UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-K

(Mark One)

 [X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 28, 2013

OR

 [  ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________to_________

Commission File Number 1-5039

WEIS MARKETS, INC.

(Exact name of registrant as specified in its charter)

PENNSYLVANIA (State or other jurisdiction of incorporation or organization) 1000 S. Second Street P. O. Box 471	24-0755415 (I.R.S. Employer Identification No.)
Sunbury, Pennsylvania (Address of principal executive offices) Registrant's telephone number, including area code: (570) 286-4571	17801-0471 (Zip Code) Registrant's web address:  www.weismarkets.com

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Common stock, no par value Securities registered pursuant to Section 12(g) of the Act:  None Name of each exchange on which registered New York Stock Exchange  

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes [  ]No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes [  ]No [X]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes [X]No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes [X]No [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  [X]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  [  ]		Accelerated filer  [X]
Non-accelerated filer   [  ]	(Do not check if a smaller reporting company)	Smaller reporting company  [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes [  ]  No [X]

The aggregate market value of Common Stock held by non-affiliates of the Registrant is approximately $564,000,000as ofJune 29, 2013 the last business day of the most recently completed second quarter.

Shares of common stock outstanding as of March 14, 2014 - 26,898,443.

DOCUMENTS INCORPORATED BY REFERENCE:  Selected portions of the Weis Markets, Inc. definitive proxy statement dated  March 13, 2014 are incorporated by reference in Part III of this Form 10-K.

WEIS MARKETS, INC.

TABLE OF CONTENTS

FORM 10-K	Page
Part I
Item 1. Business	1
Item 1a. Risk Factors	3
Item 1b. Unresolved Staff Comments	6
Item 2. Properties	6
Item 3. Legal Proceedings	6
Executive Officers of the Registrant	7
Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	8
Item 6. Selected Financial Data	9
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations	10
Item 7a. Quantitative and Qualitative Disclosures about Market Risk	20
Item 8. Financial Statements and Supplementary Data	21
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	40
Item 9a. Controls and Procedures	40
Item 9b. Other Information	41
Part III
Item 10. Directors, Executive Officers and Corporate Governance	41
Item 11. Executive Compensation	41
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	41
Item 13. Certain Relationships and Related Transactions, and Director Independence	41
Item 14. Principal Accountant Fees and Services	41
Part IV
Item 15. Exhibits, Financial Statement Schedules	42
Item 15(c)(3). Schedule II - Valuation and Qualifying Accounts	44
Signatures	45
Exhibit 21 Subsidiaries of the Registrant
Exhibit 23 Consent of Grant Thornton LLP
Exhibit 31.1 Rule 13a-14(a) Certification - CEO
Exhibit 31.2 Rule 13a-14(a) Certification - CFO
Exhibit 32 Certification Pursuant to 18 U.S.C. Section 1350

WEIS MARKETS, INC.

PART I

Item 1.Business:

Weis Markets, Inc. is a Pennsylvania business founded by Harry and Sigmund Weis in 1912 and incorporated in 1924.  The Company is engaged principally in the retail sale of food in Pennsylvania and surrounding states.  There was no material change in the nature of the Company's business during fiscal 2013.  The Company’s stock has been traded on the New York Stock Exchange since 1965 under the symbol “WMK.”  The Weis family currently owns approximately 65% of the outstanding shares.  Robert F. Weis serves as Chairman of the Board of Directors, and Jonathan H. Weis, son of Robert F. Weis, serves as Vice Chairman, President and Chief Executive Officer. 

The Company's retail food stores sell groceries, dairy products, frozen foods, meats, seafood, fresh produce, floral, pharmacy services, deli products, prepared foods, bakery products, beer and wine, fuel and general merchandise items, such as health and beauty care and household products.  The Company advertises its products and promotes its brand through weekly newspaper circulars; radio and television ads; e-mail blasts; and on-line via its website, social media and mobile applications.  Printed circulars are used extensively on a weekly basis to advertise featured items.  The Company utilizes a loyalty card program, “Weis Club Preferred Shopper,” which allows customers to receive discounts, promotions and rewards.  The Company currently owns and operates 166 retail food stores, one of which was opened in the beginning of 2014.  The Company’s operations are reported as a single reportable segment.

The following table provides additional detail on the percentage of consolidated net sales contributed by product category for fiscal years 2013, 2012, and 2011, respectively:

	2013		2012		2011
Center Store (1)	59.0	%	59.5	%	59.9	%
Fresh (2)	28.7		28.1		27.9
Pharmacy Services	8.6		8.7		8.8
Fuel	3.5		3.5		3.1
Other	0.2		0.2		0.3
Consolidated net sales	100.0	%	100.0	%	100.0	%

__________

(1) Consists primarily of groceries, dairy products, frozen foods, beer and wine, and general merchandise items, such as health and beauty care and household products.

(2) Consists primarily of meats, seafood, fresh produce, floral, deli products, prepared foods and bakery products.

At the end of 2013, Weis Markets, Inc. operated 25 stores in Maryland, 4 stores in New Jersey, 11 stores in New York, 122 stores in Pennsylvania and 2 stores in West Virginia, for a total of 164 retail food stores operating under the Weis Markets trade name.  Weis Markets, Inc. also operated one Save-A-Lot retail food store in Pennsylvania.

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WEIS MARKETS, INC.

Item 1.Business: (continued)

All retail food store locations, except Save-A-Lot, operate as conventional supermarkets.  Save-A-Lot’s limited assortment format serves value-focused customers.  The retail food stores range in size from 8,000 to 70,000 square feet, with an average size of approximately 50,000 square feet.  The following summarizes the number of stores by size categories as of year-end:

	2013	2013	2012	2012
Square feet	Number of stores	% of Total	Number of stores	% of Total
55,000 to 70,000	53	32%	49	30%
45,000 to 54,999	72	44%	72	44%
35,000 to 44,999	22	13%	24	15%
25,000 to 34,999	12	7%	12	7%
Under 25,000	6	4%	6	4%
Total	165	100%	163	100%

The following schedule shows the changes in the number of retail food stores, total square footage and store additions/remodels as of year-end:

	2013	2012	2011	2010	2009
Beginning store count	163	161	164	164	154
New stores (1)	4	4	1	---	11
Opened relocated stores	---	1	1	---	---
Closed stores	(2)	(2)	(4)	---	(1)
Closed relocated stores	---	(1)	(1)	---	---
Ending store count	165	163	161	164	164
Total square feet (000’s), at year-end	8,211	8,054	7,877	7,887	7,888
Additions/major remodels	12	13	9	4	5

____________________

(1)  On June 11, 2012, Weis Markets, Inc. acquired three former Genuardi’s stores located in Conshohocken, Doylestown and Norristown, Pennsylvania from Safeway Inc. On August 23, 2009, the Company acquired eleven Giant Markets stores located in Broome County, New York including units in Binghamton, Vestal, Endicott, Endwell and Johnson City.

The Company supports its retail operations through a centrally located distribution facility, its own transportation fleet, three manufacturing facilities and its administrative offices.The Company is required to use a significant amount of working capital to provide for the necessary amount of inventory to meet demand for its products through efficient use of buying power and effective utilization of space in its distribution facilities.  The manufacturing facilities consist of a meat processing plant, an ice cream plant and a milk processing plant.

The Company operates in a highly competitive market place.  The number and the variety of competitors vary by market.  The Company’s principal competition consists of international, national, regional and local food chains, as well as independent food stores.  The Company also faces substantial competition from convenience stores, membership warehouse clubs, specialty retailers, supercenters and large-scale drug and pharmaceutical chains.  The Company continues to effectively compete by offering a strong combination of value, quality and service.

The Company currently employs approximately 17,900 full-time and part-time associates.

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WEIS MARKETS, INC.

