months ended March 29, 2014 compared to $45.0 million for the comparable 2013 period. Most of the change is attributable to changes in working capital requirements over the comparative six-month periods.

Cash used by investing activities for the six-month period ended March 29, 2014 totaled $51.6 million, comprised almost entirely of capital expenditures. Cash used by investing activities for the six-month period ended March 30, 2013 totaled $39.4 million, comprised of $47.0 million less proceeds from the sale of a closed store property totaling $7.7 million.

Cash used by financing activities during the six-month period ended March 29, 2014 totaled $8.6 million.  The primary components were net debt repayments of $15.3 million, dividends of $7.2 million and new borrowings under a renewed loan totaling $14.0 million. 

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 5.750% per annum and were issued at par.  Note proceeds were used to repay $575.0 million aggregate principal amount of senior notes maturing in 2017, $52.0 million of indebtedness outstanding under the Company’s line of credit, and pay costs related to the offering of the Notes.  Remaining Note proceeds will be used for general corporate purposes, including future capital expenditures.  The Company’s effective interest rate on senior notes borrowings decreased from 9.5% to 5.75%. 

In connection with the offering of the Notes, the Company extended the maturity date of its $175.0 million line of credit from December 29, 2015 to June 12, 2018 and modified certain interest rate options and covenants.  At March 29, 2014, the Company had no borrowing outstanding under the line of credit.

The line of credit provides the Company with various interest rate options based on the prime rate, the Federal Funds Rate, or the London Interbank Offering Rate. The line allows the Company to issue up to $30 million in unused letters of credit, of which $9.7 million of unused letters of credit were issued at March 29, 2014.  The Company is not required to maintain compensating balances in connection with this line of credit.

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On December 29, 2010, the Company completed the funding of $99.7 million of Recovery Zone Facility Bonds (the “Bonds”) for:  (A) acquisition, construction and equipping of an approximately 830,000 square foot new warehouse and distribution center located in Buncombe County, North Carolina (the “Project”), and (B) the payment of certain expenses incurred in connection with the issuance of the Bonds.  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 January 2, 2018, subject to certain events.   Mandatory redemption of the Bonds by the Company in the annual amount of $4,530,000 began on January 1, 2014.

In connection with the offering of the Notes, the Company extended the maturity date of the Covenant Agreement from January 2, 2018 to June 30, 2021 and modified certain interest rate options and covenants.  The Company may redeem the Bonds without penalty or premium at any time prior to June 30, 2021. 

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 of credit, Bond and Notes indenture in the event of default under any one instrument.

The Notes, the Bonds and the line of credit 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 of credit 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 29, 2014, the Company was in compliance with these covenants.  Under the most restrictive of these covenants, the Company would be able to incur approximately $403 million of additional borrowings (including borrowings under the line of credit) as of March 29, 2014.

The Company’s principal sources of liquidity are expected to be cash flow from operations, borrowings under the line of credit and long-term financing. As of March 29, 2014, the Company had unencumbered real property and equipment with a net book value of approximately $962 million. The Company believes, based on its current results of operations and financial condition, that its financial resources, including the line of credit, short- and long-term financing expected to be available to it and internally generated funds, will be sufficient to meet planned capital expenditures and working capital requirements for the foreseeable future, including any debt service requirements of additional borrowings. 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, 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. 

Contractual Obligations and Commercial Commitments

There have been no material changes in contractual obligations and commercial commitments subsequent to September 28, 2013 other than as disclosed elsewhere in this Form 10-Q.

Off Balance Sheet Arrangements

The Company is not a party to any 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.

Quarterly Cash Dividends

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.  Because of increased tax rates on dividends that went into effect in January 2013, the Company paid in December 2012 a special dividend equal to $0.66 cents per each Class A share and $0.60 cents per each Class B share.  The Company also accelerated the payment of the regular quarterly January 2013 dividend into December 2012.  Both dividends were declared on December 7, 2012, payable on December 31, 2012 to shareholders of record on December 21, 2012. 

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

21

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 lines of credit 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.

Seasonality

Sales in the grocery segment of the Company’s business 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 as it did during fiscal 2013. In the third and fourth quarter, sales are affected by the return of customers to seasonal homes in our market area.  The fluid dairy operation of the Company’s business has slight seasonal variation to the extent of its sales into the grocery industry. The Company’s real estate operation is not subject to seasonal variations.

Impact of Inflation

The following table from the United States Bureau of Labor Statistics lists changes in the Consumer Price Index that could have an effect on the Company’s operations.  One of the Company’s significant costs is labor, which increases with general inflation.  Inflation in energy costs affects both the Company’s gasoline sales and distribution expenses.

	Three Months Ended				Twelve Months Ended
	March 29,		March 30,		March 29,		March 30,
	2014		2013		2014		2013
All items	0.1	%	(0.2)	%	1.5	%	1.5	%
Food and beverages	0.3	%	—	%	1.7	%	1.5	%
Energy	—	%	0.4	%	0.4	%	(1.6)	%

Forward Looking Statements

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.

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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 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 28,  2013.  

Item 4.  CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

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 29, 2014, 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 2013. After consideration of the matters discussed above, the Company has concluded that its controls and procedures were effective at a reasonable assurance level as of March 29, 2014. 

(b) Changes in Internal Control over Financial Reporting

The Company is currently performing tests of internal controls over financial reporting performing tests for fiscal year 2014.

No other change 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.

Part II. Other Information

Item 6. EXHIBITS

(a) Exhibits.

3.1Articles 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).

3.2Articles 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).

3.3Articles of Amendment to Articles of Incorporation of Ingles Markets, Incorporated dated April 23, 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).

3.4Amended 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).

4.1Articles 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, 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).

4.2Articles 2, 3, 10, 11 and 14 of the 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).

23

4.3Indenture, 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).

4.4Registration 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). 

10.1Credit 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).

10.2Exhibits and Schedules to 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 joint 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).

10.3Waiver and First Amendment to the Credit Agreement dated as of May 12, 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, File No. 0-14706, previously filed with the Commission on December 26, 2012, and incorporated herein by this reference).

10.4Second Amendment to the Credit Agreement dated as of May 12, 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 10.1 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).

