-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Qmc13NNiS32x0DPwJmEhNGbQXgefLP/QbivKL4vGWQHnXJ5SirDkW9F+ewBTHVX1 Mmx6D25LJaLvF3219N0EOw== 0000105418-99-000007.txt : 19990811 0000105418-99-000007.hdr.sgml : 19990811 ACCESSION NUMBER: 0000105418-99-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990626 FILED AS OF DATE: 19990810 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WEIS MARKETS INC CENTRAL INDEX KEY: 0000105418 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 240755415 STATE OF INCORPORATION: PA FISCAL YEAR END: 1226 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-05039 FILM NUMBER: 99682087 BUSINESS ADDRESS: STREET 1: 1000 S SECOND ST STREET 2: PO BOX 471 CITY: SUNBURY STATE: PA ZIP: 17801 BUSINESS PHONE: 7172864571 MAIL ADDRESS: STREET 1: 1000 S SECOND ST STREET 2: P O BOX 471 CITY: SUNBURY STATE: PA ZIP: 17801 10-Q 1 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 26, 1999 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 41,688,975 shares (Outstanding at end of period) WEIS MARKETS, INC. INDEX Page No. Part I. Financial Information Item 1. Consolidated Balance Sheets - June 26, 1999 and December 26, 1998 2 Consolidated Statements of Income - Six Months Ended June 26, 1999 and June 27, 1998 3 Consolidated Statements of Cash Flows - Six Months Ended June 26, 1999 and June 27, 1998 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 Disclosure of Market Risk 9 Part II. Other Information 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 26, 1999 December 26, 1998 Assets Current: Cash $ 5,577 $ 7,430 Marketable securities 398,194 403,702 Accounts receivable, net 30,996 32,735 Inventories 138,934 158,938 Prepaid expenses 3,698 4,979 Deferred income taxes 4,585 434 _________ _________ Total current assets 581,984 608,218 Property and equipment, net 422,362 398,435 Intangible and other assets, net 21,268 22,549 _________ _________ $ 1,025,614 $ 1,029,202 ========= ========= Liabilities Current: Accounts payable $ 61,686 $ 74,556 Accrued expenses 17,518 13,876 Accrued self-insurance 16,535 12,814 Payable to employee benefit plans 7,735 8,195 Income taxes payable 483 9,302 _________ _________ Total current liabilities 103,957 118,743 Deferred income taxes 18,662 19,818 Shareholders' Equity Common stock, no par value, 100,800,000 shares authorized, 47,449,829 and 47,449,429 shares issued, respectively 7,482 7,471 Retained earnings 1,022,698 1,003,170 Accumulated other comprehensive income (Net of deferred taxes of $6,804 in 1999 and $10,238 in 1998) 9,594 14,436 _________ _________ 1,039,774 1,025,077 Treasury stock, at cost 5,760,854 and 5,693,585 shares, respectively (136,779) (134,436) _________ _________ Total shareholders' equity 902,995 890,641 _________ _________ $ 1,025,614 $ 1,029,202 ========= ========= 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 06/26/99 06/27/98 06/26/99 06/27/98 Net sales $ 490,019 $ 457,566 $ 986,300 $ 912,289 Cost of sales, including warehousing and distribution expenses 365,503 342,681 736,593 683,238 _______ _______ _______ _______ Gross profit on sales 124,516 114,885 249,707 229,051 Operating, general and administrative expenses 101,123 96,048 200,380 188,927 _______ _______ _______ _______ Income from operations 23,393 18,837 49,327 40,124 Investment income 4,015 4,394 8,037 22,753 Other income 2,062 2,593 4,270 5,251 _______ _______ _______ _______ Income before provision for income taxes 29,470 25,824 61,634 68,128 Provision for income taxes 10,270 9,086 21,243 24,772 _______ _______ _______ _______ Net income $ 19,200 $ 16,738 $ 40,391 $ 43,356 ======= ======= ======= ======= Weighted average number of common shares outstanding 41,723,014 41,780,066 41,744,376 41,779,606 ========== ========== ========== ========== Cash dividends per common share $ 0.25 $ 0.24 $ 0.50 $ 0.48 ========== ========== ========== ========== Basic and diluted earnings per share $ 0.46 $ 0.40 $ 0.97 $ 1.04 ========== ========== ========== ========== See accompanying notes to consolidated financial statements. 