Item 1.Business: (continued)

Trade Names and Trademarks.    The Company has invested significantly in the development and protection of “Weis Markets” both as a trade name and a trademark and considers it to be an important asset.  The Company is the exclusive licensee of more than 60 other trademarks registered and/or pending in the United States Patent and Trademark Office from WMK Holdings, Inc., including trademarks for its product lines and promotions such as Weis, Weis 2 Go, Weis Wonder Chicken, Price Freeze, Weis Gas-n-Go and Healthy Bites.  Each trademark registration is for an initial period of 10 years and may be renewed so long as it is in continued use in commerce.

The Company considers its trademarks to be of material importance to its business and actively defends and enforces its rights.

The Company maintains a corporate web site at www.weismarkets.com.   The Company makes available, free of charge, on the “Corporate Information” section of its web site, its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after the Company electronically files such material or furnishes it to the U.S. Securities and Exchange Commission (SEC) by clicking on the “SEC Information” link.

The Company’s Corporate Governance materials can be found in the “Corporate Information” section of the Company’s web site.   These materials include the corporate governance guidelines; the charters of the Audit, Compensation and Disclosure Committees; and both the Code of Business Conduct and Ethics and the Code of Ethics for the CEO and CFO.  A copy of the foregoing corporate governance materials is available upon written request to the Company’s principal executive offices.

Item 1a.Risk Factors:

In addition to risks and uncertainties in the ordinary course of business common to all businesses, important factors are listed below specific to the Company and its industry, which could materially impact its future performance.

The Company’s industry is highly competitive.  If the Company is unable to compete effectively, the Company’s financial condition and results of operations could be materially affected.

The retail food industryis intensely price competitive, and the competition the Company encounters may have a negative impact on product retail prices.  The financial results may be adversely impacted by a competitive environment that could cause the Company to reduce retail prices without a reduction in its product cost to maintain market share; thus reducing sales and gross profit margins.

The trade area of the Company is located within a region and is subject to the economic, social and climate variables of that region.

The Company’s stores are concentrated in central and northeast Pennsylvania, central Maryland, suburban Baltimore regions and the Southern Tier of New York.  Changes in economic and social conditions in the Company’s operating regions, including fluctuations in the inflation rate along with changes in population and employment and job growth rates, affect customer shopping habits.  These changes may negatively impact sales and earnings.  Business disruptions due to weather and catastrophic events historically have been few.  The Company’s geographic regions could receive an extreme variance in the amount of annual snowfall that may materially affect sales and expense results.

The Company may be unable to retain key management personnel.

The Company's success depends to a significant degree upon the continued contributions of senior management. The loss of any key member of management may prevent the Company from implementing its business plans in a timely manner.  In addition, employment conditions specifically may affect the Company’s ability to hire and train qualified associates.

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WEIS MARKETS, INC.

Item 1a.   Risk Factors: (continued)

Food safety issues could result in the loss of consumer confidence in the Company. 

Customers count on the Company to provide them with wholesome food products.  Concerns regarding the safety of food products sold in its stores could cause shoppers to avoid purchasing certain products from the Company, or to seek alternative sources of supply for all of their food needs, even if the basis for the concern is outside of the Company’s control.  Any lost confidence on the part of its customers would be difficult and costly to reestablish.  As such, any issue regarding the safety of any food items sold by the Company, regardless of the cause, could have a substantial and adverse effect on operations.

The failure to execute expansion plans could have a material adverse effect on the Company's business and results of its operations.

Circumstances outside the Company’s control could negatively impact anticipated capital investments in store, distribution and manufacturing projects, information technology and equipment.  The Company cannot determine with certainty whether its new stores will be successful.  The failure to expand by successfully opening new stores as planned, or the failure of a significant number of these stores to perform as planned, could have a material adverse effect on the Company’s business and results of its operations.

Disruptions or security breaches in the Company’s information technology systems could adversely affect results.

The Company’s business is highly dependent on complex information technology systems that are vital to its continuing operations.  If the Company was to experience difficulties maintaining existing systems or implementing new systems, significant losses could be incurred due to disruptions in its operations.  Additionally, these systems contain valuable proprietary data as well as receipt and storage of personal information about its associates and customers, in particular electronic payment data and personal health information that, if breached, would have an adverse effect on the Company.  Such an occurrence could adversely affect the Company’s reputation with its customers, associates, and vendors, as well as the Company’s operations, results of operations, financial condition and liquidity, and could result in litigation against the Company or the imposition of penalties. Moreover, a security breach could require the expenditure of significant additional resources to further upgrade the security measures that the Company employs to guard such important personal information against cyberattacks and other attempts to access such information and could result in a disruption of operations. 

The Company is affected by certain operating costs which could increase or fluctuate considerably.

Associate expenses contribute to the majority of the Company’s operating costs.  The Company's financial performance is potentially affected by increasing wage and benefit costs, a competitive labor market, regulatory wage increases and the risk of unionized labor disruptions of its non-union workforce.  The Company's profit is particularly sensitive to the cost of oil.  Oil prices directly affect the Company's product transportation costs, as well as its utility and petroleum-based supply costs.  It also affects the costs of its suppliers, which impacts its cost of goods. 

Various aspects of the Company’s business are subject to federal, state and local laws and regulations.

The Company is subject to various federal, state and local laws, regulations and administrative practices that affect the Company’s business.  The Company must comply with numerous provisions regulating health and sanitation standards, food labeling, equal employment opportunity, minimum wages and licensing for the sale of food, drugs and alcoholic beverages.  The Company’s compliance with these regulations may require additional capital expenditures and could adversely affect the Company’s ability to conduct the Company’s business as planned.  Management cannot predict either the nature of future laws, regulations, interpretations or applications, or the effect either additional government regulations or administrative orders, when and if promulgated, or disparate federal, state, and local regulatory schemes would have on the Company’s future business.  They could, however, require the reformulation of certain products to meet new standards, the recall or discontinuance of certain products not able to be reformulated, additional record keeping, expanded documentation of the properties of certain products, expanded or different labeling and/or scientific substantiation.  Any or all of such requirements could have an adverse effect on the Company’s results of operations and financial condition.

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WEIS MARKETS, INC.

Item 1a.   Risk Factors: (continued)

Unexpected factors affecting self-insurance claims and reserve estimates could adversely affect the Company.

The Company uses a combination of insurance and self-insurance to provide for potential liabilities for workers' compensation, general liability, vehicle accident, property and associate medical benefit claims.  Management estimates the liabilities associated with the risks retained by the Company, in part, by considering historical claims experience, demographic and severity factors and other actuarial assumptions which, by their nature, are subject to a high degree of variability. Any projection of losses concerning workers’ compensation and general liability is subject to a high degree of variability. Among the causes of this variability are unpredictable external factors affecting future inflation rates, discount rates, litigation trends, legal interpretations, benefit level changes and claim settlement patterns.

The Company was liable for associate health claims up to an annual maximum of $750,000 per member prior to March 1, 2012, $1,250,000 per member prior to March 1, 2013, $2,000,000 per member prior to March 1, 2014 and an unlimited amount per member as of March 1, 2014.  The Company is liable for workers' compensation claims up to $2,000,000 per claim.  Property and casualty insurance coverage is maintained with outside carriers at deductible or retention levels ranging from $100,000 to $1,000,000.  The Company, for the benefit of cost savings, has accepted the risk of an unusual amount of independent multiple material claims arising, which could have a significant impact on earnings.

Changes in tax laws may result in higher income tax.

The Company's future effective tax rate may increase from current rates due to changes in laws and the status of pending items with various taxing authorities.  Currently, the Company benefits from a combination of its corporate structure and certain state tax laws.

The Company’s investment portfolio may suffer losses from changes in market interest rates and changes in market conditions which could adversely affect results of operations or liquidity.

