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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
July 1, 2023
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 (Zip Code)
,
Pennsylvania
(Address of principal executive offices)
Registrant's telephone number, including area code: Registrant's web address: www.weismarkets.com
(
570
)
286-4571
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 ((s)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 August 10, 2023, 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 18
Item 4. Controls and Procedures 18
Part II. Other Information
Item 6. Exhibits 19
Signatures 20
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)
(amounts in thousands, except shares) July 1, 2023 December 31, 2022
Assets
Current:
Cash and cash equivalents $ 139,338 $ 157,997
Marketable securities 217,866 186,419
SERP investment 24,995 22,696
Accounts receivable, net 56,965 50,863
Inventories 295,026 293,274
Prepaid expenses and other current assets 31,036 29,921
Total current assets 765,225 741,170
Property and equipment, net 965,251 970,913
Operating lease right-to-use 172,871 175,952
Goodwill 52,330 52,330
Intangible and other assets, net 17,830 18,785
Total assets $ 1,973,507 $ 1,959,150
Liabilities
Current:
Accounts payable $ 198,200 $ 206,849
Accrued expenses 34,438 57,431
Operating leases 43,150 43,527
Accrued self-insurance 17,216 19,416
Deferred revenue, net 8,861 11,774
Income taxes payable 15,700 6,354
Total current liabilities 317,566 345,351
Postretirement benefit obligations 26,965 25,270
Accrued self-insurance 23,555 23,712
Operating leases 139,129 142,424
Deferred income taxes 114,230 111,225
Other 6,864 9,334
Total liabilities 628,309 657,316
Shareholders' Equity
Common stock, no par value, 9,949 9,949
100,800,000
shares authorized,
33,047,807
shares issued,
26,898,443
shares outstanding
Retained earnings 1,490,979 1,449,191
Accumulated other comprehensive income (loss) ( (
(Net of deferred taxes of $ 4,874 6,449
1,758 ) )
in 2023 and $
2,342
in 2022)
1,496,055 1,452,691
Treasury stock at cost, ( (
6,149,364 150,857 150,857
shares ) )
Total shareholders' equity 1,345,198 1,301,834
Total liabilities and shareholders' equity $ 1,973,507 $ 1,959,150
See accompanying notes to Consolidated Financial Statements.
1
Table of Contents
WEIS MARKETS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
13 Weeks Ended 26 Weeks Ended
(amounts in thousands, except July 1, June 25, July 1, June 25,
shares and per share amounts) 2023 2022 2023 2022
Net sales $ 1,178,695 $ 1,135,234 $ 2,323,669 $ 2,239,302
Cost of sales, including advertising, 879,650 843,020 1,738,834 1,653,403
warehousing and distribution expenses
Gross profit 299,045 292,214 584,835 585,899
on sales
Operating, general and 253,422 243,809 506,594 496,081
administrative expenses
Income from 45,623 48,405 78,241 89,818
operations
Investment income (loss) 2,508 ( 6,306 (
and interest expense 1,030 1,910
) )
Other income ( 2,085 ( 3,590
(expense) 915 2,173
) )
Income before provision 47,216 49,460 82,374 91,498
for income taxes
Provision for 12,951 13,194 22,295 23,843
income taxes
Net $ 34,265 $ 36,266 $ 60,079 $ 67,655
income
Weighted-average shares 26,898,443 26,898,443 26,898,443 26,898,443
outstanding, basic and diluted
Cash dividends $ 0.34 $ 0.32 $ 0.68 $ 0.64
per share
Basic and diluted $ 1.27 $ 1.35 $ 2.23 $ 2.52
earnings per share
See accompanying notes to
Consolidated Financial Statements.
2
Table of Contents
WEIS MARKETS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
13 Weeks Ended 26 Weeks Ended
(amounts in thousands) July 1, 2023 June 25, 2022 July 1, 2023 June 25, 2022
Net income $ 34,265 $ 36,266 $ 60,079 $ 67,655
Other comprehensive income (loss) by component, net of tax:
Available-for-sale marketable securities
Unrealized holding gains (losses) arising during period ( ( 1,575 (
(Net of deferred taxes of $ 133 2,073 7,120
48 ) ) )
and $
822
, respectively for the thirteen weeks ended, and $
584
and $
2,823
, respectively for the twenty-six weeks ended)
Other comprehensive income gain (loss), net of tax ( ( 1,575 (
133 2,073 7,120
) ) )
Comprehensive income, net of tax $ 34,132 $ 34,193 $ 61,654 $ 60,535
See accompanying notes to Consolidated Financial Statements.
