Form 10-Q

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

 

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

For the quarterly period ended March 27, 2010

OR

 

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

For the transition period from              to             

Commission File Number 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

 

 

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

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

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

 

Large accelerated filer  x   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 Exchange Act). Yes  ¨    No  x

The number of shares outstanding of the Registrant’s common stock, $1.00 par value, as of April 23, 2010 was 791,571,000.

 

 

 

 


PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

PUBLIX SUPER MARKETS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts are in thousands, except par value)

 

     March 27, 2010     December 26, 2009  
     (Unaudited)  

ASSETS

  

 

Current assets:

    

Cash and cash equivalents

   $ 825,249      370,516   

Short-term investments

     125,719      110,499   

Trade receivables

     467,053      506,500   

Merchandise inventories

     1,345,484      1,385,273   

Deferred tax assets

     58,954      54,087   

Prepaid expenses

     29,050      22,477   
              

Total current assets

     2,851,509      2,449,352   
              

Long-term investments

     2,434,331      2,086,532   

Other noncurrent assets

     159,765      206,824   

Property, plant and equipment

     8,106,973      7,921,946   

Accumulated depreciation

     (3,734,813   (3,660,362
              

Net property, plant and equipment

     4,372,160      4,261,584   
              
   $ 9,817,765      9,004,292   
              
LIABILITIES AND EQUITY     

Current liabilities:

    

Accounts payable

   $ 1,148,970      1,125,073   

Accrued expenses:

    

Contribution to retirement plans

     179,630      349,650   

Self-insurance reserves

     116,409      119,375   

Salaries and wages

     140,364      99,548   

Dividends payable

     364,084      —     

Other

     333,662      228,720   

Current portion of long-term debt

     58,018      29,151   

Federal and state income taxes

     243,175      28,575   
              

Total current liabilities

     2,584,312      1,980,092   
              

Deferred tax liabilities

     162,998      203,069   

Self-insurance reserves

     229,086      229,589   

Accrued postretirement benefit cost

     84,060      83,368   

Long-term debt

     97,942      70,175   

Other noncurrent liabilities

     128,385      134,461   

Stockholders’ equity:

    

Common stock of $1 par value. Authorized 1,000,000 shares; issued 793,566 shares in 2010 and 780,566 shares in 2009

     793,566      780,566   

Additional paid-in capital

     1,053,001      837,969   

Retained earnings

     4,638,199      4,637,884   

Treasury stock at cost, 1,956 shares in 2010

     (33,941   —     

Accumulated other comprehensive earnings

     35,302      43,205   
              

Total stockholders’ equity

     6,486,127      6,299,624   

Noncontrolling interests

     44,855      3,914   
              

Total equity

     6,530,982      6,303,538   
              
   $ 9,817,765      9,004,292   
              

See accompanying notes to condensed consolidated financial statements.

 

1


PUBLIX SUPER MARKETS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Amounts are in thousands, except per share amounts)

 

     Three Months Ended  
     March 27, 2010    March 28, 2009  
     (Unaudited)  

Revenues:

     

Sales

   $ 6,501,357    6,368,318   

Other operating income

     47,308    48,329   
             

Total revenues

     6,548,665    6,416,647   
             

Costs and expenses:

     

Cost of merchandise sold

     4,686,033    4,602,784   

Operating and administrative expenses

     1,338,926    1,325,389   
             

Total costs and expenses

     6,024,959    5,928,173   
             

Operating profit

     523,706    488,474   

Investment income

     23,628    17,851   

Other-than-temporary impairment losses

     —      (17,440
             

Investment income, net

     23,628    411   

Other income, net

     6,263    5,162   
             

Earnings before income tax expense

     553,597    494,047   

Income tax expense

     189,198    172,539   
             

Net earnings

   $ 364,399    321,508   
             

Weighted average shares outstanding

     782,823    791,104   
             

Basic and diluted earnings per share

   $ 0.47    0.41   
             

Cash dividends declared per common share

   $ 0.46    0.41   
             

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(Amounts are in thousands)

 

     Three Months Ended
     March 27, 2010     March 28, 2009
     (Unaudited)

Net earnings

   $ 364,399      321,508

Other comprehensive earnings:

    

Unrealized (loss) gain on investment securities – available-for-sale (AFS), net of tax effect of ($1,796) and $3,040 in 2010 and 2009, respectively

     (2,851   4,827

Reclassification adjustment for net realized (gain) loss on investment securities – AFS, net of tax effect of ($3,191) and $8,244 in 2010 and 2009, respectively

     (5,067   13,091

Adjustment to postretirement benefit plan obligation, net of tax effect of $9 in 2010

     15      —  
            

Comprehensive earnings

   $ 356,496      339,426
            

See accompanying notes to condensed consolidated financial statements.

