-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KNDnoCcK6Nkk0hkbzv+2n9r0d1XuUbsttG+grRv+5C4p9WA004TGnfrNqZwcYzCX y3VJ6TkrRr/dfy+Nze1AzQ== 0000081061-99-000010.txt : 19990326 0000081061-99-000010.hdr.sgml : 19990326 ACCESSION NUMBER: 0000081061-99-000010 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19981226 FILED AS OF DATE: 19990325 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUBLIX SUPER MARKETS INC CENTRAL INDEX KEY: 0000081061 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 590324412 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-00981 FILM NUMBER: 99572803 BUSINESS ADDRESS: STREET 1: PO BOX 407 CITY: LAKELAND STATE: FL ZIP: 33802-0407 BUSINESS PHONE: 9416887407 MAIL ADDRESS: STREET 1: P O BOX 407 STREET 2: P O BOX 407 CITY: LAKELAND STATE: FL ZIP: 33802 10-K 1 ANNUAL REPORT FOR PERIOD ENDING 12/26/1998 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 26, 1998 ( ) 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 office (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. (X) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No The aggregate market value of the voting stock held by non-affiliates of the Registrant as of March 2, 1999 was approximately $5,908,273,446. The number of shares of Registrant's common stock outstanding as of March 2, 1999 was 216,125,136. DOCUMENTS INCORPORATED BY REFERENCE Pages 2 through 8 of Proxy Statement solicited for the 1999 Annual Meeting of Stockholders to be held on May 11, 1999 are incorporated by reference in Items 10, 11 and 13 of Part III hereof. 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 586 supermarkets at the end of 1998, compared with 563 at the beginning of the year. In 1998, 31 stores were opened, eight stores were closed, and 45 stores were expanded or remodeled. The net increase in square footage was 1.0 million square feet or 4.0% since 1997. At the end of 1998, the Company had 471 stores located in Florida, 91 in Georgia, 21 in South Carolina and three in Alabama. Also, as of year end, the Company had 35 stores under construction in Florida, eight in Georgia and one 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 1999. 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 117,000 employees at the end of 1998, compared with 111,000 at the end of 1997. Of this total, approximately 70,400 at the end of 1998 and 68,500 at the end of 1997 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 1998 had no material effect upon capital expenditures, earnings or the competitive position of the Company. Item 2. Properties At year end, the Company operated approximately 26.3 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 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 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 49 locations both the building and land are owned and at 32 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 suitable and adequate for operating its business. Item 3. Legal Proceedings A purported class action was filed against the Company on April 3, 1997 in the Federal District Court for the Middle District of Florida (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 sought, 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. On June 15, 1998, a Federal magistrate judge recommended certification as a class action of claims in the Middleton case relating only to Publix's retail stores in Florida and Georgia. Publix and the plaintiffs have both objected to the recommendation, with Publix asking that no class be certified and plaintiffs asking that the class be expanded. The plaintiffs have also moved to drop all claims for compensatory and punitive damages asserted in the lawsuit and, therefore, to withdraw their demand for a jury trial. 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. The plaintiffs have moved to certify a class of all female current, former and future Company employees and applicants in all of the Company's manufacturing plants and distribution centers with respect to certain claims. The plaintiffs seek, among other relief, declaratory and injunctive relief, back pay, front pay, benefits and other compensatory damages, and punitive damages. The parties have briefed issues relating to class certification and await the Court's ruling. On December 8, 1998, another purported class action was filed against the Company in the Court by Charlene Jones, individually and on behalf of other persons similarly situated (the "Jones case"). In her Complaint, the plaintiff alleges that the Company has violated and is currently violating Federal and state civil rights statutes by discriminating against female applicants for employment in the Company's manufacturing plants and distribution centers. The plaintiffs in the Jones and Dyer cases have asked the Court to combine the two cases. The Company denies the allegations of the plaintiffs in the Middleton, Dyer and Jones 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 EXECUTIVE OFFICERS OF THE COMPANY Served as Nature of Family Officer of Relationship Company Name Age Position Between Officers Since ---- --- -------- ---------------- ----- Howard M. Jenkins 47 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. 