WEIS MARKETS, INC. Overview
The following Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to help the reader understandWeis Markets, Inc. , its operations and its present business environment. The MD&A is provided as a supplement to and should be read in conjunction with the Consolidated Financial Statements and the accompanying notes thereto contained in "Item 8. Financial Statements and Supplementary Data" of this report. The following analysis should also be read in conjunction with the Financial Statements included in the Quarterly Reports on Form 10-Q and the Annual Report on Form 10-K filed with theU.S. Securities and Exchange Commission , as well as the cautionary statement captioned "Forward-Looking Statements" immediately following this analysis. This overview summarizes the MD&A, which includes the following sections:
?Company Overview - a general description of the Company's business and strategic imperatives.
?Results of Operations - an analysis of the Company's consolidated results of operations for the three years presented in the Company's Consolidated Financial Statements.
?Liquidity and Capital Resources - an analysis of cash flows, aggregate contractual obligations, and off-balance sheet arrangements.
?Critical Accounting Policies and Estimates - a discussion of accounting policies that require critical judgments and estimates.
Company Overview
General
Weis Markets is a conventional supermarket chain that operates 197 retail stores with approximately 24 thousand associates located inPennsylvania and six surrounding states:Delaware ,Maryland ,New Jersey ,New York ,Virginia , andWest Virginia . Approximately 98% ofWeis Markets associates are paid an hourly wage. Its products sold 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 EverydayLower Price , Low Price Guarantee, Low, Low Price, and Loyalty programs. The Loyalty program includes fuel rewards that may be redeemed at the Company's fuel stations or one of its third-party fuel station partners. OnJanuary 17, 2019 the Company announced a new pricing strategy for its private brand products named Low, Low Price. The move took the Company's private brand products from a high, low pricing strategy to everyday low price. Utilizing its own centrally located distribution center and transportation fleet,Weis Markets self distributes approximately 68% of product with the remaining being supplied by direct store vendors. In addition, the Company has three manufacturing facilities which process milk, ice cream and fresh meat products. The corporate offices are located inSunbury, PA where the Company was founded in 1912.
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. In 2020, the Company offered
Weis 2 Go Online in 183 of its locations, adding 29 stores since the end of
2019. 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 began offering
home delivery during the third quarter of 2018 and currently offers this
convenience to customers in 175 different locations.
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WEIS MARKETS, INC. Table of Contents
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations: (continued)
Company Overview (continued)
Strategic Imperatives
The following strategic imperatives continue to be focused upon by the Company to attempt to ensure the success of the Company in the coming years:
?Establish a Sales Driven Culture - The Company continues to focus on sales and profits growth, improved operating practices, increased productivity and positive cash flow. The Company believes disciplined growth will increase its market share and operating profits, resulting in enhanced shareholder value. The Company's method of driving sales includes focused preparation and execution of sales programs, investing in new stores and remodels, and strategic acquisitions. Communicating clear executable standards and aligning performance measures across the organization will help to instill a sales-driven operating environment. ?Build and Support Human Capital - The Company believes that talent is a business differentiator and is committed to creating a sustainable competitive advantage through the selection, development and promotion of talented, highly motivated people. The Company believes that establishing a learning culture supports its commitment to be an employer of choice and helps drive customer engagement with its associates. Improvements in the Company's talent management and development will help drive business impact while providing internal career opportunities. The Company continues to grow leaders at every level throughout the organization by creating a culture of mentoring, coaching and leveraging on-the-job assignments for continued development. The Company believes that a strong employment brand is necessary to attract and retain top talent and affects its ability to compete and