As of December 28, 2013, the Company had $18.0 million in cash and cash equivalents, $63.1 million in marketable securities and $8.8 million in SERP (Supplemental Executive Retirement Plan) investment (level 1 mutual funds).  The Company’s marketable securities consist of municipal bonds and equity securities.  These investments are subject to general credit, liquidity, market and interest rate risks.  Substantially all of these securities are subject to interest rate and credit risk and will decline in value if interest rates increase or one of the issuers’ credit ratings is reduced.  As a result, the Company may experience a reduction in value or loss of liquidity from investments, which may have a negative impact on the Company’s results of operations, liquidity and financial condition.  The Federal Deposit Insurance Corporation (FDIC) insures amounts up to $250,000 per depositor, per insured bank, for each account ownership category.  The Company has balances in bank accounts that may exceed the insured amount leaving the Company exposed for any amounts over the $250,000 limit.

The Company is a controlled Company due to the common stock holdings of the Weis family.

The Weis family’s share ownership represents approximately 65% of the combined voting power of the Company’s common stock as of December 28, 2013.  As a result, the Weis family has the power to elect a majority of the Company’s directors and approve any action requiring the approval of the shareholders of the Company, including adopting certain amendments to the Company’s charter and approving mergers or sales of substantially all of the Company’s assets.  Currently, two of the Company’s six directors are members of the Weis family.

Changes in vendor promotions or allowances, including the way vendors target their promotional spending, and the Company's ability to effectively manage these programs could significantly impact margins and profitability.

The Company cooperatively engages in a variety of promotional programs with its vendors.  As the parties assess the results of specific promotions and plan for future promotions, the nature of these programs and the allocation of dollars among them changes over time.  The Company manages these programs to maintain or improve margins while at the same time increasing sales.  A reduction in overall promotional spending or a shift by vendors in promotional spending away from certain types of promotions that the Company and its customers have historically utilized could have a significant impact on profitability.

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WEIS MARKETS, INC.

Item 1b.Unresolved Staff Comments:

There are no unresolved staff comments.

Item 2.Properties:

The Company currently owns and operates 82 of its retail food stores, and leases and operates 84 stores under operating leases that expire at various dates through 2029.  The Company owns all trade fixtures and equipment in its stores and several parcels of vacant land, which are available as locations for possible future stores or other expansion.

The Company owns and operates one distribution center in Milton, Pennsylvania of approximately 1.1 million square feet, and one in Northumberland, Pennsylvania totaling approximately 76,000 square feet.  The Company also owns one warehouse complex in Sunbury, Pennsylvania totaling approximately 552,000 square feet.  The Company utilizes 259,000 square feet of its Sunbury location to operate its ice cream plant, meat processing plant and milk processing plant.

Item 3.Legal Proceedings:

Neither the Company nor any subsidiary is presently a party to, nor is any of their property subject to, any pending legal proceedings, other than routine litigation incidental to the business.

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WEIS MARKETS, INC.

Executive Officers of the Registrant

The following sets forth the names and ages of the Company’s executive officers as of March 14, 2014, indicating all positions held during the past five years:

Name	Age	Title
Robert F. Weis (a)	94	Chairman of the Board
Jonathan H. Weis (b)	46	Vice Chairman, President and Chief Executive Officer
Kurt A. Schertle (c)	42	Chief Operating Officer
Scott F. Frost (d)	51	Senior Vice President, Chief Financial Officer and Treasurer
Harold G. Graber (e)	58	Senior Vice President of Real Estate and Development and Secretary
James E. Marcil (f)	55	Senior Vice President of Human Resources

(a) Robert F. Weis.The Company has employed Mr. Weis since 1946.  Mr. Weis served as Chairman and Treasurer from 1995 until April 2002, at which time he was appointed Chairman of the Board.

(b) Jonathan H. Weis.The Company has employed Mr. Weis since 1989.  Mr. Weis served the Company as Vice President of Property Management and Development from 1996 until April 2002, at which time he was appointed as Vice President and Secretary.  In January of 2004, the Board appointed Mr. Weis as Vice Chairman and Secretary.  Mr. Weis became the Company's interim President and Chief Executive Officer in September 2013 and was appointed as President and Chief Executive Officer in February 2014. 

(c) Kurt A. Schertle.The Company hired Mr. Schertle on March 1, 2009 as its Vice President of Sales and Merchandising.  In February 2010, Mr. Schertle was promoted to Senior Vice President of Sales and Merchandising.  In July 2012, Mr. Schertle was promoted to Executive Vice President of Sales and Merchandising.  In September 2013, Mr. Schertle assumed the additional responsibility of overseeing Store Operations and Mr. Schertle was promoted to Chief Operating Officer in March 2014.  Prior to joining the Company, Mr. Schertle was President and Chief Operating Officer of Tree Top Kids, Inc., a specialty toy retailer, from 2007 until 2009.  Mr. Schertle has more than 20 years of food retailing experience, mostly with Shoppers Food & Pharmacy, a banner of SUPERVALU, where he worked in various capacities including his last position as a Senior Vice President for Marketing and Merchandising from 2005 until 2007.

(d) Scott F.Frost.Mr. Frost joined the Company full-time in 1984 and he has held various positions since then.  The Company appointed Mr. Frost as Vice President, Chief Financial Officer and Treasurer in October 2009.  In January 2011, Mr. Frost was promoted to Senior Vice President, Chief Financial Officer and Treasurer.  Mr. Frost also served as Acting Chief Financial Officer, Controller, Assistant Treasurer and Assistant Secretary of the Company during the past five years. 

(e) Harold G. Graber.Mr. Graber joined the Company in October 1989 as the Director of Real Estate.  Mr. Graber, who served the Company as Vice President for Real Estate since 1996, was promoted to Senior Vice President of Real Estate and Development in February 2010.  Mr. Graber was appointed as Secretary of the Company in February 2014.

(f) James E. Marcil. Mr. Marcil joined the Company in September 2002 as Vice President of Human Resources.  In February 2010, Mr. Marcil was promoted to Senior Vice President of Human Resources.  

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WEIS MARKETS, INC.

PART II

Item 5.Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities:

The Company's stock is traded on the New York Stock Exchange (ticker symbol WMK).  The approximate number of shareholders, including individual participants in security position listings, on December 28, 2013 as provided by the Company's transfer agent was 5,925.  High and low stock prices and dividends paid per share for the last two fiscal years were:

	2013						2012
	Stock Price				Dividend		Stock Price				Dividend
Quarter		High		Low	Per Share			High		Low	Per Share
First	$	41.98	$	37.90	$	0.30	$	44.85	$	39.66	$	0.30
Second		47.92		39.34		0.30		45.90		42.07		0.30
Third		51.92		45.12		0.30		45.96		41.15		0.30
Fourth		54.13		46.15		0.30		42.63		37.65		0.30

The following line graph compares the yearly percentage change in the cumulative total shareholder return on the Company’s common stock against the cumulative total return of the S&P Composite-500 Stock Index and the cumulative total return of a published group index for the Retail Grocery Stores Industry (“Peer Group”), provided by Value Line, Inc., for the period of five years.  The graph depicts $100 invested at the close of trading on the last trading day preceding the first day of the fifth preceding year in Weis Markets, Inc. common stock, S&P 500, and the Peer Group.  The cumulative total return assumes reinvestment of dividends.

Comparative Five-Year Total Returns

	2008	2009	2010	2011	2012	2013
Weis Markets, Inc.	100.00	111.83	128.11	133.97	135.08	184.99
S&P 500	100.00	126.46	145.51	148.58	172.35	228.18
Peer Group	100.00	102.44	120.74	137.82	159.55	215.86

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WEIS MARKETS, INC.

Item 6.Selected Financial Data:

The following selected historical financial information has been derived from the Company's audited consolidated financial statements.  This information should be read in connection with the Company's Consolidated Financial Statements and the Notes thereto, as well as "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in Item 7.