3
Table of Contents
WEIS MARKETS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(unaudited)
Accumulated
(amounts in thousands, Other Total
except shares)
For the Thirteen Common Stock Retained Comprehensive Treasury Shareholders'
Weeks Ended Stock
July 1, 2023 and Shares Amount Earnings Income Shares Amount Equity
June 25, 2022 (Loss)
Balance at 33,047,807 $ 9,949 $ 1,465,860 $ ( 6,149,364 $ ( $ 1,320,211
April 1, 2023 4,741 150,857
) )
Net - - 34,265 - - - 34,265
income
Other comprehensive - - - ( - - (
income (loss), net of tax 133 133
) )
Dividends - - ( - - - (
paid 9,146 9,146
) )
Balance at 33,047,807 $ 9,949 $ 1,490,979 $ ( 6,149,364 $ ( $ 1,345,198
July 1, 2023 4,874 150,857
) )
Balance at 33,047,807 $ 9,949 $ 1,381,745 $ ( 6,149,364 $ ( $ 1,237,477
March 26, 2022 3,360 150,857
) )
Net - - 36,266 - - - 36,266
income
Other comprehensive - - - ( - - (
income (loss), net of tax 2,073 2,073
) )
Dividends - - ( - - - (
paid 8,608 8,608
) )
Balance at 33,047,807 $ 9,949 $ 1,409,403 $ ( 6,149,364 $ ( $ 1,263,062
June 25, 2022 5,433 150,857
) )
Accumulated
(amounts in thousands, Other Total
except shares)
For the Twenty-Six Common Stock Retained Comprehensive Treasury Shareholders'
Weeks Ended Stock
July 1, 2023 and Shares Amount Earnings Income Shares Amount Equity
June 25, 2022 (Loss)
Balance at 33,047,807 $ 9,949 $ 1,449,191 $ ( 6,149,364 $ ( $ 1,301,834
December 31, 2022 6,449 150,857
) )
Net - - 60,079 - - - 60,079
income
Other comprehensive - - - 1,575 - - 1,575
income (loss), net of tax
Dividends - - ( - - - (
paid 18,291 18,291
) )
Balance at 33,047,807 $ 9,949 $ 1,490,979 $ ( 6,149,364 $ ( $ 1,345,198
July 1, 2023 4,874 150,857
) )
Balance at 33,047,807 $ 9,949 $ 1,358,963 $ 1,687 6,149,364 $ ( $ 1,219,742
December 25, 2021 150,857
)
Net - - 67,655 - - - 67,655
income
Other comprehensive - - - ( - - (
income (loss), net of tax 7,120 7,120
) )
Dividends - - ( - - - (
paid 17,215 17,215
) )
Balance at 33,047,807 $ 9,949 $ 1,409,403 $ ( 6,149,364 $ ( $ 1,263,062
June 25, 2022 5,433 150,857
) )
See accompanying notes to Consolidated Financial Statements.
4
Table of Contents
WEIS MARKETS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
26 Weeks Ended
(amounts in thousands) July 1, 2023 June 25, 2022
Cash flows from operating activities:
Net income $ 60,079 $ 67,655
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 54,104 51,510
(Gain) loss ( (
on disposition of fixed assets 4 2,465
) )
Unrealized (gain) loss 378 145
in value of equity securities
Deferred income taxes 2,421 1,713
Unrealized (gain) loss in SERP ( 4,820
2,061
)
Changes in operating assets and liabilities:
Inventories ( (
1,752 33,830
) )
Accounts receivable and prepaid expenses ( 4,213
7,218
)
Accounts payable and other liabilities ( (
36,676 18,794
) )
Income taxes 9,346 9,140
Other 1,813 286
Net cash provided by operating activities 80,430 84,393
Cash flows from investing activities:
Purchase of property and equipment ( (
49,946 53,443
) )
Proceeds from the sale of property and equipment 57 5,413
Purchase of marketable securities ( (
57,700 170,511
) )
Proceeds from the sale and maturities of marketable securities 27,057 136,465
Purchase of intangible assets ( (
29 48
) )
Proceeds from sale of intangible assets - 125
Change in SERP investment ( (
237 549
) )
Net cash used in investing activities ( (
80,798 82,548
) )
Cash flows from financing activities:
Dividends paid ( (
18,291 17,215
) )
Net cash used in financing activities ( (
18,291 17,215
) )
Net increase (decrease) in cash and cash equivalents ( (
18,659 15,370
) )
Cash and cash equivalents at beginning of year 157,997 86,048
Cash and cash equivalents at end of period $ 139,338 $ 70,678
See accompanying notes to Consolidated Financial Statements. In the first twenty-six weeks of 2023, there was
$
10.5
million cash paid for income taxes compared to
$
13.7
million in 2022 for the same period. Cash paid for interest related to long-term debt was
$
17
thousand and
$
16
thousand in the first twenty-six weeks of 2023 and 2022, 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 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 bond and commercial paper portfolio is 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 gain of $
1.6
million in the thirteen weeks ended July 1, 2023, which included an unrealized
loss in equity securities of $
703
thousand. In the thirteen weeks ended June 25, 2022, the Company recognized
investment income of $
1.1
million, which included an unrealized gain in equity securities of $
70
thousand. In the twenty-six weeks ended July 1, 2023, the Company recognized
investment income of
$
4.2
million, which included an unrealized loss in equity securities of $
378
thousand. In the twenty-six weeks ended June 25, 2022, the Company recognized
investment income of $
1.7
million, which included unrealized losses in equity securities of $
145
thousand.
