Company Quick10K Filing
Weis Markets
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 27 $1,111
10-Q 2019-11-04 Quarter: 2019-09-28
10-Q 2019-08-06 Quarter: 2019-06-29
10-Q 2019-05-09 Quarter: 2019-03-30
10-K 2019-03-14 Annual: 2018-12-29
10-Q 2018-11-08 Quarter: 2018-09-29
10-Q 2018-08-08 Quarter: 2018-06-30
10-Q 2018-05-10 Quarter: 2018-03-31
10-K 2018-03-15 Annual: 2017-12-30
10-Q 2017-11-07 Quarter: 2017-09-30
10-Q 2017-08-10 Quarter: 2017-07-01
10-Q 2017-05-11 Quarter: 2017-04-01
10-K 2017-03-16 Annual: 2016-12-31
10-Q 2016-11-03 Quarter: 2016-09-24
10-Q 2016-07-28 Quarter: 2016-06-25
10-Q 2016-05-05 Quarter: 2016-03-26
10-K 2016-03-18 Annual: 2015-12-26
10-Q 2016-02-16 Quarter: 2015-09-26
10-Q 2015-08-04 Quarter: 2015-06-27
10-Q 2015-05-01 Quarter: 2015-03-28
10-K 2015-03-13 Annual: 2014-12-27
10-Q 2014-11-06 Quarter: 2014-09-27
10-Q 2014-08-07 Quarter: 2014-06-28
10-Q 2014-05-08 Quarter: 2014-03-29
10-K 2014-03-14 Annual: 2013-12-28
10-Q 2013-11-07 Quarter: 2013-09-28
10-Q 2013-08-08 Quarter: 2013-06-29
10-Q 2013-05-09 Quarter: 2013-03-30
10-K 2013-03-14 Annual: 2012-12-29
10-Q 2012-11-08 Quarter: 2012-09-29
10-Q 2012-08-09 Quarter: 2012-06-30
10-Q 2012-05-10 Quarter: 2012-03-31
10-K 2012-03-15 Annual: 2011-12-31
10-Q 2011-11-03 Quarter: 2011-09-24
10-Q 2011-08-04 Quarter: 2011-06-25
10-Q 2011-05-05 Quarter: 2011-03-26
10-K 2011-03-10 Annual: 2010-12-25
10-Q 2010-11-04 Quarter: 2010-09-25
10-Q 2010-08-05 Quarter: 2010-06-26
10-Q 2010-05-06 Quarter: 2010-03-27
10-K 2010-03-11 Annual: 2009-12-26
8-K 2019-11-18 Officers, Exhibits
8-K 2019-11-04 Earnings, Exhibits
8-K 2019-08-27 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-08-02 Earnings, Exhibits
8-K 2019-05-03 Earnings, Exhibits
8-K 2019-04-25 Shareholder Vote
8-K 2019-03-11 Earnings, Exhibits
8-K 2018-11-02 Earnings, Exhibits
8-K 2018-08-03 Earnings, Exhibits
8-K 2018-05-07 Earnings, Exhibits
8-K 2018-04-26 Shareholder Vote
8-K 2018-03-13 Earnings, Exhibits
WMK 2019-09-28
Part I – Financial Information
Item 2. Management’S Discussion and Analysis
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II – Other Information
Item 6. Exhibits
EX-31.1 wmk-20190928xex31_1.htm
EX-31.2 wmk-20190928xex31_2.htm
EX-32 wmk-20190928xex32.htm

Weis Markets Earnings 2019-09-28

WMK 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
WMK 1,111 1,602 560 3,527 926 62 173 1,059 26% 6.1 4%
SFS 400 2,499 2,205 4,770 728 -112 50 996 15% 19.7 -4%
NGVC 255 320 165 894 237 10 48 243 27% 5.1 3%
GNC 207 1,688 1,651 2,227 754 51 91 966 34% 10.6 3%
VSI 91 816 630 1,079 353 -5 34 77 33% 2.3 -1%
CBD 87 52,849 0 0 0 0 87 0%
IFMK 19 110 111 115 19 -13 -8 18 16% -2.4 -12%
IMKTA
VLGEA 489 173 1,225 454 25 66 -56 37% -0.8 5%
DTEA 172 114 0 106 -9 -9 -0 0.0 -5%

10-Q 1 wmk-20190928x10q.htm WEIS MARKETS, INC. 10Q 03 2019 WEIS MARKETS, INC 10Q 3 2019_Taxonomy2019

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549



FORM 10-Q

(Mark One)



 

[X]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the quarterly period ended September  28, 2019



or

[  ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the transition period from __________to_________



Commission File Number 1-5039



WEIS MARKETS, INC.
(Exact name of registrant as specified in its charter)





 

 

PENNSYLVANIA
(State or other jurisdiction of incorporation or organization)

 

24-0755415
(I.R.S. Employer Identification No.)

 

1000 S. Second Street
P. O. Box 471
Sunbury, Pennsylvania
(Address of principal executive offices)

 



17801-0471
(Zip Code)







 

Registrant's telephone number, including area code: (570) 286-4571

Registrant's web address:  www.weismarkets.com



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 by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes [X]  No [   ]



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,”  “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.





 

 

Large accelerated filer  [  ]   

 

Accelerated filer  [X]

Non-accelerated filer   [  ]

 

Smaller reporting company  [  ]



 

Emerging growth company  [  ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  [   ]



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes [   ]  No [X]



Securities registered pursuant to section 12(b) of the act:





 

 

Title of each class

Trading symbol

Name of exchange on which registered

Common stock, no par value

WMK

New York Stock Exchange



As of November 4, 2019, there were issued and outstanding 26,898,443 shares of the registrant’s common stock.

 

 


 

WEIS MARKETS, INC.

