-----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, EErxykTft8HIi495uLFRzyPI9URxud8xrWV2KRJgV5PiQ/QB/HU9C+QxMliJGPzK Cn+PQggqounF0oqlyu8Ulw== 0000105418-99-000010.txt : 19991108 0000105418-99-000010.hdr.sgml : 19991108 ACCESSION NUMBER: 0000105418-99-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990925 FILED AS OF DATE: 19991105 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: 99741797 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 September 25, 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 41,690,125 shares (Outstanding at end of period) WEIS MARKETS, INC. INDEX Page No. Part I. Financial Information Item 1. Consolidated Balance Sheets - September 25, 1999 and December 26, 1998 2 Consolidated Statements of Income - Nine Months Ended September 25, 1999 and September 26, 1998 3 Consolidated Statements of Cash Flows - Nine Months Ended September 25, 1999 and September 26, 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 Disclosures about 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) September 25, 1999 December 26, 1998 Assets Current: Cash $ 3,285 $ 7,430 Marketable securities 405,239 403,702 Accounts receivable, net 30,507 32,735 Inventories 136,053 158,938 Prepaid expenses 2,111 4,979 Deferred income taxes 5,784 434 _________ _________ Total current assets 582,979 608,218 Property and equipment, net 429,444 398,435 Intangible and other assets, net 20,440 22,549 _________ _________ $ 1,032,863 $ 1,029,202 ========= ========= Liabilities Current: Accounts payable $ 63,516 $ 74,556 Accrued expenses 14,948 13,876 Accrued self-insurance 14,527 12,814 Payable to employee benefit plans 7,944 8,195 Income taxes payable 3,918 9,302 _________ _________ Total current liabilities 104,853 118,743 Deferred income taxes 18,105 19,818 Shareholders' Equity Common stock, no par value, 100,800,000 shares authorized, 47,450,979 and 47,449,429 shares issued, respectively 7,511 7,471 Retained earnings 1,031,007 1,003,170 Accumulated other comprehensive income (Net of deferred taxes of $5,791 in 1999 and $10,238 in 1998) 8,166 14,436 _________ _________ 1,046,684 1,025,077 Treasury stock, at cost, 5,760,854 and 5,693,585 shares, respectively (136,779) (134,436) _________ _________ Total shareholders' equity 909,905 890,641 _________ _________ $ 1,032,863 $ 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 Nine Months Ended 09/25/99 09/26/98 09/25/99 09/26/98 Net sales $ 492,293 $ 463,296 $ 1,478,593 $ 1,375,585 Cost of sales, including warehousing and distribution expenses 363,301 345,626 1,099,894 1,028,864 __________ __________ __________ __________ Gross profit on sales 128,992 117,670 378,699 346,721 Operating, general and administrative expenses 104,673 97,441 305,054 286,367 __________ __________ __________ __________ Income from operations 24,319 20,229 73,645 60,354 Investment income 4,357 4,433 12,395 27,186 Other income 1,819 5,305 6,089 10,556 __________ __________ __________ __________ Income before provision for income taxes 30,495 29,967 92,129 98,096 Provision for income taxes 11,345 11,531 32,588 36,303 __________ __________ __________ __________ Net income $ 19,150 $ 18,436 $ 59,541 $ 61,793 ========== ========== ========== ========== Weighted average number of common shares outstanding 41,696,570 41,777,807 41,726,273 41,779,308 ========== ========== ========== ========== Cash dividends per common share $ 0.26 $ 0.25 $ 0.76 $ 0.73 ========== ========== ========== ========== Basic and diluted earnings per share $ 0.46 $ 0.44 $ 1.43 $ 1.48 ========== ========== ========== ========== See accompanying notes to consolidated financial statements. 3 WEIS MARKETS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (dollars in thousands) Nine Months Ended September 25, 1999 September 26, 1998 Cash flows from operating activities: Net income $ 59,541 $ 61,793 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 29,904 28,120 Amortization 4,681 6,324 (Gain) loss on sale of fixed assets 307 (148) Gain on sale of marketable securities (118) (14,210) Changes in operating assets and liabilities: Decrease in inventories 22,885 25,280 Decrease in accounts receivable and prepaid expenses 5,096 4,187 Decrease in accounts payable and other liabilities (8,506) (12,380) Increase (decrease) in income taxes payable (5,384) 4,250 Decrease in deferred income taxes (2,616) (1,755) _______ _______ Net cash provided by operating activities 105,790 101,461 Cash flows from investing activities: Purchase of property and equipment (64,285) (55,709) Proceeds from the sale of property and equipment 493 371 Purchase of marketable securities (63,142) (108,474) Proceeds from maturities of marketable securities 50,888 76,130 Proceeds from the sale of marketable securities 118 21,871 Increase in intangible assets and other assets --- (2,173) _______ _______ Net cash used in investing activities (75,928) (67,984) Cash flows from financing activities: Proceeds from issuance of common stock 40 26 Dividends paid (31,704) (30,494) Purchase of treasury stock (2,343) (146) _______ _______ Net cash used in financing activities (34,007) (30,614) Net increase (decrease) in cash (4,145) 2,863 Cash at beginning of period 7,430 3,133 _______ _______ Cash at end of period $ 3,285 $ 5,996 ======= ======= Cash paid during the period for: Interest expense $ --- $ --- ======= ======= Income taxes $ 40,588 $ 33,808 ======= ======= 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 nine-month periods ended September 25, 1999 and September 26, 1998 are as follows: Three Months Ended Nine Months Ended (dollars in thousands) 09/25/99 09/26/98 09/25/99 09/26/98 Net Income $ 19,150 $ 18,436 $ 59,541 $ 61,793 Unrealized gains/(losses) on marketable securities (1,429) 2,268 (6,271) 15,089 Less: reclassification adjustment for gains included in net income (8,386) ______ ______ ______ ______ Comprehensive income $ 17,721 $ 20,704 $ 53,270 $ 68,496 ====== ====== ====== ====== (3) Property and Equipment Property and equipment, as of September 25, 1999, and December 26,1998, consisted of : Useful Life (dollars in thousands) (in years) 1999 1998 Land $ 63,915 $ 58,151 Buildings and improvements 10-60 301,168 277,694 Equipment 3-12 433,711 413,703 Leasehold improvements 5-20 77,408 67,840 _______ _______ Total, at cost 876,202 817,388 Less accumulated depreciation and amortization 446,758 418,953 _______ _______ $ 429,444 $ 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 third quarter ended September 25, 1999, increased 6.3% to $492,293,000 compared to $463,296,000 last year. Year-to-date sales increased 7.5% to $1,478,593,000 compared to $1,375,585,000 in 1998. Same-store sales increased 2.5% for the quarter and 4.5% year-to-date. Sales performance from new and remodeled stores remains strong and the Company continues to be aggressive with its promotional activity. During the third quarter of 1999, gross profit increased $11,322,000 or 9.6% to $128,992,000 or 26.2% of sales compared to the same quarter last year. The increase in gross profit dollars is due primarily to increased store sales during the quarter. In addition, the Company's third quarter gross profit rate increased .8% compared to the same period a year ago. The increase in rate for the quarter reflects tighter operational controls implemented to reduce inventory loss and an increase in promotional income received. Year-to-date gross profit of $378,699,000 at 25.6% of sales increased $31,978,000 or 9.2% compared to last year. Gross profit rate increased .4% for the first three-quarters of the year. Third quarter operating, general and administrative expenses of $104,673,000 at 21.3% of sales were $7,232,000 or 7.4% higher than the same quarter last year. Operating expenses as a percentage of sales increased .2% during the quarter compared to the third quarter in 1998. The bulk of the dollar increase in expenses for the quarter is directly related to and proportional with the higher sales. Increased labor and benefit costs of $6,739,000 accounted for most of the rise in the Company's operating expenses in the quarter and year-to-date results. Management expects that labor and benefit costs will continue to affect net income disproportionately due to a tight employment market and the need for additional employees in newer units, which are larger and have more service departments. Fixed occupancy costs continue to rise as new stores are built and older existing units are enlarged and/or remodeled under the Company's aggressive capital improvement plan. Occupancy costs in the quarter were $1,525,000 higher than the same quarter last year. In the third quarter of 1998, the Company negotiated a settlement with a guarantor for non-performance by a lessee. Company management concluded that related intangible assets no longer had value and that certain other unrelated intangible assets exceeded future benefits. In accordance with generally accepted accounting principles, management reduced the carrying amount of these assets by $2,789,000 to their fair value in the third quarter of last year. Year-to-date operating, general and administrative expenses of $305,054,000 at 20.6% of sales compare with $286,367,000 at 20.8% through the first three quarters of 1998. Discounting the impact of the one time write-off of noncurrent assets in 1998, operating expenses as a percentage of sales is the same as last year. Investment income of $4,357,000 at .9% of sales decreased $76,000 or 1.7% compared to the results in the same quarter last year. As a percentage of sales, investment income decreased .1% in the third quarter compared to last year. Year-to-date investment income of $12,395,000 decreased $14,791,000 or 54.4% compared with results in the first three quarters of 1998. 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 gain of $14,210,000. Discounting this one-time credit, year-to-date investment income has decreased $581,000 or 4.5% for the year and decreased .1% as a percentage of sales. Other income for the quarter of $1,819,000 at .4% of sales decreased $3,486,000 or 65.7% compared to the same quarter last year. As previously mentioned, the Company negotiated a settlement with a guarantor for non-performance by a lessee for $2,450,000 in the third quarter of 1998. The Company also realized a gain on the sale of property of $305,000 during the third quarter of 1998. Other assets were determined to have a carrying value in excess of their market value by approximately $400,000 and were written down appropriately during the current quarter. Year-to-date, other income of $6,089,000 at .4% of sales decreased $4,467,000 or 42.3% compared to the same year-to-date period in 1998. 