UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

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

For the fiscal year ended December 27, 2008

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

For the transition period fromto31, 2011

Commission File Number 0-00981

PUBLIX SUPER MARKETS, INC.

(Exact name of Registrant as specified in its charter)

 

Florida 59-0324412
(State of Incorporation) (I.R.S. Employer Identification No.)

3300 Publix Corporate Parkway 
Lakeland, Florida 33811
(Address of principal executive offices) (Zip code)

Registrant’s telephone number, including area code:(863) 688-1188

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:Common Stock $1.00 Par Value

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

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  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 and (2) has been subject to such filing requirements for the past 90 days.      Yes  x  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 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 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.¨ (    )

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 x  X  

  

Accelerated filer¨

  Non-accelerated filer¨  

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  X  

The aggregate market value of the voting stock held by non-affiliates of the Registrant was approximately $8,135,662,000$8,232,213,000 as of June 27, 2008,24, 2011, the last trading day of the Registrant’s most recently completed second fiscal quarter.

The number of shares of the Registrant’s common stock outstanding as of February 6, 20097, 2012 was 788,475,000.778,373,000.

DOCUMENTS INCORPORATED BY REFERENCEDocuments Incorporated By Reference

The information required by Part III of this report, to the extent not set forth herein, is incorporated by reference from the Proxy Statement solicited for the 20092012 Annual Meeting of Stockholders to be held on April 14, 2009.17, 2012.

 

 

 


TABLE OF CONTENTS

 

      Page
  PART I  

Item 1.

  Business  1

Item 1A.

  Risk Factors  2

Item 1B.

  Unresolved Staff Comments  54

Item 2.

  Properties  54

Item 3.

  Legal Proceedings  54

Item 4.

  Submission of Matters to a Vote of Security HoldersMine Safety Disclosures  54
  Executive Officers of the Company  65
  PART II  

Item 5.

  

Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

  106

Item 6.

  Selected Financial Data  139

Item 7.

  Management’s Discussion and Analysis of Financial Condition and Results of Operations  1410

Item 7A.

  Quantitative and Qualitative Disclosures About Market Risk  2516
  Management’s Report on Internal Control over Financial Reporting  2618

Item 8.

  Financial Statements and Supplementary Data  2719

Item 9.

  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure  5343

Item 9A.

  Controls and Procedures  5343

Item 9B.

  Other Information  5343
  PART III  

Item 10.

  Directors, Executive Officers and Corporate Governance  5443

Item 11.

  Executive Compensation  5443

Item 12.

  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters  5443

Item 13.

  Certain Relationships, Related Transactions and Director Independence  5443

Item 14.

  Principal Accounting Fees and Services  5443
  PART IV  

Item 15.

  Exhibits, Financial Statement Schedules  5544


PART I

Item 1.Business

Item 1.  Business

Publix Super Markets, Inc. and its wholly owned subsidiaries (the Company) are in the primary business of operating retail food supermarkets in Florida, Georgia, Alabama, South Carolina Alabama and Tennessee. The Company was founded in 1930 and later merged into another corporation that was originally incorporated in 1921. The Company has no other significant lines of business or industry segments.

Merchandising and manufacturing

The Company sells grocery (including dairy, produce, deli, bakery, meat and seafood), health and beauty care, general merchandise, pharmacy, floral and other products and services. The percentage of consolidated sales by merchandise category for 2008, 20072011, 2010 and 20062009 was as follows:

 

  2011   2010 2009 
  2008 2007 2006 

Grocery

  85% 85% 85%   86%     85%    85%  

Other

  15% 15% 15%   14%     15%    15%  
            

 

   

 

  

 

 
  100% 100% 100%
             100%     100%    100%  
  

 

   

 

  

 

 

The Company’s lines of merchandise include a variety of nationally advertised and private label brands as well as unbranded grocery merchandise such as produce, meat and seafood. The Company receives the food and non-food products it distributes from many sources. These products are delivered to the supermarkets through Company distribution centers or directly from the suppliers and are generally available in sufficient quantities to enable the Company to adequately satisfy its customers. Approximately 70%72% of the total cost of products purchased is delivered to the supermarkets through the CompanyCompany’s distribution centers. The Company believes that its sources of supply of these products and raw materials used in manufacturing are adequate for its needs and that it is not dependent upon a single supplier or relatively few suppliers. Private label items are produced in the Company’s dairy, bakery and deli manufacturing facilities or are manufactured for the Company by outside suppliers.

The Company has experienced no significant changes in the kinds of products sold or in its methods of distribution since the beginning of the fiscal year.

Store operations

The Company operated 9931,046 supermarkets at the end of 2008,2011, compared with 9261,034 at the beginning of the year. In 2008, 792011, 29 supermarkets were opened (including 11 replacement supermarkets), 12 and 126 supermarkets were remodeled. Seventeen supermarkets were closed and 93during the same period. Replacement supermarkets were remodeled. Ofopened in 2011 replaced 11 of the 17 supermarkets closed 10 were replacedduring the same period. Five of the remaining supermarkets closed in 2008, one2011 will be replaced in a subsequent period and oneperiods, all of which will not be replaced. The net increase in square footage was 3.4replaced on site. Net new supermarkets added 0.6 million square feet or 8.1% in 2008.2011, an increase of 1.3%. At the end of 2008,2011, the Company had 713743 supermarkets located in Florida, 176179 in Georgia, 4249 in Alabama, 45 in South Carolina 37 in Alabama and 2530 in Tennessee. Also, as of year end, the Company had 1210 supermarkets under construction in Florida five in Georgia,and two each in Alabama, Georgia and two in Tennessee.

Competition

The Company is engaged in the highly competitive retail food industry. Competition is based primarily on price, quality of goods and service, price, convenience, product mix and store location. The Company’s primary competition throughout its market areas is with several national and regional supermarket chains, independent supermarkets, supercenters, membership warehouse clubs, mass merchandisers, dollar stores, drug stores, specialty food stores, restaurants and convenience stores. The Company anticipates continued competitor format innovation and location additions in 2009.2012.

Working capital

The Company’s working capital at the end of 20082011 consisted of $2,050.7$2,803.2 million in current assets and $1,817.8$2,050.8 million in current liabilities. Normal operating fluctuations in these balances can result in changes to cash flowflows from operating activities presented in the consolidated statements of cash flows that are not necessarily indicative of long-term operating trends. There are no unusual industry practices or requirements relating to working capital items.

Seasonality

The historical influx of winter residents to Florida and increased purchases of foodproducts during the traditional Thanksgiving, Christmas and Easter holidays typically result in seasonal sales increases between November and April of each year.

Employees

The Company had 144,000152,000 employees at the end of 2008, 70,0002011, 71,000 on a full-time basis and 74,00081,000 on a part-time basis. By comparison, the Company had 144,000148,000 employees at the end of 2007, 68,0002010, 70,000 on a full-time basis and 76,00078,000 on a part-time basis. The Company considers its employee relations to be good.

Intellectual property

The Company’s trademarks, trade names, copyrights and similar intellectual property are important to the success of the Company’s business. Numerous trademarks, including “Publix” and “Where Shopping is a Pleasure,” have been registered with the U.S. Patent and Trademark Office. Due to the importance of its intellectual property to its business, the Company actively defends and enforces its rights to such property.

Environmental matters

Compliance by the Company with federal, state and local environmental protection laws during 20082011 had no material effect upon capital expenditures, results of operations or the competitive position of the Company.

Company information

This Annual Report on Form 10-K and the 20092012 Proxy Statement will be mailed on or about March 12, 200915, 2012 to stockholders of record as of the close of business on February 6, 2009.7, 2012. These reports as well as Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports may also be obtained electronically, free of charge, through the Company’s website at www.publix.com/stock.

Item 1A.Risk Factors

Item 1A. Risk Factors

In addition to the other information contained in this Form 10-K, the following risk factors should be considered carefully in evaluating the Company’s business. The Company’s financial condition and results of operations could be materially adversely affected by any of these risks. Additional risks not presently known to the Company or that the Company currently deems immaterial may also impair its operations.

Increased competition and low profit margins could adversely affect the Company.

The retail food industry in which the Company operates is highly competitive with low profit margins. The Company’s competitors include national and regional supermarket chains, independent supermarkets, supercenters, membership warehouse clubs, mass merchandisers, dollar stores, drug stores, specialty food stores, restaurants and convenience stores. The Company’s ability to attract and retain customers is based primarily on price, quality of goods and service, price, convenience, product mix and store location. The Company believes it will face increased competition in the future from all of these competitors and its financial condition and results of operations could be impacted by the pricing, purchasing, advertising or promotional decisions made by its competitors.

General economic and other conditions that impact consumer spending could adversely affect the Company.

The Company’s results of operations are sensitive to changes in general economic conditions that impact consumer spending. The adverse changes in currentAdverse economic conditions, including risinghigh unemployment, significant home foreclosures, declines in the downturn of the housingstock market and the instability of the credit markets, have causedcould continue to cause a reduction in consumer spending. Other conditions that could also affect disposable consumer income include increases in tax rates, increases in fuel and energy costs, the impact of natural disasters or acts of terrorism, and other factors. This reduction in the level of consumer spending could cause customers to purchase lower-pricedlower-profit items or to shift spending to lower-priced competitors, which could adversely affect the Company’s financial condition and results of operations.

Increased laboroperating costs could adversely affect the Company.

The Company’s operations tend to be more labor intensive than some of its competitors due to the additional customer service offered in its supermarkets. Consequently, uncertain labor markets, government mandated increases in the minimum wage or other benefits, an increased proportion of full-time employees, and increased costs of health care anddue to health insurance reform or other benefitsfactors could result in an increase in labor costs. In addition, the inability to improve or manage operating costs, whichsuch as payroll, facilities, or other non-product related costs, could adversely affect the Company’s financial condition and results of operations.

Failure to execute on the Company’s core strategies could adversely affect the Company.

The Company’s core strategies focus on customer service, product quality, shopping environment, competitive pricing and convenient locations. The Company has implemented several strategic business and technology initiatives as part of the execution of these core strategies. The Company believes these core strategies and related strategic initiatives differentiate it from its competition and present opportunities for increased market share and sustained financial growth. Failure to execute on these core strategies, or a failure to execute the core strategies on a cost effective basis, could adversely affect the Company’s financial condition and results of operations.

Failure to identify and obtain or retain suitable supermarket sites could adversely affect the Company.

The Company’s ability to obtain sites for new supermarkets and, to a lesser extent, acquire existing supermarket locations is dependent on identifying and entering into lease or purchase agreements on commercially reasonable terms for properties that are suitable for its needs. If the Company fails to identify suitable sites and enter into lease or purchase agreements on a timely basis for any reason, including competition from other companies seeking similar sites, the Company’s growth could be adversely affected because it may be unable to open new supermarkets as anticipated. Similarly, its business could be adversely affected if it is unable to renew the leases on its existing supermarkets on commercially reasonable terms.

Disruptions in information technology systems or a security breach could adversely affect the Company.

The Company is dependent on complex information technology systems to operate its business, enhance customer service, improve the efficiency of its supply chain and increase employee efficiency. The Company’s information technology systems are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, security breaches, catastrophic events and user errors. The Company’s information technology systems are also subject to security breaches, including cyber security breaches and breaches of transaction processing, that could result in the compromise of confidential customer data, catastrophic eventsincluding debit and user errors.credit cardholder data. Any disruptions in theseinformation technology systems due toor a security breaches, internal failures of technology, severe damage to the data center or large scale external interruptions in technology infrastructurebreach could have an adverse impacteffect on the Company’s financial condition and results of operations.

Unexpected changes in the insurance market or factors affecting self-insurance reserve estimates could adversely affect the Company.

The Company uses a combination of insurance coverage and self-insurance to provide for potential liability for workers’ compensation, fleet and general liability, property losses, fleet liability, employee benefits and directors and officers liability and employee benefits. Due to current uncertainties in the insurance market, thereliability. There is no assurance that the Company will be able to continue to maintain suchits insurance coverage or obtain comparable insurance coverage at a reasonable cost. Self-insurance reserves are determined based on actual claims experience and an estimate of claims incurred but not reported including, where necessary, actuarial studies. Actuarial projections of losses are subject to a high degree of variability caused by, but not limited to, such factors as future interest and inflation rates, future economic conditions, litigation trends and benefit level changes. The Company’s financial condition and results of operations could be adversely affected by an increase in the frequency or costs of claims and other expenses related to such plans if future occurrences and claims differ from these assumptions and historical trends.changes in actuarial assumptions.

Product liability claims, product recalls and the resulting unfavorable publicity could adversely affect the Company.

The packaging, marketing, distribution and sale of foodgrocery, drug and drugother products purchased from otherssuppliers or manufactured by the Company entails an inherent risk of product liability claims, product recall and the resulting adverse publicity. Such products may contain contaminants that may be inadvertently distributed by the Company. These contaminants may, in certain cases, result in illness, injury or death if processing at the consumer level does not eliminate the contaminants. Even an inadvertent shipment of adulterated products is a violation of law and may lead to a product recall and/or an increased risk of exposure to product liability claims. There can be no assurance that such claims will not be asserted against the Company or that the Company will not be obligated to perform such a recallproduct recalls in the future. If a product liability claim is successful, the Company’s insurance coverage may not be adequate to coverpay all liabilities it may incur, and it may not be able to continue to maintain such insurance coverage or obtain comparable insurance coverage at a reasonable cost. If the Company does not have adequate insurance coverage or contractual indemnification available, product liability claims relating to defective products could have an adverse effect on the Company’s ability to successfully market its products and on the Company’s financial condition and results of operations. In addition, even if a product liability claim is not successful or is not fully pursued, the adverse publicity surrounding any assertion that the Company’s products caused illness or injury could have an adverse effect on the Company’s reputation with existing and potential customers and on the Company’s financial condition and results of operations.

Unfavorable changes in, failure to comply with or increased costs to comply with environmental laws and regulations could adversely affect the Company.

The Company is subject to federal, state and local laws and regulations that govern activities that may have adverse environmental effects and impose liabilities for the costs of cleaning upcontamination cleanup and certain damages arising from sites of past spills, disposals or other releases of hazardous materials. Under applicablecurrent environmental laws, the Company may be held responsible for the remediation of environmental conditions and may be subject to associated liabilities relating to its supermarkets and other facilities regardless of whether the Company leases, subleases or owns the supermarkets or other facilities and regardless of whether such environmental conditions were created by the Company or a prior owner or tenant. The costs of investigation, remediation or removal of environmental conditions may be substantial. In addition, the increased focus on climate change, waste management and other environmental issues may result in new environmental laws or regulations that negatively affect the Company directly or indirectly through increased costs on its suppliers. There can be no assurance that environmental conditions relating to prior, existing or future sites or other environmental changes will not adversely affect the Company’s financial condition and results of operations through, for instance, business interruption, cost of remediation or adverse publicity.

Unfavorable changes in, failure to comply with or increased costs to comply with laws and regulations could adversely affect the Company.

In addition to environmental laws and regulations, the Company is subject to federal, state and local laws and regulations relating to, among other things, product safety, zoning, land use, workplace safety, public health, accessibility and restrictions on the sale of various products including alcoholic beverages, tobacco and drugs. The Company is also subject to laws governing its relationship with employees, including minimum wage requirements, overtime, labor, working conditions, disabled access and work permit requirements. Compliance with, or changes in, these laws, as well as passage of new laws and the inability to deal with increased government regulation, could adversely affect the Company’s financial condition and results of operations. In addition, changes in accounting standards could impact the Company’s financial statements.

Unfavorable results of legal proceedings could adversely affect the Company.

The Company is a party in various legal claims and actions considered in the normal course of business including labor and employment, personal injury, intellectual property and other issues. Although not currently anticipated by management, the results of pending or future legal proceedings could adversely affect the Company’s financial condition and results of operations.

Item 1B.Unresolved Staff Comments

Item 1B.  UnresolvedStaff Comments

None

Item 2.Properties

Item 2.  Properties

At year end, the Company operated approximately 45.748.7 million square feet of supermarket space. The Company’s supermarkets vary in size. Current supermarket prototypes range from 28,000 to 61,000 square feet. Supermarkets are often located in strip shopping centers where the Company is the anchor tenant. The majority of the Company’s supermarkets are leased. Substantially all of these leases will expire during the next 20 years. However, in the normal course of business, it is expected that the leases will be renewed or replaced by leases on other properties. Both the building and land are owned at 88120 locations. The building is owned while the land is leased at 4148 other locations.

The Company supplies its supermarkets from eight primary distribution centers located in Lakeland, Miami, Jacksonville, Sarasota, Orlando, Deerfield Beach and Boynton Beach, Florida and Lawrenceville, Georgia. The Company operates six manufacturing facilities including three dairy plants located in Lakeland and Deerfield Beach, Florida and Lawrenceville, Georgia, two bakery plants located in Lakeland, Florida and Atlanta, Georgia and a deli plant located in Lakeland, Florida.

The Company’s corporate offices, primary distribution centers and manufacturing facilities are owned with no outstanding debt. The Company’s properties are well maintained, in good operating condition and suitable and adequate for operating its business.

Item 3.Legal Proceedings

Item 3.  Legal Proceedings

The Company is a party in various legal claims and actions considered in the normal course of business. The Company believes its recorded reserves are adequate in light of the probable and estimable liabilities. The estimated amount of reasonably possible losses for claims, individually and in the aggregate, is considered to be immaterial. In the opinion of management, the ultimate resolution of these legal proceedings will not have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

Item 4.  Mine Safety Disclosures

Item 4.Submission of Matters to a Vote of Security Holders

None

EXECUTIVE OFFICERS OF THE COMPANYExecutive Officers of the Company

 

Name

  Age  

Position

  Served as
Officer of
Company
Since

John A. Attaway, Jr.

  50  Senior Vice President, General Counsel and Secretary  2000

Hoyt R. Barnett

  65  Vice Chairman  1977

David E. Bornmann

  51  Vice President  1998

David E. Bridges

  59  Vice President  2000

Scott E. Brubaker

  50  Vice President  2005

William E. Crenshaw

  58  Chief Executive Officer  1990

G. Gino DiGrazia

  46  Vice President and Controller  2002

Laurie Z. Douglas

  45  Senior Vice President and Chief Information Officer  2006

David S. Duncan

  55  Vice President  1999

Sandra J. Estep

  49  Vice President and Controller  2002

William V. Fauerbach

  62  Vice President  1997

John R. Frazier

  59  Vice President  1997

Linda S. Hall

  49  Vice President  2002

M. Clayton Hollis, Jr.

  52  Vice President  1994

John T. Hrabusa

  53  Senior Vice President  2004

Mark R. Irby

  53  Vice President  1989

Randall T. Jones, Sr.

  46  President  2003

EXECUTIVE OFFICERS OF THE COMPANY

Name

  Age  

Position

  Served as
Officer of
Company
Since

Linda S. Kane

  43  Vice President and Assistant Secretary  2000

Thomas M. McLaughlin

  58  Vice President  1994

Sharon A. Miller

  65  Assistant Secretary  1992

Dale S. Myers

  56  Vice President  2001

Alfred J. Ottolino

  43  Vice President  2004

David P. Phillips

  49  Chief Financial Officer and Treasurer  1990

James H. Rhodes II

  64  Vice President  1995

Charles B. Roskovich, Jr.

  47  Vice President  2008

Marc H. Salm

  48  Vice President  2008

Richard J. Schuler II

  53  Vice President  2000

Michael R. Smith

  49  Vice President  2005

The retirement of James H. Rhodes II is effective March 1, 2009.

