WEIS MARKETS INC - Quarter Report: 2019 June (Form 10-Q)

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



FORM 10-Q

(Mark One)



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









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.



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:





As of August 6, 2019, there were issued and outstanding 26,898,443 shares of the registrant’s common stock.

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TABLE OF CONTENTS







 

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PART I – FINANCIAL INFORMATION

ITEM I – FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

(unaudited)





See accompanying notes to Consolidated Financial Statements.

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CONSOLIDATED STATEMENTS OF INCOME

(unaudited)





See accompanying notes to Consolidated Financial Statements.

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)





See accompanying notes to Consolidated Financial Statements.



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CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(unaudited)











See accompanying notes to Consolidated Financial Statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)



See accompanying notes to Consolidated Financial Statements.  In the first twenty-six weeks of 2019, there was $9.4 million cash paid for income taxes compared to $3.4 million in 2018 for the same period.  Cash paid for interest related to long-term debt was $49 thousand and $318 thousand in the first twenty-six weeks of 2019 and 2018, respectively. 





 

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(1) Significant Accounting Policies
Basis of Presentation:  The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X.  In the opinion of management, all adjustments (consisting of normal recurring deferrals and accruals) considered necessary for a fair presentation have been included.  The operating results for the periods presented are not necessarily indicative of the results to be expected for the full year.  The Company has evaluated subsequent events for disclosure through the date of issuance of the accompanying unaudited consolidated interim financial statements and there were no material subsequent events which require additional disclosure.  For further information, refer to the Consolidated Financial Statements and footnotes thereto included in the Company's latest Annual Report on Form 10-K.   



(2) Current Relevant Accounting Standards

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

 

(3)  Marketable Securities

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

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

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

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

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



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



The Company accrues interest on its bond portfolio throughout the life of each bond held.  Dividends from the equity securities are recognized as received.  Interest, dividends and unrealized gains and losses on equity securities are recognized in “Investment income and interest expense” on the Company’s Consolidated Statements of Income.  The Company recognized investment income of $1.1 million in the second quarter of 2019, which included an unrealized gain in equity securities of $223 thousand. In the twenty-six weeks ending June 29, 2019, the Company recognized investment income of $4 million, which included unrealized gains in equity securities of $848 thousand.  Investment income of $178 thousand and investment loss of $187 thousand were recognized in the second quarter of 2018 and twenty-six weeks ended June 30, 2018, respectively.





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(3)  Marketable Securities (continued)





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







Maturities of marketable securities classified as available-for-sale at June 29, 2019, were as follows:



SERP Investments

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



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(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. 



The following table sets forth the effects on net income of the amounts reclassified out of accumulated other comprehensive income for the periods ended June 29, 2019 and June 30, 2018.



































(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”).  The Credit Agreement provides for an unsecured revolving credit facility with an aggregate principal amount not to exceed $50.0 million with an additional discretionary amount available of $50.0 million.  As of June 29, 2019, the availability under the revolving credit agreement was $88.5 million, net of $11.5 million letters of credit.  The revolving credit agreement matures on September 1, 2019.  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 $14 thousand and $73 thousand in the thirteen weeks ended June 29, 2019 and June 30, 2018, respectively.  In the first half of 2019 and 2018, interest expense related to long-term debt totaled $33 thousand and $240 thousand, respectively.

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(6) Revenue Recognition

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



The following table represents net sales by type of product for the thirteen and twenty-six week periods ending June 29, 2019 and June 30, 2018:































 

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(7) Leases



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



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



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



The following is a schedule of the lease costs included in “Operating, general and administrative expenses” for the thirteen and twenty-six weeks ended June 29, 2019.





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(7) Leases (continued)



The following is a schedule by years of the future minimum rental payments required under operating leases and total minimum sublease and lease rental income to be received as of  June 29, 2019, inclusive of 12 months from June 30th.













The following is a schedule of weighted-average remaining lease terms and weighted-average discount rates as of June 29, 2019 and December 30, 2018.



































 

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



Company Summary



Weis Markets is a conventional supermarket chain that operates 200 retail stores with nearly 23,000 associates located in Pennsylvania and six surrounding states: Delaware, Maryland, New Jersey, New York, Virginia and West Virginia.  Its products include groceries, dairy products, frozen foods, meats, seafood, fresh produce, floral, pharmacy services, deli products, prepared foods, bakery products, beer and wine, fuel and general merchandise items, such as health and beauty care and household products.  The store product selection includes national, local and private brands and the Company promotes by using Everyday Lower Price, Low Price Guarantee, and Loyalty programs.  The Loyalty program includes fuel rewards that may be redeemed at the Company’s fuel stations or one of its third-party fuel station partners.  On January 17, 2019 the Company announced a new pricing strategy for its private brand products named Low, Low Price. The move takes the Company’s private brand products from a high, low pricing strategy to everyday low cost.