 

2


PUBLIX SUPER MARKETS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts are in thousands)

 

     Three Months Ended  
     March 27, 2010     March 28, 2009  
     (Unaudited)  

Cash flows from operating activities:

    

Cash received from customers

   $ 6,551,694      6,342,091   

Cash paid to employees and suppliers

     (5,559,612   (5,506,452

Income taxes paid

     (14,879   (17,032

Payment for self-insured claims

     (62,988   (62,193

Dividends and interest received

     24,984      19,152   

Other operating cash receipts

     44,956      45,914   

Other operating cash payments

     (1,236   (1,418
              

Net cash provided by operating activities

     982,919      820,062   
              

Cash flows from investing activities:

    

Payment for property, plant and equipment

     (101,880   (212,075

Proceeds from sale of property, plant and equipment

     611      672   

Payment for investments

     (563,791   (242,327

Proceeds from sale and maturity of investments

     187,231      156,128   
              

Net cash used in investing activities

     (477,829   (297,602
              

Cash flows from financing activities:

    

Payment for acquisition of common stock

     (99,485   (284,185

Proceeds from sale of common stock

     44,381      36,791   

Other, net

     4,747      2,052   
              

Net cash used in financing activities

     (50,357   (245,342
              

Net increase in cash and cash equivalents

     454,733      277,118   

Cash and cash equivalents at beginning of period

     370,516      201,813   
              

Cash and cash equivalents at end of period

   $ 825,249      478,931   
              

 

See accompanying notes to condensed consolidated financial statements.

   (Continued)

 

3


PUBLIX SUPER MARKETS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Amounts are in thousands)

 

     Three Months Ended  
     March 27, 2010     March 28, 2009  
     (Unaudited)  

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

    

Net earnings

   $ 364,399      321,508   

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

    

Depreciation and amortization

     125,254      121,161   

Retirement contributions paid or payable in common stock

     79,175      68,952   

Deferred income taxes

     (39,960   (15,092

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

     7,574      13,738   

(Gain) loss on sale and impairment of investments

     (8,258   21,335   

Net amortization of investments

     8,894      278   

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

    

Trade receivables

     41,423      (36,751

Merchandise inventories

     39,789      89,800   

Prepaid expenses and other noncurrent assets

     (8,353   (9,016

Accounts payable and accrued expenses

     167,211      71,551   

Self-insurance reserves

     (3,469   1,185   

Federal and state income taxes

     214,600      170,895   

Other noncurrent liabilities

     (5,360   518   
              

Total adjustments

     618,520      498,554   
              

Net cash provided by operating activities

   $ 982,919      820,062   
              

See accompanying notes to condensed consolidated financial statements.

 

4


PUBLIX SUPER MARKETS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

(1) Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Publix Super Markets, Inc. and subsidiaries (the Company) have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and the rules and regulations of the Securities and Exchange Commission (SEC) for interim financial reporting. Accordingly, the accompanying statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, these statements include all adjustments that are of a normal and recurring nature necessary to present fairly the Company’s financial position, results of operations and cash flows. Due to the seasonal nature of the Company’s business, the results of operations for the three months ended March 27, 2010 are not necessarily indicative of the results for the entire 2010 fiscal year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 26, 2009.

The preparation of financial statements in conformity with GAAP 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 condensed consolidated balance sheets primarily due to the adoption of an amendment to the standard of accounting for Variable Interest Entities (VIE).

 

(2) New Accounting Standards

Recently Adopted Standards

In January 2010, the Financial Accounting Standards Board (FASB) issued an amendment to the standards of accounting for fair value measurements and disclosures. This amendment requires 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 changes the definition of a VIE, contains new criteria for determining the primary beneficiary of a VIE, requires enhanced disclosures to provide more information about a company’s involvement in a VIE and increases the frequency of required reassessments to determine whether a company is the primary beneficiary of a VIE. The adoption of this standard resulted in the consolidation of certain joint ventures (JV) 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 adoption of this standard during the quarter ended March 27, 2010 did not have a material effect on the Company’s financial condition, results of operations or cash flows (see Note 5).

