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
General
Weis Markets is a conventional supermarket chain that operates 198 retail stores with approximately 22 thousand employees located in Pennsylvania and six surrounding states: Delaware, Maryland, New Jersey, New York, Virginia, and West Virginia. Approximately 94% of Weis Markets employees are paid an hourly wage. Its products sold include groceries, dairy products, frozen foods, meats, seafood, fresh produce, floral, pharmacy services at certain locations, 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 competitive pricing by using Everyday Lower Price; Low Price Guarantee; Low, Low Price; 3 Day Sale; senior and military discounts; and Loyalty programs. The Loyalty program includes reward points that may be redeemed for discounts on items in store, at one of the Company’s fuel stations or one of its third-party fuel station partners.
Utilizing its own strategically located distribution center and transportation fleet, Weis Markets self distributes approximately 53% of product supplied to stores with the remaining being supplied by direct store vendors and regional wholesalers. In addition, the Company has three manufacturing facilities which process milk, water, ice, ice cream and fresh meat products. The corporate offices are located in Sunbury, Pennsylvania where the Company was founded in 1912.
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations: (continued)
Company Overview (continued)
The Company has provided additional product offerings and customer conveniences such as “Weis 2 Go Online,” currently offered at 190 store locations. “Weis 2 Go Online” allows the customer to order on-line and have their order delivered or picked up at an expedient store drive-thru. The Company also currently offers home delivery to customers at all198 of its locations via multiple grocery delivery partners.
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:
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations: (continued)
Company Overview (continued)
Results of Operations
Two-Year StackedComparable Store Sales Analysis
Management is providing Comparable Store Sales Two-Year Stacked analysis, a non-GAAP measure, because Management believes this metric is useful to investors and analysts. Information presented in the tables below is not intended for use as an alternative to any other measure of performance. It is not recommended that this table be considered a substitute for the Company’s operating results as reported in accordance with GAAP.
Year-over-year and sequential comparisons are the primary calculations used to analyze operating results, however, due to significant fluctuations caused by the COVID-19 pandemic, inflation and declining government benefits, Management believes it is necessary to provide a Two-Year Stacked Comparable Store Sales analysis. The following table provides the two-year stacked comparable store sales, excluding fuel and adjusted for an additional week in 2022 for the fiscal years ended December 28, 2024, and December 30, 2023, as well as fiscal years ended December 30, 2023, and December 31, 2022, respectively.
Percentage Change
Year Ended
Comparable store sales, excluding fuel (individual year) 1.9 0.3
Comparable store sales, excluding fuel (two-year stacked) 2.2
Comparable store sales (individual year) 1.7 (0.2) %
Comparable store sales (two-year stacked) 1.5 %
The 2024 and 2023 years were comprised of 52 weeks, whereas the 2022 year was comprised of 53 weeks.
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations: (continued)
Results of Operations (continued)
When calculating the percentage change in comparable store sales, the Company defines a new store to be comparable after it has been in operation for five full fiscal 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.
Analysis of Consolidated Statements of Income
Percentage Change
Gross profit margin 25.2 % 25.1 % 25.6 %
O, G & A, percent of net sales 22.5 % 22.2 % 22.2 %
Operating margin 2.8 % 2.9 % 3.3 %
Effective income tax rate 26.8 % 29.2 % 22.1 %
Net income, percent of net sales 2.3 % 2.2 % 2.7 %
Basic and diluted earnings per share $ 4.09 $ 3.86 $ 4.65 6.0 % (17.0) %
Net Sales
Individual Year-Over-Year Analysis of Sales
Percentage Change
Net sales, adjusted for an additional week in 2022, excluding fuel 1.8 % 2.6 %
Net sales, adjusted for an additional week in 2022 1.6 1.9
Net sales, excluding fuel 1.8 0.6
Net sales 1.6 0.0
Comparable store sales excluding fuel 1.9 0.3
Comparable store sales 1.7 % (0.2) %
The 2024 and 2023 years were comprised of 52 weeks, whereas the 2022 year was comprised of 53 weeks.
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 fiscal 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.
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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 Food-at-Home Price Index increased 1.8% in 2024, adjusted, 5.0% in 2023 and 11.4% in 2022. 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 5.1%, or $0.19 cents per gallon, in 2024 compared to the 52-week average in 2023. The 52-week average price of gasoline in the Central Atlantic States, according to the U.S. Department of Energy, decreased 10.1%, or $0.42 per gallon, in 2023 compared to the 53-week average in 2022.
