UNITED STATES
SECRITIES 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 26, 1998 Commission file number 1-5039
WEIS MARKETS, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 24-0755415
(State or other jurisdiction of (IRS Employee Identification No.)
incorporation or organization)
1000 South Second Street, Sunbury, PA 17801
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 717-286-4571
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 $835,951,000. Shares of common stock outstanding
as of February 05, 1999 - 41,755,813.
The index to Exhibits is located in Part IV, Item 14(c).
DOCUMENTS INCORPORATED BY REFERENCE
Selected portions of the 1998 Weis Markets, Inc. Annual Report to Shareholders
are incorporated by reference in Part II and Part IV of this Form 10-K.
Selected portions of the Weis Markets, Inc. definitive proxy statement dated
March 4, 1999 are incorporated by reference in Part III of this Form 10-K.
<PAGE>
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 1998.
(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 131 retail food markets in Pennsylvania, 19
in Maryland, 2 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 18 Pennsylvania stores which trade as Mr. Z's Food
Mart, 6 Pennsylvania stores which trade as King Supermarkets, 4
Pennsylvania stores which trade as Save A Lot, 3 Pennsylvania
stores which trade as Scot's Lo Cost, 1 Pennsylvania store which
trades as Cressler's Marketplace, and 1 Pennsylvania store which
trades as Big Top Market. During the past fiscal year, 6 new
stores were opened, one of which was a replacement for an older
unit. One store was closed for remodel and expansion. 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, 7 stores in South Carolina, and
6 stores in Tennessee. Seven 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 26, 1998 was:
Year Grocery Meat Produce Pharmacy Pet Supply Other
1994 59.76 14.67 11.06 4.04 10.47
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
(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.
<PAGE>
WEIS MARKETS, INC.
(c)(1)(x) The business of the Company is highly competitive, and, in the
areas served by it, the Company competes based on price and
service with national retail food chains, local chains and many
independent food stores. The following list includes, but is not
limited to, the competitors of the Company: A&P, Acme Markets,
Aldi, BiLo, Festival Foods, Giant Eagle, Giant Foods of Carlisle,
Giant Foods of Landover, Insalaco, K-Mart, Riverside Markets,
Sam's, Shop Rite, Super Rite, Super Valu, and Walmart. On the
basis of sales volume, the Company believes it is the leading food
retailer in the majority of the areas in which it operates.
(c)(1)(xiii) The Company has approximately 19,500 employees.
Item 2. Properties:
The Company owns and operates 79 of its retail food stores and
leases and operates 79 stores under operating leases for varying
periods of time up to the year 2025. SuperPetz leases all 36 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 1998.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters:
"Stock Prices and Dividend Information by Quarter" on page 16
and "Stock Traded" on the inside back cover of the 1998 Weis
Markets, Inc. Annual Report to Shareholders are incorporated
herein by reference.
<PAGE>
WEIS MARKETS, INC.
The approximate number of shareholders on December 26, 1998 is
determined by the Company's transfer agent.
Item 6. Selected Financial Data:
"Five-Year Review of Operations" on page 16 of the 1998 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 6 and 7 of the 1998 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 16 of the
1998 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 pages 6 and 7
of the 1998 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 1998 Weis Markets, Inc. Annual Report to Shareholders: The
consolidated financial statements on pages 8 through 10, the notes
to consolidated financial statements on pages 11 through 15, and
the independent auditors' report on page 15.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure:
None.
PART III
Item 10. Directors and Executive Officers of the Registrant:
"Election of Directors" on pages 4 and 5 of the Weis Markets,
Inc. definitive proxy statement dated March 4, 1999 is
incorporated herein by reference.
<PAGE>
WEIS MARKETS, INC.
Item 11. Executive Compensation:
"Board Compensation Committee Report on Executive Compensation,"
"Summary Compensation Table," "Option/SAR Grants in Last Fiscal
Year," "Aggregated Option/SAR Exercises in Last Fiscal Year and
FY-End Option/SAR Values," "Retirement Plans," "Shareholder
Return Performance," "Comparative Five-Year Total Returns," and
"Comparative Ten-Year Income Percentages," on pages 6 through 10
of the Weis Markets, Inc. definitive proxy statement dated March
4, 1999 are incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management:
"Outstanding Voting Securities and Voting Rights" on pages 3 and
4 of the Weis Markets, Inc. definitive proxy statement dated March
4, 1999 is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions:
"Compensation of Directors", "Compensation Committee Interlocks
and Insider Participation", "Board Compensation Committee Report
on Executive Compensation," "Summary Compensation Table,"
"Option/SAR Grants in Last Fiscal Year," "Aggregated Option/SAR
Exercises in Last Fiscal Year and FY-End Option/SAR Values,"
"Retirement Plans," "Shareholder Return Performance,"
"Comparative Five-Year Total Returns," and "Comparative Ten-
Year Income Percentages," on pages 5 through 10 of the Weis
Markets, Inc., definitive proxy statement dated March 4, 1999 are
incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K:
The following information is incorporated herein by reference from
the 1998 Weis Markets, Inc. Annual Report to Shareholders: The
consolidated financial statements on pages 8 through 10, the notes
to consolidated financial statements on pages 11 through 15, and
the independent auditors' report on page 15.
(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 26, 1998.
<PAGE>
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 26, 1998
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.
The foregoing exhibits are available upon request from
the Secretary of the Company at a fee of $10.00 per
copy.
<PAGE>
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
<PAGE>
EXHIBIT 10-D
WEIS MARKETS, INC.
1995
STOCK OPTION PLAN
WEIS MARKETS, INC.
As Amended and Restated October 1, 1998
I. Definitions.
A. As used in this Plan the following definitions apply to the terms
indicated below:
"Board" means the Board of Directors of Weis Markets, Inc.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Executive Compensation Committee of the Board.
"Company" means Weis Markets, Inc., a Pennsylvania Corporation.
"Eligible employee" means any employee who is at the date of the
granting of an option hereunder an executive or administrative employee of the
Company or of any subsidiary corporation now or hereafter existent, and who at
the time receives regular base compensation from the Company or any
subsidiary, or any combination thereof, at a rate or rates aggregating $8,000
or more per year. For the purposes of this Plan the Committee shall have the
authority to determine whether or not an employee is an executive or
administrative employee, but these terms shall be limited to employees having
administrative responsibility involving the use of judgment or discretion in
the direction of the activities of others, and any other employees customarily
considered as executive line or staff personnel. The determination of base
compensation may be made by annualizing the regular base compensation rate in
effect with respect to an employee at the payroll period last preceding the
date of grant of the option. The term eligible employee shall not include an
individual possessing more than ten (10) percent of the total combined voting
power of all classes of stock of the Company or of its parent or subsidiary
corporation if such entity may exist in the future. Also, the term eligible
employee shall not include a member of the Committee.
"Incentive Stock Option" means an Option granted under the Plan
pursuant to Section 422 of the Code.
"Nonstatutory Stock Option" means an Option granted under the Plan
which does not qualify under Section 422 of the Code.
"Option" means an option for the purchase of Shares under the Plan.
Each Option shall be represented by an Option certificate in such form, not
inconsistent with the Plan, as the Committee may authorize for general use or
for specific cases from time to time, which shall be executed by the Company
and the Participant, provided that each Option certificate shall specify
whether the underlying Option is intended to be an Incentive Stock Option or a
Nonstatutory Stock Option.
"Option period" means a period of time expressed in months from the
date of grant of an Option, during which an Option becomes exercisable by its
terms.
"Participant" means any holder of an Option granted under the Plan.
"Plan" means this stock option plan.
"Shares" means shares of the Company's capital stock reserved for the
purposes of the Plan.
<PAGE>
WEIS MARKETS, INC.