Five Year Review of Operations

	52 Weeks		52 Weeks		53 Weeks		52 Weeks		52 Weeks
(dollars in thousands, except shares,	Ended		Ended		Ended		Ended		Ended
per share amounts and store information)	Dec. 28, 2013		Dec. 29, 2012		Dec. 31, 2011		Dec. 25, 2010		Dec. 26, 2009
Net sales	$	2,692,588	$	2,701,405	$	2,752,504	$	2,620,378	$	2,516,175
Costs and expenses		2,581,406		2,574,373		2,638,224		2,515,062		2,419,824
Income from operations		111,182		127,032		114,280		105,316		96,351
Investment and other income		4,684		3,882		3,326		2,069		1,556
Income before provision for income taxes		115,866		130,914		117,606		107,385		97,907
Provision for income taxes		44,145		48,403		42,022		39,094		35,107
Net income		71,721		82,511		75,584		68,291		62,800
Retained earnings, beginning of year		931,579		881,346		864,132		827,042		795,473
		1,003,300		963,857		939,716		895,333		858,273
Cash dividends		32,278		32,278		58,370		31,201		31,231
Retained earnings, end of year	$	971,022	$	931,579	$	881,346	$	864,132	$	827,042
Weighted-average shares outstanding, diluted		26,898,443		26,898,443		26,898,443		26,898,443		26,920,551
Cash dividends per share	$	1.20	$	1.20	$	2.17	$	1.16	$	1.16
Basic and diluted earnings per share	$	2.67	$	3.07	$	2.81	$	2.54	$	2.33
Working capital	$	211,528	$	229,748	$	223,742	$	234,889	$	173,159
Total assets	$	1,148,242	$	1,090,440	$	1,029,004	$	992,081	$	916,515
Shareholders’ equity	$	834,053	$	795,690	$	745,886	$	728,127	$	690,764
Number of grocery stores		165		163		161		164		164

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WEIS MARKETS, INC.

Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations:

Overview

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to help the reader understand Weis Markets, Inc., its operations and its present business environment.  The MD&A is provided as a supplement to and should be read in conjunction with the consolidated financial statements and the accompanying notes thereto contained in “Item 8. Financial Statements and Supplementary Data” of this report.  The following analysis should also be read in conjunction with the Financial Statements included in the Quarterly Reports on Form 10-Q and the Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission, as well as the cautionary statement captioned “Forward-Looking Statements” immediately following this analysis.  This overview summarizes the MD&A, which includes the following sections:

 •   Company Overview - a general description of the Company’s business and strategic imperatives.

 •   Results of Operations - an analysis of the Company’s consolidated results of operations for the three years presented in the Company’s consolidated financial statements.

 •   Liquidity and Capital Resources - an analysis of cash flows, aggregate contractual obligations, and off-balance sheet

arrangements.

 •   Critical Accounting Policies and Estimates - a discussion of accounting policies that require critical judgments and estimates.

Company Overview

General

Weis Markets, Inc. was founded in 1912 by Harry and Sigmund Weis in Sunbury, Pennsylvania.  Today, the Company ranks among the top 50 food and drug retailers in the United States in revenues generated.  As of December 28, 2013, the Company operated 165 retail food stores in Pennsylvania and four surrounding states: Maryland, New Jersey, New York and West Virginia.

Company revenues are generated in its retail food stores from the sale of a wide variety of consumer products including groceries, dairy products, frozen foods, meats, seafood, fresh produce, floral, pharmacy services, deli products, prepared foods, bakery products, beer and wine, fuel, and general merchandise items, such as health and beauty care and household products.  The Company supports its retail operations through a centrally located distribution facility, its own transportation fleet, three manufacturing facilities and its administrative offices.  The Company's operations are reported as a single reportable segment.

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Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations: (continued)

Company Overview, (continued)

Strategic Imperatives

The following strategic imperatives will be focused upon by the Company to attempt to ensure the success of the Company in the coming years:

· Establish a Sales Driven Culture – The Company continues to focus on sales and profits growth, improved operating discipline, increased productivity and positive cash flow.  The Company believes disciplined growth will increase its market share and operating profits, resulting in enhanced shareholder value.  The Company’s method of driving sales includes focused preparation and execution of sales programs, investing in new stores and remodels, and strategic acquisitions.  Communicating clear executable standards and aligning performance measures across the organization will help to instill a sales-driven operating environment.

· Continuously Upgrade Organizational Talent Pool  –In support of the Company’s growth and sales building strategies, the Company is committed to growing leaders at every level throughout the organization through enhanced leadership development programs, succession planning, and establishing rewarding career paths.  The Company believes that improved associate talent directly impacts the ability to execute strategic plans and views this as a strategic imperative for future growth.

· Become More Relevant to Consumers – Understanding the consumer is crucial to the Company’s strategic plan.  Research can be done by studying the wants and needs of core consumers and casual consumers.  Measuring customer satisfaction and sharing insights across the organization will help communication between management and its consumers.  The Company strives to build customer loyalty by purchasing produce from local growers and supporting organizations within the communities it serves.  It will continue to invest in new stores, remodels and additions and strategic acquisitions, to help retain and attract new consumers.

· Create Meaningful Differentiation – The Company has identified product pricing, locally focused store assortments, shopping experience, overall convenience and customer service as critical components of future success.  The strategy includes developing improved customer service training and setting customer service measurements and goals.  As part of this strategy, management is committed to offering its customers a strong combination of quality, service and value.  It will continue to offer competitive prices on name brand and private brand products to exceed customers’ expectations.

· Significantly Improve Decision Support and Measurement – The Company will continue to make investments in its information technology systems and distribution network. This will help improve associate productivity, store conditions and the overall customer experience with user-friendly, support driven systems.  These systems will also continue to play a key role in the measurement of the Company’s strategic decisions and provide valuable insight into customer behavior, shopping trends, and financial returns.  Management will continue to streamline its supply chain by focusing on improving inventory turns, cost per case, in-stock position and overall service levels, which will help to improve in-store conditions and result in increased sales and profits.

· Focus on Sustainability Strategies– The Company continues to focus on green best-practices, conservation, food and agricultural impact and social responsibility.  The Company views being good stewards in the communities where we operate as an important component of overall success.  In 2013, strategies were implemented to reduce the Company’s carbon footprint.  One of these strategies included reducing the number of miles the Company’s transportation fleet travels by mapping more efficient travel routes.  During 2012, the fleet traveled 10,483,000 miles, compared to 10,108,000 miles in 2013, a reduction of 375,000 miles or 3.6%.  Food sustainability and the impact on the environment will continue to influence the Company’s strategic plans.

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Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations: (continued)

Results of Operations

Analysis of Consolidated Statements of Income

(dollars in thousands except per share amounts)										Percent Changes
For the Fiscal Years Ended December 28, 2013,	2013			2012			2011			2013 vs.			2012 vs.
December 29, 2012 and December 31, 2011	(52 weeks)			(52 weeks)			(53 weeks)			2012			2011
Net sales	$	2,692,588		$	2,701,405		$	2,752,504			(0.3)	%	1.9	%
Cost of sales, including warehousing and distribution expenses		1,947,120			1,958,852			2,016,649			(0.6)		(2.9)
Gross profit on sales		745,468			742,553			735,855			0.4		0.9
Gross profit margin		27.7	%		27.5	%		26.7	%
Operating, general and administratives expenses		634,286			615,521			621,575			3.0		(1.0)
O, G & A, percent of net sales		23.6	%		22.8	%		22.6	%
Income from operations		111,182			127,032			114,280			(12.5)		11.2
Operating margin		4.1	%		4.7	%		4.2	%
Investment income		4,684			3,468			3,326			35.1		4.3
Investment income, percent of net sales		0.2	%		0.1	%		0.1	%
Other income		-			414			-			(100.0)		100.0
Other income, percent of net sales		-	%		0.0	%		-	%
Income before provision for income taxes		115,866			130,914			117,606			(11.5)		11.3
Provision for income taxes		44,145			48,403			42,022			(8.8)		15.2
Effective tax rate		38.1	%		37.0	%		35.7	%
Net income	$	71,721		$	82,511		$	75,584			(13.1)	%	9.2	%
Net income, percent of net sales		2.7	%		3.1	%		2.7	%
Basic and diluted earnings per share	$	2.67		$	3.07		$	2.81			(13.0)	%	9.3	%

Income is earned by selling merchandise at price levels that produce revenues in excess of cost of merchandise sold and operating and administrative expenses.  Although the Company may experience short term fluctuations in its earnings due to unforeseen short-term operating cost increases, it historically has been able to increase revenues and maintain stable earnings from year to year.