Name

  Age  

Business Experience During Last Five Years

  

Served as

Officer of

Company
Since

John A. Attaway, Jr.

  53  

Senior Vice President, General Counsel and Secretary of the Company.

  2000

Hoyt R. Barnett

  68  

Vice Chairman of the Company and Trustee of the Employee Stock Ownership Plan.

  1977

David E. Bornmann

  54  

Vice President of the Company.

  1998

David E. Bridges

  62  

Vice President of the Company.

  2000

Scott E. Brubaker

  53  

Vice President of the Company.

  2005

Jeffrey G. Chamberlain

  55  

Director of Real Estate Strategy of the Company to January 2011, Vice President thereafter.

  2011

William E. Crenshaw

  61  

President of the Company to March 2008, Chief Executive Officer thereafter.

  1990

Joseph DiBenedetto, Jr.

  52  

Regional Director of Retail Operations of the Company to January 2011, Vice President thereafter.

  2011

G. Gino DiGrazia

  49  

Vice President and Controller of the Company.

  2002

Laurie Z. Douglas

  48  

Senior Vice President and Chief Information Officer of the Company.

  2006

David S. Duncan

  58  

Vice President of the Company.

  1999

Sandra J. Estep

  52  

Vice President and Controller of the Company.

  2002

William V. Fauerbach

  65  

Vice President of the Company.

  1997

Linda S. Hall

  52  

Vice President of the Company.

  2002

M. Clayton Hollis, Jr.

  55  

Vice President of the Company.

  1994

John T. Hrabusa

  56  

Senior Vice President of the Company.

  2004

Mark R. Irby

  56  

Vice President of the Company.

  1989

Randall T. Jones, Sr.

  49  

Senior Vice President of the Company to March 2008, President thereafter.

  2003

Linda S. Kane

  46  

Vice President and Assistant Secretary of the Company.

  2000

Thomas M. McLaughlin

  61  

Vice President of the Company.

  1994

Dale S. Myers

  59  

Vice President of the Company.

  2001

Alfred J. Ottolino

  46  

Vice President of the Company.

  2004

David P. Phillips

  52  

Chief Financial Officer and Treasurer of the Company.

  1990

Charles B. Roskovich, Jr.

  50  

Regional Director of Retail Operations of the Company to January 2008, Vice President to January 2011, Senior Vice President thereafter.

  2008

Marc H. Salm

  51  

Director and Counsel of Risk Management of the Company to June 2008, Vice President thereafter.

  2008

Richard J. Schuler II

  56  

Vice President of the Company.

  2000

Michael R. Smith

  52  

Vice President of the Company.

  2005

The terms of all officers expire in May 20092012 or upon the election of their successors.

Name

Business Experience During Last Five Years

John A. Attaway, Jr.

General Counsel and Secretary of the Company to January 2005, Senior Vice President, General Counsel and Secretary thereafter.
Hoyt R. BarnettVice Chairman of the Company and Trustee of the Employee Stock Ownership Plan.
David E. BornmannVice President of the Company.
David E. BridgesVice President of the Company.
Scott E. BrubakerRegional Director of Retail Operations of the Company to July 2005, Vice President thereafter.
William E. CrenshawPresident of the Company to March 2008, Chief Executive Officer thereafter.
G. Gino DiGraziaVice President and Controller of the Company.
Laurie Z. DouglasSenior Vice President and Chief Information Officer of Kinko’s, Inc. to February 2004, Senior Vice President and Chief Information Officer of FedEx Kinko’s Office and Print Center, Inc. to January 2006, Senior Vice President and Chief Information Officer of the Company thereafter.
David S. DuncanVice President of the Company.
Sandra J. EstepVice President and Controller of the Company.
William V. FauerbachVice President of the Company.
John R. FrazierVice President of the Company.
Linda S. HallVice President of the Company.
M. Clayton Hollis, Jr.Vice President of the Company.
John T. HrabusaVice President of Office Depot, Inc. to March 2004, Vice President of the Company to January 2005, Senior Vice President thereafter.
Mark R. IrbyVice President of the Company.
Randall T. Jones, Sr.Vice President of the Company to July 2005, Senior Vice President to March 2008, President thereafter.

Name

Business Experience During Last Five Years

Linda S. Kane

Vice President and Assistant Secretary of the Company.
Thomas M. McLaughlinVice President of the Company.
Sharon A. MillerExecutive Director Publix Super Markets Charities, Inc. and Assistant Secretary of the Company.
Dale S. MyersVice President of the Company.
Alfred J. OttolinoVice President of Winn-Dixie Stores, Inc. to March 2004, Vice President of the Company thereafter.
David P. PhillipsChief Financial Officer and Treasurer of the Company.
James H. Rhodes IIVice President of the Company.
Charles B. Roskovich, Jr.Regional Director of Retail Operations of the Company to January 2008, Vice President thereafter.
Marc H. SalmDirector and Counsel of Risk Management of the Company to June 2008, Vice President thereafter.
Richard J. Schuler IIVice President of the Company.
Michael R. SmithDirector of Deli and Bakery Manufacturing of the Company to July 2004, Director of Fresh Product Manufacturing to July 2005, Vice President thereafter.

PART II

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

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

 

(a)

Market Information

The Company’s common stock is not traded on any public stock exchange.an established securities market. Therefore, substantially all transactions of the Company’s common stock have been among the Company, its employees, former employees, their families and the benefit plans established for the Company’s employees. The Company’s common stock is made available for sale only to the Company’s current employees through the Company’s Employee Stock Purchase Plan (ESPP) and to participants of the Company’s 401(k) Plan. In addition, common stock is made available under the Employee Stock Ownership Plan (ESOP). Common stock is also made available for sale to members of the Company’s Board of Directors through the Non-Employee Directors Stock Purchase Plan (Directors Plan). The Company currently repurchases common stock subject to certain terms and conditions. The ESPP, 401(k) Plan, ESOP and Directors Plan each contain provisions prohibiting any transfer for value without the owner first offering the common stock to the Company. The Company serves as the registrar and stock transfer agent for its common stock.

Because there is no trading of the Company’s common stock on a public stock exchange,an established securities market, the market price of the Company’s common stock is determined by theits Board of Directors. As part of the process to determine the stock value, an independent valuation is obtained. The Board of Directors considers, among other things,process includes comparing the Company’s financial performanceresults to those of comparable companies that are publicly traded (comparable publicly traded companies). The purpose of the process is to determine a value for the Company’s common stock that is comparable to the stock value of comparable publicly traded companies by considering both the results of the stock market and the relative financial and stock market performanceresults of comparable publicly traded companies. The market prices for the Company’s common stock for 20082011 and 20072010 were as follows:

 

  

2011

   

2010

 
  2008  2007

January - February

  $20.80  19.60  $19.85     16.30  

March - April

   20.70  19.90   20.90     17.35  

May - July

   19.45  20.90   21.65     18.50  

August - October

   19.70  20.90   22.05     18.45  

November - December

   17.90  20.80   20.20     19.85  

 

(b)

Approximate Number of Equity Security Holders

As of February 6, 2009,7, 2012, the approximate number of holders of the Company’s common stock was 120,000.152,000.

 

(c)

Dividends

The Company paid an annual cash dividend of $0.44 per share ofon its common stock in 2008 and $0.40of $0.53 per share in 2007.2011 and $0.46 per share in 2010. Payment of dividends is within the discretion of the Company’s Board of Directors and depends on, among other factors, net earnings, capital requirements and the financial condition of the Company. It is believed that comparable cash dividends will be paid in the future.

(d)

Purchases of Equity Securities by the Issuer

Issuer Purchases of Equity Securities

Shares of common stock repurchased by the Company during the three months ended December 27, 200831, 2011 were as follows (amounts are in thousands, except per share amounts):

 

Period

  Total
Number of
Shares
Purchased
  Average
Price
Paid per
Share
  Total
Number of
Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs(1)
  Approximate
Dollar Value

of Shares
that May Yet Be
Purchased Under
the Plans or
Programs(1)

September 28, 2008 through November 1, 2008

  10,061  $19.70  N/A  N/A

November 2, 2008 through November 29, 2008

  6,786   17.90  N/A  N/A

November 30, 2008 through December 27, 2008

  3,018   17.90  N/A  N/A
           

Total

  19,865  $18.81  N/A  N/A
           
    Total
Number of
Shares
  Average
Price
Paid per
  

Total

Number of
Shares
Purchased as
Part of Publicly
Announced
Plans or

  Approximate
Dollar Value of
Shares
that May Yet Be
Purchased Under
the Plans or

Period

  

Purchased

  

Share

  

Programs (1)

  

Programs (1)

 

September 25, 2011 through

          

October 29, 2011

    1,025     $22.05   N/A  N/A

October 30, 2011 through

          

November 26, 2011

    2,766     20.22   N/A  N/A

November 27, 2011 through

          

December 31, 2011

    1,920       20.20   N/A  N/A

Total

    5,711     $20.54   N/A  N/A

 

(1)Common stock is made available for sale only to the Company’s current employees through the Company’s ESPP and 401(k) Plan. In addition, common stock is made available under the ESOP. Common stock is also made available for sale to members of the Company’s Board of Directors through the Directors Plan. The Company currently repurchases common stock subject to certain terms and conditions. The ESPP, 401(k) Plan, ESOP and Directors Plan each contain provisions prohibiting any transfer for value without the owner first offering the common stock to the Company.

(1) Common stock is made available for sale only to the Company’s current employees through the Company’s ESPP and to participants of the Company’s 401(k) Plan. In addition, common stock is made available under the ESOP. Common stock is also made available for sale to members of the Company’s Board of Directors through the Directors Plan. The Company currently repurchases common stock subject to certain terms and conditions. The ESPP, 401(k) Plan, ESOP and Directors Plan each contain provisions prohibiting any transfer for value without the owner first offering the common stock to the Company.

The Company’s common stock is not traded on any public stock exchange.an established securities market. The amount of common stock offered to the Company for repurchase is not within the control of the Company, but is at the discretion of the stockholders. The Company does not believe that these repurchases of its common stock are within the scope of a publicly announced plan or program (although the terms of the plans discussed above have been communicated to the participants). Thus, the Company does not believe that it has made any repurchases during the three months ended December 27, 200831, 2011 required to be disclosed in the last two columns of the table.

(e)

Performance GraphsGraph

The following performance graph sets forth the Company’s cumulative total stockholder return during the five years ended December 27, 2008,31, 2011, compared to the cumulative total return on the S&P 500 Index and a custom Peer Group Index including retail food supermarket companiescompanies.(1)(.1) The Peer Group Index is weighted based on the various companies’ market capitalization. The comparison assumes $100 was invested at the end of 20032006 in the Company’s common stock and in each of the related indices and assumes reinvestment of dividends.

The Company’s common stock is valued as of the end of each fiscal quarter. After the end of a quarter, however, shares continue to be traded at the prior valuation until the new valuation is received. The cumulative total return for the companies represented in the S&P 500 Index and the custom Peer Group Index is based on those companies’ calendar year end trading price. The following performance graph is based on the Company’s trading price at fiscal year end based on its market price as of the prior fiscal quarter. Because the Company’s fiscal year end valuation of the Company’s shares is effective after the date this document is to be filed with the Securities and Exchange Commission (SEC), a performance graph based on the fiscal year end valuation (market price as of March 1, 2009)2012) is not presented below. Rather, for comparative purposes, a performance graph based on the fiscal year end valuation is provided in the 20092012 Proxy Statement.

Comparison of Five-Year Cumulative Return Based Upon Year End Trading Price

 

(1)Companies included in the Peer Group are: A&P, Ahold, Albertson’s Inc. (Albertson’s is included for 2003 to 2005, but is no longer publicly traded), Delhaize Group, Kroger, Safeway, Supervalu, Weis Markets and Winn-Dixie (Winn-Dixie is included through December 2005 as the company filed for Chapter 11 bankruptcy protection. Winn-Dixie’s new common stock is not included for 2006 but is included for 2007 and 2008).

(1) Companies included in the Peer Group are: Ahold, Delhaize Group, Kroger, Safeway, Supervalu, Weis Markets and Winn-Dixie.

Item 6.Selected Financial Data

Item 6.  Selected Financial Data

 

                 2011(1)           2010           2009         2008           2007 
 (Amounts are in thousands, except per share amounts and number of supermarkets.) 
  2008 2007 2006 2005 2004 

Sales:

              

Sales

  $23,929,064  23,016,568  21,654,774  20,589,130  18,554,486   $26,967,389     25,134,054     24,319,716    23,929,064     23,016,568  

Percent increase

   4.0% 6.3% 5.2% 11.0% 10.7%

Comparable store sales percent increase

   1.3% 4.3% 5.2% 5.4% 5.7%

Percent change

  7.3%     3.3%     1.6%    4.0%     6.3%  

Comparable store sales percent change

  4.1%     2.3%     (3.2%  1.3%     4.3%  

Earnings:

              

Gross profit(1)

  $6,442,241  6,210,739  5,842,817  5,529,450  4,976,746 

Gross profit(2)

  $  7,447,019     7,022,611     6,727,037    6,442,241     6,210,739  

Earnings before income tax expense

  $1,651,412  1,817,573  1,687,553  1,550,738  1,295,011   $  2,261,773     2,039,418     1,774,714    1,651,412     1,817,573  

Net earnings

  $1,089,770  1,183,925  1,097,209  989,156  819,383   $  1,491,966     1,338,147     1,161,442    1,089,770     1,183,925  

Net earnings as a percent of sales

   4.55% 5.14% 5.07% 4.80% 4.42%  5.5%     5.3%     4.8%    4.6%     5.1%  

Common stock:(2)

      

Common stock:

        

Weighted average shares outstanding

   818,248  840,523  849,815  860,196  883,879   784,815     786,378     788,835    818,248     840,523  

Basic and diluted earnings per share

  $1.33  1.41  1.29  1.15  0.93   $           1.90     1.70     1.47    1.33     1.41  

Cash dividends per share

  $0.44  0.40  0.20  0.14  0.09   $           0.53     0.46     0.41    0.44     0.40  

Financial data:

              

Capital expenditures

  $1,289,707  683,290  481,247  338,946  403,373   $     602,952     468,530     693,489    1,289,707     683,290  

Working capital

  $232,809  319,826  211,219  236,488  221,583   $     752,464     771,918     469,260    232,809     319,826  

Current ratio

   1.13  1.18  1.12  1.13  1.13   1.37     1.37     1.24    1.13     1.18  

Total assets

  $8,089,672  8,053,157  7,393,086  6,727,223  5,964,271   $11,268,232     10,159,087     9,004,292    8,089,672     8,053,157  

Stockholders’ equity

  $5,643,298  5,642,186  4,974,865  4,205,774  3,585,716 

Long-term debt (including current portion)

  $     134,584     149,361     99,326    71,940     35,482  

Common stock related to ESOP

  $  2,137,217     2,016,696     1,862,350    1,777,153     1,729,498  

Total equity

  $  8,341,457     7,305,592     6,303,538    5,643,298     5,642,186  

Supermarkets

   993  926  892  875  850   1,046     1,034     1,014    993     926  

 

NOTE: Amounts are in thousands, except per share amounts and number of supermarkets. (1)Fiscal year 20052011 includes 53 weeks. All other years include 52 weeks.

(2) Gross profit represents sales less cost of merchandise sold as reported in the consolidated statements of earnings.

(1)Gross profit represents sales less cost of merchandise sold as reported in the consolidated statements of earnings.
(2)Restated to give retroactive effect for 5-for-1 stock split in July 2006.

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

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

Overview

The Company is primarily engaged in the retail food industry, operating supermarkets in Florida, Georgia, Alabama, South Carolina Alabama and Tennessee. The Company has no other significant lines of business or industry segments. As of December 27, 2008,31, 2011, the Company operated 9931,046 supermarkets including 713743 located in Florida, 176179 in Georgia, 4249 in Alabama, 45 in South Carolina 37and 30 in AlabamaTennessee. In 2011, 29 supermarkets were opened (including 11 replacement supermarkets) and 25 in Tennessee.126 supermarkets were remodeled. Seventeen supermarkets were closed during the same period. The Company opened 5920 supermarkets in Florida, eightfour in Alabama, sixtwo in Georgia, fiveSouth Carolina, two in TennesseeGeorgia and one in South CarolinaTennessee during 2008. The Company closed 122011. Replacement supermarkets opened in 2008. Of2011 replaced 11 of the 17 supermarkets closed 10 were replacedduring the same period. Five of the remaining supermarkets closed in 2008, one2011 will be replaced in a subsequent period and oneperiods, all of which will not be replaced.replaced on site.

The Company’s revenues are earned and cash is generated as merchandise is sold to customers. Income is earned by selling merchandise at price levels that produce sales revenues in excess of the cost of merchandise sold and operating and administrative expenses. The Company has generally been able to increase revenues and net earnings from year to year. Further, the Company has generally been able to meet its cash requirements from internally generated funds without the need to generate cash through debt financing. The Company’s year end cash balances are significantly impacted by capital expenditures, investment transactions, stock repurchases and payment of the annual cash dividend.

The Company sells a variety of merchandise to generate revenues. This merchandise includes grocery (including dairy, produce, deli, bakery, meat and seafood), health and beauty care, general merchandise and other products and services. Most of the Company’s supermarkets also have pharmacy and floral departments. Merchandise includes a mix of nationally advertised and private label brands. The Company’s private label brands play an increasingly important role in its merchandising strategy.

As of December 27, 2008, the Company also operated 10 convenience stores, 73 liquor stores and 41 Crispers restaurants. All liquor stores and Crispers restaurants are located in Florida. Seven convenience stores are located in Florida, two in Georgia and one in Tennessee.

Operating Environment

The Company is engaged in the highly competitive retail food industry. Competition is based primarily on price, quality of goods and service, price, convenience, product mix and store location. In addition, the Company competes with other retailers for additional retail site locations. The Company competes with retailers as well as other labor market competitors in attracting and retaining quality employees. The Company’s primary competition throughout its market areas is with several national and regional traditional supermarket chains, independent supermarkets and specialty food stores as well as non-traditional competition such as supercenters, membership warehouse clubs, mass merchandisers, dollar stores, drug stores, restaurants and convenience stores. As a result of the highly competitive environment, traditional supermarkets, including the Company, face business challenges. There has been a trend in recent years for traditional supermarkets to lose market share to non-traditional competition. The success of the Company, in particular its ability to retain its customers, depends on its ability to meet the business challenges created by this competitive environment.

In order to meet the competitive challenges facing the Company, management continues to focus on the Company’s core strategies, including customer service, product quality, shopping environment, competitive pricing and convenient locations. The Company has implemented several strategic business and technology initiatives as part of the execution of these core strategies. The Company believes these core strategies and related strategic initiatives differentiate it from its competition and present opportunities for increased market share and sustained financial growth.

Liquidity and Capital Resources

Cash and cash equivalents, short-term investments and long-term investments totaled $2,038.4$4,620.1 million as of December 27, 2008,31, 2011, as compared with $2,932.3 million and $2,621.6$3,701.9 million as of December 29, 2007 and December 30, 2006, respectively. The decrease25, 2010. This increase is primarily due to the Company generating cash from operating activities of $2,341.2 million for 2011 of which $1,221.7 million was invested in cash and cash equivalents, short-tem investmentsshort-term and long-term investments was primarily related to the acquisition of the assets of 49 supermarket locations in Florida from Albertson’s LLC (Albertson’s) and the repurchase of Company common stock.

