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 29, 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 43,886,493 shares (Outstanding at end of period)
WEIS MARKETS, INC. INDEX Page No. Part I - Financial Information Consolidated Condensed Balance Sheets - March 29, 1997 and December 28, 1996 2 Consolidated Condensed Statements of Income Three Months Ended March 29, 1997 and March 30, 1996 3 Consolidated Condensed Statements of Cash Flows - Three Months Ended March 29, 1997 and March 30, 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 Item 4 8 Item 6 and Signatures 9 1
<TABLE> PART I - FINANCIAL INFORMATION WEIS MARKETS, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (Dollars in Thousands) <CAPTION> March 29, 1997 December 28, 1996 (Unaudited) (Unaudited) <S> <C> <C> Assets Current: Cash $ 10,416 $ 2,878 Marketable Securities 373,465 387,794 Accounts Receivable, Net 33,029 32,439 Inventories 146,656 159,347 Prepaid Expenses 7,091 8,186 _______ _______ Total Current Assets 570,657 590,644 Property and Equipment, Net 345,654 343,900 Intangible and Other Assets, Net 32,179 31,768 _______ _______ Total Assets $ 948,490 $ 966,312 ======= ======= </TABLE> <TABLE> <CAPTION> Liabilities and Stockholders' Equity <S> <C> <C> Current: Accounts Payable $ 63,346 $ 88,057 Accrued Expenses 10,744 12,221 Accrued Self-Insurance 14,969 13,320 Payable to Employee Benefit Plans 7,276 7,572 Income Taxes Payable 10,069 1,656 Deferred Income Taxes 2,981 4,563 _______ _______ Total Current Liabilities 109,385 127,389 Deferred Income Taxes 19,816 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 930,148 921,572 Net Unrealized Gain on Marketable Securities (Net of deferred taxes of $8,975 in 1997 and $10,726 in 1996) 12,655 15,123 _______ _______ 950,183 944,075 Less Treasury Stock, At Cost (130,894) (125,548) _______ _______ Total Shareholders' Equity 819,289 818,527 Total Liabilities and _______ _______ Shareholders' Equity $ 948,490 $ 966,312 ======= ======= <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 03/29/97 03/30/96 <S> <C> <C> Net Sales $ 456,786 $ 433,199 Cost of Sales 341,247 323,392 _______ _______ Gross Profit 115,539 109,807 Operating, General and Administrative Expenses 94,903 86,914 _______ _______ Income from Operations 20,636 22,893 Interest and Dividend Income 4,241 5,017 Other Income 3,262 2,911 _______ _______ Income before provision for income taxes 28,139 30,821 Provision for income taxes 9,901 11,122 _______ _______ Net Income $ 18,238 $ 19,699 ======= ======= Earnings per common share negligible difference if full dilution $ 0.43 $ 0.46 ======= ======= Cash dividends per common share $ 0.23 $ 0.21 ======= ======= Weighted average number of common shares outstanding 41,954,457 42,512,398 ========== ========== <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 end of period and 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 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> Three Months Ended 03/29/97 03/30/96 <S> <C> <C> Cash flows from operating activities: Net Income $ 18,238 $ 19,699 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 10,333 8,559 Gain on sale of fixed assets 69 --- Changes in operating assets and liabilities: (Increase)/Decrease in inventories 12,691 (3,587) (Increase)/Decrease in accounts receivable and prepaid expenses 505 (458) Decrease in accounts payable and other liabilities (24,835) (1,329) Increase in income taxes payable 8,414 5,668 Increase/(Decrease) in deferred taxes (411) 1,772 _______ _______ Net cash provided by operating activities 25,004 30,324 Cash flows from investing activities: Purchase of property and equipment (11,764) (10,542) Proceeds from the sale of property and equipment 1 --- Purchase of marketable securities (4,239) (34,111) Proceeds from maturities of marketable securities 14,347 28,979 Increase in intangible assets and other assets (804) (522) _______ _______ Net cash used by investing activities (2,459) (16,196) Cash flows from financing activities: Proceeds from issuance of common stock --- --- Dividends paid (9,661) (8,927) Purchase of treasury stock (5,346) (1,174) _______ _______ Net cash used by financing activities (15,007) (10,101) Net decrease in cash 7,538 4,027 Cash at beginning of period 2,878 3,285 _______ _______ Cash at end of period $ 10,416 $ 7,312 ======= ======= Cash Paid during the period for: Interest Expense $ 0 $ 0 ======= ======= Income Taxes $ 1,898 $ 3,682 ======= ======= <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 March 29, 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 March 29, 1997 and March 30, 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 first quarter ended March 29, 1997, increased 5.4% to $456,786,000 compared with $433,199,000 in the same quarter last year. Identical store sales for the Company increased 2.5%. SuperPetz, the 80% held pet supply stores subsidiary, accounted for $5,289,000 of the total sales increase. During the first quarter of 1996, record snowfall resulted in a significant increase in the grocery store sales. Snowfall during the first quarter of 1997 was minimal, inflation was flat and competition remained strong. Despite these formidable comparison hurdles, Weis Markets, excluding SuperPetz, had a 4.4% increase in total sales and a 2.2% increase in identical store sales. The Company continues to aggressively expand its grocery store base with current plans for construction of eleven superstores and twenty major renovations to existing stores over the next fifteen months. The expansion of the SuperPetz concept has been put on hold, as the Company is in the process of reorganization due to poor performance in 1996 and in the first quarter of 1997. Gross