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

   

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



In 2016, Weis Markets acquired five Mars Super Market locations in Baltimore County, MD, 38 Food Lion stores throughout Maryland, Virginia and Delaware, and a Nell's Family Market in East Berlin, PA.  The completion of these individual acquisitions expanded the Company's footprint into Virginia and Delaware, and increased its store count by 25 percent.  To date the acquired store group is providing a positive cash flow for the Company at a greater return on the fair value investment than if stores had been organically established.  As the acquired stores assimilate, management anticipates the adverse impact of these stores on Company margins to lessen.  In the first quarter of 2019, the Company closed two stores from the acquired store group.  The Company continues to actively investigate acquisition opportunities as well as grow its existing store base organically.



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

programs like “Weis 2 Go Online” and home delivery.  In the first twenty-six weeks of 2019, the Company offered Weis 2 Go Online in 150 of its locations, adding 61 stores since the end of 2018.  Weis 2 Go Online allows the customer to order on-line and then pick up their order at a drive-thru location at the store.  During the third quarter of 2018 the Company began offering home delivery, and currently offers this convenience to customers in 177 different locations.

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(continued)

Results of Operations





Net Sales

Analysis of Sales





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.



The Company’s 2019 second quarter sales benefited from the Easter holiday shift, since the Easter selling period occurred in the last week of the first quarter in 2018 while the slow selling post-Easter week fell in the second quarter a year ago.  In 2019, both weeks fell in the second quarter. Management estimates the incremental holiday sales impact in 2019 for comparative purposes was approximately $9.7 million which has been excluded from the Company’s 2019 comparable store sales total.

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(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 0.9% compared to an increase of 0.5% for the same period last year.  Even though the U.S. Bureau of Labor Statistics’ index rates may be reflective of a trend, it will not necessarily be indicative of the Company’s actual results.  According to the U.S. Department of Energy, the thirteen-week average price of gasoline in the Central Atlantic States increased 2.6% or $0.08 per gallon in the second quarter of 2019 compared to the same quarter in 2018. The year to date average remains the same in 2019 when compared to 2018.



Comparable store sales for the second quarter of 2019 remained positive compared to the same period a year ago, adjusted for the holiday week, with increases of 1.4% and 1.5%, with and without fuel, respectively.  Year to date, comparable store sales for 2019 also remained positive when compared to the same period in 2018, with increases of 1.4% and 1.6% with and without fuel, respectively.  Customer acceptance of the new Low, Low Price private brand program,  as well as additional product offerings and customer conveniences such as “Weis 2 Go Online,”  currently offered in 150 store locations for both pickup and delivery and additional 27 for delivery only.



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



Cost of Sales and Gross Profit

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



Gross profit margin decreased 0.9% in the second quarter of 2019 and year to date gross profit margin decreased 0.8% compared to the same periods in 2018.  Year-to-date declining retails and costs in fuel, fruits, vegetables and eggs had a negative impact on gross profit rates, while pharmacy gross profits are being pressured by recent changes in industry practices.  While the various commodities’ retails and costs are cyclical in nature, the Company cannot predict whether the pharmacy industry practices will change favorably.  Additionally, rainy weather in the Company’s operating area depressed high gross profit margin seasonal general merchandise sales in the second quarter of 2019 while fuel, fruits and vegetables returned to more normal retails and costs.



Non-cash LIFO inventory valuation adjustments was an expense of $400 thousand in the first twenty-six weeks of 2019, compared to an expense of $1.4 million in 2018.  The Company anticipates product costs to remain stagnant.



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



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(continued)

Results of Operations (continued)



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



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



Depreciation and amortization expense charged to “Operating, general and administrative expenses” was $21.4 million, or 2.4% of net sales during the second quarter of 2019 compared to $21.2 million, or 2.4% of net sales during second quarter of 2018.  During the first half of 2019 and 2018, depreciation and amortization expense charged to “Operating, general and administrative expenses” was $42.3 million, or 2.4% of net sales and $41.7 million, or 2.4% of net sales, respectively.  See the Liquidity and Capital Resources section for further information regarding the Company’s capital expansion program.













