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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the fiscal year ended December 25, 1999 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 (IRS Employee Identification No.)
incorporation or organization)
1000 South Second Street, Sunbury, PA 17801
(Address of principal executive offices) (ZipCode)
Registrant's telephone number, including area code 570-286-4571
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common stock, no par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
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
The aggregate market value of Common Stock held by non-affiliates
of the Registrant is approximately $1,038,084,000. Shares of
common stock outstanding as of March 1, 2000 - 47,453,479.
The index to Exhibits is located in Part IV, Item 14(c).
DOCUMENTS INCORPORATED BY REFERENCE
Selected portions of the 1999 Weis Markets, Inc. Annual Report to
Shareholders are incorporated by reference in Part II and Part IV
of this Form 10-K.
WEIS MARKETS, INC.
PART I
Item 1. Business:
(a) Weis Markets, Inc. is a Pennsylvania business corporation
formed in 1924. The Company is engaged principally in the retail
sale of food and pet supplies in Pennsylvania and surrounding
states. There was no material change in the nature of the
Company's business during fiscal 1999.
(b) The principal business activity which the Company has been
engaged in for the last five fiscal years is the retail sale of
food.
(c)(1)(i) The Company operates 133 retail food markets in
Pennsylvania, 21 in Maryland, 3 in New Jersey, 3 in New York, 2
in Virginia, and 1 in West Virginia. The stores trade under the
name Weis Markets, except for 19 Pennsylvania stores which trade
as Mr. Z's Food Mart, 6 Pennsylvania stores which trade as King's
Supermarkets, 3 Pennsylvania stores which trade as Save A Lot, 3
Pennsylvania stores which trade as Scot's Lo Cost and 1
Pennsylvania store which trades as Cressler's Marketplace.
During the past fiscal year, 9 new stores were opened, one of
which was a replacement for an older unit. Three stores were
closed for financial reasons. The Company also owns and operates
Weis Food Service, a restaurant and institutional supplier.
SuperPetz, a pet supply chain, operated 2 stores in Alabama, 1
store in Georgia, 1 store in Indiana, 1 store in Kentucky, 1
store in Maryland, 2 stores in Michigan, 8 stores in Ohio, 7
stores in Pennsylvania, 6 stores in South Carolina, and 5 stores
in Tennessee. Two SuperPetz stores were closed for financial
reasons. The Company supplies its retail stores from
distribution centers in Sunbury, Northumberland, and Milton,
Pennsylvania. The percentage of net sales contributed by each
class of similar products for each of the five fiscal years ended
December 25, 1999 was:
Year Grocery Meat Produce Pharmacy Pet Supply Other
1995 58.71 14.10 11.05 4.45 2.03 9.66
1996 56.77 13.87 10.80 4.67 4.17 9.72
1997 56.00 13.84 11.06 5.25 4.43 9.42
1998 55.63 13.74 11.60 5.94 4.01 9.08
1999 55.56 13.88 11.97 6.62 3.27 8.70
(c)(1)(vi) The Company has its own distribution center with
warehouses located within a 15 mile radius of its corporate
offices in Sunbury, Pennsylvania. The Company is required to use
a significant amount of working capital to provide for the
required amount of inventory to meet demand for its products
through efficient use of buying power and effective utilization
of space in the warehouse facilities.
WEIS MARKETS, INC.
(c)(1)(x) The business of the Company is highly competitive. The
number of competitors and the amount of competition experienced
by the Company's stores vary by market area. National, regional,
and local food chains, as well as independent food stores
comprise the Company's principal competition, although the
Company also faces substantial competition from convenience
stores, membership warehouse clubs, specialty retailers,
supercenters, and large-scale drug and pharmaceutical chains.
The Company competes based on price, quality, location, and
service.
(c)(1)(xiii) The Company has approximately 20,100 employees.
Item 2. Properties:
The Company owns and operates 80 of its retail food stores
and leases and operates 83 stores under operating leases for
varying periods of time up to the year 2026. SuperPetz leases
all 34 of it's retail store locations. The Company owns all of
its trade fixtures and equipment in its stores and several
parcels of vacant land which are available as locations for
possible future stores or other expansion.
The Company owns and operates one warehouse in Sunbury,
Pennsylvania totaling approximately 551,000 square feet, one in
Milton, Pennsylvania of approximately 1,109,000 square feet, and
one in Northumberland, Pennsylvania totaling approximately 76,000
square feet. The Company also operates an ice cream plant, meat
processing plant and milk processing plant at its Sunbury
location.
Item 3. Legal Proceedings:
Neither the Company nor any subsidiary is presently a party
to, nor is any of their property subject to, any material pending
legal proceedings, other than routine litigation incidental to
the business.
Item 4. Submission of Matters to a Vote of Security Holders:
There were no matters submitted to a vote of security
holders during the fourth quarter of 1999.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters:
"Stock Prices and Dividend Information by Quarter" and
"Stock Traded" on the inside back cover of the 1999 Weis Markets,
Inc. Annual Report to Shareholders are incorporated herein by
reference.
WEIS MARKETS, INC.
The approximate number of shareholders on December 25, 1999
is determined by the Company's transfer agent.
Item 6. Selected Financial Data:
"Five-Year Review of Operations" on page 20 of the 1999 Weis
Markets, Inc. Annual Report to Shareholders is incorporated
herein by reference.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations:
"Management's Discussion and Analysis of Financial Condition
and Results of Operations" on pages 9 through 11 of the 1999 Weis
Markets, Inc. Annual Report to Shareholders is incorporated
herein by reference.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk:
"Quantitative Disclosures about Market Risk" on page 11 of
the 1999 Weis Markets, Inc. Annual Report to Shareholders is
incorporated herein by reference. Qualitative disclosures about
market risk is discussed within the "Liquidity and Capital
Resources" section of "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on page 10 of the
1999 Weis Markets, Inc. Annual Report to Shareholders and is
incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data:
The following information is incorporated herein by
reference from the 1999 Weis Markets, Inc. Annual Report to
Shareholders: The consolidated financial statements on pages 12
through 14, the notes to consolidated financial statements on pages
15 through 19, and the independent auditors' report on page 20.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure:
None.
WEIS MARKETS, INC.
PART III
Item 10. Directors and Executive Officers of the Registrant:
The following is a concise statement of information
concerning directors of the Company, together with certain other
information with respect to such directors:
Shares of Stock
of the
Period Company Percent
of Principal Beneficially Owned of
Name Age Directorship Occupation on Dec. 31, 1999 Class
Robert F. Weis 80 1947 Chairman of the 12,761,411 30.6
to date Board & Treasurer
Norman S. Rich 62 1991 President 23,373 *
to date
William R. Mills 43 1996 Vice President Finance 2,000 *
to date & Secretary
Jonathan H. Weis 32 1996 Vice President Property 88,020 *
to date Management and Development
Michael M. Apfelbaum 39 1996 Partner, Apfelbaum 3,809,009 9.1
to date Apfelbaum & Apfelbaum
Attorneys at Law
Joseph I. Goldstein 57 1995 Partner, 10,097 *
to date Kirkpatrick and Lockhart, LLP
Attorneys at Law
Richard E. Shulman 60 1994 President 222 *
to date Industry Systems
Development Co.
All 14 Directors and
Officers as a Group 16,748,323 40.2
* Owns less than 1% of class.
Robert F. Weis. The Company has employed Mr. Weis since
1946. Mr. Weis served as Vice President-Treasurer from 1961
through August of 1994 at which time he was appointed Co-Chairman
& Treasurer. In January of 1995, Mr. Weis was appointed Chairman
& Treasurer. Robert F. Weis is the father of Director, Jonathan
H. Weis and brother of Ellen W. P. Wasserman who is also a
beneficial owner of more than 5% of the Company's Common Stock.
Mr. Weis has been a member of the Board of Directors since 1947.
Mr. Weis also serves as a member of the Board of Trustees of the
Sunbury Community Hospital.
Norman S. Rich. The Company has employed Mr. Rich since
1964. Mr. Rich served as Vice President-Store Operations from
1980 until April 1992, when he became Vice President-Secretary of
the Company. During the year 1994, Mr. Rich became President of
the Company. Mr. Rich has been a member of the Board of
Directors since 1991. Mr. Rich also serves as on the
Board of Trustees of Evangelical Community Hospital.
William R. Mills. The Company has employed Mr. Mills since
1992. Mr. Mills served as Vice President Finance from 1992
through January 1995, at which time he became Vice President
Finance & Secretary of the Company. Mr. Mills has been a member
of the Board of Directors since 1996.
WEIS MARKETS, INC.
Jonathan H. Weis. The Company has employed Mr. Weis since
1989. Mr. Weis served the Company in various capacities,
including Director of Property Management and Development, until
July 1996, at which time he was appointed as Vice President
Property Management and Development. Jonathan H. Weis is the son
of Director, Robert F. Weis. Mr. Weis has been a member of the
Board of Directors since 1996.
Michael M. Apfelbaum. Mr. Apfelbaum is engaged in the
private practice of law as a Partner with the firm of Apfelbaum,
Apfelbaum & Apfelbaum. Mr. Apfelbaum serves as Co-Counsel for
the Charles B. Degenstein Foundation and as City Solicitor to the
City of Sunbury. Mr. Apfelbaum has been a member of the Board of
Directors since 1996.
Joseph I. Goldstein. Mr. Goldstein is engaged in the
private practice of law as a Partner with the firm of Kirkpatrick
and Lockhart, LLP, Washington, D.C. Prior to joining Kirkpatrick and
Lockhart, LLP in 1999, Mr. Goldstein was a Partner with the firm of
Crowell & Moring, Washington, D.C. Prior to joining Crowell &
Moring in 1995, Mr. Goldstein was an Associate Director of the
Division of Enforcement, United States Securities and Exchange
Commission. Mr. Goldstein has been a member of the Board of
Directors since 1995. Mr. Goldstein is married to Ellen Weis
Goldstein, is the son-in-law of Janet C. Weis, brother-in-law of
Susan Weis Mindel and brother-in-law of Nancy Weis Wender; each
of whom are beneficial owners of more than 5% of the Company's
Common Stock.
Richard E. Shulman. Mr. Shulman serves as President of
Industry Systems Development, Co., a consulting firm. He has
expertise in the business of supermarket chains, food wholesalers
and technology companies. Mr. Shulman has been a member of the
Board of Directors since 1994.
Item 11. Executive Compensation:
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Executive Compensation Committee of the Board of Directors
believes that the primary objective of the Company's executive
compensation policies should be to attract and retain qualified
executives, which is critical to the on-going success of the
Company. The executive compensation program is based upon
factors that are subjective in nature and are in the best
interests of the Company and ultimately the shareholders. The
Committee's primary objective is achieved by providing
appropriate compensation and incentives that are competitive with
executives at selected peer companies of comparable size and
position in the retail business, while keeping compensation in
line with the financial objectives of the Company. The Committee
recognizes the fact that the Company is engaged in a highly
competitive industry and thus annually examines market
compensation levels and trends in the labor market.
The Committee, through a review process with the President's
written evaluation of executives other than the Chairman and the
President, subjectively evaluates the performance of senior
management. The reports include a review of each executive's
performance for the most recent fiscal year. In addition, senior
management is orally evaluated by the President as to their
efforts and accomplishments throughout the period from
information deemed relevant both internally and in light of the
competitive position of the Company in the industry. These
evaluations include qualitative factors such as the individuals
decision-making responsibilities, the professional experience
required to perform given tasks, and their leadership and team-
building skills. Although executive compensation is not
specifically related to corporate performance, the overall
performance of the Company is a consideration in determining
executive compensation. The Chairman and President reported that
the executives substantially met their objectives during the most
recent fiscal year. The Committee determined the President's
compensation based on subjective and qualitative considerations,
which include the overall financial and operational success of
the Company.
WEIS MARKETS, INC.