STOCK OPTION PLAN
(continued)
B. An Option shall be effectively "granted" under this Plan on the
date specified by the Committee, provided however that grants of Options under
the Plan are subject to approval by the Board. Any recipient of an Option who
serves on the Board shall abstain from any discussion or vote concerning the
grant of any Options.
C. As used herein the masculine includes the feminine and the plural
includes the singular.
II. Shares Subject to the Plan.
There may be issued pursuant to the Plan Options for the Purchase of not
more than 300,000 Shares. In the event of any change in the Shares, as a
result of recapitalization, stock split, combination of shares or stock
dividend (but in the case of a stock dividend only if and to the extent that
all of such stock dividends within one fiscal year shall increase the number
of outstanding shares by more than 5%), appropriate adjustment shall be made
in the total number of Shares to which the Plan relates, in the number of
Shares allocable to any one employee pursuant to Options, and in the number of
Shares subject to outstanding unexercised Options, and with respect to the
purchase price per Share payable upon exercise, so as to prevent undue
appreciation or dilution of the rights conferred by any Option, or of the
Shares reserved for the purposes of the Plan. No adjustment or substitution
provided for in this Section II shall require the Company to issue or sell a
fraction of a Share or other security. Accordingly, all fractional Shares or
other securities which result from any such adjustment or substitution shall
be eliminated and not carried forward to any subsequent adjustment or
substitution. If any such adjustment or substitution provided for in this
Section II requires the approval of shareholders in order to enable the
Company to grant Incentive Stock Options, then no such adjustment or
substitution shall be made without the required shareholder approval.
Notwithstanding the foregoing, in the case of Incentive Stock Options, if the
effect of any such adjustment or substitution would be to cause the Option to
fail to continue to qualify as an Incentive Stock Option or to cause a
modification, extension or renewal of such Option within the meaning of
Section 424 of the Code, the Committee may elect that such adjustment or
substitution not be made but rather shall use reasonable efforts to effect
such other adjustment of each then outstanding Option as the Committee, in its
discretion, shall deem equitable and which will not result in any
disqualification, modification, extension or renewal (within the meaning of
Section 424 of the Code) of such Incentive Stock Option.
III. Allocation of Shares.
The Committee may at any time during the term of this Plan allocate
Shares to any eligible employee under and pursuant to an Incentive Stock
Option and/or a Nonstatutory Stock Option, subject to prior allocation of
Shares under previously granted Options to the same or other persons and
provided that Incentive Stock Options and Nonstatutory Stock Options may not
be granted in tandem. The aggregate number of Shares allocable to any one
employee, pursuant to one or more Options, shall not exceed 20,000 Shares in
any one calendar year. Notwithstanding any other provision contained in the
Plan or in any Option certificate, the aggregate fair market value, determined
as provided in Section V of the Plan on the date of grant, of the Shares with
respect to which Incentive Stock Options are exercisable for the first time by
an employee during any calendar year under all plans of the corporation
employing such employee, any parent or subsidiary corporation of such
corporation and any predecessor corporation of any such corporation shall not
exceed $100,000. If any Option is canceled, or terminates or lapses in whole
or in part for any reason other than the termination of the Plan as a whole,
any number of Shares not purchased thereunder shall forthwith become available
again for allocation under new Options in accordance with the Plan.
<PAGE>
WEIS MARKETS, INC.
STOCK OPTION PLAN
(continued)
IV. Plan Term.
Subject to the provisions hereinafter contained relating to amendment or
discontinuance, this Plan shall continue in effect until December 31, 2004;
and no Option may be granted hereunder after such date, which is less than ten
years from the earlier of the date of the adoption of the Plan by the Board
and its approval by the shareholders of the Company. The effective date of
the Plan shall be February 1, 1995.
V. Option Price.
The price at which the Shares may be purchased pursuant to any Option
shall be 100% of the fair market value of the Shares on the date of the grant.
The "fair market value" of Shares on any day shall be determined by the
Committee in any proper manner in accordance with the following paragraph,
including determinations based upon the quotations for the Company's stock on
any national securities exchange on which it may be listed at the time, or
upon the opinions of one or more brokerage firms.
For all purposes under the Plan, fair market value of the Shares shall
be the mean between the following prices, as applicable, for the date as of
which fair market value is to be determined as quoted in The Wall Street
Journal (or in such other reliable publication as the Committee, in its
discretion, may determine to rely upon): (a) if the Shares are listed on the
New York Stock Exchange, the highest and lowest sales prices per share of the
Shares as quoted in the NYSE-Composite Transactions listing for such date, (b)
if the Shares are not listed on such exchange, the highest and lowest sales
prices per share of Shares for such date on (or on any composite index
including) the principal United States securities exchange registered under
the Securities Exchange Act of 1934 on which the Shares are listed, or (c) if
the Shares are not listed on any such exchange, the highest and lowest sales
prices per share of Shares for such date on the National Association of
Securities Dealers Automated Quotations System or any successor system then in
use ("NASDAQ"). If there are no such sale price quotations for the date as
of which fair market value is to be determined but there are such sale price
quotations within a reasonable period both before and after such date, then
fair market value shall be determined by taking a weighted average of the
means between the highest and lowest sales prices per share of the Shares as
so quoted on the nearest date before and the nearest date after the date as of
which fair market value is to be determined. The average should be weighted
inversely by the respective numbers of trading days between the selling dates
and the date as of which fair market value is to be determined. If there are
no such sale price quotations on or within a reasonable period both before and
after the date as of which fair market value is to be determined, then fair
market value of the Shares shall be the mean between the bona fide bid and
asked prices per share of the Shares as so quoted for such date on NASDAQ, or
if none, the weighted average of the means between such bona fide bid and
asked prices on the nearest trading date before and the nearest trading date
after the date as of which fair market value is to be determined, if both such
dates are within a reasonable period. The average is to be determined in the
manner described above in this Section V. If the fair market value of the
Shares cannot be determined on the basis previously set forth in this Section
V on the date as of which fair market value is to be determined, the Committee
shall in good faith determine the fair market value of the Shares on such
date. Fair market value shall be determined without regard to any restriction
other than a restriction which, by its terms, will never lapse.
VI. Option Period.
No Option hereunder shall be exercisable after the expiration of ten
(10) years from the date such Option is granted.
<PAGE>
WEIS MARKETS, INC.
STOCK OPTION PLAN
(continued)
VII. Conditions Relating to Exercise.
A. No Option shall be transferable by the grantee thereof otherwise
than by will or the laws of descent and distribution.
B. All Options granted hereunder shall be exercisable during the
lifetime of the grantee only by him.
C. Subject to the foregoing, any Option granted pursuant to the Plan
shall be exercisable immediately and to the extent exercisable at any time may
be exercised in whole or in part, and the Option shall be no longer
exercisable after a period of ten (10) years from the date such Option is
granted.
D. Payment for Shares purchased shall be made in full in cash upon
exercise.
E. Certificates for Shares purchased shall be issued and delivered at
the time when the Option is exercised and payment therefor is received by the
Company.
F. An Option shall be exercised by delivering to the Company (or, if
mailed to the Company, upon receipt by the Company), at 1000 South Second
Street, Sunbury, Pennsylvania, a written notice signed by the Participant
stating the number of Shares the Participant desires to purchase, enclosing
payment or instructions for delivery against payment for such Shares at the
Option price then in effect provided, that for purposes of determining whether
any Options have been timely exercised, no Option shall be considered
exercised until the Company actually receives the exercise price.
G. Any person exercising an Option shall comply with all regulations
and requirements of any Governmental authority having jurisdiction over the
issuance or sale of capital stock of the Company, and as a condition to
receiving any Shares shall execute all such instruments as the Company in its
sole discretion may deem necessary or advisable.
