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. There was no material change in the nature of the company's business during fiscal 1993.
(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 117 retail food markets in Pennsylvania, 15 in Maryland, 1 in New Jersey, 3 in New York, 4 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, 2 Pennsylvania stores which trade as Erb's, 4 Pennsylvania stores which trade as Scot's Lo Cost, and 1 Pennsylvania store which trades as Big Top Market. During the past fiscal year, 4 new stores were opened and 3 were closed. The company also owns and operates Weis Food Service, a restaurant and institutional supplier. The company supplies its stores from distribution centers in Sunbury, Northumberland, and Milton, Pennsylvania. The percentage of net sales contributed by each class of similar products for each of the five fiscal years ended December 25, 1993 was:
Grocery Meat Produce Other
1989 62.89 15.03 11.69 10.39 1990 62.73 14.99 11.21 11.07 1991 61.27 14.49 10.95 13.29 1992 60.81 14.15 10.78 14.26 1993 60.74 14.80 11.06 13.40
(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 with efficient use of buying power and space in the warehouse facilities.
(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: Acme Markets, Inc., Giant Foods of Carlisle, Giant Foods of Landover, Festival Foods, Shop Rite, Super Rite, Giant Eagle, Riverside Markets, Super Valu, Aldi, Insalaco, Walmart, K-Mart, Sam's and A&P. 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 15,000 employees.
Item 2.
Item 2. Properties:
The company owns and operates 68 of its stores and leases and operates 73 stores under operating leases for varying periods of time up to the year 2013. 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 two warehouses in Sunbury, Pennsylvania totaling approximately 551,000 square feet: one in Milton, Pennsylvania of approximately 1,016,000 square feet, and two in Northumberland, Pennsylvania totaling approximately 121,000 square feet. Weis Markets also operates an ice cream plant, meat processing plant and milk processing plant at its Sunbury location.
Item 3.
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.
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 1993.
PART II
Item 5.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters:
"Stock Prices and Dividend Information by Quarter" on page 15 and "Stock Traded" on the inside back cover of the 1993 Weis Markets, Inc. Annual Report to Shareholders are incorporated herein by reference.
The computation of the approximate number of stockholders on December 25, 1993 is based upon the approximate number of shareholders as determined by the Company's transfer agent.
Item 6.
Item 6. Selected Financial Data:
"Five-Year Review of Operations" on page 15 of the 1993 Weis Markets, Inc. Annual Report to Shareholders is incorporated herein by reference.
Item 7.
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 page 6 of the 1993 Weis Markets, Inc. Annual Report to Shareholders is incorporated herein by reference.
Item 8.
Item 8. Financial Statements and Supplementary Data:
The following information in the 1993 Weis Markets, Inc. Annual Report to Shareholders is incorporated herein by reference: The consolidated financial statements on pages 7 to 9, the notes to consolidated financial statements on pages 10 to 14 and the independent auditors' report on page 14.
Item 9.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure:
None.
PART III
Item 10.
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 18, 1994 is incorporated herein by reference.
Item 11.
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," "Pension Plan Table," "Shareholder Return Performance," "Comparative Five-Year Total Returns," and "Comparative Ten-Year Income Percentages" on pages 5 to 9 of the Weis Markets, Inc. definitive proxy statement dated March 18, 1994 is incorporated herein by reference.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management:
"Outstanding Voting Securities and Voting Rights" on page 3 of the Weis Markets, Inc. definitive proxy statement dated March 18, 1994 is incorporated herein by reference.
Item 13.
Item 13. Certain Relationships and Related Transactions:
"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," "Pension Plan Table," "Shareholder Return Performance," "Comparative Five-Year Total Returns," and "Comparative Ten-Year Income Percentages," on pages 5 to 9 of the Weis Markets, Inc. definitive proxy statement dated March 18, 1994 is incorporated herein by reference.
PART IV
Item 14.
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K
The following information is incorporated herein by reference from the 1993 Weis Markets, Inc. Annual Report to Shareholders: the consolidated financial statements on pages 7 to 9, the notes to consolidated financial statements on pages 10 to 14 and the independent auditors' report on page 14.