Employment and Severance Agreements. The Committee notes
that the President and Vice President Finance & Secretary have
employment agreements with the Company. These agreements specify
the terms of employment, including pay factors through the year
2004. The agreements provide that employment shall be at will,
but if employment is terminated without cause, or the officer
resigns for good reason, the officer shall receive his remaining
salary and all benefits payable under the agreement. The
agreements include a covenant not to compete clause, which is
limited by time and geography. The Vice President Private Label
and Vice President Pharmacy have similar employment agreements
through the year 2003, and in their case includes a one-time stay payment
bonus equal to 50% of their annual base salary rate payable if
they remain employed by the Company through January 1, 2001 or if
they are terminated without cause before January 1, 2001. The
Committee believes that the employment agreements are in the best
interest of both the Company and the officers, since it helps to
assure continued leadership for the Company and job security to
the officers.
Respectfully submitted by the Executive Compensation
Committee,
Robert F. Weis Michael M. Apfelbaum Joseph I. Goldstein Richard E. Shulman
Committee Chairman
Executive Compensation - The following table sets forth,
with respect to the last three completed fiscal years, the
compensation of the current Chairman of the Board & Treasurer,
the President of the Company and the next three highest
compensated executive officers of the Company in 1999. The
determination as to which executive officers to include in the
table are based upon total annual salary and bonus exceeding
$100,000 in the last completed fiscal year.
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Annual Compensation Awards
___________________________________ ____________
Securities
Other Annual Underlying All Other
Name and Principal Salary Bonus Compensation Options / Compensation
Position Year ($) ($) ($) SARs (#) ($)
Robert F. Weis 1999 500,000 -- -- -- / -- 4,810
Chairman of the 1998 500,000 -- -- -- / -- 4,821
Board & Treasurer 1997 460,000 -- -- -- / -- 5,282
Norman S. Rich 1999 410,000 6,150 25,781 27,211/ 10,000 26,333
President 1998 380,000 5,700 17,833 2,789/ 7,500 26,344
1997 350,000 5,355 4,125 3,000/ 6,000 26,797
William R. Mills 1999 188,000 2,820 10,313 3,000/ 3,500 13,224
Vice President 1998 175,500 2,633 8,917 2,000/ 3,000 13,235
Finance & Secretary 1997 160,500 2,456 2,750 2,000/ 3,000 13,677
Walter B. Bruce 1999 128,000 1,920 6,875 300/ 2,000 12,418
Vice President 1998 122,583 1,839 6,242 300/ 2,000 12,217
Private Label 1997 117,667 1,800 2,475 300/ 2,100 12,287
Richard L. Kunkle 1999 115,000 1,725 4,125 300/ 1,200 11,804
Vice President 1998 109,583 1,644 3,567 300/ 1,200 11,603
Pharmacy 1997 104,583 1,600 1,375 300/ 1,200 11,658
Leslie H. Knox 1999 65,667 -- -- --/ -- --
Vice President 1998 191,167 2,868 3,567 2,789/ 1,500 6,219
Merchandising 1997 182,917 2,799 1,375 3,000/ 1,200 6,923
WEIS MARKETS, INC.
Mr. Leslie H. Knox terminated his employment with the
Company in April 1999. "Other Annual Compensation" consists
solely of payments on stock appreciation rights. There are no
perquisites to report. "All Other Compensation" consists of the
vested and non-vested benefits in the profit sharing, employee
stock bonus, supplemental retirement and retirement benefit
savings plans. The current year retirement amounts were
estimated by outside actuaries for purposes of this report.
Stock Appreciation Rights. The Company maintains a Stock
Appreciation Rights program for certain of its officers and other
key executives. Under this program, participants are granted
rights equivalent to shares of Company stock. The rights expire
in one year, at which time the value of any appreciation from the
original date of issue is paid in cash to the participant. No
stock is distributed to the participant and there are no plan
provisions for reload or tax-reimbursement features.
Stock Options. The Company has an Incentive Stock Option
Plan. Under the terms of the plan, options are granted for
shares of the Company's common stock based on the market value at
the date of grant and may be exercised immediately. There are no
plan provisions for reload or tax-reimbursement features. The
following table contains all material information concerning
stock options and stock appreciation rights granted to the named
executives in the fiscal year ended December 25, 1999.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Terms
______________________________________________________________________ ___________________________
Number of % of Total
Securities Options/SARs Exercise
Underlying Granted to or Base
Options/SARs Employees in Price Expiration
Name Granted (#) Fiscal Year ($/Share) Date 5% ($) 10% ($)
Norman S. Rich 20,000 47.9% 37.9375 7/31/2009 477,174 1,209,252
7,211 / 17.3% / 35.5625 4/05/2009 161,275 408,701
10,000 18.1% 37.7500 8/01/2000 18,875 37,750
William R. Mills 3,000 / 7.2% / 37.9375 7/31/2009 71,576 181,388
3,500 6.3% 37.7500 8/01/2000 6,606 13,213
Walter B. Bruce 300 / .7% / 37.9375 7/31/2009 7,158 18,139
2,000 3.6% 37.7500 8/01/2000 3,775 7,550
Richard L. Kunkle 300 / .7% / 37.9375 7/31/2009 7,158 18,139
1,200 2.2% 37.7500 8/01/2000 2,265 4,530
WEIS MARKETS, INC.
The following table summarizes stock options and stock
appreciation rights exercised during 1999 and presents the value
of unexercised options and stock appreciation rights held by the
named executives at fiscal year end. The closing price of the
stock at the fiscal year end was $42.8750.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at FY-End (#) at FY-End ($)
Shares Acquired Value Exercisable/ Exercisable/
Name Type on Exercise (#) Realized ($) Unexercisable Unexercisable
Norman S. Rich Options 1,000 13,094 40,750 / 0 316,933 / 0
SARs 7,500 25,781 0 /10,000 0 / 51,250
William R. Mills Options - - 9,000 / 0 79,688 / 0
SARs 3,000 10,313 0 / 3,500 0 / 17,938
Walter B. Bruce Options 750 17,542 900 / 0 7,050 / 0
SARs 2,000 6,875 0 / 2,000 0 /10,250
Richard L. Kunkle Options - - 1,700 / 0 18,650 / 0
SARs 1,200 4,125 0 / 1,200 0 / 6,150
RETIREMENT PLANS
Profit Sharing Plan. The Company maintains, at its sole
expense, a Profit Sharing Plan for certain salaried employees,
store management and administrative support personnel. The
purpose of the Plan is to enhance employee opportunities for
their dedication and loyal service to the Company. The Board of
Directors annually determines the amount of contribution to the
Plan at its sole discretion. The contribution is allocated among
the various plan participants in relationship to their
compensation and years of service. Plan participants are 100%
vested in their accounts after 7 years of service with the
Company and are entitled to receive a distribution of their
vested accounts upon termination of employment, including
retirement, disability or death.
Employee Stock Ownership Plan. The Company maintains, at
its sole expense, an Employee Stock Ownership Plan for certain
salaried employees. The purpose of the Employee Stock Ownership
Plan is to give eligible employees the pride of ownership in the
Company. Eligible employees become participants at the beginning
of the plan year following the two-year anniversary date of their
employment, subject to break in service provisions. The Board of
Directors annually determines the amount of contribution to the
Plan at its sole discretion. The entire contribution is applied
toward the purchase of the Company's stock and is distributed
among participant accounts in relationship to their compensation.
Every participant is fully vested. Vested interests in plan
assets are distributed to participants upon reaching the
applicable retirement age.
Retirement Savings Plan. The Company maintains a Retirement
Savings Plan pursuant to Section 401(k) of the Internal Revenue
Code. Employees become eligible to participate once they
complete one year of eligibility service and attain the age of
21. On a quarterly basis, the Company contributes into the
plan at the rate of 25% of the employees first 4% of elective
deferral. Plan participants are 100% vested in their accounts
after 7 years of service with the Company and are entitled to
receive a distribution of their vested accounts upon termination
of employment, including retirement, disability or death.
WEIS MARKETS, INC.
Supplemental Retirement Plans. The Company maintains a non-
qualified supplemental retirement plan for certain of its
officers. The benefits are determined through actuarial
calculations dependent on the age of the recipient. The benefit
payable on an annual basis to Robert F. Weis would be $449,396 if
he had retired as of the date of this Proxy.
The Company also maintains a second non-qualified
supplemental retirement plan for certain of its employees. This
Plan is designed to provide retirement benefits and salary
deferral opportunities because of the limitations imposed by the
Internal Revenue Code and the Regulations implemented by the
Internal Revenue Service. Participants in this plan are excluded
from participation in the qualified Profit Sharing or Employee
Stock Ownership plans. The Board of Directors annually
determines the amount of the allocation to the Plan at its sole
discretion. The allocation among the various plan participants
is made in relationship to their compensation, years of service
and job performance. Plan participants are 100% vested in their
accounts after 7 years of service with the Company. Benefits are
distributed among participants upon reaching the applicable
retirement age. Substantial risk of benefit forfeiture does
exist for participants in this Plan.
COMPENSATION OF DIRECTORS
Standard Arrangements: With respect to fiscal 1999, all non-
employee Directors received an annual retainer of $16,000, and an
additional $1,000 for each regular meeting attended. The
Company's Board held four regular meetings during 1999. Messrs.
Michael M. Apfelbaum, Joseph I. Goldstein and Richard E. Shulman
attended all four of the regular meetings and each received
$20,000 in total compensation for their participation. All other
directors attended the regular meetings without remuneration.
The Audit Committee: The Audit Committee acts independently
to review the scope and results of the independent auditors'
engagement and reviews the adequacy of the Company's internal
accounting controls. The 1999 Audit Committee of the Board of
Directors was composed of Messrs. Michael M. Apfelbaum, Joseph I.
Goldstein and Richard E. Shulman. Mr. Shulman served as Chairman
of the Audit Committee. Each non-employee member of the Audit
Committee receives $700 for each audit committee meeting
attended. During fiscal 1999, all three non-employee committee
members attended all four of the Audit Committee meetings held
and were compensated $2,800 each for their participation.
The Compensation Committee: The Compensation Committee is
responsible for developing policies and making specific
recommendations about compensation of officers, including Robert
F. Weis in his capacity as Chairman of the Board & Treasurer.
The 1999 Compensation Committee of the Board of Directors was
composed of Messrs. Michael M. Apfelbaum, Joseph I. Goldstein,
Richard E. Shulman and Robert F. Weis. Mr. Weis served as
Chairman of the Compensation Committee. Each non-employee
Director of the Compensation Committee received an annual
retainer of $700 for their participation. The Compensation
Committee held one meeting during the fiscal year and all members
attended.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The 1999 Compensation Committee of the Board of Directors
was composed of Messrs. Michael M. Apfelbaum, Joseph I.
Goldstein, Richard E. Shulman and Robert F. Weis. Robert F. Weis
is an officer of the Company. Messrs. Apfelbaum, Goldstein and
Shulman were not officers or employees of the Company or had any
relationship with the Company requiring disclosure under the
Securities and Exchange Commission regulations.
SHAREHOLDER RETURN PERFORMANCE
The following line graph compares the yearly percentage
change in the cumulative total shareholder return on the
Company's Common Stock against the cumulative total return of the
S&P Composite-500 Stock Index and the cumulative total return of
a published group index for the Retail Grocery Stores Industry,
(Peer Group), provided by Value Line, Inc., for the period of
five fiscal years. The graph depicts $100 invested at the close
of trading on the last trading day preceding the first day of the
fifth preceding fiscal year in Weis Markets, Inc., common stock,
S&P 500, and the Peer Group. The cumulative total return assumes
reinvestment of dividends.
WEIS MARKETS, INC.