H. The Company may stamp, type or print upon any certificate issued
pursuant to exercise of any Option any legend deemed proper by the Company, in
its sole judgment and discretion, for the purpose of permitting it to comply,
or to facilitate its compliance, with any and all provisions of law now or
hereafter in force with respect to the issue or transfer of or reporting with
respect to any Shares issued pursuant to an Option.
VIII. Termination of Employment.
In the event of termination of a Participant's employment for any cause
other than death or dismissal for conduct injurious to the Company's business
or interests (as determined by the Board or Committee), the Participant may
exercise any portion of the Option, not theretofore exercised, which has or
under the terms of the Option become exercisable before the Participant's
termination of employment, before the expiration of three months following the
date of termination of his employment plus such additional portion or
portions, if any, as the Participant may be permitted to exercise with the
specific consent of the Committee; provided, however, that if the Participant
shall engage in any conduct injurious to the Company's business or interests
in any material way (as determined in the sole discretion of the Board or
Committee), then all rights under the Option shall forthwith lapse and
terminate.
<PAGE>
WEIS MARKETS, INC.
STOCK OPTION PLAN
(continued)
IX. Rights in the Event of Death.
In the case of the death of a Participant, any Option then held by him,
which shall not have lapsed or terminated prior to death, shall continue in
force and shall be exercisable from time to time, to the same extent as though
the decedent had remained alive for the entire period of the Option, by this
executor, administrator, legatees or distributees of his estate (his
"successors"); provided, however, that if his successors shall engage in any
conduct injurious to the business or interests of the Company in any material
way (as determined in the sole discretion of the Board or Committee), then all
rights under the Option shall forthwith lapse and terminate.
X. Powers of the Committee.
Except as provided in Section I.B. of the Plan, the Plan shall be
administered by the Committee, subject to the general supervision of the
Board. The Board is hereby authorized subject to the provisions of the Plan
to prescribe, amend and rescind rules and regulations of general application
relating to the Plan and to make all other determinations (except as
aforesaid) necessary or advisable for its administration. Any power granted
to the Committee (except as aforesaid), either in this Plan or by the Board,
may at any time be exercised by the Board.
XII. Amendment and Discontinuance.
A. The Board is authorized to make such amendments to the Plan as shall
be necessary to bring it into conformity with any regulation of any
Governmental body having jurisdiction, and may otherwise alter the Plan
subject, however, to prior or subsequent approval by the shareholders of the
Company if the amendment would decrease the Option price or increase the
number of Shares included in the Plan or the number allocable to any one
person, or make any change in the class of employees eligible to receive
Incentive Stock Options under the Plan, or would involve any factor which in
the opinion of counsel for the Company might affect qualification under the
Code in effect at the time or compliance with applicable SEC regulations. The
Board may at any time suspend or discontinue the Plan. No action of the Board
or shareholders may increase or may impair any Option granted under the Plan
except as herein provided.
B. In the event of merger or consolidation of the Company into any
other corporation, or in the event of the adoption of a Plan of complete or
partial liquidation by requisite vote of the shareholders of the Company, the
Plan and all outstanding Options shall terminate on the effective date of such
merger or consolidation, or upon a date specified by the Board in case of a
liquidation, provided that the Company shall make reasonable efforts to induce
any corporate successor or prospective successor to assume all outstanding
unexercised Options, with equitable adjustments of the Option price and number
of Shares purchasable thereunder in light of the securities of the successor
issued in the merger or consolidation.
C. Neither the Company nor any director or officer shall be liable to
any person for anything done or omitted in administration of the Plan or any
Option. The issuance of stock upon proper and timely exercise of any Option
may be compelled by an order of specific performance by any court of competent
jurisdiction provided, however, that the obligation of the Company to issue
Shares under the Plan shall be subject to (i) the effectiveness of a
registration statement under the Securities Act of 1933, as amended, with
respect to such Shares, if deemed necessary or appropriate by counsel for the
Company, (ii) the condition that the Shares shall have been listed (or
authorized for listing upon official notice of issuance) upon each stock
exchange, if any, on which the Shares may then be listed and (iii) all other
applicable laws, regulations, rules and orders which may then be in effect.
<PAGE>
EXHIBIT 13
WEIS MARKETS, INC.
(cover page)
growing
bigger (This area contains a picture of the exterior
and interior of a superstore simultaneously
under construction and after completion.)
& better
Weis Markets, Inc.
1998 Annual Report
<PAGE>
Sustained Growth
(This area contains three pictures. Interior pictures of a new Weis Markets
superstore's Delicatessen, Produce and Bakery area. The background is of a
superstore under construction.)
In 1965, Weis Markets, a small regional supermarket company, went public
on the New York Stock Exchange (WMK: NYSE). At the time, Weis Markets
employed 2,000 people, operated 52 stores throughout Central Pennsylvania and
generated sales of $111 million.
Over the next four decades, the Weis Markets story would be one of
sustained growth and profitability. Today, Weis Markets employs over 19,500
people and operates 158 stores in Pennsylvania, Maryland, New Jersey, New
York, Virginia and West Virginia. In 1998, the Company's total sales were
$1,867,492,000.
However, a storied past is no guarantee of future success. Today,
sustained growth and adaptability to changing customer needs are the keys to
maintaining success in the marketplace. Throughout 1998, Weis Markets met
both challenges as it created value for its customers and shareholders.
<PAGE>
Financial
Highlights
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 Net Sales from 1994 through 1998.) of Shareholders Equity at the end of
each year, from 1994 through 1998.)
1994 $1.557 1994 $762
1995 $1.646 1995 $792
1996 $1.753 1996 $819
1997 $1.819 1997 $847
1998 $1.867 1998 $891
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 Grocery Stores in operation at the
of each year, from 1994 through 1998.) end each year, from 1994 through 1998.)
1994 16,500 1994 149
1995 17,800 1995 151
1996 18,400 1996 155
1997 18,600 1997 154
1998 19,500 1998 158
Financial Highlights
(dollars in thousands, except per share amounts)
For the Fiscal Years Ended December 26, 1998,
December 27, 1997, and December 28, 1996 1998 1997 1996
================================================================================
Net sales $ 1,867,492 $ 1,818,816 $ 1,753,246
Income before provision for income taxes 134,498 118,582 120,709
Net income 83,683 78,194 78,855
Cash dividends 40,932 39,347 37,199
Shareholders' equity 890,641 847,333 818,527
Depreciation and amortization 46,316 43,503 38,136
Basic and diluted earnings per share 2.00 1.87 1.87
Cash dividends per share $ .98 $ .94 $ .88
Shares outstanding 41,755,844 41,772,107 42,040,856
Number of grocery stores 158 154 155
Number of pet supply stores 36 43 43
<PAGE>
Growing Value
(There is a picture in this area of Robert F. Weis, Chairman & Treasurer, and
Norman S. Rich, President.)
Norman S. Rich and Robert F. Weis
Letter To Our Shareholders
We are pleased to report that earnings for Weis Markets for the 52-week fiscal
year ended December 26, 1998 increased 7.0% to $83,683,000, compared to
$78,194,000 in 1997. Sales in 1998 increased 2.7% to $1,867,492,000 compared
to $1,818,816,000 for the previous year. Same-store sales were up 1.5%.
Earnings per share increased $.13 to $2.00 per share, compared to $1.87 in
1997. In August, Weis Markets' Board of Directors increased the quarterly
dividend for the 33rd consecutive year to $.25 per share or 4.2%. Return on
equity was 9.6% and shareholder equity increased to $890,641,000, compared to
$847,333,000 in 1997.
These are strong results, achieved in an intensely competitive marketplace and
at a time of continued food deflation in a number of key categories. We
attribute the growth in sales and earnings to the continued success of the
most ambitious expansion in our company's history, a strong and varied
merchandising program and a one-time gain from the sale of securities held by
your company.
