UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
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x
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended
December 31, 2011
OR
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from __________to_________
Commission File Number 1-5039
WEIS MARKETS, INC
.
(Exact name of registrant as specified in its
charter)
PENNSYLVANIA
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24-0755415
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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1000 S. Second Street
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P. O. Box 471
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Sunbury, Pennsylvania
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17801-0471
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(Address of principal executive offices)
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(Zip Code)
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Registrant's telephone number, including area code:
(570) 286-4571
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Registrant's web address: www.weismarkets.com
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class
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Name of each exchange on which registered
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Common stock, no par value
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New York Stock Exchange
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Securities registered pursuant to
Section 12(g) of the Act:
None
Indicate by check mark if the registrant
is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
¨
No
x
Indicate by check mark if the registrant
is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
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No
x
Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes
x
No
¨
Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post such files). Yes
x
No
¨
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or
any amendment to this Form 10-K.
x
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated
filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
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Accelerated filer
x
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Non-accelerated filer
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(Do not check if a smaller reporting company)
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Smaller reporting company
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Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Act). Yes
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No
x
The aggregate market value of Common Stock held by non-affiliates
of the Registrant is approximately $481,000,000 as of June 25, 2011 the last business day of the most recently completed second
quarter.
Shares of common stock outstanding as of March 15, 2012 - 26,898,443.
DOCUMENTS INCORPORATED BY REFERENCE: Selected portions of the Weis
Markets, Inc. definitive proxy statement dated March 15, 2012 are incorporated by reference in Part III of this Form 10-K.
WEIS MARKETS, INC.
TABLE OF CONTENTS
FORM 10-K
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Page
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Part I
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Item 1. Business
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1
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Item 1a. Risk Factors
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3
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Item 1b. Unresolved Staff Comments
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5
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Item 2. Properties
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5
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Item 3. Legal Proceedings
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5
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Executive Officers of the Registrant
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6
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Part II
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Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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7
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Item 6. Selected Financial Data
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8
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
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9
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Item 7a. Quantitative and Qualitative Disclosures about Market Risk
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17
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Item 8. Financial Statements and Supplementary Data
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18
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Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
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37
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Item 9a. Controls and Procedures
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37
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Item 9b. Other Information
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38
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Part III
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Item 10. Directors, Executive Officers and Corporate Governance
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38
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Item 11. Executive Compensation
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38
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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
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38
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Item 13. Certain Relationships and Related Transactions, and Director Independence
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38
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Item 14. Principal Accountant Fees and Services
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38
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Part IV
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Item 15. Exhibits, Financial Statement Schedules
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39
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Item 15(c)(3). Schedule II - Valuation and Qualifying Accounts
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41
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Signatures
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42
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Exhibit 21 Subsidiaries of the Registrant
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Exhibit 23 Consent of Grant Thornton LLP
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Exhibit 31.1 Rule 13a-14(a) Certification - CEO
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Exhibit 31.2 Rule 13a-14(a) Certification - CFO
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Exhibit 32 Certification Pursuant to 18 U.S.C. Section 1350
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WEIS MARKETS, INC.
PART I
Weis Markets, Inc. is a Pennsylvania business founded by Harry and
Sigmund Weis in 1912 and incorporated in 1924. The Company is engaged principally in the retail sale of food in Pennsylvania and
surrounding states. There was no material change in the nature of the Company's business during fiscal 2011. The Company’s
stock has been traded on the New York Stock Exchange since 1965 under the symbol “WMK.” The Weis family currently owns
approximately 65% of the outstanding shares. Robert F. Weis serves as Chairman of the Board of Directors, and Jonathan H. Weis,
son of Robert F. Weis, serves as Vice Chairman and Secretary.
The Company's retail food stores sell groceries, dairy products,
frozen foods, meats, seafood, fresh produce, floral, pharmacy services, deli products, prepared foods, bakery products, beer and
wine, fuel and general merchandise items, such as health and beauty care and household products. In addition, some stores offer
third party services including: in-store banks, post offices and take-out restaurants. The Company advertises its products and
promotes its brand through weekly newspaper circulars; radio and television ads; e-mail blasts; and on-line via its website, social
media and recently launched mobile applications. Printed circulars are used extensively on a weekly basis to advertise featured
items. The Company utilizes a loyalty card program, “Weis Club Preferred Shopper,” which allows customers to receive
discounts, promotions and rewards. The Company currently owns and operates 161 retail food stores. The Company’s operations
are reported as a single reportable segment.
The following table provides additional detail on the percentage
of consolidated net sales contributed by product category for fiscal years 2011, 2010, and 2009, respectively:
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2011
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2010
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2009
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Center Store (1)
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59.9
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%
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60.9
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%
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61.8
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%
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Fresh (2)
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27.9
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27.7
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27.5
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Pharmacy Services
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8.8
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8.8
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8.9
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Fuel
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3.1
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2.3
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1.7
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Other
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0.3
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0.3
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0.1
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Consolidated net sales
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100.0
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%
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100.0
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%
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100.0
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%
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(1) Consists primarily of groceries, dairy products, frozen foods,
beer and wine, and general merchandise items, such as health and beauty care and household products.
(2) Consists primarily of meats, seafood, fresh produce, floral,
deli products, prepared foods and bakery products.
At the end of 2011, Weis Markets, Inc. operated 23 stores in Maryland,
3 stores in New Jersey, 12 stores in New York, 120 stores in Pennsylvania and 2 stores in West Virginia, for a total of 160 retail
food stores operating under the Weis Markets trade name. Weis Markets, Inc. also operated one Save-A-Lot retail food store in Pennsylvania.
WEIS MARKETS, INC.
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Item 1.
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Business: (continued)
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All retail food store locations, except Save-A-Lot, operate as conventional
supermarkets. Save-A-Lot’s limited assortment format serves value-focused customers. The retail food stores range in size
from 8,000 to 70,000 square feet, with an average size of approximately 49,000 square feet. The following summarizes the number
of stores by size categories as of year-end:
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2011
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2011
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2010
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2010
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Square feet
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Number of stores
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% of Total
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Number of stores
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% of Total
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55,000 to 70,000
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46
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29
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%
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43
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26
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%
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45,000 to 54,999
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70
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43
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%
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72
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44
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%
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35,000 to 44,999
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26
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16
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%
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27
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16
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%
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25,000 to 34,999
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13
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8
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%
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14
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9
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%
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Under 25,000
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6
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4
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%
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8
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5
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%
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Total
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161
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100
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%
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164
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100
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%
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The following schedule shows the changes in the number of retail
food stores, total square footage and store additions/remodels as of year-end:
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2011
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2010
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2009
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2008
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2007
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Beginning store count
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164
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164
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154
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154
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156
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New stores (1)
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1
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—
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11
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1
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—
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Relocations
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1
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—
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—
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—
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1
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Closed stores
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(4
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)
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—
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(1
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)
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(1
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)
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(2
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)
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Relocated stores
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(1
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)
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—
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—
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—
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(1
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Ending store count
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161
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164
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164
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154
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154
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Total square feet (000’s), at year-end
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7,877
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7,887
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7,888
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7,402
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7,301
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Additions/major remodels
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9
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4
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5
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8
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4
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(1) On August 23, 2009, the Company acquired eleven Giant Markets
stores located in Broome County, New York including units in Binghamton, Vestal, Endicott, Endwell and Johnson City.
The Company supports its retail operations
through a centrally located distribution facility, its own transportation fleet, three manufacturing facilities and its administrative
offices.
The Company is required to use a significant amount of working capital to provide
for the necessary amount of inventory to meet demand for its products through efficient use of buying power and effective utilization
of space in its distribution facilities. The manufacturing facilities consist of a meat processing plant, an ice cream plant and
a milk processing plant.
The Company operates in a highly competitive market place. The number
and the variety of competitors vary by market. The Company’s principal competition consists of international, national, regional
and local food chains, as well as independent food stores. The Company also faces substantial competition from convenience stores,
membership warehouse clubs, specialty retailers, supercenters and large-scale drug and pharmaceutical chains. The Company continues
to effectively compete by offering a strong combination of value, quality and service.
The Company currently employs approximately 17,400 full-time and
part-time associates.
WEIS MARKETS, INC.
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Item 1.
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Business: (continued)
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Trade
Names and Trademarks.
The Company has invested significantly in the development and protection of “Weis Markets”
both as a trade name and a trademark and considers it to be an important asset. The Company is the exclusive licensee of more than
100 other trademarks registered and/or pending in the United States Patent and Trademark Office, including trademarks for its product
lines and promotions such as Weis, Weis 2 Go, Weis Wonder Chicken, Price Freeze, Weis Gas-n-Go, From The Field, Weis Baker’s
Basket and Healthy Bites. Each trademark registration is for an initial period of 10 years and may be renewed so long as it is
in continued use in commerce
.
The Company considers its trademarks to be of material importance
to its business and actively defends and enforces its rights.
The Company maintains a corporate web site at
www.weismarkets.com.
The Company makes available, free of charge, on the “Corporate Information” section of its web site, its annual reports
on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant
to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after the Company electronically files such material
or furnishes it to the U.S. Securities and Exchange Commission (SEC) by clicking on the “SEC Information” link.
The Company’s Corporate Governance materials can be found
in the “Corporate Information” section of the Company’s web site. These materials include the corporate governance
guidelines; the charters of the Audit, Compensation and Disclosure Committees; and both the Code of Business Conduct and Ethics
and the Code of Ethics for the CEO and CFO. A copy of the foregoing corporate governance materials is available upon written request
to the Company’s principal executive offices.
In addition to risks and uncertainties in the ordinary course of
business common to all businesses, important factors are listed below specific to the Company and its industry, which could materially
impact its future performance.
The Company’s industry is highly competitive. If the Company
is unable to compete effectively, the Company’s financial condition and results of operations could be materially affected.
The retail food industry
is intensely price competitive,
and the competition the Company encounters may have a negative impact on product retail prices. The financial results may be adversely
impacted by a competitive environment that could cause the Company to reduce retail prices without a reduction in its product cost
to maintain market share; thus reducing sales and gross profit margins.
The trade area of the Company is located within a region and
subject to the economic, social and climate variables of that region.
The Company’s stores are concentrated in central and northeast
Pennsylvania, central Maryland, suburban Baltimore regions and the Southern Tier of New York. Changes in economic and social conditions
in the Company’s operating regions, including fluctuations in the inflation rate along with changes in population and employment
and job growth rates, affect customer shopping habits. These changes may negatively impact sales and earnings. In addition, employment
conditions specifically may affect the Company’s ability to hire and train qualified associates. Business disruptions due
to weather and catastrophic events historically have been few. The Company’s geographic regions could receive an extreme
variance in the amount of annual snowfall that may materially affect sales and expense results.
Food safety issues could result in the loss of consumer confidence
in the Company.
Customers count on the Company to provide them with wholesome food
products. Concerns regarding the safety of food products sold in its stores could cause shoppers to avoid purchasing certain products
from the Company, or to seek alternative sources of supply for all of their food needs, even if the basis for the concern is outside
of the Company’s control. Any lost confidence on the part of its customers would be difficult and costly to reestablish.
As such, any issue regarding the safety of any food items sold by the Company, regardless of the cause, could have a substantial
and adverse effect on operations.
WEIS MARKETS, INC.
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Item 1a.
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Risk Factors: (continued)
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The failure to execute expansion plans could have a material
adverse effect on the Company's business and results of its operations.
Circumstances outside the Company’s control could negatively
impact anticipated capital investments in store, distribution and manufacturing projects, information technology and equipment.
The Company cannot determine with certainty whether its new stores will be successful. The failure to expand by successfully opening
new stores as planned, or the failure of a significant number of these stores to perform as planned, could have a material adverse
effect on the Company’s business and results of its operations.
Disruptions or security breaches in the Company’s information
technology systems could adversely affect results.
The Company’s business is highly dependent on complex information
technology systems that are vital to its continuing operations. If the Company was to experience difficulties maintaining existing
systems or implementing new systems, significant losses could be incurred due to disruptions in its operations. Additionally, these
systems contain valuable proprietary data that, if breached, would have an adverse effect on the Company.
The Company is affected by certain operating costs which could
increase or fluctuate considerably
.
Associate expenses contribute to the majority of the Company’s
operating costs. The Company's financial performance is potentially affected by increasing wage and benefit costs, a competitive
labor market, regulatory wage increases and the risk of unionized labor disruptions of its non-union workforce. In addition, the
long term growth in associate medical insurance costs continues to outpace the Company’s expenses as a whole. The Company's
profit is particularly sensitive to the cost of oil. Oil prices directly affect the Company's product transportation costs, as
well as its utility and petroleum-based supply costs. It also affects the costs of its suppliers, which impacts its cost of goods.
Even with recently enacted Government legislation, including the Dodd-Frank Amendment, the Company continues to remain concerned
about the continual rise in bank interchange fees for accepting payment cards at the point of sale. As the use of payment cards
grow and banks continue to raise their rates, this expense continues to decrease profit margins.
Various aspects of the Company’s business are subject to
federal, state and local laws and regulations.
The Company is subject to various federal, state and local laws,
regulations and administrative practices that affect the Company’s business. The Company must comply with numerous provisions
regulating health and sanitation standards, food labeling, equal employment opportunity, minimum wages and licensing for the sale
of food, drugs and alcoholic beverages. The Company’s compliance with these regulations may require additional capital expenditures
and could adversely affect the Company’s ability to conduct the Company’s business as planned. Management cannot predict
either the nature of future laws, regulations, interpretations or applications, or the effect either additional government regulations
or administrative orders, when and if promulgated, or disparate federal, state, and local regulatory schemes would have on the
Company’s future business. They could, however, require the reformulation of certain products to meet new standards, the
recall or discontinuance of certain products not able to be reformulated, additional record keeping, expanded documentation of
the properties of certain products, expanded or different labeling and/or scientific substantiation. Any or all of such requirements
could have an adverse effect on the Company’s results of operations and financial condition.
Unexpected factors affecting self-insurance claims and reserve
estimates could adversely affect the Company.
The Company uses a combination of insurance and self-insurance to
provide for potential liabilities for workers' compensation, general liability, vehicle accident, property and associate medical
benefit claims. Management estimates the liabilities associated with the risks retained by the Company, in part, by considering
historical claims experience, demographic and severity factors and other actuarial assumptions which, by their nature, are subject
to a high degree of variability. Any projection of losses concerning workers’ compensation and general liability is subject
to a high degree of variability. Among the causes of this variability are unpredictable external factors affecting future inflation
rates, discount rates, litigation trends, legal interpretations, benefit level changes and claim settlement patterns.
WEIS MARKETS, INC.
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Item 1a.
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Risk Factors: (continued)
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The Company
was liable for associate health claims up to an annual maximum of $750,000 per member prior to March 1, 2012 and is liable for
associate health claims up to an annual maximum of $1,250,000 per member as of March 1, 2012. The Company is liable for workers'
compensation claims up to $2,000,000 per claim. Property and casualty insurance coverage is maintained with outside carriers at
deductible or retention levels ranging from $100,000 to $1,000,000. Although the Company has minimized its exposure on individual
claims, the Company, for the benefit of cost savings, has accepted the risk of an unusual amount of independent multiple material
claims arising, which could have a significant impact on earnings
.