(a) The following documents are filed as a part of this report: Page 1.Report of Independent Auditors on Financial Statement Schedules
2.Financial Statement Schedules:
I. Marketable Securities
V. Property, Plant and Equipment
VI. Accumulated Depreciation, Depletion and Amortization of Property, Plant and Equipment
Schedules other than those listed above are omitted for the reason that they are either not applicable or not required or because the information required is contained in the financial statements or notes thereto.
(b) There were no reports on Form 8-K filed during the quarter ended December 25, 1993.
(c) A listing of exhibits filed or incorporated by reference is as follows:
Exhibit No. 3-A Articles of Incorporation 3-B By-Laws 10-A Deferred Compensation Plan 10-B Profit Sharing Plan 10-C Employee Stock Ownership Plan
10-D Stock Appreciation Rights Program 10-E Stock Option Plan 13 Annual Report to Shareholders for the Fiscal Year ended December 25, 1993 22 Subsidiaries of the Registrant 24 Consent of Independent Auditors
The exhibits listed above, except for exhibits 13, 22 and 24, 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.
The foregoing exhibits are available upon request from the Secretary of the Company at a fee of $10.00 per copy.
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 Sigfried Weis President
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 Sigfried Weis (Principal Executive Officer) President and Director
Date Robert F. Weis (Principal Financial Officer) Vice President and Treasurer and Director
Date Norman S. Rich Vice President and Secretary and Director
Date William R. Mills Vice President Finance
Independent Auditors' Report
The Board of Directors and Shareholders of Weis Markets, Inc.:
Under date of January 28, 1994, we reported on the consolidated balance sheets of Weis Markets, Inc. and subsidiaries as of December 25, 1993 and December 26, 1992 and the related consolidated statements of income, shareholders' equity, and cash flows for each of the years in the three-year period ended December 25, 1993, as contained in the 1993 annual report to shareholders. These consolidated financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the year 1993. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related financial statement schedules as listed at Item 14(a)2. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statement schedules based on our audits.
In our opinion, such schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
KPMG PEAT MARWICK
Harrisburg, Pennsylvania January 28, 1994
EXHIBIT 13
WEIS MARKETS, INC.
Annual Report to Shareholders for the fiscal year ended December 25, 1993.
WEIS MARKETS, INC. 1993 ANNUAL REPORT
Weis Markets, Inc.
Weis Markets, Inc. is a successful supermarket chain with 141 stores located in Pennsylvania, Maryland, New Jersey, New York, Virginia, and West Virginia. Started in 1912 as a cash-and-carry grocery store, Weis became publicly owned in 1965. Its stock is listed on the New York Stock Exchange under the symbol WMK. Over 15,000 employees contribute to the Company's continuing success. Many of the Company's 1,800 private label products are supplied by its own manufacturing and processing plants. Distribution centers located in Milton and Sunbury are served by a Company owned fleet of tractor-trailers. In addition to supermarkets, the Company owns and operates Weis Food Service, a distributor to restaurant and institutional customers.
To Our Shareholders We are pleased to report that sales for Weis Markets for the 52-week fiscal year ended December 25, 1993, increased 11.8% to $1,441,090,000 compared with $1,289,195,000 for the same period a year ago. Earnings were $72,953,000 compared to $72,716,000 last year, an increase of .3%.
Earnings per share were $1.66 compared with $1.65 per share last year. Depreciation and amortization increased to $28,959,000 from $26,358,000 in 1992 and return on equity was 10.3%. Shareholders' equity rose to $738,115,000 from $680,265,000 in 1992.
Sales increases came primarily from new and enlarged stores and Mr. Z's Food Mart stores in Northeastern Pennsylvania, which were acquired at the beginning of the year. Increased competition, weakness in the economy, lower retail prices, low inflation, and increased promotional expense continued to characterize the year 1993 in our trading area. This environment was conducive to increasing the sales of private label merchandise, one of the company's strongest assets.
