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 March 28, 1998
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)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock, No Par Value 41,772,607 shares
(Outstanding at end of period)
WEIS MARKETS, INC.
INDEX
Page No.
Part I - Financial Information
Consolidated Balance Sheets -
March 28, 1998 and December 27, 1997 2
Consolidated Statements of Income
Three Months Ended March 28, 1998
and March 29, 1997 3
Consolidated Statements of Cash Flows -
Three Months Ended March 28, 1998
and March 29, 1997 4
Notes to Consolidated Financial Statements 5
Management's Discussion and Analysis of the
Consolidated Statements of Income 6
Part II - Other Information
Item 4 8
Item 6 and Signatures 9
1
PART I - FINANCIAL INFORMATION
WEIS MARKETS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
March 28, 1998 December 27, 1997
(Unaudited) (Unaudited)
Assets
Current:
Cash $ 6,390 $ 3,133
Marketable Securities 421,523 374,117
Accounts Receivable, Net 33,524 32,609
Inventories 143,276 161,825
Prepaid Expenses 3,995 4,149
_______ _______
Total Current Assets 608,708 575,833
Property and Equipment, Net 364,678 365,197
Intangible and Other Assets, Net 24,841 30,722
_______ _______
Total Assets $ 998,227 $ 971,752
======= =======
Liabilities and Stockholders' Equity
Current:
Accounts Payable $ 59,160 $ 68,788
Accrued Expenses 10,736 9,257
Accrued Self-Insurance 12,726 11,911
Payable to Employee Benefit Plans 7,888 8,134
Income Taxes Payable 17,496 3,969
Deferred Income Taxes 3,781 2,212
_______ _______
Total Current Liabilities 111,787 104,271
Deferred Income Taxes 19,898 20,148
Shareholders' Equity
Common Stock, No Par Value,
100,800,000 Shares Authorized,
47,447,929 shares issued 7,433 7,420
Retained Earnings 977,012 960,419
Accumulated other comprehensive
income (Net of deferred taxes
of $11,263 in 1998 and $9,417
in 1997) 15,881 13,278
_______ _______
1,000,326 981,117
Less Treasury Stock, At Cost (133,784) (133,784)
_______ _______
Total Shareholders' Equity 866,542 847,333
Total Liabilities and _______ _______
Shareholders' Equity $ 998,227 $ 971,752
======= =======
<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
03/28/98 03/29/97
Net Sales $ 454,723 $ 456,786
Cost of Sales 340,557 343,854
_______ _______
Gross Profit 114,166 112,932
Operating, General and
Administrative Expenses 92,879 92,296
_______ _______
Income from Operations 21,287 20,636
Investment Income 18,359 4,241
Other Income 2,658 3,262
_______ _______
Income before provision
for income taxes 42,304 28,139
Provision for income taxes 15,686 9,901
_______ _______
Net Income $ 26,618 $ 18,238
======= =======
Weighted average number of common
shares outstanding 41,779,130 41,954,457
========== ==========
Cash dividends per common s $ 0.24 $ 0.23
========== ==========
Basic and diluted earnings $ 0.64 $ 0.43
========== ==========
<FN>
See accompanying notes to consolidated condensed financial statements.
3
WEIS MARKETS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
Three Months Ended
03/28/98 03/29/97
Cash flows from operating activities:
Net Income $ 26,618 $ 18,238
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 8,975 9,283
Amortization 1,136 1,050
Loss on sale of fixed assets 7 69
Gain on sale of Aqua Penn Stock (14,210) 0
Changes in operating assets and
liabilities:
Decrease in inventories 18,549 12,691
(Increase)/Decrease in accounts
receivable and prepaid expenses (761) 505
Decrease in accounts payable
and other liabilities (7,580) (24,835)
Increase in income taxes payable 13,527 8,414
Decrease in deferred taxes (527) (411)
_______ _______
Net cash provided by operating
activities 45,734 25,004
Cash flows from investing activities:
Purchase of property and equipment (9,226) (11,764)
Proceeds from the sale of property
and equipment 22 1
Purchase of marketable securities (65,644) (4,239)
Proceeds from maturities of
marketable securities 22,687 14,347
Proceeds from the sale of Aqua Penn Stock 21,871 ---
Increase in intangible assets and
other assets (2,175) (804)
_______ _______
Net cash used in investing
activities (32,465) (2,459)
Cash flows from financing activities:
Proceeds from issuance of common stock 13 ---
Dividends paid (10,025) (9,661)
Purchase of treasury stock 0 (5,346)
_______ _______
Net cash used in financing
activities (10,012) (15,007)
Net increase in cash 3,257 7,538
Cash at beginning of period 3,133 2,878
_______ _______
Cash at end of period $ 6,390 $ 10,416
======= =======
Cash Paid during the period for:
Interest Expense $ 0 $ 0
======= =======
Income Taxes $ 3,000 $ 1,898
======= =======
<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 March 28, 1998 and the results of operations
cash flows for the three months then ended.