execute strategic plans. The Company will continue to assess and upgrade underlying technologies to support human capital development as a strategic imperative for future growth. ?Become More Relevant to Consumers - Understanding the consumer is crucial to the Company's strategic plan. The Company will develop and cultivate a culture where it's continually "on trend" with its consumers at the current time and where they are going next. The Company researches and studies the wants and needs of core consumers and casual consumers. It measures customer satisfaction and shares insights across the organization to improve communication between management and its consumers. The Company uses consumer data to measure the value of programs offered and support consumer attraction and retention. The Company believes that its private brand products exceed consumer expectations and will continue to focus on the value and attribute messaging to drive organic growth. ?Create Meaningful Differentiation - The Company recognizes the need to offer a compelling reason for customers to choose them over other channels. The Company has identified product pricing and promotion, customer shopping experience, and merchandising strategies as critical components of future success. The Company recognizes that the core of the strategy will focus on alignment of merchandising programs that foster customer engagement supported by a shopping experience that surpasses customers' expectations. As part of this strategy, management is committed to offering its customers a strong combination of quality, service and value. ?Develop and Align Organizational Capabilities - The Company will elevate organizational capacity to support decision effectiveness and deliver consistent execution. To support this strategy the Company will assess organizational capacity to support the Company's strategic direction. The Company will align business functions and processes to enhance key capabilities and to support scalability of operations. Continued investments in information technology systems to improve associate engagement, increase productivity, and provide valuable insight into customer behavior/shopping trends will remain a focus of the Company. The Company believes these systems will continue to play a key role in the measurement of the Company's strategic decisions and financial returns. ?Focus on Sustainability Strategies - The Company strives to be good stewards of the environment and makes this an important part of its overall mission. Its sustainability strategy operates under four key pillars: green design, natural resource conservation, food and agricultural impact and social responsibility. The goal of the sustainability strategy is to reduce the Company's overall carbon footprint by reducing greenhouse gas emissions and reducing the impact on climate change. ? 11
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations: (continued)
Results of Operations
Analysis of Consolidated Statements of Income
Percentage Changes
(dollars in thousands
except per share amounts) 2020 2019 2018 2020 vs. 2019 vs.
For the Fiscal Years Ended
December 26, 2020,
December 28, 2019 and
December 29, 2018 (52 Weeks) (52 Weeks) (52 Weeks) 2019 2018
Net sales $ 4,112,601 $ 3,543,299 $ 3,509,270 16.1 % 1.0 %
Cost of sales, including
advertising, warehousing
and distribution expenses 3,012,167 2,605,105 2,574,269 15.6 1.2
Gross profit on sales 1,100,434 938,194 935,001
17.3 0.3
Gross profit margin 26.8 % 26.5 % 26.6 %
Operating, general and 937,256 853,555 852,330 9.8
administrative expenses 0.1
O, G & A, percent of net 22.8 % 24.1 % 24.3 %
sales
Income from operations 163,178 84,639 82,671 92.8 2.4
Operating margin 4.0 % 2.4 % 2.4 %
Investment income (loss) 3,817 7,054 (1,454)
and interest expense (45.9) 585.1
Investment income (loss)
and interest expense, 0.1 % 0.2 % 0.0 %
percent of net sales
Other income (expense) (3,316) (3,049) 919 8.8 431.8
Other income (expense), (0.1) % % %
percent of net sales (0.1) 0.0
Income before provision 163,679 88,644 82,136
for income taxes 84.6 7.9
Income before provision
for income taxes, percent 4.0 % 2.5 % 2.3 %
of net sales
Provision for income taxes 44,762 20,661 19,398 116.6 6.5
Effective income tax rate 27.3 % 23.3 % 23.6 %
Net income $ 118,917 $ 67,983 $ 62,738 74.9 % 8.4 %
Net income, percent of net 2.9 % 1.9 % 1.8 %
sales
Basic and diluted earnings $ 4.42 $ 2.53 $ 2.33 % %
per share 74.7 8.6
Net Sales
Percentage Changes
2020 vs. 2019 2019 vs. 2018
Net sales 16.1 % 1.0 %
Net sales, excluding fuel sales 17.0 0.8
Comparable store sales 16.4 1.5
Comparable store sales excluding fuel sales 17.5 % 1.5 %
When calculating the percentage change in comparable store sales, the Company
defines a new store to be comparable when it has been in operation after 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.
