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
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 28, 2019
OR
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
24-0755415
(I.R.S. Employer Identification No.)
17801-0471
(Zip Code)
Registrant's web address: www.weismarkets.com
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol
Name of exchange on which registered
Common stock, no par value
WMK
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
[ ]
XNo
[
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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
[ ]
XNo
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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.
XYes
No
[ ]
]
[
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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
such files).
XYes
No
[ ]
]
[
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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
[ ]
[ ]
[
X
Accelerated filer
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
[ ]
XNo
[
]
The aggregate market value of Common Stock held by non-affiliates of the Registrant is approximately $368,000,000 as of June 29, 2019 the last
business day of the most recently completed second fiscal quarter.
Shares of common stock outstanding as of March 12, 2020 - 26,898,443.
DOCUMENTS INCORPORATED BY REFERENCE: Selected portions of the Weis Markets, Inc. definitive proxy statement dated March 12, 2020
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
Information about our Executive Officers
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
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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 2019. 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, Low, Low price 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 197 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 2019, 2018 and 2017, respectively:
Center Store (1)
Fresh (2)
Pharmacy Services
Fuel
Other
Consolidated net sales
2019
2018
2017
56.1 %
30.5
9.5
3.6
0.3
100.0 %
56.9 %
30.4
9.0
3.6
0.1
100.0 %
57.2 %
30.5
8.9
3.2
0.2
100.0 %
(1) Consists primarily of groceries, dairy products, frozen foods, beer and wine, and general merchandise items, such as health and beauty care and
household products.
(2) Consists primarily of meats, seafood, fresh produce, floral, deli products, prepared foods and bakery products.
At the end of 2019, Weis Markets, Inc. operated 4 stores in Delaware, 50 stores in Maryland, 6 stores in New Jersey, 9 stores in New
York, 116 stores in Pennsylvania, 11 stores in Virginia and 2 stores in West Virginia, for a total of 198 retail food stores operating
under the Weis Markets trade name. Since the end of 2019, the Company opened one store location and closed two store locations,
bringing the current total store count to 197.
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 71,000 square
feet, with an average size of approximately 49,000 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 following summarizes the number of stores by size categories as of year-end:
Square feet
Over 55,000
45,000 to 54,999
35,000 to 44,999
25,000 to 34,999
Under 25,000
Total
2019
Number of stores
62
68
48
15
5
198
2019
% of Total
31%
34%
24%
8%
3%
100%
2018
Number of stores
61
70
51
15
5
202
2018
% of Total
30%
35%
25%
7%
3%
100%
The Company believes that opening 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 one third 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
2019
202
1
---
(5)
---
198
9,642
12
2018
205
2
---
(5)
---
202
9,800
3
2017
204
2
---
(1)
---
205
9,867
4
2016
163
44
---
(3)
---
204
9,777
9
2015
163
---
1
---
(1)
163
8,215
16
(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.
Utilizing its own centrally located distribution center and transportation fleet, Weis Markets self distributes approximately 66% 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 continues to be a member of the EPA GreenChill program for
advancing environmentally beneficial refrigerant management systems. The Company currently has ten stores registered under this
program and plans to expand this program to more stores. Since 2016, the Company has replaced 86% of its tractor fleet with more
fuel-efficient tractors. The Company continues to emphasize recycling in all areas, most recently noting a decrease in store waste
where the Company has diverted 40 thousand tons of waste from landfills. These statistics and more can be found in the Company’s
most recently published sustainability report, linked below in Item 7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations.
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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. This competition is augmented by the food retail industry’s expansion
into the online market in recent years. The Company continues to effectively compete by offering a strong combination of value,
quality and service, as well as offering Weis 2 Go curbside pickup and delivery; further enhancing service offerings and providing
additional convenience to customers.
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 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/investor-relations. 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 introduction of on-line food retail in
recent years has augmented competition in industry. 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.
3
Table of Contents
WEIS MARKETS, INC.
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.
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 cybersecurity 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, 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 corporate and 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 28, 2019. 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 28, 2019, the Company owned and operated 96 of its retail food stores and leased and operated 102 stores under
operating leases that expire at various dates through 2035. 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 thousand square feet. The Company also owns one warehouse complex in
Sunbury, Pennsylvania totaling approximately 535 thousand square feet. The Company utilizes 258 thousand 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
Information about our Executive Officers
WEIS MARKETS, INC.
The following sets forth the names and ages of the Company’s executive officers as of March 12, 2020, indicating all positions held
during the past five years:
Name
Age
Title
Wayne S. Bailey (a)
Scott F. Frost (b)
David W. Gose II (c)
Harold G. Graber (d)
Richard A. Gunn (e)
James E. Marcil (f)
Kurt A. Schertle (g)
Jonathan H. Weis (h)
61
57
53
64
55
61
48
52
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
Chief Operating Officer
Chairman of the Board, President and Chief Executive Officer
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
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 elected 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.
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. Prior to joining the Company,
Mr. Marcil held senior level Human Resources positions with CVS and General Electric.
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.
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.
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 12, 2020 was 7,520.
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
Company-selected group index that the Company deems most properly represents its “Peer Group”, for the period of five years. The
Peer group is made up of five retail grocers that the Company feels most closely relate to its size and business profile, and one national
grocer the Company believes to be an industry market leader. The companies making up the Peer Group, in no particular order, are,
Ingles Markets, Inc; Village Super Market, Inc.; Smart & Final Stores, Inc. (included through June 20, 2019 when it was acquired by
Apollo Global Management, LLC); Sprouts Farmers Market, Inc. and The Kroger Company. 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
150.00
125.00
100.00
75.00
50.00
2014
2015
2016
2017
2018
20H
---+-Weis Mar~ts
Ille
----Standard & Poors 500
......,._ Peer Group
Weis Markets, Inc.
S&P 500
Peer Group
2014
100.00
100.00
100.00
2015
100.23
98.83
112.61
2016
148.68
107.18
107.27
2017
94.35
128.00
85.57
2018
109.64
119.00
80.35
2019
96.81
155.12
92.89
8
Table of Contents
Item 6. Selected Financial Data:
WEIS MARKETS, INC.
The following selected five years of 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.
(dollars in thousands, except per share amounts)
52 Weeks
Ended
Dec. 30,
2017
53 Weeks
Ended
Dec. 31,
2016
Net sales
Income from operations
Net income
Cash dividends per share
Basic and diluted earnings per share
Working capital
Total assets
Inventory
Property and Equipment, net
Shareholders’ equity
Closing share price
(1) In September 2016, the Company began its acquisition of 38 former Food Lion, LLC stores. These stores contributed $369.2 million to sales in 2017.
(2) 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.
$ 3,466,807 (1) $ 3,136,720
98,922
87,162
1.20
3.24
207,700
1,431,304
276,783
878,195
926,722
66.84
78,519
98,414 (2)
1.20
3.66
208,972
1,441,739
279,509
886,243
992,844
41.39
52 Weeks
Ended
Dec. 28,
2019
$ 3,543,299
84,639
67,983
1.24
2.53
216,354
1,675,562
279,806
886,928
1,058,745
40.12
52 Weeks
Ended
Dec. 29,
2018
$ 3,509,270
82,671
62,738
1.21
2.33
201,909
1,432,011
280,756
887,608
1,022,899
46.85
52 Weeks
Ended
Dec. 26,
2015
$ 2,876,748
91,194
59,330
1.20
2.21
232,722
1,235,959
229,399
738,985
871,747
45.93
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 197 retail stores with approximately 23 thousand 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, Low, Low Price, 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. On January 17, 2019 the Company announced a new pricing
strategy for its private brand products named Low, Low Price. The move took the Company’s private brand products from a high, low
pricing strategy to everyday low price.
Utilizing its own centrally located distribution center and transportation fleet, Weis Markets self distributes approximately 66% 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 continues to innovate and remain relevant to industry trends and offer customer convenience by presenting
programs like “Weis 2 Go Online” and home delivery. In 2019 the Company offered Weis 2 Go Online in 154 of its locations, adding
65 stores since the end of 2018. Weis 2 Go Online allows the customer to order on-line and then pick up their order at a drive-thru
location at the store. The Company began offering home delivery during the third quarter of 2018 and currently offers this
convenience to customers in 175 different locations.