COMPARATIVE FIVE-YEAR TOTAL RETURNS
(This area contains a 5-year line graph as described in the previous paragraph)
1994 1995 1996 1997 1998 1999
Weis Markets 100.00 120.60 140.00 158.31 180.78 207.97
S&P 500 100.00 137.50 169.47 226.03 290.22 349.08
Peer Group 100.00 129.72 179.29 252.06 383.59 311.56
The following line graph, generated from information
provided by Value Line, Inc., compares net income as a percentage
of sales, between the Company and its Peer Group. This graph
highlights the ability of management to generate more income per
sale than the average grocery chain over the years, thus
increasing net worth for its shareholders.
COMPARATIVE TEN-YEAR INCOME PERCENTAGES
(This area contains a 10-year line graph as described in the previous paragraph)
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Weis Markets 6.82% 6.23% 5.64% 5.06% 4.90% 4.82% 4.50% 4.30% 4.48% 3.98%
Peer Group 1.30% 1.18% 0.75% 1.01% 1.41% 1.81% 1.94% 1.27% 2.00% 1.49%
WEIS MARKETS, INC.
Item 12. Security Ownership of Certain Beneficial Owners and
Management:
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
The following persons are known by the Company to be the
beneficial owners of more than 5% of its Common Stock, which is
its only class of voting securities, on December 31, 1999. Information
contained in the table and in the following footnotes was derived from
filings made with the Securities and Exchange Commissionby the Beneficial
Owners.
Name and Address Amount and Nature Percent
of of Beneficial of
Beneficial Owner Ownership Class
_________________________ ________________ _____________
Robert F. Weis 12,761,411 (1) 30.6
c/o Weis Markets, Inc.
1000 South Second Street
Sunbury, PA 17801-0471
Janet C. Weis 8,132,411 (2) 19.5
43 South Fifth Street
Sunbury, PA 17801-0471
Weis Family Holdings, L.P. 8,087,773 (3) 19.4
919 North Market Street, Suite 200
Wilmington, DE 19801
Weis Family Holdings, L.L.C. 8,087,773 (4) 19.4
919 North Market Street, Suite 200
Wilmington, DE 19801
Michael M. Apfelbaum 3,809,009 (5) 9.1
43 South Fifth Street
Sunbury, PA 17801
Ellen W. P. Wasserman 3,524,424 (6) 8.5
1000 South Second Street
Sunbury, PA 17801-0471
Susan Weis Mindel 3,490,216 (7) 8.4
43 South Fifth Street
Sunbury, PA 17801
Ellen Weis Goldstein 3,476,044 (8) 8.3
43 South Fifth Street
Sunbury, PA 17801
Nancy Weis Wender 3,381,463 (9) 8.1
43 South Fifth Street
Sunbury, PA 17801
Sidney Apfelbaum 2,598,903 (10) 6.2
43 South Fifth Street
Sunbury, PA 17801
Mellon Bank Corporation 13,963,295 (11) 33.5
One Mellon Bank Center
Pittsburgh, PA 15258
WEIS MARKETS, INC.
Footnotes:
(1) Robert F. Weis has sole voting and dispositive power as to all
12,761,411 shares listed. This amount includes 6,649,087 shares
held in trust under the Will of Harry Weis, with Mellon Bank
Corporation and Robert F. Weis as co-trustees.
(2) Janet C. Weis has sole voting and dispositive power as to all
8,132,411 shares listed. This amount includes 8,087,773 shares
held by the Weis Family Holdings, L.L.C.
(3) The Weis Family Holdings, L.P. (Partnership) is principally
engaged in holding shares of Common Stock of the Company. The
Weis Family Holdings L.L.C. is the sole general partner ofthe
Partnership and has sole voting and dispositive power as to
all assets held in the Partnership.
(4) The Weis Family Holdings L.L.C. is the sole general partner of
the Weis Family Holdings, L.P. and is principally engaged in
managing the affairs of that partnership. Janet C. Weis is the
sole Manager of the LLC. Janet C. Weis has a 52% interest in the
LLC, Susan Weis Mindel, Ellen Weis Goldstein and Nancy Weis
Wender each have a 16% interest in the LLC. Janet C. Weis has
sole voting and dispositive power as to all shares listed.
(5) Michael M. Apfelbaum has sole voting power as to 27,064, shared
voting power as to 3,781,945, sole dispositive power as to 3,088
and shared dispositive power as to 3,781,945. Of the aggregate
amount listed, Mr. Apfelbaum shares voting and dispositive powers
as to 3,781,945 shares as a co-trustee with Susan Weis Mindel,
Ellen Weis Goldstein and Nancy Weis Wender in various Claire Weis
Trusts held at Mellon Bank Corporation.
(6) Ellen W. P. Wasserman has sole voting and investment power as to
all 3,524,424 shares listed.
(7) Susan Weis Mindel has sole voting and dispositive power as to
724,085 shares. Mrs. Mindel shares voting and dispositive power
as to 127, 662 shares with Nancy Weis Wender and Ellen Weis
Goldstein as co-trustees of the Janet Weis Trusts; shares voting
and dispositive power as to 112,196 shares with her children as
co-trustee of certain trusts for the benefit of such children;
shares voting and dispositive power as to 627,836 shares with
Michael Apfelbaum as co-trustees of one of the Claire Weis
Trusts; and shares voting and dispositive power as to 1,898,437
shares with Michael Apfelbaum, Nancy Weis Wender and Ellen Weis
Goldstein as co-trustees of one of the Claire Weis Trusts.
(8) Ellen Weis Goldstein has sole voting power as to 737,444 shares and
sole dispositive power as to 739,727 shares. Mrs. Goldstein shares voting
and dispositive power as to 127, 662 shares with Susan Weis Mindel and
Nancy Weis Wender as co-trustees of the Janet Weis Trusts; shares voting
and dispositive power over 4,555 shares with Joseph I. Goldstein; shares
voting and dispositive power as to 77,627 shares with her children as co-
trustee of certain trusts for the benefit of such children;
shares voting and dispositive power as to 627,836 shares with
Michael Apfelbaum as co-trustees of one of the Claire Weis
Trusts; and shares voting and dispositive power as to 1,898,437
shares with Michael Apfelbaum, Susan Weis Mindel and Nancy Weis
Wender as co-trustees of one of the Claire Weis Trusts.
(9) Nancy Weis Wender has sole voting power as to 727,528 shares.
Ms. Wender shares voting and dispositive power as to 127, 662
shares with Susan Weis Mindel and Ellen Weis Goldstein as co-
trustees of the Janet Weis Trusts; shares voting and dispositive
power as to 627,836 shares with Michael Apfelbaum as co-trustees
of one of the Claire Weis Trusts; and shares voting and
dispositive power as to 1,898,437 shares with Michael Apfelbaum,
Susan Weis Mindel and Ellen Weis Goldstein as co-trustees of one
of the Claire Weis Trusts.
(10) Sidney Apfelbaum has sole voting and dispositive power as to
2,409,313 shares, which includes 2,408,526 shares held in the
Charles B. Degenstein Foundation Charitable Deed of Trust at
Mellon Bank. Mr. Apfelbaum shares voting and dispositive power
as to 18,000 shares with Mellon Financial Corporation, Mellon
Bank, N.A. and Walter Zweifler as co-trustees of the Zweifler
Family Trusts; shares voting and dispositive power as to 147,614
shares with Mellon Financial Corporation, Mellon Bank, N.A. and
Lore Degenstein as co-trustees of the Lore Degenstein Trusts; and
shares dispositive power only as to 23,976 shares with his wife.
WEIS MARKETS, INC.
(11) Of the total 13,963,295 shares listed, Mellon Bank Corporation
has sole voting power as to 720,618, shared voting power as to
6,456,841, sole dispositive power as to 750,387, and shared
dispositive power as to 13,211,908. (See the above footnotes for
a breakdown of the Weis family trust holdings held at Mellon
Bank)
Item 13. Certain Relationships and Related Transactions:
Mr. Michael M. Apfelbaum, a director of the Company,
is a partner in the legal firm of Apfelbaum, Apfelbaum and
Apfelbaum. Upon management's request, Mr. Apfelbaum's firm
provided legal services to the Company during 1999. Remuneration
received by Mr. Apfelbaum for services rendered to the Company
was not material to the registrant or to the directors' firm.
Central Properties, Inc., a Pennsylvania corporation
("Central Properties"), owns the land under a Company store and
an adjacent parking lot in Lebanon, Pennsylvania. Central
Properties leases these properties to the Company for rent
payments which totaled $79,969 in 1999. The stockholders of
Central Properties include Robert F. Weis, Chairman of the Board
of Directors and Treasurer of the Company, and family members of
Michael M. Apfelbaum, Joseph I.Goldstein and Jonathan H. Weis,
each of whom is a director of the Company.
WEIS MARKETS, INC.
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports
on Form 8-K:
The following information is incorporated herein by
reference from the 1999 Weis Markets, Inc. Annual Report to
Shareholders: The consolidated financial statements on pages 12
through 14, the notes to consolidated financial statements on
pages 15 through 19, and the independent auditors' report on page
20.
(a) The financial statement schedules are omitted for the reason
that they are either not applicable or not required or because
the information required is contained in the financial statements
or notes thereto.
(b) There were no reports on Form 8-K filed during the quarter ended
December 25, 1999.
WEIS MARKETS, INC.
(c) A listing of exhibits filed or incorporated by reference is
as follows:
Exhibit No.
3-A Articles of Incorporation
3-B By-Laws
3-C Amendments to the By-Laws
10-A Profit Sharing Plan
10-B Stock Bonus Plan
10-C Company Appreciation Plan
10-D Stock Option Plan
10-E Supplemental Employee Retirement Plan
10-F Executive Employment Contract
13 Annual Report to Shareholders for the Fiscal Year ended
December 25, 1999
21 Subsidiaries of the Registrant
23 Consent of Independent Auditors
27 Financial Data Schedule
Exhibits 3-A and 3-B have been filed as exhibits under Part
IV, Item 14(c) in Form 10-K for the fiscal year ended December
27, 1980 and are incorporated herein by reference. Exhibit 3-C
has been filed as an 8-K on January 27, 1998 and is herein
incorporated by reference. Exhibits 10-A, 10-B, 10-C, 10-E and
10-F, have been filed as exhibits under Part IV, Item 14(c) in
Form 10-K for the fiscal year ended December 31, 1994 and are
incorporated herein by reference. Exhibit 10-D has been filed as
an exhibit under Part IV, Item 14(c) in Form 10-K for the fiscal
year ended December 26, 1998 and is incorporated herein by
reference.
The foregoing exhibits are available upon request from the
Secretary of the Company at a fee of $10.00 per copy.
WEIS MARKETS, INC.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
(Registrant)
Date
Robert F. Weis
Chairman of the Board of Directors,
and Treasurer and Director
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated.
Date
Robert F. Weis
(Principal Financial Officer)
Chairman of the Board of Directors,
and Treasurer and Director
Date
Norman S. Rich
(Principal Executive Officer)
President and Director
Date
William R. Mills
Vice President Finance, Secretary
and Director
EXHIBIT 13
WEIS MARKETS, INC.
(cover page)
(The following is on the outside of a two page fold out.)
What is the most important
resourse a business can
can draw on to ensure its
success for 87 years?
Ask us what matters most, and we'll say... (This sentence is continued on
next page)
(This area contains various pictures of customers, employees and
products in Weis' stores.)
WEIS 1999 annual report
(The following is on the inside of a two page fold out.)
relationships
are the most important part of our business.
Every day, we seek new ways to better serve our customers,
shareholders and employees. At Weis Markets, we know that
forming strong and lasting relationships is the key to our success.
Looking ahead, we will continue to focus on serving the very people
who have made us what we are today.
(This area contains various pictures of customers, employees and
products in Weis' stores.)
