UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 30, 2017
OR
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________to_________
Commission File Number 1-5039
WEIS MARKETS, INC.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA
(State or other jurisdiction of incorporation or organization)
1000 S. Second Street
P. O. Box 471
Sunbury, Pennsylvania
(Address of principal executive offices)
Registrant's telephone number, including area code: (570) 286-4571
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common stock, no par value
Securities registered pursuant to Section 12(g) of the Act: None
24-0755415
(I.R.S. Employer Identification No.)
17801-0471
(Zip Code)
Registrant's web address: www.weismarkets.com
Name of each exchange on which registered
New York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or
an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging
growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ]
Non-accelerated filer [ ]
(Do not check if a smaller reporting company)
Accelerated filer [X]
Smaller reporting company [ ]
Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [X]
The aggregate market value of Common Stock held by non-affiliates of the Registrant is approximately $464,000,000 as of July 1, 2017 the last
business day of the most recently completed second fiscal quarter.
Shares of common stock outstanding as of March 15, 2018 - 26,898,443.
DOCUMENTS INCORPORATED BY REFERENCE: Selected portions of the Weis Markets, Inc. definitive proxy statement dated March 15, 2018
are incorporated by reference in Part III of this Form 10-K.
WEIS MARKETS, INC.
TABLE OF CONTENTS
FORM 10-K
Part I
Item 1. Business
Item 1a. Risk Factors
Item 1b. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Executive Officers of the Registrant
Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7a. Quantitative and Qualitative Disclosures about Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9a. Controls and Procedures
Item 9b. Other Information
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
Part IV
Item 15. Exhibits, Financial Statement Schedules
Item 15(c)(3). Schedule II - Valuation and Qualifying Accounts
Item 16. Form 10-K Summary
Signatures
Exhibit 21 Subsidiaries of the Registrant
Exhibit 31.1 Rule 13a-14(a) Certification - CEO
Exhibit 31.2 Rule 13a-14(a) Certification - CFO
Exhibit 32 Certification Pursuant to 18 U.S.C. Section 1350
Page
1
3
5
6
6
7
8
9
10
19
20
45
45
45
46
46
46
46
46
47
49
49
50
Table of Contents
Item 1. Business:
WEIS MARKETS, INC.
PART I
Weis Markets, Inc. is a Pennsylvania business founded by Harry and Sigmund Weis in 1912 and incorporated in 1924. The Company
is engaged principally in the retail sale of food in Pennsylvania and surrounding states. There was no material change in the nature of
the Company's business during fiscal 2017. The Company’s stock has been traded on the New York Stock Exchange since 1965
under the symbol “WMK.” The Weis family currently owns approximately 65% of the outstanding shares. Jonathan H. Weis serves
as Chairman of the Board of Directors, President and Chief Executive Officer.
The Company's retail food stores sell groceries, dairy products, frozen foods, meats, seafood, fresh produce, floral, pharmacy services,
deli products, prepared foods, bakery products, beer and wine, fuel and general merchandise items, such as health and beauty care and
household products. The store product selection includes national, local and private brands including natural, gluten-free and organic
varieties. The Company advertises its products and promotes its brand through weekly newspaper circulars; radio ads; e-mail blasts;
and on-line via its web site, social media and mobile applications. Printed circulars are used extensively on a weekly basis to advertise
featured items. The Company promotes by using Everyday Lower Price, Low Price Guarantee and utilizes a loyalty marketing
program, “Weis Club Preferred Shopper,” which enables customers to receive discounts, promotions and fuel rewards. The Company
currently owns and operates 205 retail food stores many of which have on-line order and pick up customer service. The Company’s
operations are reported as a single reportable segment. The majority of the Company’s revenues are generally not seasonal in nature.
However, revenues tend to be higher during the major holidays throughout the year. Additionally, significant inclement weather
systems, particularly winter storms, tend to affect sales trends.
The following table provides additional detail on the percentage of consolidated net sales contributed by product category for fiscal
years 2017, 2016 and 2015, respectively:
2017
2016
2015
Center Store (1)
Fresh (2)
Pharmacy Services
Fuel
Other
Consolidated net sales
____________________
(1) Consists primarily of groceries, dairy products, frozen foods, beer and wine, and general merchandise items, such as health and beauty care and
household products.
(2) Consists primarily of meats, seafood, fresh produce, floral, deli products, prepared foods and bakery products.
57.2 %
30.5
8.9
3.2
0.2
100.0 %
57.0 %
30.3
9.5
3.0
0.2
100.0 %
57.5 %
29.7
9.4
3.2
0.2
100.0 %
In 2016, Weis Markets acquired five Mars Super Market locations in Baltimore County, MD, 38 Food Lion stores throughout
Maryland, Virginia and Delaware, and a Nell's Family Market in East Berlin, PA. The completion of these individual acquisitions
expanded the Company's footprint into Virginia and Delaware, and increased its store count by 25 percent. Beginning August 1,
2016, the Company converted the 44 stores to Weis Markets stores in 96 days ending in November, during which it interviewed and
hired more than 2,000 associates who were previously employed at the acquired locations. In 2017, the acquired store group is
providing a positive cash flow for the Company as management continues to develop the stores using its business model. Although
there are no pending acquisitions, the Company continues to investigate acquisition opportunities as well as grow its existing store
base organically.
On March 9, 2017, the Company opened its new 65,000 square-foot prototype store next to a major competitor in Enola, PA.
Designated the “Community Market” format, the store features a brand new store layout and unique features to elevate the shopping
experience including a pub, grill and ice cream parlor, featuring the Company’s own ice cream. The store contains a Pennsylvania
foods section and more than 1,900 organic and gluten-free products, along with a mix-and-match pick K-cup 12-packs section and a
Chobani Yogurt Bar. The Company plans to review the success of the new features and utilize them where appropriate in other stores.
At the end of 2017, Weis Markets, Inc. operated 4 stores in Delaware, 51 stores in Maryland, 5 stores in New Jersey, 9 stores in New
York, 121 stores in Pennsylvania, 13 stores in Virginia and 2 stores in West Virginia, for a total of 205 retail food stores operating
under the Weis Markets trade name.
1
Table of Contents
Item 1. Business: (continued)
WEIS MARKETS, INC.
All retail food store locations operate as conventional supermarkets. The retail food stores range in size from 8,000 to 70,000 square
feet, with an average size of approximately 48,000 square feet. The Company’s store fleet includes a variety of sizes with a few
locations in operation since the 1950’s; all stores are branded Weis Markets and provide the same basic offerings scaled to the size of
each store. The new Weis prototype averages approximately 65,000 square feet. The following summarizes the number of stores by
size categories as of year-end:
Square feet
55,000 to 70,000
45,000 to 54,999
35,000 to 44,999
25,000 to 34,999
Under 25,000
Total
2017
Number of stores
60
70
53
17
5
205
2017
% of Total
29%
34%
26%
8%
3%
100%
2016
Number of stores
58
70
53
18
5
204
2016
% of Total
28%
34%
26%
9%
3%
100%
The Company believes that new stores and remodeling current stores are vital for future Company growth. The location and
appearance of its stores are important components of attracting new and retaining current customers. On an average basis, the
Company has five to eight new stores in the process of being developed and dedicates a quarter of its capital budget to new stores
annually, excluding acquisitions. Generally, another fifteen to twenty percent of the capital budget is dedicated to store remodels
while the remainder is attributable to smaller in-store sales-driven projects, store maintenance and store support function expenditures.
See the “Liquidity and Capital Resources” section included in “Item 7. Management’s Discussion and Analysis of the Financial
Condition and Results of Operations” for more details regarding the Company’s capital expenditures.
The following schedule shows the changes in the number of retail food stores, total square footage and store additions/remodels as of
year-end:
Beginning store count
New stores (1)
Opened relocated stores
Closed stores
Closed relocated stores
Ending store count
Total square feet (000’s), at year-end
Additions/major remodels
____________________
(1) In the second half of 2016, Weis Markets acquired five former Mars Super Market stores located in Baltimore County, Maryland; 38 former
Food Lion Supermarket stores located in Maryland, Virginia and Delaware; and one former Nell’s Family Market store located in East Berlin,
Pennsylvania.
2015
163
---
1
---
(1)
163
8,215
16
2017
204
2
---
(1)
---
205
9,867
4
2013
163
4
---
(2)
---
165
8,211
12
2014
165
1
1
(3)
(1)
163
8,202
8
2016
163
44
---
(3)
---
204
9,777
9
Utilizing its own centrally located distribution center and transportation fleet, Weis Markets self distributes approximately 67% of
product with the remaining being supplied by direct store vendors. In addition, the Company has three manufacturing facilities which
process milk, ice cream and fresh meat products. The corporate offices are located in Sunbury, PA.
The Company strives to be good stewards of the environment and makes this an important part of its overall mission. Its sustainability
strategy operates under four key pillars: green design, natural resource conservation, food and agricultural impact and social
responsibility. The goal of the sustainability strategy is to reduce the Company’s overall carbon footprint by reducing greenhouse gas
emissions and reducing the impact on climate change. The Company set a goal in 2008 to reduce its carbon footprint by 20% by the
year 2020. In 2016, the company exceeded this goal with a carbon reduction of 22%. The Company continues to be a member of the
EPA GreenChill program for advancing environmentally beneficial refrigerant management systems and has ten stores registered
under this program. Additional corporate sustainability goals are: reducing energy usage by 2% each year, replacing 50% of the truck
fleet with fuel efficient tractors within three years and increasing recycling 5% each year. In 2017, the Company recycled 73,000 tons
of materials, representing a corporate wide recycling rate of 66%.
2
Table of Contents
Item 1. Business: (continued)
WEIS MARKETS, INC.
The Company operates in a highly competitive market place. The number and the variety of competitors vary by market. The
Company’s principal competition consists of international, national, regional and local food chains, as well as independent food stores.
The Company also faces substantial competition from convenience stores, membership warehouse clubs, specialty retailers,
supercenters and large-scale drug and pharmaceutical chains. The Company continues to effectively compete by offering a strong
combination of value, quality and service.
The Company currently employs approximately 23,000 full-time and part-time associates.
Trade Names and Trademarks. The Company has invested significantly in the development and protection of “Weis Markets”
both as a trade name and a trademark and considers it to be an important asset. The Company is the exclusive licensee of nearly 100
trademarks registered and/or pending in the United States Patent and Trademark Office from WMK Holdings, Inc., including
trademarks for its product lines and promotions such as Weis, Weis 2 Go, Weis Wonder Chicken, Weis Great Meals Start Here, Weis
Gas-n-Go and Weis Nutri-Facts. Each trademark registration is for an initial period of 10 years and may be renewed so long as it is in
continued use in commerce.
The Company considers its trademarks to be of material importance to its business and actively defends and enforces its rights.
The Company maintains a corporate web site at www.weismarkets.com. The Company makes available, free of charge, on the
“Financial” page of the “Corporate Information” section of its web site, its Annual Reports on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Exchange Act, as soon as reasonably practicable after the Company electronically files such material or furnishes it to the U.S.
Securities and Exchange Commission (SEC) by clicking on the “SEC Information” link.
The Company’s Corporate Governance materials can be found on the”Governance” page of the “Corporate Information” section of its
web site. These materials include the Corporate Governance Guidelines; the Charters of the Audit, Compensation and Disclosure
Committees; and both the Code of Business Conduct and Ethics and the Code of Ethics for the CEO and CFO. A copy of the
foregoing corporate governance materials is available upon written request to the Company’s principal executive offices.
Item 1a. Risk Factors:
In addition to risks and uncertainties in the ordinary course of business common to all businesses, important factors are listed below
specific to the Company and its industry, which could materially impact its future performance.
The Company’s industry is highly competitive. If the Company is unable to compete effectively, the Company’s financial
condition and results of operations could be materially affected.
The retail food industry is intensely price competitive, and the competition the Company encounters may have a negative impact on
product retail prices. The operating environment continues to be characterized by aggressive expansion, entry of non-traditional
competitors, market consolidation and increasing fragmentation of retail and online formats. The financial results may be adversely
impacted by a competitive environment that could cause the Company to reduce retail prices without a reduction in its product cost to
maintain market share; thus reducing sales and gross profit margins.
The trade area of the Company is located within a region and is subject to the economic, social and climate variables of that
region.
The majority of the Company’s stores are concentrated in central and northeast Pennsylvania, central Maryland, suburban
Washington, DC and Baltimore regions and New York’s Southern Tier. Changes in economic and social conditions in the Company’s
operating regions, including fluctuations in the inflation rate along with changes in population and employment and job growth rates,
affect customer shopping habits. These changes may negatively impact sales and earnings. Business disruptions due to weather and
catastrophic events historically have been few. The Company’s geographic regions could receive an extreme variance in the amount
of annual snowfall that may materially affect sales and expense results.
The Company may be unable to retain key management personnel.
The Company's success depends to a significant degree upon the continued contributions of senior management. The loss of any key
member of management may prevent the Company from implementing its business plans in a timely manner. In addition,
employment conditions specifically may affect the Company’s ability to hire and train qualified associates.
3
Table of Contents
Item 1a. Risk Factors: (continued)
WEIS MARKETS, INC.
Food safety issues could result in the loss of consumer confidence in the Company.