6
Table of Contents
WEIS MARKETS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Marketable securities, as of July 1, 2023 and December 31, 2022, consisted of:
Gross Gross
(amounts in thousands) Amortized Unrealized Unrealized Fair
July 1, 2023 Cost Holding Gains Holding Losses Value
Available-for-sale:
Level 1
Equity securities $ 4,807
Level 2
Corporate and municipal bonds $ 182,891 $ 2,046 $ ( 175,908
9,029
)
Commercial Paper 36,800 352 ( 37,151
1
)
Total $ 219,691 $ 2,398 $ ( $ 217,866
9,030
)
Gross Gross
(amounts in thousands) Amortized Unrealized Unrealized Fair
December 31, 2022 Cost Holding Gains Holding Losses Value
Available-for-sale:
Level 1
Equity securities $ 5,185
Level 2
Corporate and municipal bonds $ 190,025 $ 2,110 $ ( 181,234
10,901
)
Total $ 190,025 $ 2,110 $ ( $ 186,419
10,901
)
Maturities of marketable securities classified as available-for-sale at July
1, 2023, were as follows:
Amortized Fair
(amounts in thousands) Cost Value
Available-for-sale:
Due within one year $ 78,057 $ 77,332
Due after one year through five years 91,270 87,741
Due after five years through ten years 21,749 19,726
Due after ten years 28,615 28,260
Total $ 219,691 $ 213,059
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 $
915
thousand in the thirteen weeks ended July 1, 2023, and investment loss of $
2.1
million in the same period in 2022. The Company recognized investment income of
$
2.2
million and investment loss of $
3.6
million in the twenty-six weeks ended July 1, 2023, and June 25, 2022,
respectively. 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 31, 2022 $ (
6,449
)
Other comprehensive income (loss) 1,575
Net current period other comprehensive income (loss) 1,575
Accumulated other comprehensive income (loss) balance as of July 1, 2023 $ (
4,874
)
(5) Long-Term Debt
On
September 1, 2016
, Weis Markets entered into a revolving credit agreement with Wells Fargo
Bank, N.A. (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 July 1, 2023, the availability under the revolving credit
agreement was $
25.5
million, net of $
4.5
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 $
9
thousand in the thirteen weeks ended July 1, 2023, and $
8
thousand in the thirteen weeks ended June 25, 2022. Interest expense related
to long-term debt was $
17
thousand and $
16
thousand in the twenty-six weeks ended July 1, 2023 and June 25, 2022,
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 tables represent net sales by type of product for the thirteen
and twenty-six weeks ended July 1, 2023, and June 25, 2022:
13 Weeks Ended
( July 1, 2023 June 25, 2022
amounts in thousands
)
Grocery $ 985,559 83.6 % $ 952,397 83.9 %
Pharmacy 128,999 11.0 106,924 9.4
Fuel 61,553 5.2 73,014 6.4
Manufacturing 2,584 0.2 2,899 0.3
Total net sales $ 1,178,695 100.0 % $ 1,135,234 100.0 %
26 Weeks Ended
( July 1, 2023 June 25, 2022
amounts in thousands
)
Grocery $ 1,955,372 84.2 % $ 1,893,992 84.5 %
Pharmacy 247,628 10.6 210,198 9.4
Fuel 115,244 5.0 129,171 5.8
Manufacturing 5,425 0.2 5,941 0.3
Total net sales $ 2,323,669 100.0 % $ 2,239,302 100.0 %
8
Table of Contents
WEIS MARKETS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(7) Leases
As of July 1, 2023, the Company leased approximately
49
% 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 and twenty-six weeks ended July
1, 2023, and June 25, 2022.
