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 30, 2001
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 27,211,915 shares
(Outstanding at end of period)
WEIS MARKETS, INC.
INDEX
Page No.
Part I. Financial Information
Item 1. Consolidated Balance Sheets -
June 30, 2001 and December 30, 2000 2
Consolidated Statements of Income -
Six Months Ended June 30, 2001
and June 24, 2000 3
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 2001
and June 24, 2000 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 30, 2001 December 30, 2000
Assets
Current:
Cash $ 2,875 $ 3,389
Marketable securities 32,555 410,218
Accounts receivable, net 26,297 25,080
Inventories 146,832 168,541
Prepaid expenses 3,620 6,821
Income taxes recoverable 6,734 3,144
____________ ____________
Total current assets 218,913 617,193
Property and equipment, net 439,490 441,819
Intangible and other assets, net 25,656 26,892
____________ ____________
$ 684,059 $ 1,085,904
============ ============
Liabilities
Current:
Accounts payable $ 74,105 $ 78,162
Accrued expenses 20,513 18,360
Accrued self-insurance 14,847 12,959
Payable to employee benefit plans 8,213 8,663
Deferred income taxes 2,464 2,143
____________ ____________
Total current liabilities 120,142 120,287
Deferred income taxes 17,033 17,731
Long-term debt 30,000 ---
Shareholders' Equity
Common stock, no par value,
100,800,000 shares authorized,
32,978,037 and 47,453,979
shares issued, respectively 7,630 7,594
Retained earnings 639,057 1,069,986
Accumulated other comprehensive
income (Net of deferred taxes
of $5,088 in 2001 and
$5,166 in 2000) 7,175 7,284
____________ ____________
653,862 1,084,864
Treasury stock, at cost,
5,766,122 and 5,766,122
shares, respectively (136,978) (136,978)
____________ ____________
Total shareholders' equity 516,884 947,886
____________ ____________
$ 684,059 $ 1,085,904
============ ============
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
06/30/01 06/24/00 06/30/01 06/24/00
Net sales $ 492,414 $ 508,957 $ 981,509 $ 1,028,707
Cost of sales, including
warehousing and
distribution expenses 361,219 374,079 720,128 763,766
____________ ____________ ____________ ____________
Gross profit on sales 131,195 134,878 261,381 264,941
Operating, general and
administrative expenses 121,761 113,606 234,054 222,885
____________ ____________ ____________ ____________
Income from operations 9,434 21,272 27,327 42,056
Investment income 2,643 4,243 9,401 8,718
Other income 2,168 9,387 4,374 12,373
____________ ____________ ____________ ____________
Income before provision
for income taxes 14,245 34,902 41,102 63,147
Provision for income taxes 5,539 13,244 15,202 23,611
____________ ____________ ____________ ____________
Net income $ 8,706 $ 21,658 $ 25,900 $ 39,536
============ ============ ============ ============
Weighted-average
shares outstanding 33,097,618 41,691,341 37,392,843 41,691,402
============ ============ ============ ============
Cash dividends
per share $ 0.27 $ 0.26 $ 0.54 $ 0.52
============ ============ ============ ============
Basic and diluted
earnings per share $ 0.26 $ 0.52 $ 0.69 $ 0.95
============ ============ ============ ============
See accompanying notes to consolidated financial statements.