TABLE OF CONTENTS





 

FORM 10-Q

Page

Part I. Financial Information

 

Item 1. Financial Statements

 

Consolidated Balance Sheets

1

Consolidated Statements of Income

2

Consolidated Statements of Comprehensive Income

3

Consolidated Statements of Shareholders’ Equity

4

Consolidated Statements of Cash Flows

5

Notes to Consolidated Financial Statements

6

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

11

Item 3. Quantitative and Qualitative Disclosures about Market Risk

17

Item 4. Controls and Procedures

17

Part II. Other Information

 

Item 6. Exhibits

18

Signatures

18

Exhibit 31.1 Rule 13a-14(a) Certification - CEO

 

Exhibit 31.2 Rule 13a-14(a) Certification - CFO

 

Exhibit 32 Certification Pursuant to 18 U.S.C. Section 1350

 





 

 

 


 

Table of Contents

WEIS MARKETS, INC.



PART I – FINANCIAL INFORMATION

ITEM I – FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

(unaudited)





 

 

 

 

 

(dollars in thousands)

September 28, 2019

 

December 29, 2018

Assets

 

 

 

 

 

Current:

 

 

 

 

 

Cash and cash equivalents

$

76,581 

 

$

37,808 

Marketable securities

 

60,544 

 

 

54,298 

SERP investment

 

17,885 

 

 

14,686 

Accounts receivable, net

 

53,118 

 

 

57,285 

Inventories

 

263,237 

 

 

280,756 

Prepaid expenses and other current assets

 

21,250 

 

 

24,289 

Total current assets

 

492,615 

 

 

469,122 

Property and equipment, net

 

880,566 

 

 

887,608 

Operating lease right-to-use

 

194,149 

 

 

 -

Goodwill

 

52,330 

 

 

52,330 

Intangible and other assets, net

 

17,781 

 

 

22,951 

Total assets

$

1,637,441 

 

$

1,432,011 



 

 

 

 

 

Liabilities 

 

 

 

 

 

Current:

 

 

 

 

 

Accounts payable

$

183,415 

 

$

191,099 

Accrued expenses

 

31,663 

 

 

45,354 

Operating leases

 

38,223 

 

 

 -

Accrued self-insurance

 

14,910 

 

 

15,516 

Deferred revenue, net

 

5,571 

 

 

7,961 

Income taxes payable

 

10,893 

 

 

7,283 

Total current liabilities

 

284,675 

 

 

267,213 

Postretirement benefit obligations

 

20,867 

 

 

18,110 

Accrued self-insurance

 

17,782 

 

 

17,795 

Operating leases

 

164,934 

 

 

 -

Deferred income taxes

 

92,750 

 

 

90,793 

Other

 

8,249 

 

 

15,201 

Total liabilities

 

589,257 

 

 

409,112 

Shareholders’ Equity

 

 

 

 

 

Common stock, no par value, 100,800,000 shares authorized, 33,047,807 shares issued,

 

 

 

 

 

26,898,443 shares outstanding

 

9,949 

 

 

9,949 

Retained earnings

 

1,187,627 

 

 

1,163,545 

Accumulated other comprehensive income

 

 

 

 

 

(Net of deferred taxes of $584 in 2019 and $110 in 2018)

 

1,465 

 

 

262 



 

1,199,041 

 

 

1,173,756 

Treasury stock at cost, 6,149,364 shares

 

(150,857)

 

 

(150,857)

Total shareholders’ equity

 

1,048,184 

 

 

1,022,899 

Total liabilities and shareholders’ equity

$

1,637,441 

 

$

1,432,011 



See accompanying notes to Consolidated Financial Statements.

1

 


 

Table of Contents

WEIS MARKETS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



13 Weeks Ended

39 Weeks Ended

(dollars in thousands, except shares and per share amounts)

September 28, 2019

September 29, 2018

September 28, 2019

September 29, 2018

Net sales

$

876,222 

 

$

869,076 

 

$

2,640,907 

 

$

2,616,282 

 

Cost of sales, including advertising, warehousing and distribution expenses

 

643,397 

 

 

636,736 

 

 

1,941,860 

 

 

1,908,740 

 

Gross profit on sales

 

232,825 

 

 

232,340 

 

 

699,047 

 

 

707,542 

 

Operating, general and administrative expenses

 

215,321 

 

 

214,798 

 

 

639,694 

 

 

641,124 

 

Income from operations

 

17,504 

 

 

17,542 

 

 

59,353 

 

 

66,418 

 

Investment income and interest expense

 

1,467 

 

 

1,096 

 

 

5,441 

 

 

668 

 

Income before provision for income taxes

 

18,971 

 

 

18,638 

 

 

64,794 

 

 

67,086 

 

Provision for income taxes

 

4,652 

 

 

4,431 

 

 

15,696 

 

 

17,594 

 

Net income

$

14,319 

 

$

14,207 

 

$

49,098 

 

$

49,492 

 



 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding, basic and diluted

 

26,898,443 

 

 

26,898,443 

 

 

26,898,443 

 

 

26,898,443 

 

Cash dividends per share

$

0.31 

 

$

0.30 

 

$

0.93 

 

$

0.90 

 

Basic and diluted earnings per share

$

0.53 

 

$

0.53 

 

$

1.83 

 

$

1.84 

 

See accompanying notes to Consolidated Financial Statements.

2

 


 

Table of Contents

WEIS MARKETS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



13 Weeks Ended

39 Weeks Ended

(dollars in thousands)

September 28, 2019

September 29, 2018

September 28, 2019

September 29, 2018

Net income

$

14,319 

 

$

14,207 

 

$

49,098 

 

$

49,492 

 

Other comprehensive income (loss) by component, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains (losses) arising during period

 

 

 

 

 

 

 

 

 

 

 

 

(Net of deferred taxes of $(67) and $68, respectively for the thirteen Weeks Ended and $(490) and $240, respectively for the thirty-nine Weeks Ended)

 

166 

 

 

(175)

 

 

1,242 

 

 

(620)

 

Reclassification adjustment for (gains) losses included in net income

 

 

 

 

 

 

 

 

 

 

 

 

(Net of deferred taxes of $(16) and $0 , respectively for the thirteen Weeks Ended and $(16) and $15, respectively for the thirty-nine Weeks Ended)

 

(39)

 

 

 -

 

 

(39)

 

 

39 

 

Other comprehensive income gain (loss), net of tax

 

127 

 

 

(175)

 

 

1,203 

 

 

(581)

 

Comprehensive income, net of tax

$

14,446 

 

$

14,032 

 

$

50,301 

 

$

48,911 

 

See accompanying notes to Consolidated Financial Statements.



