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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, 1997
( ) 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
-----
PUBLIX SUPER MARKETS, INC.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Florida 59-0324412
- ------------------------ ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
1936 George Jenkins Boulevard
Lakeland, Florida 33815
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (941) 688-1188
--------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock $1.00 Par Value
Indicate by check mark if 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 (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
----------------- -----------------
The aggregate market value of the voting stock held by non-affiliates
of the Registrant as of March 3, 1998 was approximately
$3,951,580,000.
The number of shares of Registrant's common stock outstanding as of
the opening of business on March 4, 1998 was 218,016,983.
DOCUMENTS INCORPORATED BY REFERENCE
Pages 2 through 8 of Proxy Statement solicited for the 1998 Annual
Meeting of Stockholders to be held on May 12, 1998 are incorporated by
reference in Items 10, 11 and 13 of Part III hereof.
2
PART I
Item 1. Business
- -----------------
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 subsidiary, hereinafter collectively
referred to as the "Company," is in the business of operating retail
food supermarkets in Florida, Georgia, South Carolina and Alabama.
The Company has no other lines of business or industry segments.
Therefore, financial information about industry segments or lines of
business is omitted.
The Company's supermarkets sell groceries, dairy, produce, deli,
bakery, meat, seafood, housewares and health and beauty care items.
Many stores have pharmacy, photo and floral departments. In addition,
the Company has agreements with commercial banks to operate in some of
its stores.
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 and deli plants are
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 563 supermarkets at the end of 1997,
compared with 534 at the beginning of the year. In 1997, 33 stores
were opened, four stores were closed, and 19 stores were expanded or
remodeled. The net increase in square footage was 1.4 million square
feet or 5.9% since 1996. At the end of 1997, the Company had 458
stores located in Florida, 86 located in Georgia, 16 located in South
Carolina and three located in Alabama. Also, as of year end, the
Company had 15 stores under construction in Florida, six in Georgia
and four in South Carolina.
The Company is engaged in a highly competitive industry.
Competition, based primarily on price, quality of goods and service,
convenience and product mix, is with several national and regional
chains, independent stores and mass merchandisers throughout its
market areas. The Company anticipates continued competitor format
innovation and location additions in 1998.
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 111,000 employees at the end of
1997, compared with 103,000 at the end of 1996. Of this total,
approximately 68,500 at the end of 1997 and 64,000 at the end of 1996
were not full-time employees.
The Company's research and development expenses are
insignificant.
Compliance by the Company with Federal, state and local
environmental protection laws during 1997 had no material effect upon
capital expenditures, earnings or the competitive position of the
Company.
3
Item 2. Properties
- -------------------
At year end, the Company operated approximately 25.3 million
square feet of retail space. The Company's stores vary in size.
Current store prototypes range from 27,000 to 60,000 square feet.
Stores are often located in strip shopping centers where the Company
is the anchor tenant.
The majority of the Company's retail stores 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 45 locations both the building and land are owned and at 33 other
locations the building is owned while the land is leased.
The Company supplies its retail stores from eight distribution
centers located in Lakeland, Miami, Jacksonville, Sarasota, Orlando,
Deerfield Beach and Boynton Beach, Florida, and Lawrenceville,
Georgia.
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 suitable and adequate for operating its
business.
Item 3. Legal Proceedings
- --------------------------
The Company was the subject of a notice of charge (the "Charge")
issued by the Equal Employment Opportunity Commission (the "EEOC") in
March 1992, In the Matter of: Kemp v. Publix Super Markets, Inc.,
alleging that the Company had and was engaged in violations of Title
VII of the Federal Civil Rights Act by discriminating against women
with respect to job assignments and promotions because of their
gender. The Charge was subsequently expanded to include allegations
of race discrimination.
The Company was also a defendant in a certified class action
filed in July 1995 in the Federal District Court for the Middle
District of Florida, Tampa Division (the "Court"), by certain present
or former employees of the Company, individually and on behalf of all
other persons similarly situated (the "Shores case"). The plaintiffs
alleged that the Company had and was then engaged in a policy and
pattern or practice of gender-based discriminatory treatment of female
employees with respect to job assignments, promotional opportunities,
management positions, equal pay, full-time status, bonuses, and other
benefits and conditions of employment, all in violation of Title VII
of the Federal Civil Rights Act, as well as the Florida Civil Rights
Act of 1992. The litigation class certified by the Court consisted of
all female employees of the Company who from May 22, 1991 (Florida and
South Carolina operations) or from October 19, 1991 (Georgia
operations) had worked or were working in the Company's retail
operations; expressly excluded were females who had worked only in the
Company's pharmacy operations.
On January 24, 1997, the Company, the EEOC and the plaintiffs in
the Shores case entered into a settlement with respect to all matters
related to the case. The settlement was memorialized in a consent
decree, which was approved by the Court on May 23, 1997 (the "Shores
Consent Decree").
Under the Shores Consent Decree, the Company will pay $81.5
million to the plaintiffs, their counsel and other class members. The
Company agreed to establish a formal system by which employees will be
considered for promotion. Promotions will be based on qualifications
and expressed interest of employees. The Company has also agreed to
make certain other procedural changes. The Company's compliance with
the Shores Consent Decree will be monitored by class counsel and the
EEOC.
4
Also on January 24, 1997, the Company agreed with the EEOC to
settle all pending EEOC charges related to gender and race
discrimination that were not included in the Shores Consent Decree. A
formal settlement agreement was executed by the parties on April 13,
1997. Under the EEOC settlement, the Company agreed to pay an
additional $3.5 million to members of the affected classes. The
Company also agreed to follow procedures with respect to class members
similar to those established under the Shores Consent Decree.
The settlement agreements recognize that the Company continues to
deny that it has engaged in any unlawful discriminatory activity.
The Company will pay the settlements from liquid investment funds
currently on hand and the settlements were charged against the
Company's fiscal 1996 fourth quarter results (see note 7). Management
does not believe that the settlements will cause any cash flow or
liquidity problems or will have any material impact on the Company's
future financial results.
A purported class action was filed against the Company on April
3, 1997 in the Court by Lemuel Middleton and 15 other present or
former employees of the Company, individually and on behalf of all
other persons similarly situated (the "Middleton case"). In their
Complaint, the plaintiffs allege that the Company has and is currently
engaged in a pattern and practice of race-based discriminatory
treatment of black employees and applicants with respect to hiring,
promotion, job assignment, conditions of employment, and other
employment aspects, all in violation of Federal and state law.
Subsequently, three of the named plaintiffs withdrew their claims with
prejudice. The plaintiffs seek, among other relief, a certification
of the suit as a class action, declaratory and injunctive relief, back
pay, front pay, benefits and other compensatory damages, and punitive
damages. Action by the Court is now pending on the plaintiffs'
request for class certification.
On November 6, 1997, another purported class action was filed
against the Company in the Court by Shirley Dyer and five other
present or former employees of the Company, individually and on behalf
of all other persons similarly situated (the "Dyer case"). In their
Complaint, the plaintiffs allege that the Company has violated and is
currently violating Federal and state civil rights statutes by
discriminating against female employees and applicants with respect to
hiring, promotion, training, compensation, discipline, demotion and
termination, and/or retaliation for bringing allegations of
discrimination. In their Complaint, the plaintiffs propose a class of
all female current, former and future Company employees and applicants
in all of the Company's "non-retail" operations. The plaintiffs seek,
among other relief, a certification of the suit as a class action,
declaratory and injunctive relief, back pay, front pay, benefits and
other compensatory damages, and punitive damages. The parties have
begun extensive discovery on issues relating to class certification.
The Company denies the allegations of the plaintiffs in the
Middleton and Dyer cases and is vigorously defending the actions.
