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 September 23, 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 41,687,857 shares
(Outstanding at end of period)
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WEIS MARKETS, INC.
INDEX
Page No.
Part I. Financial Information
Item 1. Consolidated Balance Sheets -
September 23, 2000 and December 25, 1999 2
Consolidated Statements of Income -
Nine Months Ended September 23, 2000
and September 25, 1999 3
Consolidated Statements of Cash Flows -
Nine Months Ended September 23, 2000
and September 25, 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 1. Legal Proceedings 9
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 9
1
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PART I - FINANCIAL INFORMATION
WEIS MARKETS, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(dollars in thousands)
September 23, 2000 December 25, 1999
Assets
Current:
Cash $ 3,393 $ 4,552
Marketable securities 420,978 384,663
Accounts receivable, net 21,148 34,737
Inventories 140,336 167,146
Prepaid expenses 3,434 5,672
Income taxes recoverable --- 399
Deferred income taxes 7,346 5,399
__________ __________
Total current assets 596,635 602,568
Property and equipment, net 440,484 439,418
Intangible and other assets, net 27,510 16,235
__________ __________
$ 1,064,629 $ 1,058,221
========== ==========
Liabilities
Current:
Accounts payable $ 53,626 $ 82,742
Accrued expenses 19,968 16,283
Accrued self-insurance 14,532 13,255
Payable to employee benefit plans 8,300 8,560
Income taxes payable 7,793 ---
__________ __________
Total current liabilities 104,219 120,840
Deferred income taxes 17,278 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 1,066,057 1,040,354
Accumulated other comprehensive
income (Net of deferred taxes of
$4,581 in 2000 and $5,208 in 1999) 6,459 7,343
__________ __________
1,080,110 1,055,256
Treasury stock, at cost,
5,766,122 and 5,760,854 shares,
respectively (136,978) (136,779)
__________ __________
Total shareholders' equity 943,132 918,477
__________ __________
$ 1,064,629 $ 1,058,221
========== ==========
See accompanying notes to consolidated financial statements.
2
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WEIS MARKETS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(dollars in thousands except per share amounts)
Three Months Ended Nine Months Ended
09/23/00 09/25/99 09/23/00 09/25/99
Net sales $ 485,875 $ 492,293 $ 1,514,582 $ 1,478,593
Cost of sales, including
warehousing and distribution
expenses 352,549 363,301 1,116,315 1,099,894
__________ __________ __________ __________
Gross profit on sales 133,326 128,992 398,267 378,699
Operating, general and
administrative expenses 112,117 104,673 335,002 305,054
__________ __________ __________ __________
Income from operations 21,209 24,319 63,265 73,645
Investment income 5,065 4,357 13,783 12,395
Other income 3,112 1,819 15,485 6,089
__________ __________ __________ __________
Income before provision
for income taxes 29,386 30,495 92,533 92,129
Provision for income taxes 10,283 11,345 33,894 32,588
__________ __________ __________ __________
Net income $ 19,103 $ 19,150 $ 58,639 $ 59,541
========== ========== ========== ==========
Weighted average number
of common shares
outstanding 41,689,421 41,696,570 41,695,640 41,726,273
========== ========== ========== ==========
Cash dividends
per common share $ 0.26 $ 0.26 $ 0.78 $ 0.76
========== ========== ========== ==========
Basic and diluted
earnings per share $ 0.46 $ 0.46 $ 1.41 $ 1.43
========== ========== ========== ==========
See accompanying notes to consolidated financial statements.
