UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

SCHEDULE 14A

(RULE 14a-101)

SCHEDULE 14A INFORMATION

 

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No. )

 

Filed by the Registrant  X

Filed by a Party other than the Registrant 

 

Check the appropriate box:

 

 

 

 

 

 

 

WEIS MARKETS, INC.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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TO OUR SHAREHOLDERS:

 

NOTICE IS HEREBY GIVEN that the 2014 Annual Meeting of the Shareholders (the “Annual Meeting”) of Weis Markets, Inc. (the "Company"), will be held on Thursday,  April 24, 2014 , at 10:00 a.m., Eastern Daylight Time, at the principal executive offices of the Company, 1000 South Second Street, Sunbury, Pennsylvania 17801, for the following purposes:

 

The Board of Directors has fixed the close of business on March 7, 2014 , as the record date for the Annual Meeting.  Only holders of shares of Common Stock of record at that time will be entitled to receive notice and vote at the Annual Meeting, and may vote by proxy (i) on the Internet, (ii) by telephone or (iii) by signing and dating a proxy card and returning it to the Company.

This summary is qualified in its entirety by the detailed information contained within the Proxy Statement.

Important Notice Regarding Availability of Proxy Materials for Weis Markets, Inc.

Annual Meeting of Shareholders to be Held on April 24 , 2014

 

This Proxy Statement, the form of proxy card, the Notice and the Company’s Annual Report on Form 10-K are available at http://www.weismarkets.com/financial .html.

 

 

By Order of the Board of Directors,

 

 

Harold G. Graber

Secretary

 

March 13 , 2014

Sunbury, Pennsylvania

 

 

 

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WEIS MARKETS, INC.

PROXY STATEMENT

 

ANNUAL MEETING OF SHAREHOLDERS

This Proxy Statement is being furnished to all shareholders of record as of March 7, 2014, the record date of the Company, in connection with the solicitation of proxies by the Board of Directors (the “Board”) for use at the 2014 Annual Meeting.   The Annual Meeting will be held on Thursday, April 24, 2014, at 10:00 a.m. Eastern Daylight Time, at the principal executive offices of the Company, 1000 South Second Street, Sunbury, Pennsylvania 17801.

 

INFORMATION CONCERNING THE SOLICITATION

The Company is sending an “Important Notice of Availability of Proxy Materials for the Annual Meeting of Shareholders of Weis Markets, Inc.” (the “Notice”) to its shareholders on or about March 13, 2014.  The Company is providing access to its proxy materials over the Internet under rules adopted by the Securities and Exchange Commission (the “SEC”).  All shareholders have the ability to access the proxy materials on the website identified in the Notice or to request a printed copy of proxy materials.  The Notice provides instructions on how to access the proxy materials over the Internet, and how to request a printed copy of the proxy materials.  This Proxy Statement, the form of proxy card, the Notice and the Company’s Annual Report on Form 10-K are available at http://www.weismarkets.com/financial .html.

 

Subject to the conditions hereinafter set forth, the shares represented by each proxy executed will be voted at the Annual Meeting, or any adjournments or postponements thereof, in accordance with the specifications therein made.  Where there is no contrary choice specified, the proxy will be voted "FOR" each of the proposals as therein specified. 

 

An executed proxy may be revoked by the person signing the same at any time before the authority thereby granted is exercised.  The revocation may be exercised at any time before the Annual Meeting by indicating the revocation in writing.  This revocation should be directed to the Judge of Elections, Weis Markets, Inc., 1000 South Second Street, Sunbury, Pennsylvania 17801.  The proxy may also be revoked by voting in person at the Annual Meeting or by submitting a new proxy with a later date including a proxy given over the Internet or by telephone.

 

The Company has adopted a procedure called “householding,” which the SEC has approved. Under this procedure, the Company is delivering a single copy of the Notice and, if applicable, this Proxy Statement and the Annual Report on Form 10-K to multiple shareholders who share the same address unless the Company has received contrary instructions from one or more of the shareholders.  This procedure reduces the Company’s printing costs, mailing costs and fees.  Shareholders who participate in householding will continue to be able to access and receive separate proxy cards.  Upon written or oral request, the Company will deliver promptly a separate copy of the Notice and, if applicable, this Proxy Statement and the Annual Report on Form 10-K to any shareholder at a shared address to which the Company delivered a single copy of any of these documents.  To receive a separate copy of the Notice and, if applicable, this Proxy Statement or the Annual Report on Form 10-K, shareholders may write the Company at its address set forth on page 1, by telephoning 1-866-999-WEIS (9347), or via email at financial_reports@weismarkets.com.

 

VOTING SECURITIES,  RECORD DATE AND VOTING RIGHTS

As of March 7, 2014, the record date for the Annual Meeting, the number of outstanding shares of Common Stock was  26,898,443.  The presence, in person or by proxy, of at least 13,449,222 shares will constitute a quorum.

 

Only holders of Common Stock of the Company of record at the close of business on March 7, 2014 will be entitled to notice of and to vote on all matters at the Annual Meeting and at any adjournment thereof.  Each holder of Common Stock will be entitled to one vote for each share of stock so held and to cumulative voting rights in the election of directors.  Under cumulative voting, a shareholder, or the shareholder’s proxies, may vote the number of shares of stock owned by the shareholder multiplied by the number of directors to be elected, and the shareholder may cast all of such votes for a single director nominee or distribute them among two or more director nominees.  If you wish to cumulate your votes, you must vote by using a proxy card rather than voting by telephone or the Internet.

