WEIS MARKETS INC 10-K

Item 8. Financial Statements and Supplementary Data: WEIS MARKETS, INC. CONSOLIDATED BALANCE SHEETS (dollars in thousands) December 26, 2020 December 28, 2019 Assets Current: Cash and cash equivalents $ 136,612 $ 66,871 Marketable securities 111,855 63,538 SERP investment 22,764 18,935 Accounts receivable, net 56,760 55,764 Inventories 269,024 279,806 Prepaid expenses and other current assets 29,187 23,378 Total current assets 626,202 508,292 Property and equipment, net 924,429 886,928 Operating lease right-to-use 199,901 210,196 Goodwill 52,330 52,330 Intangible and other assets, net 17,559 17,816 Total assets $ 1,820,421 $ 1,675,562 Liabilities Current: Accounts payable $ 221,566 $ 180,718 Accrued expenses 50,591 39,528 Operating leases 39,165 39,114 Accrued self-insurance 19,306 15,719 Deferred revenue, net 10,583 8,662 Income taxes payable 5,058 8,197 Total current liabilities 346,269 291,938 Postretirement benefit obligations 25,757 22,143 Accrued self-insurance 20,297 17,625 Operating leases 169,064 179,654 Deferred income taxes 103,404 97,041 Other 9,515 8,416 Total liabilities 674,306 616,817 Shareholders’ Equity Common stock, no par value, 100,800,000 shares authorized, 33,047,807 shares issued, 26,898,443 shares outstanding 9,949 9,949 Retained earnings 1,283,737 1,198,173 Accumulated other comprehensive income (Net of deferred taxes of $ 1,299 in 2020 and $ 593 in 2019) 3,286 1,480 1,296,972 1,209,602 Treasury stock at cost, 6,149,364 shares ( 150,857 ) ( 150,857 ) Total shareholders’ equity 1,146,115 1,058,745 Total liabilities and shareholders’ equity $ 1,820,421 $ 1,675,562 See accompanying notes to Consolidated Financial Statements. ‎ 19 Table of Contents WEIS MARKETS, INC. CONSOLIDATED STATEMENTS OF INCOME (dollars in thousands, except shares and per share amounts) For the Fiscal Years Ended December 26, 2020, 2020 2019 2018 December 28, 2019 and December 29, 2018 (52 weeks) (52 weeks) (52 weeks) Net sales $ 4,112,601 $ 3,543,299 $ 3,509,270 Cost of sales, including advertising, warehousing and distribution expenses 3,012,167 2,605,105 2,574,269 Gross profit on sales 1,100,434 938,194 935,001 Operating, general and administrative expenses 937,256 853,555 852,330 Income from operations 163,178 84,639 82,671 Investment income (loss) and interest expense 3,817 7,054 ( 1,454 ) Other income (expense) ( 3,316 ) ( 3,049 ) 919 Income before provision for income taxes 163,679 88,644 82,136 Provision for income taxes 44,762 20,661 19,398 Net income $ 118,917 $ 67,983 $ 62,738 Weighted-average shares outstanding, basic and diluted 26,898,443 26,898,443 26,898,443 Cash dividends per share $ 1.24 $ 1.24 $ 1.21 Basic and diluted earnings per share $ 4.42 $ 2.53 $ 2.33 20 Table of Contents WEIS MARKETS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (dollars in thousands) For the Fiscal Years Ended December 26, 2020, 2020 2019 2018 December 28, 2019 and December 29, 2018 (52 weeks) (52 weeks) (52 weeks) Net income $ 118,917 $ 67,983 $ 62,738 Other comprehensive income (loss) by component, net of tax: Available-for-sale marketable securities Unrealized holding gains (losses) arising during period (Net of deferred taxes of $ 706 , $ 498 and $ 62 , respectively) 1,806 1,255 ( 177 ) Reclassification adjustment for (gains) losses included in net income (Net of deferred taxes o f $ 0 , $ 14 and $ 14 , respectively) - ( 37 ) 40 Other comprehensive income (loss), net of tax 1,806 1,218 ( 137 ) Comprehensive income, net of tax $ 120,723 $ 69,201 $ 62,601 ‎ 21 Table of Contents WEIS MARKETS, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY Accumulated (dollars in thousands, except shares) Other Total For the Fiscal Years Ended December 26, 2020 Common Stock Retained Comprehensive Treasury Stock Shareholders’ December 28, 2019 and December 29, 2018 Shares Amount Earnings Income (Loss) Shares Amount Equity Balance at December 30, 2017 33,047,807 $ 9,949 $ 1,127,872 $ 5,880 6,149,364 $ ( 150,857 ) $ 992,844 Net Income — — 62,738 — — — 62,738 Cumulative effect of accounting principal adoption of ASU 2016-01 — — 5,481 ( 5,481 ) — — — Other comprehensive income, net of reclassification adjustments and tax — — — ( 137 ) — — ( 137 ) Dividends paid — — ( 32,546 ) — — — ( 32,546 ) Balance at December 29, 2018 33,047,807 $ 9,949 $ 1,163,545 $ 262 6,149,364 $ ( 150,857 ) $ 1,022,899 Net income — — 67,983 — — — 67,983 Other comprehensive income, net of