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 June 29, 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 42,111,981 shares (Outstanding at end of period)
WEIS MARKETS, INC. INDEX Page No. Part I - Financial Information Consolidated Condensed Balance Sheets - June 29, 1996 and December 30, 1995 2 Consolidated Condensed Statements of Income Six Months Ended June 29, 1996 and July 1, 1995 3 Consolidated Condensed Statements of Cash Flows - Six Months Ended June 29, 1996 and July 1, 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
<TABLE> PART I - FINANCIAL INFORMATION WEIS MARKETS, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (Dollars in Thousands) <CAPTION> June 29, 1996 December 30, 1995 (Unaudited) (Unaudited) <S> <C> <C> Assets Current: Cash $ 5,058 $ 3,285 Marketable Securities 420,003 432,174 Accounts Receivable, Net 31,963 31,517 Inventories 128,602 131,727 Prepaid Expenses 5,236 7,764 Prepaid Income Tax 570 --- _______ _______ Total Current Assets 591,432 606,467 Property and Equipment, Net 294,501 285,993 Intangible and Other Assets, Net 31,256 30,698 _______ _______ Total Assets $ 917,189 $ 923,158 ======= ======= </TABLE> <TABLE> <CAPTION> Liabilities and Stockholders' Equity <S> <C> <C> Current: Accounts Payable $ 59,314 $ 72,262 Accrued Expenses 14,152 12,997 Accrued Self-Insurance 13,445 13,285 Payable to Employee Benefit Plans 6,970 7,453 Income Taxes Payable --- 4,077 Deferred Income Taxes 4,907 5,258 _______ _______ Total Current Liabilities 98,788 115,332 Deferred Income Taxes 18,805 16,527 Minority Interest (371) (263) Shareholders' Equity Common Stock, No Par Value, 100,800,000Shares Authorized, 47,445,929 and 47,438,249 Shares issued, respectively 7,380 7,380 Retained Earnings 901,165 879,916 Net Unrealized Gain on Marketable Securities 14,685 14,748 _______ _______ 923,230 902,044 Less Treasury Stock, At Cost (123,263) (110,482) _______ _______ Total Shareholders' Equity 799,967 791,562 Total Liabilities and _______ _______ Shareholders' Equity $ 917,189 $ 923,158 <FN> See accompanying notes to consolidated condensed financial statements. 2 </TABLE>
<TABLE> WEIS MARKETS, INC. CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited) (Dollars in Thousands Except Per Share Amounts) <CAPTION> Three Months Ended Six Months Ended 06/29/96 07/01/95 06/29/96 07/01/95 <S> <C> <C> <C> <C> Net Sales $ 432,584 $ 407,578 $ 865,783 $ 805,077 Cost of Sales 320,780 304,319 644,172 599,926 _______ _______ _______ _______ Gross Profit 111,804 103,259 221,611 205,151 Operating, General and Administrative 89,062 83,572 175,976 164,272 _______ _______ _______ _______ Income from 22,742 19,687 45,635 40,879 Operations Interest and Dividend 4,949 5,598 9,966 10,942 Income Other Income 2,496 3,293 5,407 6,578 Minority Interest 109 0 109 0 Income before provision _______ _______ _______ _______ for income taxes 30,296 28,578 61,117 58,399 Provision for income _______ _______ _______ _______ taxes 10,895 10,199 22,017 20,959 _______ _______ _______ _______ Net Income $ 19,401 $ 18,379 $ 39,100 $ 37,440 ======= ======= ======= ======= Earnings per common share negligible difference if full dilution is assumed(a) $ 0.46 $ 0.43 $ 0.92 $ 0.87 ======= ======= ======= ======= Cash dividend per common share $ 0.21 $ 0.19 $ 0.42 $ 0.38 ======= ======= ======= ======= Weighted average number of common shares outstanding 42,480,401 43,171,266 42,296,390 43,263,350 ========== ========== ========== ========== <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 </TABLE>
<TABLE> WEIS MARKETS, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in Thousands) <CAPTION> Six Months Ended 06/29/96 07/01/95 <S> <C> <C> Cash flows from operating activities: Net Income $ 39,100 $ 37,440 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 17,460 15,475 Gain on sale of fixed assets (19) --- Changes in operating assets and liabilities: Decrease in inventories 3,125 7,216 (Increase)/Decrease in accounts receivable and prepaid expenses 2,082 (14,289) Increase in prepaid income taxes (570) Decrease in accounts payable, accrued expenses, and minority interest (12,224) (7,715) Decrease in income taxes payable (4,077) (1,823) Increase/(Decrease) in deferred taxes 1,972 (572) Net cash provided by operating _______ ______ activities 46,849 35,732 Cash flows from investing activities: Purchase of property and equipment (25,273) (31,141) Proceeds from the sale of property and equipment 19 --- Purchase of marketable securities (73,718) (20,005) Proceeds from maturities of marketable securities 64,180 49,398 (Increase)/Decrease in highly liquid, short term investments 21,601 (7,512) Increase in intangible assets and other ass (1,253) --- ______ ______ Net cash used by investing activites (14,444) (9,260) Cash flows from financing activities: Proceeds from issuance of common stock --- --- Dividends paid (17,851) (16,451) Purchase of treasury stock (12,781) (8,213) ______ ______ Net cash used by financing activites (30,632) (24,664) Net decrease in cash 1,773 1,808 Cash at beginning of period 3,285 4,011 ______ ______ Cash at end of period $ 5,058 $ 5,819 ====== ====== Cash Paid during the period for: Interest Expense $ 0 $ 0 ====== ====== Income Taxes $ 24,692 $ 23,354 <FN> ====== ====== See accompanying notes to consolidated condensed financial statements. 4 </TABLE>