 

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Directors are elected by a plurality vote of all votes cast at the Annual Meeting.  The ratification of the appointment of the independent registered public accounting firm (“independent auditors”) requires the affirmative vote of a majority of all votes cast at the Annual Meeting.  Abstentions and broker “non-votes” will be treated as present for purposes of determining a quorum, but will not affect the election of directors or other matters submitted to the vote of shareholders.  A broker “non-vote” occurs when a shareholder has not provided voting instructions to its broker for a non-routine item because the New York Stock Exchange (“NYSE”) precludes brokers from giving a proxy to vote on a non-routine item.  The election of directors (Proposal No. 1) and the advisory (non-binding) vote on executive compensation (Proposal No. 3) are non-routine items under the NYSE rules.  The ratification of the independent auditors (Proposal No. 2) is a routine matter.

 

The Company’s by-laws specify that notice of any matter to be brought before an annual meeting by a shareholder must be received at the principal executive offices of the Company no later than the notice deadline described under the caption “Shareholders’ Proposals for Next Annual Meeting.”  Management does not intend to bring any other matters before the Annual Meeting, and does not know of any other matter that is eligible for action at the Annual Meeting.

 

PROPOSAL NO. 1

ELECTION OF DIRECTORS

The Company believes that the proposed nominees for election as directors are willing to be elected as such, and it is intended that the persons named in the accompanying form of proxy or their substitutes will vote for the election of these nominees, unless specifically instructed to the contrary on the form of proxy.  However, if any nominee, at the time of the election, is unable or unwilling to serve, or is otherwise unavailable for election, and in consequence other nominees are designated, the persons named in the proxy or their substitutes shall have discretion or authority to vote or refrain from voting in accordance with their judgment on the other nominees.

 

The Company requires its directors to possess the experience and skills necessary to oversee the management of the Company in the interest of the Company and its shareholders. The Board will consider for nomination a candidate who:

 

When considering a person to be recommended for re-nomination as a director, the Board will consider, among other factors, the attendance, preparedness, participation and candor of the individual as well as the individual’s satisfaction of the above-mentioned criteria.  The Board believes the current Board members meet these criteria to effectively serve the Company.  The description of each nominee set forth below includes biographical information, on a director by director basis, which highlights the specific experience, background and education of each nominee that led the Board to conclude each director should serve on the Board.

 

The Board recommends a vote “FOR” the election of the nominees named below, each of whom has consented to be named as a nominee and to serve if elected.  All of the nominees were elected to the Board at the 2013 Annual Meeting.  The following table and accompanying footnotes set forth information about each Board nominee as of March 7, 2014:

 

 

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Mr. Weis’ extensive food retailing career with the Company provides the Board with a unique insight into the Company and its business, and adds a critical perspective to all aspects of the Board’s responsibilities, including strategy, operations, financial considerations, risk management and corporate governance that defines the Company.

 

Mr. Weis has been employed by the Company for more than 20 years.  Throughout his employment, he has diverse and extensive experience with the Company in the areas of real estate, property management, procurement, merchandising and store operations.  This experience provides him with a vision for the Company’s future as well as in-depth knowledge of the operational risks facing the Company.  His position as CEO also allows him to provide essential insight and guidance to the Board from an inside perspective of the day-to-day operations.

 

Mr. Graber currently oversees the Company’s real estate, property management and maintenance, and lease administration.  Mr. Graber is also in charge of store planning, engineering, architecture, construction, “Not For Resale” procurement and utilities.  The Company’s legal activities and sustainability initiatives are also part of Mr. Graber’s management responsibilities.  Mr. Graber’s intimate experience with the Company’s store development and planning objectives provides important information to the Board.

 

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Mr. Lauth has had an extensive career in sales, marketing and real estate development.  This combined experience along with Mr. Lauth’s entrepreneurial skills provides the Board with a valuable perspective.

 

Mr. Silverman is a highly experienced leader in the North American Jewish community and longtime corporate executive, with over 25 years of experience.  Mr. Silverman’s extensive executive level management background within other retail industries is a valuable resource for the Board.

 

Dr. Steele’s extensive background in the health care industry provides the Company with pharmaceutical and healthcare related expertise.  Dr. Steele’s experience as a director on other boards and his overall business and financial leadership perspective is a valuable asset to the Board.

 

On March 1, 2009, the Company hired Kurt A. Schertle as its Vice President of Sales and Merchandising.  Mr. Schertle was promoted to Senior Vice President of Sales and Merchandising on February 15, 2010 and was again promoted to Executive Vice President of Sales and Merchandising on July 1, 2012.  In September 2013, Mr. Schertle assumed the additional responsibility of overseeing Store Operations and was promoted to Chief Operating Officer on March 3, 2014.  Prior to being hired by the Company, Mr. Schertle was President and Chief Operating Officer of Tree Top Kids, Inc., a specialty toy retailer.  One year and four months after Mr. Schertle left that company, on March 11, 2010, an involuntary petition of bankruptcy was filed against Tree Top Kids, Inc. 

 

Independence of Directors

The Board has determined that Directors Lauth, Silverman and Steele are independent within the meaning of the listing standards of the NYSE.  An independent director is defined as a director who has no material relationship with the Company, either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company.