reclassification adjustments and tax — — — 1,218 — — 1,218 Dividends paid — — ( 33,354 ) — — — ( 33,354 ) Balance at December 28, 2019 33,047,807 $ 9,949 $ 1,198,173 $ 1,480 6,149,364 $ ( 150,857 ) $ 1,058,745 Net income — — 118,917 — — — 118,917 Other comprehensive income, net of reclassification adjustments and tax — — — 1,806 — — 1,806 Dividends paid — — ( 33,354 ) — — — ( 33,354 ) Balance at December 26, 2020 33,047,807 $ 9,949 $ 1,283,737 $ 3,286 6,149,364 $ ( 150,857 ) $ 1,146,115 See accompanying notes to Consolidated Financial Statements. ‎ 22 Table of Contents WEIS MARKETS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS 52 Weeks Ended (dollars in thousands) December 26, 2020 December 28, 2019 December 29, 2018 Cash flows from operating activities: Net income $ 118,917 $ 67,983 $ 62,738 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 99,370 93,706 93,567 Loss on disposition of fixed assets 3,914 782 1,274 Impairment of fixed assets - - 1,532 (Gain) on sale of marketable securities - ( 51 ) 54 Unrealized (gain) loss in value of equity securities 1,791 ( 1,975 ) 1,606 Deferred income taxes 5,657 5,765 3,418 Unrealized (gain) loss in SERP ( 2,641 ) ( 135 ) 1,883 Changes in operating assets and liabilities: Inventories 10,782 950 ( 1,247 ) Accounts receivable and prepaid expenses ( 6,804 ) 2,431 ( 5,874 ) Accounts payable and other liabilities 54,658 ( 505 ) ( 18,583 ) Income taxes ( 3,139 ) 913 9,330 Other ( 4,515 ) 1,822 565 Net cash provided by operating activities 277,990 171,686 150,263 Cash flows from investing activities: Purchase of property and equipment ( 130,991 ) ( 101,456 ) ( 95,696 ) Proceeds from the sale of property and equipment 470 4,245 1,734 Purchase of marketable securities ( 50,789 ) ( 13,620 ) ( 5,627 ) Proceeds from the sale and maturities of marketable securities 7,730 7,165 12,384 Purchase of intangible assets ( 127 ) ( 1,489 ) ( 3,540 ) Change in SERP investment ( 1,188 ) ( 4,114 ) ( 2,093 ) Net cash used in investing activities ( 174,895 ) ( 109,269 ) ( 92,838 ) Cash flows from financing activities: Payments on long-term debt - - ( 34,988 ) Dividends paid ( 33,354 ) ( 33,354 ) ( 32,546 ) Net cash used in financing activities ( 33,354 ) ( 33,354 ) ( 67,534 ) Net increase in cash and cash equivalents 69,741 29,063 ( 10,109 ) Cash and cash equivalents at beginning of year 66,871 37,808 47,917 Cash and cash equivalents at end of period $ 136,612 $ 66,871 $ 37,808 See accompanying notes to Consolidated Financial Statements. 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. 23 WEIS MARKETS, INC. Table of Contents NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 1 Summary of Significant Accounting Policies The following is a summary of the significant accounting policies utilized in preparing the Company’s Consolidated Financial Statements: (a) Description of Business Weis Markets, Inc. is a Pennsylvania business corporation formed in 1924. The Company is engaged principally in the retail sale of food in Pennsylvania and surrounding states. 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 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. (c) Principles of Consolidation The Consolidated Financial Statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. (d) Use of Estimates Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates. (e) Cash and Cash Equivalents The Company maintains its cash balances in the form of core checking accounts and money market accounts. The Company maintains cash deposits with banks that at times exceed applicable insurance limits. The Company reduces its exposure to credit risk by maintaining such deposits with high quality financial institutions that management believes are creditworthy. The Company considers investments with an original maturity of three months or less to be cash equivalents. Investment amounts classified as cash equivalents as of December 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. Consumer electronic payment amounts classified as cash equivalents as of December 26, 2020 and December 28, 2019 totaled $ 41.7 million and $ 23.1 million, respectively. (f) Marketable Securities Marketable securities consist of corporate and municipal bonds and equity securities. The Company invests primarily in high-grade marketable debt securities. The Company classifies all of its marketable securities as available-for-sale. Available-for-sale securities are recorded at fair value as determined by quoted market price based on national markets. Unrealized holding gains and losses, net of the related tax effect, 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. A decline in the fair value below cost that is deemed other than temporary results in a charge to earnings and the establishment of a new cost basis for the security. Dividend and interest income is recognized when earned. Realized gains and losses are included in earnings and are derived using the specific identification method for determining the cost of securities. 