Beginning in February 2008, as a result of the liquidity issues experienced in the global credit and capital markets, auctions for auction rate securities (ARS) held by the Company failed. An auction fails when secondary market makers withdraw from the auction process that provides rate resets and liquidity. However, a failed auction does not represent a default by the issuer. The underlying issuers of the ARS held by the Company have high credit ratings and continue to pay interest in accordance with the terms of the underlying security. Liquidity is limited, however, until there is a successful auction or the issuers call the securities. Because of the absence of a liquid market, the Company reclassified its ARS from short-term to long-term investments in the Company’s 2008 consolidated balance sheets. Due to the quality of the ARS held and the Company’s ability to maintain the securities, the Company does not expect the valuation of these securities to be impacted by the secondary market issues. In addition, all of the Company’s sales or issuer calls of ARS have been at cost. Therefore, no impairment charges have been recorded for ARS as of December 27, 2008. The Company had ARS totaling $14.9 million as of December 27, 2008 as compared with $132.5 million as of December 29, 2007.investments.

Net cash provided by operating activities

Net cash provided by operating activities was $1,772.9$2,341.2 million for 2008,2011, as compared with $1,756.7$2,266.0 million and $1,629.4$1,998.2 million for 20072010 and 2006,2009, respectively. As a result of Hurricane Wilma that occurred during the fourth quarter of 2005, the Company received an extension on its federal income tax payment due December 15, 2005 until February 28, 2006. The delayincrease in this tax payment decreased net cash provided by operating activities for 2011 as compared with 2010 was primarily due to an increase in net earnings of $153.8 million. The increase in cash provided by approximately $95 million during 2006.operating activities for 2010 as compared with 2009 was primarily due to an increase in net earnings of $176.7 million. Any net cash in excess of the amount needed for current operations is invested in short-term and long-term investments.

Net cash used in investing activities

Net cash used in investing activities was $441.0$1,819.4 million for 2008,2011, as compared with $852.3$1,408.7 million and $1,229.2$1,045.4 million for 20072010 and 2006,2009, respectively. The primary use of net cash in investing activities for 20082011 was funding capital expenditures.expenditures and net increases in investment securities. Capital expenditures for 20082011 totaled $1,289.7$603.0 million. These expenditures were incurred in connection with the opening of 67 net29 new supermarkets and remodeling 93 supermarkets. Net new supermarkets included 79 new supermarkets opened (including 11 replacement supermarkets) and 12remodeling 126 supermarkets. Seventeen supermarkets closed.were closed during 2011. Replacement supermarkets opened in 20082011 replaced one supermarket closed in 2007 and 1011 of the 1217 supermarkets closed in 2008. Ofduring the same period. Five of the remaining supermarkets closed in 2008, one2011 will be replaced in a subsequent period and the otherperiods, all of which will not be replaced. New supermarkets opened include 24 of the 49 Florida supermarket locations acquired from Albertson’s for $498.0 millionreplaced on September 8, 2008.site. Net new supermarkets added an additional 3.40.6 million square feet in 2008,2011, an 8.1% increase.increase of 1.3%. Expenditures were also incurred for the constructionacquisition of a second data center,shopping centers with the Company as the anchor tenant and new or enhanced information technology hardware and applications and emergency backup generators. For the same period, the proceeds from the sale and maturity of investments, net of the payment for such investments, was $838.6 million.

The primary use of net cash in investing activities for 2007 was funding capital expenditures and net increases in investments. Capital expenditures totaled $683.3 million. These expenditures were primarily incurred in connection with the opening of 34 net new supermarkets and remodeling 97 supermarkets. Net new supermarkets included 44 new supermarkets opened (including 10 replacement supermarkets) and 10 supermarkets closed. Replacement supermarkets opened in 2007 replaced one supermarket closed in 2006 and nine of the 10 supermarkets closed in 2007. The remaining supermarket closed in 2007 was opened as a replacement supermarket in 2008. Net new supermarkets added an additional 1.5 million square feet in 2007, a 3.7% increase. Expenditures were also incurred for new or enhanced information technology hardware and applications and emergency backup generators.applications. For the same period, the payment for investments, net of the proceeds from the sale and maturity of such investments, was $176.8$1,221.7 million.

The primary use of net cash in investing activities for 20062010 was funding capital expenditures and net increases in investments.investment securities. Capital expenditures for 2010 totaled $481.2$468.5 million. These expenditures were primarily incurred in connection with the opening of 17 net41 new supermarkets and remodeling 58 supermarkets. Net new supermarkets included 29 new supermarkets opened (including six21 replacement supermarkets) and 12remodeling 115 supermarkets. Twenty-one supermarkets closed.were closed during 2010. Replacement supermarkets opened in 20062010 replaced six19 of the 1221 supermarkets closed during the same period and two supermarkets closed in 2006. Five of the 122009. The remaining two supermarkets closed in 20062010 were not replaced andreplaced. New supermarkets opened included five of the remaining Florida supermarket closedlocations acquired from Albertson’s LLC (Albertson’s) not opened in 2006 was opened as a replacement supermarket in 2007.2008 or 2009. Net new supermarkets added an additional 0.81.1 million square feet in 2006, a 2.0% increase.2010, an increase of 2.4%. Expenditures were also incurred for new or enhanced information technology hardware and applications and emergency backup generators.applications. For the same period, the payment for investments, net of the proceeds from the sale and maturity of such investments, was $765.2$943.0 million.

The primary use of net cash in investing activities for 2009 was funding capital expenditures and net increases in investment securities. Capital expenditures for 2009 totaled $693.5 million. These expenditures were incurred in connection with the opening of 48 new supermarkets (including 15 replacement supermarkets) and remodeling 85 supermarkets. Twenty-seven supermarkets were closed during 2009. Replacement supermarkets opened in 2009 replaced 14 of the 27 supermarkets closed during the same period and one supermarket closed in 2008. Two of the remaining supermarkets closed in 2009 were opened as replacement supermarkets in 2010 and the other 11 supermarkets were not replaced. Both replacement supermarkets opened in 2010 from supermarkets closed in 2009 were replaced on site. New supermarkets opened included 17 of the remaining 25 Florida supermarket locations acquired from Albertson’s not opened in 2008. Net new supermarkets added 1.3 million square feet in 2009, an increase of 2.7%. Expenditures were also incurred for the construction of a second data center, expansion of warehouses and new or enhanced information technology hardware and applications. For the same period, the payment for investments, net of the proceeds from the sale and maturity of such investments, was $356.1 million.

Capital expenditure projection

In 2009,2012, the Company plans to open approximately 40 supermarkets (including 11 supermarket locations acquired from Albertson’s).30 supermarkets. Although real estate development is unpredictable, the Company’s 20092012 new store growth represents a reasonable estimate of anticipated future growth. Capital expenditures for 20092012 are expected to be approximately $665$730 million, primarily consisting of new supermarkets, remodeling certain existing supermarkets, completionexpansion of planned improvements for certain of the supermarket locations acquired from Albertson’s, completion of a second data center andwarehouses, new or enhanced information technology hardware and applications.applications and the acquisition of certain shopping centers with the Company as the anchor tenant. The shopping center acquisitions are financed with internally generated funds and assumed debt, if prepayment penalties for the debt are determined to be significant. This capital program is subject to continuing change and review. In the normal course of operations, the Company replaces supermarkets and closes supermarkets that are not meeting performance expectations. The impact of future supermarket closings is not expected to be material.

Net cash used in financing activities

Net cash used in financing activities was $1,312.9$760.8 million in 2008,2011, as compared with $762.1$621.9 million and $602.3$784.1 million in 20072010 and 2006,2009, respectively. The primary use of net cash in financing activities was funding net common stock repurchases and payment of the annual cash dividend. Net common stock repurchases totaled $291.3 million in 2011, as compared with $257.3 million and $477.4 million in 2010 and 2009, respectively. The Company currently repurchases common stock at the stockholders’ request in accordance with the terms of the Company’s ESPP, 401(k) Plan, ESOP and Directors Plan. Net common stock repurchases totaled $979.3 million in 2008, as compared with $439.8 million and $430.5 million in 2007 and 2006, respectively. The amount of common stock offered to the Company for repurchase is not within the control of the Company, but is at the discretion of the stockholders. The Company expects to continue to repurchase its common stock, as offered by its stockholders from time to time, at its then current value for amounts similar to 2008.those in prior years. However, with the exception of certain shares distributed from the ESOP, such purchases are not required and the Company retains the right to discontinue them at any time.

Dividends*Dividends

The Company paid an annual cash dividend on its common stock of $0.44$0.53 per share or $364.6$418.7 million, $0.40$0.46 per share or $338.6$364.1 million and $0.20$0.41 per share or $171.6$325.3 million in 2008, 20072011, 2010 and 2006,2009, respectively.

Cash requirements

In 2009,2012, the cash requirements for current operations, capital expenditures, common stock repurchases and payment of the annual cash dividend are expected to be financed by internally generated funds or liquid assets. Based on the Company’s financial position, it is expected that short-term and long-term borrowings would be available to support the Company’s liquidity requirements, if needed.

*Per share amounts restated to give retroactive effect for 5-for-1 stock split in July 2006.

Contractual Obligations

Following is a summary of contractual obligations as of December 27, 2008:31, 2011:

 

     Payments Due by Period     

Payments Due by Period

 
  Total  2009  2010
2011
  2012
2013
  There-
after
     (Amounts are in thousands)             2013-   2015-   There- 

Contractual Obligations:

          

Operating leases(1)

  $4,467,424  402,889  770,848  690,805  2,602,882

Purchase obligations(2) (3) (4)

   2,021,622  923,346  265,756  196,321  636,199
  

Total

   

2012

   

2014

   

2016

   

after

 
  (Amounts are in thousands) 

Contractual obligations:

          

Operating leases(1)

  $4,261,198     419,541     780,139     676,315     2,385,203  

Purchase obligations(2)(3)(4)

   1,856,700     829,504     266,482     183,767     576,947  

Other long-term liabilities:

                    

Self-insurance reserves(5)

   363,345  132,275  89,556  37,288  104,226

Accrued postretirement benefit cost(6)

   82,750  3,272  7,348  8,418  63,712

Other noncurrent liabilities

   87,880  20,675  25,126  11,406  30,673

Self-insurance reserves(5)

   345,229     125,569     101,346     37,261     81,053  

Accrued postretirement benefit cost(6)

   107,624     4,029     8,830     9,778     84,987  

Long-term debt(7)

   134,584     15,124     83,721     17,807     17,932  

Other

   16,364     500     382     450     15,032  
  

 

   

 

   

 

   

 

   

 

 
               

Total

  $7,023,021  1,482,457  1,158,634  944,238  3,437,692  $6,721,699     1,394,267     1,240,900     925,378     3,161,154  
                 

 

   

 

   

 

   

 

   

 

 

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.

 

(1)(1)

For a more detailed description of the operating lease obligations, refer to Note 8(a) Commitments and Contingencies—Contingencies - Operating Leases in the Notes to Consolidated Financial Statements.

(2)(2)

Purchase obligations include agreements to purchase goods or services that are enforceable and legally binding on the Company and that specify all significant terms, including fixed or minimum quantities to be purchased, fixed, minimum or variable price provisions and the approximate timing of the transaction. Purchase obligations exclude agreements that are cancelable within 30 days without penalty.

(3)(3)

As of December 27, 2008,31, 2011, the Company had $10.3$10.2 million outstanding in trade letters of credit and $4.1$3.7 million outstanding in standby letters of credit to support certain of these purchase obligations.

(4)(4)

Purchase obligations include $1,138.4$1,062.8 million in real estate taxes, insurance and maintenance commitments related to operating leases. The actual amounts to be paid are variable and have been estimated based on current costs.

(5)(5)

As of December 27, 2008,31, 2011, the Company had $200.0a restricted trust account in the amount of $170.0 million outstanding in a standby letter of credit for the benefit of the Company’s insurance carrier to support this obligation.

(6)(6)

For a more detailed description of the postretirement benefit obligations, refer to Note 5 Postretirement Benefits in the Notes to Consolidated Financial Statements.

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.
(7)

For a more detailed description of the long-term debt obligations, refer to Note 4 Consolidation of Joint Ventures and Long-Term Debt in the Notes to Consolidated Financial Statements.

Results of Operations

The Company’s fiscal year ends on the last Saturday in December. Fiscal year 2011 includes 53 weeks and fiscal years 2008, 20072010 and 2006 included2009 include 52 weeks.

Sales

Sales for 20082011 were $23.9$27.0 billion as compared with $23.0$25.1 billion in 2007,2010, an increase of $912.5$1,833.3 million or a 4.0%7.3% increase. The Company estimates that its sales increased $613.3$485.2 million or 2.7%1.9% from the additional week in 2011, $317.6 million or 1.3% from new supermarkets (excluding replacement supermarkets) and $299.2$1,030.5 million or 1.3%4.1% from comparable store sales (supermarkets open for the same weeks in both periods, including replacement supermarkets). The increase in comparableSales for supermarkets that are replaced on site are classified as new supermarket sales since the replacement period for the supermarket is generally 9 to 12 months. Comparable store sales isfor 2011 increased primarily attributeddue to increases in retail pricing which are comparable to increases in product costs.cost inflation and increased customer counts resulting from a better economic climate.

Sales for 20072010 were $23.0$25.1 billion as compared with $21.7$24.3 billion in 2006,2009, an increase of $1,361.8$814.3 million or a 6.3%3.3% increase. The Company estimates that its sales increased $430.6$254.9 million or 2.0%1.0% from new supermarkets and $931.2$559.4 million or 4.3%2.3% from comparable store sales. Comparable store sales for 2010 increased primarily due to increased customer counts resulting from a better economic climate.

Sales for 20062009 were $21.7$24.3 billion as compared with $20.6$23.9 billion in 2005,2008, an increase of $1,065.6$390.7 million or a 5.2%1.6% increase. After excludingThe Company estimates that its sales of $387.5 million for the extra week included in 2005, this reflects an increase of approximately $412.1increased $1,156.4 million or 2.0%4.8% from new supermarkets and approximately $1,041.0decreased $765.7 million or 5.2%3.2% from comparable store sales. The Company estimates thatComparable store sales for 2005 were positivelynegatively impacted by $73 million as a resultthe economic downturn, deflationary pressures and the large number of the hurricane the Company experiencedCompany’s supermarkets opened during the fourth quarter of 2005. If sales for 2005 had not been positively impacted by the hurricane, the reported 5.2% increase in comparable store sales for 2006 would have been 5.6%.2008 that were located near existing supermarkets.

Gross profit

Gross profit (sales less cost of merchandise sold) as a percentage of sales was 26.9%27.6%, 27.9% and 27.7% in 2008 as compared with 27.0%2011, 2010 and 2009, respectively. The decrease in 2007 and 2006. In 2008, gross profit as a percentage of sales for 2011 as compared with 2010 was primarily due to an increase in the last-in, first-out (LIFO) reserve and product cost increases some of which were not passed on to customers. Gross profit as a percentage of sales for 2010 as compared with 2009 remained relatively unchanged compared to 2007 and 2006.unchanged.

Operating and administrative expenses

Operating and administrative expenses as a percentage of sales were 20.5%, 21.1% as compared with 20.6%and 21.6% in 20072011, 2010 and 2006.2009, respectively. The increasedecrease in operating and administrative expenses as a percentage of sales for 20082011 as compared with 2010 was primarily due to increasesincremental sales from the additional week in health care costs, workers’ compensation,2011. Excluding the effect of the incremental sales from the additional week, operating and administrative expenses as a percentage of sales would have been 20.9%. The decrease in operating and administrative expenses as a percentage of sales for 2010 as compared with 2009 was primarily due to decreases in rent, payroll, utilities and repairs and maintenance expense.expenses as a percentage of sales. Rent expense decreased 0.2% of sales primarily due to a decrease in rent related to closed supermarkets; payroll expense decreased 0.1% of sales primarily due to more effective scheduling; utilities expense decreased 0.1% of sales primarily due to lower electric rates; and repairs and maintenance expense decreased 0.1% of sales primarily due to better expense control.

Investment income, net

Investment income, net was $57.5$93.0 million, $146.9$91.8 million and $115.9$68.3 million in 2008, 20072011, 2010 and 2006,2009, respectively. The decreaseincrease in investment income, net for 2008 is2011 as compared with 2010 was primarily due to thean increase in dividend income partially offset by other-than-temporary impairment of available-for-sale (AFS) securities of $60.8 million and(OTTI) losses on equity securities. The increase in investment income, net for 2010 as compared with 2009 was primarily due to a decrease in interest income resulting from lower average balancesOTTI losses on equity securities.

The Company recorded OTTI losses on equity securities of $6.1 million and lower interest rates.$19.3 million in 2011 and 2009, respectively. There were no OTTI losses on equity securities in 2010. There were no OTTI losses on debt securities in 2011, 2010 and 2009.

Income taxes

The effective income tax rates wererate was 34.0%, 34.9%34.4% and 35.0%34.6% in 2008, 20072011, 2010 and 2006,2009, respectively. The net decrease in the 2008 effective income tax rate isfor 2011 as compared with 2010 was primarily due to the increaseincreases in dividends paid to ESOP participants partially offset by decreases inand jobs tax exempt interest.credits. The effective income tax rate for 2010 as compared with 2009 remained relatively unchanged.

Net earnings

Net earnings were $1,089.8$1,492.0 million or $1.33$1.90 per share, $1,183.9$1,338.1 million or $1.41$1.70 per share and $1,097.2$1,161.4 million or $1.29$1.47 per share for 2008, 20072011, 2010 and 2006,2009, respectively.

Accounting Standards

In June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109,” (FIN 48) effective for fiscal years beginning after December 15, 2006. FIN 48 clarifies the accounting for uncertainty in tax positions. FIN 48 requires financial statement recognition of the impact of a tax position when it is more likely than not, based on its technical merits, that the position will be sustained upon examination and the cumulative effect of the change in accounting principle is to be recorded as an adjustment to opening retained earnings. The adoption of FIN 48 did not have a material effect on the Company’s financial condition, results of operations or cash flows.

In September 2006, the FASB issued Statement of Financial Accounting Standard (SFAS) 157, “Fair Value Measurement,” effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS 157 does not require any new fair value measurements. In February 2008, the FASB issued FASB Staff Position (FSP) 157-2, “Effective Dates of FASB Statement No. 157,” which defers the effective date of SFAS 157 for all nonrecurring fair value measurements of nonfinancial assets and liabilities until fiscal years beginning after November 15, 2008. As of December 30, 2007, the Company adopted SFAS 157 for its AFS securities. The partial adoption of SFAS 157 had no effect on the Company’s financial condition, results of operations or cash flows. In October 2008, the FASB issued FSP 157-3, “Determining the Fair Value of a Financial Asset in a Market That Is Not Active,” which clarifies the application of SFAS 157 when the market for a financial asset is inactive. Specifically, FSP 157-3 clarifies how (1) management’s internal assumptions should be considered in measuring fair value when observable data are not present, (2) observable market information from an inactive market should be taken into account, and (3) the use of broker quotes or pricing services should be considered in assessing the relevance of observable and unobservable data to measure fair value. The guidance in FSP 157-3 was effective immediately and did not have a material effect on the Company’s financial condition, results of operations or cash flows.

In September 2006, the FASB issued SFAS 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106 and 132(R).” SFAS 158 requires financial statement recognition of the overfunded or underfunded status of a defined benefit postretirement plan or other postretirement plan as an asset or liability and recognition of changes in the funded status in comprehensive Net earnings in the year in which the changes occur, effective for fiscal years ending after December 15, 2006. SFAS 158 also requires that the measurement date for the calculation of plan assets and obligations coincide with a company’s fiscal year end date, effective for fiscal years ending after December 15, 2008. The adoption of the recognition and measurement provisions of SFAS 158 did not have a material effect on the Company’s financial condition, results of operations or cash flows.