 

 

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Companies listed on the NYSE must comply with certain standards regarding corporate governance, as codified in Section 303A of the Listed Company Manual of the NYSE, with some exceptions.  A company of which more than 50% of the voting power is held by an individual, a group or another company is not required by the NYSE to comply with the requirements of Sections 303A.01 Independent Directors, 303A.04 Nominating/Corporate Governance Committee or 303A.05 Compensation Committee.  Robert F. Weis, Chairman, and Ellen W. P. Wasserman, his sister, control approximately 53.4% of the voting power.  They have agreed to act together for the purpose of voting their shares of Common Stock and thus constitute a group within the meaning of these rules. 

 

As permitted by the NYSE rules, the Company does not have a majority of independent directors.  As of March 13, 2014, the Company’s Audit Committee and Compensation Committee are comprised of all independent directors.  

 

Board Committees and Meeting Attendance

Board of Directors.  The Company's Board held four regular meetings and one special meeting during fiscal 2013.  No director attended fewer than 75% of the aggregate meetings of the Board and all Board committees on which the director served, other than Dr. Steele.  All directors  attended the 2013 Annual Meeting.  

 

Under the policies of the Board, directors are expected to attend regular Board meetings, Board committee meetings, the Annual Meeting and any special meetings of the shareholders.  Participation is permissible by means of conference telephone or similar communications equipment.

 

Audit Committee.  The Audit Committee is  comprised of three independent non-employee directors, as required by the NYSE listing standards.  The Audit Committee acts independently to review the scope and engagement results of the independent auditors and the adequacy of the Company's internal and financial controls.  Information regarding the functions performed by the Audit Committee is set forth in the “Audit Committee Report ” included in this P roxy S tatement.  The Audit Committee is governed by a written charter approved by the Board.  A copy of this charter  is available on the Company’s corporate governance website at  http://www.weismarkets.com/about-weis/corporate-information/governance or by request to the Corporate Secretary at the Company’s address set forth in “Shareholder or Interested Parties Communications .”

 

The 2013 Audit Committee was comprised of Directors Silverman, Steele and Lauth.  Mr. Silverman served as Chairman of the Audit Committee through April 25, 2013, at which point Mr. Lauth became Chairman of the Audit Committee.  The Audit Committee held four regular meetings and four special meetings during fiscal 2013.

 

The Board has determined that all Audit Committee members are financially literate under the listing standards of the NYSE.  The Board also determined that all Audit Committee members were “audit committee financial experts” in fiscal 2013 and all Audit Committee members are “audit committee financial experts” in fiscal 2014, as defined in Item 401(h) of Regulation S-K, and all members of the Audit Committee are “independent” for purposes of Section 10A(m)(3) of the Securities Exchange Act of 1934 and the listing standards of the NYSE.

 

Compensation Committee.  The Compensation Committee is  currently comprised of three independent non-employee directors.  The Compensation Committee is responsible for developing policies and programs, and making recommendations about compensation arrangements for senior management to the Board.  The Compensation Committee is governed by a written charter approved by the Board, which is available on the Company’s corporate governance website at http://www.weismarkets.com/about-weis/corporate-information/governance or by request to the Corporate Secretary at the Company’s address set forth in “Shareholder or Interested Parties Communications .”

 

The 2013 Compensation Committee was comprised of Directors Lauth, Silverman, Steele and Jonathan H. Weis.  Mr. Weis served as Chairman of the Compensation Committee through April 25, 2013, at which point he ceased to serve on the Compensation Committee and Mr. Lauth was appointed to the Compensation Committee.  Mr. Silverman served as Chairman of the Compensation Committee for the remainder of the year.  The Compensation Committee held two regular meetings during fiscal 2013.   The Company’s Chairman and the CEO are not members of the Compensation Committee; however, the Compensation Committee seeks input from them regarding the performance of the other executive officers.  The Compensation Committee has in the past sought assistance from consulting firms specializing in compensation and benefits and may do so in the future.  Any such consulting firm that is hired will be independent under applicable NYSE rules.

 

 

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Corporate Governance Matters

The Company has adopted Corporate Governance Guidelines which are available on the Company’s corporate governance website at http://www.weismarkets.com/about-weis/c orporate-information/governance or by request to the Corporate Secretary at the Company’s address set forth in “Shareholder or Interested Parties Communications .”

 

Board Leadership Structure.    The Company separates the roles of Chairman and CEO in recognition of the differences between the two roles.  Article V Section 5.5 of the Company’s by-laws states that the Chairman shall preside at all meetings of the shareholders and the Board.  The by-laws also state that the CEO shall have the general charge and supervision of the business of the Company and shall exercise or perform all the powers and duties usually incident to the office of CEO.  The CEO is responsible for the day-to-day leadership and performance of the Company.  In the absence of the Chairman, the Vice Chairman shall preside at all meetings of the shareholders and of the Board.  The Company believes the current leadership structure is the most appropriate structure at the time of filing. 