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 $ 2.4 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. The Company maintains an allowance for the amount of receivables deemed to be uncollectible and calculates this amount based upon historical collection activity adjusted for current conditions. ‎ 24 WEIS MARKETS, INC. Table of Contents Note 1 Summary of Significant Accounting Policies (continued) (h) Inventories 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 evaluates inventory shortages throughout the year based on actual physical counts in its facilities. Allowances for inventory shortages are recorded based on the results of these counts and to provide for estimated shortages from the last physical count to the financial statement date. (i) Property and Equipment Property and equipment are recorded at cost. Depreciation is provided on the cost of buildings and improvements and equipment using the straight-line method. Leasehold improvements are amortized using the straight-line method over the terms of the leases or the useful lives of the assets, whichever is shorter. Maintenance and repairs are expensed and renewals and betterments are capitalized. When assets are retired or otherwise disposed of, the assets and accumulated depreciation are removed from the respective accounts and any profit or loss on the disposition is credited or charged to “Operating, general and administrative expenses.” (j) Leases 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. These leases generally provide for fixed annual rentals; 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. 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 Goodwill is not amortized but tested for impairment on an annual basis and between annual tests when indicators of impairment are identified. 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 26, 2020 and December 28, 2019 consisted of the following: December 26, 2020 December 28, 2019 Accumulated Accumulated (dollars in thousands) Gross Amortization Net Gross Amortization Net Liquor licenses $ 15,032 $ - $ 15,032 $ 14,905 $ - $ 14,905 Asset acquisitions and other 5,083 3,345 1,738 5,083 2,888 2,195 Total $ 20,115 $ 3,345 $ 16,770 $ 19,988 $ 2,888 $ 17,100 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 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. ‎ 25 WEIS MARKETS, INC. Table of Contents Note 1 Summary of Significant Accounting Policies (continued) (l) Impairment of Long-Lived Assets The Company periodically evaluates the period of depreciation or amortization for long-lived assets to determine whether current circumstances warrant revised estimates of useful lives. The Company completes an impairment test annually. The Company also reviews its property and equipment for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. Recoverability is measured by a comparison of the carrying amount to the net undiscounted cash flows expected to be generated by the asset. An impairment loss would be recorded for the excess of net book value over the fair value of the asset impaired. The fair value is estimated based on current market values or expected discounted future cash flows. With respect to owned property and equipment associated with closed stores, the value of the property and equipment would be adjusted to reflect recoverable values if current economic conditions and estimated fair values of the property was less than the net book value. In accordance with Accounting Standards Codification No. 