3 WEIS MARKETS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (dollars in thousands) Six months ended June 26, 1999 June 27, 1998 Cash flows from operating activities: Net income $ 40,391 $ 43,356 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 19,100 18,373 Amortization 2,430 2,347 Loss on sale of fixed assets 231 42 Gain on sale of marketable securities --- (14,210) Changes in operating assets and liabilities: Decrease in inventories 20,004 26,415 Decrease in accounts receivable and prepaid expenses 3,020 3,730 Decrease in accounts payable and other liabilities (5,967) (10,530) Increase (decrease) in income taxes payable (8,819) 1,437 Decrease in deferred income taxes (1,873) (985) _______ _______ Net cash provided by operating activities 68,517 69,975 Cash flows from investing activities: Purchase of property and equipment (45,277) (28,200) Proceeds from the sale of property and equipment 470 31 Purchase of marketable securities (26,309) (79,971) Proceeds from maturities of marketable securities 23,541 42,045 Proceeds from the sale of marketable securities --- 21,871 (Increase) decrease in intangible assets and other assets 400 (2,175) _______ _______ Net cash used in investing activities (47,175) (46,399) Cash flows from financing activities: Proceeds from issuance of common stock 11 13 Dividends paid (20,863) (20,051) Purchase of treasury stock (2,343) (40) _______ _______ Net cash used in financing activities (23,195) (20,078) Net increase (decrease) in cash (1,853) 3,498 Cash at beginning of period 7,430 3,133 _______ _______ Cash at end of period $ 5,577 $ 6,631 ======= ======= Cash paid during the period for: Interest expense $ --- $ --- ======= ======= Income taxes $ 31,935 $ 24,000 ======= ======= 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. Restatements: Certain amounts in the 1998 financial statements have been reclassified to conform with current year presentation. (2) Comprehensive Income The components of comprehensive income, net of related tax, for the three-month and six-month periods ended June 26, 1999 and June 27, 1998 are as follows: Three Months Ended Six Months Ended (dollars in thousands) 06/26/99 06/27/98 06/26/99 06/27/98 ================================================================================ Net Income $ 19,200 $ 16,738 $ 40,391 $ 43,356 Unrealized gains/(losses) on marketable securities (2,879) 1,832 (4,842) 12,821 Less: reclassification adjustment for gains included in net income (8,386) _________ _________ _________ _________ Comprehensive income $ 16,321 $ 18,570 $ 35,549 $ 47,791 ========= ========= ========= ========= (3) Property and Equipment Property and equipment, as of June 26, 1999 , and December 26, 1998, consisted of : Useful Life (dollars in thousands) (in years) 1999 1998 ========================================================================= Land $ 63,839 $ 58,151 Buildings and improvements 10-60 291,331 277,694 Equipment 3-12 429,237 413,703 Leasehold improvements 5-20 73,628 67,840 _______ _______ Total, at cost 858,035 817,388 Less accumulated depreciation and amortization 435,673 418,953 _______ _______ $ 422,362 $ 398,435 ======= ======= 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 26, 1999 increased 7.1% to $490,019,000 as compared to sales of $457,466,000 generated in the second quarter of 1998. Sales for the first half of this year increased 8.1% to $986,300,000 compared to $912,289,000 in 1998. Identical store sales increased 4.4% for the quarter as compared to a 1.6% increase in the second quarter of 1998. Through the first half of the year, the Company has experienced an increase in identical store sales of 5.6% as compared to a .1% increase during this same period last year. Sales performance from new and remodeled stores remains strong and the Company continues to be aggressive with its promotional activity. Gross profit of $124,516,000 at 25.4% of sales, increased $9,631,000 or 8.4% compared to the second quarter results last year. The increase in gross profit dollars was due primarily to higher sales volume as the gross profit rate increased by only .3%. Year-to-date gross profit of $249,707,000 at 25.3% of sales, increased $20,656,000 or 9.0%. As a percentage of sales, the year-to-date gross profit rate increased .2%. Tighter operational controls of store inventory shrink accounted for .2% of the gross profit rate improvement in both the quarter and year-to-date results. In the second quarter of 1999, operating, general and administrative expenses were $101,123,000 or 20.6% of sales. These costs increased $5,075,000 or 5.3% compared to the same quarter in 1998. The increase in operating expenses is directly attributable to the Company's higher sales volume. Year-to-date, operating expenses were $200,380,000 at 20.3% of sales compared to $188,927,000 at 20.7% of sales in the first half of last year. As a percentage of sales, total-operating expenses for the quarter and the first half of 1999 decreased .4% due to the Company's higher sales volume. Investment income during