Comparable store sales, excluding fuel and adjusted for the 53rd week in 2022, increased for all years presented. Comparable store sales, including fuel, increased in 2024 compared to 2023, which decreased when compared to 2022. On a comparable store sales basis pharmacy services increased in sales driven by the increased number of filled prescriptions. Comparable store sales increased 1.9% excluding fuel and 1.7% including fuel for 2024 compared to 2023. The Company has provided additional product offerings and customer conveniences such as “Weis 2 Go Online,” currently offered at 190 store locations. “Weis 2 Go Online” allows the customer to order on-line and have their order delivered or picked up at an expedient store drive-thru. The Company also currently offers home delivery to customers in all 198of its locations via multiple grocery delivery partners.
Although the Company experienced retail inflation and deflation in various commodities for the periods presented, the Company anticipates overall product costs to increase given the recent inflationary indicators in the food retail industry. 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 long-term 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, warehousing costs, transportation costs, as well as manufacturing facility costs. 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 25.2% in 2024, 25.1% in 2023, and 25.6% in 2022. The increase in gross profit rate is attributable to increased grocery sales, which have a higher gross profit margin than pharmacy and fuel sales.
The Company experienced unfavorable non-cash LIFO inventory valuation adjustments, decreasing gross profit by $608 thousand, $6.7 million and $29.2 million in 2024, 2023 and 2022, respectively.
The Company has experienced retail inflation and deflation in various commodities for the periods 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.
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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 55.7% of the total “Operating, general and administrative expenses.” As a percent of sales, direct store labor increased by 0.2% in 2024 compared to 2023 and increased 0.1% in 2023 compared to 2022. Direct store labor expenses increased in 2024 compared to 2023 due to increased wage expenses for hourly employees. Direct store labor increased slightly in 2023 compared to 2022due to flat net sales results for the same period. Management continues to monitor store labor efficiencies and develop labor standards to reduce costs while maintaining the Company’s customer service expectations. During 2023, the Company completed a multi-year initiative to install or upgrade self-checkouts in its stores in response to customer preference and labor supply, including adding convertible dual-use checkout lanes.
Depreciation and amortization expense charged to “Operating, general and administrative expenses” was $102.8 million, or 2.2% of net sales, for 2024 compared to $98.0 million, or 2.2% of net sales, for 2023 compared to $94.6 million, or 2.0% of net sales, for 2022. See the Liquidity and Capital Resources section for further information regarding the Company’s capital expenditure program.
A breakdown of the material increases (decreases) as a percent of sales in "Operating, general and administrative expenses" is as follows:
(amounts in thousands) Increase Increase (Decrease)
December 28, 2024 (Decrease) as a % of sales
Employee insurance benefits expense 4,684 0.1
Supplies expense 2,999 0.0
The net increase in other expenses to 2024 from 2023 included a gain from the asset disposal on the sale of business assets and the change in the Company’s deferred compensation plan liability.
Employee insurance benefit expense increased in 2024 from 2023 due to more high dollar claims.
(amounts in thousands) Increase Increase (Decrease)
December 30, 2023 (Decrease) as a % of sales
Employee insurance benefits expense $ (6,338) (0.1) %
Repairs and maintenance expense 3,563 0.1
The majority of the decrease in other expenses to 2023 from 2022 were technology expenses due to more third-party information technology subscription and consulting services offset by less asset disposals and insurance proceeds.
Employee insurance benefits expense decreased to 2023 from 2022 due to a dependent audit which resulted in fewer claims.
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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 26.8%, 29.2% and 22.1% in 2024, 2023, and 2022, respectively. The effective income tax rate differs from the federal statutory rate of 21% primarily due to state taxes as well as nondeductible employee-related expenses. The Company reduced its provision for income taxes by $5.5 million in 2022 primarily due to the effects of Pennsylvania House Bill 1342 which was enacted on July 8, 2022. The bill made significant changes to the Commonwealth’s corporate income tax laws which included lowering the tax rate gradually from 9.99% in 2022 to 4.99% in 2031, offset by taxable income changes, inclusive of, updating market sourcing rules, and codifying the economic nexus standard.