 

5


PUBLIX SUPER MARKETS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

(3) 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 available-for-sale (AFS) securities are 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 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, 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 are determined by use of 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 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 March 27, 2010 and December 26, 2009:

 

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

March 27, 2010

   $ 2,560,050    196,252    2,363,798    —  

December 26, 2009

     2,197,031    189,053    2,007,978    —  

 

(4) Investments

All of the Company’s debt and equity investments are classified as 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 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. 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 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 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.

 

6


PUBLIX SUPER MARKETS, INC.

NOTES TO CONDENSED 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 securities sold is based on the specific identification method.

Following is a summary of investments as of March 27, 2010 and December 26, 2009:

 

     Amortized
Cost
   Gross
Unrealized
Gains
   Gross
Unrealized
Losses
   Fair
Value
     (Amounts are in thousands)
March 27, 2010            

Available-for-sale:

           

Tax exempt bonds

   $ 1,378,043    16,548    2,779    1,391,812

Taxable bonds

     955,744    8,493    4,153    960,084

Equity securities

     159,605    51,250    2,701    208,154
                     
   $ 2,493,392    76,291    9,633    2,560,050
                     
December 26, 2009            

Available-for-sale:

           

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
                     

Realized gains on sales of AFS securities totaled $8,623,000 and $2,460,000 for the three months ended March 27, 2010 and March 28, 2009, respectively. Realized losses on sales and OTTI of AFS securities totaled $365,000 and $23,795,000 for the three months ended March 27, 2010 and March 28, 2009, respectively. There were no OTTI losses on equity securities for the three months ended March 27, 2010. The Company recorded OTTI losses on equity securities of $17,440,000 for the three months ended March 28, 2009. There were no OTTI losses on debt securities for the three months ended March 27, 2010 and March 28, 2009.

 

7


PUBLIX SUPER MARKETS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

The amortized cost and fair value of debt and equity securities classified as AFS as of March 27, 2010 and December 26, 2009, by expected maturity, are as follows:

 

     March 27, 2010    December 26, 2009
     Amortized
Cost
   Fair
Value
   Amortized
Cost
   Fair
Value
     (Amounts are in thousands)

Due in one year or less

   $ 124,505    125,719    109,290    110,499

Due after one year through five years

     1,190,611    1,199,582    934,195    946,971

Due after five years through ten years

     159,116    161,314    150,839    153,506

Due after ten years

     859,555    865,281    771,850    781,889
                     
     2,333,787    2,351,896    1,966,174    1,992,865

Equity securities

     159,605    208,154    151,294    204,166
                     
   $ 2,493,392    2,560,050    2,117,468    2,197,031
                     

Following is a summary of temporarily impaired investments by the time period impaired as of March 27, 2010 and December 26, 2009:

 

     Less Than
12 Months
   12 Months
or Longer
   Total
     Fair
Value
   Unrealized
Losses
   Fair
Value
   Unrealized
Losses
   Fair
Value
   Unrealized
Losses
     (Amounts are in thousands)
March 27, 2010                  

Tax exempt bonds

   $ 329,324    2,777    58    2    329,382    2,779

Taxable bonds

     384,151    2,926    6,971    1,227    391,122    4,153

Equity securities

     24,425    2,701    —      —      24,425    2,701
                               

Total temporarily impaired investments

   $ 737,900    8,404    7,029    1,229    744,929    9,633
                               
December 26, 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 investments

   $ 328,567    4,258    10,774    1,852    339,341    6,110
                               

There are 266 investment issues contributing to the total unrealized loss of $9,633,000 as of March 27, 2010. Unrealized losses related to debt securities are primarily driven by market volatility impacting the market value of certain bonds. The Company continues to receive scheduled principal and interest payments on these investments. Unrealized losses related to equity securities are primarily driven by stock market volatility.

 

8


PUBLIX SUPER MARKETS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

(5) Consolidation of Joint Ventures

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 JVs are financed with capital contributions from the members, loans guaranteed by the members and/or with the cash flows generated by the shopping centers once in operation.

Generally, all major decision making in the Company’s JVs 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 by the JV to a member are nominal and believed to be at market.

