Ingles Confirms Fiscal 2004 Results

ASHEVILLE, N.C. -- Ingles Markets, Inc. yesterday confirmed its fiscal 2004 results, following a preliminary report the company released several weeks ago. Net income at the regional chain based here reached $28.8 million, or $1.22 per share, for the fiscal year ended Sept. 25, 2004 -- the highest net income in its 41-year history and a 69 percent increase over its net income of $17.0 million for fiscal 2003.

Ingles confirmed that net income for the fourth quarter of fiscal 2004 was $10.8 million, or $0.45 per diluted share, a 27 percent increase over fiscal 2003.

Net sales increased 7.3 percent over fiscal 2003 and 8.3 percent for the fourth fiscal quarter over the prior fiscal quarter.

As Ingles had stated in its preliminary release, comparable store sales increased 6.7 percent for 2004, and 8.2 percent for the fourth quarter.

As previously disclosed, during preparation for its annual audit and annual report for fiscal 2004 and as a result of a recently completed internal investigation initiated after an informal SEC inquiry, the company determined that certain vendor allowances during prior years and certain other revenue and expense items were recognized in the incorrect accounting periods. In addition, the company identified errors in the accounting for certain lease transactions.

The restatements resulted in an increase in earnings of $0.7 million for fiscal year 2004 through the third quarter, a slight increase in earnings of $24,000 in fiscal 2003, and a reduction in earnings of $2.2 million in 2002, Ingles said. Cumulatively through the beginning of fiscal 2003, the decrease to retained earnings of the company resulting from the restatements totaled approximately $7.0 million. There was no cash flow impact from the restatements.

Commenting on the results, c.e.o. Robert P. Ingle said in a statement, "We are quite proud of our sales and earnings increase for fiscal 2004, particularly in a time when many food retailers are struggling for sales dollars. We attribute our sales and earnings growth to the efforts of our team to better know our customers and provide them with the quality, service, and value they expect."

"The SEC inquiry and the resulting internal investigation were grueling for the company, but we believe in the long run, we will be better for it. While the SEC inquiry has not been closed, it remains an informal inquiry and the company has fully cooperated with the SEC's requests. We regret the delay in announcing our fourth quarter and fiscal year 2004 results, especially since we are so proud of them, but it was important that we fully address all issues arising from the inquiry and the internal investigation."

Ingle said the majority of the restatements resulted from the accounting for vendor allowances. He noted the company has implemented additional controls and procedures designed to ensure more accurate accounting for vendor allowances.

Ingles said there will be a delay in announcing first quarter 2005 results for the quarter ended Dec. 25, 2004. However, the company did announce an increase in first quarter 2005 comparable store sales of 4.7 percent, compared to the same quarter last year. "First quarter 2005 will be affected by the costs of the internal investigation and increased audit fees related to the investigation and the restatements," Ingle noted.

Ingles Markets operates 197 supermarkets in six southeastern states. In conjunction with its supermarket operations, the company also operates 74 neighborhood shopping centers, all but 16 of which contain an Ingles supermarket.
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