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 Capital – The Company believes that talent is a business differentiator and is committed to
creating a sustainable competitive advantage through the selection, development and promotion of talented, highly motivated
people. The Company believes that establishing a learning culture supports its commitment to be an employer of choice and
helps drive customer engagement with its associates. Improvements in the Company’s talent management and development
will help drive business impact while providing internal career opportunities. 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 attract and retain top
talent and affects 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 its private brand products exceed consumer expectations and
will continue to 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
surpasses customers’ expectations. 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
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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 28, 2019,
December 29, 2018 and December 30, 2017
Net sales
Cost of sales, including advertising, 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 (loss) and interest expense
Investment income (loss) and interest expense,
percent of net sales
Other income (expense)
Other income (expense), 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
Net sales
Net sales, excluding fuel sales
Comparable store sales
Comparable store sales excluding fuel sales
2019
2018
2017
Percentage Changes
2019 vs.
2018 vs.
(52 Weeks)
$ 3,543,299
(52 Weeks)
$ 3,509,270
(52 Weeks)
$ 3,466,807
2018
1.0
%
2017
1.2
%
2,605,105
938,194
26.5 %
853,555
24.1 %
84,639
2.4 %
7,054
0.2 %
(3,049)
(0.1)%
88,644
2.5 %
20,661
23.3 %
67,983
1.9 %
2.53
2,574,269
935,001
26.6 %
852,330
24.3 %
82,671
2.4 %
(1,454)
0.0%
919
0.0%
82,136
2.3 %
19,398
23.6 %
62,738
1.8 %
2.33
2,554,284
912,523
26.3 %
834,004
24.1 %
78,519
2.3 %
2,598
0.1%
(2,094)
(0.1)%
79,023
2.3 %
(19,391)
(24.5)%
98,414
2.8 %
3.66
$
$
$
$
$
$
1.2
0.3
0.1
2.4
0.8
2.5
2.2
5.3
585.1
(156.0)
431.8
(143.9)
7.9
6.5
8.4
8.6
3.9
(200.0)
%
%
(36.3) %
(36.3) %
Percentage Changes
2019 vs. 2018
1.0
0.8
1.5
1.5
%
%
2018 vs. 2017
1.2
0.8
0.7
0.3
%
%
When calculating the percentage change in comparable store sales, the Company defines a new store to be comparable when it has
been in operation after 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
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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
increased 0.9% in 2019 and 0.7% in 2018, but decreased 0.2% in 2017. 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 decreased 5.7%, or $0.17 per gallon, in 2019 compared to
the 52-week average in 2018. The 52-week average price of gasoline in the Central Atlantic States, according to the U.S. Department
of Energy, increased 9.8%, or $0.26 per gallon, in 2018 compared to the 52-week average in 2017.
Comparable store sales increased for all years presented. On a comparable store sales basis all product categories, Center Store, Fresh,
Pharmacy Services, and Fuel, increased in sales. In 2019, customer acceptance of the new Low, Low Price private brand program has
augmented sales, as has additional product offerings and customer conveniences such as “Weis 2 Go Online,” currently offered at 175
store locations. “Weis 2 Go Online” allows the customer to order on-line and have their order delivered or, at 154 locations, pick up
their order at an expedient store drive-thru.
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), net advertising costs, distribution center and
transportation costs, as well as manufacturing facility operations. Increased sales volume resulted in an increase in cost of sales. Both
direct product cost and distribution cost increase when sales volume increases.
Gross profit rate was 26.5% in 2019, 26.6% in 2018 and 26.3% in 2017. Declining retails and costs in the first two quarters of 2019 in
fuel, fruits, vegetables and eggs had a negative impact on gross profit rates, while year to date pharmacy gross profits are being
pressured by recent changes in industry practices. While the various commodities’ retails and costs are cyclical in nature, the
Company cannot predict whether the pharmacy industry practices will change favorably.
The Company experienced favorable non-cash LIFO inventory valuation adjustments, increasing gross profit by $5.8 million, $1.5
million and $1.1 million for 2019, 2018 and 2017, respectively.
Although the Company experienced product cost inflation and deflation in various commodities in 2019, 2018 and 2017, 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 61% of
the total “Operating, general and administrative expenses.” As a percent of sales, direct store labor decreased 0.1% in 2019 compared
to 2018 and increased 0.2% in 2018 compared to 2017. Management continues to monitor store labor efficiencies and develop labor
standards to reduce costs while maintaining the Company’s customer service expectations. Currently, the Company is undergoing an
initiative to install or upgrade self-checkouts in its stores in response to customer preference and labor rates and supply.
The Company’s self-insured health care benefit expenses increased by 1.0% in 2019 compared to 2018 and increased by 6.6% in 2018
compared to 2017.
Depreciation and amortization expense charged to “Operating, general and administrative expenses” was $85.2 million, or 2.4% of net
sales, for 2019 compared to $84.4 million, or 2.4% of net sales, for 2018 and $77.4 million, or 2.2% of net sales, for 2017. There was
no change in depreciation and amortization expense as a percent of sales in 2019 when compared to 2018, however when 2018 is
compared to 2017 there is an increase of 0.2%. The increase in depreciation and amortization expense in 2018 compared to 2017 was
due to the impact of opening two locations and a significant investment in store equipment in 2018. See the Liquidity and Capital
Resources section for further information regarding the Company’s capital expansion program.
A breakdown of the material increases (decreases) as a percent of sales in "Operating, general and administrative expenses" is as follows:
(dollars in thousands)
December 28, 2019
Utilities Expense
(dollars in thousands)
December 29, 2018
Annually accrued incentive programs
2019 vs. 2018
Increase
(Decrease)
Increase (Decrease)
as a % of sales
(5,655)
(0.2)%
2018 vs. 2017
Increase
(Decrease)
11,745
Increase (Decrease)
as a % of sales
0.3 %
$
$
All expenses as a percent of sales presented for the 2019 fiscal year have benefited in comparison with the 2018 percent of sales due to
the closure of unprofitable stores. The Company is benefiting from cost saving initiatives in various areas of its operations and is
saving in utilities with a combination of purchasing, associate sustainability and capital investments such as its LED lighting program.
The Company’s 2018 sustainability report my be found at:
https://www.weismarkets.com/sites/default/files/documents/weis_2018_9_ada.pdf?27
As Company incentive goals were not met in 2017, expense from annually accrued incentive programs increased in 2018 as goals
were met.
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 23.3%, 23.6% and negative 24.5% in 2019, 2018 and 2017, respectively. The effective income tax
rate differs from the federal statutory rate of 21% primarily due to state taxes. On December 22, 2017, the U.S. Government enacted
the Tax Cuts and Jobs Act (the ”Tax Reform”). The Tax Reform significantly impacted the Company’s effective income tax rate by
reducing the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018 and allowing immediate expensing of
qualified assets placed into service after September 27, 2017. Other elements of the Tax Reform have minor impacts, however the
above mentioned decreased deferred income tax by $49.3 million.
Liquidity and Capital Resources
The primary source of cash is cash flows generated from operations. In addition, the Company has access to a revolving credit
agreement entered into on September 1, 2016, and amended on August 21, 2019, with Wells Fargo Bank, NA (the “Credit
Agreement”). The Credit Agreement matures on September 1, 2022 and provides for an unsecured revolving credit facility with an
aggregate principal amount not to exceed $30.0 million with an additional discretionary amount available of $70.0 million. As of
December 28, 2019, the availability under the revolving credit agreement was $18.8 million with $11.2 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’s investment portfolio consists of high-grade bonds with maturity dates between one and 10 years and three long-held
high yield, large capitalized public company equity securities. The portfolio totaled $63.5 million as of December 28,
2019. 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 $120 million in its capital expansion program
in 2020.
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 $1.24 in 2019, $1.21 in 2018 and $1.20 in 2017.
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 28, 2019,
December 29, 2018 and December 30, 2017
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
2019
(52 Weeks)
2018
(52 weeks)
2017
(52 weeks)
2019 vs.
2018
2018 vs.
