Ron Freeman - Chief Financial Officer

Bryan Hunt - Wells Fargo Securities Damian Witkowski - Gabelli & Company Hale Holden - Barclays Capital William Reuter - Bank of America

Good day and welcome to the Ingles Markets Incorporated First Quarter 2014 Earnings Release Conference Call. Today’s call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to the Chief Financial Officer, Mr. Ron Freeman. Please go ahead.

Thank you. Good morning and welcome to the Ingles Markets’ Fiscal 2014 First Quarter Conference Call. With me today are Robert Ingle II, Chief Executive Officer; Jim Lanning, President and Tom Outlaw, Vice President of Sales and Marketing. Statements made on this call include forward-looking statements as defined by and subject to the Safe Harbors created by federal securities laws. Words such as expect, anticipate, intend, plan, believe, and similar expressions are intended to identify forward-looking statement. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed on this call. Ingles Markets incorporated does not undertake to update publicly any forward-looking statement whether as a result of new information, future events, or otherwise. For a description of factors that could cause actual results to differ materially from that anticipated by forward-looking statements, you refer to the Company’s public filings, including the Form 10-K for the fiscal year ended September 28, 2013. In accordance with a longstanding company policy and in recognition of the extremely competitive nature of our industry, this call will not address individual competitors or Ingles’ marketing strategies other than what is included in the public filings. This morning, I’ll provide you with a summary of our first quarter results followed by additional comments. After that, we will be pleased to take your questions. Our press release issued this morning is available on our website at www.ingles-markets.com. We plan to file the 10-Q for the quarter later this week. It will be available via our website as well. Net income totaled 9.5 million for the December 2013 quarter, compared with net income of 11.6 million for the quarter ended December 2012. Non-gasoline grocery sales were relatively level…

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Thank you. (Operator Instructions) We will take our first question from Bryan Hunt with Wells Fargo Securities.

Good morning, Ron. Wells Fargo Securities: Good morning, Ron.

Hey, Bryan, how are you?

I’m well. Excuse my voice. If I look the -- my first question it really has to do with the stepped up promotional environment, can you talk about whether the intensity was in a specific region when you look throughout your store-base or within a specific product category? Wells Fargo Securities: I’m well. Excuse my voice. If I look the -- my first question it really has to do with the stepped up promotional environment, can you talk about whether the intensity was in a specific region when you look throughout your store-base or within a specific product category?

No, no it really was across the entire store-base and across the number of product categories.

Okay. And then next one, when you look at the negative same-store sales for the period were there any categories that saw exceptional sales declines relative to others or relative increases? Wells Fargo Securities: Okay. And then next one, when you look at the negative same-store sales for the period were there any categories that saw exceptional sales declines relative to others or relative increases?

Well, it was only a 0.8% comp sales decline and that was spread throughout everything that was not one particular part that jumped out.

Okay. And when think about the timing of the holiday season with one fewer week, do you feel like if you were just for that one fewer week before ThanksGiving to Christmas, the same-store sales would have been positive or is there any way you can adjust the sales tempo for us? Wells Fargo Securities: Okay. And when think about the timing of the holiday season with one fewer week, do you feel like if you were just for that one fewer week before ThanksGiving to Christmas, the same-store sales would have been positive or is there any way you can adjust the sales tempo for us?

We have not done that particular analysis just for us. The holidays were where they were and we had to try to react accordingly.

And my last question is, if we’ve adjusted SNAP payments from the government, do you feel like you saw the full impact or reduce in that payments during the period? Wells Fargo Securities: And my last question is, if we’ve adjusted SNAP payments from the government, do you feel like you saw the full impact or reduce in that payments during the period?

That hasn’t had a significant impact on us, but that’s something that we’ll certainly watch going forward.

Do you have an idea, how many of your customers actually get government assistance? Wells Fargo Securities: Do you have an idea, how many of your customers actually get government assistance?

We do but that’s not something that we’ve ever publically disclosed.

Okay, I’ll get back in the queue. Thanks. Wells Fargo Securities: Okay, I’ll get back in the queue. Thanks.

Sure Bryan.

And we’ll take our next question from the Damian Witkowski with Gabelli & Company.

Hi, good morning, Ron. Gabelli & Company: Hi, good morning, Ron.

Good morning, Damian.

Just following up on SNAPs, any idea why -- in theory it should have had an impact, you said it wasn’t a big one, are you seeing people just using and not really changing their shopping patterns just using cash instead? Gabelli & Company: Just following up on SNAPs, any idea why -- in theory it should have had an impact, you said it wasn’t a big one, are you seeing people just using and not really changing their shopping patterns just using cash instead?

It’s difficult to tell whether someone who maybe buying reduced SNAP amounts is replacing those sales with cash sales. We have certainly seen that happening with other companies in their public releases, but we really can’t quantify that because it’s difficult for us to grab that.

Okay. And then on the consumer, I don’t think you’ll give us guidance as in terms of what’s happening currently but if you look at the first quarter the Christmas quarter, the price investments that you saw from your competition across the board, do you think these were planned investments on their part or were they sort of a response to a slower traffic than they had anticipated? Gabelli & Company: Okay. And then on the consumer, I don’t think you’ll give us guidance as in terms of what’s happening currently but if you look at the first quarter the Christmas quarter, the price investments that you saw from your competition across the board, do you think these were planned investments on their part or were they sort of a response to a slower traffic than they had anticipated?