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 September 29, 2023, with Wells Fargo Bank, N.A. (the “Credit Agreement”). The Credit Agreement matures on October 1, 2027, 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, 2024, the availability under the revolving credit agreement was $14.5 million with $15.5 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 has not had an obligation on the Credit Agreement since the second quarter of 2018.
The Company’s investment portfolio consists of high-grade bonds with maturity dates between one and 30 years and four high yield, large capitalized public company equity securities. The portfolio totaled $192.0 million as of December 28, 2024. 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 expenditure 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. The Company completed the purchase of a store located in Newville, Pennsylvania in the first quarter of 2025. Management continues to reinvest in its long-term capital expenditure program including plans to complete multiple carryover projects from prior years that were delayed due to labor and supply chain disruptions. The Company anticipates to fund the long-term capital expenditure program, the acquisition of retail stores, the construction of additional distribution facilities, repurchases of common stock, and cash dividends on common stock through its cash and cash equivalents, marketable securities, cash flows from operating activities, and revolving credit agreement.
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 $1.36 in 2024, $1.36 in 2023 and $1.30 in 2022. The Company increased its quarterly dividend from 32 cents per share to 34 cents per share in the fourth quarter of 2022. 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 financial condition of the Company, results of operations and other factors which the Board of Directors deems relevant.
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations: (continued)
Results of Operations (continued)
Cash Flow Information
(amounts in thousands)
Net cash provided by (used in):
Operating
Cash flows from operating activities decreased in 2024 as compared to 2023 and 2022. The decrease in 2024 from 2023 is due to increased value of inventory on hand due to timing of New Year’s selling period and in 2023 from 2022 is due to lower net income.
Investing
Property and equipment purchases totaled $168.5 million in 2024, $104.0 million in 2023 and $122.2 million in 2022. As a percentage of sales, capital expenditures totaled 3.5% in 2024, 2.2% in 2023 and 2.5% in 2022. The Company decreased its marketable securities holdings in 2024 by $34.0 million to fund the increase in capital expenditures and increased its marketable securities holdings in 2023 by approximately $39.5 million and in 2022 the Company maintained its marketable securities portfolio. In 2024, the Company purchased two previously leased store locations. The Company also completed a business acquisition in 2024, for which cash consideration totaled $16.2 million.
Financing
The Company paid dividends of $36.6 million in 2024, $36.6 million in 2023 and $35.0 million in 2022. The Company increased its quarterly dividend from 32 cents per share to 34 cents per share in the fourth quarter of 2022.
Contractual Obligations
The following table represents scheduled maturities of the Company’s long-term contractual obligations as of December 28, 2024.
Payments due by period
Less than More than
(dollars in thousands) Total 1 year 1-3 years 3-5 years 5 years
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.
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations: (continued)
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 accounted for as a reduction of cost of sales and realized using estimated amounts at the time it is deemed probable 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.
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations: (continued)
Critical Accounting Policies and Estimates (continued)
Leases
The Company leases approximately 47% of its open store facilities under operating leases that expire at various dates through 2038, 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.”
Self-Insurance
The Company is self-insured for a majority of its workers’ compensation, general liability, vehicle accident and employee 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 individual annual claim occurrences exceeding a $600thousand specific deductible. The Company is liable for workers’ compensation claims ranging from $1.0 million to $2.0 million per claim. Property and casualty insurance coverage is maintained with outside carriers at deductible or retention levels ranging from $250 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.
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Item 7a. Quantitative and Qualitative Disclosures about Market Risk:
(dollars in thousands) Expected Maturity Dates Fair Value
Rate sensitive assets:
Other Relevant Market Risks
The Company’s equity securities at December 28, 2024 had a fair value of $5.9 million. The dividend yield realized on these equity investments was 5.2% in 2024. 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 SOFR rate. The Company believes this exposure is not material due to availability of liquid assets to eliminate the outstanding credit facility.
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Item 8. Financial Statements and Supplementary Data:
WEIS MARKETS, INC.
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except shares) December 28, 2024 December 30, 2023
Assets
Current:
Prepaid expenses and other current assets 40,980 34,107
Intangible and other assets, net 24,066 19,527
Liabilities
Current:
Income taxes payable 2,723 516
Postretirement benefit obligations 31,123 29,032
Shareholders’ Equity
See accompanying notes to Consolidated Financial Statements.