In 1998, we marked the fourth year of our expansion program. During the year,
we built and opened superstores in Lancaster and Selinsgrove, Pennsylvania,
Glen Burnie, Maryland and Franklin, New Jersey. We also completed seven store
additions and six remodels. In addition, we completed the purchase of another
superstore in August. As a result, we increased our retail space by 298,551
square-feet or 5.0%, more than double the rate of our growth in 1997. At
year's end, our retail space totaled 6,527,244 square-feet. Also in 1998, our
SuperPetz subsidiary closed seven under performing units and an additional one
in early 1999.
<PAGE>
Letter To Our Shareholders
(continued)
We also made substantial investments in our company's infrastructure and
support systems in 1998. During the year, we finished the upgrade of our
front-end systems throughout the chain, completing work in fifty stores. This
upgrade has greatly enhanced our company's promotional and front-end
capabilities.
In July, we finished the construction of a 16,500 square foot trailer salvage
center for our Distribution Center in Milton, Pennsylvania. This salvage
center greatly improves our ability to process the return of reusable shipping
containers and clean inbound trailers in an efficient and cost-effective
manner.
Overall, we invested $80.6 million in 1998 for new stores, remodels and
expansions, support facilities and technology purchases. As in past years,
our expansion and growth has been financed with internally generated funds.
And as in past years, your company remains debt-free.
In merchandising, we successfully completed the chain-wide rollout of our Weis
Club Preferred Shopper program, which we first introduced in 1996. We also
introduced our new Kid's Club, which is an extension of our Preferred Shopper
Program.
In 1999, we plan to accelerate our expansion program. We have already opened
one superstore, a 53,088 square foot unit in Laurel, Maryland and have begun
the construction of superstores in Pasadena, Maryland and Mt. Olive, New
Jersey. Over the next 18 months, we hope to build 17 superstores and expand
or remodel 18 others. Please note this schedule is subject to change, due to
the approval process and construction schedules for individual stores.
We also plan to complete the installation of a new buying system in 1999 and
expect to begin work on a new warehouse management system later in the year.
Our new capital expansion budget for the next 18 months is $173,615,000, which
includes all store projects, additional construction, new equipment and
technology purchases. We plan to finance this new round of expansion with
internally generated funds.
As we move into the final year of the 20th Century, we have much to be proud
of and even more to be grateful for. We know our success would not be
possible without the help and dedication of our employees' both past and
present. Today, your company employs more than 19,500 associates. They are
at the heart of our success. With their help, we look forward to another year
of sustained growth and progress.
Robert F. Weis Norman S. Rich
Chairman and Treasurer President
<PAGE>
Ambitious Expansion
(This area contains three pictures: interior pictures of a new Weis Markets
superstore's Pharmacy, Produce and Salad Bar areas.)
This was the fourth year of the most ambitious expansion in Weis
Markets' history. In 1998, Weis Markets invested $80.6 million to complete
the construction of four superstores, acquire an additional unit, make
additions to seven units and remodel six others. Since expansion commenced in
1995, your company has completed construction of 28 superstores and expanded
or remodeled 47 others.
Equally important is our new store design, introduced in 1995 when our
expansion began. This new design enables the Company to compete effectively
against a wide rage of retailers; including other supermarkets, drug stores,
mass merchandisers and fast food outlets. It offers our customers more
options and increased convenience.
Another important part of convenience starts with store location. We
want our stores to be part of a neighborhood's skyline. Shorter drives to the
store mean convenience for our customers and repeat business. According to a
recent industry study, no other class of trade sees their customers with more
frequency. Today, the average customer visits a supermarket 88 times a year,
compared to 34 for mass merchandisers and 16 for drug stores.
<PAGE>
The new store design includes:
- - Larger delicatessens with a pizza kitchen and an express register. Our
delis offer simple, quality hot foods and variety of heat-and-serve meals for
the customer in search of a quick meal. In fact, many of our stores now do a
great lunch business.
- - Much larger produce departments with a fresh-cut fruit and salad bar. Ten
years ago, the typical produce department offered 250 items. Today, our
produce departments offer up to 500 items, including a selection of organic
items and our From the Field private label produce items. Our new produce
departments also have large floral departments offering a variety of seasonal
floral items, plants and fresh-cut flowers.
- - Expanded pet and baby departments. By comparison, our typical store stocks
more than 1,000 additional products than similar departments in other
supermarkets. These expanded sections help us compete against other classes
of trade.
(This area contains a cartoon picture of the Weis Kids Club mascots.)
In addition, our merchandising program has continued to build on the
successful rollout of our Weis Club Card, which took place in 1996. In 1998,
we introduced the Weis Kids Club, which is designed to make the shopping
experience more family friendly, particularly for young children, and offer
good values on products that appeal to children and their parents.
And of course, we continue to expand our private label program, which
now offers over 2,600 products.
(This area contains a picture of a new Weis Markets superstore's Perishable
Foods area.)
<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Results of Operations
Sales for the fiscal year ended December 26, 1998 increased $48,676,000
to $1,867,492,000, up 2.7% compared to sales of $1,818,816,000 in 1997.
Company sales in 1997 increased 3.7% compared to sales in 1996. Same-store
sales in 1998, 1997, and 1996 increased 1.5%, 1.3%, and 3.0% respectively.
Management attributes the sales increases over the past three years largely
to its aggressive expansion program since food price inflation has been
flat. Over the last three years, the Company has constructed 20 new
superstores, completed 15 store enlargements/remodels, and completed 22
remodels of its existing units.
In 1998, gross profit increased by $7,706,000 or 1.7% to $470,697,000
compared to $462,991,000, in 1997. Gross profit as a percentage of sales has
declined slightly over the last three years running 25.2%, 25.5% and 25.7% in
1998, 1997 and 1996, respectively. Management attributes the decrease in the
gross profit rate over the last three years to a more aggressive promotional
strategy and low inflation, or deflation, in key food categories. There have
been minimal LIFO inventory adjustments over the past three years. Earnings
were charged $84,000 for the LIFO adjustment in 1998, compared with a charge
of $27,000 in 1997 and a credit of $336,000 in 1996.
Operating, general and administrative expenses increased $16,410,000 or
4.3% compared to 1997. Expenses in 1998 were $394,271,000 at 21.1% of sales
compared with 20.8% in 1997 and 20.5% in 1996. Depreciation and amortization
expenses increased $2,813,000 to 2.5% of sales compared to 2.4% in 1997 and
2.2% in 1996. In 1998, Company management determined that certain intangible
assets exceeded future benefits and reduced the carrying amount of these
assets $2,789,000 to their fair value during the current year. Management
accrued $5,624,000 for exit costs associated with the closing of several
SuperPetz stores. A substantial portion of the expenses increased in direct
proportion with the sales volume increase. In 1997, the Company expensed
$3,312,000 for an unrealizable asset relating to SuperPetz and $3,937,000
related to the termination of the Weis Markets, Inc. Pension Plan.
In 1998, the Company's investment income increased $25,374,000 to
$47,388,000 at 2.5% of sales. This amount compares to $22,014,000, at 1.2% of
sales in 1997 and $19,617,000 at 1.1% of sales in 1996. The Company realized
a gain on the sale of marketable securities of $30,394,000 during 1998 and a
gain of $5,068,000 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 acquisition and other
investment opportunities. Therefore, all securities are classified as
available-for-sale on the consolidated balance sheets.
Other income of $10,684,000, at .6% of sales decreased $754,000 or 6.6%
in 1998 compared to 1997. Other income is chiefly generated from rental
income, coupon-handling fees, cardboard salvage, and gains on sales of
fixed assets. The fluctuation between other income in 1998 and 1997
is attributable to a gain realized on sales of fixed assets during 1997,
compared to a loss realized in 1998. The 1998 loss resulted from the
disposition of assets associated with the significant number of store
remodels and expansions completed during the year.