Well, we don’t about what the competitors’ are pricing. We consciously made decisions for our price investments to keep prices low for our customers.

Okay. And again even though as across the board was there -- I mean I assume you do respond to what the competition is doing as well and was there without naming names I mean was there someone who is acting more irrational than usual? Gabelli & Company: Okay. And again even though as across the board was there -- I mean I assume you do respond to what the competition is doing as well and was there without naming names I mean was there someone who is acting more irrational than usual?

No, no one that we care to name names on.

Okay. And then any categories that obviously I mean it was a negative same-store sales, it wasn’t a big number, less than 1%, but categories that actually did a lot better than you may be expecting, whether it’s smaller categories like may be gift cards or anything else that sort of, which has a positive tone? Gabelli & Company: Okay. And then any categories that obviously I mean it was a negative same-store sales, it wasn’t a big number, less than 1%, but categories that actually did a lot better than you may be expecting, whether it’s smaller categories like may be gift cards or anything else that sort of, which has a positive tone?

We’ll have a table in our 10-Q that’s filed later on this week that will break it down a little bit. Again we actually had dollar sales growth in our non-foods, perishables and gasoline are a little bit behind in some of the other categories.

Okay. And then people obviously keep coming in more often because you try to go slightly up, the basket being lower I mean how much of it is do you think inflation not growing as fast versus just them putting fewer things in the basket because they can’t afford it? Gabelli & Company: Okay. And then people obviously keep coming in more often because you try to go slightly up, the basket being lower I mean how much of it is do you think inflation not growing as fast versus just them putting fewer things in the basket because they can’t afford it?

Yes, we didn’t see a big impact from inflation or deflation this quarter.

Okay, thanks Ron. Gabelli & Company: Okay, thanks Ron.

Sure.

(Operator Instructions) We will go next to Hale Holden with Barclays.

Thanks. I just had two quick ones. For the pricing investments that you made in the fourth quarter, is your expectation that you will be able to get some of that back as we travel through this year or is this going to sort of sit as it is? Barclays Capital: Thanks. I just had two quick ones. For the pricing investments that you made in the fourth quarter, is your expectation that you will be able to get some of that back as we travel through this year or is this going to sort of sit as it is?

No, we expect to get some of that back. Things are always a little different during the holiday quarter, so we expect we’ll regain some of that.

Great. And then any general comments you want to give us your color on say the consumer kind in markets and what you are seeing or what you are thinking on the consumer health? Barclays Capital: Great. And then any general comments you want to give us your color on say the consumer kind in markets and what you are seeing or what you are thinking on the consumer health?

Other than what we have talked about in some of the questions, consumer still is an out of the woods we don’t think by any stretch. We have some consumers that are affected by SNAP payments again they are certainly having to change their behavior a little bit. But there is not any one large factor that’s jumping out from consumer behavior either positively or negatively for us.

Okay, great. Thank you very much. Barclays Capital: Okay, great. Thank you very much.

You are welcome.

(Operator Instructions) And we will go next to William Reuter with Bank of America.

Good morning guys. Bank of America: Good morning guys.

Good morning.

I apologize if I missed this but did you complete any share repurchases during the quarter? Bank of America: I apologize if I missed this but did you complete any share repurchases during the quarter?

No, we did not.

Okay. And then you were discussing that your CapEx this year will be broken down largely between remodels and new store construction. Can you talk about which one of those is larger and then how many new stores you are going to be completing this year? Bank of America: Okay. And then you were discussing that your CapEx this year will be broken down largely between remodels and new store construction. Can you talk about which one of those is larger and then how many new stores you are going to be completing this year?

I think we provided some guidance back in the K for new store construction. Where we’ve got a couple in process right now, when that will be completed, whether that will completely happen this fiscal year or whether some of it will bleed over into ’15 before store is actually open is little difficult to tell right now. But I think you will see us spending a little more in new stores this year than we have for the past two or three.

Okay. And then a lot of retailers have taken the opportunity to secure real estate opportunistically. I am curious whether you guys have either given some thought to that or alternatively just recently done any sort of valuation work or had outside sources do valuation work on your, on the value for real estate? Bank of America: Okay. And then a lot of retailers have taken the opportunity to secure real estate opportunistically. I am curious whether you guys have either given some thought to that or alternatively just recently done any sort of valuation work or had outside sources do valuation work on your, on the value for real estate?

No, we haven’t. We have adequate sources of liquidity set up right now. We have got a lot of room available on our line of credit. We own 75% of our real estate so it’s not something that we have felt compelled to review right now.

Okay, that’s all from me. Thank a lot. Bank of America: Okay, that’s all from me. Thank a lot.

Sure thanks.

(Operator Instructions) It appears we have no further questions in the queue at this time.

Well, great. Well, thank you everyone for joining this morning and we look forward to speaking with you again in about three months. Have a great day.

That does conclude today’s conference. We appreciate your participation. You may now disconnect.