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 27, 1997
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 41,770,607 shares
(Outstanding at end of period)
WEIS MARKETS, INC.
INDEX
Page No.
Part I - Financial Information
Consolidated Condensed Balance Sheets -
September 27, 1997 and December 28, 1996 2
Consolidated Condensed Statements of Income
Nine Months Ended September 27, 1997
and September 28, 1996 3
Consolidated Condensed Statements of Cash Flows -
Nine Months Ended September 27, 1997
and September 28, 1996 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 8
1
PART I - FINANCIAL INFORMATION
WEIS MARKETS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
September 27, 1997 December 28, 1996
(Unaudited) (Unaudited)
Assets
Current:
Cash $ 2,825 $ 2,878
Marketable Securities 389,118 387,794
Accounts Receivable, Net 31,269 32,439
Inventories 152,094 159,347
Prepaid Expenses 6,070 8,186
_______ _______
Total Current Assets 581,376 590,644
Property and Equipment, Net 357,872 343,900
Intangible and Other Assets, Net 32,499 31,768
_______ _______
Total Assets $ 971,747 $ 966,312
======= =======
Liabilities and Stockholders' Equity
Current:
Accounts Payable $ 71,957 $ 88,057
Accrued Expenses 10,524 12,221
Accrued Self-Insurance 14,371 13,320
Payable to Employee Benefit Plan 7,150 7,572
Income Taxes Payable 6,471 1,656
Deferred Income Taxes 4,196 4,563
_______ _______
Total Current Liabilities 114,669 127,389
Deferred Income Taxes 19,662 20,396
Shareholders' Equity
Common Stock, No Par Value,
100,800,000 Shares Authorized,
47,445,929 shares issued 7,380 7,380
Retained Earnings 948,816 921,572
Net Unrealized Gain on Marketable
Securities (Net of deferred taxes
of $10,640 in 1997 and $9,889 in
1996) 15,003 15,123
_______ _______
971,199 944,075
Less Treasury Stock, At Cost (133,783) (125,548)
_______ _______
Total Shareholders' Equity 837,416 818,527
Total Liabilities and
Shareholders' Equity $ 971,747 $ 966,312
======= =======
<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
09/27/97 09/28/96 09/27/97 09/28/96
Net Sales $ 444,743 $ 424,747 $ 1,348,474 $ 1,290,530
Cost of Sales 327,747 311,166 999,431 955,338
_______ _______ _______ _______
Gross Profit 116,996 113,581 349,043 335,192
Operating, General and
Administrative 94,295 90,086 283,484 266,061
_______ _______ _______ _______
Income from Operations 22,701 23,495 65,559 69,131
Interest and Dividends 4,356 4,710 12,737 14,677
Other Income 2,933 1,951 10,071 7,465
_______ _______ _______ _______
Income before provision
for income 29,990 30,156 88,367 91,273
Provision for
income taxes 10,845 10,541 31,801 32,558
_______ _______ _______ _______
Net Income $ 19,145 $ 19,615 $ 56,566 $ 58,715
======= ======= ======= =======
Earnings per common share
negligible difference if
full dilution is
assumed(a) $ 0.46 $ 0.47 $ 1.35 $ 1.39
======= ======= ======= =======
Cash dividend per
common share $ 0.24 $ 0.23 $ 0.70 $ 0.65
======= ======= ======= =======
Weighted average number
of common shares
outstanding 41,833,371 42,072,634 41,910,751 42,354,677
========== ========== ========== ==========
<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
09/27/97 09/28/96
Cash flows from operating activities:
Net Income $ 56,566 $ 58,715
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 32,165 26,581
Loss on sale of fixed assets 135 ---
Changes in operating assets and liabilities:
Decrease in inventories 7,253 5,213
Decrease in accounts receivable
and prepaid expenses 3,286 3,300
Increase in accounts payable
and other liabilities (17,168) (19,271)
Decrease in income taxes payable 4,815 596
Increase/(Decrease) in deferred taxes (1,015) 1,219
______ ______
Net cash provided by operating
activities 86,037 76,353
Cash flows from investing activities:
Purchase of property and equipment (45,117) (52,945)
Proceeds from the sale of property
and equipment 19 221
Purchase of marketable securities (102,024) (73,548)
Proceeds from maturities of
marketable securities 100,494 93,207
Proceeds from sale of marketable securities --- ---
Increase in intangible assets
and other assets (1,905) (1,645)
______ ______
Net cash used by investing activies (48,533) (34,710)
Cash flows from financing activities:
Proceeds from issuance of common stock --- ---
Dividends paid (29,322) (27,525)
Purchase of treasury stock (8,235) (14,381)
______ ______
Net cash used by financing activies (37,557) (41,906)
Net decrease in cash (53) (263)
Cash at beginning of period 2,878 3,285
______ ______
Cash at end of period $ 2,825 $ 3,022
====== ======
Cash Paid during the period for:
Interest Expense $ 0 $ 0
====== ======
Income Taxes $ 28,001 $ 31,314
====== ======
<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 27, 1997 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 28, 1996 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 27, 1997 and September 28, 1996 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 27, 1997, increased
4.7% to $444,743,000 compared to $424,747,000 last year. Year-to-date, sales
increased 4.5% to $1,348,474,000 compared to $1,290,530,000 in 1996.
Same-store sales continue to trend positively, increasing 1.8% for both the
quarter and year-to-date in spite of the impact from food deflation through
three-quarters of the year. Competition in the Companys marketing area
remains steady and management does not anticipate any significant
changes in the near term.
Gross profit of $116,996,000 at 26.3% of sales, increased $3,415,000 or
3.0% 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 decreased .4% compared to the third quarter of last year.
