10-Q 1 wmk-20220326x10q.htm WEIS MARKETS, INC. 10Q 01 2022
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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 March 26, 2022

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

    

24-0755415

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

1000 S. Second Street

P. O. Box 471

17801-0471

Sunbury, Pennsylvania

(Zip Code)

(Address of principal executive offices)

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 May 5, 2022, 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

10

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

19

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

WEIS MARKETS, INC.

PART I – FINANCIAL INFORMATION

ITEM I – FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

(unaudited)

(amounts in thousands, except shares)

    

March 26, 2022

    

December 25, 2021

Assets

Current:

Cash and cash equivalents

$

93,092

$

86,048

Marketable securities

198,756

205,744

SERP investment

24,515

27,059

Accounts receivable, net

47,310

52,108

Inventories

285,355

269,587

Prepaid expenses and other current assets

29,613

31,112

Total current assets

678,641

671,658

Property and equipment, net

954,521

977,787

Operating lease right-to-use

193,596

191,175

Goodwill

52,330

52,330

Intangible and other assets, net

17,850

17,525

Total assets

$

1,896,938

$

1,910,475

Liabilities

Current:

Accounts payable

$

193,233

$

218,774

Accrued expenses

49,040

48,654

Operating leases

44,096

39,940

Accrued self-insurance

19,003

18,568

Deferred revenue, net

8,505

11,901

Income taxes payable

14,919

7,360

Total current liabilities

328,796

345,197

Postretirement benefit obligations

26,474

29,964

Accrued self-insurance

23,390

23,400

Operating leases

159,623

161,669

Deferred income taxes

116,643

115,087

Other

4,535

15,416

Total liabilities

659,461

690,733

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

1,381,745

1,358,963

Accumulated other comprehensive income
(Net of deferred taxes of $1,332 in 2022 and $669 in 2021)

(3,360)

1,687

1,388,334

1,370,599

Treasury stock at cost, 6,149,364 shares

(150,857)

(150,857)

Total shareholders’ equity

1,237,477

1,219,742

Total liabilities and shareholders’ equity

$

1,896,938

$

1,910,475

See accompanying notes to Consolidated Financial Statements.

1

WEIS MARKETS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

13 Weeks Ended

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

March 26, 2022

March 27, 2021

Net sales

$

1,104,069

$

1,006,340

Cost of sales, including advertising, warehousing and distribution expenses

810,384

738,950

Gross profit on sales

293,685

267,390

Operating, general and administrative expenses

252,271

235,556

Income from operations

41,414

31,834

Investment income (loss) and interest expense

(881)

1,611

Other income (expense)

1,505

(775)

Income before provision for income taxes

42,038

32,670

Provision for income taxes

10,649

8,415

Net income

$

31,389

$

24,255

Weighted-average shares outstanding, basic and diluted

26,898,443

26,898,443

Cash dividends per share

$

0.32

$

0.31

Basic and diluted earnings per share

$

1.17

$

0.90

See accompanying notes to Consolidated Financial Statements.

2

WEIS MARKETS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

13 Weeks Ended

(amounts in thousands)

March 26, 2022

March 27, 2021

Net income

$

31,389

$

24,255

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 $2,001 and $306, respectively for the thirteen weeks ended)

(5,047)

(774)

Other comprehensive income gain (loss), net of tax

(5,047)

(774)

Comprehensive income, net of tax

$

26,342

$

23,481

See accompanying notes to Consolidated Financial Statements.

