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 June 24, 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 shorterperiod 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 41,691,407 shares
(Outstanding at end of period)
WEIS MARKETS, INC.
INDEX
Page No.
Part I. Financial Information
Item 1. Consolidated Balance Sheets -
June 24, 2000 and December 25, 1999 2
Consolidated Statements of Income -
Six Months Ended June 24, 2000
and June 26, 1999 3
Consolidated Statements of Cash Flows -
Six Months Ended June 24, 2000
and June 26, 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 4. Submission of Matters to a Vote of Security Holders 9
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 10
1
PART I - FINANCIAL INFORMATION
WEIS MARKETS, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(dollars in thousands)
June 24, 2000 December 25, 1999
Assets
Current:
Cash $ 9,173 $ 4,552
Marketable securities 399,280 384,663
Accounts receivable, net 22,131 34,737
Inventories 156,634 167,146
Prepaid expenses 3,304 5,672
Income taxes recoverable --- 399
Deferred income taxes 7,174 5,399
__________ __________
Total current assets 597,696 602,568
Property and equipment, net 442,235 439,418
Intangible and other assets, net 28,128 16,235
__________ __________
$ 1,068,059 $ 1,058,221
========== ==========
Liabilities
Current:
Accounts payable $ 67,079 $ 82,742
Accrued expenses 20,874 16,283
Accrued self-insurance 14,708 13,255
Payable to employee benefit plans 7,851 8,560
Income taxes payable 3,931 ---
__________ __________
Total current liabilities 114,443 120,840
Deferred income taxes 17,870 18,904
Shareholders' Equity
Common stock, no par value,
100,800,000 shares authorized,
47,453,979 and 47,452,729 shares
issued, respectively 7,594 7,559
Retained earnings 1,058,210 1,040,354
Accumulated other comprehensive
income (Net of deferred taxes of
$4,818 in 2000 and $5,208 in 1999 6,795 7,343
__________ __________
1,072,599 1,055,256
Treasury stock, at cost,
5,672,572 and 5,760,854 shares,
respectively (136,853) (136,779)
__________ __________
Total shareholders' equity 935,746 918,477
__________ __________
$ 1,068,059 $ 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 Six Months Ended
06/24/00 06/26/99 06/24/00 06/26/99
Net sales $ 508,957 $ 490,019 $ 1,028,707 $ 986,300
Cost of sales, including
warehousing and distribution
expenses 374,079 365,503 763,766 736,593
__________ __________ __________ __________
Gross profit on sales 134,878 124,516 264,941 249,707
Operating, general and
administrative expenses 113,606 101,123 222,885 200,380
__________ __________ __________ __________
Income from operations 21,272 23,393 42,056 49,327
Investment income 4,243 4,015 8,718 8,037
Other income 9,387 2,062 12,373 4,270
__________ __________ __________ __________
Income before provision
for income taxes 34,902 29,470 63,147 61,634
Provision for income taxes 13,244 10,270 23,611 21,243
__________ __________ __________ __________
Net income $ 21,658 $ 19,200 $ 39,536 $ 40,391
========== ========== ========== ==========
Weighted average number
of common shares
outstanding 41,691,341 41,723,014 41,691,402 41,744,376
========== ========== ========== ==========
Cash dividend
per common share $ 0.26 $ 0.25 $ 0.52 $ 0.50
========== ========== ========== ==========
Basic and diluted
earnings per share $ 0.52 $ 0.46 $ 0.95 $ 0.97
========== ========== ========== ==========
See accompanying notes to consolidated financial statements.