Changes in tax laws may result in higher income tax.
The Company's future effective tax rate may increase from current
rates due to changes in laws and the status of pending items with various taxing authorities. Currently, the Company benefits from
a combination of its corporate structure and certain state tax laws.
The Company’s investment portfolio may suffer losses from
changes in market interest rates and changes in market conditions which could adversely affect results of operations or liquidity.
As of December 31, 2011, the Company had $37.4 million in cash
and cash equivalents and $89.3 million in marketable securities. The Company’s marketable securities consist of
municipal bonds and equity securities. These investments are subject to general credit, liquidity, market and interest rate
risks. Substantially all of these securities are subject to interest rate and credit risk and will decline in value if
interest rates increase or one of the issuers’ credit ratings is reduced. As a result, the Company may experience a
reduction in value or loss of liquidity from investments, which may have a negative impact on the Company’s results of
operations, liquidity and financial condition.
The Company is a controlled Company due to the common stock holdings
of the Weis family.
The Weis family’s share ownership represents approximately
65% of the combined voting power of the Company’s common stock as of December 31, 2011. As a result, the Weis family has
the power to elect a majority of the Company’s directors and approve any action requiring the approval of the shareholders
of the Company, including adopting certain amendments to the Company’s charter and approving mergers or sales of substantially
all of the Company’s assets. Currently, two of the Company’s seven directors are members of the Weis family.
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Item 1b.
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Unresolved Staff Comments:
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There are no unresolved staff comments.
The Company currently owns and operates 81 of its retail food stores,
and leases and operates 80 stores under operating leases that expire at various dates through 2028. The Company owns all 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 distribution center in Milton,
Pennsylvania of approximately 1.1 million square feet, and one in Northumberland, Pennsylvania totaling approximately 76,000 square
feet. The Company also owns one warehouse complex in Sunbury, Pennsylvania totaling approximately 557,000 square feet. The Company
operates an ice cream plant, meat processing plant and milk processing plant in 259,000 square feet at its Sunbury location.
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Item 3.
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Legal Proceedings:
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Neither the Company nor any subsidiary is presently a party to,
nor is any of their property subject to, any pending legal proceedings, other than routine litigation incidental to the business.
WEIS MARKETS, INC.
Executive Officers of the Registrant
The following sets forth the names and ages of the Company’s
executive officers as of March 15, 2012, indicating all positions held during the past five years:
Name
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Age
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Title
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Robert F. Weis (a)
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92
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Chairman of the Board
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Jonathan H. Weis (b)
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44
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Vice Chairman and Secretary
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David J. Hepfinger (c)
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53
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President and Chief Executive Officer
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Scott F. Frost (d)
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49
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Senior Vice President, Chief Financial Officer and Treasurer
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Harold G. Graber (e)
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56
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Senior Vice President of Real Estate and Development
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James E. Marcil (f)
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53
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Senior Vice President of Human Resources
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Kurt A. Schertle (g)
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40
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Senior Vice President of Sales and Merchandising
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(a)
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Robert F. Weis.
The Company has employed Mr. Weis since 1946. Mr. Weis served as Chairman and Treasurer from
1995 until April 2002, at which time he was appointed Chairman of the Board.
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(b)
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Jonathan H. Weis.
The Company has employed Mr. Weis since 1989. Mr. Weis served the Company as Vice President
of Property Management and Development from 1996 until April 2002, at which time he was appointed as Vice President and Secretary.
In January of 2004, the Board appointed Mr. Weis as Vice Chairman and Secretary.
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(c)
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David J. Hepfinger.
Mr. Hepfinger joined the Company on March 1, 2008 as its President and Chief Operating Officer.
Mr. Hepfinger has served the Company as President and Chief Executive Officer since January 1, 2009. Prior to joining the Company,
Mr. Hepfinger worked for Price Chopper Supermarkets,
a
chain of
supermarkets headquartered in Rotterdam, NY, for 32 years in various capacities including his last position as
Senior Vice President Retail and Administration.
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(d)
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Scott F. Frost.
The Company appointed Mr. Frost as Vice President, Chief Financial Officer and Treasurer on October
26, 2009. In January 2011, Mr. Frost was promoted to Senior Vice President, Chief Financial Officer and Treasurer. Mr. Frost served
as Acting Chief Financial Officer, Controller, Assistant Treasurer and Assistant Secretary of the Company during the past five
years.
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(e)
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Harold G. Graber.
Mr. Graber joined the Company in October 1989 as the Director of Real Estate. Mr. Graber, who
served the Company as Vice President for Real Estate since 1996, was promoted to Senior Vice President of Real Estate and Development
in February 2010.
|
|
(f)
|
James E. Marcil.
Mr. Marcil joined the Company in September 2002 as Vice President of Human Resources. In February
2010, Mr. Marcil was promoted to Senior Vice President of Human Resources.
|
|
(g)
|
Kurt A. Schertle.
The Company hired Mr. Schertle on March 1, 2009 as its Vice President of Sales and Merchandising.
In February 2010, Mr. Schertle was promoted to Senior Vice President of Sales and Merchandising. Prior to joining the Company,
Mr. Schertle was President and Chief Operating Officer of Tree Top Kids, a specialty toy retailer, from 2007 until 2009. Mr. Schertle
has more than 20 years of food retailing experience, mostly with SUPERVALU, where he worked in various capacities including his
last position as a Senior Vice President for Marketing and Merchandising from 2005 until 2007.
|
WEIS MARKETS, INC.
PART II
Item 5.
Market for Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities:
The Company's stock is traded on the New York Stock Exchange (ticker
symbol WMK). The approximate number of shareholders, including individual participants in security position listings, on December
31, 2011 as provided by the Company's transfer agent was 6,371. High and low stock prices and dividends paid per share for the
last two fiscal years were:
|
|
2011
|
|
|
2010
|
|
|
|
Stock Price
|
|
|
Dividend
|
|
|
Stock Price
|
|
|
Dividend
|
|
Quarter
|
|
High
|
|
|
Low
|
|
|
Per Share
|
|
|
High
|
|
|
Low
|
|
|
Per Share
|
|
First
|
|
$
|
40.96
|
|
|
$
|
38.67
|
|
|
$
|
.29
|
|
|
$
|
36.92
|
|
|
$
|
32.56
|
|
|
$
|
.29
|
|
Second
|
|
|
41.82
|
|
|
|
38.03
|
|
|
|
.29
|
|
|
|
38.32
|
|
|
|
32.61
|
|
|
|
.29
|
|
Third
|
|
|
42.20
|
|
|
|
36.64
|
|
|
|
.29
|
|
|
|
38.46
|
|
|
|
32.56
|
|
|
|
.29
|
|
Fourth
|
|
|
42.01
|
|
|
|
36.52
|
|
|
|
1.30
|
|
|
|
41.30
|
|
|
|
37.66
|
|
|
|
.29
|
|
The following line graph compares the yearly percentage change in
the cumulative total shareholder return on the Company’s common stock against the cumulative total return of the S&P
Composite-500 Stock Index and the cumulative total return of a published group index for the Retail Grocery Stores Industry (“Peer
Group”), provided by Value Line, Inc., for the period of five years. The graph depicts $100 invested at the close of trading
on the last trading day preceding the first day of the fifth preceding year in Weis Markets, Inc. common stock, S&P 500, and
the Peer Group. The cumulative total return assumes reinvestment of dividends.
Comparative Five-Year Total Returns
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
Weis Markets, Inc.
|
|
|
100.00
|
|
|
|
102.30
|
|
|
|
89.12
|
|
|
|
99.66
|
|
|
|
114.17
|
|
|
|
119.39
|
|
S&P500
|
|
|
100.00
|
|
|
|
105.49
|
|
|
|
66.46
|
|
|
|
84.04
|
|
|
|
96.70
|
|
|
|
98.74
|
|
Peer Group
|
|
|
100.00
|
|
|
|
117.55
|
|
|
|
90.96
|
|
|
|
93.18
|
|
|
|
109.83
|
|
|
|
125.36
|
|
WEIS MARKETS, INC.
|
Item 6.
|
Selected Financial Data:
|
The following selected historical financial information has been
derived from the Company's audited consolidated financial statements. This information should be read in connection with the Company's
Consolidated Financial Statements and the Notes thereto, as well as "Management's Discussion and Analysis of Financial Condition
and Results of Operations," included in Item 7.
Five Year Review of Operations
|
|
53 Weeks
|
|
|
52 Weeks
|
|
|
52 Weeks
|
|
|
52 Weeks
|
|
|
52 Weeks
|
|
(dollars in thousands, except shares,
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
per share amounts and store information)
|
|
Dec. 31, 2011
|
|
|
Dec. 25, 2010
|
|
|
Dec. 26, 2009
|
|
|
Dec. 27, 2008
|
|
|
Dec. 29, 2007
|
|
Net sales
|
|
$
|
2,752,504
|
|
|
$
|
2,620,378
|
|
|
$
|
2,516,175
|
|
|
$
|
2,422,361
|
|
|
$
|
2,318,551
|
|
Costs and expenses
|
|
|
2,638,224
|
|
|
|
2,515,062
|
|
|
|
2,419,824
|
|
|
|
2,354,780
|
|
|
|
2,243,587
|
|
Income from operations
|
|
|
114,280
|
|
|
|
105,316
|
|
|
|
96,351
|
|
|
|
67,581
|
|
|
|
74,964
|
|
Investment income
|
|
|
3,326
|
|
|
|
2,069
|
|
|
|
1,556
|
|
|
|
2,532
|
|
|
|
2,795
|
|
Income before provision for income taxes
|
|
|
117,606
|
|
|
|
107,385
|
|
|
|
97,907
|
|
|
|
70,113
|
|
|
|
77,759
|
|
Provision for income taxes
|
|
|
42,022
|
|
|
|
39,094
|
|
|
|
35,107
|
|
|
|
23,118
|
|
|
|
26,769
|
|
Net income
|
|
|
75,584
|
|
|
|
68,291
|
|
|
|
62,800
|
|
|
|
46,995
|
|
|
|
50,990
|
|
Retained earnings, beginning of year
|
|
|
864,132
|
|
|
|
827,042
|
|
|
|
795,473
|
|
|
|
779,760
|
|
|
|
760,531
|
|
|
|
|
939,716
|
|
|
|
895,333
|
|
|
|
858,273
|
|
|
|
826,755
|
|
|
|
811,521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less cumulative effect of change in accounting for income taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
452
|
|
Cash dividends
|
|
|
58,370
|
|
|
|
31,201
|
|
|
|
31,231
|
|
|
|
31,282
|
|
|
|
31,309
|
|
Retained earnings, end of year
|
|
$
|
881,346
|
|
|
$
|
864,132
|
|
|
$
|
827,042
|
|
|
$
|
795,473
|
|
|
$
|
779,760
|
|
Weighted-average shares outstanding, diluted
|
|
|
26,898,443
|
|
|
|
26,898,443
|
|
|
|
26,920,551
|
|
|
|
26,966,647
|
|
|
|
26,993,997
|
|
Cash dividends per share
|
|
$
|
2.17
|
|
|
$
|
1.16
|
|
|
$
|
1.16
|
|
|
$
|
1.16
|
|
|
$
|
1.16
|
|
Basic and diluted earnings per share
|
|
$
|
2.81
|
|
|
$
|
2.54
|
|
|
$
|
2.33
|
|
|
$
|
1.74
|
|
|
$
|
1.89
|
|
Working capital
|
|
$
|
219,959
|
|
|
$
|
233,389
|
|
|
$
|
173,159
|
|
|
$
|
158,932
|
|
|
$
|
157,385
|
|
Total assets
|
|
$
|
1,029,004
|
|
|
$
|
992,081
|
|
|
$
|
916,515
|
|
|
$
|
848,214
|
|
|
$
|
840,069
|
|
Shareholders’ equity
|
|
$
|
745,886
|
|
|
$
|
728,127
|
|
|
$
|
690,764
|
|
|
$
|
661,100
|
|
|
$
|
648,228
|
|
Number of grocery stores
|
|
|
161
|
|
|
|
164
|
|
|
|
164
|
|
|
|
154
|
|
|
|
154
|
|
WEIS MARKETS, INC.
|
Item 7.
|
Management's Discussion and Analysis of Financial
Condition and Results of Operations:
|
Overview
The following Management’s Discussion and Analysis of Financial
Condition and Results of Operations (MD&A) is intended to help the reader understand Weis Markets, Inc., its operations and
its present business environment. The MD&A is provided as a supplement to and should be read in conjunction with the consolidated
financial statements and the accompanying notes thereto contained in “Item 8. Financial Statements and Supplementary Data”
of this report. The following analysis should also be read in conjunction with the Financial Statements included in the 2011 Quarterly
Reports on Form 10-Q and the 2010 Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission, as well as
the cautionary statement captioned “Forward-Looking Statements” immediately following this analysis. This overview
summarizes the MD&A, which includes the following sections:
|
•
|
Company Overview - a general description of the Company’s business and strategic imperatives.
|
|
•
|
Results of Operations - an analysis of the Company’s consolidated results of operations for the three years presented
in the Company’s consolidated financial statements.
|
|
•
|
Liquidity and Capital Resources - an analysis of cash flows, aggregate contractual obligations, and off-balance sheet arrangements.
|
|
•
|
Critical Accounting Estimates - a discussion of accounting policies that require critical judgments and estimates.
|
Company Overview
General
Weis Markets, Inc. was founded in 1912 by Harry and Sigmund Weis
in Sunbury, Pennsylvania. Today, the Company ranks among the top 50 food and drug retailers in the United States in revenues generated.
As of December 31, 2011, the Company operated 161 retail food stores in Pennsylvania and four surrounding states: Maryland, New
Jersey, New York and West Virginia.
Company revenues are generated in its retail food stores from the
sale of a wide variety of consumer products including groceries, dairy products, frozen foods, meats, seafood, fresh produce, floral,
pharmacy services, deli products, prepared foods, bakery products, beer and wine, fuel, and general merchandise items, such as
health and beauty care and household products. The Company supports its retail operations through a centrally located distribution
facility, its own transportation fleet, three manufacturing facilities and its administrative offices. The Company's operations
are reported as a single reportable segment.
