WEIS MARKETS INC - Quarter Report: 2003 March (Form 10-Q)

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

FORM 10-Q

Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934

(Mark One)

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

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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Common Stock, No Par Value                                                                              27,193,537 shares
                                                                                                                   (Outstanding at end of period)

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WEIS MARKETS, INC.

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WEIS MARKETS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(1) Significant Accounting Policies
Basis of Presentation: The accompanying unaudited consolidated financial statements have been prepared in accordance with 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 accruals) considered necessary for a fair presentation have been included. The operating results for the periods presented are not necessarily indicative of the results to be expected for the full year. For further information, refer to the consolidated financial statements and footnotes thereto included in the company's latest annual report on Form 10-K.

Impact of Recently Issued Accounting Standards: As of December 28, 2002, the company adopted Emerging Issues Task Force Issue No. 02-16, "Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor" (EITF Issue). This EITF Issue establishes new rules for accounting for certain cash considerations received by a reseller from a vendor; however, the adoption of this EITF Issue does not have an impact on the company's financial statement classifications, net income or shareholders' equity.

On December 31, 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure" (Statement No. 148). Statement 148 amends Statement of Financial Accounting Standards Statement No. 123, "Accounting for Stock-Based Compensation" (Statement No. 123), to provide alternative methods of transition to Statement No. 123's fair value method of accounting for stock-based employee compensation. Statement No. 148 also amends the disclosure provisions of Statement No. 123 and Accounting Principles Board's Opinion No. 28, "Interim Financial Reporting" (APB 28), to require disclosure in the summary of significant accounting policies of the effects of an entity's accounting policy with respect to stock-based employee compensation on reported net income and earnings per share in annual and interim financial statements. While Statement No. 148 does not amend Statement No. 123 to require companies to account for employee stock options using the fair value method, the disclosure provisions of Statement No. 148 are applicable to all companies with stock-based employee compensation, regardless of whether they account for that compensation using the fair value method of Statement No. 123 or the intrinsic value method of the Accounting Principles Board's Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25).

As of March 29, 2003, the company has a stock option plan, which is set forth in Note 7(a) of the company's 10-K under the caption "Incentive Plans," within the "Notes to Consolidated Financial Statements," which was filed for the fiscal year ended December 28, 2002 and is incorporated herein by reference. The company accounts for the plan under the recognition and measurement principles of APB 25 and related Interpretations. No stock-based employee compensation cost is reflected in net income, as all options granted under this plan have an exercise price equal to the market value of the underlying common stock on the date of grant. The effects on net income and earnings per share if the company had applied the fair value recognition provisions of Statement No. 123 are immaterial.

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WEIS MARKETS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(2) Comprehensive Income
The components of comprehensive income, net of related tax, for the period ended March 29, 2003 and March 28, 2002 are as follows:

(3) Property and Equipment
Property and equipment, as of March 29, 2003 and December 28, 2002, consisted of :

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WEIS MARKETS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OPERATING RESULTS

Sales for the first quarter ended March 29, 2003, increased .9% to $509.1 million compared with $504.4 million for the same period a year ago. Comparable store sales, which include expansions and relocations, increased 1.4%. The sales increase was the result of aggressive promotional activity in key markets. The first quarter sales comparison to last year was affected by the timing of the Easter holiday week, which fell in the first quarter of 2002 and occurs in the second quarter in 2003.

Gross profit as a percentage of sales for the first quarter of 2003 was 26.2%, virtually unchanged from a year ago. Gross profit increased $1.4 million or 1.1% to $133.1 million. The gross profit dollar increase was generated from the higher sales volume.

Operating, general and administrative expenses of $111.7 million, at 21.9% of sales, increased $500 thousand, or .5% compared to the first quarter last year. Due to the harsh winter in its operating area, the company experienced increased utility and snow removal costs of $1.1 million for the first quarter of 2003. This increase was offset by the success in several expense control initiatives throughout the organization, as total operating expenses as a percentage of sales for the quarter decreased .1%

The company's other income is primarily generated from net rental income, coupon-handling fees, store service commissions, cardboard salvage and gain or loss on the sale of fixed assets. Other income for the quarter of $3.9 million at .8% of sales, increased $700 thousand, or 20.3%, compared with $3.2 million for the same period a year ago. Rental payments for closed stores decreased $500 thousand and store service commissions increased $200 thousand, which accounted for the variation. Interest expense for 2003 is comprised of the commitment fee and the amortization of debt expense for the unsecured Revolving Credit Agreement.