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 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. However, a change in assumptions or market conditions could result in a change in estimated future cash flows and the likelihood of materially different reported results. (m) Self-Insurance The Company is self-insured for a majority of its workers’ compensation, general liability, vehicle accident and associate medical benefit claims. The self-insurance liability for most of the 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 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 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 The Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company reviews the tax positions taken or expected to be taken on tax returns to determine whether and to what extent a benefit can be recognized in the Consolidated Financial Statements. Refer to Note 9 to the Consolidated Financial Statements for the amount of unrecognized tax benefits and other disclosures related to uncertain tax positions. To the extent interest and penalties would be assessed by taxing authorities on any underpayment of income tax, such amounts are accrued and classified as a component of income tax expense. ‎ 26 WEIS MARKETS, INC. Table of Contents Note 1 Summary of Significant Accounting Policies (continued) (o) Earnings Per Share Earnings per share are based on the weighted-average number of common shares outstanding. (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. Periodically, the Company will run a point-based sales incentive program that rewards customers with future sales discounts. The Company makes reasonable and reliable estimates of the amount of future discounts based upon historical experience and its customer data tracking software. Sales are reduced rationally and systematically by these estimates over the life of the program. Discounts to customers at the point of sale provided by vendors, usually in the form of paper coupons, are not recognized as a reduction in sales provided the discounts are redeemable at any retailer that accepts those discounts. The Company records “Deferred revenue” for the sale of gift cards and revenue is recognized in “Net sales” at the time of customer redemption for products. Gift card breakage income is recognized in “Operating, general and administrative expenses” based upon historical redemption patterns and represents the balance of gift cards for which the Company believes the likelihood of redemption by the customer is remote. 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. 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. Promotional rebates and credits are accounted for as a reduction in the cost of inventory and recognized when the related inventory is sold. Volume incentive discounts are realized as a reduction of cost of sales at the time it is deemed probable and reasonably estimable that the incentive target will be reached. Long-term contract incentives, which require an exclusive vendor relationship, are allocated over the life of the contract. Promotional allowance funds for specific vendor-sponsored programs are recognized as a reduction of cost of sales as the program occurs and the funds are earned per the agreement. Cash discounts for prompt payment of invoices are realized in cost of sales as invoices are paid. Warehouse and back-haul allowances provided by suppliers for distributing their product through 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. 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 $ 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 include items such as wages, benefits, utilities, repairs and maintenance, rent, insurance, depreciation, leasehold amortization and costs for outside provided services. (t) Advertising Costs The Company expenses advertising costs as incurred. 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.” ‎ 27 WEIS MARKETS, INC. Table of Contents Note 1 Summary of Significant Accounting Policies (continued) (u) Rental and Commission Income The Company leases or subleases space to tenants in owned, vacated and open store facilities. Rental income is recorded when earned as a component of “Operating, general and administrative expenses.” All leases are operating leases. 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.” 