3

WEIS MARKETS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(unaudited)

Accumulated

(amounts in thousands, except shares)

Other

Total

For the Thirteen Weeks Ended

Common Stock

Retained

Comprehensive

Treasury Stock

Shareholders’

March 26, 2022 and March 27, 2021

Shares

Amount

Earnings

Income (Loss)

Shares

Amount

Equity

Balance at December 25, 2021

    

33,047,807

$

9,949

$

1,358,963

$

1,687

6,149,364

$

(150,857)

$

1,219,742

Net Income

31,389

31,389

Other comprehensive income (loss), net of tax

(5,047)

(5,047)

Dividends paid

(8,608)

(8,608)

Balance at March 26, 2022

33,047,807

$

9,949

$

1,381,745

$

(3,360)

6,149,364

$

(150,857)

$

1,237,477

Balance at December 26, 2020

33,047,807

$

9,949

$

1,283,737

$

3,286

6,149,364

$

(150,857)

$

1,146,115

Net income

24,255

24,255

Other comprehensive income (loss), net of tax

(774)

(774)

Dividends paid

(8,339)

(8,339)

Balance at March 27, 2021

33,047,807

$

9,949

$

1,299,653

$

2,512

6,149,364

$

(150,857)

$

1,161,257

See accompanying notes to Consolidated Financial Statements.

4

WEIS MARKETS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

13 Weeks Ended

(amounts in thousands)

March 26, 2022

March 27, 2021

Cash flows from operating activities:

Net income

$

31,389

$

24,255

Adjustments to reconcile net income to

net cash provided by operating activities:

Depreciation and amortization

25,629

25,359

(Gain) loss on disposition of fixed assets

(3)

63

Unrealized (gain) loss in value of equity securities

214

(237)

Deferred income taxes

3,557

2,133

Unrealized (gain) loss in SERP

2,184

(448)

Changes in operating assets and liabilities:

Inventories

(15,768)

(7,709)

Accounts receivable and prepaid expenses

6,297

15,763

Accounts payable and other liabilities

(26,316)

(49,776)

Income taxes

7,559

5,146

Other

(262)

388

Net cash provided by operating activities

34,480

14,937

Cash flows from investing activities:

Purchase of property and equipment

(18,793)

(37,043)

Proceeds from the sale of property and equipment

13

29

Purchase of marketable securities

(25,965)

(10,165)

Proceeds from the sale and maturities of marketable securities

25,481

6,125

Purchase of intangible assets

(48)

(17)

Proceeds from sale of intangible assets

125

Change in SERP investment

359

(922)

Net cash used in investing activities

(18,828)

(41,993)

Cash flows from financing activities:

Dividends paid

(8,608)

(8,339)

Net cash used in financing activities

(8,608)

(8,339)

Net increase (decrease) in cash and cash equivalents

7,044

(35,395)

Cash and cash equivalents at beginning of year

86,048

136,612

Cash and cash equivalents at end of period

$

93,092

$

101,217

See accompanying notes to Consolidated Financial Statements. In the first thirteen weeks of 2022, there was $233 thousand cash paid for income taxes compared to $1.1 million in 2021 for the same period. Cash paid for interest related to long-term debt was $8 thousand and $9 thousand in the first thirteen weeks of 2022 and 2021, respectively.

5

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 regularly monitors recently issued accounting standards and assesses their applicability and impact. The Company believes that there are no accounting standard updates that have or will have a material or significant impact on the Company’s accounting policies.

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

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

Level 3Unobservable 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 and commercial paper portfolio is valued using Level 2 inputs. The Company’s municipal bonds and commercial paper 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 and commercial paper portfolio throughout the life of each bond and commercial paper 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 (loss) and interest expense” on the Company’s Consolidated Statements of Income. The Company recognized investment income of $632 thousand in the thirteen weeks ended March 26, 2022, which included an unrealized loss in equity securities of $214 thousand. In the thirteen weeks ended March 27, 2021, the Company recognized investment income of $844 thousand, which included an unrealized gain in equity securities of $237 thousand.

