UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
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For the fiscal year ended December 25, 2010
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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 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. x
( )
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | Accelerated filer | 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 $7,035,217,000$8,232,213,000 as of June 25, 2010,24, 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 4, 20117, 2012 was 779,575,000.778,373,000.
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 20112012 Annual Meeting of Stockholders to be held on April 12, 2011.17, 2012.
PART I
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 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. For each of the fiscal years 2008 through 2010, sales from all other lines of business combined represent less than 5% of the total Company sales.
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 2011, 2010 2009 and 20082009 was as follows:
| 2010 | 2009 | 2008 | 2011 | 2010 | 2009 | |||||||||||||||||||
Grocery | 85% | 85% | 85% | 86% | 85% | 85% | ||||||||||||||||||
Other | 15% | 15% | 15% | 14% | 15% | 15% | ||||||||||||||||||
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| 100% | 100% | 100% | 100% | 100% | 100% | |||||||||||||||||||
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The Company’s lines of merchandise include a variety of nationally advertised and private label brands as well as unbranded 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 72% of the total cost of products purchased is delivered to the supermarkets through the Company’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 1,0341,046 supermarkets at the end of 2010,2011, compared with 1,0141,034 at the beginning of the year. In 2010, 412011, 29 supermarkets were opened (including 2111 replacement supermarkets), 21 and 126 supermarkets were remodeled. Seventeen supermarkets were closed and 115 supermarkets were remodeled.during the same period. Replacement supermarkets opened in 20102011 replaced 1911 of the 2117 supermarkets closed during the same period and twoperiod. Five of the remaining supermarkets closed in 2009. The remaining two supermarkets closed during 20102011 will not be replaced.replaced in subsequent periods, all of which will be replaced on site. Net new supermarkets added 1.10.6 million square feet in 2010,2011, an increase of 2.4%1.3%. At the end of 2010,2011, the Company had 738743 supermarkets located in Florida, 179 in Georgia, 4549 in Alabama, 4345 in South Carolina and 2930 in Tennessee. Also, as of year end, the Company had 1210 supermarkets under construction in Florida threeand two each in Alabama, and one each in Georgia South Carolina and Tennessee. As of December 25, 2010, the Company also operated 11 convenience stores, 128 liquor stores and 36 Crispers restaurants. Eight convenience stores are located in Florida, two in Georgia and one in Tennessee. All liquor stores and Crispers restaurants are located in Florida. Sales and assets associated with these other operations are not material.
Competition
The Company is engaged in the highly competitive retail food industry. Competition is based primarily on 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 2011.2012.
Working capital
The Company’s working capital at the end of 20102011 consisted of $2,878.0$2,803.2 million in current assets and $2,106.1$2,050.8 million in current liabilities. Normal operating fluctuations in these balances can result in changes to cash flows 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 products 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 152,000 employees at the end of 2011, 71,000 on a full-time basis and 81,000 on a part-time basis. By comparison, the Company had 148,000 employees at the end of 2010, 70,000 on a full-time basis and 78,000 on a part-time basis. By comparison, the Company had 142,000 employees at the end of 2009, 69,000 on a full-time basis and 73,000 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 20102011 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 20112012 Proxy Statement will be mailed on or about March 10, 201115, 2012 to stockholders of record as of the close of business on February 4, 2011.7, 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.
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.
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 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. Adverse economic conditions, including high unemployment, significant home foreclosures, declines in the stock market and the instability of the credit markets, could 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-profit items or to shift spending to lower-priced competitors, which could adversely affect the Company’s financial condition and results of operations.
Increased operating 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, increased costs of health care due to health insurance reform or other factors could result in an increase in labor costs. In addition, the inability to improve or manage operating costs, such 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, (includingcatastrophic 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 eventsdata, including debit and user errors.credit cardholder data. Any disruptions in theseinformation technology systems or the overall technology infrastructurea security breach could have an adverse effect 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, general liability, property losses, fleet liability, employee benefits and directors and officers liability. There is no assurance that the Company will be able to continue to maintain its 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 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 grocery, drug and other products purchased from suppliers 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 product recalls in the future. If a product liability claim is successful, the Company’s insurance coverage may not be adequate to pay all liabilities 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 contamination cleanup and damages arising from sites of past spills, disposals or other releases of hazardous materials. Under current environmental laws, the Company may be held responsible for the remediation of environmental conditions 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.
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. UnresolvedStaff Comments
None
At year end, the Company operated approximately 48.148.7 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 106120 locations. The building is owned while the land is leased at 4948 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.
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
None
Executive Officers of the Company
Name | Age | Business Experience During Last Five Years | Served as | Age | Business Experience During Last Five Years | Served as Officer of Company | ||||||
John A. Attaway, Jr. | 52 | Senior Vice President, General Counsel and Secretary of the Company. | 2000 | 53 | Senior Vice President, General Counsel and Secretary of the Company. | 2000 | ||||||
Hoyt R. Barnett | 67 | Vice Chairman of the Company and Trustee of the Employee Stock Ownership Plan. | 1977 | 68 | Vice Chairman of the Company and Trustee of the Employee Stock Ownership Plan. | 1977 | ||||||
David E. Bornmann | 53 | Vice President of the Company. | 1998 | 54 | Vice President of the Company. | 1998 | ||||||
David E. Bridges | 61 | Vice President of the Company. | 2000 | 62 | Vice President of the Company. | 2000 | ||||||
Scott E. Brubaker | 52 | Vice President of the Company. | 2005 | 53 | Vice President of the Company. | 2005 | ||||||
Jeffrey G. Chamberlain | 54 | Director of Real Estate Strategy of the Company to January 2011, Vice President thereafter. | 2011 | 55 | Director of Real Estate Strategy of the Company to January 2011, Vice President thereafter. | 2011 | ||||||
William E. Crenshaw | 60 | President of the Company to March 2008, Chief Executive Officer thereafter. | 1990 | 61 | President of the Company to March 2008, Chief Executive Officer thereafter. | 1990 | ||||||
Joseph DiBenedetto, Jr. | 51 | Regional Director of Retail Operations of the Company to January 2011, Vice President thereafter. | 2011 | 52 | Regional Director of Retail Operations of the Company to January 2011, Vice President thereafter. | 2011 | ||||||
G. Gino DiGrazia | 48 | Vice President and Controller of the Company. | 2002 | 49 | Vice President and Controller of the Company. | 2002 | ||||||
Laurie Z. Douglas | 47 | 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. | 2006 | 48 | Senior Vice President and Chief Information Officer of the Company. | 2006 | ||||||
David S. Duncan | 57 | Vice President of the Company. | 1999 | 58 | Vice President of the Company. | 1999 | ||||||
Sandra J. Estep | 51 | Vice President and Controller of the Company. | 2002 | 52 | Vice President and Controller of the Company. | 2002 | ||||||
William V. Fauerbach | 64 | Vice President of the Company. | 1997 | 65 | Vice President of the Company. | 1997 | ||||||
Linda S. Hall | 51 | Vice President of the Company. | 2002 | 52 | Vice President of the Company. | 2002 | ||||||
M. Clayton Hollis, Jr. | 54 | Vice President of the Company. | 1994 | 55 | Vice President of the Company. | 1994 | ||||||
John T. Hrabusa | 55 | Senior Vice President of the Company. | 2004 | 56 | Senior Vice President of the Company. | 2004 | ||||||
Mark R. Irby | 55 | Vice President of the Company. | 1989 | 56 | Vice President of the Company. | 1989 | ||||||
Randall T. Jones, Sr. | 48 | Senior Vice President of the Company to March 2008, President thereafter. | 2003 | 49 | Senior Vice President of the Company to March 2008, President thereafter. | 2003 | ||||||
Linda S. Kane | 45 | Vice President and Assistant Secretary of the Company. | 2000 | 46 | Vice President and Assistant Secretary of the Company. | 2000 | ||||||
Thomas M. McLaughlin | 60 | Vice President of the Company. | 1994 | 61 | Vice President of the Company. | 1994 | ||||||
Sharon A. Miller | 67 | Executive Director of Publix Super Markets Charities, Inc. and Assistant Secretary of the Company. | 1992 | |||||||||
Dale S. Myers | 58 | Vice President of the Company. | 2001 | 59 | Vice President of the Company. | 2001 | ||||||
Alfred J. Ottolino | 45 | Vice President of the Company. | 2004 | 46 | Vice President of the Company. | 2004 | ||||||
David P. Phillips | 51 | Chief Financial Officer and Treasurer of the Company. | 1990 | 52 | Chief Financial Officer and Treasurer of the Company. | 1990 | ||||||
Charles B. Roskovich, Jr. | 49 | Regional Director of Retail Operations of the Company to January 2008, Vice President to January 2011, Senior Vice President thereafter. | 2008 | 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 | 50 | Director and Counsel of Risk Management of the Company to June 2008, Vice President thereafter. | 2008 | 51 | Director and Counsel of Risk Management of the Company to June 2008, Vice President thereafter. | 2008 | ||||||
Richard J. Schuler II | 55 | Vice President of the Company. | 2000 | 56 | Vice President of the Company. | 2000 | ||||||
Michael R. Smith | 51 | Vice President of the Company. | 2005 | 52 | Vice President of the Company. | 2005 | ||||||
The terms of all officers expire in May 20112012 or upon the election of their successors.
PART II
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 20102011 and 20092010 were as follows:
| 2010 | 2009 | 2011 | 2010 | |||||||||||||
January - February | $ | 16.30 | 17.90 | $ | 19.85 | 16.30 | ||||||||||
March - April | 17.35 | 16.10 | 20.90 | 17.35 | ||||||||||||
May - July | 18.50 | 15.55 | 21.65 | 18.50 | ||||||||||||
August - October | 18.45 | 16.05 | 22.05 | 18.45 | ||||||||||||
November - December | 19.85 | 16.30 | 20.20 | 19.85 | ||||||||||||
| (b) | Approximate Number of Equity Security Holders |
As of February 4, 2011,7, 2012, the approximate number of holders of the Company’s common stock was 148,000.152,000.
| (c) | Dividends |
The Company paid an annual cash dividend on its common stock of $0.53 per share in 2011 and $0.46 per share in 2010 and $0.41 per share in 2009.2010. 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 25, 201031, 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 26, 2010 through October 30, 2010 | 858 | $ | 18.45 | N/A | N/A | |||||||||||
October 31, 2010 through November 27, 2010 | 3,548 | 19.85 | N/A | N/A | ||||||||||||
November 28, 2010 through December 25, 2010 | 2,162 | 19.85 | N/A | N/A | ||||||||||||
Total | 6,568 | $ | 19.67 | N/A | N/A | |||||||||||
| Total Number of Shares | Average Price Paid per | Total Number of | 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 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 25, 201031, 2011 required to be disclosed in the last two columns of the table.
| (e) | Performance Graph |
The following performance graph sets forth the Company’s cumulative total stockholder return during the five years ended December 25, 2010,31, 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 20052006 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 February 28, 2011)March 1, 2012) is not presented below. Rather, for comparative purposes, a performance graph based on the fiscal year end valuation is provided in the 20112012 Proxy Statement.