3

 


 

Table of Contents

WEIS MARKETS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(unaudited)







 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

Accumulated

 

 

 

 

 

 

(dollars in thousands, except shares)

 

 

 

 

 

Other

 

 

 

 

Total

For Thirteen Weeks Ended

Common Stock

Retained

Comprehensive

Treasury Stock

Shareholders’

September 28, 2019 and September 29, 2018

Shares

Amount

Earnings

Income (Loss)

Shares

Amount

Equity

Balance at June 29, 2019

33,047,807 

$

9,949 

$

1,181,647 

$

1,337 

 

6,149,364 

$

(150,857)

$

1,042,076 

Net income

 

 

14,319 

 

 

 

 

14,319 

Other comprehensive income, net of

 

 

 

 

 

 

 

 

 

 

 

 

 

reclassification adjustments and tax

 

 

 

127 

 

 

 

127 

Dividends paid

 

 

(8,339)

 

 

 

 

(8,339)

Balance at September 28, 2019

33,047,807 

$

9,949 

$

1,187,627 

$

1,465 

 

6,149,364 

$

(150,857)

$

1,048,184 



 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

Balance at June 30, 2018

33,047,807 

$

9,949 

$

1,152,499 

$

(8)

 

6,149,364 

$

(150,857)

$

1,011,583 

Net Income

 

 

14,207 

 

 

 

 

14,207 

Other comprehensive loss, net of

 

 

 

 

 

 

 

 

 

 

 

 

 

reclassification adjustments and tax

 

 

 

(175)

 

 

 

(175)

Dividends paid

 

 

(8,069)

 

 

 

 

(8,069)

Balance at September 29, 2018

33,047,807 

$

9,949 

$

1,158,636 

$

(184)

 

6,149,364 

$

(150,857)

$

1,017,545 







 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

Accumulated

 

 

 

 

 

 

(dollars in thousands, except shares)

 

 

 

 

 

Other

 

 

 

 

Total

For Thirty-Nine Weeks Ended

Common Stock

Retained

Comprehensive

Treasury Stock

Shareholders’

September 28, 2019 and September 29, 2018

Shares

Amount

Earnings

Income (Loss)

Shares

Amount

Equity

Balance at December 29, 2018

33,047,807 

$

9,949 

$

1,163,545 

$

262 

 

6,149,364 

$

(150,857)

$

1,022,899 

Net income

 

 

49,098 

 

 

 

 

49,098 

Other comprehensive income, net of

 

 

 

 

 

 

 

 

 

 

 

 

 

reclassification adjustments and tax

 

 

 

1,203 

 

 

 

1,203 

Dividends paid

 

 

(25,016)

 

 

 

 

(25,016)

Balance at September 28, 2019

33,047,807 

$

9,949 

$

1,187,627 

$

1,465 

 

6,149,364 

$

(150,857)

$

1,048,184 



 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

Balance at December 30, 2017

33,047,807 

$

9,949 

$

1,127,872 

$

5,880 

 

6,149,364 

$

(150,857)

$

992,844 

Net Income

 

 

49,492 

 

 

 

 

49,492 

Cumulative effect of accounting principle adoption of ASU 2016-01

 

 

5,482 

 

(5,482)

 

 

 

Other comprehensive loss, net of

 

 

 

 

 

 

 

 

 

 

 

 

 

reclassification adjustments and tax

 

 

 

(581)

 

 

 

(581)

Dividends paid

 

 

(24,209)

 

 

 

 

(24,209)

Balance at September 29, 2018

33,047,807 

$

9,949 

$

1,158,636 

$

(184)

 

6,149,364 

$

(150,857)

$

1,017,545 



See accompanying notes to Consolidated Financial Statements.

4

 


 

Table of Contents

WEIS MARKETS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)





 

 

 

 

 



39 Weeks Ended

(dollars in thousands)

September 28, 2019

September 29, 2018

Cash flows from operating activities:

 

 

 

 

 

Net income

$

49,098 

 

$

49,492 

Adjustments to reconcile net income to

 

 

 

 

 

net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

69,857 

 

 

69,589 

(Gain) Loss on disposition of fixed assets

 

1,137 

 

 

(76)

(Gain) Loss on sale of marketable securities

 

(55)

 

 

54 

Unrealized (gain) loss in value of equity securities

 

(1,637)

 

 

883 

Deferred income taxes

 

1,483 

 

 

3,752 

Changes in operating assets and liabilities:

 

 

 

 

 

Inventories

 

17,519 

 

 

(1,388)

Accounts receivable and prepaid expenses

 

7,205 

 

 

(2,118)

Accounts payable and other liabilities

 

(9,153)

 

 

(17,172)

Income taxes

 

3,610 

 

 

8,637 

Other

 

972 

 

 

409 

Net cash provided by operating activities

 

140,036 

 

 

112,062 

Cash flows from investing activities:

 

 

 

 

 

Purchase of property and equipment

 

(70,084)

 

 

(64,504)

Proceeds from the sale of property and equipment

 

1,489 

 

 

1,113 

Purchase of marketable securities

 

(9,220)

 

 

(3,256)

Proceeds from maturities of marketable securities

 

4,575 

 

 

4,915 

Proceeds from the sale of marketable securities

 

750 

 

 

4,333 

Purchase of intangible assets

 

(558)

 

 

(3,540)

Change in SERP investment

 

(3,199)

 

 

(1,531)

Net cash used in investing activities

 

(76,247)

 

 

(62,470)

Cash flows from financing activities:

 

 

 

 

 

Payments on long-term debt

 

 -

 

 

(34,988)

Dividends paid

 

(25,016)

 

 

(24,209)

Net cash used in financing activities

 

(25,016)

 

 

(59,197)

Net increase (decrease) in cash and cash equivalents

 

38,773 

 

 

(9,605)

Cash and cash equivalents at beginning of year

 

37,808 

 

 

47,917 

Cash and cash equivalents at end of period

$

76,581 

 

$

38,312 

See accompanying notes to Consolidated Financial StatementsIn the first thirty-nine weeks of 2019, there was $10.6 million cash paid for income taxes compared to $5.2 million in 2018 for the same period.  Cash paid for interest related to long-term debt was $50 thousand and $359 thousand in the first thirty-nine weeks of 2019 and 2018, respectively. 





