FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended September 28, 1996
Commission File Number 1-5039
WEIS MARKETS, INC.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 24-0755415
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 S. Second Street
P. O. Box 471
Sunbury, PA 17801-0471
(Address of principal executive offices) (Zip Code)
(717) 286-4571
(Registrant's telephone number, including area code)
NONE
(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 42,061,981 shares
(Outstanding at end of period)
WEIS MARKETS, INC.
INDEX
Page No.
Part I - Financial Information
Consolidated Condensed Balance Sheets -
September 28, 1996 and December 30, 1995 2
Consolidated Condensed Statements of Income
Nine Months Ended September 28, 1996
and September 30, 1995 3
Consolidated Condensed Statements of Cash Flows -
Nine Months Ended September 28, 1996
and September 30, 1995 4
Notes to Consolidated Condensed Financial Statements 5
Management's Discussion and Analysis of the
Consolidated Condensed Statements of Income 6
Part II - Other Information
Other Information and Signatures 9
1
PART I - FINANCIAL INFORMATION
WEIS MARKETS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
September 28, 1996 December 30, 1995
(Unaudited) (Unaudited)
Assets
Current:
Cash $ 3,022 $ 3,285
Marketable Securities 411,139 432,174
Accounts Receivable, Net 31,173 31,517
Inventories 126,514 131,727
Prepaid Expenses 4,808 7,764
_______ _______
Total Current Assets 576,656 606,467
Property and Equipment, Net 314,191 285,993
Intangible and Other Assets, Net 30,288 30,698
_______ _______
Total Assets $ 921,135 $ 923,158
======= =======
Liabilities and Stockholders' Equity
Current:
Accounts Payable $ 52,720 $ 72,262
Accrued Expenses 12,553 12,997
Accrued Self-Insurance 14,520 13,285
Payable to Employee Benefit Plans 7,162 7,453
Income Taxes Payable 4,673 4,077
Deferred Income Taxes 4,094 5,258
_______ _______
Total Current Liabilities 95,722 115,332
Deferred Income Taxes 18,339 16,527
Minority Interest . (492) (263)
Shareholders' Equity
Common Stock, No Par Value,
100,800,000 Shares Authorized,
47,445,929 and 47,438,249 Shares
issued, respectively 7,380 7,380
Retained Earnings 911,106 879,916
Net Unrealized Gain
on Marketable Securities 13,943 14,748
_______ _______
932,429 902,044
Less Treasury Stock, At Cost (124,863) (110,482)
_______ _______
Total Shareholders' Equity 807,566 791,562
Total Liabilities and _______ _______
Shareholders' Equity $ 921,135 $ 923,158
======= =======
<FN>
See accompanying notes to consolidated condensed financial
statements.
2
WEIS MARKETS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(Dollars in Thousands Except Per Share Amounts)
Three Months Ended Nine Months Ended
09/28/96 09/30/95 09/28/96 09/30/95
Net Sales $ 424,747 $ 404,578 $ 1,290,530 $ 1,209,655
Cost of Sales 311,166 298,768 955,338 898,694
_______ _______ _______ _______
Gross Profit 113,581 105,810 335,192 310,961
Operating, General and
Admin. Expense 90,086 84,028 266,061 248,300
_______ _______ _______ _______
Income from
Operations 23,495 21,782 69,131 62,661
Interest and Dividend 4,710 5,376 14,677 16,318
Other Income 1,830 3,127 7,236 9,705
Minority Interest 121 0 229 0
_______ _______ _______ _______
Income before provision
for income tax 30,156 30,285 91,273 88,684
Provision for income 10,541 11,096 32,558 32,055
_______ _______ _______ _______
Net Income $ 19,615 $ 19,189 $ 58,715 $ 56,629
======= ======= ======= =======
Earnings per common share negligible
difference if full dilution
is assumed (a) $ 0.47 $ 0.45 $ 1.39 $ 1.31
======== ======== ======== ========
Cash dividends
per Common Share $ 0.23 $ 0.21 $ 0.65 $ 0.59
======== ======== ======== ========
Weighted average number of common
of common shares
outstanding 42,072,634 43,101,115 42,354,677 43,201,645
========== ========== ========== ==========
<FN>
(a) Primary earnings per common share have been computed by
dividing net income by the weighted average number of shares
outstanding during this period. Earnings per common share assuming
full dilution have been determined on the assumption that stock
options outstanding at the end of the period and options exercised
during the period were exercised as of the beginning of the period.
The increase in the average shares outstanding during the period
resulting from the above assumptions was reduced by the number of
common shares which were assumed to have been purchased from
the assumed proceeds resulting from the exercise of options; these
purchases were assumed to have been made at average market
prices for the options outstanding at the end of the period.
See accompanying notes to consolidated condensed financial
statements.
