What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-03-11 compared with 2020-03-12 · 160 added, 221 removed, 452 unchanged (46% of the section changed)

26 unchanged sentences

Total liabilities

Shareholders’

Shareholders’ Equity

Common stock, no par value, 100,800,000 shares authorized, 33,047,807 shares issued,

4 unchanged sentences

Treasury stock at cost, 6,149,364 shares

Total shareholders’

Total liabilities and shareholders’

Total shareholders’ equity

Total liabilities and shareholders’ equity

See accompanying notes to Consolidated Financial Statements.

24 unchanged sentences

(Net of deferred taxes of $ 706 , $ 498 and $ 62 , respectively)

Accumulated change in effective tax rate

Reclassification adjustment for (gains) losses included in net income

3 unchanged sentences

WEIS MARKETS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(dollars in thousands, except shares)

2 unchanged sentences

Treasury Stock

Shareholders’

December 28, 2019 and December 29, 2018

1 unchanged sentence

Balance at December 30, 2017

Other comprehensive income tax reform adjustment

Cumulative effect of accounting principal adoption of ASU 2016-01

Other comprehensive income, net of

2 unchanged sentences

Balance at December 29, 2018

Cumulative effect of accounting principle adoption of ASU 2016-01

Other comprehensive loss, net of

Other comprehensive income, net of

reclassification adjustments and tax

1 unchanged sentence

Balance at December 28, 2019

Other comprehensive loss, net of

Other comprehensive income, net of

reclassification adjustments and tax

6 unchanged sentences

(dollars in thousands)

December 26, 2020

December 28, 2019

December 29, 2018

Cash flows from operating activities:

2 unchanged sentences

Depreciation and amortization

(Gain) Loss on disposition of fixed assets

Loss on disposition of fixed assets

Impairment of fixed assets

(Gain) Loss on sale of marketable securities

(Gain) on sale of marketable securities

Unrealized (gain) loss in value of equity securities

9 unchanged sentences

Purchase of marketable securities

Proceeds from maturities of marketable securities

Proceeds from the sale of marketable securities

Proceeds from the sale and maturities of marketable securities

Purchase of intangible assets

5 unchanged sentences

Net cash used in financing activities

Net increase (decrease) in cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of year

1 unchanged sentence

See accompanying notes to Consolidated Financial Statements.

Cash paid for income taxes was $14.1 million, $6.

5 million and $13.0 million in 2019, 2018 and 2017, respectively.

Cash paid for income taxes was $ 42.3 million, $ 14.1 million and $ 6.5 million in 2020, 2019 and 2018, respectively.

Cash paid for interest related to long-term debt was $ 34 thousand , $ 65 thousand and $ 383 thousand in 2020, 2019 and 2018, respectively.

2 unchanged sentences

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

2 unchanged sentences

The Company is engaged principally in the retail sale of food in Pennsylvania and surrounding states.

The Company’s operations are reported as a single reportable segment.

There was no material change in the nature of the Company's business during fiscal 2019 .

The Company’s operations are reported as a single reportable segment.

There was no material change in the nature of the Company's business during fiscal 2020.

(b) Definition of Fiscal Year

The Company’s fiscal year ends on the last Saturday in December.

Fiscal 2019 was comprised of 52 we eks, ending on December 28, 2019 .

Fiscal 2018 was comprised of 52 w eeks, ending on December 29, 2018 .

Fiscal 2017 was comprised of 52 w eeks, ending on Dec ember 30 , 201 7 .

The Company’s fiscal year ends on the last Saturday in December.

Fiscal 2020 was comprised of 52 weeks, ending on December 26, 2020.

Fiscal 2019 was comprised of 52 weeks, ending on December 28, 2019.

Fiscal 2018 was comprised of 52 weeks, ending on December 29, 2018.

References to years in this Annual Report relate to fiscal years.

10 unchanged sentences

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 28, 2019 and December 29, 2018 totaled $ 32.9 million and $ 5 .

4 million , respectively.

Investment amounts classified as cash equivalents as of December 26, 2020 and December 28, 2019 totaled $ 95.9 million and $ 32.9 million , respectively.

Consumer electronic payments accepted at the point of sale, including all credit card, debit card and electronic benefits transfer transactions that process in three days or less are classified as cash equivalents.

1 unchanged sentence

(f) Marketable Securities

Marketable securities consist of municipal bonds and equity securities.

Marketable securities consist of corporate and municipal bonds and equity securities.

The Company invests primarily in high-grade marketable debt securities.