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 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. ‎ 28 WEIS MARKETS, INC. Table of Contents 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. FASB has established three levels of inputs that may be used to measure fair value: Level 1 Observable inputs such as quoted prices in active markets for identical assets or liabilities; Level 2 Observable inputs, other than Level 1 inputs in active markets, that are observable either directly or indirectly; and Level 3 Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions. The Company’s marketable securities valued using Level 1 inputs include 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. These procedures also require specific price monitoring practices as well as pricing review reports, valuation oversight and pricing challenge procedures to maintain the most accurate representation of investment fair market value. The Company accrues interest on its bond portfolio throughout the life of each bond held. 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 $ 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: Gross Gross (dollars in thousands) Amortized Unrealized Unrealized Fair December 26, 2020 Cost Holding Gains Holding Losses Value Available-for-sale: Level 1 Equity securities $ 7,410 Level 2 Corporate and municipal bonds $ 99,861 $ 5,723 $ ( 1,139 ) 104,445 $ 99,861 $ 5,723 $ ( 1,139 ) $ 111,855 Gross Gross (dollars in thousands) Amortized Unrealized Unrealized Fair December 28, 2019 Cost Holding Gains Holding Losses Value Available-for-sale: Level 1 Equity securities $ 9,201 Level 2 Corporate and municipal bonds $ 52,264 $ 2,091 $ ( 18 ) 54,337 $ 52,264 $ 2,091 $ ( 18 ) $ 63,538 Maturities of marketable securities classified as available-for-sale at December 26, 2020, were as follows: Amortized Fair (dollars in thousands) Cost Value Available-for-sale: Due within one year $ 9,146 $ 9,233 Due after one year through five years 44,030 45,788 Due after five years through ten years 46,685 49,424 $ 99,861 $ 104,445 29 WEIS MARKETS, INC. Table of Contents Note 2 Marketable Securities (continued) SERP Investments The Company also maintains a non-qualified supplemental executive retirement plan for certain of its associates which allows them to defer income to future periods. Participants in the plans earn a return on their deferrals based on mutual fund investments. 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 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 Merchandise inventories, as of December 26, 2020 and December 28, 2019, were valued as follows: (dollars in thousands) 2020 2019 LIFO $ 191,051 $ 204,043 Average cost 77,973 75,763 $ 269,024 $ 279,806 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. During 2020 and 2019, the Company had certain decrements in its LIFO pools, which had an insignificant impact on the cost of sales. Note 4 Property and Equipment Property and equipment, as of December 26, 2020 and December 28, 2019, consisted of: Useful Life (dollars in thousands) ( in years) 2020 2019 Land $ 137,890 $ 137,977 Buildings and improvements 10 -60 779,927 736,812 Equipment 3 -12 1,159,084 1,096,252 Leasehold improvements 5 -20 225,393 217,664 Total, at cost 2,302,294 2,188,705 Less accumulated depreciation and amortization 1,377,865 1,301,777 $ 924,429 $ 886,928 ‎ 30 WEIS MARKETS, INC. Table of Contents 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 as of December 30, 2018. 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. 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) 2020 2019 Operating lease cost $ 46,283 $ 46,063 Variable lease cost 11,167 10,998 Lease or sublease income ( 8,636 ) ( 7,749 ) Net lease cost $ 48,814 $ 49,312 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) Leases Subleases 2021 $ 46,631 ( 3,683 ) 2022 41,800 ( 3,126 ) 2023 37,108 ( 2,462 ) 2024 31,925 ( 1,696 ) 2025 23,953 ( 1,336 ) Thereafter 59,734 ( 4,846 ) Total Lease Payments $ 241,151 ( 17,149 ) Less: Interest 32,922 - Present value of lease liabilities 208,229 ( 17,149 ) The following is a schedule of weighted-average remaining lease terms and weighted-average discount rates as of December 26, 2020 and December 28, 2019. Lease Term and Discount Rate December 26, 2020 December 28, 2019 Weighted-average remaining lease term 4.06 4.44 Weighted-average discount rate 3.36 % 3.47 % 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 year ended December 29, 2018 consisted of: (dollars in thousands) 2018 Minimum annual rentals $ 47,253 Contingent rentals 419 Lease or sublease income ( 7,757 ) $ 39,915 Note 6 Retirement Plans The Company has a qualified retirement savings plan, the Weis Markets, Inc. Retirement Savings Plan, covering substantially all associates. The plan has a contributory component as well as a noncontributory profit-sharing component for certain associates. The noncontributory component covers eligible associates which included certain salaried associates, store management and administrative support personnel. 