 

The Board’s Role in Risk Oversight.    The Board oversees the management of risks inherent in the operation of the Company’s business.  It is management’s responsibility to manage risk and bring to the Board’s attention the most material risks to the Company.  The Board has oversight responsibility of the processes established to monitor systems for material risks applicable to the Company.  Each of the Board’s Committees also oversees the management of Company risks that fall within the Committees’ areas of responsibility.  In performing this function, each Committee has full access to management, as well as the ability to engage advisors.  As part of its responsibilities as set forth in its charter, the Audit Committee is responsible for discussing with management the Company’s major financial risk exposures and the steps management has taken to monitor and control those exposures.  The Audit Committee gives updates to the Board at its regular meetings, includ ing financial and information technology risks.  In connection with its risk management role, the Audit Committee also meets privately with the Company’s independent auditors, the Chief Internal Auditor and the Chief Financial Officer quarterly.  As part of its responsibilities as set forth in its charter, the Compensation Committee reviews the impact of the Company’s executive compensation program and the associated incentives to determine whether they present a significant risk to the Company.  Based on this review, the Compensation Committee concluded its compensation policies and procedures are not reasonably likely to have a material adverse effect on the Company.

 

Code of Business Conduct and Ethics.    The Company has adopted a “Code of Business Conduct and Ethics” that applies to all of its directors, officers and employees.  Separately, the Company also adopted a “Code of Ethics for CEO and CFO” specific to its chief executive officer, chief financial officer, corporate controller and any person performing similar functions.  The Company has made both documents available on its corporate governance website at http://www.weismarkets.com/about-weis/corporate-information/governance or by request to the Corporate Secretary at the Company’s address set forth in “Shareholder or Interested Parties Communications .”

 

Non-Management Independent Directors.    To empower non-management independent directors to serve as a more effective check on management, the non-management independent directors of the Company have met at regularly scheduled executive sessions without management.    The 2013 non-management independent directors were Directors Lauth, Silverman and Steele.   Dr.  Steele presided over the first two meetings held du ring fiscal 2013 and Mr. Silverman presided over the remaining two meetings.  Shareholders or interested parties wishing to communicate directly with the non-management independent directors as a group may do so as set forth in “Shareholder or Interested Parties Communications.”

 

Board Nominations.    Based upon the stock ownership of the principal shareholders, the Company determined it would be better served by having the full Board review nominating and corporate governance issues rather than establishing separate committees.  Therefore, there is no nominating committee charter.

If the Board determines there is a need to add or replace a director, the following criteria are considered for each recommended candidate.  The candidate (a) has the highest personal and professional ethics, integrity and values; (b) consistently exercises sound and objective business judgment; (c) has significant appropriate senior management and leadership experience; (d) is able and willing to devote the required amount of time to the Company’s affairs, including attendance at Board meetings, Board committee meetings and annual shareholder meetings and (e) will be committed to building sound, long-term Company growth. 

 

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T he Company does not have a formal policy with respect to considering diversity.  However, its Corporate Govern ance Guidelines state that the Board seeks members from diverse professional and personal backgrounds who combine a broad spectrum of experience and expertise.  This assessment will include an individual’s qualification as independent, as well as consideration of diversity, age, skills and experience in the context of the needs of the Board.  Chosen candidates are extended invitations to join the Board.  If a candidate accepts, he or she is form ally nominated.

 

The Board will consider nominees brought to the attention of the Board by an eligible shareholder, a non-management independent director, the CEO , any other executive officer or other appropriate sources.  The Company’s by-laws require that any shareholder intending to nominate a candidate for election as a director must give written notice, containing specified information, to the Corporate Secretary at the Company’s address set forth in “Shareholder or Interested Parties Communications, ” not later than the notice deadline specified in the by-laws, which is 120 calendar days before the anniversary of the date that the Company’s P roxy S tatement was released to shareholders in connection with the previous year’s Annual Meeting.  The notice should include the name and address of both the eligible shareholder and the candidate and the qualifications of the candidate being recommended.  A copy of the by-law provision concerning shareholder nominations will be furnished to any shareholder upon written request to the Corporate Secretary at the Company’s address set forth in “Shareholder or Interested Parties Communications. ”

 

The Board does not have a formal process for identifying and evaluating candidates for director.  It is not anticipated that the process for evaluating a nominee would differ based on whether the nominee is recommended by an eligible shareholder.

 

Board Recommendation and Vote Required

As stated in each nominee’s biography above, the six candidates possess all of the experience, qualifications, attributes and skills appropriate for functioning as a board.  No notices from shareholders intending to nominate a candidate for election as a director were received with respect to the 2014 Annual Meeting.  Therefore, only the six nominees named above, or a substitute nominee of the Board, will be eligible for election at the Annual Meeting.  The six candidates receiving the highest numbers of votes cast by the holders of Common Stock voting in person or by proxy will be elected as directors.  The Board of Directors recommends a vote “FOR” the election of the six nominees named above.

 

EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

Throughout this Proxy Statement, the individuals who served as the Company’s CEO and CFO at the end of fiscal 2013 , as well as the other individuals included in the “Summary Compensation Table,” are referred to as the “Named Officers. ”    

 

Compensation Philosophy and Objectives

The primary objective of the Company’s executive compensation program is to attract and retain qualified executives, which is critical to the ongoing success of the Company.  This primary objective is achieved by providing a combination of base salary, annual cash incentives, health and welfare benefits, retirement benefits and perquisites that overall provide a complete compensation package that is competitive with executives at companies of comparable size and position in the retail business, while keeping compensation in line with the financial objectives of the Company. 

 

Compensation Committee Discretion

The Compensation Committee has broad discretion to set the compensation paid to the Company’s Named Officers, subject to Board approval, as it may determine is in the best interest of the Company and its shareholders.  The exercise of discretion is an important feature of the Compensation Committee’s philosophy and provides the Compensation Committee with sufficient flexibility to respond to specific circumstances facing the Company.