3
WEIS MARKETS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(dollars in thousands)
Six Months Ended
June 30, 2001 June 24, 2000
Cash flows from operating activities:
Net income $ 25,900 $ 39,536
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 21,463 21,442
Amortization 3,409 3,416
(Gain) loss on sale of fixed assets 1,469 (6,063)
Gain on sale of marketable securities (568) (658)
Changes in operating assets and liabilities:
Decrease in inventories 21,709 10,512
Decrease in accounts receivable
and prepaid expenses 1,984 14,974
(Increase) decrease in income
taxes recoverable (3,590) 399
Decrease in accounts payable
and other liabilities (466) (10,328)
Increase in income taxes payable --- 3,931
Decrease in deferred income taxes (299) (2,419)
____________ ____________
Net cash provided by operating activities 71,011 74,742
Cash flows from investing activities:
Purchase of property and equipment (22,821) (31,576)
Proceeds from the sale of property and
equipment 45 11,450
Purchase of marketable securities (299,064) (53,359)
Proceeds from maturities of marketable
securities 553,459 35,706
Proceeds from the sale of marketable
securities 123,649 2,756
Increase in intangible assets and other assets --- (13,379)
____________ ____________
Net cash provided by (used in)
investing activities 355,268 (48,402)
Cash flows from financing activities:
Proceeds from long-term debt 30,000 ---
Proceeds from issuance of common stock 36 35
Dividends paid (22,512) (21,680)
Cancellation of stock (434,317) ---
Purchase of treasury stock --- (74)
____________ ____________
Net cash used in financing activities (426,793) (21,719)
Net increase (decrease) in cash (514) 4,621
Cash at beginning of period 3,389 4,552
____________ ____________
Cash at end of period $ 2,875 $ 9,173
============ ============
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 30, 2001 and June 24, 2000 are as follows:
Three Months Ended Six Months Ended
(dollars in thousands) 06/30/01 06/24/00 06/30/01 06/24/00
Net Income $ 8,706 $ 21,658 $ 25,900 $ 39,536
Unrealized gains (losses) on
marketable securities (486) 634 223 (165)
Less: reclassification
adjustment for gains
included in net income (62) (65) (332) (384)
__________ __________ __________ __________
Comprehensive income $ 8,158 $ 22,227 $ 25,791 $ 38,987
========== ========== ========== ==========
(3) Property and Equipment
Property and equipment, as of June 30, 2001 and December 30, 2000, consisted
of:
Useful Life
(dollars in thousands) (in years) 2001 2000
Land $ 69,426 $ 63,341
Buildings and improvements 10-60 316,546 312,462
Equipment 3-12 464,373 462,079
Leasehold improvements 5-20 96,131 97,310
____________ ____________
Total, at cost 946,476 935,192
Less accumulated depreciation
and amortization 506,986 493,373
____________ ____________
$ 439,490 $ 441,819
============ ============
(4) Significant Event
On May 7, 2001, the Registrant purchased an aggregate of 14,477,242 shares of
its common stock from the family of the late Sigfried Weis. The purchase price
was $30.00 per share, for an aggregate purchase price of approximately $434.3
million in cash. The amount of such consideration was determined through
negotiations between the Registrant and the sellers of such shares, and was
subject to review by a special committee of the Registrant's board of directors
formed for the purpose of evaluating the transaction. In determining the amount
of such consideration and assessing the fairness thereof, the company received
financial advice from Morgan Stanley Dean Witter, and the special committee
received financial advice from Dresdner Kleinwort Wasserstein, Inc., both of
which firms rendered fairness opinions to the special committee. The selling
shareholders are descendants, or family members of descendants, of one of the
founders of the Registrant. The selling shareholders include Joseph I.
Goldstein, a director of the Registrant who has resigned from the Board of
Directors, his wife and certain of his relatives. The sources of the funds used
for the Registrant's acquisition of its shares were the Registrant's own cash
resources and borrowings from Mellon Bank under a credit agreement entered into
in the ordinary course.
5
WEIS MARKETS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OPERATING RESULTS
Total company sales for the second quarter ended June 30, 2001 decreased
3.3% to $492,414,000 compared to sales of $508,957,000 generated in the second
quarter of 2000. Year-to-date, the company's sales decreased 4.6% to
$981,509,000 compared to $1,028,707,000 for the same period in 2000. Year-over-
year sales comparisons were affected unfavorably by the sale of the company's
food service division last year, a weak economy and competitive activity. In
the second quarter of 2000, the company's results included $5,351,000 in
revenues from the food service division, which was sold in the same quarter.
Total sales through the first half of 2000 included $37,062,000 generated from
the food service division. Identical store sales decreased .9% in the recently
concluded quarter and .2% through the first half of the year.
In the second quarter, the company generated $131,195,000 in gross profit
at 26.6% of sales, a decrease of $3,683,000 or 2.7% compared to the same period
in 2000. The decrease in gross profit dollars was due to the lower sales volume
as the gross profit rate increased .1%. Year-to-date gross profit of
$261,381,000 at 26.6% of sales decreased $3,560,000 or 1.3%. As a percentage of
sales, the year-to-date gross profit rate increased .9%.
The second quarter operating, general and administrative expenses of
$121,761,000 at 24.7% of sales, increased $8,155,000 or 7.2% compared to the
same quarter in 2000. As a percentage of sales, operating expenses for the
quarter were 2.4% higher than the 22.3% rate realized in the second quarter of
2000. Year-to-date operating expenses of $234,054,000 at 23.8% of sales
compared to $222,885,000 at 21.7% of sales in the first half of last year.