1 unchanged sentence

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, on municipal bonds are excluded from earnings and are reported as a separate component of shareholders’

equity until realized.

Unrealized holding gains and losses, net of the related tax effect, on corporate and municipal bonds are excluded from earnings and are reported as a separate component of shareholders’ equity until realized.

Unrealized holding gains and losses on equity securities are recorded in investment income (loss) and interest expense.

2 unchanged sentences

Realized gains and losses are included in earnings and are derived using the specific identification method for determining the cost of securities.

E quity securities are measured at fair value and the unrealized holding gains and losses are recorded in investment income (loss) and interest expense.

The Company recognized a $2.0 million gain in 2019 and a $1.6 million loss in 2018 .

Equity securities are measured at fair value and the unrealized holding gains and losses are recorded in investment income (loss) and interest expense.

The Company recognized a $ 1.8 million loss in 2020 and a $ 2.0 million gain in 2019.

(g) Accounts Receivable

Accounts receivable are stated net of an allowance for uncollectible accounts of $2.

8 million and $ 2 .

1 million as of December 28, 2019 and December 29, 2018 , respectively.

Accounts receivable are stated net of an allowance for uncollectible accounts of $ 2.4 million and $ 2.8 million as of December 26, 2020 and December 28, 2019, respectively.

The reserve balance relates to amounts due from pharmacy third party providers, retail customer returned checks, manufacturing customers, vendors and tenants.

4 unchanged sentences

Inventories are valued at the lower of cost or net realizable value, using both the retail inventory and average cost methods.

The retail inventory method is commonly used by retail companies to determine cost and calculate gross margin based on applying a cost-to-retail ratio to each similar merchandise category’s ending retail value.

The Company’s center store and pharmacy inventories are valued using last in, first out ( LIFO ) .

The Company’s fresh inventories are valued using average cost.

The Company’s center store and pharmacy inventories are valued using last in, first out (LIFO).

The Company’s fresh inventories are valued using average cost.

The Company evaluates inventory shortages throughout the year based on actual physical counts in its facilities.

5 unchanged sentences

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.”

The Company leases approximately 51 % of its open store facilities under operating leases that expire at various dates through 2036, with the remaining store facilities being owned.

1 unchanged sentence

however, several provide for minimum annual rentals plus variable lease costs related to real estate taxes and insurance as well as contingent rentals based on a percentage of annual sales or increases periodically based on inflation.

Most of the leases contain multiple renewal options, under which the Company may extend the lease terms from 5 to 20 years.

These variable lease costs are not included in the measurement of the operating lease right-to-use assets or lease liabilities and are charged to the related expense category included in “Operating, general and administrative expenses.” Most of the leases contain multiple renewal options, under which the Company may extend the lease terms from 5 to 20 years.

Additionally, the Company has operating leases for certain transportation and other equipment.

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.”

(k) Goodwill and Intangible Assets

1 unchanged sentence

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.

The Company’s intangible assets and related accumulated amortization at December 28, 2019 and December 29, 2018 consisted of the following:

The Company’s intangible assets and related accumulated amortization at December 26, 2020 and December 28, 2019 consisted of the following:

December 26, 2020

4 unchanged sentences

Intangible assets with a definite useful life are generally amortized on a straight-line basis over periods up to 10 years for customer lists.

Estimated amortization expense for the next five fiscal years is appro ximately $ 455 thousand in 20 20 , $ 444 thousand in 202 1 , $ 314 thousand in 202 2 , and $ 310 thousand in 202 3 and 202 4, respectively .

As of December 28, 2019 , the Company’s intangible assets with indefinite lives consisted of goodwill and liquor licenses.

Estimated amortization expense for the next five fiscal years is approximately $ 444 thousand in 2021, $ 320 thousand in 2022, $ 310 thousand in 2023, $ 310 thousand in 2024 and $ 147 thousand in 2025.

As of December 26, 2020, the Company’s intangible assets with indefinite lives consisted of goodwill and liquor licenses.

WEIS MARKETS, INC.

10 unchanged sentences

360, Property, Plant and Equipment , the Company recorded a pre-tax charge of $ 1.5 million in the fourth quarter of 2018 for the impairment of long-lived assets, including equipment and leasehold improvements.

The charge w as a result of management determining that the net book value of th is propert y was less than the recoverable value.

This charge was included as a component of "Operating, general and administrative expenses." Management determined that no assets met the impairment criteria as of December 28, 2019.

The results of impairment tests are subject to management’s estimates and assumptions of projected cash flows and operating results.

The charge was a result of management determining that the net book value of this property was less than the recoverable value.

