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Significant Accounting Policies | 12 Months Ended
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Dec. 28, 2013
Significant Accounting Policies [Abstract] |
Significant Accounting Policies | 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. There was no material change in the nature of the Company's business during fiscal 2013. (b) Definition of Fiscal Year The Company’s fiscal year ends on the last Saturday in December. Fiscal 2013 was comprised of 52 weeks, ending on December 28, 2013. Fiscal 2012 was comprised of 52 weeks, ending on December 29, 2012. Fiscal 2011 was comprised of 53 weeks, ending on December 31, 2011. 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) Reclassifications The Company has reclassified 2012 balances related to its “SERP investment” (consisting of level 1 mutual funds) out of “Cash and cash equivalents” in the 2012 Consolidated Balance Sheet for a total of $7.1 million. The opening cash impact on the Consolidated Statement of Cash Flows was $6.8 million and the changes to investing activities in 2012 and 2011, respectively, were immaterial. (f) 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, 2013 and December 29, 2012 totaled $7.2 million and $992,000, respectively. (g) Marketable Securities Marketable securities consist of municipal bonds and equity securities. The Company invests primarily in high-grade marketable debt securities. The Company classifies all of its marketable securities as available-for-sale. Available-for-sale securities are recorded at fair value as determined by quoted market price based on national markets. Unrealized holding gains and losses, net of the related tax effect, are excluded from earnings and are reported as a separate component of shareholders’ equity until realized. A decline in the fair value below cost that is deemed other than temporary results in a charge to earnings and the establishment of a new cost basis for the security. Dividend and interest income is recognized when earned. Realized gains and losses are included in earnings and are derived using the specific identification method for determining the cost of securities. (h) Accounts Receivable Accounts receivable are stated net of an allowance for uncollectible accounts of $1,882,000 and $1,526,000 as of December 28, 2013 and December 29, 2012, respectively. The reserve balance relates to amounts due from pharmacy third party providers, retail customer returned checks, manufacturing customers and vendors. The Company maintains an allowance for the amount of receivables deemed to be uncollectible and calculates this amount based upon historical collection activity adjusted for current conditions. Customer electronic payments accepted at the point of sale are classified as accounts receivable until collected. Note 1 Summary of Significant Accounting Policies (continued) (i) Inventories Inventories are valued at the lower of cost or market, using both the last-in, first-out (LIFO) and average cost methods. The Company’s center store and pharmacy inventories are valued using LIFO and 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. (j) Property and Equipment In the first quarter of 2012, the Company changed its accounting policy for property and equipment. Property and equipment continue to be recorded at cost. Prior to January 1, 2012, the Company provided for depreciation of buildings and improvements and equipment using accelerated methods. Effective January 1, 2012, the Company changed its method of depreciation for this group of assets from the accelerated methods to straight-line. Management deemed the change preferable because the straight-line method will more accurately reflect the pattern of usage and the expected benefits of such assets. Management also considered that the change will provide greater consistency with the depreciation methods used by other companies in the Company's industry. The change was accounted for as a change in accounting estimate effected by a change in accounting principle. The net book value of assets acquired prior to January 1, 2012 with useful lives remaining will be depreciated using the straight-line method prospectively. If the Company had continued using accelerated methods, depreciation expense would have been $11.5 million greater in 2012. Had accelerated methods continued to be used, after considering the impact of income taxes, the effect would decrease net income by $6.8 million or $.25 per share in 2012. Leasehold improvements are unaffected by the change noted above. Leasehold improvements continue to be 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.” (k) Goodwill and Intangible Assets 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. Goodwill is not amortized but tested for impairment for each reporting unit, on an annual basis and between annual tests in certain circumstances. To derive the fair value of the Company’s sole reporting unit, the Company uses an income approach along with an analysis of its stock value. Under the income approach, fair value of a reporting unit is determined based on estimated future cash flows discounted by an estimated weighted-average cost of capital, which reflects the overall level of inherent risk of the Company. Estimated future cash flows are based on the Company’s internal projection model. The stock value evaluation consists of measuring the average market capitalization of the Company against its total asset value of its sole reporting unit. The Company completes its impairment test in the third quarter of each fiscal year. See Note 1(l) to the Consolidated Financial Statements included in this Annual Report on Form 10-K for more information on the Company’s impairment of long-lived assets. Note 1 Summary of Significant Accounting Policies (continued) (k) Goodwill and Intangible Assets (continued) The Company’s intangible assets and related accumulated amortization at December 28, 2013 and December 29, 2012 consisted of the following:
|  |  | December 28, 2013 |  |  |  |  | December 29, 2012 |  |
|  |  | Accumulated |  |  |  |  | Accumulated |  |
(dollars in thousands) |  | Gross | Amortization |  | Net |  | Gross | Amortization |  | Net
Non-Compete Agreements | $ | - | $ | - | $ | - | $ | 1,200 | $ | 1,120 | $ | 80
Lease Acquisitions |  | 3,654 |  | 2,235 |  | 1,419 |  | 5,330 |  | 2,961 |  | 2,369
Liquor Licenses |  | 1,879 |  | 65 |  | 1,814 |  | 942 |  | 22 |  | 920
Customer Lists |  | 120 |  | 6 |  | 114 |  | 120 |  | 2 |  | 118
Total | $ | 5,653 | $ | 2,306 | $ | 3,347 | $ | 7,592 | $ | 4,105 | $ | 3,487
Intangible assets with a definite useful life are generally amortized on a straight-line basis over periods ranging from 15 to 30 years. Estimated amortization expense for the next five fiscal years is approximately $250,000 in 2014, $250,000 in 2015, $250,000 in 2016, $250,000 in 2017 and $250,000 in 2018. As of December 28, 2013, the Company has no intangible assets, other than goodwill, with indefinite lives. (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 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 expected discounted future cash flows. With respect to owned property and equipment associated with closed stores, the value of the property and equipment is adjusted to reflect recoverable values based on the Company’s prior history of disposing of similar assets and current economic conditions. In accordance with Accounting Standards Codification No. 360, Property, Plant and Equipment, the Company recorded a pre-tax charge of $2.1 million in the third quarter of 2013 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 four properties was impaired. This charge was included as a component of "Operating, general and administrative expenses." The results of impairment tests are subject to management’s estimates and assumptions of projected cash flows and operating results. The Company believes that, based on current conditions, materially different reported results are not likely to result from long-lived asset impairments. However, a change in assumptions or market conditions could result in a change in estimated future cash flows and the likelihood of materially different reported results. (m) Store Closing Costs The Company provides for closed store liabilities relating to the estimated post-closing lease liabilities and related other exit costs associated with the store closing commitments. Currently, closed stores have remaining lease terms ranging from one to five years, and the liabilities associated with these closed store leases are paid over the terms of the lease. Closed store lease liabilities totaled $1,193,000 and $635,000 as of December 28, 2013 and December 29, 2012, respectively. The Company estimates the lease liabilities, net of estimated sublease income, using the undiscounted rent payments of closed stores. Adjustments to closed store liabilities primarily relate to changes in sublease income and actual exit costs differing from original estimates. Adjustments are made for changes in estimates in the period in which the change becomes known. Store closing liabilities are reviewed quarterly to ensure that any accrued amount that is not a sufficient estimate of future costs, or that no longer is needed for its originally intended purpose, is adjusted to income in the proper period. Note 1 Summary of Significant Accounting Policies (continued) (m) Store Closing Costs (continued) The following table summarizes accrual activity for future lease obligations of stores that were closed in the normal course of business:
|  |  | Future Lease
(dollars in thousands) |  |  | Obligations
Balance at December 31, 2011 |  | $ | 756
Additions |  |  | 198
Payments |  |  | (248)
Adjustments |  |  | (71)
Balance at December 29, 2012 |  |  | 635
Additions |  |  | 680
Payments |  |  | (33)
Adjustments |  |  | (89)
Balance at December 28, 2013 |  | $ | 1,193
(n) Self-Insurance The Company is self-insured for a majority of its workers’ compensation, general liability, vehicle accident and associate medical benefit claims. Self-insurance costs are accrued based upon the aggregate of the liability for reported claims and an estimated liability for claims incurred but not reported. The Company was liable for associate health claims up to an annual maximum of $750,000 per member prior to March 1, 2012, $1,250,000 per member prior to March 1, 2013, $2,000,000 per member prior to March 1, 2014 and an unlimited amount per member as of March 1, 2014. The Company is liable for workers' compensation claims up to $2,000,000 per claim. Property and casualty insurance coverage is maintained with outside carriers at deductible or retention levels ranging from $100,000 to $1,000,000. (o) 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. (p) Earnings Per Share Earnings per share are based on the weighted-average number of common shares outstanding. (q) Revenue Recognition Revenue from the sale of products to the Company’s customers is recognized at the point of sale. Discounts provided to customers at the point of sale through