In February 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities,” effective for fiscal years beginning after November 15, 2007. SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. Unrealized gains and losses on items for which the fair value option has been elected will be recognized in earnings at each subsequent reporting date. The Company has not elected the fair value option.

In December 2007, the FASB issued SFAS 141(R), “Business Combinations,” effective for fiscal years beginning after December 15, 2008. SFAS 141(R) will change the accounting treatment for business combinations on a prospective basis. SFAS
141(R) requires that all assets, liabilities, contingent considerations and contingencies of an acquired business be recorded at fair value at the acquisition date. SFAS 141(R) also requires that acquisition costs be expensed as incurred and restructuring costs be expensed in periods after the acquisition date. SFAS 141(R) will only affect the Company’s financial condition or results of operations to the extent it has business combinations after the effective date.

In December 2007, the FASB issued SFAS 160, “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51,” effective for fiscal years beginning after December 15, 2008. SFAS 160 requires the noncontrolling interest in a subsidiary be reported as a separate componentpercentage of stockholders’ equitysales were 5.5%, 5.3% and 4.8% for 2011, 2010 and 2009, respectively. The increase in net earnings as a percentage of sales for 2011 as compared with 2010 was primarily due to incremental sales from the consolidated financial statements. SFAS 160 also requiresadditional week partially offset by the decrease in gross profit as a percentage of sales, as noted above. The increase in net income attributableearnings as a percentage of sales for 2010 as compared with 2009 was primarily due to the noncontrolling interestincreases in gross profit as a subsidiary be reported separately on the facepercentage of the consolidated statementsales and decreases in operating and administrative expenses as a percentage of earnings. Changes in ownership interest are to be accounted forsales, as equity transactions and when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary is to be measured at fair value with any gain or loss recognized in earnings. The adoption of SFAS 160 is not expected to have a material effect on the Company’s financial condition, results of operations or cash flows.

In March 2008, the FASB issued SFAS 161, “Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133,” effective for fiscal years beginning after November 15, 2008. SFAS 161 requires enhanced disclosures about an entity’s derivative and hedging activities under SFAS 133, “Accounting for Derivative Instruments and Hedging Activities.” The Company does not currently have derivatives or enter into hedging activities as defined by SFAS 133; therefore, the adoption of SFAS 161 is not expected to have an effect on the Company’s financial condition, results of operations or cash flows.noted above.

Critical Accounting Policies

The Company’s discussion and analysis of its financial condition and results of operations are based upon the Company’s consolidated financial statements, which have been prepared in accordance with accounting principlesU.S. generally accepted in the U.S.accounting principles. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company’s significant accounting policies are described in Note 1 ofin the Notes to Consolidated Financial Statements. The Company believes the following critical accounting policies reflect its more significant judgments and estimates used in the preparation of its consolidated financial statements.

Inventories

Inventories are valued at the lower of cost or market. The cost for 86%84% and 85% of inventories was determined using the dollar value last-in, first-outLIFO method as of December 27, 200831, 2011 and December 29, 2007,25, 2010, respectively. Under this method, inventory is stated at cost, which is determined by applying a cost-to-retail ratio to each similar merchandise category’s ending retail value. The cost of the remaining inventories was determined using the first-in, first-out (FIFO) method. The FIFO cost of inventory approximates replacement or current cost. The FIFO method is used to value manufactured, seasonal, certain perishable and other miscellaneous inventory items because of fluctuating costs and inconsistent product availability. The Company also reduces inventory for estimated losses related to shrink.

Investments

All of the Company’s debt and equity investmentssecurities are classified as AFS.available-for-sale (AFS) and carried at fair value. The Company reviews itsevaluates whether AFS investments for other-than-temporary impairmentssecurities are OTTI based on criteria that include the extent to which cost exceeds market value, the duration of the market decline, the credit rating of the issuer or security, the failure of the issuer to make scheduled principal or interest payments and the financial health of and prospects forof the issuer. Factors indicating other-than-temporary impairments include issuer downgrade, default or bankruptcy. Historically,security. Declines in the Company’s estimates for other-than-temporary impairments have been reasonably accurate.value of AFS securities determined to be OTTI are recognized in earnings and reported as OTTI losses, while declines in the value of AFS securities determined to be temporary are reported, net of tax, as other comprehensive losses and included as a component of stockholders’ equity. If market or issuer conditions decline, the Company may incur future impairments.

Debt investmentssecurities with unrealized losses are considered OTTI if the Company intends to sell the debt security or if the Company will be required to sell the debt security prior to any anticipated recovery. If the Company determines that a debt security is OTTI under these circumstances, the impairment recognized in earnings is measured as the difference between the amortized cost and the current fair value. A debt security is also determined to be OTTI if the Company does not expect to recover the amortized cost of the debt security. However, in this circumstance, if the Company does not intend to sell the debt security and will not be required to sell the debt security, the impairment recognized in earnings equals the estimated credit loss as measured by the difference between the present value of expected cash flows and the amortized cost of the debt security. Expected cash flows are discounted using the debt security’s effective interest rate. Debt securities held by the Company at year end primarily consisted of corporate, state and municipality issued bonds and collateralized mortgage obligations with high credit ratings; therefore, the Company believes the credit risk is low. The Company purchases its debt investments with the intent and ability to hold such investments to maturity. The Company believes a one percentage point increase in long-term interest rates, or 100 basis points, would result in an immaterial unrealized loss on its debt investments.securities. Since these investments are classified as AFS,the Company does not intend to sell its debt securities or will likely not be required to sell its debt securities prior to any anticipated recovery, such a theoretical temporary unrealized loss would impact comprehensive earnings, but not net earnings or cash flows.

Equity investmentssecurities held by the Company are subject to equity price risk that results from fluctuations in quoted market prices as of the end of the balance sheet date. Market price fluctuations may result from perceived changes in the underlying economic characteristics of the issuer, the relative price of alternative investments and general market conditions. The recent market liquidity issues have created volatility in market prices that resulted in unrealized losses for most of the Company’sAn equity investments. Unrealized losses on investments are evaluated quarterly for other-than-temporary impairments. The carrying value of investmentssecurity is determined to be other-than-temporarily impaired is written downOTTI if the Company does not expect to fair market value.recover the cost of the equity security. A theoretical decrease of 25%10% in the value of the Company’s equity investmentssecurities would result in an immaterial decrease in the value of long-term investments.

Property, Plant and Equipment and Depreciation

Assets are recorded at cost and are depreciated using the straight-line method over their estimated useful lives or the terms of their leases, if shorter, as follows: buildings and improvements are at 10 – 40 years, furniture, fixtures and equipment are at 3 – 20 years and leasehold improvements are at 25 – 40 years. The Company considers lease renewals in the useful life of its leasehold improvements when such renewals are reasonably assured.

Long-Lived Assets

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the net book value of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the net book value of an asset to the future net undiscounted cash flows expected to be generated by the asset. An impairment loss is recorded for the excess of the net book value over the fair value of the asset impaired. The fair value is estimated based on expected discounted future cash flows. Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell and are no longer depreciated. Long-lived assets, including buildings and improvements, leasehold improvements, and furniture, fixtures and equipment are evaluated for impairment at the supermarket level.

The Company’s judgment regarding the existence of circumstances that indicate the potential impairment of an asset’s net book value is based on several factors, including the decision to close a supermarket or a decline in operating cash flows. The variability of these factors depends on a number of conditions, including uncertainty about future events and general economic conditions; therefore, the Company’s accounting estimates may change from period to period. These factors could cause the Company to conclude that a potential impairment exists, and the applicable impairment tests could result in a determination that the value of long-lived assets is impaired, resulting in a write-down of the long-lived assets. The Company attempts to select supermarket sites that will achieve the forecasted operating results. To the extent the Company’s assets are maintained in good condition and the forecasted operating results of the supermarkets are achieved, it is relatively unlikely that future assessments of recoverability would result in impairment charges that would have a material effect on the Company’s financial condition and results of operations. There were no material changes in the estimates or assumptions related to the impairment of long-lived assets in 2008.2011.

Revenue Recognition

Revenue is recognized at the point of sale for retail sales. Customer returns are immaterial. Vendor coupons that are reimbursed are accounted for as sales. Coupons and other sales incentives offered by the Company that are not reimbursed are recorded as a reduction of sales.

Cost of Merchandise Sold

Cost of merchandise sold includes costs of inventory and costs related to in-store production. Cost of merchandise sold also includes inbound freight charges, purchasing and receiving costs, warehousing costs and other costs of the Company’s distribution network.

Vendor allowances and credits, including cooperative advertising fees, received from a vendor in connection with the purchase or promotion of the vendor’s products are recognized as a reduction of cost of merchandise sold as earned. These allowances and credits are recognized as earned in accordance with the underlying agreement with the vendor and completion of the earningearnings process. Short-term vendor agreements with advance payment provisions are recorded as a current liability and are recognized over the appropriate period as earned according to the underlying agreement.agreements. Long-term vendor agreements with advance payment provisions are recorded as a noncurrent liability and are recognized over the appropriate period as earned according to the underlying agreement.agreements.

Self-Insurance

The Company has insurance coverage for losses in excess of the self-insurance limits for fleet liability, general liability and workers’ compensation claims. Historically, it has been infrequent for incurred claims to exceed these self-insurance limits.

Self-insurance reserves are established for health care, fleet liability, general liability and workers’ compensation claims. These reserves are determined based on actual claims experience and an estimate of claims incurred but not reported including, where necessary, actuarial studies. The Company believes that the use of actuarial studies to determine self-insurance reserves represents a consistent method of measuring these subjective estimates. Actuarial projections of losses for general liability and workers’ compensation claims are discounted and subject to a high degree of variability. The causes of variability include, but are not limited to, such factors as future interest and inflation rates, future economic conditions, claims experience, litigation trends and benefit level changes and other factors.changes. The Company believes a one percentage point change in the discount rate, or 100 basis points, would result in an immaterial change in the Company’s self-insurance reserves.

Forward-Looking Statements

From time to time, certain information provided by the Company, including written or oral statements made by its representatives, may contain forward-looking information as defined in Section 21E of the Securities Exchange Act of 1934. Forward-looking information includes statements about the future performance of the Company, which is based on management’s assumptions and beliefs in light of the information currently available to them. When used, the words “plan,” “estimate,” “project,” “intend,” “believe” and other similar expressions, as they relate to the Company, are intended to identify such forward-looking statements. These forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from those statements including, but not limited to:to, the following: competitive practices and pricing in the food and drug industries generally and particularly in the Company’s principal markets; results of programs to control or reduce costs, improve buying practices and control shrink;increase sales, including private-label sales; results of programs to increase sales, including private-label sales, improve perishable departments and improvecontrol or reduce costs; changes in buying, pricing and promotional efforts;practices; changes in shrink management; changes in the general economy; changes in consumer spending; changes in population, employment and job growth in the Company’s principal markets; and other factors affecting the Company’s business inwithin or beyond the Company’s control. These factors include changes in the rate of inflation, changes in state and federal legislation or regulation, adverse determinations with respect to litigation or other claims, ability to recruit and retain employees, increases in operating costs including, but not limited to, labor costs, credit card fees and utility costs, particularly electric utility costs,rates, ability to construct new supermarkets or complete remodels as rapidly as planned and stability of product costs. Other factors and assumptions not identified above could also cause the actual results to differ materially from those set forth in the forward-looking statements. The Company assumes no obligation to publicly update publicly these forward-looking statements.

Item 7A.Quantitative and Qualitative Disclosures About Market Risk

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

The Company does not utilize financial instruments for trading or other speculative purposes, nor does it utilize leveraged financial instruments.

The Company’s cash equivalents and short-term investments are subject to three market risks:risks, namely: interest rate risk, credit risk and secondary market risk. Most of the cash equivalents and short-term investments are held in money market investments and debt securities that mature in less than one year. Due to the quality of the short-term investments held, the Company does not expect the valuation of these investments to be significantly impacted by currentfuture market conditions.

The Company’s long-term investments consist of debt and equity investments. securities that are classified as AFS and carried at fair value. The Company evaluates whether AFS securities are OTTI based on criteria that include the extent to which cost exceeds market value, the duration of the market decline, the credit rating of the issuer or security, the failure of the issuer to make scheduled principal or interest payments and the financial health and prospects of the issuer or security. Declines in the value of AFS securities determined to be OTTI are recognized in earnings and reported as OTTI, while declines in the value of AFS securities determined to be temporary are reported, net of tax, as other comprehensive losses and included as a component of stockholders’ equity. If market or issuer conditions decline, the Company may incur future impairments.

Debt investmentssecurities are subject to both interest rate risk and credit risk. TheDebt securities with unrealized losses are considered OTTI if the Company intends to sell the debt investmentssecurity or if the Company will be required to sell the debt security prior to any anticipated recovery. If the Company determines that a debt security is OTTI under these circumstances, the impairment recognized in earnings is measured as the difference between the amortized cost and the current fair value. A debt security is also determined to be OTTI if the Company does not expect to recover the amortized cost of the debt security. However, in this circumstance, if the Company does not intend to sell the debt security and will not be required to sell the debt security, the impairment recognized in earnings equals the estimated credit loss as measured by the difference between the present value of expected cash flows and the amortized cost of the debt security. Expected cash flows are discounted using the debt security’s effective interest rate. Debt securities held by the Company at year end primarily consisted of corporate, state and municipality issued bonds and collateralized mortgage obligations with high credit ratings; therefore, the Company believes the credit risk is low. The Company purchases its debt investments with the intent and ability to hold such investments to maturity. The Company believes a one percentage point increase in long-term interest rates, or 100 basis points, would result in an immaterial unrealized loss on its debt investments.securities. Since the Company does not intend to sell its debt investments are classified as AFS,securities or will likely not be required to sell its debt securities prior to any anticipated recovery, such a theoretical temporary unrealized loss would impact comprehensive earnings, but not net earnings or cash flows.

Equity investmentssecurities held by the Company are subject to equity price risk that results from fluctuations in quoted market prices as of the end of the balance sheet date. Market price fluctuations may result from perceived changes in the underlying economic characteristics of the issuer, the relative price of alternative investments and general market conditions. The recent market liquidity issues have created volatility in market prices that resulted in unrealized losses for most of the Company’sAn equity investments. Unrealized losses on investments are evaluated quarterly for other-than-temporary impairments. The carrying value of investmentssecurity is determined to be other-than-temporarily impaired is written downOTTI if the Company does not expect to fair market value.recover the cost of the equity security. A theoretical decrease of 25%10% in the value of the Company’s equity investmentssecurities would result in an immaterial decrease in the value of long-term investments.

Management’s Report on Internal Control over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Securities Exchange Act of 1934). The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 27, 2008.31, 2011. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission inInternal Control – Integrated Framework.Framework. Based on this assessment and these criteria, management believes that the Company’s internal control over financial reporting was effective as of December 27, 2008.31, 2011.

The Company’s independent registered public accounting firm, KPMG LLP, has issued an audit report on the effectiveness of the Company’s internal control over financial reporting, which is included on page 29.21.

Item 8.Financial Statements and Supplementary Data

Item 8.  Financial Statements and Supplementary Data

Index to Consolidated Financial Statements and Schedule

 

   Page

Reports of Independent Registered Public Accounting Firm

  2820

Consolidated Financial Statements:

  

Consolidated Balance Sheets – December 27, 200831, 2011 and December 29, 200725, 2010

  3022

Consolidated Statements of Earnings – Years ended December 27, 2008,31, 2011, December  29, 200725, 2010 and December 30, 200626, 2009

  3224

Consolidated Statements of Comprehensive Earnings – Years ended December 27, 2008,31, 2011,  December 29, 200725, 2010 and December 30, 200626, 2009

  3325

Consolidated Statements of Cash Flows – Years ended December 27, 2008,31, 2011, December  29, 200725, 2010 and December 30, 200626, 2009

  3426

Consolidated Statements of Stockholders’ Equity – Years ended December  27, 2008,31, 2011, December 29, 200725, 2010 and December 30, 200626, 2009

  3628

Notes to Consolidated Financial Statements

  3729

The following consolidated financial statement schedule of the Company for the years ended December 27, 2008,31, 2011, December 29, 200725, 2010 and December 30, 200626, 2009 is submitted herewith:

  

Schedule:

Schedule II—Valuation and Qualifying Accounts

  5242

All other schedules are omitted as the required information is inapplicable or the information is presented in the financial statements or related notes.

  

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Publix Super Markets, Inc.:

We have audited the accompanying consolidated balance sheets of Publix Super Markets, Inc. and subsidiaries (the Company) as of December 27, 200831, 2011 and December 29, 2007,25, 2010, and the related consolidated statements of earnings, comprehensive earnings, cash flows and stockholders’ equity and cash flows for each of the years in the three-year period ended December 27, 2008.31, 2011. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Publix Super Markets, Inc. and subsidiaries as of December 27, 200831, 2011 and December 29, 2007,25, 2010, and the results of their operations and their cash flows for each of the years in the three-year period ended December 27, 2008,31, 2011, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As discussed in Note 7, the Company adopted Financial Accounting Standards Board Interpretation No. 48,Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109, as of December 31, 2006. As discussed in Note 5, the Company adopted the recognition provision and the measurement provision of Statement of Financial Accounting Standard No. 158,Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, as of December 30, 2006 and December 30, 2007, respectively. As discussed in Note 4, the Company adopted Statement of Financial Accounting Standard No. 157,Fair Value Measurement,for its available-for-sale securities as of December 30, 2007.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’sPublix Super Markets, Inc.’s internal control over financial reporting as of December 27, 2008,31, 2011, based on criteria established in Internal Control – Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 23, 200929, 2012 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

KPMG LLP

February 23, 2009

Tampa, Florida

February 29, 2012

Certified Public Accountants

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Publix Super Markets, Inc.:

We have audited Publix Super Markets, Inc.’s (the Company) internal control over financial reporting as of December 27, 2008,31, 2011, based on criteria established in Internal Control – Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’sPublix Super Markets, Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Publix Super Markets, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 27, 2008,31, 2011, based on criteria established in Internal Control – Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the CompanyPublix Super Markets, Inc. and subsidiaries as of December 27, 200831, 2011 and December 29, 2007,25, 2010, and the related consolidated statements of earnings, comprehensive earnings, cash flows and stockholders’ equity and cash flows for each of the years in the three-year period ended December 27, 2008,31, 2011, and our report dated February 23, 200929, 2012 expressed an unqualified opinion on those consolidated financial statements.

KPMG LLP

KPMG LLP
February 23, 2009
Tampa, Florida
Certified Public Accountants

Tampa, Florida

February 29, 2012

Certified Public Accountants

PUBLIX SUPER MARKETS, INC.