In 1993, we added 562,839 square feet of retail space. Four new super stores were opened in Pennsylvania and New Jersey, averaging about 45,000 square feet with pharmacies, floral departments, bakeries, delis, and salad bars. One of these stores was opened under the Scot's Lo-Cost format, a warehouse-type market. Full-service banks were installed in a number of stores. Thirteen stores were enlarged or remodeled. Retail space now totals 5,142,000 square feet. More than half of all stores are new or have been remodeled in the last five years. At the end of the year, construction was substantially completed on the 184,000 square-foot addition to the Milton Distribution Center. It will house Shamrock Wholesale Distributing Company, a wholly owned organization developed to buy, sell, and distribute nonfoods, health and beauty care, and other products. The addition will also provide new space for distribution of private label bread, snacks, and other grocery items.
At the end of the year, Weis Markets had 141 stores in Pennsylvania, Maryland, New Jersey, New York, Virginia, and West Virginia, and Weis Food Service - a restaurant and institutional supplier. Three stores were closed during the year.
After the end of the year, the company made an investment in several large pet supply stores in Ohio called SuperPetz. It is anticipated that the number of these stores will grow into a successful chain in many areas of the country.
The Company continues to develop improved programs to meet the needs of its customers. We installed a targeted coupon dispensing system at more than two thirds of all checkouts before the end of 1993. The point-of-sale computer- based system dispenses coupons based on customers' purchases and will be installed company wide before the end of this first quarter of 1994. The Company's front-end systems will be enhanced in many stores to allow use of three major credit cards.At our general office, improvements will continue with the installation of a new central computer system. This system is based on newly developed technology which will provide almost triple the processing speed while requiring significantly less maintenance and energy consumption. The upgraded equipment is to be installed in the first quarter of 1994, just in advance of planned improvements in store communication and merchandising information systems.
Capital expenditures including acquisitions for 1993 totaled about $64,412,000, compared to the budgeted figures of $55,527,000. We expect to spend about $76,000,000 over the next eighteen months, provided that our program of new and remodeled stores can be completed. Long approval times still make predicting project completion a tentative factor.
Two new stores are now under construction. Eight more are in the planning or approval stage and should be completed in the next eighteen months. Over this period of time, about twenty stores should be remodeled or enlarged. Construction is underway on several of these projects. New stores are planned for Pennsylvania, Maryland, and New Jersey. Financing for the new and remodeled stores will come from company funds, and the company will continue to have no debt.
Mr. Charles H. Watts II, director for eighteen years, will not be standing for reelection this year. We wish to extend our appreciation for his guidance and counsel as a member of the board during a period of greatcompany growth.
With our new and acquired stores, plus our capable and energetic Weis Markets people, our company should have a successful year, growth and profits in 1994.
Sigfried Weis President
Robert F. Weis Vice President and Treasurer
Service and Value Old-Fashioned Quality and Innovative Programs Lead the Way
During these uncertain economic times, the last thing anyone should have to worry about is a grocery bill. At Weis Markets, we understand that - after all, we buy groceries, too. That's why we're ahead of the rest in finding new ways to give our loyal customers the service and value they deserve at a price they can afford.
Checkout Coupons: Personalized for the Way You Shop No two shoppers are exactly alike. Their tastes, needs, and shopping habits vary as much as their clothing style or the cars they drive. Yet every year, in newspapers, magazines, and even the U.S. mail, they receive thousands of coupons that they will never use.
At Weis Markets, we know the value of coupon shopping when the coupons match the products our customers actually buy. That's the theory behind Checkout Coupons, our individualized coupon program. Shoppers simply buy their groceries as usual. As their items are rung up, our computerized registers print out Checkout Coupons right along with their receipt. No hold-ups at the checkout line, no coupons for products our shoppers don't need or want. Just super coupon values designed to meet personal shopping needs. With Weis Markets Checkout Coupons it's easy to stretch a weekly food budget.
More than two thirds of our supermarkets offered Checkout Coupons at the close of 1993, and during the first quarter of 1994 this program will be expanded to all stores with checkout scanners.
Weis Vision Value Club: Frequent Shopper Points Add Up Many Weis shoppers visit our stores weekly. And with our new Vision Value Club, currently being tested in a limited area, frequent shoppers can earn points for free gifts at no extra charge. . .and no extra effort!