10.5Third Amendment to the Credit Agreement dated as of May 12, 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 10.5 to Ingles Markets, Incorporated’s Annual Report on Form 10-K, File No. 0-14706, previously filed with the Commission on December 26, 2012 and incorporated herein by this reference).

10.6Fourth Amendment to the Credit Agreement dated as of May 12, 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 10.6 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).

10.7Fifth 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).

31.1*Rule 13a-14(a) Certification

31.2*Rule 13a-14(a) Certification

32.1*Certification Pursuant to 18 U.S.C. Section 1350

32.2*Certification Pursuant to 18 U.S.C. Section 1350

24

101*The following financial information from the Quarterly Report on Form 10-Q for the fiscal quarter ended March 29, 2014, formatted in XBRL (Extensible Business Reporting Language) and furnished electronically herewith: (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Income; (iii) the Consolidated Statements of Changes in Stockholders Equity; (iv) the Consolidated Statements of Cash Flows; and (v) the Notes to the Consolidated Financial Statements.

________

* Filed herewith.

25

SIGNATURES

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.

	INGLES MARKETS, INCORPORATED
Date: May 6,  2014	/s/ Robert P. Ingle, II
	Robert P. Ingle, II
	Chief Executive Officer
Date: May 6,  2014	/s/ Ronald B. Freeman
	Ronald B. Freeman
	Vice President-Finance and Chief Financial Officer

26

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO 17 CFR 240.13a-14

PROMULGATED UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert P. Ingle, II, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Ingles Markets, Incorporated;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15 (e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d – 15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s first fiscal quarter) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):  

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May6,  2014

/s/ Robert P. Ingle, II

Robert P. Ingle, II

Chief Executive Officer

1

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO 17 CFR 240.13a-14

PROMULGATED UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Ronald B. Freeman, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Ingles Markets, Incorporated;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15 (e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d – 15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s first fiscal quarter) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):  

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

6

Date: May 6,  2014

/s/ Ronald B. Freeman

Ronald B. Freeman

Vice President - Finance and

Chief Financial Officer

1

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Ingles Markets, Incorporated (the “Company”) on Form 10-Q for the period endedMarch  29,  2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert P. Ingle, II, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Robert P. Ingle, II

Robert P. Ingle, II

Chief Executive Officer

May 6,  2014

The foregoing certification is being furnished as an exhibit of the Report pursuant to Item 601(b)(32) of Regulation S-K and Section 906 of the Sarbanes-Oxley Act of 2002 and, accordingly, is not being filed with the Securities and Exchange Commission as part of the Report and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Act of 1934, as amended (whether made before or after the date of the Report, irrespective of any general incorporation language contained in such filing).

1

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Ingles Markets, Incorporated (the “Company”) on Form 10-Q for the period ended March29,  2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ronald B. Freeman, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Ronald B. Freeman

Ronald B. Freeman

Vice President - Finance and

Chief Financial Officer

May6,  2014

The foregoing certification is being furnished as an exhibit of the Report pursuant to Item 601(b)(32) of Regulation S-K and Section 906 of the Sarbanes-Oxley Act of 2002 and, accordingly, is not being filed with the Securities and Exchange Commission as part of the Report and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Act of 1934, as amended (whether made before or after the date of the Report, irrespective of any general incorporation language contained in such filing).

1

XML

Segment Information (Narrative) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 29, 2014	Mar. 30, 2013	Mar. 29, 2014	Mar. 30, 2013
Segment Reporting Information [Line Items]
Increase in net sales from shopping center rentals		$ 2.1		$ 4.2
Increase in cost of goods sold from shopping center rentals		1.7		3.6
Fluid Dairy [Member]
Segment Reporting Information [Line Items]
Sales	$ 15.3	$ 14.8	$ 30.1	$ 30.7

XML

Income Taxes (Details) (USD $)	Mar. 29, 2014	Sep. 28, 2013
Income Taxes [Abstract]
Interest and penalties, accrued	$ 51,000
Unrecognized tax benefits	130,000
Refundable current income taxes	$ 9,700,000	$ 13,800,000

XML

Allowance For Doubtful Accounts

6 Months Ended

Mar. 29, 2014

Allowance For Doubtful Accounts [Abstract]

Allowance For Doubtful Accounts

C. ALLOWANCE FOR DOUBTFUL ACCOUNTS

Receivables are presented net of an allowance for doubtful accounts of $764,000 at March 29, 2014 and $733,000 at September 28, 2013, respectively.

XML

Long-Term Debt (Schedule Of Redemption Prices Of Senior Notes) (Details)	6 Months Ended
	Mar. 29, 2014
Long-Term Debt [Abstract]
2018	102.875%
2019	101.917%
2020	100.958%
2021 and thereafter	100.00%

XML

Long-Term Debt (Narrative) (Details) (USD $)	6 Months Ended
	Mar. 29, 2014	Oct. 29, 2009 sqft
Debt Instrument [Line Items]
Maturity period of Senior note	2023
Redemption period of senior notes	redeem all or a portion of the Notes at any time on or after June 15, 20
Amount of line of credit arrangement	$ 175,000,000
Final maturity date of bonds	Jan. 01, 2036
Redemption period of bonds	Jan. 01, 2014
Description of interest rate on bonds	interest rate on the Bonds is equal to one month LIBOR (adjusted monthly) plus a credit spread
Principal amount	700,000,000
Interest rate of Senior note	5.75%
Unused letters of credit issued	9,700,000
Total amount of bonds funded		99,700,000
Total area of new warehouse and distribution center		830,000
Annual amount of redemption of bonds	4,530,000
Repayment of line of credit	52,000,000
Redemption of senior notes, date	Jun. 15, 2018
Maximum amount of unused letters of credit allowed to issue	30,000,000
Senior Notes Maturing 2017 [Member]
Debt Instrument [Line Items]
Maturity period of Senior note	2017
Principal amount	$ 575,000,000