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CONSOLIDATED STATEMENTS OF INCOME
(amounts in thousands, except shares and per share amounts)
Investment income (loss) and interest expense 21,970 13,162 (82)
Cash dividends per share $ 1.36 $ 1.36 $ 1.30
Basic and diluted earnings per share $ 4.09 $ 3.86 $ 4.65
See accompanying notes to Consolidated Financial Statements.
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(amounts in thousands)
Other comprehensive income (loss) by component, net of tax:
Available-for-sale marketable securities
Other comprehensive income (loss), net of tax (1,666) 5,255 (8,135)
See accompanying notes to Consolidated Financial Statements.
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CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Accumulated
(amounts in thousands, except shares) Other Total
Dividends paid — — (34,968) — — — (34,968)
Dividends paid — — (36,582) — — — (36,582)
Dividends paid — — (36,582) — — — (36,582)
See accompanying notes to Consolidated Financial Statements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
52 Weeks Ended 52 Weeks Ended 53 Weeks Ended
Cash flows from operating activities:
Adjustments to reconcile net income to
net cash provided by operating activities:
(Gain) loss on disposition of fixed assets (4,447) (46) (2,407)
Unrealized (gain) loss in SERP (2,987) (2,834) 5,653
Changes in operating assets and liabilities:
Accounts receivable and prepaid expenses (23,347) (18,564) 2,436
Cash flows from investing activities:
Proceeds from the sale of property and equipment 6,507 867 6,691
Acquisition of business (16,225) — —
Purchase of intangible assets (4,251) (1,075) (819)
Change in SERP investment (1,485) (1,120) (1,290)
Cash flows from financing activities:
Net cash used in financing activities (36,582) (36,582) (34,968)
See accompanying notes to Consolidated Financial Statements. Cash paid for income taxes was $43.1 million, $43.8 million, $37.4 million in 2024, 2023 and 2022, respectively. Cash paid for interest related to long-term debt was $45 thousand, $41 thousand, $40 thousand in 2024, 2023 and 2022, respectively.
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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 founded in 1912 and incorporated 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 2024.
(b) Definition of Fiscal Year
The Company’s fiscal year ends on the last Saturday in December. Fiscal 2024 was comprised of 52 weeks, ending on December 28, 2024. Fiscal 2023 was comprised of 52 weeks, ending on December 30, 2023. Fiscal 2022 was comprised of 53 weeks, ending on December 31, 2022. 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, 2024 and December 30, 2023 totaled $129.7 million and $118.4 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, 2024 and December 30, 2023 totaled $31.6 million and $39.7 million, respectively.
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Note 1 Summary of Significant Accounting Policies (continued)
(f) Marketable Securities
Marketable securities consist of corporate and municipal bonds, commercial paper 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. To determine fair value the Company utilizes standard pricing procedures of its investment advisory firm(s), which include various third-party pricing services. If the cost of an investment exceeds its fair value, the Company evaluates general market conditions, credit quality of debt instrument issuers, and the extent to which the fair value is less than cost. Unrealized holding gains and losses, net of the related tax effect, on corporate and municipal bonds and commercial paper 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. 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.
Investment amounts classified as marketable securities as of December 28, 2024 and December 30, 2023 totaled $192.0 million and $226.0 million, respectively.
Equity securities are measured at fair value and the unrealized holding gains and losses are recorded in investment income (loss) and interest expense. The Company recognized a $1.0 million gain in 2024 and a $275 thousand loss in 2023.
(g) Accounts Receivable
Accounts receivable are stated net of an allowance for uncollectible accounts of $3.4 million and $2.0 million as of December 28, 2024 and December 30, 2023, 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. Accounts receivable as of January 1, 2023 amounted to $50,863.
(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.”
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Note 1 Summary of Significant Accounting Policies (continued)
(j) Leases
The Company leases approximately 47% of its open store facilities under operating leases that expire at various dates through 2038, 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.
In 2024, the Company increased goodwill by $8.9 million from the acquisition of two Sunnyway Food stores, increasing goodwill to $61.3 million in 2024 from $52.3 million in 2023 and 2022.