The effective tax rate was 37.8% in 1998, 34.1% in 1997, and 34.7% in
1996. The tax rate increase in 1998 is due to the increase in taxable
investment income. Investment income generated in 1998 from tax-free
marketable securities held by the Company was marginally higher than in 1997.
Net income in 1998 was $83,683,000, or 4.5% of sales, compared with
$78,194,000, or 4.3% of sales in 1997, and $78,855,000, or 4.5% of sales in
1996. Basic and diluted earnings per share of $2.00 in 1998 compared to $1.87
in both 1997 and 1996. The after-tax loss in the SuperPetz stores amounted to
$9,548,000 in 1998 compared with an after-tax loss of $6,939,000 in 1997 and
$3,485,000 in 1996. Exit costs related to the closing of several SuperPetz
stores accounts for approximately $4,638,000 of the after-tax loss generated
from those retail units in 1998.
As of the end of the fiscal year, Weis Markets, Inc. was operating 158
retail food stores, 36 SuperPetz pet supply stores and Weis Food Service, a
restaurant and institutional supplier. The Company currently operates
supermarkets in Pennsylvania, Maryland, New Jersey, New York, Virginia and
West Virginia. SuperPetz operates stores in Alabama, Georgia, Indiana,
Kentucky, Maryland, Michigan, North Carolina, Ohio, Pennsylvania, South
Carolina and Tennessee.
Liquidity and Capital Resources
Net cash provided by operating activities in 1998 was $115,559,000,
compared to $95,470,000 in 1997 and $103,666,000 in 1996. Depreciation and
amortization increased in 1998 by $2,813,000 or 6.5% primarily due to the
previously noted write down of certain intangible assets to their fair value.
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 $30,394,000 from
these transactions. A large percentage of the increase in accounts payable
and other liabilities during 1998 is related to the accrual of store closing
costs for several SuperPetz stores. Accounts payable and other liabilities
fluctuated in 1997 and 1996 primarily due to the timing of normal vendor
payment terms. Working capital increased 3.8% in 1998, increased 1.8% in
1997, and decreased 5.7% in 1996.
Net cash used in investing activities during 1998 was $69,729,000,
compared to $47,672,000 in 1997 and $51,808,000 in 1996. Property and
equipment purchases during fiscal 1998 totaled $76,964,000, compared to
$64,171,000 in 1997 and $95,289,000 in 1996. Intangible and other assets
increased $3,647,000 in 1998 due mainly to store acquisitions. Proceeds
from the sale and maturity of marketable securities of $144,829,000 during
1998 were used in the purchase of $134,380,000 in 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.
Net cash used in financing activities during 1998 was $41,533,000, compared
to $47,543,000 in 1997 and $52,265,000 in 1996. Treasury stock purchases
amounted to $652,000 in 1998, compared to $8,236,000 in 1997 and $15,066,000
in 1996. The Board of Directors' 1996 resolution authorizing the purchase of
treasury stock has a remaining balance of 645,922 shares. Total cash dividend
payments on common stock amounted to $.98 per share in 1998, compared to $.94
in 1997 and $.88 in 1996.
<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations
(continued)
The Company funded its 1998 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 $173,615,000 over the next eighteen months. The
Company continues to pursue acquisitions and investment opportunities to
enhance future financial performance. 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. In view of
the Company's significant liquid assets, lack of debt financing, and its
ability to generate working capital internally, it is not expected that any
type of external financing will be needed for these activities.
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 consists 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
may be found on page 16 of this report.
Year 2000 Compliance
The Year 2000, also known as Y2K, issue is the result of computer programs
written using two digits rather than four to define the applicable year within
its calculations. In 1995, the Company began evaluating its information
technology systems and various other systems in order to identify and adjust
date sensitive systems for Year 2000 compliance. In 1996, a project group
comprised of management from various areas within the organization was
established to coordinate the Company's Year 2000 compliance efforts. This
project group is also working with the Company's various suppliers and
contractors to determine their Year 2000 compliance status and to monitor
their compliance progress. Bi-weekly updates and periodic status reports from
the project group keep executive management informed of the team's progress.
The Company's Year 2000-project group has completed its assessment of all
systems potentially affected by the Year 2000 problem. To date, approximately
85% of the remediation, testing and implementation has been completed on all
software applications and hardware systems used within the Company. Outside
consultants are being utilized as needed.
All software applications and embedded chip technology reprogramming,
replacement, testing, and implementation are scheduled for completion by June
30, 1999. Management believes the most critical Year 2000 area remaining to
be fully rectified is the Company's own store billing applications. To this
end, modifications to the billing applications are scheduled to be completed,
tested and in production by June 30, 1999.
The Company does not believe that the Year 2000 issue presents a material
exposure as it relates to its overall operations and feels its own efforts
will result in full compliance. Management has estimated that total Year 2000
remediation expenditures will cost between $2.0 to $2.5 million.
Consequently, the Year 2000 issue should not have a material impact on the
operational results or on the liquidity and capital resources of the Company.
Normal maintenance and modification costs are being expensed as incurred and
the acquisition cost of new software or hardware is being capitalized and
written off over the expected useful life of the asset.
Management believes it has an effective program in place to resolve its
Year 2000 issue in a timely manner. As a precaution, the Year 2000-project
group is in the process of establishing contingency plans. These plans will
provide viable alternatives to ensure that the Company's core business
operations will be able to continue in the event of a Year 2000 related
systems failure. This contingency planning is also scheduled for completion
by June 30, 1999. 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 a material and adverse effect on the
Company's future operational results.
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.
<PAGE>
Consolidated Balance Sheets
(dollars in thousands)
December 26, 1998 and December 27, 1997 1998 1997
==============================================================================
Assets
Current:
Cash $ 7,430 $ 3,133
Marketable securities 403,702 374,117
Accounts receivable, net 32,735 32,609
Inventories 158,938 161,825
Prepaid expenses 4,979 4,149
Deferred income taxes 434 ---
______________________________________________________________________________
Total current assets 608,218 575,833
______________________________________________________________________________
Property and equipment, net 398,435 365,197
Intangible and other assets, net 22,549 30,722
______________________________________________________________________________
$ 1,029,202 $ 971,752
==============================================================================
Liabilities
Current:
Accounts payable $ 74,556 $ 68,788
Accrued expenses 13,876 9,257
Accrued self-insurance 12,814 11,911
Payable to employee benefit plans 8,195 8,134
Income taxes payable 9,302 3,969
Deferred income taxes --- 2,212
______________________________________________________________________________
Total current liabilities 118,743 104,271
______________________________________________________________________________
Deferred income taxes 19,818 20,148
______________________________________________________________________________
Shareholders' Equity
Common stock, no par value, 100,800,000
shares authorized, 47,449,429 and 47,447,429
shares issued, respectively 7,471 7,420
Retained earnings 1,003,170 960,419
Accumulated other comprehensive income
(Net of deferred taxes of $10,238 in 1998
and $9,417 in 1997) 14,436 13,278
______________________________________________________________________________
1,025,077 981,117
Treasury stock at cost, 5,693,585 and
5,675,322 shares, respectively (134,436) (133,784)
______________________________________________________________________________
Total shareholders' equity 890,641 847,333
______________________________________________________________________________
$ 1,029,202 $ 971,752
==============================================================================
See accompanying notes to consolidated financial statements.
