Document
 



  
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 29, 2018
Commission File Number 0-00981
 publixlogorev2a03.jpg
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 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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months.
Yes    X          No         
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer            Accelerated filer           Non-accelerated filer    X    
Smaller reporting company            Emerging growth company           
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.        
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 of the Registrant’s common stock outstanding as of October 15, 2018 was 718,491,000.

 





PART I. FINANCIAL INFORMATION
Item 1.    Financial Statements
PUBLIX SUPER MARKETS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts are in thousands, except par value)
 
September 29, 2018
 
December 30, 2017
 
 
(Unaudited)
 
ASSETS
 
Current assets:
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
616,283

 
 
 
579,925

 
Short-term investments
 
575,195

 
 
 
915,579

 
Trade receivables
 
649,945

 
 
 
671,414

 
Inventories
 
1,752,610

 
 
 
1,876,519

 
Prepaid expenses
 
49,781

 
 
 
41,484

 
Total current assets
 
3,643,814

 
 
 
4,084,921

 
Long-term investments
 
6,278,318

 
 
 
5,517,732

 
Other noncurrent assets
 
502,556

 
 
 
583,149

 
Property, plant and equipment
 
14,089,076

 
 
 
13,085,492

 
Accumulated depreciation
 
(5,515,016
)
 
 
 
(5,087,788
)
 
Net property, plant and equipment
 
8,574,060

 
 
 
7,997,704

 
 
 
$
18,998,748

 
 
 
18,183,506

 
LIABILITIES AND EQUITY
 
Current liabilities:
 
 
 
 
 
 
 
Accounts payable
 
$
1,754,822

 
 
 
1,754,706

 
Accrued expenses:
 
 
 
 
 
 
 
Contributions to retirement plans
 
441,513

 
 
 
517,493

 
Self-insurance reserves
 
141,882

 
 
 
137,100

 
Salaries and wages
 
272,712

 
 
 
124,423

 
Other
 
494,300

 
 
 
329,420

 
Current portion of long-term debt
 
4,895

 
 
 
37,873

 
Federal and state income taxes
 
23,524

 
 
 
241,299

 
Total current liabilities
 
3,133,648

 
 
 
3,142,314

 
Deferred income taxes
 
399,678

 
 
 
360,952

 
Self-insurance reserves
 
224,529

 
 
 
218,598

 
Accrued postretirement benefit cost
 
113,661

 
 
 
113,461

 
Long-term debt
 
163,928

 
 
 
155,201

 
Other noncurrent liabilities
 
71,412

 
 
 
84,361

 
Total liabilities
 
4,106,856

 
 
 
4,074,887

 
Common stock related to Employee Stock Ownership Plan (ESOP)
 
3,188,497

 
 
 
3,053,138

 
Stockholders’ equity:
 
 
 
 
 
 
 
Common stock of $1 par value. Authorized 1,000,000 shares;
issued 740,595 shares in 2018 and 733,440 shares in 2017
 
740,595

 
 
 
733,440

 
Additional paid-in capital
 
3,439,412

 
 
 
3,139,647

 
Retained earnings
 
11,669,368

 
 
 
10,044,564

 
Treasury stock at cost, 22,012 shares in 2018
 
(921,510
)
 
 
 

 
Accumulated other comprehensive (losses) earnings
 
(72,372
)
 
 
 
152,636

 
Common stock related to ESOP
 
(3,188,497
)
 
 
 
(3,053,138
)
 
Total stockholders’ equity
 
11,666,996

 
 
 
11,017,149

 
Noncontrolling interests
 
36,399

 
 
 
38,332

 
Total equity
 
14,891,892

 
 
 
14,108,619

 
 
 
$
18,998,748

 
 
 
18,183,506

 

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
 
 
September 29, 2018
 
September 30, 2017
 
 
(Unaudited)
 
Revenues:
 
 
 
 
 
 
 
Sales
 
$
8,788,762

 
 
 
8,520,569

 
Other operating income
 
69,339

 
 
 
65,511

 
Total revenues
 
8,858,101

 
 
 
8,586,080

 
Costs and expenses:
 
 
 
 
 
 
 
Cost of merchandise sold
 
6,436,041

 
 
 
6,219,735

 
Operating and administrative expenses
 
1,838,908

 
 
 
1,731,551

 
Total costs and expenses
 
8,274,949

 
 
 
7,951,286

 
Operating profit
 
583,152

 
 
 
634,794

 
Investment income
 
230,234

 
 
 
38,430

 
Other nonoperating income, net
 
19,051

 
 
 
17,218

 
Earnings before income tax expense
 
832,437

 
 
 
690,442

 
Income tax expense
 
154,693

 
 
 
215,515

 
Net earnings
 
$
677,744

 
 
 
474,927

 
Weighted average shares outstanding
 
723,236

 
 
 
748,347

 
Basic and diluted earnings per share
 
$
0.94

 
 
 
0.63

 
Dividends paid per share
 
$
0.26

 
 
 
0.23

 


CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
(Amounts are in thousands)

 
 
Three Months Ended
 
 
September 29, 2018
 
September 30, 2017
 
 
(Unaudited)
 
Net earnings
 
$
677,744

 
 
 
474,927

 
Other comprehensive earnings:
 
 
 
 
 
 
 
Unrealized (loss) on debt securities net of income taxes of $(708) in 2018. Unrealized gain on debt and equity securities net of income taxes of $30,884 in 2017.
 