3
WEIS MARKETS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(dollars in thousands)
Six Months Ended
June 24, 2000 June 26, 1999
Cash flows from operating activities:
Net income $ 39,536 $ 40,391
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 21,442 19,100
Amortization 3,416 2,430
(Gain) loss on sale of fixed assets (6,063) 231
Gain on sale of marketable securities (658) ---
Changes in operating assets and liabilities:
Decrease in inventories 10,512 20,004
Decrease in accounts receivable
and prepaid expenses 14,974 3,020
Decrease in income taxes recoverable 399 ---
Decrease in accounts payable
and other liabilities (10,328) (5,967)
Increase (decrease) in income taxes payable 3,931 (8,819)
Decrease in deferred income taxes (2,419) (1,873)
__________ __________
Net cash provided by operating activities 74,742 68,517
Cash flows from investing activities:
Purchase of property and equipment (31,576) (45,277)
Proceeds from the sale of property and equipment 11,450 470
Purchase of marketable securities (53,359) (26,309)
Proceeds from maturities of marketable securities 35,706 23,541
Proceeds from the sale of marketable securities 2,756 ---
(Increase) decrease in intangible assets (13,379) 400
__________ __________
Net cash used in investing activities (48,402) (47,175)
Cash flows from financing activities:
Proceeds from issuance of common stock 35 11
Dividends paid (21,680) (20,863)
Purchase of treasury stock (74) (2,343)
__________ __________
Net cash used in financing activities (21,719) (23,195)
Net increase (decrease) in cash 4,621 (1,853)
Cash at beginning of period 4,552 7,430
__________ __________
Cash at end of period $ 9,173 $ 5,577
========== ===========
Cash paid during the period for:
Interest expense $ --- $ ---
========== ==========
Income taxes $ 21,701 $ 31,935
========== ==========
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 June 24, 2000 and June 26, 1999 are as follows:
Three Months Ended Six Months Ended
(dollars in thousands) 06/24/00 06/26/99 06/24/00 06/26/99
Net Income $ 21,658 $ 19,200 $ 39,536 $ 40,391
Unrealized gains (losses)
on marketable securities 634 (2,879) (165) (4,842)
Less: reclassification
adjustment for gains
included in net income (65) --- (384) ---
_______ _______ _______ _______
Comprehensive income $ 22,227 $ 16,321 $ 38,987 $ 35,549
======= ======= ======= =======
(3) Property and Equipment
Property and equipment, as of June 24, 2000, and December 25, 1999,
consisted of:
Useful Life
(dollars in thousands) (in years) 2000 1999
Land $ 63,020 $ 63,732
Buildings and improvements 10-60 312,824 310,137
Equipment 3-12 447,682 441,771
Leasehold improvements 5-20 88,589 81,133
_________ _________
Total, at cost 912,115 896,773
Less accumulated depreciation and
amortization 469,880 457,355
_________ _________
$ 442,235 $ 439,418
========= =========
5
WEIS MARKETS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OPERATING RESULTS
Total sales for the second quarter ended June 24, 2000 increased 3.9% to
$508,957,000 compared to sales of $490,019,000 generated in the second quarter
of 1999. Year-to-date, sales increased 4.3% to $1,028,707,000 compared to
$986,300,000 in 1999. Identical store sales increased 2.2% for the quarter and
.8% through the first half of the year.
Early in the second quarter, the Company completed the sale of Weis Food
Service, its regional food service division, to Reinhart FoodService of
LaCrosse, Wisconsin. In recent years, the Company has strongly focused on the
growth of its core operations, the retail food business. As part of this
focus, senior management moved to sell Weis Food Service after concluding its
supermarket and food service divisions had evolved into businesses with separate
distribution, marketing and operational requirements. Excluding Weis Food
Service sales from the Company's second quarter results in 2000 and 1999, the
Company's sales from ongoing operations increased 9.9%. Year-to-date sales from
ongoing operations, excluding Weis Food Service, increased 7.5%.
In the second quarter, the Company generated $134,878,000 in gross profit
at 26.5% of sales, an increase of $10,362,000 or 8.3% compared to the same
period in 1999. The increase in gross profit dollars was due primarily to
higher sales volume as the gross profit rate increased by 1.1%. Year-to-date
gross profit of $264,941,000 at 25.8% of sales, increased $15,234,000 or 6.1%.