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 June 29, 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 June 29, 1996 and July 1, 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 second quarter ended June 27, 1996, increased 6.1% to $432,584,000 compared to $407,578,000 last year. For the first half of this year, sales have increased 7.5% to $865,783,000 compared to $805,077,000 in 1995. Same-store sales continue to trend positively, increasing 3.2% for the quarter and 4.2% year-to-date. Sales at SuperPetz, the 80% held pet supply stores subsidiary, accounted for $10,431,000 of the sales increase in the quarter, as it has grown from 20 stores operating at the end of the second quarter last year to 40 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 $111,804,000 at 25.9% of sales, increased $8,545,000 or 8.3% 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 only .6% compared to the second quarter of last year. The year-to-date gross profit at 25.6% of sales, increased $16,460,000 or 8.0%, and increased as a percent of sales by .1%. The gross profit generated by the SuperPetz operation, did increase the Weis Markets, Inc., consolidated gross margin rate by .3% in both the quarter and year-to-date. Operating expenses for the second quarter of $89,062,000 at 20.6% of sales, were $5,490,000 or 6.6% higher than the same quarter last year. As a percent of sales, operating expenses increased by .1% for the quarter. Year-to-date operating expenses of $175,976,000 at 20.3% of sales compares with $164,272,000 at 20.4% through the first half of 1995. The increased expenses versus last year are, for the most part, in direct correlation with the higher sales volume. However, 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 .7% for the quarter and .6% year-to-date. Depreciation and amortization expense increased $1,533,000 or 20.8% in the second quarter and $1,985,000 or 12.8% year-to-date. This is a direct effect of the aggressive remodel and expansion plans the Company has embarked upon. Interest and dividend income of $4,949,000 at 1.1% of sales, decreased $649,000, or 11.6%, versus the same quarter last year. As a percentage of sales, the interest and dividend income decreased .3% compared to last year. Year-to-date interest and dividend income of $9,966,000 decreased $976,000 or 8.9% versus the first half of 1995. The amortized cost of marketable securities held by the Company at the end of the first half were $27,609,000 less than at the end of the same period last year. Likewise, dividend and interest income from those investments are also lower. Other income for the quarter of $2,496,000 at .6% of sales decreased $797,000, or 24.2% compared to the same quarter last year. Year-to-date other income of $5,407,000 at .6% of sales has decreased $1,171,000 or 17.8% versus a year ago. Income from the sale of cardboard salvage decreased $853,000 this quarter versus the second quarter last year and has decreased $1,249,000 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. Minority interest of $109,000 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. Management did anticipate the negative impact from the initial startup of this concept and expects the company to be at a break-even point by the end of this year. Heavy emphasis is being placed on the establishment of better operational controls to reduce expenses. 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 1996 was 36.0% compared with 35.7% in 1995. Year-to-date, the effective tax rate is 36.0% compared to 35.9% last year. The increased taxes are due to the combined effect of an increase in operational profit and the decline in tax-free investment income. Net earnings for the second quarter of $19,401,000, or 46 cents per share, compared with $18,379,000, or 43 cents per share, in 1995. Year-to-date earnings of $39,100,000 or 92 cents per share, compare with $37,440,000, or 87 cents per share in 1995. During the quarter, the Company completed six store remodels and the remodel and enlargement of one other store. Construction is currently in progress on ten new stores, five of which are replacements of old facilities, and the major renovation and expansion of three existing stores. Seven additional new stores and twelve major remodels are in active planning stages. SuperPetz, Inc., opened three stores in the second quarter and anticipates four additional stores to be opened before year end. The adoption of 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), had no effect on the Companys financial position. At the end of the quarter, Weis Markets, Inc., had 151 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 40 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 were $46,849,000 for the six-month period ended June 29, 1996, as compared to $35,732,000 in the comparable period of 1995. Working capital has increased .3% since the beginning of the year. The company's funding requirements in both years were financed entirely from internally generated funds. Property and equipment expenditures in the first half of 1996 amounted to $25,273,000, compared to $31,141,000 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 second half of this year. The purchase of Treasury Stock during the first half totaled $12,781,000 compared with $8,213,000 purchased in the first half of 1995. The Board of Directors 1995 resolution authorizing the purchase of Treasury Stock, has a remaining balance of 5,559 shares and the 1996 resolution has a remaining balance of 1,000,000 shares. Cash dividends were paid during the quarter to holders of common stock at a rate of 21 cents per share. The Board of Directors recently declared a 9.5% increase in the quarterly dividend up from 21 cents a share to 23 cents a share. The dividend will be payable to holders of record as of August 9, 1996, payable August 23, 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 June 29, 1996. 8
PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (b) One Form 8-K was filed on April 2, 1996, announcing an, "Item 5. Other Event". The size of the board of directors was increased from six to eight by unanimous approval. Unanimously approved to those positions were Jonathan H. Weis and Michael M. Apfelbaum. 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