The effective tax rate for the first quarter of 2003 was 38.0% compared with 37.7% in 2002. The company's federal income tax returns for 1997 through 1999 are under a routine audit by the Internal Revenue Service. The Internal Revenue Service has provided the company with a number of preliminary notices of proposed adjustment. The Internal Revenue Service has not completed its audit; however, if it were to propose a deficiency, the amount may be material to the overall financial position of the company. The company believes that it has meritorious defenses and would vigorously contest these matters.

For the three-month period ended March 29, 2003, the company generated $15.8 million in net income, an increase of 6.8% compared to last year's net income of $14.8 million. The company's first quarter basic and diluted earnings per share of $.58 compared to $.54 per share in 2002.

As of the end of the fiscal quarter, Weis Markets, Inc. operated 160 retail food stores and 33 SuperPetz pet supply stores. The company currently operates supermarkets in Pennsylvania, Maryland, New Jersey, New York, Virginia and West Virginia. SuperPetz operates stores in Alabama, Georgia, Indiana, Kentucky, Maryland, Michigan, North Carolina, Ohio, Pennsylvania, South Carolina and Tennessee.

LIQUIDITY AND CAPITAL RESOURCES

The company generated $43.2 million in cash flows from operating activities for the three-month period ended March 29, 2003 compared to $34.8 million during the same period of 2002. Working capital increased $13.4 million or 11.7% since the beginning of the year.

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WEIS MARKETS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)

LIQUIDITY AND CAPITAL RESOURCES (continued)

Net cash used in investing activities during the first quarter of 2003 was $35.9 million compared to $12.1 million in 2002. Property and equipment expenditures in the first quarter of 2003 amounted to $5.7 million as compared to $6.3 million in 2002. The company invested $31.4 million in short-term marketable securities to provide funds for future working capital needs and for its capital expansion program.

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 processing and distribution facilities. Company management estimates that its current development plans will require an investment of approximately $72.4 million in 2003. In 2003, the company will fund its working capital requirements and its $72.4 million capital expansion program through internally generated cash flows from operations. It is not expected that any type of external financing will be needed for these activities this year.

Net cash used in financing activities during the first quarter of 2003 was $7.3 million, compared to $22.3 million in 2002. During 2002, the company cancelled its bridge credit agreement and established a three-year unsecured revolving credit facility in the amount of $100 million to provide funds for general corporate purposes including working capital and letters of credit. The Board of Directors' 1996 resolution authorizing the purchase of 1,000,000 shares of treasury stock has a remaining balance of 546,707 shares. Cash dividend payments made during the quarter at $.27 per common share amounted to $7.3 million, the same as a year ago. At a regularly scheduled meeting held on April 8, 2003, the Board of Directors declared a $.27 per share dividend payable to holders of record as of May 2, 2003, payable on May 16, 2003. The company has no other commitment of capital resources as of March 29, 2003, other than the lease commitments on its store facilities under operating leases.

Critical Accounting Policies

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.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires that the company makes estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. These estimates and assumptions are based on historical and other factors believed to be reasonable under the circumstances. The company evaluates these estimates and assumptions on an ongoing basis and may retain outside consultants, lawyers and actuaries to assist in its evaluation. The company believes the following accounting policies are the most critical because they involve the most significant judgments and estimates used in preparation of its consolidated financial statements.

Vendor Allowances

Vendor rebates, credits and promotional allowances that relate to the company's buying and merchandising activities, including lump-sum payments associated with long-term contracts, are recorded as a component of cost of sales as they are earned, in accordance with its underlying agreement.