2017
$ 171,686
(109,269)
(33,354)
$ 150,263
(92,838)
(67,534)
$ 159,147
(96,282)
(61,766)
$
21,423
(16,431)
34,180
$
(8,884)
3,444
(5,768)
Operating
Cash flows from operating activities increased in 2019 as compared to 2018 and decreased in 2018 as compared to 2017. The increase
in cash from Operating activities is attributable to improved profits and a decrease of $7.7 million in inventory from continued supply
chain efficiencies. The change from 2017 to 2018 primarily reflects the increase in income tax payments partially offset by accounts
payable. 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 $101.5 million in 2019, compared to $95.6 million in 2018 and $95.9 million in 2017. As a
percentage of sales, capital expenditures totaled 2.9% in 2019, 2.7% in 2018, and 2.8% in 2017. In 2020, the Company plans to
maintain or increase its marketable securities portfolio.
Financing
The Company paid dividends of $33.4 million in 2019, $32.5 million in 2018 and $32.3 million in 2017. The Company increased its
quarterly dividend from 30 cents per share to 31 cents per share in the fourth quarter of 2018. In 2018 and 2017, payments on the
revolving credit agreement increased net cash used in financing activities by $35.0 million and $29.5 million, respectively.
Contractual Obligations
The following table represents scheduled maturities of the Company’s long-term contractual obligations as of December 28, 2019.
(dollars in thousands)
Operating leases
Total
Payments due by period
Total
$ 258,577
$ 258,577
Less than
1 year
47,184
47,184
$
$
1-3 years
78,452
78,452
$
$
3-5 years
57,319
57,319
$
$
More than
5 years
75,622
75,622
$
$
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.
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 retail inventory and average cost methods. The retail
inventory method is commonly used by retail companies to determine cost and calculate gross margin based on applying a cost-to-
retail ratio to each similar merchandise category’s ending retail value. The Company’s center store and pharmacy inventories are
valued using last in, first out (LIFO). The Company’s fresh inventories are valued using average cost. The Company evaluates
inventory shortages throughout the year based on actual physical counts in its facilities. Allowances for inventory shortages are
recorded based on the results of these counts and to provide for estimated shortages from the last physical count to the financial
statement date.
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 estimatable 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 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.
Income Taxes
Income taxes are inherently complex and require management’s evaluation and estimates, specifically regarding current and deferred
income taxes and uncertain tax positions. 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 its Consolidated Financial Statements. The assessment of the
Company’s tax position relies on the judgment of management to estimate the more likely than not merits associated with the
Company’s various tax positions.
Leases
The Company leases approximately 52% of its open store facilities under operating leases that expire at various dates through 2035,
with the remaining store facilities being owned. These leases generally provide for fixed annual rentals; however, several provide for
minimum annual rentals plus variable lease costs related to real estate taxes and insurance as well as contingent rentals based on a
percentage of annual sales or increases periodically based on inflation. These variable lease costs are not included in the measurement
of the operating lease right-to-use assets or lease liabilities and are charged to the related expense category included in “Operating,
general and administrative expenses.” Most of the leases contain multiple renewal options, under which the Company may extend the
lease terms from 5 to 20 years. Additionally, the Company has operating leases for certain transportation and other equipment. The
Company leases or subleases space to tenants in owned, vacated and open store facilities. Rental income is recorded when earned as a
component of “Operating, general and administrative expenses.”
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)
Self-Insurance
The Company is self-insured for a majority of its workers’ compensation, general liability, vehicle accident and associate medical
benefit claims. The self-insurance liability for most of the medical benefit claims is determined based on historical data and an
estimate of claims incurred but not reported. The other self-insurance liabilities including workers’ compensation are determined
actuarially, based on claims filed and an estimate of claims incurred but not yet reported. The Company is self-insured for certain
healthcare claims and stop-loss coverage is maintained for occurrences exceeding a $500 thousand specific deductible with a $250
thousand aggregating deductible. The Company is liable for workers' compensation claims up to $2.0 million per claim. Property and
casualty insurance coverage is maintained with outside carriers at deductible or retention levels ranging from $100 thousand to $1.0
million. Significant assumptions used in the development of the actuarial estimates include reliance on the Company’s historical
claims data including average monthly claims and average lag time between incurrence and reporting of the claim.
Forward-Looking Statements
In addition to historical information, this Annual Report may contain forward-looking statements, which are included pursuant to the
“safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Any forward-looking statements contained herein
are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. For example,
risks and uncertainties can arise with changes in: general economic conditions, including their impact on capital expenditures;
business conditions in the retail industry; the regulatory environment; rapidly changing technology and competitive factors, including
increased competition with regional and national retailers; and price pressures. Readers are cautioned not to place undue reliance on
forward-looking statements, which reflect management's analysis only as of the date hereof. The Company undertakes no obligation
to publicly revise or update these forward-looking statements to reflect events or circumstances that arise after the date hereof.
Readers should carefully review the risk factors described in other documents the Company files periodically with the Securities and
Exchange Commission.
Item 7a. Quantitative and Qualitative Disclosures about Market Risk:
(dollars in thousands)
December 28, 2019
Rate sensitive assets:
Fixed interest rate securities
Average interest rate
2020
2021
2022
2023
2024
Thereafter
Total
Expected Maturity Dates
Fair Value
Dec. 28, 2019
$ 4,585
$ 8,540
$ 4,680
$ 7,080
$ 6,915
$ 17,600
$ 49,400
$ 54,337
1.62%
1.28%
1.33%
1.54%
1.76%
1.97%
1.66%
Other Relevant Market Risks
The Company’s equity securities at December 28, 2019 had a fair value of $9.2 million. The dividend yield realized on these equity
investments was 4.8% in 2019. 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.
18
Table of Contents
Item 8. Financial Statements and Supplementary Data:
WEIS MARKETS, INC.
CONSOLIDATED BALANCE SHEETS
December 28, 2019
December 29, 2018
$
$
$
$
66,871
63,538
18,935
55,764
279,806
23,378
508,292
886,928
210,196
52,330
17,816
1,675,562
180,718
39,528
39,114
15,719
8,662
8,197
291,938
22,143
17,625
179,654
97,041
8,416
616,817
9,949
1,198,173
1,480
1,209,602
(150,857)
1,058,745
1,675,562
$
$
$
$
37,808
54,298
14,686
57,285
280,756
24,289
469,122
887,608
-
52,330
22,951
1,432,011
191,099
45,354
-
15,516
7,961
7,283
267,213
18,110
17,795
-
90,793
15,201
409,112
9,949
1,163,545
262
1,173,756
(150,857)
1,022,899
1,432,011
(dollars in thousands)
Assets
Current:
Cash and cash equivalents
Marketable securities
SERP investment
Accounts receivable, net
Inventories
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Operating lease right-to-use
Goodwill
Intangible and other assets, net
Total assets
Liabilities
Current:
Accounts payable
Accrued expenses
Operating leases
Accrued self-insurance
Deferred revenue, net
Income taxes payable
Total current liabilities
Postretirement benefit obligations
Accrued self-insurance
Operating leases
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 of deferred taxes of $593 in 2019 and $110 in 2018)
Treasury stock at cost, 6,149,364 shares
Total shareholders' equity
Total liabilities and shareholders' equity
See accompanying notes to Consolidated Financial Statements.