 

5

 


 

Table of Contents

WEIS MARKETS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 



 

(1) Significant Accounting Policies
Basis of Presentation:  The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States 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 deferrals and 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.  The Company has evaluated subsequent events for disclosure through the date of issuance of the accompanying unaudited consolidated interim financial statements and there were no material subsequent events which require additional disclosure.  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) Current Relevant Accounting Standards

The Company adopted ASU 2016-02 Leases (Topic 842) effective December 30, 2018. The ASU requires lessees to recognize assets and liabilities for the rights and obligations created by their leases with lease terms more than 12 months. During 2018, the ASU was amended to permit the election of transitional provisions, including the elimination of the requirement to restate reporting periods prior to the date of adoption.  The Company has adopted the standard using transitional provisions and has elected practical expedients to not reassess the original conclusions reached regarding lease identification, lease classification and initial direct costs. The adoption had a significant impact on the Company’s Consolidated Balance Sheets, resulting in $202 million and $211 million of the operating lease right-to-use assets and lease liabilities, respectively.  There are no significant changes to the Consolidated Statements of Comprehensive Income or Consolidated Statements of Cash Flows.  See Note 7 for additional disclosures on the adoption.

 

(3)  Marketable Securities

The Company’s marketable securities are all classified as available-for-sale within “Current Assets” in the Company’s Consolidated Balance Sheets.  FASB has established three levels of inputs that may be used to measure fair value: 

Level 1  Observable inputs such as quoted prices in active markets for identical assets or liabilities;

Level 2  Observable inputs, other than Level 1 inputs in active markets, that are observable either directly or indirectly; and

Level 3  Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions.

The Company’s marketable securities valued using Level 1 inputs include highly liquid equity securities, for which quoted market prices are available.  The Company’s municipal bond portfolio is valued using Level 2 inputs.  The Company’s municipal bonds are valued using a combination of pricing for similar securities, recently executed transactions, cash flow models with yield curves and other pricing models utilizing observable inputs, which are considered Level 2 inputs.



For Level 2 investment valuation, the Company utilizes standard pricing procedures of its investment advisory firm which includes various third party pricing services.  These procedures also require specific price monitoring practices as well as pricing review reports, valuation oversight and pricing challenge procedures to maintain the most accurate representation of investment fair market value. 



The Company accrues interest on its bond portfolio throughout the life of each bond held.  Dividends from the equity securities are recognized as received.  Interest, dividends and unrealized gains and losses on equity securities are recognized in “Investment income and interest expense” on the Company’s Consolidated Statements of Income.  The Company recognized investment income of $1.5 million in the third quarter of 2019, which included an unrealized gain in equity securities of $844 thousand. In the thirty-nine weeks ending September 28, 2019, the Company recognized investment income of $5.5 million, which included unrealized gains in equity securities of $1.7 million.  Investment income of $1.1 million and investment income of $936 thousand were recognized in the third quarter of 2018 and thirty-nine weeks ended September 29, 2018, respectively.





6

 


 

Table of Contents

WEIS MARKETS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

(3)  Marketable Securities (continued)





Marketable securities, as of September 28, 2019 and December 29, 2018, consisted of:



 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



 

 

Gross

Gross

 

 

(dollars in thousands)

Amortized

Unrealized

Unrealized

Fair

September 28, 2019

Cost

Holding Gains

Holding Losses

Value

Available-for-sale:

 

 

 

 

 

 

 

 

Level 1

 

 

 

 

 

 

 

 

Equity securities

 

 

 

 

 

 

$

8,862 

Level 2

 

 

 

 

 

 

 

 

Municipal bonds

$

49,633 

$

2,060 

$

(11)

 

51,682 



$

49,633 

$

2,060 

$

(11)

$

60,544 







 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



 

 

Gross

Gross

 

 

(dollars in thousands)

Amortized

Unrealized

Unrealized

Fair

December 29, 2018

Cost

Holding Gains

Holding Losses

Value

Available-for-sale:

 

 

 

 

 

 

 

 

Level 1

 

 

 

 

 

 

 

 

Equity securities

 

 

 

 

 

 

$

7,226 

Level 2

 

 

 

 

 

 

 

 

Municipal bonds

$

46,699 

$

426 

$

(53)

 

47,072 



$

46,699 

$

426 

$

(53)

$

54,298 



Maturities of marketable securities classified as available-for-sale at September 28, 2019, were as follows:



 

 

 

 



 

Amortized

 

Fair

(dollars in thousands)

 

Cost

 

Value

Available-for-sale:

 

 

 

 

Due within one year

$

6,563 

$

6,581 

Due after one year through five years

 

24,209 

 

24,832 

Due after five years through ten years

 

18,861 

 

20,269 



$

49,633 

$

51,682 



SERP Investments

The Company also maintains a non-qualified supplemental executive retirement plan for certain of its associates which allows them to defer income to future periods.  Participants in the plans earn a return on their deferrals based on mutual fund investments.  The Company chooses to invest in the underlying mutual fund investments to offset the liability associated with the non-qualified deferred compensation plans.  Such investments are reported on the Company’s Consolidated Balance Sheets as “SERP investment,” are classified as trading securities and are measured at fair value using Level 1 inputs with gains and losses included in “Investment income and interest expense” on the Company’s Consolidated Statements of Income.  The changes in the underlying liability to the associates are recorded in “Operating, general and administrative expenses.”