<PAGE>
Consolidated Statements of Income
(dollars in thousands, except per share amounts)
For the Fiscal Years Ended December 26, 1998,
December 27, 1997, and December 28, 1996 1998 1997 1996
==============================================================================
Net sales $ 1,867,492 $ 1,818,816 $ 1,753,246
Cost of sales, including warehousing
and distribution expenses 1,396,795 1,355,825 1,303,214
______________________________________________________________________________
Gross profit on sales 470,697 462,991 450,032
Operating, general and
administrative expenses 394,271 377,861 359,406
______________________________________________________________________________
Income from operations 76,426 85,130 90,626
Investment income 47,388 22,014 19,617
Other income 10,684 11,438 10,466
______________________________________________________________________________
Income before provision for income taxes 134,498 118,582 120,709
Provision for income taxes 50,815 40,388 41,854
______________________________________________________________________________
Net income $ 83,683 $ 78,194 $ 78,855
==============================================================================
Weighted average shares outstanding 41,775,991 41,842,583 42,280,352
Cash dividends per share $ .98 $ .94 $ .88
Basic and diluted earnings per share $ 2.00 $ 1.87 $ 1.87
==============================================================================
See accompanying notes to consolidated financial statements.
<TABLE>
Consolidated Statements of Shareholders' Equity
<CAPTION>
(dollars in thousands) Accumulated
For the Fiscal Years Ended Other Total
December 26, 1998, December 27, Common Retained Comprehensive Treasury Shareholders'
1997, and December 28, 1996 Stock Earnings Income Stock Equity
=========================================================================================================
<S> <C> <C> <C> <C> <C>
Balance at December 30, 1995 $ 7,380 $ 879,916 $ 14,748 $ (110,482) $ 791,562
Net income --- 78,855 --- --- 78,855
Other comprehensive income --- --- 375 --- 375
___________
Comprehensive income 79,230
___________
Treasury stock purchased (492,761 shares) --- --- --- (15,066) (15,066)
Dividends paid --- (37,199) --- --- (37,199)
_________________________________________________________________________________________________________
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
=========================================================================================================
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
Consolidated Statements of Cash Flows
(dollars in thousands)
For the Fiscal Years Ended December 26, 1998,
December 27, 1997, and December 28, 1996 1998 1997 1996
==============================================================================
Cash flows from operating activities:
Net income $ 83,683 $ 78,194 $ 78,855
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 38,769 39,038 34,220
Amortization 7,547 4,465 3,916
(Gain) Loss on sale of fixed assets 1,136 (491) 19
Gain on sale of marketable securities (30,394) (5,068) (40)
Changes in operating assets and
liabilities:
(Increase) decrease in inventories 2,887 (2,478) (27,620)
(Increase) decrease in accounts
receivable and prepaid expenses (956) 3,867 (1,344)
Increase (decrease) in accounts payable
and other liabilities 11,351 (23,080) 15,173
Increase (decrease) in income
taxes payable 5,333 2,313 (2,421)
Increase (decrease) in deferred
income taxes (3,797) (1,290) 2,908
______________________________________________________________________________
Net cash provided by operating activities 115,559 95,470 103,666
______________________________________________________________________________
Cash flows from investing activities:
Purchase of property and equipment (76,964) (64,171) (95,289)
Proceeds from the sale of
property and equipment 433 1,433 255
Purchase of marketable securities (134,380) (127,925) (81,567)
Proceeds from maturities of
marketable securities 100,503 135,394 126,571
Proceeds from sale of marketable securities 44,326 8,122 57
Increase in intangible and other assets (3,647) (525) (1,835)
______________________________________________________________________________
Net cash used in investing activities (69,729) (47,672) (51,808)
______________________________________________________________________________
Cash flows from financing activities:
Proceeds from issuance of common stock 51 40 ---
Dividends paid (40,932) (39,347) (37,199)
Purchase of treasury stock (652) (8,236) (15,066)
______________________________________________________________________________
Net cash used in financing activities (41,533) (47,543) (52,265)
______________________________________________________________________________
Net increase (decrease) in cash 4,297 255 (407)
Cash at beginning of year 3,133 2,878 3,285
______________________________________________________________________________
Cash at end of year $ 7,430 $ 3,133 $ 2,878
==============================================================================
See accompanying notes to consolidated financial statements.
<PAGE>
Notes to Consolidated Financial Statements
(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 1998.
(b) Definition of Fiscal Year
The Company's fiscal year ends on the last Saturday in December. Fiscal 1998,
1997, and 1996 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, 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) Retirement Plans
In February 1998, the Financial Accounting Standards Board's (FASB) Statement
of Financial Accounting Standards No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits" (Statement 132), was issued.
Statement 132 revises employers' disclosures about pension and other
postretirement benefit plans. The adoption of Statement 132 had no impact on
the Company's consolidated results of operations, financial position, or cash
flows. The Company has provided restatement of disclosures for earlier
periods for comparative purposes.
(j) 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 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 proforma net income and
earnings per share that are not materially different from amounts reported.
(k) Pre-Opening Costs
Pre-opening costs of retail stores are charged against earnings as incurred.
(l) Income Taxes
Under the asset and liability method of the FASB Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (Statement 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.
(m) Earnings Per Share
Basic and diluted earnings per share are the same amounts for all periods
presented, and dual presentation is accomplished in one line on the statements
of income.
(n) Comprehensive Income
As of December 28, 1997, the Company adopted FASB Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (Statement
130). Statement 130 establishes new rules for the reporting and display of
comprehensive income and its components; however, the adoption of this
Statement had no impact on the Company's net income or shareholders' equity.
Statement 130 requires unrealized gains or losses on the Company's available-
for-sale securities, which prior to adoption was reported separately in
shareholders' equity, to be included in other comprehensive income. Prior
year financial statements have been reclassified to conform to the
requirements of Statement 130.
<PAGE>
Notes to Consolidated Financial Statements
(continued)
(o) 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.
(p) Reclassifications
Certain amounts in the 1997 and 1996 financial statements have been
reclassified to conform to the current year presentation.
(2) Marketable Securities
Marketable securities, as of December 26, 1998, and December 27, 1997,
consisted of:
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
=============================================================================
Gross Gross
Unrealized Unrealized
December 27, 1997 Amortized Holding Holding Fair
(dollars in thousands) Cost Gains Losses Value
=============================================================================
Available-for-sale:
Pennsylvania state and
municipal bonds $ 329,043 $ 2,674 $ 92 $ 331,625
U.S. Treasury securities 10,418 12 1 10,429
Equity Securities 9,058 20,102 --- 29,160
Other short-term investments 2,903 --- --- 2,903
_____________________________________________________________________________
$ 351,422 $ 22,788 $ 93 $ 374,117
=============================================================================
Maturities of marketable securities classified as available-for-sale at
December 26, 1998, were as follows:
Amortized Fair
(dollars in thousands) Cost Value
Available-for-sale:
Due within one year $ 98,348 $ 98,947
Due after one year through five years 275,928 280,350
Due after five years through ten years 1,000 1,000
Equity securities 3,752 23,405
_____________________________________________________________________________
$ 379,028 $ 403,702
=============================================================================
See additional disclosures regarding marketable securities in notes 1(d)
and 11.
(3) Inventories
Merchandise inventories, as of December 26, 1998, and December 27, 1997, were
valued as follows:
(dollars in thousands) 1998 1997
=============================================================================
LIFO $ 112,897 $ 115,338
Average cost 46,041 46,487
_____________________________________________________________________________
$ 158,938 $ 161,825
=============================================================================
If all inventories were valued on the average cost method, which
approximates current cost, total inventories would have been
$44,111,000 and $44,027,000 higher than as reported on the above methods
as of December 26, 1998, and December 27, 1997, 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) 1998 1997 1996
=============================================================================
Net income $ 83,732 $ 78,208 $ 78,658
Basic and diluted earnings per share $ 2.00 $ 1.87 $ 1.86
=============================================================================
(4) Property and Equipment
Property and equipment, as of December 26, 1998, and December 27, 1997,
consisted of:
Useful Life
(dollars in thousands) (in years) 1998 1997
=============================================================================
Land $ 58,151 $ 52,612
Buildings and improvements 10-60 277,694 253,543
Equipment 3-12 413,703 378,400
Leasehold improvements 5-20 67,840 63,814
_____________________________________________________________________________
Total, at cost 817,388 748,369
Less accumulated depreciation and amortization 418,953 383,172
_____________________________________________________________________________
$ 398,435 $ 365,197
=============================================================================
(5) Lease Commitments
At December 26, 1998, the Company leased approximately 60% of its facilities
under operating leases that expire at various dates up to 2025. 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.