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(1) Companies included in the Peer Group are: Ahold, Delhaize Group, Kroger, Safeway, Supervalu, Weis Markets and Winn-Dixie.
Item 6. Selected Financial Data
| 2010 | 2009 | 2008 | 2007 | 2006 | 2011(1) | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||||||||||||||
| (Amounts are in thousands, except per share amounts and number of supermarkets. All years include 52 weeks.) | (Amounts are in thousands, except per share amounts and number of supermarkets.) | |||||||||||||||||||||||||||||||||||||||
Sales: | ||||||||||||||||||||||||||||||||||||||||
Sales | $ | 25,134,054 | 24,319,716 | 23,929,064 | 23,016,568 | 21,654,774 | $26,967,389 | 25,134,054 | 24,319,716 | 23,929,064 | 23,016,568 | |||||||||||||||||||||||||||||
Percent change | 3.3% | 1.6% | 4.0% | 6.3% | 5.2% | 7.3% | 3.3% | 1.6% | 4.0% | 6.3% | ||||||||||||||||||||||||||||||
Comparable store sales percent change | 2.3% | (3.2% | ) | 1.3% | 4.3% | 5.2% | 4.1% | 2.3% | (3.2% | ) | 1.3% | 4.3% | ||||||||||||||||||||||||||||
Earnings: | ||||||||||||||||||||||||||||||||||||||||
Gross profit(1) | $ | 7,022,611 | 6,727,037 | 6,442,241 | 6,210,739 | 5,842,817 | ||||||||||||||||||||||||||||||||||
Gross profit(2) | $ 7,447,019 | 7,022,611 | 6,727,037 | 6,442,241 | 6,210,739 | |||||||||||||||||||||||||||||||||||
Earnings before income tax expense | $ | 2,039,418 | 1,774,714 | 1,651,412 | 1,817,573 | 1,687,553 | $ 2,261,773 | 2,039,418 | 1,774,714 | 1,651,412 | 1,817,573 | |||||||||||||||||||||||||||||
Net earnings | $ | 1,338,147 | 1,161,442 | 1,089,770 | 1,183,925 | 1,097,209 | $ 1,491,966 | 1,338,147 | 1,161,442 | 1,089,770 | 1,183,925 | |||||||||||||||||||||||||||||
Net earnings as a percent of sales | 5.3% | 4.8% | 4.6% | 5.1% | 5.1% | 5.5% | 5.3% | 4.8% | 4.6% | 5.1% | ||||||||||||||||||||||||||||||
Common stock: | ||||||||||||||||||||||||||||||||||||||||
Weighted average shares outstanding | 786,378 | 788,835 | 818,248 | 840,523 | 849,815 | 784,815 | 786,378 | 788,835 | 818,248 | 840,523 | ||||||||||||||||||||||||||||||
Basic and diluted earnings per share | $ | 1.70 | 1.47 | 1.33 | 1.41 | 1.29 | $ 1.90 | 1.70 | 1.47 | 1.33 | 1.41 | |||||||||||||||||||||||||||||
Cash dividends per share | $ | 0.46 | 0.41 | 0.44 | 0.40 | 0.20 | $ 0.53 | 0.46 | 0.41 | 0.44 | 0.40 | |||||||||||||||||||||||||||||
Financial data: | ||||||||||||||||||||||||||||||||||||||||
Capital expenditures | $ | 468,530 | 693,489 | 1,289,707 | 683,290 | 481,247 | $ 602,952 | 468,530 | 693,489 | 1,289,707 | 683,290 | |||||||||||||||||||||||||||||
Working capital | $ | 771,918 | 469,260 | 232,809 | 319,826 | 211,219 | $ 752,464 | 771,918 | 469,260 | 232,809 | 319,826 | |||||||||||||||||||||||||||||
Current ratio | 1.37 | 1.24 | 1.13 | 1.18 | 1.12 | 1.37 | 1.37 | 1.24 | 1.13 | 1.18 | ||||||||||||||||||||||||||||||
Total assets | $ | 10,159,087 | 9,004,292 | 8,089,672 | 8,053,157 | 7,393,086 | $11,268,232 | 10,159,087 | 9,004,292 | 8,089,672 | 8,053,157 | |||||||||||||||||||||||||||||
Stockholders’ equity | $ | 7,260,590 | 6,299,624 | 5,643,298 | 5,642,186 | 4,974,865 | ||||||||||||||||||||||||||||||||||
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 | 1,034 | 1,014 | 993 | 926 | 892 | 1,046 | 1,034 | 1,014 | 993 | 926 | ||||||||||||||||||||||||||||||
(1)Fiscal year 2011 includes 53 weeks. All other years include 52 weeks. |
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(2) Gross profit represents sales less cost of merchandise sold as reported in the consolidated statements of earnings.
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 and Tennessee. The Company has no other significant lines of business or industry segments. For each of the fiscal years 2008 through 2010, sales from all other lines of business combined represent less than 5% of total Company sales. As of December 25, 2010,31, 2011, the Company operated 1,0341,046 supermarkets including 738743 located in Florida, 179 in Georgia, 4549 in Alabama, 4345 in South Carolina and 2930 in Tennessee. In 2010, 412011, 29 supermarkets were opened (including 2111 replacement supermarkets), 21 and 126 supermarkets were remodeled. Seventeen supermarkets were closed and 115 supermarkets were remodeled.during the same period. The Company opened 2820 supermarkets in Florida, sixfour in Alabama, four in Georgia, two in TennesseeSouth Carolina, two in Georgia and one in South CarolinaTennessee during 2010.2011. Replacement supermarkets opened in 20102011 replaced 1911 of the 2117 supermarkets closed during the same period and twoperiod. Five of the remaining supermarkets closed in 2009. The remaining two supermarkets closed during 20102011 will not be replaced.replaced in subsequent periods, all of which will be 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 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 25, 2010, the Company also operated 11 convenience stores, 128 liquor stores and 36 Crispers restaurants. Eight convenience stores are located in Florida, two in Georgia and one in Tennessee. All liquor stores and Crispers restaurants are located in Florida. Sales and assets associated with these other operations are not material.
Operating Environment
The Company is engaged in the highly competitive retail food industry. Competition is based primarily on 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 $4,620.1 million as of December 31, 2011, as compared with $3,701.9 million as of December 25, 2010, as compared with $2,567.52010. This increase is primarily due to the Company generating cash from operating activities of $2,341.2 million asfor 2011 of December 26, 2009.which $1,221.7 million was invested in short-term and long-term investments.
Net cash provided by operating activities
Net cash provided by operating activities was $2,341.2 million for 2011, as compared with $2,266.0 million and $1,998.2 million for 2010 and 2009, respectively. The increase in 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 operating activities for 2010 as compared with $1,998.2 million and $1,772.9 million for 2009 and 2008, respectively.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 $1,819.4 million for 2011, as compared with $1,408.7 million and $1,045.4 million for 2010 and 2009, respectively. The primary use of net cash in investing activities for 2011 was funding capital expenditures and net increases in investment securities. Capital expenditures for 2011 totaled $603.0 million. These expenditures were incurred in connection with the opening of 29 new supermarkets (including 11 replacement supermarkets) and remodeling 126 supermarkets. Seventeen supermarkets were closed during 2011. Replacement supermarkets opened in 2011 replaced 11 of the 17 supermarkets closed during the same period. Five of the remaining supermarkets closed in 2011 will be replaced in subsequent periods, all of which will be replaced on site. Net new supermarkets added 0.6 million square feet in 2011, an increase of 1.3%. Expenditures were also incurred for the acquisition of shopping centers with the Company as compared with $1,045.4 millionthe anchor tenant and $441.0 millionnew or enhanced information technology hardware and applications. For the same period, the payment for 2009investments, net of the proceeds from the sale and 2008, respectively. maturity of such investments, was $1,221.7 million.
The primary use of net cash in investing activities for 2010 was funding capital expenditures and net increases in investment securities. Capital expenditures for 2010 totaled $468.5 million. These expenditures were incurred in connection with the opening of 41 new supermarkets (including 21 replacement supermarkets) and remodeling 115 supermarkets. Twenty-one supermarkets were closed during the same period.2010. Replacement supermarkets opened in 2010 replaced 19 of the 21 supermarkets closed during the same period and two supermarkets closed in 2009. The remaining two supermarkets closed duringin 2010 willwere not be replaced. New supermarkets opened included five of the remaining Florida supermarket locations acquired from Albertson’s LLC (Albertson’s) not opened in 2008 or 2009. Net new supermarkets added 1.1 million square feet in 2010, an increase of 2.4%. Expenditures were also incurred for 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 $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 in 2009during 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.
The primary use of net cash in investing activities for 2008 was funding capital expenditures. Capital expenditures for 2008 totaled $1,289.7 million. These expenditures were incurred in connection with the opening of 79 new supermarkets (including 11 replacement supermarkets) and remodeling 93 supermarkets. Twelve supermarkets were closed in 2008. Replacement supermarkets opened in 2008 replaced 10 of the 12 supermarkets closed in 2008 and one supermarket closed in 2007. One of the remaining supermarkets closed in 2008 was opened as a replacement supermarket in 2009 and the other was not replaced. The replacement supermarket opened in 2009 from the supermarket closed in 2008 was replaced on site. New supermarkets opened included 24 of the 49 Florida supermarket locations acquired from Albertson’s for $498.0 million on September 8, 2008. Net new supermarkets added 3.4 million square feet in 2008, an increase of 8.1%. Expenditures were also incurred for the construction of a second data center, 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.
Capital expenditure projection
In 2011,2012, the Company plans to open 2630 supermarkets. Although real estate development is unpredictable, the Company’s 20112012 new store growth represents a reasonable estimate of anticipated future growth. Capital expenditures for 20112012 are expected to be approximately $710$730 million, primarily consisting of new supermarkets, acquiring and remodeling certain existing supermarkets, expansion of warehouses, and 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 $760.8 million in 2011, as compared with $621.9 million and $784.1 million in 2010 as compared with $784.1 million and $1,312.9 million in 2009, and 2008, 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 as compared with $477.4 million and $979.3 million in 2009, and 2008, 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. 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 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
The Company paid an annual cash dividend on its common stock of $0.53 per share or $418.7 million, $0.46 per share or $364.1 million and $0.41 per share or $325.3 million in 2011, 2010 and $0.44 per share or $364.6 million in 2010, 2009, and 2008, respectively.