(2,076
)
 
 
 
49,043

 
Reclassification adjustment for net realized gain on debt securities net of income taxes of $(62) in 2018. Reclassification adjustment for net realized gain on debt and equity securities net of income taxes of $(3,989) in 2017.
 
(181
)
 
 
 
(6,334
)
 
Adjustment to postretirement benefit obligation net of income taxes of
$192 in 2018.
 
564

 
 
 

 
Comprehensive earnings
 
$
676,051

 
 
 
517,636

 




See accompanying notes to condensed consolidated financial statements.     
2



PUBLIX SUPER MARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts are in thousands, except per share amounts)

 
 
Nine Months Ended
 
 
September 29, 2018
 
September 30, 2017
 
 
(Unaudited)
 
Revenues:
 
 
 
 
 
 
 
Sales
 
$
26,814,561

 
 
 
25,620,710

 
Other operating income
 
215,350

 
 
 
201,143

 
Total revenues
 
27,029,911

 
 
 
25,821,853

 
Costs and expenses:
 
 
 
 
 
 
 
Cost of merchandise sold
 
19,483,545

 
 
 
18,592,991

 
Operating and administrative expenses
 
5,486,465

 
 
 
5,240,753

 
Total costs and expenses
 
24,970,010

 
 
 
23,833,744

 
Operating profit
 
2,059,901

 
 
 
1,988,109

 
Investment income
 
342,687

 
 
 
192,906

 
Other nonoperating income, net
 
64,709

 
 
 
49,745

 
Earnings before income tax expense
 
2,467,297

 
 
 
2,230,760

 
Income tax expense
 
493,110

 
 
 
705,490

 
Net earnings
 
$
1,974,187

 
 
 
1,525,270

 
Weighted average shares outstanding
 
729,434

 
 
 
759,284

 
Basic and diluted earnings per share
 
$
2.71

 
 
 
2.01

 
Dividends paid per share
 
$
0.75

 
 
 
0.6825

 


CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
(Amounts are in thousands)

 
 
Nine Months Ended
 
 
September 29, 2018
 
September 30, 2017
 
 
(Unaudited)
 
Net earnings
 
$
1,974,187

 
 
 
1,525,270

 
Other comprehensive earnings:
 
 
 
 
 
 
 
Unrealized (loss) on debt securities net of income taxes of $(9,770) in 2018. Unrealized gain on debt and equity securities net of income taxes of $70,268 in 2017.
 
(28,657
)
 
 
 
111,585

 
Reclassification adjustment for net realized loss on debt securities net of income taxes of $91 in 2018. Reclassification adjustment for net realized (gain) on debt and equity securities net of income taxes of $(40,526) in 2017.
 
266

 
 
 
(64,355
)
 
Adjustment to postretirement benefit obligation net of income taxes of
$577 in 2018.
 
1,693

 
 
 

 
Comprehensive earnings
 
$
1,947,489

 
 
 
1,572,500

 


See accompanying notes to condensed consolidated financial statements.         
3


PUBLIX SUPER MARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts are in thousands)

 
 
Nine Months Ended
 
 
September 29, 2018
 
September 30, 2017
 
 
(Unaudited)
 
Cash flows from operating activities:
 
 
 
 
 
 
 
Cash received from customers
 
$
26,976,556

 
 
 
25,786,802

 
Cash paid to employees and suppliers
 
(23,613,609
)
 
 
 
(22,593,366
)
 
Income taxes paid
 
(548,092
)
 
 
 
(478,456
)
 
Self-insured claims paid
 
(292,064
)
 
 
 
(270,036
)
 
Dividends and interest received
 
140,673

 
 
 
185,542

 
Other operating cash receipts
 
211,856

 
 
 
197,277

 
Other operating cash payments
 
(12,329
)
 
 
 
(14,748
)
 
Net cash provided by operating activities
 
2,862,991

 
 
 
2,813,015

 
Cash flows from investing activities:
 
 
 
 
 
 
 
Payment for capital expenditures
 
(1,098,845
)
 
 
 
(1,063,152
)
 
Proceeds from sale of property, plant and equipment
 
9,408

 
 
 
4,460

 
Payment for investments
 
(1,941,469
)
 
 
 
(2,353,947
)
 
Proceeds from sale and maturity of investments
 
1,752,100

 
 
 
2,593,592

 
Net cash used in investing activities
 
(1,278,806
)
 
 
 
(819,047
)
 
Cash flows from financing activities:
 
 
 
 
 
 
 
Payment for acquisition of common stock
 
(1,192,046
)
 
 
 
(1,438,628
)
 
Proceeds from sale of common stock
 
228,032

 
 
 
215,424

 
Dividends paid
 
(547,693
)
 
 
 
(519,787
)
 
Repayment of long-term debt
 
(42,253
)
 
 
 
(46,019
)
 
Other, net
 
6,133

 
 
 
27,418

 
Net cash used in financing activities
 
(1,547,827
)
 
 
 
(1,761,592
)
 
Net increase in cash and cash equivalents
 
36,358

 
 
 
232,376

 
Cash and cash equivalents at beginning of period
 
579,925

 
 
 
438,319

 
Cash and cash equivalents at end of period
 
$
616,283

 
 
 
670,695

 


See accompanying notes to condensed consolidated financial statements.     (Continued)
4


PUBLIX SUPER MARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts are in thousands)
 
 
 
Nine Months Ended
 
 
September 29, 2018
 
September 30, 2017
 
 
(Unaudited)
 
Reconciliation of net earnings to net cash
provided by operating activities:
 
 
 