6

Table of Contents

WEIS MARKETS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

Marketable securities, as of March 26, 2022 and December 25, 2021, consisted of:

Gross

Gross

(amounts in thousands)

Amortized

Unrealized

Unrealized

Fair

March 26, 2022

    

Cost

    

Holding Gains

    

Holding Losses

    

Value

Available-for-sale:

Level 1

Equity securities

$

6,295

Level 2

Corporate and municipal bonds

$

152,238

$

2,012

$

(6,648)

147,602

Commercial Paper

44,915

6

(62)

44,859

$

197,153

$

2,018

$

(6,710)

$

198,756

Gross

Gross

(amounts in thousands)

Amortized

Unrealized

Unrealized

Fair

December 25, 2021

    

Cost

    

Holding Gains

    

Holding Losses

    

Value

Available-for-sale:

Level 1

Equity securities

$

6,509

Level 2

Corporate and municipal bonds

$

151,947

$

4,753

$

(2,384)

154,315

Commercial Paper

44,931

2

(13)

44,920

$

196,878

$

4,755

$

(2,397)

$

205,744

Maturities of marketable securities classified as available-for-sale at March 26, 2022, were as follows:

Amortized

Fair

(amounts in thousands)

    

Cost

    

Value

Available-for-sale:

Due within one year

$

57,746

$

57,494

Due after one year through five years

89,527

87,916

Due after five years through ten years

49,880

47,051

$

197,153

$

192,461

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 (loss) and interest expense” on the Company’s Consolidated Statements of Income. The Company recognized investment loss of $1.5 million in the thirteen weeks ended March 26, 2022, and investment income of $775 thousand in the same period in 2021. The changes in the underlying liability to the associates are recorded in “Other income (expense).”

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 (Losses)

on Available-for-Sale

(amounts in thousands)

    

Marketable Securities

Accumulated other comprehensive income (loss) balance as of December 25, 2021

$

1,687

Other comprehensive income (loss)

(5,047)

Net current period other comprehensive income (loss)

(5,047)

Accumulated other comprehensive income (loss) balance as of March 26, 2022

$

(3,360)

(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 on September 29, 2021, and matures on September 1, 2024. 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 March 26, 2022, the availability under the revolving credit agreement was $25.3 million, net of $4.7 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 $8 thousand in each of the thirteen weeks ended March 26, 2022, and March 27, 2021.

(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 products, 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 weeks ended March 26, 2022, and March 27, 2021:

13 Weeks Ended

(amounts in thousands)

March 26, 2022

March 27, 2021

Grocery

    

$

941,596

85.3

%

$

874,073

86.9

%

Pharmacy

103,274

9.4

95,597

9.5

Fuel

56,157

5.1

34,372

3.4

Manufacturing

3,042

0.2

2,298

0.2

Total net sales

$

1,104,069

100.0

%  

$

1,006,340

100.0

%

(7) Leases

As of March 26, 2022, the Company leased approximately 50% of its open store facilities under operating leases that expire at various dates through 2036, 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.”

8

Table of Contents

WEIS MARKETS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

The following is a schedule of the lease costs included in “Operating, general and administrative expenses” for the thirteen weeks ended March 26, 2022, and March 27, 2021.

13 Weeks Ended

(amounts in thousands)

    

    

March 26, 2022

March 27, 2021

Operating lease cost

$

11,378

$

11,317

Variable lease cost

2,827

2,698

Lease or sublease income

(2,383)

(2,309)

Net lease cost

$

11,822

$

11,706

9

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 25, 2021, 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 197 retail stores with approximately 24 thousand 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.

The Company advertises its products and promotes its brand through weekly and monthly printed circulars; radio ads; e-mail blasts; and on-line via its web site, social media and mobile applications. The Company promotes by using Everyday Lower Price; Low Price Guarantee; Low, Low Price; 3 Day Sale; senior and military discounts; and Loyalty programs. The Loyalty program includes reward points that may be redeemed for discounts on items in store, at the Company’s fuel stations or one of its third-party fuel station partners.

Utilizing its own strategically located distribution center and transportation fleet, Weis Markets self distributes approximately 64% of product with the remaining being supplied by direct store delivery vendors. In addition, the Company has three manufacturing facilities which process milk, ice cream and fresh meat products. The corporate offices are located in Sunbury, PA where the Company was founded in 1912.