The Company is also a party in various legal claims and actions
considered in the normal course of business. Management believes that
the ultimate disposition of these matters will not have a material
effect on the Company's liquidity, results of operations or financial
condition.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
None
5
EXECUTIVE OFFICERS OF THE COMPANY
Served as
Nature of Family Officer of
Relationship Company
Name Age Position Between Officers Since
---- --- -------- ---------------- -----
Howard M. Jenkins 46 Chairman of Cousin of 1976
the Board and Charles H. Jenkins,
Chief Executive Jr., uncle of
Officer W. Edwin Crenshaw
and brother-in-law
of Hoyt R. Barnett
Charles H. Jenkins, Jr. 54 Chairman of the Cousin of 1974
Executive Committee Howard M. Jenkins and
cousin of
W. Edwin Crenshaw
W. Edwin Crenshaw 47 President Nephew of 1990
Howard M. Jenkins
and cousin of
Charles H. Jenkins, Jr.
William H. Vass 48 Executive 1986
Vice President
Hoyt R. Barnett 54 Executive Brother-in-law of 1977
Vice President Howard M. Jenkins
Jesse L. Benton 55 Vice President 1988
S. Keith Billups 65 Secretary 1968
R. Scott Charlton 39 Vice President 1992
Carolyn C. Day 52 Assistant Secretary 1992
Glenn J. Eschrich 53 Vice President 1995
William V. Fauerbach 51 Vice President 1997
John R. Frazier 47 Vice President 1997
M. Clayton Hollis, Jr. 41 Vice President 1994
Mark R. Irby 42 Vice President 1989
Tina P. Johnson 38 Senior Vice President 1990
James J. Lobinsky 58 Senior Vice President 1992
Thomas M. McLaughlin 47 Vice President 1994
Sharon A. Miller 54 Assistant Secretary 1992
Robert H. Moore 55 Vice President 1994
Thomas M. O'Connor 50 Vice President 1992
David P. Phillips 38 Vice President Finance 1990
and Treasurer
6
EXECUTIVE OFFICERS OF THE COMPANY
Served as
Nature of Family Officer of
Relationship Company
Name Age Position Between Officers Since
---- --- -------- ---------------- -----
James H. Rhodes II 53 Vice President 1995
Daniel M. Risener 57 Vice President 1985
Edward T. Shivers 58 Vice President 1985
James F. Slappey 55 Vice President 1992
The terms of all officers expire at the annual meeting of the Company
in May 1998.
7
Name Business Experience During Last Five Years
- ---- ------------------------------------------
Howard M. Jenkins Chairman of the Board and Chief Executive Officer of the
Company.
Charles H. Jenkins, Jr. Chairman of the Executive Committee of the Company.
W. Edwin Crenshaw Vice President of the Company to January 1994, Executive
Vice President to January 1996, President thereafter.
William H. Vass Executive Vice President and Trustee of the ESOT of the
Company.
Hoyt R. Barnett Executive Vice President and Trustee of the Profit Sharing
Plan of the Company.
Jesse L. Benton Vice President of the Company.
S. Keith Billups Secretary of the Company.
R. Scott Charlton Vice President of the Company.
Carolyn C. Day Capital Stock Registrar and Transfer Agent and Assistant
Secretary of the Company.
Glenn J. Eschrich Director of Strategy Support of the Company to March
1995, Vice President thereafter.
William V. Fauerbach Assistant Director of Retail Operations - Miami Division
of the Company to January 1994, Regional Director of
Retail Operations - Miami Division to January 1997, Vice
President thereafter.
John R. Frazier Real Estate Manager of the Company to August 1996,
Director of Real Estate to January 1997, Vice President
thereafter.
M. Clayton Hollis, Jr. Director of Government Relations of the Company to June
1994, Vice President thereafter.
Mark R. Irby Vice President of the Company.
Tina P. Johnson Treasurer of the Company to January 1995, Treasurer and
Trustee of the 401(k) Plan - Publix Stock Fund to March
1996, Vice President, Treasurer and Trustee of the 401(k)
Plan - Publix Stock Fund to July 1997, Senior Vice
President and Trustee of the 401(k) Plan - Publix Stock
Fund thereafter.
James J. Lobinsky Vice President of the Company to July 1997, Senior Vice
President thereafter.
Thomas M. McLaughlin Director of Retail Operations - Lakeland Division of the
Company to January 1994, Regional Director of Retail
Operations - Lakeland Division to June 1994, Vice
President thereafter.
Sharon A. Miller Director of Administration and Assistant Secretary of the
Company.
8
Name Business Experience During Last Five Years
- ---- ------------------------------------------
Robert H. Moore Director of Retail Operations - Atlanta Division of the
Company to January 1994, Vice President thereafter.
Thomas M. O'Connor Vice President of the Company.
David P. Phillips Controller of the Company to March 1996, Vice President
and Controller to July 1997, Vice President Finance and
Treasurer thereafter.
James H. Rhodes II Director of Human Resources of the Company to April 1995,
Vice President thereafter.
Daniel M. Risener Vice President of the Company.
Edward T. Shivers Vice President of the Company.
James F. Slappey Vice President of the Company.
PART II
Item 5. Market for the Company's Common Stock and Related Stockholder Matters
- ------------------------------------------------------------------------------
(a)Market Information
------------------
Substantially all transactions of the Company's common stock have
been among the Company, its employees, former employees, their
families and various benefit plans established for the Company's
employees. The market price of the Company's common stock is
determined by the Board of Directors based upon appraisals prepared
by an independent appraiser. The market price for 1997 and 1996 was
as follows:
1997 1996
---- ----
January - February $20.75 $16.25
March - April 21.00 16.75
May - July 21.75 18.50
August - October 23.00 20.00
November - December 23.25 20.75
(b)Approximate Number of Equity Security Holders
---------------------------------------------
As of March 4, 1998, the approximate number of holders of record of
the Company`s common stock was 70,000.
(c)Dividends
---------
The Company paid cash dividends of $.15 per share of common stock in
1997 and $.13 per share in 1996. 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.
9
Item 6. Five Year Summary of Selected Financial Data
- -----------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Sales:
Sales $11,224,378 10,431,302 9,393,021 8,664,795 7,472,652
Percent increase 7.6% 11.1% 8.4% 16.0% 12.1%
Comparable store sales
percent increase 3.3% 5.6% 2.8% 5.2% 6.4%
Earnings:
Gross profit $ 2,674,118 2,424,799 2,124,036 1,952,043 1,638,044
Earnings before income
tax expense and
cumulative effect
of changes in
accounting
principles $ 555,357 416,584 381,500 378,300 288,709
Net earnings before
cumulative effect
of changes in
accounting
principles $ 354,622 265,176 242,141 238,567 183,811
Net earnings $ 354,622 265,176 242,141 238,567 180,317
Net earnings as a
percent of sales 3.16% 2.54% 2.58% 2.75% 2.41%
Common stock:
Weighted average
shares outstanding 218,871,661 221,195,884 225,852,938 231,514,459 236,249,110
Basic earnings per
common share,
based on weighted
average shares
outstanding $ 1.62 1.20 1.07 1.03 .76
Dividends per share $ .15 .13 .11 .09 .08
Financial data:
Capital expenditures $ 259,806 226,752 256,629 374,190 320,167
Working capital $ 366,680 317,265 232,570 159,971 137,160
Current ratio 1.37 1.35 1.31 1.24 1.23
Total assets $ 3,294,980 2,921,084 2,559,365 2,302,336 2,054,315
Long-term debt $ --- 108 1,765 3,031 4,930
Stockholders' equity $ 2,019,299 1,751,179 1,614,717 1,473,154 1,308,009
Other:
Number of stores 563 534 508 470 425
NOTE: Amounts are in thousands, except per share and share amounts.
Fiscal year 1994 includes 53 weeks. All other years include 52 weeks.
10
Item 7. Management's Discussion and Analysis of Financial Condition
- --------------------------------------------------------------------
and Results of Operations
-------------------------
Business Environment
- --------------------
As of December 27, 1997, the Company operated 563 retail grocery
stores representing approximately 25.3 million square feet of retail
space. Historically, the Company's primary competition has been from
national and regional chains and smaller independents located
throughout its market areas. The Company has continued to experience
increased competition from mass merchandisers. The products offered by
these retailers include many of the same items sold by the Company.