Cash requirements
In 2011,2012, 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.
Contractual Obligations
Following is a summary of contractual obligations as of December 25, 2010:31, 2011:
Payments Due by Period | ||||||||||||||||||||||||||||||||||||||||
| Payments Due by Period | 2013- | 2015- | There- | |||||||||||||||||||||||||||||||||||||
Total | 2012 | 2014 | 2016 | after | ||||||||||||||||||||||||||||||||||||
| Total | 2011 | 2012- 2013 | 2014- 2015 | Thereafter | ||||||||||||||||||||||||||||||||||||
| (Amounts are in thousands) | ||||||||||||||||||||||||||||||||||||||||
| (Amounts are in thousands) | ||||||||||||||||||||||||||||||||||||||||
Contractual obligations: | ||||||||||||||||||||||||||||||||||||||||
Operating leases(1) | $ | 4,393,123 | 423,168 | 790,479 | 682,385 | 2,497,091 | ||||||||||||||||||||||||||||||||||
Purchase obligations(2)(3)(4) | 1,905,260 | 858,927 | 233,913 | 186,252 | 626,168 | |||||||||||||||||||||||||||||||||||
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) | 335,470 | 114,133 | 95,933 | 35,806 | 89,598 | |||||||||||||||||||||||||||||||||||
Accrued postretirement benefit cost(6) | 94,776 | 3,841 | 8,442 | 9,549 | 72,944 | |||||||||||||||||||||||||||||||||||
Long-term debt(7) | 149,361 | 72,879 | 47,511 | 14,667 | 14,304 | |||||||||||||||||||||||||||||||||||
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 | 16,487 | 500 | 385 | 454 | 15,148 | 16,364 | 500 | 382 | 450 | 15,032 | ||||||||||||||||||||||||||||||
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Total | $ | 6,894,477 | 1,473,448 | 1,176,663 | 929,113 | 3,315,253 | $ | 6,721,699 | 1,394,267 | 1,240,900 | 925,378 | 3,161,154 | ||||||||||||||||||||||||||||
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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.
For a more detailed description of the operating lease obligations, refer to Note 8(a) Commitments and Contingencies - Operating Leases in the Notes to Consolidated Financial Statements. |
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. |
As of December |
Purchase obligations include |
As of December |
For a more detailed description of the postretirement benefit obligations, refer to Note 5 Postretirement Benefits in the Notes to Consolidated Financial Statements. |
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 2010 and 2009 and 2008 includedinclude 52 weeks.
Sales
Sales for 20102011 were $25.1$27.0 billion as compared with $24.3$25.1 billion in 2009,2010, an increase of $814.3$1,833.3 million or a 3.3%7.3% increase. The Company estimates that its sales increased $254.9$485.2 million or 1.0%1.9% from the additional week in 2011, $317.6 million or 1.3% from new supermarkets (excluding replacement supermarkets) and $559.4$1,030.5 million or 2.3%4.1% from comparable store sales (supermarkets open for the same weeks in both periods, including replacement supermarkets). Sales 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 have improved but continuefor 2011 increased primarily due to be impacted by the difficult economy.product cost inflation and increased customer counts resulting from a better economic climate.
Sales for 2010 were $25.1 billion as compared with $24.3 billion in 2009, an increase of $814.3 million or a 3.3% increase. The Company estimates that its sales increased $254.9 million or 1.0% from new supermarkets and $559.4 million or 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 2009 were $24.3 billion as compared with $23.9 billion in 2008, an increase of $390.7 million or a 1.6% increase. The Company estimates that its sales increased $1,156.4 million or 4.8% from new supermarkets and decreased $765.7 million or 3.2% from comparable store sales. Comparable store sales were negatively impacted by the economic downturn, deflationary pressures and the large number of the Company’s supermarkets opened during the fourth quarter of 2008 that were located near existing supermarkets.
Sales for 2008 were $23.9 billion as compared with $23.0 billion in 2007, an increase of $912.5 million or a 4.0% increase. The Company estimates that its sales increased $613.3 million or 2.7% from new supermarkets and $299.2 million or 1.3% from comparable store sales. Comparable store sales were positively impacted by increases in retail pricing which were comparable to increases in product costs.
Gross profit
Gross profit (sales less cost of merchandise sold) as a percentage of sales was 27.9%27.6%, 27.9% and 27.7% in 2011, 2010 and 26.9%2009, respectively. The decrease in gross profit as a percentage of sales for 2011 as compared with 2010 2009was primarily due to an increase in the last-in, first-out (LIFO) reserve and 2008, respectively.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. The increase in gross profit as a percentage of sales for 2009 as compared with 2008 was primarily due to a decrease in distribution costs, improvements in buying and merchandising practices and a decrease in the LIFO reserve.
Operating and administrative expenses
Operating and administrative expenses as a percentage of sales were 21.1%20.5%, 21.1% and 21.6% in 2011, 2010 and 21.1%2009, respectively. The decrease in operating and administrative expenses as a percentage of sales for 2011 as compared with 2010 2009was primarily due to incremental sales from the additional week in 2011. Excluding the effect of the incremental sales from the additional week, operating and 2008, respectively.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 facilities costs. The increase in operatingrent, payroll, utilities and administrativerepairs and maintenance expenses as a percentage of sales. Rent expense decreased 0.2% of sales for 2009 as compared with 2008 was primarily due to increasesa decrease in rent related to closed supermarkets; payroll employee benefitsexpense 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 facilities costs.repairs and maintenance expense decreased 0.1% of sales primarily due to better expense control.
Investment income, net
Investment income, net was $93.0 million, $91.8 million and $68.3 million in 2011, 2010 and $57.5 million2009, respectively. The increase in investment income, net for 2011 as compared with 2010 2009 and 2008, respectively.was primarily due to an increase in dividend income partially offset by other-than-temporary impairment (OTTI) losses on equity securities. The increase in investment income, net for 2010 as compared with 2009 was primarily due to a decrease in other-than-temporary impairment (OTTI) losses on available-for-sale (AFS) securities. The increase in investment income, net for 2009 as compared with 2008 was primarily due to a decrease in OTTI losses on AFSequity securities.
The Company recorded OTTI losses on equity securities partially offset by a decreaseof $6.1 million and $19.3 million in interest income resulting from lower average balances2011 and interest rates.
2009, respectively. There were no OTTI losses on equity securities in 2010. The Company recorded OTTI losses on equity securities of $19.3 million and $59.0 million in 2009 and 2008, respectively. There were no OTTI losses on debt securities in 2011, 2010 and 2009. The Company recorded OTTI losses on debt securities of $1.8 million in 2008.
Income taxes
The effective income tax rate was 34.4%34.0%, 34.4% and 34.6% in 2011, 2010 and 34.0%2009, respectively. The decrease in the effective income tax rate for 2011 as compared with 2010 2009was primarily due to increases in dividends paid to ESOP participants and 2008, respectively.jobs tax credits. The effective income tax rate for 2010 as compared with 2009 remained relatively unchanged. The net increase in the effective income tax rate for 2009 as compared with 2008 was primarily due to decreases in tax exempt interest income and dividends paid to ESOP participants.
Net earnings
Net earnings were $1,492.0 million or $1.90 per share, $1,338.1 million or $1.70 per share and $1,161.4 million or $1.47 per share for 2011, 2010 and $1,089.8 million or $1.33 per share2009, respectively. Net earnings as a percentage of sales were 5.5%, 5.3% and 4.8% for 2011, 2010 2009 and 2008,2009, 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 additional week partially offset by the decrease in gross profit as a percentage of sales, as noted above. The increase in net earnings as a percentage of sales for 2010 as compared with 2009 was primarily due to increases in gross profit and investment income, netas a percentage of sales and decreases in facilities costs. The increase in net earnings for 2009operating and administrative expenses as compared with 2008 was primarily due to increases in gross profit and investment income, net partially offset by increases in payroll, employee benefits and facilities costs.
Accounting Standards
Recently Adopted Standards
In January 2010, the Financial Accounting Standards Board (FASB) issued an amendment to the standardsa percentage of accounting for fair value measurements and disclosures. This amendment required expanded disclosures about the different classes of assets and liabilities measured at fair value, the transfers between Level 1 and Level 2 fair value measurement categories and the valuation techniques and inputs used to determine the fair value of assets and liabilities classified in Level 2 and Level 3 measurement categories. The adoption of this amendment during the quarter ended March 27, 2010 did not have an effect on the Company’s financial condition, results of operations or cash flows.
In June 2009, the FASB issued a new standard that changed the definition of a Variable Interest Entity (VIE), contained new criteria for determining the primary beneficiary of a VIE, required enhanced disclosures to provide more information about a company’s involvement in a VIE and increased the frequency of required reassessments to determine whether a company is the primary beneficiary of a VIE. The adoption of this standard during the quarter ended March 27, 2010 resulted in the consolidation of certain joint ventures in which the Company has a controlling financial interest but did not have a material effect on the Company’s financial condition, results of operations or cash flows.sales, as 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 U.S. generally accepted 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 85%84% and 86%85% of inventories was determined using the dollar value last-in, first-outLIFO method as of December 25, 201031, 2011 and December 26, 2009,25, 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 securities are classified as AFSavailable-for-sale (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 other-than-temporary impairmentOTTI 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 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. 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 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 securities. Since 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 securities held by the Company are subject to equity price risk that results from fluctuations in quoted market prices as 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. An equity security is determined to be OTTI if the Company does not expect to recover the cost of the equity security. A theoretical decrease of 15%10% in the value of the Company’s equity securities 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 5 – 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 2010.2011.
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. 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, 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 increase sales, including private-label sales; results of programs to control or reduce costs; changes in buying, pricing and promotional 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 within 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 these forward-looking statements.
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, 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 future market conditions.
The Company’s long-term investments consist of debt and equity 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 other-than-temporary impairment losses,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 securities are subject to both interest rate risk and credit risk. 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. 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 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 securities. Since 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 securities held by the Company are subject to equity price risk that results from fluctuations in quoted market prices as 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. An equity security is determined to be OTTI if the Company does not expect to recover the cost of the equity security. A theoretical decrease of 15%10% in the value of the Company’s equity securities 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 25, 2010.31, 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. Based on this assessment and these criteria, management believes that the Company’s internal control over financial reporting was effective as of December 25, 2010.31, 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 21.