Customers count on the Company to provide them with safe and wholesome food products. Concerns regarding the safety of food
products sold in its stores could cause shoppers to avoid purchasing certain products from the Company, or to seek alternative sources
of supply for all of their food needs, even if the basis for the concern is outside of the Company’s control. A loss in confidence on the
part of its customers would be difficult and costly to reestablish. As such, any issue regarding the safety of any food items sold by the
Company, regardless of the cause, could have a substantial and adverse effect on operations.
The failure to execute expansion plans could have a material adverse effect on the Company's business and results of its
operations.
Circumstances outside the Company’s control could negatively impact anticipated capital investments in store, distribution and
manufacturing projects, information technology and equipment. The Company cannot determine with certainty whether its new or
acquired stores will meet expected benefits including, among other things, operating efficiencies, procurement savings, innovation,
sharing of best practices and increased market share that may allow for future growth. Achieving the anticipated benefits may be
subject to a number of significant challenges and uncertainties, including, without limitation, the possibility of imprecise assumptions
underlying expectations regarding potential synergies and the integration process, unforeseen expenses and delays diverting
management’s time and attention and competitive factors in the marketplace.
Disruptions or security breaches in the Company’s information technology systems could adversely affect results.
The Company’s business is highly dependent on complex information technology systems that are vital to its continuing operations. If
the Company was to experience difficulties maintaining existing systems or implementing new systems, significant losses could be
incurred due to disruptions in its operations. Additionally, these systems contain valuable proprietary data as well as receipt and
storage of personal information about its associates and customers, in particular electronic payment data and personal health
information that, if breached, would have an adverse effect on the Company. Such an occurrence could adversely affect the
Company’s reputation with its customers, associates, and vendors, as well as the Company’s operations, results of operations,
financial condition and liquidity, and could result in litigation against the Company or the imposition of penalties.
The Company is affected by certain operating costs which could increase or fluctuate considerably.
Associate expenses contribute to the majority of the Company’s operating costs. The Company's financial performance is potentially
affected by increasing wage and benefit costs, a competitive labor market, regulatory wage increases and the risk of unionized labor
disruptions of its non-union workforce. The Company's profit is particularly sensitive to the cost of oil. Oil prices directly affect the
Company's product transportation costs, as well as its utility and petroleum-based supply costs. It also affects the costs of its
suppliers, which impacts its cost of goods.
Various aspects of the Company’s business are subject to federal, state and local laws and regulations.
The Company is subject to various federal, state and local laws, regulations and administrative practices that affect the Company’s
business. The Company must comply with numerous provisions regulating health and sanitation standards, food labeling, equal
employment opportunity, minimum wages and licensing for the sale of food, drugs and alcoholic beverages. The Company’s
compliance with these regulations may require additional capital expenditures and could adversely affect the Company’s ability to
conduct the Company’s business as planned. Management cannot predict either the nature of future laws, regulations, interpretations
or applications, or the effect either additional government regulations or administrative orders, when and if promulgated, or disparate
federal, state, and local regulatory schemes would have on the Company’s future business. They could, however, require the
reformulation of certain products to meet new standards, the recall or discontinuance of certain products not able to be reformulated,
additional record keeping, expanded documentation of the properties of certain products, expanded or different labeling and/or
scientific substantiation. Any or all of such requirements could have an adverse effect on the Company’s results of operations and
financial condition.
4
Table of Contents
Item 1a. Risk Factors: (continued)
WEIS MARKETS, INC.
Unexpected factors affecting self-insurance claims and reserve estimates could adversely affect the Company.
The Company uses a combination of insurance and self-insurance to provide for potential liabilities for workers' compensation,
general liability, vehicle accident, property and associate medical benefit claims. Management estimates the liabilities associated with
the risks retained by the Company, in part, by considering historical claims experience, demographic and severity factors and other
actuarial assumptions which, by their nature, are subject to a high degree of variability. Any projection of losses concerning workers’
compensation and general liability is subject to a high degree of variability. Among the causes of this variability are unpredictable
external factors affecting future inflation rates, discount rates, litigation trends, legal interpretations, benefit level changes and claim
settlement patterns.
Changes in tax laws may result in higher income tax.
The Company's future effective tax rate may increase from current rates due to changes in laws and the status of pending items with
various taxing authorities. Currently, the Company benefits from a combination of its corporate structure and certain state tax laws.
The Company’s investment portfolio may suffer losses from changes in market interest rates and changes in market
conditions which could adversely affect results of income or liquidity.
The Company’s marketable securities consist of municipal bonds and equity securities. The municipal bond investments are subject
to general credit, liquidity, market and interest rate risks. Substantially all of these securities are subject to interest rate and credit risk
and will decline in value if interest rates increase or one of the issuers’ credit ratings is reduced. As a result, the Company may
experience a reduction in value or loss of liquidity from investments, which may have a negative impact on the Company’s results of
operations, liquidity and financial condition.
The Company is a controlled Company due to the common stock holdings of the Weis family.
The Weis family’s share ownership represents approximately 65% of the combined voting power of the Company’s common stock as
of December 30, 2017. As a result, the Weis family has the power to elect a majority of the Company’s directors and approve any
action requiring the approval of the shareholders of the Company, including adopting certain amendments to the Company’s charter
and approving mergers or sales of substantially all of the Company’s assets. Currently, one of the Company’s five directors is a
member of the Weis family.
Changes in vendor promotions or allowances, including the way vendors target their promotional spending, and the
Company's ability to effectively manage these programs could significantly impact margins and profitability.
The Company cooperatively engages in a variety of promotional programs with its vendors. As the parties assess the results of
specific promotions and plan for future promotions, the nature of these programs and the allocation of dollars among them changes
over time. The Company manages these programs to maintain or improve margins while at the same time increasing sales. A
reduction in overall promotional spending or a shift by vendors in promotional spending away from certain types of promotions that
the Company and its customers have historically utilized could have a significant impact on profitability.
Item 1b. Unresolved Staff Comments:
There are no unresolved staff comments.
5
Table of Contents
Item 2. Properties:
WEIS MARKETS, INC.
As of December 30, 2017, the Company owned and operated 94 of its retail food stores and leased and operated 111 stores under
operating leases that expire at various dates through 2033. The Company owns all trade fixtures and equipment in its stores and
several parcels of vacant land, which are available as locations for possible future stores or other expansion.
The Company owns and operates one distribution center in Milton, Pennsylvania of approximately 1.3 million square feet, and one in
Northumberland, Pennsylvania totaling approximately 76,000 square feet. The Company also owns one warehouse complex in
Sunbury, Pennsylvania totaling approximately 541,000 square feet. The Company utilizes 258,000 square feet of its Sunbury location
to operate its ice cream plant, meat processing plant and milk processing plant.
Item 3. Legal Proceedings:
Neither the Company nor any subsidiary is presently a party to, nor is any of their property subject to, any pending legal proceedings,
other than routine litigation incidental to the business that would not have a material adverse effect on the financial results. The
Company estimates any exposure to these legal proceedings and establishes accruals for the estimated liabilities, where it is
reasonably possible to estimate and where an adverse outcome is probable.
6
Table of Contents
Executive Officers of the Registrant
WEIS MARKETS, INC.
The following sets forth the names and ages of the Company’s executive officers as of March 15, 2018, indicating all positions held
during the past five years:
Name
Age
Title
Jonathan H. Weis (a)
Kurt A. Schertle (b)
Wayne S. Bailey (c)
Scott F. Frost (d)
David W. Gose II (e)
Harold G. Graber (f)
Richard A. Gunn (g)
James E. Marcil (h)
50
46
59
55
51
62
53
59
Chairman of the Board, President and Chief Executive Officer
Chief Operating Officer
Senior Vice President of Supply Chain and Logistics
Senior Vice President, Chief Financial Officer and Treasurer
Senior Vice President of Operations
Senior Vice President of Real Estate and Development, Secretary
Senior Vice President of Merchandising and Marketing
Senior Vice President of Human Resources
(a)
(b)
(c)
(d)
(e)
(f)
(g)
Jonathan H. Weis. The Company has employed Mr. Weis since 1989. Mr. Weis served the Company as Vice President
of Property Management and Development from 1996 until April 2002, at which time he was appointed as Vice
President and Secretary. In January of 2004, the Board appointed Mr. Weis as Vice Chairman and Secretary. Mr. Weis
became the Company's interim President and Chief Executive Officer in September 2013 and was appointed as President
and Chief Executive Officer in February 2014. The Board elected Mr. Weis as Chairman of the Board in April 2015.
Kurt A. Schertle. The Company hired Mr. Schertle on March 1, 2009 as its Vice President of Sales and Merchandising,
which included the responsibility of overseeing the Marketing Department. In February 2010, Mr. Schertle was
promoted to Senior Vice President of Sales and Merchandising. In July 2012, Mr. Schertle was promoted to Executive
Vice President of Sales and Merchandising at which time, he assumed the additional responsibility of overseeing the
Company’s Supply Chain. In September 2013, Mr. Schertle assumed the additional responsibility of overseeing Store
Operations and Mr. Schertle was promoted to Chief Operating Officer in March 2014.
Wayne S. Bailey. Mr. Bailey joined the Company full-time in 1979 and he has held several positions since then,
including but not limited to, Grocery Manager, Store Manager, District Manager, Director of Merchandising and Sales
and Vice President of Operational Administration. In January 2011, Mr. Bailey became a Regional Vice President and
in January 2013 he assumed the role of Vice President of Supply Chain and Logistics. In June 2016, Mr. Bailey was
promoted to Senior Vice President of Supply Chain and Logistics.
Scott F. Frost. Mr. Frost joined the Company full-time in 1984 and he has held various positions since then, including
but not limited to, Controller, Assistant Secretary, Assistant Treasurer and Acting Chief Financial Officer. The
Company appointed Mr. Frost as Vice President, Chief Financial Officer and Treasurer in October 2009. In January
2011, Mr. Frost was promoted to Senior Vice President, Chief Financial Officer and Treasurer.
David W. Gose II. Mr. Gose joined the Company in May 2014 as Senior Vice President of Operations. Prior to joining
the Company, Mr. Gose was Senior Director and Regional General Manager of Walmart Ohio, a retail store
SuperCenter, from February 2010 until May 2014. Walmart Ohio consisted of 92 stores that geographically included all
stores South of Toledo, Cleveland, Akron and Youngstown.
Harold G. Graber. Mr. Graber joined the Company in October 1989 as the Director of Real Estate. Mr. Graber, who
served the Company as Vice President for Real Estate since 1996, was promoted to Senior Vice President of Real Estate
and Development in February 2010. Mr. Graber was appointed as Secretary of the Company in February 2014.
Richard A. Gunn. Mr. Gunn joined the Company in May 2015 as the Senior Vice President of Merchandising and
Marketing. Prior to joining the Company, Mr. Gunn was employed by K-VA-T Food Stores, Inc. from May 1999
through April 2015 and most recently served as Executive Vice President of Merchandising and Marketing. K-VA-T
Food Stores, Inc. is a regional supermarket chain and distribution center operating in Virginia, Kentucky and Tennessee.
(h)
James E. Marcil. Mr. Marcil joined the Company in September 2002 as Vice President of Human Resources. In
February 2010, Mr. Marcil was promoted to Senior Vice President of Human Resources.
7
Table of Contents
WEIS MARKETS, INC.
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities:
The Company's stock is traded on the New York Stock Exchange (ticker symbol WMK). The approximate number of shareholders,
including individual participants in security position listings on March 14, 2018 was 6,493. High and low stock prices and dividends
paid per share for the last two fiscal years were:
Quarter
First
Second
Third
Fourth
2017
Stock Price
$
High
68.88
62.88
49.44
45.68
$
Low
55.34
46.05
41.30
31.26
2016
Dividend
Per Share
$
0.30
0.30
0.30
0.30
Stock Price
Dividend
High
Low
Per Share
$
46.64
53.59
55.49
68.40
$
37.14
42.77
48.01
51.56
$
0.30
0.30
0.30
0.30
The following line graph compares the yearly percentage change in the cumulative total shareholder return on the Company’s
common stock against the cumulative total return of the S&P Composite-500 Stock Index and the cumulative total return of a
published group index for the Retail Grocery Stores Industry (“Peer Group”), provided by Value Line, Inc., for the period of five
years. The graph depicts $100 invested at the close of trading on the last trading day preceding the first day of the fifth preceding year
in Weis Markets, Inc. common stock, S&P 500, and the Peer Group. The cumulative total return assumes reinvestment of dividends.
Comparative Five-Year Total Returns
Weis Markets, Inc.
S&P 500
Peer Group
2012
100.00
100.00
100.00
2013
136.95
132.39
125.60
2014
127.95
150.51
188.67
2015
121.81
152.60
223.35
2016
188.49
170.85
209.14
2017
119.53
208.15
194.77
8
Table of Contents
Item 6. Selected Financial Data:
WEIS MARKETS, INC.
The following selected historical financial information has been derived from the Company's audited Consolidated Financial
Statements. This information should be read in connection with the Company's Consolidated Financial Statements and the Notes
thereto, as well as "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in Item 7.