3
WEIS MARKETS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
Nine Months Ended
09/28/96 09/30/95
Cash flows from operating activities:
Net Income $ 58,715 $ 56,629
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 26,581 23,634
Gain on sale of fixed assets --- ---
Changes in operating assets and liabilities:
Decrease in inventories 5,213 10,145
(Increase)/Decrease in accounts receivable
and prepaid expenses 3,300 (5,543)
Decrease in accounts payable,
accrued expenses, and minority interest (19,271) (6,470)
(Increase)/Decrease in income taxes payable 596 (75)
Increase/(Decrease) in deferred taxes 1,219 (245)
_______ _______
Net cash provided by operating
activities 76,353 78,075
Cash flows from investing activities:
Purchase of property and equipment (52,945) (50,484)
Proceeds from the sale of property and equipment 221 ---
Purchase of marketable securities (81,221) (65,083)
Proceeds from maturities of marketable securities 93,207 75,862
(Increase)/Decrease in highly liquid, short term inv 7,673 687
Increase in intangible assets and other assets (1,645) (3,165)
_______ _______
Net cash used by investing activities (34,710) (42,183)
Cash flows from financing activities:
Proceeds from issuance of common stock --- ---
Dividends paid (27,525) (25,506)
Purchase of treasury stock (14,381) (11,394)
_______ _______
Net cash used by financing activities (41,906) (36,900)
Net decrease in cash (263) (1,008)
Cash at beginning of period 3,285 4,011
_______ _______
Cash at end of period $ 3,022 $ 3,003
======= =======
Cash Paid during the period for:
Interest Expense $ 0 $ 0
======= =======
Income Taxes $ 31,314 $ 32,130
======= =======
<FN>
See accompanying notes to consolidated condensed financial statements.
4
WEIS MARKETS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying unaudited
consolidated condensed financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to present
fairly the financial position as of September 28, 1996 and the results
of operations for the three months then ended, and statements of cash
flows for the three months then ended.
2. The comparative balance sheet for December 30, 1995 was
derived from the audited financial reports for that year ended. This
information has been designated as "unaudited" in its entirety as the
year-end column is not covered by an auditors report, as
contemplated by SAS 42, in this 10-Q filing.
3. The results of operations for the three month ended periods
September 28, 1996 and September 28, 1995 are not necessarily
indicative of the results to be expected for the full year.
5
WEIS MARKETS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OPERATING RESULTS
Sales for the third quarter ended September 28, 1996, increased
5.0% to $424,747,000 compared to $404,578,000 last year.
Year-to-date, sales increased 6.7% to $1,290,530,000 compared to
$1,209,655,000 in 1995. Same-store sales continue to trend positively,
increasing 1.6% for the quarter and 3.3% year-to-date. Sales at
SuperPetz, the 80% held pet supply stores subsidiary, accounted for
$10,669,000 of the sales increase in the quarter, as it has grown from 23
stores operating at the end of the third quarter last year to 41 stores
today. Inflation in grocery products remains flat versus a year ago,
and there have been no abnormal retail price fluctuations. Competition
in the Companys marketing area remains intense and management
does not expect any significant changes in this level of competition in
the future.
Gross profit of $113,581,000 at 26.7% of sales, increased $7,771,000
or 7.4% versus the same quarter last year. The increase in gross profit
dollars were generated primarily from the higher sales volume, as the
gross profit rate increased .6% compared to the third quarter of last
year. The year-to-date gross profit at 26.0% of sales, increased
$24,231,000 or 7.8%, and increased as a percent of sales by .3%. The
gross profit generated by the SuperPetz operation, did increase the
Weis Markets, Inc., consolidated gross margin rate by .4% in both the
quarter and year-to-date.
Operating expenses for the third quarter of $90,086,000 at 21.2% of
sales, were $6,058,000 or 7.2% higher than the same quarter last year.
As a percent of sales, operating expenses increased by .4% for the
quarter. Year-to-date operating expenses of $266,061,000 at 20.6% of
sales compares with $248,300,000 at 20.5% through the first three
quarters of 1996. The increased expenses versus last year are directly
related to the higher sales volume. Operating expenses at SuperPetz
did run considerably higher as a percentage of sales, and did cause
the consolidated Weis Markets, Inc., operating expense as a
percentage of sales to increase by .9% for the quarter and .7%
year-to-date. Depreciation and amortization expense increased
$1,075,000 or 13.4% in the third quarter and are $2,947,000 or 12.5%
higher year-to-date. This is a direct effect of the aggressive capital
expenditure plans being completed.
Interest and dividend income of $4,710,000 at 1.1% of sales,
decreased $666,000, or 12.4%, versus the same quarter last year. As
a percentage of sales, interest and dividend income decreased .2% in
the third quarter compared to last year. Year-to-date interest and
dividend income of $14,677,000 decreased $1,642,000 or 10.1%
versus the first three quarters of 1995. The amortized cost of
marketable securities held by the Company at the end of the third
quarter were $45,621,000 less than at the end of the same quarter last
year. Likewise, dividend and interest income from those investments
are also lower.