19
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WEIS MARKETS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except shares and per share amounts)
For the Fiscal Years Ended December 28, 2019,
December 29, 2018 and December 30, 2017
Net sales
Cost of sales, including advertising, warehousing and distribution expenses
Gross profit on sales
Operating, general and administrative expenses
Income from operations
Investment income (loss) and interest expense
Other income (expense)
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
2019
(52 weeks)
2018
(52 weeks)
2017
(52 weeks)
3,543,299
2,605,105
938,194
853,555
84,639
7,054
(3,049)
88,644
20,661
67,983
26,898,443
1.24
2.53
$
$
$
$
3,509,270
2,574,269
935,001
852,330
82,671
(1,454)
919
82,136
19,398
62,738
26,898,443
1.21
2.33
$
$
$
$
3,466,807
2,554,284
912,523
834,004
78,519
2,598
(2,094)
79,023
(19,391)
98,414
26,898,443
1.20
3.66
$
$
$
$
20
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WEIS MARKETS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(dollars in thousands)
For the Fiscal Years Ended December 28, 2019,
December 29, 2018 and December 30, 2017
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 $498, $62 and $19, respectively)
Accumulated change in effective tax rate
Reclassification adjustment for (gains) losses included in net income
(Net of deferred taxes of $14, $14 and $11, respectively)
Other comprehensive income (loss), net of tax
Comprehensive income, net of tax
2019
(52 weeks)
2018
(52 weeks)
$
67,983
$
62,738
$
2017
(52 weeks)
98,414
1,255
-
(177)
-
(37)
1,218
69,201
$
40
(137)
62,601
$
$
(43)
1,042
29
1,028
99,442
21
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WEIS MARKETS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Common Stock
Shares Amount
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Treasury Stock
Shares
Amount
Total
Shareholders'
Equity
4,852 6,149,364 $ (150,857) $
—
—
—
1,042
—
—
(14)
—
—
—
5,880 6,149,364 $ (150,857) $
—
—
—
—
—
(5,481)
—
—
(137)
—
—
—
262 6,149,364 $ (150,857) $
—
—
—
—
—
1,218
—
—
—
1,480 6,149,364 $ (150,857) $
—
—
926,722
98,414
—
(14)
(32,278)
992,844
62,738
—
(137)
(32,546)
1,022,899
67,983
1,218
(33,354)
1,058,745
(dollars in thousands, except shares)
For the Fiscal Years Ended December 28, 2019,
December 29, 2018 and December 30, 2017
Balance at December 31, 2016
Net income
Other comprehensive income tax reform
adjustment
Other comprehensive income, net of
reclassification adjustments and tax
Dividends paid
33,047,807 $ 9,949 $ 1,062,778 $
—
—
—
—
—
—
—
—
98,414
(1,042)
—
(32,278)
Balance at December 30, 2017
33,047,807 $ 9,949 $ 1,127,872 $
Net Income
Cumulative effect of accounting principle
adoption of ASU 2016-01
Other comprehensive loss, net of
reclassification adjustments and tax
Dividends paid
Balance at December 29, 2018
Net Income
Other comprehensive loss, net of
reclassification adjustments and tax
Dividends paid
—
—
—
—
—
—
—
—
62,738
5,481
—
(32,546)
33,047,807 $ 9,949 $ 1,163,545 $
—
—
—
—
—
—
67,983
—
(33,354)
Balance at December 28, 2019
See accompanying notes to Consolidated Financial Statements.
33,047,807 $ 9,949 $ 1,198,173 $
22
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WEIS MARKETS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
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
Unrealized (gain) loss in value of equity securities
Deferred income taxes
Unrealized (gain) loss in SERP
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
Purchase of intangible assets
Change in SERP investment
Net cash used in investing activities
Cash flows from financing activities:
Payments on long-term debt
Dividends paid
Net cash used in financing activities
2019
52 Weeks Ended
2018
2017
$
67,983
$
62,738
$
98,414
93,706
782
-
(51)
(1,975)
5,765
(135)
950
2,431
(505)
913
1,822
171,686
(101,456)
4,245
(13,620)
5,985
1,180
(1,489)
(4,114)
(109,269)
93,567
1,274
1,532
54
1,606
3,418
1,883
(1,247)
(5,874)
(18,583)
9,330
565
150,263
(95,696)
1,734
(5,627)
6,550
5,834
(3,540)
(2,093)
(92,838)
85,415
(700)
-
40
-
(31,993)
(1,114)
(2,726)
4,045
7,742
(422)
446
159,147
(95,857)
2,246
(12,612)
8,442
7,272
(3,565)
(2,208)
(96,282)
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of period
See accompanying notes to Consolidated Financial Statements. Cash paid for income taxes was $14.1 million, $6.5 million and $13.0 million in 2019, 2018 and 2017,
respectively. Cash paid for interest related to long-term debt was $65 thousand, $383 thousand and $973 thousand in 2019, 2018 and 2017, respectively.
$
$
$
-
(33,354)
(33,354)
29,063
37,808
66,871
(34,988)
(32,546)
(67,534)
(10,109)
47,917
37,808
(29,488)
(32,278)
(61,766)
1,099
46,818
47,917
23
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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 2019.
(b) Definition of Fiscal Year
The Company’s fiscal year ends on the last Saturday in December. Fiscal 2019 was comprised of 52 weeks, ending on December 28,
2019. Fiscal 2018 was comprised of 52 weeks, ending on December 29, 2018. Fiscal 2017 was comprised of 52 weeks, ending on
December 30, 2017. 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 28, 2019 and December 29, 2018 totaled $32.9 million and $5.4 million, respectively.
Consumer electronic payments accepted at the point of sale, including all credit card, debit card and electronic benefits transfer
transactions that process in three days or less are classified as cash equivalents. Consumer electronic payment amounts classified as
cash equivalents as of December 28, 2019 and December 29, 2018 totaled $23.1 million and $23.6 million, 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, on municipal bonds are excluded from earnings and are reported as a separate
component of shareholders’ equity until realized. Unrealized holding gains and losses on equity securities are recorded in investment
income (loss) and interest expense. A decline in the fair value below cost that is deemed other than temporary results in a charge to
earnings and the establishment of a new cost basis for the security. Dividend and interest income is recognized when earned.
Realized gains and losses are included in earnings and are derived using the specific identification method for determining the cost of
securities.
Equity securities are measured at fair value and the unrealized holding gains and losses are recorded in investment income (loss) and
interest expense. The Company recognized a $2.0 million gain in 2019 and a $1.6 million loss in 2018.
(g) Accounts Receivable
Accounts receivable are stated net of an allowance for uncollectible accounts of $2.8 million and $2.1 million as of December 28,
2019 and December 29, 2018, respectively. The reserve balance relates to amounts due from pharmacy third party providers, retail
customer returned checks, manufacturing customers, vendors and tenants. The Company maintains an allowance for the amount of
receivables deemed to be uncollectible and calculates this amount based upon historical collection activity adjusted for current
conditions.
24
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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 retail inventory and average cost methods. The retail
inventory method is commonly used by retail companies to determine cost and calculate gross margin based on applying a cost-to-
retail ratio to each similar merchandise category’s ending retail value. The Company’s center store and pharmacy inventories are
valued using last in, first out (LIFO). The Company’s fresh inventories are valued using average cost. The Company evaluates
inventory shortages throughout the year based on actual physical counts in its facilities. Allowances for inventory shortages are
recorded based on the results of these counts and to provide for estimated shortages from the last physical count to the financial
statement date.
(i) Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided on the cost of buildings and improvements and equipment
using the straight-line method.
Leasehold improvements are amortized using the straight-line method over the terms of the leases or the useful lives of the assets,
whichever is shorter.
Maintenance and repairs are expensed and renewals and betterments are capitalized. When assets are retired or otherwise disposed of,
the assets and accumulated depreciation are removed from the respective accounts and any profit or loss on the disposition is credited
or charged to “Operating, general and administrative expenses.”
(j) Leases
The Company leases approximately 52% of its open store facilities under operating leases that expire at various dates through 2035,
with the remaining store facilities being owned. These leases generally provide for fixed annual rentals; however, several provide for
minimum annual rentals plus variable lease costs related to real estate taxes and insurance as well as contingent rentals based on a
percentage of annual sales or increases periodically based on inflation. These variable lease costs are not included in the measurement
of the operating lease right-to-use assets or lease liabilities and are charged to the related expense category included in “Operating,
general and administrative expenses.” Most of the leases contain multiple renewal options, under which the Company may extend the
lease terms from 5 to 20 years. Additionally, the Company has operating leases for certain transportation and other equipment. The
Company leases or subleases space to tenants in owned, vacated and open store facilities. Rental income is recorded when earned as a
component of “Operating, general and administrative expenses.”
(k) Goodwill and Intangible Assets
Goodwill is not amortized but tested for impairment on an annual basis and between annual tests when indicators of impairment are
identified. Intangible assets with an indefinite useful life are not amortized until their useful life is determined to be no longer
indefinite and are tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might
be impaired.