Five Year Review of Operations
(dollars in thousands, except shares,
per share amounts and store information)
Net sales
Costs and expenses
Income from operations
Investment income and interest expense
Gain on bargain purchase
Income before provision for income taxes
Provision for income taxes
Net income
Retained earnings, beginning of year
Other comprehensive income tax reform
adjustment
Cash dividends
52 Weeks
Ended
Dec. 30, 2017
53 Weeks
Ended
Dec. 31, 2016
52 Weeks
Ended
Dec. 26, 2015
52 Weeks
Ended
Dec. 27, 2014
52 Weeks
Ended
Dec. 28, 2013
$
3,466,807
$
3,136,720
$
2,876,748
$
2,776,683
$
2,692,588
3,390,382
3,038,395
2,785,969
2,695,308
2,578,916
76,425
2,598
0
79,023
(19,391)
98,414
1,062,778
1,161,192
1,042
32,278
98,325
2,457
23,879
124,661
37,499
87,162
1,007,894
1,095,056
-
32,278
90,779
1,552
-
92,331
33,001
59,330
9
80,842
1,040,172
-
32,278
81,375
2,287
-
83,662
29,281
54,381
958,739
1,013,120
-
32,278
980,842
26,898,443
1.20
2.02
229,595
1,191,119
844,763
163
$
$
$
$
$
$
113,672
4,684
-
118,356
45,170
73,186
917,831
991,017
-
32,278
958,739
26,898,443
1.20
2.72
215,802
1,148,242
821,770
165
$
$
$
$
$
$
Retained earnings, end of year
$
1,127,872
$
1,062,778
$
1,007,894
Weighted-average shares outstanding, diluted
26,898,443
26,898,443
26,898,443
Cash dividends per share
Basic and diluted earnings per share
Working capital
Total assets
Shareholders’ equity
Number of grocery stores
$
$
$
$
$
1.20
3.66
208,972
1,441,739
992,844
205
$
$
$
$
$
1.20
3.24
207,700
1,431,304
926,722
204
$
$
$
$
$
1.20
2.21
232,722
1,235,959
871,747
163
9
Table of Contents
WEIS MARKETS, INC.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations:
Overview
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to help
the reader understand Weis Markets, Inc., its operations and its present business environment. The MD&A is provided as a
supplement to and should be read in conjunction with the Consolidated Financial Statements and the accompanying notes thereto
contained in “Item 8. Financial Statements and Supplementary Data” of this report. The following analysis should also be read in
conjunction with the Financial Statements included in the Quarterly Reports on Form 10-Q and the Annual Report on Form 10-K filed
with the U.S. Securities and Exchange Commission, as well as the cautionary statement captioned “Forward-Looking Statements”
immediately following this analysis. This overview summarizes the MD&A, which includes the following sections:
•
Company Overview - a general description of the Company’s business and strategic imperatives.
• Results of Operations - an analysis of the Company’s consolidated results of operations for the three years presented in the
Company’s Consolidated Financial Statements.
• Liquidity and Capital Resources - an analysis of cash flows, aggregate contractual obligations, and off-balance sheet
arrangements.
• Critical Accounting Policies and Estimates - a discussion of accounting policies that require critical judgments and estimates.
Company Overview
General
Weis Markets is a conventional supermarket chain that operates 205 retail stores with over 23,000 associates located in Pennsylvania
and six surrounding states: Delaware, Maryland, New Jersey, New York, Virginia, and West Virginia. Its products sold include
groceries, dairy products, frozen foods, meats, seafood, fresh produce, floral, pharmacy services, deli products, prepared foods, bakery
products, beer and wine, fuel, and general merchandise items, such as health and beauty care and household products. The store
product selection includes national, local and private brands and the Company promotes by using Everyday Lower Price, Low Price
Guarantee and Loyalty programs. The Loyalty program includes fuel rewards that may be redeemed at the Company’s fuel stations or
one of its third-party fuel station partners.
Utilizing its own centrally located distribution center and transportation fleet, Weis Markets self distributes approximately 67% of
product with the remaining being supplied by direct store vendors. In addition, the Company has three manufacturing facilities which
process milk, ice cream and fresh meat products. The corporate offices are located in Sunbury, PA where the Company was founded
in 1912. The Company’s operations are reported as a single reportable segment.
10
Table of Contents
WEIS MARKETS, INC.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations: (continued)
Company Overview, (continued)
Strategic Imperatives
The following strategic imperatives continue to be focused upon by the Company to attempt to ensure the success of the Company in
the coming years:
• Establish a Sales Driven Culture – The Company continues to focus on sales and profits growth, improved operating
practices, increased productivity and positive cash flow. The Company believes disciplined growth will increase its market
share and operating profits, resulting in enhanced shareholder value. The Company’s method of driving sales includes
focused preparation and execution of sales programs, investing in new stores and remodels, and strategic acquisitions.
Communicating clear executable standards and aligning performance measures across the organization will help to instill a
sales-driven operating environment.
• Build and Support Human Resources – The Company is committed to creating a sustainable competitive advantage through
the selection, development and promotion of the best people. The Company believes that establishing a learning culture will
both support its commitment to be an employer of choice and will drive customer engagement with its associates.
Improvements in the Company’s human capital communication and support structures will facilitate internal career
opportunities which will improve retention of top talent. The Company continues to grow leaders at every level throughout
the organization by creating a culture of mentoring, coaching and leveraging on-the-job assignments for continued
development. The Company believes that a strong employment brand is necessary to build associate engagement and
directly impacts its ability to compete and execute strategic plans. The Company will continue to assess and upgrade
underlying technologies to support human capital development as a strategic imperative for future growth.
• Become More Relevant to Consumers – Understanding the consumer is crucial to the Company’s strategic plan. The
Company will develop and cultivate a culture where it’s continually “on trend” with its consumers at the current time and
where they are going next. The Company researches and studies the wants and needs of core consumers and casual
consumers. It measures customer satisfaction and shares insights across the organization to improve communication between
management and its consumers. The Company uses consumer data to measure the value of programs offered and support
consumer attraction and retention. The Company believes that private brand products exceed consumer expectations and will
focus on the value and attribute messaging to drive organic growth.
• Create Meaningful Differentiation – The Company recognizes the need to offer a compelling reason for customers to choose
them over other channels. The Company has identified product pricing and promotion, customer shopping experience, and
merchandising strategies as critical components of future success. The Company recognizes that the core of the strategy will
focus on alignment of merchandising programs that foster customer engagement supported by a shopping experience that
delivers the customer’s needs. As part of this strategy, management is committed to offering its customers a strong
combination of quality, service and value.
• Develop and Align Organizational Capabilities – The Company will elevate organizational capacity to support decision
effectiveness and deliver consistent execution. To support this strategy the Company will assess organizational capacity to
support the Company’s strategic direction. The Company will align business functions and processes to enhance key
capabilities and to support scalability of operations. Continued investments in information technology systems to improve
associate engagement, increase productivity, and provide valuable insight into customer behavior/shopping trends will
remain a focus of the Company. The Company believes these systems will continue to play a key role in the measurement of
the Company’s strategic decisions and financial returns.
• Focus on Sustainability Strategies – The Company strives to be good stewards of the environment and makes this an
important part of its overall mission. Its sustainability strategy operates under four key pillars: green design, natural resource
conservation, food and agricultural impact and social responsibility. The goal of the sustainability strategy is to reduce the
Company’s overall carbon footprint by reducing greenhouse gas emissions and reducing the impact on climate change.
11
Table of Contents
WEIS MARKETS, INC.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations: (continued)
Results of Operations
Analysis of Consolidated Statements of Income
(dollars in thousands except per share amounts)
For the Fiscal Years Ended December 30, 2017,
December 31, 2016 and December 26, 2015
Net sales
Cost of sales, including warehousing and distribution
expenses
Gross profit on sales
Gross profit margin
Operating, general and administrative expenses
O, G & A, percent of net sales
Income from operations
Operating margin
Investment income and interest expense
Investment income and interest expense, percent of
net sales
Gain on bargain purchase
Gain on bargain purchase, percent of net sales
Income before provision for income taxes
Income before provision for income taxes, percent
of net sales
Provision for income taxes
Effective income tax rate
Net income
Net income, percent of net sales
Basic and diluted earnings per share
Net Sales
2017
(52 Weeks)
2016
(53 Weeks)
2015
(52 Weeks)
$
3,466,807
$
3,136,720
$
2,876,748
Percentage Changes
2017 vs.
2016
10.5 %
2016 vs.
2015
9.0 %
2,540,348
926,459
2,264,565
872,155
26.7 %
850,034
24.5 %
76,425
2.2 %
2,598
0.1 %
-
- %
79,023
2.3 %
(19,391)
(24.5) %
27.8 %
773,830
24.7 %
98,325
3.1 %
2,457
0.1 %
23,879
0.8 %
124,661
4.0 %
37,499
30.1 %
$
$
98,414
$
87,162
$
2.8 %
3.66
$
2.8 %
3.24
$
2,090,016
786,732
27.3 %
695,953
24.2 %
90,779
3.2 %
1,552
0.1 %
-
-%
12.2
6.2
9.8
8.4
10.9
11.2
(22.3)
8.3
5.7
58.3
(100.0)
100.0
92,331
(36.6)
35.0
3.2 %
33,001
(151.7)
13.6
35.7 %
59,330
2.1 %
2.21
12.9 %
46.9 %
13.0 %
46.6 %
(dollars in thousands except per share amounts)
For the Fiscal Years Ended December 30, 2017,
December 31, 2016 and December 26, 2015
Net sales
Net sales, excluding fuel sales
Net sales, adjusted for the additional week in 2016
Net sales, adjusted for the additional week in 2016, excluding fuel sales
Comparable store sales, adjusted for the additional week in 2016
Comparable store sales, adjusting for the additional week in 2016, excluding fuel sales
____________________
(1) The 2017 and 2015 years were comprised of 52 weeks where the 2016 year was comprised of 53 weeks. Due to the Company’s 2016 fiscal year
being comprised of 53 weeks, the first quarter of 2017 did not include a New Year holiday sales week. Management estimates the incremental
holiday sales impact was approximately $3.0 million in 2016. The $3.0 million holiday impact has been removed from the 2016 comparable sales
numbers above.
2016 vs 2015
9.0
9.3
6.9
7.0
2.9
2.9
2017 vs 2016
10.5
10.4
12.8
12.6
1.6
1.2
Percentage Changes
%
%
%
%
When calculating the percentage change in comparable store sales, the Company defines a new store to be comparable when it has
been in operation for five full quarters. Relocated stores and stores with expanded square footage are included in comparable store
sales since these units are located in existing markets and are open during construction. Planned store dispositions are excluded from
the calculation. The Company only includes retail food stores in the calculation.
12
Table of Contents
WEIS MARKETS, INC.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations: (continued)
Results of Operations (continued)
Net Sales (continued)
According to the latest U.S. Bureau of Labor Statistics’ report, the annual Seasonally Adjusted Food-at-Home Consumer Price Index
decreased 0.2% and 1.3% in 2017 and 2016 respectively but increased 1.1% in 2015. Even though the U.S. Bureau of Labor
Statistics’ index rates may be reflective of a trend, it will not necessarily be indicative of the Company’s actual results. According to
the U.S. Department of Energy, the 52-week average price of gasoline in the Central Atlantic States increased 13.1%, or $0.31 per
gallon, in 2017 compared to the 53-week average in 2016. The 53-week average price of gasoline in the Central Atlantic States,
according to the U.S. Department of Energy, decreased 10.1%, or $0.26 per gallon, in 2016 compared to the 52-week average in 2015.
The Company attributes the increased net sales primarily to the acquisition of 44 locations in the second half of 2016. Comparable
store sales increased for all years presented. The Company was able to achieve this through targeted, tactical marketing programs in
key regional markets along with its chain wide sales-driving promotional programs such as its loyalty card. In conjunction with its
marketing initiatives the Company continues to add additional product offerings and customer conveniences such as “Click and
Collect.” “Click and Collect” allows the customer to order on-line and then pick their order up at a drive thru location at the store.
With the aforementioned offerings and programs, the Company was able to offset substantial deflationary pressures in its fresh
departments most notably meat and produce. Pharmacy sales volume increased as a result of the Affordable Care Act and increased
immunizations. Fuel sales benefited from inflation as comparable fuel sales rose 12.2% during 2017.
Although the Company experienced retail inflation and deflation in various commodities for the years presented, management cannot
accurately measure the full impact of inflation or deflation on retail pricing due to changes in the types of merchandise sold between
periods, shifts in customer buying patterns and the fluctuation of competitive factors. Management remains confident in its ability to
generate sales growth in a highly competitive environment, but also understands some competitors have greater financial resources
and could use these resources to take measures which could adversely affect the Company's competitive position.
Cost of Sales and Gross Profit
Cost of sales consists of direct product costs (net of discounts and allowances), distribution center and transportation costs, as well as
manufacturing facility operations. Almost all of the increase in cost of sales in 2017 as compares to 2016 is due to the increased sales
volume in 2017. Both direct product cost and distribution cost increase when sales volume increases.
