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Summary of Significant Accounting Policies | 12 Months Ended
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Dec. 31, 2016
Summary of 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. 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 2016. ﻿ (b) Definition of Fiscal Year The Company’s fiscal year ends on the last Saturday in December. Fiscal 2016 was comprised of 53 weeks, ending on December 31, 2016. Fiscal 2015 was comprised of 52 weeks, ending on December 26, 2015. Fiscal 2014 was comprised of 52 weeks, ending on December 27, 2014. 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 31, 2016 and December 26, 2015 totaled $714,000 and $7.7 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, are excluded from earnings and are reported as a separate component of shareholders’ equity until realized. A decline in the fair value below cost that is deemed other than temporary results in a charge to earnings and the establishment of a new cost basis for the security. Dividend and interest income is recognized when earned. Realized gains and losses are included in earnings and are derived using the specific identification method for determining the cost of securities. ﻿ (g) Accounts Receivable Accounts receivable are stated net of an allowance for uncollectible accounts of $1,455,000 and $1,967,000 as of December 31, 2016 and December 26, 2015, respectively. The reserve balance relates to amounts due from pharmacy third party providers, retail customer returned checks, manufacturing customers, vendors and tenants. The Company maintains an allowance for the amount of receivables deemed to be uncollectible and calculates this amount based upon historical collection activity adjusted for current conditions. Customer electronic payments accepted at the point of sale are classified as accounts receivable until collected. ﻿ Note 1 Summary of Significant Accounting Policies (continued) ﻿ (h) 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. Under this method, inventory is stated a t cost, which is determined by applying a cost-to-retail to each similar merchandise category’s ending retail value. The Company’s fresh inventories are valued using average cost. The Company evaluates inventory shortages throughout the year based on actual physical counts in its facilities. Allowances for inventory shortages are recorded based on the results of these counts and to provide for estimated shortages from the last physical count to the financial statement date. ﻿ (i) Property and Equipment Property and equipment are recorded at cost. Depreciation is provided on the cost of buildings and improvements and equipment using the straight-line method. ﻿ Leasehold improvements are amortized using the straight-line method over the terms of the leases or the useful lives of the assets, whichever is shorter. ﻿ Maintenance and repairs are expensed and renewals and betterments are capitalized. When assets are retired or otherwise disposed of, the assets and accumulated depreciation are removed from the respective accounts and any profit or loss on the disposition is credited or charged to “Operating, general and administrative expenses.” ﻿ (j) Goodwill and Intangible Assets Goodwill is not amortized but tested for impairment on an annual basis and between annual tests when indicators of impairment are identified. Intangible assets with an indefinite useful life are not amortized until their useful life is determined to be no longer indefinite and are tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. ﻿ The Company’s intangible assets and related accumulated amortization at December 31, 2016 and December 26, 2015 consisted of the following: ﻿
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﻿ |  |  | December 31, 2016 |  |  |  |  | December 26, 2015 |  |
﻿ |  |  | Accumulated |  |  |  |  | Accumulated |  |
﻿ (dollars in thousands) |  | Gross | Amortization |  | Net |  | Gross | Amortization |  | Net
﻿Liquor Licenses | $ | 8,423 | $ | - | $ | 8,423 | $ | 5,965 | $ | - | $ | 5,965
﻿Lease Acquisitions |  | 10,960 |  | 2,984 |  | 7,976 |  | 3,654 |  | 2,604 |  | 1,050
﻿Customer Lists |  | 295 |  | 21 |  | 274 |  | 162 |  | 15 |  | 147
﻿Total | $ | 19,678 | $ | 3,005 | $ | 16,673 | $ | 9,781 | $ | 2,619 | $ | 7,162
﻿ Intangible assets with a definite useful life are generally amortized on a straight-line basis over periods up to 30 years. Estimated amortization expense for the next five fiscal years is approximately $928,000 in 2017, $928,000 in 2018, $928,000 in 2019, $925,000 in 2020 and $869,000 in 2021. As of December 31, 2016, the Company’s intangible assets with indefinite lives consisted of goodwill and Pennsylvania liquor licenses. Note 1 Summary of Significant Accounting Policies (continued) ﻿ (k) Impairment of Long-Lived Assets The Company periodically evaluates the period of depreciation or amortization for long-lived assets to determine whether current circumstances warrant revised estimates of useful lives. The Company completes an impairment test annually. The Company also reviews its property and equipment for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. Recoverability is measured by a comparison of the carrying amount to the net undiscounted cash flows expected to be generated by the asset. An impairment loss would be recorded for the excess of net book value over the fair value of the asset impaired. The fair value is estimated based on current market values or expected discounted future cash flows. ﻿ With respect to owned property and equipment associated with closed stores, the value of the property and equipment would be adjusted to reflect recoverable values if current economic conditions and estimated fair values of the property was less than the net book value. ﻿ In accordance with Accounting Standards Codification No. 360, Property, Plant and Equipment, the Company recorded a pre-tax charge of $894,000 in the fourth quarter of 2016 for the impairment of long-lived assets, including equipment and leasehold improvements. The charge was a result