Membership in the Vision Value Club isn't exclusive - it's a breeze. After signing up, frequent shoppers simply make their purchases as usual. As items are totaled, points are accumulated and stored electronically on a special computer chip membership card right at the checkout. Shoppers may redeem those points for brand name merchandise through the Vision Value Club gift catalog. And as a bonus, specials like coupons, recipes, sweepstakes, games and more appear automatically on the Vision Screen during checkout, adding further value to frequent shopping.
New Store Locations and Acquisitions: Convenience and Competition Wins Hands Down With today's shoppers' busy schedules, even the most innovative and profitable savings programs can't match the value of convenient shopping locations. That's why we at Weis Markets are always looking for ways to expand our service area. In 1993, we acquired fourteen Mr. Z's Markets, bringing the total number of our convenient shopping locations to 141. Mr. Z's Markets are concentrated in the Northeastern Pennsylvania area. Of course, customers will see the same low prices and excellent service they've come to expect at all Weis Markets locations.
In addition to acquisitions, we've opened new Weis Markets in Elizabethtown, Pennsylvania and in Newton, New Jersey, the first Weis Markets in New Jersey. A Scot's Lo-Cost Supermarket was opened in Montoursville, Pennsylvania and a new Mr. Z' s in Waverly, Pennsylvania. Our growing customer base is proof that it's quality products and dollar value that count. . .week after week.
Business As Usual: Those Little "Extras" Make Shopping a Pleasure No matter which store they visit, our customers know that service and value are just "company policy" at Weis Markets. More than 15,000 employees are hard at work to make shopping a little more pleasant at every convenient location. For example, our informative deli people can help busy shoppers find the perfect prepared food to take home to a hungry family, without sacrificing nutritional value. And with new products being added all the time, they don't have to forego variety either. In the pharmacy, our professional staff is waiting to answer questions regarding medicines and health concerns. Third Party Departments and Weis' own computerized patient profile system make getting prescriptions that much easier. Of course, our butchers are always happy to provide special meat cuts, while our bakery specialists add just the right touches to festive party delicacies. And checking out isn't a hassle, either. Courteous register clerks and baggers end the shopping trip on an upbeat note.
At Weis Markets, we know that special deals and exciting programs - though valuable - aren't enough. Getting more for their money on everyday buys is what brings our shoppers back week after week. From well- stocked fresh produce aisles, to a wide variety of succulent meats, to thousands of brand names, our customers find competitive prices on everything they need. More than 1,800 of our own private label products - including "Weis Quality," "Big Top" and "The Way It Was" - line our shelves, ensuring that shoppers don't have to sacrifice top quality for extra value. And Weis Markets' SUPER BUYS add yet another way to save; economical larger sizes, bonus packs and special features mean greater savings on weekly shopping budgets.
In the supermarket business, the competition can be keen. And at Weis Markets, we know that creative solutions to meeting our shoppers' needs are crucial to our continued success. But we haven't forgotten that good old-fashioned excellent service and unbeatable quality are what guarantees customer satisfaction. You might just say that's what puts Weis Markets Ahead of the Rest.
Management's Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations Sales for the 52 - week period ended December 25, 1993 of $1,441,090,000 increased 11.8% over sales of $1,289,195,000 for the 1992 fiscal year. Sales in 1992 had decreased .4% compared with fiscal 1991 sales of $1,294,332,000. The majority of the sales increase in the current year was generated from the 14 IGA stores acquired. Same store sales decreased 1.2 % in 1993. During the last three years, the Company has experienced increased competitive activity in a weak economy with very little price inflation in each of the three years. Management anticipates a slight increase in inflation in 1994 but no decline in competitive activity.
	Expressed as a percentage of sales, the gross profit at 25.5% in 1993, compares with 25.4% in 1992 and 25.7% in 1991. The Company has maintained its gross margin at a consistent rate over the past three years through its use of category management and the fact that suppliers have shifted traditional promotional funding towards the cost of product. The LIFO inventory adjustment in 1993 resulted in a charge to earnings of $510,000 compared to $2,321,000 in 1992.