Consolidated Balance Sheets

December 27, 200831, 2011 and

December 29, 200725, 2010

 

Assets  

2011

     

2010

 
  2008 2007   (Amounts are in thousands) 
  (Amounts are in thousands) 
Assets  

Current assets:

         

Cash and cash equivalents

  $   201,813  182,867   $366,853       605,901  

Short-term investments

  26,495  237,206    447,972       336,282  

Trade receivables

  366,418  360,260    542,990       492,311  

Merchandise inventories

  1,387,575  1,279,531    1,361,709       1,359,028  

Deferred tax assets

  44,628  52,010    59,400       59,126  

Prepaid expenses

  23,727  17,080    24,316       25,354  
         

 

     

 

 

Total current assets

  2,050,656  2,128,954    2,803,240       2,878,002  
         

 

     

 

 

Long-term investments

  1,810,048  2,512,200    3,805,283       2,759,751  

Other noncurrent assets

  154,639  46,531    171,179       168,398  

Property, plant and equipment:

         

Land

  313,750  213,301    592,843       504,415  

Buildings and improvements

  1,494,560  1,237,343    2,062,833       1,918,940  

Furniture, fixtures and equipment

  4,166,752  3,822,396    4,540,988       4,488,139  

Leasehold improvements

  1,153,979  1,068,259    1,321,646       1,293,578  

Construction in progress

  298,364  92,017    103,006       110,909  
         

 

     

 

 
  7,427,405  6,433,316    8,621,316       8,315,981  

Accumulated depreciation

  (3,353,076) (3,067,844)   (4,132,786     (3,963,045
         

 

     

 

 

Net property, plant and equipment

  4,074,329  3,365,472    4,488,530       4,352,936  
         

 

     

 

 
  $8,089,672  8,053,157   $11,268,232       10,159,087  
         

 

     

 

 

See accompanying notes to consolidated financial statements.

   2008  2007 
   (Amounts are in thousands,
except par value)
 
Liabilities and Stockholders’ Equity  

Current liabilities:

   

Accounts payable

  $1,039,858  974,648 

Accrued expenses:

   

Contribution to retirement plans

   335,245  356,529 

Self-insurance reserves

   132,275  113,597 

Salaries and wages

   92,484  97,844 

Other

   217,985  206,101 

Federal and state income taxes

   —    60,409 
        

Total current liabilities

   1,817,847  1,809,128 

Deferred tax liabilities

   131,433  152,192 

Self-insurance reserves

   231,070  230,849 

Accrued postretirement benefit cost

   79,478  77,379 

Other noncurrent liabilities

   186,546  141,423 
        

Total liabilities

   2,446,374  2,410,971 
        

Stockholders’ equity:

   

Common stock of $1 par value. Authorized 1,000,000 shares; issued and outstanding 793,966 shares in 2008 and 831,476 shares in 2007

   793,966  831,476 

Additional paid-in capital

   806,526  746,759 

Retained earnings

   4,055,432  4,079,428 
        
   5,655,924  5,657,663 

Accumulated other comprehensive losses

   (12,626) (15,477)
        

Total stockholders’ equity

   5,643,298  5,642,186 

Commitments and contingencies

   —    —   
        
  $8,089,672  8,053,157 
        

Liabilities and Equity  

2011

  

2010

 
   (Amounts are in thousands,
except par value)
 

Current liabilities:

   

Accounts payable

  $1,133,120    1,156,181  

Accrued expenses:

   

Contribution to retirement plans

   405,818    376,002  

Self-insurance reserves

   125,569    114,133  

Salaries and wages

   110,207    113,794  

Other

   221,713    249,633  

Current portion of long-term debt

   15,124    72,879  

Federal and state income taxes

   39,225    23,462  
  

 

 

  

 

 

 

Total current liabilities

   2,050,776    2,106,084  

Deferred tax liabilities

   316,802    225,695  

Self-insurance reserves

   219,660    221,337  

Accrued postretirement benefit cost

   103,595    90,935  

Long-term debt

   119,460    76,482  

Other noncurrent liabilities

   116,482    132,962  
  

 

 

  

 

 

 

Total liabilities

   2,926,775    2,853,495  
  

 

 

  

 

 

 

Common stock related to Employee Stock Ownership Plan (ESOP)

   2,137,217    2,016,696  
  

 

 

  

 

 

 

Stockholders’ equity:

   

Common stock of $1 par value. Authorized 1,000,000 shares; issued and outstanding 779,675 shares in 2011 and 780,969 shares in 2010

   779,675    780,969  

Additional paid-in capital

   1,354,881    1,092,008  

Retained earnings

   6,131,193    5,349,387  

Accumulated other comprehensive earnings

   30,261    38,226  

Common stock related to ESOP

   (2,137,217  (2,016,696
  

 

 

  

 

 

 

Total stockholders’ equity

   6,158,793    5,243,894  
  

 

 

  

 

 

 

Noncontrolling interests

   45,447    45,002  
  

 

 

  

 

 

 

Total equity

   8,341,457    7,305,592  
  

 

 

  

 

 

 

Commitments and contingencies

   ---    ---  
  

 

 

  

 

 

 
  $11,268,232    10,159,087  
  

 

 

  

 

 

 

PUBLIX SUPER MARKETS, INC.

Consolidated Statements of Earnings

Years ended December 27, 2008,31, 2011, December 29, 200725, 2010

and December 30, 200626, 2009

 

  

2011

   

2010

   

2009

 
  2008  2007  2006   (Amounts are in thousands, except per share amounts)  
  (Amounts are in thousands, except per share amounts)

Revenues:

            

Sales

  $23,929,064  23,016,568  21,654,774   $26,967,389         25,134,054         24,319,716    

Other operating income

  180,520  177,022  164,951          211,375              194,000              195,244    
         

Total revenues

  24,109,584  23,193,590  21,819,725     27,178,764         25,328,054         24,514,960    
         

Costs and expenses:

            

Cost of merchandise sold

  17,486,823  16,805,829  15,811,957   19,520,370         18,111,443         17,592,679    

Operating and administrative expenses

  5,056,962  4,743,456  4,457,117       5,523,469           5,295,287           5,241,368    
         

Total costs and expenses

  22,543,785  21,549,285  20,269,074  

 

  25,043,839    

  

   23,406,730         22,834,047    
         

Operating profit

  1,565,799  1,644,305  1,550,651   2,134,925         1,921,324         1,680,913    

Investment income

   99,039         91,835         87,555    

Other-than-temporary impairment losses

            (6,082)                      ---              (19,283  

Investment income, net

  57,493  146,857  115,851   92,957         91,835         68,272    

Other income, net

  28,120  26,411  21,051            33,891                26,259                25,529    
         

Earnings before income tax expense

  1,651,412  1,817,573  1,687,553   2,261,773         2,039,418         1,774,714    

Income tax expense

  561,642  633,648  590,344          769,807              701,271              613,272    
         

Net earnings

  $  1,089,770  1,183,925  1,097,209   $  1,491,966           1,338,147           1,161,442    
         

Weighted average shares outstanding

  818,248  840,523  849,815          784,815              786,378              788,835    
         

Basic and diluted earnings per share

  $1.33  1.41  1.29   $           1.90                    1.70                    1.47    
         

See accompanying notes to consolidated financial statements.

PUBLIX SUPER MARKETS, INC.

Consolidated Statements of Comprehensive Earnings

Years ended December 27, 2008,31, 2011, December 29, 200725, 2010

and December 30, 200626, 2009

 

   2008  2007  2006 
   (Amounts are in thousands) 

Net earnings

  $1,089,770  1,183,925  1,097,209 

Other comprehensive earnings (losses):

    

Unrealized (loss) gain on investment securities – available-for-sale (AFS), net of tax effect of ($25,089), $619 and $4,585 in 2008, 2007 and 2006, respectively

   (39,841) 978  7,282 

Reclassification adjustment for net realized loss (gain) on investment securities – AFS, net of tax effect of $26,210, ($2,832) and ($564) in 2008, 2007 and 2006, respectively

   41,622  (4,496) (895)

Adjustment to other postretirement benefit plan obligation, net of tax effect of ($155) and $1,775 in 2008 and 2007, respectively

   (245) 2,818  —   
           

Comprehensive earnings

  $1,091,306  1,183,225  1,103,596 
           
   

2011

   

2010

   

2009

 
   (Amounts are in thousands)  

Net earnings

  $1,491,966     1,338,147     1,161,442  

Other comprehensive (losses) earnings:

      

Unrealized gain on available-for-sale (AFS) securities, net of tax effect of $6,324, $8,251 and $33,777 in 2011, 2010 and 2009, respectively

   10,041     13,102     53,637  

Reclassification adjustment for net realized (gain) loss on AFS securities, net of tax effect of ($7,684), ($9,473) and $2,628 in 2011, 2010 and 2009, respectively

   (12,202   (15,043   4,173  

Adjustment to postretirement benefit plan obligation, net of tax effect of ($3,655), ($1,913) and ($1,246) in 2011, 2010 and 2009, respectively

   (5,804   (3,038   (1,979
  

 

 

   

 

 

   

 

 

 

Comprehensive earnings

  $1,484,001     1,333,168     1,217,273  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

PUBLIX SUPER MARKETS, INC.

Consolidated Statements of Cash Flows

Years ended December 27, 2008,31, 2011, December 29, 200725, 2010

and December 30, 200626, 2009

 

  

2011

   

2010

   

2009

 
  2008 2007 2006    (Amounts are in thousands)  
  (Amounts are in thousands) 

Cash flows from operating activities:

          

Cash received from customers

  $23,956,284  23,057,677  21,683,210   $26,980,492     25,209,753     24,231,980  

Cash paid to employees and suppliers

   (21,570,749) (20,695,114) (19,355,029)   (24,024,194   (22,253,046   (21,646,622

Income taxes paid

   (641,307) (672,833) (735,285)   (658,213   (686,037   (553,235

Payment for self-insured claims

   (267,780) (228,216) (205,135)

Self-insured claims paid

   (285,362   (274,305   (283,079

Dividends and interest received

   135,382  142,454  100,379    139,727     95,794     73,087  

Other operating cash receipts

   170,124  165,809  152,470    203,112     184,760     185,331  

Other operating cash payments

   (9,100) (13,101) (11,178)   (14,375   (10,951   (9,230
            

 

   

 

   

 

 

Net cash provided by operating activities

   1,772,854  1,756,676  1,629,432    2,341,187     2,265,968     1,998,232  
            

 

   

 

   

 

 

Cash flows from investing activities:

          

Payment for property, plant and equipment

   (1,289,707) (683,290) (481,247)   (602,952   (468,530   (693,489

Proceeds from sale of property, plant and equipment

   10,074  7,760  17,289    5,312     2,815     4,150  

Payment for investments

   (317,020) (844,199) (1,244,890)   (2,062,775   (1,598,759   (1,133,449

Proceeds from sale and maturity of investments

   1,155,615  667,417  479,683    841,028     655,799     777,381  
            

 

   

 

   

 

 

Net cash used in investing activities

   (441,038) (852,312) (1,229,165)   (1,819,387   (1,408,675   (1,045,407
            

 

   

 

   

 

 

Cash flows from financing activities:

          

Payment for acquisition of common stock

   (1,127,581) (647,324) (665,376)   (497,570   (436,224   (629,453

Proceeds from sale of common stock

   148,281  207,546  234,882    206,245     178,914     152,096  

Dividends paid

   (364,583) (338,575) (171,645)   (418,680   (364,087   (325,295

Repayments of long-term debt

   (49,076   (10,875   (1,138

Other, net

   31,013  16,260  (131)   (1,767   10,364     19,668  
            

 

   

 

   

 

 

Net cash used in financing activities

   (1,312,870) (762,093) (602,270)   (760,848   (621,908   (784,122
            

 

   

 

   

 

 

Net increase (decrease) in cash and cash equivalents

   18,946  142,271  (202,003)

Net (decrease) increase in cash and cash equivalents

   (239,048   235,385     168,703  

Cash and cash equivalents at beginning of year

   182,867  40,596  242,599    605,901     370,516     201,813  
            

 

   

 

   

 

 

Cash and cash equivalents at end of year

  $201,813  182,867  40,596   $366,853     605,901     370,516  
            

 

   

 

   

 

 

See accompanying notes to consolidated financial statements.

   2008  2007  2006 
   (Amounts are in thousands) 

Reconciliation of net earnings to net cash provided by operating activities:

    

Net earnings

  $1,089,770  1,183,925  1,097,209 

Adjustments to reconcile net earnings to net cash provided by operating activities:

    

Depreciation and amortization

   444,311  406,358  390,996 

Retirement contributions paid or payable in common stock

   231,892  259,219  268,006 

Deferred income taxes

   (14,666) (66,439) (30,738)

Loss on disposal and impairment of property, plant and equipment and goodwill

   23,383  41,554  20,785 

Loss (gain) on sale and impairment of investments

   67,832  (7,328) (1,459)

Net amortization (accretion) of investments

   8,489  9,130  (8,551)

Change in operating assets and liabilities providing (requiring) cash:

    

Trade receivables

   (6,158) 2,760  (8,070)

Merchandise inventories

   (108,044) (127,624) (42,364)

Prepaid expenses and other noncurrent assets

   (768) 14,693  (1,270)

Accounts payable and accrued expenses

   71,733  28,971  73,170 

Self-insurance reserves

   18,899  (18,791) 1,449 

Federal and state income taxes

   (65,020) 27,170  (115,113)

Other noncurrent liabilities

   11,201  3,078  (14,618)
           

Total adjustments

   683,084  572,751  532,223 
           

Net cash provided by operating activities

  $1,772,854  1,756,676  1,629,432 
           

   

2011

   

2010

   

2009

 
   (Amounts are in thousands)  

Reconciliation of net earnings to net cash provided by operating activities:

      

Net earnings

  $1,491,966     1,338,147     1,161,442  

Adjustments to reconcile net earnings to net cash provided by operating activities:

      

Depreciation and amortization

   492,639     507,341     496,106  

Retirement contributions paid or payable in common stock

   291,240     275,547     256,110  

Deferred income taxes

   95,848     20,722     27,018  

Loss on disposal and impairment of property, plant and equipment

   13,734     19,896     32,482  

(Gain) loss on AFS securities

   (19,886   (24,516   6,801  

Net amortization of investments

   80,890     48,113     15,625  

Change in operating assets and liabilities providing (requiring) cash:

      

Trade receivables

   (50,782   16,165     (140,082

Merchandise inventories

   (3,132   26,245     2,302  

Prepaid expenses and other noncurrent assets

   (15,635   (8,054   (5,825

Accounts payable and accrued expenses

   (51,741   63,852     103,014  

Self-insurance reserves

   9,762     (13,494   (14,381

Federal and state income taxes

   15,763     (5,113   33,186  

Other noncurrent liabilities

   (9,479   1,117     24,434  
  

 

 

   

 

 

   

 

 

 

Total adjustments

   849,221     927,821     836,790  
  

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

  $2,341,187     2,265,968     1,998,232  
  

 

 

   

 

 

   

 

 

 

PUBLIX SUPER MARKETS, INC.

Consolidated Statements of Stockholders’ Equity

Years ended December 27, 2008,31, 2011, December 29, 200725, 2010

and December 30, 200626, 2009

 

   Common
Stock
  Additional
Paid-in
Capital
  Retained
Earnings
  Common Stock
(Acquired from)
Sold to
Stockholders
  Accumulated
Other
Comprehensive
Earnings (Losses)
  Total
Stockholders’
Equity
 
   (Amounts are in thousands, except per share amounts) 

Balances at December 31, 2005

  $846,942  302,178  3,070,310  —    (13,656) 4,205,774 

Comprehensive earnings

   —    —    1,097,209  —    6,387  1,103,596 

Cash dividends, $0.20 per share

   —    —    (171,645) —    —    (171,645)

Contribution of 17,090 shares to retirement plans

   13,576  208,082  —    53,484  —    275,142 

Acquired 37,799 shares from stockholders

   —    —    —    (665,376) —    (665,376)

Sale of 13,482 shares to stockholders

   1,397  23,299  —    210,186  —    234,882 

Retirement of 22,200 shares

   (22,200) —    (379,506) 401,706  —    —   

Adjustment to reflect additional unfunded postretirement benefit obligation per SFAS 158

   —    —    —    —    (7,508) (7,508)
                    

Balances at December 30, 2006

   839,715  533,559  3,616,368  —    (14,777) 4,974,865 

Comprehensive earnings (losses)

   —    —    1,183,925  —    (700) 1,183,225 

Cash dividends, $0.40 per share

   —    —    (338,575) —    —    (338,575)

Contribution of 13,188 shares to retirement plans

   10,694  202,862  —    48,893  —    262,449 

Acquired 31,527 shares from stockholders

   —    —    —    (647,324) —    (647,324)

Sale of 10,100 shares to stockholders

   529  10,338  —    196,679  —    207,546 

Retirement of 19,462 shares

   (19,462) —    (382,290) 401,752  —    —   
                    

Balances at December 29, 2007

   831,476  746,759  4,079,428  —    (15,477) 5,642,186 

Comprehensive earnings

   —    —    1,089,770  —    1,536  1,091,306 

Cash dividends, $0.44 per share

   —    —    (364,583) —    —    (364,583)

Contribution of 12,231 shares to retirement plans

   1,697  32,296  —    219,182  —    253,175 

Acquired 57,337 shares from stockholders

   —    —    —    (1,127,581) —    (1,127,581)

Sale of 7,596 shares to stockholders

   1,506  27,471  —    119,304  —    148,281 

Retirement of 40,713 shares

   (40,713) —    (748,382) 789,095  —    —   

Adjustment to reflect the impact of the measurement date provision per SFAS 158

   —    —    (801) —    1,315  514 
                    

Balances at December 27, 2008

  $793,966  806,526  4,055,432  —    (12,626) 5,643,298 
                    
    

Common

Stock

 Additional
Paid-in
Capital
 Retained
Earnings
 

Common

Stock

(Acquired

from) Sold

to Stock-

holders

 

Accumulated

Other

Comprehensive

Earnings

(Losses)

 

Common

Stock

Related

to ESOP

 

Total

Stock-

holders’

Equity

     (Amounts are in thousands, except per share amounts)  

Balances at December 27, 2008

    $793,966    806,526    4,055,432    ---    (12,626)   (1,777,153)   3,866,145 

Comprehensive earnings

    ---    ---    1,161,442    ---    55,831    ---    1,217,273 

Cash dividends, $0.41 per share

    ---    ---    (325,295)   ---    ---    ---    (325,295)

Contribution of 15,013 shares to retirement plans

    3,522    31,594    ---    206,589    ---    ---    241,705 

Acquired 37,895 shares from stockholders

    ---    ---    ---    (629,453)   ---    ---    (629,453)

Sale of 9,482 shares to stockholders

    7    (151)   ---    152,240    ---    ---    152,096 

Retirement of 16,929 shares

    (16,929)   ---    (253,695)   270,624    ---    ---    --- 

Change for ESOP related shares

               ---                ---                ---              ---           ---         (85,197)       (85,197)

Balances at December 26, 2009

    780,566    837,969    4,637,884    ---    43,205    (1,862,350)   4,437,274 

Comprehensive earnings

    ---    ---    1,338,147    ---    (4,979)   ---    1,333,168 

Cash dividends, $0.46 per share

    ---    ---    (364,087)   ---    ---    ---    (364,087)

Contribution of 14,363 shares to retirement plans

    12,968    214,414    ---    21,813    ---    ---    249,195 

Acquired 23,731 shares from stockholders

    ---    ---    ---    (436,224)   ---    ---    (436,224)

Sale of 9,771 shares to stockholders

    2,255    39,625    ---    137,034    ---    ---    178,914 

Retirement of 14,820 shares

    (14,820)   ---    (262,557)   277,377    ---    ---    --- 

Change for ESOP related shares

               ---                ---                ---              ---           ---       (154,346)     (154,346)

Balances at December 25, 2010

    780,969    1,092,008    5,349,387    ---    38,226    (2,016,696)   5,243,894 

Comprehensive earnings

    ---    ---    1,491,966    ---    (7,965)   ---    1,484,001 

Cash dividends, $0.53 per share

    ---    ---    (418,680)   ---    ---    ---    (418,680)

Contribution of 12,508 shares to retirement plans

    10,064    202,761    ---    48,599    ---    ---    261,424 

Acquired 23,513 shares from stockholders

    ---    ---    ---    (497,570)   ---    ---    (497,570)

Sale of 9,711 shares to stockholders

    2,920    60,112    ---    143,213    ---    ---    206,245 

Retirement of 14,278 shares

    (14,278)   ---    (291,480)   305,758    ---    ---    --- 

Change for ESOP related shares

               ---                ---                ---              ---           ---       (120,521)     (120,521)

Balances at December 31, 2011

    $779,675    1,354,881    6,131,193              ---    30,261    (2,137,217)   6,158,793 

See accompanying notes to consolidated financial statements.