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations: (continued)
Results of Operations (continued)
According to the latestU.S. Bureau of Labor Statistics' report, the annual Seasonally Adjusted Food-at-Home Consumer Price Index increased 0.2% in 2020, 0.9% in 2019 and 0.7% in 2018. Even though theU.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 theU.S. Department of Energy , the 52-week average price of gasoline in the Central Atlantic States decreased 12.8%, or$0.36 per gallon, in 2020 compared to the 52-week average in 2019. The 52-week average price of gasoline in the Central Atlantic States, according to theU.S. Department of Energy , decreased 5.7%, or$0.17 per gallon, in 2019 compared to the 52-week average in 2018. Comparable store sales increased for all years presented. On a comparable store sales basis all product categories,Center Store , Fresh and Pharmacy Services, with the exception of Fuel, increased in sales. The Company's 2020 sales were favorably impacted as a result of increased sales demand related to the novel coronavirus pandemic as well as increasing market share. The Company has provided additional product offerings and customer conveniences such as "Weis 2 Go Online," currently offered at 184 store locations. "Weis 2 Go Online" allows the customer to order on-line and have their order delivered or pick up their order at an expedient store drive-thru. 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 rate was 26.8% in 2020, 26.5% in 2019 and 26.6% in 2018. The increase in gross profit rate is attributable to a change in sales mix along with increased fresh department sell-through during the novel coronavirus pandemic, reducing the amount of product loss. Pharmacy gross profit margin continues to be pressured by recent changes in industry practices. The Company cannot predict whether the pharmacy industry practices will change favorably.
The Company experienced favorable non-cash LIFO inventory valuation adjustments,
increasing gross profit by
Although the Company experienced product cost inflation and deflation in various
commodities in 2020, 2019 and 2018, 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.
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WEIS MARKETS, INC. Table of Contents
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations: (continued)
Results of Operations (continued)
Operating, General and Administrative Expenses
The majority of the expenses were driven by increased sales volume.
Employee-related costs such as wages, employer paid taxes, health care benefits and retirement plans, comprise approximately 62.7% of the total "Operating, general and administrative expenses." During the novel coronavirus pandemic, the Company compensated its employees, primarily front-line associates over$32.5 million in various rewards, including an additional$2 per hour for 15 weeks. As a percent of sales, direct store labor decreased 0.6% in 2020 compared to 2019 and decreased 0.1% in 2019 compared to 2018. While direct store labor expenses increased in 2020 compared to 2019, the sales increases have outpaced the labor expense increase causing the rate to fall, primarily due to the fixed component of store labor. Management continues to monitor store labor efficiencies and develop labor standards to reduce costs while maintaining the Company's customer service expectations. Currently, the Company is continuing a multi-year initiative to install or upgrade self-checkouts in its stores in response to customer preference and labor rates and supply, including adding convertible dual-use checkout lanes.
The Company's self-insured health care benefit expenses increased by 9.8% in 2020 compared to 2019 and increased by 1.0% in 2019 compared to 2018.
Depreciation and amortization expense charged to "Operating, general and administrative expenses" was$90.2 million , or 2.2% of net sales, for 2020 compared to$85.2 million , or 2.4% of net sales, for 2019 and$84.4 million , or 2.4% of net sales, for 2018. Depreciation and amortization expense as a percent of sales decreased 0.2% in 2020 when compared to 2019, however when 2019 is compared to 2018 there was no change. See the Liquidity and Capital Resources section for further information regarding the Company's capital expansion program.
A breakdown of the material increases (decreases) as a percent of sales in "Operating, general and administrative expenses" is as follows:
2020 vs. 2019
Increase Increase
(dollars in thousands) (Decrease)
December 26, 2020 (Decrease) as a % of sales
Employee expense $ 64,241 (0.5) %
Utilities expense (2,385) (0.2)
Fixed Expense 9,462 (0.4)
2019 vs. 2018
(dollars in thousands) Increase Increase (Decrease)
(0.2) %
Fixed expenses include occupancy costs, depreciation and amortization and insurance expenses. Although fixed expenses have increased from a cost perspective, the increase in sales has caused a decrease in the percent of sales rate.
The majority of the operating, general and administrative expenses as a percent of sales presented for the fiscal year 2020 have benefited in comparison with the 2019 percent of sales due to the increase in sales caused by the novel coronavirus pandemic. Due to the nature of fixed expenses, management expects less variability when analyzed as a percent of sales, relative to the majority of operating, general and administrative expenses. All expenses as a percent of sales presented for the 2019 fiscal year have benefited in comparison with the 2018 percent of sales due to the closure of unprofitable stores. The Company is benefiting from cost saving initiatives in various areas of its operations and is saving in utilities with a combination of purchasing, associate sustainability and capital investments such as its LED lighting program.