<PAGE>
Notes to Consolidated Financial Statements
(continued)
Rent expense on all leases consisted of:
(dollars in thousands) 1998 1997 1996
=============================================================================
Minimum annual rentals $ 24,294 $ 22,899 $ 20,536
Contingent rentals 245 252 169
_____________________________________________________________________________
$ 24,539 $ 23,151 $ 20,705
=============================================================================
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 26, 1998.
(dollars in thousands)
=============================================================================
1999 $ 24,996
2000 25,493
2001 23,982
2002 22,722
2003 21,771
Thereafter 173,695
_____________________________________________________________________________
$ 292,659
=============================================================================
The Company accrued $5,001,000 for future minimum rental payments due on
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 26, 1998, the future minimum rentals to be received under
non-cancelable leases and subleases were $9,699,000.
(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
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 $6,875,000 and
$6,522,000 at December 26, 1998, and December 27, 1997, 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) 1998 1997 1996
=============================================================================
Pension plan $ (329) $ 3,937 $ (883)
Retirement savings plan 401(k) 899 842 831
Profit-sharing plan 815 815 814
Employee stock bonus plan 40 40 40
Supplemental retirement plans 655 605 417
_____________________________________________________________________________
$ 2,080 $ 6,239 $ 1,219
=============================================================================
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, 1998, and December 31, 1997, is as follows:
(dollars in thousands) 1998 1997
=============================================================================
Change in benefit obligation:
Benefit obligation at beginning of year $ 6,277 $ 28,978
Interest cost --- 2,305
Amendments --- 5,901
Actuarial gain --- 796
Benefits paid (6,277) (31,703)
_____________________________________________________________________________
Benefit obligation at end of year $ --- $ 6,277
_____________________________________________________________________________
Change in plan assets:
Fair value of plan assets at beginning of year $ 6,277 $ 31,448
Actual return on plan assets --- 6,532
Benefits paid (6,277) (31,703)
_____________________________________________________________________________
Fair value of plan assets at end of year $ --- $ 6,277
_____________________________________________________________________________
Unrecognized net gain $ --- $ (29)
Unrecognized transition asset --- (300)
_____________________________________________________________________________
Accrued benefit cost $ --- $ (329)
=============================================================================
(dollars in thousands) 1998 1997 1996
_____________________________________________________________________________
Weighted-average assumptions:
Discount rate 7.0% 7.0% 7.0%
Expected return on plan assets 7.5% 7.5% 8.5%
Rate of compensation increase 5.0% 5.0% 5.0%
Components of net periodic benefit cost:
Interest cost $ --- $ 2,305 $ 1,835
Expected return on plan assets --- (2,356) (2,387)
Partial settlement --- (1,584) ---
Amortization of unrecognized net
transition asset (300) (331) (331)
Amortization of prior service costs --- 5,901 ---
Recognized net actuarial loss (29) 2 ---
_____________________________________________________________________________
Net periodic benefit cost $ (329) $ 3,937 $ (883)
=============================================================================
The Company has no other post-retirement benefit plans.
<PAGE>
Notes to Consolidated Financial Statements
(continued)
(7) Incentive Plans
(a) Stock Option Plan
The Company has an incentive stock option plan for officers and other key
employees under which 258,522 shares of common stock are reserved for issuance
at December 26, 1998. 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 26, 1998, in options
outstanding under the plan were as follows:
Weighted Average Shares
Exercise Price Under Option
=============================================================================
Balance, December 30, 1995 $26.80 22,390
Granted $31.50 12,500
Expired $26.50 (300)
_____________________________________________________________________________
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
=============================================================================
Exercise prices for options outstanding as of December 26, 1998 ranged from
$25.25 to $31.50. The weighted-average remaining contractual life of those
options is 6.5 years. As of December 26, 1998, 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 1998, 1997, and 1996, 43,600, 39,150, and 28,200 rights,
respectively, were awarded under the program. In 1998, 1997, and 1996,
$152,000, $102,000, and $96,000, respectively, were charged to earnings.
(8) Income Taxes
The provision for income taxes consists of:
(dollars in thousands) 1998 1997 1996
=============================================================================
Currently payable:
Federal $ 40,842 $ 30,817 $ 29,013
State 13,770 10,861 9,580
Deferred (3,797) (1,290) 3,261
_____________________________________________________________________________
$ 50,815 $ 40,388 $ 41,854
=============================================================================
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 1998, 1997, and 1996.
(dollars in thousands) 1998 1997 1996
=============================================================================
Tax at statutory rate $ 47,074 $ 41,504 $ 42,248
State income taxes, net of federal
income tax benefit 8,951 7,059 6,227
Other - principally tax-exempt
investment income (5,210) (8,175) (6,621)
_____________________________________________________________________________
Actual provision (effective tax
rate 37.8%, 34.1% and 34.7%,
respectively) $ 50,815 $ 40,388 $ 41,854
=============================================================================
Cash paid for income taxes was $49,353,000, $37,281,000, and $41,772,000 in
1998, 1997, and 1996, respectively.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
26, 1998, and December 27, 1997, are presented below:
(dollars in thousands) 1998 1997
=============================================================================
Deferred tax assets:
Accounts receivable $ 591 $ 457
Inventories 1,839 1,673
Compensated absences 621 580
Employee benefit plans 3,600 3,412
General liability insurance 2,454 2,299
Other 1,567 ---
_____________________________________________________________________________
Total deferred tax assets 10,672 8,421
_____________________________________________________________________________
Deferred tax liabilities:
Unrealized gain on marketable securities (10,238) (9,417)
Depreciation (19,818) (20,148)
Other --- (1,216)
_____________________________________________________________________________
Total deferred tax liabilities (30,056) (30,781)
_____________________________________________________________________________
Net deferred tax liability $ (19,384) $ (22,360)
_____________________________________________________________________________
Current deferred asset (liability) - net $ 434 $ (2,212)
Noncurrent deferred liability - net (19,818) (20,148)
_____________________________________________________________________________
Net deferred tax liability $ (19,384) $ (22,360)
=============================================================================
(9) Comprehensive Income
(dollars in thousands) 1998 1997 1996
=============================================================================
Net income $ 83,683 $ 78,194 $ 78,855
Other comprehensive income
by component, net of tax:
Unrealized holding gains arising during period
(Net of deferred taxes of $13,432,
$793, and $283 respectively) 18,942 1,120 399
Reclassification adjustment for gains
included in net income (Net of deferred
taxes of $12,610, $2,103, and $16
respectively) (17,784) (2,965) (24)
_____________________________________________________________________________
Other comprehensive income, net of tax 1,158 (1,845) 375
_____________________________________________________________________________
Comprehensive income $ 84,841 $ 76,349 $ 79,230
=============================================================================
<PAGE>
Notes to Consolidated Financial Statements
(continued)
(10) Summary of Quarterly Results (Unaudited)
Quarterly financial data for 1998 and 1997 are as follows:
(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
(dollars in thousands,
except per share amounts) Thirteen Weeks Ended
==============================================================================
Mar. 29, '97 June 28, '97 Sep. 27, '97 Dec. 27, '97
______________________________________________________________________________
Net sales $ 456,786 $ 446,945 $ 444,743 $ 470,342
Gross profit on sales 112,932 114,521 114,896 120,642
Net income 18,238 18,792 19,145 22,019
Basic and diluted
earnings per share .43 .45 .46 .53
(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 are based on quoted
market prices.
