UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 for the fiscal year ended December 27, 2003
( ) 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 0-981
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PUBLIX SUPER MARKETS, INC.
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(Exact name of Registrant as specified in its charter)
Florida 59-0324412
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(State of Incorporation) (I.R.S. Employer Identification No.)
3300 Airport Road
Lakeland, Florida 33811
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (863) 688-1188
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock $1.00 Par Value
Indicate by check mark 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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ( )
Indicate by check mark whether the Registrant is an accelerated filer.
Yes X No
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The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of March 3, 2004 was approximately $4,908,556,825.
The number of shares of Registrant's common stock outstanding as of March 3,
2004 was 180,910,540.
DOCUMENTS INCORPORATED BY REFERENCE
Pages 2 through 11 of the Proxy Statement solicited for the 2004 Annual Meeting
of Stockholders to be held on May 11, 2004 are incorporated by reference in
Items 10, 11, 12, 13 and 14 of Part III hereof.
PART I
Item 1. Business
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Publix Super Markets, Inc. is based in Lakeland, Florida and was
incorporated in Florida on December 27, 1921. Publix Super Markets, Inc. and its
wholly owned subsidiaries, hereinafter collectively referred to as the
"Company," are in the business of operating retail food supermarkets in Florida,
Georgia, South Carolina, Alabama and Tennessee. The Company has no other lines
of business or industry segments.
The Company's supermarkets sell groceries, dairy, produce, deli, bakery,
meat, seafood, housewares and health and beauty care items. Many supermarkets
also have pharmacy and floral departments. In addition, the Company has
agreements with commercial banks to operate in many of its supermarkets.
The Company's lines of merchandise include a variety of nationally
advertised and private label brands, as well as unbranded merchandise such as
produce, meat and seafood. Private label items are produced in the Company's
manufacturing facilities or are manufactured for the Company by outside
suppliers.
The Company manufactures dairy, bakery and deli products. The Company's
dairy plants are located in Lakeland and Deerfield Beach, Florida, and
Lawrenceville, Georgia. The bakery plants are located in Lakeland, Florida and
Atlanta, Georgia. The deli plant is located in Lakeland, Florida. The Company
receives the food and non-food items it distributes from many sources. These
products are generally available in sufficient quantities to enable the Company
to adequately satisfy its customers. The Company believes that its sources of
supply of these products and raw materials used in manufacturing are adequate
for its needs and that it is not dependent upon a single or relatively few
suppliers.
The Company operated 801 supermarkets at the end of 2003, compared with 741
at the beginning of the year. In 2003, 78 supermarkets were opened, 18
supermarkets were closed, and 80 supermarkets were expanded or remodeled. The
net increase in square footage was 3.2 million square feet or 9.4% since 2002.
At the end of 2003, the Company had 600 supermarkets located in Florida, 148 in
Georgia, 34 in South Carolina, 12 in Alabama and seven in Tennessee. Also, as of
year end, the Company had 13 supermarkets under construction in Florida, nine in
Georgia, seven in Alabama and one in South Carolina. Additionally, during 2003,
the Company operated four convenience stores and a fulfillment center to support
an online grocery shopping service. The Company closed the fulfillment center
and online grocery shopping service in August 2003, as explained in Management's
Discussion and Analysis of Financial Condition and Results of Operations and
Note 8 of the Notes to Consolidated Financial Statements.
The Company is engaged in a highly competitive industry. Competition is
based primarily on price, quality of goods and service, convenience and product
mix. The Company's primary competition throughout its market areas is with
several national and regional chains, independent supermarkets, supercenters,
membership warehouse clubs, mass merchandisers, dollar stores and drug stores.
The Company anticipates continued competitor format innovation and location
additions in 2004.
The influx of winter residents to Florida and increased purchases of food
during the traditional Thanksgiving, Christmas and Easter holidays typically
results in seasonal sales increases between November and April of each year.
The Company has experienced no significant changes in the kinds of products
sold or in its methods of distribution since the beginning of the fiscal year.
The Company had approximately 125,000 employees at the end of 2003,
compared with 123,000 at the end of 2002. Of this total, approximately 69,000 at
the end of 2003 and 67,000 at the end of 2002 were not full-time employees.
Compliance by the Company with Federal, state and local environmental
protection laws during 2003 had no material effect upon capital expenditures,
earnings or the competitive position of the Company.
The Company makes available through its website, free of charge, its annual
report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K
and any amendments to those reports as soon as reasonably practicable after such
material is electronically filed with the Securities and Exchange Commission.
The Company's website address is http://www.publix.com/stock.
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Item 2. Properties
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At year end, the Company operated approximately 36.8 million square feet of
supermarket space. The Company's supermarkets vary in size. Current supermarket
prototypes range from 28,000 to 61,000 square feet. Supermarkets are often
located in strip shopping centers where the Company is the anchor tenant.
The Company supplies its supermarkets from eight distribution centers
located in Lakeland, Miami, Jacksonville, Sarasota, Orlando, Deerfield Beach and
Boynton Beach, Florida, and Lawrenceville, Georgia.
The majority of the Company's supermarkets are leased. Substantially all of
these leases will expire during the next 20 years. However, in the normal course
of business, it is expected that the leases will be renewed or replaced by
leases on other properties. At 70 locations, both the building and land are
owned and at 36 other locations, the building is owned while the land is leased.
The Company's corporate offices, distribution facilities and manufacturing
plants are owned with no outstanding debt.
All of the Company's properties are well maintained and in good operating
condition and are suitable and adequate for operating its business.
Item 3. Legal Proceedings
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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 4. Submission of Matters to a Vote of Security Holders
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None
EXECUTIVE OFFICERS OF THE COMPANY
---------------------------------
Served as
Nature of Family Officer of
Relationship Company
Name Age Position Between Officers Since
- ---- --- -------- ---------------- -----
Charles H. Jenkins, Jr. 60 Chief Executive Cousin of 1974
Officer William E. Crenshaw
William E. Crenshaw 53 President Cousin of 1990
Charles H. Jenkins, Jr.
Hoyt R. Barnett 60 Vice Chairman 1977
John A. Attaway, Jr. 45 General Counsel 2000
and Secretary
David E. Bornmann 46 Vice President 1998
David E. Bridges 54 Vice President 2000
R. Scott Charlton 45 Vice President 1992
G. Gino DiGrazia 41 Vice President 2002
and Controller
David S. Duncan 50 Vice President 1999
William V. Fauerbach 57 Vice President 1997
John R. Frazier 54 Vice President 1997
Linda S. Hall 44 Vice President 2002
M. Clayton Hollis, Jr. 47 Vice President 1994
John T. Hrabusa 48 Vice President 2004
Mark R. Irby 48 Vice President 1989
Tina P. Johnson 44 Senior Vice President 1990
Randall T. Jones, Sr. 41 Vice President 2003
Linda S. Kane 38 Vice President and 2000
Assistant Secretary
James J. Lobinsky 64 Senior Vice President 1992
Thomas M. McLaughlin 53 Vice President 1994
Sharon A. Miller 60 Assistant Secretary 1992
Robert H. Moore 61 Vice President 1994
Dale S. Myers 51 Vice President 2001
David P. Phillips 44 Chief Financial 1990
Officer and Treasurer
James H. Rhodes II 59 Vice President 1995
EXECUTIVE OFFICERS OF THE COMPANY
---------------------------------
Served as
Nature of Family Officer of
Relationship Company
Name Age Position Between Officers Since
- ---- --- -------- ---------------- -----
Daniel M. Risener 63 Senior Vice 1985
President and
Chief Information
Officer
Richard J. Schuler II 48 Vice President 2000
Edward T. Shivers 64 Vice President 1985
Sandra J. Woods 44 Vice President 2002
and Controller
The terms of all officers expire at the annual meeting of the Company in May
2004.
Name Business Experience During Last Five Years
- ---- ------------------------------------------------------
Charles H. Jenkins, Jr. Chairman of the Executive Committee of the Company to
June 2000, Chairman of the Executive Committee and
Chief Operating Officer to May 2001, Chief Executive
Officer thereafter.
William E. Crenshaw President of the Company.
Hoyt R. Barnett Vice Chairman, Trustee of the Profit Sharing Plan and
Trustee of the Employee Stock Ownership Plan to
December 1999, Vice Chairman, Trustee of the Employee
Stock Ownership Plan thereafter.
John A. Attaway, Jr. Corporate Counsel of the Company to May 2000, General
Counsel and Secretary thereafter.
David E. Bornmann Vice President of the Company.
David E. Bridges Regional Director of Retail Operations - Lakeland
Division of the Company to July 2000, Vice President
thereafter.
R. Scott Charlton Vice President of the Company.
G. Gino DiGrazia Director of Business Analysis and Reporting to May
2002, Vice President and Controller thereafter.
David S. Duncan Director of Facility Services of the Company
to November 1999, Vice President thereafter.
William V. Fauerbach Vice President of the Company.
John R. Frazier Vice President of the Company.
Linda S. Hall Director of Internal Audit to November 2002, Vice
President thereafter.
M. Clayton Hollis, Jr. Vice President of the Company.
John T. Hrabusa Vice President of Office Depot, Inc. to March 2004,
Vice President of the Company thereafter.
Mark R. Irby Vice President of the Company.
Tina P. Johnson Senior Vice President of the Company and Trustee of
the 401(k) Plan - Publix Stock Fund (Publix stock
portion).
Randall T. Jones, Sr. Regional Director of Retail Operations - Jacksonville
Division of the Company to November 2003, Vice
President thereafter.
Linda S. Kane Director of Benefits Administration of the Company to
June 2000, Director of Benefits Administration and
Assistant Secretary to May 2002, Vice President and
Assistant Secretary thereafter.
James J. Lobinsky Senior Vice President of the Company.
Thomas M. McLaughlin Vice President of the Company.