Gross profit rate was 26.7% in 2017, 27.8% in 2016 and 27.3% in 2015. The decline in gross profit margin in 2017 can be attributed
to lower than average winter sales volume due to lack of winter weather events in the first quarter of 2017. Decreased sales volume
negatively impacts the gross profit margin by increasing inventory shrinkage and fixed distribution costs comparative rates. In the
third quarter of 2017 retail deflation combined with cost inflation, decreased sales volume, competitive pricing and inventory
management challenges in some of the recently acquired stores significantly reduced profits as a percent of sales for the produce,
deli/food service, bakery, seafood and floral departments. The 2016 increase in gross profit rate as compared to 2015 was driven by a
shift in sales mix from fuel to grocery sales which carry a higher profit margin.
The Company experienced non-cash LIFO inventory valuation adjustment income of $1.1 million and $2.2 million for 2017 and 2016,
respectively, and adjustment expense of $1.4 million for 2015.
Although the Company experienced product cost inflation and deflation in various commodities in 2017, 2016 and 2015, management
cannot accurately measure the full impact of inflation or deflation on retail pricing due to changes in the types of merchandise sold
between periods, shifts in customer buying patterns and the fluctuation of competitive factors.
13
Table of Contents
WEIS MARKETS, INC.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations: (continued)
Results of Operations (continued)
Operating, General and Administrative Expenses
The majority of the expenses were driven by increased sales volume.
Employee-related costs such as wages, employer paid taxes, health care benefits and retirement plans, comprise approximately 60% of
the total “Operating, general and administrative expenses.” As a percent of sales, direct store labor decreased 0.2% in 2017 compared
to 2016 and increased 0.2% in 2016 compared to 2015. The percent of sales increase in 2016 is due to the labor involved in opening
the 44 acquisition stores in the second half of 2016. State and local minimum wage laws continue to be a challenge for the Company
however, management continues to monitor store labor efficiencies and develop labor standards to reduce costs while maintaining the
Company’s customer service expectations to offset their impact.
The Company’s self-insured health care benefit expenses increased by 4.2% in 2017 compared to 2016 and increased by 15.4% in
2016 compared to 2015 and as a percent of sales were 0.9%, 1.0% and 0.9% for 2017, 2016 and 2015, respectively. The increase in
2017 from 2016 is mainly attributed to the increase in participants for a full year from the acquired stores. The increase in 2016 from
2015 is mainly attributed to an increase in participants from the acquired locations as well as overall group health costs. The
Company remains concerned about the impact that The Patient Protection and Affordable Care Act (ACA) will have on its future
operating expenses.
Depreciation and amortization expense charged to “Operating, general and administrative expenses” was $77.4 million, or 2.2% of net
sales, for 2017 compared to $69.8 million, or 2.2% of net sales, for 2016 and $63.3 million, or 2.2% of net sales, for 2015. The
decrease in depreciation and amortization expense in 2017 compared to 2016 and increase in 2016 compared to 2015 was the impact
of opening the 44 acquisition stores in the second half of 2016. See the Liquidity and Capital Resources section for further
information regarding the Company’s capital expansion program.
In 2016, the Company determined that the asset value of one property was impaired. As a result, the Company recognized a pre-tax
impairment loss of $894,000. See Note 1(l) to the Consolidated Financial Statements included in this Annual Report on Form 10-K
for more information on the Company's impairment charges. The Company recognized pre-tax gains of $751,000 in 2015 from the
sale of two properties.
A breakdown of the material increases (decreases) as a percent of sales in "Operating, general and administrative expenses" is as follows:
(dollars in thousands)
Employee-related expenses
Rent expense
2017 vs. 2016
Increase
(Decrease)
Increase (Decrease)
as a % of sales
$
38,808
7,152
(0.3) %
0.1
The dollar amount increase in rent is primarily driven by the acquisition of five former Mars Super Market stores, 38 former
Food Lion stores and a former Nell’s Family Market store in the second half of 2016. The Company expects the percent of
sales to decrease over time as it develops the acquisition stores’ sales.
(dollars in thousands)
Employee-related expenses
Acquisition-related expenses
2016 vs. 2015
Increase
(Decrease)
Increase (Decrease)
as a % of sales
$
$
41,174
14,166
0.1 %
0.5 %
Employee related expenses increased in 2016 for the reasons noted above and due to a 25% increase in associates related the
acquisition of five former Mars stores, 38 former Food Lion stores and a former Nell’s Family Market store. This increase in
associates contributed to increased wages, benefits and retirement expenses.
Acquisition-related expenses, excluding the expenses mentioned above, primarily consisted of store operating expenses,
travel expenses and contracted labor for store resets.
14
Table of Contents
WEIS MARKETS, INC.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations: (continued)
Results of Operations (continued)
Provision for Income Taxes
The effective income tax rate was (24.5)%, 30.1% and 35.7% in 2017, 2016 and 2015, respectively. 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. The effective income tax rate decreased in 2016 due
to the impact of the bargain purchase gain on the 38 locations being included in the overall gain calculation and not in income tax
expense. The effective tax rate excluding the bargain purchase gain was 37.2%.
Liquidity and Capital Resources
The primary sources of cash are cash flows generated from operations and borrowings under the revolving credit agreement the
Company entered into on September 1, 2016 with Wells Fargo Bank, NA. The Company’s revolving credit agreement has a principal
amount of $100.0 million with an additional discretionary availability of $50.0 million. As of December 30, 2017, the Company’s
unused availability under the revolving credit agreement was $46.8 million with $35.0 million of borrowings outstanding and $18.2
million of letters of credit outstanding. The letters of credit are maintained primarily to support performance, payment, deposit or
surety obligations of the Company. The Company does not anticipate drawing on any of them.
The Company’s investment portfolio consists of high grade municipal bonds with maturity dates between one and 10 years and large
capitalized public company equity securities. The portfolio totaled $63.7 million as of December 30, 2017. Management anticipates
maintaining the investment portfolio, but has the ability to liquidate if needed. See “Item 7a. Quantitative and Qualitative Disclosures
about Market Risk” for more details regarding the Company’s market risk.
The Company’s capital expansion program includes the construction of new superstores, the expansion and remodeling of existing
units, the acquisition of sites for future expansion, new technology purchases and the continued upgrade of the Company’s distribution
facilities and transportation fleet. Management currently plans to invest approximately $85.5 million in its capital expansion program
in 2018.
The Board of Directors’ 2004 resolution authorizing the repurchase of up to one million shares of the Company’s common stock has a
remaining balance of 752,468 shares.
Quarterly Cash Dividends
Total cash dividend payments on common stock, on a per share basis, amounted to $1.20 in 2017, 2016 and 2015. The Company
expects to continue paying regular cash dividends on a quarterly basis. However, the Board of Directors reconsiders the declaration of
dividends quarterly. The Company pays these dividends at the discretion of the Board of Directors and the continuation of these
payments and the amount of the dividends depends upon the results of operations, the financial condition of the Company and other
factors which the Board of Directors deems relevant.
15
Table of Contents
WEIS MARKETS, INC.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations: (continued)
Liquidity and Capital Resources (Continued)
Cash Flow Information
(dollars in thousands)
For the Fiscal Years Ended December 30, 2017,
December 31, 2016 and December 26, 2015
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
2017
(52 Weeks)
2016
(53 weeks)
2015
(52 weeks)
2017 vs.
2016
2016 vs.
2015
$
165,814
(97,396)
(61,766)
$
151,593
(186,734)
32,198
$
136,733
(109,845)
(32,278)
$
14,221
89,338
(93,964)
$
14,860
(76,889)
64,476
Operating
Cash flows from operating activities increased in 2017 as compared to 2016 and in 2016 as compared to 2015 primarily
related to the Company’s recent acquisitions. The acquisitions are summarized in Note 9 of the Notes to the Consolidated
Financial Statements included in this Annual Report on Form 10-K. In addition, in 2017 the negative impact of first quarter
long-term incentive payments of $11.8 million were offset by a reduction of $17.1 million of cash paid for income taxes
during the year.
Investing
Property and equipment purchases totaled $95.9 million in 2017, compared to $142.1 million in 2016 and $90.2 million in
2015. In the second half of 2016, the Company paid $24.6 million for the purchase of five former Mars Super Market
locations in the Baltimore County, MD region; $29.4 million for the purchase of 38 former Food Lion Supermarket locations
throughout Virginia, Maryland and Delaware and $9.6 million for the purchase of a former Nell’s Family Market location in
East Berlin, PA. The Company paid $7.9 million for the property and equipment related to the purchase of a store in
Hanover, PA in the third quarter of 2015. As a percentage of sales, capital expenditures, including the 2016 acquisitions,
were 2.8% in 2017, 7.0% in 2016, and 3.1% in 2015. In 2016, the Company sold $42.5 million of marketable securities as it
prepared to finance future acquisitions. In 2017, the Company plans to maintain its marketable securities portfolio at its
current level.
Financing
The Company paid dividends of $32.3 million in 2017, 2016 and 2015. In 2017, payments on the revolving credit agreement
increased net cash used in financing activities by $29.5 million. In 2016, the funds provided by the revolving credit
agreement increased net cash flow provided by financing activities by $64.5 million. The Company anticipates payments on
the revolving credit agreement to continue throughout 2018.
Contractual Obligations
The following table represents scheduled maturities of the Company’s long-term contractual obligations as of December 30, 2017.
(dollars in thousands)
Operating leases
Long-term Debt
Total
Payments due by period
Total
245,494
34,988
280,482
$
$
$
$
Less than
1 year
43,820
-
43,820
1-3 years
73,765
34,988
108,753
$
$
3-5 years
48,017
-
48,017
$
$
$
$
More than
5 years
79,892
-
79,892
16
Table of Contents
WEIS MARKETS, INC.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations: (continued)
Off-Balance Sheet Arrangements
The Company is not a party to any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect
on the Company’s financial condition, results of operations or cash flows, except for the Company's lease commitments to be
recognized on the balance sheet related to operating leases for its store facilities and transportation equipment, which will be required
for annual periods beginning after December 15, 2018 per the Financial Accounting Standards Board (“FASB”) Accounting Standards
Update (“ASU”) 2016-02, Leases (Topic 842). See Note 1(v) Summary of Significant Accounting Policies, to the Consolidated
Financial Statements included in this Annual Report on Form 10-K for more information on ASU 2016-02.
Critical Accounting Policies and Estimates
The Company has chosen accounting policies that it believes are appropriate to accurately and fairly report its operating results and
financial position, and the Company applies those accounting policies in a consistent manner. The Significant Accounting Policies are
summarized in Note 1 to the Consolidated Financial Statements.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires that the Company makes estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and
expenses. These estimates and assumptions are based on historical and other factors believed to be reasonable under the
circumstances. The Company evaluates these estimates and assumptions on an ongoing basis and may retain outside consultants,
lawyers and actuaries to assist in its evaluation. The Company believes the following accounting policies are the most critical because
they involve the most significant judgments and estimates used in preparation of its Consolidated Financial Statements.
Inventories
Inventories are valued at the lower of cost or net realizable value, using both the last-in, first-out (LIFO) for center store and pharmacy
inventories and average cost methods for fresh inventories. Under the LIFO method, inventory is stated at cost, which is determined
by applying a cost-to-retail to each similar merchandise category’s ending retail value. 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.
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 as the required
performance is completed. Warehouse rack and slotting allowances are recorded in cost of sales when new items are initially set up in
the Company's distribution system, which is when the related expenses are incurred and performance under the agreement is complete.
Swell allowances for damaged goods are realized in cost of sales as provided by the supplier, helping to offset product shrink losses
also recorded in cost of sales.
17
Table of Contents
WEIS MARKETS, INC.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations: (continued)
Critical Accounting Policies and Estimates (continued)
Store Closing Costs
The Company provides for closed store liabilities relating to the estimated post-closing lease liabilities and related other exit costs
associated with the store closing commitments. As of December 30, 2017, the remaining closed store has a lease term of
approximately eight months, and the liabilities associated with the closed store lease are paid over the term of the lease. Closed store
lease liabilities totaled $39,000 and $105,000 as of December 30, 2017 and December 31, 2016, respectively. The Company estimates
the lease liabilities, net of estimated sublease income, using the undiscounted rent payments of closed stores. Other exit costs include
estimated real estate taxes, common area maintenance, insurance and utility costs to be incurred after the store closes over the
remaining lease term. Store closings are generally completed within one year after the decision to close. Adjustments to closed store
liabilities and other exit costs primarily relate to changes in sublease income and actual exit costs differing from original estimates.
Adjustments are made for changes in estimates in the period in which the changes become known. Any excess store closing liability
remaining upon settlement of the obligation is reversed to income in the period that such settlement is determined. Store closing
liabilities are reviewed quarterly to ensure that any accrued amount that is not a sufficient estimate of future costs, or that is no longer
needed for its originally intended purpose, is adjusted to income in the proper period. Inventory write-downs, if any, in connection
with store closings, are classified in cost of sales. Costs to transfer inventory and equipment from closed stores are expensed as
incurred.
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 was liable for associate health
claims up to an annual maximum of $2,000,000 per member prior to March 1, 2014 and an unlimited amount per member as of March
1, 2014. As of March 1, 2014, the Company purchased stop loss insurance which carries a $500,000 specific deductible with a
$250,000 aggregating deductible. The Company is liable for workers' compensation claims up to $2,000,000 per claim. Property and
casualty insurance coverage is maintained with outside carriers at deductible or retention levels ranging from $100,000 to $1,000,000.