Item 8. Financial Statements and Supplementary Data
Index to Consolidated Financial Statements and Schedule
| Page | ||||
| 20 | ||||
Consolidated Financial Statements: | ||||
Consolidated Balance Sheets – December | 22 | |||
| 24 | ||||
| 25 | ||||
| 26 | ||||
| 28 | ||||
| 29 | ||||
The following consolidated financial statement schedule of the Company for the years ended December 31, 2011, December 25, 2010 and December 26, 2009 | ||||
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 as of December 25, 201031, 2011 and December 26, 2009,25, 2010, and the related consolidated statements of earnings, comprehensive earnings, cash flows and stockholders’ equity for each of the years in the three-year period ended December 25, 2010.31, 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 25, 201031, 2011 and December 26, 2009,25, 2010, and the results of their operations and their cash flows for each of the years in the three-year period ended December 25, 2010,31, 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 4, the Company adopted new accounting and disclosure guidance related to variable interest entities and noncontrolling interests in consolidated financial statements as of December 27, 2009.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Publix Super Markets, Inc.’s internal control over financial reporting as of December 25, 2010,31, 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 28, 201129, 2012 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
/s/ KPMG LLP
Tampa, Florida
February 28, 201129, 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 internal control over financial reporting as of December 25, 2010,31, 2011, based on criteria established in Internal Control – Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. Publix 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 25, 2010,31, 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 Publix Super Markets, Inc. and subsidiaries as of December 25, 201031, 2011 and December 26, 2009,25, 2010, and the related consolidated statements of earnings, comprehensive earnings, cash flows and stockholders’ equity for each of the years in the three-year period ended December 25, 2010,31, 2011, and our report dated February 28, 201129, 2012 expressed an unqualified opinion on those consolidated financial statements.
/s/ KPMG LLP
Tampa, Florida
February 28, 201129, 2012
Certified Public Accountants
Consolidated Balance SheetsDecember 31, 2011 and
December 25, 2010 and
December 26, 2009
| Assets | 2011 | 2010 | ||||||||||||||
| 2010 | 2009 | (Amounts are in thousands) | ||||||||||||||
| (Amounts are in thousands) | ||||||||||||||||
Assets | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 605,901 | 370,516 | $ | 366,853 | 605,901 | ||||||||||
Short-term investments | 336,282 | 110,499 | 447,972 | 336,282 | ||||||||||||
Trade receivables | 492,311 | 506,500 | 542,990 | 492,311 | ||||||||||||
Merchandise inventories | 1,359,028 | 1,385,273 | 1,361,709 | 1,359,028 | ||||||||||||
Deferred tax assets | 59,126 | 54,087 | 59,400 | 59,126 | ||||||||||||
Prepaid expenses | 25,354 | 22,477 | 24,316 | 25,354 | ||||||||||||
|
| |||||||||||||||
Total current assets | 2,878,002 | 2,449,352 | 2,803,240 | 2,878,002 | ||||||||||||
|
| |||||||||||||||
Long-term investments | 2,759,751 | 2,086,532 | 3,805,283 | 2,759,751 | ||||||||||||
Other noncurrent assets | 168,398 | 206,824 | 171,179 | 168,398 | ||||||||||||
Property, plant and equipment: | ||||||||||||||||
Land | 504,415 | 397,618 | 592,843 | 504,415 | ||||||||||||
Buildings and improvements | 1,918,940 | 1,704,908 | 2,062,833 | 1,918,940 | ||||||||||||
Furniture, fixtures and equipment | 4,488,139 | 4,366,123 | 4,540,988 | 4,488,139 | ||||||||||||
Leasehold improvements | 1,293,578 | 1,261,390 | 1,321,646 | 1,293,578 | ||||||||||||
Construction in progress | 110,909 | 191,907 | 103,006 | 110,909 | ||||||||||||
|
| |||||||||||||||
| 8,315,981 | 7,921,946 | 8,621,316 | 8,315,981 | |||||||||||||
Accumulated depreciation | (3,963,045 | ) | (3,660,362 | ) | (4,132,786 | ) | (3,963,045 | ) | ||||||||
|
| |||||||||||||||
Net property, plant and equipment | 4,352,936 | 4,261,584 | 4,488,530 | 4,352,936 | ||||||||||||
|
| |||||||||||||||
| $ | 10,159,087 | 9,004,292 | $ | 11,268,232 | 10,159,087 | |||||||||||
|
| |||||||||||||||
See accompanying notes to consolidated financial statements.
Current liabilities: Accounts payable Accrued expenses: Contribution to retirement plans Self-insurance reserves Salaries and wages Other Current portion of long-term debt Federal and state income taxes Total current liabilities Deferred tax liabilities Self-insurance reserves Accrued postretirement benefit cost Long-term debt Other noncurrent liabilities Total liabilities Stockholders’ equity: Common stock of $1 par value. Authorized 1,000,000 shares; issued and outstanding 780,969 shares in 2010 and 780,566 shares in 2009 Additional paid-in capital Retained earnings Accumulated other comprehensive earnings Total stockholders’ equity Noncontrolling interests Total equity Commitments and contingencies 2010 2009 (Amounts are in thousands,
except par value) Liabilities and Equity $ 1,156,181 1,125,073 376,002 349,650 114,133 119,375 113,794 99,548 249,633 228,720 72,879 29,151 23,462 28,575 2,106,084 1,980,092 225,695 203,069 221,337 229,589 90,935 83,368 76,482 70,175 132,962 134,461 2,853,495 2,700,754 780,969 780,566 1,092,008 837,969 5,349,387 4,637,884 38,226 43,205 7,260,590 6,299,624 45,002 3,914 7,305,592 6,303,538 — — $ 10,159,087 9,004,292
| 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 | ||||||
|
|
|
| |||||
Consolidated Statements of Earnings
Years ended December 31, 2011, December 25, 2010
and December 26, 2009
and December 27, 2008
2011 | 2010 | 2009 | ||||||||||||||||||||||
| 2010 | 2009 | 2008 | ||||||||||||||||||||||
| (Amounts are in thousands, except per share amounts) | ||||||||||||||||||||||||
| (Amounts are in thousands, except per share amounts) | ||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||
Sales | $ | 25,134,054 | 24,319,716 | 23,929,064 | $26,967,389 | 25,134,054 | 24,319,716 | |||||||||||||||||
Other operating income | 194,000 | 195,244 | 180,520 | 211,375 | 194,000 | 195,244 | ||||||||||||||||||
Total revenues | 25,328,054 | 24,514,960 | 24,109,584 | 27,178,764 | 25,328,054 | 24,514,960 | ||||||||||||||||||
Costs and expenses: | ||||||||||||||||||||||||
Cost of merchandise sold | 18,111,443 | 17,592,679 | 17,486,823 | 19,520,370 | 18,111,443 | 17,592,679 | ||||||||||||||||||
Operating and administrative expenses | 5,295,287 | 5,241,368 | 5,056,962 | 5,523,469 | 5,295,287 | 5,241,368 | ||||||||||||||||||
Total costs and expenses | 23,406,730 | 22,834,047 | 22,543,785 |
| 25,043,839 |
| 23,406,730 | 22,834,047 | ||||||||||||||||
Operating profit | 1,921,324 | 1,680,913 | 1,565,799 | 2,134,925 | 1,921,324 | 1,680,913 | ||||||||||||||||||
Investment income | 91,835 | 87,555 | 118,293 | 99,039 | 91,835 | 87,555 | ||||||||||||||||||
Other-than-temporary impairment losses | — | (19,283 | ) | (60,800 | ) | (6,082) | --- | (19,283) | ||||||||||||||||
Investment income, net | 92,957 | 91,835 | 68,272 | |||||||||||||||||||||
Investment income, net | 91,835 | 68,272 | 57,493 | |||||||||||||||||||||
Other income, net | 26,259 | 25,529 | 28,120 | 33,891 | 26,259 | 25,529 | ||||||||||||||||||
Earnings before income tax expense | 2,039,418 | 1,774,714 | 1,651,412 | 2,261,773 | 2,039,418 | 1,774,714 | ||||||||||||||||||
Income tax expense | 701,271 | 613,272 | 561,642 | 769,807 | 701,271 | 613,272 | ||||||||||||||||||
Net earnings | $ | 1,338,147 | 1,161,442 | 1,089,770 | $ 1,491,966 | 1,338,147 | 1,161,442 | |||||||||||||||||
Weighted average shares outstanding | 786,378 | 788,835 | 818,248 | 784,815 | 786,378 | 788,835 | ||||||||||||||||||
Basic and diluted earnings per share | $ | 1.70 | 1.47 | 1.33 | $ 1.90 | 1.70 | 1.47 | |||||||||||||||||
See accompanying notes to consolidated financial statements.
