FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended March 25, 2000
Commission File Number 1-5039
WEIS MARKETS, INC.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 24-0755415
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 S. Second Street
P. O. Box 471
Sunbury, PA 17801-0471
(Address of principal executive offices) (Zip Code)
(570) 286-4571
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report.)
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 X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, No Par Value 41,690,907 shares
(Outstanding at end of period)
WEIS MARKETS, INC.
INDEX
Page No.
Part I. Financial Information
Item 1. Consolidated Balance Sheets -
March 25, 2000 and December 25, 1999 2
Consolidated Statements of Income -
Three Months Ended March 25, 2000
and March 27, 1999 3
Consolidated Statements of Cash Flows -
Three Months Ended March 25, 2000
and March 27, 1999 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
Item 3. Quantitative and Qualitative Disclosures
about Market Risk 8
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 9
1
PART I - FINANCIAL INFORMATION
WEIS MARKETS, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(dollars in thousands)
March 25, 2000 December 25, 1999
Assets
Current:
Cash $ 5,434 $ 4,552
Marketable securities 373,387 384,663
Accounts receivable, net 35,856 34,737
Inventories 161,623 167,146
Prepaid expenses 4,129 5,672
Income taxes recoverable --- 399
Deferred income taxes 5,469 5,399
_________ _________
Total current assets 585,898 602,568
Property and equipment, net 447,494 439,418
Intangible and other assets, net 29,060 16,235
_________ _________
$ 1,062,452 $ 1,058,221
========= =========
Liabilities
Current:
Accounts payable $ 68,487 $ 82,742
Accrued expenses 20,040 16,283
Accrued self-insurance 14,454 13,255
Payable to employee benefit plans 8,295 8,560
Income taxes payable 8,252 ---
_________ _________
Total current liabilities 119,528 120,840
Deferred income taxes 18,580 18,904
Shareholders' Equity
Common stock, no par value,
100,800,000 shares authorized,
47,453,479 and 47,452,729 shares
issued, respectively 7,580 7,559
Retained earnings 1,047,392 1,040,354
Accumulated other comprehensive
income (Net of deferred taxes of
$5,536 in 2000 and $5,208 in 1999) 6,225 7,343
_________ _________
1,061,197 1,055,256
Treasury stock, at cost,
5,762,572 and 5,760,854 shares,
respectively (136,853) (136,779)
_________ _________
Total shareholders' equity 924,344 918,477
_________ _________
$ 1,062,452 $ 1,058,221
========= =========
See accompanying notes to consolidated financial statements.
2
WEIS MARKETS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(dollars in thousands except per share amounts)
Three months ended
March 25, 2000 March 27, 1999
Net sales $ 519,750 $ 496,281
Cost of sales, including warehousing
and distribution expenses 389,687 371,091
_________ _________
Gross profit on sales 130,063 125,190
Operating, general and
administrative expenses 109,279 99,257
_________ _________
Income from operations 20,784 25,933
Investment income 4,475 4,022
Other income 2,986 2,209
_________ _________
Income before provision
for income taxes 28,245 32,164
Provision for income taxes 10,367 10,973
_________ _________
Net income $ 17,878 $ 21,191
========= =========
Weighted average number of common
shares outstanding 41,703,856 41,765,994
========== ==========
Cash dividends per common share $ 0.26 $ 0.25
========== ==========
Basic and diluted earnings $ 0.43 $ 0.51
========== ==========
See accompanying notes to consolidated financial statements.
3
WEIS MARKETS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(dollars in thousands)
Three Months Ended
March 25, 2000 March 27, 1999
Cash flows from operating activities:
Net income $ 17,878 $ 21,191
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 10,547 9,443
Amortization 1,510 1,258
Loss on sale of fixed assets 57 156
Gain on sale of marketable securities (546) ---
Changes in operating assets and liabilities:
Decrease in inventories 5,523 13,644
Decrease in accounts receivable
and prepaid expenses 424 2,801
Decrease in income taxes recoverable 399 ---
Decrease in accounts payable
and other liabilities (9,564) (7,705)
Increase in income taxes payable 8,252 5,415
Decrease in deferred income taxes (722) (1,078)
_________ __________
Net cash provided by operating
activities 33,758 45,125
Cash flows from investing activities:
Purchase of property and equipment (19,690) (28,083)
Proceeds from the sale of property and equipment 54 436
Purchase of marketable securities (2,474) (8,911)
Proceeds from maturities of marketable securities 11,081 6,983
Proceeds from the sale of marketable securitities 2,425 ---
Increase in intangible assets (13,379) ---
_________ _________
Net cash used in investing activities (21,983) (29,575)
Cash flows from financing activities:
Proceeds from issuance of common stock 21 11
Dividends paid (10,840) (10,439)
Purchase of treasury stock (74) (12)
_________ _________
Net cash used in financing activities (10,893) (10,440)
Net increase in cash 882 5,110
Cash at beginning of period 4,552 7,430
_________ _________
Cash at end of period $ 5,434 $ 12,540
========= =========
Cash paid during the period for:
Interest expense $ --- $ ---
========= =========
Income taxes $ 2,438 $ 6,636
========= =========
See accompanying notes to consolidated financial statements.