On May 7, 2001, the company repurchased approximately 14.5 million
shares of its common stock from the family of the late Sigfried Weis for
$434.3 million in cash. The share repurchase was reviewed and unanimously
approved, as being in the best interests of the company, by a committee
composed of all of the company's non-management independent directors who
are not members of the Weis family. The committee received financial advice
from Morgan Stanley & Co. and Dresdner Kleinwort Wasserstein, Inc., both of
whom rendered fairness opinions in respect of the transaction.
Due to this transaction, the company incurred $5,266,000 in
non-recurring expenses in the quarter. These expenses accounted for 64.6% of
the total increase in operating expenses in the quarter and 47.1% year-to-date
compared to the same periods last year. The remaining operating expense
increase was primarily due to rising labor and benefit costs, which were up
4.5% in the second quarter and 3.1% year-to-date.
In the second quarter, the company's investment income totaled $2,643,000
at .5% of sales, a decrease of $1,600,000 or 37.7% compared to the same period a
year ago. During the quarter, the company sold the majority of its investment
portfolio at a small gain in order to complete the all cash stock repurchase
transaction. Year-to-date, the company's investment income increased $683,000
or 7.8% to $9,401,000 at 1.0% of sales. The year-to-date increase was realized
as the company sold its tax-free municipal bonds and reinvested the funds into
taxable instruments, resulting in increases in investment income and applicable
income taxes.
Other income and expenses in the second quarter decreased $7,219,000 or
76.9% to $2,168,000 at .4% of sales compared to the same period in 2000. Early
in the second quarter of 2000, the company sold its food service division,
realizing a gain of $5,839,000 from the transaction. On May 7, 2001, the
company established and borrowed against a bank credit agreement in order to
transact the stock repurchase resulting in $247,000 in interest expense during
the current quarter. The remaining year-to-year difference is due largely to
gains or losses realized on closed store facilities. Year-to-date, the
company's other income decreased $7,999,000 or 64.6% to $4,374,000 at .4% of
sales.
The effective tax rate for the second quarter of 2001 was 38.9% compared
with 38.0% in 2000. Year-to-date, the effective tax rate is 37.0% compared to
37.4% in the same period last year. The company anticipates an
6
WEIS MARKETS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
OPERATING RESULTS (continued)
increase in the tax rate going forward due to the sale of its primarily
tax-free investment portfolio.
For the three-month period ending June 30, 2001, the company generated
$8,706,000 in net income, a decrease of 59.8% compared to last year. As
reported in this filing, several non-recurring items affected the company's
net income. The company's second quarter basic and diluted earnings per share
totaled $.26 compared to $.52 per share in 2000. Year-to-date earnings were
$25,900,000 or $.69 per diluted share, compared to $39,536,000, or $.95 per
diluted share in 2000. Second quarter and year-to-date basic and diluted
earnings per share are computed using weighted-average shares outstanding.
At the end of the second quarter, after the $434.3 million stock repurchase,
the company had 27.2 million shares of common stock outstanding, a reduction
of 14.5 million shares. The impact from the stock repurchase will be
partially realized this year in the company's earnings per share results
and fully realized in 2002.
As of June 30, 2001, Weis Markets, Inc. was operating 163 retail food
stores, with locations in Pennsylvania, Maryland, New Jersey, New York, Virginia
and West Virginia. The company was operating three less stores at the end of
the second quarter of 2001, compared to the same period a year ago. 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 2001, the company generated $71,011,000 in
cash flows from operating activities compared to $74,742,000 for the same period
in 2000. The gain on the sale of fixed assets in 2000 was primarily due to the
sale of the company's food service division. The decrease in inventories in
this year is attributable to how the Fourth of July holiday shipping period fell
this fiscal year compared to last year. Inventory improvements are also being
realized as the new warehouse management system becomes fully functional. Year-
to-date, working capital decreased $398,135,000 or 80.1% since the beginning of
this fiscal year due to the share repurchase transaction.