As a percentage of sales, the year-to-date gross profit rate increased .5%.
In the second quarter of 2000, operating, general and administrative
expenses were $113,606,000 or 22.3% of sales. These costs increased $12,483,000
or 12.3% compared to the same quarter in 1999. The increase in operating
expenses is primarily attributable to the Company's higher sales volume.
After a flat sales period in the first quarter of this year, management
increased its advertising and promotional spending as it did in the first
quarter. As a result, the Company's advertising and special promotion costs in
the second quarter were up $1,388,000 compared to the same period a year ago.
Fixed occupancy costs increased $1,928,000 compared to last year's second
quarter results as the Company's capital spending program continues at an
aggressive pace compared to the industry average. The Company wrote off
$314,000 in goodwill remaining from prior Weis Food Service acquisitions and
increased its reserve for bad debts by $2,727,000 after a closer review of open
Weis Food Service customer accounts following the sale of this division. As a
percentage of sales, total operating expenses for the quarter increased 1.7%.
Weis Food Service accounted for .5% of the rate increase compared to the second
quarter of last year.
Year-to-date operating expenses of $222,885,000 at 21.7% of sales
compared to $200,380,000 at 20.3% of sales in the first half of last year.
The Company's second quarter investment income totaled $4,243,000 at .8%
of sales, an increase of $228,000 or 5.7% compared to last year. The Company
realized a $112,000 gain in the second quarter from the sale of publicly traded
securities in its portfolio. Overall, the company has realized a gain of
$658,000 on the sale of publicly traded securities during the first two quarters
of 2000. Year-to-date, the Company's investment income has increased $681,000
or 8.5% to $8,718,000 at .8% of sales.
Other income in the second quarter increased $7,325,000 or 355.2% to
$9,387,000 at 1.8% of sales compared to the same period in 1999. This total
includes $5,839,000 realized from the sale of Weis Food Service equipment to
Reinhart FoodService. Year-to-date, the company's other income increased
$8,103,000 or 189.8% to $12,373,000 at 1.2% of sales.
6
WEIS MARKETS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
OPERATING RESULTS (continued)
The effective tax rate for the second quarter of 2000 was 38.0% compared
with 34.8% in 1999. Year-to-date, the effective tax rate is 37.4% compared to
34.5% last year. The higher tax rate in 2000 reflects taxes due on the capital
gain realized from the sale of Weis Food Service and gains on the sale of
publicly traded stocks from the investment portfolio.
Net income after tax in the second quarter increased 12.8% to $21,658,000,
or $.52 per diluted share, compared to net income of $19,200,000, or $.46 per
diluted share, in 1999.
Year-to-date earnings were $39,536,000 or $.95 per diluted share, compared
to $40,391,000, or $.97 per diluted share in 1999. When Weis Food Service's
financial results, including gains from its sale, are excluded from the
Company's second quarter results in 2000 and 1999, the Company's net income
increased 7.8%. Basic and diluted earnings per share from ongoing operations
increased $.04 per share to $.49 for the quarter. Year-to-date net income
generated from ongoing operations, excluding Weis Food Service, decreased 4.4%.
Basic and diluted earnings per share from ongoing operations declined $.04 to
$.91 per share for the year-to-date. The Company attributed the decline in
year-to-date net income to its first quarter results, which were affected by a
softer than expected sales environment.
As of June 24, 2000, Weis Markets, Inc. was operating 166 retail food
stores, with locations in Pennsylvania, Maryland, New Jersey, New York,
Virginia, and West Virginia. The Company also owns SuperPetz II, Inc., a chain
of 33 pet supply stores with locations in Alabama, Georgia, Indiana, Kentucky,
Maryland, Michigan, North Carolina, Ohio, Pennsylvania, South Carolina and
Tennessee.
