IMKTA » Topics » Nine Months Ended June 24, 2006 Compared to the Nine Months Ended June 25, 2005

This excerpt taken from the IMKTA 10-Q filed Jul 31, 2006.

Nine Months Ended June 24, 2006 Compared to the Nine Months Ended June 25, 2005

Net Sales. Net sales for the nine months ended June 24, 2006 increased 12.2% to $1.89 billion, compared to $1.68 billion for the nine months ended June 25, 2005. Sales grew in every department except video, with the largest percentage increases in the gasoline, pharmacy, deli and produce departments.

Grocery segment comparable store sales for the same period grew $174.0 million or 11.0%. Fuel price inflation of approximately 27.8% and a 55.1% increase in total gallons sold increased gasoline department sales in the June 2006 nine-month period. Excluding gasoline sales, comparable store sales increased $117.2 million, or 7.7% for the nine months ended June 24, 2006.

Changes in grocery segment sales for the nine months ended June 24, 2006 can be summarized as follows (dollars in thousands):

 

Total grocery sales for the nine months ended June 25, 2005

   $ 1,601,372  

Comparable store sales increase (including gasoline)

     173,952  

Impact of stores opened in fiscal 2005 and 2006

     39,408  

Impact of stores closed in fiscal 2005 and 2006

     (7,566 )

Other

     8  
        

Total grocery sales for the nine months ended June 24, 2006

   $ 1,807,174  
        

Net sales to outside parties for the Company’s milk processing subsidiary increased $0.3 million or 0.3% in the June 2006 nine-month period compared to the June 2005 nine-month period. Decreases in the price of raw milk during the fiscal year 2006 period were offset by increased case volume sales compared to the fiscal year 2005 period.

Gross Profit. Gross profit for the nine months ended June 24, 2006 increased $44.1 million or 10.3% to $471.2 million compared to $427.1 million, for the nine months ended June 25, 2005. As a percentage of sales, gross profit decreased to 24.9% for the nine months ended June 24, 2006 from 25.4% for the nine months ended June 25, 2005.

The increase in grocery segment gross profit dollars was primarily due to the higher sales volume. Grocery segment gross profit as a percentage of total sales was lower for the June 2006 nine month period due primarily to higher sales growth in the gasoline and pharmacy departments. These departments generally have lower gross margins. Excluding gasoline sales, grocery segment gross profit as a percentage of sales was 27.0% for the nine months ended June 24, 2006 compared to 26.7% for the same period of last fiscal year.

Gross profit for the Company’s milk processing subsidiary increased $0.3 million or 2.1% for the June 2006 nine-month period compared to the June 2005 nine-month period. Gross profit dollars and gross profit as a percentage of sales was substantially unchanged over the comparative nine month period as lower per case sales prices were offset by increased case volume and per gallon margins.

Operating and Administrative Expenses. Operating and administrative expenses increased $22.9 million or 6.3% to $389.6 million for the nine months ended June 24, 2006, from $366.7 million for the nine months ended June 25, 2005. As a percentage of sales, operating and administrative expenses decreased to 20.6% for the June 2006 nine-month period from 21.8% for the same period last year.

 

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A breakdown of the major increases (decreases) in operating and administrative expenses is as follows:

 

     Increase
(decrease)
in millions
    Increase
(decrease)
as a % of
sales
 

Salaries and wages

   $ 14.2     (0.2 )%

Utilities and fuel

   $ 2.7     —    %

Bank charges

   $ 2.5     0.1  %

Store supplies

   $ 2.2     —    %

Equipment rent expense

   $ (3.6 )   (0.2 )%

Salaries and wages increased in dollars due to additional labor hours required for the increased sales volume, but decreased slightly as a percentage of sales due to the allocation of management salaries over higher sales dollars and sales growth in less labor-intensive departments, such as gasoline.

Utility and fuel expenses increased due to increases in market energy prices.

Bank charges rose primarily due to increased fees for processing debit and credit cards. The increase is a result of both increased usage of cards and increased transaction fees related to the usage.