Significant assumptions used in the development of the actuarial estimates include reliance on the Company’s historical claims data
including average monthly claims and average lag time between incurrence and reporting of the claim.
Forward-Looking Statements
In addition to historical information, this Annual Report may contain forward-looking statements, which are included pursuant to the
“safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Any forward-looking statements contained herein
are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. For example,
risks and uncertainties can arise with changes in: general economic conditions, including their impact on capital expenditures;
business conditions in the retail industry; the regulatory environment; rapidly changing technology and competitive factors, including
increased competition with regional and national retailers; and price pressures. Readers are cautioned not to place undue reliance on
forward-looking statements, which reflect management's analysis only as of the date hereof. The Company undertakes no obligation
to publicly revise or update these forward-looking statements to reflect events or circumstances that arise after the date hereof.
Readers should carefully review the risk factors described in other documents the Company files periodically with the Securities and
Exchange Commission.
18
Table of Contents
WEIS MARKETS, INC.
Item 7a. Quantitative and Qualitative Disclosures about Market Risk:
(dollars in thousands)
December 30, 2017
Rate sensitive assets:
Fixed interest rate securities
Average interest rate
2018
2019
Expected Maturity Dates
2021
2020
2022
Thereafter
Total
Fair Value
Dec. 30, 2017
$ 13,341
$ 5,774
$ 4,519
$ 7,475
$ 6,024
$ 19,407
$ 56,540
$ 54,833
2.04 %
1.63 %
2.15%
2.09 %
2.51%
2.37 %
2.16%
Other Relevant Market Risks
The Company’s equity securities at December 30, 2017 had a cost basis of $1,198,000 and a fair value of $8,832,000. The dividend
yield realized on these equity investments was 4.86% in 2017. By their nature, both the fixed interest rate securities and the equity
investments inherently expose the holders to market risk. The extent of the Company’s interest rate and other market risk is not
quantifiable or predictable with precision due to the variability of future interest rates and other changes in market conditions.
However, the Company believes that its exposure in this area is not material.
The Company’s revolving credit agreement is exposed to interest rate fluctuations to the extent of changes in the LIBOR rate. The
Company believes this exposure is not material due to availability of liquid assets to eliminate the outstanding credit facility
19
Table of Contents
Item 8. Financial Statements and Supplementary Data:
WEIS MARKETS, INC.
CONSOLIDATED BALANCE SHEETS
2017
2016
$
$
$
$
$
$
$
21,305
63,665
14,476
82,877
279,509
19,435
2,047
483,314
886,243
52,330
19,852
1,441,739
216,252
33,403
17,470
7,217
274,342
34,988
18,409
20,140
87,422
13,594
448,895
9,949
1,127,872
5,880
1,143,701
(150,857)
992,844
1,441,739
$
14,653
67,171
11,154
96,170
276,783
16,310
1,625
483,866
878,195
52,330
16,913
1,431,304
199,159
50,947
19,330
6,730
276,166
64,476
15,277
21,353
119,445
7,865
504,582
9,949
1,062,778
4,852
1,077,579
(150,857)
926,722
1,431,304
in thousands)
(dollars
December 30, 2017 and December 31, 2016
Assets
Current:
Cash and cash equivalents
Marketable securities
SERP investment
Accounts receivable, net
Inventories
Prepaid expenses and other current assets
Income taxes recoverable
Total current assets
Property and equipment, net
Goodwill
Intangible and other assets, net
Total assets
Liabilities
Current:
Accounts payable
Accrued expenses
Accrued self-insurance
Deferred revenue, net
Total current liabilities
Long-term debt
Postretirement benefit obligations
Accrued self-insurance
Deferred income taxes
Other
Total liabilities
Shareholders’ Equity
Common stock, no par value, 100,800,000 shares authorized, 33,047,807 shares issued,
26,898,443 shares outstanding
Retained earnings
Accumulated other comprehensive income, net
Treasury stock at cost, 6,149,364 shares
Total shareholders’ equity
Total liabilities and shareholders’ equity
See accompanying notes to Consolidated Financial Statements.
20
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 30, 2017,
December 31, 2016 and December 26, 2015
Net sales
Cost of sales, including warehousing and distribution expenses
Gross profit on sales
Operating, general and administrative expenses
Income from operations
Investment income and interest expense
Gain on bargain purchase
Income before provision for income taxes
Provision for income taxes
Net income
Weighted-average shares outstanding, basic and diluted
Cash dividends per share
Basic and diluted earnings per share
2017
(52 weeks)
2016
(53 weeks)
2015
(52 weeks)
$
$
$
$
3,466,807
2,540,348
926,459
850,034
76,425
2,598
-
79,023
(19,391)
98,414
26,898,443
1.20
3.66
$
$
$
$
3,136,720
2,264,565
872,155
773,830
98,325
2,457
23,879
124,661
37,499
87,162
26,898,443
1.20
3.24
$
$
$
$
2,876,748
2,090,016
786,732
695,953
90,779
1,552
-
92,331
33,001
59,330
26,898,443
1.20
2.21
21
Table of Contents
WEIS MARKETS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(dollars in thousands)
For the Fiscal Years Ended December 30, 2017,
December 31, 2016 and December 26, 2015
Net income
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 $19, $239 and $37, respectively)
Accumulated change in effective tax rate
Reclassification adjustment for (gains) losses included in net income
(Net of deferred taxes of $11, $180 and $11, respectively)
Other comprehensive income (loss), net of tax
Comprehensive income, net of tax
2017
(52 weeks)
2016
(53 weeks)
2015
(52 weeks)
$
98,414
$
87,162
$
59,330
(43)
1,042
29
1,028
99,442
$
348
-
(52)
-
(257)
91
87,253
$
(16)
(68)
59,262
$
22
Table of Contents
WEIS MARKETS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Common Stock
Shares
Amount
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Treasury Stock
Amount
Total
Shareholders’
Equity
(dollars in thousands, except shares)
For the Fiscal Years Ended December 30, 2017,
December 31, 2016 and December 26, 2015
Balance at December 27, 2014
Net income
Other comprehensive loss, net of
reclassification adjustments and tax
Dividends paid
Balance at December 26, 2015
Net income
Other comprehensive income, net of
reclassification adjustments and tax
Dividends paid
Balance at December 31, 2016
Net income
Other comprehensive income, net of
reclassification adjustments and tax
Other comprehensive income tax reform adjustment
Dividends paid
33,047,807 $
—
9,949 $
—
980,842 $
59,330
—
—
33,047,807
—
—
—
33,047,807
—
—
—
9,949
—
—
—
9,949
—
—
(32,278)
1,007,894
87,162
—
(32,278)
1,062,778
98,414
—
—
—
Balance at December 30, 2017
See accompanying notes to Consolidated Financial Statements.
33,047,807 $
4,829
—
(68)
—
4,761
—
91
—
4,852
—
(14)
1,042
—
5,880
Shares
6,149,364 $
—
—
—
6,149,364
—
—
—
6,149,364
—
(150,857) $
—
—
—
(150,857)
—
—
—
(150,857)
—
—
—
—
—
—
—
6,149,364 $
(150,857) $
844,763
59,330
(68)
(32,27
8)
871,747
87,162
91
(32,278)
926,722
98,414
(14)
-
(32,278)
992,844
—
—
—
9,949 $
—
(1,042)
(32,278)
1,127,872 $
23
Table of Contents
WEIS MARKETS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
For the Fiscal Years Ended December 30, 2017,
December 31, 2016 and December 26, 2015
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization
(Gain) loss on disposition of fixed assets
Impairment of fixed assets
(Gain) loss on sale of marketable securities
Gain on sale of intangible assets
Gain on acquisition of business
Deferred income taxes
Changes in operating assets and liabilities:
Inventories
Accounts receivable and prepaid expenses
Accounts payable and other liabilities
Income taxes
Other
Net cash provided by operating activities
Cash flows from investing activities:
Purchase of property and equipment
Proceeds from the sale of property and equipment
Purchase of marketable securities
Proceeds from maturities of marketable securities
Proceeds from the sale of marketable securities
Acquisition of business
Purchase of intangible assets
Proceeds from sale of intangible assets
Change in SERP investment
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from (payments on) long-term debt
Dividends paid
Net cash (used in) provided by financing activities
2017
(52 weeks)
2016
(53 weeks)
2015
(52 weeks)
$
98,414
$
87,162
$
59,330
85,415
(700)
-
40
-
-
(31,993)
(2,726)
9,598
7,742
(422)
446
165,814
76,862
1,353
894
(437)
(200)
(23,879)
5,703
(38,102)
(5,096)
46,131
41
1,161
151,593
(
(
95,857)
2,246
12,612)
8,442
7,272
-
(3,565)
-
(3,322)
97,396)
(
(
142,144)
442
(40,858)
1,335
62,566
(63,632)
(2,568)
200
(2,075)
186,734)
(
70,114
(54)
-
(27)
-
-
(212)
10,242
(17,127)
14,403
(1,054)
1,118
136,733
(90,210)
1,929
(31,329)
3,201
9,171
-
(2,649)
-
42
(109,845)
(29,488)
(32,278)
(61,766)
6,652
14,653
21,305
64,476
(32,278)
32,198
(2,943)
17,596
14,653
-
(32,278)
(32,278)
(5,390)
22,986
17,596
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
See accompanying notes to Consolidated Financial Statements. Cash paid for income taxes was $13.0 million, $31.0 million and $30.2 million in 2017, 2016 and 2015,
respectively. Cash paid for interest related to long-term debt was $973,000 and $141,000 in 2017 and 2016, respectively.
$
$
$
24
Table of Contents
WEIS MARKETS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Summary of Significant Accounting Policies
The following is a summary of the significant accounting policies utilized in preparing the Company’s Consolidated Financial
Statements:
(a) Description of Business
Weis Markets, Inc. is a Pennsylvania business corporation formed in 1924. The Company is engaged principally in the retail sale of
food in Pennsylvania and surrounding states. 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 2017.
(b) Definition of Fiscal Year
The Company’s fiscal year ends on the last Saturday in December. Fiscal 2017 was comprised of 52 weeks, ending on December 30,
2017. Fiscal 2016 was comprised of 53 weeks, ending on December 31, 2016. Fiscal 2015 was comprised of 52 weeks, ending on
December 26, 2015. 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 30, 2017 and December 31, 2016 totaled $341,000 and $714,000, respectively.
(f) Marketable Securities
Marketable securities consist of 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, are excluded from earnings and are reported as a separate component of
shareholders’ equity until realized. A decline in the fair value below cost that is deemed other than temporary results in a charge to
earnings and the establishment of a new cost basis for the security. Dividend and interest income is recognized when earned.
Realized gains and losses are included in earnings and are derived using the specific identification method for determining the cost of
securities.
(g) Accounts Receivable
Accounts receivable are stated net of an allowance for uncollectible accounts of $1,946,000 and $1,455,000 as of December 30, 2017
and December 31, 2016, 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. Customer electronic payments accepted at the point of sale are classified as accounts receivable until collected.
25
Table of Contents
WEIS MARKETS, INC.
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 last-in, first-out (LIFO) and average cost methods.
The Company’s center store and pharmacy inventories are valued using LIFO. Under this method, inventory is stated at cost, which is
determined by applying a cost-to-retail to each similar merchandise category’s ending retail value. 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) 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 30, 2017 and December 31, 2016 consisted of the
following:
(dollars in thousands)
Liquor Licenses
Lease Acquisitions
Customer Lists
Total
$
Gross
11,121
10,960
1,162
$
23,243
December 30, 2017
Accumulated
Amortization
-
3,902
175
$
$
Net
$
11,121
7,058
987
$
Gross
8,423
10,960
295
December 31, 2016
Accumulated
Amortization
$
-
2,984
21
$
Net
8,423
7,976
274
4,077
$
19,166
$
19,678
$
3,005
$
16,673
Intangible assets with a definite useful life are generally amortized on a straight-line basis over periods up to 30 years for lease
acquisitions and up to 10 years for customer lists. Estimated amortization expense for the next five fiscal years is approximately $1.0
million in 2018, $1.0 million in 2019, $1.0 million in 2020, $975,000 in 2021 and $732,000 in 2022. As of December 30, 2017, the
Company’s intangible assets with indefinite lives consisted of goodwill and Pennsylvania liquor licenses.
26
Table of Contents
WEIS MARKETS, INC.
Note 1 Summary of Significant Accounting Policies (continued)
(k) 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 $894,000 in the fourth quarter of 2016 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 a property was less than the recoverable
value. This charge was included as a component of "Operating, general and administrative expenses."
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.
(l) Store Closing Costs
The Company provides for closed store liabilities relating to the estimated post-closing lease liabilities and related other exit costs
associated with the store closing commitments. As of December 30, 2017, the remaining closed store has a lease term of
approximately eight months, and the liabilities associated with the closed store lease are paid over the term of the lease. Closed store
lease liabilities totaled $39,000 and $105,000 as of December 30, 2017 and December 31, 2016, respectively. The Company estimates
the lease liabilities, net of estimated sublease income, using the undiscounted rent payments of closed stores. Other exit costs include
estimated real estate taxes, common area maintenance, insurance and utility costs to be incurred after the store closes over the
remaining lease term. Store closings are generally completed within one year after the decision to close. Adjustments to closed store
liabilities and other exit costs primarily relate to changes in sublease income and actual exit costs differing from original estimates.