 

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Use of Comparable Data in Setting Executive Compensation Levels

The Company is engaged in a highly competitive industry.  As a result, the Compensation Committee annually examines compensation levels and trends in the labor market as part of its process in establishing compensation for the Company’s Named Officers.    In 2013, the Compensation Committee made the decision to provide a  salary merit increase, ranging from 2% to 4%, to the Named Executive Officers.

 

The Company competes with many larger companies for top executive-level talent, it generally sets compensation for Named Officers at the 75th percentile of compensation paid to similarly situated executives.  Variations to the base salary component may occur because of the individual’s experience level, job responsibilities and market factors.  The Compensation Committee also realizes that a primary difference between the Company’s executive compensation program and some of its peers’ compensation programs is the absence of an equity-based incentive plan.  This fact is strongly considered when evaluating discretionary contributions to the Supplemental Executive Retirement Plan (“SERP”) for the Named Officers. 

 

2013 Executive Compensation Components

The Compensation Committee annually evaluates the performance of executive officers with the Chairman and CEO.  In performing its evaluations, the Compensation Committee relies upon written and verbal evaluations of each officer’s performance for the most recent fiscal year.  The CEO meets with the executive officers to discuss their efforts and accomplishments throughout the period from information deemed relevant both internally and in light of the competitive position of the Company in the industry.  These evaluations include qualitative factors such as the individual’s decision-making responsibilities, the professional experience required to perform given tasks, and their leadership and team-building skills.  Although executive compensation is not specifically related to corporate performance, the overall performance of the Company is a consideration in determining executive compensation.

 

Compensation for Named Officers is comprised of the following: 

 

Base Salary:    The base salary component of the executive compensation program provides the foundation for a fair and competitive compensation package.  Although the Compensation Committee generally intends to set compensation for Named Officers at the 75th percentile of compensation paid to similarly situated executives, the Compensation Committee has the discretion to deviate from the 75th percentile of the compensation surveys as it may determine in its discretion. The determination of base salaries is generally independent of the decisions regarding other elements of compensation, but some of the other elements of the compensation program are dependent on base salary, to the extent they are expressed as percentages of base salary.  In setting base salaries, the Compensation Committee considers each Named Officers' job responsibilities, value-added contributions to the Company and tenure.

 

Based on consideration of the criteria discussed above and the overall financial and operational success of the Company,  t he Compensation Committee approved a 4.0% increase in base salary for both the Chairman, Mr. Robert F. Weis, and the Vice Chairman, Mr. Jonathan H. Weis, in fiscal 2013.  The Chairman and Vice Chairman base salaries were at 95.9% and 106.7%, respectively, of the 75% base salary quartile for similarly situated executives.  The Compensation Committee approved a 4.0% increase in base salary for the former CEO, Mr. David J. Hepfinger, in fiscal 2013.  The base salary for Mr. Hepfinger was 89.6 % of the 75% base salary quartile for similarly situated executives.  The Compensation Committee approved a 2.0% increase in base salary for the Executive Vice President, Mr. Kurt A. Schertle, as of February 2013 and a  12.6% increase in base salary in October 2013 after he assumed the additional responsibility of overseeing Store Operations.  Mr. Schertle now earns 87.2% of the 75% quartile for similarly situated executives.  The Compensation Committee approved a 4.0% increase in base salary for both the CFO, Mr. Scott F. Frost, and the Senior Vice President, Mr. Harold G. Graber, in fiscal 2013.  The base salaries of Messrs. Frost and Graber were at 59.9% and 74.2%, respectively, of the 75% quartile for similarly situated executives.

 

 

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Non-Equity Incentive Plan:    Since 2002, the Company's executive compensation program includes an annual non-equity incentive plan designed to reward certain key employees, including the Named Officers, for meeting specific financial objectives.    The Compensation Committee administers the non-equity incentive plan for management to provide the short-term incentive compensation element of the executive compensation program.  This short-term incentive is a cash-based performance incentive program designed to motivate and reward key employees for their contributions to factors and business goals that the Company believes drive its earnings and create shareholder value.  Incentive payout targets are established by job level within the Company as a percentage of base salary, and actual payouts are based on achievement of budgeted sales and operating profit targets as approved by the Board annually.  Prior to implementation of this non-equity incentive plan in 2002, the Compensation Committee hired an independent compensation consulting firm to provide guidance on the basic plan structure.  In 2009, consultants were utilized to evaluate the competiveness of the current non-equity incentive plan as compared to the market place and recommended changes, of which the Board approved.  Actual non-equity incentive plan compensation amounts earned by the Named Officers are reflected in the “Summary Compensation Table” for the year earned.  The amounts which each Named Officer could have earned for fiscal 2013 based on performance at the threshold, target and maximum levels are shown in the “Grants of Plan-Based Awards” table below.