The Company’s intangible assets and related accumulated amortization at December 28, 2019 and December 29, 2018 consisted of the
following:
(dollars in thousands)
Liquor licenses
Asset acquisitions and other
Total
December 28, 2019
Accumulated
Amortization
$
$
-
2,888
2,888
Gross
14,905
5,083
19,988
$
$
Net
14,905
2,195
17,100
$
$
Gross
14,226
11,870
26,096
$
$
December 29, 2018
Accumulated
Amortization
$
$
-
4,975
4,975
Net
14,226
6,895
21,121
$
$
Intangible assets with a definite useful life are generally amortized on a straight-line basis over periods up to 10 years for customer
lists. Estimated amortization expense for the next five fiscal years is approximately $455 thousand in 2020, $444 thousand in 2021,
$314 thousand in 2022, and $310 thousand in 2023 and 2024, respectively. As of December 28, 2019, the Company’s intangible
assets with indefinite lives consisted of goodwill and liquor licenses.
25
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WEIS MARKETS, INC.
Note 1 Summary of Significant Accounting Policies (continued)
(l) Impairment of Long-Lived Assets
The Company periodically evaluates the period of depreciation or amortization for long-lived assets to determine whether current
circumstances warrant revised estimates of useful lives. The Company completes an impairment test annually. The Company also
reviews its property and equipment for impairment whenever events or changes in circumstances indicate the carrying value of an
asset may not be recoverable. Recoverability is measured by a comparison of the carrying amount to the net undiscounted cash flows
expected to be generated by the asset. An impairment loss would be recorded for the excess of net book value over the fair value of
the asset impaired. The fair value is estimated based on current market values or expected discounted future cash flows.
With respect to owned property and equipment associated with closed stores, the value of the property and equipment would be
adjusted to reflect recoverable values if current economic conditions and estimated fair values of the property was less than the net
book value.
In accordance with Accounting Standards Codification No. 360, Property, Plant and Equipment, the Company recorded a pre-tax
charge of $1.5 million in the fourth quarter of 2018 for the impairment of long-lived assets, including equipment and leasehold
improvements. The charge was a result of management determining that the net book value of this property was less than the
recoverable value. This charge was included as a component of "Operating, general and administrative expenses." Management
determined that no assets met the impairment criteria as of December 28, 2019.
The results of impairment tests are subject to management’s estimates and assumptions of projected cash flows and operating results.
The Company believes that, based on current conditions, materially different reported results are not likely to result from long-lived
asset impairments. However, a change in assumptions or market conditions could result in a change in estimated future cash flows
and the likelihood of materially different reported results.
(m) Self-Insurance
The Company is self-insured for a majority of its workers’ compensation, general liability, vehicle accident and associate medical
benefit claims. The self-insurance liability for most of the medical benefit claims is determined based on historical data and an
estimate of claims incurred but not reported. The other self-insurance liabilities including workers’ compensation are determined
actuarially, based on claims filed and an estimate of claims incurred but not yet reported. The Company is self-insured for certain
healthcare claims and stop-loss coverage is maintained for occurrences exceeding a $500 thousand specific deductible with a $250
thousand aggregating deductible. The Company is liable for workers' compensation claims up to $2.0 million per claim. Property and
casualty insurance coverage is maintained with outside carriers at deductible or retention levels ranging from $100 thousand to $1.0
million. Significant assumptions used in the development of the actuarial estimates include reliance on the Company’s historical
claims data including average monthly claims and average lag time between incurrence and reporting of the claim.
(n) Income Taxes
The Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The Company reviews the tax positions taken or expected to be taken on tax returns to determine
whether and to what extent a benefit can be recognized in the Consolidated Financial Statements. Refer to Note 10 to the
Consolidated Financial Statements for the amount of unrecognized tax benefits and other disclosures related to uncertain tax positions.
To the extent interest and penalties would be assessed by taxing authorities on any underpayment of income tax, such amounts are
accrued and classified as a component of income tax expense.
26
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WEIS MARKETS, INC.
Note 1 Summary of Significant Accounting Policies (continued)
(o) Earnings Per Share
Earnings per share are based on the weighted-average number of common shares outstanding.
(p) Revenue Recognition
Revenue from the sale of products to the Company’s customers is recognized at the point of sale. Discounts provided to customers at
the point of sale through the Weis Club Preferred Shopper loyalty program are recognized as a reduction in sales as products are sold.
Periodically, the Company will run a point-based sales incentive program that rewards customers with future sales discounts. The
Company makes reasonable and reliable estimates of the amount of future discounts based upon historical experience and its customer
data tracking software. Sales are reduced rationally and systematically by these estimates over the life of the program. Discounts to
customers at the point of sale provided by vendors, usually in the form of paper coupons, are not recognized as a reduction in sales
provided the discounts are redeemable at any retailer that accepts those discounts. The Company records “Deferred revenue” for the
sale of gift cards and revenue is recognized in “Net sales” at the time of customer redemption for products. Gift card breakage income
is recognized in “Operating, general and administrative expenses” based upon historical redemption patterns and represents the
balance of gift cards for which the Company believes the likelihood of redemption by the customer is remote. Sales tax is excluded
from “Net sales.” The Company charges sales tax on all taxable customer purchases and remits these taxes monthly to the appropriate
taxing jurisdiction. Merchandise return activity is immaterial to revenues due to products being returned quickly and the relatively
low unit cost.
(q) Cost of Sales, Including Advertising, Warehousing and Distribution Expenses
“Cost of sales, including advertising, warehousing and distribution expenses” consists of direct product costs (net of discounts and
allowances), advertising (net of vendor paid cooperative advertising credits), distribution center and transportation costs, as well as
manufacturing facility operations. Advertising costs, net of vendor paid cooperative advertising credits, are expensed as incurred
which are primarily funded by vendor cooperative advertising credits and occur in the same period as the product is sold.
(r) Vendor Allowances
Vendor allowances related to the Company's buying and merchandising activities are recorded as a reduction of cost of sales as they
are earned, in accordance with the underlying agreement. Off-invoice and bill-back allowances are used to reduce direct product costs
upon the receipt of goods. Promotional rebates and credits are accounted for as a reduction in the cost of inventory and recognized
when the related inventory is sold. Volume incentive discounts are realized as a reduction of cost of sales at the time it is deemed
probable and reasonably estimable that the incentive target will be reached. Long-term contract incentives, which require an exclusive
vendor relationship, are allocated over the life of the contract. Promotional allowance funds for specific vendor-sponsored programs
are recognized as a reduction of cost of sales as the program occurs and the funds are earned per the agreement. Cash discounts for
prompt payment of invoices are realized in cost of sales as invoices are paid. Warehouse and back-haul allowances provided by
suppliers for distributing their product through the Company’s distribution system are recorded in cost of sales offsetting costs
incurred. Warehouse slotting allowances are recorded in cost of sales when new items are initially set up in the Company's
distribution system, which is when the related expenses are incurred and performance under the agreement is complete. Swell
allowances for damaged goods are realized in cost of sales as provided by the supplier, helping to offset product shrink losses also
recorded in cost of sales.
Vendor allowances recorded as credits in cost of sales totaled $130.4 million in 2019, $132.0 million in 2018 and $131.1 million in
2017. Vendor paid cooperative advertising credits totaled $24.8 million in 2019, $19.4 million in 2018 and $19.2 million in 2017.
These credits were netted against advertising costs within “Cost of Sales, including Advertising, Warehousing and Distribution
expenses.” The Company had accounts receivable due from vendors of $1.0 million and $1.6 million for earned advertising credits
and $9.5 million and $12.8 million for earned promotional discounts as of December 28, 2019 and December 29, 2018, respectively.
The Company had $5.4 million and $7.4 million in unearned income included in accrued liabilities for unearned vendor programs
under long-term contracts for display and shelf space allocation as of December 28, 2019 and December 29, 2018, respectively.
(s) Operating, General and Administrative Expenses
Business operating costs including expenses generated from administration and purchasing functions, are recorded in “Operating,
general and administrative expenses” in the Consolidated Statements of Income. Business operating costs include items such as
wages, benefits, utilities, repairs and maintenance, rent, insurance, depreciation, leasehold amortization and costs for outside provided
services.
(t) Advertising Costs
The Company expenses advertising costs as incurred. The Company recorded advertising expense, before vendor paid cooperative
advertising credits, of $30.3 million in 2019, $30.5 million in 2018 and $31.0 million in 2017 in “Cost of Sales, including Advertising,
Warehousing and Distribution Expenses.”
27
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WEIS MARKETS, INC.