At the end of fiscal 1997, the Company had 458 stores located in
Florida, 86 located in Georgia, 16 located in South Carolina and three
located in Alabama. The Company opened its first store in Georgia
during the fourth quarter of 1991, its first store in South Carolina in
the fourth quarter of 1993, and its first store in Alabama in the third
quarter of 1996. The Company opened 16 stores in Florida, 13 stores in
Georgia, three stores in South Carolina and one store in Alabama during
1997. The Company intends to continue to pursue vigorously new
locations in Florida and other states.
Liquidity and Capital Resources
- -------------------------------
Operating activities continue to be the Company's primary source
of liquidity. Net cash provided by operating activities was
approximately $589.2 million in 1997, compared with $639.9 million in
1996 and $488.3 million in 1995. Working capital was approximately
$366.7 million as of December 27, 1997, as compared with $317.3 million
and $232.6 million as of December 28, 1996 and December 30, 1995,
respectively. Cash and cash equivalents aggregated approximately
$530.0 million as of December 27, 1997, as compared with $457.4 million
and $276.7 million as of December 28, 1996 and December 30, 1995,
respectively.
Capital expenditures totaled $259.8 million in 1997. These
expenditures were primarily incurred in connection with the opening of
33 new stores and remodeling or expanding 19 stores which added 1.4
million square feet. In addition, the Company closed four stores.
Capital expenditures totaled $226.8 million in 1996. These
expenditures were primarily incurred in connection with the opening of
34 new stores and remodeling or expanding 12 stores which added 1.4
million square feet. In addition, the Company closed eight stores.
Capital expenditures totaled $256.6 million in 1995. These
expenditures were primarily incurred in connection with the opening of
44 new stores and remodeling or expanding 19 stores which added 2.2
million square feet. Construction was completed on a new distribution
center and dairy processing plant in Lawrenceville, Georgia. In
addition, the Company closed six stores.
The Company plans to open as many as 31 stores in 1998. Although
real estate development is unpredictable, the Company's 1998 new store
growth represents a reasonable estimate of anticipated future growth.
Capital expenditures for 1998, primarily made up of new store
construction and the remodeling or expanding of several existing
stores, are expected to be approximately $300 million. This capital
program is subject to continuing change and review. The 1998 capital
expenditures are expected to be financed by internally generated funds
and current liquid assets. In the normal course of operations, the
Company replaces stores and closes unprofitable stores. The impact of
future store closings is not expected to be material.
11
The Company is self-insured, up to certain limits, for health
care, fleet liability, general liability and workers' compensation
claims. Reserves are established to cover estimated liabilities for
existing and anticipated claims based on actual experience including,
where necessary, actuarial studies. The Company has insurance
coverage for losses in excess of varying amounts. The provision for
self-insured reserves was $116.8 million, $122.0 million and $103.1
million in fiscal 1997, 1996 and 1995, respectively. The Company does
not believe its self-insurance program will have a material adverse
impact on its future liquidity, financial condition or results of
operations.
The Company has a committed line of credit totaling $50.0
million. This line is reviewed annually by the bank. The interest
rate for this line is at or below the prime rate. No amounts were
outstanding on the line of credit as of December 27, 1997 or
December 28, 1996.
Cash generated in excess of the amount needed for current
operations and capital expenditures is invested in short-term and long-
term investments. Short-term investments were approximately $46.8
million in 1997 compared with $65.6 million in 1996. Long-term
investments, primarily comprised of tax exempt bonds, taxable bonds
and preferred stocks, were approximately $331.7 million in 1997
compared with $172.5 million in 1996. Management believes the
Company's liquidity will continue to be strong.
The Company currently repurchases common stock at the
stockholders' request in accordance with the terms of the Company's
Employee Stock Purchase Plan. 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. However, such
purchases are not required and the Company retains the right to
discontinue them at any time.
Results of Operations
- ---------------------
The Company's fiscal year ends on the last Saturday in December.
Fiscal years 1997, 1996 and 1995 include 52 weeks.
Sales for fiscal 1997 were $11,224.4 million as compared with
$10,431.3 million in fiscal 1996, a 7.6% increase. This reflects an
increase of $344.3 million or 3.3% in sales from stores that were open
for all of both years (comparable stores) and sales of $448.8 million
or 4.3% from the net impact of new and closed stores since the
beginning of 1996. Net new stores contributed an increase of 5.9% or
approximately 1.4 million square feet in retail space in fiscal 1997.
Sales for fiscal 1996 were $10,431.3 million as compared with
$9,393.0 million in fiscal 1995, an 11.1% increase. This reflects an
increase of $526.0 million or 5.6% in sales from comparable stores and
sales of $512.3 million or 5.5% from the net impact of new and closed
stores since the beginning of 1995. Net new stores contributed an
increase of 6.2% or approximately 1.4 million square feet in retail
space in fiscal 1996.
Cost of merchandise sold including store occupancy, warehousing
and delivery expenses was approximately 76.2% of sales in 1997 as
compared with 76.8% and 77.4% in 1996 and 1995, respectively. In 1997
and 1996, cost of merchandise sold decreased as a percentage of sales
due to buying and merchandising efficiencies.
Operating and administrative expenses, as a percent of sales,
were 19.9%, 19.3% and 19.4% in 1997, 1996 and 1995, respectively. The
significant components of operating and administrative expenses are
payroll costs, employee benefits and depreciation.
In recent years, the impact of inflation on the Company's food
prices has been lower than the overall increase in the Consumer Price
Index.
12
Nonrecurring Charge
- -------------------
An $89.0 million nonrecurring charge was recorded in the fourth
quarter of 1996 to cover the settlements of class action litigation
against the Company involving alleged violations of the Federal Civil
Rights Act and Florida law with respect to certain of the Company's
retail employees and certain other allegations resulting from a notice
of charge issued by the Equal Employment Opportunity Commission. The
nonrecurring charge covers the full cost of the settlements, including
the agreed payments to class members and their counsel, as well as the
estimated cost of implementing and complying with the procedures
agreed to be established under the settlements. The impact of the
nonrecurring charge on net earnings was $46.4 million or $.21 per
share for fiscal 1996.
Accounting Standards
- --------------------
The Company adopted Statement of Financial Accounting Standard
No. 128, "Earnings Per Share," (SFAS 128) effective for the year ended
December 27, 1997. SFAS 128 governs the computation, presentation and
disclosure requirements for earnings per share (EPS). SFAS 128
simplifies the computation of EPS and makes the presentation of EPS
comparable to international EPS standards. There was no effect on the
Company's EPS as a result of adopting SFAS 128.
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 130, "Reporting
Comprehensive Income," (SFAS 130) effective for fiscal years beginning
after December 15, 1997. SFAS 130 sets forth standards for the
reporting of comprehensive income in the financial statements.
Comprehensive income includes net earnings and other comprehensive
income. Other comprehensive income includes revenues, expenses, gains
and losses that have been excluded from net earnings and recorded
directly in the stockholders' equity section of the balance sheet.
The Company will report comprehensive income beginning with the
quarter ending March 28, 1998.
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 131, "Disclosures about
Segments of an Enterprise and Related Information," (SFAS 131)
effective for fiscal years beginning after December 15, 1997. SFAS
131 provides accounting guidance for reporting information about
operating segments and requires interim segment reporting. The
Company operates in a single segment of business therefore, the effect
of adopting SFAS 131 is not expected to be material.
Year 2000
- ---------
The Company is currently completing its review of key financial
informational and operational computer systems for year 2000 issues.
Based upon this review to date, management does not anticipate that
the Company will encounter significant operational issues related to
making its systems year 2000 compliant. The financial impact of
making required systems changes is not expected to be material.
13
Cautionary Note Regarding Forward-Looking Statements
- ----------------------------------------------------
From time to time, information provided by the Company, including
written or oral statements made by its representatives, may contain
forward-looking information 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 in
this document, the words "plan," "estimate," "project," "intend" and
"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
train 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 have any material exposure to market risk
associated with activities in derivative financial instruments, other
financial instruments and derivative commodity instruments.
Item 8. Financial Statements and Supplemental 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
14
PART III
Item 10. Directors, Executive Officers, Promoters and Control Persons of the
- -----------------------------------------------------------------------------
Registrant
----------
Certain information concerning the directors of the Company is
incorporated by reference to pages 2 through 5 of the Proxy Statement
of the Company (1998 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."