55 Chairman of the Cousin of 1974 Executive Committee Howard M. Jenkins and cousin of W. Edwin Crenshaw W. Edwin Crenshaw 48 President Nephew of 1990 Howard M. Jenkins and cousin of Charles H. Jenkins, Jr. Hoyt R. Barnett 55 Vice Chairman Brother-in-law of 1977 Howard M. Jenkins William H. Vass 49 Executive 1986 Vice President Jesse L. Benton 56 Vice President 1988 S. Keith Billups 66 Secretary 1968 David E. Bornmann 41 Vice President 1998 Joseph W. Carvin 48 Vice President 1998 R. Scott Charlton 40 Vice President 1992 Carolyn C. Day 53 Assistant Secretary 1992 Glenn J. Eschrich 54 Vice President 1995 William V. Fauerbach 52 Vice President 1997 John R. Frazier 49 Vice President 1997 M. Clayton Hollis, Jr. 42 Vice President 1994 Mark R. Irby 43 Vice President 1989 Tina P. Johnson 39 Senior Vice President 1990 James J. Lobinsky 59 Senior Vice President 1992 Thomas M. McLaughlin 48 Vice President 1994 Sharon A. Miller 55 Assistant Secretary 1992 EXECUTIVE OFFICERS OF THE COMPANY Served as Nature of Family Officer of Relationship Company Name Age Position Between Officers Since ---- --- -------- ---------------- ----- Robert H. Moore 56 Vice President 1994 Thomas M. O'Connor 51 Vice President 1992 David P. Phillips 39 Vice President Finance 1990 and Treasurer Henry J. Pileggi, Jr. 40 Vice President 1998 James H. Rhodes II 54 Vice President 1995 Daniel M. Risener 58 Vice President 1985 Edward T. Shivers 59 Vice President 1985 James F. Slappey 56 Vice President 1992 The terms of all officers expire at the annual meeting of the Company in May 1999, with the exception of William H. Vass who retired as Executive Vice President effective December 31, 1998. Mr. Vass continues to work for the Company on a part-time basis. 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. Hoyt R. Barnett Executive Vice President and Trustee of the Profit Sharing Plan of the Company to August 1998, Executive VicPresident, Trustee of the Profit Sharing Plan and Trustee of the ESOT to January 1999, Vice Chairman, Trustee of the Profit Sharing Plan and Trustee of the ESOT, thereafter. William H. Vass Executive Vice President and Trustee of the ESOT of the Company to August 1998, Executive Vice President to December 1998. Employee of the Company on a part-time basis, thereafter. Jesse L. Benton Vice President of the Company. S. Keith Billups Secretary of the Company. David E. Bornmann Manager of Strategic Projects - Improvement Systems of the Company to September 1994, Business Development Manager Corporate Purchasing to October 1998, Vice President thereafter. Joseph W. Carvin Human Resources Counsel of the Company to June 1998, Director of Human Resources and Employment Law to November 1998, Vice President thereafter. 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. Name Business Experience During Last Five Years 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. 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. Henry J. Pileggi, Jr. District Manager of the Company to June 1994, Regional Director to October 1998, Vice President 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 1998 and 1997 was as follows: 1998 1997 ---- ---- January - February $23.25 $20.75 March - April 30.75 21.00 May - July 34.75 21.75 August - October 38.25 23.00 November - December 41.00 23.25 (b) Approximate Number of Equity Security Holders As of March 2, 1999, the approximate number of holders of record of the Company`s common stock was 73,000. (c) Dividends The Company paid cash dividends of $.20 per share of common stock in 1998 and $.15 per share in 1997. 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
1998 1997 1996 1995 1994 ---- ---- ---- ---- ---- Sales: Sales ................ $ 12,067,125 11,224,378 10,431,302 9,393,021 8,664,795 Percent increase ..... 7.5% 7.6% 11.1% 8.4% 16.0% Comparable store sales percent increase ... 3.6% 3.3% 5.6% 2.8% 5.2% Earnings: Gross profit ......... $ 2,935,707 2,674,118 2,424,799 2,124,036 1,952,043 Earnings before income tax expense ........ $ 584,388 555,357 416,584 381,500 378,300 Net earnings ......... $ 378,274 354,622 265,176 242,141 238,567 Net earnings as a percent of sales ... 3.13% 3.16% 2.54% 2.58% 2.75% Common stock: Weighted average shares outstanding . 217,383,413 218,871,661 221,195,884 225,852,938 231,514,459 Basic earnings per common share, based on weighted average shares outstanding ........ $ 1.74 1.62 1.20 1.07 1.03 Dividends per share .. $ .20 .15 .13 .11 .09 Financial data: Capital expenditures . $ 357,754 259,806 226,752 256,629 374,190 Working capital ...... $ 467,385 366,680 317,265 232,570 159,971 Current ratio ........ 1.47 1.37 1.35 1.31 1.24 Total assets ......... $ 3,617,259 3,294,980 2,921,084 2,559,365 2,302,336 Long-term debt ....... $ --- --- 108 1,765 3,031 Stockholders' equity . $ 2,327,632 2,019,299 1,751,179 1,614,717 1,473,154 Other: Number of stores ..... 586 563 534 508 470
NOTE: Amounts are in thousands, except per share, share amounts and number of stores. Fiscal year 1994 includes 53 weeks. All other years include 52 weeks. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations BUSINESS ENVIRONMENT As of December 26, 1998, the Company operated 586 retail grocery stores representing approximately 26.3 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 1998, the Company had 471 stores located in Florida, 91 in Georgia, 21 in South Carolina and three in Alabama. The Company opened 20 stores in Florida, six stores in Georgia and five stores in South Carolina during 1998. 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 $665.0 million in 1998, compared with $589.2 million in 1997 and $639.9 million in 1996. Working capital was approximately $467.4 million as of December 26, 1998, as compared with $366.7 million and $317.3 million as of December 27, 1997 and December 28, 1996, respectively. Cash and cash equivalents aggregated approximately $669.3 million as of December 26, 1998, as compared with $530.0 million and $457.4 million as of December 27, 1997 and December 28, 1996, respectively. Capital expenditures totaled $357.8 million in 1998. These expenditures were primarily incurred in connection with the opening of 31 new stores and remodeling or expanding 45 stores. In addition, the Company closed eight stores. The net impact of new and closed stores (net new stores) added an additional 1.0 million square feet in 1998, a 4.0% increase. 