Consolidated Statements of Comprehensive Earnings
Years ended December 31, 2011, December 25, 2010
and December 26, 2009
and December 27, 2008
| 2010 | 2009 | 2008 | 2011 | 2010 | 2009 | |||||||||||||||||||
| (Amounts are in thousands) | (Amounts are in thousands) | |||||||||||||||||||||||
Net earnings | $ | 1,338,147 | 1,161,442 | 1,089,770 | $ | 1,491,966 | 1,338,147 | 1,161,442 | ||||||||||||||||
Other comprehensive (losses) earnings: | ||||||||||||||||||||||||
Unrealized gain (loss) on available-for-sale (AFS) securities, net of tax effect of $8,251, $33,777 and ($25,089) in 2010, 2009 and 2008, respectively | 13,102 | 53,637 | (39,841 | ) | ||||||||||||||||||||
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 ($9,473), $2,628 and $26,210 in 2010, 2009 and 2008, respectively | (15,043 | ) | 4,173 | 41,622 | ||||||||||||||||||||
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 ($1,913), ($1,246) and ($155) in 2010, 2009 and 2008, respectively | (3,038 | ) | (1,979 | ) | (245 | ) | ||||||||||||||||||
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 | $ | 1,333,168 | 1,217,273 | 1,091,306 | $ | 1,484,001 | 1,333,168 | 1,217,273 | ||||||||||||||||
|
|
| ||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
Consolidated Statements of Cash Flows
Years ended December 31, 2011, December 25, 2010
and December 26, 2009
and December 27, 2008
| 2010 | 2009 | 2008 | 2011 | 2010 | 2009 | |||||||||||||||||||
| (Amounts are in thousands) | (Amounts are in thousands) | |||||||||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||||||
Cash received from customers | $ | 25,209,753 | 24,231,980 | 23,956,284 | $ | 26,980,492 | 25,209,753 | 24,231,980 | ||||||||||||||||
Cash paid to employees and suppliers | (22,253,046 | ) | (21,646,622 | ) | (21,570,749 | ) | (24,024,194 | ) | (22,253,046 | ) | (21,646,622 | ) | ||||||||||||
Income taxes paid | (686,037 | ) | (553,235 | ) | (641,307 | ) | (658,213 | ) | (686,037 | ) | (553,235 | ) | ||||||||||||
Self-insured claims paid | (274,305 | ) | (283,079 | ) | (267,780 | ) | (285,362 | ) | (274,305 | ) | (283,079 | ) | ||||||||||||
Dividends and interest received | 95,794 | 73,087 | 135,382 | 139,727 | 95,794 | 73,087 | ||||||||||||||||||
Other operating cash receipts | 184,760 | 185,331 | 170,124 | 203,112 | 184,760 | 185,331 | ||||||||||||||||||
Other operating cash payments | (10,951 | ) | (9,230 | ) | (9,100 | ) | (14,375 | ) | (10,951 | ) | (9,230 | ) | ||||||||||||
|
|
| ||||||||||||||||||||||
Net cash provided by operating activities | 2,265,968 | 1,998,232 | 1,772,854 | 2,341,187 | 2,265,968 | 1,998,232 | ||||||||||||||||||
|
|
| ||||||||||||||||||||||
Cash flows from investing activities: | ||||||||||||||||||||||||
Payment for property, plant and equipment | (468,530 | ) | (693,489 | ) | (1,289,707 | ) | (602,952 | ) | (468,530 | ) | (693,489 | ) | ||||||||||||
Proceeds from sale of property, plant and equipment | 2,815 | 4,150 | 10,074 | 5,312 | 2,815 | 4,150 | ||||||||||||||||||
Payment for investments | (1,598,759 | ) | (1,133,449 | ) | (317,020 | ) | (2,062,775 | ) | (1,598,759 | ) | (1,133,449 | ) | ||||||||||||
Proceeds from sale and maturity of investments | 655,799 | 777,381 | 1,155,615 | 841,028 | 655,799 | 777,381 | ||||||||||||||||||
|
|
| ||||||||||||||||||||||
Net cash used in investing activities | (1,408,675 | ) | (1,045,407 | ) | (441,038 | ) | (1,819,387 | ) | (1,408,675 | ) | (1,045,407 | ) | ||||||||||||
|
|
| ||||||||||||||||||||||
Cash flows from financing activities: | ||||||||||||||||||||||||
Payment for acquisition of common stock | (436,224 | ) | (629,453 | ) | (1,127,581 | ) | (497,570 | ) | (436,224 | ) | (629,453 | ) | ||||||||||||
Proceeds from sale of common stock | 178,914 | 152,096 | 148,281 | 206,245 | 178,914 | 152,096 | ||||||||||||||||||
Dividends paid | (364,087 | ) | (325,295 | ) | (364,583 | ) | (418,680 | ) | (364,087 | ) | (325,295 | ) | ||||||||||||
Repayments of long-term debt | (49,076 | ) | (10,875 | ) | (1,138 | ) | ||||||||||||||||||
Other, net | (511 | ) | 18,530 | 31,013 | (1,767 | ) | 10,364 | 19,668 | ||||||||||||||||
|
|
| ||||||||||||||||||||||
Net cash used in financing activities | (621,908 | ) | (784,122 | ) | (1,312,870 | ) | (760,848 | ) | (621,908 | ) | (784,122 | ) | ||||||||||||
|
|
| ||||||||||||||||||||||
Net increase in cash and cash equivalents | 235,385 | 168,703 | 18,946 | |||||||||||||||||||||
Net (decrease) increase in cash and cash equivalents | (239,048 | ) | 235,385 | 168,703 | ||||||||||||||||||||
Cash and cash equivalents at beginning of year | 370,516 | 201,813 | 182,867 | 605,901 | 370,516 | 201,813 | ||||||||||||||||||
|
|
| ||||||||||||||||||||||
Cash and cash equivalents at end of year | $ | 605,901 | 370,516 | 201,813 | $ | 366,853 | 605,901 | 370,516 | ||||||||||||||||
|
|
| ||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
Reconciliation of net earnings to net cash provided by operating activities: Net earnings Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization Retirement contributions paid or payable in common stock Deferred income taxes Loss on disposal and impairment of property, plant and equipment (Gain) loss on AFS securities Net amortization of investments Change in operating assets and liabilities providing (requiring) cash: Trade receivables Merchandise inventories Prepaid expenses and other noncurrent assets Accounts payable and accrued expenses Self-insurance reserves Federal and state income taxes Other noncurrent liabilities Total adjustments Net cash provided by operating activities 2010 2009 2008 (Amounts are in thousands) $ 1,338,147 1,161,442 1,089,770 507,341 496,106 444,311 275,547 256,110 231,892 20,722 27,018 (14,666 ) 19,896 32,482 23,383 (24,516 ) 6,801 67,832 48,113 15,625 8,489 16,165 (140,082 ) (6,158 ) 26,245 2,302 (108,044 ) (8,054 ) (5,825 ) (768 ) 63,852 103,014 71,733 (13,494 ) (14,381 ) 18,899 (5,113 ) 33,186 (65,020 ) 1,117 24,434 11,201 927,821 836,790 683,084 $ 2,265,968 1,998,232 1,772,854
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 | ||||||||
|
|
|
|
|
| |||||||
Consolidated Statements of Stockholders’ Equity
Years ended December 31, 2011, December 25, 2010
and December 26, 2009
and December 27, 2008
| Common Stock | Additional Paid-in Capital | Retained Earnings | Common Stock (Acquired from) Sold to Stockholders | Accumulated Other Comprehensive Earnings (Losses) | Total Stockholders’ Equity | 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 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 on postretirement benefits | — | — | (801 | ) | — | 1,315 | 514 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Amounts are in thousands, except per share amounts) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balances at December 27, 2008 | 793,966 | 806,526 | 4,055,432 | — | (12,626 | ) | 5,643,298 | $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 | --- | --- | 1,161,442 | --- | 55,831 | --- | 1,217,273 | ||||||||||||||||||||||||||||||||||||||||||||||
Cash dividends, $0.41 per share | — | — | (325,295 | ) | — | — | (325,295 | ) | --- | --- | (325,295 | ) | --- | --- | --- | (325,295 | ) | ||||||||||||||||||||||||||||||||||||||||||
Contribution of 15,013 shares to retirement plans | 3,522 | 31,594 | — | 206,589 | — | 241,705 | 3,522 | 31,594 | --- | 206,589 | --- | --- | 241,705 | ||||||||||||||||||||||||||||||||||||||||||||||
Acquired 37,895 shares from stockholders | — | — | — | (629,453 | ) | — | (629,453 | ) | --- | --- | --- | (629,453 | ) | --- | --- | (629,453 | ) | ||||||||||||||||||||||||||||||||||||||||||
Sale of 9,482 shares to stockholders | 7 | (151 | ) | — | 152,240 | — | 152,096 | 7 | (151 | ) | --- | 152,240 | --- | --- | 152,096 | ||||||||||||||||||||||||||||||||||||||||||||
Retirement of 16,929 shares | (16,929 | ) | — | (253,695 | ) | 270,624 | — | — | (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 | 6,299,624 | 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 | --- | --- | 1,338,147 | --- | (4,979 | ) | --- | 1,333,168 | ||||||||||||||||||||||||||||||||||||||||||||
Cash dividends, $0.46 per share | — | — | (364,087 | ) | — | — | (364,087 | ) | --- | --- | (364,087 | ) | --- | --- | --- | (364,087 | ) | ||||||||||||||||||||||||||||||||||||||||||
Contribution of 14,363 shares to retirement plans | 12,968 | 214,414 | — | 21,813 | — | 249,195 | 12,968 | 214,414 | --- | 21,813 | --- | --- | 249,195 | ||||||||||||||||||||||||||||||||||||||||||||||
Acquired 23,731 shares from stockholders | — | — | — | (436,224 | ) | — | (436,224 | ) | --- | --- | --- | (436,224 | ) | --- | --- | (436,224 | ) | ||||||||||||||||||||||||||||||||||||||||||
Sale of 9,771 shares to stockholders | 2,255 | 39,625 | — | 137,034 | — | 178,914 | 2,255 | 39,625 | --- | 137,034 | --- | --- | 178,914 | ||||||||||||||||||||||||||||||||||||||||||||||
Retirement of 14,820 shares | (14,820 | ) | — | (262,557 | ) | 277,377 | — | — | (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 | 7,260,590 | 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.
Notes to Consolidated Financial Statements
(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 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. For eachSee percentage of the fiscal years 2008 through 2010,consolidated sales from all other lines of business combined represent less than 5% of the total Company sales.by merchandise category on page 1.
| (b) | Principles of Consolidation |
The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries and certain joint ventures (JV) in which the Company has a controlling financial interest. All significant intercompany balances and transactions are eliminated in consolidation.
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. The Company evaluates these JVs using specific criteria to determine whether the Company has a controlling financial interest and is the primary beneficiary of the JV. 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. 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 day to day capital and operating decisions and each member’s influence over the shopping center’s economic performance.
| (c) | Fiscal Year |
The Company’s fiscal year ends on the last Saturday in December. Fiscal year 2011 includes 53 weeks and fiscal years 2010 2009 and 20082009 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 85%84% and 86%85% of inventories was determined using the dollar value last-in, first-out method as of December 25, 201031, 2011 and December 26, 2009,25, 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 $279,413,000$346,558,000 and $265,289,000$279,413,000 as of December 25, 201031, 2011 and December 26, 2009,25, 2010, respectively.
| (g) | Investments |
All of the Company’s debt and equity securities are classified as available-for-sale (AFS) and are carried at fair value. The Company evaluates 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 and prospects of the issuer or security.
PUBLIX SUPER MARKETS, INC.
Notes to Consolidated Financial Statements
Declines in the value of AFS securities determined to be OTTI are recognized in earnings and reported as other-than-temporary impairmentOTTI 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 included as a component of 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 cost of AFS securities sold is based on the 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 the related leases, if shorter, as follows:
Buildings and improvements | 10 – 40 years | ||||||
Furniture, fixtures and equipment | 3 – 20 years | ||||||
Leasehold improvements | 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.
| (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 $9,818,000, $7,514,000 and $11,959,000 for 2011, 2010 and $16,750,000 for 2010, 2009, and 2008, respectively.
| (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. Long-lived assets, including buildings and improvements, leasehold improvements, and furniture, fixtures and equipment are evaluated for impairment at the 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.
