wmk-20210327x10q

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 27, 2021
	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 May 6, 2021, there were issued and outstanding 26,898,443 shares of the registrant’s common stock.

‎

PART I – FINANCIAL INFORMATION

ITEM I – FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

(unaudited)


(dollars in thousands)	March 27, 2021		December 26, 2020
Assets
Current:
Cash and cash equivalents	$	101,217	$	136,612
Marketable securities		114,727		111,855
SERP investment		24,135		22,764
Accounts receivable, net		44,598		56,760
Inventories		276,733		269,024
Prepaid expenses and other current assets		25,586		29,187
Total current assets		586,996		626,202
Property and equipment, net		932,552		924,429
Operating lease right-to-use		195,637		199,901
Goodwill		52,330		52,330
Intangible and other assets, net		17,408		17,559
Total assets	$	1,784,923	$	1,820,421

Liabilities
Current:
Accounts payable	$	184,536	$	221,566
Accrued expenses		35,394		50,591
Operating leases		39,352		39,165
Accrued self-insurance		20,606		19,306
Deferred revenue, net		7,947		10,583
Income taxes payable		10,204		5,058
Total current liabilities		298,039		346,269
Postretirement benefit obligations		26,299		25,757
Accrued self-insurance		20,284		20,297
Operating leases		164,547		169,064
Deferred income taxes		105,231		103,404
Other		9,266		9,515
Total liabilities		623,666		674,306
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		1,299,653		1,283,737
Accumulated other comprehensive income
(Net of deferred taxes of $993 in 2021 and $1,299 in 2020)		2,512		3,286
		1,312,114		1,296,972
Treasury stock at cost, 6,149,364 shares		(150,857)		(150,857)
Total shareholders’ equity		1,161,257		1,146,115
Total liabilities and shareholders’ equity	$	1,784,923	$	1,820,421

See accompanying notes to Consolidated Financial Statements.

‎

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)



	13 Weeks Ended
(dollars in thousands, except shares and per share amounts)	March 27, 2021		March 28, 2020
Net sales	$	1,006,340	$	985,820
Cost of sales, including advertising, warehousing and distribution expenses		738,950		721,673
Gross profit on sales		267,390		264,147
Operating, general and administrative expenses		235,556		226,719
Income from operations		31,834		37,428
Investment income (loss) and interest expense		1,611		(4,019)
Other income (expense)		(775)		2,676
Income before provision for income taxes		32,670		36,085
Provision for income taxes		8,415		9,396
Net income	$	24,255	$	26,689

Weighted-average shares outstanding, basic and diluted		26,898,443		26,898,443
Cash dividends per share	$	0.31	$	0.31
Basic and diluted earnings per share	$	0.90	$	0.99

See accompanying notes to Consolidated Financial Statements.
‎

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)



	13 Weeks Ended
(dollars in thousands)	March 27, 2021		March 28, 2020
Net income	$	24,255	$	26,689
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 $306 and $38, respectively for the thirteen weeks ended)		(774)		95
Reclassification adjustment for (gains) losses included in net income
(Net of deferred taxes of $0 and $2, respectively for the thirteen weeks ended)		-		(6)
Other comprehensive income gain (loss), net of tax		(774)		89
Comprehensive income, net of tax	$	23,481	$	26,778

See accompanying notes to Consolidated Financial Statements.

‎

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’
March 27, 2021 and March 28, 2020	Shares	Amount		Earnings		Income (Loss)		Shares		Amount		Equity
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, net of
reclassification adjustments and 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

Balance at December 28, 2019	33,047,807	$	9,949	$	1,198,173		1,480		6,149,364	$	(150,857)	$	1,058,745
Net income	—		—		26,689		—		—		—		26,689
Other comprehensive income, net of
reclassification adjustments and tax	—		—		—		89		—		—		89
Dividends paid	—		—		(8,339)		—		—		—		(8,339)
Balance at March 28, 2020	33,047,807	$	9,949	$	1,216,524	$	1,569		6,149,364	$	(150,857)	$	1,077,185

See accompanying notes to Consolidated Financial Statements.