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. 31 WEIS MARKETS, INC. Table of Contents Retirement plan costs: (dollars in thousands) 2020 2019 2018 Retirement savings plan 4,949 3,434 3,525 Deferred compensation plan 806 801 508 Supplemental executive retirement plan 463 498 390 $ 6,218 $ 4,733 $ 4,423 The Company maintains a non-qualified deferred compensation plan for the payment of specific amounts of annual retirement benefits to certain officers or their beneficiaries over an actuarially computed normal life expectancy. Currently, there are no active officers in the plan. The expected payments under the plan provisions were determined through actuarial calculations dependent on the age of the recipient, using an assumed discount rate. The plan is unfunded and accounted for on an accrual basis. The 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 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. This plan 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. This plan is unfunded and accounted for on an accrual basis. Participants in this plan are excluded from participation in the profit sharing portion of the Weis Markets, Inc. Retirement Savings Plan once their yearly earnings exceed the IRS highly compensated threshold. The Board of Directors annually determines the amount of the allocation to the plans at its sole discretion. The allocation among the various plan participants is made in both flat dollar amounts and in relationship to their compensation. Plan participants are 100% vested in their accounts after three years of service with the Company. Benefits are distributed among participants upon termination or retirement. Substantial risk of benefit forfeiture does exist for participants in this plan. 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 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. 52 Weeks Ended ( dollars in thousands ) December 26, 2020 December 28, 2019 December 29, 2018 Grocery $ 3,627,898 88.2 % $ 3,068,754 86.6 % $ 3,063,218 87.3 % Pharmacy 356,630 8.7 337,233 9.5 314,584 9.0 Fuel 117,800 2.9 127,828 3.6 125,993 3.6 Manufacturing 10,273 0.2 9,484 0.3 5,475 0.1 Total net sales $ 4,112,601 100.0 % $ 3,543,299 100.0 % $ 3,509,270 100.0 % 32 WEIS MARKETS, INC. Table of Contents 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 on Available-for-Sale (dollars in thousands) Marketable Securities Accumulated other comprehensive income balance as of December 29, 2018 $ 262 Other comprehensive loss before reclassifications 1,255 Amounts reclassified from accumulated other comprehensive income ( 37 ) Net current period other comprehensive Income 1,218 Accumulated other comprehensive income balance as of December 28, 2019 $ 1,480 Other comprehensive income before reclassifications 1,806 Amounts reclassified from accumulated other comprehensive income - Net current period change in other comprehensive income 1,806 Accumulated other comprehensive income balance as of December 26, 2020 $ 3,286 The following table sets forth the effects on net income of the amounts reclassified out of accumulated other comprehensive income for the periods ended December 26, 2020, December 28, 2019 and December 29, 2018. Amounts Reclassified from Accumulated Other Comprehensive Income to the Consolidated Statements of Income (dollars in thousands) Location 2020 2019 2018 Unrealized gains (losses) on available-for-sale marketable securities Investment income (loss) and interest expense $ - $ ( 51 ) $ ( 54 ) Provision for income taxes - 14 14 Total amount reclassified, net of tax $ - $ ( 37 ) $ ( 40 ) ‎ 33 WEIS MARKETS, INC. Table of Contents Note 9 Income Taxes (dollars in thousands) 2020 2019 2018 Current: Federal $ 29,121 $ 11,779 $ 11,385 State 9,984 3,117 4,594 Deferred: Federal 4,090 6,636 6,059 State 1,567 ( 871 ) ( 2,640 ) $ 44,762 $ 20,661 $ 19,398 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) 2020 2019 2018 Income taxes at federal statutory rate $ 34,373 $ 18,615 $ 17,249 State income taxes, net of federal income tax benefit 7,261 1,333 639 Nondeductible employee-related expenses 2,223 1,974 768 2017 tax reform - - 657 Other 905 ( 1,261 ) 85 Provision for income taxes (effective tax rate 27.3 %, 23.3 % and 23.6 %, respectively) $ 