 
 
 
 
Net earnings
 
$
1,974,187

 
 
 
1,525,270

 
Adjustments to reconcile net earnings to net cash
provided by operating activities:
 
 
 
 
 
 
 
Depreciation and amortization
 
501,098

 
 
 
484,307

 
Increase in last-in, first out (LIFO) reserve
 
22,926

 
 
 
20,720

 
Retirement contributions paid or payable
in common stock
 
273,950

 
 
 
280,571

 
Deferred income taxes
 
47,828

 
 
 
36,311

 
Loss on disposal and impairment of property,
plant and equipment
 
10,612

 
 
 
1,991

 
Gain on investments
 
(249,808
)
 
 
 
(104,881
)
 
Net amortization of investments
 
50,357

 
 
 
87,982

 
Changes in operating assets and liabilities
providing (requiring) cash:
 
 
 
 
 
 
 
Trade receivables
 
21,566

 
 
 
67,952

 
Inventories
 
100,983

 
 
 
(4,632
)
 
Prepaid expenses and other noncurrent assets
 
64,758

 
 
 
(5,410
)
 
Accounts payable and accrued expenses
 
262,581

 
 
 
264,196

 
Self-insurance reserves
 
10,713

 
 
 
1,692

 
Federal and state income taxes
 
(217,775
)
 
 
 
162,748

 
Other noncurrent liabilities
 
(10,985
)
 
 
 
(5,802
)
 
Total adjustments
 
888,804

 
 
 
1,287,745

 
Net cash provided by operating activities
 
$
2,862,991

 
 
 
2,813,015

 



See accompanying notes to condensed consolidated financial statements.         
5


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 (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 and results of operations. Due to the seasonal nature of the Company’s business, the results of operations for the three and nine months ended September 29, 2018 are not necessarily indicative of the results for the entire 2018 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 30, 2017.
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.

(2)
Recently Issued Accounting Standards
In June 2016, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) requiring companies to change the methodology used to measure credit losses on financial instruments. The ASU is effective for reporting periods beginning after December 15, 2019 with early adoption permitted only for reporting periods beginning after December 15, 2018.  The Company does not expect the adoption of the ASU to have a material effect on the Company’s financial condition or results of operations. The adoption of the ASU will have no effect on the Company’s cash flows.
In February 2016, the FASB issued an ASU requiring the lease rights and obligations arising from lease contracts, including existing and new arrangements, be recognized as assets and liabilities on the balance sheet. The ASU is effective for reporting periods beginning after December 15, 2018 with early adoption permitted. While the Company is still evaluating the ASU, the Company expects the adoption of the ASU to have a material effect on the Company’s financial condition due to the recognition of approximately $3 billion of lease rights and obligations as assets and liabilities on the consolidated balance sheets. The Company does not expect the adoption of the ASU to have a material effect on the Company’s results of operations. The adoption of the ASU will have no effect on the Company’s cash flows.
In January 2016, the FASB issued an ASU requiring equity securities be measured at fair value with net unrealized gains and losses from changes in the fair value recognized in earnings. The ASU is effective for reporting periods beginning after December 15, 2017. In 2018, the Company prospectively adopted the ASU and reclassified the cumulative effect of the net unrealized gain on equity securities net of income taxes as of December 31, 2017 of $198,310,000 from accumulated other comprehensive earnings to retained earnings. The effect of the ASU on results of operations will vary with changes in the fair value of equity securities.
In May 2014, the FASB issued an ASU requiring additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The ASU is effective for reporting periods beginning after December 15, 2017. In 2018, the Company adopted the ASU on a modified retrospective basis. The adoption of the ASU did not have a material effect on the Company’s financial condition, results of operations or cash flows.



6


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, approximates their respective carrying amounts due to their short-term maturity.
The fair value of investments is 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. Investments included in this category are equity securities (exchange traded funds and individual equity securities) and a restricted investment held as collateral (money market/mutual fund), collectively referred to as 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, state and municipal bonds by using pricing of similar bonds based on coupons, ratings and maturities. Investments 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 investments are currently included in this category.
Following is a summary of fair value measurements for investments as of September 29, 2018 and December 30, 2017:
 
 
Fair Value
 
Level 1
 
Level 2
 
Level 3
 
 
(Amounts are in thousands)
September 29, 2018
 
$
6,853,513

 
2,983,110

 
3,870,403

 

December 30, 2017
 
6,433,311

 
2,545,320

 
3,887,991

 





7


PUBLIX SUPER MARKETS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



(4)
Investments
(a)
Debt Securities
Debt securities are classified as available-for-sale and carried at fair value. The Company evaluates whether debt securities are other-than-temporarily impaired (OTTI) based on criteria that include the extent to which the cost (cost of the debt security adjusted for amortization of premium or accretion of discount) 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.
Declines in the fair value of debt securities determined to be OTTI are recognized in earnings and reported as OTTI losses. Debt securities with unrealized losses are considered OTTI if the Company intends to sell the debt security or if the Company will be required to sell the debt security prior to any anticipated recovery. If the Company determines that a debt security is OTTI under these circumstances, the impairment recognized in earnings is measured as the difference between the cost and the fair value. A debt security is also determined to be OTTI if the Company does not expect to recover the 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 cost of the debt security. Expected cash flows are discounted using the debt security’s effective interest rate. Changes in the fair value of debt securities determined to be temporary are reported in other comprehensive earnings net of income taxes and included as a component of stockholders’ equity.
Following is a summary of debt securities as of September 29, 2018 and December 30, 2017:
 