Net cash used in investing activities in the first half of 2001 amounted
to $355,268,000 as compared to cash provided by investing activities of
$48,402,000 in 2000. Capital expenditures for the first half of the year
totaled $22,821,000 as compared to $44,955,000 in the first half of 2000, which
included the acquisition of four stores from Fleming Food Companies, Inc. 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 2001 was
$426,793,000 compared to $21,719,000 in 2000. The company purchased and retired
14,477,242 shares of common stock from the family of the late Sigfried Weis at
$30 per share on May 7, 2001. During the second quarter and before consummation
of the large stock repurchase transaction, the company made $11,256,000 in
dividend payments to shareholders of record at $.27 per share, compared to $.26
per share in 2000. Year-to-date cash dividends paid to shareholders amounts to
$22,512,000 compared to $21,680,000 in dividend payments in the first half of
2000. The Board of Directors recently declared a quarterly dividend of $.27 per
share payable to shareholders of record as of August 10, 2001, payable August
24, 2001.
7
WEIS MARKETS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
LIQUIDITY AND CAPITAL RESOURCES (continued)
In a letter to its shareholders in the 2000 Annual Report, management
stated that over the next 18 months, it expects to invest up to $95.2 million
for capital expenditures to build six superstores and to remodel or expand 24
others, and for continued technology and infrastructure investments. Management
believes that the company's cash flow from operations will be sufficient to
finance current operations, dividends, self-insurance programs, capital
expenditures and debt obligations. To ensure funds are available for continued
strategic growth of the company, management is currently working with its
lenders to establish a $100,000,000 3-Year Unsecured Revolving Credit
Facility, part of which will replace the current credit facility under which
$30,000,000 was borrowed. The company has no other commitment of capital
resources as of June 30, 2001.
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 - The company divested itself of a significant portion
of its investment portfolio in conjunction with the stock repurchase from the
family of the late Sigfried Weis. There have been no material changes in the
company's market risk on the remainder of the portfolio during the six months
ended June 30, 2001. Quantitative information is set forth in Item 7A on the
company's Form 10-K under the caption "Quantitative Disclosures About Market
Risk", which was filed for the fiscal year ended December 30, 2000 and is
incorporated herein by reference.
Qualitative Disclosure - This information is set forth on Item 7A of the
company's 10-K under the caption "Liquidity and Capital Resources," within
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", which was filed for the fiscal year ended December 30, 2000 and is
incorporated herein by reference.
The company entered into a bridge loan agreement during the quarter and borrowed
$30,000,000 against that facility. The interest rate on the company's long-term
debt is directly tied to the LIBOR rate and thus the company is subject to
interest rate risk due to market fluctuations.
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
Monday, June 25, 2001, 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 seven 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 24,766,974 827,598
Norman S. Rich 24,851,473 743,098
William R. Mills 24,852,656 741,916
Jonathan H. Weis 24,767,626 826,946
Michael M. Apfelbaum 24,875,660 718,912
Richard E. Shulman 24,999,291 595,279
Steven C. Smith 24,987,315 607,256
Proposal #2 For Against Abstain
Proposal to approve the
appointment of Ernst &
Young, LLP, as the
independent public accountants
of the Corporation. 25,085,225 500,975 8,371
9
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b) One Form 8-K was filed on May 7, 2001, announcing an, "Item 2. Acquisition
or Disposition of Assets". On May 7, 2001, the Registrant purchased an
aggregate of 14,477,242 shares of its common stock from the family of the late
Sigfried Weis. The purchase price was $30.00 per share, for an aggregate
purchase price of approximately $434.3 million in cash. The amount of such
consideration was determined through negotiations between the Registrant and the
sellers of such shares, and was subject to review by a special committee of the
Registrant's board of directors formed for the purpose of evaluating the
transaction. In determining the amount of such consideration and assessing the
fairness thereof, the company received financial advice from Morgan Stanley Dean
Witter, and the special committee received financial advice from Dresdner
Kleinwort Wasserstein, Inc., both of which firms rendered fairness opinions to
the special committee. The selling shareholders are descendants, or family
members of descendants, of one of the founders of the Registrant. The selling
shareholders include Joseph I. Goldstein, a director of the Registrant who has
resigned from the Board of Directors, his wife and certain of his relatives. The
sources of the funds used for the Registrant's acquisition of its shares were
the Registrant's own cash resources and borrowings from Mellon Bank under a
credit agreement entered into in the ordinary course.
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 08/14/01 /S/ Robert F. Weis
ROBERT F. WEIS
Chairman of the Board & Treasurer
Date 08/14/01 /S/ William R. Mills
WILLIAM R. MILLS
Vice President-Finance & Secretary
10