3
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WEIS MARKETS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(dollars in thousands)
Nine Months Ended
09/23/00 09/25/99
Cash flows from operating activities:
Net income $ 58,639 $ 59,541
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 32,569 29,904
Amortization 5,035 4,681
(Gain) loss on sale of fixed assets (6,022) 307
Gain on sale of marketable securities (1,100) (118)
Changes in operating assets and liabilities:
Decrease in inventories 26,810 22,885
Decrease in accounts receivable
and prepaid expenses 15,827 5,096
Decrease in income taxes recoverable 399 ---
Decrease in accounts payable
and other liabilities (24,414) (8,506)
Increase (decrease) in income taxes payable 7,793 (5,384)
Decrease in deferred income taxes (2,946) (2,616)
__________ __________
Net cash provided by operating
activities 112,590 105,790
Cash flows from investing activities:
Purchase of property and equipment (42,078) (64,285)
Proceeds from the sale of property and equipment 11,534 493
Purchase of marketable securities (171,595) (63,142)
Proceeds from maturities of marketable securities 67,525 50,888
Proceeds from the sale of marketable securities 67,344 118
Increase in intangible assets (13,379) ---
__________ __________
Net cash used in investing activities (80,649) (75,928)
Cash flows from financing activities:
Proceeds from issuance of common stock 35 40
Dividends paid (32,936) (31,704)
Purchase of treasury stock (199) (2,343)
__________ __________
Net cash used in financing activities (33,100) (34,007)
Net decrease in cash (1,159) (4,145)
Cash at beginning of period 4,552 7,430
__________ __________
Cash at end of period $ 3,393 $ 3,285
========== ==========
Cash paid during the period for:
Interest expense $ --- $ ---
========== ==========
Income taxes $ 28,649 $ 40,588
========== ==========
See accompanying notes to consolidated financial statements.
4
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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 September 23, 2000 and September 25, 1999 are
as follows:
Three Months Ended Nine Months Ended
(dollars in thousands) 09/23/00 09/25/99 09/23/00 09/25/99
Net Income $ 19,103 $ 19,150 $ 58,639 $ 59,541
Unrealized losses on
marketable securities (76) (1,429) (241) (6,271)
Less: reclassification
adjustment for gains
included in net income (259) --- (643) ---
_______ _______ _______ _______
Comprehensive income $ 18,768 $ 17,721 $ 57,755 $ 53,270
======= ======= ======= =======
(3) Property and Equipment
Property and equipment, as of September 23, 2000, and December 25, 1999,
consisted of :
Useful Life
(dollars in thousands) (in years) 2000 1999
Land $ 63,305 $ 63,732
Buildings and improvements 10-60 313,970 310,137
Equipment 3-12 453,194 441,771
Leasehold improvements 5-20 91,627 81,133
_________ _________
Total, at cost 922,096 896,773
Less accumulated depreciation and
amortization 481,612 457,355
_________ _________
$ 440,484 $ 439,418
========= =========
5
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WEIS MARKETS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OPERATING RESULTS
Total sales generated for the third quarter ended September 23, 2000
decreased 1.3% to $485,875,000 compared to $492,293,000 for the same
period in 1999. Year-to-date, sales increased 2.4% to $1,514,582,000
compared to $1,478,593,000 in 1999. Identical store sales increased .2% for
the quarter and .8% through the year-to-date.
Excluding Weis Food Service sales from the Company's third quarter
results in 2000 and 1999, the Company's sales from ongoing operations
increased 5.7%. Year-to-date sales from ongoing operations, excluding Weis
Food Service, increased 6.9%. 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.
During the third quarter of 2000, gross profit increased $4,334,000 or
3.4%, to $133,326,000 or 27.4% of sales, compared to the same period last
year. Higher sales volume resulted in an increase in gross profit dollars,
while the increase in the percent of sales was due to the elimination of Weis
Food Service as part of the Company's overall sales mix. Gross profit,
excluding Weis Food Service, was 27.6% for the third quarter in 1999.
Year-to-date gross profit of $398,267,000 at 26.3% of sales, increased
$19,568,000 or 5.2%. As a percentage of sales, the Company's year-to-date
gross profit rate increased .7%.
In the third quarter of 2000, operating, general and administrative
expenses were $112,117,000 or 23.1% of sales. These costs increased
$7,444,000 or 7.1% compared to the same quarter in 1999.
Management continues its aggressive advertising and promotional
spending in the third quarter, which began in the first half of the year, after
a flat first quarter sales period. As a result of the program, the Company's
advertising and special promotion costs in the third quarter were up
$1,652,000 compared to the same period a year ago. Increased labor and
benefit costs accounted for $2,143,000 of the increase in the Company's
operating expenses for the third quarter, and fixed occupancy costs increased
$755,000 compared to last year's results. The Company's capital spending
program continues at an aggressive pace, compared to the published
industry averages.