On March 11, 2020, the World Health Organization declared that the novel coronavirus (COVID-19) had become a pandemic, and on March 13, the U.S. President declared a National Emergency concerning the disease. This resulted in government mandated shutdowns, as well as multiple legislative acts to provide emergency economic assistance for individuals, families and businesses affected by the novel coronavirus pandemic. These events were accretive to our sales and gross profits compared to the time periods preceding the impact of the novel coronavirus pandemic. The Company is not able to speculate how the ensuing economy or unknown future related expenses will affect it after the governmental novel coronavirus pandemic measures have ended.

The Company continues to innovate and remain relevant to industry trends and offering customer convenience by presenting programs like “Weis 2 Go Online” ordering with curbside pickup and home delivery. As of March 26, 2022, the Company offered Weis 2 Go Online curbside pickup in 188 of its locations as well as home delivery with Shipt in 177 locations. Sales in the first thirteen weeks of 2022 through Weis 2 Go Online have decreased 22 percent when compared to the same period last year. When compared to the first thirteen weeks of 2020 through Weis 2 Go Online sales have increased 148 percent. In September 2021, the Company announced a partnership with DoorDash to offer on-demand grocery delivery, which is currently available in 174 locations.

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WEIS MARKETS, INC.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)

Two-Year Stacked Comparable Store Sales Analysis

Management is providing Comparable Store Sales Two-Year Stacked analysis, a non-GAAP measure, because management believes this metric is useful to investors and analysts. A Comparable Store Sales Two-Year Stacked analysis presents a comparison of results and trends over a longer period of time to demonstrate the effect of the novel coronavirus pandemic on the operating results of the Company. Information presented in the tables below is not intended for use as an alternative to any other measure of performance. It is not recommended that this table be considered a substitute for the Company’s operating results as reported in accordance with GAAP.

Year-over-year and sequential comparisons are the primary calculations used to analyze operating results, however, due to significant fluctuations caused by the novel coronavirus pandemic management believes it is necessary to provide a Two-Year Stacked Comparable Store Sales analysis. The following tables provide the two-year stacked comparable store sales, including and excluding fuel, for the periods ended March 26, 2022, and March 27, 2021, as well as periods ended March 27, 2021, and March 28, 2020, respectively.

Percentage Changes

13 Weeks Ended

2022 vs. 2021

2021 vs. 2020

Comparable store sales (individual year)

9.4

%

1.4

%

Comparable store sales (two-year stacked)

10.8

Comparable store sales, excluding fuel (individual year)

7.6

1.1

%

Comparable store sales, excluding fuel (two-year stacked)

8.7

%

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 fiscal 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.

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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

13 Weeks Ended

(amounts in thousands, except per share amounts)

March 26, 2022

March 27, 2021

2022 vs. 2021

Net sales

$

1,104,069

$

1,006,340

9.7

%

Cost of sales, including advertising, warehousing and distribution expenses

810,384

738,950

9.7

Gross profit on sales

293,685

267,390

9.8

Gross profit margin

26.6

%

26.6

%

Operating, general and administrative expenses

252,271

235,556

7.1

O, G & A, percent of net sales

22.8

%

23.4

%

Income from operations

41,414

31,834

30.1

Operating margin

3.8

%

3.2

%

Investment income (loss) and interest expense

(881)

1,611

(154.7)

Investment income (loss) and interest expense, percent of net sales

(0.1)

%

0.2

%

Other income (expense)

1,505

(775)

294.2

Other income (expense), percent of net sales

0.1

%

(0.1)

%

Income before provision for income taxes

42,038

32,670

28.7

Income before provision for income taxes, percent of net sales

3.8

%

3.2

%

Provision for income taxes

10,649

8,415

26.5

Effective income tax rate

25.3

%

25.8

%

Net income

$

31,389

$

24,255

29.4

%

Net income, percent of net sales

2.8

%

2.4

%

Basic and diluted earnings per share

$

1.17

$

0.90

30.0

%

Net Sales

Individual Year-Over-Year Analysis of Sales

Percentage Changes

2022 vs. 2021

March 26, 2022

13 Weeks Ended

Net sales

    

9.7

%

Net sales, excluding fuel

7.8

Comparable store sales

9.4

Comparable store sales, excluding fuel

7.6

%

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 fiscal 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.