PUBLIX SUPER MARKETS, INC.
Notes to Consolidated Financial Statements
| (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 postretirement benefit plan obligation.
As of December 31, 2011, accumulated other comprehensive earnings included net unrealized gains on AFS securities of $72,879,000, less tax effect of $28,176,000, and an unfunded postretirement benefit obligation of $23,536,000, less tax effect of $9,094,000. As of December 25, 2010, accumulated other comprehensive earnings included net unrealized gains on AFS securities of $76,400,000, net ofless tax effect of $29,536,000, and an unfunded postretirement benefit obligation of $14,077,000, net ofless tax effect of $5,439,000. As of December 26, 2009, accumulated other comprehensive earnings included net unrealized gains on AFS securities of $79,563,000, net of tax effect of $30,758,000, and an unfunded postretirement benefit obligation of $9,126,000, net of tax effect of $3,526,000.
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.
| (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 transaction fees, commissions on licensee sales, vending machine commissions, mall gift card commissions, money transfer fees and coupon redemption income and mall gift card commissions.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 $8,898,000, $10,715,000 and $7,982,000 for 2011, 2010 and $12,969,000 for 2010, 2009, and 2008, respectively.
| (q) | Advertising Costs |
Advertising costs are expensed as incurred and were $202,405,000, $191,788,000 and $180,159,000 for 2011, 2010 and $196,391,000 for 2010, 2009, and 2008, 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 income tax liabilities 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 U.S. generally accepted 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.
Certain 2009 amounts have been reclassified to conform with the 2010 presentation in the consolidated balance sheets primarily due to the adoption of an amendment to the standard of accounting for Variable Interest Entities (VIE).
| (2) | Fair Value of Financial Instruments |
The fair value of certain of the Company’s financial instruments, including cash and cash equivalents, trade receivables and accounts payable, approximate their respective carrying amounts due to their short-term maturity.
The fair value of AFS securities areis based on market prices using the following measurement 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, 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 value of collateralized mortgage obligation securities areis determined by using models to develop prepayment and interest rate scenarios for these securities which have prepayment features. AFS securities that are included in this category are primarily debt securities (tax exempt and taxable 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 25, 201031, 2011 and December 26, 2009:25, 2010:
| Fair Value | Level 1 | Level 2 | Level 3 | Fair | ||||||||||||||||||||||||||
Value | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||||
| (Amounts are in thousands) | ||||||||||||||||||||||||||||||
| (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 | — | 3,096,033 | 223,655 | 2,872,378 | --- | |||||||||||||||||||||
December 26, 2009 | 2,197,031 | 189,053 | 2,007,978 | — | ||||||||||||||||||||||||||
PUBLIX SUPER MARKETS, INC.
Notes to Consolidated Financial Statements
| (3) | Investments |
Following is a summary of AFS securities as of December 25, 201031, 2011 and December 26, 2009:25, 2010:
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | 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 | ||||||||||||||||||||||||||||||||
| (Amounts are in thousands) | $4,180,376 | 92,236 | 19,357 | 4,253,255 | ||||||||||||||||||||||||||||||||
2010 | ||||||||||||||||||||||||||||||||||||
Tax exempt bonds | $ | 1,932,466 | 13,308 | 8,322 | 1,937,452 | $1,932,466 | 13,308 | 8,322 | 1,937,452 | |||||||||||||||||||||||||||
Taxable bonds | 867,430 | 16,108 | 2,542 | 880,996 | 867,430 | 16,108 | 2,542 | 880,996 | ||||||||||||||||||||||||||||
Equity securities | 219,737 | 60,536 | 2,688 | 277,585 | 219,737 | 60,536 | 2,688 | 277,585 | ||||||||||||||||||||||||||||
| $3,019,633 | 89,952 | 13,552 | 3,096,033 | |||||||||||||||||||||||||||||||||
| $ | 3,019,633 | 89,952 | 13,552 | 3,096,033 | ||||||||||||||||||||||||||||||||
2009 | ||||||||||||||||||||||||||||||||||||
Tax exempt bonds | $ | 1,193,775 | 20,210 | 598 | 1,213,387 | |||||||||||||||||||||||||||||||
Taxable bonds | 772,399 | 10,383 | 3,304 | 779,478 | ||||||||||||||||||||||||||||||||
Equity securities | 151,294 | 55,080 | 2,208 | 204,166 | ||||||||||||||||||||||||||||||||
| $ | 2,117,468 | 85,673 | 6,110 | 2,197,031 | ||||||||||||||||||||||||||||||||
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 realizedrestricted 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 $22,445,000 for 2010, 2009, and 2008, 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 $90,277,000 for 2010, 2009, respectively. The Company recorded OTTI losses on equity securities of $6,082,000 and 2008,$19,283,000 in 2011 and 2009, respectively. There were no OTTI losses on equity securities in 2010. The Company recorded OTTI losses on equity securities of $19,283,000 and $58,990,000 for 2009 and 2008, respectively. There were no OTTI losses on debt securities in 2011, 2010 and 2009. The Company recorded OTTI losses on debt securities of $1,810,000 in 2008.
The amortized cost and fair value of AFS securities by expected maturity as of December 25, 201031, 2011 and December 26, 200925, 2010 are as follows:
| 2010 | 2009 | |||||||||||||||||||||||||||||||||||
| 2011 | 2010 | |||||||||||||||||||||||||||||||||||
| Amortized | Fair | Amortized | Fair | |||||||||||||||||||||||||||||||||
| Cost | Value | Cost | Value | Amortized Cost | Fair Value | Amortized Cost | Fair Value | |||||||||||||||||||||||||||||
| (Amounts are in thousands) | (Amounts are in thousands) | |||||||||||||||||||||||||||||||||||
Due in one year or less | $ | 332,992 | 336,282 | 109,290 | 110,499 | $ 445,296 | 447,972 | 332,992 | 336,282 | |||||||||||||||||||||||||||
Due after one year through five years | 1,499,176 | �� | 1,506,731 | 934,195 | 946,971 | 2,492,484 | 2,524,020 | 1,499,176 | 1,506,731 | |||||||||||||||||||||||||||
Due after five years through ten years | 337,677 | 335,056 | 150,839 | 153,506 | 348,427 | 356,808 | 337,677 | 335,056 | ||||||||||||||||||||||||||||
Due after ten years | 630,051 | 640,379 | 771,850 | 781,889 | 428,064 | 440,079 | 630,051 | 640,379 | ||||||||||||||||||||||||||||
| 3,714,271 | 3,768,879 | 2,799,896 | 2,818,448 | |||||||||||||||||||||||||||||||||
| 2,799,896 | 2,818,448 | 1,966,174 | 1,992,865 | |||||||||||||||||||||||||||||||||
Restricted investments | 170,000 | 166,981 | --- | --- | ||||||||||||||||||||||||||||||||
Equity securities | 219,737 | 277,585 | 151,294 | 204,166 | 296,105 | 317,395 | 219,737 | 277,585 | ||||||||||||||||||||||||||||
| $4,180,376 | 4,253,255 | 3,019,633 | 3,096,033 | |||||||||||||||||||||||||||||||||
| $ | 3,019,633 | 3,096,033 | 2,117,468 | 2,197,031 | ||||||||||||||||||||||||||||||||
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 25, 201031, 2011 and December 26, 2009:25, 2010:
| Less Than 12 Months | 12 Months or Longer | Total | Less Than 12 Months | 12 Months or Longer | Total | |||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||||||||||||||||||||||||||||||||
| (Amounts are in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
(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 | $624,553 | 8,321 | 54 | 1 | 624,607 | 8,322 | |||||||||||||||||||||||||||||||||||||||||
Taxable bonds | 155,160 | 2,045 | 4,130 | 497 | 159,290 | 2,542 | 155,160 | 2,045 | 4,130 | 497 | 159,290 | 2,542 | ||||||||||||||||||||||||||||||||||||||||||
Equity securities | 30,065 | 1,914 | 3,571 | 774 | 33,636 | 2,688 | 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 | $809,778 | 12,280 | 7,755 | 1,272 | 817,533 | 13,552 | |||||||||||||||||||||||||||||||||||||||||
2009 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tax exempt bonds | $ | 108,628 | 598 | — | — | 108,628 | 598 | |||||||||||||||||||||||||||||||||||||||||||||||
Taxable bonds | 202,633 | 1,452 | 10,774 | 1,852 | 213,407 | 3,304 | ||||||||||||||||||||||||||||||||||||||||||||||||
Equity securities | 17,306 | 2,208 | — | — | 17,306 | 2,208 | ||||||||||||||||||||||||||||||||||||||||||||||||
Total temporarily impaired AFS securities | $ | 328,567 | 4,258 | 10,774 | 1,852 | 339,341 | 6,110 | |||||||||||||||||||||||||||||||||||||||||||||||
There are 336298 AFS securities issues contributing to the total unrealized loss of $13,552,000$19,357,000 as of December 25, 2010.31, 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 VIEsvariable interest entities (VIE) that resulted in the consolidationsconsolidation 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, allmost major JV 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. Management and other fees paid byHowever, 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 toowned shopping center. Additionally, through its member equity interest in the JV, the Company will receive a member are nominal and believed to be at market.
The consolidation of certain JVs during the quarter ended March 27, 2010 did not have an effect on beginning retained earnings since the earnings and losses of these JVs were previously accounted for under the equity method. The noncash balance sheet effect from the consolidation of these JVs assignificant portion of the beginningJV’s benefits or is obligated to absorb a significant portion of the year was as follows:JV’s losses.
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PUBLIX SUPER MARKETS, INC.
Notes to Consolidated Financial Statements
As of December 25, 2010,31, 2011, the carrying amounts of the assets and liabilities of the consolidated JVs including previously consolidated JVs, were $226,541,000$177,226,000 and $123,660,000,$76,249,000, respectively. The assets are owned by, and the liabilities are obligations of, the JVs, not the Company, except for a 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 2009 and 20082009 were immaterial. The Company’s involvement with these JVs does not have a significant effect on the Company’s financial condition, results of operations or cash flows.
The JVs are financed with capital contributions from the members, loans guaranteed by the members and/or the cash flows generated by the shopping centers once in operation. Generally, the assets of the JVs are used as collateral to secure the JVs’ debt. Certain of the JVs have borrowings which are comprised of non-recourse loans. The Company is not contingently obligated under any of these loans.