7

 


 

Table of Contents

WEIS MARKETS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 





(4)  Accumulated Other Comprehensive Income

All balances in accumulated other comprehensive income are related to available-for-sale marketable securities.  The following table sets forth the balance of the Company’s accumulated other comprehensive income, net of tax. 



 

 



 

 



 

Unrealized Gains



 

on Available-for-Sale

(dollars in thousands)

 

Marketable Securities

Accumulated other comprehensive income balance as of December 29, 2018

$

262 



 

 

Other comprehensive income before reclassifications

 

1,242 

Amounts reclassified from accumulated other comprehensive income

 

(39)

Net current period change in other comprehensive income

 

1,203 

Accumulated other comprehensive income balance as of September 28, 2019

$

1,465 



The following table sets forth the effects on net income of the amounts reclassified out of accumulated other comprehensive income for the periods ended September 28, 2019 and September 29, 2018.



 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

Amounts Reclassified from



 

Accumulated Other Comprehensive Income to the



 

Consolidated Statements of Income



 

13 Weeks Ended

39 Weeks Ended

(dollars in thousands)

Location

September 28, 2019

September 29, 2018

September 28, 2019

September 29, 2018

Unrealized gains (losses) on available-for-sale marketable securities

 

 

 

 

 

 

 

 



Investment income and interest expense

$

(55)

$

 -

$

(55)

$

54 



Provision for income taxes

 

16 

 

 -

 

16 

 

(15)

Total amount reclassified, net of tax

$

(39)

$

 -

$

(39)

$

39 









































(5) Long-Term Debt

On September 1, 2016 Weis Markets entered into a revolving credit agreement with Wells Fargo Bank, National Association (the “Credit Agreement”),  which was amended August 21, 2019 prior to maturity September 1, 2019.  The Credit Agreement provides for an unsecured revolving credit facility with an aggregate principal amount not to exceed $30.0 million with an additional discretionary amount available of $70.0 million.  As of September 28, 2019, the availability under the revolving credit agreement was $18.5 million, net of $11.5 million letters of credit.  The letters of credit are maintained primarily to support performance, payment, deposit or surety obligations of the Company.



Interest expense related to long-term debt was $10 thousand and $29 thousand in the thirteen weeks ended September  28, 2019 and September 29, 2018, respectively.  In the first thirty-nine weeks of 2019 and 2018, interest expense related to long-term debt totaled $43 thousand and $269 thousand, respectively.

8

 


 

Table of Contents

WEIS MARKETS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

(6) Revenue Recognition

The Chief Operating Officer, the Company’s chief operating decision maker, analyzes store operational revenues by geographical area but each area offers customers similar product, has similar distribution methods, and is supported by centralized management processes.  The Company’s operations are reported as a single reportable segment.



The following table represents net sales by type of product for the thirteen and thirty-nine week periods ending September 28, 2019 and September 29, 2018:







 

 

 

 

 

 

 

 

 

 

 

 



 

13 Weeks Ended

(dollars in thousands)

 

September 28, 2019

 

September 29, 2018 1

Grocery

 

$

754,872 

 

86.1 

%

 

$

756,578 

 

87.1 

%

Pharmacy

 

 

84,632 

 

9.7 

 

 

 

77,568 

 

8.9 

 

Fuel

 

 

34,041 

 

3.9 

 

 

 

33,668 

 

3.9 

 

Manufacturing

 

 

2,677 

 

0.3 

 

 

 

1,262 

 

0.1 

 



 

 

 

 

 

 

 

 

 

 

 

 

Total net sales

 

$

876,222 

 

100.0 

%

 

$

869,076 

 

100.0 

%

















 

 

 

 

 

 

 

 

 

 

 

 



 

39 Weeks Ended

(dollars in thousands)

 

September 28, 2019

 

September 29, 2018 1

Grocery

 

$

2,289,658 

 

86.7 

%

 

$

2,282,490 

 

87.2 

%

Pharmacy

 

 

251,095 

 

9.5 

 

 

 

233,778 

 

8.9 

 

Fuel

 

 

93,777 

 

3.6 

 

 

 

95,751 

 

3.7 

 

Manufacturing

 

 

6,377 

 

0.2 

 

 

 

4,263 

 

0.2 

 



 

 

 

 

 

 

 

 

 

 

 

 

Total net sales

 

$

2,640,907 

 

100.0 

%

 

$

2,616,282 

 

100.0 

%







1  The Company reclassified net sales amounts between manufacturing and grocery relating to the Company’s 10-Q filed November, 2018. For the thirteen weeks ended September 29, 2018, the Company presents the amounts above with $13.4 million, or 1.6% of net sales, as a reclass between manufacturing and grocery.  For the thirty-nine weeks ended September 29, 2018, the Company presents the amounts above with $39.3 million, or 1.5% of net sales, as a reclass between manufacturing and grocery.









 

9

 


 

Table of Contents

WEIS MARKETS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

(7) Leases



The adoption of ASU 2016-02 Leases (Topic 842) had a significant impact on the Company’s Consolidated Balance Sheets, resulting in operating lease right-to-use assets of $202 million and lease liabilities of $211 million.  The difference between the operating lease right-to-use assets and lease liabilities represents prepaid and accrued rents, unfavorable lease obligations, favorable lease assets and deferred tenant allowances associated with operating leases as of December 30, 2018 and reclassified against the operating lease right-to-use asset upon adoption.



As of December 30, 2018, the Company leased approximately 53% of its open store facilities under operating leases that expire at various dates through 2033, with the remaining store facilities being owned.  These leases generally provide for fixed annual rentals; however, several provide for minimum annual rentals plus variable lease costs related to real estate taxes and insurance as well as contingent rentals based on a percentage of annual sales or increases periodically based on inflation.  These variable lease costs are not included in the measurement of the operating lease right-to-use assets or lease liabilities and are charged to the related expense category included in “Operating, general and administrative expenses.”  Most of the leases contain multiple renewal options, under which the Company may extend the lease terms from 5 to 20 years.  Additionally, the Company has operating leases for certain transportation and other equipment.