Financial Highlights
(dollars in thousands,
except per share amounts)
For the Fiscal Years Ended
December 25, 1999,
December 26, 1998 and
December 27, 1997 1999 1998 1997
Net sales $ 2,004,947 $ 1,867,492 $ 1,818,816
Income before provision
for income taxes 124,015 134,498 118,582
Net income 79,725 83,683 78,194
Cash dividends 42,541 40,932 39,347
Shareholders' equity 918,477 890,641 847,333
Depreciation and amortization 46,276 46,316 43,503
Basic and diluted
earnings per share 1.91 2.00 1.87
Cash dividends per share $ 1.02 $ .98 $ .94
Shares outstanding 41,691,875 41,755,844 41,772,107
Number of grocery stores 163 158 154
Number of pet supply stores 34 36 43
(The graphs are aligned horizontially across the bottom of the page.)
Net Sales Shareholders'
(in billions) Equity
(in millions)
(This area contains a 5-year bar graph (This area contains a 5-year bar graph of
of Net Sales from 1995 through 1999.) Shareholder's Equity at the end of each
year, from 1995 through 1999.)
1995 $1.646 1995 $792
1996 $1.753 1996 $819
1997 $1.819 1997 $847
1998 $1.867 1998 $891
1999 $2.005 1999 $918
Number of Number of
Employees Stores
(in thousands)
(This area contains a 5-year bar graph (This area contains a 5-year bar graph
of Number of Employees at the end of Number of Grocery Stores in
of each year, from 1995 through 1999.) operation at the of each year, from
1995 through 1999.)
1995 17.8 1995 151
1996 18.4 1996 155
1997 18.6 1997 154
1998 19.5 1998 158
1999 20.1 1999 163
strategy for growth (The latter is on the top of the next two
pages.)
Letter to our Shareholders
We are pleased to report strong financial results for the fiscal
year ended December 25, 1999. For the first time in our
Company's history, our sales exceeded $2 billion. These results
were achieved during a period of intense competition in the
supermarket industry and at a time when deflation continued to be
a factor in key categories throughout our stores.
During 1999:
Sales increased 7.4 percent to $2,004,947,000 (from
$1,867,492,000 in 1998).
Earnings decreased 4.7 percent to $79,725,000 (compared to
$83,683,000 for 1998) due to unusual charges and credits detailed
below.
Same-store sales -- an important benchmark figure -- were up 4.0
percent, significantly higher than the industry average.
In July, Weis Markets' Board of Directors increased the quarterly
dividend for the 34th consecutive year to $.26 per share, up 4.0
percent.
Return on equity was 8.7 percent and shareholders' equity
increased to $918,477,000 in 1999, compared to $890,641,000 in
1998.
Our company's net income was affected by three unusual credits
and charges. In 1998, we realized a gain of $30.4 million in pre-
tax income from the sale of marketable securities. Also in 1998,
the Company expensed $5.6 million for exit costs related to the
closing of several SuperPetz units. The Company realized an
unusual gain of $3.4 million in pre-tax income from the sale of
an asset at the end of 1999.
Excluding these unusual charges and credits, your Company's net
income in 1999 increased 12.2%, amounting to an increase of $.20
per share.
We attribute our strong performance in large measure to the
continued success of the most ambitious expansion in our
Company's history, increased promotional spending and targeted
marketing in key areas.
Since the beginning of 1995, we have built or opened 38
superstores and expanded or remodeled 51 others. We have spent
$400.4 million of internally generated funds on this aggressive
capital expansion program, which also includes investments in our
support facilities and new technology purchases. Our total
retail space is now 6,908,827 square feet, as compared to
5,471,000 when we launched our expansion program in 1995, an
increase of 26 percent.
In 1999 alone, we built or opened nine superstores in
Pennsylvania, Maryland and New Jersey and expanded or remodeled
six others. Four Penn Traffic units, acquired early in 1999, are
included in this total. By year's end, we had increased our
retail space by 381,583 square feet or six percent. Overall, we
invested $86.7 million in 1999 for new stores, remodels and
expansions, store acquisitions, support facilities and technology
purchases.
(At the bottom of the page is a picture of Mr. Robert F. Weis,
Chairman and Treasurer, and Noman S. Rich, President. Beside
them is an insert box containing the following:)
Weis Markets Today
"We are a financially stable, well-managed company, with a long
history of success in our market area. During the past five
years, we have added tremendous value to our Company by
implementing a major expansion program to increase our market
share. Consequently, we have entered the 21st century ready to
serve our customers and community and to create even greater
value for our shareholders."
We also continued to invest in our company's infrastructure and
support systems. During the year, we completed the installation
of a new Purchasing/Inventory Management System and began work on
several other projects in this area. In the summer, we installed
a spring water bottling operation at our dairy in Sunbury and
began production of Weis Quality Spring Water.
In December, we announced the acquisition of four additional
units from Fleming Food Companies, Inc., located in Swatara, PA
(outside of Harrisburg), Red Lion, PA (outside of York),
Hampstead, MD (outside of Hanover) and Bel Air, MD (outside of
Baltimore). Each of these high-volume stores will complement our
existing store base in these important markets.
During 2000, our expansion program will continue at an aggressive
pace. By the end of the first quarter of 2000, Weis Markets will
have reopened three of the four newly-acquired stores, and we
will have opened new superstores in Macungie, PA and Odenton, MD.
In addition, construction is underway for stores in Hagerstown,
MD; Wyomissing, PA; Hackettstown, NJ; and Harrisburg, PA, with
openings scheduled for later in the year.
Over the next eighteen months, Weis Markets expects to invest up
to $135.6 million in capital expenditures to open 17 superstores
and to expand or remodel 20 others. As always, we plan to
finance this new round of expansion with internally generated
funds.
On November 30, the heirs of Sigfried Weis, our Company's late
President, and related trusts, filed documents seeking to replace
the Company's Board of Directors through a proxy vote. They
engaged Solomon Smith Barney to act as their financial advisor to
assist them in obtaining increased liquidity and value for the
shares they own. They believed the value shareholders could
receive through a sale, merger and/or other similar business
transaction was likely to be substantially in excess of the
current trading range of the Company's stock and that there would
be strong interest in the company by potential acquirers.
Management disagreed with their approach, which we felt was not
in the best interests of all of Weis Markets' shareholders,
employees and the communities we serve and, consequently, we
moved to oppose it. On December 22, in an effort to avoid the
continuing disruption of a proxy contest to our Company and the
inevitable resulting litigation, we began a process designed to
allow the full board of Weis Markets to determine what is in our
collective best interest. Based on a review by Morgan Stanley
Dean Witter, our financial advisor, we have concluded that a sale
of the Company at the present time would not be in the best
interests of Weis Markets' shareholders. As this report went to
press, we are continuing to pursue alternative strategies to
benefit all of our shareholders.
It is important to note that since 1994, our first year as
Chairman and President respectively, we have done much to
increase the overall value of your investment in our Company.
For instance, Weis Markets' dividend has increased by 38 percent
since 1994, during a time when fewer corporations offer
dividends, including many large supermarket companies.
Looking ahead, we will continue to focus on expansion through our
store development program and acquisitions, which will help our
Company compete and succeed in markets where we already prosper
and in the new markets we are entering. Weis Markets has begun
the new century with the financial resources, employee base,
merchandising expertise and market share that will contribute to
enduring success in our industry in the years to come.
We owe a sincere debt of gratitude to the people who have
contributed to our prosperity: our loyal employees, our
customers and you, our shareholders. Together we stand ready to
meet the challenges that lie ahead.
(Signature) (Signature)
Robert F. Weis Norman S. Rich
Chairman and Treasurer President
progress & change (The latter is on the top of the next two
pages.)
In 1912, Weis Pure Foods, a small
neighborhood grocery store, opened
in Sunbury, Pennsylvania. It was a
modest store founded on convenience,
value and variety. Today, Weis Pure
Foods is known as Weis Markets, a
thriving, multi-billion dollar super-
market company. Under the leadership
of Company Chairman Robert F. Weis
and Company President Norman S. Rich,
Weis Markets has embarked on an
aggressive growth program over the
past five years which has resulted in
both increased sales and market share
in a highly competitive industry.
(At the bottom of the page is an insert box containing the
following:)
(Next to the insert box is a picture of various Weis private
label merchandise.)
The Highest Quality
Weis Markets stores carry 2,500
private label products. In addition
to our own dairy, ice cream and
meat-processing plants, we main-
tain a quality control lab to ensure
that all products we stock meet
our own high standards for quality.
(At the top of the page is a picture of a Weis Markets produce
department, including salad bar.)
(Below is an insert box containing the following:)
State-of-the-Art Store Design
Our prototype store design has been implemented widely throughout
our store network as we retrofit existing stores and build new
units to the updated specifications. We recognize our customers'
desire for greater convenience and increased selection, so our
design incorporates large delicatessens with a wide selection of
prepared and pre-cooked items, in-store bakeries, service meat
and seafood counters, expanded produce areas with fresh-cut fruit
and salad bars, floral shops and large and varied grocery
departments. (End of insert box.)
At Weis Markets, our commitment to building and maintaining
strong relationships with our customers, employees and
shareholders underlies everything we do. Each initiative our
Company undertakes benefits these important stakeholders.
Our Customers
Our customers' evolving needs are always the driving force behind
our plans for growth.
LOCATION. Consumer research tells us that the average
supermarket customer visits a supermarket 88 times a year, as
compared to 34 times for mass merchandisers and 16 times for drug
stores. We have looked for sites close to our customers' homes
and offices -- "by their rooftops," as we like to say. The size
of our newer stores -- an average of 53,088 square feet, compared
to other classes of trade that require significantly larger sites
- -- has made it easier to find existing buildings and new
construction sites. Our new locations are a part of the
communities we serve, offering customers easy access to our
stores.
STORE DESIGN. We recognize the competing demands on our
customers' time and know they have less time to devote to food
shopping. So we have made our new prototype stores more user-
friendly and attractive than ever. Timesaving features typically
include express checkout, more debit payment options and a
greater variety of prepared food items.
VALUE. Finding the best value shouldn't mean spending a lot of
extra time comparing prices. With our Weis Club Card program,
sale items are clearly marked and the scanner automatically
tabulates the discount at the checkout.
loyalty
One of Weis Markets' greatest assets
is the enduring loyalty of our customers.
Although our market area now covers
a vast geographical region, we still think
of ourselves as a larger, more modern
version of our original neighborhood
store. Every day we work to earn our
customers' business, knowing they are
the key to our continued success.
(Below is an insert box containing the following:)
Weis Preferred Shoppers Club
Our Weis Preferred Shoppers Club -- introduced in 1996 -- offers
our customers excellent savings on a wide range of products in our stores and
makes them eligible for special values and sweepstakes. Knowing the
priority they place on convenience and value, we make Club membership easy and
beneficial for our customers. Club discounts are clearly marked throughout our
stores and auto-matically tallied at checkout. Our customers know they are
"shopping smart" whenever they use the Weis Preferred Shoppers Club card -- and
they can see the proof right on their receipts. Today, more than two million
people are Weis Club members.
(At the top of the page is a picture of a warehouse employee
displaying a box of vine-ripened tomatoes.)
integrity
(Below is an insert box containing the following:)
Customer Service
Personal attention to quality and value is the secret ingredient
in Weis Markets' recipe for success. We know that each
interaction with a customer gives us an opportunity to offer the
exceptional service that keeps customers coming back to our
stores. It is these relationships, often built on many years of
repeatedly satisfying shopping experiences, that have helped
build our reputation as a market leader in the communities we
serve. (End of insert box.)
Our Community
Weis Markets has been a presence in Central Pennsylvania for
nearly 90 years. We are very serious about our role and
responsibilities in the communities we serve. As we have entered
new geographic markets, we have forged strong ties with the
communities where we do business.
EMPLOYER. Today, Weis Markets employs 20,000 men and women,
primarily in Pennsylvania and Maryland, but also in New Jersey,
New York, Virginia and West Virginia. In our home territory, in
and around Sunbury, PA we are a stable source of employment.