Item 11. Executive Compensation
- --------------------------------
Information regarding executive compensation is incorporated by
reference to pages 5 through 8 of the 1998 Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- ------------------------------------------------------------------------
The following table sets forth, as of the opening of business on
March 4, 1998, the information with respect to common stock ownership
of all directors, including some who are 5% or more beneficial owners,
and all officers and directors as a group. Also, listed are others
known by the Company to own beneficially 5% or more of the shares of
the Company's common stock.
Amount and Nature Percent
Name of Beneficial Ownership (1) of Class
- ---- --------------------------- --------
Carol Jenkins Barnett 11,991,612 (2) 5.50
Hoyt R. Barnett 22,574,456 (3) 10.35
W. Edwin Crenshaw 638,220 *
Mark C. Hollis 1,411,414 (4) *
Charles H. Jenkins, Jr. 1,744,795 *
Howard M. Jenkins 14,006,850 (5) 6.42
Tina P. Johnson 2,813,570 (6) 1.29
E. V. McClurg 1,985,132 *
William H. Vass 32,998,039 (7) 15.14
All Officers and Directors
as a group (28 individuals) 89,542,824 (8) 41.07
All Other Beneficial Owners:
- ----------------------------
Publix Super Markets, Inc.
Profit Sharing Plan and Trust 21,200,000 9.72
Publix Super Markets, Inc.
Employee Stock Ownership Plan
and Trust 32,964,229 15.12
Nancy E. Jenkins 14,703,305 6.74
*Shares represent less than 1% of class.
Note references are explained on the following page.
15
(1) As used in the table on the preceding page, "beneficial
ownership" means the sole or shared voting or investment power
with respect to the Company's common stock. Holdings of officers
include shares allocated to their individual accounts in the
Company's Employee Stock Ownership Plan, over which each officer
exercises sole voting power and shared investment power. In
accordance with the beneficial ownership regulations, the same
shares of common stock may be included as beneficially owned by
more than one individual or entity. The address for all
beneficial owners is 1936 George Jenkins Boulevard, Lakeland,
Florida 33815.
(2) Includes 1,248,255 shares which are also shown as beneficially
owned by Carol Jenkins Barnett's husband, Hoyt R. Barnett, but
excludes all other shares beneficially owned by Hoyt R. Barnett,
as to which Carol Jenkins Barnett disclaims beneficial ownership.
(3) Hoyt R. Barnett is Trustee of the Profit Sharing Plan which is
the record owner of 21,200,000 shares of common stock over which
he exercises sole voting and investment power. Total shares
beneficially owned include 1,248,255 shares also shown as
beneficially owned by his wife, Carol Jenkins Barnett, but
exclude all other shares of common stock beneficially owned by
Carol Jenkins Barnett, as to which Hoyt R. Barnett disclaims
beneficial ownership.
(4) All shares are owned in a family trust over which Mark C. Hollis
is Co-Trustee with his wife. As Co-Trustee, Mark C. Hollis has
shared voting and investment power for these shares.
(5) Howard M. Jenkins has sole voting and sole investment power over
3,126,015 shares of common stock which are held directly, sole
voting and sole investment power over 162,103 shares which are
held indirectly and shared voting and shared investment power
over 10,700,373 shares which are held indirectly.
(6) Tina P. Johnson is Trustee of the 401(k) Plan - Publix Stock Fund
which is the record owner of 2,762,813 shares of common stock
over which she has sole voting and shared investment power.
(7) William H. Vass is Trustee of the Employee Stock Ownership Plan
(ESOT) which is the record owner of 32,964,229 shares of common
stock over which he has shared investment power. As Trustee,
William H. Vass exercises sole voting power over 626,744 shares
in the ESOT because such shares have not been allocated to
participants' accounts. For ESOT shares allocated to
participants' accounts, William H. Vass will vote shares as
instructed by participants. Additionally, William H. Vass will
vote ESOT shares for which no instruction is received.
(8) Includes 56,927,042 shares of common stock owned by the Profit
Sharing Plan, ESOT and 401(k) Plan.
Item 13. Certain Relationships and Related Transactions
- --------------------------------------------------------
Information regarding certain relationships and related
transactions is incorporated by reference to pages 2 through 5 and 8
of the 1998 Proxy Statement.
16
PART IV
Item 14. 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 no reports on Form 8-K during the fourth
quarter of the year ended December 27, 1997.
(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
Annual Report of the Company on Form 10-K for the year
ended December 28, 1996.
9. Voting Trust Agreement dated September 12,
1986, between Howard M. Jenkins, Julia J. Fancelli, Nancy
E. Jenkins and David F. Jenkins, is incorporated by
reference to the exhibits to the Annual Report of the
Company on Form 10-K for the year ended December 31, 1988.
Amendment to Voting Trust Agreement dated
September 12, 1986, between Howard M. Jenkins, Julia J.
Fancelli, Nancy E. Jenkins and David F. Jenkins, effective
March 8, 1990, is incorporated by reference to the
exhibits to the Annual Report of the Company on Form 10-K
for the year ended December 30, 1989.
Amendment to Voting Trust Agreement dated
September 12, 1986, between Howard M. Jenkins, Julia J.
Fancelli, Nancy E. Jenkins and David F. Jenkins, effective
June 14, 1991, is incorporated by reference to the
exhibits to the Annual Report of the Company on Form 10-K
for the year ended December 28, 1991.
Amendment to Voting Trust Agreement dated
September 12, 1986, between Howard M. Jenkins, Julia J.
Fancelli, Nancy E. Jenkins and David F. Jenkins, effective
November 3, 1992, is incorporated by reference to the
exhibits to the Annual Report of the Company on Form 10-K
for the year ended December 26, 1992.
Amendment to Voting Trust Agreement dated
September 12, 1986, between Howard M. Jenkins, Julia J.
Fancelli, Nancy E. Jenkins and David F. Jenkins, effective
February 26, 1993, is incorporated by reference to the
exhibits to the Annual Report of the Company on Form 10-K
for the year ended December 26, 1992.
Amendment to Voting Trust Agreement dated
September 12, 1986, between Howard M. Jenkins, Julia J.
Fancelli, Nancy E. Jenkins and David F. Jenkins, effective
March 1, 1994, is incorporated by reference to the
exhibits to the Annual Report of the Company on Form 10-K
for the year ended December 31, 1994.
Deed of Termination of Voting Trust Agreement
dated September 12, 1986, between Howard M. Jenkins, Julia
J. Fancelli, Nancy E. Jenkins and David F. Jenkins,
effective June 9, 1995, is incorporated by reference to
the exhibits to the Annual Report of the Company on Form
10-K for the year ended December 30, 1995.
17
(c) Exhibits, continued
-------------------
21. Subsidiary of the Company.
27. Financial Data Schedule.
18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PUBLIX SUPER MARKETS, INC.
March 4, 1998 By: /s/ S. Keith Billups
--------------------
S. Keith Billups
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 Company and in the capacities and on the dates
indicated.
Chairman of the Board, Chief
Executive Officer and Director
/s/ Howard M. Jenkins (Principal Executive Officer) March 4, 1998
- ---------------------------
Howard M. Jenkins
Chairman of the Executive
/s/ Charles H. Jenkins, Jr. Committee and Director March 4, 1998
- ---------------------------
Charles H. Jenkins, Jr.
/s/ W. Edwin Crenshaw President and Director March 4, 1998
- ----------------------------
W. Edwin Crenshaw
Executive Vice President
/s/ William H. Vass and Director March 4, 1998
- ----------------------------
William H. Vass
Executive Vice President
/s/ Hoyt R. Barnett and Director March 4, 1998
- ----------------------------
Hoyt R. Barnett
Senior Vice President
/s/ Tina P. Johnson and Director March 4, 1998
- ----------------------------
Tina P. Johnson
Vice President Finance
and Treasurer
(Principal Financial and
/s/ David P. Phillips Accounting Officer) March 4, 1998
- ----------------------------
David P. Phillips
19
PUBLIX SUPER MARKETS, INC.