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. 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 centers’ economic performance.

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 as of the beginning of the quarter ended March 27, 2010 was as follows:

 

     Increase (decrease)
in  Asset, Liability or Equity
 
     (Amounts are in thousands)  

Trade receivables

   $ 1,976   

Prepaid expenses

     316   

Other noncurrent assets

     (39,331

Property, plant and equipment

     132,311   

Accounts payable

     1,957   

Accrued expenses - other

     487   

Long-term debt

     55,837   

Noncontrolling interests

     36,991   

As of March 27, 2010, the carrying amounts of the assets and liabilities of the consolidated JVs, including previously consolidated JVs, were $232,300,000 and $129,400,000, respectively. The Company’s debt results primarily from the consolidation of certain JVs. 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 guaranteed by the Company. The long-term debt maturities range from June 2011 through January 2015 and have (1) fixed interest rates ranging from 4.25% to 5.28% or (2) variable interest rates based on a LIBOR index plus basis points ranging from 80 basis points to 200 basis points. Total earnings attributable to noncontrolling interests for the quarters ended March 27, 2010 and March 28, 2009 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.

 

9


Item 2. 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, South Carolina, Alabama and Tennessee. As of March 27, 2010, the Company operated 1,014 supermarkets, 11 convenience stores, 109 liquor stores and 37 Crispers restaurants.

Liquidity and Capital Resources

Cash and cash equivalents, short-term investments and long-term investments totaled $3,385.3 million as of March 27, 2010, as compared with $2,567.5 million as of December 26, 2009.

Net cash provided by operating activities

Net cash provided by operating activities was $982.9 million for the three months ended March 27, 2010, as compared with $820.1 million for the three months ended March 28, 2009. 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 $477.8 million for the three months ended March 27, 2010, as compared with $297.6 million for the three months ended March 28, 2009. For the three months ended March 27, 2010, the primary use of net cash in investing activities was funding capital expenditures and net increases in investment securities. Capital expenditures totaled $101.9 million. These expenditures were incurred in connection with the opening of nine new supermarkets (including four replacement supermarkets) and remodeling 22 supermarkets. Nine supermarkets were closed during the same period. Replacement supermarkets opened during the three months ended March 27, 2010 replaced four of the nine supermarkets closed during the same period. The remaining supermarkets closed during the three months ended March 27, 2010 will be replaced on-site in subsequent periods. An additional 0.1 million square feet were added in the three months ended March 27, 2010, a 0.2% increase. 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 $376.6 million.

For the three months ended March 28, 2009, the primary use of net cash in investing activities was funding capital expenditures and net increases in investment securities. Capital expenditures totaled $212.1 million. These expenditures were incurred in connection with the opening of 12 new supermarkets (including two replacement supermarkets) and remodeling 22 supermarkets. Three supermarkets were closed during the same period. Replacement supermarkets opened during the three months ended March 28, 2009 replaced two of the three supermarkets closed during the same period. The remaining supermarket closed during the three months ended March 28, 2009 was replaced on-site in a subsequent period. An additional 0.5 million square feet were added in the three months ended March 28, 2009, a 1.1% increase. Expenditures were also incurred for the construction of a second data center 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 $86.2 million.

Capital expenditure projection

Capital expenditures for the remainder of 2010 are expected to be approximately $453 million, primarily consisting of new supermarkets, remodeling certain existing supermarkets, completion of planned improvements for certain of the supermarket locations acquired from Albertson’s LLC in 2008 and new or enhanced information technology hardware and applications. 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.

 

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Net cash used in financing activities

Net cash used in financing activities was $50.4 million for the three months ended March 27, 2010, as compared with $245.3 million for the three months ended March 28, 2009. The primary use of net cash in financing activities was funding net common stock repurchases. Net common stock repurchases totaled $55.1 million for the three months ended March 27, 2010, as compared with $247.4 million for the three months ended March 28, 2009. The Company currently repurchases common stock at the stockholders’ request in accordance with the terms of the Company’s Employee Stock Purchase Plan (ESPP), 401(k) Plan, Employee Stock Ownership Plan (ESOP) and Non-Employee Directors Stock Purchase Plan (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, such purchases are not required and the Company retains the right to discontinue them at any time.