The Company’s long-term debt results primarily from the consolidation of loans of certain JVs and loans assumed in connection with the purchaseacquisition of certain shopping centers. Long-term debt maturitiescenters 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 January 2011July 2012 through January 2015 and have either (1) fixed interest rates ranging from 4.5% to 5.5%5.3% or (2) variable interest rates based on a LIBOR index plus basis points ranging from 110195 basis points to 250 basis points. Long-term debt maturitiesMaturities of assumed shopping center loans range from September 2013 through June 2024 and have fixed interest rates ranging from 5.25%5.1% to 7.125%7.1%.
As of December 25, 2010,31, 2011, the aggregate annual maturities and scheduled payments of long-term debt are as follows:
Year | ||||||||
| (Amounts are in thousands) | (Amounts are in thousands) | |||||||
2011 | $ | 72,879 | ||||||
2012 | 1,841 | $ | 15,124 | |||||
2013 | 45,670 | 45,401 | ||||||
2014 | 6,262 | 38,320 | ||||||
2015 | 8,405 | 8,550 | ||||||
2016 | 9,257 | |||||||
Thereafter | 14,304 | 17,932 | ||||||
| ||||||||
| $ | 149,361 | $ | 134,584 | |||||
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| (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.
On December 30, 2007, the Company adopted a new accounting standard on postretirement benefits that requires measurement of the funded status as of the end of the Company’s fiscal year. Previously, the measurement date was October 1. Upon adoption, the Company re-measured the postretirement benefit obligation which resulted in a reduction to retained earnings of $1,306,000, net of tax effect of $505,000, and an actuarial gain to accumulated other comprehensive earnings of $2,143,000, net of tax effect of $828,000, as of December 27, 2008. A net actuarial loss was recognized in other comprehensive earnings of $4,951,000, net of tax effect of $1,913,000, in 2010. 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, net ofless tax effect of $1,246,000, in 2009 and $400,000, net of tax effect of $155,000, in 2008.2009.
The Company made benefit payments to beneficiaries of retirees of $3,146,000, $2,626,000 and $4,483,000 during 2011, 2010 and $2,746,000 during 2010, 2009, and 2008, respectively.
PUBLIX SUPER MARKETS, INC.
Notes to Consolidated Financial Statements
The following tables provide a reconciliation of the changes in the benefit obligation and fair value of plan assets and the unfunded status of the plan measured as of December 25, 201031, 2011 and December 26, 2009:25, 2010:
| 0000000 | 0000000 | |||||||||||||||
| 2011 | 2010 | |||||||||||||||
| 2010 | 2009 | |||||||||||||||
| (Amounts are in thousands) | ||||||||||||||||
(Amounts are in thousands) | ||||||||||||||||
Change in benefit obligation: | ||||||||||||||||
Benefit obligation as of beginning of year | $ | 86,890 | 82,750 | $ 94,776 | 86,890 | |||||||||||
Service cost | 175 | 194 | 163 | 175 | ||||||||||||
Interest cost | 5,291 | 5,204 | 5,301 | 5,291 | ||||||||||||
Actuarial loss | 5,046 | 3,225 | 10,530 | 5,046 | ||||||||||||
Benefit payments | (2,626 | ) | (4,483 | ) | (3,146) | (2,626) | ||||||||||
Benefit obligation as of end of year | 94,776 | 86,890 | 107,624 | 94,776 | ||||||||||||
Change in fair value of plan assets: | ||||||||||||||||
Fair value of plan assets as of beginning of year | — | — | --- | --- | ||||||||||||
Employer contributions | 2,626 | 4,483 | 3,146 | 2,626 | ||||||||||||
Benefit payments | (2,626 | ) | (4,483 | ) | (3,146) | (2,626) | ||||||||||
Fair value of plan assets as of end of year | — | — | --- | --- | ||||||||||||
Unfunded status of the plan as of end of year | $ | 94,776 | 86,890 | $107,624 | 94,776 | |||||||||||
Current liability | $ | 3,841 | 3,522 | $ 4,029 | 3,841 | |||||||||||
Noncurrent liability | 90,935 | 83,368 | 103,595 | 90,935 | ||||||||||||
Total recognized liability | $ | 94,776 | 86,890 | $107,624 | 94,776 | |||||||||||
The estimated future benefit payments are expected to be paid as follows:
Year | ||||||||
| (Amounts are in thousands) | (Amounts are in thousands) | |||||||
2011 | $ | 3,841 | ||||||
2012 | 4,086 | $ | 4,029 | |||||
2013 | 4,356 | 4,291 | ||||||
2014 | 4,637 | 4,539 | ||||||
2015 | 4,912 | 4,776 | ||||||
2016 through 2020 | 29,055 | |||||||
2016 | 5,002 | |||||||
2017 through 2021 | 28,663 | |||||||
Thereafter | 43,889 | 56,324 | ||||||
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| $ | 94,776 | $ | 107,624 | |||||
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Net periodic postretirement benefit cost consists of the following components:
| 00000 | 00000 | 00000 | ||||||||||||||||||||||
| 2010 | 2009 | 2008 | 2011 | 2010 | 2009 | |||||||||||||||||||
| (Amounts are in thousands) | (Amounts are in thousands) | |||||||||||||||||||||||
Service cost | $ | 175 | 194 | 217 | $ 163 | 175 | 194 | |||||||||||||||||
Interest cost | 5,291 | 5,204 | 5,093 | 5,301 | 5,291 | 5,204 | ||||||||||||||||||
Amortization of actuarial losses | 95 | — | — | 1,071 | 95 | --- | ||||||||||||||||||
Net periodic postretirement benefit cost | $ | 5,561 | 5,398 | 5,310 | $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 measurement date is the Company’s fiscal year end. The net periodic postretirement benefit cost is based on assumptions determined at the prior year end measurement date.
Following are the actuarial assumptions that were used in the calculation of the year end benefit obligation:
| 2010 | 2009 | 2008 | 2011 | 2010 | 2009 | |||||||||||||||||||
Discount rate | 5.70 | % | 6.20 | % | 6.40 | % | 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:
| 2010 | 2009 | 2008 | 2011 | 2010 | 2009 | |||||||||||||||||||
Discount rate | 6.20 | % | 6.40 | % | 6.50 | % | 5.7% | 6.2% | 6.4% | |||||||||||||||
Rate of compensation increase | 4.00 | % | 4.00 | % | 4.00 | % | 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.
| (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. The amountCompensation expense recorded for contributions to this plan was $267,099,000, $253,093,000 and $234,336,000 for 2011, 2010 and $210,593,0002009, 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, 2009respectively. The cost of the shares held by the ESOP totaled $2,020,393,000 and 2008,$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 2011, 2010 2009 and 2008,2009, 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. The amountCompensation expense recorded for the Company’s match to the 401(k) plan was $24,141,000, $22,454,000 and $21,774,000 for 2011, 2010 and $21,300,000 for 2010, 2009, and 2008, 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.
Total income taxes for 2010, 2009 and 2008 were allocated as follows:
| 2010 | 2009 | 2008 | ||||||||||
| (Amounts are in thousands) | ||||||||||||
Earnings | $ | 701,271 | 613,272 | 561,642 | ||||||||
Other comprehensive earnings (losses) | (3,135 | ) | 35,159 | 966 | ||||||||
Accumulated other comprehensive earnings and retained earnings | — | — | 323 | |||||||||
| $ | 698,136 | 648,431 | 562,931 | |||||||||
PUBLIX SUPER MARKETS, INC.
Notes to Consolidated Financial Statements
| (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 | |||||||
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| $ | 764,792 | 698,136 | 648,431 | |||||||||
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The provision for income taxes consists of the following:
| Current | Deferred | Total | Current | Deferred | Total | ||||||||||||||||||||||
| (Amounts are in thousands) | |||||||||||||||||||||||||||
2011 | |||||||||||||||||||||||||||
Federal | $592,275 | 90,486 | 682,761 | ||||||||||||||||||||||||
State | 81,684 | 5,362 | 87,046 | ||||||||||||||||||||||||
| (Amounts are in thousands) | $673,959 | 95,848 | 769,807 | ||||||||||||||||||||||||
2010 | |||||||||||||||||||||||||||
Federal | $ | 601,098 | 23,778 | 624,876 | $601,098 | 23,778 | 624,876 | ||||||||||||||||||||
State | 79,451 | (3,056 | ) | 76,395 | 79,451 | (3,056 | ) | 76,395 | |||||||||||||||||||
| $680,549 | 20,722 | 701,271 | |||||||||||||||||||||||||
| $ | 680,549 | 20,722 | 701,271 | ||||||||||||||||||||||||
2009 | |||||||||||||||||||||||||||
Federal | $ | 518,269 | 28,064 | 546,333 | $518,269 | 28,064 | 546,333 | ||||||||||||||||||||
State | 67,985 | (1,046 | ) | 66,939 | 67,985 | (1,046 | ) | 66,939 | |||||||||||||||||||
| $586,254 | 27,018 | 613,272 | |||||||||||||||||||||||||
| $ | 586,254 | 27,018 | 613,272 | ||||||||||||||||||||||||
2008 | |||||||||||||||||||||||||||
Federal | $ | 509,003 | (7,597 | ) | 501,406 | ||||||||||||||||||||||
State | 67,305 | (7,069 | ) | 60,236 | |||||||||||||||||||||||
| $ | 576,308 | (14,666 | ) | 561,642 | |||||||||||||||||||||||
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 | ||||||||||||||||||||||
| 2010 | 2009 | 2008 | ||||||||||||||||||||||
| (Amounts are in thousands) | ||||||||||||||||||||||||
| (Amounts are in thousands) | ||||||||||||||||||||||||
Federal tax at statutory tax rate | $ | 713,796 | 621,150 | 577,994 | $ | 791,621 | 713,796 | 621,150 | ||||||||||||||||
State income taxes (net of federal tax benefit) | 49,657 | 43,511 | 39,153 | 56,580 | 49,657 | 43,511 | ||||||||||||||||||
ESOP dividend | (40,718 | ) | (36,033 | ) | (39,077 | ) | (46,675 | ) | (40,718 | ) | (36,033 | ) | ||||||||||||
Other, net | (21,464 | ) | (15,356 | ) | (16,428 | ) | (31,719 | ) | (21,464 | ) | (15,356 | ) | ||||||||||||
|
|
| ||||||||||||||||||||||
| $ | 701,271 | 613,272 | 561,642 | $ | 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 25, 201031, 2011 and December 26, 200925, 2010 are as follows:
| 2010 | 2009 | |||||||
| (Amounts are in thousands) | ||||||||
Deferred tax assets: | ||||||||
Self-insurance reserves | $ | 113,557 | 114,512 | |||||
Retirement plan contributions | 44,686 | 39,225 | ||||||
Postretirement benefit cost | 36,551 | 33,519 | ||||||
Reserves not currently deductible | 24,731 | 26,846 | ||||||
Advance purchase allowances | 7,768 | 9,253 | ||||||
Inventory capitalization | 12,650 | 12,130 | ||||||
Other | 9,378 | 11,020 | ||||||
Total deferred tax assets | $ | 249,321 | 246,505 | |||||
Deferred tax liabilities: | ||||||||
Property, plant and equipment, primarily due to depreciation | $ | 409,736 | 391,356 | |||||
Other | 6,154 | 4,131 | ||||||
Total deferred tax liabilities | $ | 415,890 | 395,487 | |||||
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 31, 2011 and December 25, 2010 or December 26, 2009.2010.