Index to Consolidated Financial Statements and Schedule
Independent Auditors' Report
Consolidated Financial Statements:
Consolidated Balance Sheets - December 27, 1997 and December 28, 1996
Consolidated Statements of Earnings - Years ended December 27, 1997,
December 28, 1996 and December 30, 1995
Consolidated Statements of Stockholders' Equity - Years ended December 27,
1997, December 28, 1996 and December 30, 1995
Consolidated Statements of Cash Flows - Years ended December 27,
1997, December 28, 1996 and December 30, 1995
Notes to Consolidated Financial Statements
The following consolidated supporting schedule of the Company for the
years ended December 27, 1997, December 28, 1996 and December 30, 1995 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.
20
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
Publix Super Markets, Inc.:
We have audited the consolidated financial statements of Publix Super
Markets, Inc. (the "Company") as listed in the accompanying index. In
connection with our audits of the consolidated financial statements,
we also have audited the consolidated 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the consolidated 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. as of December 27, 1997 and December 28,
1996, and the results of its operations and its cash flows for each of
the years in the three-year period ended December 27, 1997, in
conformity with generally accepted accounting principles. Also in our
opinion, the related consolidated 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 PEAT MARWICK LLP
Tampa, Florida
February 25, 1998
21
PUBLIX SUPER MARKETS, INC.
Consolidated Balance Sheets
December 27, 1997 and
December 28, 1996
Assets 1997 1996
------ ---- ----
(Amounts are in thousands)
Current assets:
Cash and cash equivalents $ 530,018 457,405
Short-term investments 46,847 65,586
Trade receivables (principally due from
suppliers) 71,318 61,221
Merchandise inventories 638,044 570,254
Deferred tax assets 66,402 71,027
Prepaid expenses 2,153 1,339
---------- ----------
Total current assets 1,354,782 1,226,832
---------- ----------
Long-term investments 331,659 172,486
Other noncurrent assets 9,036 11,491
Property, plant and equipment:
Land 87,733 87,052
Buildings and improvements 609,639 577,129
Furniture, fixtures and equipment 1,688,425 1,747,854
Leasehold improvements 315,205 282,922
Construction in progress 56,705 33,509
---------- ----------
2,757,707 2,728,466
Less accumulated depreciation 1,158,204 1,218,191
---------- ----------
Net property, plant and equipment 1,599,503 1,510,275
---------- ----------
$3,294,980 2,921,084
========== ==========
See accompanying notes to consolidated financial statements.
22
PUBLIX SUPER MARKETS, INC.
Consolidated Balance Sheets
December 27, 1997 and
December 28, 1996
Liabilities and Stockholders' Equity 1997 1996
(Amounts are in thousands,
except share amounts)
Current liabilities:
Accounts payable $ 562,536 523,497
Accrued expenses:
Salaries and wages 47,367 47,115
Contribution to retirement plans 138,858 73,555
Self-insurance reserves 57,415 64,250
Other 97,094 91,114
Nonrecurring charge 69,249 89,000
---------- ----------
Total accrued expenses 409,983 365,034
---------- ----------
Federal and state income taxes 15,583 21,036
---------- ----------
Total current liabilities 988,102 909,567
Deferred tax liabilities, net 114,807 100,127
Self-insurance reserves 90,068 73,336
Accrued postretirement benefit cost 42,612 37,295
Other noncurrent liabilities 40,092 49,580
---------- ----------
Total liabilities 1,275,681 1,169,905
---------- ----------
Stockholders' equity:
Common stock of $1 par value. Authorized
300,000,000 shares; issued and outstanding
217,419,178 shares in 1997 and 219,942,912
shares in 1996 217,419 219,943
Additional paid-in capital 100,757 91,991
Reinvested earnings 1,696,659 1,437,902
---------- ----------
2,014,835 1,749,836
Unrealized gain on investment
securities available-for-sale, net 4,464 1,343
---------- ----------
Total stockholders' equity 2,019,299 1,751,179
Commitments and contingencies
---------- ----------
$3,294,980 2,921,084
========== ==========
See accompanying notes to consolidated financial statements.
23
PUBLIX SUPER MARKETS, INC.
Consolidated Statements of Earnings
Years ended December 27, 1997, December 28, 1996
and December 30, 1995
1997 1996 1995
---- ---- ----
(Amounts are in thousands,
except per share amounts)
Revenues:
Sales $11,224,378 10,431,302 9,393,021
Other income, net 114,507 94,667 77,685
----------- ---------- ----------
Total revenues 11,338,885 10,525,969 9,470,706
----------- ---------- ----------
Costs and expenses:
Cost of merchandise sold including
store occupancy, warehousing
and delivery expenses 8,550,260 8,006,503 7,268,985
Operating and administrative
expenses 2,233,268 2,013,882 1,820,221
Nonrecurring charge --- 89,000 ---
----------- ---------- ----------
Total costs and expenses 10,783,528 10,109,385 9,089,206
----------- ---------- ----------
Earnings before income tax expense 555,357 416,584 381,500
Income tax expense 200,735 151,408 139,359
----------- ---------- ----------
Net earnings $ 354,622 265,176 242,141
=========== ========== ==========
Basic earnings per common share based on
weighted average shares outstanding $ 1.62 1.20 1.07
=========== ========== ==========
See accompanying notes to consolidated financial statements.
24
PUBLIX SUPER MARKETS, INC.
Consolidated Statements of Stockholders' Equity
Years ended December 27, 1997, December 28, 1996
and December 30, 1995
Common Unrealized
stock gain (loss)
acquired on investment Total
Additional from securities stock-
Common paid-in Reinvested stock- available- holders'
stock capital earnings holders for-sale, net equity
----- ------- -------- ------- ------------- ------
(Amounts are in thousands, except per share and share amounts)
Balances at December 31, 1994 $231,585 78,421 1,165,128 --- (1,980) 1,473,154
Net earnings for the year --- --- 242,141 --- --- 242,141
Cash dividends, $.11 per share --- --- (25,250) --- --- (25,250)
Contribution of 3,369,603 shares to
retirement plans --- 6,859 --- 47,898 --- 54,757
11,196,418 shares acquired from stockholders --- --- --- (162,137) --- (162,137)
Sale of 1,987,772 shares to stockholders --- --- --- 29,668 --- 29,668
Change in valuation allowance, net of tax --- --- --- --- 2,384 2,384
Retirement of 5,839,043 shares (5,839) --- (78,732) 84,571 --- ---
-------- ------- --------- ------- ----- ---------
Balances at December 30, 1995 225,746 85,280 1,303,287 --- 404 1,614,717
Net earnings for the year --- --- 265,176 --- --- 265,176
Cash dividends, $.13 per share --- --- (29,184) --- --- (29,184)
Contribution of 3,156,519 shares to
retirement plans --- 6,711 --- 57,487 --- 64,198
11,161,186 shares acquired from stockholders --- --- --- (206,235) --- (206,235)
Sale of 2,200,962 shares to stockholders --- --- --- 41,568 --- 41,568
Change in valuation allowance, net of tax --- --- --- --- 939 939
Retirement of 5,803,705 shares (5,803) --- (101,377) 107,180 --- ---
-------- ------- --------- ------- ----- ---------
Balances at December 28, 1996 219,943 91,991 1,437,902 --- 1,343 1,751,179
Net earnings for the year --- --- 354,622 --- --- 354,622
Cash dividends, $.15 per share --- --- (33,003) --- --- (33,003)
Contribution of 1,407,322 shares to
retirement plans --- 1,446 --- 30,479 --- 31,925
6,926,207 shares acquired from stockholders --- --- --- (153,886) --- (153,886)
Sale of 2,637,377 shares to stockholders 358 7,320 --- 57,663 --- 65,341
Change in valuation allowance, net of tax --- --- --- --- 3,121 3,121
Retirement of 2,881,508 shares (2,882) --- (62,862) 65,744 --- ---
-------- ------- --------- ------- ----- ---------
Balances at December 27, 1997 $217,419 100,757 1,696,659 --- 4,464 2,019,299
======== ======= ========= ======= ===== =========
See accompanying notes to consolidated financial statements.
25
PUBLIX SUPER MARKETS, INC.