Note 1 Summary of Significant Accounting Policies (continued)
(u) Rental and Commission Income
The Company leases or subleases space to tenants in owned, vacated and open store facilities. Rental income is recorded when earned
as a component of “Operating, general and administrative expenses.” All leases are operating leases, 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
The Company adopted ASU 2016-02 Leases (Topic 842) effective December 30, 2018. The ASU requires lessees to recognize assets
and liabilities for the rights and obligations created by their leases with lease terms geater than 12 months. During 2018, the ASU was
amended to permit the election of transitional provisions, including the elimination of the requirement to restate reporting periods
prior to the date of adoption. The Company has adopted the standard using transitional provisions and has elected practical expedients
to not reassess the original conclusions reached regarding lease identification, lease classification and initial direct costs. The adoption
had a significant impact on the Company’s Consolidated Balance Sheets, resulting in $202 million and $211 million of the operating
lease right-to-use assets and lease liabilities, respectively. There are no significant changes to the Consolidated Statements of
Comprehensive Income or Consolidated Statements of Cash Flows. See Note 5 for additional disclosures on the adoption.
28
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WEIS MARKETS, INC.
Note 2 Marketable Securities
The Company’s marketable securities are all classified as available-for-sale within “Current Assets” in the Company’s Consolidated
Balance Sheets. FASB has established three levels of inputs that may be used to measure fair value:
Level 1 Observable inputs such as quoted prices in active markets for identical assets or liabilities;
Level 2 Observable inputs, other than Level 1 inputs in active markets, that are observable either directly or indirectly; and
Level 3 Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its
own assumptions.
The Company’s marketable securities valued using Level 1 inputs include three public company equity securities, for which quoted
market prices are available. The Company’s bond portfolio is valued using Level 2 inputs. The Company’s municipal bonds are
valued using a combination of pricing for similar securities, recently executed transactions, cash flow models with yield curves and
other pricing models utilizing observable inputs, which are considered Level 2 inputs.
For Level 2 investment valuation, the Company utilizes standard pricing procedures of its investment advisory firm(s), which include
various third-party pricing services. These procedures also require specific price monitoring practices as well as pricing review
reports, valuation oversight and pricing challenge procedures to maintain the most accurate representation of investment fair market
value.
The Company accrues interest on its bond portfolio throughout the life of each bond held. Dividends from the equity securities are
recognized as received. Both interest and dividends are recognized in “Investment income and interest expense” on the Company’s
Consolidated Statements of Income. The Company recognized investment income of $7.1 million and loss of $1.2 million which
included an unrealized gain in equity securities of $2.0 million and loss in equity securities of $1.6 million in the fiscal years ended
December 28, 2019 and December 29, 2018, respectively.
Marketable securities, as of December 28, 2019 and December 29, 2018, consisted of:
(dollars in thousands)
December 28, 2019
Available-for-sale:
Level 1
Equity securities
Level 2
Municipal bonds
(dollars in thousands)
December 29, 2018
Available-for-sale:
Level 1
Equity securities
Level 2
Municipal bonds
Amortized
Cost
Gross
Unrealized
Holding Gains
Gross
Unrealized
Holding Losses
Fair
Value
$
$
52,264
52,264
$
$
2,091
2,091
$
$
(18)
(18)
Amortized
Cost
Gross
Unrealized
Holding Gains
Gross
Unrealized
Holding Losses
$
$
46,699
46,699
$
$
426
426
$
$
(53)
(53)
$
$
$
$
9,201
54,337
63,538
7,226
47,072
54,298
Fair
Value
Maturities of marketable securities classified as available-for-sale at December 28, 2019, 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
Amortized
Cost
Fair
Value
$
$
4,666
28,773
18,825
52,264
$
$
4,678
29,535
20,124
54,337
29
Table of Contents
Note 2 Marketable Securities (continued)
WEIS MARKETS, INC.
SERP Investments
The Company also maintains a non-qualified supplemental executive retirement plan for certain of its associates which allows them to
defer income to future periods. Participants in the plans earn a return on their deferrals based on mutual fund investments. The
Company chooses to invest in the underlying mutual fund investments to offset the liability associated with the non-qualified deferred
compensation plans. Such investments are reported on the Company’s Consolidated Balance Sheets as “SERP investment,” are
classified as trading securities and are measured at fair value using Level 1 inputs with gains and losses included in “Investment
income and interest expense” on the Company’s Consolidated Statements of Income. The changes in the underlying liability to the
associates are recorded in “Other income (expense).”
30
Table of Contents
WEIS MARKETS, INC.
Note 3 Inventories
Merchandise inventories, as of December 28, 2019 and December 29, 2018, were valued as follows:
(dollars in thousands)
LIFO
Average cost
2019
204,043
75,763
279,806
$
$
2018
211,911
68,845
280,756
$
$
Management believes the use of the LIFO method for valuing certain inventories represents the most appropriate matching of costs
and revenues in the Company’s circumstances. If all inventories were valued on the average cost method, which approximates current
cost, total inventories would have been $70.7 million and $76.5 million higher than as reported on the above methods as of
December 28, 2019 and December 29, 2018, respectively. During 2019 and 2018, the Company had certain decrements in its LIFO
pools, which had an insignificant impact on the cost of sales.
Note 4 Property and Equipment
Property and equipment, as of December 28, 2019 and December 29, 2018, 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
2019
137,977
736,812
1,096,252
217,664
2,188,705
1,301,777
886,928
$
$
2018
133,386
713,128
1,069,616
224,231
2,140,361
1,252,753
887,608
$
$
31
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WEIS MARKETS, INC.
Note 5 Lease Commitments
The adoption of ASU 2016-02 Leases (Topic 842) had a significant impact on the Company’s Consolidated Balance Sheets, resulting
in operating lease right-to-use assets of $202 million and lease liabilities of $211 million. The difference between the operating lease
right-to-use assets and lease liabilities represents prepaid and accrued rents, unfavorable lease obligations, favorable lease assets and
deferred tenant allowances associated with operating leases as of December 30, 2018 and reclassified against the operating lease right-
to-use asset upon adoption.
As of December 28, 2019, the Company leased approximately 52% of its open store facilities under operating leases that expire at
various dates through 2035, with the remaining store facilities being owned. These leases generally provide for fixed annual rentals;
however, several provide for minimum annual rentals plus variable lease costs related to real estate taxes and insurance as well as
contingent rentals based on a percentage of annual sales or increases periodically based on inflation. These variable lease costs are not
included in the measurement of the operating lease right-to-use assets or lease liabilities and are charged to the related expense
category included in “Operating, general and administrative expenses.” Most of the leases contain multiple renewal options, under
which the Company may extend the lease terms from 5 to 20 years. Additionally, the Company has operating leases for certain
transportation and other equipment.
The Company leases or subleases space to tenants in owned, vacated and open store facilities. Rental income is recorded when earned
as a component of “Operating, general and administrative expenses.”
The following is a schedule of the lease costs included in “Operating, general and administrative expenses” for the fiscal year
ended December 28, 2019.
(dollars in thousands)
Operating lease cost
Variable lease cost
Lease or sublease income
Net lease cost
2019
$
$
46,063
10,998
(7,749)
49,312
The following is a schedule by years of the future minimum rental payments required under operating leases and total minimum
sublease and lease rental income to be received as of December 28, 2019.
(dollars in thousands)
2020
2021
2022
2023
2024
Thereafter
Total Lease Payments
Less: Interest
Present value of lease liabilities
Leases
Subleases
$
$
47,184
42,607
35,845
31,063
26,256
75,622
258,577
39,809
218,768
(4,044)
(3,480)
(2,901)
(2,308)
(1,663)
(6,336)
(20,732)
-
(20,732)
The following is a schedule of weighted-average remaining lease terms and weighted-average discount rates as of December 28, 2019
and December 30, 2018.
Lease Term and Discount Rate
Weighted-average remaining lease term
Weighted-average discount rate
December 28, 2019
4.44
3.47%
December 30, 2018
4.69
3.84%
Prior to the adoption of the ASU, leases generally provide for fixed annual rentals, minimum annual rentals, contingent rentals and
sublease income.