The Company’s intangible assets and related accumulated amortization at December 28, 2024 and December 30, 2023 consisted of the following:
December 28, 2024 December 30, 2023
Accumulated Accumulated
(amounts in thousands) Gross Amortization Net Gross Amortization Net
Software license 3,656 — 3,656 — — —
Intangible assets with a definite useful life are generally amortized on a straight-line basis over periods up to 10 years for customer lists and 3 years for software. Estimated amortization expense for the next five fiscal years is approximately $1.5 million in 2025, $1.5 million in 2026, $1.1 million in 2027, $148 thousand in 2028 and $121 thousand in 2029. As of December 28, 2024, the Company’s intangible assets with indefinite lives consisted of goodwill and liquor licenses.
(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.
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Note 1 Summary of Significant Accounting Policies (continued)
(l) Impairment of Long-Lived Assets (continued)
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 employee 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 individual annual claim occurrences exceeding a $600 thousand specific deductible. The Company is liable for workers’ compensation claims ranging from $1.0 million to $2.0 million per claim. Property and casualty insurance coverage is maintained with outside carriers at deductible or retention levels ranging from $250 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.
(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. Gift card breakage income is not material for either period presented. 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. 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 “Other revenue.” The Company recorded commission income of $17.9 million in 2024, $17.6 million in 2023, $18.0 million in 2022.
(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.
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Note 1 Summary of Significant Accounting Policies (continued)
(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 accounted for as a reduction of cost of sales and realized using estimated amounts at the time it is deemed probable 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 $122.9million in 2024, $106.9 million in 2023 and $120.0 million in 2022. Vendor paid cooperative advertising credits totaled $2.8 million in 2024, $3.1 million in 2023 and $2.9 million in 2022. 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 $318 thousand and $450 thousand for earned advertising credits and $10.1 million and $8.8 million for earned promotional discounts as of December 28, 2024 and December 30, 2023, respectively. The Company had $1.6 million and $2.4 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, 2024 and December 30, 2023, 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 $25.5 million in 2024, $24.2 million in 2023, $23.7 million in 2022 in “Cost of Sales, including Advertising, Warehousing and Distribution 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. Refer to Note 5 to the Consolidated Financial Statements for further disclosure on operating leases and rental income.
(v) Current Relevant Accounting Standards
The Company regularly monitors recently issued accounting standards and assesses their applicability and impact. The Company believes there are three accounting standard updates (ASU) that have or will have an impact on the Company’s disclosures.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU 2023-07"), which requires companies to enhance the disclosures about segment expenses. The new standard expands incremental line-item disclosures of significant segment expenses and how the expense information is applied in decision making and assessing performance of the reportable segment. The Company adopted ASU 2023-07 for the fiscal year ended December 28, 2024.
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Note 1 Summary of Significant Accounting Policies (continued)
(v) Current Relevant Accounting Standards (continued)
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):Improvements to Income Tax Disclosures (“ASU 2023-09”), that is intended to enhance the transparency and decision usefulness of income tax disclosures. ASU 2023-09 requires disclosures of reconciliation of the expected tax at the applicable statutory federal income tax rate to the reported tax in a tabular format, using both percentages and amounts, broken out into specific categories with certain reconciling items of five percent or greater of the expected tax further broken out by nature and/or jurisdiction, disclosure of income taxes paid, net of refunds received, broken out between federal and state and local income taxes and payments to individual jurisdictions representing five percent or more of the total income tax payments must also be separately disclosed. The disclosures are effective for annual periods beginning after December 15, 2025, with early adoption permitted. The disclosures in ASU 2023-09 should be applied on a prospective basis. The Company is currently evaluating this ASU to determine its impact on the Company's disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses ("ASU 2024-03"), which requires incremental disclosures about specific expense categories, including but not limited to, purchases of inventory, employee compensation, depreciation, amortization and selling expenses. The new guidance is effective for annual reporting periods after December 15, 2026, and interim periods with annual reporting periods beginning after December 15, 2027. Early adoption of ASU 2024-03 is permitted. The Company is currently evaluating this ASU to determine its impact on the Company's disclosures.