Net Sales

The Company's revenues are earned and cash is generated as merchandise is sold to customers at the point of sale.  Discounts provided to customers by the Company at the point of sale are recognized as a reduction in sales as products are sold or over the life of a promotional program if redeemable in the future.  Discounts provided by vendors, usually in the form of paper coupons, are not recognized as a reduction in sales provided the coupons are redeemable at any retailer that accepts coupons.

Total store sales decreased 0.3% in 2013, a 52-week period, compared to 2012, a 52-week period. Excluding fuel sales, total sales decreased 0.4%.  Total store sales decreased 1.9% from 2012, compared to 2011, a 53-week period.  Excluding fuel sales, total sales decreased 2.3%.  Adjusting for the extra week in 2011, there was no change in total sales from 2012 to 2011.  Excluding fuel sales and adjusting for the extra week in 2011, total sales decreased 0.4% in 2012 compared to 2011.

When calculating the percentage change in comparable store sales, the Company defines a new store to be comparable when it has been in operation for five full quarters.  Relocated stores and stores with expanded square footage are included in comparable store sales since these units are located in existing markets and are open during construction.  Planned store dispositions are excluded from the calculation.  The Company only includes retail food stores in the calculation.

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Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations: (continued)

Results of Operations (continued)

Comparable store sales decreased 2.6% in 2013, a 52-week period, compared to 2012, a 52-week period.  Excluding fuel sales, comparable store sales decreased 2.7%.  The 2013 sales decline is attributed to increased competition, cycling the 2012 sales impact of Hurricane Sandy and a decline in food stamp/SNAP (the United States Department of Agriculture’s Supplemental Nutrition Assistance Program) spending in its stores, which accelerated in the fourth quarter with the reduction in SNAP benefits that went into effect November 1, 2013.  Comparable store sales decreased 2.0% in 2012, compared to 2011, a 53-week period.  Excluding fuel sales, comparable store sales decreased 2.4% in 2012 compared to 2011.  Adjusting for the extra week in 2011, comparable store sales decreased 0.1% in 2012 compared to 2011.  Excluding fuel sales and adjusting for the extra week in 2011, comparable store sales decreased 0.5% in 2012 compared to 2011.

The Company's operating regions continue to be hindered by slow economic growth, high unemployment and declining household income, particularly in Northeastern Pennsylvania, New York's Southern Tier and the Lehigh Valley and Pocono areas of Central Pennsylvania.  In addition, the Company’s customers were impacted by the reduction in SNAP benefits.  Many customers remain cautious in their spending and continue to focus on value and long term savings. 

To meet these needs, the Company continued to make significant investments in its "Price Freeze" and "Get Grillin'" promotional programs.  The Company ran two "Price Freeze" programs in 2013.  The first program froze prices on more than 2,000 products for a thirteen-week period.  The second “Price Freeze” program froze prices on over 1,500 items for a thirteen-week period.  The Company launched a twelfth round of its "Price Freeze" program on December 29, 2013, which has proven to be an enduring and relevant promotion for our customers during challenging economic times.  This program froze prices on more than 2,000 products for a thirteen-week period.  The "Get Grillin'" promotional program was a reduced pricing program on top items throughout the store that our customers found to be the most seasonally relevant.  This program lowered prices of approximately 1,200 items for a fifteen-week period.  In addition, the Company introduced a promotional program in October 2013 which reduced the price of over 300 Weis Quality products by 10% through the end of the year.

In addition to the "Price Freeze" and "Get Grillin'" promotional programs, the Company also offered its “Gas Rewards” program in most markets.  The “Gas Rewards” program allows Weis Preferred Shoppers club card members to earn gas discounts resulting from their in-store purchases.  Customers can redeem these gas discounts at Sheetz convenience stores, located in most of the Company’s markets, at Manley’s Mighty Mart Valero locations, in the Binghamton, NY market or at any of the twenty-three Weis Gas-n-Go locations.

The Company continued to employ a disciplined marketing and advertising strategy, along with targeted promotional activity in key markets, to help maintain its market share and increase its profits.  During 2013, the Company generated a 0.7% increase in average sales per customer transaction, while the number of identical customer store visits declined by 3.3%.  In the fourth quarter of 2011, in preparation for the Company’s 100th anniversary celebration in 2012, the Company launched its Gold Card program, an extension of its existing Preferred Club Shopper program.  The Gold Card program targets the Company’s best shoppers with personalized offers and strong values to help them save money.  In 2014, the Company started an aggressive sales building program, notably its Three Ways to Save sales initiative, which offers discounts on more than 2,000 products and includes its Prize Freeze, Lowest Price Guarantee and Everyday Lower Price programs. 

Comparable center store sales decreased 3.4% in 2013, compared to 2012.  Center store was impacted by stagnant sales performance in key center store categories, increased competition and a decline in food stamp/SNAP spending in its stores, which accelerated in the fourth quarter with the reduction in SNAP benefits that went into effect November 1, 2013.  Comparable fuel sales declined 8.3% in 2013, compared to 2012.  Sales were affected by fuel price deflation in 2013, which resulted in lower retail gas sales. 

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Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations: (continued)

Results of Operations (continued)

Comparable deli sales decreased 4.6% in 2013, compared to 2012, and 2.8% in 2012 compared to 2011, adjusting for the extra week in 2011.  Sales declined in 2013 and 2012 as a result of emergency sales surges in October 2012 and September 2011, respectively, caused by flooding due to Hurricane Sandy in 2012 and Hurricanes Irene and Lee in 2011, which impacted regions of Pennsylvania and southern New York, where the majority of the Company's stores are located.  Customers were unable to prepare meals at home for extended periods of time in 2012 and 2011, resulting in increased deli sales.  Additionally, 2013 sales were negatively affected by deli salad recalls occurring in September and which continued to impact the fourth quarter, due to a disruption in supply.

Comparable meat sales decreased 2.5% in 2013, compared to 2012.  With the cost of meat rising, the Company made the strategic decision to reduce retail prices in order to encourage meat sales.  The Company sold 256,084 more pounds of meat in 2013, compared to 2012.  Although total tonnage of meat sold increased, comparable meat sales decreased over the previous fiscal year due to the retail price reduction strategy.

Comparable pharmacy sales decreased 2.2% in 2013, compared to 2012.  Adjusting for the extra week in 2011, pharmacy sales decreased 3.1% in 2012 compared to 2011.  Pharmacy sales were impacted by a $15.3 million and $10.4 million decline in 2013 and 2012, respectively, due to the conversion of brand drugs to generic.  Generics are sold at lower retail prices, decreasing total pharmacy sales.  While sales dropped significantly in dollars because of the increased utilization of generic pharmaceuticals, the number of units sold in comparable stores decreased 0.4% in 2013 compared to 2012 but increased 0.4% in 2012 compared to 2011.  As part of management's strategy to offset this decline, the Company emphasized a continued focus on immunization while implementing in-store pet medications and a medication synchronization program.

Management remains confident in its ability to generate sales growth in a highly competitive environment, but also understands some competitors have greater financial resources and could use these resources to take measures which could adversely affect the Company's competitive position.

Cost of Sales and Gross Profit

Cost of sales consists of direct product costs (net of discounts and allowances), distribution center and transportation costs, as well as manufacturing facility operations.