Consolidated Statements of Cash Flows
Years ended December 27, 1997, December 28, 1996
and December 30, 1995
1997 1996 1995
---- ---- ----
(Amounts are in thousands)
Cash flows from operating activities:
Cash received from customers $ 11,291,118 10,482,420 9,451,659
Cash paid to employees and suppliers (10,441,281) (9,589,610) (8,758,575)
Dividends and interest received 42,437 28,816 21,649
Income taxes paid (188,842) (170,412) (124,884)
Payment for self-insured claims (106,920) (103,286) (93,250)
Other operating cash receipts 678 626 548
Other operating cash payments (7,982) (8,651) (8,808)
------------ ---------- ----------
Net cash provided by operating
activities 589,208 639,903 488,339
------------ ---------- ----------
Cash flows from investing activities:
Payment for property, plant and
equipment (259,806) (226,752) (256,629)
Proceeds from sale of property, plant
and equipment 7,778 11,072 3,559
Payment for investment securities -
available-for-sale (AFS) (512,912) (453,334) (241,414)
Proceeds from sale and maturity of
investment securities - AFS 375,335 408,808 252,009
Other, net (5,204) (2,349) 1,290
------------ ---------- ----------
Net cash used in investing activities (394,809) (262,555) (241,185)
------------ ---------- ----------
Cash flows from financing activities:
Payment of long-term debt (238) (2,792) (1,620)
Proceeds from sale of common stock 65,341 41,568 29,668
Payment for acquisition of common stock (153,886) (206,235) (162,137)
Dividends paid (33,003) (29,184) (25,250)
------------ ---------- ----------
Net cash used in financing activities (121,786) (196,643) (159,339)
------------ ---------- ----------
Net increase in cash and cash equivalents 72,613 180,705 87,815
Cash and cash equivalents at beginning
of year 457,405 276,700 188,885
------------ ---------- ----------
Cash and cash equivalents at end of year $ 530,018 457,405 276,700
============ ========== ==========
See accompanying notes to consolidated financial statements. (Continued)
26
PUBLIX SUPER MARKETS, INC.
Consolidated Statements of Cash Flows
(Continued)
1997 1996 1995
---- ---- ----
(Amounts are in thousands)
Reconciliation of Net Earnings to Net Cash
Provided by Operating Activities
Net earnings $354,622 265,176 242,141
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 168,613 158,454 144,717
Retirement contributions paid or payable
in common stock 78,695 68,239 60,385
Deferred income taxes 17,345 (38,721) 15,886
Loss on sale of property, plant and
equipment 3,674 242 5,891
(Gain) loss on sale of investments (415) 126 (681)
Self-insurance reserves in excess of
current payments 9,897 18,709 9,872
Postretirement accruals in excess of
current payments 5,317 4,098 2,867
Increase (decrease) in advance purchase
allowances (10,690) 60,773 (3,358)
Other, net 2,121 967 1,236
Changes in current assets and liabilities:
Increase in trade receivables (10,097) (16,729) (3,643)
Increase in merchandise inventories (67,790) (27,368) (62,010)
(Increase) decrease in prepaid expenses (814) 1,930 (1,502)
Increase in accounts payable and accrued
expenses 44,183 124,289 77,949
Increase (decrease) in Federal and state
income taxes payable (5,453) 19,718 (1,411)
-------- ------- -------
Total adjustments 234,586 374,727 246,198
-------- ------- -------
Net cash provided by operating activities $589,208 639,903 488,339
======== ======= =======
See accompanying notes to consolidated financial statements.
27
PUBLIX SUPER MARKETS, INC.
Notes to Consolidated Financial Statements
December 27, 1997, December 28, 1996
and December 30, 1995
(1) Summary of Significant Accounting Policies
------------------------------------------
(a)Business
--------
The Company is in the business of operating retail food
supermarkets in Florida, Georgia, South Carolina and Alabama.
(b)Principles of Consolidation
---------------------------
The consolidated financial statements include the
Company and its wholly owned subsidiary. All significant
intercompany balances and transactions have been eliminated in
consolidation.
(c)Definition of Fiscal Year
-------------------------
The fiscal year ends on the last Saturday in December. Fiscal
years 1997, 1996 and 1995 include 52 weeks.
(d)Cash Equivalents
----------------
The Company considers all liquid investments with maturities
of three months or less to be cash equivalents.
(e)Inventories
-----------
Inventories are valued at cost (principally the dollar value last-
in, first-out method) including store inventories which are
calculated by the retail method.
(f)Property, Plant and Equipment and Depreciation
----------------------------------------------
Assets are recorded at cost and are depreciated
using the straight-line method over their estimated useful life
or the term of their lease. Maintenance and repairs are charged
to expense as incurred. Expenditures for renewals and
betterments are capitalized. The gain or loss is applied to the
asset accounts for traded items or is reflected in income for
disposed items.
(g)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.
(h)Long-Lived Assets
-----------------
At the beginning of fiscal year 1996, the Company
adopted Statement of Financial Accounting Standard No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed Of"(SFAS 121). SFAS 121 requires
that long-lived assets and certain identifiable intangibles held
and used by an entity be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of
the asset may not be recoverable. SFAS 121 also requires that
long-lived assets and certain identifiable intangibles to be
disposed of be reported at the lower of the carrying amount or
fair value less costs to sell. The effect of adopting SFAS 121
as of the beginning of fiscal 1996 was not material.
(Continued)
28
PUBLIX SUPER MARKETS, INC.
Notes to Consolidated Financial Statements
(i)Earnings Per Share
------------------
The Company adopted Statement of Financial Accounting Standard
No. 128, "Earnings Per Share," (SFAS 128) effective for the year
ended December 27, 1997. SFAS 128 governs the computation,
presentation and disclosure requirements for earnings per share
(EPS). SFAS 128 simplifies the computation of EPS and makes the
presentation of EPS comparable to international EPS standards.
There was no effect on the Company's EPS as a result of adopting
SFAS 128.
(j)Comprehensive Income
--------------------
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 130, "Reporting
Comprehensive Income," (SFAS 130) effective for fiscal years
beginning after December 15, 1997. SFAS 130 sets forth standards
for the reporting of comprehensive in the financial statements.
Comprehensive income includes net earnings and other
comprehensive income. Other comprehensive income includes
revenues, expenses, gains and losses that have been excluded from
net earnings and recorded directly in the stockholders' equity
section of the balance sheet. The Company will report
comprehensive income beginning with the quarter ending March 28,
1998.
(k)Segment Information
-------------------
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 131, "Disclosures
about Segments of an Enterprise and Related Information," (SFAS
131) effective for fiscal years beginning after December 15,
1997. SFAS 131 provides accounting guidance for reporting
information about operating segments and requires interim segment
reporting. The Company operates in a single segment of business
therefore, the effect of adopting SFAS 131 is not expected to be
material.
(l)Use of Estimates
----------------
The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
(m)Reclassifications
-----------------
Certain 1995 and 1996 amounts have been
reclassified to conform with the 1997 presentation.
(2) Merchandise Inventories
-----------------------
If the first-in, first-out method of valuing inventories had been
used by the Company, inventories and current assets would have been
higher than reported by approximately $102,393,000, $101,531,000 and
$96,231,000 as of December 27, 1997, December 28, 1996 and December
30, 1995, respectively. Also, net earnings would have increased by
approximately $423,000 or less than $.01 per share in 1997,
$2,764,000 or $.01 per share in 1996 and $3,106,000 or $.01 per share
in 1995.
2 (Continued)
29
PUBLIX SUPER MARKETS, INC.
Notes to Consolidated Financial Statements
(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 marketable debt and
equity securities are based on quoted market prices.
The carrying amount of the Company's financial instruments as of
December 27, 1997 and December 28, 1996 approximated their respective
fair values.
(4) Investments
-----------
Management 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 other income, net. The Company had no held-to-maturity
securities as of December 27, 1997 and December 28, 1996.
All of the Company's debt securities 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 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 other income, net.
Realized gains and losses and declines in value judged to be other-
than-temporary on available-for-sale securities are included in other
income, net. The cost of securities sold is based on the specific
identification method.