Name Business Experience During Last Five Years
- ---- ------------------------------------------------------
Sharon A. Miller Director of Administration and Assistant Secretary of
the Company to May 2003, Executive Director Publix
Super Markets Charities, Inc. and Assistant Secretary
thereafter.
Robert H. Moore Vice President of the Company.
Dale S. Myers Regional Director of Retail Operations - Lakeland
Division of the Company to July 2001, Vice President
thereafter.
David P. Phillips Vice President Finance and Treasurer of the Company to
July 1999, Chief Financial Officer and Treasurer
thereafter.
James H. Rhodes II Vice President of the Company.
Daniel M. Risener Vice President of the Company to July 1999, Senior
Vice President and Chief Information Officer
thereafter.
Richard J. Schuler II Miami Distribution Manager of the Company to June
2000, Vice President thereafter.
Edward T. Shivers Vice President of the Company.
Sandra J. Woods Director of Corporate Accounting to May 2002, Vice
President and Controller thereafter.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
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Matters
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(a) Market Information
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The Company's common stock is not traded on any public stock exchange.
Therefore, substantially all transactions of the Company's common stock
have been among the Company, its employees, former employees, their
families and the benefit plans established for the Company's employees. The
Company's common stock is made available for sale only to the Company's
current employees and members of its Board of Directors through the
Company's Employee Stock Purchase Plan (the "ESPP") and the Company's
Non-Employee Directors Stock Purchase Plan (the "Directors' Plan"). In
addition, the common stock is made available under the Company's Employee
Stock Ownership Plan (the "ESOP"). The ESOP, the ESPP and the Directors'
Plan each contain provisions prohibiting any transfer for value without the
owner first offering the common stock to the Company. The Company serves as
the registrar and stock transfer agent for its common stock.
Because there is no trading of the Company's common stock on a public stock
exchange, the market price of the Company's common stock is determined by
the Board of Directors based upon quarterly appraisals prepared by an
independent appraiser. The market price for 2003 and 2002 was as follows:
2003 2002
---- ----
January - February $37.00 $41.00
March - April 38.50 41.00
May - July 37.50 44.00
August - October 42.25 40.00
November - December 46.50 37.00
(b) Approximate Number of Equity Security Holders
---------------------------------------------
As of March 3, 2004, the approximate number of holders of the Company's
common stock was 94,000.
(c) Dividends
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The Company paid an annual cash dividend of $.40 per share of common stock
in 2003 and $.33 per share in 2002. Payment of dividends is within the
discretion of the Company's Board of Directors and depends on, among other
factors, earnings, capital requirements and the operating and financial
condition of the Company. It is believed that comparable cash dividends
will be paid in the future.
Item 6. Five Year Summary of Selected Financial Data
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2003 2002 2001 2000 1999
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Sales:
Sales $16,848,277 15,930,602 15,284,229 14,575,031 13,068,900
Percent increase 5.8% 4.2% 4.9% 11.5% 8.3%
Comparable store sales
percent increase
(decrease) 0.0% (0.7%) 3.9% 4.1% 5.7%
Earnings:
Gross profit $ 4,518,323 4,260,080 3,890,977 3,657,900 3,210,262
Earnings before income
tax expense $ 1,047,089 1,002,830 826,823 823,553 719,569
Net earnings $ 660,933 632,404 530,421 530,406 462,409
Net earnings as a
percent of sales 3.92% 3.97% 3.47% 3.64% 3.54%
Common stock:
Weighted average
shares outstanding 184,112,742 194,466,212 202,171,794 210,145,666 216,160,316
Basic and diluted
earnings per
common share,
based on weighted
average shares
outstanding $ 3.59 3.25 2.62 2.52 2.14
Cash dividends per
share $ .40 .33 .32 .27 .22
Financial data:
Capital expenditures $ 563,576 635,891 656,422 558,133 512,658
Working capital $ 209,941 127,870 49,328 193,088 531,847
Current ratio 1.15 1.10 1.04 1.16 1.49
Total assets $ 5,150,717 4,789,602 4,408,187 4,250,067 4,101,192
Stockholders' equity $ 3,169,310 3,008,068 2,762,551 2,662,435 2,676,144
Stores:
Number of supermarkets 801 741 684 647 614
Number of convenience
stores 4 4 2 - -
NOTE: Amounts are in thousands, except shares outstanding, per share amounts
and number of stores. Fiscal year 2000 includes 53 weeks. All other
years include 52 weeks.
Certain prior year amounts have been reclassified to conform to the 2003
presentation.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
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of Operations
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Overview
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As of December 27, 2003, the Company operated 801 supermarkets representing
approximately 36.8 million square feet of retail space. Additionally, during
2003 the Company operated four convenience stores and a fulfillment center to
support an online grocery shopping service. The Company closed the fulfillment
center and online grocery shopping service in August 2003, as discussed below in
Results of Operations. The Company's primary competition throughout its market
areas is with several national and regional chains, independent supermarkets,
supercenters, membership warehouse clubs, mass merchandisers, dollar stores and
drug stores.
At the end of fiscal year 2003, the Company had 600 supermarkets located in
Florida, 148 in Georgia, 34 in South Carolina, 12 in Alabama and seven in
Tennessee. The Company opened 53 supermarkets in Florida, 11 supermarkets in
Georgia, six supermarkets in South Carolina, five supermarkets in Alabama and
three supermarkets in Tennessee during 2003.
Liquidity and Capital Resources
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Cash and cash equivalents and short-term and long-term investments totaled
approximately $674.6 million at December 27, 2003, compared to $591.9 million
and $592.6 million at December 28, 2002 and December 29, 2001, respectively. Net
cash provided by operating activities was approximately $1,311.8 million for the
year ended December 27, 2003, as compared with $1,211 million and $1,060.8
million for the years ended December 28, 2002 and December 29, 2001,
respectively. 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 was approximately $534.6 million for
the year ended December 27, 2003, as compared with $625.5 million and $557.1
million for the years ended December 28, 2002 and December 29, 2001,
respectively. The primary use of net cash in investing activities was funding
capital expenditures. During the year ended December 27, 2003, capital
expenditures totaled approximately $563.6 million. These expenditures were
primarily incurred in connection with the opening of 60 net new supermarkets (78
new supermarkets opened and 18 supermarkets closed) and remodeling or expanding
80 supermarkets. Net new supermarkets added an additional 3.2 million square
feet in the year ended December 27, 2003, a 9.4% increase. Significant
expenditures were also incurred in the expansion of warehouses and new or
enhanced information technology applications. During the year ended December 28,
2002, capital expenditures totaled approximately $635.9 million. These
expenditures were primarily incurred in connection with the opening of 57 net
new supermarkets (76 new supermarkets opened and 19 supermarkets closed) and
remodeling or expanding 91 supermarkets. Net new supermarkets added an
additional 2.7 million square feet in the year ended December 28, 2002, an 8.8%
increase. Significant expenditures were also incurred in the expansion of
warehouses, office construction and new or enhanced information technology
applications. Additionally, during 2002 the Company opened two convenience
stores. During the year ended December 29, 2001, capital expenditures totaled
approximately $656.4 million. These expenditures were primarily incurred in
connection with the opening of 37 net new supermarkets (52 new supermarkets
opened and 15 supermarkets closed) and remodeling or expanding 79 supermarkets.
Net new supermarkets added an additional 1.7 million square feet in the year
ended December 29, 2001, a 5.8% increase. Significant expenditures were also
incurred in the expansion of warehouses in Lakeland, Florida and the development
of an online grocery shopping service, PublixDirect. Additionally, during 2001
the Company opened two convenience stores.
In 2004, the Company plans to open approximately 57 supermarkets. Although
real estate development is unpredictable, the Company's 2004 new store growth
represents a reasonable estimate of anticipated future growth. Capital
expenditures for 2004, consisting of new supermarkets, remodeling and expanding
certain existing supermarkets, expansion of warehouses and new or enhanced
information technology applications, are expected to be approximately $500
million. This capital program is subject to continuing change and review. In the
normal course of operations, the Company replaces supermarkets and closes
supermarkets that are not meeting performance expectations. The impact of future
supermarket closings is not expected to be material.
Net cash used in financing activities was approximately $707.6 million for
the year ended December 27, 2003, as compared with $589.3 million and $645.9
million for the years ended December 28, 2002 and December 29, 2001,
respectively. The primary use of net cash in financing activities was funding
net common stock repurchases. The Company currently repurchases common stock at
the stockholders' request in accordance with the terms of the Company's Employee
Stock Purchase Plan. Net common stock repurchases totaled approximately $632
million for the year ended December 27, 2003, as compared with $523.7 million
and $579.6 million for the years ended December 28, 2002 and December 29, 2001,
respectively. The amount of common stock offered to the Company for repurchase
is not within the control of the Company, but is at the discretion of the
stockholders. The Company expects to continue to repurchase its common stock, as
offered by its stockholders from time to time, at its then currently appraised
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.
The Company paid an annual cash dividend on its common stock of $75.5
million or $.40 per share, $65.4 million or $.33 per share and $66.3 million or
$.32 per share in 2003, 2002 and 2001, respectively.
In December 2003, the Company renewed an agreement for a committed line of
credit totaling $100 million. This 364-day line of credit facility is available
to fund liquidity requirements if necessary. The interest rate is based on LIBOR
or prime. There were no amounts outstanding on this line of credit as of
December 27, 2003.
The cash requirements for 2004 current operations, capital expenditures and
common stock repurchases are expected to be financed by internally generated
funds, liquid assets, or the committed line of credit described above. Based on
the Company's financial position, it is expected that short-term and long-term
borrowings would be readily available to support the Company's liquidity
requirements if needed.