This charge was included as a component of "Operating, general and administrative expenses."

Management determined that no assets met the impairment criteria as of December 26, 2020 and December 28, 2019.

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.

1 unchanged sentence

(m) Self-Insurance

The Company is self-insured for a majority of its workers’

compensation, general liability, vehicle accident and associate medical benefit claims.

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 medical benefit claims is determined based on historical data and an estimate of claims incurred but not reported.

The other self-insurance liabilities including workers’

compensation are determined actuarially, based on claims filed and an estimate of claims incurred but not yet reported.

The other self-insurance liabilities including workers’ compensation are determined actuarially, based on claims filed and an estimate of claims incurred but not yet reported.

The Company is self-insured for certain healthcare claims and stop-loss coverage is maintained for occurrences exceeding a $ 500 thousand specific deductible with a $ 450 thousand aggregating deductible.

The Company is liable for workers' compensation claims up to $2.0 million per claim .

The Company is liable for workers'

compensation claims ranging from $ 1.0 million to $ 2.0 million per claim.

Property and casualty insurance coverage is maintained with outside carriers at deductible or retention levels ranging from $ 100 thousand to $ 1.0 million.

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 .

(n) Income Taxes

9 unchanged sentences

(p) 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.

3 unchanged sentences

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.

Sales tax is excluded from “Net sales.”

The Company charges sales tax on all taxable customer purchases and remits these taxes monthly to the appropriate taxing jurisdiction.

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.

Sales tax is excluded from “Net sales.” The Company charges sales tax on all taxable customer purchases and remits these taxes monthly to the appropriate taxing jurisdiction.

Merchandise return activity is immaterial to revenues due to products being returned quickly and the relatively low unit cost.

(q) Cost of Sales, Including Advertising, Warehousing and Distribution Expenses

“Cost of sales, including advertising, warehousing and distribution expenses”

consists of direct product costs (net of discounts and allowances), advertising (net of vendor paid cooperative advertising credits), distribution center and transportation costs, as well as manufacturing facility operations.

“Cost of sales, including advertising, warehousing and distribution expenses” consists of direct product costs (net of discounts and allowances), advertising (net of vendor paid cooperative advertising credits), distribution center and transportation costs, as well as manufacturing facility operations.

Advertising costs, net of vendor paid cooperative advertising credits, are expensed as incurred which are primarily funded by vendor cooperative advertising credits and occur in the same period as the product is sold.

(r) 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 the underlying agreement.

Off-invoice and bill-back allowances are used to reduce direct product costs upon the receipt of goods.

4 unchanged sentences

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 the Company’s distribution system are recorded in cost of sales offsetting costs incurred.

Warehouse 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.

Warehouse and back-haul allowances provided by suppliers for distributing their product through the Company’s distribution system are recorded in cost of sales offsetting costs incurred.

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 $13 0 .

4 million in 2019 , $13 2 .

0 million in 2018 and $1 31 .

1 million in 2017 .

Vendor paid cooperative advertising credits totaled $ 24 .

8 million in 2019 , $19.

4 million in 2018 and $19.

2 million in 2017 .

These credits were netted against advertising costs within “Cost of Sales, including Advertising, Warehousing and Distribution expenses.”

The Company had accounts receivable due from vendors of $1.

0 million and $1.

6 million for earned advertising credits and $ 9 .

5 million and $1 2 .

8 million for earned promotional discounts as of December 28, 2019 and December 29, 2018 , respectively.

The Company had $ 5 .

4 million and $ 7 .

4 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 28, 2019 and December 29, 2018 , respectively.

Vendor allowances recorded as credits in cost of sales totaled $ 133.5 million in 2020, $ 130.4 million in 2019 and $ 132.0 million in 2018.

Vendor paid cooperative advertising credits totaled $ 21.7 million in 2020, $ 24.8 million in 2019 and $ 19.4 million in 2018.

These credits were netted against advertising costs within “Cost of Sales, including Advertising, Warehousing and Distribution expenses.” The Company had accounts receivable due from vendors of $ 886 thousand and $ 1.0 million for earned advertising credits and $ 8.6 million and $ 9.5 million for earned promotional discounts as of December 26, 2020 and December 28, 2019, respectively.

The Company had $ 3.3 million and $ 5.4 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 26, 2020 and December 28, 2019, respectively.

(s) 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 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, rent, insurance, depreciation, leasehold amortization and costs for outside provided services.

1 unchanged sentence

The Company expenses advertising costs as incurred.