Adjustments are made for changes in estimates in the period in which the changes become known. Any excess store closing liability
remaining upon settlement of the obligation is reversed to income in the period that such settlement is determined. Store closing
liabilities are reviewed quarterly to ensure that any accrued amount that is not a sufficient estimate of future costs, or that is no longer
needed for its originally intended purpose, is adjusted to income in the proper period. Inventory write-downs, if any, in connection
with store closings are classified in cost of sales. Costs to transfer inventory and equipment from closed stores are expensed as
incurred.
The following table summarizes accrual activity for future lease obligations of stores that were closed in the normal course of
business:
(dollars in thousands)
Balance at December 26, 2015
Additions
Payments
Adjustments
Balance at December 31, 2016
Additions
Payments
Adjustments
Balance at December 30, 2017
27
Closed Store
Obligations
212
0
(33)
(74)
105
0
0
)
(66
39
$
$
Table of Contents
WEIS MARKETS, INC.
Note 1 Summary of Significant Accounting Policies (continued)
(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 was liable for associate health
claims up to an annual maximum of $2,000,000 per member prior to March 1, 2014 and an unlimited amount per member as of and
after March 1, 2014. As of March 1, 2014, the Company purchased stop loss insurance which carries a $500,000 specific deductible
with a $250,000 aggregating deductible. The Company is liable for workers' compensation claims up to $2,000,000 per claim.
Property and casualty insurance coverage is maintained with outside carriers at deductible or retention levels ranging from $100,000
to $1,000,000. Significant assumptions used in the development of the actuarial estimates include reliance on the Company’s
historical claims data including average monthly claims and average lag time between incurrence and reporting of the claim.
(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 8 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.
(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 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 Warehousing and Distribution Expenses
“Cost of sales, including warehousing and distribution expenses” consists of direct product costs (net of discounts and allowances),
distribution center and transportation costs, as well as manufacturing facility operations.
(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 rack and slotting allowances are recorded in cost of sales when new items are initially set up in the Company's
distribution system, which is when the related expenses are incurred and performance under the agreement is complete. Swell
allowances for damaged goods are realized in cost of sales as provided by the supplier, helping to offset product shrink losses also
recorded in cost of sales.
28
Table of Contents
WEIS MARKETS, INC.
Note 1 Summary of Significant Accounting Policies (continued)
(r) Vendor Allowances (continued)
Vendor allowances recorded as credits in cost of sales totaled $114.1 million in 2017, $123.9 million in 2016 and $97.0 million in
2015. Vendor paid cooperative advertising credits totaled $19.2 million in 2017, $19.1 million in 2016 and $17.1 million in 2015.
These credits were netted against advertising costs within “Operating, general and administrative expenses.” The Company had
accounts receivable due from vendors of $1.0 million and $852,000 for earned advertising credits and $13.1 million and $10.7 million
for earned promotional discounts as of December 30, 2017 and December 31, 2016, respectively. The Company had $9.8 million and
$4.0 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 30, 2017 and December 31, 2016, 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, advertising costs and credits, 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 $31.0 million in 2017, $26.3 million in 2016 and $23.1 million in 2015 in “Operating, general and
administrative expenses.”
(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, as disclosed in Note 5.
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.”
(v) Current Relevant Accounting Standards
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from
Contracts with Customers (Topic 606), as amended by several subsequent ASU’s, which establishes principles for recognizing
revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received
in exchange for those goods or services. In August 2015, the FASB issued a one-year deferral of the effective date of this new
guidance resulting in it now being effective for the Company beginning in fiscal year 2018. The Company has evaluated the impact of
adoption of the ASU. The Company’s assessment of the new guidance has identified customer loyalty programs and gift cards
affected by the new guidance. The effects related to these transactions will not effect the Company’s Consolidated Financial
Statements as any effect as a result of the adoption is not material. The Company has determined that the adoption of the ASU will
not have a significant impact on the Company’s point of sale product sales. The Company will adopt the new standard using the
modified retrospective method beginning December 31, 2017.
In January 2016, the FASB issued ASU 2016-01 Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement
of Financial Assets and Financial Liabilities. ASU 2016-01 generally requires that equity investments (excluding equity method
investments) be measured at fair value with changes in fair value recognized in net income. The Company expects that the adoption
of ASU 2016-01 will likely have an impact on the net income reported in the Company’s Consolidated Statements of Income, but will
not impact the Company’s comprehensive income or shareholders’ equity. The amendment is effective for fiscal years beginning after
December 15, 2017, with the cumulative effect of the adoption made to the balance sheet as of the date of adoption. Adoption will
result in a reclassification of the related accumulated unrealized appreciation, net of applicable deferred income taxes, currently
included in accumulated other comprehensive income to retained earnings, resulting in no impact on the Company’s shareholders’
equity.
In February 2016, the FASB issued ASU 2016-02 Leases (Topic 842). ASU 2016-02 requires lessees to recognize assets and
liabilities for the rights and obligations created by their leases with lease terms more than 12 months. ASU 2016-02 will become
effective for annual periods beginning after December 15, 2018 and for interim periods within those fiscal years. The Company is
currently in the process of evaluating the impact of adoption of the ASU and expects the adoption to have a significant impact on the
Company’s Consolidated Balance Sheets.
29
Table of Contents
WEIS MARKETS, INC.
Note 1 Summary of Significant Accounting Policies (continued)
(v) Current Relevant Accounting Standards (continued)
In March 2016, the FASB issued ASU 2016-04 Liabilities – Extinguishments of Liabilities (Subtopic 405-20) Recognition of Breakage
for Certain Prepaid Stored-Value Products. ASU 2016-04 requires that an entity must disclose the methodology and specific
judgements made in applying the breakage recognized. ASU 2016-04 will become effective for the financial statements issued for the
fiscal years beginning after December 15, 2017. The Company has evaluated the effect of the adoption of the ASU and determined
there will not be a significant impact on the Company’s Consolidated Financial Statements. The Company plans to adopt ASU 2016-
04 beginning December 31, 2017.
In February 2018, the FASB issued ASU 2018-02 Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification
of Certain Tax Effects from Accumulated Other Comprehensive Income. ASU 2018-02 clarifies the treatment of the deferred tax
adjustments on temporary differences that arose from items of income or loss that were originally recorded in accumulated other
comprehensive income (AOCI) by reclassifying the stranded tax effect to retained earnings. The Company early adopted this ASU for
the fiscal year ending December 30, 2017.
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 highly liquid equity securities, for which quoted market
prices are available. The Company’s bond portfolio is valued using Level 2 inputs. The Company’s 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.
30
Table of Contents
WEIS MARKETS, INC.
Note 2 Marketable Securities (continued)
Marketable securities, as of December 30, 2017 and December 31, 2016, consisted of:
(dollars in thousands)
December 30, 2017
Available-for-sale:
Level 1
Equity securities
Level 2
Municipal bonds
(dollars in thousands)
December 31, 2016
Available-for-sale:
Level 1
Equity securities
Level 2
Municipal bonds
Amortized
Cost
Gross
Unrealized
Holding Gains
Gross
Unrealized
Holding Losses
Fair
Value
$
$
$
$
1,198 $
7,634
$
-
$
8,832
54,278
55,476
$
671
8,305
$
(116)
(116)
$
54,833
63,665
Amortized
Cost
Gross
Unrealized
Holding Gains
Gross
Unrealized
Holding Losses
Fair
Value
1,198 $
8,162
$
-
$
9,360
57,739
58,937 $
531
8,693
$
(459)
(459)
$
57,811
67,171
Maturities of marketable securities classified as available-for-sale at December 30, 2017, were as follows:
(dollars in thousands)
Available-for-sale:
Due within one year
Due after one year through five years
Due after five years through ten years
Equity securities
Amortized
Cost
Fair
Value
$
$
12,535
22,421
19,322
1,198
55,476
$
$
12,585
22,655
19,593
8,832
63,665
SERP Investments
The Company also maintains a non-qualified supplemental executive retirement plan and a non-qualified pharmacist deferred
compensation 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 changes in the underlying liability to the associates are recorded in “Operating, general and administrative
expenses.”
31
Table of Contents
WEIS MARKETS, INC.
Note 3 Inventories
Merchandise inventories, as of December 30, 2017 and December 31, 2016, were valued as follows:
(dollars in thousands)
LIFO
Average cost
2017
221,777
57,732
279,509
$
$
2016
223,294
53,489
276,783
$
$
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 $78,005,000 and $79,128,000 higher than as reported on the above methods as of
December 30, 2017 and December 31, 2016, respectively.
Note 4 Property and Equipment
Property and equipment, as of December 30, 2017 and December 31, 2016, consisted of:
(dollars in thousands)
Land
Buildings and improvements
Equipment
Leasehold improvements
Total, at cost
Less accumulated depreciation and amortization
Useful Life
(in years)
10-60
3-12
5-20
2017
129,878
693,898
1,054,986
212,109
2,090,871
1,204,628
886,243
$
$
2016
134,81
3
655,487
1,033,967
205,506
2,029,773
1,151,578
878,195
$
$
32
Table of Contents
WEIS MARKETS, INC.
Note 5 Lease Commitments
At December 30, 2017, the Company leased approximately 54% of its open store facilities under operating leases that expire at
various dates through 2033. These leases generally provide for fixed annual rentals; however, several provide for minimum annual
rentals plus contingent rentals as a percentage of annual sales and a number of leases require the Company to pay for all or a portion
of insurance, real estate taxes, water and sewer rentals, and repairs, the cost of which is charged to the related expense category rather
than being accounted for as rent expense. Most of the leases contain multiple renewal options, under which the Company may extend
the lease terms from 5 to 20 years. Rents on operating leases, including agreements with step rents, are charged to expense on a
straight-line basis over the minimum lease term. Additionally, the Company has operating leases for certain transportation and other
equipment.
Rent expense and income on all leases consisted of:
(dollars in thousands)
Minimum annual rentals
Contingent rentals
Lease or sublease income
2017
46,804
432
(7,612)
39,624
$
$
2016
38,632
431
(7,212)
31,851
$
$
$
2015
34,794
452
(7,069)
$
28,177
The following is a schedule by years of future minimum rental payments required under operating leases and total minimum sublease
and lease rental income to be received that have initial or remaining non-cancelable lease terms in excess of one year as of
December 30, 2017.
(dollars in thousands)
2018
2019
2020
2021
2022
Thereafter
Leases
Subleases
$
$
43,820
40,665
33,100
26,893
21,124
79,892
245,494
$
$
(3,278)
(3,075)
(2,800)
(2,397)
(2,054)
(8,693)
(22,297)
The Company did not have a liability accrued as of December 31, 2017 and as of December 31, 2016, for future minimum rental
payments due on previously closed stores, reduced by the estimated sublease income to be received. The future minimum rental
payments required under operating leases and estimated sublease income for these locations are included in the above schedule.
33
Table of Contents
WEIS MARKETS, INC.
Note 6 Retirement Plans
The Company has a qualified retirement savings plan, the Weis Markets, Inc. Retirement Savings Plan, covering substantially all full-
time 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 three non-qualified supplemental retirement plans 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.
Retirement plan costs:
(dollars in thousands)
Retirement savings plan
Deferred compensation plan
Supplemental executive retirement plan
Deferred compensation plan for pharmacists
2017
2016
2015
3,343
813
1,920
705
6,781
$
3,593
788
909
284
5,574
$
3,161
(318)
484
(165)
3,162
$
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 30, 2017 is $4,914,000, 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 $1,013,000 for 2018 and for the years thereafter dependent on the lives of the
beneficiaries.
The Company also maintains a non-qualified supplemental executive retirement plan and a non-qualified pharmacist deferred
compensation plan for certain of its associates. These plans are designed to provide retirement benefits and salary deferral
opportunities because of limitations imposed by the Internal Revenue Code and the Regulations implemented by the Internal Revenue
Service. These plans are unfunded and accounted for on an accrual basis. Participants in these plans are excluded from participation
in the profit sharing portion of the Weis Markets, Inc. Retirement Savings Plan 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 six years of service with the Company. Benefits are distributed among
participants upon reaching the applicable retirement age. Substantial risk of benefit forfeiture does exist for participants in these
plans. The present value of accumulated benefits amounted to $14,508,000 and $11,176,000 at December 30, 2017 and December 31,
2016, respectively, and is included in “Postretirement benefit obligations” in the Consolidated Balance Sheets.
The Company has no other postretirement benefit plans.
34
Table of Contents
WEIS MARKETS, INC.
Note 7 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.
(dollars in thousands)
Accumulated other comprehensive income balance as of December 26, 2015
Other comprehensive income before reclassifications
Amounts reclassified from accumulated other comprehensive income
Net current period other comprehensive loss
Accumulated other comprehensive income balance as of December 31, 2016
Other comprehensive loss before reclassifications
Accumulated change in effective tax rate
Amounts reclassified from accumulated other comprehensive income
Net current period other comprehensive income
Accumulated other comprehensive income balance as of December 30, 2017
Unrealized Gains
on Available-for-Sale
Marketable Securities
4,761
348
(257)
91
4,852
(43)
1,042
29
1,028
5,880
$
$
$
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 30, 2017, December 31, 2016 and December 26, 2015.