PHILANTHROPIST. Our company was founded in Sunbury, PA, and
region that has been our home for several generations. We
welcome the opportunity to give back to our communities,
particularly in our home region, by supporting local and national
charities. As a company and as individuals, we have supported
many worthy causes over the years. Healthcare is a primary focus
of our charitable efforts. For example, each year, we support
the Children's Miracle Network, raising more than $160,000 in
1999 for the Geisinger Medical Center's Children's Hospital in
Danville, PA and other pediatric medical programs across the
state.
In addition, we support local hospitals, the Red Cross, the
Salvation Army, volunteer fire companies, churches and
educational facilities, individual United Way chapters and the
Foundation for (Continued on the next page)
growth - expansion
(In the middle of the page is a picture of a Weis Preferred
Shoppers Club coupon kiosk. Beside it is an insert box
containing the following:)
Growing for the Future
The last five years have been a time of unprecedented change and
growth at Weis Markets. In an increasingly competitive industry, we have
recognized the need to serve the changing needs of our customers and to
protect our substantial market share. Fortunately, we have had the resources
and opportunities to effectively retool our Company for the challenges of the
new century.
The financial flexibility to undertake a significant capital expansion program
is the result of our long-standing philosophy of self-reliance. Over the
past five years, it has helped us build 38 superstores and remodel 51 others
- -- more than half our store base. During this time our expansion has been
financed through internally generated funds. (End of insert box.)
(Continued from the previous page)
Independent College in Pennsylvania. Last year, Weis Markets
donated 18 truckloads of provisions to food banks.
Our Shareholders
Weis Markets never loses sight of its responsibility to our
shareholders. Year after year, our well-managed company delivers
exceptional value. We are one of the most consistently
profitable supermarket companies in the nation -- a fact that is
reflected in our increased market share, steadily growing stock
price, and record for paying generous dividends. Since 1994, the
overall value of our Company has increased significantly and our
board has increased the quarterly dividend for 34 consecutive
years.
While we take great pride in our successes, we are mindful
of rapid change in our industry and of the need for careful
analysis and thoughtful response. The supermarket industry --
once widely diffuse -- is moving toward consolidation, which
offers the prospect of increased competition. Nonetheless, we
strongly believe that there is plenty of room for a medium-sized
supermarket chain with a carefully considered growth strategy.
We are a financially stable, well-managed company, with a long
history of success in our market area. During the past five
years, we have added tremendous value to our Company by
implementing a major expansion program. Consequently, we have
entered the 21st century ready to serve our customers and
community and to create even greater value for our shareholders.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Results of Operations
Total sales for the fiscal year ended December 25, 1999 rose
7.4% to $2.005 billion, an increase of $137.5 million over 1998.
Company sales in 1998 of $1.867 billion increased 2.7% over 1997
sales of $1.819 billion. Sales generated from units open a full
year (identical store sales), in 1999, 1998 and 1997 increased
4.0%, 1.5% and 1.3%, respectively.
The Company's continued sales growth is attributable to its
aggressive expansion program combined with a stronger promotional
strategy. Capital expenditures over the last five years include
the construction of 33 superstores, completion of 51 store
enlargements and/or remodels, and the acquisition of 5 additional
stores. As a percentage of sales, capital expenditures of 4.3%,
4.3% and 3.5% in 1999, 1998 and 1997, respectively, have outpaced
the 2.8% industry average. The impact on sales from food price
inflation has been negligible for the last several years and the
Company has actually experienced deflation in some key food
categories.
The cost of goods sold in 1999 increased 7.1% to $1.496
billion due to the increase in sales volume. Gross profit
realized on total sales in 1999 increased by $37.9 million, or
8.0%, to $508.6 million compared to 1998 and by $7.7 million or
1.7% in 1998 compared to 1997. Gross profit as a percentage of
sales remained relatively consistent over the last three years at
25.4%, 25.2% and 25.5% in 1999, 1998 and 1997, respectively. The
Company has been more aggressive with its promotional strategy
for several years. It has been able to offset the related profit
decline from increased promotional activity and low inflation
during this period by increasing sales from the higher grossing
perishable and specialty departments. Adjustments to LIFO
inventory reserves have also been minimal over the past three
years. The LIFO adjustment in 1999 increased earnings $612,000
compared with an $84,000 charge in 1998 and a $27,000 charge in
1997.
Operating, general and administrative expenses decreased .4%
as a percentage of sales in 1999 as compared to 1998. Total 1999
operating expenses of $415.5 million at 20.7% of sales compares
to 21.1% in 1998 and 20.8% in 1997. The $21.3 million increase
in operating expenses in 1999 is primarily attributable to higher
sales volume. Employee labor and benefit costs, which exceed 60%
of the total operating, general and administrative expenses,
increased 9.4% in 1999 as compared to 1998 and accounts for a
majority of the increase in the Company's operating expenses for
the year. Management expects labor and benefit costs will
continue to affect net income disproportionately due to a tight
employment market, higher health insurance costs and the need for
additional employees in newer units, which are larger and have
more service departments.
A substantial portion of the expenses over the last three
years increased in direct proportion to the increase in the
Company's sales volume. In addition to the rising labor costs in
1998, Company management determined that certain intangible
assets exceeded future benefits and reduced the carrying amount
of these assets $2.8 million to their fair value during that
year. Management also accrued $5.6 million for exit costs
associated with the closing of several under-performing SuperPetz
stores in 1998. In 1997, the Company expensed $3.3 million for
an unrealizable asset relating to SuperPetz and $3.9 million
related to the termination of the Weis Markets, Inc. Pension
Plan.
Investment income of $19.9 million in 1999 decreased $27.5
million or 58.0% compared to 1998. The Company realized gains on
the sale of marketable securities of $3.5 million in 1999, $30.4
million in 1998, and $5.1 million in 1997. The Company's
investment portfolio consists of Pennsylvania tax-free state and
municipal bonds, U.S. Treasury securities, equity securities and
other short-term investments. It is management's intent to
maintain a liquid portfolio to take advantage of acquisitions and
other investment opportunities. Therefore, all securities are
classified as available-for-sale on the consolidated balance
sheets.
Other income in 1999 of $11.1 million at .6% of sales
increased $.4 million compared to 1998 and remained unchanged as
a percentage of sales in all three years presented. The
Company's other income is generated from rental income, coupon-
handling fees, cardboard salvage and gains on sales of fixed
assets. The dollar fluctuation in other income in 1999, 1998 and
1997 is primarily attributable to gains and/or losses realized on
the sale of fixed assets during those years.
The effective tax rate was 35.7% in 1999, 37.8% in 1998 and
34.1% in 1997. The tax rate increase in 1998 was due to the
increase in taxable investment income.
Net income in 1999 was $79.7 million or 4.0% of sales
compared with $83.7 million or 4.5% of sales in 1998 and $78.2
million or 4.3% of sales in 1997. Basic and diluted earnings per
share of $1.91 in 1999 compared to $2.00 in 1998 and $1.87 in
1997. Three unusual items notably impacted net income and
diluted earnings per share in 1999 and 1998. In 1998, the
Company reported a pre-tax gain of $30.4 million generated from
the sale of two marketable securities and accrued for a pre-tax
expense of $5.6 million associated with exit costs for several
under-performing SuperPetz units. In 1999, the Company realized
a pre-tax gain of $3.4 million from the sale of an investment in
a privately held company. Not including these unusual charges
and credits, the Company's after-tax, net income in 1999
increased approximately 12.2% or $8.5 million amounting to an
increase of $.20 per share.
As of the end of the fiscal year, Weis Markets, Inc.
operated 163 retail food stores, 34 SuperPetz pet supply, stores
and Weis Food Service, a restaurant and institutional supplier.
The Company currently operates supermarkets in Pennsylvania,
Management's Discussion and Analysis
of Financial Condition and Results of Operations
(continued)
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
Net cash provided by operating activities during 1999 was
$111.9 million compared to $115.6 million in 1998 and $95.5
million in 1997. Amortization decreased $2.4 million in 1999
compared to 1998 due to the previously noted write down of
certain intangible assets to their fair value. In 1998, the
Company sold its interest in AquaPenn Spring Water Co., Inc.
during that company's initial public offering on the NYSE (NYSE:
APN) and its interest in Giant Food Inc. (AMEX GFSa) in a tender
offer by Koninklijke Ahold N.V. (NYSE: AHO). Consequently, the
Company realized capital gains of $30.4 million from these
transactions. The increase in accounts payable and other
liabilities in 1999 are related to the increase in store
inventories and capital expenditures on stores scheduled to open
in early 2000. A large percentage of the increase in accounts
payable and other liabilities from 1997 to 1998 is related to the
accrual of store closing costs for several SuperPetz stores.
Working capital decreased 1.6% in 1999 and increased in 1998 and
1997 by 3.8% and 1.8%, respectively.
Net cash used in investing activities during 1999 was $70.0
million compared to $69.7 million in 1998 and $47.7 in 1997.
Property and equipment purchases during fiscal 1999 totaled $86.7
million compared to $77.0 million in 1998 and $64.2 million in
1997. Intangible and other assets increased $3.6 million in 1998
mainly due to store acquisitions. Proceeds from the sale and
maturity of marketable securities in each of the past three years
were used in the purchase of new securities and, to a lesser
degree, the purchase of property and equipment. Management
anticipates the continued use of the Company's cash for
acquisitions, the construction of new superstores, the expansion
and remodeling of existing stores, the securing of sites for
future expansion, new technology purchases, and the upgrading of
its processing and distribution facilities. The Company is also
working with its financial advisor, Morgan Stanley Dean Witter,
to develop proposals to enhance shareholder value, which may
require the use of some or all of the Company's marketable
securities.
Net cash used in financing activities during 1999 was $44.8
million compared to $41.5 million in 1998 and $47.5 million in
1997. Treasury stock purchases amounted to $2.3 million in 1999
compared to $.7 million in 1998 and $8.2 million in 1997. The
Board of Directors' 1996 resolution authorizing the purchase of
1,000,000 shares of treasury stock has a remaining balance of
578,653 shares. Total cash dividend payments on common stock
amounted to $1.02 per share in 1999 compared to $.98 in 1998 and
$.94 in 1997.
In 1999, the Company funded its working capital requirements
through internally generated cash flows from operations, as it
has done in prior years. Company management estimates that its
current development plans will require an investment of
approximately $135.6 million over the next eighteen months. The
financial and liquidity position of the Company, combined with
its historical insurance loss experience rates, has allowed it to
carry higher deductible and retention levels on its employee and
business insurance coverage. The Company plans to maintain these
higher exposure levels, thus benefiting from reduced premium
expenses. The Company has significant liquid assets, no debt
financing and has historically displayed an ability to generate
working capital internally to fund growth. It is not expected
that any type of external financing will be needed for these
activities in the coming year.
The Company's earnings and cash flows are subject to
fluctuations due to the changes in interest rates as they relate
to investments. The Company's marketable securities consist of
Pennsylvania tax-free state and municipal bonds, U.S. Treasury
securities, equity securities and other short-term investments
that are classified as available-for-sale. By their nature,
these financial instruments inherently expose the holders to
market risk. The definitive extent of the Company's interest
rate and other market risk is not quantifiable or predictable due
to the variability of future interest rates and other changes in
market conditions. However, the Company believes that its
exposure in this area is not material. Under its current
policies, the Company invests primarily in high-grade marketable
securities and does not use interest rate derivative instruments
to manage exposure to interest rate changes. In addition, the
Company's principal investment strategy of obtaining marketable
securities with maturity dates between one and five years helps
minimize market risk and maintain a balance between risk and
return. The equity securities owned by the Company consist
primarily of stock held in large capitalized companies trading on
public security exchange markets. Weis Markets' management
continually monitors the risk associated with its marketable
securities. A quantitative tabular presentation of risk exposure
is located on page 11.