Following is a summary of available-for-sale securities as of
December 27, 1997 and December 28, 1996:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
(Amounts are in thousands)
1997:
Tax-free bonds $231,517 1,185 775 231,927
Taxable bonds 32,940 1,632 46 34,526
Equity securities 106,782 5,845 574 112,053
-------- ----- ----- -------
$371,239 8,662 1,395 378,506
======== ===== ===== =======
1996:
Tax-free bonds $156,694 713 416 156,991
Equity securities 79,191 2,584 694 81,081
-------- ----- ----- -------
$235,885 3,297 1,110 238,072
======== ===== ===== =======
For the fiscal years ended December 27, 1997 and December 28, 1996,
the realized gains on sales of available-for-sale securities totaled
$1,540,000 and $451,000, respectively, and the realized losses
totaled $1,125,000 and $577,000, respectively. The unrealized gains
on available-for-sale securities, net of applicable income taxes,
included as a separate component of stockholders' equity, was
$4,464,000 at the end of 1997 and $1,343,000 at the end of 1996.
3 (Continued)
30
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 as
of December 27, 1997 and December 28, 1996, by expected maturity,
are as follows:
1997 1996
-------------------- -------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
---- ----- ---- -----
(Amounts are in thousands)
Due in one year or less $ 46,722 46,847 65,487 65,586
Due after one year through
three years 26,200 26,624 57,795 57,985
Due after three years 191,535 192,982 33,412 33,420
-------- ------- ------- -------
264,457 266,453 156,694 156,991
Equity securities 106,782 112,053 79,191 81,081
-------- ------- ------- -------
$371,239 378,506 235,885 238,072
======== ======= ======= =======
(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 service are entitled to postretirement life insurance
benefits. The Company funds the life insurance benefits on a pay-
as-you-go basis. During 1997, 1996 and 1995, the Company made
benefit payments to beneficiaries of retirees of approximately
$1,271,000, $1,420,000 and $1,310,000, respectively.
Net postretirement benefit cost consists of the following
components:
1997 1996 1995
---- ---- ----
(Amounts are in thousands)
Service cost attributed to service
during the year $ 2,533 1,980 1,362
Interest cost on postretirement
benefit obligation 3,755 3,208 2,815
Net amortization 300 330 ---
------- ----- -----
Net periodic postretirement benefit cost $ 6,588 5,518 4,177
======= ===== =====
The following summarizes the reconciliation of the amounts
recognized in the Company's consolidated balance sheets as of
December 27, 1997 and December 28, 1996:
1997 1996
---- ----
(Amounts are in thousands)
Accumulated postretirement benefit obligation:
Retirees $18,417 15,337
Fully eligible active plan participants 11,966 12,981
Other active plan participants 23,634 18,201
------- ------
Accumulated postretirement benefit obligation 54,017 46,519
Unrecognized net loss (11,405) (9,224)
------- ------
Accrued postretirement benefit cost $42,612 37,295
======= ======
4 (Continued)
31
PUBLIX SUPER MARKETS, INC.
Notes to Consolidated Financial Statements
The following actuarial assumptions were used in the calculation
of the year end accumulated postretirement benefit obligation:
1997 1996 1995
---- ---- ----
Discount rate 7.25% 7.75% 7.25%
Salary increase rate 4.00% 4.00% 4.00%
The change in the discount rate from 7.75% to 7.25% in 1997
increased the accumulated postretirement benefit obligation by
$4,438,000 and is expected to increase annual postretirement
benefit costs by $684,000 beginning in 1998. The change in the
discount rate from 7.25% to 7.75% in 1996 decreased the
accumulated postretirement benefit obligation by $4,064,000.
(6) Retirement Plans
----------------
The Company has a trusteed, noncontributory profit sharing plan
for the benefit of eligible employees. The amount of the
Company's contribution to this plan is determined by the Board of
Directors. The contribution cannot exceed 15% of compensation
paid to participants. The expense recorded for contributions to
this plan amounted to $69,420,000 in 1997, $49,010,000 in 1996
and $44,941,000 in 1995.
The Company has an Employee Stock Ownership Plan (ESOT). Annual
contributions to the ESOT are determined by the Board of
Directors and can be made in Company stock or cash. The expense
recorded for contributions to the plan amounted to $69,420,000 in
1997, $60,818,000 in 1996 and $54,944,000 in 1995.
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 6% of their annual
compensation, subject to certain maximum contribution
restrictions. The Company may make a discretionary annual
matching contribution to eligible participants of this plan as
determined by the Board of Directors. During 1997, 1996 and
1995, the Board of Directors approved a match of 50% of eligible
contributions up to 3% of eligible wages not to exceed a maximum
of $750 per employee. The match, which is made in the subsequent
year, is in the form of common stock of the Company. The expense
recorded for the Company's match to the 401(k) plan was
approximately $9,275,000, $7,421,000 and $5,441,000 in 1997, 1996
and 1995, respectively.
The Company intends to continue the profit sharing plan, ESOT and
401(k) plan indefinitely; however, the right to modify, amend or
terminate 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) Nonrecurring Charge
-------------------
An $89.0 million nonrecurring charge was recorded in the fourth
quarter of 1996 to cover the settlements of class action
litigation against the Company involving alleged violations of
the Federal Civil Rights Act and Florida law with respect to
certain of the Company's retail employees and certain other
allegations resulting from a notice of charge issued by the Equal
Employment Opportunity Commission. The nonrecurring charge
covers the full cost of the settlements, including the agreed
payments to class members and their counsel, as well as the
estimated cost of implementing and complying with the procedures
agreed to be established under the settlements (see note 9).
5 (Continued)
32
PUBLIX SUPER MARKETS, INC.
Notes to Consolidated Financial Statements
(8) Income Taxes
------------
The provision for income taxes consists of the following:
Current Deferred Total
------- -------- -----
(Amounts are in thousands)
1997:
Federal $156,543 14,792 171,335
State 26,847 2,553 29,400
-------- ------ -------
$183,390 17,345 200,735
======== ====== =======
1996:
Federal $162,460 (33,073) 129,387
State 27,669 (5,648) 22,021
-------- ------ -------
$190,129 (38,721) 151,408
======== ====== =======
1995:
Federal $104,996 13,546 118,542
State 18,477 2,340 20,817
-------- ------ -------
$123,473 15,886 139,359
======== ====== =======
The actual tax expense for 1997, 1996 and 1995 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:
1997 1996 1995
---- ---- ----
(Amounts are in thousands)
Computed "expected" tax expense $194,375 145,804 133,525
State income taxes (net of
Federal income tax benefit) 9,108 14,309 13,532
Tax exempt interest (9,291) (7,066) (5,530)
Other, net (3,457) (1,639) (2,168)
-------- ------- -------
$200,735 151,408 139,359
======== ======= =======
The tax effects of temporary differences that give rise to
significant portions of deferred tax assets and deferred tax
liabilities as of December 27, 1997 and December 28, 1996 are as
follows:
1997 1996
---- ----
(Amounts are in thousands)
Deferred tax assets:
Self-insurance reserves $ 55,579 50,363
Nonrecurring charge 26,728 34,390
Advance purchase allowances 19,481 23,483
Postretirement benefit cost 16,445 14,356
Retirement plan contributions 13,390 9,432
Inventory capitalization 7,872 7,552
Other 10,152 11,161
-------- -------
Total deferred tax assets $149,647 150,737
======== =======
Deferred tax liabilities:
Property, plant and equipment,
principally due to depreciation $197,875 179,570
Other 177 267
-------- -------
Total deferred tax liabilities $198,052 179,837
======== =======
The Company expects the results of future operations to generate
sufficient taxable income to allow utilization of deferred tax
assets.
6 (Continued)
33
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 and shopping center premises
generally under 20 year leases. Contingent rentals paid to
lessors of certain store facilities are determined on the
basis of a percentage of sales in excess of stipulated
minimums plus, in certain cases, reimbursement of taxes and
insurance.