(dollars in thousands)
Location
Unrealized gains (losses) on available-for-sale marketable securities
Am oun ts Reclassified fro m
Accumulated Other Comprehensive Income to the
Consolidated Statements of Income
2017
2016
2015
Total amount reclassified, net of tax
Investment income and interest
expense
Provision for income taxes
$
$
(40) $
11
(29) $
437 $
(180)
257 $
27
(11)
16
35
WEIS MARKETS, INC.
Table of Contents
Note 8 Income Taxes
The provision (benefit) for income taxes consists of:
(dollars in thousands)
Current:
Federal
State
Deferred:
Federal
State
2017
2016
2015
$
10,630
1,972
(34,659)
2,666
(19,391)
$
$
$
25,908
5,888
6,020
(317)
37,499
$
29,888
3,325
(188)
(24)
33,001
$
The reconciliation of income taxes computed at the federal statutory rate 35% in 2017, 2016 and 2015 respectively.
Ending deferred tax liability has been computed at the federal statutory rate of 21% due to the Tax Reform.
(dollars in thousands)
Income taxes at federal statutory rate
State income taxes, net of federal income tax benefit
Deferred tax on gain on bargain purchase
Nondeductible employee-related expenses
2017 tax reform
Other
$
$
2017
27,658
1,306
-
1,828
(49,336)
(847)
Provision for income taxes (effective tax rate (24.5)%, 30.1% and 35.7%, respectively)
$
(19,391)
$
2016
43,631
2,413
(8,358)
-
-
(187)
37,499
$
2015
32,316
1,112
-
-
-
(427)
$
33,001
The effective income tax rate was (24.5)%, 30.1% and 35.7% in 2017, 2016 and 2015, respectively. 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. The effective income tax rate decreased in 2016 due
to the impact of the bargain purchase gain on the 38 locations being included in the overall gain calculation and not in income tax
expense. The effective tax rate excluding the bargain purchase gain was 37.2%
Cash paid for federal income taxes was $12.0 million, $27.3 million and $28.0 million in 2017, 2016 and 2015 respectively. Cash
paid for state income taxes was $1.0 million, $3.7 million and $2.2 million in 2017, 2016 and 2015 respectively.
The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities at December 30, 2017 and
December 31, 2016, are:
(dollars in thousands)
Deferred tax assets:
Accounts receivable
Compensated absences
Employment incentives
Employee benefit plans
General liability insurance
Postretirement benefit obligations
Net operating loss carryforwards
Other
Total deferred tax assets
Deferred tax liabilities:
Inventories
Unrealized gains on marketable securities
Nondeductible accruals and other
Depreciation
Total deferred tax liabilities
Net deferred tax liability
36
2017
2016
$
$
542
848
388
5,581
2,991
5,365
7,745
4,373
27,833
(8,026)
(2,310)
(5,160)
(99,759)
(115,255)
(87,422)
$
$
586
1,076
9,826
9,243
4,359
6,484
5,600
2,224
39,398
(7,619)
(3,382
)
(7,517
)
(140,325)
(158,843
)
(119,445)
Table of Contents
WEIS MARKETS, INC.
Note 8 Income Taxes (continued)
The following table summarizes the activity related to the Company’s unrecognized tax benefits:
(dollars in thousands)
Unrecognized tax benefits at beginning of year
Increases based on tax positions related to the current year
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
Unrecognized tax benefits at end of year
2017
2016
$
$
3,124
1,567
-
-
-
-
4,691
$
$
1,264
1,563
297
-
-
-
3,124
The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $1,567,000 in 2017,
$1,860,000 in 2016 and $1,264,000 in 2015.
The Company’s U.S. Federal income tax filings have been examined by the Internal Revenue Service through 2008. The Company or
one of its subsidiaries files tax returns in various states. The tax years subject to examination in Pennsylvania, where the majority of
the Company's revenues are generated, are 2014 to 2017.
The Company has net operating loss carryforwards of $98.1 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.
37
Table of Contents
Note 9 Acquisition of Business
Fiscal 2017 Acquisitions
There were no acquisitions for fiscal 2017.
WEIS MARKETS, INC.
Fiscal 2016 Acquisitions
On August 1, 2016, the Company purchased five Mars Super Market stores located in Maryland. Weis Markets, Inc. acquired these
locations and their operations in an effort to expand its presence in the Baltimore County region. The results of operations of the
former Mars Super Market acquisition are included in the accompanying Consolidated Financial Statements from the date of
acquisition. The five former Mars Super Market stores contributed $91.5 million and $38.0 million to sales in 2017 and 2016,
respectively. The cash purchase price paid was $24.6 million for the property, equipment, inventories, prepaid expenses and goodwill
related to this purchase. The Company accounted for this transaction as a business combination in accordance with the acquisition
method. The fair value of intangibles was determined based on the discounted cash flow model and property and equipment were
determined based on external appraisals. Weis Markets, Inc. assumed two lease obligations in the acquisition of the former Mars
Super Market stores and entered into two new lease agreements. Goodwill of $13.3 million has been recorded, based upon the
expected benefits to be derived from new management business strategy and cost synergies. The $13.3 million of goodwill is
deductible for tax purposes. The purchase price has been allocated to the acquired assets as follows.
The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition. The fair values
of the acquired assets and assumed liabilities are reported below.
(dollars in thousands)
Inventories
Accounts receivable and prepaid expenses
Property and equipment
Goodwill
Intangibles - favorable leasehold interest, net
Total fair value of assets acquired
5 Mars Super Market Stores
August 1, 2016
$
$
1,267
248
7,305
13,255
2,495
24,570
38
Table of Contents
WEIS MARKETS, INC.
Note 9 Acquisition of Business (continued)
Fiscal 2016 Acquisitions (continued)
In September 2016, the Company began its acquisition of 38 former Food Lion, LLC stores. Within eight weeks, ending in October
2016, Weis Markets acquired 21 Maryland, 13 Virginia and 4 Delaware former Food Lion, LLC stores. The results of operations of
the 38 former Food Lion, LLC stores are included in the accompanying Consolidated Financial Statements from the date of
acquisition. The Company accounted for this transaction as a business combination in accordance with the acquisition method. The
fair value of intangibles was determined based on the discounted cash flow model and property and equipment were determined based
on external appraisals. The acquired locations were part of a FTC forced diversiture in the approval process of the merger of Ahold
and Delhaize Group, which resulted in a below fair value purchase price consideration. The cash purchase price paid was $29.4
million for the property, equipment, inventories, prepaid expenses and liabilities. Weis Markets, Inc. assumed thirty lease obligations
and ownership of eight locations. The Company recognized a gain of $23.9 million on the purchase of the 38 former Food Lion, LLC
stores. The 38 acquired Food Lion, LLC locations contributed $369.2 million and $92.5 million to sales in 2017 and 2016,
respectively.
The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition. The fair values
of the acquired assets and assumed liabilities are reported below.
(dollars in thousands)
Assets
Current:
Accounts receivable, net
Inventories
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Intangibles - favorable leasehold interest
Total assets
Liabilities
Current:
Accrued expenses
Total current liabilities
Other - unfavorable leasehold interest
Deferred tax liability
Total liabilities
Total fair value of assets acquired and liabilities assumed
Gain on bargain purchase
38 Food Lion, LLC Stores
Sept. 11 - Oct. 30, 2016
146
7,614
1,044
8,804
60,735
4,583
74,122
(428)
(428)
(3,738)
(16,663)
(20,829)
53,293
23,879
$
$
$
39
Table of Contents
WEIS MARKETS, INC.
Note 9 Acquisition of Business (continued)
Fiscal 2016 Acquisitions (continued)
On October 30, 2016, Weis Markets acquired a former Nell’s Family Market store located in East Berlin, PA from C&S Wholesale
Grocers. The results of operations of the former Nell’s Family Market acquisition are included in the accompanying Consolidated
Financial Statements from the date of acquisition. The purchase price was $13.0 million , of which $3.4 million is payable over a 4
year term for the property, equipment, inventory, prepaid expenses and liabilities. The Company accounted for this transaction as a
business combination in accordance with the acquisition method. The fair value of intangibles was determined based on the
discounted cash flow model and property and equipment were determined based on external appraisals. The former Nell’s Family
Market contributed $17.6 million and $3.0 million to sales in 2017 and 2016, respectively. Goodwill of $3.9 million has been
recorded, based upon the expected benefits to be derived from new management business strategy and cost synergies. The $3.9
million of goodwill is deductible for tax purposes.
The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition. The fair values
of the acquired assets and assumed liabilities are reported below.
Nell's Family Market Store
October 30, 2016
$
(dollars in thousands)
Assets
Current:
Inventories
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Goodwill
Intangible and other assets, net
Total assets
Liabilities
Current:
Accrued expenses
Total current liabilities
401
39
440
8,625
3,913
23
13,001
(3)
(3)
12,998
Total fair value of assets acquired and liabilities assumed
$
The pro forma information includes historical results of operations of the 38 former Food Lion Supermarket and 5 former Mars Super
Market stores but does not include efficiencies, cost reductions, synergies or investments in lower prices for the Company’s customers
expected to result from the acquisitions. The unaudited pro forma financial information is not necessarily indicative of the results that
actually would have occurred had the 38 former Food Lion Supermarket and the 5 former Mars Super Market stores been acquired at
the beginning of 2015. Pro forma results of sales, assuming the acquisitions had taken place at the beginning of 2015, are included in
the following table. The Company does not have reliable information to provide additional pro forma disclosures.
(dollars in thousands)
For the Fiscal Years Ended December 30, 2017,
December 31, 2016 and December 26, 2015
Store sales
2017
(52 weeks)
2016
(53 weeks)
2015
(52 weeks)
$
3,460,484
$
3,563,145
$
3,424,414
Fiscal 2015 Acquisitions
The Company paid $7.9 million for the property and equipment related to the purchase of a store in Hanover, Pennsylvania on August
31, 2015 from C&S Wholesale Grocers to expand current market share. The purchase price was allocated between land, building and
equipment of $1.9 million, $5.9 million and $112,000, respectively, in accordance with the Company’s accounting policies for
business combinations. No Goodwill was recognized.
40
Table of Contents
WEIS MARKETS, INC.
Note 10 Summary of Quarterly Results (Unaudited)
Quarterly financial data for 2017 and 2016 are as follows:
(dollars in thousands, except per share amounts)
Thirteen Weeks Ended
April 1,2017
July 1, 2017
Net sales
Gross profit on sales
Net income
Basic and diluted earnings per share
__________________
*The quarter ended December 30, 2017 includes the tax benefit of $49.3 million as a result of revaluing the Company’s net deferred
tax liability using the enacted Federal tax rate of 21% under the Tax Reform.
September 30, 2017 December 30, 2017
883,748
233,945
63,654 *
2.37
876,569
239,879
18,475
.69
854,261
222,839
4,449
.16
852,229
229,796
11,836
.44
$
$
$
$
$
$
$
$
(dollars in thousands, except per share amounts)
Thirteen Weeks Ended
Fourteen Weeks
Ended
Net sales
Gross profit on sales
Gain on bargain purchase
Net income
Basic and diluted earnings per share
$
March 26, 2016
738,204
207,112
-
20,129
.75
$
$
June 25, 2016
730,433
201,938
-
15,265
.57
$
$
$
September 24, 2016 December 31, 2016
925,097
258,241
23,879
41,140
1.52
742,986
204,864
-
10,628
.40
$
$
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. The carrying amount of long-term debt approximates
fair value as interest rates on this debt agreement approximates current market rates.
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.
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). The Credit Agreement provides for an unsecured revolving credit facility with an aggregate principal amount not
to exceed $100.0 million with an additional discretionary amount available of $50.0 million. As of December 30, 2017, $35.0 million
of the available $100.0 million was borrowed from the credit facility. The loan will bear interest on the outstanding principal amount
at the one month LIBOR rate plus the applicable margin rate of 0.65% until its Maturity on September 1, 2019. The loan was used to
fund the recent acquisitions and the Company’s working capital requirements. The only financial covenant in the credit facility
requires the Company’s minimum EBITDA to be at least $75.0 million. The Credit Agreement is also being utilized by the Company
for letters of credit. As of December 30, 2017, the Company had $18.2 million, of the available $100.0 million from the credit
facility, committed to outstanding letters of credit. The letters of credit are maintained primarily to support performance, payment,
deposit or surety obligations of the Company. The Company does not anticipate drawing on any of them.
Interest expense related to long-term debt was $946,000 and $242,000 for 2017 and 2016, respectively.
Note 14 Subsequent Related Party Transactions
On January 16, 2018, the Company purchased a parcel of land from Central Properties, Inc in which Jonathan H. Weis and his
immediate family members have beneficial ownership interest. The purchase price of $1.1 million was approved by the Company’s
Executive Committee in accordance with Company policy and regulatory guidelines.
41
Table of Contents
WEIS MARKETS, INC.