Strategic Imperatives
The following strategic imperatives will ensure the success of the
Company in the coming years:
|
·
|
Growth and Profitability –
The
Company continues to focus on sales and profits growth, improved operating discipline, increased productivity and positive cash
flow. It will continue to invest in its growth by investing in new stores, remodels and additions and strategic acquisitions. It
will also make substantial investments in its information technology systems and distribution network. The Company believes disciplined
growth will increase its market share and operating profits, resulting in enhanced shareholder value
.
|
|
·
|
Merchandising and Operational Differentiation –
The
Company has identified product pricing, locally focused store assortments, shopping experience, overall convenience and customer
service to maintain its differentiation versus its competitors. As part of this strategy, management is committed to offering its
customers a strong combination of quality, service and value. It will continue to offer competitive prices on branded and private
brand products to meet and exceed customers’ expectations
.
|
WEIS MARKETS, INC.
|
Item 7.
|
Management's Discussion and Analysis of Financial
Condition and Results of Operations: (continued)
|
Company Overview, Strategic Imperatives
(continued)
|
·
|
Talent Management – In support of the Company’s growth
and sales building strategies, senior management is committed to the continued development of its management group, particularly
in its stores. It is working to increase its bench strength to ensure succession preparedness, and to improve overall associate
performance
.
|
|
·
|
Supply Chain – Management will continue to streamline its supply
chain by improving inventory turns, cost per case, in-stock position and overall service levels, which will help improve in-store
conditions and result in increased sales and profits
.
|
|
·
|
Information Technology Initiatives – The Company will increase
its investment in information technology to improve associate productivity, overall store conditions and the overall customer experience
with user-friendly, support driven systems
. These investments will also result in improved inventory management and shelf
replenishment practices.
|
|
·
|
Sustainability Strategy -
The Company continued to focus on green
best-practices, conservation, food and agricultural impact and social responsibility. In 2011, it recycled 46 million pounds of
cardboard, 1.5 million pounds of plastic bags, 45 tons of office paper and over 10 tons of pharmacy plastics. The Company also
replaced its existing lighting system at its 1.1 million square-foot distribution center with low watt florescent and LED lighting,
reducing energy consumption by 80% and operating costs by 30%. Its new store prototypes contain skylights that harvest natural
daylight to reduce lighting costs, LED lighting and motion sensors in its frozen departments and energy management systems. All
Company stores have an assigned Energy Captain to promote in-store energy conservation. This effort has decreased overall store
energy usage by 3%, reducing energy costs by $1.1 million dollars.
|
Results of Operations
Analysis of Consolidated Statements of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Fiscal Years Ended December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
Percent Changes
|
|
December 25, 2010 and December 26, 2009
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
2011 vs.
|
|
|
2010 vs.
|
|
|
|
(53 weeks)
|
|
|
(52 weeks)
|
|
|
(52 weeks)
|
|
|
2010
|
|
|
2009
|
|
Net sales
|
|
$
|
2,752,504
|
|
|
$
|
2,620,378
|
|
|
$
|
2,516,175
|
|
|
|
5.0
|
%
|
|
|
4.1
|
%
|
Cost of sales, including warehousing and distribution expenses
|
|
|
2,016,649
|
|
|
|
1,906,753
|
|
|
|
1,838,003
|
|
|
|
5.8
|
|
|
|
3.7
|
|
Gross profit on sales
|
|
|
735,855
|
|
|
|
713,625
|
|
|
|
678,172
|
|
|
|
3.1
|
|
|
|
5.2
|
|
Gross profit margin
|
|
|
26.7
|
%
|
|
|
27.2
|
%
|
|
|
27.0
|
%
|
|
|
|
|
|
|
|
|
Operating, general and administrative expenses
|
|
|
621,575
|
|
|
|
608,309
|
|
|
|
581,821
|
|
|
|
2.2
|
|
|
|
4.6
|
|
O, G & A, percent of net sales
|
|
|
22.6
|
%
|
|
|
23.2
|
%
|
|
|
23.1
|
%
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
114,280
|
|
|
|
105,316
|
|
|
|
96,351
|
|
|
|
8.5
|
|
|
|
9.3
|
|
Operating Margin
|
|
|
4.2
|
%
|
|
|
4.0
|
%
|
|
|
3.8
|
%
|
|
|
|
|
|
|
|
|
Investment income
|
|
|
3,326
|
|
|
|
2,069
|
|
|
|
1,556
|
|
|
|
60.8
|
|
|
|
33.0
|
|
Investment income, percent of net sales
|
|
|
0.1
|
%
|
|
|
0.1
|
%
|
|
|
0.1
|
%
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
|
117,606
|
|
|
|
107,385
|
|
|
|
97,907
|
|
|
|
9.5
|
|
|
|
9.7
|
|
Provision for income taxes
|
|
|
42,022
|
|
|
|
39,094
|
|
|
|
35,107
|
|
|
|
7.5
|
|
|
|
11.4
|
|
Effective tax rate
|
|
|
35.7
|
%
|
|
|
36.4
|
%
|
|
|
35.9
|
%
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
75,584
|
|
|
$
|
68,291
|
|
|
$
|
62,800
|
|
|
|
10.7
|
%
|
|
|
8.7
|
%
|
Net income, percent of net sales
|
|
|
2.7
|
%
|
|
|
2.6
|
%
|
|
|
2.5
|
%
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per share
|
|
$
|
2.81
|
|
|
$
|
2.54
|
|
|
$
|
2.33
|
|
|
|
10.6
|
%
|
|
|
9.0
|
%
|
Page
10
of 42 (Form 10-K)
|
WEIS MARKETS, INC.
|
Item 7.
|
Management's Discussion and Analysis of Financial
Condition and Results of Operations: (continued)
|
Results of Operations (continued)
Net Sales
The Company's revenues are earned and cash is generated as merchandise
is sold to customers at the point of sale. Discounts, except those provided by a vendor, are recognized as a reduction in sales
as products are sold or over the life of a promotional program if redeemable in the future.
When calculating the percentage change in comparable store sales,
the Company defines a new store to be comparable when it has been in operation for five full quarters. Relocated stores and stores
with expanded square footage are included in comparable store sales since these units are located in existing markets and are open
during construction. Planned store dispositions are excluded from the calculation. The Company only includes retail food stores
in the calculation.
Comparable
store sales increased 6.1% in 2011, a 53-week period, compared to 2010, a 52-week period,
while total sales increased 5.0%.
Excluding fuel sales,
comparable store sales increased 5.3% in 2011 compared to 2010, while total sales increased 4.2%.
The Company’s comparable store sales, adjusting for the extra week in 2011, increased 4.2% compared to 2010, while total
sales increased 4.1%.
Excluding fuel sales and adjusting for the extra
week in 2011,
comparable store sales increased 3.5% in 2011 compared to 2010, while total sales increased 3.3%. The Company’s
2011 sales were impacted by the divestiture of 25 underperforming SuperPetz stores and four supermarkets.
Comparable
store sales increased 1.0% in 2010 compared to 2009, also a 52-week period, while total sales increased 4.1%. Excluding fuel sales,
comparable store sales increased 0.3% in 2010 compared to 2009, while total sales increased 3.5%.
Slow economic growth and high unemployment continue to impact the
Company’s markets. Many customers remain cautious in their spending and continue to focus on value and long-term savings.
To meet these needs, the Company continued to make significant investments
in its “Price Freeze” and “Get Grillin’ Weis” promotional programs. The Company ran two successful
90-day “Price Freeze” programs in 2011. The programs froze 2,400 and 1,600 staple item prices, respectively. The Company
launched an eighth round of its “Price Freeze” program on January 8, 2012. This program froze prices of approximately
1,700 staple items for a 90-day period.
The “Get Grillin’ Weis” promotional program was a seasonal cross-merchandising
program linking meat items to specific general merchandise items such as gas grills and patio furniture, as well as complementary
grocery and perishable items. This program also lowered prices of approximately 1,000 staple items for a fourteen-week period.
In addition to the
“Price
Freeze” and “Get Grillin’ Weis” promotional programs
, the Company also offered its “Gas Rewards”
program in most markets. The “Gas Rewards” program allows Weis Preferred Shoppers club card members to earn gas discounts
resulting from their in-store purchases. Customers can redeem these gas discounts at Sheetz convenience stores, located in most
of the Company’s markets, at Manley’s Mighty Mart Valero locations, in the Binghamton, NY market or at any of the eighteen
Weis Gas-n-Go locations.
The Company continued to employ a disciplined marketing and advertising
strategy, along with targeted promotional activity in key markets, to help maintain its market share and increase its profits.
During 2011, the Company generated a 4.5% increase in average sales per customer transaction while the number of identical customer
store visits increased by 2.1%. In
the fourth quarter of 2011
,
in preparation for the Company’s 100
th
anniversary celebration
in 2012,
the
Company launched its Gold Card program, an extension
of its existing Preferred Club Shopper program. The Gold Card program targets the Company’s
best
shoppers with personalized offers and strong values to help them save money.
Adjusting for the extra week in 2011, pharmacy sales increased 2.3%
in 2011 versus 2010 and 2.1% in 2010 versus 2009. The pharmacy-based immunization program was expanded to all stores and currently
has 272 pharmacists (representing 97% of its pharmacist staff) who are certified by their respective Board of Pharmacy to administer
vaccines. The Company also leveraged increased customer counts to drive trial usage and loyalty through existing marketing channels.
Category expansion and better private brand penetration in key health care over-the-counter categories were successful in mitigating
mass and chain drug store intrusion.
Page
11
of 42 (Form 10-K)
|
WEIS MARKETS, INC.
|
Item 7.
|
Management's Discussion and Analysis of Financial
Condition and Results of Operations: (continued)
|
Results of Operations (continued)
Within the Fresh Category, meat and produce sales remained strong,
providing positive results to the Company. Adjusting for the extra week in 2011, meat sales increased 4.5%
in
2011 compared to 2010
. This increase is credited to better in-store execution of merchandising plans, which has helped increase
the number of units sold, and product inflation in all meat categories, with the exception of the poultry category. Adjusting for
the extra week in 2011, produce sales increased 4.9%
in 2011 compared
to 2010 and
3.4%
in 2010 compared to 2009
. The 2011 results
were attributable to a combination of an increase in produce units sold, solid in-store execution of merchandising plans and product
inflation. Adjusting for the extra week in 2011, dairy sales increased 6.7%
in
2011 compared to 2010, as a result of continued product inflation throughout the dairy category in 2011.
Dairy sales increased
3.2%
in 2010 when compared with 2009
, when the Company experienced
significant price deflation in key dairy categories, notably eggs and milk.
The Company is committed to maintaining retail prices, but recognizes
that inflationary pressures could cause the Company to raise prices in order to maintain margin rates.
Management remains confident in its ability to generate sales growth
in a highly competitive environment, but also understands some competitors have greater financial resources and could use these
resources to take measures which could adversely affect the Company's competitive position.
Cost of Sales and Gross Profit
Cost of sales consists of direct product costs (net of discounts
and allowances), warehouse and transportation costs, as well as manufacturing facility operations.
According to the latest U.S. Bureau of Labor Statistics’ report,
the annual Seasonally Adjusted Food-at-Home Consumer Price Index increased 4.8% in 2011 and 0.4% in 2010 and 2009. The annual Seasonally
Adjusted Producer Price Index for Finished Consumer Foods increased 6.3% for 2011 compared to an increase of 3.9% for 2010 and
a decrease of 1.4% for 2009. Despite the fluctuation of retail and wholesale prices, the Company maintained a gross profit rate
of 26.7% in 2011.
Because
of
significant
wholesale price inflation during the year, the Company
experienced a LIFO charge of $8.7 million for 2011, compared to a charge of $2.9 million for 2010 and a gain of $826,000 in 2009.
The Company is expecting moderate wholesale price inflation in 2012.
The Company's
profitability is particularly impacted by the cost of oil. Fluctuating fuel prices affect the delivered cost of product and the
cost of other petroleum-based supplies such as plastic bags. As a percentage of sales, the cost of diesel fuel used by the Company
to deliver goods from its distribution center to its stores increased 0.1% in 2011 compared to 2010.
According to the
U.S.
Department of Energy, the average U.S. diesel fuel price increased $0.55 per gallon to $3.79 per gallon as of December 31,
2011, compared to $3.24 per gallon as of December 25, 2010. Based upon the
U.S.
Department of Energy’s current estimate, t
he Company is expecting
diesel fuel prices to continue to increase in 2012.
Although the Company experienced product cost inflation for both
2011 and 2010 and deflation in 2009, management does not feel it can accurately measure the full impact of inflation or deflation
on retail pricing due to changes in the types of merchandise sold between periods, shifts in customer buying patterns and the fluctuation
of competitive factors.
Operating, General and Administrative Expenses
Business operating costs including expenses generated from administration
and purchasing functions, are recorded in "Operating, general and administrative expenses." Business operating costs
include items such as wages, benefits, utilities, repairs and maintenance, advertising costs and credits, rent, insurance, equipment
depreciation, leasehold amortization and costs for outside provided services.
Page
12
of 42 (Form 10-K)
|
WEIS MARKETS, INC.
|
Item 7.
|
Management's Discussion and Analysis of Financial
Condition and Results of Operations: (continued)
|
Results of Operations (continued)
Employee-related costs such as wages, employer paid taxes, health
care benefits and retirement plans, comprise over 60% of the total operating, general and administrative expenses. Employee-related
costs, inclusive of the extra week in 2011, increased 3.3% compared to 2010 and 3.9% in 2010 compared to 2009, of which 3.6% of
the increase is related to the Giant Markets acquisition. As a percent of sales, employee-related costs decreased 0.2% and direct
store labor decreased 0.1% in 2011 as compared to 2010.
The Company expensed $111,000, $798,000 and $1.3 million in 2011,
2010 and 2009, respectively, due to adjustments made to the non-qualified supplemental executive retirement plan resulting from
a rise in the equity market. In 2009, additional profit-sharing plan contributions of $1.1 million were made to compensate participants
for the decline in the equity markets (see Note 6 Retirement Plans of Notes to the Consolidated Financial Statements.)
The Company’s
self-insured health care benefit expenses decreased 0.5% in 2011 compared to 2010 and increased 5.9% in 2010 compared to 2009,
of which 4.2% of the increase is related to the Giant Markets acquisition. The Company remains concerned about the potential impact
that The
Patient Protection and Affordable Care Act
will
have on its future operating expenses.
Depreciation expense was $59.4 million, or 2.2% of total sales,
for 2011 compared to $55.1 million, or 2.1% of total sales, for 2010 and $53.4 million, or 2.1% of total sales, for 2009. The increase
in depreciation expense, in total dollars, was the result of additional capital expenditures as the Company implements its capital
expansion program. See the Liquidity and Capital Resources section for further information regarding the capital expansion program.
The Company’s
interchange fees for accepting electronic payments increased 8.3% to $19.3 million in 2011 compared to 2010 and 15.4% to $17.8
million in 2010 compared to 2009,
of which 4.4% of the increase is related to the Giant Markets acquisition
.
The Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act authorized the Federal Reserve to
set rules to implement caps on debit card interchange fees. The Federal Reserve released its final rules, which indicate there
will be a reduction in fees. However, the Company is currently unable to determine the full impact of these rules on its “Operating,
general and administrative expenses”.
Retail
store profitability is sensitive to volatility in utility costs due to the amount of electricity and gas required to operate
the
Company's stores and facilities
.
The Company is responding to this
volatility in operating costs by employing technologies, procurement strategies and associate energy awareness programs to manage
and reduce consumption. Through these initiatives, with the added benefit of a declining market in electricity costs, the Company’s
utility expense decreased by 6.3% in 2011 compared to 2010.
Due to the below average snow fall in 2011, snow removal costs decreased
$150,000 compared to 2010. In 2010, the snow fall was above average in the Mid-Atlantic states, the Company's operating region,
resulting in increased costs of $977,000 compared to 2009.
The Company
may not be able to recover rising expenses through increased prices charged to its customers. Any delay in the Company's response
to unforeseen cost increases or competitive pressures that prevent its ability to raise prices may cause earnings to suffer. Management
does not foresee a change in these trends in the near future
.