 

Mr. Robert F. Weis,  Mr. Jonathan H. Weis,  the former CEO Mr. Hepfinger, Mr. Schertle,  Mr. Frost and Mr. Graber can earn up to 130%, 104%, 156% , 65%, 52% and 52%, respectively, of their base salary in the non-equity incentive plan.  The incentive targets for Mr. Robert F. Weis, Mr. Jonathan H. Weis, the former CEO Mr. Hepfinger, Mr. Schertle, Mr. Frost and Mr. Graber are 100%, 80%, 120%, 50%, 40% and 40%, respectively, of their base salary.  For fiscal 2013, 40% of the incentive award was based upon achievement of the bu dgeted total Company sales and 60% of the incentive award was based upon achievement of the budgeted total Company operating profit for the Named Officers.  Company operating profit was defined as U.S. GAAP “Operating Income. ”    Threshold and target hurdles were established for the budgeted sales category, which allowed each Named Officer to earn 25% and 100%, respectively, of his total incentive award for achieving the specified results within the sales category.  Threshold, target and maximum hurdles were established for the operating profit category, which allowed each Named Officer to earn 25%, 100% and 150%, respectively, of his total incentive award for achieving the specified results within the operating profit category.  The operating profit category target hurdle must be met before the sales category incentive award is earned under the plan.  For achieving 97% through 100% of the budgeted sales target, the Named Officers can earn 25% to 100% of the sales incentive award.  For achieving 97% through 118% of the budgeted operating profit, the Named Officers can earn 25% to 150% of the operating profit incentive award.  The threshold and target hurdles for sales in fiscal 2013 were equal to a sales result of $2.7 billion and $2.8 billion, respectively.  The threshold, target and maximum hurdles for the operating profit in fiscal 2013 were equal to an operating profit result of $130.1 million, $134.1 million and $158.3 million, respectively.  None of the minimum targets under the plan were met for 2013.

 

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 Plan”).  Both plans are qualified defined contribution plans.  The Named Officers along with other highly compensated employees have limited participation in the 401(k) portion of the Plan and are excluded from receiving contributions in the profit sharing portion of the Plan once their annual earnings exceed the limitations imposed by the Internal Revenue Code and the Regulations implemented by the Internal Revenue Service for highly compensated employees.  A few of the Named Officers continue to possess an investment account in the profit sharing portion of the Plan, resulting from their tenure with the Company prior to becoming a  highly compensated employee. 

 

 

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Supplemental Executive Retirement Plan: Company contributions normally made to the qualified plans for the Named Officers are credited instead to the SERP, an unfunded, nonqualified deferred compensation plan.  The SERP account for each Named Officer is credited annually with the amount, if any, that would have been allocated to the participant’s qualified plans if he had not been excluded from participation in these qualified plans.  Although the SERP is primarily a replacement retirement plan, the Compensation Committee may at any time recommend to the Board discretionary amounts to be credited to the account(s) of one or more SERP participants.  Substantial risk of benefit forfeiture does exist for participants in the SERP.  The SERP provides the participant with the ability to direct his or her investments into one or more of the investment options made available through the plan.

 

Contributions to the SERP are determined in the same manner as contributions to participants in the Company’s qualified plans except for discretionary contributions.  Contribution allocations and earnings for the three components of the SERP are computed as follows:

 

 

 

 

The investment funds made available to the participants are managed by independent investment advisors.  For more information regarding the Company’s retirement plans, please refer to the “Pension Benefits” and “Nonqualified Deferred Compensation” tables below and Note 6 to the Consolidated Financial Statements in the 2013 Annual Report on Form 10-K.

 

Deferred Compensation Agreement: The Company maintains an unfunded, nonqualified deferred compensation agreement with Robert F. Weis for the payment of specific amounts of annual retirement benefits to him or his spouse over their lifetime, with a guaranteed payment for their actuarially computed life expectancies.  The benefits are determined through actuarial calculations dependent on the age of the recipient, as specified in the plan document, using the 1971 Group Annuity Mortality Table (Plus 5 for Males) and an assumed discount rate of 7.5%.  The benefit payable on an annual basis to Robert F. Weis would be $1,706,580 if he had retired as of the date of this Proxy Statement.  For more information regarding this deferred compensation agreement, refer to the  “Pension Benefits” table below and Note 6 to the Consolidated Financial Statements in the Company’s 2013 Annual Report on Form 10-K.

 

 

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Vice Chairman Incentive Award Plan:    On November 3, 2011, the Compensation Committee adopted the Company’s Vice Chairman Incentive Award Plan, with retroactive effect to July 1, 2011.  The Vice Chairman Incentive Award Plan was implemented in connection with the new Employment Agreement the Company entered into with Jonathan H. Weis, Vice Chairman of the Company, on November 3, 2011, with retroactive effect to July 1, 2011.  The purposes of the Vice Chairman Incentive Award Plan are to provide a strong financial incentive each year for performance of the Company’s Vice Chairman by making a significant percentage of the Vice Chairman’s total cash compensation dependent upon the level of corporate performance attained yearly, and to encourage Vice Chairman retention.  Mr. Weis may earn a supplemental cash incentive under the Company’s Vice Chairman Incentive Award Plan.  The Vice Chairman Incentive Award consists of a retention award equal to Mr. Weis’s base salary for the fiscal year (although in 2011 (and only 2011), the amount of the retention award was $334,750) and a profit performance award equal to the base salary for the fiscal year if the “Net Income” of the Company increases by 5% or more from the “Net Income” of the previous fiscal year (although in 2011 (and only 2011) the amount of the profit performance award was $334,750).  “Net Inc ome” is the net income as set forth in the Company’s Consolidated Statements of Income, as contained in the audited financial statements of the Company in the Forms 10-K filed by the Company, but in comparing the Net Income for a particular fiscal year (the “Current Year”) to the Net Income of the prior fiscal year (the “Prior Year”), the Compensation Committee may take into account, in an objectively determinable manner, certain changes that occur between years, including in particular, changes that are due to the addition or disposition of stores.  For the past fiscal year, the Committee did not make any adjustments to the Company’s reported net income.  The maximum amount of the Vice Chairman Incentive Award payable under the Plan in any fiscal year is limited to $1,339,000 (although in 2011 (and only 2011) the maximum amount of the Incentive Award was limited to $669,500).  Although the right to receive awards under the plan are measured and determined on an annual basis, the payment of the award is contingent upon Mr. Weis’s continued employment with the Company and no plan award will be paid until after December 31, 2016, except in the case of a termination without cause or death. 