Year 2000 Issue
The Year 2000 issue (Y2K) was the result of computer
programs written using two digits rather than four to define the
applicable year within calculations. In 1995, the Company began
to evaluate its information technology systems and various other
systems in order to identify and adjust date sensitive systems
for Y2K compliance. To coordinate the Company's Y2K compliance
efforts, executive management established a project group in 1996
consisting of management from various parts of the Company. The
project group worked with various
Management's Discussion and Analysis
of Financial Condition and Results of Operations
(continued)
Company suppliers and contractors to determine their Y2K compliance status
and to monitor their compliance progress. Executive management actively
worked with the project group on Y2K testing and the remediation
process.
The Company's Y2K-project group completed its assessment of
all systems potentially affected by the Y2K issue early in 1999.
All remediation, testing, and implementation was completed on all
software applications and hardware systems used within the
Company before the end of 1999. Outside consultants were
utilized as needed to complete both the analysis and remediation
process. As a precaution, the Y2K-project group established
contingency plans offering viable alternatives to ensure that the
Company's core business operations would be able to continue in
the event of a Y2K related systems failure.
The Y2K issue did not have a material impact on the
operational results or on the liquidity and capital resources of
the Company. Normal maintenance and modification costs were
expensed as incurred and the acquisition cost of new software or
hardware as a result of Y2K is being capitalized and written off
over the expected useful life of the asset.
Overall, the Company experienced no significant business
disruption due to Y2K related issues. The impact on business
operations from failure by the Company to achieve compliance or
failure by external entities beyond the Company's control could
potentially have had a material and adverse effect on the
Company's future operational results. Management is positive
that its comprehensive Y2K program effectively resolved the
Company's Y2K challenges in a timely manner.
Forward-Looking Statements
In addition to historical information, this Annual 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 Company
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 Company
files periodically with the Securities and Exchange Commission.
Quantitative Disclosures About Market Risks
(dollars in thousands)
Expected Maturity Dates Fair Value
December 25, 1999 2000 2001 2002 2003 2004 Thereafter Total Dec. 25, 1999
Rate sensitive assets:
Fixed interest rate securities $ 95,389 $ 110,263 $ 47,616 $ 28,325 $ 25,815 $ 34,739 $ 342,147 $ 350,204
Average interest rate 4.43% 4.42% 4.38% 4.38% 4.43% 4.47% 4.42%
Variable interest rate
securities $ 12,317 --- --- --- --- $ 1,000 $ 13,317 $ 13,317
Average interest rate 2.68% --- --- --- --- 3.48% 2.74%
(dollars in thousands) Expected Maturity Dates Fair Value
December 26, 1998 1999 2000 2001 2002 2003 Thereafter Total Dec. 26, 1998
Rate sensitive assets:
Fixed interest rate securities $ 68,315 $ 89,354 $ 108,763 $ 49,851 $ 15,635 --- $ 331,918 $ 349,347
Average interest rate 4.50% 4.46% 4.47% 4.45% 4.40% --- 4.48%
Variable interest rate
securities $ 29,950 --- --- --- --- $ 1,000 $ 30,950 $ 30,950
Average interest rate 2.50% --- --- --- --- 3.00% 2.52%
Other relevant market risks:
The Company's equity securities at December 26, 1998 had a cost
basis of $3,752,000 and a market value of $23,405,000. The
dividend yield realized on these equity investments was 1.22% in
1998. The Company's equity securities at December 25, 1999 had a
cost basis of $5,262,000 and a market value of $21,142,000. The
dividend yield realized on these equity investments was 1.59% in
1999. Market risk, as it relates to equities owned by the
Company, is discussed within the Liquidity and Capital Resources
section of Management's Discussion and Analysis of Financial
Condition and Results of Operations contained within this report.
Consolidated Balance Sheets
(dollars in thousands)
December 25, 1999 and December 26, 1998 1999 1998
Assets
Current:
Cash $ 4,552 $ 7,430
Marketable securities 384,663 403,702
Accounts receivable, net 34,737 32,735
Inventories 167,146 158,938
Prepaid expenses 5,672 4,979
Income taxes recoverable 399 ---
Deferred income taxes 5,399 434
_____________________________________________________________________________
Total current assets 602,568 608,218
_____________________________________________________________________________
Property and equipment, net 439,418 398,435
Intangible and other assets, net 16,235 22,549
_____________________________________________________________________________
$ 1,058,221 $ 1,029,202
=============================================================================
Liabilities
Current:
Accounts payable $ 82,742 $ 74,556
Accrued expenses 16,283 13,876
Accrued self-insurance 13,255 12,814
Payable to employee benefit plans 8,560 8,195
Income taxes payable --- 9,302
_____________________________________________________________________________
Total current liabilities 120,840 118,743
_____________________________________________________________________________
Deferred income taxes 18,904 19,818
_____________________________________________________________________________
Shareholders' Equity
Common stock, no par value,
100,800,000 shares authorized,
47,452,729 and 47,449,429
shares issued, respectively 7,559 7,471
Retained earnings 1,040,354 1,003,170
Accumulated other
comprehensive income
(Net of deferred taxes of
$5,208 in 1999 and $10,238 in
1998) 7,343 14,436
_____________________________________________________________________________
1,055,256 1,025,077
Treasury stock at cost,
5,760,854 and 5,693,585 shares,
respectively (136,779) (134,436)
_____________________________________________________________________________
Total shareholders' equity 918,477 890,641
_____________________________________________________________________________
$ 1,058,221 $ 1,029,202
=============================================================================
See accompanying notes to consolidated financial statements.
Consolidated Statements of Income
(dollars in thousands,
except per share amounts)
For the Fiscal Years Ended
December 25, 1999,December
26, 1998 and December 27, 1997 1999 1998 1997
Net sales $ 2,004,947 $ 1,867,492 $ 1,818,816
Cost of sales, including
warehousing and distribution
expenses 1,496,375 1,396,795 1,355,825
__________________________________________________________________________
Gross profit on sales 508,572 470,697 462,991
Operating, general and
administrative expenses 415,537 394,271 377,861
__________________________________________________________________________
Income from operations 93,035 76,426 85,130
Investment income 19,892 47,388 22,014
Other income 11,088 10,684 11,438
__________________________________________________________________________
Income before provision
for income taxes 124,015 134,498 118,582
Provision for income taxes 44,290 50,815 40,388
__________________________________________________________________________
Net income $ 79,725 $ 83,683 $ 78,194
==========================================================================
Weighted average
shares outstanding 41,718,188 41,775,991 41,842,583
Cash dividends per share $ 1.02 $ .98 $ .94
Basic and diluted earnings
per share $ 1.91 $ 2.00 $ 1.87
See accompanying notes to consolidated financial statements.
Consolidated Statements of Shareholders' Equity
Accumulated
(dollars in thousands) Other Total
For the Fiscal Years Ended December 25, 1999, Common Retained Comprehensive Treasury Shareholders'
December 26, 1998, and December 27, 1997 Stock Earnings Income Stock Equity
Balance at December 28, 1996 $ 7,380 $ 921,572 $ 15,123 $ (125,548) $ 818,527
Net income --- 78,194 --- --- 78,194
Other comprehensive income --- --- (1,845) --- (1,845)
_________
Comprehensive income 76,349
_________
Shares issued for options (1,500 shares) 40 --- --- --- 40
Treasury stock purchased (270,249 shares) --- --- --- (8,236) (8,236)
Dividends paid --- (39,347) --- --- (39,347)
________________________________________________________________________________________________________________________
Balance at December 27, 1997 7,420 960,419 13,278 (133,784) 847,333
Net income --- 83,683 --- --- 83,683
Other comprehensive income --- --- 1,158 --- 1,158
_______
Comprehensive income 84,841
_______
Shares issued for options (2,000 shares) 51 --- --- --- 51
Treasury stock purchased (18,263 shares) --- --- --- (652) (652)
Dividends paid --- (40,932) --- --- (40,932)
________________________________________________________________________________________________________________________
Balance at December 26, 1998 7,471 1,003,170 14,436 (134,436) 890,641
Net income --- 79,725 --- --- 79,725
Other comprehensive income --- --- (7,093) --- (7,093)
_______
Comprehensive income 72,632
_______
Shares issued for options (3,300 shares) 88 --- --- --- 88
Treasury stock purchased (67,269 shares) --- --- --- (2,343) (2,343)
Dividends paid --- (42,541) --- --- (42,541)
________________________________________________________________________________________________________________________
Balance at December 25, 1999 $ 7,559 $ 1,040,354 $ 7,343 $ (136,779) $ 918,477
========================================================================================================================
See accompanying notes to consolidated financial statements.
Consolidated Statements of Cash Flows
(dollars in thousands)
For the Fiscal Years Ended
December 25, 1999, December 26,
1998, and December 27, 1997 1999 1998 1997
Cash flows from operating activities:
Net income $ 79,725 $ 83,683 $ 78,194
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation 41,097 38,769 39,038
Amortization 5,179 7,547 4,465
(Gain) loss on sale of fixed assets (525) 1,136 (491)
Gain on sale of other assets (3,413) --- ---
Gain on sale of marketable securities (123) (30,394) (5,068)
Changes in operating assets and liabilities:
(Increase) decrease in inventories (8,208) 2,887 (2,478)
(Increase) decrease in accounts receivable
and prepaid expenses (2,695) (956) 3,867
Increase in income taxes recoverable (399) --- ---
Increase (decrease) in accounts payable
and other liabilities 11,399 11,351 (23,080)
Increase (decrease) in income
taxes payable (9,302) 5,333 2,313
Decrease in deferred income taxes (849) (3,797) (1,290)
_______________________________________________________________________________
Net cash provided by
operating activities 111,886 115,559 95,470
_______________________________________________________________________________
Cash flows from investing activities:
Purchase of property and equipment (86,660) (76,964) (64,171)
Proceeds from the sale of property
and equipment 1,641 433 1,433
Proceeds from the sale of other assets 8,012 --- ---
Purchase of marketable securities (62,565) (134,380) (127,925)
Proceeds from maturities of
marketable securities 69,479 100,503 135,394
Proceeds from sale of
marketable securities 125 44,326 8,122
Increase in intangible
and other assets --- (3,647) (525)
_______________________________________________________________________________
Net cash used in investing activities (69,968) (69,729) (47,672)
________________________________________________________________________________
Cash flows from financing activities:
Proceeds from issuance of common stock 88 51 40
Dividends paid (42,541) (40,932) (39,347)
Purchase of treasury stock (2,343) (652) (8,236)
________________________________________________________________________________
Net cash used in financing activities (44,796) (41,533) (47,543)
________________________________________________________________________________
Net increase (decrease) in cash (2,878) 4,297 255
Cash at beginning of year 7,430 3,133 2,878
________________________________________________________________________________
Cash at end of year $ 4,552 $ 7,430 $ 3,133
================================================================================
See accompanying notes to consolidated financial statements.
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies
The following is a summary of the significant accounting policies
utilized in preparing the Company's consolidated financial
statements:
(a) Description of Business. Weis Markets, Inc. is a
Pennsylvania business corporation formed in 1924. The Company is
engaged principally in the retail sale of food and pet supplies
in Pennsylvania and surrounding states. There was no material
change in the nature of the Company's business during fiscal
1999.
(b) Definition of Fiscal Year. The Company's fiscal year ends
on the last Saturday in December. Fiscal 1999, 1998, and 1997
were each comprised of 52 weeks.
(c) Principles of Consolidation. The consolidated financial
statements include the accounts of the Company and its
subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
(d) Marketable Securities. Marketable securities consist of
Pennsylvania tax-free state and municipal bonds, U.S. Treasury
securities, equity securities, and other short-term investments.
By policy, the Company invests primarily in high-grade marketable
securities. The Company classifies all of its marketable
securities as available-for-sale.