Store supplies increased due to upgraded packaging used in perishables departments and the higher cost of plastic used in bags and wrapping materials.

Equipment rent expense decreased due to the expiration of operating leases on equipment used in the Company’s distribution facility and in its stores. Much of this equipment was purchased by the Company at the expiration of the lease term.

Rental Income, Net. Rental income, net decreased $0.4 million to $4.0 million in the June 2006 nine-month period from $4.4 million in the June 2005 comparable period due to a decrease in gross rental income and an increase in shopping center expenses.

Other Income, Net. Other income, net was $1.3 million for each of the nine-month periods. During the June 2005 nine month period, gains attributable to the termination of a lease with a former tenant were offset by write-downs of equipment and leaseholds in closed stores.

Interest Expense. Interest expense decreased $1.8 million to $36.7 million for the nine months ended June 24, 2006 from $38.5 million for the nine months ended June 25, 2005, due primarily to $24.3 million of principal debt repayment between June 25, 2005 and June 24, 2006.

Income Taxes. Income tax expense as a percentage of pre-tax income was 38.1% in the June 2006 nine-month period compared to 37.8% in the June 2005 nine-month period due to a larger percentage of income allocated to higher tax jurisdictions.

Net Income. Net income increased $13.9 million or 80.9% for the nine-month period ended June 24, 2006 to $31.1 million compared to $17.2 million for the nine-month period ended June 25, 2005. Net income, as a percentage of sales, was 1.6% for the June 2006 nine-month period and 1.0% for the June 2005 nine-month period. The increase in net income is attributed to increased sales, stable gross margin and a decrease in expenses as a percentage of sales. Basic and diluted earnings per share for Class A Common Stock were $1.33 and $1.27 for the nine months ended June 2006 compared to $0.75 and $0.71, respectively, for the nine months ended June 2005. Basic and diluted earnings per share for Class B Common Stock were each $1.21 for the nine months ended June 2006 compared to $0.68 of basic and diluted earnings per share for the nine months ended June 2005.

This excerpt taken from the IMKTA 10-Q filed May 2, 2006.

Six Months Ended March 25, 2006 Compared to the Six Months Ended March 26, 2005

Net Sales. Net sales for the six months ended March 25, 2006 increased 10.2% to $1.23 billion, compared to $1.12 billion for the six months ended March 26, 2005. Comparable store sales increased $93.1 million or 8.9% for the same period. Sales improved in each department except video, with the largest percentage increases in the gasoline, pharmacy, deli and produce departments, as noted above in the three-month discussion.

Net sales to outside parties for the Company’s milk processing subsidiary increased $0.4 million or 0.7% in the March 2006 six-month period compared to the March 2005 six-month period due to the increased raw milk costs and slightly higher volume of gallons sold.

Sales comparisons for the three and six-month periods were affected by the timing of the Easter holiday, as described in the three-month discussion. The Company estimates that comparable store sales increases are slightly higher, at 9.2% for the March 2006 six month period adjusted for the effect of Easter 2005 sales.

In addition to the factors discussed above in the three-month discussion, the Company recently completed or expects to complete four new, remodeled or replacement stores during the last six months of fiscal 2006. The Company expects that both the maturation of new and expanded stores and successful promotional efforts will continue to drive sales growth.

Gross Profit. Gross profit for the six months ended March 25, 2006 increased $24.1 million or 8.5% to $308.1 million compared to $284.0 million, for the six months ended March 26, 2005. As a percent of sales, gross profit decreased to 25.0% for the six months ended March 25, 2006 from 25.4% for the six months ended March 26, 2005. Lower margins in gasoline and frozen foods during the first six months of fiscal 2006, attributable to competitive and promotional factors, accounted for much of the overall margin decrease. Sales of lower margin gasoline increased substantially both in sales dollars and gallons sold. Following heavy holiday promotional activity during the Company’s first fiscal quarter ended December 24, 2005 gross profit as a percentage of sales increased during the second fiscal quarter of 2006.