The Company recorded advertising expense, before vendor paid cooperative advertising credits, of $30.

3 million in 2019 , $3 0 .

5 million in 2018 and $ 31 .

0 million in 2017 in “Cost of Sales, including Advertising, Warehousing and Distribution Expenses.”

The Company recorded advertising expense, before vendor paid cooperative advertising credits, of $ 24.5 million in 2020, $ 30.3 million in 2019 and $ 30.5 million in 2018 in “Cost of Sales, including Advertising, Warehousing and Distribution Expenses.”

WEIS MARKETS, INC.

2 unchanged sentences

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.

Rental income is recorded when earned as a component of “Operating, general and administrative expenses.” All leases are operating leases.

Refer to Note 5 to the Consolidated Financial Statements for further disclosure on operating leases and rental income.

The Company provides a variety of services to its customers, including but not limited to lottery, money orders, third-party gift cards, and third-party bill pay services.

Commission income earned from these services are recorded when earned as a component of “Operating, general and administrative expenses.”

Commission income earned from these services are recorded when earned as a component of “Operating, general and administrative expenses.” The Company recorded commission income of $ 17.7 million in 2020, $ 18.3 million in 2019 and $ 17.9 million in 2018.

(v) Current Relevant Accounting Standards

The Company adopted ASU 2016-02 Leases (Topic 842) effective December 30, 2018.

The ASU requires lessees to recognize assets and liabilities for the rights and obligations created by their leases with lease terms geater than 12 months.

During 2018, the ASU was amended to permit the election of transitional provisions, including the el i mination of the requirement to restate reporting periods prior to the date of adoption.

The Company has adopted the standard using transitional provisions and has elected practical expedients to not reassess the original conclusions reached regarding lease identification, lease classification and initial direct costs.

The adoption had a significant impact on the Company’s Consolidated Balance Sheets, resulting in $202 million and $211 million of the operating lease right-to-use assets and lease liabilities, respectively.

There are no significant changes to the Consolidated Statements of Comprehensive Income or Consolidated Statements of Cash Flows.

See Note 5 for additional disclosures on the adoption.

The Company regularly monitors recently issued accounting standards and assesses their applicabilty and impact.

The Company believes that there are no accounting standard updates that have or will have a material or significant impact on the Company’s accounting policies.

WEIS MARKETS, INC.

Note 2 Marketable Securities

The Company’s marketable securities are all classified as available-for-sale within “Current Assets”

in the Company’s Consolidated Balance Sheets.

The Company’s marketable securities are all classified as available-for-sale within “Current Assets” in the Company’s Consolidated Balance Sheets.

FASB has established three levels of inputs that may be used to measure fair value:

2 unchanged sentences

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 three public company equity securities, for which quoted market prices are available .

The Company’s bond portfolio is valued using Level 2 inputs.

The Company’s municipal 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.

The Company’s marketable securities valued using Level 1 inputs include three public company equity securities, for which quoted market prices are available .

The Company’s bond portfolio is valued using Level 2 inputs.

The Company’s corporate and municipal 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 advisory firm(s), which include various third-party pricing services.

2 unchanged sentences

Dividends from the equity securities are recognized as received.

Both interest and dividends are recognized in “Investment income and interest expense”

on the Company’s Consolidated Statements of Income.

The Company recognized investment income of $7.1 million and loss of $1.

2 million which included an unrealized gain in equity securities of $2.0 million and loss in equity securities of $1.

6 million in the fiscal years ended December 28, 2019 and December 29, 2018, respectively.

Both interest and dividends are recognized in “Investment income and interest expense” on the Company’s Consolidated Statements of Income.

The Company recognized investment income of $ 536 thousand, $ 4.1 million and investment loss of $ 234 thousand which included an unrealized loss in equity securities of $ 1.8 million, an unrealized gain in equity securities of $ 2.0 million and an unrealized loss in equity securities of $ 1.6 million in the fiscal years ended December 26, 2020, December 28, 2019 and December 29, 2018, respectively.

Marketable securities, as of December 26, 2020 and December 28, 2019, consisted of:

5 unchanged sentences

Equity securities

Municipal bonds

Corporate and municipal bonds

(dollars in thousands)

4 unchanged sentences

Equity securities

Municipal bonds

Corporate and municipal bonds

Maturities of marketable securities classified as available-for-sale at December 26, 2020, were as follows:

10 unchanged sentences

The Company chooses to invest in the underlying mutual fund investments to offset the liability associated with the non-qualified deferred compensation plans.