The Company’s income benefited from the sale of cardboard
salvage, which increased $1.2 million in 2011 compared to 2010 and $1.9 million in 2010 compared to 2009, as market prices significantly
increased.
Page
13
of 42 (Form 10-K)
|
WEIS MARKETS, INC.
|
Item 7.
|
Management's Discussion and Analysis of Financial
Condition and Results of Operations: (continued)
|
Results of Operations (continued)
Investment Income
The Company’s
investment portfolio consists of marketable securities which currently includes municipal bonds and equity securities. The Company
classifies all of its marketable securities as available-for-sale.
The Company experienced a $975,000 increase in investment
income from gains recognized on the sale of equity securities
in 2011
compared to 2010.
The Company’s investment income during 2011 also increased as a result of strategic investment decisions
weighed heavily toward municipal bonds, starting at the end of 2010.
Due
to declining yields on short-term money market funds, the Company experienced a $210,000 decrease in interest income in 2010 compared
to 2009
.
Provision for Income Taxes
The effective income tax rate was 35.7%, 36.4% and 35.9% in 2011,
2010, and 2009, respectively. The effective income tax rate differs from the federal statutory rate of 35% primarily due to the
effect of state taxes, net of permanent differences.
Income
is earned by selling merchandise at price levels that produce revenues in excess of cost of merchandise sold and operating and
administrative expenses. Although the Company may experience short term fluctuations in its earnings due to unforeseen short-term
operating cost increases, it historically has been able to increase revenues and maintain stable earnings from year to year
.
Liquidity and Capital Resources
Net cash provided by operating activities was $152.4 million in
2011 compared to $146.7 million in 2010 and $118.9 million in 2009. Working capital decreased 5.8% in 2011 and increased 34.8%
and 9.0% in 2010 and 2009, respectively. The decrease in working capital is a result of the special dividend issued to shareholders
in the fourth quarter of 2011.
Net cash used in investing activities was $165.8 million in 2011
compared to $73.5 million in 2010, and $78.0 million in 2009. These funds were used primarily for property and equipment purchases
in the three fiscal years presented. Property and equipment purchases, including the 2009 acquisition of a business, totaled $110.5
million in 2011 compared to $69.9 million in 2010 and $81.1 million in 2009. In 2009, the Company acquired eleven Giant Markets
stores for $35.8 million. As a percentage of sales, capital expenditures were 4.0%, 2.7% and 2.1% in 2011, 2010 and 2009, respectively.
The Company also purchased $81.9 million of marketable securities in 2011, compared to $12.2 million in 2010.
The Company’s capital expansion program includes the construction
of new superstores, the expansion and remodeling of existing units, the acquisition of sites for future expansion, new technology
purchases and the continued upgrade of the Company’s processing and distribution facilities. Management estimates that its
current development plans will require an investment of approximately $125.0 million in 2012.
Net cash used in financing activities during 2011 was $58.4 million
compared to $31.2 million in 2010 and $33.2 million in 2009. The majority of the financing activities consisted of dividend payments
to shareholders, including a special dividend declaration during the fourth quarter of 2011. At December 31, 2011, the Company
had outstanding letters of credit of $15.9 million. The letters of credit are maintained primarily to support performance, payment,
deposit or surety obligations of the Company. The Company does not anticipate drawing on any of them.
Total cash dividend payments on common stock, on a per share basis,
amounted to $2.17 in 2011 and $1.16 in both 2010 and 2009. No treasury stock was purchased in 2011, compared to treasury stock
purchases of $2,000 in 2010 and $2.0 million in 2009. The Board of Directors’ 2004 resolution authorizing the repurchase
of up to one million shares of the Company’s common stock has a remaining balance of 752,468 shares.
Page
14
of 42 (Form 10-K)
|
WEIS MARKETS, INC.
|
Item 7.
|
Management's Discussion and Analysis of Financial
Condition and Results of Operations: (continued)
|
Liquidity and Capital Resources (continued)
The Company has no other commitment of capital resources as of December
31, 2011, other than the lease commitments on its store facilities under operating leases that expire at various dates through
2028. The Company anticipates funding its working capital requirements and its $125.0 million capital expansion program through
cash and investment reserves and future internally generated cash flows from operations. However, management is considering both
a short-term and long-term credit facility to fund working capital needs and potential acquisitions.
The Company’s earnings and cash flows are subject to fluctuations
due to changes in interest rates as they relate to available-for-sale securities and any future long-term debt borrowings. The
Company’s marketable securities portfolio currently consists of municipal bonds and equity securities. Other short-term investments
are classified as cash equivalents on the Consolidated Balance Sheets.
The Company’s unrealized holding gains net of deferred taxes
were $1.4 million, $405,000 and $68,000 in 2011, 2010 and 2009, respectively (see Consolidated Statements of Comprehensive Income).
As of December 31, 2011, the Company had $9.2 million in gross unrealized holding gains in marketable securities (see Note 2 Marketable
Securities of Notes to the Consolidated Financial Statements).
By their nature, these financial instruments inherently expose the
holders to market risk. The extent of the Company’s interest rate and other market risk is not quantifiable or predictable
with precision 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 in high-grade marketable securities and does not use interest rate derivative instruments
to manage exposure to interest rate fluctuations. Currently, the Company’s investment strategy of obtaining marketable securities
with maturity dates between one and ten years helps to minimize market risk and to 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. The Company’s management continually monitors the risk associated with its marketable securities. A quantitative
tabular presentation of risk exposure is located in “Item 7a. Quantitative and Qualitative Disclosures about Market Risk”
of this report
.
Contractual Obligations
The following table represents scheduled maturities of the Company’s
long-term contractual obligations as of December 31, 2011.
|
|
Payments due by period
|
|
|
|
|
|
|
Less than
|
|
|
|
|
|
|
|
|
More than
|
|
(dollars in thousands)
|
|
Total
|
|
|
1 year
|
|
|
1-3 years
|
|
|
3-5 years
|
|
|
5 years
|
|
Operating leases
|
|
$
|
203,349
|
|
|
$
|
29,090
|
|
|
$
|
57,361
|
|
|
$
|
45,558
|
|
|
$
|
71,340
|
|
Total
|
|
$
|
203,349
|
|
|
$
|
29,090
|
|
|
$
|
57,361
|
|
|
$
|
45,558
|
|
|
$
|
71,340
|
|
Off-Balance Sheet Arrangements
The Company is not a party to any off-balance sheet arrangements
that have, or are reasonably likely to have, a current or future effect on the Company’s financial condition, results of
operations or cash flows.
Page
15
of 42 (Form 10-K)
|
WEIS MARKETS, INC.
|
Item 7.
|
Management's Discussion and Analysis of Financial
Condition and Results of Operations: (continued)
|
Critical Accounting Estimates
The Company has chosen accounting policies that it believes are
appropriate to accurately and fairly report its operating results and financial position, and the Company applies those accounting
policies in a consistent manner. The Significant Accounting Policies are summarized in Note 1 to the Consolidated Financial Statements.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires that the Company makes estimates and assumptions that affect
the reported amounts of assets, liabilities, revenues and expenses. These estimates and assumptions are based on historical and
other factors believed to be reasonable under the circumstances. The Company evaluates these estimates and assumptions on an ongoing
basis and may retain outside consultants, lawyers and actuaries to assist in its evaluation. The Company believes the following
accounting policies are the most critical because they involve the most significant judgments and estimates used in preparation
of its consolidated financial statements.
Vendor Allowances
Vendor allowances related to the Company's buying and merchandising
activities are recorded as a reduction of cost of sales as they are earned, in accordance with its underlying agreement. Off-invoice
and bill-back allowances are used to reduce direct product costs upon the receipt of goods. Promotional rebates and credits are
accounted for as a reduction in the cost of inventory and recognized when the related inventory is sold. Volume incentive discounts
are realized as a reduction of cost of sales at the time it is deemed probable and reasonably estimable that the incentive target
will be reached. Long-term contract incentives, which require an exclusive vendor relationship, are allocated over the life of
the contract. Promotional allowance funds for specific vendor-sponsored programs are recognized as a reduction of cost of sales
as the program occurs and the funds are earned per the agreement. Cash discounts for prompt payment of invoices are realized in
cost of sales as invoices are paid. Warehouse and back-haul allowances provided by suppliers for distributing their product through
our distribution system are recorded in cost of sales as the required performance is completed. Warehouse rack and slotting allowances
are recorded in cost of sales when new items are initially set up in the Company's distribution system, which is when the related
expenses are incurred and performance under the agreement is complete. Swell allowances for damaged goods are realized in cost
of sales as provided by the supplier, helping to offset product shrink losses also recorded in cost of sales.
Store Closing Costs
The Company provides for closed store liabilities relating to the
estimated post-closing lease liabilities and related other exit costs associated with the store closing commitments. The closed
store liabilities are usually paid over the lease terms associated with the closed stores having remaining terms ranging from one
to seven years. At December 31, 2011, closed store lease liabilities totaled $756,000. The Company estimates the lease liabilities,
net of estimated sublease income, using the undiscounted rent payments of closed stores. Other exit costs include estimated real
estate taxes, common area maintenance, insurance and utility costs to be incurred after the store closes over the remaining lease
term. Store closings are generally completed within one year after the decision to close. Adjustments to closed store liabilities
and other exit costs primarily relate to changes in subtenants and actual exit costs differing from original estimates. Adjustments
are made for changes in estimates in the period in which changes become known. Any excess store closing liability remaining upon
settlement of the obligation is reversed to income in the period that such settlement is determined. Inventory write-downs, if
any, in connection with store closings, are classified in cost of sales. Costs to transfer inventory and equipment from closed
stores are expensed as incurred. Store closing liabilities are reviewed quarterly to ensure that any accrued amount that is no
longer needed for its originally intended purpose is reversed to income in the proper period.
Page
16
of 42 (Form 10-K)
|
WEIS MARKETS, INC.
|
Item 7.
|
Management's Discussion and Analysis of Financial
Condition and Results of Operations: (continued)
|
Self-Insurance
The Company is self-insured for a majority of its workers’
compensation, general liability, vehicle accident and associate medical benefit claims. The self-insurance liability for most of
the workers’ compensation claims is determined based on historical data and an estimate of claims incurred but not reported.
The other self-insurance liabilities are determined actuarially, based on claims filed and an estimate of claims incurred but not
yet reported. The Company was liable for associate health claims up to an annual maximum of $750,000 per member prior to March
1, 2012 and is liable for associate health claims up to an annual maximum of $1,250,000 per member as of March 1, 2012. The Company
is liable for workers' compensation claims up to $2,000,000 per claim. Property and casualty insurance coverage is maintained with
outside carriers at deductible or retention levels ranging from $100,000 to $1,000,000. Significant assumptions used in the development
of the actuarial estimates include reliance on the Company’s historical claims data including average monthly claims and
average lag time between incurrence and reporting of the claim.
Forward-Looking
Statements
In addition to historical information, this Annual Report may contain
forward-looking statements, which are included pursuant to the “safe harbor” provisions of the Private Securities Litigation
Reform Act of 1995. 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.
|
Item 7a.
|
Quantitative and Qualitative Disclosures about Market
Risk:
|
(dollars in thousands)
|
|
Expected Maturity Dates
|
|
Fair Value
|
|
December 31, 2011
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
Thereafter
|
|
|
Total
|
|
|
Dec. 31, 2011
|
|
Rate sensitive assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed interest rate securities
|
|
$
|
—
|
|
|
$
|
21,805
|
|
|
$
|
15,265
|
|
|
$
|
13,200
|
|
|
$
|
3,100
|
|
|
$
|
18,150
|
|
|
$
|
71,520
|
|
|
$
|
79,900
|
|
Average interest rate
|
|
|
—
|
|
|
|
1.14
|
%
|
|
|
1.49
|
%
|
|
|
2.20
|
%
|
|
|
3.13
|
%
|
|
|
3.40
|
%
|
|
|
2.04
|
%
|
|
|
|
|
Other
Relevant Market Risks
The Company’s equity securities at December 31, 2011 had a
cost basis of $1,713,000 and a fair value of $9,448,000. The dividend yield realized on these equity investments was 5.03% in 2011.
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.
Page
17
of 42 (Form 10-K)
|
WEIS MARKETS, INC.
|
Item 8.
|
Financial Statements and Supplementary Data:
|
WEIS MARKETS, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
|
|
|
|
|
|
|
December 31, 2011 and December 25, 2010
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
37,392
|
|
|
$
|
109,140
|
|
Marketable securities
|
|
|
89,348
|
|
|
|
25,759
|
|
Accounts receivable, net
|
|
|
52,410
|
|
|
|
53,302
|
|
Inventories
|
|
|
226,191
|
|
|
|
231,021
|
|
Prepaid expenses
|
|
|
8,995
|
|
|
|
6,439
|
|
Income taxes recoverable
|
|
|
1,226
|
|
|
|
2,712
|
|
Total current assets
|
|
|
415,562
|
|
|
|
428,373
|
|
Property and equipment, net
|
|
|
575,003
|
|
|
|
525,062
|
|
Goodwill
|
|
|
35,162
|
|
|
|
35,162
|
|
Intangible and other assets, net
|
|
|
3,277
|
|
|
|
3,484
|
|
Total assets
|
|
$
|
1,029,004
|
|
|
$
|
992,081
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
132,092
|
|
|
$
|
134,278
|
|
Accrued expenses
|
|
|
35,081
|
|
|
|
28,803
|
|
Accrued self-insurance
|
|
|
18,103
|
|
|
|
19,163
|
|
Deferred revenue, net
|
|
|
6,197
|
|
|
|
6,922
|
|
Deferred income taxes
|
|
|
4,130
|
|
|
|
5,818
|
|
Total current liabilities
|
|
|
195,603
|
|
|
|
194,984
|
|
Postretirement benefit obligations
|
|
|
14,434
|
|
|
|
14,622
|
|
Deferred income taxes
|
|
|
73,081
|
|
|
|
54,348
|
|
Total liabilities
|
|
|
283,118
|
|
|
|
263,954
|
|
Shareholders’ Equity
|
|
|
|
|
|
|
|
|
Common stock, no par value, 100,800,000 shares authorized,
33,047,807 shares issued
|
|
|
9,949
|
|
|
|
9,949
|
|
Retained earnings
|
|
|
881,346
|
|
|
|
864,132
|
|
Accumulated other comprehensive income, net
|
|
|
5,448
|
|
|
|
4,903
|
|
|
|
|
896,743
|
|
|
|
878,984
|
|
Treasury stock at cost, 6,149,364 shares
|
|
|
(150,857
|
)
|
|
|
(150,857
|
)
|
Total shareholders’ equity
|
|
|
745,886
|
|
|
|
728,127
|
|
Total liabilities and shareholders’ equity
|
|
$
|
1,029,004
|
|
|
$
|
992,081
|
|
See accompanying notes to consolidated financial statements.