 

CEO Incentive Award Plan:    On October 26, 2010, the Compensation Committee adopted the Company’s CEO Incentive Award Plan, with retroactive effect to January 1, 2010.  The CEO Incentive Award Plan was implemented in connection with the new Employment Agreement the Company entered into with David J. Hepfinger, CEO, on October 26, 2010, with retroactive effect to March 1, 2010.  The purposes of the CEO Incentive Award Plan are to provide a strong financial incentive each year for performance of the Company’s CEO by making a significant percentage of the CEO’s total cash compensation dependent upon the level of corporate performance attained yearly, and to encourage CEO retention.  Mr. Hepfinger may earn a supplemental cash incentive under the Company’s CEO Incentive Award Plan.  The CEO Incentive Award consists of a retention award equal to Mr. Hepfinger’s base salary for the fiscal year and a profit performance award equal to the base salary for the fiscal year if the “Net Income” of the Company increases by 5% or more from the “Net Income” of the previous fiscal year.  “Net Income” is the net income as set forth in the Company’s Consolidated Statements of Income, as contained in the audited financial statements of the Company in the Forms 10-K filed by the Company, but in comparing the Net Income for a particular fiscal year (the “Current Year”) to the Net Income of the prior fiscal year (the “Prior Year”), the Compensation Committee may take into account, in an objectively determina ble manner, certain changes that occur between years, including in particular, changes that are due to the addition or disposition of stores.  For the past fiscal year, the Committee did not make any adjustments to the Company’s reported net income.  The maximum amount of the CEO Incentive Award payable under the plan in any fiscal year is limited to $1,500,000.  Although the right to receive awards under the plan are measured and determined on an annual basis, the payment of the award is contingent upon Mr. Hepfinger’s continued employment with the Company.  While the plan states that no plan award will be paid until after December 31, 2014, except in the case of a termination without cause or death, the Board of Directors made the decision to issue a payment of $2,250,000 (based upon a portion of the amounts previously earned under the plan) to Mr. Hepfinger in March 2013 to incentivize him to enter into the new Employment Agreement signed on March 8, 2013. 

 

The former CEO Mr. Hepfinger did not earn any amounts for 2013 under the CEO Incentive Award Plan, which was superseded by the Separation Agreement entered into between the Company and Mr. Hepfinger.  The amounts paid to Mr. Hepfinger under the Separation Agreement are detailed in the “All Other Compensation” column to the Summary Compensation Table, and the Separation Agreement is described under “Potential Payments upon Termination of Employment or Change in Control.”

 

 

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Recoupment Policy:    On November 3, 2011, with retroactive effect to July 1, 2011, the Company entered into an Employment Agreement with the Company’s Vice Chairman, Jonathan H. Weis.  On October 26, 2010, with retroactive effect to March 1, 2010, the Company entered into an Employment Agreement with the Company’s former CEO, David J. Hepfinger.  The Employment Agreements contain a recoupment policy (commonly referred to as a clawback policy), which provides that if the Board determines that  Mr. Weis or Mr. Hepfinger has been incompetent or negligent in the performance of his duties or has engaged in fraud or willful misconduct in a manner that caused or contributed to the need for a material restatement of the Company’s financial results, the Board will review all performance-based compensation awarded to or earned by Mr. W eis or Mr. Hepfinger on the basis of performance during fiscal periods affected by the restatement.  If the performance-based compensation would have been lower if it had been based on the restated results, the Board and the Company will, to the extent permitted by law, seek recoupment from Mr. Weis or Mr. Hepfinger of any portion of such performance-based compensation deemed appropriate.  The recoupment provisions of the Employment Agreement of former CEO Mr. Hepfinger were superseded by the Separation Agreement entered into between the Company and Mr. Hepfinger.

 

Long Term Incentive Plan:    In 2012, the Compensation Committee adopted the Company’s Long Term Incentive Plan, which was effective July 1, 2012 and continues until June 30, 2017.  The purposes of the Long Term Incentive Plan are to provide a strong financial incentive each year for performance of the participants by making a significant percentage of their total cash compensation dependent upon the level of corporate performance attained yearly, and to encourage their retention.  Messrs. Schertle, Frost and Graber may earn a supplemental cash incentive under the Company’s Long Term Incentive Plan.  The Long Term Incentive Plan provides an incentive equal to 50% of the participant’s base salary (effective at the end of the fiscal year) if, and only if, the “Net Income” of the Company increases by 5% or more from the “Net Income” of the previous fiscal year.  “Net Income” is the net income as set forth in the Company’s Consolidated Statements of Income, as contained in the audited financial statements of the Company in the Forms 10-K filed by the Company, but in comparing the Net Income for a particular fiscal year (the “Current Year”) to the Net Income of the prior fiscal year (the “Prior Year”), the Compensation Committee may take into account, in an objectively determinable manner, certain changes that occur between years, including in particular, changes that are due to the addition or disposition of stores.  For the past fiscal year, th e Committee did not make any adjustments to the Company’s reported net income.  Although the right to receive awards under the plan are measured and determined on an annual basis, the payment of the award is contingent upon the participant’s continued employment with the Company in an employment position eligible under the Plan for the entire term of the plan, except in the case of a termination without cause or due to a long term disability, in which case the participant is entitled to any earned, but unpaid incentive.  No plan award will be paid until after June 30, 2017. 