profit of $115,539,000 at 25.3% of sales, increased $5,732,000 or 5.2% versus the same quarter last year. The dollar increase in gross profit was primarily due to increased sales volume, as the gross profit rate as a percentage of sales decreased .1% versus a year ago. Due to the heavy snowfall in the first quarter of 1996, consumers purchased more staple food products with lower gross margins causing a slight decrease of .2% versus the first quarter of 1995. In the first quarter of 1997, gross profits in the grocery stores were naturally higher due to better product sales mix. However, gross profit was negatively affected by inventory shrink loss of $2,510,000 at SuperPetz, Inc. in the first quarter of this year. Members of management at Weis Markets, Inc., assumed substantial operational control of SuperPetz at the end of April this year, in order to correct inadequate merchandising and operational controls. On Wednesday May 7, 1997, the SuperPetz Board of Directors accepted the resignation of Lee Schear, President of SuperPetz, Inc. effective May 15, 1997; Stephen McAllister, Vice President of Finance of SuperPetz, Inc. resigned effective May 9, 1997. As previously reported in financial news releases by Weis Markets, the search for a new President is currently underway. Operating expenses of $94,903,000 at 20.8% of sales increased $7,989,000, or 9.2% compared to the first quarter last year. As a percentage of sales, total operating expenses increased .7% compared with 20.1% a year ago. Generally, dollar increases in various expense classifications ran in direct correlation with the sales volume increase. In total, controllable expenses increased $5,801,000 or 7.8% over the first quarter of last year. Of that total controllable amount, wages and supplies comprised the largest areas of increased expense. Wages and other associated employee benefits increased $3,470,000 and store level supply usage increased $506,000 over last year. The Companys very aggressive capital expenditure program caused a $2,275,000 or 14.3% increase in the fixed expenses in the first quarter of 1997 over the same period in 1996. Depreciation and amortization expense comprised $1,774,000 of the total increase in the fixed expense area. Interest and dividend income of $4,241,000 at .9% of sales, decreased $776,000, or 15.5% versus the same quarter last year. The investment portfolio has been decreasing 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. Management anticipates a further decline in investment income as the aggressive capital expansion program continues through 1997. Other income for the quarter of $3,262,000 at .7% of sales decreased $351,000, or 12.1% compared to the first quarter in 1996. The majority of the decline was from a reduction in coupon handling credits. The effective tax rate at 35.2% in the first quarter compares with a 36.1% in the same quarter in 1996. 6
WEIS MARKETS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) OPERATING RESULTS (continued) Net earnings for the quarter of $18,238,000, or 43 cents per share, compared with $19,699,000, or 46 cents per share, in 1996. The decline in the Companys net income for the quarter, versus the same period last year, can be attributed to continuing problems in the SuperPetz subsidiary. As previously stated management has substantially taken over the operations of SuperPetz and is in the process of reorganizing that company. At the end of March, Weis Markets, Inc., was operating 153 retail food stores, 43 SuperPetz pet supply stores and Weis Food Service, a restaurant and institutional supplier. 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. LIQUIDITY AND CAPITAL RESOURCES Cash flows from operations of $25,004,000 for the three-month period ended March 29, 1997 compares with $30,324,000 in the comparable time period of 1996. Working capital has decreased .4% 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 quarter of 1997 amounted to $11,764,000, compared to $10,542,000 in 1996. The beginning of the year capital project expenditure estimate of $120,000,000 over eighteen months appears to be on schedule with a significant amount of the projects being completed in the last half of this year. The purchase of Treasury Stock year-to-date totaled $5,346,000 compared with $1,174,000 purchased in the first quarter of 1996. The Board of Directors 1996 resolution authorizing the purchase of Treasury Stock has a remaining balance of 760,071 shares. Cash dividends were paid during the quarter to holders of common stock at a rate of 23 cents per share. At a regularly scheduled meeting held on April 1, 1997, the Board of Directors declared a 23 cents per share dividend payable to holders of record as of May 9, 1997, payable May 23, 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 corporation has no other commitment of capital resources as of March 29, 1997. 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 1, 1997, 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 auditors 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. <TABLE> <CAPTION> Proposal #1 For Withhold % <S> <C> <C> <C> Robert F. Weis 40,024,470 224,540 95.4 Norman S. Rich 40,024,742 224,269 95.4 Joseph I. Goldstein 39,941,876 307,134 95.2 Richard E. Shulman 40,025,256 223,755 95.4 Johnatan H. Weis 40,026,023 222,988 95.4 Michael M. Apfelbaum 39,920,758 328,253 95.2 William R. Mills 32,134,687 9,508,038 76.6 </TABLE> Proposal #2 For Against Abstain % Proposal to approve the appointment of Ernst & Young, LLP, as the independent public accountants of the corporation. 39,934,962 18,151 16,650 93.9 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 29, 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 9