PUBLIX SUPER MARKETS, INC.

Notes to Consolidated Financial Statements

(1)      Summary of Significant Accounting Policies

(1)Summary of Significant Accounting Policies

 

 (a)

Business

Publix Super Markets, Inc. and its wholly owned subsidiaries (the Company) are in the primary business of operating retail food supermarkets in Florida, Georgia, Alabama, South Carolina Alabama and Tennessee. The Company operateswas founded in a single1930 and later merged into another corporation that was originally incorporated in 1921. The Company has no other significant lines of business or industry segment.segments. See percentage of consolidated sales by merchandise category on page 1.

 

 (b)

Principles of Consolidation

The consolidated financial statements include all entities overthe accounts of the Company, its wholly owned subsidiaries and certain joint ventures (JV) in which the Company has control, including its majority-owned subsidiaries. The Company accounts for equity investments in companies over which it has the ability to exercise significant influence, but does not hold a controlling interest, under the equity method.financial interest. All significant intercompany balances and transactions are eliminated in consolidation.

 

 (c)

Fiscal Year

The Company’s fiscal year ends on the last Saturday in December. Fiscal year 2011 includes 53 weeks and fiscal years 2008, 20072010 and 20062009 include 52 weeks.

 

 (d)

Cash Equivalents

The Company considers all liquid investments with maturities of three months or less to be cash equivalents.

 

 (e)

Trade Receivables

Trade receivables primarily include amounts due from vendor allowances, debit and credit card sales and third party insurance pharmacy billings.

 

 (f)

Inventories

Inventories are valued at the lower of cost or market. The cost for 86%84% and 85% of inventories was determined using the dollar value last-in, first-out method as of December 27, 200831, 2011 and December 29, 2007,25, 2010, respectively. The cost of the remaining inventories was determined using the first-in, first-out (FIFO) method. The FIFO cost of inventory approximates replacement or current cost. The FIFO method is used to value manufactured, seasonal, certain perishable and other miscellaneous inventory items because of fluctuating costs and inconsistent product availability. The Company also reduces inventory for estimated losses related to shrink. If the FIFO method of valuing inventories had been used by the Company to value all inventories, then inventories and current assets would have been higher than reported by $346,558,000 and $279,413,000 as of December 31, 2011 and December 25, 2010, respectively.

 

 (g)

Investments

All of the Company’s debt and equity investmentssecurities are classified as available-for-sale (AFS). AFS securities and are carried at fair value, with the unrealized gains and losses, net of tax, reported as other comprehensive earnings (losses) and included as a separate component of stockholders’ equity. The cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion is included in investment income, net.value. The Company reviews its investments for other-than-temporary impairmentsevaluates whether AFS securities are other-than-temporarily impaired (OTTI) based on criteria that include the extent to which cost exceeds market value, the duration of the market value decline, the credit rating of the issuer or security, the failure of the issuer to make scheduled principal or interest payments and the financial health of and prospects forof the issuer. Realized gainsissuer or security.

Declines in the value of AFS securities determined to be OTTI are recognized in earnings and reported as OTTI losses. Debt securities with unrealized losses are considered OTTI if the Company intends to sell the debt security or if the Company will be required to sell the debt security prior to any anticipated recovery. If the Company determines that a debt security is OTTI under these circumstances, the impairment recognized in earnings is measured as the difference between the amortized cost and the current fair value. A debt security is also determined to be OTTI if the Company does not expect to recover the amortized cost of the debt security. However, in this circumstance, if the Company does not intend to sell the debt security and will not be required to sell the debt security, the impairment recognized in earnings equals the estimated credit loss as measured by the difference between the present value of expected cash flows and the amortized cost of the debt security. Expected cash flows are discounted using the debt security’s effective interest rate. An equity security is determined to be OTTI if the Company does not expect to recover the cost of the equity security. Declines in the value of AFS securities determined to be temporary are reported, net of tax, as other comprehensive losses and declines in value judged to be other-than-temporary on AFS securities are included in investment income, net. The costas a component of securities sold is based on the specific identification method.stockholders’ equity.

PUBLIX SUPER MARKETS, INC.

Notes to Consolidated Financial Statements

 

Interest and dividend income, amortization of premiums, accretion of discounts and realized gains and losses on AFS securities are included in investment income. Interest income is accrued as earned. Dividend income is recognized as income on the ex-dividend date of the stock.

The Company also holds other investments in joint ventures, partnerships or other equity investments for which evaluationcost of AFS securities sold is based on the existence and quantification of other-than-temporary declines in value may be required. Realized gains and losses and declines in value judged to be other-than-temporary on other investments are included in investment income, net.FIFO method.

 

 (h)

Property, Plant and Equipment and Depreciation

Assets are recorded at cost and are depreciated using the straight-line method over their estimated useful lives or the terms of theirthe related leases, if shorter, as follows:

 

Buildings and improvements

  

10 – 40 years

Furniture, fixtures and equipment

  

3 – 20 years

Leasehold improvements

  2

  5 – 40 years

Maintenance and repairs are charged to operating expenses as incurred. Expenditures for renewals and betterments are capitalized. The gain or loss realized on disposed assets or assets to be disposed of is recorded as operating and administrative expenses in the consolidated statements of earnings.

On September 8, 2008, the Company acquired the assets of 49 supermarket locations in Florida from Albertson’s LLC (Albertson’s) for $498,000,000. Assets acquired include supermarkets that are owned and supermarkets that are subject to ground leases and traditional leases. All acquired supermarkets were closed prior to the acquisition date to undergo planned improvements. The Company opened 24 of the acquired supermarket locations in 2008 and expects to open substantially all of the remaining acquired supermarket locations in 2009 and 2010.

At the acquisition date, the acquired assets were classified as construction in progress and are being reclassified based on the purchase price allocation as the supermarkets open. Of the total purchase price of $498,000,000, approximately $376,000,000 will be allocated to property, plant and equipment, $6,000,000 to pharmacy inventory, $11,000,000 to liquor licenses and $105,000,000 to amortizable intangible assets, primarily below-market leases. The weighted average amortization period for the amortizable intangible assets is 27 years. As of December 27, 2008, a total of $346,000,000 was transferred from construction in progress and allocated to the applicable assets as the supermarkets opened.

 

 (i)

Capitalized Computer Software Costs

The Company capitalizes certain costs incurred in connection with developing or obtaining software for internal use. These costs are capitalized and amortized over a three year life. The amounts capitalized were $16,750,000, $16,132,000$9,818,000, $7,514,000 and $14,297,000$11,959,000 for 2008, 20072011, 2010 and 2006,2009, respectively.

PUBLIX SUPER MARKETS, INC.

Notes to Consolidated Financial Statements

 

 (j)

Long-Lived Assets

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the net book value of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the net book value of an asset to the future net undiscounted cash flows expected to be generated by the asset. An impairment loss is recorded for the excess of the net book value over the fair value of the asset impaired. The fair value is estimated based on expected discounted future cash flows. Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell and are no longer depreciated.

Due to declining operating results at its Crispers restaurants, the Company recorded an asset impairment charge of $16,117,000 in 2007 to write down certain Long-lived assets, including buildings and improvements, leasehold improvements, and furniture, fixtures and equipment and leasehold improvements to fair valueare evaluated for impairment at underperforming Crispers restaurants. Additionally, the Company recorded related goodwill impairment charges of $16,135,000 in 2007 to write down substantially all of its recorded goodwill in Crispers. These impairment charges are included in operating and administrative expenses in the consolidated statements of earnings.supermarket level.

 

 (k)

Self-Insurance

Self-insurance reserves are established for health care, fleet liability, general liability and workers’ compensation claims. These reserves are determined based on actual claims experience and an estimate of claims incurred but not reported including, where necessary, actuarial studies. Actuarial projections of losses for general liability and workers’ compensation claims are discounted. The Company has insurance coverage for losses in excess of the self-insurance limits for fleet liability, general liability and workers’ compensation claims. Historically, it has been infrequent for incurred claims to exceed these self-insurance limits.

 

 (l)

Comprehensive Earnings

Comprehensive earnings include net earnings and other comprehensive earnings. Other comprehensive earnings include revenues, expenses, gains and losses that have been excluded from net earnings and recorded directly to stockholders’ equity. Included in other comprehensive earnings for the Company are unrealized gains and losses on AFS securities and adjustments to the other postretirement benefit plan obligation.

As of December 27, 2008,31, 2011, accumulated other comprehensive losses includeearnings included net unrealized lossesgains on AFS securities of $14,652,000, net of$72,879,000, less tax effect of $5,647,000$28,176,000, and an unfunded postretirement benefit obligation of $5,901,000, net of$23,536,000, less tax effect of $2,280,000.$9,094,000. As of December 29, 2007,25, 2010, accumulated other comprehensive losses includeearnings included net unrealized lossesgains on AFS securities of $17,555,000, net of$76,400,000, less tax effect of $6,768,000$29,536,000, and an unfunded postretirement benefit obligation of $7,643,000, net of$14,077,000, less tax effect of $2,953,000.$5,439,000.

PUBLIX SUPER MARKETS, INC.

Notes to Consolidated Financial Statements

 

 (m)

Revenue Recognition

Revenue is recognized at the point of sale for retail sales. Customer returns are immaterial. Vendor coupons that are reimbursed are accounted for as sales. Coupons and other sales incentives offered by the Company that are not reimbursed are recorded as a reduction of sales.

PUBLIX SUPER MARKETS, INC.

Notes to Consolidated Financial Statements

 

 (n)

Sales Taxes

The Company records sales net of applicable sales taxes.

 

 (o)

Other Operating Income

Other operating income is recognized on a net revenue basis as earned. Other operating income includes income generated from other activities, primarily lottery commissions, automated teller transactions,transaction fees, commissions on licensee sales, check cashing fees, circulationvending machine commissions, mall gift card commissions, money transfer fees and vending machine commissions.coupon redemption income.

 

 (p)

Cost of Merchandise Sold

Cost of merchandise sold includes costs of inventory and costs related to in-store production. Cost of merchandise sold also includes inbound freight charges, purchasing and receiving costs, warehousing costs and other costs of the Company’s distribution network.

Vendor allowances and credits, including cooperative advertising allowances, received from a vendor in connection with the purchase or promotion of the vendor’s products are recognized as a reduction of cost of merchandise sold as earned. These allowances and credits are recognized as earned in accordance with the underlying agreement with the vendor and completion of the earningearnings process. Short-term vendor agreements with advance payment provisions are recorded as a current liability and are recognized over the appropriate period as earned according to the underlying agreement.agreements. Long-term vendor agreements with advance payment provisions are recorded as a noncurrent liability and are recognized over the appropriate period as earned according to the underlying agreement.agreements.

The amount of cooperative advertising allowances recognized as a reduction of cost of merchandise sold was $12,969,000, $11,997,000$8,898,000, $10,715,000 and $11,051,000$7,982,000 for 2008, 20072011, 2010 and 2006,2009, respectively.

 

 (q)

Advertising Costs

Advertising costs are expensed as incurred and were $196,391,000, $182,863,000$202,405,000, $191,788,000 and $163,141,000$180,159,000 for 2008, 20072011, 2010 and 2006,2009, respectively.

 

 (r)

Other Income, net

Other income, net includes rent received from tenants in owned shopping centers, net of related expenses, and other miscellaneous nonoperating income.

 

 (s)

Income Taxes

Deferred tax assets and liabilities are established for temporary differences between financial and tax reporting bases and are subsequently adjusted to reflect changes in tax rates expected to be in effect when the temporary differences reverse. The Company recognizes accrued interest and penalties related to unrecognizedincome tax benefitsliabilities as a component of income tax expense.

PUBLIX SUPER MARKETS, INC.

Notes to Consolidated Financial Statements

 

 (t)

Common Stock and Earnings Per Share

Basic and diluted earnings per share are calculated by dividing net earnings by the weighted average shares outstanding. Basic and diluted earnings per share are the same because the Company does not have options or other stock compensation programs that would impact the calculation of diluted earnings per share. All shares owned by the Employee Stock Ownership Plan (ESOP) are included in the earnings per share calculations. Cash dividends paid to the ESOP, as well as dividends on all other common stock shares, are reflected as a reduction of retained earnings. All common stock shares, including ESOP and 401(k) Plan shares, receive one vote per share and have the same dividend rights. The voting rights for ESOP shares allocated to participants’ accounts are passed through to the participants. The Trustee of the 401(k) Plan votes the shares held in that plan.

PUBLIX SUPER MARKETS, INC.

Notes to Consolidated Financial Statements

 

 (u)

Use of Estimates

The preparation of financial statements in conformity with accounting principlesU.S. generally accepted in the U.S.accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

(2)Merchandise Inventories

If the FIFO method of valuing inventories had been used by the Company to value all inventories, inventories and current assets would have been higher than reported by $267,187,000 and $195,169,000 as of December 27, 2008 and December 29, 2007, respectively.

(3)Fair Value of Financial Instruments

The following methods and assumptions were used by the Company in estimating the fair value of itscertain of the Company’s financial instruments:

Cash and cash equivalents: The carrying amount forinstruments, including cash and cash equivalents, approximates fair value.

Investment securities: The fair values for debttrade receivables and equity securities are based on Level 1 and Level 2 market prices as described in Note 4.

The carrying amount of the Company’s other financial instruments as of December 27, 2008 and December 29, 2007 approximatedaccounts payable, approximate their respective fair values. Other investments are accounted for using the equity method. The carrying amount of other investments approximates fair value.

amounts due to their short-term maturity.

PUBLIX SUPER MARKETS, INC.

Notes to Consolidated Financial Statements

(4)Investments

Following is a summary of investments as of December 27, 2008 and December 29, 2007:

   Amortized
Cost
  Gross
Unrealized
Gains
  Gross
Unrealized
Losses
  Fair
Value
   (Amounts are in thousands)
2008        

Available-for-sale:

        

Tax exempt bonds

  $390,526  8,277  334  398,469

Taxable bonds

   1,236,777  6,556  10,662  1,232,671

Equity securities

   158,499  3,424  21,913  140,010
             
   1,785,802  18,257  32,909  1,771,150

Other investments

   65,393  —    —    65,393
             
  $1,851,195  18,257  32,909  1,836,543
             
2007        

Available-for-sale:

        

Tax exempt bonds

  $810,840  5,291  513  815,618

Taxable bonds

   1,673,612  5,843  43,859  1,635,596

Equity securities

   223,874  32,024  16,341  239,557
             
   2,708,326  43,158  60,713  2,690,771

Other investments

   58,635  —    —    58,635
             
  $2,766,961  43,158  60,713  2,749,406
             

Included in tax exempt bonds are auction rate securities with a cost andThe fair value of $14,900,000 and $132,500,000 as of December 27, 2008 and December 29, 2007, respectively.

The realized gains on sales of AFS securities totaled $22,445,000, $13,414,000 and $3,549,000 for 2008, 2007 and 2006, respectively, andis based on market prices using the realized losses on sales and other-than-temporary impairments of AFS securities totaled $90,277,000, $6,086,000 and $2,090,000, respectively.

PUBLIX SUPER MARKETS, INC.

Notes to Consolidated Financial Statements

The amortized cost and estimated fair value of debt and equity securities classified as AFS and other investments as of December 27, 2008 and December 29, 2007, by expected maturity, are as follows:

   2008  2007
   Amortized
Cost
  Fair
Value
  Amortized
Cost
  Fair
Value
   (Amounts are in thousands)

Due in one year or less

  $26,241  26,495  104,849  104,706

Due after one year through five years

   279,778  283,940  446,448  450,056

Due after five years through ten years

   56,597  56,472  108,934  107,890

Due after ten years

   1,264,687  1,264,233  1,824,221  1,788,562
             
   1,627,303  1,631,140  2,484,452  2,451,214

Equity securities

   158,499  140,010  223,874  239,557

Other investments

   65,393  65,393  58,635  58,635
             
  $1,851,195  1,836,543  2,766,961  2,749,406
             

Following is a summary of temporarily impaired investments by the time period impaired as of December 27, 2008 and December 29, 2007:

   Less Than
12 Months
  12 Months
or Longer
  Total
   Fair
Value
  Unrealized
Losses
  Fair
Value
  Unrealized
Losses
  Fair
Value
  Unrealized
Losses
   (Amounts are in thousands)
2008            

Tax exempt bonds

  $18,531  334  —    —    18,531  334

Taxable bonds

   172,202  6,387  256,381  4,275  428,583  10,662

Equity securities

   58,186  21,348  1,718  565  59,904  21,913
                   

Total temporarily impaired investments

  $248,919  28,069  258,099  4,840  507,018  32,909
                   
2007            

Tax exempt bonds

  $3,203  8  145,976  505  149,179  513

Taxable bonds

   444,549  8,270  572,115  35,589  1,016,664  43,859

Equity securities

   80,441  15,706  4,037  635  84,478  16,341
                   

Total temporarily impaired investments

  $528,193  23,984  722,128  36,729  1,250,321  60,713
                   

The Company believes the reported unrealized losses are temporary. To make this determination, management reviews the length of time and the extent to which the security’s market value has been less than cost; the financial condition, credit worthiness and near term prospects of the issuer; the intent and ability to hold the security for a period of time sufficient to allow recovery of cost; and underlying factors mitigating risk of loss of principal or default of interest payments.

PUBLIX SUPER MARKETS, INC.

Notes to Consolidated Financial Statements

There are 334 investment issues contributing to the total unrealized loss of $32,909,000 as of December 27, 2008. The unrealized loss related to the bonds owned by the Company is primarily driven by changes in interest rates impacting the market value of the bonds. The Company continues to receive scheduled principal and interest payments on these investments. The unrealized loss related to the equity securities owned by the Company is primarily driven by stock market volatility.

As of December 30, 2007, the Company adopted Statement of Financial Accounting Standard (SFAS) 157, “Fair Value Measurement,” for its AFS securities. Following are descriptions of the SFAS 157following measurement categories used as of the reporting date.categories:

Level 1 – Fair value is determined by using quoted prices in active markets for identical investments. AFS securities that are included in this category are primarily a mutual fund and equity securities.

Level 2 – Fair value is determined by using other than quoted prices. By using observable inputs (for example, benchmark yields, interest rates)rates, reported trades and broker dealer quotes), the fair value is determined through processes such as benchmark curves, benchmarking of like securities and matrix pricing of corporate and municipal bonds by using pricing of similar bonds based on coupons, ratings and maturities. In addition, the usevalue of collateralized mortgage obligation securities is determined by using models or other valuation methodologies.to develop prepayment and interest rate scenarios for these securities which have prepayment features. AFS securities that are included in this category are primarily taxdebt securities (tax exempt and taxable bonds.bonds).

Level 3 – Fair value is determined by using other than observable inputs. Fair value is determined by using the best information available in the circumstances and requires significant management judgment or estimation. No AFS securities are currently included in this category.

