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 28, 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 41,796,893 shares (Outstanding at end of period)
WEIS MARKETS, INC. INDEX Page No. Part I - Financial Information Consolidated Condensed Balance Sheets - June 28, 1997 and December 28, 1996 2 Consolidated Condensed Statements of Income Six Months Ended June 28, 1997 and June 29, 1996 3 Consolidated Condensed Statements of Cash Flows - Six Months Ended June 28, 1997 and June 29, 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
<TABLE> PART I - FINANCIAL INFORMATION WEIS MARKETS, INC. <CAPTION> CONSOLIDATED CONDENSED BALANCE SHEETS (Dollars in Thousands) <S> <C> <C> June 28, 1997 December 28, 1996 (Unaudited) (Unaudited) Assets Current: Cash $ 3,053 $ 2,878 Marketable Securities 377,516 387,794 Accounts Receivable, Net 31,378 32,439 Inventories 146,189 159,347 Prepaid Expenses 6,925 8,186 _______ _______ Total Current Assets 565,061 590,644 Property and Equipment, Net 351,462 343,900 Intangible and Other Assets, Net 32,236 31,768 _______ _______ Total Assets $ 948,759 $ 966,312 ======= ======= </TABLE> <TABLE> <CAPTION> Liabilities and Stockholders' Equity <S> <C> <C> Current: Accounts Payable $ 58,521 $ 88,057 Accrued Expenses 13,244 12,221 Accrued Self-Insurance 15,176 13,320 Payable to Employee Benefit Plans 6,993 7,572 Income Taxes Payable 1,510 1,656 Deferred Income Taxes 4,421 4,563 _______ _______ Total Current Liabilities 99,865 127,389 Deferred Income Taxes 19,764 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 939,702 921,572 Net Unrealized Gain on Marketable Securities (Net of deferred taxes of $10,617 in 1997 and $10,726 in 1996) 14,970 15,123 _______ _______ 962,052 944,075 Less Treasury Stock, At Cost (132,922) (125,548) _______ _______ Total Shareholders' Equity 829,130 818,527 Total Liabilities and _______ _______ Shareholders' Equity $ 948,759 $ 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 Six Months Ended 06/28/97 06/29/96 06/28/97 06/29/96 <S> <C> <C> <C> <C> Net Sales $ 446,945 $ 432,584 $ 903,731 $ 865,783 Cost of Sales 330,437 320,780 671,684 644,172 _______ _______ _______ _______ Gross Profit 116,508 111,804 232,047 221,611 Operating, General and Administrative 94,286 89,062 189,189 175,976 _______ _______ _______ _______ Income from Operations 22,222 22,742 42,858 45,635 Interest and Dividend Income 4,139 4,949 8,380 9,966 Other Income 3,877 2,605 7,139 5,516 _______ _______ _______ _______ Income before provision for income 30,238 30,296 58,377 61,117 Provison for income taxes 11,055 10,895 20,956 22,017 _______ _______ _______ _______ Net Income $ 19,183 $ 19,401 $ 37,421 $ 39,100 ======= ======= ======= ======= Earnings per common share negligible difference if full dulition is assumed (a) $ 0.46 $ 0.46 $ 0.89 $ 0.92 ======= ======= ======= ======= Cash dividend $ 0.23 $ 0.21 $ 0.46 $ 0.42 ======= ======= ======= ======= Weighted average number of common shares outstanding 41,849,126 42,480,401 41,901,894 42,496,390 ========== ========== ========== ========== <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 06/28/97 06/29/96 <S> <C> <C> Cash flows from operating activities: Net Income $ 37,421 $ 39,100 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 21,099 17,460 (Gain)/Loss on sale of fixed assets 68 (19) Changes in operating assets and liabilities: Decrease in inventories 13,159 3,125 Decrease in accounts receivable and prepaid expenses 2,322 2,082 Increase in prepaid income taxes --- (570) Decrease in accounts payable and other liabilities (27,236) (12,224) Decrease in income taxes payable (146) (4,077) Increase/(Decrease) in deferred taxes (665) 1,972 Net cash provided by operating _______ ______ activities 46,022 46,849 Cash flows from investing activities: Purchase of property and equipment (27,947) (25,273) Proceeds from the sale of property and equipment 2 19 Purchase of marketable securities (41,946) (73,718) Proceeds from maturities of marketable securities 51,961 85,781 Proceeds from sale of marketable securities --- --- Increase in intangible assets and other assets (1,252) (1,253) ______ ______ Net cash used by investing activities (19,182) (14,444) Cash flows from financing activities: Proceeds from issuance of common stock --- --- Dividends paid (19,291) (17,851) Purchase of treasury stock (7,374) (12,781) ______ ______ Net cash used by financing activities (26,665) (30,632) Net decrease in cash 175 1,773 Cash at beginning of period 2,878 3,285 ______ ______ Cash at end of period $ 3,053 $ 5,058 ====== ====== Cash Paid during the period for: Interest Expense $ 0 $ 0 ====== ====== Income Taxes $ 21,767 $ 24,692 ====== ====== <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 28, 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 June 28, 1997 and June 29, 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 second quarter ended June 28, 1997 increased 3.3% to $446,945,000 compared to $432,584,000 last year. For the first half of this year, sales have increased 4.4% to $903,731,000 compared to $865,783,000 in 1996. Same-store sales continue to trend positively, increasing .6% for the quarter and 1.6% year-to-date. The flat identical-store sales growth reflects the deflationary environment in the industry versus a year ago. Since the beginning of the year, grocery retail prices have declined nearly 1%. Competition in the Companys marketing area remains steady and management does not anticipate any significant changes in the near term. Gross profit of $116,508,000 at 