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 30, 2002
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 27,203,707 shares
(Outstanding at end of period)
WEIS MARKETS, INC.
INDEX
Page No.
Part I. Financial Information
Item 1 Consolidated Balance Sheets -
March 30, 2002 and December 29, 2001 2
Consolidated Statements of Income -
Three Months Ended March 30, 2002
and March 31, 2001 3
Consolidated Statements of Cash Flows -
Three Months Ended March 30, 2002
and March 31, 2001 4
Notes to Consolidated Financial Statements 5
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
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)
March 30, 2002 December 29, 2001
Assets
Current:
Cash $ 3,619 $ 3,255
Marketable securities 36,965 28,675
Accounts receivable, net 30,335 26,530
Inventories 158,362 169,952
Prepaid expenses 5,551 8,294
Income taxes recoverable --- 3,395
___________ ___________
Total current assets 234,832 240,101
Property and equipment, net 432,116 439,977
Goodwill 15,731 15,731
Other intangible assets 8,201 8,376
___________ ___________
$ 690,880 $ 704,185
=========== ===========
Liabilities
Current:
Accounts payable $ 80,944 $ 98,382
Accrued expenses 15,306 11,043
Accrued self-insurance 17,676 15,040
Payable to employee benefit plans 8,965 8,672
Income taxes payable 4,608 ---
Deferred income taxes 4,637 4,633
___________ ___________
Total current liabilities 132,136 137,770
Deferred income taxes 16,261 16,051
Long-term debt 10,000 25,000
Shareholders' Equity
Common stock, no par value,
100,800,000 shares authorized,
32,978,537 and 32,978,037 shares
issued, respectively 7,643 7,630
Retained earnings 655,953 648,522
Accumulated other comprehensive income
(Net of deferred taxes of $4,365 in 2002
and $4,595 in 2001) 6,154 6,479
___________ ___________
669,750 662,631
Treasury stock, at cost, 5,774,830 and
5,774,830 shares, respectively (137,267) (137,267)
___________ ___________
Total shareholders' equity 532,483 525,364
___________ ___________
$ 690,880 $ 704,185
=========== ===========
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 30, 2002 March 31, 2001
Net sales $ 504,423 $ 485,695
Cost of sales, including warehousing
and distribution expenses 372,740 358,787
___________ ___________
Gross profit on sales 131,683 126,908
Operating, general and
administrative expenses 111,151 109,015
___________ ___________
Income from operations 20,532 17,893
Investment income 173 6,757
Other income and expense 3,028 2,207
___________ ___________
Income before provision
for income taxes 23,733 26,857
Provision for income taxes 8,957 9,663
___________ ___________
Net income $ 14,776 $ 17,194
=========== ===========
Weighted-average shares outstanding 27,203,559 41,692,178
=========== ===========
Cash dividends per share $ 0.27 $ 0.27
=========== ===========
Basic and diluted earnings per share $ 0.54 $ 0.41
=========== ===========
See accompanying notes to consolidated financial statements.
3
WEIS MARKETS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(dollars in thousands)
Three Months Ended
March 30, 2002 March 31, 2001
Cash flows from operating activities:
Net income $ 14,776 $ 17,194
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 10,061 10,552
Amortization 1,324 1,696
(Gain) loss on sale of fixed assets (83) 714
Gain on sale of marketable securities --- (462)
Changes in operating assets and liabilities:
Decrease in inventories 11,590 14,827
(Increase) decrease in accounts
receivable and prepaid expenses (1,062) 4,693
Decrease in income taxes recoverable 3,395 3,144
Decrease in accounts payable
and other liabilities (10,246) (2,578)
Increase in income taxes payable 4,608 3,562
Increase in deferred income taxes 444 738
___________ ___________
Net cash provided by operating
activities 34,807 54,080
Cash flows from investing activities:
Purchase of property and equipment (6,270) (13,761)
Proceeds from the sale of property and equipment 3,004 15
Purchase of marketable securities (8,860) (128,646)
Proceeds from maturities of marketable securities 15 14,462
Proceeds from the sale of marketable securities --- 85,118
___________ ___________
Net cash used in investing activities (12,111) (42,812)
Cash flows from financing activities:
Long-term debt (15,000) ---
Proceeds from issuance of common stock 13 9
Dividends paid (7,345) (11,256)
___________ ___________
Net cash used in financing activities (22,332) (11,247)
Net increase in cash 364 21
Cash at beginning of period 3,255 3,389
___________ ___________
Cash at end of period $ 3,619 $ 3,410
=========== ===========
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.