Page
18
of 42 (Form 10-K)
|
WEIS MARKETS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except shares and per share amounts)
|
|
|
|
|
|
|
|
|
|
For the Fiscal Years Ended December 31, 2011,
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
December 25, 2010 and December 26, 2009
|
|
(53 weeks)
|
|
|
(52 weeks)
|
|
|
(52 weeks)
|
|
Net sales
|
|
$
|
2,752,504
|
|
|
$
|
2,620,378
|
|
|
$
|
2,516,175
|
|
Cost of sales, including warehousing and distribution expenses
|
|
|
2,016,649
|
|
|
|
1,906,753
|
|
|
|
1,838,003
|
|
Gross profit on sales
|
|
|
735,855
|
|
|
|
713,625
|
|
|
|
678,172
|
|
Operating, general and administrative expenses
|
|
|
621,575
|
|
|
|
608,309
|
|
|
|
581,821
|
|
Income from operations
|
|
|
114,280
|
|
|
|
105,316
|
|
|
|
96,351
|
|
Investment income
|
|
|
3,326
|
|
|
|
2,069
|
|
|
|
1,556
|
|
Income before provision for income taxes
|
|
|
117,606
|
|
|
|
107,385
|
|
|
|
97,907
|
|
Provision for income taxes
|
|
|
42,022
|
|
|
|
39,094
|
|
|
|
35,107
|
|
Net income
|
|
$
|
75,584
|
|
|
$
|
68,291
|
|
|
$
|
62,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding, basic and diluted
|
|
|
26,898,443
|
|
|
|
26,898,443
|
|
|
|
26,920,551
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends per share
|
|
$
|
2.17
|
|
|
$
|
1.16
|
|
|
$
|
1.16
|
|
Basic and diluted earnings per share
|
|
$
|
2.81
|
|
|
$
|
2.54
|
|
|
$
|
2.33
|
|
See accompanying notes to consolidated financial statements.
Page
19
of 42 (Form 10-K)
|
WEIS MARKETS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
For the Fiscal Years Ended December 31, 2011,
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
December 25, 2010 and December 26, 2009
|
|
(53 weeks)
|
|
|
(52 weeks)
|
|
|
(52 weeks)
|
|
Net income
|
|
$
|
75,584
|
|
|
$
|
68,291
|
|
|
$
|
62,800
|
|
Other comprehensive income by component, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains arising during period
|
|
|
|
|
|
|
|
|
|
|
|
|
(Net of deferred taxes of $923, $288 and $47, respectively)
|
|
|
1,391
|
|
|
|
405
|
|
|
|
68
|
|
Reclassification adjustment for gains included in net income
|
|
|
|
|
|
|
|
|
|
|
|
|
(Net of deferred taxes of $601, $93 and $0, respectively)
|
|
|
(846
|
)
|
|
|
(130
|
)
|
|
|
—
|
|
Other comprehensive income, net of tax
|
|
|
545
|
|
|
|
275
|
|
|
|
68
|
|
Comprehensive income, net of tax
|
|
$
|
76,129
|
|
|
$
|
68,566
|
|
|
$
|
62,868
|
|
See accompanying notes to consolidated financial statements.
Page
20
of 42 (Form 10-K)
|
WEIS MARKETS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’
EQUITY
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands, except shares)
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
Total
|
|
For the Fiscal Years Ended December 31, 2011,
|
|
Common Stock
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Treasury Stock
|
|
|
Shareholders’
|
|
December 25, 2010 and December 26, 2009
|
|
Shares
|
|
|
Amount
|
|
|
Earnings
|
|
|
Income (Loss)
|
|
|
Shares
|
|
|
Amount
|
|
|
Equity
|
|
Balance at December 27, 2008
|
|
|
33,047,807
|
|
|
$
|
9,949
|
|
|
$
|
795,473
|
|
|
$
|
4,560
|
|
|
|
6,081,908
|
|
|
$
|
(148,882
|
)
|
|
$
|
661,100
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
62,800
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
62,800
|
|
Other comprehensive income, net of reclassification adjustments and tax
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
68
|
|
|
|
—
|
|
|
|
—
|
|
|
|
68
|
|
Treasury stock purchased
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
67,407
|
|
|
|
(1,973
|
)
|
|
|
(1,973
|
)
|
Dividends paid
|
|
|
—
|
|
|
|
—
|
|
|
|
(31,231
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(31,231
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 26, 2009
|
|
|
33,047,807
|
|
|
|
9,949
|
|
|
|
827,042
|
|
|
|
4,628
|
|
|
|
6,149,315
|
|
|
|
(150,855
|
)
|
|
|
690,764
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
68,291
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
68,291
|
|
Other comprehensive income, net of reclassification adjustments and tax
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
275
|
|
|
|
—
|
|
|
|
—
|
|
|
|
275
|
|
Treasury stock purchased
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
49
|
|
|
|
(2
|
)
|
|
|
(2
|
)
|
Dividends paid
|
|
|
—
|
|
|
|
—
|
|
|
|
(31,201
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(31,201
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 25, 2010
|
|
|
33,047,807
|
|
|
|
9,949
|
|
|
|
864,132
|
|
|
|
4,903
|
|
|
|
6,149,364
|
|
|
|
(150,857
|
)
|
|
|
728,127
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
75,584
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
75,584
|
|
Other comprehensive income, net of reclassification adjustments and tax
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
545
|
|
|
|
—
|
|
|
|
—
|
|
|
|
545
|
|
Dividends paid
|
|
|
—
|
|
|
|
—
|
|
|
|
(58,370
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(58,370
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2011
|
|
|
33,047,807
|
|
|
$
|
9,949
|
|
|
$
|
881,346
|
|
|
$
|
5,448
|
|
|
|
6,149,364
|
|
|
$
|
(150,857
|
)
|
|
$
|
745,886
|
|
See accompanying notes to consolidated financial statements.
Page
21
of 42 (Form 10-K)
|
WEIS MARKETS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
For the Fiscal Years Ended December 31, 2011,
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
December 25, 2010 and December 26, 2009
|
|
(53 weeks)
|
|
|
(52 weeks)
|
|
|
(52 weeks)
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
75,584
|
|
|
$
|
68,291
|
|
|
$
|
62,800
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
53,185
|
|
|
|
48,567
|
|
|
|
47,201
|
|
Amortization
|
|
|
6,198
|
|
|
|
6,491
|
|
|
|
6,207
|
|
(Gain) loss on disposition / impairment of fixed assets
|
|
|
(576
|
)
|
|
|
(1,023
|
)
|
|
|
60
|
|
Gain on sale of marketable securities
|
|
|
(1,447
|
)
|
|
|
(223
|
)
|
|
|
—
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories
|
|
|
4,830
|
|
|
|
(8,006
|
)
|
|
|
(27,780
|
)
|
Accounts receivable and prepaid expenses
|
|
|
(1,664
|
)
|
|
|
(1,272
|
)
|
|
|
(8,066
|
)
|
Income taxes recoverable
|
|
|
1,486
|
|
|
|
(2,712
|
)
|
|
|
—
|
|
Accounts payable and other liabilities
|
|
|
2,119
|
|
|
|
297
|
|
|
|
37,472
|
|
Income taxes payable
|
|
|
—
|
|
|
|
(484
|
)
|
|
|
(254
|
)
|
Deferred income taxes
|
|
|
16,723
|
|
|
|
38,195
|
|
|
|
1,372
|
|
Other
|
|
|
(4,029
|
)
|
|
|
(1,379
|
)
|
|
|
(93
|
)
|
Net cash provided by operating activities
|
|
|
152,409
|
|
|
|
146,742
|
|
|
|
118,919
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(110,517
|
)
|
|
|
(69,869
|
)
|
|
|
(45,249
|
)
|
Proceeds from the sale of property and equipment
|
|
|
2,097
|
|
|
|
2,013
|
|
|
|
991
|
|
Purchase of marketable securities
|
|
|
(81,885
|
)
|
|
|
(12,245
|
)
|
|
|
—
|
|
Proceeds from maturities of marketable securities
|
|
|
8,620
|
|
|
|
6,296
|
|
|
|
2,197
|
|
Proceeds from the sale of marketable securities
|
|
|
16,019
|
|
|
|
341
|
|
|
|
—
|
|
Acquisition of business
|
|
|
—
|
|
|
|
—
|
|
|
|
(35,802
|
)
|
Purchase of intangible assets
|
|
|
(121
|
)
|
|
|
—
|
|
|
|
(138
|
)
|
Net cash used in investing activities
|
|
|
(165,787
|
)
|
|
|
(73,464
|
)
|
|
|
(78,001
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid
|
|
|
(58,370
|
)
|
|
|
(31,201
|
)
|
|
|
(31,231
|
)
|
Purchase of treasury stock
|
|
|
—
|
|
|
|
(2
|
)
|
|
|
(1,973
|
)
|
Net cash used in financing activities
|
|
|
(58,370
|
)
|
|
|
(31,203
|
)
|
|
|
(33,204
|
)
|
Net (decrease) increase in cash and cash equivalents
|
|
|
(71,748
|
)
|
|
|
42,075
|
|
|
|
7,714
|
|
Cash and cash equivalents at beginning of year
|
|
|
109,140
|
|
|
|
67,065
|
|
|
|
59,351
|
|
Cash and cash equivalents at end of year
|
|
$
|
37,392
|
|
|
$
|
109,140
|
|
|
$
|
67,065
|
|
See accompanying notes to consolidated financial statements.
Page
22
of 42 (Form 10-K)
|
WEIS MARKETS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Summary of Significant Accounting Policies
The following is a summary of the significant accounting policies
utilized in preparing the Company’s consolidated financial statements:
(a) Description of Business
Weis Markets, Inc. is a Pennsylvania business corporation formed
in 1924. The Company is engaged principally in the retail sale of food in Pennsylvania and surrounding states. There was no material
change in the nature of the Company's business during fiscal 2011.
(b) Definition of Fiscal Year
The Company’s fiscal year ends on the last Saturday in December.
Fiscal 2011 was comprised of 53 weeks, ending on December 31, 2011. Fiscal 2010 and 2009 were comprised of 52 weeks, ending on
December 25, 2010 and December 26, 2009. References to years in this annual report relate to fiscal years.
(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) 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 consolidated
financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results
could differ from those estimates.
(e) Reclassifications
The Company reclassified certain immaterial amounts in the 2009
Consolidated Statements of Income.
(f) Cash and Cash Equivalents
The Company maintains its cash balances in the form of core checking
accounts and money market accounts. The Company maintains cash deposits with banks that at times exceed applicable insurance limits.
The Company reduces its exposure to credit risk by maintaining such deposits with high quality financial institutions that management
believes are creditworthy.
The Company considers investments with an original maturity of three
months or less to be cash equivalents. Investment amounts classified as cash equivalents as of December 31, 2011 and December 25,
2010 totaled $17.8 million and $76.6 million, respectively.
(g) Marketable Securities
Marketable securities consist of municipal bonds and equity securities.
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 based on national markets. 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 fair 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.
(h) Accounts Receivable
Accounts receivable are stated net of an allowance for uncollectible
accounts of $1,415,000 and $1,037,000 as of December 31, 2011 and December 25, 2010, respectively. The reserve balance relates
to amounts due from pharmacy third party providers, retail customer returned checks and manufacturing customers. The Company maintains
an allowance for the amount of receivables deemed to be uncollectible and calculates this amount based upon historical collection
activity adjusted for current conditions. Customer electronic payments accepted at the point of sale are classified as accounts
receivable until collected.
Page
23
of 42 (Form 10-K)
|
WEIS MARKETS, INC.
Note 1 Summary of Significant Accounting Policies
(continued
)
(i) Inventories
Inventories are valued at the lower of cost or market, using both
the last-in, first-out (LIFO) and average cost methods. The Company evaluates inventory shortages throughout the year based on
actual physical counts in its facilities. Allowances for inventory shortages are recorded based on the results of these counts
and to provide for estimated shortages from the last physical count to the financial statement date.
(j) Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided
on the cost of buildings and improvements and equipment principally using accelerated methods. Leasehold improvements are amortized
using the straight-line method 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 “Operating, general and administrative
expenses.”
(k) Goodwill and Intangible Assets
Intangible assets with an indefinite useful life are not amortized
until their useful life is determined to be no longer indefinite and are tested for impairment annually or more frequently if events
or changes in circumstances indicate that the asset might be impaired. Goodwill is not amortized but tested for impairment for
each reporting unit, on an annual basis and between annual tests in certain circumstances.
To derive the fair value of the Company’s sole reporting unit,
the Company uses an income approach along with an analysis of its stock value. Under the income approach, fair value of a reporting
unit is determined based on estimated future cash flows discounted by an estimated weighted-average cost of capital, which reflects
the overall level of inherent risk of the Company. Estimated future cash flows are based on the Company’s internal projection
model. The stock value evaluation consists of measuring the average market capitalization of the Company against its total asset
value of its sole reporting unit. The Company completes its impairment test in the third quarter of each fiscal year.
The results of the impairment test are subject to management’s
estimates and assumptions of projected cash flows and operating results. The Company believes that, based on current conditions,
materially different reported results are not likely to result from long-lived asset impairments. However, a change in assumptions
or market conditions could result in a change in estimated future cash flows and the likelihood of materially different reported
results.
The Company’s intangible assets and related accumulated amortization
at December 31, 2011 and December 25, 2010 consisted of the following:
|
|
|
|
|
December 31, 2011
|
|
|
|
|
|
|
|
|
December 25, 2010
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
(dollars in thousands)
|
|
Gross
|
|
|
Amortization
|
|
|
Net
|
|
|
Gross
|
|
|
Amortization
|
|
|
Net
|
|
Non-Compete Agreements
|
|
$
|
1,200
|
|
|
$
|
1,040
|
|
|
$
|
160
|
|
|
$
|
1,200
|
|
|
$
|
960
|
|
|
$
|
240
|
|
Lease Acquisitions
|
|
|
5,409
|
|
|
|
2,795
|
|
|
|
2,614
|
|
|
|
5,409
|
|
|
|
2,546
|
|
|
|
2,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,609
|
|
|
$
|
3,835
|
|
|
$
|
2,774
|
|
|
$
|
6,609
|
|
|
$
|
3,506
|
|
|
$
|
3,103
|
|
Intangible assets with a definite useful life are generally amortized
on a straight-line basis over periods ranging from 15 to 20 years. Estimated amortization expense for the next five fiscal years
is approximately $325,000 in 2012, $321,000 in 2013, $236,000 in 2014, $236,000 in 2015 and $236,000 in 2016. As of December 31,
2011, the Company has no intangible assets, other than goodwill, with indefinite lives.
Page
24
of 42 (Form 10-K)
|
WEIS MARKETS, INC.
Note 1 Summary of Significant Accounting Policies
(continued
)
(l) Impairment of Long-Lived Assets
The Company
periodically evaluates the period of depreciation or amortization for long-lived assets to determine whether current circumstances
warrant revised estimates of useful lives. The Company reviews its property and equipment for impairment whenever events or changes
in circumstances indicate the carrying value of an asset may not be recoverable. Recoverability is measured by a comparison of
the carrying amount to the net undiscounted cash flows expected to be generated by the asset. An impairment loss would be recorded
for the excess of net book value over the fair value of the asset impaired.
The
fair value is estimated based on expected discounted future cash flows.
With respect to owned property and equipment associated with closed
stores, the value of the property and equipment is adjusted to reflect recoverable values based on the Company’s prior history
of disposing of similar assets and current economic conditions.