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 periods subject to examination for the Company’s federal return are the 20022008 through 20092010 tax years, and the Internal Revenue Service is currently auditing thosethe 2008 and 2009 tax years. The periods subject to examination for the Company’s state returns are the 20062007 through 20092010 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 25, 201031, 2011 and December 26, 2009,25, 2010, the Company had immaterial accruals for income tax related interest expense.
The Company had no unrecognized tax benefits in 20102011 and 2009.2010. Because the Company does not have any unrecognized tax benefits as of December 25, 2010,31, 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.
Total rental expense for 2011, 2010 2009 and 20082009 is as follows:
2011 | 2010 | 2009 | ||||||||||||||||||||||
| 2010 | 2009 | 2008 | (Amounts are in thousands) | |||||||||||||||||||||
| (Amounts are in thousands) | ||||||||||||||||||||||||
Minimum rentals | $ | 410,390 | 437,857 | 398,992 | $ | 410,590 | 410,390 | 437,857 | ||||||||||||||||
Contingent rentals | 117,249 | 123,736 | 118,106 | 110,900 | 117,249 | 123,736 | ||||||||||||||||||
Sublease rental income | (5,912 | ) | (5,953 | ) | (7,022 | ) | (4,699 | ) | (5,912 | ) | (5,953 | ) | ||||||||||||
|
|
| ||||||||||||||||||||||
| $ | 521,727 | 555,640 | 510,076 | $ | 516,791 | 521,727 | 555,640 | |||||||||||||||||
|
|
| ||||||||||||||||||||||
As of December 25, 2010,31, 2011, future minimum lease payments for all noncancelable operating leases and related subleases are as follows:
Year | Minimum Rental Commitments | Sublease Rental Income | Net | |||||||||
| (Amounts are in thousands) | ||||||||||||
2011 | $ | 423,168 | (5,157 | ) | 418,011 | |||||||
2012 | 405,272 | (4,445 | ) | 400,827 | ||||||||
2013 | 385,207 | (4,075 | ) | 381,132 | ||||||||
2014 | 356,301 | (3,358 | ) | 352,943 | ||||||||
2015 | 326,084 | (868 | ) | 325,216 | ||||||||
Thereafter | 2,497,091 | (240 | ) | 2,496,851 | ||||||||
| $ | 4,393,123 | (18,143 | ) | 4,374,980 | ||||||||
PUBLIX SUPER MARKETS, INC.
Notes to Consolidated Financial Statements
Year | Minimum Rental Commitments | Sublease Rental Income | Net | |||||||||
| (Amounts are in thousands) | ||||||||||||
2012 | $ 423,516 | 3,975 | 419,541 | |||||||||
2013 | 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 | 2,385,617 | 414 | 2,385,203 | |||||||||
| $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 $1,459,000$1,827,000 and $1,446,000$1,459,000 as of December 25, 201031, 2011 and December 26, 2009,25, 2010, respectively. Rental income was $36,057,000, $32,576,000 and $25,590,000 for 2011, 2010 and $25,272,000 for 2010, 2009, and 2008, respectively. The amounts of minimum future rental payments to be received under noncancelable operating leases are $25,664,000, $22,371,000, $17,849,000, $12,480,000$34,381,000, $28,711,000, $21,897,000, $15,433,000 and $8,568,000$10,634,000 for the years 20112012 through 2015,2016, respectively, and $41,237,000$59,964,000 thereafter.
| (b) | Letters of Credit |
As of December 25, 2010,31, 2011, the Company had $8,600,000$10,200,000 outstanding in trade letters of credit and $4,400,000$3,700,000 in standby letters of credit to support certain purchase obligations. In addition, the Company had $85,000,000 outstanding in a standby letter of credit for the benefit of the Company’s insurance carrier related
PUBLIX SUPER MARKETS, INC.
Notes to self-insurance reserves.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 20102011 and 2009.2010. All quarters have 13 weeks, except the fourth quarter of 2011 which has 14 weeks.
| Quarter | Quarter | |||||||||||||||||||||||||||||||
First | Second | Third | Fourth | |||||||||||||||||||||||||||||
| First | Second | Third | Fourth | |||||||||||||||||||||||||||||
| (Amounts are in thousands, except per share amounts) | ||||||||||||||||||||||||||||||||
| (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 | $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 | 6,024,959 | 5,762,828 | 5,676,395 | 5,942,548 | |||||||||||||||||||||||
Net earnings | $ | 364,399 | 348,424 | 283,222 | 342,102 | 364,399 | 348,424 | 283,222 | 342,102 | |||||||||||||||||||||||
Basic and diluted earnings per share | $ | 0.47 | 0.44 | 0.36 | 0.44 | 0.47 | 0.44 | 0.36 | 0.44 | |||||||||||||||||||||||
2009 | ||||||||||||||||||||||||||||||||
Revenues | $ | 6,416,647 | 6,055,977 | 5,878,716 | 6,163,620 | |||||||||||||||||||||||||||
Costs and expenses | $ | 5,928,173 | 5,626,651 | 5,521,738 | 5,757,485 | |||||||||||||||||||||||||||
Net earnings | $ | 321,508 | 300,840 | 254,934 | 284,160 | |||||||||||||||||||||||||||
Basic and diluted earnings per share | $ | 0.41 | 0.38 | 0.32 | 0.36 | |||||||||||||||||||||||||||
PUBLIX SUPER MARKETS, INC.
Valuation and Qualifying Accounts
Years ended December 31, 2011, December 25, 2010
and December 26, 2009
and December 27, 2008
Description Balance at Beginning of Year Additions Charged to Income Deductions From Reserves Balance at End of Year Year ended December 31, 2011 Reserves not deducted from assets: Self-insurance reserves: Current Noncurrent Year ended December 25, 2010 Reserves not deducted from assets: Self-insurance reserves: Current Noncurrent Year ended December 26, 2009 Reserves not deducted from assets: Self-insurance reserves: Current Noncurrent(Amounts are in thousands) (Amounts are in thousands) $114,133 296,798 285,362 125,569 221,337 --- 1,677 219,660 $335,470 296,798 287,039 345,229 $119,375 269,063 274,305 114,133 229,589 --- 8,252 221,337 $348,964 269,063 282,557 335,470 $132,275 270,179 283,079 119,375 231,070 --- 1,481 229,589 $363,345 270,179 284,560 348,964
Description | Balance at Beginning of Year | Additions Charged to Income | Deductions From Reserves | Balance at End of Year | ||||||||||||
Year ended December 25, 2010 | ||||||||||||||||
Reserves not deducted from assets: | ||||||||||||||||
Self-insurance reserves: | ||||||||||||||||
Current | $ | 119,375 | 269,063 | 274,305 | 114,133 | |||||||||||
Noncurrent | 229,589 | — | 8,252 | 221,337 | ||||||||||||
| $ | 348,964 | 269,063 | 282,557 | 335,470 | ||||||||||||
Year ended December 26, 2009 | ||||||||||||||||
Reserves not deducted from assets: | ||||||||||||||||
Self-insurance reserves: | ||||||||||||||||
Current | $ | 132,275 | 270,179 | 283,079 | 119,375 | |||||||||||
Noncurrent | 231,070 | — | 1,481 | 229,589 | ||||||||||||
| $ | 363,345 | 270,179 | 284,560 | 348,964 | ||||||||||||
Year ended December 27, 2008 | ||||||||||||||||
Reserves not deducted from assets: | ||||||||||||||||
Self-insurance reserves: | ||||||||||||||||
Current | $ | 113,597 | 286,458 | 267,780 | 132,275 | |||||||||||
Noncurrent | 230,849 | 221 | — | 231,070 | ||||||||||||
| $ | 344,446 | 286,679 | 267,780 | 363,345 | ||||||||||||
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
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 25, 201031, 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 18 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 21.
None
PART III
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 (2011(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
Information regarding executive compensation is incorporated by reference from the 20112012 Proxy Statement.
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 20112012 Proxy Statement.
Item 13. Certain Relationships, Related Transactions and Director Independence
Information regarding certain relationships, related transactions and director independence is incorporated by reference from the 20112012 Proxy Statement.
Item 14. Principal Accounting Fees and Services
Information regarding principal accounting fees and services is incorporated by reference from the 20112012 Proxy Statement.
PART IV
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) | 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 | 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 | 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 |
| 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 |
| 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. |
| 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 | Subsidiaries of the Registrant. |
| 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 |
| 32.2 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the |
| 101 | The following financial information from the Company’s Annual Report on Form 10-K for the year ended December |
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 | 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 | ||||||
| Carol Jenkins Barnett | ||||||||
/s/ Hoyt R. Barnett
| Vice Chairman and Director | February | ||||||
| Hoyt R. Barnett | ||||||||
/s/ William E. Crenshaw
| Chief Executive Officer and Director
| February | ||||||
| William E. Crenshaw | (Principal Executive Officer) | |||||||
/s/ Jane B. Finley
| Director | February | ||||||
| Jane B. Finley | ||||||||
/s/ Sherrill W. Hudson
| Director | February | ||||||
| Sherrill W. Hudson | ||||||||
/s/ Charles H. Jenkins, Jr.
| Chairman of the Board and Director | February | ||||||
| Charles H. Jenkins, Jr. | ||||||||
/s/ Howard M. Jenkins
| Director | February | ||||||
| Howard M. Jenkins | ||||||||
/s/ E. Vane McClurg
| Director | February | ||||||
| E. Vane McClurg | ||||||||
/s/ Maria A. Sastre
| Director | February | ||||||
| Maria A. Sastre | ||||||||
/s/ David P. Phillips
| Chief Financial Officer and Treasurer | February 29, 2012 | ||||||
| David P. Phillips | (Principal Financial and Accounting Officer) | |||||||
4445