‎

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	13 Weeks Ended
(dollars in thousands)		March 27, 2021		March 28, 2020
Cash flows from operating activities:
Net income	$	24,255	$	26,689
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization		25,359		23,886
Loss on disposition of fixed assets		63		1,425
(Gain) on sale of marketable securities		-		(8)
Unrealized (gain) loss in value of equity securities		(237)		1,922
Deferred income taxes		2,133		(21)
Unrealized (gain) loss in SERP		(448)		2,676
Changes in operating assets and liabilities:
Inventories		(7,709)		46,385
Accounts receivable and prepaid expenses		15,763		(2,492)
Accounts payable and other liabilities		(49,776)		14,919
Income taxes		5,146		9,329
Other		388		53
Net cash provided by operating activities		14,937		124,763
Cash flows from investing activities:
Purchase of property and equipment		(37,043)		(24,848)
Proceeds from the sale of property and equipment		29		161
Purchase of marketable securities		(10,165)		(2,079)
Proceeds from the sale and maturities of marketable securities		6,125		1,800
Purchase of intangible assets		(17)		41
Change in SERP investment		(922)		(91)
Net cash used in investing activities		(41,993)		(25,016)
Cash flows from financing activities:
Dividends paid		(8,339)		(8,339)
Net cash used in financing activities		(8,339)		(8,339)
Net increase in cash and cash equivalents		(35,395)		91,408
Cash and cash equivalents at beginning of year		136,612		66,871
Cash and cash equivalents at end of period	$	101,217	$	158,279

See accompanying notes to Consolidated Financial Statements. In the first thirteen weeks of 2021, there was $1.1 million cash paid for income taxes compared to $89 thousand in 2020 for the same period. Cash paid for interest related to long-term debt was $9 thousand and $10 thousand in the first thirteen weeks of 2021 and 2020, respectively.

(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 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 (loss) and interest expense” on the Company’s Consolidated Statements of Income. The Company recognized investment income of $844 thousand in the first quarter of 2021, which included an unrealized gain in equity securities of $237 thousand. In the thirteen weeks ending March 28, 2020, the Company recognized investment loss of $1.3 million, which included unrealized loss in equity securities of $1.9 million.

‎

(3) Marketable Securities (continued)

Marketable securities, as of March 27, 2021 and December 26, 2020, consisted of:



			Gross		Gross
(dollars in thousands)	Amortized		Unrealized		Unrealized		Fair
March 27, 2021	Cost		Holding Gains		Holding Losses		Value
Available-for-sale:
Level 1
Equity securities							$	7,648
Level 2
Corporate and municipal bonds	$	103,575	$	4,878	$	(1,374)		107,079
	$	103,575	$	4,878	$	(1,374)	$	114,727



			Gross		Gross
(dollars in thousands)	Amortized		Unrealized		Unrealized		Fair
December 26, 2020	Cost		Holding Gains		Holding Losses		Value
Available-for-sale:
Level 1
Equity securities							$	7,410
Level 2
Corporate and municipal bonds	$	99,861	$	5,723	$	(1,139)		104,445
	$	99,861	$	5,723	$	(1,139)	$	111,855

Maturities of marketable securities classified as available-for-sale at March 27, 2021, were as follows:
‎


		Amortized		Fair
(dollars in thousands)		Cost		Value
Available-for-sale:
Due within one year	$	6,631	$	6,675
Due after one year through five years		44,550		46,223
Due after five years through ten years		52,394		54,181
	$	103,575	$	107,079

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 income of $775 thousand in the first quarter of 2021, and investment loss of $2.7 million in the same period in 2020. The changes in the underlying liability to the associates are recorded in “Other income (expense).”

‎

(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 26, 2020	$	3,286

Other comprehensive loss before reclassifications		(774)
Net current period change in other comprehensive income		(774)
Accumulated other comprehensive income balance as of March 27, 2021	$	2,512

The following table sets forth the effects on net income of the amounts reclassified out of accumulated other comprehensive income for the periods ended March 27, 2021 and March 28, 2020.



		Amounts Reclassified from
		Accumulated Other Comprehensive Income to the
		Consolidated Statements of Income
		13 Weeks Ended
(dollars in thousands)	Location	March 27, 2021		March 28, 2020
Unrealized gains (losses) on available-for-sale marketable securities
	Investment income (loss) and interest expense	$	-	$	(8)
	Provision for income taxes		-		2
Total amount reclassified, net of tax		$	-	$	(6)

(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 August 21, 2019 and matures on September 1, 2022. 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 27, 2021, the availability under the revolving credit agreement was $25.1 million, net of $4.9 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 and $9 thousand in the thirteen weeks ended March 27, 2021 and March 28, 2020, respectively.

‎

(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-week periods ending March 27, 2021 and March 28, 2020:


	13 Weeks Ended
(dollars in thousands)	March 27, 2021				March 28, 2020
Grocery	$	874,073	86.9	%	$	863,747	87.6	%
Pharmacy		95,597	9.5			89,333	9.1
Fuel		34,372	3.4			29,967	3.0
Manufacturing		2,298	0.2			2,773	0.3

Total net sales	$	1,006,340	100.0	%	$	985,820	100.0	%

(7) Leases

As of March 27, 2021, 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.”

The following is a schedule of the lease costs included in “Operating, general and administrative expenses” for the thirteen weeks ended March 27, 2021 and March 28, 2020.