The results of impairment tests are subject to management’s
estimates and assumptions of projected cash flows and operating results. The Company believes that, based on current conditions,
materially different reported results are not likely to result from long-lived asset impairments. However, a change in assumptions
or market conditions could result in a change in estimated future cash flows and the likelihood of materially different reported
results.
(m) Store Closing Costs
The Company provides for closed store liabilities relating to the
estimated post-closing lease liabilities and related other exit costs associated with the store closing commitments. The closed
store liabilities are usually paid over the lease terms associated with the closed stores having remaining terms ranging from one
to seven years. Closed store lease liabilities totaled $756,000 and $1.1 million as of December 31, 2011 and December 25, 2010,
respectively. The Company estimates the lease liabilities, net of estimated sublease income, using the undiscounted rent payments
of closed stores.
(n) Self-Insurance
The Company is self-insured for a majority of its workers’
compensation, general liability, vehicle accident and associate medical benefit 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
was liable for associate health claims up to an annual maximum of $750,000 per member prior to March 1, 2012 and is liable for
associate health claims up to an annual maximum of $1,250,000 per member as of March 1, 2012. The Company is liable for workers'
compensation claims up to $2,000,000 per claim. Property and casualty insurance coverage is maintained with outside carriers at
deductible or retention levels ranging from $100,000 to $1,000,000.
(o) Income Taxes
The Company recognizes deferred tax assets and liabilities 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.
(p) Earnings Per Share
Earnings per share are based on the weighted-average number of common
shares outstanding. Diluted earnings per share are based on the weighted-average number of common shares outstanding, plus the
incremental shares that would have been outstanding upon the assumed exercise of all dilutive stock options, subject to antidilution
limitations. The last stock options granted under the Stock Option Plan in 2002 expired in 2010. Basic and diluted earnings per
share are the same amounts for each period presented.
Page
25
of 42 (Form 10-K)
|
WEIS MARKETS, INC.
Note 1 Summary of Significant Accounting Policies
(continued
)
(q) Revenue Recognition
Revenue from the sale of products to the Company’s customers
is recognized at the point of sale. Discounts provided to customers at the point of sale through the Weis Club Preferred Shopper
loyalty program are recognized as a reduction in sales as products are sold. Periodically, the Company will run a point based sales
incentive program that rewards customers with future sales discounts. The Company makes reasonable and reliable estimates of the
amount of future discounts based upon historical experience and its customer data tracking software. Sales are reduced by these
estimates over the life of the program. Discounts to customers at the point of sale provided by vendors, usually in the form of
paper coupons, are not recognized as a reduction in sales provided the discounts are redeemable at any retailer that accepts those
discounts. The Company records “Deferred revenue” for the sale of gift cards and revenue is recognized in “Net
sales” at the time of customer redemption for products. Gift card breakage income is recognized in “Operating, general
and administrative expenses” based upon historical redemption patterns and represents the balance of gift cards for which
the Company believes the likelihood of redemption by the customer is remote. Merchandise return activity is immaterial to revenues.
(r) Cost of Sales, Including Warehousing and Distribution Expenses
“Cost of sales, including warehousing and distribution expenses”
consists of direct product (net of discounts and allowances), warehouse and transportation costs, as well as manufacturing facility
operations.
(s) Vendor Allowances
Vendor allowances that relate to the Company's buying and merchandising
activities are recorded as a reduction of cost of sales as they are earned, in accordance with its underlying agreement. Off-invoice
and bill-back allowances are used to reduce direct product costs upon the receipt of goods. Promotional rebates and credits are
accounted for as a reduction in the cost of inventory and recognized when the related inventory is sold. Volume incentive discounts
are realized as a reduction of cost of sales at the time it is deemed probable and reasonably estimable that the incentive target
will be reached. Long-term contract incentives, which require an exclusive vendor relationship, are allocated over the life of
the contract. Promotional allowance funds for specific vendor-sponsored programs are recognized as a reduction of cost of sales
as the program occurs and the funds are earned per the agreement. Cash discounts for prompt payment of invoices are realized in
cost of sales as invoices are paid. Warehouse and back-haul allowances provided by suppliers for distributing their product through
our distribution system are recorded in cost of sales as the required performance is completed. Warehouse rack and slotting allowances
are recorded in cost of sales when new items are initially set up in the Company's distribution system, which is when the related
expenses are incurred and performance under the agreement is complete. Swell allowances for damaged goods are realized in cost
of sales as provided by the supplier, helping to offset product shrink losses also recorded in cost of sales.
Vendor allowances recorded as credits in cost of sales totaled $66.5
million in 2011, $60.3 million in 2010 and $54.9 million in 2009. Vendor paid cooperative advertising credits totaled $18.2 million
in 2011, $18.8 million in 2010 and $17.1 million in 2009. These credits were netted against advertising costs within “Operating,
general and administrative expenses.” The Company had accounts receivable due from vendors of $95,000 and $256,000 for earned
advertising credits and $4.5 million and $5.3 million for earned promotional discounts as of December 31, 2011 and December 25,
2010, respectively. The Company had $1.1 million in unearned income included in accrued liabilities for unearned vendor programs
under long-term contracts for display and shelf space allocation as of December 31, 2011 and December 25, 2010.
(t) Operating, General and Administrative Expenses
Business operating costs including expenses generated from administration
and purchasing functions, are recorded in “Operating, general and administrative expenses” in the Consolidated Statements
of Income. Business operating costs include items such as wages, benefits, utilities, repairs and maintenance, advertising costs
and credits, rent, insurance, equipment depreciation, leasehold amortization and costs for outside provided services.
Page
26
of 42 (Form 10-K)
|
WEIS MARKETS, INC.
Note 1 Summary of Significant Accounting Policies
(continued
)
(u) Advertising Costs
The Company expenses advertising costs as incurred. The Company
recorded advertising expense, before vendor paid cooperative advertising credits, of $24.7 million in 2011, $25.1 million in 2010
and $23.4 million in 2009 in “Operating, general and administrative expenses.”
(v) Rental Income
The Company leases or subleases space to tenants in owned, vacated
and open store facilities. Rental income is recorded when earned as a component of “Operating, general and administrative
expenses.” All leases are operating leases, as disclosed in Note 5, and do not contain upfront considerations.
(w) Current Relevant Accounting Standards
In January 2010, the Financial Accounting Standards Board (FASB)
issued additional authoritative guidance on fair value measurements. The guidance requires previous fair value hierarchy disclosures
to be further disaggregated by class of assets and liabilities. In addition, significant transfers between Levels 1 and 2 of the
fair value hierarchy are required to be disclosed. The guidance was effective for interim and annual reporting periods beginning
after December 15, 2009. Adoption of the new guidance did not have an impact on the Company’s consolidated financial position,
as this guidance relates only to additional disclosures. In addition, the guidance requires that in the reconciliation for fair
value measurements using significant unobservable inputs, or Level 3, a reporting entity separately disclose information about
purchases, sales, issuances and settlements on a gross basis rather than as one net number. The guidance was effective for fiscal
years, and interim periods within those years, beginning after December 15, 2010. Adoption of the new guidance did not have an
impact on the Company’s consolidated financial position, as the Company has no Level 3 inputs.
In December 2010, FASB issued additional authoritative guidance
on goodwill impairment. The guidance modifies step 1 of the goodwill impairment test for entities with a zero or negative carrying
value to require entities to assess, considering qualitative factors, whether it is more likely than not that a goodwill impairment
exists. If an entity concludes that it is more likely than not that goodwill impairment exists, the entity must perform step 2
of the goodwill impairment test. The guidance allows an entity to use either the equity or the enterprise valuation premise to
determine the carrying amount of a reporting unit. The guidance was effective for impairment tests performed during fiscal years,
and interim periods within those years, beginning after December 15, 2010. Adoption of the new guidance did not have an impact
on the Company’s consolidated financial statements.
In December 2010, FASB issued additional authoritative guidance
on business combinations. The guidance provides clarification regarding pro forma revenue and earnings disclosure requirements
for business combinations. The guidance specifies that if a public entity presents comparative financial statements, the entity
should disclose only revenue and earnings of the combined entity as though the business combination(s) that occurred during the
current year had occurred as of the beginning of the comparable prior annual reporting period. The guidance also expands the supplemental
pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly
attributable to the business combination included in the reported pro forma revenue and earnings. The guidance was effective prospectively
for business combinations for which the acquisition date was on or after the beginning of the first annual reporting period beginning
on or after December 15, 2010. Adoption of the new guidance did not have an impact on the Company’s consolidated financial
statements.
In May 2011, FASB issued new authoritative guidance to achieve a
consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between
U.S. GAAP and International Financial Reporting Standards. This new guidance amends current fair value measurement and disclosure
guidance to include increased transparency around valuation inputs and investment categorization. This new guidance is effective
for fiscal years and interim periods beginning after December 15, 2011. The Company does not expect the adoption of the new guidance
to have an impact on the consolidated financial statements.
Page
27
of 42 (Form 10-K)
|
WEIS MARKETS, INC.
Note 1 Summary of Significant Accounting Policies
(continued
)
(w) Current Relevant Accounting Standards (continued)
In June 2011, FASB issued new authoritative guidance on the presentation
of comprehensive income. The new guidance requires an entity to present the components of net income and other comprehensive income
either in one continuous statement, referred to as the statement of comprehensive income, or in two separate, but consecutive statements.
The new guidance eliminates the current option to report other comprehensive income and its components in the statement of changes
in shareholders’ equity. While the new guidance changes the presentation of comprehensive income, there are no changes to
the components that are recognized in net income or other comprehensive income under current accounting guidance. This new guidance
is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. I
n
December 2011, FASB amended this guidance to postpone a requirement to present items that are reclassified from other comprehensive
income to net income on the face of the financial statement where the components of net income and other comprehensive income are
presented and reinstate previous guidance related to such reclassifications.
The deferral did not affect the requirement
to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements.
The Company
elected for early adoption of the requirements to present
a separate comprehensive income statement in 2011.
Adoption of
the new guidance did not have an impact on the Company’s consolidated financial statements, as the guidance impacted presentation
only.
In September 2011, FASB issued additional authoritative guidance
on testing goodwill for impairment. The guidance permits an entity to first assess qualitative factors to determine whether the
existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting
unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment
test. This new guidance is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after
December 15, 2011. The Company does not expect the adoption of the new guidance to have an impact on the consolidated financial
statements.
In December
2011, the FASB and International Accounting Standards Board jointly issued
additional authoritative
guidance
to enhance disclosure requirements, including both gross and net information, for instruments and transactions eligible for offset
in the statement of financial position as well as instruments and transactions subject to an agreement similar to a master netting
arrangement.
The guidance
is effective for annual reporting periods
beginning on or after January 1, 2013 and is to be applied retrospectively. The Company is currently assessing the impact of this
guidance on its disclosures.
Adoption of the new guidance will not have an impact on the Company’s consolidated financial
statements, as the guidance impacts
disclosure requirements only.
Page
28
of 42 (Form 10-K)
|
WEIS MARKETS, INC.
Note 2 Marketable Securities
The Company’s marketable securities are all classified as
available-for-sale. FASB has established three levels of inputs that may be used to measure fair value:
Level 1 Observable inputs such as quoted prices
in active markets for identical assets or liabilities;
Level 2 Observable inputs, other than Level
1 inputs in active markets, that are observable either directly
or indirectly; and
Level 3 Unobservable inputs for which there
is little or no market data, which require the reporting entity
to develop its own assumptions.
The Company’s marketable securities
valued
using Level 1 inputs include highly liquid
equity securities, for which
quoted market prices
are available
. The Company’s
bond portfolio is valued using Level 2 inputs
.
The Company’s
bonds are valued using a combination of pricing for similar securities, recently
executed transactions, cash flow models with yield curves and other pricing models utilizing observable inputs, which are considered
Level 2 inputs.
For Level 2 investment valuation, the Company utilizes standard
pricing procedures of its investment brokerage firm(s) which include various third party pricing services such as FT Interactive
Data, Reuters, Bloomberg and JP Morgan Pricing Direct. These procedures also require specific price monitoring practices as well
as pricing review reports, valuation oversight and pricing challenge procedures to maintain the most accurate representation of
investment fair market value.
Marketable securities, as of December 31, 2011 and December
25, 2010, consisted of:
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
|
|
(dollars in thousands)
|
|
Amortized
|
|
|
Holding
|
|
|
Holding
|
|
|
Fair
|
|
December 31, 2011
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
$
|
1,713
|
|
|
$
|
7,735
|
|
|
$
|
—
|
|
|
$
|
9,448
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal bonds
|
|
|
78,388
|
|
|
|
1,512
|
|
|
|
—
|
|
|
|
79,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
80,101
|
|
|
$
|
9,247
|
|
|
$
|
—
|
|
|
$
|
89,348
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
|
|
(dollars in thousands)
|
|
Amortized
|
|
|
Holding
|
|
|
Holding
|
|
|
Fair
|
|
December 25, 2010
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
$
|
1,756
|
|
|
$
|
8,368
|
|
|
$
|
—
|
|
|
$
|
10,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal bonds
|
|
|
15,623
|
|
|
|
12
|
|
|
|
—
|
|
|
|
15,635
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
17,379
|
|
|
$
|
8,380
|
|
|
$
|
—
|
|
|
$
|
25,759
|
|
Maturities of marketable securities classified as available-for-sale
at December 31, 2011, were as follows:
|
|
Amortized
|
|
|
Fair
|
|
(dollars in thousands)
|
|
Cost
|
|
|
Value
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
Due after one year through five years
|
|
$
|
53,412
|
|
|
$
|
53,459
|
|
Due after five years through ten years
|
|
|
23,479
|
|
|
|
24,944
|
|
Due after ten years
|
|
|
1,497
|
|
|
|
1,497
|
|
Equity securities
|
|
|
1,713
|
|
|
|
9,448
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
80,101
|
|
|
$
|
89,348
|
|
Page
29
of 42 (Form 10-K)
|
WEIS MARKETS, INC.
Note 3 Inventories
Merchandise inventories, as of December 31, 2011 and December
25, 2010, were valued as follows:
(dollars in thousands)
|
|
2011
|
|
|
2010
|
|
LIFO
|
|
$
|
173,879
|
|
|
$
|
190,038
|
|
Average cost
|
|
|
52,312
|
|
|
|
40,983
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
226,191
|
|
|
$
|
231,021
|
|
Management believes the use of the LIFO method for valuing
certain inventories represents the most appropriate matching of costs and revenues in the Company’s circumstances. If all
inventories were valued on the average cost method, which approximates current cost, total inventories would have been $77,129,000
and $68,402,000 higher than as reported on the above methods as of December 31, 2011 and December 25, 2010, respectively. During
2011, the Company realized a decrement of $5.6 million in its LIFO pools.