Following is a summary of fair value measurements for AFS securities as of December 27, 2008:31, 2011 and December 25, 2010:

 

   Fair
Value
  Level 1  Level 2  Level 3
   (Amounts are in thousands)

AFS securities

  $1,771,150  119,668  1,651,482  —  
   Fair            
   

Value

  

Level 1

   

Level 2

   

Level 3

 
      (Amounts are in thousands)     

December 31, 2011

  $4,253,255   473,099     3,780,156     ---  

December 25, 2010

    3,096,033   223,655     2,872,378     ---  

PUBLIX SUPER MARKETS, INC.

Notes to Consolidated Financial Statements

(3)

Investments

Following is a summary of AFS securities as of December 31, 2011 and December 25, 2010:

      Gross  Gross   
   Amortized  Unrealized  Unrealized  Fair
   

Cost

  

Gains

  

Losses

  

Value

      (Amounts are in thousands)   

2011

            
Tax exempt bonds    $2,488,135     36,657       550       2,524,242 
Taxable bonds    1,226,136     20,015       1,514       1,244,637 
Restricted investments    170,000     ---       3,019       166,981 
Equity securities         296,105     35,564       14,274           317,395 
    $4,180,376     92,236       19,357        4,253,255 

2010

            
Tax exempt bonds    $1,932,466     13,308       8,322       1,937,452 
Taxable bonds    867,430     16,108       2,542       880,996 
Equity securities         219,737     60,536         2,688           277,585 
    $3,019,633     89,952       13,552        3,096,033 

On December 29, 2010, the Company funded a restricted trust account in the amount of $170,000,000 for the benefit of its insurance carrier related to the Company’s workers’ compensation self-insurance reserves in lieu of providing a standby letter of credit or other security. The restricted trust account is invested in a mutual fund primarily comprised of short-term, investment grade bonds. Earnings from the investments held in the restricted trust account are paid to the Company in accordance with the terms of the trust agreement.

Realized gains on sales of AFS securities totaled $35,864,000, $28,935,000 and $21,423,000 for 2011, 2010 and 2009, respectively. Realized losses on sales and OTTI of AFS securities totaled $15,978,000, $4,419,000 and $28,224,000 for 2011, 2010 and 2009, respectively. The Company recorded OTTI losses on equity securities of $6,082,000 and $19,283,000 in 2011 and 2009, respectively. There were no OTTI losses on equity securities in 2010. There were no OTTI losses on debt securities in 2011, 2010 and 2009.

The amortized cost and fair value of AFS securities by expected maturity as of December 31, 2011 and December 25, 2010 are as follows:

    2011  2010
   Amortized
Cost
  Fair
Value
  Amortized
Cost
  Fair
Value
      (Amounts are in thousands)   

Due in one year or less

    $   445,296     447,972     332,992     336,282 

Due after one year through five years

    2,492,484     2,524,020     1,499,176     1,506,731 

Due after five years through ten years

    348,427     356,808     337,677     335,056 

Due after ten years

         428,064        440,079        630,051         640,379 
    3,714,271     3,768,879     2,799,896     2,818,448 

Restricted investments

    170,000     166,981     ---     --- 

Equity securities

         296,105        317,395        219,737         277,585 
    $4,180,376     4,253,255     3,019,633      3,096,033 

PUBLIX SUPER MARKETS, INC.

Notes to Consolidated Financial Statements

Following is a summary of temporarily impaired AFS securities by the time period impaired as of December 31, 2011 and December 25, 2010:

    

Less Than

12 Months

  

12 Months

or Longer

  

Total

    

Fair

Value

  

Unrealized

Losses

  

Fair

Value

  

Unrealized

Losses

  

Fair

Value

  

Unrealized

Losses

         

(Amounts are in

thousands)

      

2011

                  

Tax exempt bonds

    $138,892     536     6,026     14     144,918     550 

Taxable bonds

    201,538     1,514     ---     ---     201,538     1,514 

Restricted investments

    166,981     3,019     ---     ---     166,981     3,019 

Equity securities

        86,236     13,899     1,889        375       88,125     14,274 

Total temporarily impaired AFS securities

    $593,647     18,968     7,915        389     601,562     19,357 

2010

                  

Tax exempt bonds

    $624,553     8,321     54     1     624,607     8,322 

Taxable bonds

    155,160     2,045     4,130     497     159,290     2,542 

Equity securities

        30,065       1,914     3,571        774       33,636       2,688 

Total temporarily impaired AFS securities

    $809,778     12,280     7,755     1,272     817,533     13,552 

There are no298 AFS securities contributing to the total unrealized loss of $19,357,000 as of December 31, 2011. Unrealized losses related to debt securities are primarily driven by interest rate volatility impacting the market value of certain bonds. The Company continues to receive scheduled principal and interest payments on these debt securities. Unrealized losses related to the equity securities are primarily driven by stock market volatility.

(4)

Consolidation of Joint Ventures and Long-Term Debt

From time to time, the Company enters into JVs, in the legal form of limited liability companies, with certain real estate developers to partner in the development of shopping centers with the Company as the anchor tenant. Effective December 27, 2009, the Company adopted a new accounting standard on variable interest entities (VIE) that resulted in the consolidation of certain JVs in which the Company has a controlling financial interest. The Company is considered to have a controlling financial interest in a JV when it has (1) the power to direct the activities of the JV that most significantly impact the JV’s economic performance and (2) the obligation to absorb losses or the right to receive benefits from the JV that could potentially be significant to such JV.

The Company evaluates a JV using specific criteria to determine whether the Company has a controlling financial interest and is the primary beneficiary of the JV. Factors considered in determining whether the Company is the primary beneficiary include risk and reward sharing, experience and financial condition of the other JV members, voting rights, involvement in routine capital and operating decisions and each member’s influence over the JV owned shopping center’s economic performance.

Generally, most major categoriesJV decision making is shared between all members. In particular, the use and sale of JV assets, business plans and budgets are generally required to be approved by all members. However, the Company, through its anchor tenant operating lease agreement, has the power to direct the activities that most significantly influence the economic performance of the JV owned shopping center. Additionally, through its member equity interest in the JV, the Company will receive a significant portion of the JV’s benefits or is obligated to absorb a significant portion of the JV’s losses.

PUBLIX SUPER MARKETS, INC.

Notes to Consolidated Financial Statements

As of December 31, 2011, the carrying amounts of the assets and liabilities thatof the consolidated JVs were $177,226,000 and $76,249,000, respectively. The assets are recognized at fair valueowned by, and the liabilities are obligations of, the JVs, not the Company, except for which SFAS 157 hasa portion of the long-term debt of certain JVs guaranteed by the Company. The JVs are financed with capital contributions from the members, loans and/or the cash flows generated by the JV owned shopping centers once in operation. Total earnings attributable to noncontrolling interests for 2011, 2010 and 2009 were immaterial. The Company’s involvement with these JVs does not been applied.have a significant effect on the Company’s financial condition, results of operations or cash flows.

The Company’s long-term debt results primarily from the consolidation of loans of certain JVs and loans assumed in connection with the acquisition of certain shopping centers with the Company as the anchor tenant. The Company assumed loans totaling $34,299,000 during 2011. No loans were assumed during 2010. Maturities of JV loans range from July 2012 through January 2015 and have either (1) fixed interest rates ranging from 4.5% to 5.3% or (2) variable interest rates based on a LIBOR index plus basis points ranging from 195 basis points to 250 basis points. Maturities of assumed shopping center loans range from September 2013 through June 2024 and have fixed interest rates ranging from 5.1% to 7.1%.

As of December 31, 2011, the aggregate annual maturities and scheduled payments of long-term debt are as follows:

Year

    
(Amounts are in thousands) 

2012

  $15,124  

2013

   45,401  

2014

   38,320  

2015

   8,550  

2016

   9,257  

Thereafter

   17,932  
  

 

 

 
  $134,584  
  

 

 

 

 

(5)

Postretirement Benefits

The Company provides postretirement life insurance benefits for certain salaried and hourly full-time employees who meet the eligibility requirements. Effective January 1, 2002, the Company amended the retiree life insurance benefit under its Group Life Insurance Plan. To receive the retiree life insurance benefit after the amendment, an employee must have had at least five years of full-time service and the employee’s age plus years of credited service must have equaled 65 or greater as of October 1, 2001. At retirement, such employees also must be at least age 55 with tenat least 10 years of full-time service to be eligible to receive postretirement life insurance benefits.

Actuarial losses were recognized in other comprehensive earnings of $9,459,000, less tax effect of $3,655,000, in 2011, $4,951,000, less tax effect of $1,913,000, in 2010 and $3,225,000, less tax effect of $1,246,000, in 2009.

The Company made benefit payments to beneficiaries of retirees of $3,146,000, $2,626,000 and $4,483,000 during 2011, 2010 and 2009, respectively.

PUBLIX SUPER MARKETS, INC.

Notes to Consolidated Financial Statements

 

On December 30, 2006, the Company adopted SFAS 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106 and 132(R).” In adopting the recognition provision of SFAS 158, the Company recognized an adjustment to its accrued postretirement benefit cost and other comprehensive losses for the underfunded status of its postretirement plan totaling $12,236,000, net of tax effect of $4,728,000. On December 30, 2007, the Company adopted the measurement date provision. As of December 27, 2008, retained earnings includes a measurement date adjustment for the net periodic benefit cost of $1,306,000, net of tax effect of $505,000. In addition, accumulated other comprehensive earnings includes a measurement date adjustment to reduce the projected benefit obligation by $2,143,000, net of tax effect of $828,000.

The Company made benefit payments to beneficiaries of retirees of $2,746,000, $2,440,000 and $3,169,000 during 2008, 2007 and 2006, respectively.

The following tables provide a reconciliation of the changes in the benefit obligationsobligation and fair value of plan assets and the unfunded status of the plan measured as of December 27, 200831, 2011 and October 1, 2007.December 25, 2010:

 

00000000000000
  2011     2010   
  2008 2007   (Amounts are in thousands) 
  (Amounts are in thousands) 

Change in benefit obligation:

       

Benefit obligation as of beginning of year

  $  80,623  81,852    $  94,776             86,890     

Service cost

  217  267    163             175     

Interest cost

  5,093  4,758    5,301             5,291     

Actuarial gain

  400  (3,814)

Actuarial loss

   10,530             5,046     

Benefit payments

  (2,746) (2,440)       (3,146)            (2,626)    

Adjustment to reflect the impact of the measurement date provision

  (837) —   
       

Benefit obligation as of end of year

  $  82,750  80,623      107,624             94,776     
       

Change in fair value of plan assets:

       

Fair value of plan assets as of beginning of year

  $      —    —      ---             ---     

Employer contributions

  2,746  2,440    3,146             2,626     

Benefit payments

  (2,746) (2,440)       (3,146)            (2,626)    
       

Fair value of plan assets as of end of year

  $      —    —                 ---                    ---     
       

Unfunded status of the plan as of end of year

   $107,624             94,776     

Funded status

  $  82,750  80,623 

Unrecognized actuarial loss

  (5,901) (7,643)

Amount recognized in noncurrent liabilities

  5,901  7,643 

Current liability

   $    4,029             3,841     

Noncurrent liability

     103,595             90,935     
       

Accrued postretirement benefit cost

  $  82,750  80,623 
       

Total recognized liability

   $107,624             94,776     

The estimated future benefit payments are expected to be paid as follows:

Year

    
(Amounts are in thousands) 

2012

  $4,029  

2013

   4,291  

2014

   4,539  

2015

   4,776  

2016

   5,002  

2017 through 2021

   28,663  

Thereafter

   56,324  
  

 

 

 
  $107,624  
  

 

 

 

Net periodic postretirement benefit cost consists of the following components:

000000000000000
   2011   2010   2009 
   (Amounts are in thousands) 

Service cost

   $   163       175      194   

Interest cost

     5,301       5,291      5,204   

Amortization of actuarial losses

     1,071            95           ---   

Net periodic postretirement benefit cost

   $6,535       5,561      5,398   

Actuarial losses are amortized from accumulated other comprehensive earnings into net periodic postretirement benefit cost over future years when the accumulation of such losses exceeds 10% of the year end benefit obligation.

PUBLIX SUPER MARKETS, INC.

Notes to Consolidated Financial Statements

 

The benefit payments, which reflect expected future service, as appropriate, are expected to be paid as follows:

Year

   
(Amounts are in thousands)   

2009

  $3,272

2010

   3,544

2011

   3,804

2012

   4,072

2013

   4,346

2014 through 2018

   26,330

Thereafter

   37,382
    
  $82,750
    

Effective with the adoption of the measurement provision of SFAS 158, the measurement date is December 27, 2008 for 2008 and the Company’s fiscal year end. The net periodic postretirement benefit costs are measured forcost is based on assumptions determined at the prior year then ended. Theend measurement dates are as of October 1 for 2007 and 2006.date.

Following are the actuarial assumptions that were used in the calculation of the year end benefit obligation:

 

  2011   2010   2009 
  2008 2007 2006 

Discount rate

  6.40% 6.30% 5.90%   4.6%     5.7%     6.2%  

Rate of compensation increase

  4.00% 4.00% 4.00%   4.0%     4.0%     4.0%  

Following are the actuarial assumptions that were used in the calculation of the net periodic postretirement benefit cost:

   2011   2010   2009 

Discount rate

   5.7%     6.2%     6.4%  

Rate of compensation increase

   4.0%     4.0%     4.0%  

The Company determined the discount rate using a yield curve methodology based on high quality corporate bonds with a rating of AA or better.

Net periodic postretirement benefit cost consists of the following components:

   2008  2007  2006 
   (Amounts are in thousands) 

Service cost

  $217  267  372 

Interest cost

   5,093  4,758  4,656 

Amortization of prior service cost

   —    —    (2,446)

Recognized actuarial loss

   —    779  2,115 
           

Net periodic postretirement benefit cost

  $5,310  5,804  4,697 
           

Effective with the adoption of SFAS 158, actuarial losses are amortized from accumulated other comprehensive losses into net periodic postretirement benefit cost over future years when the accumulation of such losses exceeds 10% of the year end benefit obligation.

Following are the actuarial assumptions that were used in the calculation of the net periodic postretirement benefit cost:

   2008  2007  2006 

Discount rate

  6.50% 5.90% 5.50%

Rate of compensation increase

  4.00% 4.00% 4.00%

PUBLIX SUPER MARKETS, INC.

Notes to Consolidated Financial Statements

 

(6)

Retirement Plans

The Company has a trusteed, noncontributory Employee Stock Ownership Plan (ESOP)ESOP for the benefit of eligible employees. The amount ofCompany recognizes an expense related to the Company’s discretionary contribution to the ESOP based on a percent of net earnings before taxes that is determined annuallyapproved by the Board of Directors andeach year. ESOP contributions can be made in Company common stock or cash. TheCompensation expense recorded for contributions to this plan was $210,593,000, $239,197,000$267,099,000, $253,093,000 and $249,710,000$234,336,000 for 2008, 20072011, 2010 and 2006,2009, respectively.

The Company’s ESOP includes a put option for shares of the Company’s common stock distributed from the ESOP. Shares are distributed from the ESOP primarily to separated vested participants and certain eligible participants who elect to diversify their account balances. Since the Company’s common stock is not currently traded on an established securities market, if the owners of distributed shares desire to sell their shares, the Company is required to purchase the shares at fair value for a 15-month period after distribution of the shares from the ESOP. The fair value of distributed shares subject to the put option totaled $116,824,000 and $114,815,000 as of December 31, 2011 and December 25, 2010, respectively. The cost of the shares held by the ESOP totaled $2,020,393,000 and $1,901,881,000 as of December 31, 2011 and December 25, 2010, respectively. Due to the Company’s obligation under the put option, the distributed shares subject to the put option and the shares held by the ESOP (collectively referred to as ESOP related shares) are classified as temporary equity in the mezzanine section of the consolidated balance sheets and totaled $2,137,217,000 and $2,016,696,000 as of December 31, 2011 and December 25, 2010, respectively. The fair value of the shares held by the ESOP totaled $4,917,283,000 and $4,887,626,000 as of December 31, 2011 and December 25, 2010, respectively. See Note 9.

The Company has a 401(k) plan for the benefit of eligible employees. The 401(k) plan is a voluntary defined contribution plan. Eligible employees may contribute up to 10% of their eligible annual compensation, subject to the maximum contribution limits established by federal law. The Company may make a discretionary annual matching contribution to eligible participants of this plan as determined by the Board of Directors. During 2008, 20072011, 2010 and 2006,2009, the Board of Directors approved a match of 50% of eligible contributions up to 3% of eligible wages, not to exceed a maximum match of $750 per employee. The match, which is determined as of the last day of the plan year and paid in the subsequent plan year, is in common stock of the Company. TheCompensation expense recorded for the Company’s match to the 401(k) plan was $21,300,000, $20,022,000$24,141,000, $22,454,000 and $18,296,000$21,774,000 for 2008, 20072011, 2010 and 2006,2009, respectively.

The Company intends to continue its retirement plans; however, the right to modify, amend, terminate or merge these plans has been reserved. In the event of termination, all amounts contributed under the plans must be paid to the participants or their beneficiaries.

(7)Income Taxes

Total income taxes for 2008, 2007 and 2006, respectively were allocated as follows:

   2008  2007  2006 
   (Amounts are in thousands) 

Earnings

  $561,642  633,648  590,344 

Other comprehensive earnings (losses)

   966  (438) 4,021 

Accumulated other comprehensive earnings (losses) and retained earnings

   323  —    (4,728)
           
  $562,931  633,210  589,637 
           

The provision for income taxes consists of the following:

   Current  Deferred  Total
   (Amounts are in thousands)
2008     

Federal

  $509,003  (7,597) 501,406

State

   67,305  (7,069) 60,236
          
  $576,308  (14,666) 561,642
          

PUBLIX SUPER MARKETS, INC.

Notes to Consolidated Financial Statements

 

   Current  Deferred  Total
   (Amounts are in thousands)
2007     

Federal

  $615,121  (59,077) 556,044

State

   84,966  (7,362) 77,604
          
  $700,087  (66,439) 633,648
          
2006     

Federal

  $560,073  (25,218) 534,855

State

   61,009  (5,520) 55,489
          
  $621,082  (30,738) 590,344
          
(7)

Income Taxes

Total income taxes for 2011, 2010 and 2009 were allocated as follows:

   

2011

  

2010

  

2009

 
   (Amounts are in thousands) 

Earnings

  $769,807    701,271    613,272  

Other comprehensive (losses) earnings

   (5,015  (3,135  35,159  
  

 

 

  

 

 

  

 

 

 
  $764,792    698,136    648,431  
  

 

 

  

 

 

  

 

 

 

The provision for income taxes consists of the following:

   

Current

  

Deferred

 

Total

   (Amounts are in thousands)

2011

        

Federal

    $592,275     90,486    682,761 

State

        81,684       5,362      87,046 
    $673,959     95,848    769,807 

2010

        

Federal

    $601,098     23,778    624,876 

State

        79,451      (3,056)     76,395 
    $680,549     20,722    701,271 

2009

        

Federal

    $518,269     28,064    546,333 

State

        67,985      (1,046)     66,939 
    $586,254     27,018    613,272 

A reconciliation of the provision for income taxes at the federal statutory tax rate of 35% to earnings before income taxes compared to the Company’s actual income tax expense is as follows:

 

  

2011

 

2010

 

2009

 
  2008 2007 2006   (Amounts are in thousands) 
  (Amounts are in thousands) 

Federal tax at statutory tax rate

  $577,994  636,150  590,644   $791,621    713,796    621,150  

State income taxes (net of federal tax benefit)

   39,153  50,443  36,068    56,580    49,657    43,511  

ESOP dividend

   (39,077) (36,588) (18,660)   (46,675  (40,718  (36,033

Other, net

   (16,428) (16,357) (17,708)   (31,719  (21,464  (15,356
            

 

  

 

  

 

 
  $561,642  633,648  590,344 
            $769,807    701,271    613,272  
  

 

  

 

  

 

 

PUBLIX SUPER MARKETS, INC.