The Company's 2019 sustainability report my be found at: https://www.weismarkets.com/sites/default/files/weisbynature_sustainabilityupdate_2019_web_final-s.pdf?330
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WEIS MARKETS, INC. Table of Contents
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations: (continued)
Results of Operations (continued)
Provision for Income Taxes
The effective income tax rate was 27.3%, 23.3% and 23.6% in 2020, 2019 and 2018, respectively. The effective income tax rate differs from the federal statutory rate of 21% primarily due to state taxes as well as nondeductible employee expenses. Not all the Company's tax credits and state deductions are driven proportionately by taxable income levels, due to these items and the significant increase in taxable income from prior years, the result was a higher effective income tax rate for 2020.
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 onSeptember 1, 2016 , and amended onAugust 21, 2019 , withWells Fargo Bank, NA (the "Credit Agreement"). The Credit Agreement matures onSeptember 1, 2022 and provides for an unsecured revolving credit facility with an aggregate principal amount not to exceed$30.0 million with an additional discretionary amount available of$70.0 million . As ofDecember 26, 2020 , the availability under the revolving credit agreement was$25.1 million with$4.9 million of letters of credit outstanding. The letters of credit are maintained primarily to support performance, payment, deposit or surety obligations of the Company. The Company's investment portfolio consists of high-grade bonds with maturity dates between one and 10 years and three long-held high yield, large capitalized public company equity securities. The portfolio totaled$111.9 million as ofDecember 26, 2020 . Management anticipates maintaining the investment portfolio, but has the ability to liquidate if needed. See "Item 7a. Quantitative and Qualitative Disclosures about Market Risk" for more details regarding the Company's market risk. The Company's capital expansion program includes the construction of new superstores, the expansion and remodeling of existing units, the acquisition of sites for future expansion, new technology purchases and the continued upgrade of the Company's distribution facilities and transportation fleet. Management currently plans to invest approximately$135 million in its capital expansion program in 2021. The 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 Total cash dividend payments on common stock, on a per share basis, amounted to$1.24 in 2020,$1.24 in 2019 and$1.21 in 2018. The Company expects to continue paying regular cash dividends on a quarterly basis. However, the Board of Directors reconsiders the declaration of dividends quarterly. The Company pays these dividends at the discretion of the Board of Directors and the continuation of these payments and the amount of the dividends depends upon the results of operations, the financial condition of the Company and other factors which the Board of Directors deems relevant. ? 15
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations: (continued)
Liquidity and Capital Resources (Continued)
Cash Flow Information (dollars in thousands) For the Fiscal Years Ended 2020 2019 2018 2020 vs. 2019 vs.December 26, 2020 , December 28, 2019 and (52 Weeks) (52 weeks) (52 weeks) 2019 2018 December 29, 2018 Net cash provided by (used in): Operating activities$ 277,990 $ 171,686 $ 150,263 $ 106,304 $ 21,423 Investing activities (174,895) (109,269) (92,838) (65,626) (16,431) Financing activities (33,354) (33,354) (67,534) - 34,180 Operating Cash flows from operating activities increased in 2020 as compared to 2019 and in 2019 as compared to 2018, respectively. Management attributes the majority of the increase in 2020 over 2019 to increased sales volume resulting from the novel coronavirus pandemic and its impact on Net Income. The increase in cash flow from 2018 to 2019 is attributable to improved profits. Decreased inventory levels supporting greater sales volume throughout the supply chain continue to favorably impact cash flow for all years presented. Improved ordering methods for the Company's distribution center and stores as well as the Company's most recent store inventory initiative, "Top Stock" have contributed to this improvement. "Top Stock" moves product from the store back room to a top shelf in the aisle, making replenishment and inventory control more efficient while keeping the associates more accessible to the customer.
Investing
Property and equipment purchases totaled$131.0 million in 2020, compared to$101.5 million in 2019 and$95.6 million in 2018. As a percentage of sales, capital expenditures totaled 3.2% in 2020, 2.9% in 2019 and 2.7% in 2018. The Company significantly increased its marketable securities holdings in 2020 by approximately$43 million . In 2021, the Company plans to maintain or further increase its marketable securities portfolio.