13 Weeks Ended 26 Weeks Ended
(amounts in thousands) July 1, 2023 June 25, 2022 July 1, 2023 June 25, 2022
Operating lease cost $ 11,780 $ 11,896 $ 23,572 $ 23,654
Variable lease cost 2,817 2,761 5,656 5,587
Lease or sublease income ( ( ( (
2,625 2,456 5,106 4,839
) ) ) )
Net lease cost $ 11,972 $ 12,201 $ 24,122 $ 24,402
9
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 31, 2022,
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 over 23 thousand associates located in Pennsylvania and six
surrounding states: Delaware, Maryland, New Jersey, New York, Virginia and
West Virginia. Approximately 97% of Weis Markets associates are paid an hourly
wage. Its products sold include groceries, dairy products, frozen foods,
meats, seafood, fresh produce, floral, pharmacy services at certain locations,
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 promotes competitive pricing 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 one of 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 61% 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.
The COVID-19 pandemic resulted in government mandated shutdowns in early 2020,
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 the Company's sales and gross profits
compared to the time periods preceding the impact of the novel coronavirus
pandemic.
The Company continues to innovate and remain relevant to industry trends and
offer customer convenience by presenting programs like "Weis 2 Go Online" and
home delivery. As of July 1, 2023, the Company offered Weis 2 Go Online in 188
of its locations. 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. The Company
also currently offers home delivery to customers in all 197 of its locations
via multiple grocery delivery partners.
10
Table of Contents
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 July 1, 2023, and June 25, 2022, as well as
periods ended June 25, 2022, and June 26, 2021, respectively. Comparable store
sales increased 3.5 percent on an individual year-over-year basis and
increased 11.9 percent on a two-year stacked basis for the thirteen weeks
ended July 1, 2023 following the decrease of 5.8 percent for the same period
in 2021. Comparable store sales increased 3.3 percent on an individual
year-over-year basis and increased 12.2 percent on a two-year stacked basis in
the twenty-six weeks ended July 1, 2023 following the decrease of 2.4 percent
for the same period in 2021.
Percentage Change
13 Weeks Ended
2023 vs. 2022 2022 vs. 2021
Comparable store sales (individual year) 3.5 % 8.4 %
Comparable store sales (two-year stacked) 11.9
Comparable store sales, excluding fuel (individual year) 4.8 6.0 %
Comparable store sales, excluding fuel (two-year stacked) 10.8 %
Percentage Change
26 Weeks ended
2023 vs. 2022 2022 vs. 2021
Comparable store sales (individual year) 3.3 % 8.9 %
Comparable store sales (two-year stacked) 12.2
Comparable store sales, excluding fuel (individual year) 4.2 6.8
Comparable store sales, excluding fuel (two-year stacked) 11.0
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.
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
Change
13 Weeks 26 Weeks 13 Weeks 26 Weeks
Ended Ended Ended Ended
(amounts in thousands, July 1, June 25, July 1, June 25, 2023 vs. 2023 vs.