Rent expense and income on all leases for the fiscal years ended December 29, 2018 and December 30, 2017 consisted of:
(dollars in thousands)
Minimum annual rentals
Contingent rentals
Lease or sublease income
2018
2017
$
$
47,253
419
(7,757)
39,915
$
$
32
46,804
432
(7,612)
39,624
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
associates. The plan has a contributory component as well as a noncontributory profit-sharing component for certain associates. The
noncontributory component covers eligible associates which included certain salaried associates, store management and administrative
support personnel. The Company also has a non-qualified supplemental retirement plan covering highly compensated employees of
the Company. The Company’s policy is to fund retirement plan costs as accrued, with the exception of the deferred compensation
plan. Employer contributions to the qualified retirement plan are made at the sole discretion of the Company.
Retirement plan costs:
(dollars in thousands)
Retirement savings plan
Deferred compensation plan
Supplemental executive retirement plan
2019
2018
2017
3,434
801
498
4,733
$
3,525
508
390
4,423
$
3,343
813
531
4,687
$
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 28, 2019 is $4.2 million which is based on expected payments to be made over the remaining lives of the beneficiaries.
This amount is included in “Accrued expenses” and “Postretirement benefit obligations” in the Consolidated Balance Sheets. The
expected payment amounts are approximately $1.0 million for 2020 and for the years thereafter dependent on the lives of the
beneficiaries.
The Company also maintains a non-qualified supplemental executive retirement plan for certain of its associates. This plan is
designed to provide retirement benefits and salary deferral opportunities because of limitations imposed by the Internal Revenue Code
and the Regulations implemented by the Internal Revenue Service. This plan is unfunded and accounted for on an accrual basis.
Participants in this plan are excluded from participation in the profit sharing portion of the Weis Markets, Inc. Retirement Savings
Plan once their yearly earnings exceed the IRS highly compensated threshold. The Board of Directors annually determines the
amount of the allocation to the plans at its sole discretion. The allocation among the various plan participants is made in both flat
dollar amounts and in relationship to their compensation. Plan participants are 100% vested in their accounts after three years of
service with the Company. Benefits are distributed among participants upon termination or retirement. Substantial risk of benefit
forfeiture does exist for participants in this plan. The present value of accumulated benefits amounted to $19.0 million and $14.7
million at December 28, 2019 and December 29, 2018, respectively, and is included in “Postretirement benefit obligations” in the
Consolidated Balance Sheets.
Note 7 Revenue Recognition
The adoption of ASU 2014-9 Revenue from Contracts with Customers (ASC 606) did not have a material impact on the Company’s
Consolidated Financial Statements. The Chief Operating Officer, the Company’s chief operating decision maker, analyzed store
operational revenues by geographical area but each area offers customers similar product, has similar distribution methods, and
supported by centralized management processes. The Company’s operations are reported as a single reportable segment.
The following table represents net sales by type of product for years ending December 28, 2019, December 29, 2018 and December
30, 2017.
(dollars in thousands)
Grocery
Pharmacy
Fuel
Manufacturing
December 28, 2019
52 Weeks Ended
December 29, 2018
December 30, 2017
$
3,068,754
337,233
127,828
9,484
86.6 % $ 3,063,218
314,584
125,993
5,475
9.5
3.6
0.3
87.3 %
9.0
3.6
0.1
$ 3,041,481
309,079
109,467
6,780
87.7 %
8.9
3.2
0.2
Total net sales
$
3,543,299
100.0 % $ 3,509,270
100.0 %
$ 3,466,807
100.0 %
33
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WEIS MARKETS, INC.
Note 8 Prior Year Reclassifications
As of December 28, 2019, the Company reclassified non-service components of the Supplemental Executive Retirement Plan (SERP)
benefit obligation separately from the service cost component. These non-service components in the amounts of $3.0 million, $(0.9)
million and $2.1 million as of December 28, 2019, December 29, 2018 and December 30, 2017, respectively, were reclassified to
“Other income (expense)”. The Company recognizes service cost components in “Operating, general and administrative costs”.
The table below summarizes the effect of the reclassifications of previously reported Consolidated Financial Statements for the fiscal
years ended December 29, 2018 and December 30, 2017.
Consolidated Statements of Income
(dollars in thousands)
Operating, general and administrative
expenses
Income from operations
Other income (expense)
December 29, 2018
December 30, 2017
As Previously
As Previously
Reported Reclassifications As Adjusted
Reported Reclassifications As Adjusted
$
851,411 $
83,590
-
919 $
(919)
919
852,330 $
82,671
919
836,098 $
76,425
-
(2,094) $ 834,004
78,519
2,094
(2,094)
(2,094)
Note 9 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 30, 2017
Amount reclassified to retained earnings for equity unrealized gain (adoption of ASU 2016-01)
Other comprehensive loss before reclassifications
Amounts reclassified from accumulated other comprehensive income
Net current period other comprehensive Income
Accumulated other comprehensive income balance as of December 29, 2018
Other comprehensive income before reclassifications
Amounts reclassified from accumulated other comprehensive income
Net current period change in other comprehensive income
Accumulated other comprehensive income balance as of December 28, 2019
$
$
$
Unrealized Gains
on Available-for-Sale
Marketable Securities
5,880
(5,481)
(177)
40
(5,618)
262
1,255
(37)
1,218
1,480
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 28, 2019, December 29, 2018 and December 30, 2017.
(dollars in thousands)
Unrealized gains (losses) on available-for-sale marketable securities
Location
Amounts Reclassified from
Accumulated Other Comprehensive Income to the
Consolidated Statements of Income
2018
2019
2017
Total amount reclassified, net of tax
Investment income and interest expense
Provision for income taxes
$
$
(51) $
14
(37) $
(54) $
14
(40) $
(40)
11
(29)
34
Table of Contents
Note 10 Income Taxes
The provision (benefit) for income taxes consists of:
WEIS MARKETS, INC.
(dollars in thousands)
2019
2018
2017
Current:
Federal
State
Deferred:
Federal
State
$
$
11,779
3,117
6,636
(871)
20,661
$
$
11,385
4,594
6,059
(2,640)
19,398
$
$
10,630
1,972
(34,659)
2,666
(19,391)
The reconciliation of income taxes computed at the federal statutory rate of 21% in 2019 and 2018, respectively, and 35% in 2017.
Ending deferred tax liability has been computed at the federal statutory rate of 21% due to the Tax Reform.
(dollars in thousands)
Income taxes at federal statutory rate
State income taxes, net of federal income tax benefit
Nondeductible employee-related expenses
2017 tax reform
Other
Provision for income taxes (effective tax rate 23.3%, 23.6% and (24.5)%, respectively)
2019
18,615
1,333
1,974
-
(1,261)
20,661
$
$
2018
17,249
639
768
657
85
19,398
$
$
2017
27,658
1,306
1,828
(49,336)
(847)
(19,391)
$
$
The effective income tax rate was 23.3%, 23.6% and negative 24.5% in 2019, 2018, and 2017, respectively. The effective income tax
rate differs from the federal statutory rate of 21% primarily due to state taxes. On December 22, 2017, the U.S. Government enacted
the Tax Cuts and Jobs Act (the “Tax Reform”). The Tax Reform significantly impacted the Company’s effective income tax rate by
reducing the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018 and allowing immediate expensing of
qualified assets placed into service after September 27, 2017. Other elements of the Tax Reform have minor impacts, however the
above mentioned decreased deferred income tax by $49.3 million during 2017.
Cash paid for federal income taxes was $11.3 million, $4.5 million $12.0 million and in 2019, 2018 and 2017 respectively. Cash paid
for state income taxes was $2.8 million, $2.1 million and $1.0 million in 2019, 2018 and 2017 respectively.
The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities at December 28, 2019 and
December 29, 2018, 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
35
2019
2018
$
$
749
-
1,405
4,853
2,778
5,767
6,582
8,136
30,270
(13,072)
(2,851)
(5,252)
(106,136)
(127,311)
(97,041)
$
$
588
355
842
4,914
2,702
5,272
8,030
7,967
30,670
(9,828)
(1,809)
(5,274)
(104,552)
(121,463)
(90,793)
Table of Contents
WEIS MARKETS, INC.