XML

Dividends (Details) (USD $)	3 Months Ended	6 Months Ended		3 Months Ended	6 Months Ended			0 Months Ended		6 Months Ended	0 Months Ended		6 Months Ended	0 Months Ended		6 Months Ended	0 Months Ended
	Mar. 29, 2014 Class A Common Stock [Member]	Mar. 29, 2014 Class A Common Stock [Member]	Mar. 30, 2013 Class A Common Stock [Member]	Mar. 29, 2014 Class B Common Stock [Member]	Mar. 29, 2014 Class B Common Stock [Member]	Mar. 30, 2013 Class B Common Stock [Member]	Mar. 29, 2014 Dividend 1 [Member]	Oct. 25, 2012 Dividend 1 [Member] Class A Common Stock [Member]	Oct. 25, 2012 Dividend 1 [Member] Class B Common Stock [Member]	Mar. 29, 2014 Dividend 2 [Member]	Jan. 23, 2014 Dividend 2 [Member] Class A Common Stock [Member]	Jan. 23, 2014 Dividend 2 [Member] Class B Common Stock [Member]	Mar. 29, 2014 Dividend 3 [Member]	Dec. 31, 2012 Dividend 3 [Member] Class A Common Stock [Member]	Dec. 31, 2012 Dividend 3 [Member] Class B Common Stock [Member]	Mar. 29, 2014 Special Dividend [Member]	Dec. 07, 2012 Special Dividend [Member] Class A Common Stock [Member]	Dec. 07, 2012 Special Dividend [Member] Class B Common Stock [Member]
Dividends Payable [Line Items]
Cash dividends per share of common stock																	$ 0.66	$ 0.60
Cash dividends per share of common stock	$ 0.165	$ 0.33	$ 0.99	$ 0.150	$ 0.30	$ 0.90		$ 0.165	$ 0.15		$ 0.165	$ 0.15		$ 0.165	$ 0.15
Dividend payment date							Oct. 24, 2013			Jan. 23, 2014			Dec. 31, 2012			Dec. 31, 2012
Dividend record date							Oct. 10, 2013			Jan. 09, 2014			Dec. 21, 2012			Dec. 21, 2012

XML

Earnings Per Common Share (Narrative) (Details)	6 Months Ended
	Mar. 29, 2014
Earnings Per Share [Line Items]
Voting rights for shareholders	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
Percentage of cash dividend on Class B Common Stock entitled to receive for each share of Class A Common Stock	110.00%
Conversion feature for Class B Common Stock	each share is convertible into one share of Class A Common Stock at any time
Class A Common Stock [Member]
Earnings Per Share [Line Items]
Number of votes for common stock	1
Class B Common Stock [Member]
Earnings Per Share [Line Items]
Number of votes for common stock	10

XML

New Accounting Pronouncements

6 Months Ended

Mar. 29, 2014

New Accounting Pronouncements [Abstract]

New Accounting Pronouncements

B. NEW ACCOUNTING PRONOUNCEMENTS

There were no new accounting standards adopted in the six-month period ended March 29, 2014.

XML

Earnings Per Common Share (Reconciliation Of Numerators And Denominators Of Basic And Diluted Earnings Per Share) (Details) (USD $)	3 Months Ended		6 Months Ended
	Mar. 29, 2014	Mar. 30, 2013	Mar. 29, 2014	Mar. 30, 2013
Class A Common Stock [Member]
Schedule Of Calculation Of Numerator And Denominator In Earnings Per Share [Line Items]
Net income allocated, basic	$ 6,417,400	$ 4,513,615	$ 12,263,861	$ 10,962,905
Conversion of Class B to Class A shares	4,037,528	3,576,541	7,724,197	8,694,898
Net income allocated, diluted	10,454,928	8,090,156	19,988,058	19,657,803
Weighted average shares outstanding, basic	13,456,262	12,961,853	13,447,893	12,958,169
Conversion of Class B to Class A shares	9,303,514	11,297,923	9,311,883	11,301,607
Weighted average shares outstanding, diluted	22,759,776	24,259,776	22,759,776	24,259,776
Earnings per share, Basic	$ 0.47	$ 0.35	$ 0.91	$ 0.85
Earnings per share, Diluted	$ 0.46	$ 0.33	$ 0.88	$ 0.81
Class B Common Stock [Member]
Schedule Of Calculation Of Numerator And Denominator In Earnings Per Share [Line Items]
Net income allocated, basic	4,037,528	3,576,541	7,724,197	8,694,898
Net income allocated, diluted	$ 4,037,528	$ 3,576,541	$ 7,724,197	$ 8,694,898
Weighted average shares outstanding, basic	9,303,514	11,297,923	9,311,883	11,301,607
Weighted average shares outstanding, diluted	9,303,514	11,297,923	9,311,883	11,301,607
Earnings per share, Basic	$ 0.43	$ 0.32	$ 0.83	$ 0.77
Earnings per share, Diluted	$ 0.43	$ 0.32	$ 0.83	$ 0.77

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Condensed Consolidated Balance Sheets (USD $)	Mar. 29, 2014	Sep. 28, 2013
Current Assets:
Cash and cash equivalents	$ 7,387,333	$ 16,844,007
Receivables - net	64,923,793	59,929,491
Inventories	333,423,272	329,691,256
Other current assets	25,110,990	28,075,314
Total Current Assets	430,845,388	434,540,068
Property and Equipment – Net	1,205,951,284	1,212,132,055
Other Assets	23,654,647	22,655,614
Total Assets	1,660,451,319	1,669,327,737
Current Liabilities:
Current portion of long-term debt	13,814,664	18,956,761
Accounts payable - trade	151,851,736	160,314,263
Accrued expenses and current portion of other long-term liabilities	61,970,660	72,002,983
Total Current Liabilities	227,637,060	251,274,007
Deferred Income Taxes	83,550,000	86,082,000
Long-Term Debt	897,318,379	893,514,238
Other Long-Term Liabilities	28,549,670	27,818,217
Total Liabilities	1,237,055,109	1,258,688,462
Common stocks:
Paid-in capital in excess of par value	77,186,249	77,186,249
Retained earnings	345,071,972	332,315,037
Total Stockholders’ Equity	423,396,210	410,639,275
Total Liabilities and Stockholders’ Equity	1,660,451,319	1,669,327,737
Class A Common Stock [Member]
Common stocks:
Common stock, value	673,427	671,899
Class B Common Stock [Member]
Common stocks:
Common stock, value	$ 464,562	$ 466,090