except per share amounts) 2023 2022 2023 2022 2022 2022
Net $ 1,178,695 $ 1,135,234 $ 2,323,669 $ 2,239,302 3.8 % 3.8 %
sales
Cost of sales, including advertising, 879,650 843,020 1,738,834 1,653,403 4.3 5.2
warehousing and distribution expenses
Gross profit 299,045 292,214 584,835 585,899 2.3 (0.2)
on sales
Gross profit 25.4 % 25.7 % 25.2 % 26.2 %
margin
Operating, general and 253,422 243,809 506,594 496,081 3.9 2.1
administrative expenses
O, G & A, percent 21.5 % 21.5 % 21.8 % 22.2 %
of net sales
Income from 45,623 48,405 78,241 89,818 (5.7) (12.9)
operations
Operating 3.9 % 4.3 % 3.4 % 4.0 %
margin
Investment income (loss) 2,508 (1,030) 6,306 (1,910) 343.5 430.2
and interest expense
Investment income (loss) and interest 0.2 % (0.1) % 0.3 % (0.1) %
expense, percent of net sales
Other income (915) 2,085 (2,173) 3,590 (143.9) (160.5)
(expense)
Other income (expense), (0.1) % 0.2 % (0.1) % 0.2 %
percent of net sales
Income before provision 47,216 49,460 82,374 91,498 (4.5) (10.0)
for income taxes
Income before provision for income 4.0 % 4.4 % 3.5 % 4.1 %
taxes, percent of net sales
Provision for 12,951 13,194 22,295 23,843 (1.8) (6.5)
income taxes
Effective 27.4 % 26.7 % 27.1 % 26.1 %
income tax rate
Net $ 34,265 $ 36,266 $ 60,079 $ 67,655 (5.5) % (11.2) %
income
Net income, percent 2.9 % 3.2 % 2.6 % 3.0 %
of net sales
Basic and diluted $ 1.27 $ 1.35 $ 2.23 $ 2.52 (5.9) % (11.5) %
earnings per share
Net Sales
Individual Year-Over-Year Analysis of Sales
Percentage Change
2023 vs. 2022
July 1, 2023 13 Weeks Ended 26 Weeks Ended
Net sales 3.8 % 3.8 %
Net sales, excluding fuel 5.2 4.6
Comparable store sales 3.5 3.3
Comparable store sales, excluding fuel 4.8 % 4.2 %
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.
12
Table of Contents
WEIS MARKETS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
According to the latest U.S. Bureau of Labor Statistics' report, the
Seasonally Adjusted Food-at-Home Consumer Price Index decreased 0.2% and
increased 3.5% for the thirteen week periods ended July 1, 2023 and June 25,
2022, respectively. The Seasonally Adjusted Food-at-Home Consumer Price Index
increased 0.2% and 8.2% for twenty-six week periods ended July 1, 2023 and
June 25, 2022, respectively. 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 average price of gasoline in the Central Atlantic States
decreased 19.7% or $0.91 per gallon in the thirteen weeks ended July 1, 2023,
compared to the same period in 2022. The average price of gasoline in the
Central Atlantic States decreased 13.1% or $0.56 per gallon in the first
twenty-six weeks of 2023 when compared to the same period in 2022.
Total net sales increased 3.8% to $1.2 billion for the thirteen weeks ended
July 1, 2023, from $1.1 billion for the thirteen weeks ended June 25, 2022. In
the twenty-six weeks ended July 1, 2023, total net sales increased 3.8% to
$2.3 billion from $2.2 billion. The increase in total net sales includes
retail price inflation in grocery, pharmacy and fresh product categories.
Comparable store sales for the thirteen weeks ended July 1, 2023, compared to
the same period in 2022 increased 3.5% including fuel and 4.8% excluding fuel.
Comparable store sales for the twenty-six weeks ended July 1, 2023, compared
to the same period in 2022 increased 3.3% including fuel and 4.2% 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 2.3% and decreased 0.2% for the thirteen and
twenty-six weeks ended July 1, 2023, compared to the same period in 2022. When
compared to the thirteen and twenty-six weeks ended June 25, 2022, gross
profit margin for the thirteen and twenty-six weeks ended July 1, 2023
decreased 0.3% and 1.0%, respectively. The Company experienced degradation in
its gross profit margin as product costs increased in the fresh meats and
pharmacy departments and lower margin departments, such as pharmacy, increased
in the product mix.
Non-cash LIFO inventory valuation adjustments represent expense of $2.9
million in the first twenty-six weeks of 2023 compared to expense of $4.9
million in the same period in 2022. 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.
13
Table of Contents
WEIS MARKETS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Operating, General and Administrative Expenses
The majority of the operating, general and administrative expenses are driven
by sales volume.
Employee expenses such as wages, employer paid taxes, health care benefits and
retirement plans, comprise approximately 59.8% of the total "Operating,
general and administrative expenses." As a percent of sales, direct store
labor decreased 0.2% in both the thirteen and twenty-six week periods ended
July 1, 2023 when compared to the same period in 2022, respectively.
Depreciation and amortization expense charged to "Operating, general and
administrative expenses" was $24.8 million, or 2.1% of net sales during the
thirteen weeks ended July 1, 2023 compared to $23.5 million, or 2.1% of net
sales during the thirteen weeks ended June 25, 2022. During the first
twenty-six weeks of 2023 and 2022, depreciation and amortization expense
charged to "Operating, general and administrative expenses" was $48.9 million,
or 2.1% of net sales and $46.8 million, or 2.1% of net sales, respectively.