the Weis Club Preferred Shopper loyalty program are recognized as a reduction in sales as products are sold. Periodically, the Company will run a point based sales incentive program that rewards customers with future sales discounts. The Company makes reasonable and reliable estimates of the amount of future discounts based upon historical experience and its customer data tracking software. Sales are reduced by these estimates over the life of the program. Discounts to customers at the point of sale provided by vendors, usually in the form of paper coupons, are not recognized as a reduction in sales provided the discounts are redeemable at any retailer that accepts those discounts. The Company records “Deferred revenue” for the sale of gift cards and revenue is recognized in “Net sales” at the time of customer redemption for products. Gift card breakage income is recognized in “Operating, general and administrative expenses” based upon historical redemption patterns and represents the balance of gift cards for which the Company believes the likelihood of redemption by the customer is remote. Sales tax is excluded from “Net sales.” The Company charges sales tax on all taxable customer purchases and remits these taxes monthly to the appropriate taxing jurisdiction. Merchandise return activity is immaterial to revenues. Note 1 Summary of Significant Accounting Policies (continued) (r) Cost of Sales, Including Warehousing and Distribution Expenses “Cost of sales, including warehousing and distribution expenses” consists of direct product (net of discounts and allowances), distribution center and transportation costs, as well as manufacturing facility operations. (s) Vendor Allowances Vendor allowances that relate to the Company's buying and merchandising activities are recorded as a reduction of cost of sales as they are earned, in accordance with the underlying agreement. Off-invoice and bill-back allowances are used to reduce direct product costs upon the receipt of goods. Promotional rebates and credits are accounted for as a reduction in the cost of inventory and recognized when the related inventory is sold. Volume incentive discounts are realized as a reduction of cost of sales at the time it is deemed probable and reasonably estimable that the incentive target will be reached. Long-term contract incentives, which require an exclusive vendor relationship, are allocated over the life of the contract. Promotional allowance funds for specific vendor-sponsored programs are recognized as a reduction of cost of sales as the program occurs and the funds are earned per the agreement. Cash discounts for prompt payment of invoices are realized in cost of sales as invoices are paid. Warehouse and back-haul allowances provided by suppliers for distributing their product through the Company’s distribution system are recorded in cost of sales as the required performance is completed. Warehouse rack and slotting allowances are recorded in cost of sales when new items are initially set up in the Company's distribution system, which is when the related expenses are incurred and performance under the agreement is complete. Swell allowances for damaged goods are realized in cost of sales as provided by the supplier, helping to offset product shrink losses also recorded in cost of sales. Vendor allowances recorded as credits in cost of sales totaled $76.4 million in 2013, $75.1 million in 2012 and $66.5 million in 2011. Vendor paid cooperative advertising credits totaled $16.0 million in 2013, $16.4 million in 2012 and $18.2 million in 2011. These credits were netted against advertising costs within “Operating, general and administrative expenses.” The Company had accounts receivable due from vendors of $440,000 and $609,000 for earned advertising credits and $5.8 million and $4.6 million for earned promotional discounts as of December 28, 2013 and December 29, 2012, respectively. The Company had $911,000 and $861,000 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, 2013 and December 29, 2012, respectively. (t) Operating, General and Administrative Expenses Business operating costs including expenses generated from administration and purchasing functions, are recorded in “Operating, general and administrative expenses” in the Consolidated Statements of Income. Business operating costs include items such as wages, benefits, utilities, repairs and maintenance, advertising costs and credits, rent, insurance, equipment depreciation, leasehold amortization and costs for outside provided services. (u) Advertising Costs The Company expenses advertising costs as incurred. The Company recorded advertising expense, before vendor paid cooperative advertising credits, of $23.5 million in 2013, $23.5 million in 2012 and $24.7 million in 2011 in “Operating, general and administrative expenses.” (v) Rental 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. (w) Current Relevant Accounting Standards In February 2013, FASB issued additional authoritative guidance on comprehensive income and the reporting of amounts reclassified out of accumulated other comprehensive income. This guidance requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. This new guidance is effective prospectively for reporting periods beginning after December 15, 2012. Adoption of this new guidance required additional disclosures and presentation of items impacting other comprehensive income but did not have an impact on the Company’s consolidated financial statements.

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