Contractual Obligations
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Following is a summary of contractual obligations as of December 27, 2003:
Payments Due by Period
2005- 2007- There-
Total 2004 2006 2008 after
----- ---- ---- ---- -----
(Amounts are in thousands)
Contractual Obligations:
Operating leases (1) $3,963,913 305,064 593,098 556,867 2,508,884
Purchase obligations (2)(3) 414,170 357,231 48,534 8,405 ---
Other long-term
liabilities reflected
on the Company's Balance
Sheet under GAAP (4) 163,943 --- 163,943 --- ---
---------- ------- ------- ------- ---------
Total $4,542,026 662,295 805,575 565,272 2,508,884
========== ======= ======= ======= =========
(1) For a more detailed description of the operating lease obligations refer to
Note 9(a) Commitments and Contingencies - Operating Leases, in the Notes to
Consolidated Financial Statements.
(2) Purchase obligations include agreements to purchase goods or services that
are enforceable and legally binding on the Company and that specify all
significant terms, including: fixed or minimum quantities to be purchased;
fixed, minimum or variable price provisions; and the approximate timing of
the transaction. Purchase obligations exclude agreements that are
cancelable within 30 days without penalty.
(3) As of December 27, 2003, the Company had $5 million outstanding in trade
letters of credit and $1.8 million outstanding in standby letters of credit
to support certain of these purchase obligations.
(4) Includes standby letters of credit of $163.9 million for the benefit of the
Company's insurance carriers for the self-insured portion of workers'
compensation and fleet liability. The estimated amounts of these
liabilities are included in the Company's consolidated balance sheets.
Off-Balance Sheet Arrangements
- ------------------------------
The Company is not a party to any off-balance sheet arrangements that have,
or are reasonably likely to have, a current or future effect on the Company's
financial condition, results of operations or cash flows.
Results of Operations
- ---------------------
The Company's fiscal year ends on the last Saturday in December. Fiscal
years 2003, 2002 and 2001 included 52 weeks.
Sales for 2003 were $16.8 billion as compared with $15.9 billion in 2002,
an increase of $917.7 million or a 5.8% increase. All of this increase was from
net new supermarkets since the beginning of 2002 as comparable store sales
(supermarkets open for the same weeks in both periods, including replacement
supermarkets) were unchanged. Sales for 2002 were $15.9 billion as compared with
$15.3 billion in 2001, an increase of $646.4 million or a 4.2% increase. This
reflects an increase of $753.4 million or 4.9% from net new supermarkets and a
decrease of $107 million or 0.7% in comparable store sales since the beginning
of 2001. During the first quarter of 2002, the Company modified its calculation
of comparable store sales to include replacement supermarkets. The comparable
store sales calculation was modified to improve the comparability of this key
performance measure to others in the food retailing industry. If the current
comparable store sales calculation had been used for the year ended December 29,
2001, the comparable store sales increase would have been 3.9%, as compared to
the previously reported comparable store sales increase of 3.2%. Sales for 2001
were $15.3 billion as compared with $14.6 billion in 2000, a 4.9% increase.
After excluding sales of $288.8 million for the extra week included in fiscal
2000, this reflects an increase of $448 million or 3.1% from net new
supermarkets and an increase of $550 million or 3.9% in comparable store sales
since the beginning of 2000.
Gross profit, as a percentage of sales, was approximately 26.8% in 2003 as
compared with 26.7% and 25.5% in 2002 and 2001, respectively. In 2003, gross
profit remained relatively unchanged compared to 2002. During 2003, the Company
modified its calculation of cost of merchandise sold. The cost of merchandise
sold calculation was modified to improve the comparability of its gross profit
to others in the food retailing industry. In 2002 and 2001, gross profit
increased as a percentage of sales primarily due to increased margins from
retail pricing strategies as well as continuing improvements in buying practices
including centralized product procurement, promotional efficiencies including
category management and more efficient distribution channels.
Operating and administrative expenses, as a percentage of sales, were
approximately 21.5%, 21.3% and 21% in 2003, 2002 and 2001, respectively.
Decreases in payroll and employee benefit costs were offset by increases in
certain facilities costs and other expenses. The operating and administrative
expenses, as a percentage of sales, for prior years were adjusted due to the
modification of the gross profit calculation described above.
In August 2003, the Company announced its decision to close its online
grocery shopping service operated under its wholly owned subsidiary,
PublixDirect, LLC, ("PublixDirect"). In September 2001, the online grocery
shopping service began delivering orders to homes in South Florida from its
fulfillment center located in Pompano Beach, Florida. The decision to close the
online service resulted from a lack of growth in the demand for this service and
ongoing losses from operations. The Company could not justify the continued
investment in an operation that was not expected to become profitable in the
foreseeable future. The Company expects most of the sales generated from this
operation to transfer to its traditional supermarkets located in these market
areas.
As a result of the decision to close PublixDirect the Company recorded an
expense of $30 million. The expense recorded represents approximately $17
million in asset impairments, $10 million in operating lease obligations and $3
million in remaining payroll obligations and other costs. The expense has been
recorded in the Company's consolidated statements of earnings and is included in
operating and administrative expenses. The impact of the expense recorded on net
earnings was approximately $18 million or $.10 per share for the fiscal year
ended December 27, 2003.
The remaining accrued liabilities for PublixDirect totaling approximately
$15.6 million are reflected in the Company's consolidated balance sheet as of
December 27, 2003, and are included in other current and noncurrent liabilities.
In recent years, the impact of inflation on the Company's food costs has
been lower than the overall increase in the Consumer Price Index.
Net earnings were $660.9 million or $3.59 per share, $632.4 million or
$3.25 per share and $530.4 million or $2.62 per share for 2003, 2002 and 2001,
respectively.
Accounting Standards
- --------------------
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 143, "Accounting for Asset Retirement
Obligations," (SFAS 143) effective for fiscal years beginning after June 15,
2002. SFAS 143 addresses the financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. SFAS 143 requires the Company to record the fair value
of an asset retirement obligation as a liability in the period in which it
incurs a legal obligation associated with the retirement of tangible long-lived
assets. The Company would also record a corresponding asset which is depreciated
over the life of the asset. Subsequent to the initial measurement of the asset
retirement obligation, the obligation will be adjusted at the end of each period
to reflect the passage of time and changes in the estimated future cash flows
underlying the obligation. The adoption of SFAS 143 did not have a material
effect on the Company's financial condition, results of operations or cash
flows.
In July 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 146, "Accounting for Costs Associated with
Exit or Disposal Activities," (SFAS 146) effective for exit or disposal
activities initiated after December 31, 2002. SFAS 146 requires that a liability
for a cost associated with an exit or disposal activity be recognized at fair
value when the liability is incurred rather than at the date of a commitment to
an exit or disposal plan. The adoption of SFAS 146 did not have a material
effect on the Company's financial condition, results of operations or cash
flows.
In November 2002, the Emerging Issues Task Force (EITF) issued EITF Issue
No. 02-16, "Accounting by a Customer (Including a Reseller) for Certain
Consideration Received from a Vendor," (EITF 02-16). EITF 02-16 provides
guidance for the accounting for cash consideration given to a reseller from a
vendor. The adoption of EITF No. 02-16 did not have a material effect on the
Company's financial condition, results of operations or cash flows.
In November 2002, the Financial Accounting Standards Board issued
Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others," (FIN 45)
effective for guarantees issued or modified after December 31, 2002. FIN 45
elaborates on the existing disclosure requirements for most guarantees,
including loan guarantees such as standby letters of credit. It also clarifies
that at the time a company issues a guarantee, the company must recognize an
initial liability for the fair market value of the obligations it assumes under
that guarantee and must disclose that information in its interim and annual
financial statements. The Company does not have any guarantees as defined in FIN
45; therefore, the adoption of FIN 45 had no effect on the Company's financial
condition, results of operations or cash flows.
In December 2002, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 148, "Accounting for Stock-Based
Compensation," (SFAS 148) effective for fiscal years ending after December 15,
2002. SFAS 148 amends SFAS 123, "Accounting for Stock-Based Compensation," to
provide alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-based employee compensation. In
addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require
disclosures in both interim and annual financial statements about the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results. The Company does not have any stock-based employee
compensation; therefore, the adoption of SFAS 148 had no effect on the Company's
financial condition, results of operations or cash flows.
In January 2003, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 46, "Consolidation of Variable Interest Entities, an
interpretation of ARB No. 51" (FIN 46). FIN 46 addresses the consolidation of
entities whose equity holders have either (a) not provided sufficient equity at
risk to allow the entity to finance its own activities or (b) do not possess
certain characteristics of a controlling financial interest. FIN 46 requires the
consolidation of these entities, known as variable interest entities ("VIE's"),
by the primary beneficiary of the entity. The primary beneficiary is the entity,
if any, that is subject to a majority of the risk of loss from the VIE's
activities, entitled to receive a majority of the VIE's residual returns, or
both. In December 2003, the FASB issued FIN 46(R), "Consolidation of Variable
Interest Entities," which represents a revision to FIN 46. FIN 46(R) provided
clarifications to FIN 46 and excluded certain entities from its scope. The
requirements of FIN 46(R) for entities commonly referred to as special-purpose
entities (SPE) are effective for periods ending after December 15, 2003. The
requirements for all other types of entities are effective for periods ending
after March 15, 2004. The Company does not have any entities classified as SPEs.
The Company is currently evaluating the effect of adopting FIN 46(R) for its
other entities.
In May 2003, the Financial Accounting Standards Board issued Statement No.
150, "Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity," (SFAS 150) effective for financial instruments entered
into or modified after May 31, 2003, and otherwise is effective at the beginning
of the first interim period beginning after June 15, 2003. SFAS 150 provides
guidance on the classification and measurement of certain financial instruments
with characteristics of both liabilities and equity and requires that those
instruments be classified as liabilities in the balance sheets. Previously, many
of those financial instruments were classified as equity. The Company does not
have any financial instruments as defined in SFAS 150; therefore, the adoption
of SFAS 150 had no effect on the Company's financial condition, results of
operations or cash flows.