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. In addition, the Company closed four stores. Net new stores added an additional 1.4 million square feet in 1997, a 5.9% increase. 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. In addition, the Company closed eight stores. Net new stores added an additional 1.4 million square feet in 1996, a 6.4% increase. The Company plans to open as many as 48 stores in 1999. Although real estate development is unpredictable, the Company's 1999 new store growth represents a reasonable estimate of anticipated future growth. Capital expenditures for 1999, primarily made up of new store and warehouse construction and the remodeling or expanding of many existing stores, are expected to be approximately $510 million. This capital program is subject to continuing change and review. The 1999 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. 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 $136.4 million, $116.8 million and $122.0 million in fiscal 1998, 1997 and 1996, 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. 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 $2.0 million in 1998 compared with $46.8 million in 1997. Long-term investments, primarily comprised of tax exempt bonds, taxable bonds, equity securities and preferred stocks, were approximately $385.6 million in 1998 compared with $331.7 million in 1997. 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 1998, 1997 and 1996 include 52 weeks. Sales for 1998 were $12.1 billion as compared with $11.2 billion in 1997, a 7.5% increase. This reflects an increase of $404.1 million or 3.6% in sales from stores that were open for all of both years (comparable stores) and sales of $438.6 million or 3.9% from net new stores since the beginning of 1997. Sales for 1997 were $11.2 billion as compared with $10.4 billion in 1996, a 7.6% increase. This reflects an increase of $344.3 million or 3.3% in sales from comparable stores and sales of $448.8 million or 4.3% from net new stores since the beginning of 1996. Cost of merchandise sold including store occupancy, warehousing and delivery expenses was approximately 75.7% of sales in 1998 as compared with 76.2% and 76.8% in 1997 and 1996, respectively. In 1998 and 1997, 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 20.5%, 19.9% and 19.3% in 1998, 1997 and 1996, 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. 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 In March 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use," (SOP 98-1) effective for fiscal years beginning after December 15, 1998. SOP 98-1 provides guidance on accounting for the costs of computer software developed or obtained for internal use. This pronouncement identifies the characteristics of internal use software and provides guidance on new cost recognition principles. The Company is currently evaluating the effect of adopting SOP 98-1. In April 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities," (SOP 98-5) effective for fiscal years beginning after December 15, 1998. SOP 98-5 requires that costs incurred for start-up activities, such as store openings, be expensed as incurred. The Company has historically accounted for start-up costs in accordance with the requirements of SOP 98-5, therefore, there will be no effect on the Company's financial statements from the adoption of SOP 98-5. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 133, "Accounting for Derivative Instruments and Hedging Activities," (SFAS 133) effective for fiscal years beginning after June 15, 1999. SFAS 133 requires that derivatives be carried at fair value and provides for hedge accounting when certain conditions are met. The Company is currently evaluating the effect of adopting SFAS 133. YEAR 2000 Year 2000 problems result from the use in computer hardware and software of two digits rather than four digits to define the applicable year. When computer systems must process dates both before and after January 1, 2000, two-digit year "fields" may create processing ambiguities that can cause errors and system failures. These errors or failures may have limited effects, or the effects may be widespread, depending on the computer chip, system or software, and its location and function. The effects of Year 2000 problems are further complicated because of the interdependence of computer and telecommunications systems in the United States and throughout the world. This interdependence certainly is true for the Company and its suppliers, business partners and customers. The Company's Board of Directors has been briefed about Year 2000 problems generally and as they may affect the Company. The Company has adopted a Year 2000 plan (the "Plan") covering all of the Company's business units. The aim of the Plan is to take steps to prevent the Company's processes and systems, with emphasis on mission-critical functions, from being impaired due to Year 2000 problems. "Mission-critical" functions are those critical functions whose loss would cause an immediate stoppage of or significant impairment to major business areas (a major business area is one of material importance to the Company's business). To oversee the Plan, the Company established a Year 2000 Project Office. The Project Office is staffed with representatives from the Company's Information Systems Department, non-Information Systems business areas and outside consultants. Additional consultants are used on an as needed basis. Under the Plan, three main areas are addressed: information technology (IT) systems; non-IT systems (including embedded chip technology); and supply chain and other third party business partner readiness. The Plan called for the Company to inventory its mission-critical computer hardware and software systems and embedded chips (computer chips with date-related functions, contained