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Condensed Consolidated Statements Of Cash Flows (USD $)	6 Months Ended
	Mar. 29, 2014	Mar. 30, 2013
Cash Flows from Operating Activities:
Net income	$ 19,988,058	$ 19,657,803
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	48,113,901	47,128,497
Gain on disposals of property and equipment	(208,156)	(4,175,642)
Receipt of advance payments on purchase contracts	2,516,458	3,015,720
Recognition of advance payments on purchase contracts	(1,632,251)	(1,754,024)
Deferred income taxes	(3,271,000)	(1,278,000)
Changes in operating assets and liabilities:
Receivables	(4,994,302)	(3,182,573)
Inventory	(3,732,015)	(640,035)
Other assets	2,064,706	(1,131,736)
Accounts payable and accrued expenses	(8,095,489)	(12,616,141)
Net Cash Provided by Operating Activities	50,749,910	45,023,869
Cash Flows from Investing Activities:
Proceeds from sales of property and equipment	200,804	7,679,488
Capital expenditures	(51,838,307)	(47,046,109)
Net Cash Used by Investing Activities	(51,637,503)	(39,366,621)
Cash Flows from Financing Activities:
Proceeds from short-term borrowings	297,451,513	411,598,618
Payments on short-term borrowings	(297,451,513)	(389,719,260)
Proceeds from other long-term borrowings	14,000,000	8,000,000
Principal payments on long-term borrowings	(15,337,958)	(5,037,754)
Dividends paid	(7,231,123)	(22,999,892)
Net Cash (Used) Provided by Financing Activities	(8,569,081)	1,841,712
Net (Decrease) Increase in Cash and Cash Equivalents	(9,456,674)	7,498,960
Cash and cash equivalents at beginning of period	16,844,007	4,683,410
Cash and Cash Equivalents at End of Period	$ 7,387,333	$ 12,182,370

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Segment Information (Sales By Product Category) (Details) (USD $)	3 Months Ended		6 Months Ended
	Mar. 29, 2014	Mar. 30, 2013	Mar. 29, 2014	Mar. 30, 2013
Segment Reporting Information By Segment [Line Items]
Net sales	$ 947,760,587	$ 920,694,264	$ 1,892,885,457	$ 1,855,671,791
Grocery [Member]
Segment Reporting Information By Segment [Line Items]
Net sales	355,658,000	359,466,000	714,557,000	730,727,000
Non-Foods [Member]
Segment Reporting Information By Segment [Line Items]
Net sales	176,580,000	170,271,000	358,454,000	347,975,000
Perishables [Member]
Segment Reporting Information By Segment [Line Items]
Net sales	230,450,000	218,433,000	457,052,000	438,381,000
Gasoline [Member]
Segment Reporting Information By Segment [Line Items]
Net sales	145,760,000	138,204,000	288,471,000	269,087,000
Grocery Sales [Member]
Segment Reporting Information By Segment [Line Items]
Net sales	$ 908,448,000	$ 886,374,000	$ 1,818,534,000	$ 1,786,170,000

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Segment Information (Tables)

6 Months Ended

Mar. 29, 2014

Segment Information [Abstract]

Operations By Lines Of Business

	Three Months Ended				Six Months Ended
	March 29,		March 30,		March 29,		March 30,
	2014		2013		2014		2013
Revenues from unaffiliated customers:
Grocery sales	$	908,448	$	886,374	$	1,818,534	$	1,786,170
Other		39,313		34,320		74,351		69,502
Total revenues from unaffiliated customers	$	947,761	$	920,694	$	1,892,885	$	1,855,672
Income from operations:
Grocery sales	$	24,284	$	24,415	$	48,449	$	55,256
Other		3,521		3,307		5,556		5,947
Total income from operations	$	27,805	$	27,722	$	54,005	$	61,203

	March 29,		September 28,
	2014		2013
Assets:
Grocery sales	$	1,516,206	$	1,528,483
Other		146,490		143,237
Elimination of intercompany receivable		(2,245)		(2,392)
Total assets	$	1,660,451	$	1,669,328

Sales By Product Category

	Three Months Ended				Six Months Ended
	March 29,		March 30,		March 29,		March 30,
	2014		2013		2014		2013
Grocery	$	355,658	$	359,466	$	714,557	$	730,727
Non-foods		176,580		170,271		358,454		347,975
Perishables		230,450		218,433		457,052		438,381
Gasoline		145,760		138,204		288,471		269,087
Total grocery segment	$	908,448	$	886,374	$	1,818,534	$	1,786,170

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Fair Values Of Financial Instruments (Details) (USD $) In Thousands, unless otherwise specified	Mar. 29, 2014
Carrying Amount [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Estimated fair value of debt	$ 911,133
Fair Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Estimated fair value of debt	914,770
Level 2 [Member] | Senior Notes, Net Of Unamortized Original Issue Discount [Member] | Carrying Amount [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Estimated fair value of debt	700,000
Level 2 [Member] | Senior Notes, Net Of Unamortized Original Issue Discount [Member] | Fair Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Estimated fair value of debt	703,500
Level 2 [Member] | Recovery Zone Facility Bonds [Member] | Carrying Amount [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Estimated fair value of debt	95,210
Level 2 [Member] | Recovery Zone Facility Bonds [Member] | Fair Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Estimated fair value of debt	95,210
Level 2 [Member] | Real Estate And Equipment Notes Payable [Member] | Carrying Amount [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Estimated fair value of debt	115,923
Level 2 [Member] | Real Estate And Equipment Notes Payable [Member] | Fair Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Estimated fair value of debt	$ 116,060

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Allowance For Doubtful Accounts (Details) (USD $)	Mar. 29, 2014	Sep. 28, 2013
Allowance For Doubtful Accounts [Abstract]
Allowance for doubtful accounts receivables	$ 764,000	$ 733,000

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Basis Of Preparation

6 Months Ended

Mar. 29, 2014

Basis Of Preparation [Abstract]

Basis Of Preparation

A. BASIS OF PREPARATION

In the opinion of management, the accompanying unaudited interim financial statements contain all adjustments necessary to present fairly the financial position of Ingles Markets, Incorporated and Subsidiaries (the “Company”) as of March 29, 2014, the results of operations for the three-month and six-month periods ended March 29, 2014 and March 30, 2013, and the changes in stockholders’ equity and cash flows for the six-month periods ended March 29, 2014 and March 30, 2013. 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 28, 2013 filed by the Company under the Securities Exchange Act of 1934 on December 12, 2013.