In November 2003, the Emerging Issues Task Force (EITF) issued EITF Issue
No. 03-1, "The Meaning of Other-Than-Temporary Impairment and Its Application to
Certain Investments," (EITF 03-1) effective for fiscal years ending after
December 15, 2003. EITF 03-1 includes new disclosure requirements for
temporarily impaired investments. The requirements apply to investments in debt
and marketable equity securities that are accounted for under Statement of
Financial Accounting Standard No. 115, "Accounting for Certain Investments in
Debt and Equity Securities". The Company adopted the new disclosure requirements
of EITF No. 03-1 for the fiscal year ended December 27, 2003. The adoption of
EITF No. 03-1 had no effect on the Company's financial condition, results of
operations or cash flows.
Critical Accounting Policies
- ----------------------------
The Company's discussion and analysis of its financial condition and
results of operations are based upon the Company's consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States of America. The preparation of these
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The Company's significant
accounting policies are described in Note 1 of the Notes to Consolidated
Financial Statements. The Company believes the following critical accounting
policies reflect its more significant judgments and estimates used in the
preparation of its consolidated financial statements:
Inventories
-----------
Inventories are valued at the lower of cost or market. The cost for
approximately 87% of inventories was determined using the dollar value
last-in, first-out method as of December 27, 2003 and December 28, 2002.
The cost of all remaining inventories was determined using the first-in,
first-out ("FIFO") method. The FIFO cost of inventory approximates
replacement or current cost.
Investments
-----------
All of the Company's debt and marketable equity securities are classified
as available-for-sale. Available-for-sale securities are carried at fair
value, with the unrealized gains and losses, net of tax, reported as other
comprehensive earnings and included as a separate component of
stockholders' equity. The cost of debt securities in this category is
adjusted for amortization of premiums and accretion of discounts to
maturity. Such amortization and accretion is included in investment
income, net. The Company reviews its investments for impairment based on
criteria that include the extent to which cost exceeds market value, the
duration of the market decline and the financial health of and prospects
for the issuer. Realized gains and losses and declines in value judged to
be other-than-temporary on available-for-sale securities are included in
investment income, net.
The Company also from time to time holds investments in joint ventures,
partnerships or other equity investments for which evaluation of the
existence and quantification of other-than-temporary declines in value may
be required. Realized gains and losses and declines in value judged to be
other-than-temporary on other investments are included in investment
income, net.
Property, Plant and Equipment and Depreciation
----------------------------------------------
Assets are recorded at cost and are depreciated using the straight-line
method over their estimated useful lives or the terms of their leases, if
shorter, as follows: buildings and improvements are at 10 - 40 years,
furniture, fixtures and equipment are at 3 - 20 years and leasehold
improvements are at 10 - 40 years.
Long-Lived Assets
-----------------
The Company reviews its long-lived assets for impairment whenever events
or changes in circumstances indicate that the net book value of an asset
may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the net book value of an asset to the future
net undiscounted cash flows expected to be generated by the asset. An
impairment loss would be recorded for the excess of the net book value
over the fair value of the asset impaired. The fair value is estimated
based on expected discounted future cash flows. Assets to be disposed of
are reported at the lower of the carrying amount or fair value less cost
to sell and are no longer depreciated.
Revenue Recognition
-------------------
Revenue is recognized at the point of sale for retail sales. Vendor
coupons that are reimbursed are accounted for as sales. Coupons and other
sales incentives offered by the Company that are not reimbursed are
recorded as a reduction of sales.
Cost of Merchandise Sold
------------------------
Cost of merchandise sold includes costs of inventory, costs related to
in-store production and related purchase and distribution costs. Cost of
merchandise sold also includes inbound freight charges, purchasing and
receiving costs, warehousing costs and other costs of the Company's
distribution network.
Vendor allowances and credits, including cooperative advertising fees,
received from a vendor in connection with the purchase or promotion of the
vendor's products, are recognized as a reduction of cost of merchandise
sold as earned. These allowances and credits are recognized as earned in
accordance with the underlying agreement with the vendor and completion of
the earning process. Short-term vendor agreements with advance payment
provisions are recorded as a current liability and are recognized over the
appropriate period as earned according to the underlying agreement.
Long-term vendor agreements with advance payment provisions are recorded
as a noncurrent liability and are recognized over the appropriate period
as earned according to the underlying agreement.
Self-Insurance
--------------
Self-insurance reserves are established for health care, fleet liability,
general liability and workers' compensation claims. These reserves are
determined based on actual experience including, where necessary,
actuarial studies. The Company has insurance coverage for losses in excess
of varying amounts.
Cautionary Note Regarding 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: competitive
practices and pricing in the food and drug industries generally and particularly
in the Company's principal markets; changes in the general economy; changes in
consumer spending; 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, ability to construct new stores 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 update publicly these forward-looking statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
- -------------------------------------------------------------------
The Company does not utilize financial instruments for trading or other
speculative purposes, nor does it utilize leveraged financial instruments. The
Company does not consider to be material the potential losses in future
earnings, fair values and cash flows from reasonably possible near-term changes
in interest rates.
Item 8. Financial Statements and Supplementary Data
- ----------------------------------------------------
The Company's financial statements, together with the independent auditors'
report thereon, are included in the section following Part IV of this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
- ------------------------------------------------------------------------
Financial Disclosure
--------------------
None
Item 9A. Controls and Procedures
- --------------------------------
As of the end of the period covered by this annual report, the Company
carried out an evaluation, under the supervision and with the participation of
the Company's management, including the Company's Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures pursuant to Exchange Act Rule
13a-15. Based upon that evaluation, the Chief Executive Officer and the Chief
Financial Officer concluded that the Company's disclosure controls and
procedures are effective in timely alerting them to material information
relating to the Company (including its consolidated subsidiaries) required to be
included in the Company's periodic Securities and Exchange Commission filings.
There have been no significant changes in the Company's internal control over
financial reporting during the quarter ended December 27, 2003 that have
materially affected, or are reasonably likely to materially affect, the internal
control over financial reporting.
PART III
Item 10. Directors and Executive Officers of the Registrant
- -----------------------------------------------------------
Certain information concerning the directors and executive officers of the
Company is incorporated by reference to pages 2 through 8 of the Proxy Statement
of the Company (2004 Proxy Statement) which the Company intends to file no later
than 120 days after its fiscal year end. Certain information concerning the
executive officers of the Company is set forth in Part I under the caption
"Executive Officers of the Company."
The Company has adopted a Code of Ethical Conduct for Financial Managers
that applies to the Company's principal executive officer, principal financial
officer, principal accounting officer or controller and all persons performing
similar functions. A copy of the Code of Ethical Conduct for Financial Managers
was filed as Exhibit 14 to the Annual Report of the Company on Form 10-K for the
year ended December 28, 2002.
Item 11. Executive Compensation
- -------------------------------
Information regarding executive compensation is incorporated by reference
to pages 8 through 10 of the 2004 Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- -----------------------------------------------------------------------
Information regarding security ownership is incorporated by reference to
pages 6 through 8 of the 2004 Proxy Statement.
Item 13. Certain Relationships and Related Transactions
- -------------------------------------------------------
Information regarding certain relationships and related transactions is
incorporated by reference to pages 3, 7 and 8 of the 2004 Proxy Statement.
Item 14. Principal Accounting Fees and Services
- -----------------------------------------------
Information regarding principal accounting fees and services is
incorporated by reference to pages 10 and 11 of the 2004 Proxy Statement.
PART IV
Item 15. Exhibits, Financial Statement Schedule and Reports on Form 8-K
- -----------------------------------------------------------------------
(a) Consolidated Financial Statements and Schedule
----------------------------------------------
The consolidated financial statements and schedule listed in the
accompanying Index to Consolidated Financial Statements and Schedule are
filed as part of this Annual Report on Form 10-K.
(b) Reports on Form 8-K
-------------------
The Company filed a report on Form 8-K on November 4, 2003, pursuant to
Item 12 ("Results of Operations and Financial Condition"), attaching the
Company's press release dated November 3, 2003.
(c) Exhibits
--------
3(a). Articles of Incorporation of the Company, together with all
amendments thereto, are incorporated by reference to the exhibits
to the Annual Report of the Company on Form 10-K for the year
ended December 25, 1993.
3(b). Amended and Restated By-laws of the Company are incorporated by
reference to the exhibits to the quarterly report of the Company
on Form 10-Q for the quarter ended June 29, 2002.
10. Indemnification Agreement, in the form attached as an exhibit to
the quarterly report of the Company on Form 10-Q for the quarter
ended March 31, 2001, between the Company and all of its
directors and officers as reported in the quarterly and annual
reports of the Company on Form 10-Q and Form 10-K for the periods
ended March 31, 2001, June 30, 2001, September 29, 2001, June 29,
2002, December 28, 2002 and September 27, 2003. Such subsequent
indemnified officer is listed as follows:
John T. Hrabusa
10.1 Non-Employee Directors Stock Purchase Plan Summary Plan
Description, as registered in the Form S-8 filed with the
Securities and Exchange Commission on June 21, 2001, is
incorporated by reference to the exhibits to the quarterly report
of the Company on Form 10-Q for the quarter ended June 30, 2001.
14. Code of Ethical Conduct for Financial Managers is incorporated by
reference to the exhibits to the Annual Report of the Company on
Form 10-K for the year ended December 28, 2002.
15. Subsidiaries of the Registrant.
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.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PUBLIX SUPER MARKETS, INC.
March 3, 2004 By: /s/ John A. Attaway, Jr.
--------------------------
John A. Attaway, Jr.
Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ Carol Jenkins Barnett Director March 3, 2004
- ---------------------------
Carol Jenkins Barnett
/s/ Hoyt R. Barnett Vice Chairman and Director March 3, 2004
- ---------------------------
Hoyt R. Barnett
/s/ Joan G. Buccino Director March 3, 2004
- ---------------------------
Joan G. Buccino
/s/ William E. Crenshaw President and Director March 3, 2004
- ---------------------------
William E. Crenshaw
/s/ Mark C. Hollis Director March 3, 2004
- ---------------------------
Mark C. Hollis
/s/ Sherrill W. Hudson Director March 3, 2004
- ---------------------------
Sherrill W. Hudson
Chief Executive Officer and
Director
/s/ Charles H. Jenkins, Jr. (Principal Executive Officer) March 3, 2004
- ---------------------------
Charles H. Jenkins, Jr.