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WEIS MARKETS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)

Critical Accounting Policies(continued)

Accrued Store Closing Costs

The company provides for closed store liabilities relating to the estimated post-closing lease liabilities and related other exit costs associated with the store closing commitments. The closed store liabilities are usually paid over the lease terms associated with the closed stores having remaining terms ranging from one to eight years. At March 29, 2003, closed store lease liabilities totaled $2.9 million. The company estimates the lease liabilities, net of sublease income, using the undiscounted rent payments of closed stores. Other exit costs include estimated real estate taxes, common area maintenance, insurance and utility costs to be incurred after the store closes over the remaining lease term. Store closings are generally completed within one year after the decision to close. Adjustments to closed store liabilities and other exit costs primarily relate to changes in subtenants and actual exit costs differing from original estimates. Adjustments are made for changes in estimates in the period in which the change becomes known. Any excess store closing liability remaining upon settlement of the obligation is reversed to income in the period that such settlement is determined. Inventory write-downs, if any, in connection with store closings, are classified in cost of sales. Costs to transfer inventory and equipment from closed stores are expensed as incurred. Store closing liabilities are reviewed quarterly to ensure that any accrued amount that is no longer needed for its originally intended purpose is reversed to income in the proper period.

Self-Insurance

The company is self-insured for a majority of its workers' compensation, general liability, vehicle accident and associate medical benefit claims. The self-insurance liability for most of the workers' compensation is determined based on historical data and an estimate of claims incurred but not reported. The other self-insurance liabilities are determined actuarially, based on claims filed and an estimate of claims incurred but not yet reported. The company is liable for associate health claims up to a lifetime aggregate of $1,000,000 per member and for workers' compensation claims up to $1,000,000 per claim. Property and casualty insurance coverage is maintained with outside carriers at deductible or retention levels ranging from $100,000 to $500,000. Significant assumptions used in the development of the actuarial estimates include reliance on our historical claims data including average monthly claims and average lag time between incurrence and payment.

FORWARD-LOOKING STATEMENTS

          In addition to historical information, this 10-Q Report may contain forward-looking statements. Any forward-looking statements contained herein are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. For example, risks and uncertainties can arise with changes in: general economic conditions, including their impact on capital expenditures; business conditions in the retail industry; the regulatory environment; rapidly changing technology and competitive factors, including increased competition with regional and national retailers; and price pressures. Readers are cautioned not to place undue reliance on forward-looking statements, which reflect management's analysis only as of the date hereof. The company undertakes no obligation to publicly revise or update these forward-looking statements to reflect events or circumstances that arise after the date hereof. Readers should carefully review the risk factors described in other documents the company files periodically with the Securities and Exchange Commission.

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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 three months ended March 29, 2003. Quantitative information is set forth in Item 7a on the company's Form 10-K under the caption "Quantitative Disclosures About Market Risk," which was filed for the fiscal year ended December 28, 2002 and is incorporated herein by reference.

Qualitative Disclosure - This information is set forth in Item 7a of the company's 10-K under the caption "Liquidity and Capital Resources," within "Management's Discussion and Analysis of Financial Condition and Results of Operations," which was filed for the fiscal year ended December 28, 2002 and is incorporated herein by reference.

ITEM 4. CONTROLS AND PROCEDURES

The Chief Executive Officer and the Chief Financial Officer of the company (its principal executive officer and principal financial officer, respectively) have concluded, based on their evaluation as of a date within 90 days prior to the date of the filing of this Report, that the company's disclosure controls and procedures are effective 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, is 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 is 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.

There were no significant changes in the company's internal controls or in other factors that could significantly affect these controls subsequent to the date of such evaluation.

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PART II - OTHER INFORMATION
WEIS MARKETS, INC.

Item 4. Submission of Matters to a Vote of Security Holders

(a) The Annual Meeting of the Shareholders of Weis Markets, Inc., was held on Tuesday, April 8, 2003, at 10:00 a.m., Eastern Standard Time, at the Corporate offices, 1000 South Second Street, Sunbury, PA 17801.

(b) Proxies for the meeting were solicited pursuant to Regulation 14 under the Act, there was no solicitation in opposition to the management's nominees as listed in the proxy statement, and all such nominees were elected.

(c) The meeting was held for the following purposes:

  1. To elect seven directors to serve, subject to provisions of the by-laws, until the next Annual Meeting of Shareholders or until their respective successors have qualified.

  2. To approve the appointment of independent public accountants for the current fiscal year.

  3. To act upon such other business as may properly come before such meeting, or any adjournments or postponements thereof.