The results of operations for the three-month and six-month periods ended March 29, 2014 are not necessarily indicative of the results to be expected for the full fiscal year.

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $)	Mar. 29, 2014	Sep. 28, 2013
Preferred stock, par value	$ 0.05	$ 0.05
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Class A Common Stock [Member]
Common stock, par value	$ 0.05	$ 0.05
Common stock, shares authorized	150,000,000	150,000,000
Common stock, shares issued	13,468,537	13,437,975
Common stock, shares outstanding	13,468,537	13,437,975
Class B Common Stock [Member]
Common stock, par value	$ 0.05	$ 0.05
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	9,291,239	9,321,801
Common stock, shares outstanding	9,291,239	9,321,801

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Nonqualified Investment Plan

6 Months Ended

Mar. 29, 2014

Nonqualified Investment Plan [Abstract]

Nonqualified Investment Plan

K.  NONQUALIFIED INVESTMENT PLAN

The purpose of the Executive Nonqualified Excess Plan is to provide retirement benefits similar to the Company’s Investment/Profit Sharing Plan 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.  Participant retirement account balances are liabilities of the Company.  Assets of the plan are assets of the Company and are held in trust for employees and distributed upon retirement, death, disability, in-service distributions, or other termination of employment.  In accordance with the trust, the Company may not use these assets for general corporate purposes.  During the six months ended March 29, 2014 and March 30, 2013, the Company invested a portion of the proceeds of liquidated life insurance policy assets in marketable securities.  These marketable securities will be liquidated and invested in other life insurance policies in future periods.  Life insurance policies and marketable securities held in the trust are included in the caption “Other assets” in the Condensed Consolidated Balance Sheets.

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Document And Entity Information	6 Months Ended
	Mar. 29, 2014	May 05, 2014 Class A Common Stock [Member]	May 05, 2014 Class B Common Stock [Member]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 29, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2
Trading Symbol	IMKTA
Entity Registrant Name	INGLES MARKETS INC
Entity Central Index Key	0000050493
Current Fiscal Year End Date	--09-27
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		13,513,983	9,245,793

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Subsequent Events

6 Months Ended

Mar. 29, 2014

Subsequent Events [Abstract]

Subsequent Events

L. SUBSEQUENT EVENTS

We have evaluated subsequent events and transactions for potential recognition or disclosure in the financial statements through the day the financial statements were issued.

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Condensed Consolidated Statements Of Income (USD $)	3 Months Ended		6 Months Ended
	Mar. 29, 2014	Mar. 30, 2013	Mar. 29, 2014	Mar. 30, 2013
Net sales	$ 947,760,587	$ 920,694,264	$ 1,892,885,457	$ 1,855,671,791
Cost of goods sold	741,636,640	722,048,693	1,483,255,844	1,448,820,979
Gross profit	206,123,947	198,645,571	409,629,613	406,850,812
Operating and administrative expenses	178,402,604	174,977,866	355,832,785	349,823,648
Gain from sale or disposal of assets	83,283	4,054,095	208,156	4,175,642
Income from operations	27,804,626	27,721,800	54,004,984	61,202,806
Other income, net	737,862	739,704	1,577,865	1,303,894
Interest expense	11,698,560	15,720,348	23,480,791	31,279,897
Income before income taxes	16,843,928	12,741,156	32,102,058	31,226,803
Income tax expense	6,389,000	4,651,000	12,114,000	11,569,000
Net income	$ 10,454,928	$ 8,090,156	$ 19,988,058	$ 19,657,803
Class A Common Stock [Member]
Per share amounts:
Basic earnings per common share	$ 0.47	$ 0.35	$ 0.91	$ 0.85
Diluted earnings per common share	$ 0.46	$ 0.33	$ 0.88	$ 0.81
Cash dividends per common share:
Common Stock	$ 0.165		$ 0.33	$ 0.99
Class B Common Stock [Member]
Per share amounts:
Basic earnings per common share	$ 0.43	$ 0.32	$ 0.83	$ 0.77
Diluted earnings per common share	$ 0.43	$ 0.32	$ 0.83	$ 0.77
Cash dividends per common share:
Common Stock	$ 0.150		$ 0.30	$ 0.90

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Long-Term Debt

6 Months Ended

Mar. 29, 2014

Long-Term Debt [Abstract]

Long-Term Debt

F. LONG-TERM DEBT

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 5.750% per annum and were issued at par. Note proceeds were used to repay $575.0 million aggregate principal amount of senior notes maturing in 2017,  $52.0 million of indebtedness outstanding under the Company’s line of credit, and to pay costs related to the offering of the Notes.  Remaining Note proceeds will be used for general corporate purposes, including future capital expenditures.

The Company filed a registration statement with the Securities and Exchange Commission to exchange the private placement notes with registered notes. The exchange has been completed.

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:

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

In connection with the offering of the Notes, the Company extended the maturity date of its $175.0 million line of credit from December 29, 2015 to June 12, 2018 and modified certain interest rate options and covenants.  There were no outstanding borrowings under the line of credit at March 29, 2014 or at September 28, 2013.

The line of credit provides the Company with various interest rate options based on the prime rate, the Federal Funds Rate, or the London Interbank Offering Rate. The line allows the Company to issue up to $30.0 million in unused letters of credit, of which $9.7 million of unused letters of credit were issued at March 29, 2014.  The Company is not required to maintain compensating balances in connection with the line of credit.

On December 29, 2010, the Company completed the funding of $99.7 million of Recovery Zone Facility Bonds (the “Bonds”) for:  (A) acquisition, construction and equipping of an approximately 830,000 square foot new warehouse and distribution center located in Buncombe County, North Carolina (the “Project”), and (B) the payment of certain expenses incurred in connection with the issuance of the Bonds.  The final maturity date of the Bonds is January 1, 2036.