According to the latest U.S. Bureau of Labor Statistics’ report, the annual Seasonally Adjusted Food-at-Home Consumer Price Index increased 3.9% compared to an increase of 0.2% 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 39.1% or $1.09 per gallon in the thirteen weeks ended March 26, 2022, compared to the same period in 2021.

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WEIS MARKETS, INC.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)

Total net sales increased 9.7% to $1.1 billion for the thirteen weeks ended March 26, 2022, from $1.0 billion for the thirteen weeks ended March 27, 2021. The increase in total net sales includes retail price inflation in center store, fresh, pharmacy services, and fuel product categories. Comparable store sales for the thirteen weeks ended March 26, 2022, compared to the same period in 2021 increased 9.4% including fuel and 7.6% excluding fuel.

Although the Company experienced retail inflation and deflation in various commodities for the periods presented, the Company anticipates overall product costs to increase given the recent inflationary indicators in the food retail industry. 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 long-term 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.

Gross profit on sales increased 9.8% for the thirteen weeks ended March 26, 2022, compared to the same period in 2021. Gross profit margin remained 26.6% in the thirteen weeks ended March 26, 2022, when compared to the thirteen weeks ended March 27, 2021. The Company was able to maintain gross profit margin quarter over quarter due to strong holiday selling, targeted programs and weather related events.

Non-cash LIFO inventory valuation adjustments represent expense of $1.7 million in the first thirteen weeks of 2022 compared to expense of $329 thousand in the same period in 2021. Although the Company experienced cost inflation and deflation in various commodities for the periods presented, the Company anticipates overall product costs to increase given the recent inflationary indicators in the food retail industry.

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 60.5% of the total “Operating, general and administrative expenses.” As a percent of sales, direct store labor decreased 0.3% in the thirteen weeks ended March 26, 2022 when compared to the same period in 2021.

Depreciation and amortization expense charged to “Operating, general and administrative expenses” was $23.3 million, or 2.1% of net sales during the thirteen weeks ended March 26, 2022 compared to $23.4 million, or 2.3% of net sales during the thirteen weeks ended March 27, 2021. See the Liquidity and Capital Resources section for further information regarding the Company’s capital expansion program.

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WEIS MARKETS, INC.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)

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

13 Weeks Ended

(amounts in thousands)

Increase

Increase (Decrease)

March 26, 2022

(Decrease)

as a % of sales

Employee expenses

$

9,485

(0.4)

%

Fixed expense (amortization, depreciation, insurance expenses, and occupancy costs)

1,329

(0.3)

Utilities

3,390

0.2

Overall, the operating, general and administrative expenses as a percent of sales presented for the first thirteen weeks of 2022 have benefited in comparison with the 2021 percent of sales due to the increase in sales. Although direct store labor and fixed expenses have increased from a cost perspective, the increase in sales has caused a decrease in the percent of sales rate.

Provision for Income Taxes

The effective income tax rate was 25.3% and 25.8% for the thirteen weeks ended March 26, 2022 and March 27, 2021, respectively. 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 entered into on September 1, 2016, and amended on September 29, 2021, with Wells Fargo Bank, NA (the “Credit Agreement”). The Credit Agreement matures on September 1, 2024, and 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 March 26, 2022, the availability under the revolving credit agreement was $25.3 million with $4.7 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 bonds and commercial paper with maturity dates between one and 10 years and three long-held high yield, large capitalized public company equity securities. The portfolio totaled $198.8 million as of March 26, 2022. 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 $150 million in its capital expansion program in 2022.

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 March 26, 2022, other than the lease commitments on its store facilities and transportation equipment under operating leases that expire at various dates through 2036.

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.