The Company leases or subleases space to tenants in owned, vacated and open store facilities.  Rental income is recorded when earned as a component of “Operating, general and administrative expenses.”



The following is a schedule of the lease costs included in “Operating, general and administrative expenses” for the thirteen and thirty-nine weeks ended September 28, 2019.





 

 

 

 

(dollars in thousands)

13 Weeks Ended

39 Weeks Ended

Operating lease cost

$

11,493 

$

34,549 

Variable lease cost

 

2,636 

 

8,190 

Lease or sublease income

 

(1,945)

 

(5,795)

Net lease cost

$

12,184 

$

36,944 



The following is a schedule by years of the future minimum rental payments required under operating leases and total minimum sublease and lease rental income to be received as of  September 28, 2019, inclusive of 12 months from September 28th.







 

 

 

(dollars in thousands)

 

Leases

Subleases

2019

$

45,907  (4,020)

2020

 

40,860  (3,519)

2021

 

34,264  (3,020)

2022

 

29,164  (2,590)

2023

 

25,033  (1,987)

Thereafter

 

66,110  (7,534)

Total Lease Payments

$

241,338  (22,670)

Less: Interest

 

38,181 

 -

Present value of lease liabilities

 

203,157  (22,670)







The following is a schedule of weighted-average remaining lease terms and weighted-average discount rates as of September 28, 2019 and December 30, 2018.







 

 

 

 

Lease Term and Discount Rate

 

September 28, 2019

 

December 30, 2018

Weighted-average remaining lease term

 

4.36 

 

4.69 

Weighted-average discount rate

 

3.63% 

 

3.84% 



































 

10

 


 

Table of Contents

WEIS MARKETS, INC.

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



The following discussion and analysis of Weis Markets, Inc.’s (the “Company”) financial condition and results of operations should be read in conjunction with the unaudited Consolidated Financial Statements and related notes included in Item 1 of this Quarterly Report on Form 10-Q, the Company’s audited Consolidated Financial Statements and the related notes included in the Company’s Annual Report on Form 10-K for the year ended December 29, 2018, filed with the U.S. Securities and Exchange Commission, as well as the cautionary statement captioned "Forward-Looking Statements" immediately following this analysis.



Company Summary



Weis Markets is a conventional supermarket chain that operates 198 retail stores with nearly 22,000 associates located in Pennsylvania and six surrounding states: Delaware, Maryland, New Jersey, New York, Virginia and West Virginia.  Its products include groceries, dairy products, frozen foods, meats, seafood, fresh produce, floral, pharmacy services, deli products, prepared foods, bakery products, beer and wine, fuel and general merchandise items, such as health and beauty care and household products.  The store product selection includes national, local and private brands and the Company promotes by using Everyday Lower Price, Low Price Guarantee, and Loyalty programs.  The Loyalty program includes fuel rewards that may be redeemed at the Company’s fuel stations or one of its third-party fuel station partners.  On January 17, 2019 the Company announced a new pricing strategy for its private brand products named Low, Low Price. The move takes the Company’s private brand products from a high, low pricing strategy to everyday low cost.



The Company advertises its products and promotes its brand through weekly newspaper circulars; radio ads; e-mail blasts; and on-line via its web site, social media and mobile applications.  Printed circulars are used extensively on a weekly basis to advertise featured items.  The Company promotes by using Everyday Lower Price, Low Price Guarantee, Low, Low Price and utilizes a loyalty marketing program, “Weis Club Preferred Shopper,” which enables customers to receive discounts, promotions and in-store and fuel rewards.  

   

Utilizing its own centrally located distribution center and transportation fleet, Weis Markets self distributes approximately 65% of product with the remaining being supplied by direct store vendors.  In addition, the Company has three manufacturing facilities which process milk, ice cream and fresh meat products primarily for the Company’s stores but serve other companies as well.  The corporate offices are located in Sunbury, PA where the Company was founded in 1912. 



In 2016, Weis Markets acquired five Mars Super Market locations in Baltimore County, MD, 38 Food Lion stores throughout Maryland, Virginia and Delaware, and a Nell's Family Market in East Berlin, PA.  The completion of these individual acquisitions expanded the Company's footprint into Virginia and Delaware, and increased its store count by 25 percent.  To date the acquired store group is providing a positive cash flow for the Company at a greater return on the fair value investment than if stores had been organically established.  As the acquired stores assimilate, management anticipates the adverse impact of these stores on Company margins to lessen.  During the first thirty-nine weeks of 2019, the Company closed three stores from the acquired store group.  On September 30, 2019 the Company announced the purchase of two former Thomas’ Foods locations in north eastern Pennsylvania with the plan to re-open the Dallas, PA location under the Weis Markets banner in the fourth quarter of 2019.  The Company continues to actively investigate acquisition opportunities as well as grow its existing store base organically.



The Company continues to innovate and remain relevant to industry trends and offering customer convenience by presenting

programs like “Weis 2 Go Online” and home delivery.  In the first thirty-nine weeks of 2019, the Company offered Weis 2 Go Online in 154 of its locations, adding 65 stores since the end of 2018.  Weis 2 Go Online allows the customer to order on-line and then pick up their order at a drive-thru location at the store.  During the third quarter of 2018 the Company began offering home delivery, and currently offers this convenience to customers in 175 different locations.

11

 


 

Table of Contents

WEIS MARKETS, INC.