The Bonds were issued by the Buncombe County Industrial Facilities and Pollution Control Financing Authority and were purchased by certain financial institutions.  Under a Continuing Covenant and Collateral Agency Agreement (the “Covenant Agreement”) between the financial institutions and the Company, the financial institutions would hold the Bonds until January 2, 2018, subject to certain events.   Mandatory redemption of the Bonds by the Company in the annual amount of $4,530,000 began on January 1, 2014. 

In connection with the offering of the Notes, the Company extended the maturity date of the Covenant Agreement from January 2, 2018 to June 30, 2021 and modified certain interest rate options and covenants. The Company may redeem the Bonds without penalty or premium at any time prior to June 30, 2021.

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 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 of credit.

The Notes, the Bonds and the line of credit 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 of credit 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 29, 2014.

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 of credit, Bond and Notes indenture in the event of default under any one instrument.

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Accrued Expenses And Current Portion Of Other Long-Term Liabilities

6 Months Ended

Mar. 29, 2014

Accrued Expenses And Current Portion Of Other Long-Term Liabilities [Abstract]

Accrued Expenses And Current Portion Of Other Long-Term Liabilities

E. ACCRUED EXPENSES AND CURRENT PORTION OF OTHER LONG-TERM LIABILITIES

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

	March 29,		September 28,
	2014		2013
Property, payroll and other taxes payable	$	11,423,655	$	16,771,941
Salaries, wages and bonuses payable		21,246,096		25,129,025
Self-insurance liabilities		12,136,910		12,844,143
Interest payable		12,551,936		12,993,252
Other		4,612,063		4,264,622
	$	61,970,660	$	72,002,983

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 Company is insured for covered costs in excess of $750,000 per occurrence for workers’ compensation, $500,000 for general liability and $325,000 per covered person for medical care benefits for a policy year. At March 29, 2014, the Company’s self-insurance reserves totaled $29.4 million.  Of this amount, $12.1 million is accounted for as a current liability and $17.3 million as a long-term liability. Employee insurance expense, including workers’ compensation and medical care benefits, net of employee contributions, totaled $3.5 million and $9.3 million for each of the three-month periods ended March 29, 2014 and March 30, 2013, respectively. For the six-month periods ended March 29, 2014 and March 30, 2013, employee insurance expense, net of employee contributions, totaled $12.0 million and $17.8 million, respectively.

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Fair Values Of Financial Instruments (Tables)

6 Months Ended

Mar. 29, 2014

Fair Values Of Financial Instruments [Abstract]

Carrying Amount And Fair Value Of Debt

	Carrying				Fair Value
	Amount		Fair Value		Measurements
Senior Notes	$	700,000	$	703,500	Level 2
Recovery Zone Facility Bonds		95,210		95,210	Level 2
Real estate and equipment notes payable		115,923		116,060	Level 2
Total debt	$	911,133	$	914,770

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Accrued Expenses And Current Portion Of Other Long-Term Liabilities (Tables)

6 Months Ended

Mar. 29, 2014

Accrued Expenses And Current Portion Of Other Long-Term Liabilities [Abstract]

Accrued Expenses and Current Portion of Other Long-Term Liabilities

	March 29,		September 28,
	2014		2013
Property, payroll and other taxes payable	$	11,423,655	$	16,771,941
Salaries, wages and bonuses payable		21,246,096		25,129,025
Self-insurance liabilities		12,136,910		12,844,143
Interest payable		12,551,936		12,993,252
Other		4,612,063		4,264,622
	$	61,970,660	$	72,002,983

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Segment Information

6 Months Ended

Mar. 29, 2014

Segment Information [Abstract]

Segment Information

I. SEGMENT INFORMATION

The Company operates one primary business segment, retail grocery sales.   The “Other” activities include fluid dairy and shopping center rentals.  The Company previously presented the fluid dairy and shopping center rentals as separate segments; however, these have now been combined as neither meets the criteria for separate disclosure in any period presented.  Prior year data has been recast to reflect the current segment presentation.  In addition, the Company has historically presented the revenue and expense of the shopping center rental segment “net” on the condensed consolidated statements of income.  In 2013, the Company concluded that the income and expense amounts associated with shopping center rentals should be presented as “gross” rather than “net”.  Accordingly the prior period condensed consolidated statements of income have been revised to eliminate the amounts presented as rental income, net while increasing net sales by $2.1 million and cost of goods sold by $1.7 million for the three months ended March 30, 2013.  The increase to net sales was $4.2 million and to cost of goods sold was $3.6 million for the six months ended March 30, 2013.  Management does not believe that these corrections are material to the financial statements.  Information about the Company’s operations by lines of business (amounts in thousands) is as follows:

	Three Months Ended				Six Months Ended
	March 29,		March 30,		March 29,		March 30,
	2014		2013		2014		2013
Revenues from unaffiliated customers:
Grocery sales	$	908,448	$	886,374	$	1,818,534	$	1,786,170
Other		39,313		34,320		74,351		69,502
Total revenues from unaffiliated customers	$	947,761	$	920,694	$	1,892,885	$	1,855,672
Income from operations:
Grocery sales	$	24,284	$	24,415	$	48,449	$	55,256
Other		3,521		3,307		5,556		5,947
Total income from operations	$	27,805	$	27,722	$	54,005	$	61,203

	March 29,		September 28,
	2014		2013
Assets:
Grocery sales	$	1,516,206	$	1,528,483
Other		146,490		143,237
Elimination of intercompany receivable		(2,245)		(2,392)
Total assets	$	1,660,451	$	1,669,328

Sales by product category (amounts in thousands) are as follows:

	Three Months Ended				Six Months Ended
	March 29,		March 30,		March 29,		March 30,
	2014		2013		2014		2013
Grocery	$	355,658	$	359,466	$	714,557	$	730,727
Non-foods		176,580		170,271		358,454		347,975
Perishables		230,450		218,433		457,052		438,381
Gasoline		145,760		138,204		288,471		269,087
Total grocery segment	$	908,448	$	886,374	$	1,818,534	$	1,786,170

The grocery category includes grocery, dairy, and frozen foods.