See the Liquidity and Capital Resources section for further information
regarding the Company's capital expenditure program.
A breakdown of the material increases (decreases) as a percent of sales in "Operating, general and administrative expenses" is as fo
13 Weeks Ended
(amounts in thousands) Increase Increase (Decrease)
July 1, 2023 (Decrease) as a % of sales
Employee expenses $ 2,606 (0.3) %
Fixed expense 1,157 (0.1)
(amortization,
depreciation,
insurance
expenses,
and occupancy
costs)
Other expenses 5,850 0.4
(financial
service fees,
technology,
repairs and
maintenance,
supplies)
26 Weeks Ended
(amounts in thousands) Increase Increase (Decrease)
July 1, 2023 (Decrease) as a % of sales
Employee expenses $ 1,511 (0.4) %
Fixed expense 1,608 (0.1)
(amortization,
depreciation,
insurance
expenses,
and occupancy
costs)
Other expenses 7,394 0.1
(financial
service fees,
technology,
repairs and
maintenance,
supplies)
llows:
Overall, the operating, general and administrative expenses as a percent of
sales presented for the thirteen and twenty-six weeks ended July 1, 2023 have
benefited in comparison with the 2022 percent of sales due to the increase in
sales. Although employee expenses, fixed expenses and other 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 27.1% and 26.1% for the twenty-six weeks
ended July 1, 2023 and June 25, 2022, respectively. The effective income tax
rate differed from the federal statutory rate, primarily due to the effect of
state taxes, net of permanent differences.
14
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
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, N.A. (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 July 1, 2023, the
availability under the revolving credit agreement was $25.5 million, net of
$4.5 million letters of credit. 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 30 years and four high yield, large
capitalized public company equity securities. The portfolio totaled $217.9
million as of July 1, 2023. Management anticipates maintaining the investment
portfolio but has the ability to liquidate if needed.
The Company's capital expenditure 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
expenditure program in 2023, including multiple carryover projects from 2022
that were delayed due to labor and supply chain disruptions.
The Company expects that cash generated from operations and cash available
under the Credit Agreement will fund its working capital requirements, debt
requirements, capital expenditure program, acquisitions and dividends. The
Company has no other commitment of capital resources as of July 1, 2023, 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.
Quarterly Cash Dividends
At its regular meeting held in July, the Board of Directors declared a
quarterly dividend of $0.34 per share, payable on August 21, 2023, to
shareholders of record on August 7, 2023. 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.
15
Table of Contents
WEIS MARKETS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Cash Flow Information
26 Weeks Ended
(amounts in thousands) July 1, 2023 June 25, 2022 2023 vs. 2022
Net cash provided by (used in):
Operating activities $ 80,430 $ 84,393 $ (3,963)
Investing activities (80,798) (82,548) 1,750
Financing activities (18,291) (17,215) (1,076)
Operating
Cash flows from operating activities decreased $4.0 million in the first
twenty-six weeks of 2023 compared to the first twenty-six weeks of 2022. The
decrease in cash flow from operating activities is primarily due to less net
income when compared to the same period in 2022.
Investing
In the first twenty-six weeks of 2023, when compared to the same period in
2022, the purchase of property and equipment exceeded the proceeds from sales
of property and equipment by $1.9 million and the proceeds from the sale and
maturities of marketable securities exceeded the purchase of marketable
securities by $3.4 million. Additionally, as a percent of sales, capital
expenditures were 2.1% in the first twenty-six weeks of 2023 and 2.4% in the
first twenty-six weeks of 2022. The decrease as a percent of sales in 2023
compared to 2022 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 2023, management
anticipates maintaining the investment portfolio but has the ability to
liquidate if needed.
Financing
The Company paid dividends of $18.3 million and $17.2 million in the first
twenty-six weeks of 2023 and 2022, respectively.
16
Table of Contents
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 2022 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 31,
2022.
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 (such as the 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 July 1, 2023. 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 31, 2022, 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 31,
2022, 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 July 1, 2023. 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 July 1, 2023, 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.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS
Exhibits
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
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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: 8/10/2023 /S/Jonathan H. Weis
Jonathan H. Weis
Chairman,
President and Chief Executive Officer
(Principal Executive Officer)
Date: 8/10/2023 /S/Michael T. Lockard
Michael T. Lockard
Senior Vice President, Chief Financial Officer
and Treasurer
(Principal Financial Officer)
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