the quarter of $4,015,000 at .8% of sales, decreased $379,000, or 8.6% compared to last year. As a percentage of sales, the Company's investment income decreased .2%. Year-to-date investment income of $8,037,000 at .8% of sales, decreased $14,716,000 or 64.7% compared to the first half of last year. In the first quarter of 1998, the Company sold its interest in AquaPenn Spring Water Co., Inc. during that company's initial public offering on the NYSE (NYSE: APN) at a pretax profit of $14,210,000. Other income for the quarter of $2,062,000 at .4% of sales decreased $531,000, or 20.5% compared to the second quarter last year. Year-to-date, other income of $4,270,000 at .4% of sales decreased $981,000 or 18.7% versus a year ago. The effective tax rate for the second quarter of 1999 was 34.8% compared with 35.2% in 1998. Year-to- date, the effective tax rate is 34.5% compared to 36.4% last year. The higher tax rate in 1998 reflects taxes due on the capital gain realized from the sale of AquaPenn stock in the first quarter of the same year. Net income after tax for the second quarter increased 14.7% to $19,200,000, or $.46 per diluted share, compared to net income of $16,738,000, or $.40 per diluted share, in 1998. Year-to-date earnings were $40,391,000 or $.97 per diluted share, compared to $43,356,000, or $1.04 per diluted share in 1998. The Company's sale of its AquaPenn stock in the first quarter of 1998 contributed $0.20 to basic and diluted earnings per share. When this one-time investment gain is factored out of 1998's first half earnings, 1999 diluted earnings per share increased $.13 per share and net-profits increased 15.5%. As of June 26, 1999 Weis Markets, Inc., was operating 160 retail food stores, with locations in Pennsylvania, Maryland, New Jersey, New York, Virginia, and West Virginia. The Company also operates a restaurant and institutional food supplier, known as Weis Food Service. The Company also 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) LIQUIDITY AND CAPITAL RESOURCES During the first six months of 1999, the Company generated $68,517,000 in cash flows from operating activities compared to $69,975,000 for the same period in 1998. It is important to note that 1998's net cash provided by operating activities includes $14,210,000 from the sale of its AquaPenn stock. Year-to-date, working capital has decreased $11,448,000 or 2.3% since the beginning of this fiscal year. A significant part of this decrease stems from the payment of income taxes related to one-time gains in 1998 from the sale of securities held by the Company. Net cash used in investing activities in the first half of 1999 amounted to $47,175,000 compared to $46,399,000 in 1998. Capital expenditures for the first half of the year totaled $45,277,000, as compared to $28,200,000 in the first half of 1998. At the annual shareholder meeting held in April, the Company announced plans to invest $173,615,000 in capital improvements over an 18-month period. 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 1999 was $23,195,000, compared to $20,078,000 in 1998. Treasury stock purchases during the first half amounted to $2,343,000, compared to $40,000 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 578,653 shares. Cash dividend payments of $10,424,000 were made during the quarter to common stock shareholders at $.25 per share, as compared to $.24 per share in 1998. Year-to-date cash dividends paid to holders of common stock amounts to $20,863,000 compared to $20,051,000 in dividend payments in the first half of 1998. The Board of Directors recently declared a 4.0% increase in the quarterly dividend up from $.25 per share to $.26 cents per share. This marks the 34th consecutive year of dividend increases by the Company. The dividend will be payable to holders of record as of August 9, 1999, payable August 23, 1999. 