Chairman of the Board and
/s/ Howard M. Jenkins Director March 3, 2004
- ---------------------------
Howard M. Jenkins
Senior Vice President
/s/ Tina P. Johnson and Director March 3, 2004
- ---------------------------
Tina P. Johnson
/s/ E. Vane McClurg Director March 3, 2004
- ---------------------------
E. Vane McClurg
/s/ Kelly E. Norton Director March 3, 2004
- ---------------------------
Kelly E. Norton
Chief Financial Officer
and Treasurer
(Principal Financial and
/s/ David P. Phillips Accounting Officer) March 3, 2004
- ---------------------------
David P. Phillips
PUBLIX SUPER MARKETS, INC.
Index to Consolidated Financial Statements and Schedule
Independent Auditors' Report
Consolidated Financial Statements:
Consolidated Balance Sheets - December 27, 2003 and December 28, 2002
Consolidated Statements of Earnings - Years ended December 27, 2003,
December 28, 2002 and December 29, 2001
Consolidated Statements of Comprehensive Earnings - Years ended December 27,
2003, December 28, 2002 and December 29, 2001
Consolidated Statements of Stockholders' Equity - Years ended December 27,
2003, December 28, 2002 and December 29, 2001
Consolidated Statements of Cash Flows - Years ended December 27, 2003,
December 28, 2002 and December 29, 2001
Notes to Consolidated Financial Statements
The following consolidated financial statement schedule of the Company for the
years ended December 27, 2003, December 28, 2002 and December 29, 2001 is
submitted herewith:
Schedule:
II - Valuation and Qualifying Accounts
All other schedules are omitted as the required information is inapplicable or
the information is presented in the financial statements or related notes.
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors and Stockholders
Publix Super Markets, Inc.:
We have audited the consolidated financial statements of Publix Super Markets,
Inc. and subsidiaries (the "Company") as listed in the accompanying index. In
connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedule as listed in the accompanying
index. These consolidated financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Publix Super
Markets, Inc. and subsidiaries as of December 27, 2003 and December 28, 2002,
and the results of their operations and their cash flows for each of the years
in the three-year period ended December 27, 2003, in conformity with accounting
principles generally accepted in the United States of America. Also in our
opinion, the related financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
KPMG LLP
Tampa, Florida
February 24, 2004
PUBLIX SUPER MARKETS, INC.
Consolidated Balance Sheets
December 27, 2003 and
December 28, 2002
Assets 2003 2002
------ ---- ----
(Amounts are in thousands)
Current assets:
Cash and cash equivalents $ 277,072 207,523
Short-term investments 16,661 6,713
Trade receivables 241,101 188,077
Merchandise inventories 981,456 922,243
Deferred tax assets 55,479 57,383
Prepaid expenses 9,778 4,263
---------- ---------
Total current assets 1,581,547 1,386,202
---------- ---------
Long-term investments 380,852 377,616
Other noncurrent assets 1,119 950
Property, plant and equipment:
Land 174,283 162,552
Buildings and improvements 1,108,605 1,034,854
Furniture, fixtures and equipment 2,936,339 2,620,704
Leasehold improvements 833,569 745,468
Construction in progress 88,015 134,072
---------- ---------
5,140,811 4,697,650
Less accumulated depreciation 1,953,612 1,672,816
---------- ---------
Net property, plant and equipment 3,187,199 3,024,834
---------- ---------
$5,150,717 4,789,602
========== =========
See accompanying notes to consolidated financial statements. (Continued)
PUBLIX SUPER MARKETS, INC.
Consolidated Balance Sheets
December 27, 2003 and
December 28, 2002
Liabilities and Stockholders' Equity 2003 2002
------------------------------------ ---- ----
(Amounts are in thousands,
except share amounts)
Current liabilities:
Accounts payable $ 768,197 686,634
Accrued expenses:
Salaries and wages 63,756 63,906
Contribution to retirement plans 244,848 248,605
Self-insurance reserves 123,462 102,722
Other 158,835 140,334
---------- ---------
Total accrued expenses 590,901 555,567
---------- ---------
Federal and state income taxes 12,508 16,131
---------- ---------
Total current liabilities 1,371,606 1,258,332
Deferred tax liabilities, net 284,458 238,573
Self-insurance reserves 202,737 176,895
Accrued postretirement benefit cost 67,960 69,062
Other noncurrent liabilities 54,646 38,672
---------- ---------
Total liabilities 1,981,407 1,781,534
---------- ---------
Stockholders' equity:
Common stock of $1 par value. Authorized
300,000,000 shares; issued and outstanding
178,369,413 shares in 2003 and 189,167,769
shares in 2002 178,369 189,168
Additional paid-in capital 494,154 421,019
Retained earnings 2,492,759 2,397,634
---------- ---------
3,165,282 3,007,821
Accumulated other comprehensive earnings 4,028 247
---------- ---------
Total stockholders' equity 3,169,310 3,008,068
Commitments and contingencies --- ---
---------- ---------
$5,150,717 4,789,602
========== =========
See accompanying notes to consolidated financial statements.
PUBLIX SUPER MARKETS, INC.
Consolidated Statements of Earnings
Years ended December 27, 2003, December 28, 2002
and December 29, 2001
2003 2002 2001
---- ---- ----
(Amounts are in thousands, except shares
outstanding and per share amounts)
Revenues:
Sales $ 16,848,277 15,930,602 15,284,229
Other operating income 98,041 96,062 85,790
------------ ----------- -----------
Total revenues 16,946,318 16,026,664 15,370,019
------------ ----------- -----------
Costs and expenses:
Cost of merchandise sold 12,329,954 11,670,522 11,393,252
Operating and administrative
expenses 3,618,386 3,386,551 3,208,687
------------ ----------- -----------
Total costs and expenses 15,948,340 15,057,073 14,601,939
------------ ----------- -----------
Operating profit 997,978 969,591 768,080
------------ ----------- -----------
Investment income, net 21,926 16,477 38,353
Other income, net 27,185 16,762 20,390
------------ ----------- -----------
Earnings before income tax expense 1,047,089 1,002,830 826,823
Income tax expense 386,156 370,426 296,402
------------ ----------- -----------
Net earnings $ 660,933 632,404 530,421
============ =========== ===========
Weighted average number of common
shares outstanding 184,112,742 194,466,212 202,171,794
============ =========== ===========
Basic and diluted earnings per common
share based on weighted average
shares outstanding $ 3.59 3.25 2.62
============ =========== ===========
PUBLIX SUPER MARKETS, INC.
Consolidated Statements of Comprehensive Earnings
Years ended December 27, 2003, December 28, 2002
and December 29, 2001
2003 2002 2001
---- ---- ----
(Amounts are in thousands)
Net earnings $660,933 632,404 530,421
Other comprehensive earnings
Unrealized gain (loss) on investment
securities available-for-sale,
net of tax effect of $3,174,
($456) and $1,704 in 2003,
2002 and 2001, respectively 5,055 (726) 2,713
Reclassification adjustment for net
realized (gain) loss on investment
securities available-for-sale, net
of tax effect of ($800), $3,854 and
$170 in 2003, 2002 and 2001, respectively (1,274) 6,136 270
-------- ------- -------
Comprehensive earnings $664,714 637,814 533,404
======== ======= =======
See accompanying notes to consolidated financial statements.
PUBLIX SUPER MARKETS, INC.
Consolidated Statements of Stockholders' Equity
Years ended December 27, 2003, December 28, 2002
and December 29, 2001
Common
Stock
(Acquired Accumulated Total
Additional From)Sold Other Stock-
Common Paid-in Retained to Stock- Comprehensive holders'
Stock Capital Earnings holders Earnings Equity
----- ------- -------- ------- -------- ------
(Amounts are in thousands, except per share and share amounts)
Balances at December 30, 2000 $204,973 212,947 2,252,661 --- (8,146) 2,662,435
Comprehensive earnings for the year --- --- 530,421 --- 2,983 533,404
Cash dividends, $.32 per share --- --- (66,284) --- --- (66,284)
Contribution of 4,404,719 shares to
retirement plans --- 1,738 --- 210,855 --- 212,593
Acquired 14,249,727 shares from stockholders --- 357 --- (670,665) --- (670,308)
Sale of 1,983,741 shares to stockholders 2,744 128,792 --- (40,825) --- 90,711
Retirement of 10,605,219 shares (10,605) --- (490,030) 500,635 --- ---
-------- ------- --------- -------- ------ ---------
Balances at December 29, 2001 197,112 343,834 2,226,768 --- (5,163) 2,762,551
Comprehensive earnings for the year --- --- 632,404 --- 5,410 637,814
Cash dividends, $.33 per share --- --- (65,439) --- --- (65,439)
Contribution of 4,801,677 shares to
retirement plans 1,809 72,350 --- 122,710 --- 196,869
Acquired 14,558,822 shares from stockholders --- (703) --- (597,776) --- (598,479)
Sale of 1,813,378 shares to stockholders 137 5,538 --- 69,077 --- 74,752
Retirement of 9,890,943 shares (9,890) --- (396,099) 405,989 --- ---
-------- ------- --------- -------- ------ ---------
Balances at December 28, 2002 189,168 421,019 2,397,634 --- 247 3,008,068
Comprehensive earnings for the year --- --- 660,933 --- 3,781 664,714
Cash dividends, $.40 per share --- --- (75,455) --- --- (75,455)
Contribution of 5,298,904 shares to
retirement plans 1,705 69,313 --- 132,990 --- 204,008
Acquired 17,631,828 shares from stockholders --- --- --- (694,669) --- (694,669)
Sale of 1,534,568 shares to stockholders 102 3,822 --- 58,720 --- 62,644
Retirement of 12,605,111 shares (12,606) --- (490,353) 502,959 --- ---
-------- ------- --------- -------- ------ ---------
Balances at December 27, 2003 $178,369 494,154 2,492,759 --- 4,028 3,169,310
======== ======= ========= ======== ====== =========
See accompanying notes to consolidated financial statements.