According to the latest U.S. Bureau of Labor Statistics’ report, the annual Seasonally Adjusted Food-at-Home Consumer Price Index increased 0.9% in 2013, 2.4% in 2012 and 4.8% in 2011.  The annual Seasonally Adjusted Producer Price Index for Finished Consumer Foods increased 2.3% in 2013, 2.5% in 2012 and 6.3% in 2011.  Despite the fluctuation of retail and wholesale prices, the Company maintained a gross profit rate of 27.7% in 2013, 27.5% in 2012 and 26.7% in 2011.  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.

The Company experienced a LIFO charge of $692,000 for 2013, compared to a charge of $1.2 million for 2012 and a charge of $8.7 million in 2011.  Significant wholesale price inflation occurred during 2011.  With the exception of pharmacy, the Company expects wholesale price inflation to increase slightly in 2014.

The Company's profitability is impacted by the cost of oil.  Fluctuating fuel prices affect the delivered cost of product and the cost of other petroleum-based supplies such as plastic bags.  As a percentage of sales, the cost of diesel fuel used by the Company to deliver goods from its distribution center to its stores remained unchanged in 2013 compared to 2012 and in 2012 compared to 2011.  According to the U.S. Department of Energy, the 52-week average diesel fuel price for the Central Atlantic States decreased $0.09 per gallon to $4.01 per gallon as of December 23, 2013, compared to $4.10 per gallon as of December 24, 2012.  Based upon the U.S. Energy Information Administration’s current projections, the Company is expecting diesel fuel prices to slightly decrease during 2014.

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Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations: (continued)

Results of Operations (continued)

Although the Company experienced product cost inflation and deflation in various commodities in 2013, 2012 and 2011, 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.

Operating, General and Administrative Expenses

Business operating costs including expenses generated from administration and purchasing functions, are recorded in "Operating, general and administrative expenses."  Business operating costs include items such as wages, benefits, utilities, repairs and maintenance, advertising costs and credits, rent, insurance, equipment depreciation, leasehold amortization and costs for outside provided services.

The Company may not be able to recover rising expenses through increased prices charged to its customers.  Any delay in the Company's response to unforeseen cost increases or competitive pressures that prevent its ability to raise prices may cause earnings to suffer.  A majority of our associates are paid hourly rates related to federal and state minimum wage laws. Although we have and will continue to attempt to pass along any increased labor costs through food price increases, there can be no assurance that all such increased labor costs can be reflected in our prices or that increased prices will be absorbed by consumers without diminishing consumer spending to some degree.  However, to date, we have not experienced a significant reduction in profit margins as a result of changes in such laws, and management does not anticipate any significant related future reductions in gross profit margins.

Employee-related costs such as wages, employer paid taxes, health care benefits and retirement plans, comprise over 60% of the total “Operating, general and administrative expenses.”  Employee-related costs increased 1.2% in 2013 compared to 2012 and increased 1.0% in 2012 compared to 2011, inclusive of the extra week in 2011.  As a percent of sales, employee-related costs increased 0.2% in 2013 compared to 2012 and increased 0.4% in 2012 compared to 2011.  As a percent of sales, direct store labor increased 0.3% in 2013 compared to 2012 and 0.2% in 2012 compared to 2011. 

The Company expensed $2.0 million, $1.1 million and $111,000 in 2013, 2012 and 2011, respectively, due to adjustments made to the non-qualified supplemental executive retirement plan resulting from a rise in the equity market.  See Note 6 Retirement Plans, of Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for more information on the Company’s retirement plans.

The Company’s self-insured health care benefit expenses decreased 14.9% in 2013 compared to 2012 and increased 5.4% in 2012 compared to 2011.  During 2013, the Company incurred less expensive health care claims, compared to 2012.  The Company remains concerned about the potential impact that The Patient Protection and Affordable Care Actwill have on its future operating expenses.

On September 21, 2013, the Company entered into a separation agreement with the former President and Chief Executive Officer.  The Company's "Operating, general and administrative expenses" were negatively impacted by the charge of $6.1 million worth of estimated expenses related to the separation agreement.  See Exhibit 10, filed with the quarterly report on Form 10-Q filed on November 7, 2013, for more information pertaining to the separation agreement.

Depreciation and amortization expense was $58.3 million, or 2.2% of net sales, for 2013 compared to $50.7 million, or 1.9% of net sales, for 2012 and $59.4 million, or 2.2% of net sales, for 2011.  The increase in depreciation and amortization expense in 2013 compared to 2012 was the result of additional capital expenditures as the Company implements its capital expansion program.  In the first quarter of 2012, the Company changed its accounting policy for property and equipment.  The decrease in depreciation and amortization expense in 2012 compared to 2011 resulted from the Company's change in depreciation method for this group of assets from accelerated methods to straight-line, despite additional capital expenditures as the Company implements its capital expansion program.  See Note 1 (j) to the Consolidated Financial Statements included in this Annual Report on Form 10-K for more information on the Company’s change in accounting estimate related to depreciation expense.  See the Liquidity and Capital Resources section for further information regarding the Company’s capital expansion program.

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Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations: (continued)

Results of Operations (continued)

The Company recognized pre-tax gains of $2.9 million and $1.7 million in 2013 and 2012, respectively, from the sale of two properties in 2013 and one property in 2012.  In 2013, the Company determined that the asset value of four properties was impaired. As a result, the Company recognized a pre-tax impairment loss of $2.1 million.  See Note 1(l) to the Consolidated Financial Statements included in this Annual Report on Form 10-K for more information on the Company's impairment charges.  Earnings were further impacted in 2013 by a $680,000 adjustment to liabilities for future expenses on closed stores.

Retail store profitability is sensitive to volatility in utility costs due to the amount of electricity and gas required to operate the Company's stores and facilities.  The Company is responding to this volatility in operating costs by employing conservation technologies, procurement strategies and associate energy awareness programs to manage and reduce consumption.  The Company is a member of the EPA GreenChill program for advancing environmentally beneficial refrigerant management systems.  The Company was awarded the GreenChill Distinguished Partner Award for leadership in refrigerant management due to the demonstrated extraordinary leadership and initiative in achieving GreenChill’s mission in 2013.  This past year, the Company received 3 Gold Level Certified Stores.  In total, the Company has nine stores registered under the EPA GreenChill program.  In 2012, the Company replaced its existing lighting system at its 1.1 million square-foot distribution center with low watt fluorescent and LED lighting, reducing energy consumption by 80% and operating costs by 30%.  Its new store prototypes contain skylights that harvest natural daylight to reduce lighting costs, LED lighting and motion sensors in its frozen departments and energy management systems.  All Company stores have an assigned Energy Captain to promote in-store energy conservation.  Through these initiatives, with the added benefit of clement weather and a declining market in electricity costs, the Company’s utility expense decreased by 2.6% in 2013 compared to 2012 and decreased 8.6% in 2012 compared to 2011.

Above average snowfall and significant ice storms struck the Mid-Atlantic states, the Company's operating region, in the first quarter of 2011.  In order to hedge the Company's potential snow removal expense against drastic swings and divert the associated risk, the Company entered into a fixed rate three year contractual arrangement for snow and ice removal in November 2011.  As a result, these expenses only increased $10,000 in 2013 compared to 2012 and snow removal costs decreased $336,000 in 2012 compared to 2011.  

The Company’s income from the sale of cardboard salvage decreased $195,000 in 2013 compared to 2012 and decreased $1.5 million in 2012 compared to 2011.  This was due to decreased price per ton of cardboard in 2012 compared to 2011 and a reduction in volume salvaged.

Investment Income

The Company’s investment portfolio consists of marketable securities which currently includes municipal bonds and equity securities.  The Company classifies all of its marketable securities as available-for-sale.  The Company experienced an $868,000 increase on gains recognized on the sale of equity securities in 2013 compared to 2012. 