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 third quarter of 1999 was 37.2% compared with 38.5% in 1998. Year-to-date, the effective tax rate is 35.4% compared to 37.0% last year. Intangible assets written down to fair value during the third quarter of 1998 were not tax deductible. The higher year-to-date tax rate in 1998 also reflects taxes due on the capital gain realized from the sale of AquaPenn stock in the first quarter of the same year. Net earnings for the third quarter of $19,150,000 or 46 cents per diluted share compared with $18,436,000 or 44 cents per diluted share in 1998. Year-to-date earnings of $59,541,000 or $1.43 per diluted share, compares with $61,793,000 or $1.48 per diluted share in 1998. In the first quarter of 1998, the Company's after tax net-income included a one-time gain from the sale of AquaPenn Spring Water stock of $8.3 million in after tax net-income or .20 per share. Excluding the impact of this one-time item, Weis Markets 1999 year-to-date diluted earnings per share increased $.15 per share and net profits increased 11.3%. During the third quarter, Weis Markets opened two new stores; a 46,500-square-foot unit in Tannersville, PA and a 56,705-square-foot superstore in Pasadena, MD. The Company also completed the expansion of an existing unit located in Milton, PA. In the fourth quarter, the Company plans to open new grocery superstores in Flanders, NJ, Honesdale, PA, and Allentown, PA. In addition, the Company is currently building five superstores, three new, and two replacement units that are scheduled to open in early 2000. As of September 25, 1999 Weis Markets, Inc. was operating 162 stores in six states: Pennsylvania, Maryland, New Jersey, New York, Virginia, and West Virginia. The Company owns SuperPetz II, Inc., a chain of 34 pet supply stores in eleven states: Alabama, Georgia, Indiana, Kentucky, Maryland, Michigan, North Carolina, Ohio, Pennsylvania, South Carolina and Tennessee. The Company also operates Weis Food Service, a restaurant and institutional food supplier. LIQUIDITY AND CAPITAL RESOURCES The Company generated $105,790,000 in cash flows from operating activities for the nine-month period ended September 25, 1999 compared to $101,461,000 through September 26, 1998. Year-to-date, working capital has decreased $11,349,000 or 2.3% since the beginning of this fiscal year. Net cash used in investing activities in the first three-quarters of 1999 amounted to $75,928,000 compared to $67,984,000 in 1998. Year-to-date capital expenditures for property and equipment total $64,285,000, as compared to $55,709,000 during the same period in 1998. Proceeds from the sale of marketable securities during the first quarter of 1998 totaling $21,871,000 were used to purchase other marketable securities in that same year. Net cash used in financing activities during the first three-quarters of 1999 was $34,007,000, compared to $30,614,000 in 1998. Year-to-date cash dividends paid to holders of common stock amounts to $31,704,000 compared to $30,494,000 in dividend payments made in the first three-quarters of 1998. At a regularly scheduled meeting, the Board of Directors declared a 26 cents per share dividend for holders of record as of November 5, 1999, payable on November 19, 1999. Treasury stock purchases during the first three-quarters of this year of $2,343,000, compares to $146,000 in purchases made during the same period last year. The Board of Directors' 1996 resolution authorizing the purchase of treasury stock has a remaining balance of 578,653 shares. 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 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, Treasury Stock purchases, and the continuing expansion program. The corporation has no other commitment of capital resources as of September 25, 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 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 keep 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 reported in the second quarter of this year that it expected to complete the software installation in all stores by September 30, 1999. Although the installation of the software is substantially complete, additional delays encountered by outside product developers forced the install completion date to mid-November. 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 8 WEIS MARKETS, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) READINESS FOR THE YEAR 2000 (continued) 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. 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 September 25, 1999. 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 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 25, 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 SEP-25-1999 3,285,000 405,239,000 30,507,000 0 136,053,000 582,979,000 876,202,000 446,758,000 1,032,863,000 104,853,000 0 7,511,000 0 0 902,394,000 1,032,863,000 492,293,000 492,293,000 363,301,000 473,143,000 0 0 0 30,495,000 11,345,000 19,150,000 0 0 0 19,150,000 .46 .46
-----END PRIVACY-ENHANCED MESSAGE-----