 
Cost
 
Gross
Unrealized
Gains
Gross
Unrealized
Losses
 
Fair
Value
 
 
(Amounts are in thousands)
September 29, 2018
 
 
 
 
 
 
 
 
 
 
 
Tax exempt bonds
 
$
1,340,795

 
 
110

 
 
20,347

 
 
1,320,558

Taxable bonds
 
2,406,444

 
 
340

 
 
58,739

 
 
2,348,045

 
 
$
3,747,239

 
 
450

 
 
79,086

 
 
3,668,603

December 30, 2017
 
 
 
 
 
 
 
 
 
 
 
Tax exempt bonds
 
$
1,811,523

 
 
602

 
 
16,420

 
 
1,795,705

Taxable bonds
 
2,115,174

 
 
695

 
 
25,443

 
 
2,090,426

 
 
$
3,926,697

 
 
1,297

 
 
41,863

 
 
3,886,131



8


PUBLIX SUPER MARKETS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



The cost and fair value of debt securities by expected maturity as of September 29, 2018 and December 30, 2017 are as follows:
 
 
September 29, 2018
 
December 30, 2017
 
 
Cost
 
Fair
Value
 
Cost
 
Fair
Value
 
 
(Amounts are in thousands)
Due in one year or less
 
$
577,480

 
575,195

 
917,576

 
915,579

Due after one year through five years
 
2,713,698

 
2,640,263

 
2,794,099

 
2,757,504

Due after five years through ten years
 
448,838

 
445,862

 
205,792

 
203,533

Due after ten years
 
7,223

 
7,283

 
9,230

 
9,515

 
 
$
3,747,239

 
3,668,603

 
3,926,697

 
3,886,131

Following is a summary of temporarily impaired debt securities by the time period impaired as of September 29, 2018 and December 30, 2017:
 
 
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)
 
September 29, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tax exempt bonds
 
$
775,195

 
 
8,384

 
 
537,591

 
 
11,963

 
 
1,312,786

 
 
20,347

 
Taxable bonds
 
1,214,748

 
 
20,329

 
 
1,017,301

 
 
38,410

 
 
2,232,049

 
 
58,739

 
 
 
$
1,989,943

 
 
28,713

 
 
1,554,892

 
 
50,373

 
 
3,544,835

 
 
79,086

 
December 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tax exempt bonds
 
$
1,543,151

 
 
13,827

 
 
136,217

 
 
2,593

 
 
1,679,368

 
 
16,420

 
Taxable bonds
 
811,886

 
 
4,908

 
 
1,153,645

 
 
20,535

 
 
1,965,531

 
 
25,443

 
 
 
$
2,355,037

 
 
18,735

 
 
1,289,862

 
 
23,128

 
 
3,644,899

 
 
41,863

 
There are 436 debt securities contributing to the total unrealized losses of $79,086,000 as of September 29, 2018. Unrealized losses related to debt securities are primarily due to increases in interest rates impacting the market value of certain bonds. The Company continues to receive scheduled principal and interest payments on these debt securities.


9


PUBLIX SUPER MARKETS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



(b)
Equity Securities
In 2018, the Company adopted the ASU requiring equity securities be measured at fair value with net unrealized gains and losses from changes in the fair value recognized in earnings (fair value adjustment). The fair value adjustment also includes the cumulative effect of the ASU as of December 31, 2017 reclassified from accumulated other comprehensive earnings to retained earnings.
Prior to adoption of the ASU, changes in the fair value of equity securities were accounted for similar to changes in the fair value of debt securities. Equity securities were classified as available-for-sale and carried at fair value. Declines in the fair value of equity securities determined to be OTTI were recognized in earnings and reported as OTTI losses. An equity security was determined to be OTTI if the Company did not expect to recover the cost of the equity security. Changes in the fair value of equity securities determined to be temporary were reported in other comprehensive earnings net of income taxes and included as a component of stockholders’ equity.
Following is a summary of the fair value of equity securities as of September 29, 2018 and December 30, 2017:
 
September 29, 2018
December 30, 2017
 
(Amounts are in thousands)
Equity securities
 
$
3,023,603

 
 
2,383,095

 
Restricted investment
 
161,307

 
 
164,085

 
 
 
$
3,184,910

 
 
2,547,180

 
The Company maintains a restricted investment for the benefit of the Company’s insurance carrier related to self-insurance reserves. This investment is held as collateral and is not used for self-insured claims payments.
(c)
Investment Income
Interest and dividend income, amortization of premiums, accretion of discounts and realized gains and losses on the sale of debt and equity securities are included in investment income. Interest income is accrued as earned. Dividend income is recognized as income on the ex-dividend date. The cost of debt and equity securities sold is based on the first-in, first-out method. With the adoption of the ASU, the fair value adjustment on equity securities held as of September 29, 2018 is also included in investment income.
In the following table, net realized gain on the sale of investments represents the difference between the cost and the proceeds from the sale of debt and equity securities. For the three and nine months ended September 29, 2018, the net realized gain on the sale of investments excludes the net gain on the sale of equity securities previously recognized through the fair value adjustment, which is presented separately.
Following is a summary of investment income for the three and nine months ended September 29, 2018 and September 30, 2017:
 
 
Three Months Ended
 
 
Nine Months Ended
 
 
September 29, 2018
September 30, 2017
September 29, 2018
September 30, 2017
 
(Amounts are in thousands)
Interest income
 
$
21,822

 
 
16,984

 
 
60,077

 
 