	13 Weeks Ended
(dollars in thousands)	2021		2020
Operating lease cost	$	11,317	$	11,504
Variable lease cost		2,698		2,667
Lease or sublease income		(2,309)		(2,037)
Net lease cost	$	11,706	$	12,134

‎

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 26, 2020, 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 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 and the Company promotes by using Everyday Lower Price; Low Price Guarantee; Low, Low Price; 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 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. Additionally, in March 2020, state governments in the Company’s geographic operating area began instituting preventative shut down measures in order to combat the novel coronavirus pandemic. The Company’s business was deemed essential and thus its stores have remained open during this time period. The closure of other food sources and government stimulus payments to affected individuals have been accretive to our sales and gross profits compared to the time periods preceding the impact of the novel coronavirus pandemic; however, the Company also faces new and increased risks concerning its associates, government regulation, and supply chain. 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 (see Forward-Looking Statements).

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 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 68% 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. The Company has implemented current CDC guidelines to attempt to ensure the continuity of its distribution center and fleet.

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. In the first quarter of 2021, the Company offered Weis 2 Go Online curbside pickup in 184 of its locations. During the third quarter of 2018 the Company began offering home delivery with Shipt, and currently offers this convenience to customers in 175 different locations. Due to the surge in volume created by the novel coronavirus pandemic, sales in the first quarter of 2021 through Weis 2 Go Online have increased over 170% percent when compared to the same period last year.

‎

(continued)

Results of Operations



Analysis of Consolidated Statements of Income
							Percentage Changes
	13 Weeks Ended						2021 vs. 2020
(dollars in thousands except per share amounts)	March 27, 2021			March 28, 2020			13 Weeks Ended
Net sales	$	1,006,340		$	985,820			2.1	%
Cost of sales, including advertising, warehousing and distribution expenses		738,950			721,673			2.4
Gross profit on sales		267,390			264,147			1.2
Gross profit margin		26.6	%		26.8	%
Operating, general and administrative expenses		235,556			226,719			3.9
O, G & A, percent of net sales		23.4	%		23.0	%
Income from operations		31,834			37,428			(14.9)
Operating margin		3.2	%		3.8	%
Investment income (loss) and interest expense		1,611			(4,019)			140.1
Investment income (loss) and interest expense, percent of net sales		0.2	%		(0.4)	%
Other income (expense)		(775)			2,676			(129.0)
Other income (expense), percent of net sales		(0.1)	%		0.3	%
Income before provision for income taxes		32,670			36,085			(9.5)
Income before provision for income taxes, percent of net sales		3.2	%		3.7	%
Provision for income taxes		8,415			9,396			(10.4)
Effective income tax rate		25.8	%		26.0	%
Net income	$	24,255		$	26,689			(9.1)	%
Net income, percent of net sales		2.4	%		2.7	%
Basic and diluted earnings per share	$	0.90		$	0.99			(9.1)	%

Net Sales

Analysis of Sales


	Percentage Changes
	2021 vs. 2020
March 27, 2021	13 Weeks Ended
Net sales		2.1	%
Net sales, excluding fuel sales		1.7
Comparable store sales		1.4
Comparable store sales, excluding fuel sales		1.1	%

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.

‎

(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 0.2% compared to an increase of 1.1% 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 5.2% or $0.14 per gallon in the first quarter of 2021 compared to the same quarter in 2020.

Comparable store sales for the first quarter of 2021 compared to the same period in 2020 increased 1.4% with fuel and 1.1% without fuel. The Company’s first quarter sales were favorably impacted as a result of increased sales demand related to the novel coronavirus pandemic. The pandemic affected the latter half of the first quarter in 2020, whereas in 2021 the Company has recognized impacts of the pandemic through the whole period.

Although the Company experienced retail inflation and deflation in various commodities for the periods presented, the novel coronavirus pandemic has caused uncertainty about future economic conditions and may change future product mix. 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. Increased sales volume resulted in an increase in cost of sales. Both direct product costs and distribution costs increase when sales volume increases.

Gross profit on sales increased 1.2% for the first quarter of 2021 compared to the same period in 2020. The increase is attributable to a change in sales mix along with increased fresh department sell-through, which reduced the amount of product loss.

Non-cash LIFO inventory valuation adjustments represent expense of $329 thousand in the first quarter of 2021 compared to expense of $1.5 million in the same period in 2020. Although the Company experienced cost inflation and deflation in various commodities for the periods presented, the novel coronavirus pandemic has caused uncertainty about future economic conditions.

‎

(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 increased 0.3% in the first quarter of 2021 when compared to the same period in 2020.