The non-foods include alcoholic beverages, tobacco, pharmacy, health and video.

The perishables category includes meat, produce, deli and bakery.

For the three-month periods ended March 29, 2014 and March 30, 2013, respectively, the fluid dairy operation had $15.3 million and $14.8 million in sales to the grocery sales segment. The fluid dairy operation had $30.1 million and $30.7 million in sales to the grocery sales segment for the six-month periods ended March 29, 2014 and March 30, 2013, respectively. These sales have been eliminated in consolidation and are excluded from the amounts in the table above.

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Dividends

6 Months Ended

Mar. 29, 2014

Dividends [Abstract]

Dividends

G. DIVIDENDS

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 24, 2013 to stockholders of record on October 10, 2013. 

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 23, 2014 to stockholders of record on January 9, 2014.  

On December 7, 2012, the Company declared a special dividend of $0.66 per share of Class A Common Stock and $0.60 per share of Class B Common Stock payable on December 31, 2012 to shareholders of record on December 21, 2012.  The Company also 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 December 31, 2012 to stockholders of record on December 21, 2012.

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 12, 2013.

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Earnings Per Common Share

6 Months Ended

Mar. 29, 2014

Earnings Per Common Share [Abstract]

Earnings Per Common Share

H. EARNINGS PER COMMON SHARE

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 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 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
	March 29, 2014				March 29, 2014
	Class A		Class B		Class A		Class B
Numerator: Allocated net income
Net income  allocated, basic	$	6,417,400	$	4,037,528	$	12,263,861	$	7,724,197
Conversion of Class B to Class A shares		4,037,528		—		7,724,197		—
Net income  allocated, diluted	$	10,454,928	$	4,037,528	$	19,988,058	$	7,724,197
Denominator: Weighted average shares outstanding
Weighted average shares outstanding, basic		13,456,262		9,303,514		13,447,893		9,311,883
Conversion of Class B to Class A shares		9,303,514		—		9,311,883		—
Weighted average shares outstanding, diluted		22,759,776		9,303,514		22,759,776		9,311,883
Earnings per share
Basic	$	0.47	$	0.43	$	0.91	$	0.83
Diluted	$	0.46	$	0.43	$	0.88	$	0.83

The per share amounts for the second quarter of fiscal 2013 and the six months ended March 30, 2013 are based on the following amounts:

	Three Months Ended				Six Months Ended
	March 30, 2013				March 30, 2013
	Class A		Class B		Class A		Class B
Numerator: Allocated net income
Net income allocated, basic	$	4,513,615	$	3,576,541	$	10,962,905	$	8,694,898
Conversion of Class B to Class A shares		3,576,541		—		8,694,898		—
Net income allocated, diluted	$	8,090,156	$	3,576,541	$	19,657,803	$	8,694,898
Denominator: Weighted average shares outstanding
Weighted average shares outstanding, basic		12,961,853		11,297,923		12,958,169		11,301,607
Conversion of Class B to Class A shares		11,297,923		—		11,301,607		—
Weighted average shares outstanding, diluted		24,259,776		11,297,923		24,259,776		11,301,607
Earnings per share
Basic	$	0.35	$	0.32	$	0.85	$	0.77
Diluted	$	0.33	$	0.32	$	0.81	$	0.77

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Fair Values Of Financial Instruments

6 Months Ended

Mar. 29, 2014

Fair Values Of Financial Instruments [Abstract]

Fair Values Of Financial Instruments

J. FAIR VALUES OF FINANCIAL INSTRUMENTS

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 is 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:

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.

The carrying amount and fair value of the Company’s debt at March 29, 2014 is as follows (in thousands):

	Carrying				Fair Value
	Amount		Fair Value		Measurements
Senior Notes	$	700,000	$	703,500	Level 2
Recovery Zone Facility Bonds		95,210		95,210	Level 2
Real estate and equipment notes payable		115,923		116,060	Level 2
Total debt	$	911,133	$	914,770

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

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Segment Information (Operations By Lines Of Business) (Details) (USD $)	3 Months Ended		6 Months Ended
	Mar. 29, 2014	Mar. 30, 2013	Mar. 29, 2014	Mar. 30, 2013	Sep. 28, 2013
Segment Reporting Information By Segment [Line Items]
Total revenues from unaffiliated customers	$ 947,761,000	$ 920,694,000	$ 1,892,885,000	$ 1,855,672,000
Total income from operations	27,804,626	27,721,800	54,004,984	61,202,806
Total assets	1,660,451,319		1,660,451,319		1,669,327,737
Elimination Of Intercompany Receivable [Member]
Segment Reporting Information By Segment [Line Items]
Total assets	(2,245,000)		(2,245,000)		(2,392,000)
Grocery Sales [Member]
Segment Reporting Information By Segment [Line Items]
Total revenues from unaffiliated customers	908,448,000	886,374,000	1,818,534,000	1,786,170,000
Total income from operations	24,284,000	24,415,000	48,449,000	55,256,000
Total assets	1,516,206,000		1,516,206,000		1,528,483,000
Other Segment [Member]
Segment Reporting Information By Segment [Line Items]
Total revenues from unaffiliated customers	39,313,000	34,320,000	74,351,000	69,502,000
Total income from operations	3,521,000	3,307,000	5,556,000	5,947,000
Total assets	$ 146,490,000		$ 146,490,000		$ 143,237,000

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Earnings Per Common Share (Tables)

6 Months Ended

Mar. 29, 2014

Earnings Per Common Share [Abstract]

Reconciliation Of Numerators And Denominators Of Basic And Diluted Earnings Per Share

	Three Months Ended				Six Months Ended
	March 29, 2014				March 29, 2014
	Class A		Class B		Class A		Class B
Numerator: Allocated net income
Net income  allocated, basic	$	6,417,400	$	4,037,528	$	12,263,861	$	7,724,197
Conversion of Class B to Class A shares		4,037,528		—		7,724,197		—
Net income  allocated, diluted	$	10,454,928	$	4,037,528	$	19,988,058	$	7,724,197
Denominator: Weighted average shares outstanding
Weighted average shares outstanding, basic		13,456,262		9,303,514		13,447,893		9,311,883
Conversion of Class B to Class A shares		9,303,514		—		9,311,883		—
Weighted average shares outstanding, diluted		22,759,776		9,303,514		22,759,776		9,311,883
Earnings per share
Basic	$	0.47	$	0.43	$	0.91	$	0.83
Diluted	$	0.46	$	0.43	$	0.88	$	0.83