Impact of Recently Issued Accounting Standards: As of December 30, 2001, the
company adopted Emerging Issues Task Force Issue Nos. 00-14, "Accounting for
Certain Sales Incentives;" 00-22, "Accounting for 'Points' and Certain Other
Time-Based or Volume-Based Sales Incentives Offers, and Offers for Free Products
or Services to Be Delivered in the Future;" and 00-25, "Vendor Income Statement
Characterization of Consideration from a Vendor to a Retailer" (EITF Issues).
These EITF Issues establish new rules for accounting for certain sales
incentives, loyalty programs and vendor contracts; however, the adoption of
these EITF Issues will not have an impact on the company's net income or
shareholders' equity. These EITF Issues require certain sales incentives, which
prior to adoption were reported as expenses or costs of goods sold, to be
classified as a reduction of revenue. Prior year financial statements are
reclassified to conform to the requirements of these EITF Issues.
In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, "Business Combinations" (Statement No.
141) and No. 142, "Goodwill and Other Intangible Assets" (Statement No. 142)
effective for fiscal years beginning after December 15, 2001. Under the new
rules, goodwill and intangible assets deemed to have indefinite lives will no
longer be amortized but will be subject to annual impairment tests in accordance
with the statements. Other intangible assets will continue to be amortized over
their useful lives.
The company applied Statement No. 142 in the first quarter of fiscal 2002.
Application of the statement is expected to result in an increase in pre-tax
net income of approximately $1.6 million for fiscal 2002 due to the elimination
of amortization of goodwill. During fiscal 2002, the company will perform the
required impairment tests of goodwill. The company has not yet determined what
the effect of these impairment tests will be on the earnings and financial
position of the company.
2) Goodwill and Other Intangible Assets - Adoption of Statement 142
The effect of goodwill on net income and earnings per share, for the three-month
period ended March 30, 2002 and March 31, 2001, is as follows:
Three Months Ended
(dollars in thousands) 03/30/02 03/31/01
Reported net income $ 14,776 $ 17,194
Add back: Goodwill amortization, net of tax --- 323
___________ __________
Adjusted net income $ 14,776 $ 17,517
=========== ==========
Three Months Ended
03/30/02 03/31/01
Reported basic and diluted earnings per share $ 0.54 $ 0.41
Add back: Goodwill amortization, net of tax --- 0.01
___________ __________
Adjusted basic and diluted earnings per share $ 0.54 $ 0.42
=========== ==========
5
WEIS MARKETS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
(unaudited)
(3) Comprehensive Income
The components of comprehensive income, net of related tax, for the three-month
period ended March 30, 2002 and March 31, 2001 are as follows:
Three Months Ended
(dollars in thousands) 03/30/02 03/31/01
Net income $ 14,776 $ 17,194
Other comprehensive income by component,
net of tax:
Unrealized gains(losses) on marketable securities (325) 709
Less: reclassification adjustment for
gains included in net income --- (271)
___________ ___________
Other comprehensive income, net of tax: (325) 438
___________ ___________
Comprehensive income $ 14,451 $ 17,632
=========== ===========
(4) Property and Equipment
Property and equipment, as of March 30, 2002 and December 29, 2001, consisted
of:
Useful Life
(dollars in thousands) (in years) 2002 2001
Land $ 68,401 $ 69,103
Buildings and improvements 10-60 325,513 325,775
Equipment 3-12 473,624 475,472
Leasehold improvements 5-20 98,587 99,692
___________ ___________
Total, at cost 966,125 970,042
Less accumulated
depreciation and amortization 534,009 530,065
___________ ___________
$ 432,116 $ 439,977
=========== ===========
6
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 30, 2002, increased 3.9% to $504.4
million compared with $485.7 million in the for the same period a year ago.
Identical store sales increased 3.3%. The sales increase was the result of
aggressive promotional activity in key markets, continuing enhancements to the
company's loyalty-marketing program, and Easter holiday sales, which fell in the
second quarter last year. This variation in the calendar will affect the
company's results in the second quarter.
Gross profit of $131.7 million at 26.1% of sales, increased $4.8 million
or 3.8% versus the same quarter last year. The gross profit dollar increase was
generated from the higher sales volume as the gross profit rate remained
constant compared to first quarter of 2001.
Operating, general and administrative expenses of $111.2 million, at 22.0%
of sales, increased $2.1 million, or 2.0% compared to the first quarter last
year. The dollar increase in expenses was in direct correlation with the sales
volume increase. As a percentage of sales, total operating expenses decreased
...4% compared to first quarter 2001 expenses, which accounted for 22.4% of sales.
