FORM 10-Q/A
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 June 27, 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.)
Amendment #1 is being filed to correct Part I, Notes to Consolidated Financial
Statements, Note 7.
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 forthe 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 41,771,507 shares
(Outstanding at end of period)
WEIS MARKETS, INC.
INDEX
Page No.
Part I - Financial Information
Consolidated Balance Sheets -
June 27, 1998 and December 27,1997 2
Consolidated Statements of Income
Six Months Ended June 27, 1998
and June 28, 1997 3
Consolidated Statements of Cash Flows -
Six Months Ended June 27, 1998
and June 28, 1997 4
Notes to Consolidated Financial Statements 5
Management's Discussion and Analysis of the
Consolidated Statements of Income 6
Part II - Other Information
Other Information and Signatures 9
1
PART I - FINANCIAL INFORMATION
WEIS MARKETS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
June 27, 1998 December 27,1997
(Unaudited) (Unaudited)
Assets
Current:
Cash $ 6,631 $ 3,133
Marketable Securities 419,624 374,117
Accounts Receivable, Net 29,888 32,609
Inventories 135,410 161,825
Prepaid Expenses 3,140 4,149
_______ _______
Total Current Assets 594,693 575,833
Property and Equipment, Net 373,402 365,197
Intangible and Other Assets, Net 24,438 30,722
_______ _______
Total Assets $ 992,533 $ 971,752
======= =======
Liabilities and Shareholders' Equity
Current:
Accounts Payable $ 55,367 $ 68,788
Accrued Expenses 11,469 9,257
Accrued Self-Insurance 12,991 11,911
Payable to Employee Benefit Plans 7,733 8,134
Income Taxes Payable 5,406 3,969
Deferred Income Taxes 4,861 2,212
_______ _______
Total Current Liabilities 97,827 104,271
Deferred Income Taxes 19,659 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 983,724 960,419
Accumulated other comprehensive
income (Net of deferred taxes
of $12,562 in 1998 and $9,417
in 1997) 17,714 13,278
_______ _______
1,008,871 981,117
Less Treasury Stock, At Cost (133,824) (133,784)
_______ _______
Total Shareholders' Equity 875,047 847,333
Total Liabilities and _______ _______
Shareholders' Equity $ 992,533 $ 971,752
======= =======
<FN>
See accompanying notes to consolidated condensed financial statements.
2
WEIS MARKETS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in Thousands Except Per Share Amounts)
Three Months Ended Six Months Ended
06/27/98 06/28/97 06/27/98 06/28/97
Net Sales $ 457,566 $ 446,945 $ 912,289 $ 903,731
Cost of Sales 342,681 332,424 683,238 676,278
_______ _______ _______ _______
Gross Profit 114,885 114,521 229,051 227,453
Operating, General and
Administrative
Expenses 96,048 98,036 188,927 190,331
_______ _______ _______ _______
Income from Operations 18,837 16,485 40,124 37,122
Investment Income 4,394 9,207 22,753 13,448
Other Income 2,593 3,877 5,251 7,138
_______ _______ _______ _______
Income before
provision for
income taxes 25,824 29,569 68,128 57,708
Provision for
income taxes 9,086 10,777 24,772 20,679
_______ _______ _______ _______
Net Income $ 16,738 $ 18,792 $ 43,356 $ 37,029
======= ======= ======= =======
Weighted average
number of common
shares outstanding 41,780,066 41,849,126 41,779,606 41,901,894
========== ========== ========== ==========
Cash dividend $ 0.24 $ 0.23 $ 0.48 $ 0.46
======= ======= ======= =======
Basic and diluted
earnings per share $ 0.40 $ 0.45 $ 1.04 $ 0.88
======= ======= ======= =======
<FN>
See accompanying notes to consolidated condensed financial statements.
3
WEIS MARKETS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
Six Months Ended
06/27/98 06/28/97
Cash flows from operating activities:
Net Income $ 43,356 $ 37,030
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 18,373 18,933
Amortization 2,347 2,166
Loss on sale of fixed assets 42 68
Gain on sale of Marketable Securities --- (5,068)
Gain on sale of Aqua Penn Stock (14,210) ---
Changes in operating assets and liabilities:
Decrease in inventories 26,415 13,159
Decrease in accounts receivable
and prepaid expenses 3,730 2,322
Decrease in accounts payable
and other liabilities (10,530) (21,500)
Increase/(Decrease) in
income taxes payable 1,437 (424)
Decrease in deferred income taxes (985) (665)
______ ______
Net cash provided by operating
activities 69,975 46,021
Cash flows from investing activities:
Purchase of property and equipment (28,200) (27,947)
Proceeds from the sale of
property and equipment 31 2
Purchase of marketable securities (79,971) (41,946)
Proceeds from maturities of
marketable securities 42,045 51,961
Proceeds from sale of marketable securities --- 8,122
Proceeds from the sale of Aqua Penn Stock 21,871 ---
Increase in intangible assets and
other assets (2,175) (1,252)
______ ______
Net cash used in investing activities (46,399) (11,060)
Cash flows from financing activities:
Proceeds from issuance of common stock 13 ---
Dividends paid (20,051) (19,291)
Purchase of treasury stock (40) (7,374)
______ ______
Net cash used in financing activities (20,078) (26,665)
Net increase in cash 3,498 8,296
Cash at beginning of period 3,133 2,878
______ ______
Cash at end of period $ 6,631 $ 11,174
====== ======
Cash Paid during the period for:
Interest Expense $ 0 $ 0
====== ======
Income Taxes $ 24,000 $ 21,767
====== ======
<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
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial position as of
June 27, 1998 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 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 June 27, 1998
and June 28, 1997 are not necessarily indicative of the results to be expected
for the full year.