26.1% of sales, increased $4,704,000 or 4.2% 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 .2% compared to the second quarter of last year. Gross profit was negatively affected by inventory shrink loss of $1,002,000 at SuperPetz, Inc. in the second quarter of this year and by $3,512,000 year-to-date. The year-to-date gross profit at 25.7% of sales, increased $10,437,000 or 4.7%, and increased as a percent of sales by .1%. Operating, general and administrative expenses for the second quarter of $94,286,000 at 21.1% of sales, were $5,224,000 or 5.9% higher than the same quarter last year. Year-to-date operating expenses of $189,189,000 at 20.9% of sales compares with $175,976,000 at 20.3% through the first half of 1996. As a percent of sales, operating expenses increased by .5% for the quarter and .6% year-to-date. The majority of the dollar increase in expenses versus last year is in direct correlation with the higher sales volume. The aggressive remodel and expansion plan the Company has embarked upon is evidenced by the escalating depreciation and amortization expense. Depreciation and amortization increased $1,865,000 or 21.0% versus the same quarter last year and by $3,639,000 or 20.8% year-to-date. As a percentage of sales, depreciation and amortization increased .4% for the quarter and .3% year-to-date. Operating expenses at the SuperPetz subsidiary ran considerably higher as a percentage of sales compared to the retail grocery stores. The higher expense rate at SuperPetz caused the consolidated Weis Markets, Inc., operating expense as a percentage of sales to increase by .9% for the quarter and .8% year-to-date. Interest and dividend income of $4,139,000 at .9% of sales, decreased $810,000, or 16.4%, versus the same quarter last year. As a percentage of sales, the interest and dividend income decreased .2% compared to last year. Year-to-date interest and dividend income of $8,380,000 decreased $1,586,000 or 15.9% versus the first half of 1996. The Company has funded part of its capital expenditure program 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 first half were $42,974,000 less than at the end of the same period last year. Likewise, dividend and interest income from those investments is also lower. Other income for the quarter of $3,877,000 at .9% of sales increased $1,272,000, or 48.8% compared to the same quarter last year. Year-to-date other income of $7,139,000 at .8% of sales has increased $1,623,000 or 29.4% versus a year ago. The majority of the increase in other income for the quarter came from a $415, 000 increase from the sale of cardboard salvage and a $378,000 increase from store sub-lease income. The effective tax rate for the second quarter of 1997 was 36.6% compared with 36.0% in 1996. Year-to-date, the effective tax rate is 35.9% compared to 36.0% last year. The increased taxes in the quarter are due to the decline in tax-free investment income. 6
WEIS MARKETS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) OPERATING RESULTS (continued) Net earnings for the second quarter of $19,183,000, or 46 cents per share, compared with $19,401,000, or 46 cents per share, in 1996. Year-to-date earnings of $37,421,000 or 89 cents per share, compares with $39,100,000, or 92 cents per share in 1996. The decline in the Companys net income in the quarter and year-to-date versus the same period last year, can be attributed to the SuperPetz subsidiary. Weis management took over the operations of SuperPetz during the second quarter of this year and is in the process of reorganizing that company. Management does expect to continue to reduce losses at SuperPetz in the third quarter and to be profitable in the fourth quarter of this year. During the second quarter, the Company opened a superstore in Gap, PA and completed extensive remodels of stores in Newburgh NY, Hanover PA, Emmaus PA and Frederick MD. One store was closed for operational reasons. Construction is currently in progress on nine new stores and the major renovation and expansion of ten existing stores. Seven of the new store facilities are replacements for older facilities. At the end of June, 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 were $46,022,000 for the first half of 1997 compared to $46,849,000 in the comparable period of 1996. Working capital has increased .4% 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 1997 amounted to $27,947,000 compared to $25,273,000 in 1996. The capital project expenditure estimate made at the beginning of this year of $120,000,000 over an eighteen month period appears to be on schedule with a significant number of projects being completed in the second half of this year. The purchase of Treasury Stock during the first half totaled $7,374,000 compared with $12,781,000 purchased in the first half of 1996. The Board of Directors 1996 resolution authorizing the purchase of Treasury Stock has a remaining balance of 690,471. Cash dividends of $9,629,000 were paid during the quarter to holders of common stock at a rate of 23 cents per share. Total year-to-date dividends paid to holders of common stock amounts to $19,291,000. The Board of Directors recently declared a 4.4% increase in the quarterly dividend up from 23 cents a share to 24 cents a share. The dividend will be payable to holders of record as of August 8, 1997, payable August 22, 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 June 28, 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 June 28, 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