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, announced at the Company's annual shareholders meeting in April, will require an investment of approximately $173,615,000 over an eighteen-month period through mid-year 2000. The Company also 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 26, 1999. READINESS FOR THE YEAR 2000 The Year 2000-issue (Y2K) is the result of computer programs written using two digits rather than four to define the applicable year within its calculations. Consequently, date sensitive calculations within computer programs or hardware with embedded chip technology may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or a program miscalculation that may cause a business interruption. In 1995, the Company began evaluating its information technology systems and various other systems in order to identify and adjust date sensitive systems for Y2K compliance. In 1996, a project group comprised of management from various areas within the organization was established to coordinate the Company's Y2K compliance efforts. This project group is also 7 WEIS MARKETS, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) READINESS FOR THE YEAR 2000 (continued) working with the Company's various suppliers and contractors to determine their Y2K compliance status and to monitor their compliance progress. Bi-weekly updates and periodic status reports from the project group keeps executive management informed of the team's progress. The Company's Y2K-project group completed its assessment of all systems potentially affected by the Y2K problem in 1998. Outside consultants were hired to perform some of the planning and remediation work and several business critical applications were sent to outside resources for independent certification. As of June 30, 1999, the Company completed remediation and testing on all software applications and hardware systems initially identified during the assessment phase of this project. The Company has completed Y2K implementation on all significant applications and hardware systems except point-of-sale software. The point-of-sale software was fully tested in both internal and external lab environments by June 30, 1999. However, problems encountered during earlier testing phases delayed the software installation. The Company expects to complete the software installation in all stores by September 30, 1999. The Company does not believe that the Y2K presents a material exposure as it relates to its overall operations and feels its own efforts will result in full compliance. Management has estimated that total Y2K remediation expenditures will cost $2.5 million. Consequently, the Y2K issue should not have a material impact on the operational results, liquidity, and capital resources of the Company. Normal maintenance and modification costs are being expensed as incurred. The acquisition cost of new software and hardware has been capitalized and will be written off over the expected useful life of the assets. The impact on business operations from failure by the Company to achieve compliance or failure by external entities beyond the Company's control could potentially have a material and adverse effect on the Company's future operational results. Management believes its Y2K efforts to date will be effective in preventing potential business interruptions. As a precaution, the Company has developed contingency plans for critical business applications and processes. These contingency plans involve manual workarounds and increasing both store and warehouse inventories. The Y2K-project group will continue to monitor, review, and test the systems throughout the remainder of the year. It will also continue to review and update its contingency plans as may be required. The contingency plans provide viable alternatives to ensure that the Company's core business operations will continue in the event of a Y2K related system failure. 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. 8 WEIS MARKETS, INC. 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 June 26, 1999. However, the Company is unsure as to the value of one investment totaling $4.2 million. The Company is monitoring this situation closely. Quantitative information is set forth on page 16 of the Company's 1998 Annual Report under the caption "Quantitative Disclosures About Market Risks", which was filed as Exhibit 13 to the Company's Annual Report on Form 10-K for the fiscal year ended December 26, 1998 and is incorporated herein by reference. Qualitative Disclosure - This information is set forth on page 7 of the Company's 1998 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 26, 1998 and is incorporated herein by reference. 9 PART II - OTHER INFORMATION (continued) 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 26, 1999. 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 EX-27 2
5 3-MOS DEC-25-1999 JUN-26-1999 5,577,000 398,194,000 30,996,000 0 138,934,000 581,984,000 858,035,000 435,673,000 1,025,614,000 103,957,000 0 7,482,000 0 0 895,513,000 1,025,614,000 490,019,000 490,019,000 365,503,000 460,549,000 0 0 0 29,470,000 10,270,000 19,200,000 0 0 0 19,200,000 .46 .46
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