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(continued)

Results of Operations





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Analysis of Consolidated Statements of Income

 



 

 

 

 

 

 

 

 

 

 

 

 

 

Percentage Changes

 



13 Weeks Ended

39 Weeks Ended

2019 vs. 2018

 

2019 vs. 2018

 

(dollars in thousands except per share amounts)

September 28, 2019

September 29, 2018

September 28, 2019

September 29, 2018

13 Weeks Ended

 

39 Weeks Ended

 

Net sales

$

876,222 

 

$

869,076 

 

$

2,640,907 

 

$

2,616,282 

 

 

 

0.8

%

 

 

0.9

%

 

Cost of sales, including advertising, warehousing and distribution expenses

 

643,397 

 

 

636,736 

 

 

1,941,860 

 

 

1,908,740 

 

 

 

1.0

 

 

 

1.7

 

 

Gross profit on sales

 

232,825 

 

 

232,340 

 

 

699,047 

 

 

707,542 

 

 

 

0.2

 

 

 

(1.2)

 

 

Gross profit margin

 

26.6 

%

 

26.7 

%

 

26.5 

%

 

27.0 

%

 

 

 

 

 

 

 

 

 

Operating, general and administrative expenses

 

215,321 

 

 

214,798 

 

 

639,694 

 

 

641,124 

 

 

 

0.2

 

 

 

(0.2)

 

 

  O, G & A, percent of net sales

 

24.6 

%

 

24.7 

%

 

24.2 

%

 

24.5 

%

 

 

 

 

 

 

 

 

 

  Income from operations

 

17,504 

 

 

17,542 

 

 

59,353 

 

 

66,418 

 

 

 

(0.2)

 

 

 

(10.6)

 

 

  Operating margin

 

2.0 

%

 

2.0 

%

 

2.2 

%

 

2.5 

%

 

 

 

 

 

 

 

 

 

Investment income and interest expense

 

1,467 

 

 

1,096 

 

 

5,441 

 

 

668 

 

 

 

33.9

 

 

 

714.5

 

 

Investment income and interest expense, percent of net sales

 

0.2 

%

 

0.1 

%

 

0.2 

%

 

0.0 

%

 

 

 

 

 

 

 

 

 

Income before provision for income taxes

 

18,971 

 

 

18,638 

 

 

64,794 

 

 

67,086 

 

 

 

1.8

 

 

 

(3.4)

 

 

Income before provision for income taxes, percent of net sales

 

2.2 

%

 

2.1 

%

 

2.5 

%

 

2.6 

%

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

4,652 

 

 

4,431 

 

 

15,696 

 

 

17,594 

 

 

 

5.0

 

 

 

(10.8)

 

 

Effective income tax rate

 

24.5 

%

 

23.8 

%

 

24.2 

%

 

26.2 

%

 

 

 

 

 

 

 

 

 

Net income

$

14,319 

 

$

14,207 

 

$

49,098 

 

$

49,492 

 

 

 

0.8

%

 

 

(0.8)

%

 

Net income, percent of net sales

 

1.6 

%

 

1.6 

%

 

1.9 

%

 

1.9 

%

 

 

 

 

 

 

 

 

 

Basic and diluted earnings per share

$

0.53 

 

$

0.53 

 

$

1.83 

 

$

1.84 

 

 

 

0.0

%

 

 

(0.5)

%

 



Net Sales

Analysis of Sales





 

 

 

 

 

 



Percentage Changes



2019 vs. 2018

September 28, 2019

13 Weeks Ended

39 Weeks Ended

Net sales

 

0.8 

%

 

0.9 

%

Net sales, excluding fuel sales

 

0.8 

 

 

1.1 

 

Comparable store sales

 

1.7 

 

 

1.5 

 

Comparable store sales, excluding fuel sales

 

1.7 

%

 

1.7 

%



When calculating the percentage change in comparable store sales, the Company defines a new store to be comparable after it has been in operation for five full quarters.  Relocated stores and stores with expanded square footage are included in comparable store sales since these units are located in existing markets and are open during construction.  Planned store dispositions are excluded from the calculation.  The Company only includes retail food stores in the calculation.

12

 


 

Table of Contents

WEIS MARKETS, INC.

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(continued)

Results of Operations (continued)



Net Sales (continued)

Analysis of Sales (continued)



According to the latest U.S. Bureau of Labor Statistics’ report, the annual Seasonally Adjusted Food-at-Home Consumer Price Index increased 0.8% compared to an increase of 0.5% for the same period last year.  Even though the U.S. Bureau of Labor Statistics’ index rates may be reflective of a trend, it will not necessarily be indicative of the Company’s actual results.  According to the U.S. Department of Energy, the thirteen-week average price of gasoline in the Central Atlantic States increased 0.3% or $0.01 per gallon in the third quarter of 2019 compared to the same quarter in 2018.  The year to date average remains the same in 2019 when compared to 2018.



Comparable store sales for the third quarter of 2019 is positive compared to the same period a year ago with increases of 1.7% with and without fuelYear to date, comparable store sales for 2019 is also positive when compared to the same period in 2018, with increases of 1.5% and 1.7% with and without fuel, respectively.  In 2019, customer acceptance of the new Low, Low Price private brand program has augmented sales, as well as additional product offerings and customer conveniences such as “Weis 2 Go Online,” currently offered at 175 store locations.  “Weis 2 Go Online” allows the customer to order on-line and have their order delivered or at 154 of the 175 locations, pick their order up at an expedient store drive-thru.



Although the Company experienced retail inflation and deflation in various commodities for the years presented, management cannot accurately measure the full impact of inflation or deflation on retail pricing due to changes in the types of merchandise sold between periods, shifts in customer buying patterns and the fluctuation of competitive factors.  Management remains confident in its ability to generate sales growth in a highly competitive environment, but also understands some competitors have greater financial resources and could use these resources to take measures which could adversely affect the Company's competitive position.



Cost of Sales and Gross Profit

Cost of sales consists of direct product costs (net of discounts and allowances), net advertising costs, distribution center and transportation costs, as well as manufacturing facility operations.  Increased sales volume resulted in an increase in cost of sales.  Both direct product cost and distribution cost increase when sales volume increases.



Gross profit on sales for the third quarter of 2019 is positive compared to the same period a year ago with an increase of 0.2%.  In the third quarter of 2019, the Company’s gross profit margin stabilized as grocery retails and costs maintained consistency.  Year to date, gross profit on sales for 2019 is negative when compared to the same period in 2018, with a decrease of 1.2%.  For the first two quarters, declining retails and costs in fuel, fruits, vegetables and eggs had a negative impact on gross profit rates, while year to date pharmacy gross profits are being pressured by recent changes in industry practices.  While the various commodities’ retails and costs are cyclical in nature, the Company cannot predict whether the pharmacy industry practices will change favorably.