Such investments are reported on the Company’s Consolidated Balance Sheets as “SERP investment,”

are classified as trading securities and are measured at fair value using Level 1 inputs with gains and losses included in “Investment income and interest expense”

on the Company’s Consolidated Statements of Income.

The changes in the underlying liability to the associates are recorded in “

O t her income ( expense ) .”

WEIS MARKETS, INC.

Such investments are reported on the Company’s Consolidated Balance Sheets as “SERP investment,” are classified as trading securities and are measured at fair value using Level 1 inputs with gains and losses included in “Investment income and interest expense” on the Company’s Consolidated Statements of Income.

The Company recognized investment income of $ 3.3 million, $ 3.0 million, and investment loss of $ 931 thousand in fiscal years ended December, 26, 2020, December 28, 20219, and December 29, 2018 The changes in the underlying liability to the associates are recorded in “Other income (expense) .”

Note 3 Inventories

1 unchanged sentence

(dollars in thousands)

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 $ 70.4 million and $ 70.7 million higher than as reported on the above methods as of December 26, 2020 and December 28, 2019, respectively.

9 unchanged sentences

Note 5 Lease Commitments

The adoption of ASU 2016-02 Leases (Topic 842) had a significant impact on the Company’s Consolidated Balance Sheets, resulting in operating lease right-to-use assets of $202 million and lease liabilities of $211 million.

The difference between the operating lease right-to-use assets and lease liabilities represents prepaid and accrued rents, unfavorable lease obligations, favorable lease assets and deferred tenant allowances associated with operating leases as of December 30, 2018 and reclassified against the operating lease right-to-use asset upon adoption.

As of December 28 , 201 9 , the Company leased approximately 5 2 % of its open store facilities under operating leases that expire at various dates through 203 5 , with the remaining store facilities being owned.

These leases generally provide for fixed annual rentals;

Most of the leases contain multiple renewal options, under which the Company may extend the lease terms from 5 to 20 years.

Additionally, the Company has operating leases for certain transportation and other equipment.

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.”

The following is a schedule of the lease costs included in “Operating, general and administrative expenses”

for the fiscal year ended December 28, 2019.

The following is a schedule of the lease costs included in “Operating, general and administrative expenses” for the fiscal year ended December 26, 2020.

(dollars in thousands)

3 unchanged sentences

Net lease cost

T he following is a schedule by years of the future minimum rental payments required under operating leases and total minimum sublease and lease rental income to be received as of December 28, 2019.

The following is a schedule by years of the future minimum rental payments required under operating leases and total minimum sublease and lease rental income to be received as of December 26, 2020.

(dollars in thousands)

8 unchanged sentences

Prior to the adoption of the ASU, leases generally provide for fixed annual rentals, minimum annual rentals, contingent rentals and sublease income.

Rent expense and income on all leases for the fiscal years ended December 29, 2018 and December 30, 2017 consisted of :

Rent expense and income on all leases for the fiscal year ended December 29, 2018 consisted of:

(dollars in thousands)

2 unchanged sentences

Lease or sublease income

WEIS MARKETS, INC.

Note 6 Retirement Plans

4 unchanged sentences

The Company also has a non-qualified supplemental retirement plan covering highly compensated employees of the Company.

The Company’s policy is to fund retirement plan costs as accrued, with the exception of the deferred compensation plan.

Employer contributions to the qualified retirement plan are made at the sole discretion of the Company.

WEIS MARKETS, INC.

Retirement plan costs:

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The recorded liability at December 26, 2020 is $ 4.0 million which is based on expected payments to be made over the remaining lives of the beneficiaries.

This amount is included in “Accrued expenses”

and “Postretirement benefit obligations”

in the Consolidated Balance Sheets.

The expected payment amounts are approximately $1 .

0 million for 2020 and for the years thereafter dependent on the lives of the beneficiaries.

This amount is included in “Accrued expenses” and “Postretirement benefit obligations” in the Consolidated Balance Sheets.

The expected payment amounts are approximately $ 1.0 million for 2021 and for the years thereafter dependent on the lives of the beneficiaries.

The Company also maintains a non-qualified supplemental executive retirement plan for certain of its associates.

8 unchanged sentences

Substantial risk of benefit forfeiture does exist for participants in this plan.

The present value of accumulated benefits amounted to $ 19.0 million and $14 .7 million at December 28, 2019 and December 29, 2018 , respectively, and is included in “Postretirement benefit obligations”

in the Consolidated Balance Sheets.

The present value of accumulated benefits amounted to $ 22.8 million and $ 19.0 million at December 26, 2020 and December 28, 2019, respectively, and is included in “Postretirement benefit obligations” in the Consolidated Balance Sheets.