of management determining that the net book value of a property was less than the recoverable value. This charge was included as a component of "Operating, general and administrative expenses." ﻿ The results of impairment tests are subject to management’s estimates and assumptions of projected cash flows and operating results. The Company believes that, based on current conditions, materially different reported results are not likely to result from long-lived asset impairments. However, a change in assumptions or market conditions could result in a change in estimated future cash flows and the likelihood of materially different reported results. ﻿ (l) Store Closing Costs The Company provides for closed store liabilities relating to the estimated post-closing lease liabilities and related other exit costs associated with the store closing commitments. As of December 31, 2016, the remaining closed store has a lease term of approximately two years, and the liabilities associated with the closed store lease are paid over the term of the lease. Closed store lease liabilities totaled $105,000 and $212,000 as of December 31, 2016 and December 26, 2015, respectively. The Company estimates the lease liabilities, net of estimated sublease income, using the undiscounted rent payments of closed stores. Other exit costs include estimated real estate taxes, common area maintenance, insurance and utility costs to be incurred after the store closes over the remaining lease term. Store closings are generally completed within one year after the decision to close. Adjustments to closed store liabilities and other exit costs primarily relate to changes in sublease income and actual exit costs differing from original estimates. Adjustments are made for changes in estimates in the period in which the changes become known. Any excess store closing liability remaining upon settlement of the obligation is reversed to income in the period that such settlement is determined. Store closing liabilities are reviewed quarterly to ensure that any accrued amount that is not a sufficient estimate of future costs, or that is no longer needed for its originally intended purpose, is adjusted to income in the proper period. Inventory write-downs, if any, in connection with store closings are classified in cost of sales. Costs to transfer inventory and equipment from closed stores are expensed as incurred. ﻿ The following table summarizes accrual activity for future lease obligations of stores that were closed in the normal course of business:
﻿ |  |  |
﻿ |  |  | Closed Store
﻿ (dollars in thousands) |  |  | Obligations
﻿Balance at December 27, 2014 |  | $ | 955
﻿Additions |  |  | 0
﻿Payments |  |  | (578)
﻿Adjustments |  |  | (165)
﻿Balance at December 26, 2015 |  |  | 212
﻿Additions |  |  | 0
﻿Payments |  |  | (33)
﻿Adjustments |  |  | (74)
﻿Balance at December 31, 2016 |  | $ | 105
Note 1 Summary of Significant Accounting Policies (continued) ﻿ (m) Self-Insurance The Company is self-insured for a majority of its workers’ compensation, general liability, vehicle accident and associate medical benefit claims. The self-insurance liability for most of the medical benefit claims is determined based on historical data and an estimate of claims incurred but not reported. The other self-insurance liabilities including workers’ compensation are determined actuarially, based on claims filed and an estimate of claims incurred but not yet reported. The Company was liable for associate health claims up to an annual maximum of $2,000,000 per member prior to March 1, 2014 and an unlimited amount per member as of and after March 1, 2014. As of March 1, 2014, the Company purchased stop loss insurance which carries a $500,000 specific deductible with a $250,000 aggregating deductible. The Company is liable for workers' compensation claims up to $2,000,000 per claim. Property and casualty insurance coverage is maintained with outside carriers at deductible or retention levels ranging from $100,000 to $1,000,000. Significant assumptions used in the development of the actuarial estimates include reliance on the Company’s historical claims data including average monthly claims and average lag time between incurrence and reporting of the claim. ﻿ (n) Income Taxes The Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company reviews the tax positions taken or expected to be taken on tax returns to determine whether and to what extent a benefit can be recognized in our Consolidated Financial Statements. Refer to Note 8 to the Consolidated Financial Statements for the amount of unrecognized tax benefits and other disclosures related to uncertain tax positions. To the extent interest and penalties would be assessed by taxing authorities on any underpayment of income tax, such amounts are accrued and classified as a component of income tax expense. ﻿ (o) Earnings Per Share Earnings per share are based on the weighted-average number of common shares outstanding. ﻿ (p) Revenue Recognition Revenue from the sale of products to the Company’s customers is recognized at the point of sale. Discounts provided to customers at the point of sale through the Weis Club Preferred Shopper loyalty program are recognized as a reduction in sales as products are sold. Periodically, the Company will run a point based sales incentive program that rewards customers with future sales discounts. The Company makes reasonable and reliable estimates of the amount of future discounts based upon historical experience and its customer data tracking software. Sales are reduced by these estimates over the life of the program. Discounts to customers at the point of sale provided by vendors, usually in the form of paper coupons, are not recognized as a reduction in sales provided the discounts are redeemable at any retailer that accepts those discounts. The Company records “Deferred revenue” for the sale of gift cards and revenue is recognized in “Net sales” at the time of customer redemption for products. Gift card breakage income is recognized in “Operating, general and administrative expenses” based upon