Operating, general and administrative expenses of 20.0% as a percentage of fiscal 1993 sales compares with 19.5% in 1992 and 18.9% in 1991. The majority of the total dollar increase in 1993 expenses was directly associated with the operation of the new stores acquired at the beginning of the year. Labor and associated fringe benefit costs, as a percentage of sales, increased .28% from 1992 to 1993. Advertising expenditures, net of promotional funding, increased .34% from 1992 to 1993.
Interest and dividend income of $21,528,000, at 1.5% of sales in 1993 compared to $23,783,000, at 1.8% of sales in 1992, and $25,935,000, at 2.0% of sales in 1991. Investment income has continued to decline as a result of the decline in market rates over the past three years. The investment portfolio consists of Pennsylvania tax free municipal bonds, U.S. Treasury securities, equity securities and other short-term investments. The Company has made an effort to offset the decline in short term yields by extending its investment maturities. It is management's intent to maintain a liquid portfolio to take advantage of acquisition or other investment opportunities; therefore all securities are classified as available-for-sale.
Other income is primarily generated from rental income, coupon handling fees, cardboard salvage and gains on sales of fixed assets. Other income increased $1,421,000 in 1993 compared to 1992 as a result of the acquired stores. Expressed as a percentage of sales, other income at .9% in 1993, compared to .9% in 1992, and .8% in 1991.
The effective tax rate was 35.8% in 1993, 35.0% in 1992, and 35.1% in 1991. Corporate federal tax rates increased from 34% to 35% during the current year, having a negative impact of $928,000 to the current year profits. The Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," as of December 29, 1991, which resulted in a cumulative effect adjustment of $1,046,000 in the first quarter of fiscal 1992.
During fiscal 1993, the Company opened four new stores, closed three existing stores, remodeled 13 stores, and completed the acquisition of 14 IGA stores located in Northeastern Pennsylvania. The distribution center was enlarged by 184,000 square feet to meet the current and future service demands associated with the store growth. As of its fiscal year end Weis Markets, Inc. was operating 141 retail food stores and Weis Food Service, a restaurant and institutional supplier. The company currently operates stores in Pennsylvania, Maryland, New Jersey, New York, Virginia and West Virginia.
Liquidity and Capital Resources The Company has consistently funded its working capital requirements each year through internally generated cash flows from operations. Net cash provided by operating activities was $104,103,000 in 1993, compared to $83,282,000 in 1992 and $98,796,000 in 1991. Working capital has increased by 6.1% in 1993, 5.9% in 1992 and 5.7% in 1991. The increase in working capital in 1993 was impacted by the adoption of the provisions of the Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities" (Statement 115). Had Statement 115 not been adopted, working capital would have increased by 2.7% in 1993.
The Company continues to use its cash for acquisitions, the construction of new supermarkets, the expansion and remodeling of existing stores, the securing of sites for future expansion, and the upgrading of the processing and distribution facilities. Property, equipment and other acquisition expenditures during fiscal 1993 amounted to $64,412,000 compared to $31,985,000 in 1992 and $40,526,000 in 1991. Treasury Stock purchases amounted to $1,149,000 in 1993, compared to $10,044,000 in 1992, and $14,914,000 in 1991. The Board of Directors' 1991 resolution authorizing the purchase of treasury stock has a remaining balance of 696,000 shares. Total cash dividend payments on common stock amounted to $.70 per share in 1993, compared to $.68 in 1992 and $.64 in 1991.
The Company's current store development plans will require investment of approximately $76,000,000 during the next eighteen months. This includes the opening of ten new stores, completion of 20 store remodels, and significant improvements in the area of store and general office technology. The Company is actively seeking acquisitions and investment opportunities so as to enhance future performance. In view of the Company's significant liquid assets, no existing debt financing, and its ability to generate working capital internally, it is not expected that any type of external financing will be needed.
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies The following is a summary of the significant accounting policies followed in preparing the Company's consolidated financial statements:
(a) Definition of Fiscal Year The Company's fiscal year ends on the last Saturday in December. Fiscal 1993, 1992, and 1991 were each comprised of 52 weeks.
(b) Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries.
(c) Business Segment The principal business activity reflected in the accompanying consolidated financial statements is the retail sale of food.