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WEIS MARKETS, INC.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)

Quarterly Cash Dividends

At its regular meeting held in April, the Board of Directors declared a quarterly dividend of $0.32 per share, payable on May 23, 2022, to shareholders of record on May 9, 2022. 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.

Cash Flow Information

13 Weeks Ended

(amounts in thousands)

March 26, 2022

March 27, 2021

2022 vs. 2021

Net cash provided by (used in):

Operating activities

$

34,480

$

14,937

$

19,543

Investing activities

(18,828)

(41,993)

23,165

Financing activities

(8,608)

(8,339)

(269)

Operating

Cash flows from operating activities increased $19.5 million in the first thirteen weeks of 2022 compared to the first thirteen weeks of 2021. The increase in cash flow from operating activities is primarily due an increase in operating margin in the first thirteen weeks of 2022 when compared to the same period in 2021.

Investing

In the first thirteen weeks of 2022, when compared to the same period in 2021, reinvestment in property and equipment purchases decreased $18.3 million and net changes in marketable securities decreased $3.6 million. Additionally, as a percentage of sales, capital expansions were 1.7% in the first thirteen weeks of 2022 and 3.7% in the first thirteen weeks of 2021. The decrease as a percent of sales in 2022 compared to 2021 is due to the increase in sales as well as a decrease in spend resulting from limited availability of raw materials and equipment to complete remodels, supply chain and information technology upgrades, and smaller store improvement projects. For the remainder of 2022, management anticipates maintaining the investment portfolio but has the ability to liquidate if needed.

Financing

The Company paid dividends of $8.6 million and $8.3 million in the first thirteen weeks of 2022 and 2021, respectively.

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WEIS MARKETS, INC.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)

Accounting Policies and Estimates

The Company has chosen accounting policies that it believes are appropriate to accurately and fairly report its operating results and financial position, and the Company applies those accounting policies in a consistent manner. The Significant Accounting Policies are summarized in Note 1 to the Consolidated Financial Statements included in the 2021 Annual Report on Form 10-K. There have been no changes to the Significant Accounting Policies since the Company filed its Annual Report on Form 10-K for the fiscal year ended December 25, 2021.

Forward-Looking Statements

In addition to historical information, this Form 10-Q Report may contain forward-looking statements, which are included pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. 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: competitive and reputational risks; financial, investment and infrastructure risks; information security, cybersecurity and data privacy risks; supply chain and third-party risks; risks created by pandemics (including the ongoing COVID-19 outbreak and the related responses of governments, consumers, customers, suppliers and employees); and legal, regulatory and other external risks. 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.

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WEIS MARKETS, INC.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Quantitative Disclosure - There have been no material changes in the Company’s market risk during the fiscal quarter ended March 26, 2022. Quantitative information is set forth in Item 7a on the Company’s Annual Report on Form 10-K under the caption “Quantitative and Qualitative Disclosures About Market Risk,” which was filed for the fiscal year ended December 25, 2021, and is incorporated herein by reference.

Qualitative Disclosure - This information is set forth in the Company’s Annual Report on Form 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 25, 2021, and is incorporated herein by reference.

ITEM 4. CONTROLS AND PROCEDURES

The Chief Executive Officer and the Chief Financial Officer, together with the Company’s Disclosure Committee, evaluated the Company’s disclosure controls and procedures as of the fiscal quarter ended March 26, 2022. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed by the Company in the reports filed or submitted by it under the Securities Exchange Act of 1934, as amended, was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by the Company in such reports was accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

In connection with the evaluation described above, there was no change in the Company’s internal control over financial reporting during the fiscal quarter ended March 26, 2022, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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WEIS MARKETS, INC.

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.

(Registrant)

Date:

5/5/2022

/S/Jonathan H. Weis

Jonathan H. Weis

Chairman,

President and Chief Executive Officer

(Principal Executive Officer)

Date:

5/5/2022

/S/Michael T. Lockard

Michael T. Lockard

Senior Vice President, Chief Financial Officer

and Treasurer

(Principal Financial Officer)

19