Other Income

Upon completion, the Company recognized a gain of $414,000 on the bargain purchase of three former Genuardi locations in the Delaware Valley region of Pennsylvania, from Safeway Inc., in the second quarter of 2012. 

Provision for Income Taxes

The effective income tax rate was 38.1%, 37.0% and 35.7% in 2013, 2012 and 2011, respectively.  The rate increased starting in 2012 due to the decrease in the domestic production deduction also referred to as the Section 199 deduction.  The qualifying manufacturing sales decreased during 2011 resulting in a sizeable provision to return adjustment which results in a higher effective tax rate.  The 2012 manufacturing sales also decreased.  Therefore, the deduction was reduced compared to the 2011 deduction resulting in a higher effective tax rate.  The effective income tax rate differs from the federal statutory rate of 35% primarily due to the effect of state taxes, net of permanent differences.

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Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations: (continued)

Liquidity and Capital Resources

Net cash provided by operating activities was $142.6 million in 2013 compared to $124.0 million in 2012 and $152.4 million in 2011.  In 2013, management implemented new inventory control buying procedures that increased distribution center efficiencies.  Under these new buying procedures, a decrease in inventories in the Company's distribution center was expected.  The distribution center inventory level decreased an average of $7.0 million during the last nine fiscal months of 2013 compared to the same period in 2012.  The Company's overall inventory level only decreased by $4.8 million in 2013 compared to 2012 as a result of holding more inventory at year end for the holidays and the addition of larger stores during the year.  Working capital decreased 7.9% in 2013, increased 2.7% in 2012 and decreased 4.7% in 2011, in each case compared to the prior year.  The 2013 decrease in working capital is primarily due to the utilization of marketable securities to fund the Company’s capital expansion program and the 2011 decrease is a result of the special dividend issued to shareholders in the fourth quarter.

Net cash used in investing activities was $106.8 million in 2013, compared to $107.8 million in 2012 and $165.9 million in 2011.  These funds were used primarily to purchase marketable securities and property and equipment in the three fiscal years presented.  While the Company purchased marketable securities in all three years presented, the Company’s net marketable securities transactions resulted in the disposal of $18.7 million in 2013, compared to the sale of $6.2 million in 2012 and the purchase of $57.2 million in 2011.  Property and equipment purchases totaled $128.1 million in 2013 compared to $115.9 million in 2012, which in 2012 included the acquisition of a business, and $110.5 million in 2011.  In 2012, the Company acquired three former Genuardi stores for $6.1 million.  As a percentage of sales, capital expenditures including the acquisition were 4.8%, 4.3% and 4.0% in 2013, 2012 and 2011, respectively.  Proceeds from the sale of property and equipment increased $1.9 million in 2013 compared to 2012, primarily due to the sale of two properties for $3.2 million in the second quarter of 2013.

The Company’s capital expansion program includes the construction of new superstores, the expansion and remodeling of existing units, the acquisition of sites for future expansion, new technology purchases and the continued upgrade of the Company’s distribution facilities and transportation fleet.  Management estimates that its current development plans will require an investment of approximately $100.0 million in 2014.

Net cash used in financing activities of $32.3 million, $32.3 million and $58.4 million in 2013, 2012 and 2011, respectively, solely consisted of dividend payments to shareholders.  A special dividend was declared during the fourth quarter of 2011.  At December 28, 2013, the Company had outstanding letters of credit of $19.2 million.  The letters of credit are maintained primarily to support performance, payment, deposit or surety obligations of the Company.  The Company does not anticipate drawing on any of them. 

Total cash dividend payments on common stock, on a per share basis, amounted to $1.20 in 2013, $1.20 in 2012 and $2.17 in 2011.  No treasury stock was purchased in 2013, 2012 or 2011.  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.

The Company has no other commitment of capital resources as of December 28, 2013, other than the lease commitments on its store facilities under operating leases that expire at various dates through 2029.  The Company anticipates funding its working capital requirements and its $100.0 million capital expansion program through cash and investment reserves and future internally generated cash flows from operations.

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Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations: (continued)

Liquidity and Capital Resources (continued)

The Company’s earnings and cash flows are subject to fluctuations due to changes in interest rates as they relate to available-for-sale securities and any future long-term debt borrowings.  The Company’s marketable securities portfolio currently consists of municipal bonds and equity securities.  Other short-term investments are classified as cash equivalents on the Consolidated Balance Sheets.

Under its current policies, the Company invests in high-grade marketable debt securities and does not use interest rate derivative instruments to manage exposure to interest rate fluctuations.  Currently, the Company’s investment strategy of obtaining marketable debt securities with maturity dates between one and ten years helps to minimize market risk and to maintain a balance between risk and return.  The equity securities owned by the Company consist primarily of stock held in large capitalized companies trading on public security exchange markets.  The Company’s management continually monitors the risk associated with its marketable securities.  A quantitative tabular presentation of risk exposure is located in “Item 7a. Quantitative and Qualitative Disclosures about Market Risk” of this report.

By their nature, these financial instruments 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 experienced unrealized holding losses net of deferred taxes of $36,000 in 2013 and $9,000 in 2012, compared to an unrealized holding gain net of deferred taxes of $1.4 million in 2011 (see Consolidated Statements of Comprehensive Income).  As of December 28, 2013, the Company had $7.9 million in gross unrealized holding gains and $1.2 million in gross unrealized holding losses related to marketable securities.  See Note 2 Marketable Securities, of Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for more information on the Company’s marketable securities.

Contractual Obligations

The following table represents scheduled maturities of the Company’s long-term contractual obligations as of December 28,  2013.

	Payments due by period
				Less than						More than
(dollars in thousands)		Total		1 year		1-3 years		3-5 years		5 years
Operating leases	$	223,060	$	33,651	$	60,757	$	46,445	$	82,207
Total	$	223,060	$	33,651	$	60,757	$	46,445	$	82,207

Off-Balance Sheet Arrangements

The Company is not a party to any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on the Company’s financial condition, results of operations or cash flows, except for the possibility that the Financial Accounting Standards Board could require the Company's store leases to be recognized on the balance sheet.

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.  In the first quarter of 2012, the Company changed its accounting policy for the depreciation of property and equipment.  See Note 1 (j) to the Consolidated Financial Statements included in this Annual Report on Form 10-K for more information on the Company’s change in accounting estimate related to depreciation expense.

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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)

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.

Vendor Allowances

Vendor allowances related to the Company's buying and merchandising activities are recorded as a reduction of cost of sales as they are earned, in accordance with the underlying agreement.  Off-invoice and bill-back allowances are used to reduce direct product costs upon the receipt of goods.  Promotional rebates and credits are accounted for as a reduction in the cost of inventory and recognized when the related inventory is sold.  Volume incentive discounts are realized as a reduction of cost of sales at the time it is deemed probable and reasonably estimable that the incentive target will be reached.  Long-term contract incentives, which require an exclusive vendor relationship, are allocated over the life of the contract.  Promotional allowance funds for specific vendor-sponsored programs are recognized as a reduction of cost of sales as the program occurs and the funds are earned per the agreement.  Cash discounts for prompt payment of invoices are realized in cost of sales as invoices are paid.  Warehouse and back-haul allowances provided by suppliers for distributing their product through the Company’s distribution system are recorded in cost of sales as the required performance is completed.  Warehouse rack and slotting allowances are recorded in cost of sales when new items are initially set up in the Company's distribution system, which is when the related expenses are incurred and performance under the agreement is complete.  Swell allowances for damaged goods are realized in cost of sales as provided by the supplier, helping to offset product shrink losses also recorded in cost of sales.

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.  The closed store liabilities are usually paid over the lease terms associated with the closed stores having remaining terms ranging from one to five years.  At December 28, 2013, closed store lease liabilities totaled $1,193,000.  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 subtenants and actual exit costs differing from original estimates.  Adjustments are made for changes in estimates in the period in which 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.  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.  Store closing liabilities are reviewed quarterly to ensure that any accrued amount that is no longer needed for its originally intended purpose is reversed to income in the proper period.