PUBLIX SUPER MARKETS, INC.
Consolidated Statements of Cash Flows
Years ended December 27, 2003, December 28, 2002
and December 29, 2001
2003 2002 2001
---- ---- ----
(Amounts are in thousands)
Cash flows from operating activities:
Cash received from customers $ 16,921,033 16,031,205 15,394,511
Cash paid to employees and suppliers (15,061,486) (14,325,863) (13,887,440)
Dividends and interest received 21,383 27,363 42,228
Income taxes paid (344,364) (307,799) (293,877)
Payment for self-insured claims (216,169) (204,190) (182,180)
Other operating cash receipts 971 919 873
Other operating cash payments (9,613) (10,649) (13,364)
------------ ----------- -----------
Net cash provided by operating
activities 1,311,755 1,210,986 1,060,751
------------ ----------- -----------
Cash flows from investing activities:
Payment for property, plant and
equipment (563,576) (635,891) (656,422)
Proceeds from sale of property, plant
and equipment 35,679 15,512 2,550
Payment for investment securities -
available-for-sale (AFS) (340,499) (265,381) (173,061)
Proceeds from sale and maturity of
investment securities - AFS 327,485 259,622 285,072
Net proceeds from (investment in)
joint ventures and other investments 6,528 644 (15,289)
Other, net (212) 32 48
------------ ----------- -----------
Net cash used in investing activities (534,595) (625,462) (557,102)
------------ ----------- -----------
Cash flows from financing activities:
Proceeds from sale of common stock 62,644 74,752 90,711
Payment for acquisition of common stock (694,669) (598,479) (670,308)
Dividends paid (75,455) (65,439) (66,284)
Other, net (131) (131) ---
------------ ----------- -----------
Net cash used in financing activities (707,611) (589,297) (645,881)
------------ ----------- -----------
Net increase (decrease) in cash and
cash equivalents 69,549 (3,773) (142,232)
Cash and cash equivalents at beginning
of year 207,523 211,296 353,528
------------ ----------- -----------
Cash and cash equivalents at end of year $ 277,072 207,523 211,296
============ =========== ===========
See accompanying notes to consolidated financial statements. (Continued)
PUBLIX SUPER MARKETS, INC.
Consolidated Statements of Cash Flows
(Continued)
2003 2002 2001
---- ---- ----
(Amounts are in thousands)
Reconciliation of net earnings to net cash
provided by operating activities
Net earnings $ 660,933 632,404 530,421
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 343,997 309,793 259,682
Retirement contributions paid or payable
in common stock 199,620 213,722 196,582
Deferred income taxes 45,415 59,526 19,163
Loss on sale of property, plant and
equipment 21,578 28,977 20,966
(Gain) loss on sale of investments (2,074) 9,990 439
Self-insurance reserves in excess of
current payments 46,582 39,095 47,004
Postretirement accruals (less than)
in excess of current payments (1,102) (1,089) 7,165
Decrease in advance purchase allowances (2,466) (6,721) (4,333)
Other, net 1,531 3,120 3,077
Change in cash from:
Trade receivables (53,024) (16,199) 1,873
Merchandise inventories (59,213) (82,128) (25,130)
Prepaid expenses (5,515) (1,262) (727)
Accounts payable and accrued expenses 119,116 18,657 21,207
Federal and state income taxes (3,623) 3,101 (16,638)
---------- -------- ---------
Total adjustments 650,822 578,582 530,330
---------- -------- ---------
Net cash provided by operating activities $1,311,755 1,210,986 1,060,751
========== ========= =========
See accompanying notes to consolidated financial statements.
PUBLIX SUPER MARKETS, INC.
Notes to Consolidated Financial Statements
December 27, 2003, December 28, 2002
and December 29, 2001
(1) Summary of Significant Accounting Policies
------------------------------------------
(a) Business
--------
The Company is in the business of operating retail food supermarkets
in Florida, Georgia, South Carolina, Alabama and Tennessee. The
Company operates in a single industry segment.
(b) Principles of Consolidation
---------------------------
The consolidated financial statements include the Company and its
wholly owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
(c) Fiscal Year
-----------
The fiscal year ends on the last Saturday in December. Fiscal years
2003, 2002 and 2001 include 52 weeks.
(d) Cash Equivalents
----------------
The Company considers all liquid investments with maturities of three
months or less to be cash equivalents.
(e) Trade Receivables
-----------------
Trade receivables primarily includes amounts due from vendor
allowances, debit and credit card sales and third party insurance
pharmacy billings.
(f) Inventories
-----------
Inventories are valued at the lower of cost or market. The cost for
approximately 87% of inventories was determined using the dollar
value last-in, first-out method as of December 27, 2003 and December
28, 2002. The cost of all remaining inventories was determined using
the first-in, first-out ("FIFO") method. The FIFO cost of inventory
approximates replacement or current cost.
(g) Investments
-----------
The Company determines the appropriate classification of debt
securities at the time of purchase and reevaluates such designation
as of each balance sheet date. Debt securities are classified as
held-to-maturity when the Company has the positive intent and ability
to hold the securities to maturity. Held-to-maturity securities are
stated at cost, adjusted for amortization of premiums and accretion
of discounts to maturity. Such amortization and accretion is included
in investment income, net. The Company had no held-to-maturity
securities as of December 27, 2003 and December 28, 2002.
(Continued)
PUBLIX SUPER MARKETS, INC.
Notes to Consolidated Financial Statements
All of the Company's debt and marketable equity securities are
classified as available-for-sale. Available-for-sale securities are
carried at fair value, with the unrealized gains and losses, net of
tax, reported as other comprehensive earnings and included as a
separate component of stockholders' equity. The cost of debt
securities in this category is adjusted for amortization of premiums
and accretion of discounts to maturity. Such amortization and
accretion is included in investment income, net. The Company reviews
its investments for impairment based on criteria that include the
extent to which cost exceeds market value, the duration of the market
decline and the financial health of and prospects for the issuer.
Realized gains and losses and declines in value judged to be
other-than-temporary on available-for-sale securities are included in
investment income, net. The cost of securities sold is based on the
specific identification method.
Interest income is accrued as earned. Dividend income is recognized
as income on the ex-dividend date of the stock.
The Company also from time to time holds investments in joint
ventures, partnerships or other equity investments for which
evaluation of the existence and quantification of
other-than-temporary declines in value may be required. Realized
gains and losses and declines in value judged to be
other-than-temporary on other investments are included in investment
income, net.
(h) Property, Plant and Equipment and Depreciation
----------------------------------------------
Assets are recorded at cost and are depreciated using the
straight-line method over their estimated useful lives or the terms
of their leases, if shorter, as follows:
Buildings and improvements 10 - 40 years
Furniture, fixtures and equipment 3 - 20 years
Leasehold improvements 10 - 40 years
Maintenance and repairs are charged to operating expenses as
incurred. Expenditures for renewals and betterments are capitalized.
The gain or loss realized on disposed assets or assets to be disposed
of is recorded in operating and administrative expenses in the
consolidated statements of earnings.
(i) Capitalized Computer Software Costs
-----------------------------------
The Company capitalizes certain costs incurred in connection with
developing or obtaining software for internal use in accordance with
Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." These costs are
capitalized and amortized over a three year life. The amounts
capitalized were approximately $22,351,000, $26,282,000 and
$24,611,000 for the fiscal years ended December 27, 2003, December
28, 2002 and December 29, 2001, respectively.
2 (Continued)
PUBLIX SUPER MARKETS, INC.
Notes to Consolidated Financial Statements
(j) Long-Lived Assets
-----------------
The Company reviews its long-lived assets for impairment whenever
events or changes in circumstances indicate that the net book value
of an asset may not be recoverable. Recoverability of assets to be
held and used is measured by a comparison of the net book value of an
asset to the future net undiscounted cash flows expected to be
generated by the asset. An impairment loss would be recorded for the
excess of the net book value over the fair value of the asset
impaired. The fair value is estimated based on expected discounted
future cash flows. Assets to be disposed of are reported at the lower
of the carrying amount or fair value less cost to sell and are no
longer depreciated.
(k) Self-Insurance
--------------
Self-insurance reserves are established for health care, fleet
liability, general liability and workers' compensation claims. These
reserves are determined based on actual experience including, where
necessary, actuarial studies. The Company has insurance coverage for
losses in excess of varying amounts.
(l) Comprehensive Earnings
----------------------
Comprehensive earnings includes net earnings and other comprehensive
earnings. Other comprehensive earnings includes revenues, expenses,
gains and losses that have been excluded from net earnings and
recorded directly to stockholders' equity. Included in other
comprehensive earnings for the Company are unrealized gains and
losses on available-for-sale securities.
(m) Revenue Recognition
-------------------
Revenue is recognized at the point of sale for retail sales. Vendor
coupons that are reimbursed are accounted for as sales. Coupons and
other sales incentives offered by the Company that are not reimbursed
are recorded as a reduction of sales.
(n) Other Operating Income
----------------------
Other operating income includes income generated from other
activities conducted in the Company's stores, primarily check
cashing, automated teller transactions, money transfer and money
order sales, lottery sales, vending machine sales and in-store
subleases.
(o) Cost of Merchandise Sold
------------------------
Cost of merchandise sold includes costs of inventory, costs related
to in-store production and related purchase and distribution costs.
Cost of merchandise sold also includes inbound freight charges,
purchasing and receiving costs, warehousing costs and other costs of
the Company's distribution network.