Non-cash LIFO inventory valuation adjustments represent income of $1.2 million in the first thirty-nine weeks of 2019, compared to an expense of $0 in 2018.  The Company anticipates product costs to continue to decrease in the coming quarter resulting in additional income.



Although the Company experienced product cost inflation and deflation in various commodities for the quarters presented, management cannot accurately measure the full impact of inflation or deflation on costs due to changes in the types of merchandise sold between periods, shifts in customer buying patterns and the fluctuation of competitive factors.



13

 


 

Table of Contents

WEIS MARKETS, INC.

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(continued)

Results of Operations (continued)



Operating, General and Administrative Expenses 
The majority of the operating, general and administrative expenses are driven by sales volume.



Employee-related costs such as wages, employer paid taxes, health care benefits and retirement plans, comprise approximately 61%  of the total “Operating, general and administrative expenses.”  As a percent of sales, direct store labor decreased 0.2% in the third quarter of 2019 when compared to the same period in 2018,  and decreased 0.1% when comparing the first three quarters of 2019 with the same period in 2018.  The Company continues to monitor store labor efficiencies and develop labor standards to reduce cost while maintaining the Company’s customer service expectations.  Currently, the Company is undergoing an initiative installing or upgrading self-checkouts in its stores in response to customer preference and labor rates and supply.



Depreciation and amortization expense charged to “Operating, general and administrative expenses was $21.4 million, or 2.5% of net sales during the third quarter of 2019 compared to $23.4 million, or 2.7% of net sales during the third quarter of 2018.  During the first three quarters of 2019 and 2018, depreciation and amortization expense charged to “Operating, general and administrative expenses” was $63.9 million, or 2.4% of net sales and $69.5 million, or 2.7% of net sales, respectively.  See the Liquidity and Capital Resources section for further information regarding the Company’s capital expansion program.







 

 

 

 

A breakdown of the material increases (decreases) as a percent of sales in "Operating, general and administrative expenses" is as follows:



 

 

 

 



13 Weeks Ended

 

(dollars in thousands)

Increase

Increase (Decrease)

 

September 28, 2019

(Decrease)

as a % of sales

 

Utilities expense

 

(1,700) (0.2)

%







 

 

 

 



39 Weeks Ended

 

(dollars in thousands)

Increase

Increase (Decrease)

 

September 28, 2019

(Decrease)

as a % of sales

 

Store operational expenses & supplies

$

(2,733) (0.1)

%

Utilities expense

 

(4,442) (0.2)

 





All expenses as a percent of sales presented for the third quarter of 2019 have benefited in comparison with the 2018 percent of sales due to the closure of unprofitable stores.  The Company is benefiting from cost saving initiatives in various areas of its operations and is saving in utilities with a combination of purchasing, associate sustainability and capital investments such as its LED lighting program.



The Company’s 2018 sustainability report may be found at: https://www.weismarkets.com/sites/default/files/documents/weis_2018_9_ada.pdf?27



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Table of Contents

WEIS MARKETS, INC.

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS





Provision for Income Taxes 

The effective income tax rate was 24.5% and 23.8% for the third quarter of 2019 and 2018, respectively.  The effective income tax rate was 24.2% and 26.2% for the first thirty-nine weeks of 2019 and 2018, respectively.  Historically, the effective income tax rate differed from the federal statutory rate, primarily due to the effect of state taxes, net of permanent differences.



Liquidity and Capital Resources



The primary source of cash is cash flows generated from operations. In addition, the Company has access to a revolving credit agreement amended on August 21, 2019 with Wells Fargo Bank, NA (the “Credit Agreement”).  The Credit Agreement provides for an unsecured revolving credit facility with an aggregate principal amount not to exceed $30.0 million with an additional discretionary amount available of $70.0 million.  As of September 28, 2019, the availability under the revolving credit agreement was $18.5 million with $11.5 million of letters of credit outstanding.  The letters of credit are maintained primarily to support performance, payment, deposit or surety obligations of the Company.



The Company’s investment portfolio consists of high grade municipal bonds with maturity dates generally between one and 10 years and large capitalized public company equity securities.  The portfolio totaled $60.5 million as of September 28, 2019.  Management anticipates maintaining the investment portfolio, but has the ability to liquidate if needed.



The Company’s 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 distribution facilities and transportation fleet.  Management currently plans to invest approximately $86 million in its capital expansion program in 2019. 



The Company expects that cash generated from operations and cash available under the Credit Agreement will fund its working capital requirements, debt requirements, capital expansion program, acquisitions and dividends.  The Company has no other commitment of capital resources as of September 28, 2019, other than the lease commitments on its store facilities and transportation equipment under operating leases that expire at various dates through 2033.



The Board of Directors’ 2004 resolution authorizing the repurchase of up to one million shares of the Company’s common stock has a remaining balance of 752,468 shares.  The Company has recently entered into a brokerage agreement with Wells Fargo Securities, LLC to facilitate possible share repurchases.



Quarterly Cash Dividends 

At its regular meeting held in October, the Board of Directors unanimously approved a quarterly dividend of $0.31 per share, payable on November 25, 2019 to shareholders of record on November 11, 2019.  The Company expects to continue paying regular cash dividends on a quarterly basis. However, the Board of Directors reconsiders the declaration of dividends quarterly. The Company pays these dividends at the discretion of the Board of Directors and the continuation of these payments and the amount of the dividends depends upon the results of operations, the financial condition of the Company and other factors which the Board of Directors deems relevant.



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Table of Contents

WEIS MARKETS, INC.

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(continued)

Liquidity and Capital Resources (continued)



Cash Flow Information







 

 

 

 

 

 

 

 

 



39 Weeks Ended

 

 

 

(dollars in thousands)

September 28, 2019

September 29, 2018

2019 vs. 2018

Net cash provided by (used in):

 

 

 

 

 

 

 

 

 

Operating activities