Note 10 Income Taxes (continued)
The following table summarizes the activity related to the Company’s unrecognized tax benefits:
(dollars in thousands)
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
2019
2018
$
$
6,405
1,769
-
-
-
(1,562)
6,612
$
$
4,691
1,714
-
-
-
-
6,405
The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $1.8 million in 2019, $1.7
million in 2018 and $1.6 million in 2017.
The Company or one of its subsidiaries files tax returns in the United States and various state jurisdictions. The tax years subject to
examination in the United State and in Pennsylvania, where the majority of the Company's revenues are generated, are 2016 to 2019.
The Company has net operating loss carryforwards of $83.4 million available for state income tax purposes. The net operating losses
will begin to expire starting in 2027. The Company expects to fully utilize these net operating loss carryforwards.
Note 11 Summary of Quarterly Results (Unaudited)
Quarterly financial data for 2019 and 2018 are as follows:
(dollars in thousands, except per share amounts)
Thirteen Weeks Ended
Net sales
Gross profit on sales
Net income
Basic and diluted earnings per share
March 30, 2019
June 29, 2019
September 28, 2019 December 28, 2019
$
$
876,718
229,552
14,304
.53
$
$
887,967
236,670
20,475
.76
$
$
876,222
232,825
14,319
.53
$
$
902,392
239,147
18,885
.70
(dollars in thousands, except per share amounts)
Thirteen Weeks Ended
Net sales
Gross profit on sales
Net income
Basic and diluted earnings per share
March 31, 2018
876,106
$
234,907
16,191
.60
$
June 30, 2018
$
$
871,100
240,295
19,095
.71
September 29, 2018 December 29, 2018
892,988
$
227,459
13,245
.49
869,076
232,340
14,207
.53
$
$
$
Note 12 Fair Value Information
The carrying amounts for cash, accounts receivable and accounts payable approximate fair value because of the short maturities of
these instruments. The fair values of the Company’s marketable securities, as disclosed in Note 2, are based on quoted market prices
and institutional pricing guidelines for those securities not classified as Level 1 securities. The Company’s SERP investments are
classified as trading securities and are carried at fair value using Level 1 inputs.
Note 13 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.
36
Table of Contents
WEIS MARKETS, INC.
Note 14 Long-Term Debt
On September 1, 2016 Weis Markets entered into a revolving credit agreement with Wells Fargo Bank, National Association (the
“Credit Agreement”), which was amended on August 21, 2019 and matures on September 1, 2022. The Credit Agreement provides
for an unsecured revolving credit facility with an aggregate principal amount not to exceed $30.0 million with an additional
discretionary amount available of $70.0 million. As of December 28, 2019, the availability under the revolving credit agreement was
$18.8 million, net of $11.2 million letters of credit. The letters of credit are maintained primarily to support performance, payment,
deposit or surety obligations of the Company.
Interest expense related to long-term debt was $55 thousand and $288 thousand for 2019 and 2018, respectively.
37
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 28, 2019 and December 29, 2018, and the related consolidated statements of income, comprehensive income, shareholders’
equity, and cash flows for the 52 week periods ended December 28, 2019, December 29, 2018 and December 30, 2017, and the related
notes to the consolidated financial statements and the financial statement schedule listed in the accompanying index (collectively, the
financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the
Company as of December 28, 2019 and December 29, 2018, and the results of its operations and its cash flows for the 52 week
periods ended December 28, 2019, December 29, 2018 and December 30, 2017, 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 28, 2019, 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 12, 2020 expressed an unqualified opinion on the effectiveness of the Company's
internal control over financial reporting.
Change in Accounting Principle
As discussed in Note 1 to the financial statements, the Company has changed its method of accounting for leases effective December
30, 2018 due to the adoption of Accounting Standards Update ("ASU") No. 2016-02, Leases (Topic 842), using the modified
retrospective transition method.
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 12, 2020
38
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 28, 2019, based on
criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission in 2013. In our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of December 28, 2019, based on criteria established in Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission in 2013.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company as of December 28, 2019 and December 29, 2018, and the related
consolidated statements of income, comprehensive income, shareholders' equity and cash flows for the 52 week periods ended
December 28, 2019, December 29, 2018 and December 30, 2017, and the related notes to the consolidated financial statements and
the financial statement schedule listed in the accompanying index, and our report dated March 12, 2020 expressed an unqualified
opinion.
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 12, 2020
39
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 28, 2019.
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 28, 2019. The report can be found in Item 8 of this Annual Report on Form 10-K.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting during the fiscal year ended December 28, 2019,
that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. The
Company implemented additional internal controls to ensure proper assessment and accounting for the impact of the new accounting
standard relating to leases on the financial statements, which became effective on December 30, 2018.
Item 9b. Other Information:
There was no information required on Form 8-K during this quarter that was not reported.
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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 “Information about our Executive Officers,”
“Election of Directors,” “Board Committees and Meeting Attendance, Audit Committee,” “Corporate Governance Matters,”
“Compensation Tables” and “Stock Ownership” of the Weis Markets, Inc. definitive proxy statement dated March 12, 2020 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 12,
2020 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 12, 2020 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 12, 2020 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 12, 2020 is incorporated herein by reference.
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WEIS MARKETS, INC.
PART IV
Item 15. Exhibits, Financial Statement Schedules:
(a)(1)- The Company’s 2019 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
19
20
21
22
23
24
38
(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 44 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.
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WEIS MARKETS, INC.
Item 15. Exhibits, Financial Statement Schedules: (continued)
(a)(3) A listing of exhibits filed or incorporated
by reference is as follows:
Exhibit No. Exhibits
3-A
3-B
4-A
10-A
10-B
10-E
10-G
10-H
10-I
10-J
Articles of Incorporation, filed as exhibit 4.1 in Form S-8 on September 13, 2002 and incorporated herein by reference.
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.
Description of Securities Registered under Section 12 of the Securities Exchange Act of 1934, as amended, filed with
this Annual Report on Form 10-K.
Retirement Savings Plan, filed with this Annual Report on Form 10-K.*
Supplemental Executive Retirement Plan, filed with this Annual Report on Form 10-K. *
Deferred Compensation Agreement between the Company and Mr. Robert F. Weis, filed as exhibit under Part IV, Item 15(a)(3) in the
Annual Report on Form 10-K for the fiscal year ended December 26, 2009 and incorporated herein by reference. *
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, filed
as Exhibit 10.1 to Form 8-K April 7, 2017 and incorporated herein by reference. *
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. *
Executive Employment Agreement between the Company and Jonathan H Weis, Chairman, President and Chief Executive Officer,
signed on November 15, 2019 effective January 1, 2020 and continuing thereafter through December 31, 2023, filed as Exhibit 10.1 to
Form 8-K November 18, 2019 and incorporatetd herein by reference. *
Chief Executive Office Incentive Award Plan between the Company and Jonathan H Weis, Chairman, President and Chief Executive
Officer, signed on November 15, 2019 effective January 1, 2020 and continuing thereafter through December 31, 2023, filed as
Exhibit 10.2 to Form 8-K November 18, 2019 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
21
31.1
31.2
32
* 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.
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WEIS MARKETS, INC.
Item 15(c)(3). Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts:
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
WEIS MARKETS, INC.
(dollars in thousands)
Col. A
Col. B
Col. C
Additions
Col. D
Col. E
Description
Fiscal Year ended December 28, 2019:
Deducted from asset accounts:
Balance at
Beginning
of Period
Charged to
Costs and
Expenses
Charged to
Accounts
Describe
Deductions
Describe (1)
Balance at
End of
Period
Allowance for uncollectible accounts
$
2,090
$
1,975
$
---
$ 1,308
$
2,757
Fiscal Year ended December 29, 2018:
Deducted from asset accounts:
Allowance for uncollectible accounts
$
1,946
$
1,144
$
---
$ 1,000
$
2,090
Fiscal Year ended December 30, 2017:
Deducted from asset accounts:
Allowance for uncollectible accounts
$
1,455
$
2,176
$
---
$ 1,685
$
1,946
(1) Deductions are uncollectible accounts written off, net of recoveries.
Item 16. Form 10-K Summary:
None.
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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: 3/12/2020
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
3/12/2020
Date
3/12/2020
Date
3/12/2020
Date
3/12/2020
Date
3/12/2020
Date
3/12/2020
Date
3/12/2020
/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)
45