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 30, 2017 and December 31, 2016, and the related consolidated statements of income,
comprehensive income, shareholders’ equity, and cash flows for the 52 week period ended December 30, 2017 and the
53 week period ended December 31, 2016, 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 30, 2017
and December 31, 2016, and the results of its operations and its cash flows for the 52 week period ended December 30,
2017 and the 53 week period ended December 31, 2016, 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 30, 2017, 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 15, 2018 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.
/s/ RSM US LLP
We have served as the Company's auditor since 2016.
Philadelphia, Pennsylvania
March 15, 2018
42
Table of Contents
WEIS MARKETS, INC.
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 30, 2017,
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 30, 2017, 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 30, 2017 and December 31, 2016,
and the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for the
52 week period ended December 30, 2017 and the 53 week period ended December 31, 2016 and the related notes to
the consolidated financial statements and the financial statement schedule listed in the accompanying index, and our
report dated March 15, 2018 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 15, 2018
43
Table of Contents
WEIS MARKETS, INC.
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Weis Markets, Inc.
We have audited the accompanying consolidated statements of income, comprehensive income, shareholders' equity and cash flows of
Weis Markets, Inc. for the 52 week period ended December 26, 2015. Our audit also included the financial statement schedule for the
52 week period ended December 26, 2015 at Item 15(c)(3). These financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated results of operations
and cash flows of Weis Markets, Inc. for the 52 week period ended December 26, 2015, in conformity with U.S. generally accepted
accounting principles. Also in our opinion, the related financial statement schedule for the 52 week period ended December 26, 2015,
when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information
set forth therein.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
March 18, 2016
44
Table of Contents
WEIS MARKETS, INC.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure:
None.
Item 9a. Controls and Procedures:
Management’s Report on Disclosure Controls and Procedures
The Chief Executive Officer and the Chief Financial Officer of the Company (its principal executive officer and principal financial
officer, respectively) have concluded, based on their evaluation as of the close of the period covered by this Report, that the
Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the
reports filed or submitted by it under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and forms, and include controls and procedures designed to ensure that
information required to be disclosed by the Company in such reports is accumulated and communicated to the Company's
management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding
required disclosure.
Management's Report on Internal Control Over Financial Reporting
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting (as
defined in Rules 13a-15(f) under the Exchange Act). Under the supervision and with the participation of management, including the
Company’s Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of internal
control over financial reporting based on the framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control – Integrated Framework (2013 framework). The Company’s internal control system was
designed to provide reasonable assurance to the Company’s management and board of directors regarding the preparation and fair
presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations.
Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement
preparation and presentation. Based on the Company’s evaluation, management concluded that the Company’s internal control over
financial reporting was effective as of December 30, 2017.
RSM US LLP, an independent registered public accounting firm, has audited the Consolidated Financial Statements included in this
Annual Report on Form 10-K and, as part of their audit, has issued their attestation report on the Company’s internal control over
financial reporting as of December 30, 2017. The report can be found in Item 8 of this Annual Report on Form 10-K.
Changes in Internal Control over Financial Reporting
Except as noted in the preceding paragraphs, there were no changes in the Company’s internal control over financial reporting during
the fiscal year ended December 30, 2017, that has materially affected, or is reasonably likely to materially affect, the Company’s
internal control over financial reporting.
Item 9b. Other Information:
There was no information required on Form 8-K during this quarter that was not reported.
45
Table of Contents
WEIS MARKETS, INC.
PART III
Item 10. Directors, Executive Officers and Corporate Governance:
In addition to the information reported in Part I of this Form 10-K under the caption “Executive Officers of the Registrant,” “Election
of Directors,” “Board Committees and Meeting Attendance, Audit Committee,” “Corporate Governance Matters,” “Compensation
Tables” and “Stock Ownership, Section 16(a) Beneficial Ownership Reporting Compliance” of the Weis Markets, Inc. definitive
proxy statement dated March 15, 2018 are incorporated herein by reference.
Item 11. Executive Compensation:
“Board Committees and Meeting Attendance, Compensation Committee,” “Executive Compensation, Compensation Discussion and
Analysis,” “Compensation Committee Report,” “Compensation Tables” and “Other Information Concerning the Board of Directors,
Compensation Committee Interlocks and Insider Participation” of the Weis Markets, Inc. definitive proxy statement dated March 15,
2018 are incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters:
“Stock Ownership” of the Weis Markets, Inc. definitive proxy statement dated March 15, 2018 is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence:
“Other Information Concerning the Board of Directors, Review and Approval of Related Party Transactions” and “Independence of
Directors” of the Weis Markets, Inc. definitive proxy statement dated March 15, 2018 are incorporated herein by reference.
Item 14. Principal Accounting Fees and Services:
“Ratification Of Appointment Of Independent Registered Public Accounting Firm” of the Weis Markets, Inc. definitive proxy
statement dated March 15, 2018 is incorporated herein by reference.
46
Table of Contents
WEIS MARKETS, INC.
PART IV
Item 15. Exhibits, Financial Statement Schedules:
(a)(1) The Company’s 2017 Consolidated Financial Statements and the Report of Independent Registered Public Accounting Firm
are included in Item 8 of Part II.
Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Page
20
21
22
23
24
25
42
(a)(2) Financial statement schedules required to be filed by Item 8 of this form, and by Item 15(c)(3) below:
Schedule II - Valuation and Qualifying Accounts, page 49 of this Annual Report on Form 10-K
All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission
are not required under the related instructions or are inapplicable and therefore have been omitted.
47
Table of Contents
WEIS MARKETS, INC.
Item 15. Exhibits, Financial Statement Schedules: (continued)
(a)(3) A listing of exhibits filed or incorporated by reference is as follows:
Exhibit No.
3-A
Exhibits
Articles of Incorporation, filed as exhibit 4.1 in Form S-8 on September 13, 2002 and incorporated herein by reference.
3-B
10-A
10-B
10-C
10-D
10-E
10-F
10-G
10-H
10-I
21
31.1
31.2
32
By-Laws, filed as exhibit under Part IV, Item 14(c) in the Annual Report on Form 10-K for the fiscal year ended December 29, 2001
and incorporated herein by reference.
Retirement Savings Plan, amended November 20, 2017 and filed with this Annual Report on Form 10-K.
Supplemental Executive Retirement Plan, filed as exhibit under Part IV, Item 15(a)(3) in the Annual Report on Form 10-K for the
fiscal year ended December 31, 2011 and incorporated herein by reference. *
Deferred Compensation Plan for Pharmacists, filed as exhibit under Part IV, Item 15(a)(3) in the Annual Report on Form 10-K for the
fiscal year ended December 26, 2009 and incorporated herein by reference.
Executive Benefits Agreement between the Company and Robert F. Weis, Chairman of the Board, signed on March 24, 2006,
commencing immediately and continuing thereafter through December 31, 2023, filed on Form 8-K March 24, 2006 and incorporated
herein by reference. *
Deferred Compensation Agreement between the Company and Mr. Robert F. Weis, filed as exhibit under Part IV, Item 15(a)(3) in th
Annual Report on Form 10-K for the fiscal year ended December 26, 2009 and incorporated herein by reference. *
e
Executive Employment Agreement between the Company and Jonathan H. Weis, Vice Chairman, President and Chief Executive
Officer, signed on July 14, 2014, with retroactive effect to January 1, 2014 and continuing thereafter through December 31, 2016, file
as Exhibit 10.1 to Form 8-K July 18, 2014 and incorporated herein by reference. *
Executive Employment Agreement between the Company and Jonathan H. Weis, Vice Chairman, President and Chief Executive
Officer, signed on April 4, 2017, with retroactive effect to January 1, 2017 and continuing thereafter through December 31, 2019, file
as Exhibit 10.1 to Form 8-K April 7, 2017 and incorporated herein by reference. *
d
d
Chief Executive Office Incentive Award Plan between the Company and Jonathan H. Weis, Chairman, President and Chief Executive
Officer, effective July 1, 2011, amended and restated effective as of January 1, 2014 and January 1, 2017 and continuing thereafter
through December 31, 2019, filed as Exhibit 10.2 to Form 8-K April 7, 2017 and incorporated herein by reference. *
Confidential Separation Agreement and General Release between the Company and David J. Hepfinger, Former President and Chief
Executive Officer, signed on September 21, 2013, filed as Exhibit 10.1 to Form 10-Q November 7, 2013 and incorporated herein by
reference. *
Subsidiaries of the Registrant, filed with this Annual Report on Form 10-K
Rule 13a-14(a) Certification - CEO, filed with this Annual Report on Form 10-K
Rule 13a-14(a) Certification - CFO, filed with this Annual Report on Form 10-K
Certification Pursuant to 18 U.S.C. Section 1350, filed with this Annual Report on Form 10-K
* Management contract or compensatory plan arrangement.
The Company will provide a copy of any exhibit upon receipt of a written request for the particular exhibit or exhibits desired. All
requests should be addressed to the Company’s principal executive offices.
(b) The Company files as exhibits to this Annual Report on Form 10-K, those exhibits listed in Item 15(a)(3) above.
48
Table of Contents
Item 15(c)(3). Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts:
WEIS MARKETS, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
WEIS MARKETS, INC.
(dollars in thousands)
Col. A
Description
Fiscal Year ended December 30, 2017:
Deducted from asset accounts:
Col. B
Balance at
Beginning
of Period
Col. C
Additions
Col. D
Col. E
Charged to
Costs and
Expenses
Charged to
Accounts
Describe
Deductions
Describe (1)
Balance at
End of
Period
Allowance for uncollectible accounts
$
1,455
$
2,176
$
---
$
1,685
$
1,946
Fiscal Year ended December 31, 2016:
Deducted from asset accounts:
Allowance for uncollectible accounts
$
1,967
$
1,145
$
---
$ 1,657
$
1,455
Fiscal Year ended December 26, 2015:
Deducted from asset accounts:
Allowance for uncollectible accounts
$
1,578
$
1,438
$
---
$ 1,049
$
1,967
(1)
Deductions are uncollectible accounts written off, net of recoveries.
Item 16.
Form 10-K Summary:
None.
49
Table of Contents
WEIS MARKETS, INC.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: 3/15/2018
WEIS MARKETS, INC.
(Registrant)
/S/Jonathan H. Weis
Jonathan H. Weis
Chairman,
President and Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated.
Date
3/15/2018
Date
3/15/2018
Date
3/15/2018
Date
3/15/2018
Date
3/15/2018
Date
3/15/2018
Date
3/15/2018
/S/Jonathan H. Weis
Jonathan H. Weis
Chairman,
President and Chief Executive Officer
and Director
(principal executive officer)
/S/Scott F. Frost
Scott F. Frost
Senior Vice President, Chief Financial Officer
and Treasurer
(principal financial officer)
/S/Harold G. Graber
Harold G. Graber
Senior Vice President of Real Estate and Development
and Secretary
and Director
/S/Dennis G. Hatchell
Dennis G. Hatchell
Director
/S/Edward J. Lauth III
Edward J. Lauth III
Director
/S/Gerrald B. Silverman
Gerrald B. Silverman
Director
/S/Jeanette R. Rogers
Jeanette R. Rogers
Vice President, Corporate Controller
(principal accounting officer)
50
WEIS MARKETS, INC.
SUBSIDIARIES OF THE REGISTRANT
State of
Incorporation
Pennsylvania
Pennsylvania
Delaware
Exhibit 21
Percent Owned
By Registrant
100%
100%
100%
Dutch Valley Food Company, Inc.
Weis Transportation, Inc.
WMK Financing, Inc.
The Consolidated Financial Statements include the accounts of the Company and its subsidiaries.
51
WEIS MARKETS, INC.
CERTIFICATION- CEO
Exhibit 31.1
I, Jonathan H. Weis, certify that:
1. I have reviewed this Annual Report on Form 10-K of Weis Markets, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the periods covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal controls over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, 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;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an Annual Report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report
financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: March 15, 2018
/S/Jonathan H. Weis
Jonathan H. Weis
Chairman,
President and Chief Executive Officer
52
WEIS MARKETS, INC.
CERTIFICATION- CFO
Exhibit 31.2
I, Scott F. Frost, certify that:
1. I have reviewed this Annual Report on Form 10-K of Weis Markets, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the periods covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal controls over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, 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;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an Annual Report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report
financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: March 15, 2018
/S/Scott F. Frost
Scott F. Frost
Senior Vice President, Chief Financial Officer
and Treasurer
53
WEIS MARKETS, INC.
Exhibit 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Weis Markets, Inc. (the "Company") on Form 10-K for the fiscal year ending December 30,
2017, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we, Jonathan H. Weis, Chairman,
President and Chief Executive Officer, and Scott F. Frost, Senior Vice President, Chief Financial Officer and Treasurer, of the
Company, certify, pursuant to and for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:
(1) to my knowledge the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of
the Company.
/S/Jonathan H. Weis
Jonathan H. Weis
Chairman, President and Chief Executive Officer
3/15/2018
/S/Scott F. Frost
Scott F. Frost
Senior Vice President, Chief Financial Officer and Treasurer
3/15/2018
A signed original of this written statement required by Section 906 has been provided to Weis Markets, Inc. and will be retained by
Weis Markets, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
54