44,762 $ 20,661 $ 19,398 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. ‎ 34 WEIS MARKETS, INC. Table of Contents 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: (dollars in thousands) 2020 2019 Deferred tax assets: Accounts receivable $ 659 $ 749 Employment incentives 6,204 4,735 Self-insurance liability 8,515 7,344 Postretirement benefit obligations 6,527 6,054 Net operating loss and credit carryforwards 7,787 9,945 Unrecognized Tax Benefits 1,751 1,389 Other 1,407 611 Total deferred tax assets 32,850 30,827 Deferred tax liabilities: Inventories ( 13,407 ) ( 13,072 ) Unrealized gains on marketable securities ( 3,059 ) ( 2,851 ) Prepaids ( 5,993 ) ( 4,883 ) Nondeductible accruals and other ( 332 ) ( 926 ) Depreciation ( 113,463 ) ( 106,136 ) Total deferred tax liabilities ( 136,254 ) ( 127,868 ) Net deferred tax liability $ ( 103,404 ) $ ( 97,041 ) The following table summarizes the activity related to the Company’s unrecognized tax benefits: (dollars in thousands) 2020 2019 Unrecognized tax benefits at beginning of year $ 6,612 $ 6,405 Increases based on tax positions related to the current year 1,725 1,769 Additions for tax positions of prior year - - Reductions for tax positions of prior years - - Settlements - - Expiration of the statute of limitations for assessment of taxes - ( 1,562 ) Unrecognized tax benefits at end of year $ 8,337 $ 6,612 The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $ 1.7 million in 2020, $ 1.8 million in 2019 and $ 1.7 million in 2018. 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 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. 35 WEIS MARKETS, INC. Table of Contents Note 10 Summary of Quarterly Results (Unaudited) Quarterly financial data for 2020 and 2019 are as follows: (dollars in thousands, except per share amounts) Thirteen Weeks Ended March 28, 2020 June 27, 2020 September 26, 2020 December 26, 2020 Net sales $ 985,820 $ 1,098,704 $ 1,002,387 $ 1,025,690 Gross profit on sales 264,147 292,888 274,333 269,066 Net income 26,689 41,472 31,336 19,420 Basic and diluted earnings per share $ 0.99 $ 1.54 $ 1.16 $ 0.73 (dollars in thousands, except per share amounts) Thirteen Weeks Ended March 30, 2019 June 29, 2019 September 28, 2019 December 28, 2019 Net sales $ 876,718 $ 887,967 $ 876,222 $ 902,392 Gross profit on sales 229,552 236,670 232,825 239,147 Net income 14,304 20,475 14,319 18,885 Basic and diluted earnings per share $ 0.53 $ 0.76 $ 0.53 $ 0.70 Note 11 Fair Value Information The carrying amounts for cash, accounts receivable and accounts payable approximate fair value because of the short maturities of these instruments. The fair values of the Company’s marketable securities, as disclosed in Note 2, are based on quoted market prices and institutional pricing guidelines for those securities not classified as Level 1 securities. 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 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 matures on September 1, 2022. 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 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. 36 WEIS MARKETS, INC. Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and the Board of Directors of Weis Markets, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Weis Markets, Inc. 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. 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. 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. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. 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. Income taxes 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: 37 WEIS MARKETS, INC. Table of Contents  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 March 11, 2021 ‎ 38 WEIS MARKETS, INC. Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and the Board of Directors of Weis Markets, Inc. 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 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. 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 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, 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. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. 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. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ RSM US LLP Philadelphia, Pennsylvania March 11, 2021 ‎ 39 WEIS MARKETS, INC. Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure: None.