historical redemption patterns and represents the balance of gift cards for which the Company believes the likelihood of redemption by the customer is remote. Sales tax is excluded from “Net sales.” The Company charges sales tax on all taxable customer purchases and remits these taxes monthly to the appropriate taxing jurisdiction. Merchandise return activity is immaterial to revenues due to products being returned quickly and the relatively low unit cost. ﻿ (q) Cost of Sales, Including Warehousing and Distribution Expenses “Cost of sales, including warehousing and distribution expenses” consists of direct product costs (net of discounts and allowances), distribution center and transportation costs, as well as manufacturing facility operations. ﻿ (r) Vendor Allowances Vendor allowances related to the Company's buying and merchandising activities are recorded as a reduction of cost of sales as they are earned, in accordance with the underlying agreement. Off-invoice and bill-back allowances are used to reduce direct product costs upon the receipt of goods. Promotional rebates and credits are accounted for as a reduction in the cost of inventory and recognized when the related inventory is sold. Volume incentive discounts are realized as a reduction of cost of sales at the time it is deemed probable and reasonably estimable that the incentive target will be reached. Long-term contract incentives, which require an exclusive vendor relationship, are allocated over the life of the contract. Promotional allowance funds for specific vendor-sponsored programs are recognized as a reduction of cost of sales as the program occurs and the funds are earned per the agreement. Cash discounts for prompt payment of invoices are realized in cost of sales as invoices are paid. Warehouse and back-haul allowances provided by suppliers for distributing their product through the Company’s distribution system are recorded in cost of sales offsetting costs incurred. Warehouse rack and slotting allowances are recorded in cost of sales when new items are initially set up in the Company's distribution system, which is when the related expenses are incurred and performance under the agreement is complete. Swell allowances for damaged goods are realized in cost of sales as provided by the supplier, helping to offset product shrink losses also recorded in cost of sales. ﻿ Note 1 Summary of Significant Accounting Policies (continued) ﻿ (r) Vendor Allowances (continued) Vendor allowances recorded as credits in cost of sales totaled $123.9 million in 2016, $97.0 million in 2015 and $89.5 million in 2014. Vendor paid cooperative advertising credits totaled $19.1 million in 2016, $17.1 million in 2015 and $16.0 million in 2014. These credits were netted against advertising costs within “Operating, general and administrative expenses.” The Company had accounts receivable due from vendors of $852,000 and $842,000 for earned advertising credits and $10.7 million and $8.1 million for earned promotional discounts as of December 31, 2016 and December 26, 2015, respectively. The Company had $4.0 million and $823,000 in unearned income included in accrued liabilities for unearned vendor programs under long-term contracts for display and shelf space allocation as of December 31, 2016 and December 26, 2015, respectively. ﻿ (s) Operating, General and Administrative Expenses Business operating costs including expenses generated from administration and purchasing functions, are recorded in “Operating, general and administrative expenses” in the Consolidated Statements of Income. Business operating costs include items such as wages, benefits, utilities, repairs and maintenance, advertising costs and credits, rent, insurance, depreciation, leasehold amortization and costs for outside provided services. ﻿ (t) Advertising Costs The Company expenses advertising costs as incurred. The Company recorded advertising expense, before vendor paid cooperative advertising credits, of $26.3 million in 2016, $23.1 million in 2015 and $24.6 million in 2014 in “Operating, general and administrative expenses.” ﻿ (u) 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. ﻿ (v) Current Relevant Accounting Standards ﻿ In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606), which amended the existing accounting standards for revenue recognition. ASU 2014-09 establishes principles for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. The standard was initially effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. In August 2015, the FASB issued a one-year deferral of the effective date of this new guidance resulting in it now being effective for the Company beginning in fiscal year 2018. In March, April, May and December of 2016 the FASB issued ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 2016-20, respectively, Revenue from Contracts with Customers (Topic 606) which amends the guidance in ASU 2014-09. Early adoption is not permitted. The amendments may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. The Company is currently in the process of evaluating the impact of adoption of the ASU. The Company expects that the adoption of the ASU will not have a significant impact on the Company’s point of sale product sales. In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40)(Topic 718): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. ASU 2014-15 provides guidance related to management’s responsibility to evaluate whether there is substantial doubt about the entity’s ability to continue as a going concern and to provide related note disclosures. The new requirements are effective for the annual periods ending after December 15, 2016, and for interim periods and annual periods thereafter. Early adoption is permitted. Adoption of the ASU did not have an impact on the Company’s 2016 Consolidated Financial Statements. ﻿ In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. ASU 2015-11 amends guidance on the measurement of inventory from lower of cost or market to net realizable value. The amendment applies to all inventory other than those measured by Last-In-First-Out (LIFO) and the Retail Inventory Method (RIM). The amendment is effective for fiscal years beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is permitted. Adoption of the new ASU will not have a material impact on the Company’s Consolidated Financial Statements. ﻿ ﻿ Note 1 Summary of Significant Accounting Policies (continued) ﻿ (v) Current Relevant Accounting Standards (continued) ﻿ In January 2016, the FASB issued ASU 2016-01 Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 generally requires that equity investments (excluding equity method investments) be measured at fair value with changes in fair value recognized in net income. ASU 2016-01 also modifies certain disclosure requirements related to financial assets and liabilities. Under existing GAAP, changes in fair value of available-for-sale equity investments are recorded in other comprehensive income. The Company expects that the adoption of ASU 2016-01 will likely have an impact on the net income reported in the Company’s Consolidated Statements of Income but it is not expected to significantly impact the Company’s comprehensive income or shareholders’ equity. The amendment is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with the cumulative effect of the adoption made to the balance sheet as of the date of adoption. Adoption will result in a reclassification of the related accumulated unrealized appreciation, net of applicable deferred income taxes, currently included in accumulated other comprehensive income to retained earnings, resulting in no impact on the Company’s shareholders’ equity. ﻿ In February 2016, the FASB issued ASU 2016-02 Leases (Topic 842). ASU 2016-02 requires lessees to recognize assets and liabilities for the rights and obligations created by their leases with lease terms more than 12 months. Current guidance only requires capital leases to be recognized on the balance sheet. However, the ASU 2016-02 now requires that both capital and operating leases be recognized on the balance sheet. The effect on cash flows will strictly depend on whether the lease is classified as an operating lease or capital lease. The ASU 2016-02 will require disclosures to aid investors and other financial statement users to better understand the amount, timing and uncertainty of the cash flows arising from leases. These disclosures are to include qualitative and quantitative information about the amounts recorded in the financial statements. This ASU will have a limited impact on the accounting for leases by lessors. However, new guidance contains targeted improvements to align, where necessary, the lessor’s accounting with the lessee’s accounting standards. ASU 2016-02 will become effective for annual periods beginning after December 15, 2018 and for interim periods within those fiscal years. Although the Company has not completed its assessment, the Company expects that the adoption of ASU 2016-02 will have a significant impact on the Company’s Consolidated Balance Sheets. ﻿ ﻿In March 2016, the FASB issued ASU 2016-04, Liabilities – Extinguishments of Liabilities (Suptopic 405-20) Recognition of Breakage for Certain Prepaid Stored-Value Products. ASU 2016-04 requires the debtor to derecognize a liability, such as a prepaid stored-value product, if and only if it has been extinguished by paying the creditor in cash, other financial assets, goods or services or if the debtor is relieved of its obligation legally, either judicially or by the creditor. ASU 2016-04 also requires that an entity must disclose the methodology and specific judgements made in applying the breakage recognized. ASU 2016-04 will become effective for the financial statements issued for the fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. Early application is permitted including adoption in an interim period. The Company is currently in the process of evaluating the impact of adoption of the ASU. The Company expects that the adoption of the ASU will not have a significant impact on the Company’s Consolidated Financial Statements. ﻿ In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The ASU attempts to clarify the definition of a business by better defining the term output and requiring that to be considered a business the entity must (1) include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create an output and (2) remove the evaluation whether a market participant could replace missing elements. The amendments in ASU 2017-01 are effective for fiscal years beginning after December 15, 2017, including interim periods within those periods. The amendments should be applied prospectively on or after the effective date. No disclosures are required at the time of transition. The Company expects that the adoption of the ASU will not have a significant impact on the Company’s Consolidated Financial Statements . ﻿ In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The ASU eliminates Step 2 from the goodwill impairment test which had an entity perform procedures to determine the fair value of its assets and liabilities at the impairment testing date. The entity is now required, under ASU 2017-04, to perform the goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognizing an impairment charge when the carrying amount exceeds the reporting unit’s fair value. The loss should not exceed the total amount of goodwill allocated to the reporting unit. The ASU also eliminates requirements for reporting units with a zero or negative carrying amount to perform a qualitative assessment. Therefore, the same impairment assessment applies to all reporting units. ASU 2017-04 should be applied prospectively and requires the disclosure of the nature and reason for the change in accounting principle upon transition, in the first interim and annual period the ASU is initially adopted. The amendments in ASU 2017-04 are effective for the annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company expects that the adoption of the ASU will not have a significant impact on the Company’s Consolidated Financial Statements. ﻿

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