Available-for-sale securities are recorded at fair value as
determined by quoted market price. Unrealized holding gains and
losses, net of the related tax effect, are excluded from earnings
and are reported as a separate component of shareholders' equity
until realized. A decline in the market value below cost that is
deemed other than temporary results in a charge to earnings and
the establishment of a new cost basis for the security. Dividend
and interest income is recognized when earned. Realized gains
and losses are included in earnings and are derived using the
specific identification method for determining the cost of
securities.
(e) Inventories. Inventories are valued at the lower of cost or
market, using both the last-in, first-out (LIFO) and average cost
methods.
(f) Property and Equipment. Property and equipment are carried
at cost. Depreciation is provided on the cost of buildings and
improvements and equipment principally using accelerated methods.
Leasehold improvements are amortized over the terms of the leases
or the useful lives of the assets, whichever is shorter.
Maintenance and repairs are expensed and renewals and
betterments are capitalized. When assets are retired or
otherwise disposed of, the assets and accumulated depreciation
are removed from the respective accounts and any profit or loss
on the disposition is credited or charged to income.
(g) Intangible Assets. Intangible assets are generally
amortized over periods ranging from 15 to 40 years.
(h) Insurance Programs. The Company maintains self-insurance
programs for the majority of its employee health care benefits
and workers compensation claims. Self-insurance costs are
accrued based upon the aggregate of the liability for reported
claims and an estimated liability for claims incurred but not
reported. The Company is liable for employee health claims up to
a lifetime aggregate of $1,000,000 per member and for workers
compensation claims up to $1,000,000 per claim. Property and
casualty insurance coverage is maintained with outside carriers
at deductible or retention levels ranging from $0 to $250,000.
(i) Incentive Plans. The Company has elected to follow the
Accounting Principles Board's Opinion No. 25, "Accounting for
Stock Issued to Employees" (APB 25) and related Interpretations
in accounting for its employee stock options because the
alternative fair value accounting provided for under FASB
Statement No. 123, "Accounting for Stock-Based Compensation,"
(Statement No. 123) requires use of option valuation models that
were not developed for use in valuing employee stock options.
The effect of applying Statement No. 123's fair value method to
the Company's stock-based awards results in pro forma net income
and earnings per share that are not materially different from
amounts reported.
(j) Income Taxes. Under the asset and liability method of the
FASB Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (Statement No. 109), deferred tax
assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled.
(k) Earnings Per Share. Basic and diluted earnings per share
are the same amounts for all periods presented.
(l) Use of Estimates. Management of the Company has made a
number of estimates and assumptions relating to the reporting of
assets and liabilities and the disclosure of contingent assets
and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
Notes to Consolidated Financial Statements (continued)
Note 2 Marketable Securities
Marketable securities, as of December 25, 1999 and December 26,
1998, consisted of:
Gross Gross
Unrealized Unrealized
December 25, 1999 Amortized Holding Holding Fair
(dollars in thousands) Cost Gains Losses Value
Available-for-sale:
Pennsylvania state and
municipal bonds $ 353,511 $ 140 $ 3,448 $ 350,203
U.S. Treasury
securities 1,022 --- 21 1,001
Equity securities 5,262 15,950 70 21,142
Other short-term
investments 12,317 --- --- 12,317
_________________________________________________________________________
$ 372,112 $ 16,090 $ 3,539 $ 384,663
=========================================================================
Gross Gross
Unrealized Unrealized
December 26, 1998 Amortized Holding Holding Fair
(dollars in thousands) Cost Gains Losses Value
Available-for-sale:
Pennsylvania state
and municipal bonds $ 344,305 $ 4,996 $ --- $ 349,301
U.S. Treasury
securities 1,021 25 --- 1,046
Equity securities 3,752 19,653 --- 23,405
Other short-term
investments 29,950 --- --- 29,950
__________________________________________________________________________
$ 379,028 $ 24,674 $ --- $ 403,702
==========================================================================
Maturities of marketable securities classified as available-
for-sale at December 25, 1999, were as follows:
Amortized Fair
(dollars in thousands) Cost Value
Available-for-sale:
Due within one year $ 104,659 $ 104,713
Due after one year through
five years 224,530 222,389
Due after five years
through ten years 37,661 36,419
Equity securities 5,262 21,142
______________________________________________________________________
$ 372,112 $ 384,663
======================================================================
See additional disclosures regarding marketable securities
in notes 1(d) and 11.
Note 3 Inventories
Merchandise inventories, as of December 25, 1999 and December 26,
1998, were valued as follows:
(dollars in thousands) 1999 1998
LIFO $ 128,237 $ 112,897
Average cost 38,909 46,041
_______________________________________________________________
$ 167,146 $ 158,938
===============================================================
If all inventories were valued on the average cost method,
which approximates current cost, total inventories would have
been $43,499,000 and $44,111,000 higher than as reported on the
above methods as of December 25, 1999 and December 26, 1998,
respectively.
Although management believes the use of the LIFO method for
valuing certain inventories (as set forth above) represents the
most appropriate matching of costs and revenues in the Company's
circumstances, the following summary of net income and per share
amounts based on the use of the average cost method for valuing
all inventories is presented for comparative purposes.
(dollars in thousands,
except per share amounts) 1999 1998 1997
Net income $ 79,368 $ 83,732 $ 78,208
Basic and diluted
earnings per share $ 1.90 $ 2.00 $ 1.87
Note 4 Property and Equipment
Property and equipment, as of December 25, 1999 and December 26,
1998, consisted of:
Useful Life
(dollars in thousands) (in years) 1999 1998
Land $ 63,732 $ 58,151
Buildings and improvements 10-60 310,137 277,694
Equipment 3-12 441,771 413,703
Leasehold improvements 5-20 81,133 67,840
___________________________________________________________________
Total, at cost 896,773 817,388
Less accumulated depreciation
and amortization 457,355 418,953
___________________________________________________________________
$ 439,418 $ 398,435
===================================================================
Note 5 Lease Commitments
At December 25, 1999, the Company leased approximately 59% of its
open store facilities under operating leases that expire at
various dates up to 2026. These leases generally provide for
fixed annual rentals; however, several provide for minimum annual
rentals plus contingent rentals as a percentage of annual sales
and a number of leases require the Company to pay for all or a
portion of insurance, real estate taxes, water and sewer rentals,
and repairs, the cost of which is charged to the related expense
category rather than being accounted for as rent expense. Most
of the leases contain multiple renewal options, under which the
Company may extend the lease terms from 5 to 20 years.
Notes to Consolidated Financial Statements (continued)
Rent expense on all leases consisted of:
(dollars in thousands) 1999 1998 1997
Minimum annual rentals $ 25,794 $ 24,294 $ 22,899
Contingent rentals 286 245 252
______________________________________________________________________
$ 26,080 $ 24,539 $ 23,151
======================================================================
The following is a schedule by year of future minimum rental
payments required under operating leases that have initial or
remaining non-cancelable lease terms in excess of one year as of
December 25, 1999.
(dollars in thousands)
2000 $ 25,109
2001 26,437
2002 25,312
2003 24,333
2004 22,746
Thereafter 186,268
___________________________________________________
$ 310,205
===================================================
The Company has $2,227,000 accrued for future minimum rental
payments due on previously closed stores, reduced by the
estimated sub-rental income to be received. The future minimum
rental payments required under operating leases for these
locations are included in the above schedule.
As of December 25, 1999, the future minimum rentals to be
received under non-cancelable leases and subleases were
$9,674,000.
Note 6 Retirement Plans
The Company has a contributory retirement savings plan (401(k))
covering substantially all full-time employees, a noncontributory
profit-sharing plan covering eligible employees, a
noncontributory employee stock bonus plan covering eligible
employees, and two supplemental retirement plans covering certain
officers of the Company. An eligible employee as defined in the
Weis Markets, Inc. Profit Sharing Plan includes salaried
employees, store management and administrative support personnel.
The Company's policy is to fund 401(k), profit-sharing and stock
bonus costs accrued, but not supplemental retirement costs.
Contributions to the 401(k) plan, the profit-sharing plan, and
the stock bonus plan are made at the sole discretion of the
Company.
The Company's supplemental retirement plans provide for the
payment of specific amounts of annual retirement benefits to the
officers or to their beneficiaries over an actuarially computed
normal life expectancy. The actuarial present value of
accumulated benefits amounted to $7,197,000 and $6,875,000 at
December 25, 1999, and December 26, 1998, respectively. Plan
costs are based upon the deferral of retirement rather than upon
future service and all benefits are fully vested.
Retirement plan costs amounted to:
(dollars in thousands) 1999 1998 1997
Pension plan $ --- $ (329) $ 3,937
Retirement savings plan 401(k) 907 899 842
Profit-sharing plan 850 815 815
Employee stock bonus plan 40 40 40
Supplemental retirement plans 600 655 605
_________________________________________________________________________
$ 2,397 $ 2,080 $ 6,239
=========================================================================
In 1997, the Company initiated settlement of the benefit
obligations associated with its terminated defined benefit plan.
Benefit obligations of $30,250,000 were settled prior to the end
of the 1997 plan year to the majority of plan participants,
resulting in the recognition of a partial settlement gain of
$1,584,000. Settlement of all benefit obligations was completed
in 1998.
The change in the Company's pension plan benefit obligation
and the plan assets at December 31, 1999 and December 31, 1998,
is as follows:
(dollars in thousands) 1999 1998
Change in benefit obligation:
Benefit obligation at beginning of year $ --- $ 6,277
Benefits paid --- (6,277)
_______________________________________________________________________
Benefit obligation at end of year $ --- $ ---
=======================================================================
Change in plan assets:
Fair value of plan assets at
beginning of year $ --- $ 6,277
Benefits paid --- (6,277)
_______________________________________________________________________
Fair value of plan assets at end of year $ --- $ ---
=======================================================================
(dollars in thousands) 1999 1998 1997
Weighted-average assumptions:
Discount rate --- 7.0% 7.0%
Expected return on plan assets --- 7.5% 7.5%
Rate of compensation increase --- 5.0% 5.0%
Components of net periodic benefit cost:
Interest cost $ --- $ --- $ 2,305
Expected return on plan assets --- --- (2,356)
Partial settlement --- --- (1,584)
Amortization of unrecognized
net transition asset --- (300) (331)
Amortization of prior
service costs --- --- 5,901
Recognized net actuarial loss --- (29) 2
____________________________________________________________________________
Net periodic benefit cost $ --- $ (329) $ 3,937
============================================================================
The Company has no other post-retirement benefit plans.
Notes to Consolidated Financial Statements (continued)
Note 7 Incentive Plans
(a) Stock Option Plan
The Company has an incentive stock option plan for officers and
other key employees under which 232,239 shares of common stock
are reserved for issuance at December 25, 1999. Under the terms
of the plan, option prices are 100% of the "fair market value" of
the shares on the date granted. Options granted are immediately
exercisable and expire ten years after date of grant.
Changes during the three years ended December 25, 1999, in
options outstanding under the plan were as follows:
Weighted Average Shares
Exercise Price Under Option
Balance, December 28, 1996 $28.50 34,590
Granted $32.88 13,500
Exercised $26.79 (1,500)
____________________________________________________________________________
Balance, December 27, 1997 $29.82 46,590
Granted $34.31 15,478
Exercised $25.44 (2,000)
Forfeited $29.03 (450)
____________________________________________________________________________
Balance, December 26, 1998 $31.14 59,618
Granted $37.53 41,761
Exercised $26.79 (3,300)
Forfeited $31.46 (12,359)
____________________________________________________________________________
Balance, December 25, 1999 $34.37 85,720
============================================================================
Exercise prices for options outstanding as of December 25,
1999 ranged from $26.25 to $37.94. The weighted-average
remaining contractual life of those options is 7.1 years. As of
December 25, 1999, all options are exercisable.
(b) Company Appreciation Plan
Under a Company Appreciation Plan, officers and other employees
are awarded rights equivalent to shares of Company common stock.
At the maturity date, usually one year after the date of award,
the value of any appreciation from the original date of issue is
paid in cash to the participants.