Depreciation and amortization expense charged to “Operating, general and administrative expenses” was $23.4 million, or 2.3% of net sales during the first quarter of 2021 compared to $21.7 million, or 2.2% of net sales during the first quarter of 2020. 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)
March 27, 2021	(Decrease)		as a % of sales
Direct store labor	$	4,455	0.3	%
Fixed expenses		2,205	0.1

Wages expense increased in the first quarter of 2021 as a percent of sales when compared to the same period in 2020 as a result of the ongoing novel coronavirus pandemic. Fixed expenses include occupancy costs, depreciation and amortization and insurance expenses.

Provision for Income Taxes

The effective income tax rate was 25.8% and 26.0% for the first quarter of 2021 and 2020, 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 entered into on September 1, 2016, and amended on August 21, 2019, with Wells Fargo Bank, NA (the “Credit Agreement”). The Credit Agreement matures on September 1, 2022 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 27, 2021, the availability under the revolving credit agreement was $25.1 million with $4.9 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 with maturity dates between one and 10 years and three long-held high yield, large capitalized public company equity securities. The portfolio totaled $114.7 million as of March 27, 2021. 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 $135 million in its capital expansion program in 2021.

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 27, 2021, 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. In the second quarter of 2019, the Company entered into a brokerage agreement with Wells Fargo Securities, LLC to facilitate possible share repurchases.

Quarterly Cash Dividends

At its regular meeting held in April, the Board of Directors unanimously approved a quarterly dividend of $0.31 per share, payable on May 24, 2021 to shareholders of record on May 10, 2021. 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.

‎

(continued)

Liquidity and Capital Resources (continued)

Cash Flow Information


	13 Weeks Ended
(dollars in thousands)	March 27, 2021		March 28, 2020		2021 vs. 2020
Net cash provided by (used in):
Operating activities	$	14,937	$	124,763	$	(109,826)
Investing activities		(41,993)		(25,016)		(16,977)
Financing activities		(8,339)		(8,339)		-

Operating

Cash flows from operating activities decreased $109.8 million in the first thirteen weeks of 2021 compared to the first thirteen weeks of 2020. Management attributes this decrease to cycling the immediate impact of the novel coronavirus pandemic experienced by the Company during the first quarter of 2020 which, comparably in 2021, produced decreases in accounts payables and increases in inventories.

Investing

Property and equipment purchases during the first thirteen weeks of 2021 totaled $37.0 million compared to $24.8 million in the first thirteen weeks of 2020. As a percentage of sales, capital expenditures were 3.7% in the first thirteen weeks of 2021 and 2.5% in the first thirteen weeks of 2020. In 2021, the Company plans to maintain or increase its marketable securities portfolio.

Financing

The Company paid dividends of $8.3 million in the first thirteen weeks of 2021 and 2020, respectively. The Company has not had an obligation on the Credit Agreement since the second quarter of 2018.

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 2020 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 26, 2020.

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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: general economic conditions, including their impact on capital expenditures; business conditions in the retail industry; the regulatory environment; rapidly changing technology and competitive factors, including increased competition with regional and national retailers; and price pressures. Readers are cautioned not to place undue reliance on forward-looking statements, which reflect management's analysis only as of the date hereof. The Company undertakes no obligation to publicly revise or update these forward-looking statements to reflect events or circumstances that arise after the date hereof. Readers should carefully review the risk factors described in other documents the Company files periodically with the Securities and Exchange Commission.

Employees - Reduced workforces due to the temporary inability to work caused by illness, quarantine, or government mandates.

Supply Chain – Interruption in the Company’s supply chain due to having to suspend operations at its centrally located distribution center or vendors not being able to supply the Company because of their own suspended operations.

Lawsuits – Future litigation arising from issues concerning the novel coronavirus.

Future government regulation - Future laws, regulations, interpretations, administrative orders, or applications that may have an adverse impact on the Company’s operations and costs.

Customer trends – Changes in the methods in which customers procure the Company’s products.

Cyber security – Increased Cyber-attacks due to “work at home” requirements.

PART II – OTHER INFORMATION

ITEM 6. EXHIBITS

Exhibits


	Exhibit 31.1 Rule a-14(a) Certification - CEO
	Exhibit 31.2 Rule 13a-14(a) Certification - CFO
	Exhibit 32 Certification Pursuant to 18 U.S.C. Section 1350

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:	5/6/2021	/S/Jonathan H. Weis
		Jonathan H. Weis
		Chairman,
		President and Chief Executive Officer
		(Principal Executive Officer)

Date:	5/6/2021	/S/Michael T. Lockard
		Michael T. Lockard
		Senior Vice President, Chief Financial Officer
		and Treasurer
		(Principal Financial Officer)


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	18
Item 4. Controls and Procedures	18
Part II. Other Information
Item 6. Exhibits	19
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