Year-to-date operating expenses of $335,002,000 at 22.1% of sales
compared to $305,054,000 at 20.6% of sales in the first nine months of last
year.
The Company's investment income for the third quarter totaled $5,065,000
at 1.0% of sales, an increase of $708,000 or 16.2% compared to last year.
The Company realized a $452,000 gain from the sale of publicly traded
securities in its portfolio. Overall, the Company has realized a gain of
$1,109,000 on the sale of publicly traded securities during the first three
quarters of 2000. Year-to-date, the Company's investment income increased
$1,388,000 or 11.2% to $13,783,000 at .9% of sales.
Other income in the third quarter increased $1,293,000 or 71.1%, to
$3,112,000 at .6% of sales compared to the same period in 1999.
Year-to-date, the Company's other income increased $9,396,000 or 154.3%
to $15,485,000 at 1.0% of sales. This total includes $5,839,000 realized from
the sale of Weis Food Service equipment to Reinhart FoodService.
The effective tax rate for the third quarter of 2000 was 35.0% compared
with 37.2% in 1999. Year-to-date, the effective tax rate is 36.6% compared to
35.4% 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.
6
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WEIS MARKETS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
OPERATING RESULTS (continued)
Basic and diluted earnings per share for the third quarter were $.46,
which remained unchanged from the same period a year ago. Net income
decreased in the third quarter by .2% to $19,103,000 from $19,150,000.
Year-to-date earnings were $58,639,000 or $1.41 per diluted share,
compared to $59,541,000, or $1.43 per diluted share in 1999.
When Weis Food Service's financial results are excluded from the
Company's results in 2000 and 1999, the Company's net income decreased
1.2% for the quarter. Basic and diluted earnings per share from ongoing
operations remained constant at $.46 for the third quarter. Year-to-date net
income generated from ongoing operations, excluding Weis Food Service,
decreased 3.31%. Basic and diluted earnings per share from ongoing
operations declined $.04 to $1.37 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 September 23, 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 nine months of 2000, the Company generated
$112,590,000 in cash flows from operating activities compared to
$105,790,000 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
$10,688,000 or 2.2% since the beginning of this fiscal year.
Net cash used in investing activities in the first three quarters of 2000
amounted to $80,649,000, compared to $75,928,000 in 1999. Year-to-date
capital expenditures totaled $55,457,000, as compared to $64,285,000 in
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 three quarters of
2000 was $33,100,000, compared to $34,007,000 in 1999. Treasury stock
purchases during the first half amounted to $199,000, compared to
$2,343,000 in purchases made in the first nine months of last year. The
Board of Directors' 1996 resolution authorizing the purchase of treasury stock
has a remaining balance of 573,385 shares. In the third quarter, the
Company made $11,256,000 in dividend payments to shareholders of record
at $.26 per share. Year-to-date cash dividends paid to shareholders totals to
$32,936,000 compared to $31,704,000 in dividend payments in the first three
quarters of 1999.
7
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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. 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, the purchase of Treasury Stock, and
the continuing expansion program. The corporation has no other
commitment of capital resources as of September 23, 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 nine months ended September 23, 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
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Various lawsuits, claims and proceedings of a nature considered normal to
its business are pending against the Company.
The most significant of these was filed in early 1995 by PVC Realty, a
Pennsylvania Limited Liability Partnership, in the Court of Common Pleas,
Cambria County, Pennsylvania, naming Weis Markets, Inc. as the defendant.
On October 19, 2000, a jury determined that the Company breached its lease
related to the Company's failure to conduct business as a supermarket at
one location and awarded the plaintiff $6.5 million for lost profits and $15
million for punitive damages.
While the ultimate outcome of this matter can not be determined presently
with certainty, the Company is advised by its legal counsel that it is remote
that this verdict will survive the post trial motions and appeals.
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 September 23, 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