During 1999, 1998 and 1997, 55,200, 43,600 and 39,150
rights, respectively, were awarded under the program. In 1999,
1998 and 1997, $295,000, $152,000 and $102,000, respectively,
were charged to earnings.
Note 8 Income Taxes
The provision for income taxes consists of:
(dollars in thousands) 1999 1998 1997
Currently payable:
Federal $ 33,936 $ 40,842 $ 30,817
State 11,203 13,770 10,861
Deferred ( 849) (3,797) (1,290)
______________________________________________________________________
$ 44,290 $ 50,815 $ 40,388
======================================================================
The following is a reconciliation between the applicable
income tax expense and the amount of income taxes that would have
been provided at the Federal statutory rate. The statutory rate
was 35% in 1999, 1998 and 1997.
(dollars in thousands) 1999 1998 1997
Tax at statutory rate $ 43,405 $ 47,074 $ 41,504
State income taxes, net
of federal income tax benefit 7,282 8,951 7,059
Other - principally tax-exempt
investment income (6,397) (5,210) (8,175)
______________________________________________________________________
Actual provision (effective
tax rate 35.7%, 37.8% and
34.1%, respectively) $ 44,290 $ 50,815 $ 40,388
======================================================================
Cash paid for income taxes was $52,809,000, $49,353,000 and
$37,281,000 in 1999, 1998 and 1997, respectively.
The tax effects of temporary differences that give rise to
deferred tax assets and deferred tax liabilities at December 25,
1999 and December 26, 1998, are presented below:
(dollars in thousands) 1999 1998
Deferred tax assets:
Accounts receivable $ 1,236 $ 591
Inventories 2,005 1,839
Compensated absences 666 621
Employee benefit plans 3,726 3,600
General liability insurance 2,341 2,454
Other 633 1,567
________________________________________________________________
Total deferred tax assets 10,607 10,672
Deferred tax liabilities:
Unrealized gain on
marketable securities ( 5,208) (10,238)
Depreciation (18,904) (19,818)
________________________________________________________________
Total deferred tax liabilities (24,112) (30,056)
________________________________________________________________
Net deferred tax liability $ (13,505) $ (19,384)
________________________________________________________________
Current deferred asset -- net $ 5,399 $ 434
Noncurrent deferred liability -- net (18,904) (19,818)
________________________________________________________________
Net deferred tax liability $ (13,505) $ (19,384)
================================================================
Note 9 Comprehensive Income
(dollars in thousands) 1999 1998 1997
Net income $ 79,725 $ 83,683 $ 78,194
Other comprehensive income
by component, net of tax:
Unrealized holding gains
(losses) arising during period
(Net of deferred taxes of
($5,031), $13,432, and $793,
respectively) (7,093) 18,942 1,120
Reclassification adjustment
for gains included in net
income (Net of deferred taxes
of $0, $12,610, and $2,103,
respectively) --- (17,784) (2,965)
_____________________________________________________________________
Other comprehensive income,
net of tax (7,093) 1,158 (1,845)
_____________________________________________________________________
Comprehensive income $ 72,632 $ 84,841 $ 76,349
=====================================================================
Notes to Consolidated Financial Statements (continued)
Note 10 Summary of Quarterly Results (Unaudited)
Quarterly financial data for 1999 and 1998 are as follows:
(dollars in thousands,
except per share amounts) Thirteen Weeks Ended
Mar. 27, '99 June 26, '99 Sep. 25, '99 Dec. 25, '99
Net sales $ 496,281 $ 490,019 $ 492,293 $ 526,354
Gross profit on sales 125,190 124,516 128,992 129,874
Net income 21,191 19,199 19,150 20,185
Basic and diluted
earnings per share .51 .46 .46 .48
(dollars in thousands,
except per share amounts) Thirteen Weeks Ended
Mar. 28, '98 June 27, '98 Sep. 26, '98 Dec. 26, '98
Net sales $ 454,723 $ 457,566 $ 463,296 $ 491,907
Gross profit on sales 114,166 114,885 117,670 123,976
Net income 26,618 16,738 18,436 21,891
Basic and diluted
earnings per share .64 .40 .44 .52
Note 11 Fair Value Information
The carrying amounts for cash, trade receivables and trade
payables approximate fair value because of the short maturities
of these instruments. The fair values of the Company's
marketable securities, as disclosed in Note 2, are based on
quoted market prices.
Note 12 Acquisitions
On February 22, 1999, the Company acquired four Bi-Lo Foods
stores located in central Pennsylvania from Penn Traffic, Inc.
On August 16, 1998, the Company acquired one store, doing
business as Cressler's Marketplace, located in Shippensburg, PA.
Both acquisitions were cash-only transactions accounted for by
the purchase method. Goodwill arising from these transactions,
which is not material, is being amortized over a 15-year period
on a straight-line basis.
Note 13 Subsequent Event
On December 10, 1999, the Company signed an agreement to acquire
four store locations from Fleming Food Companies, Inc., subject
to satisfaction of certain conditions including approval from the
Federal Trade Commission. The Company closed the deal and took
possession of two central Pennsylvania stores on January 17, 2000
and two Maryland stores on January 31, 2000.
Note 14 Contingencies
The Company is involved in various legal actions arising out of
the normal course of business. In the opinion of management, the
ultimate disposition of these matters will not have a material
adverse effect on the Company's consolidated financial position,
results of operations or liquidity.
Note 15 Shareholder Matter
On November 30, 1999, certain Company shareholders filed
documents seeking to replace the Company's Board of Directors
through a special meeting of its shareholders and a proxy vote.
On December 22, an agreement was reached with these shareholders
that resulted in the withdrawal of their request and began a
process to review strategic alternatives to increase shareholder
value. On March 1, 2000, after a careful review conducted by its
financial advisor, Morgan Stanley Dean Witter, the Company
announced that transactions other than the sale of the Company
would best serve the interests of its shareholders. While the
Company is actively reviewing other alternatives, it is possible
that no such transaction will ultimately be proposed or effected.
This matter had no significant effect on the accompanying
financial statements.
Report of Independent Auditors
The Board of Directors and Shareholders
Weis Markets, Inc.
Sunbury, Pennsylvania
We have audited the accompanying consolidated balance sheets of
Weis Markets, Inc. as of December 25, 1999 and December 26, 1998,
and the related consolidated statements of income, shareholders'
equity, and cash flows for each of the three years in the period
ended December 25, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require
that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of Weis Markets, Inc. at December 25, 1999 and
December 26, 1998, and the consolidated results of its operations
and its cash flows for each of the three years in the period
ended December 25, 1999, in conformity with accounting principles
generally accepted in the United States.
Harrisburg, PA Ernst &Young LLP
March 1, 2000 Signature
Five Year Review of Operations
52 Weeks 52 Weeks 52 Weeks 52 Weeks 52 Weeks
(dollars in thousands, Ended Ended Ended Ended Ended
except per share amounts) Dec. 25, 1999 Dec. 26, 1998 Dec. 27, 1997 Dec. 28, 1996 Dec. 30, 1995
Net sales $ 2,004,947 $ 1,867,492 $ 1,818,816 $ 1,753,246 $ 1,646,435
Costs and expenses 1,911,912 1,791,066 1,733,686 1,662,620 1,560,238
___________________________________________________________________________________________________________
Income from operations 93,035 76,426 85,130 90,626 86,197
Other income, net 30,980 58,072 33,452 30,083 35,520
___________________________________________________________________________________________________________
Income before provision for
income taxes 124,015 134,498 118,582 120,709 121,717
Provision for income taxes 44,290 50,815 40,388 41,854 42,297
___________________________________________________________________________________________________________
Net income 79,725 83,683 78,194 78,855 79,420
Retained earnings,
beginning of year 1,003,170 960,419 921,572 879,916 834,995
___________________________________________________________________________________________________________
1,082,895 1,044,102 999,766 958,771 914,415
Cash dividends 42,541 40,932 39,347 37,199 34,499
___________________________________________________________________________________________________________
Retained earnings,
end of year $ 1,040,354 $ 1,003,170 $ 960,419 $ 921,572 $ 879,916
===========================================================================================================
Weighted average
shares outstanding 41,718,188 41,775,991 41,842,583 42,280,352 43,083,449
===========================================================================================================
Cash dividends per share $ 1.02 $ .98 $ .94 $ .88 $ .80
===========================================================================================================
Basic and diluted earnings
per share $ 1.91 $ 2.00 $ 1.87 $ 1.87 $ 1.84
===========================================================================================================
Working capital $ 481,728 $ 489,475 $ 471,562 $ 463,255 $ 491,135
Total assets $ 1,058,221 $ 1,029,202 $ 971,752 $ 966,312 $ 923,421
Shareholders' equity $ 918,477 $ 890,641 $ 847,333 $ 818,527 $ 791,562
Number of grocery stores 163 158 154 155 151
Number of pet supply stores 34 36 43 43 35
Corporate Directory
board of directors officers Richard L. Kunkle
Robert F. Weis Robert F. Weis Vice President
Chairman and Treasurer Chairman and Treasurer Pharmacy
Norman S. Rich Norman S. Rich Edward W. Rakoskie
President President Vice President
Operations
William R. Mills William R. Mills registrar and transfer agent
Vice President Vice President American Stock Transfer &
Finance and Secretary Finance and Secretary Trust
40 Wall Street, 46th Floor
New York, NY 10005
Jonathan H. Weis Jonathan H. Weis (718) 921-8210
Vice President Vice President
Property Management Property Management auditors
and Development and Development Ernst & Young LLP
Commerce Court, Suite 200
Richard E. Shulman Wayne S. Bailey 2601 Market Place
President, Industry Vice President Harrisburg, PA 17110-9359
Systems Development Grocery Merchandising
Corporation stock traded
New York Stock Exchange
Joseph I. Goldstein Alan L. Barrick
Partner, Kirkpatrick Vice President
and Lockhart, LLP Engineering and Manufacturing
Michael M. Apfelbaum Stephen J. Bowers
Partner, Apfelbaum, Vice President
Apfelbaum & Apfelbaum, Weis Food Service
Attorneys at Law
Walter B. Bruce
Vice President
Private Label
Harold G. Graber
Vice President
Real Estate
Stock Prices and Dividend Information by Quarter
The approximate number of shareholders including individual
participants in security positions listings on December 25, 1999
as provided by the Company's transfer agent was 7,172.
1999 1998
___________________________________________________________________________
4th 3rd 2nd 1st 4th 3rd 2nd 1st
___________________________________________________________________________
Stock Prices
High 43 3/8 40 38 7/8 40 1/4 38 1/2 37 1/2 36 5/8 35 13/16
Low 33 33 5/8 32 7/8 35 5/8 33 1/4 33 5/8 35 3/16 33 7/8
Dividends Per
Share .26 .26 .25 .25 .25 .25 .24 .24
(This page contains a picture of a Weis Markets tractor-trailer.)
Weis Markets Inc.
1000 S. 2nd Street
Sunbury, PA 17801-0471
EXHIBIT 21
WEIS MARKETS, INC.
SUBSIDIARIES OF THE REGISTRANT
Percent
State of Owned by
Incorporation Registrant
Albany Public Markets, Inc. New York 100%
Dutch Valley Food Company, Inc. Pennsylvania 100%
King's Supermarkets, Inc. Pennsylvania 100%
Martin's Farm Market, Inc. Pennsylvania 100%
Shamrock Wholesale Distributors, Inc. Pennsylvania 100%
SuperPetz II, Inc. Pennsylvania 100%
The consolidated financial statements include the accounts of the
Company and its subsidiaries.
EXHIBIT 23
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual
Report (Form 10-K) of Weis Markets, Inc. of our report dated
March 1, 2000 included in the 1999 Annual Report to Shareholders
of Weis Markets, Inc.
(Signed Ernst & Young LLP)
Harrisburg, Pennsylvania
March 1, 2000