4
WEIS MARKETS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(1) Significant Accounting Policies
Basis of Presentation: The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions for Form
10-Q and Article 10 of Regulation S-X. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. The operating results for the periods
presented are not necessarily indicative of the results to be expected for the
full year. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's latest annual report
on Form 10-K.
(2) Comprehensive Income
The components of comprehensive income, net of related tax, for the three-month
period ended March 25, 2000 and March 27, 1999 are as follows:
Three Months Ended
(dollars in thousands) 03/25/00 03/27/99
Net Income $ 17,878 $ 21,191
Unrealized losses on market (799) (1,963)
Less: reclassification adjustment for
gains included in net income (319) ---
_________ _________
Comprehensive income $ 16,760 $ 19,228
========= =========
(3) Property and Equipment
Property and equipment, as of March 25, 2000 , and December 25, 1999, consisted
of :
Useful Life
(dollars in thousands) (in years) 2000 1999
Land $ 63,646 $ 63,732
Buildings and improvements 10-60 313,840 310,137
Equipment 3-12 453,902 441,771
Leasehold improvements 5-20 84,975 81,133
_________ _________
Total, at cost 916,363 896,773
Less accumulated depreciation and
amortiztion 468,869 457,355
_________ _________
$ 447,494 $ 439,418
========= =========
5
WEIS MARKETS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OPERATING RESULTS
Sales for the first quarter ended March 25, 2000, increased 4.7% to
$519,750,000 compared with $496,281,000 in the same quarter last year.
Identical store sales decreased .9%. Sales performance from new and remodeled
stores remains strong and the Company continues to be aggressive with its
promotional activity. The Company attributes the identical sales decrease to an
abnormally warm winter, which reduced the surges in sales normally resulting
from snow and inclement weather, a highly competitive supermarket environment,
and nearly flat food inflation. Management will continue to focus on its
strategic expansion program, which is producing increased sales and market
share. As in 1999 and 1998, the Easter sales period for the Company will fall
in the second quarter.
Gross profit of $130,063,000 at 25.0% of sales, increased $4,873,000 or
3.9% versus the same quarter last year. The gross profit dollar increase was
generated from the higher sales volume as the gross profit rate decreased .2%
compared to results achieved in the first quarter of 1999.
The first quarter operating, general and administrative expenses of
$109,279,000, at 21.0% of sales, increased $10,022,000, or 10.1% compared to the
same quarter last year. As a percentage of sales, operating expenses for the
quarter were 1.0% higher than the 20.0% rate realized in the first quarter of
1999.
A large portion of the dollar increase in operating, general and
administrative expenses during the quarter was proportionate with the increase
in sales. Employee labor and benefit expenses accounted for $5,988,000 or 59.7%
of the total increase. The Company's cost per gallon for diesel fuel and
gasoline rose substantially during the first quarter. During this period, the
Company's fuel expenses increased $309,000 compared to the prior year.
Professional services of $1,270,000 were incurred in response to the Schedule
13D-A filing by the heirs of Sigfried Weis and related trusts and the
subsequent, ongoing review of options to further increase shareholder value.
Advertising expenditures increased $1,837,000 compared to last year, exceeding
budgeted expectations by $508,000. Fixed occupancy costs increased $2,190,000
compared to last year's first quarter results as the Company's capital spending
program continues at an aggressive pace compared to the industry average.
Investment income of $4,475,000 at .9% of sales compares to $4,022,000 at
.8% of sales in 1999. The Company realized a $546,000 gain on the sale of
publicly traded stocks from its investment portfolio during the quarter.
Dividends and interest income decreased $93,000 compared to results for the same
quarter last year. Income realized from the investment portfolio has and will
continue to decrease as marketable securities are used to fund the Company's
capital expansion program.
Other income for the quarter of $2,986,000 at .6% of sales increased
$777,000, or 35.2%, compared to the first quarter in 1999. Most of this
increase was due to an increase in the price paid for cardboard salvage compared
to the same period a year ago.
The effective tax rate of 36.7% in the first quarter compares with 34.1%
in the same quarter in 1999.
Net earnings for the quarter of $17,878,000, or 43 cents per share,
compared with $21,191,000, or 51 cents per share, in 1999.
As of March 25, 2000, the Company was operating 168 retail food stores,
with locations in Pennsylvania, Maryland, New Jersey, New York, Virginia and
West Virginia. The Company also operates Weis Food Service, a restaurant and
institutional food supplier. The Company owns SuperPetz II, Inc., a chain of
34 pet supply stores with locations in Alabama, Georgia, Indiana, Kentucky,
Maryland, Michigan, North Carolina, Ohio, Pennsylvania, South Carolina and
Tennessee.