Notes to Consolidated Financial Statements

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities as of December 27, 200831, 2011 and December 29, 200725, 2010 are as follows:

 

   2008  2007
   (Amounts are in thousands)

Deferred tax assets:

    

Self-insurance reserves

  $121,707  118,301

Retirement plan contributions

  36,374  40,147

Postretirement benefit cost

  31,914  31,103

Reserves not currently deductible

  16,964  12,167

Unrealized losses and impairments on AFS securities

  35,203  10,305

Advance purchase allowances

  6,806  9,279

Inventory capitalization

  11,502  9,196

Other

  1,064  2,900
      

Total deferred tax assets

  $261,534  233,398
      

Deferred tax liabilities:

    

Property, plant and equipment, principally due to depreciation

  $340,260  331,420

Other

  8,079  2,160
      

Total deferred tax liabilities

  $348,339  333,580
      

PUBLIX SUPER MARKETS, INC.

Notes to Consolidated Financial Statements

   

2011

  

2010

    (Amounts are in thousands)

Deferred tax assets:

      

Self-insurance reserves

    $114,522         113,557   

Retirement plan contributions

    48,825         44,686   

Postretirement benefit cost

    41,515         36,551   

Reserves not currently deductible

    18,047         24,731   

Inventory capitalization

    11,687         12,650   

Advance purchase allowances

    6,454         7,768   

Other

          4,357             9,378   

Total deferred tax assets

    $245,407         249,321   

Deferred tax liabilities:

      

Property, plant and equipment, primarily due to depreciation

    $491,485         409,736   

Other

        11,324             6,154   

Total deferred tax liabilities

    $502,809         415,890   

The Company expects the results of future operations and the reversal of deferred tax liabilities to generate sufficient taxable income to allow utilization of deferred tax assets; therefore, no valuation allowance has been recorded as of December 27, 2008 or31, 2011 and December 29, 2007.25, 2010.

The Company adopted Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109” (FIN 48) on December 31, 2006, the beginning of the 2007 fiscal year. The Company has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns as well as all open tax years in these jurisdictions. The only periods subject to examination for the Company’s federal return are the 20022008 through 20072010 tax years. Theyears, and the Internal Revenue Service is currently auditing the 2008 and 2009 tax years 2002 through 2007.years. The periods subject to examination for the Company’s state returns are the 20052007 through 20072010 tax years. The Company believes that the outcome of any examination will not have a material effect on its financial condition, results of operations or cash flows. As of December 27, 200831, 2011 and December 29, 2007,25, 2010, the Company hashad immaterial accruals for income tax related interest expense.

The Company had no unrecognized tax benefits upon adoption of FIN 48. Additionally, it did not have any unrecognized tax benefits in 20082011 and 2007.2010. Because the Company does not have any unrecognized tax benefits as of December 27, 2008,31, 2011, there will be no effect on the Company’s effective income tax rate in future periods due to the recognition of unrecognized tax benefits.

PUBLIX SUPER MARKETS, INC.

Notes to Consolidated Financial Statements

 

(8)

Commitments and Contingencies

 

 (a)

Operating Leases

The Company conducts a major portion of its retail operations from leased premises. Initial terms of the leases are typically 20 years, followed by renewal options at five year intervals, and may include rent escalation clauses. Minimum rentals represent fixed lease obligations, including insurance and maintenance to the extent they are fixed in the lease. Contingent rentals represent payment of variable lease obligations, including real estate taxes, insurance, maintenance and, for certain premises, additional rentals based on a percentage of sales in excess of stipulated minimums (excess rent). The payment of variable real estate taxes, insurance and maintenance is generally based on the Company’s pro-rata share of total shopping center square footage. The Company recognizes rent expense for operating leases with rent escalation clauses on a straight-line basis over the applicable lease term. The Company estimates excess rent, where applicable, based on annual sales projections and uses the straight-line method to amortize this cost to rent expense. The annual sales projections are reviewed periodically and adjusted if necessary. Additionally, the Company has operating leases for certain transportation and other equipment.

PUBLIX SUPER MARKETS, INC.

Notes to Consolidated Financial Statements

Total rental expense for 2008, 20072011, 2010 and 2006, respectively,2009 is as follows:

 

  

2011

 

2010

 

2009

 
  2008 2007 2006   (Amounts are in thousands) 
  (Amounts are in thousands) 

Minimum rentals

  $398,992  361,960  336,932   $410,590    410,390    437,857  

Contingent rentals

   118,106  110,989  111,624    110,900    117,249    123,736  

Sublease rental income

   (7,022) (8,836) (8,978)   (4,699  (5,912  (5,953
            

 

  

 

  

 

 
  $510,076  464,113  439,578 
            $516,791    521,727    555,640  
  

 

  

 

  

 

 

As of December 27, 2008,31, 2011, future minimum lease payments for all noncancelable operating leases and related subleases are as follows:

 

Year

  Minimum
Rental
Commitments
  Sublease
Rental
Income
 Net  

Minimum

Rental

Commitments

   

Sublease

Rental

Income

   Net 
  (Amounts are in thousands)

2009

  $402,889  (6,997) 395,892

2010

   393,457  (3,980) 389,477

2011

   377,391  (2,731) 374,660
  (Amounts are in thousands) 

2012

   355,893  (2,243) 353,650   $   423,516     3,975     419,541  

2013

   334,912  (1,711) 333,201   407,277     3,831     403,446  

2014

   380,002     3,309     376,693  

2015

   351,137     1,025     350,112  

2016

   326,609     406     326,203  

Thereafter

   2,602,882  (2,671) 2,600,211     2,385,617          414     2,385,203  
         
  $4,467,424  (20,333) 4,447,091   $4,274,158     12,960     4,261,198  
         

The Company also owns shopping centers which are leased to tenants for minimum monthly rentals plus, in certain instances, contingent rentals. Minimum rentals represent fixed lease commitments, including insurance and maintenance. Contingent rentals includerepresent variable lease obligations including real estate taxes, insurance, maintenance and, in certain instances, additional rentals based on a percentage of sales in excess of stipulated minimums.rent. Total rental amounts included in trade receivables were $1,478,000$1,827,000 and $1,056,000$1,459,000 as of December 27, 200831, 2011 and December 29, 2007,25, 2010, respectively. Rental income was $25,272,000, $23,638,000$36,057,000, $32,576,000 and $21,565,000$25,590,000 for 2008, 20072011, 2010 and 2006,2009, respectively. The approximate amounts of minimum future rental payments to be received under noncancelable operating leases are $18,236,000, $15,258,000, $12,780,000, $9,564,000$34,381,000, $28,711,000, $21,897,000, $15,433,000 and $6,609,000$10,634,000 for the years 20092012 through 2013,2016, respectively, and $37,768,000$59,964,000 thereafter.

 

 (b)

Letters of Credit

As of December 27, 2008,31, 2011, the Company had $10,300,000$10,200,000 outstanding in trade letters of credit and $4,100,000$3,700,000 in standby letters of credit to support certain purchase obligations. In addition, the Company had $200,000,000 outstanding in a standby letter of credit for the benefit of the Company’s insurance carrier related to self-insurance reserves.

PUBLIX SUPER MARKETS, INC.

Notes to Consolidated Financial Statements

 

 (c)

Litigation

The Company is a party in various legal claims and actions considered in the normal course of business. The Company believes its recorded reserves are adequate in light of the probable and estimable liabilities. The estimated amount of reasonably possible losses for claims, individually and in the aggregate, is considered to be immaterial. In the opinion of management, the ultimate resolution of these legal proceedings will not have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

 

(9)

Correction of Error

The Company’s ESOP includes a put option for shares of the Company’s common stock distributed from the ESOP. Shares are distributed from the ESOP primarily to separated vested participants and certain eligible participants who elect to diversify their account balances. Since the Company’s common stock is not currently traded on an established securities market, if the owners of distributed shares desire to sell their shares, the Company is required to purchase the shares at fair value for a 15-month period after distribution of the shares from the ESOP. Due to the Company’s obligation under the put option, the ESOP related shares should be classified as temporary equity in the mezzanine section of the consolidated balance sheets. The ESOP related shares were previously classified in permanent equity. This correction of an error resulted in the December 25, 2010 permanent equity decreasing by $2,016,696,000 and temporary equity increasing by $2,016,696,000 from amounts previously reported. See Note 6.

(10)

Quarterly Information (unaudited)

Following is a summary of the quarterly results of operations for 20082011 and 2007.2010. All quarters have 13 weeks, except the fourth quarter of 2011 which has 14 weeks.

 

   Quarter
   First  Second  Third  Fourth
   (Amounts are in thousands, except per share amounts)

2008

        

Revenues

  $6,276,413  5,894,769  5,842,889  6,095,513

Costs and expenses

  $5,792,199  5,484,554  5,550,024  5,717,008

Net earnings

  $343,160  295,754  201,829  249,027

Basic and diluted earnings per share

  $0.41  0.36  0.25  0.31

2007

        

Revenues

  $5,921,757  5,698,999  5,632,929  5,939,905

Costs and expenses

  $5,478,320  5,265,593  5,291,268  5,514,104

Net earnings

  $317,581  306,398  248,995  310,951

Basic and diluted earnings per share

  $0.38  0.36  0.30  0.37

   Quarter 
   

First

   

Second

   

Third

   

Fourth

 
   (Amounts are in thousands, except per share amounts) 

2011

        

Revenues

   $6,836,402     6,621,633     6,425,379     7,295,350  

Costs and expenses

   6,264,682     6,079,262     5,978,544     6,721,351  

Net earnings

   398,167     382,369     311,902     399,528  

Basic and diluted earnings per share

   0.51     0.48     0.40     0.51  

2010

        

Revenues

   $6,548,665     6,261,831     6,086,076     6,431,482  

Costs and expenses

   6,024,959     5,762,828     5,676,395     5,942,548  

Net earnings

   364,399     348,424     283,222     342,102  

Basic and diluted earnings per share

   0.47     0.44     0.36     0.44  

Schedule II

PUBLIX SUPER MARKETS, INC.

Valuation and Qualifying Accounts

Years ended December 27, 2008,31, 2011, December 29, 200725, 2010

and December 30, 200626, 2009

(Amounts are in thousands)

 

Description

  Balance at
Beginning
of Year
  Additions
Charged to
Income
  Deductions
From
Reserves
  Balance at
End of
Year
  

Balance at

Beginning

of Year

  

Additions

Charged to

Income

  

Deductions

From

Reserves

  

Balance at

End of

Year

Year ended December 27, 2008

        
  (Amounts are in thousands)

Year ended December 31, 2011

            

Reserves not deducted from assets:

                    

Self-insurance reserves:

                    

Current

  $113,597  286,458  267,780  132,275    $114,133     296,798     285,362     125,569 

Noncurrent

   230,849  221  —    231,070      221,337              ---         1,677     219,660 
            
  $344,446  286,679  267,780  363,345    $335,470     296,798     287,039     345,229 
            

Year ended December 29, 2007

        

Year ended December 25, 2010

            

Reserves not deducted from assets:

                    

Self-insurance reserves:

                    

Current

  $112,177  229,636  228,216  113,597    $119,375     269,063     274,305     114,133 

Noncurrent

   251,060  —    20,211  230,849      229,589              ---         8,252     221,337 
            
  $363,237  229,636  248,427  344,446    $348,964     269,063     282,557     335,470 
            

Year ended December 30, 2006

        

Year ended December 26, 2009

            

Reserves not deducted from assets:

                    

Self-insurance reserves:

                    

Current

  $119,339  197,973  205,135  112,177    $132,275     270,179     283,079     119,375 

Noncurrent

   242,449  8,611  —    251,060      231,070              ---         1,481     229,589 
            
  $361,788  206,584  205,135  363,237    $363,345     270,179     284,560     348,964 
            

Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None

Item 9A.Controls and Procedures

Item 9A. Controls and Procedures

Disclosure Controls and Procedures

As of the end of the period covered by this Annual Report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer each concluded that the Company’s disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms, and that such information has been accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, in a manner that allows timely decisions regarding required disclosure. There have been no changes in the Company’s internal control over financial reporting identified in connection with the evaluation that occurred during the quarter ended December 27, 2008,31, 2011 that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting.

Internal Control over Financial Reporting

Management’s report on the Company’s internal control over financial reporting is included on page 2618 of this report. The Company’s independent registered public accounting firm, KPMG LLP, has issued their audit report on the effectiveness of the Company’s internal control over financial reporting, which is included on page 29.21.

Item 9B.Other Information

None

PART IIIItem 9B. Other Information

None

PART III

Item 10.Directors, Executive Officers and Corporate Governance

Item 10. Directors, Executive Officers and Corporate Governance

Certain information concerning the executive officers of the Company is set forth in Part I under the caption “Executive Officers of the Company.” All other information concerning the directors and executive officers of the Company is incorporated by reference from the Proxy Statement of the Company (2009(2012 Proxy Statement), which the Company intends to file no later than 120 days after its fiscal year end.

The Company has adopted a Code of Ethical Conduct for Financial Managers that applies to the Company’s principal executive officer, principal financial officer, principal accounting officer or controller and all persons performing similar functions. A copy of the Code of Ethical Conduct for Financial Managers was filed as Exhibit 14 to the Annual Report of the Company on Form 10-K for the year ended December 28, 2002.

Item 11.Executive Compensation

Item 11. Executive Compensation

Information regarding executive compensation is incorporated by reference from the 20092012 Proxy Statement.

Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information regarding security ownership of certain beneficial owners and management and related stockholder matters is incorporated by reference from the 20092012 Proxy Statement.

Item 13.Certain Relationships, Related Transactions and Director Independence

Item 13. Certain Relationships, Related Transactions and Director Independence

Information regarding certain relationships, and related transactions and director independence is incorporated by reference from the 20092012 Proxy Statement.

Item 14.Principal Accounting Fees and Services

Item 14. Principal Accounting Fees and Services

Information regarding principal accounting fees and services is incorporated by reference from the 20092012 Proxy Statement.

PART IV

Item 15.Exhibits, Financial Statement Schedules

Item 15. Exhibits, Financial Statement Schedules

 

(a)

Consolidated Financial Statements and Schedule

The consolidated financial statements and schedule listed in the accompanying Index to Consolidated Financial Statements and Schedule are filed as part of this Annual Report on Form 10-K.

 

(b)

Exhibits

 

3.1(a)

Composite of the Restated Articles of Incorporation of the Company dated June 25, 1979 as amended by (i) Articles of Amendment dated February 22, 1984, (ii) Articles of Amendment dated June 24, 1992, (iii) Articles of Amendment dated June 4, 1993, and (iv) Articles of Amendment dated April 18, 2006 are incorporated by reference to the exhibits to the Quarterly Report of the Company on Form 10-Q for the quarter ended April 1, 2006.

  3.1(b) 3.1(b)

Articles of Amendment of the Restated Articles of Incorporation of the Company dated April 18, 2006 are incorporated by reference to the exhibits to the Quarterly Report of the Company on Form 10-Q for the quarter ended April 1, 2006.

  3.2 3.2

Amended and Restated By-laws of the Company are incorporated by reference to the exhibits to the Quarterly Report of the Company on Form 10-Q for the quarter ended June 29, 2002.

10. 10

Indemnification Agreement is incorporated by reference to the form attached as an exhibit to the Quarterly Report of the Company on Form 10-Q for the quarter ended March 31, 2001, between the Company and all of its directors and officers as reported in the quarterly, annual and current reports of the CompanyCompany’s Quarterly Reports on
Form 10-Q, Annual Reports on Form 10-K and Current Reports on Form 8-K for the periods ended March 31, 2001, June 30, 2001, September 29, 2001, June 29, 2002, December 28, 2002, September 27, 2003, December 27, 2003, March 27, 2004, May 18, 2005, July 1, 2005, January 30, 2006, January 30, 2008, and December 22, 2008.2008, April 14, 2009 and January 1, 2011.

10.1

Non-Employee Directors Stock Purchase Plan Summary Plan Description, as registered in the Form S-8 filed with the Securities and Exchange Commission on June 21, 2001, is incorporated by reference to the exhibits to the Quarterly Report of the Company on Form 10-Q for the quarter ended June 30, 2001.

10.2

Incentive Bonus Plan is incorporated by reference to the exhibits to the Annual Report of the Company on Form 10-K for the year ended December 25, 2004.Plan.

10.3

Employee Stock Ownership Plan as amended and restated as of January 1, 2007 is incorporated by reference to the exhibits to the Annual Report of the Company on Form 10-K for the year ended December 29, 2007.

10.4

401(k) SMART Plan as amended and restated as of January 1, 2007 is incorporated by reference to the exhibits to the Annual Report of the Company on Form 10-K for the year ended December 29, 2007.

14. 10.5

Indemnification Agreement is incorporated by reference to the form attached as an exhibit to the Current Report of the Company on Form 8-K dated December 14, 2011, between the Company and the Trustee of its ESOP, one of the Trustees of its 401(k) SMART Plan and with each member of its 401(k) SMART Plan investment committee.

14

Code of Ethical Conduct for Financial Managers is incorporated by reference to the exhibits to the Annual Report of the Company on Form 10-K for the year ended December 28, 2002.

21. 21

Subsidiaries of the Registrant.

23. 23

Consent of Independent Registered Public Accounting Firm.

31.1

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101

The following financial information from the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, is formatted in Extensible Business Reporting Language: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Earnings, (iii) Consolidated Statements of Comprehensive Earnings, (iv) Consolidated Statements of Cash Flows, (v) Consolidated Statements of Stockholders’ Equity and (vi) Notes to Consolidated Financial Statements.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  PUBLIX SUPER MARKETS, INC.

February 27, 200929, 2012

 By: 

/s/ John A. Attaway, Jr.

  

John A. Attaway, Jr.

  

Secretary

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

/s/ Carol Jenkins Barnett

    Director February 27, 200929, 2012
Carol Jenkins Barnett     

/s/ Hoyt R. Barnett

    Vice Chairman and Director February 27, 200929, 2012
Hoyt R. Barnett     

/s/ William E. Crenshaw

    Chief Executive Officer and Director February 27, 200929, 2012
William E. Crenshaw    (Principal Executive Officer) 

/s/ Sherrill W. Hudson

Jane B. Finley
    Director February 27, 200929, 2012
Sherrill W. HudsonJane B. Finley     

/s/ Sherrill W. Hudson

DirectorFebruary 29, 2012
Sherrill W. Hudson
/s/ Charles H. Jenkins, Jr.

    Chairman of the Board and Director February 27, 200929, 2012
Charles H. Jenkins, Jr.      

/s/ Howard M. Jenkins

    Director February 27, 200929, 2012
Howard M. Jenkins     

/s/ E. Vane McClurg

    Director February 27, 200929, 2012
E. Vane McClurg     

/s/ Kelly E. Norton

Maria A. Sastre
    Director February 27, 200929, 2012
Kelly E. NortonMaria A. Sastre     

/s/ Maria A. Sastre

DirectorFebruary 27, 2009
Maria A. Sastre

/s/ David P. Phillips

    Chief Financial Officer and Treasurer February 27, 200929, 2012
David P. Phillips    (Principal Financial and Accounting Officer) 

 

56

45