(12) Acquisition
On August 16, 1998, the Company acquired one store, doing business as
Cressler's Marketplace, located in Shippensburg, PA in a cash-only transaction
accounted for by the purchase method. Goodwill arising from this transaction,
which is not material, is being amortized over a 15-year period on a straight-
line basis.
(13) Subsequent Event
On December 21, 1998, the Company signed an agreement to acquire four store
locations from Penn Traffic, Inc., subject to satisfaction of certain
conditions including approval from the Federal Trade Commission. The purchase
price was escrowed on January 29, 1999. The Company anticipates closing,
delivery of the purchase price, and possession of the property on or about
March 1, 1999.
(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.
Report of Independent Auditors
The Board of Directors
Weis Markets, Inc.
Sunbury, Pennsylvania
We have audited the accompanying consolidated balance sheets of Weis Markets,
Inc. as of December 26, 1998, and December 27, 1997, and the related
consolidated statements of income, shareholders' equity, and cash flows for
each of the three years in the period ended December 26, 1998. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 26, 1998 and December 27, 1997, and the
consolidated results of its operations and its cash flows cash for each of the
three years in the period ended December 26, 1998, in conformity with
generally accepted accounting principles.
Harrisburg, PA Ernst & Young LLP
February 5, 1999
<PAGE>
<TABLE>
<CAPTION>
Weis Markets, Inc.
Five Year Review of Operations
52 Weeks 52 Weeks 52 Weeks 52 Week 53 Weeks
(dollars in thousands, Ended Ended Ended Ended Ended
except per share amounts Dec. 26, 1998 Dec. 27, 1997 Dec. 28, 1996 Dec. 30, 1995 Dec. 31, 1994
=====================================================================================================
<S> <C> <C> <C> <C> <C>
Net sales $ 1,867,492 $ 1,818,816 $ 1,753,246 $ 1,646,435 $ 1,556,663
Costs and expenses 1,791,066 1,733,686 1,662,620 1,560,238 1,476,661
_____________________________________________________________________________________________________
Income from operations 76,426 85,130 90,626 86,197 80,002
Other income, net 58,072 33,452 30,083 35,520 37,191
_____________________________________________________________________________________________________
Income before provision
for income taxes 134,498 118,582 120,709 121,717 117,193
Provision for income taxes 50,815 40,388 41,854 42,297 40,944
_____________________________________________________________________________________________________
Net income 83,683 78,194 78,855 79,420 76,249
Retained earnings,
beginning of year 960,419 921,572 879,916 834,995 791,072
_____________________________________________________________________________________________________
1,044,102 999,766 958,771 914,415 867,321
Cash dividends 40,932 39,347 37,199 34,499 32,326
_____________________________________________________________________________________________________
Retained earnings,
end of year $ 1,003,170 $ 960,419 $ 921,572 $ 879,916 $ 834,995
_____________________________________________________________________________________________________
Weighted average shares
outstanding 41,775,991 41,842,583 42,280,352 43,083,449 43,662,031
_____________________________________________________________________________________________________
Cash dividends per share $ .98 $ .94 $ .88 $ .80 $ .74
_____________________________________________________________________________________________________
Basic and diluted
earnings per share $ 2.00 $ 1.87 $ 1.87 $ 1.84 $ 1.75
_____________________________________________________________________________________________________
Working capital $ 489,475 $ 471,562 $ 463,255 $ 491,135 $ 505,449
Total assets $ 1,029,202 $ 971,752 $ 966,312 $ 923,421 $ 892,093
Shareholders' equity $ 890,641 $ 847,333 $ 818,527 $ 791,562 $ 762,380
Number of grocery stores 158 154 155 151 149
Number of pet supply stores 36 43 43 35 14
</TABLE>
<TABLE>
<CAPTION>
Quantitative Disclosures About Market Risks
Expected Maturity Dates Fair Value
(dollars in thousands) 1999 2000 2001 2002 2003 Thereafter Total Dec. 26, 1998
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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%
<FN>
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. 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.
</TABLE>
Stock Prices and Dividend Information by Quarter
The approximate number of shareholders including individual participants in
security positions listings on December 26, 1998 as provided by the Company's
transfer agent was 7,078.
<TABLE>
<CAPTION>
1998 1997
=========================================================================================
4th 3rd 2nd 1st 4th 3rd 2nd 1st
_________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Prices
High 38 1/2 37 1/2 36 5/8 35 13/16 36 1/4 34 7/8 29 7/8 32 1/4
Low 33 1/4 33 5/8 35 3/16 33 7/8 33 3/8 28 3/4 26 7/8 28 3/8
Dividends
Per Share .25 .25 .24 .24 .24 .24 .23 .23
</TABLE>
<PAGE>
The Board of Directors
(This area contains pictures of the Board of Directors above their respective
names and titles.)
Robert F. Weis Norman S. Rich William R. Mills Jonathan H. Weis
Chairman and Treasurer President Vice President Vice President
Finance and Secretary Property
Management and
Development
Richard E. Shulman Joseph I. Goldstein Michael M. Apfelbaum
President, Industry Partner, Crowell & Partner, Apfelbaum,
Systems Development Moring, Attorneys Apfelbaum, & Apfelbaum,
Corporation at Law Attorneys at Law
Officers
Robert F. Weis Harold G. Graber
Chairman and Treasurer Vice President
Real Estate
Norman S. Rich Leslie H. Knox
President Vice President
Merchandising
William R. Mills Richard L. Kunkle
Vice President Vice President
Finance and Secretary Pharmacy
Alan L. Barrick Edward W. Rakoskie
Vice President Vice President
Engineering and Operations
Manufacturing
Stephen J. Bowers Jonathan H. Weis
Vice President Vice President
Weis Food Service Property Management and
Development
Walter B. Bruce
Vice President
Private Label
Annual Meeting
The annual meeting of the shareholders of the Company will be held at 10 a.m.
on Tuesday, April 6, 1999, at the Corporate offices, 1000 South Second Street,
Sunbury, PA 17801.
Registrar and Transfer Agent
American Stock Transfer & Trust Company
40 Wall Street, 46th Floor,
New York, NY 10005
(718) 921-8210
Auditors
Ernst & Young LLP
Commerce Court, Suite 200
2601 Market Place
Harrisburg, PA 17110-9359
Stock Traded
New York Stock Exchange
<PAGE>
Growing better to satisfy all of our customers' needs.
(This area contains a picture of a child pushing a toy shopping cart full of
Weis private label products.)
Weis
Weis Markets, Inc.
1000 S. Second Street
Sunbury, PA 17801
<PAGE>
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.
<PAGE>
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 February 5, 1999, included in the
1998 Annual Report to Shareholders of Weis Markets, Inc.
(Signed Ernst & Young LLP)
Harrisburg, Pennsylvania
February 5, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<CAPTION>
EXHIBIT 27
WEIS MARKETS, INC.
FINANCIAL DATA SCHEDULE
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-26-1998
<PERIOD-END> DEC-26-1998
<CASH> 7,430,000
<SECURITIES> 403,702,000
<RECEIVABLES> 32,735,000
<ALLOWANCES> 0
<INVENTORY> 158,938,000
<CURRENT-ASSETS> 608,218,000
<PP&E> 817,388,000
<DEPRECIATION> 418,953,000
<TOTAL-ASSETS> 1,029,202,000
<CURRENT-LIABILITIES> 118,743,000
<BONDS> 0
0
0
<COMMON> 7,471,000
<OTHER-SE> 883,170,000
<TOTAL-LIABILITY-AND-EQUITY> 1,029,202,000
<SALES> 1,867,492,000
<TOTAL-REVENUES> 1,867,492,000
<CGS> 1,396,795,000
<TOTAL-COSTS> 1,732,994,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 134,498,000
<INCOME-TAX> 50,815,000
<INCOME-CONTINUING> 83,683,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 83,683,000
<EPS-PRIMARY> 2.000
<EPS-DILUTED> 2.000