(d) Intangible Assets Intangible assets are generally amortized over periods ranging from 3 to 40 years. A portion of the excess of cost of investments over net assets acquired prior to November 1, 1970, ($2,322,000) is not being amortized because, in the opinion of management, there has been no decrease in value.
(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) Marketable securities Marketable securities at December 25, 1993, consist of Pennsylvania municipal bonds, U.S. Treasury securities, equity securities, and other short-term investments. The Company adopted the provisions of Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" (Statement 115) at December 25, 1993. Under Statement 115, the Company classifies all of its marketable securities as available-for- sale. Available-for-sale securities are recorded at fair value. 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 are 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. Prior to adopting Statement 115, the Company valued its'securities in accordance with Statement of Financial Accounting Standards No. 12, "Accounting for Certain Marketable Securities" (Statement 12) and related interpretations. Marketable debt securities were carried at amortized cost and marketable equity securities were carried at the lower of cost or market.
(g) Property and Equipment Depreciation is provided on the cost of buildings and improvements and equipment principally using accelerated methods. Leasehold improvements are amortized over the terms of the lease or the useful lives of the assets, whichever is shorter. Maintenance and repairs are charged to income 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.
(h) Income Taxes In February 1992, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (Statement 109). Statement 109 requires a change from the deferred method of accounting for income taxes of APB Opinion 11 to the asset and liability method of accounting for income taxes. Under the asset and liability method of 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. Under Statement 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Effective December 29, 1991, the Company adopted Statement 109 and has reported the cumulative effect of that change in the method of accounting for income taxes in the 1992 consolidated statement of income. Pursuant to the deferred method under APB Opinion 11, which was applied in 1991 and prior years, deferred income taxes are recognized for income and expense items that are reported in different years for financial reporting purposes and income tax purposes using the tax rate applicable for the year of the calculation. Under the deferred method, deferred taxes are not adjusted for subsequent changes in tax rates.
(i) Earnings Per Share The earnings per share computations are based upon the weighted average number of common shares and common share equivilants outstanding during the year.
(j) Reclassification Certain amounts in prior-year financial statements have been reclassified to conform with current year classifications.
(2) Income Taxes As discussed in note 1, the Company adopted Statement 109 as of December 29, 1991. The cumulative effect of this change in accounting for income taxes of $1,046,000 is determined as of December 29, 1991, and is reported separately in the consolidated statement of income for the year ended December 26, 1992. Prior years' financial statements have not been restated to apply the provisions of Statement 109.
The following is a reconciliation between the applicable income tax expense and the amount of income taxes which would have been provided at the Federal statutory rate. The statutory rate was 35% in 1993, 34% in 1992, and 34% in 1991. The tax rate change in 1993 had a negative impact of $928,000 to the current year profits.
Cash paid for income taxes was $40,530,000, $43,171,000 and $40,621,000 in 1993, 1992 and 1991, respectively. For the year ended December 28, 1991, deferred income tax expense of $676,000 results from timing differences in the recognition of income and expense for income tax and financial reporting purposes. The sources and tax effects of those timing differences are presented as follows:
(3) Inventories Merchandise inventories as of December 25, 1993, and December 26, 1992, were valued as follows:
If all inventories were valued on the average cost method, which approximates current cost, total inventories would have been $40,395,000 and $39,885,000 higher than as reported on the above methods as of December 25, 1993, and December 26, 1992, 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.
(4) Property and EquipmentProperty and equipment as of December 25, 1993, and December 26, 1992, consisted of:
(5) Marketable SecuritiesAs discussed in note 1, the Company adopted Statement 115 as of December 25, 1993. The impact of this change in accounting principle resulted in an increase in marketable securities of $29,349,000 and an increase in shareholders' equity of $16,740,000, representing the after-tax impact. Marketable Securities as of December 25, 1993, consisted of:
Maturities of investment securities classified as available-for- sale at December 25, 1993, were as follows:
For the year ended December 26, 1992, marketable debt securities and marketable equity securities were valued in accordance with Statement 12. Marketable debt securities consisted primarily of Pennsylvania municipal bonds and U. S. Treasury securities and had a cost of $408,978,000 at December 26, 1992, and a market value of $419,701,000. Gross unrealized gains amounted to $10,723,000. Also included in marketable securities were marketable equity securities having a cost of $10,337,000 at December 26, 1992, and a market value of $21,780,000. Gross unrealized gains amounted to $11,443,000. Unrealized gross losses and realized gains and losses of the marketable securities portfolios were not significant.