59,031

 
Dividend income
 
10,904

 
 
11,123

 
 
32,802

 
 
28,994

 
Net realized gain on sale of investments
 
69,251

 
 
10,323

 
 
92,918

 
 
104,881

 
 
 
101,977

 
 
38,430

 
 
185,797

 
 
192,906

 
Fair value adjustment (net unrealized gain) on equity securities held at end of period
 
166,267

 
 

 
 
217,314

 
 

 
Net gain on sale of equity securities previously recognized through fair value adjustment
 
(38,010
)
 
 

 
 
(60,424
)
 
 

 
 
 
$
230,234

 
 
38,430

 
 
342,687

 
 
192,906

 



10


PUBLIX SUPER MARKETS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



(5)
Consolidation of Joint Ventures and Long-Term Debt
From time to time, the Company enters into joint ventures (JV), 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 consolidates certain of these JVs in which it has a controlling financial interest. The Company is considered to have a controlling financial interest in a JV when it has (1) the power to direct the activities of the JV that most significantly impact the JV’s economic performance and (2) the obligation to absorb losses or the right to receive benefits from the JV that could potentially be significant to such JV.
The Company evaluates a JV using specific criteria to determine whether the Company has a controlling financial interest and is the primary beneficiary of the JV. Factors considered in determining whether the Company is the primary beneficiary include risk and reward sharing, experience and financial condition of the other JV members, voting rights, involvement in routine capital and operating decisions and each member’s influence over the JV owned shopping center’s economic performance.
Generally, most major 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. However, the Company, through its anchor tenant operating lease agreement, has the power to direct the activities that most significantly influence the economic performance of the JV owned shopping center. Additionally, through its member equity interest in the JV, the Company will receive a significant portion of the JV’s benefits or is obligated to absorb a significant portion of the JV’s losses.
As of September 29, 2018, the carrying amounts of the assets and liabilities of the consolidated JVs were $147,414,000 and $74,408,000, respectively. As of December 30, 2017, the carrying amounts of the assets and liabilities of the consolidated JVs were $144,559,000 and $67,631,000, 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 2018 and 2017 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 Company’s long-term debt results primarily from the consolidation of loans of certain JVs and loans assumed in connection with the acquisition of certain shopping centers with the Company as the anchor tenant. The Company assumed loans totaling $9,936,000 during the nine months ended September 29, 2018. No loans were assumed during the nine months ended September 30, 2017. Maturities of JV loans range from June 2020 through April 2027 and have variable interest rates based on a LIBOR index plus 175 to 250 basis points. Maturities of assumed shopping center loans range from December 2020 through January 2027 and have fixed interest rates ranging from 3.7% to 7.5%.

(6)
Retirement Plan
The Company has a trusteed, noncontributory Employee Stock Ownership Plan (ESOP) for the benefit of eligible employees. Since the Company’s common stock is not traded on an established securities market, the 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. Under the Company’s administration of the ESOP’s put option, if the owners of distributed shares desire to sell their shares, the Company is required to purchase the shares at fair value for a specified time period after distribution of the shares from the ESOP. The fair value of distributed shares subject to the put option totaled $312,521,000 and $311,315,000 as of September 29, 2018 and December 30, 2017, respectively. The cost of the shares held by the ESOP totaled $2,875,976,000 and $2,741,823,000 as of September 29, 2018 and December 30, 2017, 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 are classified as temporary equity in the mezzanine section of the condensed consolidated balance sheets and totaled $3,188,497,000 and $3,053,138,000 as of September 29, 2018 and December 30, 2017, respectively. The fair value of the shares held by the ESOP totaled $8,117,696,000 and $7,252,657,000 as of September 29, 2018 and December 30, 2017, respectively.


11


PUBLIX SUPER MARKETS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



(7)
Accumulated Other Comprehensive Earnings
A reconciliation of the changes in accumulated other comprehensive earnings (losses) net of income taxes for the three months ended September 29, 2018 and September 30, 2017 is as follows:
 
 
Investments
 
Postretirement Benefits
 
Accumulated Other Comprehensive Earnings
 
 
 
(Amounts are in thousands)
 
2018
 
 
 
 
 
 
 
 
 
 
 
 
Balances at June 30, 2018
 
 
$
(56,387
)
 
 
 
(14,292
)
 
 
 
(70,679
)
 
Unrealized loss on debt securities
 
 
(2,076
)
 
 
 

 
 
 
(2,076
)
 
Net realized gain on debt securities reclassified to investment income
 
 
(181
)
 
 
 

 
 
 
(181
)
 
Amortization of actuarial loss reclassified to other nonoperating income, net
 
 

 
 
 
564

 
 
 
564

 
Net other comprehensive (losses) earnings
 
 
(2,257
)
 
 
 
564

 
 
 
(1,693
)
 
Balances at September 29, 2018
 
 
$
(58,644
)
 
 
 
(13,728
)
 
 
 
(72,372
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2017
 
 
 
 
Balances at July 1, 2017
 
 
$
33,639

 
 
 
(5,691
)
 
 
 
27,948

 
Unrealized gain on debt and equity securities
 
 
49,043

 
 
 

 
 
 
49,043

 
Net realized gain on debt and equity securities reclassified to investment income
 
 
(6,334
)
 
 
 

 
 
 
(6,334
)
 
Net other comprehensive earnings
 
 
42,709

 
 
 

 
 
 
42,709

 
Balances at September 30, 2017
 
 
$
76,348

 
 
 
(5,691
)
 
 
 
70,657

 