LIQUIDITY AND CAPITAL RESOURCES
During the first six months of 2000, the Company generated $74,742,000 in
cash flows from operating activities compared to $68,517,000 for the same period
in 1999. The majority of the gain on sale of fixed assets, the decrease in
inventories, and the decrease in accounts receivable and prepaid expenses, is
associated with the sale of the Weis Food Service division. Year-to-date,
working capital has increased $1,525,000 or .3% since the beginning of this
fiscal year.
Net cash used in investing activities in the first half of 2000 amounted
to $48,402,000, compared to $47,175,000 in 1999. Capital expenditures for the
first half of the year totaled $44,955,000, as compared to $45,277,000 in the
first half of 1999. At the annual shareholders' meeting held in June, the
Company reiterated its plans to invest $135,600,000 in capital improvements over
an 18-month period, which began in January of 2000. The capital expansion
program includes the construction of new superstores, the expansion and
remodeling of existing units, the acquisition of sites for future expansion,
new technology purchases and the continued upgrade of company processing and
distribution facilities.
Net cash used in financing activities during the first half of 2000 was
$21,719,000, compared to $23,195,000 in 1999. Treasury stock purchases during
the first half amounted to $74,000, compared to $2,343,000 in purchases made
in the first half of last year. The Board of Directors' 1996 resolution
authorizing the purchase of treasury stock has a remaining balance of 576,935
shares. In the second quarter, the Company made $10,840,000 in dividend
payments to shareholders of record at $.26 per share, compared to $.25 per
share in 1999. Year-to-date cash dividends paid to shareholders amounts to
$21,680,000 compared to $20,863,000 in dividend payments in the first half of
1999. The Board of Directors recently declared a 3.8% increase in the
7
WEIS MARKETS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
LIQUIDITY AND CAPITAL RESOURCES (continued)
quarterly dividend up from $.26 per share to $.27 cents per share. This marks
the 35th consecutive year of dividend increases by the Company. The dividend
will be payable to holders of record as of August 7, 2000, payable August 24,
2000.
The Company funded its working capital requirements for the quarter
through internally generated cash flows from operations, as it has done in prior
years. The Company continues to pursue acquisitions and investment
opportunities to enhance future financial performance. Management believes that
the Company's cash and short-term investments, plus cash flow from operations,
will be sufficient to finance current operations, cover dividend requirements,
self-insurance programs, possible acquisitions, the purchase of Treasury Stock,
and the continuing expansion program. The corporation has no other commitment
of capital resources as of June 24, 2000.
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 six months ended June 24, 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 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Shareholders of Weis Markets, Inc., was held on
Tuesday, June 6, 2000, at 10:00 a.m., Eastern Standard Time, at Tedd's On The
Hill, Routes 11 & 15, Shamokin Dam, Pennsylvania, 17876.
(b) Proxies for the meeting were solicited pursuant to Regulation 14 under the
Act, there was no solicitation in opposition to the management's nominees as
listed in the proxy statement, and all such nominees were elected.
(c) The meeting was held for the following purposes:
1. To elect eight directors to serve, subject to provisions of the by-laws,
until the next Annual Meeting of shareholders or until their respective
successors have qualified.
2. To approve the appointment of independent public accountants for the
current fiscal year.
3. To act upon such other business as may properly come before such meeting,
or any adjournments or postponements thereof.
The official ballot from the meeting submitted to the Secretary by the Judge of
Elections disclosed the following tabulation of votes.
Proposal #1 For Withhold
Robert F. Weis 47,564,259 222,626
Norman S. Rich 47,561,326 222,523
William R. Mills 47,562,234 221,615
Jonathan H. Weis 47,561,671 222,178
Michael M. Apfelbaum 25,604,113 241,186
Joseph I. Goldstein 25,606,755 238,535
Jeffery E. Perelman 25,579,391 265,908
Richard E. Shulman 47,561,776 222,073
Proposal #2 For Against Abstain
Proposal to approve the
appointment of Ernst &
Young, LLP, as the
independent public accountants
of the Corporation. 39,551,923 19,470 8,847
9
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 June 24, 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
10