Note 7 Revenue Recognition

The adoption of ASU 2014-9 Revenue from Contracts with Customers (ASC 606) did not have a material impact on the Company’s Consolidated Financial Statements.

The Chief Operating Officer, the Company’s chief operating decision maker, analyzed store operational revenues by geographical area but each area offers customers similar product, has similar distribution methods, and supported by centralized management processes.

The Company’s operations are reported as a single reportable segment.

The following table represents net sales by type of product for years ending December 26, 2020, December 28, 2019 and December 29, 2018.

7 unchanged sentences

WEIS MARKETS, INC.

Note 8 Prior Year Reclassifications

As of December 28, 2019, the Company reclassified non-service components of the Supplemental Executive Retirement Plan (SERP) benefit obligation separately from the service cost component.

These non-service components in the amounts of $3.0 million, $(0.9) million and $2.1 million as of December 28, 2019, December 29, 2018 and December 30, 2017, respectively, were reclassified to “Other income (expense)”.

The Company recognizes service cost components in “Operating, general and administrative costs”.

The table below summarizes the effect of the reclassifications of previously reported Consolidated Financial Statements for the fiscal years ended December 29, 2018 and December 30, 2017.

December 29, 2018

December 30, 2017

Consolidated Statements of Income

As Previously

(dollars in thousands)

Reclassifications

Operating, general and administrative expenses

Income from operations

Other income (expense)

Note 8 Accumulated Other Comprehensive Income

All balances in accumulated other comprehensive income are related to available-for-sale marketable securities.

The following table sets forth the balance of the Company’s accumulated other comprehensive income, net of tax.

Unrealized Gains

3 unchanged sentences

Accumulated other comprehensive income balance as of December 29, 2018

Amount reclassified to retained earnings for equity unrealized gain (adoption of ASU 2016-01)

Other comprehensive loss before reclassifications

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Unrealized gains (losses) on available-for-sale marketable securities

Investment income and interest expense

Investment income (loss) and interest expense

Provision for income taxes

2 unchanged sentences

Note 9 Income Taxes

The provision (benefit) for income taxes consists of:

(dollars in thousands)

The reconciliation of income taxes computed at the federal statutory rate of 21% in 2019 and 2018 , respectively, and 35% in 2017.

Ending deferred tax liability has been computed at the federal statutory rate of 21% due to the Tax Reform.

The reconciliation of income taxes computed at the federal statutory rate of 21 % in 2020, 2019 and 2018.

Ending deferred tax liability has been computed at the federal statutory rate of 21 %.

(dollars in thousands)

4 unchanged sentences

Provision for income taxes (effective tax rate 27.3 %, 23.3 % and 23.6 %, respectively)

The effective income tax rate was 2 3 .

6 % and negative 24 .

5 % in 201 9 , 201 8 , and 201 7 , respectively.

The effective income tax rate differs from the federal statutory rate of 21% primarily due to state taxes .

On December 22, 2017, the U.S.

Government enacted the Tax Cuts and Jobs Act (the “Tax Reform”).

The Tax Reform significantly impacted the Company’s effective income tax rate by reducing the U.S.

federal corporate tax rate from 35% to 21% effective January 1, 2018 and allowing immediate expensing of qualified assets placed into service after September 27, 2017.

Other elements of the Tax Reform have minor impacts, however the above mentioned decreased deferred income tax by $49.3 million during 2017.

Cash paid for federal income taxes was $ 11 .

3 million, $ 4 .

5 million $ 12 .

0 million and in 201 9 , 201 8 a nd 201 7 respectively.

Cash paid for state income taxes was $2.

8 million, $ 2 .

1 million and $ 1 .

0 million in 201 9 , 201 8 and 201 7 respectively.

The effective income tax rate was 27.3 %, 23.3 % and 23.6 % in 2020, 2019, and 2018, respectively.

The effective income tax rate differs from the federal statutory rate of 21 % primarily due to state taxes as well as nondeductible employee expenses.

Not all the Company’s tax credits and state deductions are driven proportionately by taxable income levels, due to these items and the significant increase in taxable income from prior years, the result was a higher effective income tax rate for 2020.

Cash paid for federal income taxes was $ 33.5 million, $ 11.3 million $ 4.5 million and in 2020, 2019 and 2018 respectively.

Cash paid for state income taxes was $ 8.8 million, $ 2.8 million and $ 2.1 million in 2020, 2019 and 2018 respectively.

WEIS MARKETS, INC.