Financing
The Company paid dividends of$33.4 million in 2020,$33.4 million in 2019 and$32.5 million in 2018. The Company increased its quarterly dividend from30 cents per share to31 cents per share in the fourth quarter of 2018. In 2018, payments on the revolving credit agreement increased net cash used in financing activities by$35.0 million . Contractual Obligations The following table represents scheduled maturities of the Company's long-term contractual obligations as ofDecember 26, 2020 . ? Payments due by period Less than More than (dollars in thousands) Total 1 year 1-3 years 3-5 years 5 years Operating leases$ 241,151 $ 46,631 $ 78,908 $ 55,878 $ 59,734 Total$ 241,151 $ 46,631 $ 78,908 $ 55,878 $ 59,734 ? 16
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WEIS MARKETS, INC. Table of Contents
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations: (continued)
Off-Balance Sheet Arrangements
The Company is not a party to any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on the Company's financial condition, results of operations or cash flows.
Critical 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. The preparation of financial statements in conformity with accounting principles generally accepted inthe 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.
Inventories
Inventories are valued at the lower of cost or net realizable value, using both the retail inventory and average cost methods. The retail inventory method is commonly used by retail companies to determine cost and calculate gross margin based on applying a cost-to-retail ratio to each similar merchandise category's ending retail value. The Company's center store and pharmacy inventories are valued using last in, first out (LIFO). The Company's fresh inventories are valued using average cost. The Company evaluates inventory shortages throughout the year based on actual physical counts in its facilities. Allowances for inventory shortages are recorded based on the results of these counts and to provide for estimated shortages from the last physical count to the financial statement date. Vendor Allowances Vendor allowances related to the Company's buying and merchandising activities are recorded as a reduction of cost of sales as they are earned, in accordance with the underlying agreement. Off-invoice and bill-back allowances are used to reduce direct product costs upon the receipt of goods. Promotional rebates and credits are accounted for as a reduction in the cost of inventory and recognized when the related inventory is sold. Volume incentive discounts are realized as a reduction of cost of sales at the time it is deemed probable and reasonably estimatable that the incentive target will be reached. Long-term contract incentives, which require an exclusive vendor relationship, are allocated over the life of the contract. Promotional allowance funds for specific vendor-sponsored programs are recognized as a reduction of cost of sales as the program occurs and the funds are earned per the agreement. Cash discounts for prompt payment of invoices are realized in cost of sales as invoices are paid. Warehouse and back-haul allowances provided by suppliers for distributing their product through the Company's distribution system are recorded in cost of sales as the required performance is completed. Warehouse slotting allowances are recorded in cost of sales when new items are initially set up in the Company's distribution system, which is when the related expenses are incurred and performance under the agreement is complete. Swell allowances for damaged goods are realized in cost of sales as provided by the supplier, helping to offset product shrink losses also recorded in cost of sales.
Income Taxes
Income taxes are inherently complex and require management's evaluation and
estimates, specifically regarding current and deferred income taxes and
uncertain tax positions. The Company reviews the tax positions taken, or
expected to be taken, on tax returns to determine whether, and to what extent, a
benefit can be recognized in its Consolidated Financial Statements. The
assessment of the Company's tax position relies on the judgment of management to
estimate the more likely than not merits associated with the Company's various
tax positions.
Leases
The Company leases approximately 51% 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."
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations: (continued)
Critical Accounting Policies and Estimates (continued)
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 medical benefit claims is determined based on historical data and an estimate of claims incurred but not reported. The other self-insurance liabilities including workers' compensation are determined actuarially, based on claims filed and an estimate of claims incurred but not yet reported. The Company is self-insured for certain healthcare claims and stop-loss coverage is maintained for occurrences exceeding a$500 thousand specific deductible with a$450 thousand aggregating deductible. The Company is liable for workers' compensation claims ranging from$1.0 million to$2.0 million per claim. Property and casualty insurance coverage is maintained with outside carriers at deductible or retention levels ranging from$100 thousand to$1.0 million . Significant assumptions used in the development of the actuarial estimates include reliance on the Company's historical claims data including average monthly claims and average lag time between incurrence and reporting of the claim. Forward-Looking Statements In addition to historical information, this Annual 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 theSecurities and Exchange Commission .
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