Vendor allowances and credits, including cooperative advertising
fees, received from a vendor in connection with the purchase or
promotion of the vendor's products, are recognized as a reduction of
cost of merchandise sold as earned. These allowances and credits are
recognized as earned in accordance with the underlying agreement with
the vendor and completion of the earning process. Short-term vendor
agreements with advance payment provisions are recorded as a current
liability and are recognized over the appropriate period as earned
according to the underlying agreement. Long-term vendor agreements
with advance payment provisions are recorded as a noncurrent
liability and are recognized over the appropriate period as earned
according to the underlying agreement.
3 (Continued)
PUBLIX SUPER MARKETS, INC.
Notes to Consolidated Financial Statements
During 2003, the Company modified its calculation of cost of
merchandise sold. The cost of merchandise sold calculation was
modified to improve the comparability of its gross profit to others
in the food retailing industry.
(p) Advertising Costs
-----------------
Advertising costs are expensed as incurred and were approximately
$125,209,000, $116,210,000 and $111,555,000 for the fiscal years
ended December 27, 2003, December 28, 2002 and December 29, 2001,
respectively.
(q) Other Income, net
-----------------
Other income, net includes rent received from shopping center
operations, net of related expenses and other miscellaneous
nonoperating income.
(r) Income Taxes
------------
Deferred tax assets and liabilities are established for temporary
differences between financial and tax reporting bases and are
subsequently adjusted to reflect changes in tax rates expected to be
in effect when the temporary differences reverse.
(s) Earnings Per Share
------------------
Basic and diluted earnings per common share are calculated by
dividing net earnings by the weighted average number of common shares
outstanding. Basic and diluted earnings per common share are the same
because the Company does not have options or other stock compensation
programs that would impact the calculation of diluted earnings per
share.
(t) Use of Estimates
----------------
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America
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.
(u) Reclassifications
-----------------
Certain 2002 and 2001 amounts have been reclassified to conform with
the 2003 presentation.
(2) Merchandise Inventories
-----------------------
If the first-in, first-out method of valuing inventories had been used by
the Company to value all inventories, inventories and current assets would
have been higher than reported by approximately $127,989,000, $117,581,000
and $119,809,000 as of December 27, 2003, December 28, 2002 and December
29, 2001, respectively.
(3) Fair Value of Financial Instruments
-----------------------------------
The following methods and assumptions were used by the Company in
estimating the fair value of its financial instruments:
Cash and cash equivalents: The carrying amount for cash and cash
----------------------------
equivalents approximates fair value.
Investment securities: The fair values for debt and marketable equity
----------------------
securities are based on quoted market prices.
4 (Continued)
PUBLIX SUPER MARKETS, INC.
Notes to Consolidated Financial Statements
The carrying amount of the Company's other financial instruments as of
December 27, 2003 and December 28, 2002 approximated their respective fair
values.
All other investments are accounted for using the equity method. The
carrying amount of other investments approximates fair value.
(4) Investments
-----------
Following is a summary of investments as of December 27, 2003 and December
28, 2002:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
2003 (Amounts are in thousands)
----
Available-for-sale:
Tax exempt bonds $144,352 2,082 2,055 144,379
Taxable bonds 131,584 457 2,049 129,992
Equity securities 85,122 8,630 508 93,244
-------- ------ ----- -------
361,058 11,169 4,612 367,615
Other investments 29,898 --- --- 29,898
-------- ------ ----- -------
$390,956 11,169 4,612 397,513
======== ====== ===== =======
2002
----
Available-for-sale:
Tax exempt bonds $152,207 2,068 2,322 151,953
Taxable bonds 123,185 1,988 570 124,603
Equity securities 72,110 2,290 3,052 71,348
-------- ------ ----- -------
347,502 6,346 5,944 347,904
Other investments 36,425 --- --- 36,425
-------- ------ ----- -------
$383,927 6,346 5,944 384,329
======== ====== ===== =======
The realized gains on sales of available-for-sale securities totaled
approximately $4,544,000, $5,957,000 and $6,218,000 for the fiscal years
ended December 27, 2003, December 28, 2002 and December 29, 2001,
respectively, and the realized losses totaled approximately $2,470,000,
$15,947,000 and $6,657,000, respectively.
The net realized gains on other investments totaled approximately
$259,000, $1,903,000 and $602,000 for the fiscal years ended December 27,
2003, December 28, 2002 and December 29, 2001, respectively.
5 (Continued)
PUBLIX SUPER MARKETS, INC.
Notes to Consolidated Financial Statements
The amortized cost and estimated fair value of debt and marketable equity
securities classified as available-for-sale and other investments as of
December 27, 2003 and December 28, 2002, by expected maturity, are as
follows:
2003 2002
-------------------- --------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
---- ----- ---- -----
(Amounts are in thousands)
Due in one year or less $ 16,681 16,661 6,740 6,713
Due after one year through
five years 55,964 56,897 24,749 24,734
Due after five years through
ten years 47,818 47,325 33,975 33,951
Due after ten years 155,473 153,488 209,928 211,158
-------- ------- ------- -------
275,936 274,371 275,392 276,556
Equity securities 85,122 93,244 72,110 71,348
Other investments 29,898 29,898 36,425 36,425
-------- ------- ------- -------
$390,956 397,513 383,927 384,329
======== ======= ======= =======
Following is a summary of temporarily impaired investments as of December
27, 2003:
Less Than 12 Months
12 Months or Longer Total
--------- --------- -----
Unreal- Unreal- Unreal-
Fair ized Fair ized Fair ized
Value Losses Value Losses Value Losses
----- ------ ----- ------ ----- ------
(Amounts are in thousands)
2003
----
Tax exempt bonds $ 45,566 1,211 4,525 844 50,091 2,055
Taxable bonds 91,029 1,819 260 230 91,289 2,049
Equity securities 1,504 24 9,810 484 11,314 508
-------- ----- ------ ----- ------- -----
Total temporarily
impaired
securities $138,099 3,054 14,595 1,558 152,694 4,612
======== ===== ====== ===== ======= =====
The Company believes the unrealized losses presented above are temporary.
To make this determination, management reviews the credit worthiness of
the issuers as well as underlying factors mitigating risk of loss of
principal or default of interest payments. There are 39 investment issues
contributing to the total unrealized loss of $4.6 million. Of this amount,
$4.1 million or 89% of the unrealized loss is driven by changes in
interest rates impacting the market value of the tax exempt and taxable
bonds owned by the Company. The Company continues to receive scheduled
principal and interest payments on these investments.
6 (Continued)
PUBLIX SUPER MARKETS, INC.
Notes to Consolidated Financial Statements
(5) Postretirement Benefits
-----------------------
The Company provides life insurance benefits for salaried and hourly
full-time employees. Such employees retiring from the Company on or after
attaining age 55 and having ten years of credited full-time service are
entitled to postretirement life insurance benefits.
Effective January 1, 2002, the Company amended the plan's eligibility
requirements. As of October 1, 2001, an employee must have had at least
five years of full-time service and the employee's age plus years of
credited service must have equaled 65 or greater to retain postretirement
life insurance benefits at retirement. In addition, the employee must be
at least age 55 with ten years of full-time service at retirement to
receive the benefit.
The Company funds the life insurance benefits on a pay-as-you-go basis.
The Company made benefit payments to beneficiaries of retirees of
approximately $2,255,000, $1,879,000 and $1,976,000 during the fiscal
years ended December 27, 2003, December 28, 2002 and December 29, 2001,
respectively.
The following tables provide a reconciliation of the changes in the
benefit obligations and fair value of plan assets measured as of October
1, and a statement of the funded status as of December 27, 2003 and
December 28, 2002:
2003 2002
---- ----
(Amounts are in thousands)
Change in benefit obligation:
Benefit obligation as of beginning of year $ 62,297 55,733
Service cost 775 830
Interest cost 4,191 4,035
Actuarial loss 7,694 3,578
Benefit payments (2,255) (1,879)
-------- -------
Benefit obligation as of end of year $ 72,702 62,297
======== =======
Change in fair value of plan assets:
Fair value of plan assets as of beginning
of year $ --- ---
Employer contributions 2,255 1,879
Benefit payments (2,255) (1,879)
-------- -------
Fair value of plan assets as of end of year $ --- ---
======== =======
Funded status $(72,702) (62,297)
Unrecognized actuarial loss 15,338 7,906
Unrecognized prior service cost (10,596) (14,671)
-------- -------
Accrued postretirement benefit cost $(67,960) (69,062)
======== =======
7 (Continued)
PUBLIX SUPER MARKETS, INC.
Notes to Consolidated Financial Statements
Following are the actuarial assumptions that were used in the calculation
of the year end benefit obligation:
2003 2002 2001
---- ---- ----
Discount rate 6.00% 6.75% 7.25%
Rate of compensation increase 4.00% 4.00% 4.00%
Net periodic postretirement benefit cost consists of the following
components:
2003 2002 2001
---- ---- ----
(Amounts are in thousands)
Service cost $ 775 830 3,560
Interest cost 4,191 4,035 5,581
Amortization of prior service cost (4,075) (4,075) ---
Recognized actuarial loss 262 --- ---
------ ------ -----
Net periodic postretirement benefit cost $1,153 790 9,141
====== ====== =====
Actuarial losses are amortized over the average remaining service life of
active participants when the accumulation of such losses exceeds 10% of
the greater of the projected benefit obligation or the fair value of plan
assets.
Following are the actuarial assumptions that were used in the calculation
of the net periodic postretirement benefit cost:
2003 2002 2001
---- ---- ----
Discount rate 6.75% 7.25% 7.75%
Rate of compensation increase 4.00% 4.00% 4.00%
The following benefit payments, which reflect expected future service, as
appropriate, are expected to be paid:
Year
----
(Amounts are in thousands)
2004 $ 2,171
2005 2,405
2006 2,653
2007 2,908
2008 3,167
2009 through 2013 19,892
(6) Retirement Plans
----------------
The Company has a trusteed, noncontributory Employee Stock Ownership Plan
(ESOP) for the benefit of eligible employees. The amount of the Company's
discretionary contribution to the ESOP is determined annually by the Board
of Directors and can be made in Company common stock or cash. The expense
recorded for contributions to this plan was approximately $184,849,000,
$198,315,000 and $181,507,000 for the fiscal years ended December 27,
2003, December 28, 2002 and December 29, 2001, respectively.