 

Perquisites:    The Company provides the Named Officers with perquisites that the Compensation Committee believes are reasonable and consistent with its overall executive compensation program.  The Named Officers are provided use of Company automobiles.  For security purposes, Mr. Robert F. Weis, Mr. Jonathan H. Weis and Mr. Schertle may use the Company aircraft for business, and for limited personal travel.  In addition, the Company pays for tax filing assistance for Mr. Robert F. Weis.  Mr. Hepfinger, the former CEO, was provided use of a Company automobile, use of the Company aircraft for business and for limited personal travel and with tax and investment advisory services.  The cost to the Company of the u se of Company automobiles and the Company aircraft is calculated as prescribed by the Internal Revenue Service and is treated as taxable income to the Named Officers. Please refer to Footnote 3 of the “Summary Compensation Table” for perquisite details. 

 

Matters Relating to Mr. Hepfinger

Mr. Hepfinger resigned as President and Chief Executive Officer and as a director of the Company effective September 21, 2013.  As discussed in “Potential Payments Upon Termination of Employment or Change in Control,” a Confidential Separation Agreement and General Release (the "Separation Agreement") was entered into by Mr. Hepfinger and the Company on September 21, 2013.  The Separation Agreement replaced and superseded the March 1, 2013 Employment Agreement between the Company and Mr. Hepfinger, and any rights of Mr. Hepfinger under the CEO Incentive Award Plan effective January 1, 2010.  Under the Separation Agreement, Mr. Hepfinger will be paid salary,  amounts due related to the non-equity incentive plan, lump-sum payments and the cost of an annual physical examination (up to $1,000) throug h the end of December 31, 2014, and for health and welfare benefits through the end of December 31, 2016, as well as his retirement benefits.    

 

 

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Management of Compensation – Related Risk

The Company’s Board of Directors has considered and determined that risks arising from the Company’s compensation policies and practices for its employees are not reasonably likely to have a material adverse effect on the Company.

 

COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed the “Compensation Discussion and Analysis” and has discussed it with the executive management team.  Based upon its review and those discussions, the Compensation Committee recommended to the Board that the “Compensation Discussion and Analysis” be included in this Proxy Statement, which will be incorporated by reference in the Company’s 2013 Annual Report on Form 10-K.

Gerrald B. Silverman, Chairman

Edward J. Lauth III

Glenn D. Steele Jr.

 

COMPENSATION TABLES

Summary Compensation Table

The following table shows the compensation of the Company’s principal executive officer, the principal financial officer and three other officers with the highest total compensation paid or earned for fiscal 2013,  2012 and 2011 (the “Named Officers”).    The following table also shows the compensation of Mr. Hepfinger, the Company’s former Chief Executive Officer who resigned as the Chief Executive Officer on September 21, 2013.    The Company has employment agreements with the Chairman and Vice Chairman and a separation agreement with the former CEO. The material terms of these agreements are discussed under “Potential Payments upon Termination of Employment or Change in Control” below.

 

 

 

 

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Grants of Plan-Based Awards

The following table shows the grants of plan-based awards made to the Named Officers for fiscal 2013.

 

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Pension Benefits

The following table provides information concerning the value of Robert F. Weis’ accumulated benefits under the Company’s  nonqualified deferred compensation agreement.

 

Nonqualified Deferred Compensation

The Company maintains a SERP for certain of its associates.  The SERP is 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 for highly compensated employees.  The plan is unfunded and accounted for on an accrual basis.  Participants in the plan have limited participation in the 401(k) portion of the Retirement Savings Plan and are excluded from receiving contributions in the qualified profit sharing portion of the Retirement Savings Plan once their annual earnings exceed the IRS limitations.    Based upon recommendation from the Compensation Committee, the Board annually determines the amount of the allocation to the SERP. 

 

The allocation among the various plan participants is made in both flat dollar amounts and in relationship to their compensation.  Plan participants are 100% vested in their accounts after six years of service with the Company.  In accordance with the lump-sum or installment election made by the Named Officer prior to the deferral of compensation, benefits are distributed to the participant during the calendar year following the calendar year in which the participant’s termination of service occurs.  Substantial risk of benefit forfeiture does exist for participants in the plan.  The present value of accumulated benefits is included under “Postretirement benefit obligations” in the Consolidated Balance Sheets within the 2013 Annual Report on Form 10-K.

 

Qualified Retirement Plans

Please refer to the “Retirement Plans” section of the “ Compensation Discussion and Analysis.”

 

The following table provides information concerning deferrals by the Named Officers of their earned compensation under the Company’s SERP and qualified retirement plans.