SuperPetz, Inc. gross profits decreased in the quarter primarily due to
inventory shrink losses; negatively impacting the aggregated company
gross profit rate by .1%. The year-to-date gross profit at 25.9% of sales,
increased $13,851,000 or 4.1%, but decreased as a percent of sales by
.1%. A gross profit decrease at SuperPetz, Inc. accounts for the .1%
decline in gross profit rate for the year.
Operating expenses for the third quarter of $94,295,000 at 21.2% of
sales, were $4,209,000 or 4.7% higher than the same quarter last year.
As a percent of sales, operating expenses remained constant for the quarter.
Year-to-date operating expenses of $283,484,000 at 21.0% of sales
compares with $266,061,000 at 20.6% through the first three quarters of
1996. The increased expenses versus last year are primarily due to the
higher sales volume. The aggressive remodel and expansion plan the
Company has embarked upon over the last couple of years is evidenced
by the $1,945,000 or 21.3% increase in depreciation and amortization
versus the same quarter last year and by $5,584,000 or 21.0% year-to-date.
As a percentage of sales, depreciation and amortization increased .3%
for the quarter and .4% year-to-date. Weis Markets, Inc. uses an
accelerated book depreciation method for the majority of its fixed assets,
thus incurring a higher expense in the earlier years of an assets life. Higher
operating expenses incurred at SuperPetz versus Weis retail stores, as a
percentage of sales, caused the consolidated Weis Markets, Inc.,
operating expense to increase by .7% for the quarter and .8% year-to-date.
Interest and dividend income of $4,356,000 at 1.0% of sales, decreased
$354,000, or 7.5%, versus the same quarter last year. As a percentage of
sales, interest and dividend income decreased .1% in the third quarter
compared to last year. Year-to-date interest and dividend income of
$12,737,000 decreased $1,940,000 or 13.2% versus the first three quarters
of 1996. The Company has funded its capital expenditure program from
normal cash flow and from its portfolio of marketable securities over the
last three years. The amortized cost of marketable securities held by the
Company at the end of the third quarter were $23,833,000 less than at the
end of the same quarter last year. Likewise, dividend and interest income
from those investments is also lower.
Other income for the quarter of $2,933,000 at .7% of sales increased
$982,000, or 50.3% compared to the same quarter last year. Income from
cardboard salvage sales has increased $404,000. Year-to-date other
income of $10,071,000 at .8% of sales has increased $2,606,000 or 34.9%
versus a year ago. The majority of the increase this year stems from
$922,000 in additional cardboard salvage credits and $1,213,000 from
sub-leased property.
The effective tax rate for the third quarter of 1997 was 36.2% compared
with 35.0% in 1996. Year-to-date, the effective tax rate is 36.0% compared
to 35.7% last year. The effective tax rate continues to rise as the tax-free
municipal bond portfolio declines due to the aggressive capital
expenditure program.
Net earnings for the third quarter of $19,145,000, or 46 cents per
share, compared with $19,615,000, or 47 cents per share, in 1996.
Year-to-date earnings of $56,566,000 or 1.35 cents per share compare with
$58,715,000 or 1.39 cents per share in 1996.
6
WEIS MARKETS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
OPERATING RESULTS (continued)
During the quarter, the Company opened a replacement superstore in
Pottsville, PA and completed the extensive remodel of units in Emmaus
and Camp Hill, PA. During the fourth quarter, the Company will open
replacement superstores in York and Brodheadsville, PA A new
superstore will be opened in Chambersburg, PA after exiting this area 10
years ago due to a poor site location. Major renovations will be
completed to two stores located in Mt. Airy and Owings Mills, MD.
At the end of the quarter, Weis Markets, Inc., had 153 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., operates 43 stores located in Alabama, Georgia,
Indiana, Kentucky, Maryland, Michigan, North Carolina, Ohio,
Pennsylvania, South Carolina, and Tennessee.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operations of $86,037,000 for the nine-month period
ended September 27, 1997 compares with $76,353,000 in the comparable period
in 1996. Working capital has increased .8% 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 1997
amounted to $45,117,000, compared to $52,945,000 in 1996. The capital
expenditures estimate made at the beginning of this year of $120,000,000
over an eighteen-month period appears to be on schedule. However,
construction is behind on several of the projects originally projected to be
completed within fiscal 1997. These projects are expected to be
completed in the first half of 1998.
The purchase of Treasury Stock year-to-date totaled $8,235,000
compared with $14,381,000 purchased in the first three-quarters of 1996.
The Board of Directors 1996 resolution authorizing the purchase of
Treasury Stock has a remaining balance of 664,185 shares.
Cash dividends were paid during the quarter to holders of common stock
at a rate of 24 cents per share represented a 4.3% increase in the quarterly
dividend. At a regularly scheduled meeting held on October 6, 1997, the
Board of Directors declared a 24 cents per share dividend payable to
holders of record as of November 7, 1997, payable November 21, 1997.
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 Company is in the process of completing the termination of the Weis
Markets, Inc., Pension Plan, which was frozen in 1994 and replaced with the
Weis Markets, Inc. Retirement Savings Plan. The appropriate termination
documents have been filed with the Internal Revenue Service (IRS) and
the Pension Benefit Guaranty Corporation (PBGC). It is anticipated that
approval to terminate will be received from the IRS and that payment of
plan assets will occur before the end of this year. At this time, actuarial
computations indicate that the Company will need to contribute an
additional $3,000,000 to $5,000,000 into the plan in order to complete the
payment transaction. The Company intends to pay the needed cash
contribution and offset the termination expense with funds received from the
sale of appreciated securities.
The corporation has no other commitment of capital resources as of
September 27, 1997.
7
PART II - OTHER INFORMATION
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 September 27, 1997
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
8