2. The comparative balance sheet for December 27, 1997 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 March 28,
1998 and March 29, 1997 are not necessarily indicative of the results to be
expected for the full year.
4. Property and equipment, as of March 28, 1998, and December 27,
1997, consisted of :
Useful Life
(dollars in thousands) (in years) 1998 1997
Building and Improvements 10-60 $ 256,781 $ 253,543
Equipment 3-12 383,536 378,400
Leasehold improvements 5-20 64,536 63,814
_______ _______
Total, at cost 757,440 748,369
Less accumulated deprciation
and amortization 392,762 383,172
_______ _______
$ 364,678 $ 365,197
======= =======
5. In 1997, the Financial Accounting Standards Board issued Statement
128, "Earnings per Share" (Statement 128). Statement 128 replaced the
calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic
earnings per share excludes any dilutive effects of options, warrants and
convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share. Basic and diluted
earnings per share are the same amounts for all periods presented, and
dual presentation is accomplished in one line on the income statements.
6. As of December 28, 1997, the company adopted statement 130,
Reporting Comprehensive Income. Statement 130 establishes new rules
for the reporting and display of comprehensive income and its
components; however, the adoption of this Statement had no impact on the
Company's net income or shareholders' equity. Statement 130 requires
unrealized gains or losses on the Company's available- for-sale securities
adjustments, which prior to adoption were reported separately in
shareholder's equity to be included in other comprehensive income. Prior
year financial statements have been reclassified to conform to the
requirements of Statement 130.
The components of comprehensive income, net of related tax, for the
three-month periods ended March 28, 1998 and March 29, 1997 are as
follows:
(dollars in thousands) 1998 1997
Net Income $ 26,618 $ 18,238
Unrealized gains/(losses) on
marketable securities 2,603 (2,468)
_______ _______
Comprehensive income $ 29,221 $ 15,770
======= =======
7. Certain amounts in the 1997 financial statements have been
reclassified to conform with current year presentation.
5
WEIS MARKETS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OPERATING RESULTS
Sales for the first quarter ended March 28, 1998, decreased .5% to
$454,723,000 compared with $456,786,000 in the same quarter last year.
Identical store sales for the Company decreased 1.5%. The decrease in
sales is largely attributed to two factors. The 1998 Easter sales season will
fall in the second quarter compared to 1997, when the Easter sales season
occurred in the first quarter and the Company is experiencing price
deflation, particularly in certain grocery and meat categories.
Gross profit of $114,468,000 at 25.1% of sales, increased $1,234,000 or
1.1% versus the same quarter last year. As a percentage of sales, the
gross profit rate increased .4% compared to the same quarter last year.
The gross profit dollar increase stems from a reduction in inventory losses
of $857,000 at the SuperPetz, Inc. subsidiary and $457,000 at the Weis
retail grocery stores compared to the same quarter last year.
Operating, general and administrative expenses of $92,879,000 at
20.4% of sales increased $583,000, or .6% compared to the first quarter last
year. As a percentage of sales, operating expenses increased .2%
compared with 20.2% a year ago. Variable expenses increased $871,000
or 1.1% versus the first quarter last year. Wages and other associated
employee benefits increased $2,393,000 compared to the same period
last year. The wage increase was primarily due to an increase in the
average hourly wage and from the planned expansion of the more
labor-intensive perishable departments. Advertising and promotional
spending for the quarter decreased by $1,055,000 versus last year.
Investment income of $18,359,000 at 4.0% of sales, increased
$14,118,000, or 332.9% versus the same quarter last year. The Company
sold its interest in AquaPenn Spring Water, Co. during that company's
initial public offering on the NYSE (NYSE:APN) at a pretax profit of
$14,210,000. Since 1993, the investment portfolio has decreased as the
amount of capital required to fund the expansion and remodel program
has increased, thus causing a decline in income generated from the
portfolio. Dividends and interest income for the quarter decreased $92,000
compared to last year. Management anticipates a further decline in
investment income as the Company continues with its more assertive
capital expansion program.
Other income for the quarter of $2,658,000 at .6% of sales decreased
$604,000, or 18.5% compared to the first quarter in 1997.