Note 4 Property and Equipment
Property and equipment, as of December 31, 2011 and December
25, 2010, consisted of:
|
|
Useful Life
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
(in years)
|
|
|
2011
|
|
|
2010
|
|
Land
|
|
|
|
|
|
$
|
93,676
|
|
|
$
|
91,596
|
|
Buildings and improvements
|
|
10-60
|
|
|
|
492,024
|
|
|
|
447,648
|
|
Equipment
|
|
3-12
|
|
|
|
759,158
|
|
|
|
714,308
|
|
Leasehold improvements
|
|
5-20
|
|
|
|
144,057
|
|
|
|
142,319
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total, at cost
|
|
|
|
|
|
|
1,488,915
|
|
|
|
1,395,871
|
|
Less accumulated depreciation and amortization
|
|
|
|
|
|
|
913,912
|
|
|
|
870,809
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
575,003
|
|
|
$
|
525,062
|
|
Note 5 Lease Commitments
At December 31, 2011, the Company leased approximately 50%
of its open store facilities under operating leases that expire at various dates through 2028. 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. Rents on
operating leases, including agreements with step rents, are charged to expense on a straight-line basis over the minimum lease
term. The Company does not have any leases that include capital improvement funding or other lease concessions.
Rent expense and income on all leases consisted of:
(dollars in thousands)
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
Minimum annual rentals
|
|
$
|
30,970
|
|
|
$
|
33,285
|
|
|
$
|
31,436
|
|
Contingent rentals
|
|
|
512
|
|
|
|
598
|
|
|
|
569
|
|
Lease or sublease income
|
|
|
(6,704
|
)
|
|
|
(6,514
|
)
|
|
|
(6,482
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
24,778
|
|
|
$
|
27,369
|
|
|
$
|
25,523
|
|
Page
30
of 42 (Form 10-K)
|
WEIS MARKETS, INC.
Note 5 Lease Commitments (continued)
The following is a schedule by years of future minimum rental
payments required under operating leases and total minimum sublease and lease rental income to be received that have initial or
remaining noncancelable lease terms in excess of one year as of December 31, 2011.
(dollars in thousands)
|
|
Leases
|
|
|
Subleases
|
|
2012
|
|
$
|
29,090
|
|
|
$
|
(3,054
|
)
|
2013
|
|
|
29,321
|
|
|
|
(2,787
|
)
|
2014
|
|
|
28,040
|
|
|
|
(2,424
|
)
|
2015
|
|
|
24,365
|
|
|
|
(2,102
|
)
|
2016
|
|
|
21,193
|
|
|
|
(1,769
|
)
|
Thereafter
|
|
|
71,340
|
|
|
|
(2,175
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
203,349
|
|
|
$
|
(14,311
|
)
|
The Company has $139,200 accrued as of December 31, 2011 and had
$531,000 accrued as of December 25, 2010, for future minimum rental payments due on previously closed stores, reduced by the estimated
sublease income to be received. The future minimum rental payments required under operating leases and estimated sublease income
for these locations are included in the above schedule.
Note 6 Retirement Plans
The Company has a contributory retirement savings plan, the
Weis Markets, Inc. Retirement Savings Plan, covering substantially all full-time associates. The Company had a noncontributory
profit-sharing plan, the Weis Markets, Inc. Profit Sharing Plan, covering eligible associates which included certain salaried associates,
store management and administrative support personnel. Effective December 1, 2009, the Weis Markets, Inc. Profit Sharing Plan was
merged into the Weis Markets, Inc. Retirement Savings Plan. The Company also has three supplemental retirement plans covering highly
compensated employees of the Company. The Company’s policy is to fund all qualified retirement plan costs as accrued, but
not supplemental retirement costs. Employer contributions to the qualified retirement plans are made at the sole discretion of
the Company.
As of December 31, 2006, the Weis Markets, Inc. Employee
Stock Bonus Plan was terminated, and subsequently all plan assets were distributed to participants or beneficiaries by December
31, 2009.
Retirement plan costs:
(dollars in thousands)
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
Retirement savings plan
|
|
$
|
1,242
|
|
|
$
|
1,134
|
|
|
$
|
1,070
|
|
Profit-sharing plan
|
|
|
1,650
|
|
|
|
1,414
|
|
|
|
2,000
|
|
Employee stock bonus plan
|
|
|
—
|
|
|
|
(3
|
)
|
|
|
2
|
|
Deferred compensation plan
|
|
|
(26
|
)
|
|
|
570
|
|
|
|
570
|
|
Supplemental retirement plan
|
|
|
111
|
|
|
|
798
|
|
|
|
1,304
|
|
Pharmacist deferred compensation plan
|
|
|
(17
|
)
|
|
|
81
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,960
|
|
|
$
|
3,994
|
|
|
$
|
4,942
|
|
The Company maintains a non-qualified deferred compensation
plan for the payment of specific amounts of annual retirement benefits to certain officers or their beneficiaries over an actuarially
computed normal life expectancy. The benefits are determined through actuarial calculations dependent on the age of the recipient,
using an assumed discount rate. The plan is unfunded and accounted for on an accrual basis. The projected benefit obligations are
equal to the liability for pension benefits included in “Accrued expenses” and “Postretirement benefit obligations”
in the Consolidated Balance Sheets.
Page
31
of 42 (Form 10-K)
|
WEIS MARKETS, INC.
Note 6 Retirement Plans (continued)
Change in the benefit obligations:
(dollars in thousands)
|
|
2011
|
|
|
2010
|
|
Benefit obligations at beginning of year
|
|
$
|
7,744
|
|
|
$
|
7,406
|
|
Interest cost
|
|
|
564
|
|
|
|
538
|
|
Benefit payments
|
|
|
(232
|
)
|
|
|
(232
|
)
|
Actuarial (loss) gain
|
|
|
(589
|
)
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,487
|
|
|
$
|
7,744
|
|
Weighted-average assumptions used to determine benefit obligations:
|
|
2011
|
|
|
2010
|
|
Discount rate
|
|
|
7.50
|
%
|
|
|
7.50
|
%
|
Components of net periodic benefit cost:
(dollars in thousands)
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
Interest cost
|
|
$
|
564
|
|
|
$
|
538
|
|
|
$
|
513
|
|
Amount of recognized gain
|
|
|
821
|
|
|
|
200
|
|
|
|
175
|
|
Estimated future benefit payments:
(dollars in thousands)
|
|
Benefits
|
|
2012
|
|
$
|
51
|
|
2013
|
|
|
1,462
|
|
2014
|
|
|
1,462
|
|
2015
|
|
|
1,462
|
|
2016
|
|
|
1,462
|
|
2017 – 2021
|
|
|
7,309
|
|
The Company also maintains a non-qualified supplemental executive
retirement plan and a non-qualified pharmacist deferred compensation plan for certain of its associates. These plans are designed
to provide retirement benefits and salary deferral opportunities because of limitations imposed by the Internal Revenue Code and
the Regulations implemented by the Internal Revenue Service. These plans are unfunded and accounted for on an accrual basis. Participants
in these plans are excluded from participation in the profit sharing portion of the Weis Markets, Inc. Retirement Savings Plan.
The Board of Directors annually determines the amount of the allocation to the plans at its sole discretion. The allocation among
the various plan participants is made in relationship to their compensation, years of service and job performance. Plan participants
are 100% vested in their accounts after six years of service with the Company. Benefits are distributed among participants upon
reaching the applicable retirement age. Substantial risk of benefit forfeiture does exist for participants in these plans. The
present value of accumulated benefits amounted to $6,999,000 and $7,109,000 at December 31, 2011 and December 25, 2010, respectively,
and is included in “Postretirement benefit obligations” in the Consolidated Balance Sheets.
The Company has no other postretirement benefit plans.
Page
32
of 42 (Form 10-K)
|
WEIS MARKETS, INC.
Note 7 Income Taxes
The provision (benefit) for income taxes consists of:
(dollars in thousands)
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
24,518
|
|
|
$
|
1,578
|
|
|
$
|
30,415
|
|
State
|
|
|
781
|
|
|
|
(679
|
)
|
|
|
3,320
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
12,731
|
|
|
|
33,612
|
|
|
|
1,805
|
|
State
|
|
|
3,992
|
|
|
|
4,583
|
|
|
|
(433
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
42,022
|
|
|
$
|
39,094
|
|
|
$
|
35,107
|
|
The reconciliation of income taxes
computed at the federal statutory rate (35% in 2011, 2010 and 2009) to the provision for income taxes is:
(dollars in thousands)
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
Income taxes at federal statutory rate
|
|
$
|
41,151
|
|
|
$
|
37,585
|
|
|
$
|
34,268
|
|
State income taxes, net of federal income tax benefit
|
|
|
2,558
|
|
|
|
2,538
|
|
|
|
1,877
|
|
Other
|
|
|
(1,687
|
)
|
|
|
(1,029
|
)
|
|
|
(1,038
|
)
|
Provision for income taxes (effective tax rate 35.7%, 36.4%
and 35.9%, respectively)
|
|
$
|
42,022
|
|
|
$
|
39,094
|
|
|
$
|
35,107
|
|
Cash paid for income taxes was $21,000,000, $4,123,000 and $34,305,000
in 2011, 2010 and 2009, respectively.
The tax effects of temporary differences that give rise to deferred
tax assets and deferred tax liabilities at December 31, 2011 and December 25, 2010, are:
(dollars in thousands)
|
|
2011
|
|
|
2010
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
$
|
403
|
|
|
$
|
190
|
|
Compensated absences
|
|
|
495
|
|
|
|
520
|
|
Long term employment incentives
|
|
|
1,554
|
|
|
|
—
|
|
Employee benefit plans
|
|
|
3,496
|
|
|
|
4,080
|
|
General liability insurance
|
|
|
1,074
|
|
|
|
1,413
|
|
Postretirement benefit obligations
|
|
|
5,931
|
|
|
|
6,064
|
|
Net operating loss carryforwards
|
|
|
6,825
|
|
|
|
9,253
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
19,778
|
|
|
|
21,520
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Inventories
|
|
|
(5,511
|
)
|
|
|
(7,191
|
)
|
Unrealized gains on marketable securities
|
|
|
(3,799
|
)
|
|
|
(3,477
|
)
|
Nondeductible accruals and other
|
|
|
(1,021
|
)
|
|
|
(195
|
)
|
Depreciation
|
|
|
(86,658
|
)
|
|
|
(70,823
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(96,989
|
)
|
|
|
(81,686
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax liability
|
|
$
|
(77,211
|
)
|
|
$
|
(60,166
|
)
|
|
|
|
|
|
|
|
|
|
Current deferred liability - net
|
|
$
|
(4,130
|
)
|
|
$
|
(5,818
|
)
|
Noncurrent deferred liability - net
|
|
|
(73,081
|
)
|
|
|
(54,348
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax liability
|
|
$
|
(77,211
|
)
|
|
$
|
(60,166
|
)
|
Page
33
of 42 (Form 10-K)
|
WEIS MARKETS, INC.
Note 7 Income Taxes (continued)
The following table summarizes the activity related to the Company’s
unrecognized tax benefits:
(dollars in thousands)
|
|
2011
|
|
|
2010
|
|
Unrecognized tax benefits at beginning of year
|
|
$
|
925
|
|
|
$
|
925
|
|
Increases based on tax positions related to the current year
|
|
|
—
|
|
|
|
—
|
|
Additions for tax positions of prior years
|
|
|
—
|
|
|
|
—
|
|
Reductions for tax positions of prior years
|
|
|
—
|
|
|
|
—
|
|
Settlements
|
|
|
(764
|
)
|
|
|
—
|
|
Expiration of the statute of limitations for assessment of taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Unrecognized tax benefits at end of year
|
|
$
|
161
|
|
|
$
|
925
|
|
During 2011 the Company settled an outstanding tax claim with the
state of New Jersey in the amount of $764,000. The Company accrues interest and penalties related to income tax matters as a part
of the provision for income taxes. The Company had $161,000 of accrued interest and penalties at December 31, 2011, $434,000 at
December 25, 2010 and $55,000 at December 26, 2009. The end of year unrecognized tax benefit of $161,000 for 2011 would impact
the effective tax rate over time and if recognized would reduce the effective tax rate. Management anticipates settlement for the
majority of unrecognized tax benefits within the next twelve months.
The Company’s U.S. Federal income tax filings have been examined
by the Internal Revenue Service through 2008. The Company or one of its subsidiaries files tax returns in various states. The tax
years subject to examination in Pennsylvania, where the majority of the Company's revenues are generated, are 2008 to 2011.
The Company has net operating loss carryforwards of $105 million
available for state income tax purposes. The net operating losses will begin to expire starting in 2027. The Company expects to
fully utilize these net operating loss carryforwards.
Note 8 Acquisition of Business
Fiscal 2011 Acquisitions
There were no acquisitions for fiscal 2011.
Fiscal 2010 Acquisitions
There were no acquisitions for fiscal 2010.
Fiscal 2009 Acquisitions
On August 23, 2009, the Company acquired eleven Giant Markets stores
located in Broome County, New York including units in Binghamton, Vestal, Endicott, Endwell and Johnson City. The Company acquired
the store locations and operations of Giant Markets in an effort to establish its retail presence in the Southern Tier of New York.
The results of operations of the Giant Markets acquisition are included in the accompanying consolidated financial statements from
the date of acquisition. The Giant Markets acquisition contributed $58.8 million to sales in 2009.
The cash purchase price paid to Giant Markets was $35.8 million.
The purchased assets include inventories, equipment and goodwill. Weis Markets, Inc. assumed one lease obligation in the acquisition
of the Giant Markets stores and entered into ten new lease agreements.
The following table summarizes the fair values of the assets acquired
at the date of acquisition. The fair value of the acquired assets is reported below.
(dollars in thousands)
|
|
August 23, 2009
|
|
Inventories
|
|
$
|
7,802
|
|
Equipment
|
|
|
8,560
|
|
Goodwill
|
|
|
19,440
|
|
Total Assets Acquired
|
|
$
|
35,802
|
|
Page
34
of 42 (Form 10-K)
|
WEIS MARKETS, INC.
Note 9 Summary of Quarterly Results (Unaudited)
Quarterly financial data for 2011 and 2010 are as follows:
(dollars in thousands,
|
|
|
|
|
|
|
|
|
|
|
Fourteen
|
|
except per share amounts)
|
|
Thirteen Weeks Ended
|
|
|
Weeks Ended
|
|
|
|
March 26, 2011
|
|
|
June 25, 2011
|
|
|
Sep. 24, 2011
|
|
|
Dec. 31, 2011
|
|
Net sales
|
|
$
|
659,455
|
|
|
$
|
676,660
|
|
|
$
|
678,612
|
|
|
$
|
737,777
|
|
Gross profit on sales
|
|
|
178,504
|
|
|
|
182,657
|
|
|
|
183,146
|
|
|
|
191,548
|
|
Net income
|
|
|
18,601
|
|
|
|
20,701
|
|
|
|
16,982
|
|
|
|
19,300
|
|
Basic and diluted earnings per share
|
|
|
.69
|
|
|
|
.77
|
|
|
|
.63
|
|
|
|
.72
|
|
(dollars in thousands,
|
|
Thirteen Weeks Ended
|
|
except per share amounts)
|
|
March 27, 2010
|
|
|
June 26, 2010
|
|
|
Sep. 25, 2010
|
|
|
Dec. 25, 2010
|
|
Net sales
|
|
$
|
664,256
|
|
|
$
|
653,677
|
|
|
$
|
639,967
|
|
|
$
|
662,478
|
|
Gross profit on sales
|
|
|
179,697
|
|
|
|
184,374
|
|
|
|
177,719
|
|
|
|
171,835
|
|
Net income
|
|
|
17,382
|
|
|
|
20,509
|
|
|
|
16,316
|
|
|
|
14,084
|
|
Basic and diluted earnings per share
|
|
|
.65
|
|
|
|
.76
|
|
|
|
.61
|
|
|
|
.52
|
|
Note 10 Fair Value Information
The carrying amounts for cash, accounts receivable and accounts
payable approximate fair value because of the short maturities of these instruments. The fair values of the Company’s marketable
securities, as disclosed in Note 2, are based on quoted market prices and institutional pricing guidelines for those securities
not classified as Level 1 securities.