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 workers’ compensation claims is determined based on historical data and an estimate of claims incurred but not reported.  The other self-insurance liabilities 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 $750,000 per member prior to March 1, 2012, $1,250,000 per member prior to March 1, 2013, $2,000,000 per member prior to March 1, 2014 and an unlimited amount per member as of March 1, 2014.  The Company is liable for workers' compensation claims up to $2,000,000 per claim.  Property and casualty insurance coverage is maintained with outside carriers at deductible or retention levels ranging from $100,000 to $1,000,000.  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.

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WEIS MARKETS, INC.

Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations: (continued)

Forward-Looking Statements

In addition to historical information, this Annual Report may contain forward-looking statements, which are included pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.  Any forward-looking statements contained herein are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected.  For example, risks and uncertainties can arise with changes in: general economic conditions, including their impact on capital expenditures; business conditions in the retail industry; the regulatory environment; rapidly changing technology and competitive factors, including increased competition with regional and national retailers; and price pressures.  Readers are cautioned not to place undue reliance on forward-looking statements, which reflect management's analysis only as of the date hereof.  The Company undertakes no obligation to publicly revise or update these forward-looking statements to reflect events or circumstances that arise after the date hereof.  Readers should carefully review the risk factors described in other documents the Company files periodically with the Securities and Exchange Commission.

Item 7a.Quantitative and Qualitative Disclosures about Market Risk:

(dollars in thousands)	Expected Maturity Dates																					Fair Value
December 28, 2013		2014			2015			2016			2017			2018		Thereafter				Total		Dec. 28, 2013
Rate sensitive assets:
Fixed interest rate securities	$	4,450		$	9,950		$	9,925		$	8,485		$	8,375		$	10,230		$	51,415		$	54,884
Average interest rate		1.81	%		2.04	%		1.61	%		2.27	%		3.00	%		2.91	%		2.32	%

Other Relevant Market Risks

The Company’s equity securities at December 28, 2013 had a cost basis of $970,000 and a fair value of $8,209,000.  The dividend yield realized on these equity investments was 5.41% in 2013.  Market risk, as it relates to equities owned by the Company, is discussed within the “Liquidity and Capital Resources” section of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained within this report.

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Item 8.Financial Statements and Supplementary Data:

WEIS MARKETS, INC.

CONSOLIDATED BALANCE SHEETS

(dollars in thousands)
December 28, 2013 and December 29, 2012		2013		2012
Assets
Current:
Cash and cash equivalents	$	17,965	$	14,381
Marketable securities		63,093		82,501
SERP investment		8,752		7,058
Accounts receivable, net		57,193		53,842
Inventories		240,452		245,243
Prepaid expenses		17,293		10,132
Total current assets		404,748		413,157
Property and equipment, net		704,985		638,634
Goodwill		35,162		35,162
Intangible and other assets, net		3,347		3,487
Total assets	$	1,148,242	$	1,090,440
Liabilities
Current:
Accounts payable	$	133,568	$	126,258
Accrued expenses		27,416		27,193
Accrued self-insurance		19,333		18,544
Deferred revenue, net		7,056		6,635
Income taxes payable		1,628		1,359
Deferred income taxes		4,219		3,420
Total current liabilities		193,220		183,409
Postretirement benefit obligations		17,101		15,206
Deferred income taxes		97,934		89,109
Other		5,934		7,026
Total liabilities		314,189		294,750
Shareholders’ Equity
Common stock, no par value, 100,800,000 shares authorized, 33,047,807 shares issued		9,949		9,949
Retained earnings		971,022		931,579
Accumulated other comprehensive income, net		3,939		5,019
		984,910		946,547
Treasury stock at cost, 6,149,364 shares		(150,857)		(150,857)
Total shareholders’ equity		834,053		795,690
Total liabilities and shareholders’ equity	$	1,148,242	$	1,090,440

See accompanying notes to consolidated financial statements.

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WEIS MARKETS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(dollars in thousands, except shares and per share amounts)
For the Fiscal Years Ended December 28, 2013,		2013		2012		2011
December 29, 2012 and December 31, 2011		(52 weeks)		(52 weeks)		(53 weeks)
Net sales	$	2,692,588	$	2,701,405	$	2,752,504
Cost of sales, including warehousing and distribution expenses		1,947,120		1,958,852		2,016,649
Gross profit on sales		745,468		742,553		735,855
Operating, general and administrative expenses		634,286		615,521		621,575
Income from operations		111,182		127,032		114,280
Investment income		4,684		3,468		3,326
Other income		-		414		-
Income before provision for income taxes		115,866		130,914		117,606
Provision for income taxes		44,145		48,403		42,022
Net income	$	71,721	$	82,511	$	75,584
Weighted-average shares outstanding, basic and diluted		26,898,443		26,898,443		26,898,443
Cash dividends per share	$	1.20	$	1.20	$	2.17
Basic and diluted earnings per share	$	2.67	$	3.07	$	2.81

See accompanying notes to consolidated financial statements.

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WEIS MARKETS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(dollars in thousands)
For the Fiscal Years Ended December 28, 2013,		2013		2012		2011
December 29, 2012 and December 31, 2011		(52 weeks)		(52 weeks)		(53 weeks)
Net income	$	71,721	$	82,511	$	75,584
Other comprehensive (loss) income by component, net of tax:
Unrealized holding (losses) gains arising during period
(Net of deferred taxes of $23, $0 and $923, respectively)		(36)		(9)		1,391
Reclassification adjustment for gains included in net income
(Net of deferred taxes of $730, $293 and $601, respectively)		(1,044)		(420)		(846)
Other comprehensive (loss) income, net of tax		(1,080)		(429)		545
Comprehensive income, net of tax	$	70,641	$	82,082	$	76,129

See accompanying notes to consolidated financial statements.

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WEIS MARKETS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

						Accumulated
(dollars in thousands, except shares)						Other						Total
For the Fiscal Years Ended December 28, 2013,	Common Stock			Retained		Comprehensive		Treasury Stock				Shareholders’
December 29, 2012 and December 31, 2011	Shares	Amount		Earnings		Income (Loss)		Shares		Amount		Equity
Balance at December 25, 2010	33,047,807	$	9,949	$	864,132	$	4,903		6,149,364	$	(150,857)	$	728,127
Net income	—		—		75,584		—		—		—		75,584
Other comprehensive income, net of
reclassification adjustments and tax	—		—		—		545		—		—		545
Dividends paid	—		—		(58,370)		—		—		—		(58,370)
Balance at December 31, 2011	33,047,807		9,949		881,346		5,448		6,149,364		(150,857)		745,886
Net income	—		—		82,511		—		—		—		82,511
Other comprehensive loss, net of
reclassification adjustments and tax	—		—		—		(429)		—		—		(429)
Dividends paid	—		—		(32,278)		—		—		—		(32,278)
Balance at December 29, 2012	33,047,807		9,949		931,579		5,019		6,149,364		(150,857)		795,690
Net income	—		—		71,721		—		—		—		71,721
Other comprehensive loss, net of
reclassification adjustments and tax	—		—		—		(1,080)		—		—		(1,080)
Dividends paid	—		—		(32,278)		—		—		—		(32,278)
Balance at December 28, 2013	33,047,807	$	9,949	$	971,022	$	3,939		6,149,364	$	(150,857)	$	834,053

See accompanying notes to consolidated financial statements.

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WEIS MARKETS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)
For the Fiscal Years Ended December 28, 2013,		2013		2012		2011
December 29, 2012 and December 31, 2011		(52 weeks)		(52 weeks)		(53 weeks)
Cash flows from operating activities:
Net income	$	71,721	$	82,511	$	75,584
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation		51,068		44,153		53,185
Amortization		7,207		6,498		6,198