The official ballot from the meeting, submitted to the Secretary by the Judge of Elections, disclosed the following tabulation of votes:

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WEIS MARKETS, INC.

Item 6. Exhibits and Reports on Form 8-K

(b) Reports on Form 8-K - There were no reports on Form 8-K filed for the three months ended March 29, 2003.

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.

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WEIS MARKETS, INC.

CERTIFICATION- CEO

I, Norman S. Rich, President/CEO of Weis Markets Inc., certify that:

1.  I have reviewed this quarterly report on Form 10-Q of Weis Markets Inc.;

2.  Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit
     to state a material fact necessary to make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the periods covered by this quarterly report;

3.  Based on my knowledge, the financial statements, and other financial information included in this quarterly
     report, fairly present in all material respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this quarterly report;

4.  The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure
     controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

         a)  designed such disclosure controls and procedures to ensure that material information relating to the
               registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
               particularly during the period in which this quarterly report is being prepared;
         b)  evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90
              days prior to the filing date of this quarterly report (the "Evaluation Date"); and
         c)  presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and
              procedures based on our evaluation as of the Evaluation Date;

5.  The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the
      registrant's auditors and the audit committee of registrant's board of directors (or persons performing the
      equivalent function):

         a)  all significant deficiencies in the design or operation of internal controls which could adversely affect
              the registrant's ability to record, process, summarize and report financial data and have identified for the
              registrant's auditors any material weaknesses in internal controls; and
         b)  any fraud, whether or not material, that involves management or other employees who have a significant
               role in the registrant's internal controls; and

6.  The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were
     significant changes in internal controls or in other factors that could significantly affect internal controls
     subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant
     deficiencies and material weaknesses.

Date: May 8, 2003                                                                                                    /S/ Norman S. Rich
                                                                                                                                         Norman S. Rich

                                                                                                                                          President/CEO

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WEIS MARKETS, INC.

CERTIFICATION- CFO

I, William R. Mills, Senior Vice President and Treasurer/CFO of Weis Markets Inc., certify that:

1.  I have reviewed this quarterly report on Form 10-Q of Weis Markets Inc.;

2.  Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit
     to state a material fact necessary to make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the periods covered by this quarterly report;

3.  Based on my knowledge, the financial statements, and other financial information included in this quarterly
     report, fairly present in all material respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this quarterly report;

4.  The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure
     controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

         a)  designed such disclosure controls and procedures to ensure that material information relating to the
               registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
               particularly during the period in which this quarterly report is being prepared;
         b)  evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90
              days prior to the filing date of this quarterly report (the "Evaluation Date"); and
         c)  presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and
              procedures based on our evaluation as of the Evaluation Date;

5.  The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the
      registrant's auditors and the audit committee of registrant's board of directors (or persons performing the
      equivalent function):

         a)  all significant deficiencies in the design or operation of internal controls which could adversely affect
              the registrant's ability to record, process, summarize and report financial data and have identified for the
              registrant's auditors any material weaknesses in internal controls; and
         b)  any fraud, whether or not material, that involves management or other employees who have a significant
               role in the registrant's internal controls; and

6.  The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were
     significant changes in internal controls or in other factors that could significantly affect internal controls
     subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant
     deficiencies and material weaknesses.

Date: May 8, 2003                                                                                                    /S/ William R. Mills
                                                                                                                                         William R. Mills
                                                                                                                                      Senior Vice President
                                                                                                                                         and Treasurer/CFO

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EXHIBIT 99.1

WEIS MARKETS, INC.

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the 10-Q Report of Weis Markets, Inc. (the "company") on Form 10-Q for the quarter ending March 29, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Norman S. Rich, President / Chief Executive Officer of the company, certify, pursuant to and for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the company.

/S/ Norman S. Rich
Norman S. Rich
President / CEO
05/8/2003

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EXHIBIT 99.2

WEIS MARKETS, INC.

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the 10-Q Report of Weis Markets, Inc. (the "company") on Form 10-Q for the quarter ending March 29, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, William R. Mills, Senior Vice President and Treasurer / Chief Financial Officer of the company, certify, pursuant to and for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the company.

/S/ William R. Mills
William R. Mills
Senior Vice President and Treasurer / CFO
05/8/2003