Note 9 Income Taxes (continued)

The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities at December 26, 2020 and December 28, 2019, are:

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Accounts receivable

Compensated absences

Employment incentives

Employee benefit plans

General liability insurance

Self-insurance liability

Postretirement benefit obligations

Net operating loss carryforwards

Net operating loss and credit carryforwards

Unrecognized Tax Benefits

Total deferred tax assets

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Net deferred tax liability

WEIS MARKETS, INC.

Note 10 Income Taxes (continued)

The following table summarizes the activity related to the Company’s unrecognized tax benefits:

(dollars in thousands)

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The Company or one of its subsidiaries files tax returns in the United States and various state jurisdictions.

The tax years subject to examination in the United State and in Pennsylvania, where the majority of the Company's revenues are generated, are 201 6 to 201 9 .

The Company has net operating loss carryforwards of $ 8 3 .

4 million available for state income tax purposes.

The tax years subject to examination in the United State and in Pennsylvania, where the majority of the Company's revenues are generated, are 2016 to 2020 .

The Company has net operating loss carryforwards of $ 72 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.

WEIS MARKETS, INC.

Note 10 Summary of Quarterly Results (Unaudited)

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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.

The Company’s SERP investments are classified as trading securities and are carried at fair value using Level 1 inputs.

Note 12 Commitments and 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 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.

WEIS MARKETS, INC.

The Company also accrues for contingencies when it is probable that a liability has been incurred and the amount of the contingency can be reasonably estimated, based on 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.

Note 13 Long-Term Debt

On September 1, 2016 Weis Markets entered into a revolving credit agreement with Wells Fargo Bank, National Association (the “Credit Agreement”), which was amended on August 21, 2019 and matu res on September 1, 20 22 .

The Credit Agreement provides for an unsecured revolving credit facility with an aggregate principal amount not to exceed $ 30.0 million with an additional discretionary amount available of $ 70.0 million.

As of December 28, 2019, the availability under the revolving credit agreement was $18.

8 million, net of $11.

2 million letters of credit.

As of December 26, 2020, the availability under the revolving credit agreement was $ 25.1 million, net of $ 4.9 million letters of credit.

The letters of credit are maintained primarily to support performance, payment, deposit or surety obligations of the Company.

Interest expense related to long-term debt was $ 35 thousand and $ 55 thousand for 2020 and 2019, respectively.

Note 14 COVID-19

On March 11, 2020, the World Health Organization declared that the novel coronavirus (COVID-19) had become a pandemic, and on March 13, the U.S.

President declared a National Emergency concerning the disease.

Additionally, in March 2020, state governments in the Company’s geographic operating area began instituting preventative shut down measures in order to combat the novel coronavirus pandemic.

The coronavirus and actions taken to mitigate the spread of it have had and are expected to continue to have an adverse impact on the economies and financial markets of the geographical area in which the Company operates.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted to amongst other provisions, provide emergency assistance for individuals, families and businesses affected by the novel coronavirus pandemic.

The Company’s business being deemed essential resulted in incremental financial performance that may not be indicative of future financial results and there remains uncertainty and increased risks concerning its employees, customers, supply chain and government regulation.

WEIS MARKETS, INC.

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We have audited the accompanying consolidated balance sheets of Weis Markets, Inc.

and its subsidiaries (the Company) as of December 28, 2019 and December 29, 2018, and the related consolidated statements of income, comprehensive income, shareholders’

equity, and cash flows for the 52 week periods ended December 28, 2019, December 29, 2018 and December 30, 2017, and the related notes to the consolidated financial statements and the financial statement schedule listed in the accompanying index (collectively, the financial statements).

and its subsidiaries (the Company) as of December 26, 2020 and December 28, 2019, and the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for the 52 week periods ended December 26, 2020, December 28, 2019 and December 29, 2018, and the related notes to the consolidated financial statements and the financial statement schedule listed in the accompanying index (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 26, 2020 and December 28, 2019, and the results of its operations and its cash flows for the 52 week periods ended December 26, 2020, December 28, 2019 and December 29, 2018, in conformity with accounting principles generally accepted in the United States of America.

Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated March 12, 2020 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 1 to the financial statements, the Company has changed its method of accounting for leases effective December 30, 2018 due to the adoption of Accounting Standards Update ("ASU") No.

2016-02, Leases (Topic 842), using the modified retrospective transition method.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 26, 2020, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated March 11, 2021 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the Audit Committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

As described in Notes 1 and 9 of the consolidated financial statements, the Company operates 196 stores across seven states in the U.S.

and a centralized distribution center in Pennsylvania.