12


PUBLIX SUPER MARKETS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



A reconciliation of the changes in accumulated other comprehensive earnings (losses) net of income taxes for the nine months ended September 29, 2018 and September 30, 2017 is as follows:
 
 
Investments
 
Postretirement Benefits
 
Accumulated Other Comprehensive Earnings
 
 
 
(Amounts are in thousands)
 
2018
 
 
 
 
 
 
 
 
 
 
 
 
Balances at December 30, 2017
 
 
$
168,057

 
 
 
(15,421
)
 
 
 
152,636

 
Unrealized loss on debt securities
 
 
(28,657
)
 
 
 

 
 
 
(28,657
)
 
Net realized loss on debt securities reclassified to investment income
 
 
266

 
 
 

 
 
 
266

 
Amortization of actuarial loss reclassified to other nonoperating income, net
 
 

 
 
 
1,693

 
 
 
1,693

 
Net other comprehensive (losses) earnings
 
 
(28,391
)
 
 
 
1,693

 
 
 
(26,698
)
 
Cumulative effect of net unrealized gain on equity securities reclassified to retained earnings
 
 
(198,310
)
 
 
 

 
 
 
(198,310
)
 
Balances at September 29, 2018
 
 
$
(58,644
)
 
 
 
(13,728
)
 
 
 
(72,372
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2017
 
 
 
 
Balances at December 31, 2016
 
 
$
29,118

 
 
 
(5,691
)
 
 
 
23,427

 
Unrealized gain on debt and equity securities
 
 
111,585

 
 
 

 
 
 
111,585

 
Net realized gain on debt and equity securities reclassified to investment income
 
 
(64,355
)
 
 
 

 
 
 
(64,355
)
 
Net other comprehensive earnings
 
 
47,230

 
 
 

 
 
 
47,230

 
Balances at September 30, 2017
 
 
$
76,348

 
 
 
(5,691
)
 
 
 
70,657

 
 
 
 
 
 
 
 
 
 
 
 
 
 
In 2018, the Company adopted the ASU requiring equity securities be measured at fair value with net unrealized gains and losses from changes in the fair value recognized in earnings. Prior to adoption of the ASU, equity securities were classified as available-for-sale and carried at fair value. Changes in fair value determined to be temporary were reported in other comprehensive earnings net of income taxes. Upon adoption of the ASU, the Company reclassified the cumulative effect of the net unrealized gain on equity securities net of income taxes as of December 31, 2017 of $198,310,000 from accumulated other comprehensive earnings to retained earnings.

(8)
Subsequent Event
On October 1, 2018, the Company declared a quarterly dividend of $0.26 per share or $186,800,000, payable November 1, 2018 to stockholders of record as of the close of business October 15, 2018.


13



Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
The Company is engaged in the retail food industry and as of September 29, 2018 operated 1,198 supermarkets in Florida, Georgia, Alabama, South Carolina, Tennessee, North Carolina and Virginia. For the nine months ended September 29, 2018, 35 supermarkets were opened (including eight replacement supermarkets) and 101 supermarkets were remodeled. Four supermarkets were closed during the period. The replacement supermarkets that opened during the nine months ended September 29, 2018 replaced one of the supermarkets closed during the same period and seven supermarkets closed during 2017. Two of the remaining supermarkets closed in 2018 will be replaced on site in subsequent periods and one supermarket will not be replaced. 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.
Results of Operations
Sales
Sales for the three months ended September 29, 2018 were $8.8 billion as compared with $8.5 billion for the three months ended September 30, 2017, an increase of $268.2 million or 3.2%. The increase in sales for the three months ended September 29, 2018 as compared with the three months ended September 30, 2017 was primarily due to new supermarket sales and a 0.6% increase in comparable store sales (supermarkets open for the same weeks in both periods, including replacement supermarkets). The Company estimates the increase in sales for the three months ended September 29, 2018 as compared with the three months ended September 30, 2017 was $250 million or 3.1% lower due to the impact of Hurricane Irma in September 2017. Excluding the impact of the hurricane, sales for the three months ended September 29, 2018 would have increased 6.3% and comparable store sales would have increased 3.7%. Comparable store sales for the three months ended September 29, 2018 increased primarily due to increased product costs, largely offset by the impact of the hurricane.
Sales for the nine months ended September 29, 2018 were $26.8 billion as compared with $25.6 billion for the nine months ended September 30, 2017, an increase of $1,193.9 million or 4.7%. The increase in sales for the nine months ended September 29, 2018 as compared with the nine months ended September 30, 2017 was primarily due to new supermarket sales and a 2.5% increase in comparable store sales. The Company estimates the increase in sales for the nine months ended September 29, 2018 as compared with the nine months ended September 30, 2017 was $250 million or 1.0% lower due to the impact of Hurricane Irma. Excluding the impact of the hurricane, sales for the nine months ended September 29, 2018 would have increased 5.7% and comparable store sales would have increased 3.5%. Comparable store sales for the nine months ended September 29, 2018 increased primarily due to increased product costs, partially offset by the impact of the hurricane.
Gross profit
Gross profit (sales less cost of merchandise sold) as a percentage of sales was 26.8% and 27.0% for the three months ended September 29, 2018 and September 30, 2017, respectively. Gross profit as a percentage of sales was 27.3% and 27.4% for the nine months ended September 29, 2018 and September 30, 2017, respectively. The decrease in gross profit as a percentage of sales for the three and nine months ended September 29, 2018 as compared with the three and nine months ended September 30, 2017 was primarily due to the effect of volume driven efficiencies experienced in 2017 related to Hurricane Irma.
Operating and administrative expenses
Operating and administrative expenses as a percentage of sales were 20.9% and 20.3% for the three months ended September 29, 2018 and September 30, 2017, respectively. The increase in operating and administrative expenses as a percentage of sales for the three months ended September 29, 2018 as compared with the three months ended September 30, 2017 was primarily due to an increase in payroll costs and the effect of volume driven efficiencies experienced in 2017 related to Hurricane Irma. Operating and administrative expenses as a percentage of sales were 20.5% for the nine months ended September 29, 2018 and September 30, 2017.
Operating profit
Operating profit as a percentage of sales was 6.6% and 7.5% for the three months ended September 29, 2018 and September 30, 2017, respectively. The decrease in operating profit as a percentage of sales for the three months ended September 29, 2018 as compared with the three months ended September 30, 2017 was primarily due to the increase in operating and administrative expenses as a percentage of sales. Operating profit as a percentage of sales was 7.7% and 7.8% for the nine months ended September 29, 2018 and September 30, 2017, respectively. Operating profit as a percentage of sales for the nine months ended September 29, 2018 as compared with the nine months ended September 30, 2017 remained relatively unchanged.