6
WEIS MARKETS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
OPERATING RESULTS (continued)
On December 10, 1999, the Company signed an agreement to acquire four
store locations from Fleming Food Companies, Inc. The Company closed the deal
and took possession of two central Pennsylvania stores on January 17, 2000 and
two Maryland stores on January 31, 2000. During the quarter, the Company opened
two new superstores, had a grand reopening in one major expansion/remodel and
also reopened three of the four newly acquired stores. The fourth acquired
store will be opened during the second quarter.
On April 7, 2000, the Company announced its intent to sell the Weis Food
Service division to Reinhart FoodService of LaCrosse, Wisconsin. Management
feels that the supermarket and foodservice divisions have evolved into two very
different businesses with different distribution, marketing and operational
requirements. This was the principal reason in the decision to sell Weis Food
Service. Reinhart FoodService will continue to operate the division from the
Sunbury region and will retain the Weis Food Service employees, which was a very
important part of the decision to sell the division. Management would not have
made the deal without these assurances. The sale was consummated effective
April 8, 2000.
Over the next eighteen months, the Company expects to invest up to
$135,600,000 for capital expenditures to open 17 superstores and to expand or
remodel 20 others.
LIQUIDITY AND CAPITAL RESOURCES
The Company generated $33,758,000 in cash flows from operating activities
for the three-month period ended March 25, 2000 compared to $45,125,000 during
the same period of 1999. Working capital decreased $15,358,000 or 3.2% since
the beginning of the year.
Net cash used in investing activities during the first quarter of 2000 was
$21,983,000 compared to $29,575,000 in 1999. Property, equipment and intangible
expenditures in the first quarter of 2000 amounted to $33,069,000 as compared to
$28,083,000 in 1999. The first quarter 2000 amount includes the acquisition
of the four grocery stores from Fleming Food Companies, Inc. Proceeds from the
sale of marketable securities during the quarter amounted to $2,425,000.
Management anticipates the continued use of the Company's cash for acquisitions,
the construction of new superstores, the expansion and remodeling of existing
units, the securing of sites for future expansion, new technology purchases and
the upgrading of its processing and distribution facilities.
Net cash used in financing activities during the first quarter of 2000 was
$10,893,000, compared to $10,440,000 in 1999. Treasury stock purchases during
the quarter amounted to $74,000 and compares to $12,000 in purchases made in the
first quarter last year. The Board of Directors' 1996 resolution authorizing
the purchase of treasury stock has a remaining balance of 576,935 shares. Cash
dividend payments made during the quarter at $.26 per common share amounted to
$10,840,000. This compares to $10,439,000 in dividends paid at the rate of
$.25 per share in the first quarter of 1999. At a regularly scheduled meeting
held on April 13, 2000, the Board of Directors declared a $.26 per share
dividend payable to holders of record as of May 5, 2000, payable on May 19,
2000.
7
WEIS MARKETS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
LIQUIDITY AND CAPITAL RESOURCES (continued)
The Company funded its working capital requirements for the quarter
through internally generated cash flows from operations, as it has done in prior
years. Company management estimates that its current development plans will
require an investment of approximately $135,600,000 over an eighteen-month
period through the middle of 2001. The Company continues to pursue acquisitions
and investment opportunities to enhance future financial performance.
The financial and liquidity position of the Company, combined with its
historical insurance loss experience rates, has allowed it to carry higher
deductible and retention levels on its employee and business insurance coverage.
The Company plans to maintain these higher exposure levels, thus benefiting from
reduced premium expenses. In view of the Company's significant liquid assets,
lack of debt financing, and its ability to generate working capital internally,
it is not expected that any type of external financing will be needed for these
activities.
FORWARD-LOOKING STATEMENTS
In addition to historical information, this 10-Q Report may contain
forward-looking statements. Any forward-looking statements contained herein are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those projected. For example, risks and uncertainties
can arise with changes in: general economic conditions, including their impact
on capital expenditures; business conditions in the retail industry; the
regulatory environment; rapidly changing technology and competitive factors,
including increased competition with regional and national retailers; and price
pressures. Readers are cautioned not to place undue reliance on forward-looking
statements, which reflect management's analysis only as of the date hereof. The
Company undertakes no obligation to publicly revise or update these
forward-looking statements to reflect events or circumstances that arise after
the date hereof. Readers should carefully review the risk factors described in
other documents the Company files periodically with the Securities and Exchange
Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
Quantitative Disclosure - There have been no material changes in the Company's
market risk during the three months ended March 25, 2000. Quantitative
information is set forth on page 11 of the Company's 1999 Annual Report under
the caption "Quantitative Disclosures About Market Risk", which was filed as
Exhibit 13 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 25, 1999 and is incorporated herein by reference.
Qualitative Disclosure - This information is set forth on page 10 of the
Company's 1999 Annual Report under the caption "Liquidity and Capital
Resources," within "Management's Discussion and Analysis of Financial Condition
and Results of Operations", which was filed as Exhibit 13 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 25, 1999 and is
incorporated herein by reference.
8
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K -- There were no reports on Form 8-K filed for the
three months ended March 25, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WEIS MARKETS, INC.
Date
ROBERT F. WEIS
Chairman of the Board & Treasurer
Date
WILLIAM R. MILLS
Vice President-Finance & Secretary
9