Gross profit for the Company’s milk processing subsidiary for the March 2006 six-month period decreased $0.3 million or 2.8% to $9.8 million, or 12.4% of sales compared to $10.1 million or 12.9% of sales for the March 2005 six-month period. Higher cream prices during the first quarter of fiscal 2005 contributed to the higher gross profit as a percentage of sales during last fiscal year. Excess cream is produced in the processing of milk and is sold in bulk to producers of ice cream and cheese.

Operating and Administrative Expenses. Operating and administrative expenses increased $14.2 million or 5.8% to $258.5 million for the six months ended March 25, 2006, from $244.3 million for the six months ended March 26, 2005. As a percentage of sales, operating and administrative expenses decreased to 21.0% for the March 2006 six-month period from 21.8% for the March 2005 six-month period. A variety of factors contributed to the dollar increase.

A breakdown of the major increases (decreases) in operating and administrative expenses is as follows:

 

     Increase
(decrease)
in millions
   

Increase
(decrease)
as a %

of sales

 

Salaries and wages

   $ 8.1     (0.2 )%

Utilities and fuel

   $ 1.9     —    %

Bank charges

   $ 1.4     0.1  %

Store supplies

   $ 1.3     —    %

Taxes and licenses

   $ 1.3     —    %

Rent expense

   $ (2.0 )   (0.2 )%

Salaries and wages increased in dollars due to additional labor hours required for the increased sales volume but decreased to 8.9% of sales for the March 2006 six-month period compared to 9.1% for the comparable 2005 period. Increased sales over the same number of store properties allows the Company to better leverage store and management personnel costs.

Utility and fuel expenses increased due to increases in market energy prices.

Bank charges rose primarily due to increased fees for processing debit and credit cards. The increase is a result of both increased usage of cards and increased transaction fees related to the usage.

Store supplies increased due to upgraded packaging used in perishables departments and the higher cost of plastic used in bags and wrapping materials.

Taxes and licenses increased due to higher estimated expected tax payments.

 

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Table of Contents

Equipment rent expense decreased due to the expiration of operating leases on equipment used in the Company’s distribution facility and in its stores. Much of this equipment was purchased by the Company at the expiration of the lease term.

Rental Income, Net. Rental income, net was $2.6 million for each of the six month periods. Tenant activity has been relatively quiet over the past eighteen months, following a period in which the Company sold certain income-producing properties and in which several tenants relocated from shopping centers to stand alone sites.

Other Income, Net. Other income, net increased $0.1 million for the March 2006 six-month period over the comparable period in fiscal 2005. During the March 2005 six-month period, the Company disposed of certain equipment and leasehold improvements from recently closed stores. During the March 2006 six-month period, the Company received proceeds from land compensation settlements with state or local governments.

Interest Expense. Interest expense decreased $1.4 million to $24.6 million for the six months ended March 25, 2006 from $26.0 million for the six months ended March 26, 2005. Total debt at March 25, 2006 was $560.6 million compared to $586.5 million at March 26, 2005.

Income Taxes. Income tax expense as a percentage of pre-tax income increased to 39.5% in the March 2006 six-month period from 37.9% in the March 2005 six-month period due to increased state income taxes.

Net Income. Net income increased $6.7 million or 63.3% for the March 2006 six-month period to $17.2 million, compared to $10.5 million, for the March 2005 six-month period. The increase in net income is attributed to increased sales, stable gross margin and a decrease in expenses as a percent of sales. Basic and diluted earnings per share for Class A Common Stock were $0.74 and $0.70 for the March 2006 six-month period compared to $0.46 and $0.44, respectively, for the March 2005 six-month period. Basic and diluted earnings per share for Class B Common Stock were each $0.67 for the March 2006 six month period compared to $0.42 of basic and diluted earnings per share for the March 2005 six month period.

EXCERPTS ON THIS PAGE:

10-Q
Jul 31, 2006
10-Q
May 2, 2006

RELATED TOPICS for IMKTA:

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