14



Investment income
Investment income was $230.2 million and $38.4 million for the three months ended September 29, 2018 and September 30, 2017, respectively. The increase in investment income for the three months ended September 29, 2018 as compared with the three months ended September 30, 2017 was primarily due to an increase in realized gains on the sale of equity securities and the adoption of the ASU requiring equity securities be measured at fair value with net unrealized gains and losses from changes in the fair value recognized in earnings. Excluding the impact of the ASU, investment income would have been $102.0 million for the three months ended September 29, 2018.
Investment income was $342.7 million and $192.9 million for the nine months ended September 29, 2018 and September 30, 2017, respectively. The increase in investment income for the nine months ended September 29, 2018 as compared with the nine months ended September 30, 2017 was primarily due to the adoption of the ASU requiring equity securities be measured at fair value with net unrealized gains and losses from changes in the fair value recognized in earnings. Excluding the impact of the ASU, investment income would have been $185.8 million for the nine months ended September 29, 2018.
Income tax expense
The effective income tax rate was 18.6% and 31.2% for the three months ended September 29, 2018 and September 30, 2017, respectively. The decrease in the effective income tax rate for the three months ended September 29, 2018 as compared with the three months ended September 30, 2017 was primarily due to the decrease in the federal statutory income tax rate from 35% to 21% effective in 2018 due to the Tax Cuts and Jobs Act of 2017 (Tax Act) and an increase in investment related tax credits. The effective income tax rate was 20.0% and 31.6% for the nine months ended September 29, 2018 and September 30, 2017, respectively. The decrease in the effective income tax rate for the nine months ended September 29, 2018 as compared with the nine months ended September 30, 2017 was primarily due to the decrease in the federal statutory income tax rate due to the Tax Act. The impact of the Tax Act decreased the Company’s income tax expense for the three and nine months ended September 29, 2018 by approximately $101 million and $288 million, respectively.
Net earnings
Net earnings were $677.7 million or $0.94 per share and $474.9 million or $0.63 per share for the three months ended September 29, 2018 and September 30, 2017, respectively. Net earnings as a percentage of sales were 7.7% and 5.6% for the three months ended September 29, 2018 and September 30, 2017, respectively. The increase in net earnings as a percentage of sales for the three months ended September 29, 2018 as compared with the three months ended September 30, 2017 was primarily due to the decrease in the effective income tax rate due to the Tax Act and the recognition of net unrealized gains on equity securities.
Net earnings were $1,974.2 million or $2.71 per share and $1,525.3 million or $2.01 per share for the nine months ended September 29, 2018 and September 30, 2017, respectively. Net earnings as a percentage of sales were 7.4% and 6.0% for the nine months ended September 29, 2018 and September 30, 2017, respectively. The increase in net earnings as a percentage of sales for the nine months ended September 29, 2018 as compared with the nine months ended September 30, 2017 was primarily due to the decrease in the effective income tax rate due to the Tax Act and the recognition of net unrealized gains on equity securities.
Net earnings and earnings per share for the three and nine months ended September 29, 2018 were impacted by the ASU requiring equity securities be measured at fair value with net unrealized gains and losses from changes in the fair value recognized in earnings. Excluding the impact of the ASU, net earnings would have been $582.0 million or $0.80 per share and 6.6% as a percentage of sales for the three months ended September 29, 2018 and $1,857.2 million or $2.55 per share and 6.9% as a percentage of sales for the nine months ended September 29, 2018.


15



Non-GAAP Financial Measures
In addition to reporting financial results for the three and nine months ended September 29, 2018 in accordance with GAAP, the Company presents net earnings and earnings per share excluding the impact of the ASU requiring equity securities be measured at fair value with net unrealized gains and losses from changes in the fair value recognized in earnings (fair value adjustment). These measures are not in accordance with, or an alternative to, GAAP. The Company excludes the fair value adjustment since it is primarily due to temporary equity market fluctuations that do not reflect the Company’s operations. The Company believes this information is useful in providing period-to-period comparisons of the results of operations. Following is a reconciliation of net earnings to net earnings excluding the impact of the fair value adjustment for the three and nine months ended September 29, 2018 (amounts are in millions, except per share amounts):
 
Three Months Ended
Nine Months Ended
 
September 29, 2018
September 29, 2018
Net earnings
 
$
677.7

 
 
1,974.2

 
Fair value adjustment (net unrealized gain) on equity securities held at end of period
 
(166.3
)
 
 
(217.3
)
 
Net gain on sale of equity securities previously recognized through fair value adjustment
 
38.0

 
 
60.4

 
Income tax expense (1)
 
32.6

 
 
39.9

 
Net earnings excluding impact of fair value adjustment
 
$
582.0

 
 
1,857.2

 
Weighted average shares outstanding
 
723.2

 
 
729.4

 
Earnings per share excluding impact of fair value adjustment
 
$
0.80

 
 
2.55

 
(1) 
Income tax expense is based on the Company’s combined federal and state statutory income tax rates.