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. Financial Accounting Standards Board (FASB) has established three levels of inputs that may be used to measure fair value:
Level 1Observable inputs such as quoted prices in active markets for identical assets or liabilities;
Level 2Observable inputs, other than Level 1 inputs in active markets, that are observable either directly or indirectly; and
Level 3Unobservable 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 four public company equity securities, for which quoted market prices are available. The Company’s bond and commercial paper portfolio is valued using Level 2 inputs. The Company’s corporate and municipal bonds and commercial paper 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 and commercial paper portfolio throughout the life of each bond and commercial paper 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 $18.6 million, $9.5 million and $3.8 million which included unrealized gain in equity securities of $1.0 million, an unrealized loss in equity securities of $275 thousand, and an unrealized loss in equity securities of $1.3 million in the fiscal years ended December 28, 2024, December 30, 2023 and December 31, 2022, respectively.
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Note 2 Marketable Securities (continued)
Marketable securities, as of December 28, 2024 and December 30, 2023, consisted of:
Gross Gross
(amounts in thousands) Amortized Unrealized Unrealized Fair
December 28, 2024 Cost Holding Gains Holding Losses Value
Available-for-sale:
Level 1
Equity securities $ 5,930
Level 2
Gross Gross
(amounts in thousands) Amortized Unrealized Unrealized Fair
December 30, 2023 Cost Holding Gains Holding Losses Value
Available-for-sale:
Level 1
Equity securities $ 4,910
Level 2
Maturities of marketable securities classified as available-for-sale at December 28, 2024, were as follows:
Amortized Fair
(amounts in thousands) Cost Value
Available-for-sale:
Due after one year through five years 62,259 59,575
Due after five years through ten years 12,787 11,899
SERP Investments
The Company also maintains a non-qualified supplemental executive retirement plan (SERP) for certain of its employees which allows them to defer income to future periods. Participants in the plans earn a return on their deferrals based on mutual fund investments. The Company chooses to invest in the underlying mutual fund investments to offset the liability associated with the non-qualified deferred compensation plans. Such investments are reported on the Company’s Consolidated Balance Sheets as “SERP investment,” are classified as trading securities and are measured at fair value using Level 1 inputs with gains and losses included in “Investment income and interest expense” on the Company’s Consolidated Statements of Income. The Company recognized investment income of $3.4 million in the fiscal year ended December 28, 2024, investment income of $3.7 million in the fiscal year ended December 30, 2023 and investment loss of $3.8 million in the fiscal year ended December 31, 2022, respectively. The changes in the underlying liability to the employees are recorded in “Other income (expense).”
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Note 3 Inventories
Inventories, as of December 28, 2024 and December 30, 2023, were valued as follows:
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 $110.9 million and $110.3 million higher than as reported on the above methods as of December 28, 2024, and December 30, 2023, respectively.
Note 4 Property and Equipment
Property and equipment, as of December 28, 2024 and December 30, 2023, consisted of:
Useful Life
(amounts in thousands) (in years) 2024 2023
Less accumulated depreciation and amortization 1,755,267 1,647,579
Note 5 Lease Commitments
The following is a schedule of the lease costs included in “Operating, general and administrative expenses” for the fiscal years ended December 28, 2024, December 30, 2023 and December 31, 2022.
52 Weeks Ended 52 Weeks Ended 53 Weeks Ended
The following is a schedule by year 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, 2024.
(amounts in thousands) Leases Subleases
Less: Interest 29,533 -
Present value of lease liabilities 173,463 (19,827)
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Note 5 Lease Commitments (continued)
The following is a schedule of weighted-average remaining lease terms and weighted-average discount rates as of December 28, 2024, December 30, 2023, and December 31, 2022.
Weighted-average remaining lease term 3.56 3.63 3.85
Weighted-average discount rate 4.08% 3.43% 2.81%
The following is a schedule of supplemental cash flow information related to leases as of December 28, 2024, December 30, 2023, and December 31, 2022.
Note 6 Retirement Plans
The following is a schedule of the retirement plan costs for the fiscal years ended December 28, 2024, December 30, 2023 and December 31, 2022.
Profit Sharing — — —
Supplemental executive retirement plan 793 875 709
The Company has a qualified retirement savings plan, the Weis Markets, Inc. Retirement Savings Plan, covering substantially all employees. Employer contributions are made at the sole discretion of the Company. In 2022, the plan was adjusted to benefit more employees by eliminating the noncontributory profit-sharing component and increasing the contributory component to $0.50 for every dollar that all eligible employeess contributed to the plan, up to 6% of their eligible pay.