4. Property and equipment, as of June 27, 1998, and December 27, 1997,
consisted of :
Useful Life
(dollars in thousands) (in years) 1998 1997
Land $ 55,471 $ 52,612
Building and Improvements 10-60 265,859 253,543
Equipment 3-12 390,424 378,400
Leasehold improvements 5-20 64,525 63,814
_______ _______
Total, at cost 776,279 748,369
Less accumulated depreciation
and amortization 402,877 383,172
_______ _______
$ 373,402 $ 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
and six-month periods ended June 27, 1998 and June 28, 1997 are as follows:
Three Months Ended Six Months Ended
(dollars in thousands) 06/27/98 06/28/97 06/27/98 06/28/97
Net Income $ 16,738 $ 18,792 $ 43,356 $ 37,029
Unrealized gains/
(losses) on marketable
securities 1,832 (649) 4,435 (3,118)
Less: reclassification
adjustment for gains
included in net income 0 (2,965) 0 (2,965)
_______ _______ _______ _______
Comprehensive income $ 18,570 $ 15,178 $ 47,791 $ 30,946
======= ======= ======= =======
7. Certain amounts in the 1997 financial statements have been reclassified
to conform with current year presentation. Net income for the period ended
June 28, 1997, has been adjusted to reflect the tax effected impact on pension
cost associated with a retroactive pension plan amendment (increasing the
operating,general and administrative expenses by $5,737,000), and the gain on
sale of an investment asset (increasing investment income by $5,608,000). The
net effect on provision for income taxes and net income was a decrease of
$278,000 and $391,000 respectively.
5
WEIS MARKETS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OPERATING RESULTS
Total sales for the second quarter ended June 27, 1998 increased 2.4% to
$457,566,000 as compared to the second quarter of 1997. Sales for the first
half of this year increased 1.0% to $912,289,000 compared to $903,731,000 in
1997. Comparable store sales increased 1.6% for the quarter and .1% year-to-
date. The sales increase for the quarter came despite a deflationary
environment in the grocery food sector and increased competition in the
Company's marketing areas. Management increased promotional spending to achieve
higher sales volume during the quarter. Based upon a review of various
food-marketing reports, management does not anticipate any significant changes
in food inflation during the second half of this year.
Gross profit of $114,885,000 at 25.1% of sales, increased $364,000 or
.3% versus the same quarter last year. The increase in gross profit dollars was
generated solely from the higher sales volume, as the gross profit rate
decreased .5% compared to the second quarter of last year. Higher promotional
activity contributed significantly to the decrease in gross profit rate.
Year-to-date gross profit at 25.1% of sales, increased $1,598,000 or .7%.
However, the gross profit rate decreased .1% versus last years 25.2% of sales.
Operating, general and administrative expenses for the second quarter of
$96,048,000 at 21.0% of sales, were $1,988,000 or 2.0% less than the same
quarter last year. The second quarter 1997 earnings reflect a one-time charge
of $5,737,000 for pension cost associated with a retroactive pension plan
amendment. Discounting the impact of the pension charge in 1997, operating,
general and administrative expenses increased in the quarter by $3,749,000 or
4.1% compared to last year. The major contributors to this increase in
operating and administrative expenses were in increased labor costs,
advertising and promotional spending, and fixed occupancy costs. Labor costs
have grown with the expansion of the more labor intensive perishable departments
in our new and remodeled stores. The mandated minimum wage increase in
September of 1997 caused a domino effect of increased wages at higher pay levels
and the low unemployment has increased competition for employees in our
markets. Management increased advertising and promotional spending as part of
its effort to build sales that are hampered by deflationary pricing in an
increasingly competitive environment. Fixed occupancy costs have increased as
new stores have been built and older existing stores remodeled. Year-to-date
operating expenses for 1998 of $188,927,000 at 20.7% of sales compares with
$190,331,000 at 21.1% of sales for 1997. As a percent of sales, operating
expenses decreased by .9% for the quarter and .4% year-to-date.
Investment income of $4,394,000 at 1.0% of sales, decreased $4,813,000,
or 52.3%, versus the same quarter last year. The second quarter 1997 investment
income reflects a $5,068,000 gain on the sale of an investment asset.
Discounting this one-time credit, investment income increased $255,000 or 6.2%
during the second quarter. As a percentage of sales, the investment income for
the quarter decreased 1.1% compared to last year. Year-to-date investment
income of $22,753,000 increased $9,305,000 or 69.2% versus the first half of
1997. In the first quarter of 1998, the Company sold its interest in
AquaPenn Spring Water Co., Inc. during that company's initial public offering on
the NYSE (NYSE: APN) at a pretax profit of $14,210,000.