The effective tax rate at 37.1% in the first quarter compares with 35.2%
in the same quarter in 1997. The increase in taxes was caused by the capital
gain generated from the sale of the AquaPenn stock during the quarter.
Net earnings for the quarter of $26,618,000, or 64 cents per share,
compared with $18,238,000, or 43 cents per share, in 1997. The
Company's sale of its AquaPenn stock contributed $0.20 to basic and
diluted earnings per share.
At the end of March, Weis Markets, Inc., was operating 154 retail food
stores, 42 SuperPetz pet supply stores and Weis Food Service, a
restaurant and institutional supplier. One SuperPetz store was closed
during the quarter for operational reasons. The Company currently
operates its retail food stores in Pennsylvania, Maryland, New Jersey,
New York, Virginia and West Virginia. SuperPetz operates stores in
Alabama, Georgia, Indiana, Kentucky, Maryland, Michigan, North Carolina,
Ohio, Pennsylvania, South Carolina and Tennessee.
6
WEIS MARKETS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operating activities of $45,734,000 for the three-month
period ended March 28, 1998 compares with $25,004,000 during the same
period of 1997. Working capital has increased 5.4% since the beginning of
this year. Since the end of the last fiscal year on December 27, 1997,
inventories were reduced $18,549,000. Reductions in warehouse stock
accounted for $15,208,000 of the total inventory decrease. The company's
funding requirements in both years were financed entirely from internally
generated funds.
Net cash used in investing activities in the first quarter of 1998
amounted to $32,465,000 compared to $2,459,000 in 1997. Property and
equipment expenditures in the first quarter of 1998 amounted to $9,226,000,
compared to $11,764,000 in 1997. The Company continues to expand its
grocery store base with plans to invest $127,500,000 on the construction of
11 superstores, the expansion of 11 units, the remodel of seven other
stores over the next eighteen months and a trailer salvage center at our
distribution complex in Milton, Pennsylvania. Proceeds from the sale of
AquaPenn stock during the quarter amounted to $21,871,000.
To date there has been no purchases made of Treasury Stock in fiscal
1998. During the first quarter of 1997, the Company purchased $5,346,000
of Treasury Stock. 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. At a regularly scheduled meeting held
on April 7, 1998, the Board of Directors declared a 24 cents per share
dividend payable to holders of record as of May 8, 1998, payable May 22,
1998.
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 March 28, 1998.
FORWARD-LOOKING STATEMENTS
In addition to historical information, this 10-Q Report may contain
forward-looking statements. Any forward-looking statements contained herein
are subject to certain risks and uncertainties that could cause actual
results to differ materially from those projected. For example, risks and
uncertainties can arise with changes in : general economic conditions,
including their impact on capital expenditures; business conditions in the
retail industry; the regulatory environment; rapidly changing technology
and competitive factors, including increased competition with regional and
national retailers; and price pressures. Readers are cautioned not to
place undue reliance on forward-looking statements, which reflect
management's analysis only as of the date hereof. The Corporation
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 Corporation files periodically with the Securities
and Exchange Commission.
7
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Shareholders of Weis Markets, Inc., was held on
Tuesday, April 7, 1998, at 10:00 a.m., Eastern Standard Time, at the
principal office of the Corporation.
(b) Proxies for the meeting were solicited pursuant to Regulation 14 under
the Act, there was no solicitation in opposition to the management's
nominees as listed in the proxy statement, and all such nominees were
elected.
(c) The meeting was held for the following purposes:
1. To elect seven directors to serve, subject to provisions of the by-laws,
until the next Annual Meeting of shareholders or until their respective
successors have qualified.
2. To approve the appointment of independent public accountants for the
current fiscal year.
3. To act upon such other business as may properly come before such
meeting, or any adjournments or postponements thereof.
The official ballot from the meeting submitted to the Secretary by the Judge
of Elections disclosed the following tabulation of votes.
Proposal #1 For Withhold %
Robert F. Weis 40,099,707 128,193 96.0
Norman S. Rich 40,108,366 119,535 96.0
Joseph I. Goldstein 39,921,807 306,094 95.6
Richard E. Shulman 40,108,876 119,025 96.0
Jonathan H. Weis 40,109,274 118,627 96.0
Michael M. Apfelbaum 39,668,230 559,671 95.0
William R. Mills 27,436,122 12,791,777 65.7
Proposal #2 For Against Abstain %
Proposal to approve the
appointment of Ernst &
Young, LLP, as the
independent public accountants
of the corporation. 40,195,082 14,493 18,324 96.2
8
PART II - OTHER INFORMATION
(continued)
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K -- There were no reports on Form 8-K filed for the
three months ended March 28, 1998
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