All expenses as a percent of sales presented for the second quarter of 2019 have benefited in comparison with the 2018 percent of sales due to the Easter holiday shift and the closure of unprofitable stores.  In the first quarter of 2019 the Company recorded gains in investment income after income from operations due to the SERP retirement plan market gains in the first quarter of 2019 that have a corresponding expense recorded in “Operating, general and administrative expenses.”  The Company is also benefiting from cost saving initiatives in various area of its operations and is saving in utilities with a combination of purchasing, associate sustainability and capital investments such as it LED lighting program.



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



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Provision for Income Taxes 

The effective income tax rate was 24.0% and 27.0% for the second quarter of 2019 and 2018, respectively.  The effective income tax rate was 24.1% and 27.2% for the first half of 2019 and 2018, respectively.  Historically, the effective income tax rate differed from the federal statutory rate, primarily due to the effect of state taxes, net of permanent differences.



Liquidity and Capital Resources



The primary sources of cash are cash flows generated from operations and borrowings under the revolving credit agreement the Company entered into on September 1, 2016 with Wells Fargo Bank, NA (the “Credit Agreement”).  The Credit Agreement provides for an unsecured revolving credit facility with an aggregate principal amount not to exceed $50.0 million with an additional discretionary amount available of $50.0 million.  As of June 29, 2019, the availability under the revolving credit agreement was $88.5 million with $11.5 million of letters of credit outstanding.  The Company anticipates amending and extending the Credit Agreement, which matures on September 1, 2019.  The letters of credit are maintained primarily to support performance, payment, deposit or surety obligations of the Company.



The Company’s investment portfolio consists of high grade municipal bonds with maturity dates generally between one and 10 years and large capitalized public company equity securities.  The portfolio totaled $56.7 million as of June 29, 2019.  Management anticipates maintaining the investment portfolio, but has the ability to liquidate if needed.



The Company’s capital expansion program includes the construction of new superstores, the expansion and remodeling of existing units, the acquisition of sites for future expansion, new technology purchases and the continued upgrade of the Company’s distribution facilities and transportation fleet.  Management currently plans to invest approximately $86 million in its capital expansion program in 2019. 



The Company expects that cash generated from operations and cash available under the Credit Agreement (and future amendment) 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 June 29, 2019, other than the lease commitments on its store facilities and transportation equipment under operating leases that expire at various dates through 2033.



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



Quarterly Cash Dividends 

At its regular meeting held in July, the Board of Directors unanimously approved a quarterly dividend of $0.31 per share, payable on August 12, 2019 to shareholders of record on July 29, 2019.  The Company expects to continue paying regular cash dividends on a quarterly basis. However, the Board of Directors reconsiders the declaration of dividends quarterly. The Company pays these dividends at the discretion of the Board of Directors and the continuation of these payments and the amount of the dividends depends upon the results of operations, the financial condition of the Company and other factors which the Board of Directors deems relevant.



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(continued)

Liquidity and Capital Resources (continued)



Cash Flow Information







Operating

Cash flows from operating activities decreased $5.2 million in the first twenty-six weeks of 2019 compared to the first twenty-six weeks of 2018.  The decrease in cash from Operating activities is attributable to a $9.1 million first quarter payment increase in associate incentives, as well as other changes in accounts payable.



Investing

Property and equipment purchases during the first twenty-six weeks of 2019 totaled $44.3 million compared to $46.4 million in the first twenty-six weeks of 2018.  As a percentage of sales, capital expenditures were 2.5% in the first twenty-six weeks of 2019 compared to 2.6% in the first twenty-six weeks of 2018.  In 2019, the Company plans to maintain or increase its marketable securities portfolio.



Financing

The Company paid dividends of $8.3 million and $16.7 million in the second quarter and first twenty-six weeks of 2019, respectively; and $8.1 million and $16.1 million in the second quarter and first twenty-six weeks of 2018, respectively.  The Company has not had an obligation on the Credit Agreement since the second quarter of 2018. As such, the Company had no payments on long-term debt in the first twenty-six weeks of 2019 compared to $35 million paid in the first twenty-six weeks 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 2018 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 29, 2018, except for the adoption of ASU 2016-02, Leases (Topic 842) as discussed in Notes 2 and 7 of the Notes to the Consolidated Financial Statements.





Forward-Looking Statements



In addition to historical information, this 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.



 

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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 June 29, 2019.  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 29, 2018 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 29, 2018 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 June 29, 2019.  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 June 29, 2019, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.  The Company implemented additional internal controls to ensure proper assessment and accounting for the impact of the new accounting standard relating to leases on the financial statements, which became effective on December 30, 2018.



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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.



 







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