Other income for the quarter of $2,593,000 at .6% of sales decreased
$1,284,000, or 33.1% compared to the same quarter last year. The 1997 results
included the receipt of $324,000 in a legal settlement and a minority interest
credit related to SuperPetz, Inc. of $449,079. Lower fees generated from the
sale of cardboard salvage and commissions from lottery sales, account for the
remaining decrease in the quarter as compared to last year. Year-to-date other
income of $5,251,000 at .6% of sales has decreased $1,887,000 or 26.4% versus a
year ago. In the first half of 1997, the Company increased pre-tax earnings by
$1,253,000 for the 20% minority interest portion of the SuperPetz net losses.
The Company now records 100% of the associated subsidiary losses on its
consolidated financial statements as it has completed the merger of the 80%
held SuperPetz, Inc. into its 100% held SuperPetz II, Inc. subsidiary.
6
WEIS MARKETS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
OPERATING RESULTS (continued)
The effective tax rate for the second quarter of 1998 was 35.2% compared
with 36.5% in 1997. Year-to-date, the effective tax rate is 36.4% compared to
35.8% last year. The increase in the provision for income taxes for the current
year was caused primarily by the capital gain generated from the sale of the
AquaPenn stock in the first quarter.
Net earnings for the second quarter of $16,738,000, or $.40 per diluted
share, compared with $18,792,000, or $.45 per diluted share, in 1997.
Year-to-date earnings of $43,356,000 or $1.04 per diluted share, compares with
$37,029,000, or $.88 per diluted share in 1997.
Weis Markets currently operates 154 grocery stores in six states:
Pennsylvania, Maryland, New Jersey, New York, Virginia and West Virginia. It
also owns SuperPetz, a pet-supply superstore chain with 42 units in eleven
states and Weis Food Service, an institutional food service company based in
Northumberland PA.
The Company's capital expenditure plan calls for the construction of
eleven superstores, the expansion of eleven units and the remodel of seven
thers over an eighteen-month period. The Company currently has superstores
under construction in Lancaster PA, Glen Burnie MD, Laurel MD, Selinsgrove PA,
and Franklin NJ. It is also building additions to four units and remodeling two
others. The construction of a new salvage center at the Company's distribution
center in Milton, PA was completed during the quarter. Several of the store
projects were delayed in the second quarter due to a slow approval process. The
Company continues to look for acquisitions in current markets and in markets
contiguous to its trade area.
LIQUIDITY AND CAPITAL RESOURCES
The Company generated $69,975,000 in cash flows from operating
activities for the six- month period ended June 27, 1998 compared to
$46,021,000 in the first half of 1997. Working capital has increased
$25,304,000 or 5.4% since the beginning of this year. Inventory has been
reduced $26,415,000 since the beginning of the year. Warehouse inventory has
been reduced by $15,656,000 and inventories at store level have been reduced
$9,041,000. Store inventories are at nearly the same level as this time last
year, but the warehouse stock is lower by $9,202,000. The company's funding
requirements in both years were financed entirely from internally generated
funds.
Net cash used in investing activities in the first half of 1998 amounted
to $46,399,000 compared to $11,060,000 in 1997. Capital expenditures for the
first half of the year totaled $28,200,000, as compared to $27,947,000 in the
first half of 1997. At the beginning of this year, the Company announced plans
to invest $127,500,000 on new, relocated and expanded stores to open in 1998 and
1999 and to make improvements necessary to maintain current facilities and
systems. There have been delays in a number of store projects originally
planned for completion in the second quarter. Proceeds from the sale of
AquaPenn stock during the first quarter of this year totaling $21,871,000
were used to purchase other marketable securities. Treasury Stock purchases
totaling $40,000 in the first half of 1998 compare to purchases of $7,374,000
in the first half of 1997. The Board of Directors 1996 resolution
authorizing the purchase of Treasury Stock has a remaining balance of
663,085 shares.
Cash dividends of $10,026,000 were paid during the quarter to holders of
common stock at a rate of 24 cents per share. Year-to-date cash dividends
paid to holders of common stock amounts to $20,051,000. The Board of Directors
recently declared a 4.2% increase in the quarterly dividend up from 24 cents per
share to 25 cents per share. The dividend will be payable to holders of record
as of August 7, 1998, payable August 21, 1998.
7
WEIS MARKETS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
LIQUIDITY AND CAPITAL RESOURCES (continued)
On May 19, 1998, Giant Food Inc. (AMEX: GFSa) announced that it had
accepted an offer from Koninklijke Ahold N.V. (NYSE: AHO) to purchase all of
the outstanding shares of Class A Common Stock for USD $43.50 per share in
cash. Weis Markets, Inc. has tendered all 513,400 common shares it held to
The Bank of New York, as depositary for the offer. Completion of the tender
offer and the acquisition of the shares are subject to obtaining necessary
regulatory approvals. On July 31, 1998, Ahold announced that it extended its
tender offer until 5:00 p.m. New York City time, on August 14, 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
June 27, 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.
8
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 June 27, 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