The Company’s provision for income taxes is impacted based on interpretations of various state and local income tax laws.

Management prepared the Company’s provision for state income taxes using significant judgment when interpreting the provisions of state and local tax regulations and assessing the positions taken as a result of these considerations as to whether or not the amount of benefit recorded would be more likely than not to be sustained upon examination.

We identified the evaluation of the Company’s provision for state income taxes and its assessment of more likely than not surrounding state tax positions as a critical audit matter due to the significant judgments made by management when assessing the complex provisions of the tax laws and regulations.

Auditing the matter required significant auditor judgment and increased audit effort, including the use of our state and local tax professionals, in evaluating the recorded results of management’s tax positions and their assessment of the sustainability of these tax positions.

Our audit procedures related to the Company’s provision for state income taxes include the following, among others:

WEIS MARKETS, INC.

 We obtained an understanding of the relevant controls related to the determination of current and deferred taxes and the assessment of more likely than not surrounding state tax positions and tested such controls for design and operating effectiveness, including controls related to the interpretation and application of tax laws.

 We involved our state and local tax professionals to assist in evaluating the application of state and local tax regulations.

Our professionals developed an independent assessment of interpretations of state and local tax positions requiring significant judgement and compared them to the Company’s recorded positions.

 We tested the accuracy and completeness of the data and inputs used to calculate the effective state tax rate, current provision calculations, deferred tax assets/liabilities, more likely than not state tax positions assessment and income taxes receivable/payable rollforward.

Retail inventory and related cost of sales

As described in Note 1 to the consolidated financial statements, the Company accounts for retail center store inventory under the retail inventory method (RIM) using the last-in, first-out (LIFO) method.

RIM is commonly used by retail companies to determine cost and calculate gross margin based on applying a cost-to-retail ratio to each similar merchandise category’s ending retail value.

We identified the auditing of RIM inventory as a critical audit matter due to the increased audit effort, including involvement of more experienced audit team members and our information technology (IT) professionals.

The RIM inventory computations utilize critical inputs dependent on multiple information systems that capture and process high volume transactions that elevates the importance of data interfaces and reliability of information systems.

Our audit procedures related to the Company’s RIM inventory include the following, among others:

 We obtained an understanding of the relevant controls, including IT general controls, surrounding the retail inventory valuation process and tested such controls for design and operating effectiveness, including automated processes and transactional data interfaces and managements review controls over these data inputs and the Company’s RIM calculation outputs.

 We tested the accuracy and completeness of the key inputs into the RIM calculation, including purchases, sales, discounts, shrink and price changes (markdowns) by comparing the key inputs back to source information such as point of sale information via retail pricing and tender/cash receipts, third-party vendor invoices and third-party inventory count information, including testing of a rollforward from the inventory count date to year-end inventory valuation.

 We performed analytical procedures disaggregated by inventory category.

Such disaggregated analytical procedures included trend analysis of RIM inputs based on warehouse and direct store delivery purchases as percent of sales, cost of sales percentages compared to historical periods and trends, and discounts and markdown analytics based on inquiries with various Company personnel to assess the level of retail price changes due to pricing and promotional strategies and inflation/deflation within a category.

Additional analytics include trends analyses on store count and shrink results, store square footage analytics related to ending store level inventory values and gross profit analytics by category.

/s/ RSM US LLP

We have served as the Company's auditor since 2016.

Philadelphia, Pennsylvania

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Opinion on the Internal Control Over Financial Reporting

We have audited Weis Markets, Inc.'s (the Company) internal control over financial reporting as of December 28, 2019, based on criteria established in Internal Control —

Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 28, 2019, based on criteria established in Internal Control —

Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 28, 2019 and December 29, 2018, and the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for the 52 week periods ended December 28, 2019, December 29, 2018 and December 30, 2017, and the related notes to the consolidated financial statements and the financial statement schedule listed in the accompanying index, and our report dated March 12, 2020 expressed an unqualified opinion.

We have audited Weis Markets, Inc.'s (the Company) internal control over financial reporting as of December 26, 2020, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 26, 2020, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

equity and cash flows for the 52 week periods ended December 26, 2020, December 28, 2019 and December 29, 2018, and the related notes to the consolidated financial statements and the financial statement schedule listed in the accompanying index, and our report dated March 11, 2021 expressed an unqualified opinion.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting in the accompanying Management's Report on Internal Control Over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S.

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Definition and Limitations of Internal Control Over Financial Reporting

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.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data