The per share amounts for the second quarter of fiscal 2013 and the six months ended March 30, 2013 are based on the following amounts:

	Three Months Ended				Six Months Ended
	March 30, 2013				March 30, 2013
	Class A		Class B		Class A		Class B
Numerator: Allocated net income
Net income allocated, basic	$	4,513,615	$	3,576,541	$	10,962,905	$	8,694,898
Conversion of Class B to Class A shares		3,576,541		—		8,694,898		—
Net income allocated, diluted	$	8,090,156	$	3,576,541	$	19,657,803	$	8,694,898
Denominator: Weighted average shares outstanding
Weighted average shares outstanding, basic		12,961,853		11,297,923		12,958,169		11,301,607
Conversion of Class B to Class A shares		11,297,923		—		11,301,607		—
Weighted average shares outstanding, diluted		24,259,776		11,297,923		24,259,776		11,301,607
Earnings per share
Basic	$	0.35	$	0.32	$	0.85	$	0.77
Diluted	$	0.33	$	0.32	$	0.81	$	0.77

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Accrued Expenses And Current Portion Of Other Long-Term Liabilities (Narrative) (Details) (USD $)	3 Months Ended		6 Months Ended
	Mar. 29, 2014	Mar. 30, 2013	Mar. 29, 2014	Mar. 30, 2013
Accrued Expenses And Current Portion Of Other Long-Term Liabilities [Abstract]
Workers' compensation per occurrence covered under insurance cost	$ 750,000		$ 750,000
General liability	500,000		500,000
Medical care benefits per person covered under insurance cost	325,000		325,000
Self insurance reserves	29,400,000		29,400,000
Employee insurance expense	3,500,000	9,300,000	12,000,000	17,800,000
Self insurance reserves, current	12,100,000		12,100,000
Self insurance reserves, noncurrent	$ 17,300,000		$ 17,300,000

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Condensed Consolidated Statements Of Changes In Stockholders' Equity (USD $)	Class A Common Stock [Member]	Class B Common Stock [Member]	Paid-In Capital In Excess Of Par Value [Member]	Retained Earnings [Member]	Total
Balance at Sep. 29, 2012	$ 647,682	$ 565,307	$ 114,236,249	$ 341,964,231	$ 457,413,469
Balance (in shares) at Sep. 29, 2012	12,953,635	11,306,141
Net income				19,657,803	19,657,803
Cash dividends				(22,999,892)	(22,999,892)
Common stock conversions (in shares)	19,665	(19,665)
Common stock conversions	983	(983)
Balance at Mar. 30, 2013	648,665	564,324	114,236,249	338,622,142	454,071,380
Balance (in shares) at Mar. 30, 2013	12,973,300	11,286,476
Balance at Sep. 28, 2013	671,899	466,090	77,186,249	332,315,037	410,639,275
Balance (in shares) at Sep. 28, 2013	13,437,975	9,321,801
Net income				19,988,058	19,988,058
Cash dividends				(7,231,123)	(7,231,123)
Common stock conversions (in shares)	30,562	(30,562)
Common stock conversions	1,528	(1,528)
Balance at Mar. 29, 2014	$ 673,427	$ 464,562	$ 77,186,249	$ 345,071,972	$ 423,396,210
Balance (in shares) at Mar. 29, 2014	13,468,537	9,291,239

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Income Taxes

6 Months Ended

Mar. 29, 2014

Income Taxes [Abstract]

Income Taxes

D.  INCOME TAXES

The Company’s continuing practice is to recognize interest and penalties related to uncertain tax positions and related matters in income tax expense. As of March 29, 2014, the Company had approximately $51,000 accrued for interest and penalties.

The Company’s effective tax rate differs from the federal statutory rate primarily as a result of state income taxes and tax credits.  As of March 29, 2014, the Company had gross unrecognized tax benefits of approximately $130,000, all of which, if recognized, would affect the effective tax rate.  The Company does not expect that the total amounts of unrecognized tax benefits will significantly increase or decrease within the next twelve months.

The Company files income tax returns with federal and various state jurisdictions.  With few exceptions, the Company is no longer subject to state income tax examinations by tax authorities for the years before 2009. Additionally, the Internal Revenue Service has completed its examination of the Company’s U.S. Federal income tax returns filed through fiscal 2008.

The Company had approximately $9.7 million and $13.8 million of refundable income taxes included in the caption “Other current assets” in the Condensed Consolidated Balance Sheets at March 29, 2014 and September 28, 2013, respectively.

On September 13, 2013, the IRS released final tangible property regulations under Sections 162(a) and 263(a) of the Internal Revenue Code regarding the deduction and capitalization of expenditures related to tangible property as well as dispositions of tangible property.  These regulations will be effective for the Company’s fiscal year ending September 26, 2015.  Taxpayers may elect to apply them to tax years beginning on or after January 1, 2012.  The Company does not anticipate that the regulations will have a material impact on the Company’s consolidated results of operations, cash flows or financial position.

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Accrued Expenses And Current Portion Of Other Long-Term Liabilities (Accrued Expenses And Current Portion Of Other Long-Term Liabilities) (Details) (USD $)	Mar. 29, 2014	Sep. 28, 2013
Accrued Expenses And Current Portion Of Other Long-Term Liabilities [Abstract]
Property, payroll, and other taxes payable	$ 11,423,655	$ 16,771,941
Salaries, wages and bonuses payable	21,246,096	25,129,025
Self-insurance liabilities	12,136,910	12,844,143
Interest payable	12,551,936	12,993,252
Other	4,612,063	4,264,622
Total	$ 61,970,660	$ 72,002,983

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Long-Term Debt (Tables)

6 Months Ended

Mar. 29, 2014

Long-Term Debt [Abstract]

Schedule Of Maturities Of Long-Term Debt

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