Note 11 Contingencies
The Company is involved in various legal actions arising
out of the normal course of business. The Company also accrues for tax contingencies when it is probable that a liability to a
taxing authority has been incurred and the amount of the contingency can be reasonably estimated, based on past experience. 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.
Page
35
of 42 (Form 10-K)
|
WEIS MARKETS, INC.
Report of Independent Registered Public Accounting
Firm
The Board of Directors and Shareholders
Weis Markets, Inc.
We have audited the accompanying consolidated
balance sheets of Weis Markets, Inc. and subsidiaries (a Pennsylvania corporation) as of December 31, 2011 and December 25, 2010,
and the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for the fiscal
years ended December 31, 2011, December 25, 2010, and December 26, 2009 (53 weeks, 52 weeks, and 52 weeks, respectively). Our audits
of the basic financial statements included the financial statement schedule listed in the index appearing under Item 15(c)(3).
We also have audited Weis Markets, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2011,
based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO). Weis Markets, Inc. and subsidiaries’ management is responsible for these consolidated
financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness
of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial
Reporting. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule
and an opinion on Weis Markets, Inc. and subsidiaries’ internal control over financial reporting based on our audits
.
We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement
and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated
financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial
statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall consolidated
financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design
and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures
as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions
.
A company’s internal control over financial
reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations
of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements
.
Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate
.
Page
36
of 42 (Form 10-K)
|
WEIS MARKETS, INC.
Report of Independent Registered Public Accounting Firm (continued)
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of Weis Markets, Inc. and subsidiaries as of December 31,
2011 and December 25, 2010, and the consolidated results of their operations and their cash flows for the fiscal years ended December
31, 2011, December 25, 2010, and December 26, 2009 (53 weeks, 52 weeks, and 52 weeks, respectively) in conformity with accounting
principles generally accepted in the United States of America. Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the
information set forth therein. Also, in our opinion, Weis Markets, Inc. and subsidiaries maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control—Integrated
Framework issued by COSO
.
/S/Grant Thornton LLP
Philadelphia, Pennsylvania
March 15, 2012
|
Item 9.
|
Changes in and Disagreements
With Accountants on Accounting and Financial Disclosure:
|
None.
|
Item 9a.
|
Controls and Procedures:
|
Management’s Report on Disclosure Controls and Procedures
The Chief Executive Officer and the Chief Financial Officer of the
Company (its principal executive officer and principal financial officer, respectively) have concluded, based on their evaluation
as of the close of the period covered by this Report, that the Company's disclosure controls and procedures are effective to ensure
that information required to be disclosed by the Company in the reports filed or submitted by it under the Securities Exchange
Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and
forms, and include controls and procedures designed to ensure that information required to be disclosed by the Company in such
reports is accumulated and communicated to the Company's management, including the Chief Executive Officer and Chief Financial
Officer, as appropriate to allow timely decisions regarding required disclosure.
Management's Report on Internal Control Over Financial Reporting
The management of the Company is responsible for establishing and
maintaining adequate internal control over financial reporting. The Company’s internal control system was designed to provide
reasonable assurance to the Company’s management and board of directors regarding the preparation and fair presentation of
published financial statements. In making its assessment of internal control over financial reporting, management used the criteria
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined
to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
With the participation of the Chief Executive Officer and the Chief
Financial Officer, management concluded that the Company’s internal control over financial reporting was effective as of
December 31, 2011.
The effectiveness of the Company's internal control over financial
reporting as of the fiscal year end, has been audited by Grant Thornton LLP, an independent registered public accounting firm,
as stated in their report, which can be found in Item 8 of this Form 10-K.
Page
37
of 42 (Form 10-K)
|
WEIS MARKETS, INC.
|
Item 9a.
|
Controls and Procedures: (continued)
|
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over
financial reporting during the fiscal quarter ended December 31, 2011, that materially affected, or are reasonably likely to materially
affect, the Company’s internal control over financial reporting.
|
Item 9b.
|
Other Information:
|
There was no information required on Form 8-K during this quarter
that was not reported.
PART III
|
Item 10.
|
Directors, Executive Officers and Corporate Governance:
|
In addition to the information reported in Part I of this Form 10-K
under the caption “Executive Officers of the Registrant,” “Election of Directors,” “Board Committees
and Meeting Attendance, Audit Committee,” “Corporate Governance Matters,” “Compensation Tables” and
“Stock Ownership, Section 16(a) Beneficial Ownership Reporting Compliance” of the Weis Markets, Inc. definitive proxy
statement dated March 15, 2012 are incorporated herein by reference.
|
Item 11.
|
Executive Compensation:
|
“Board Committees and Meeting Attendance, Compensation Committee,”
“Executive Compensation, Compensation Discussion and Analysis,” “Compensation Committee Report,” “Compensation
Tables” and “Other Information Concerning the Board of Directors, Compensation Committee Interlocks and Insider Participation”
of the Weis Markets, Inc. definitive proxy statement dated March 15, 2012 are incorporated herein by reference.
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters:
|
“Stock Ownership” of the Weis Markets, Inc. definitive
proxy statement dated March 15, 2012 is incorporated herein by reference.
|
Item 13.
|
Certain Relationships and Related Transactions, and
Director Independence:
|
“Other Information Concerning the Board of Directors, Review
and Approval of Related Party Transactions” and “Independence of Directors” of the Weis Markets, Inc. definitive
proxy statement dated March 15, 2012 are incorporated herein by reference.
|
Item 14.
|
Principal Accounting Fees and Services:
|
“Ratification Of Appointment Of Independent Registered Public
Accounting Firm” of the Weis Markets, Inc. definitive proxy statement dated March 15, 2012 is incorporated herein by reference.
Page
38
of 42 (Form 10-K)
|
WEIS MARKETS, INC.
PART IV
|
Item 15.
|
Exhibits, Financial
Statement Schedules:
|
(a)(1)
The
Company’s 2011 Consolidated Financial Statements and the Report of Independent Registered Public Accounting Firm are included
in Item 8 of Part II.
Financial Statements
|
Page
|
Consolidated Balance Sheets
|
18
|
Consolidated Statements of Income
|
19
|
Consolidated Statements of Comprehensive Income
|
20
|
Consolidated Statements of Shareholders’ Equity
|
21
|
Consolidated Statements of Cash Flows
|
22
|
Notes to Consolidated Financial Statements
|
23
|
Report of Independent Registered Public Accounting Firm
|
36
|
(a)(2) Financial statement schedules required to be filed by Item
8 of this form, and by Item 15(c)(3) below:
Schedule II - Valuation and Qualifying Accounts, page
41 of this annual report on Form 10-K
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable
and therefore have been omitted.
Page
39
of 42 (Form 10-K)
|
WEIS MARKETS, INC.
|
Item 15.
|
Exhibits, Financial
Statement Schedules: (continued)
|
(a)(3) A listing of exhibits filed or incorporated by reference
is as follows:
Exhibit No.
|
|
Exhibits
|
3-A
|
|
Articles of Incorporation, filed as exhibit 4.1 in Form S-8 on September 13, 2002 and incorporated herein by reference.
|
|
|
|
3-B
|
|
By-Laws, filed as exhibit under Part IV, Item 14(c) in the annual report on Form 10-K for the fiscal year ended December 29, 2001 and incorporated herein by reference.
|
|
|
|
10-A
|
|
Retirement Savings Plan, amended December 20, 2011 and filed with this annual report on Form 10-K.
|
|
|
|
10-B
|
|
Supplemental Executive Retirement Plan, amended August 18, 2011 and filed with this annual report on Form 10-K. *
|
|
|
|
10-C
|
|
Deferred Compensation Plan for Pharmacists, filed as exhibit under Part IV, Item 15(a)(3) in the annual report on Form 10-K for the fiscal year ended December 26, 2009 and incorporated herein by reference.
|
|
|
|
10-D
|
|
Executive Benefits Agreement between the Company and Robert F. Weis, Chairman of the Board, signed on March 24, 2006, commencing immediately and continuing thereafter through December 31, 2023, filed on Form 8-K March 24, 2006 and incorporated herein by reference. *
|
|
|
|
10-E
|
|
Deferred Compensation Agreement between the Company and Mr. Robert F. Weis, filed as exhibit under Part IV, Item 15(a)(3) in the annual report on Form 10-K for the fiscal year ended December 26, 2009 and incorporated herein by reference. *
|
|
|
|
10-F
|
|
Executive Employment Agreement between the Company and Jonathan H. Weis, Vice Chairman and Secretary, signed on November 3, 2011, with retroactive effect to July 1, 2011 and continuing thereafter through December 31, 2016, filed as Exhibit 10.1 to Form 8-K November 8, 2011 and incorporated herein by reference. *
|
|
|
|
10-G
|
|
Vice Chairman Incentive Award Plan between the Company and Jonathan H. Weis, Vice Chairman and Secretary, signed on November 3, 2011, with retroactive effect to July 1, 2011 and continuing thereafter through December 31, 2016, filed as Exhibit 10.2 to Form 8-K November 8, 2011 and incorporated herein by reference. *
|
|
|
|
10-H
|
|
Executive Employment Agreement between the Company and David J. Hepfinger, President and Chief Executive Officer, signed on October 26, 2010, with retroactive effect to March 1, 2010 and continuing thereafter through February 28, 2013, filed as Exhibit 10.1 to Form 8-K November 1, 2010 and incorporated herein by reference. *
|
|
|
|
10-I
|
|
CEO Incentive Award Plan between the Company and David J. Hepfinger, President and Chief Executive Officer, signed on October 26, 2010, with retroactive effect to January 1, 2010 and continuing thereafter through December 31, 2014, filed as Exhibit 10.2 to Form 8-K November 1, 2010 and incorporated herein by reference. *
|
|
|
|
10-J
|
|
Executive Employment Agreement between the Company and William R. Mills, Former Senior Vice President, Treasurer and Chief Financial Officer, signed on June 27, 2007, commencing on January 1, 2008 and continuing thereafter through December 31, 2010, filed on Form 8-K June 29, 2007 and incorporated herein by reference. *
|
|
|
|
21
|
|
Subsidiaries of the Registrant, filed with this annual report on Form 10-K
|
|
|
|
23
|
|
Consent of Grant Thornton LLP, filed with this annual report on Form 10-K
|
|
|
|
31.1
|
|
Rule 13a-14(a) Certification - CEO, filed with this annual report on Form 10-K
|
|
|
|
31.2
|
|
Rule 13a-14(a) Certification - CFO, filed with this annual report on Form 10-K
|
|
|
|
32
|
|
Certification Pursuant to 18 U.S.C. Section 1350, filed with this annual report on Form 10-K
|
* Management contract or compensatory plan arrangement.
The Company will provide a copy of any exhibit upon receipt of a
written request for the particular exhibit or exhibits desired. All requests should be addressed to the Company’s principal
executive offices.
(b) The Company files as exhibits to this annual report on Form
10-K, those exhibits listed in Item 15(a)(3) above.
Page
40
of 42 (Form 10-K)
|
WEIS MARKETS, INC.
Item 15(c)(3).
Financial
Statement Schedules:
Schedule II - Valuation and Qualifying Accounts:
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
WEIS MARKETS, INC.
(dollars in thousands)
Col. A
|
|
Col. B
|
|
|
Col. C
|
|
|
Col. D
|
|
|
Col. E
|
|
|
|
|
|
|
Additions
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
Charged to
|
|
|
Charged to
|
|
|
|
|
|
Balance at
|
|
|
|
Beginning
|
|
|
Costs and
|
|
|
Accounts
|
|
|
Deductions
|
|
|
End of
|
|
Description
|
|
of Period
|
|
|
Expenses
|
|
|
Describe
|
|
|
Describe (1)
|
|
|
Period
|
|
Fiscal Year ended December 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deducted from asset accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for uncollectible accounts
|
|
$
|
1,037
|
|
|
$
|
1,377
|
|
|
$
|
—
|
|
|
$
|
999
|
|
|
$
|
1,415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year ended December 25, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deducted from asset accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for uncollectible accounts
|
|
$
|
969
|
|
|
$
|
872
|
|
|
$
|
—
|
|
|
$
|
804
|
|
|
$
|
1,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year ended December 26, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deducted from asset accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for uncollectible accounts
|
|
$
|
673
|
|
|
$
|
859
|
|
|
$
|
—
|
|
|
$
|
563
|
|
|
$
|
969
|
|
(1) Deductions are uncollectible accounts written off, net of recoveries.
Page
41
of 42 (Form 10-K)
|
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
03/15/2012
|
|
/S/David J. Hepfinger
|
|
|
David J. Hepfinger
|
|
|
President and Chief Executive Officer
|
|
|
and Director
|
|
|
(principal executive officer)
|
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
03/15/2012
|
|
/S/Robert F. Weis
|
|
|
Robert F. Weis
|
|
|
Chairman of the Board of Directors
|
|
|
|
Date
03/15/2012
|
|
/S/Jonathan H. Weis
|
|
|
Jonathan H. Weis
|
|
|
Vice Chairman and Secretary
|
|
|
and Director
|
|
|
|
Date
03/15/2012
|
|
/S/David J. Hepfinger
|
|
|
David J. Hepfinger
|
|
|
President and Chief Executive Officer
|
|
|
and Director
|
|
|
(principal executive officer)
|
|
|
|
Date
03/15/2012
|
|
/S/Scott F. Frost
|
|
|
Scott F. Frost
|
|
|
Senior Vice President, Chief Financial Officer
and Treasurer
|
|
|
(principal financial officer)
|
|
|
|
Date
03/15/2012
|
|
/S/Harold G. Graber
|
|
|
Harold G. Graber
|
|
|
Senior Vice President of Real Estate and Development
and Director
|
|
|
|
Date
03/15/2012
|
|
/S/Gerrald B. Silverman
|
|
|
Gerrald B. Silverman
|
|
|
Director
|
|
|
|
Date
03/15/2012
|
|
/S/Steven C. Smith
|
|
|
Steven C. Smith
|
|
|
Director
|
|
|
|
Date
03/15/2012
|
|
/S/Glenn D. Steele Jr.
|
|
|
Glenn D. Steele Jr.
|
|
|
Director
|
|
|
|
Date
03/15/2012
|
|
/S/Paul M. Stombaugh
|
|
|
Paul M. Stombaugh
|
|
|
Corporate Controller
|
|
|
(principal accounting officer)
|
Page
42
of 42 (Form 10-K)
|
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