The Company maintained 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. The expected payments under the plan provisions were determined through actuarial calculations dependent on the age of the recipient, using an assumed discount rate. As of December 28, 2024, there are no active participants in the plan. A benefit payment of approximately $1.0 million was made in 2024 and the $2.4 million remaining liability was reversed.
The Company also maintains a non-qualified supplemental executive retirement plan covering highly compensated employees. 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. 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 $31.1million and $26.7 million at December 28, 2024 and December 30, 2023, respectively, and is included in “Postretirement benefit obligations” in the Consolidated Balance Sheets.
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Note 7 Revenue Recognition
The following table represents net sales by product category and other revenue for years ending December 28, 2024, December 30, 2023 and December 31, 2022.
52 Weeks Ended 52 Weeks Ended 53 Weeks Ending
Note 8Segment Reporting
The Company manages the business activities on a consolidated basis and has one operating segment: retail. The Company derives all its revenue from sales within Pennsylvania and surrounding states. The Company’s retail segment derives revenues from customers through the retail sale of a range of products including grocery, pharmaceutical and fuel from company owned supermarkets. See Note 7 for the disaggregation of revenue by product category. The accounting policies of the Company’s single segment are the same as those described in the Company’s Significant Accounting Policies.
The Company’s chief operating decision maker is the Chief Operating Officer. The chief operating decision maker assesses performance for the segment and decides how to allocate resources based on operating income and net income that is also reported on the accompanying Consolidated Statements of Income. The measure of segment assets used to assess performance and allocate resources is reported on the Consolidated Balance Sheets as total assets. The chief operating decision maker uses operating income and net income to evaluate income generated from segment assets in deciding whether to reinvest profits into the segment, such as for acquisitions. Operating income and net income are used to monitor budget versus actual results. The chief operating decision maker also uses operating income and net income in competitive analysis by benchmarking to the Company’s competitors. The competitive analysis along with the monitoring of budgeted versus actual results are used in assessing performance of the segment.
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Note 8Segment Reporting (continued)
The following table presents the retail segment’s revenue, significant segment expenses, and segment operating and net income for the years ended December 28, 2024, December 30, 2023, and December 31, 2022:
Less:
Investment income (loss) and interest expense 21,970 13,162 (82)
(1) Other revenue represents commission income as described in Note 1.
(4) Other income (expenses) consists of gains (losses) on SERP investments.
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.
Unrealized Gains (Losses)
on Available-for-Sale
(amounts in thousands) Marketable Securities
Other comprehensive income (loss) 5,255
Net current period other comprehensive income (loss) 5,255
Other comprehensive income (loss) (1,666)
Net current period other comprehensive income (loss) (1,666)
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Note 10 Income Taxes
Current:
Deferred:
The reconciliation of income taxes has been computed at the federal statutory rate of 21% in 2024, 2023 and 2022. Ending deferred tax liability has been computed at the federal statutory rate of 21%.
Nondeductible employee-related expenses 2,137 2,709 2,235
State deferred rate change — — (5,462)
Tax Credits (1,450) — —
The effective income tax rate was 26.8%, 29.2% and 22.1% in 2024, 2023, and 2022, respectively. The effective income tax rate differs from the federal statutory rate of 21% primarily due to state taxes, federal and state tax credits, and nondeductible employee-related expenses. The Company reduced its provision for income taxes by $5.5 million in 2022 primarily due to the effects of Pennsylvania House Bill 1342 which was enacted on July 8, 2022. The bill made significant changes to the Commonwealth’s corporate income tax laws which included lowering the tax rate gradually from 9.99% in 2022 to 4.99% in 2031, offset by taxable income changes, inclusive of, updating market sourcing rules, and codifying the economic nexus standard.
Cash paid for federal income taxes was $34.4 million, $23.0 million and $29.4 million in 2024, 2023 and 2022 respectively. Cash paid for state income taxes was $8.7 million, $20.8 million and $8.0 million in 2024, 2023 and 2022 respectively.
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Note 10 Income Taxes (continued)
The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities at December 28, 2024 and December 30, 2023, are:
Deferred tax assets:
Accounts receivable $ 794 $ 540
Employment incentives 4,300 4,855
Self-insurance liability 9,283 9,155
Postretirement benefit obligations 6,454 6,565