Dividends

On March 3, 2010, the Company declared an annual cash dividend on its common stock of $0.46 per share or approximately $364.1 million, payable on June 1, 2010 to stockholders of record as of the close of business April 30, 2010. In 2009, the Company paid an annual cash dividend on its common stock of $0.41 per share or $325.3 million.

Cash requirements

In 2010, 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.

Results of Operations

Sales

Sales for the three months ended March 27, 2010 were $6.5 billion as compared with $6.4 billion for the three months ended March 28, 2009, an increase of $133.0 million or a 2.1% increase. The Company estimates that its sales increased $75.7 million or 1.2% from new supermarkets (excluding replacement supermarkets) and $57.3 million or 0.9% 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 for the three months ended March 27, 2010 continued to be impacted by the economic downturn and deflationary pressures.

Gross profit

Gross profit (sales less cost of merchandise sold) as a percentage of sales was 27.9% and 27.7% for the three months ended March 27, 2010 and March 28, 2009, respectively. Gross profit as a percentage of sales for the three months ended March 27, 2010 remained relatively unchanged compared to the three months ended March 28, 2009.

Operating and administrative expenses

Operating and administrative expenses as a percentage of sales were 20.6% and 20.8% for the three months ended March 27, 2010 and March 28, 2009, respectively. Operating and administrative expenses as a percentage of sales for the three months ended March 27, 2010 remained relatively unchanged compared to the three months ended March 28, 2009.

 

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Investment income, net

Investment income, net was $23.6 million and $0.4 million for the three months ended March 27, 2010 and March 28, 2009, respectively. The increase in investment income, net for the three months ended March 27, 2010 is primarily due to the decrease in OTTI losses on AFS securities and an increase in realized gains on the sale of AFS securities, partially offset by a decrease in interest income resulting from lower interest rates. There were no OTTI losses on equity securities for the three months ended March 27, 2010. The Company recorded OTTI losses on equity securities of $17.4 million for the three months ended March 28, 2009. There were no OTTI losses on debt securities for the three months ended March 27, 2010 and March 28, 2009.

Income taxes

The effective income tax rates were 34.2% and 34.9% for the three months ended March 27, 2010 and March 28, 2009, respectively. The decrease in the effective tax rate is primarily due to increases in dividends paid to ESOP participants, tax exempt interest and deductions for manufacturing production costs.

Net earnings

Net earnings were $364.4 million or $0.47 per share and $321.5 million or $0.41 per share for the three months ended March 27, 2010 and March 28, 2009, respectively.

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 in 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, 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.

 

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Item 3. 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. There have been no material changes in the market risk factors from those disclosed in the Company’s Form 10-K for the year ended December 26, 2009.

 

Item 4. Controls and Procedures

As of the end of the period covered by this quarterly 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 SEC’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 March 27, 2010 that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting.

 

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PUBLIX SUPER MARKETS, INC.

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

As reported in the Company’s Form 10-K for the year ended December 26, 2009, the Company is a party in various legal claims and actions considered in the normal course of business. 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 1A. Risk Factors

There have been no material changes in the risk factors from those disclosed in the Company’s Form 10-K for the year ended December 26, 2009.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

Shares of common stock repurchased by the Company during the three months ended March 27, 2010 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)

December 27, 2009 through January 30, 2010

   1,319    $ 16.30    N/A    N/A

January 31, 2010 through February 27, 2010

   1,216      16.30    N/A    N/A

February 28, 2010 through March 27, 2010

   3,353      17.35    N/A    N/A
                 

Total

   5,888    $ 16.90    N/A    N/A
                 

 

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

The Company’s common stock is not traded on any public stock exchange. 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 March 27, 2010 required to be disclosed in the last two columns of the table.

 

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Item 3. Defaults Upon Senior Securities

Not Applicable.

 

Item 4. Reserved

 

Item 5. Other Information

Not Applicable.

 

Item 6. Exhibits

 

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

 

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

 

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

 

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

 

101 The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 27, 2010, is formatted in Extensible Business Reporting Language: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Earnings, (iii) Condensed Consolidated Statements of Comprehensive Earnings, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements (tagged as blocks of text).

 

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SIGNATURES

Pursuant to the requirements 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.
Date: May 6, 2010      

/s/ John A. Attaway, Jr.

      John A. Attaway, Jr., Secretary
Date: May 6, 2010      

/s/ David P. Phillips

      David P. Phillips, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)

 

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