16



Liquidity and Capital Resources
Cash and cash equivalents, short-term investments and long-term investments totaled $7,469.8 million as of September 29, 2018, as compared with $7,013.2 million as of December 30, 2017 and $7,171.2 million as of September 30, 2017.
Net cash provided by operating activities
Net cash provided by operating activities was $2,863.0 million and $2,813.0 million for the nine months ended September 29, 2018 and September 30, 2017, respectively. The increase in net cash provided by operating activities for the nine months ended September 29, 2018 as compared with the nine months ended September 30, 2017 was primarily due to the increase in net earnings, partially offset by 2017 federal income tax payments extended to 2018 due to Hurricane Irma.
Net cash used in investing activities
Net cash used in investing activities was $1,278.8 million and $819.0 million for the nine months ended September 29, 2018 and September 30, 2017, respectively. The primary use of net cash in investing activities for the nine months ended September 29, 2018 was funding capital expenditures and net increases in investment securities. Capital expenditures for the nine months ended September 29, 2018 totaled $1,098.8 million. These expenditures were incurred in connection with the opening of 35 supermarkets (including eight replacement supermarkets) and remodeling 101 supermarkets. Expenditures were also incurred for supermarkets and remodels in progress, new or enhanced information technology hardware and applications and the acquisition of shopping centers with the Company as the anchor tenant. For the nine months ended September 29, 2018, the payment for investments, net of the proceeds from the sale and maturity of such investments, was $189.4 million.
Net cash used in financing activities
Net cash used in financing activities was $1,547.8 million and $1,761.6 million for the nine months ended September 29, 2018 and September 30, 2017, respectively. The primary use of net cash in financing activities was funding net common stock repurchases and dividend payments. Net common stock repurchases totaled $964.0 million and $1,223.2 million for the nine months ended September 29, 2018 and September 30, 2017, respectively. The Company currently repurchases common stock at the stockholders’ request in accordance with the terms of the Employee Stock Purchase Plan (ESPP), Non-Employee Directors Stock Purchase Plan (Directors Plan), 401(k) Plan and ESOP. 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. 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 quarterly dividends on its common stock totaling $547.7 million or $0.75 per share and $519.8 million or $0.6825 per share during the nine months ended September 29, 2018 and September 30, 2017, respectively.
Capital expenditures projection
Capital expenditures for the remainder of 2018 are expected to be approximately $430 million, primarily consisting of new supermarkets, remodeling existing supermarkets, new or enhanced information technology hardware and applications and the acquisition of 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.
Cash requirements
In 2018, cash requirements for operations, capital expenditures, common stock repurchases and dividend payments 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.


17



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 (Exchange Act). 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,” “expect,” “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 federal, state and local laws and regulations, 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 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. Except as may be required by applicable law, the Company assumes no obligation to publicly update these forward-looking statements.
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 30, 2017.
Item 4.    Controls and Procedures
As of the end of the period covered by this Quarterly Report on Form 10-Q, 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 September 29, 2018 that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting.



18



PART II. OTHER INFORMATION
Item 1.    Legal Proceedings
As reported in the Company’s Form 10-K for the year ended December 30, 2017, the Company is subject from time to time to various lawsuits, claims and charges arising 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 lawsuits, claims and charges, 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 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 30, 2017.
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 September 29, 2018 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)
July 1, 2018
through
August 4, 2018
 
 
4,027

 
 
 
$
41.99

 
 
N/A
 
N/A
August 5, 2018
through
September 1, 2018
 
 
2,138

 
 
 
42.55

 
 
N/A
 
N/A
September 2, 2018
through
September 29, 2018
 
 
4,259

 
 
 
42.55

 
 
N/A
 
N/A
 
 
Total
 
 
10,424

 
 
 
$
42.33

 
 
N/A
 
N/A
(1) 
Common stock is made available for sale by the Company only to its current employees and members of its Board of Directors through the ESPP and Directors Plan and to participants of the 401(k) Plan. In addition, common stock is provided to employees through the ESOP. The Company currently repurchases common stock subject to certain terms and conditions. The ESPP, Directors Plan, 401(k) Plan and ESOP 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 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 September 29, 2018 required to be disclosed in the last two columns of the table.
Item 3.    Defaults Upon Senior Securities
Not Applicable
Item 4.    Mine Safety Disclosures
Not Applicable


19




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 Quarterly Report on Form 10-Q for the quarter ended September 29, 2018 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.



20



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:
November 1, 2018
 
/s/  John A. Attaway, Jr.
 
 
 
John A. Attaway, Jr., Secretary
 
 
 
 
 
 
 
 
 
 
 
Date:
November 1, 2018
 
/s/  David P. Phillips
 
 
 
David P. Phillips, Executive Vice President and Chief Financial Officer (Principal Financial and
Accounting Officer)



21