8 (Continued)
PUBLIX SUPER MARKETS, INC.
Notes to Consolidated Financial Statements
The Company has a 401(k) plan for the benefit of eligible employees. The
401(k) plan is a voluntary defined contribution plan. Eligible employees
may contribute up to 10% of their eligible annual compensation (8% prior
to January 1, 2002), subject to the maximum contribution limits
established by Federal law. The Company may make a discretionary annual
matching contribution to eligible participants of this plan as determined
by the Board of Directors. During 2003, 2002 and 2001, the Board of
Directors approved a match of 50% of eligible contributions up to 3% of
eligible wages, not to exceed a maximum match of $750 per employee. The
match, which is determined as of the last day of the plan year and paid in
the subsequent plan year, is in common stock of the Company. The expense
recorded for the Company's match to the 401(k) plan was approximately
$14,771,000, $15,407,000 and $15,075,000 for the fiscal years ended
December 27, 2003, December 28, 2002 and December 29, 2001, respectively.
The Company intends to continue its retirement plans; however, the right
to modify, amend, terminate or merge these plans has been reserved. In the
event of termination, all amounts contributed under the plans must be paid
to the participants or their beneficiaries.
(7) Income Taxes
------------
The provision for income taxes consists of the following:
Current Deferred Total
------- -------- -----
(Amounts are in thousands)
2003
----
Federal $294,488 39,021 333,509
State 46,253 6,394 52,647
-------- ------ -------
$340,741 45,415 386,156
======== ====== =======
2002
----
Federal $270,386 50,411 320,797
State 41,510 8,119 49,629
-------- ------ -------
$311,896 58,530 370,426
======== ====== =======
2001
----
Federal $240,433 16,285 256,718
State 36,805 2,879 39,684
-------- ------ -------
$277,238 19,164 296,402
======== ====== =======
The actual tax expense for the fiscal years ended December 27, 2003,
December 28, 2002 and December 29, 2001 differs from the "expected" tax
expense for those years (computed by applying the U.S. Federal corporate
tax rate of 35% to earnings before income taxes) as follows:
2003 2002 2001
---- ---- ----
(Amounts are in thousands)
Computed "expected" tax expense $366,481 350,991 289,388
State income taxes (net of
Federal income tax benefit) 34,221 32,259 25,795
Tax exempt interest (3,210) (4,088) (8,077)
Other, net (11,336) (8,736) (10,704)
-------- ------ -------
$386,156 370,426 296,402
======== ======= =======
9 (Continued)
PUBLIX SUPER MARKETS, INC.
Notes to Consolidated Financial Statements
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities as of
December 27, 2003 and December 28, 2002 are as follows:
2003 2002
---- ----
(Amounts are in thousands)
Deferred tax assets:
Self-insurance reserves $115,682 99,895
Advance purchase allowances 11,226 12,205
Postretirement benefit cost 26,206 26,636
Retirement plan contributions 24,217 23,636
Inventory capitalization 7,760 8,444
Other 17,855 18,828
-------- -------
Total deferred tax assets $202,946 189,644
======== =======
Deferred tax liabilities:
Property, plant and equipment,
principally due to depreciation $417,327 357,644
Other 14,598 13,190
-------- -------
Total deferred tax liabilities $431,925 370,834
======== =======
The Company expects the results of future operations and the reversal of
deferred tax liabilities to generate sufficient taxable income to allow
utilization of deferred tax assets; therefore, no valuation allowance has
been recorded as of December 27, 2003 and December 28, 2002.
(8) PublixDirect Closure
--------------------
In August 2003, the Company announced its decision to close its online
grocery shopping service operated under its wholly owned subsidiary,
PublixDirect, LLC, ("PublixDirect"). In September 2001, the online grocery
shopping service began delivering orders to homes in South Florida from
its fulfillment center located in Pompano Beach, Florida. The decision to
close the online service resulted from a lack of growth in the demand for
this service and ongoing losses from operations. The Company could not
justify the continued investment in an operation that was not expected to
become profitable in the foreseeable future. The Company expects most of
the sales generated from this operation to transfer to its traditional
supermarkets located in these market areas.
As a result of the decision to close PublixDirect the Company recorded an
expense of $30 million. The expense recorded represents approximately $17
million in asset impairments, $10 million in operating lease obligations
and $3 million in remaining payroll obligations and other costs. The
expense has been recorded in the Company's consolidated statements of
earnings and is included in operating and administrative expenses. The
impact of the expense recorded on net earnings was approximately $18
million or $.10 per share for the fiscal year ended December 27, 2003.
The remaining accrued liabilities for PublixDirect totaling approximately
$15.6 million are reflected in the Company's consolidated balance sheet as
of December 27, 2003, and are included in other current and noncurrent
liabilities.
10 (Continued)
PUBLIX SUPER MARKETS, INC.
Notes to Consolidated Financial Statements
(9) Commitments and Contingencies
-----------------------------
(a) Operating Leases
----------------
The Company conducts a major portion of its retail operations from
leased store premises generally subject to 20 year leases. Contingent
rentals paid to lessors of certain stores are determined on the basis
of a percentage of sales in excess of stipulated minimums plus, in
certain instances, reimbursement of taxes, insurance and other
expenses.
The Company recognizes rent expense for operating leases with step
rent provisions and escalation clauses on a straight-line basis over
the applicable minimum lease term.
Total rental expense for the fiscal years ended December 27, 2003,
December 28, 2002 and December 29, 2001, is as follows:
2003 2002 2001
---- ---- ----
(Amounts are in thousands)
Minimum rentals $295,539 257,258 219,757
Contingent rentals 6,392 8,949 10,529
Sublease rental income (10,105) (10,181) (10,148)
-------- ------- -------
$291,826 256,026 220,138
======== ======= =======
As of December 27, 2003, future minimum lease payments for all
noncancelable operating leases and related subleases are as follows:
Minimum Sublease
Rental Rental
Year Commitments Income Net
---- ----------- ------ ---
(Amounts are in thousands)
2004 $ 305,064 9,290 295,774
2005 299,593 7,689 291,904
2006 293,505 5,421 288,084
2007 283,532 3,054 280,478
2008 273,335 1,027 272,308
Thereafter 2,508,884 402 2,508,482
---------- ------ ---------
$3,963,913 26,883 3,937,030
========== ====== =========
The Company also owns shopping centers which are leased to tenants
for minimum monthly rentals plus, in certain instances, contingent
rentals. Contingent rentals received are determined on the basis of a
percentage of sales in excess of stipulated minimums plus, in certain
instances, reimbursement of taxes, insurance and other expenses.
Contingent rentals are included in trade receivables and were
approximately $1,262,000 and $1,024,000 as of December 27, 2003 and
December 28, 2002, respectively. Rental income was approximately
$16,789,000, $14,057,000 and $12,986,000 for the fiscal years ended
December 27, 2003, December 28, 2002 and December 29, 2001,
respectively. The approximate amounts of minimum future rental
payments to be received under noncancelable operating leases are
$13,079,000, $10,711,000, $8,343,000, $5,884,000 and $4,136,000 for
the years 2004 through 2008, respectively, and $15,896,000
thereafter.
11 (Continued)
PUBLIX SUPER MARKETS, INC.
Notes to Consolidated Financial Statements
(b) Line of Credit
--------------
In December 2003, the Company renewed an agreement for a committed
line of credit totaling $100 million. This 364-day line of credit
facility is available to fund liquidity requirements if necessary.
The interest rate is based on LIBOR or prime. There were no amounts
outstanding on this line of credit as of December 27, 2003.
(c) Litigation
----------
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.
(10) Quarterly Information (unaudited)
---------------------------------
Following is a summary of the quarterly results of operations for the
fiscal years ended December 27, 2003 and December 28, 2002. All quarters
have 13 weeks.
Quarter Ended
----------------------------------------------------
March June September December
----- ---- --------- --------
(Amounts are in thousands, except per share amounts)
2003
----
Revenues $4,343,174 4,134,257 4,091,793 4,377,094
Costs and expenses $4,056,284 3,888,668 3,896,776 4,106,612
Net earnings $ 187,108 161,510 134,570 177,745
Basic and diluted
earnings per common
share, based on
weighted average
shares outstanding $ .99 .87 .74 .99
2002
----
Revenues $4,217,661 3,847,054 3,867,430 4,094,519
Costs and expenses $3,916,454 3,631,019 3,654,345 3,855,255
Net earnings $ 195,169 141,449 140,701 155,085
Basic and diluted
earnings per common
share, based on
weighted average
shares outstanding $ .99 .72 .73 .81
12 (Continued)
Schedule II
-----------
PUBLIX SUPER MARKETS, INC.
Valuation and Qualifying Accounts
Years ended December 27, 2003, December 28, 2002
and December 29, 2001
(Amounts are in thousands)
Balance at Additions Deductions Balance at
Beginning Charged to From End of
Description of Year Income Reserves Year
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Year ended December 27, 2003
Reserves not deducted from assets:
Self-insurance reserves:
-Current $102,722 236,909 216,169 123,462
-Noncurrent 176,895 25,842 --- 202,737
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$279,617 262,751 216,169 326,199
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Year ended December 28, 2002
Reserves not deducted from assets:
Self-insurance reserves:
-Current $103,048 203,864 204,190 102,722
-Noncurrent 137,474 39,421 --- 176,895
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$240,522 243,285 204,190 279,617
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Year ended December 29, 2001
Reserves not deducted from assets:
Self-insurance reserves:
-Current $ 84,095 201,133 182,180 103,048
-Noncurrent 109,423 28,051 --- 137,474
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$193,518 229,184 182,180 240,522
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