Other income for the quarter of $1,830,000 at .4% of sales
decreased $1,297,000, or 41.5% compared to the same quarter last
year. Year-to-date other income of $7,236,000 at .6% of sales has
decreased $2,469,000 or 25.4% versus a year ago. Income from the
sale of cardboard salvage decreased $607,000 this quarter versus
the third quarter last year and has decreased $1,856,000 year-to-date.
In 1995, the price paid per ton for cardboard salvage hit record highs
as foreign countries paid a premium for the export of corrugated box.
Year-to-date coupon handling income has decreased $139,000.
Coupon handling income is expected to continue to decline, as
manufacturers are now issuing less coupons than in prior years.
6
WEIS MARKETS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
OPERATING RESULTS (continued)
Minority interest of $121,000 represents the 20% shareholder portion
of the net loss before tax of SuperPetz, Inc., for the quarter. Income
from the SuperPetz store operations continues to be profitable,
however, the write-off of new store opening costs and operational
weakness due to the extremely fast growth of this concept has inhibited
the bottom line. Supervision at SuperPetz is working on tightening all
operational aspects of the business such as buying, man-hour control
and general expense controls. The establishment of better
operational controls to reduce expenses is key to the future success
of this concept. Management does expect SuperPetz to break-even
by this end of this year and to begin to make a contribution to the
bottom line next year.
The effective tax rate for the third quarter of 1996 was 35.0%
compared with 36.6% in 1995. Year-to-date, the effective tax rate is
35.7% compared to 36.1% last year.
Net earnings for the second quarter of $19,615,000, or 47 cents per
share, compared with $19,189,000, or 45 cents per share, in 1995.
Year-to-date earnings of $58,715,000 or 1.39 cents per share, compare
with $56,629,000, or 1.31 cents per share in 1995.
During the quarter, the Company completed two store remodels
and opened one new store in Lebanon, PA. Construction is currently in
progress on nine new stores, six of which are replacements of old
facilities, and the major renovation and expansion of one existing
stores. By end of this fiscal year, the Company will have opened
eleven new stores, six of which are replacement units, completed six
major remodels/expansions of existing stores, completed five minor
store remodel projects, renovated and expanded the ice cream
manufacturing plant and completed the expansion of the perishable
distribution facility. SuperPetz, Inc., opened one store in the second
quarter and anticipates opening three additional stores before year
end.
The Financial Accounting Standard Boards Statement of Financial
Accounting Standards Number 121, (Accounting for the Impairment of
Long-Lived Assets and for Long- Lived Assets to be Disposed of), and
Number 123, (Accounting for Stock Compensation), have no effect on
the Companys financial position.
At the end of the quarter, Weis Markets, Inc., had 152 food stores in
operation in Pennsylvania, Maryland, New Jersey, New York, Virginia
and West Virginia, along with Weis Food Service, a restaurant and
institutional supplier. SuperPetz, Inc., now operates 41 stores located
in Alabama, Georgia, Indiana, Kentucky, Maryland, Michigan, North
Carolina, Ohio, Pennsylvania, South Carolina, and Tennessee.
7
WEIS MARKETS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operations of $76,353,000 for the nine-month period
ended September 28, 1996, compares with $78,075,000 in the
comparable time period of 1995. Working capital has decreased
2.1% since the beginning of this year. The company's funding
requirements in both years were financed entirely from internally
generated funds.
Property and equipment expenditures in the first three quarters of
1996 amounted to $52,945,000, compared to $50,484,000 in 1995. The
beginning of the year capital project expenditure estimate of
$107,000,000 for eighteen months appears to be on schedule with a
significant amount of the projects being completed in the fourth quarter
of this year.
The purchase of Treasury Stock year-to-date totaled $14,381,000
compared with $11,394,000 purchased in the first three quarters of
1995. The Board of Directors 1996 resolution authorizing the purchase
of Treasury Stock, has a remaining balance of 955,559 shares.
Cash dividends were paid during the quarter to holders of common
stock at a rate of 23 cents per share. This represented a 9.5%
increase in the quarterly dividend. At a regularly scheduled meeting
held on October 28, 1996, the Board of Directors declared a 23 cents
per share dividend payable to holders of record as of November 8,
1996, payable November 22, 1996.
Management believes that the company's cash and short-term
investments, plus cash flow from operations, will be sufficient to finance
current operations, cover dividend requirements, self-insurance
programs, possible acquisitions, the purchase of Treasury Stock, and
the continuing expansion program. The corporation has no other
commitment of capital resources as of September 28, 1996.
8
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b) One Form 8-K was filed on September 24, 1996, announcing an,
"Item 6. Resignations of Registrant's Directors". Peter M.
Sacerdote, a member of the Weis Markets, Inc., Board of
Directors, his resigned his position as director effective
September 17, 1996. Mr. Sacerdote has not had any
disagreements with the registrant on any matter relating to the
registrant's operations, policies or practices.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
WEIS MARKETS, INC.
Date
ROBERT F. WEIS
Chairman of the Board & Treasurer
Date
WILLIAM R. MILLS
Vice President-Finance & Secretary
9