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 31, 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 41,688,157 shares (Outstanding at end of period)
WEIS MARKETS, INC. INDEX Page No. Part I. Financial Information Item 1. Consolidated Balance Sheets - March 31, 2001 and December 30, 2000 2 Consolidated Statements of Income - Three Months Ended March 31, 2001 and March 25, 2000 3 Consolidated Statements of Cash Flows - Three Months Ended March 31, 2001 and March 25, 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 7 Part II. Other Information Item 4. Exhibits and Reports on Form 8-K 8 Signatures 8 1
PART I - FINANCIAL INFORMATION WEIS MARKETS, INC. CONSOLIDATED BALANCE SHEETS (unaudited) (dollars in thousands) March 31, 2001 December 30, 2000 Assets Current: Cash $ 3,410 $ 3,389 Marketable securities 440,496 410,218 Accounts receivable, net 22,216 25,080 Inventories 153,714 168,541 Prepaid expenses 4,992 6,821 Income taxes recoverable --- 3,144 __________ __________ Total current assets 624,828 617,193 Property and equipment, net 443,221 441,819 Intangible and other assets, net 26,274 26,892 __________ __________ $ 1,094,323 $ 1,085,904 ========== ========== Liabilities Current: Accounts payable $ 77,455 $ 78,162 Accrued expenses 14,988 18,360 Accrued self-insurance 14,461 12,959 Payable to employee benefit plans 8,662 8,663 Income taxes payable 3,562 --- Deferred income taxes 3,529 2,143 __________ __________ Total current liabilities 122,657 120,287 Deferred income taxes 17,394 17,731 Shareholders' Equity Common stock, no par value, 100,800,000 shares authorized, 47,454,279 and 47,453,979 shares issued, respective 7,603 7,594 Retained earnings 1,075,924 1,069,986 Accumulated other comprehensive income (Net of deferred taxes of $5,477 in 2001 and $5,166 in 2000) 7,723 7,284 __________ __________ 1,091,250 1,084,864 Treasury stock, at cost, 5,766,122 and 5,766,122 shares, respectively (136,978) (136,978) __________ __________ Total shareholders' equity 954,272 947,886 __________ __________ $ 1,094,323 $ 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 March 31, 2001 March 25, 2000 Net sales $ 489,095 $ 519,750 Cost of sales, including warehousing and distribution expenses 358,909 389,687 __________ __________ Gross profit on sales 130,186 130,063 Operating, general and administrative expenses 112,293 109,279 __________ __________ Income from operations 17,893 20,784 Investment income 6,757 4,475 Other income 2,207 2,986 __________ __________ Income before provision for income taxes 26,857 28,245 Provision for income taxes 9,663 10,367 __________ __________ Net income $ 17,194 $ 17,878 ========== ========== Weighted-average shares outstanding 41,692,178 41,703,856 ========== ========== Cash dividends per share $ 0.27 $ 0.26 ========== ========== Basic and diluted earnings per $ 0.41 $ 0.43 ========== ========== See accompanying notes to consolidated financial statements. 3
WEIS MARKETS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (dollars in thousands) Three Months Ended March 31, 2001 March 25, 2000 Cash flows from operating activities: Net income $ 17,194 $ 17,878 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 10,552 10,547 Amortization 1,696 1,510 Loss on sale of fixed assets 714 57 Gain on sale of marketable securities (462) (546) Changes in operating assets and liabilities: Decrease in inventories 14,827 5,523 Decrease in accounts receivable and prepaid expenses 4,693 424 Decrease in income taxes recoverable 3,144 399 Decrease in accounts payable and other liabilities (2,578) (9,564) Increase in income taxes payable 3,562 8,252 Increase (decrease) in deferred income taxes 738 (722) __________ __________ Net cash provided by operating activities 54,080 33,758 Cash flows from investing activities: Purchase of property and equipment (13,761) (19,690) Proceeds from the sale of property and equipment 15 54 Purchase of marketable securities (128,646) (2,474) Proceeds from maturities of marketable securities 14,462 11,081 Proceeds from the sale of marketable securities 85,118 2,425 Increase in intangible assets and other assets --- (13,379) __________ __________ Net cash used in investing activities (42,812) (21,983) Cash flows from financing activities: Proceeds from issuance of common stock 9 21 Dividends paid (11,256) (10,840) Purchase of treasury stock --- (74) __________ __________ Net cash used in financing activities (11,247) (10,893) Net increase in cash 21 882 Cash at beginning of period 3,389 4,552 __________ __________ Cash at end of period $ 3,410 $ 5,434 ========== ========== Cash paid during the period for: Interest expense $ --- $ --- ========== ========== Income taxes $ 2,219 $ 2,438 ========== ========== 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 March 31, 2001 and March 25, 2000 are as follows: Three Months Ended (dollars in thousands) 03/31/01 03/25/00 Net Income $ 17,194 $ 17,878 Unrealized gains (losses) on marketable secrurities 709 (799) Less: reclassification adjustment for gains included in net income (271) (319) _______ _______ Comprehensive income $ 17,632 $ 16,760 ======= ======= (3) Property and Equipment Property and equipment, as of March 31, 2001 and December 30, 2000, consisted of : Useful Life (dollars in thousands) (in years) 2001 2000 Land $ 67,474 $ 63,341 Buildings and improvements 10-60 315,484 312,462 Equipment 3-12 462,877 462,079 Leasehold improvements 5-20 95,895 97,310 _______ _______ Total, at cost 941,730 935,192 Less accumulated depreciation and amoritiztion 498,509 493,373 _______ _______ $ 443,221 $ 441,819 ======= ======= (4) Subsequent 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 ANALYS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OPERATING RESULTS Sales for the first quarter ended March 31, 2001 of $489,095,000 compares to $519,750,000 during the same period last year when sales for our food service division, which was sold on April 7, 2000, were included in the company's overall sales. Excluding the food service division's sales from last year's results, the company's sales in the first quarter increased .8%, while identical store sales increased 0.4%. The flat sales are indicative of a slowing economy and the overall competitive environment. Gross profit of $130,186,000 at 26.6% of sales, increased .1% versus the same quarter last year. Excluding the food service division's gross profit from last year's results for the quarter, gross profit increased $2,075,000 or 1.6% over last year and increased .4% as a percent of sales. The first quarter operating, general and administrative expenses of $112,293,000, at 23.0% of sales, increased $3,014,000, or 2.8% compared to the same quarter last year. As a percentage of sales, operating expenses for the quarter were 2.0% higher than the 21.0% rate realized in the first quarter of 2000. Employee labor and benefit expense accounted for 41.4% of the total dollar increase in expenses while rising energy costs accounted for an additional 48.7%. Investment income of $6,757,000 at 1.4% of sales, compares to $4,475,000 at .9% of sales in 2000. The company realized a $462,000 gain on the sale of publicly traded securities from its investment portfolio during the quarter. Dividends and interest income increased $2,366,000 compared to results for the same quarter last year. The company sold tax-free municipal bonds, reinvesting those funds into taxable instruments increasing both investment income and applicable income taxes. Other income for the quarter of $2,207,000 at .5% of sales, decreased $779,000, or 26.1%, compared to the first quarter in 2000. The majority of the decline is due to the write-off of leasehold improvements on a closed store in the current year. The effective tax rate of 36% in the first quarter compared with 36.7% in the same quarter in 2000. Net earnings for the quarter of $17,194,000, or 41 cents per share, compared with $17,878,000, or 43 cents per share, in 2000. Discounting the impact of the food service division from the first quarter of 2000, earnings per share decreased one cent per share on a comparable basis. As of March 31, 2001, the company was operating 164 retail food stores, with locations in Pennsylvania, Maryland, New Jersey, New York, Virginia and West Virginia. The company owns SuperPetz II, Inc., a chain of 33 pet supply stores with locations in Alabama, Georgia, Indiana, Kentucky, Maryland, ichigan, North Carolina, Ohio, Pennsylvania, South Carolina and Tennessee. LIQUIDITY AND CAPITAL RESOURCES The company generated $54,080,000 in cash flows from operating activities for the three-month period ended March 31, 2001 compared to $33,758,000 during the same period of 2000. Working capital increased $5,265,000 or 1.1% since the beginning of the year. Net cash used in investing activities during the first quarter of 2001 was $42,812,000 compared to $21,983,000 in 2000. Property, equipment and intangible expenditures in the first quarter of 2001 amounted to $13,761,000 as compared to $33,069,000 in 2000. 6
WEIS MARKETS, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) LIQUIDITY AND CAPITAL RESOURCES (continued) Net cash used in financing activities during the first quarter of 2001 was $11,247,000, compared to $10,893,000 in 2000. The Board of Directors' 1996 resolution authorizing the purchase of treasury stock has a remaining balance of 573,385 shares. Cash dividend payments made during the quarter at $.27 per common share amounted to $11,256,000. This compares to $10,840,000 in dividends paid at the rate of $.26 per share in the first quarter of 2000. At a regularly scheduled meeting held on April 20, 2001, the Board of Directors declared a $.27 per share dividend payable to holders of record as of April 30, 2001, payable on May 14, 2001. 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 will require an investment of approximately $95,200,000 over an eighteen-month period through the middle of 2002. The company continues to pursue acquisitions and investment opportunities to enhance future financial performance. The financial and liquidity position of the company, combined with its historical insurance loss experience rates, has allowed it to carry higher deductible and retention levels on its employee and business insurance coverage. The company plans to maintain these higher exposure levels, thus benefiting from reduced premium expenses. 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 31, 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 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 30, 2000 and is incorporated herein by reference. 7
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 March 31, 2001. 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 05/15/2001 /S/ Robert F. Weis ROBERT F. WEIS Chairman of the Board & Treasurer Date 05/15/2001 /S/ William R. Mills WILLIAM R. MILLS Vice President-Finance & Secretary 8