The company's first quarter investment income of $173 thousand decreased
$6.6 million or 97.4% compared to the same period a year ago. During the second
quarter of 2001, the company sold the majority of its investment portfolio at a
small gain in order to complete the all cash stock repurchase transaction.
The company's other income and expense is generated from rental payments,
coupon-handling fees, cardboard salvage, gain or loss on the sale of fixed
assets and interest expense. Other income for the quarter of $3.0 million at
...6% of sales, increased $821 thousand, or 37.2%, compared to the first quarter
in 2001. The majority of the increase is due to the gain on the sale of a
closed store during the quarter.
The effective tax rate for the first quarter of 2002 was 37.7% compared
with 36.0% in 2001. The investment portfolio sold in order to finance the stock
repurchase in May of 2001 consisted primarily of Pennsylvania tax-free municipal
bonds, which lowered the effective tax rate in the prior year.
For the three-month period ended March 30, 2002, the company generated
$14.8 million in net income, a decrease of 14.1% compared to last year's net
income of $17.2 million. This decrease was due to the $6.6 million reduction in
investment income, as income from operations increased 14.8%. The company's
first quarter basic and diluted earnings per share of $.54 compared to $.41 per
share in 2001. The increased earnings per share is partially related to the
34.8% reduction in shares after the large stock purchase in the second quarter
of last year.
As of March 30, 2002, the company was operating 162 retail food stores,
with locations in Pennsylvania, Maryland, New Jersey, New York, Virginia and
West Virginia. The company owns SuperPetz LLC, 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
The company generated $34.8 million in cash flows from operating
activities for the three-month period ended March 30, 2002 compared to $54.1
million during the same period of 2001. Working capital increased $365 thousand
or .4% since the beginning of the year.
Net cash used in investing activities during the first quarter of 2002 was
$12.1 million compared to $42.8 million in 2001. Property and equipment
expenditures in the first quarter of 2002 amounted to $6.3 million as compared
to $13.8 million in 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)
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 the company's processing and distribution facilities. Company management
estimates that its current development plans will require an investment of
approximately $67.4 million in 2002.
Net cash used in financing activities during the first quarter of 2002 was
$22.3 million, compared to $11.2 million in 2001. The Board of Directors' 1996
resolution authorizing the purchase of 1,000,000 shares of treasury stock has a
remaining balance of 564,677 shares. Cash dividend payments made during the
quarter at $.27 per common share amounted to $7.3 million. This compares to
$11.3 million in dividends paid at the rate of $.27 per share in the first
quarter of 2001. At a regularly scheduled meeting held on April 9, 2002, the
Board of Directors declared a $.27 per share dividend payable to holders of
record as of May 3, 2002, payable on May 17, 2002.
The company entered into an unsecured bridge credit agreement in May of
2001 to provide funds for general corporate purposes. The availability under
the bridge credit agreement, which was reduced by the company to $30 million in
March 2002, is on a revolving basis with a final maturity of May 31, 2002. As
of March 30, 2002, the unused portion of the facility was $20 million, of which
the company incurs a commitment fee of .25% on the unused balance. The year-to-
date weighted-average interest rate for funds borrowed via the credit facility
was 3.0% as of March 30, 2002.
The debt amount outstanding at March 30, 2002 is classified as long-term
based upon management's intent to refinance under this facility.
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 30, 2002. 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 29, 2001 and is incorporated herein by reference.
Qualitative Disclosure - This information is set forth in Item 7 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 29, 2001 and is
incorporated herein by reference.
8
PART II - OTHER INFORMATION
WEIS MARKETS, INC.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of the Shareholders of Weis Markets, Inc., was held on
Tuesday, April 9, 2002, 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 25,140,803 794,692
Norman S. Rich 25,222,709 712,785
William R. Mills 25,224,326 711,169
Jonathan H. Weis 24,993,289 942,206
Michael M. Apfelbaum 25,643,667 291,828
Richard E. Shulman 25,645,773 289,722
Steven C. Smith 25,632,596 302,900
Proposal #2 For Against Abstain
Proposal to approve the
appointment of Ernst &
Young, LLP, as the
independent public accountants
of the Corporation. 25,694,902 224,829 15,764
9
WEIS MARKETS, INC.
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 30, 2002.
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 05/14/02 /S/ Robert F. Weis
ROBERT F. WEIS
Chairman of the Board
Date 05/14/02 /S/ William R. Mills
WILLIAM R. MILLS
Vice President and Treasurer
10