Total rental expense, net of sublease rental income, for the
years ended December 27, 1997, December 28, 1996 and
December 30, 1995, is as follows:
1997 1996 1995
---- ---- ----
(Amounts are in thousands)
Minimum rentals $154,727 135,273 129,288
Contingent rentals 9,835 9,892 9,525
Sublease rental income (4,366) (3,572) (3,467)
-------- ------- -------
$160,196 141,593 135,346
======== ======= =======
As of December 27, 1997, 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)
1998 $ 153,933 4,957 148,976
1999 152,690 4,587 148,103
2000 150,999 4,253 146,746
2001 149,921 3,512 146,409
2002 148,339 1,845 146,494
Thereafter 1,435,595 322 1,435,273
---------- ------ ---------
$2,191,477 19,476 2,172,001
========== ====== =========
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. Contingent rentals were estimated at
December 27, 1997 and are included in trade receivables.
Rental income was approximately $9,622,000 in 1997,
$8,983,000 in 1996 and $8,576,000 in 1995. The approximate
amounts of minimum future rental payments to be received
under operating leases are $7,455,000, $5,971,000,
$4,589,000, $2,879,000 and $2,005,000 for the years 1998
through 2002, respectively, and $5,747,000 thereafter.
(b)Lines of Credit
---------------
The Company has a committed line of credit totaling
$50,000,000 available for short-term borrowings, with an
interest rate at or below the prime rate. There were no
amounts outstanding as of December 27, 1997 or
December 28, 1996. The Company pays no fees related to this
line.
(c)Environmental
-------------
In October 1996, the American Institute of Certified Public
Accountants issued Statement of Position (SOP) 96-1,
"Environmental Remediation Liabilities." The guidance
provided by the SOP is consistent with the Company's current
method of accounting for environmental remediation costs.
The Company accrues for losses associated with environmental
remediation obligations when such losses are probable and
reasonably estimable. Accruals for estimated losses from
environmental remediation obligations generally are
recognized no later than completion of the remedial
feasibility study. Such accruals are adjusted as further
information develops or circumstances change.
7 (Continued)
34
PUBLIX SUPER MARKETS, INC.
Notes to Consolidated Financial Statements
(d)Litigation
----------
The Company was the subject of a notice of charge (the
"Charge") issued by the Equal Employment Opportunity
Commission (the "EEOC") in March 1992, In the Matter of: Kemp
v. Publix Super Markets, Inc., alleging that the Company had
and was engaged in violations of Title VII of the Federal
Civil Rights Act by discriminating against women with respect
to job assignments and promotions because of their gender.
The Charge was subsequently expanded to include allegations
of race discrimination.
The Company was also a defendant in a certified class action
filed in July 1995 in the Federal District Court for the
Middle District of Florida, Tampa Division (the "Court"), by
certain present or former employees of the Company,
individually and on behalf of all other persons similarly
situated (the "Shores case"). The plaintiffs alleged that
the Company had and was then engaged in a policy and pattern
or practice of gender-based discriminatory treatment of
female employees with respect to job assignments, promotional
opportunities, management positions, equal pay, full-time
status, bonuses, and other benefits and conditions of
employment, all in violation of Title VII of the Federal
Civil Rights Act, as well as the Florida Civil Rights Act of
1992. The litigation class certified by the Court consisted
of all female employees of the Company who from May 22, 1991
(Florida and South Carolina operations) or from October 19,
1991 (Georgia operations) had worked or were working in the
Company's retail operations; expressly excluded were females
who had worked only in the Company's pharmacy operations.
On January 24, 1997, the Company, the EEOC and the plaintiffs
in the Shores case entered into a settlement with respect to
all matters related to the case. The settlement was
memorialized in a consent decree, which was approved by the
Court on May 23, 1997 (the "Shores Consent Decree").
Under the Shores Consent Decree, the Company will pay $81.5
million to the plaintiffs, their counsel and other class
members. The Company agreed to establish a formal system by
which employees will be considered for promotion. Promotions
will be based on qualifications and expressed interest of
employees. The Company has also agreed to make certain other
procedural changes. The Company's compliance with the Shores
Consent Decree will be monitored by class counsel and the
EEOC.
Also on January 24, 1997, the Company agreed with the EEOC to
settle all pending EEOC charges related to gender and race
discrimination that were not included in the Shores Consent
Decree. A formal settlement agreement was executed by the
parties on April 13, 1997. Under the EEOC settlement, the
Company agreed to pay an additional $3.5 million to members
of the affected classes. The Company also agreed to follow
procedures with respect to class members similar to those
established under the Shores Consent Decree.
The settlement agreements recognize that the Company
continues to deny that it has engaged in any unlawful
discriminatory activity.
The Company will pay the settlements from liquid investment
funds currently on hand and the settlements were charged
against the Company's fiscal 1996 fourth quarter results (see
note 7). Management does not believe that the settlements
will cause any cash flow or liquidity problems or will have
any material impact on the Company's future financial
results.
A purported class action was filed against the Company on
April 3, 1997 in the Court by Lemuel Middleton and 15 other
present or former employees of the Company, individually and
on behalf of all other persons similarly situated (the
"Middleton case"). In their Complaint, the plaintiffs allege
that the Company has and is currently engaged in a pattern
and practice of race-based discriminatory treatment of black
employees and applicants with respect to hiring, promotion,
job assignment, conditions of employment, and other
employment aspects, all in violation of Federal and state
law. Subsequently, three of the named plaintiffs withdrew
their claims with prejudice. The plaintiffs seek, among
other relief, a certification of the suit as a class action,
declaratory and injunctive relief, back pay, front pay,
benefits and other compensatory damages, and punitive
damages. Action by the Court is now pending on the
plaintiffs' request for class certification.
8 (Continued)
35
PUBLIX SUPER MARKETS, INC.
Notes to Consolidated Financial Statements
On November 6, 1997, another purported class action was filed
against the Company in the Court by Shirley Dyer and five
other present or former employees of the Company,
individually and on behalf of all other persons similarly
situated (the "Dyer case"). In their Complaint, the
plaintiffs allege that the Company has violated and is
currently violating Federal and state civil rights statutes
by discriminating against female employees and applicants
with respect to hiring, promotion, training, compensation,
discipline, demotion and termination, and/or retaliation for
bringing allegations of discrimination. In their Complaint,
the plaintiffs propose a class of all female current, former
and future Company employees and applicants in all of the
Company's "non-retail" operations. The plaintiffs seek,
among other relief, a certification of the suit as a class
action, declaratory and injunctive relief, back pay, front
pay, benefits and other compensatory damages, and punitive
damages. The parties have begun extensive discovery on
issues relating to class certification.
The Company denies the allegations of the plaintiffs in the
Middleton and Dyer cases and is vigorously defending the
actions.
The Company is also a party in various legal claims and
actions considered in the normal course of business.
Management believes that the ultimate disposition of these
matters will not have a material effect on the Company's
liquidity, results of operations or financial condition.
9
36
Schedule II
-----------
PUBLIX SUPER MARKETS, INC.
Valuation and Qualifying Accounts
Years ended December 27, 1997, December 28, 1996
and December 30, 1995
(Amounts are in thousands)
Balance at Additions Deductions Balance at
beginning charged to from end of
Description of year income reserves year
----------- ------- ------ -------- ----
Year ended December 27, 1997
Reserves not deducted from assets:
Self-insurance reserves:
-Current $ 64,250 100,085 106,920 57,415
-Noncurrent 73,336 16,732 --- 90,068
-------- ------- ------- -------
$137,586 116,817 106,920 147,483
======== ======= ======= =======
Year ended December 28, 1996
Reserves not deducted from assets:
Self-insurance reserves:
-Current $ 58,442 109,094 103,286 64,250
-Noncurrent 60,435 12,901 --- 73,336
-------- ------- ------- -------
$118,877 121,995 103,286 137,586
======== ======= ======= =======
Year ended December 30, 1995
Reserves not deducted from assets:
Self-insurance reserves:
-Current $ 49,295 102,397 93,250 58,442
-Noncurrent 59,710 725 --- 60,435
-------- ------- ------- -------
$109,005 103,122 93,250 118,877
======== ======= ======= =======
37
PUBLIX SUPER MARKETS, INC.
Index to Exhibits
EXHIBIT 21 Subsidiary of the Company
EXHIBIT 27 Financial Data Schedule for the year ended December 28, 1996