(6) Retirement Plans The Company has a noncontributory defined benefit pension plan covering substantially all full-time employees, a noncontributory profit-sharing plan covering eligible employees and a supplemental retirement plan 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 pension and profit-sharing cost accrued, but not supplemental retirement costs. Contri-butions to the defined benefit pension plan are based on guidelines of the Employee Retirement Income Security Act of 1974, whereas contributions to the profit-sharing plan are made at the sole discretion of the Company. The Company's supplemental retirement plan provides 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 $5,408,000 and $4,782,000 at December 25, 1993, and December 26, 1992, 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:
The net periodic defined benefit pension expense iscomputed as follows:
The funded status of the Company's pension plan at September 30, 1993, and September 30, 1992, (the measurement dates) is as follows:
(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 1993, 1992 and 1991, 17,500, 16,900 and 17,800 rights were awarded under the program. In 1993, 1992 and 1991, $37,000, $11,000 and $35,000, respectively, were charged to earnings.
(8) Lease Commitments At December 25, 1993, the Company leased approximately 55% of its facilities under operating leases which expire at various dates up to 2013. 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.
Rent expense on all leases consists of:
The following is a schedule by year of future minimum rental payments required under operating leases that have initial or remaining noncancelable lease terms in excess of one year as of December 25, 1993.
(9) 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.
(10) Acquisitions On December 31, 1992, the Company acquired 14 retail grocery stores from IGA Food Mart, Inc., of Stroudsburg, Pennsylvania. The cash only transaction was made from internally generated funds and was accounted for by the purchase method. Goodwill arising from this transaction, which was not material, is being amortized over a 15 year period on a straight line basis.
(11) Summary of Quarterly Results (Unaudited) Quarterly financial data for 1993 and 1992 is as follows:
Directors
Sigfried Weis Robert F. Weis Norman S. Rich President Vice President and Treasurer Vice President and Secretary
Micheal C. Rheam Charles H. Watts, II Peter M. Sacerdote Special Projects Educational and Financial Limited Partner, Coordinator Consultant Goldman Sachs & Co.
Officers
Sigfried Weis President Alan L. Barrick Walter B. Bruce Robert E. Lutz Vice President Vice President Vice President Engineering and Private Label Grocery Merchandising Robert F. Weis Manufacturing Vice President and Treasurer Stephen J. Bowers Richard L. Kunkle William R. Mills Vice President Vice President Vice President Norman S. Rich Weis Food Service Pharmacy Finance Finance Vice President and Secretary
Annual Meeting The annual meeting of the shareholders of the Company will be held at 10 a.m. on Monday, April 4, 1994, 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
Auditors KPMG Peat MarwickCertified Public Accountants 225 Market StreetSuite 300 P.O. Box 1190 Harrisburg, PA 17108-1190
Stock Traded New York Stock Exchange
EXHIBIT 22
EXHIBIT 24
Consent of Independent Auditors
The Board of Directors Weis Markets, Inc.:
We consent to incorporation by reference in the registration statement on Form S-8 of Weis Markets, Inc. of our report dated January 28, 1994, relating to the consolidated balance sheets of Weis Markets, Inc. and subsidiaries as of December 25, 1993 and December 26, 1992 and the related consolidated statements of income, shareholders' equity, and cash flows for each of the years in the three-year period ended December 25, 1993, which report appears in the December 25, 1993 Annual Report to Shareholders on Form 10-K of Weis Markets, Inc. and is incorporated herein by reference.
We also consent to incorporation by reference in the registration statement on Form S-8 of Weis Markets, Inc. of our report dated January 28, 1994, relating to the financial statement schedules as listed at Item 14(a) 2 of the Company's December 25, 1993 Annual Report on Form 10-K, which report appears in the Company's December 25, 1993 Annual Report on Form 10-K.
KPMG PEAT MARWICK
Harrisburg, Pennsylvania March 18, 1994