in a wide variety of devices); assess the effects of Year 2000 problems on the Company's business units; remedy systems, software and embedded chips in an effort to avoid material disruptions or other material adverse effects on mission-critical functions, processes and systems; verify and test the systems to which remediation efforts have been applied; and develop contingency plans to cope with the mission-critical consequences of Year 2000 problems that have not been identified or remediated by that date. The Plan recognizes that the computer, telecommunications, and other systems ("Outside Systems") of outside entities ("Outside Entities") have the potential for major, mission-critical, adverse effects on the conduct of the Company's business. The Company does not have control of these Outside Entities or Outside Systems. The Plan includes an ongoing process of identifying and contacting Outside Entities whose systems have or may have a substantial effect on the Company's ability to continue to conduct the mission-critical aspects of its business without disruption from Year 2000 problems. The Plan includes reasonable efforts to inventory and assess the extent to which these Outside Systems may not be "Year 2000 ready" or "Year 2000 compatible." The Company will use reasonable efforts to coordinate and cooperate with these Outside Entities in an ongoing effort to obtain assurance that the Outside Systems that are mission-critical will be Year 2000 compatible well before January 1, 2000. As of February 1999, the Company and all its business units are at various stages in implementation of the Plan. The Company will continue to closely monitor work under the Plan and to revise estimated completion dates as needed. With respect to non-IT systems and equipment with date sensitive operating controls such as manufacturing equipment, security, and other similar systems, the Company is in the process of identifying and addressing those items requiring replacement, upgrade or other remediation efforts. The Company estimates that it is approximately 80% complete with the identification, remediation or replacement, and validation of the Company's IT and non-IT systems that have been identified as having potential Year 2000 deficiencies. The Company further estimates that substantially all mission-critical IT and non-IT systems and equipment will be Year 2000 ready by May 31, 1999, though unforeseen circumstances may affect this date. The Company anticipates that total costs for Year 2000 awareness, inventory, assessment, analysis, conversion, testing, or contingency planning to be $40.0 million. As of February 1999, approximately $26.0 million of this amount has been incurred. The incurred costs include the costs of all equipment upgrades, software modifications, software replacements, employee salaries allocable to the Year 2000 efforts, and consultant fees and expenses addressing Year 2000 problems. The funds to pay for addressing Year 2000 problems are expected to be financed by internally generated funds and current liquid assets. The Company believes that the cost of addressing Year 2000 problems will not have a material effect on the Company's consolidated financial position or results of operations. Although management believes that its estimates are reasonable, there can be no assurance that the actual costs of implementing the Plan will not differ materially from the estimated costs or that the Company will not be materially adversely affected by Year 2000 problems. Additionally, Year 2000 costs are difficult to estimate accurately because of unanticipated vendor delays, technical difficulties, the impact of tests of Outside Systems and similar events. Furthermore, the estimated costs of implementing the Plan do not take into account the costs, if any, that might be incurred as a result of Year 2000-related failures that occur despite the Company's implementation of the Plan. The Company cannot assure that suppliers upon which it depends for essential goods and services will convert and test their mission-critical systems and processes in a timely and effective manner. Failure or delay to do so by all or some of these entities, including U.S. Federal, state or local governments, could create substantial disruptions having a material adverse effect on the Company's business. As part of the Plan, the Company is developing contingency plans that deal with two aspects of Year 2000 problems:(1) that the Company, despite its good-faith, reasonable efforts, may not have satisfactorily remediated all of its internal mission-critical systems; and (2) that Outside Systems may not be Year 2000 ready, despite the Company's good-faith, reasonable efforts to work with Outside Entities. The Company's contingency plans are being designed to minimize the disruptions or other adverse effects resulting from Year 2000 incompatibilities regarding these mission-critical functions or systems, and to facilitate the early identification and remediation of mission-critical Year 2000 problems that first manifest themselves after January 1, 2000. Should the Company or any third party with whom the Company has a significant business relationship have a Year 2000 systems failure, the Company believes that the most significant worst-case impact would likely be the inability, with respect to a store or group of stores, to conduct operations due to a power failure, to timely deliver inventory, to receive certain products from vendors, or to electronically process sales to the customer at the store level. The Company could also experience an inability by customers, suppliers, and others to pay, on a timely basis or at all, obligations owed to the Company. Under these circumstances, the adverse effect on the Company could be material, although not quantifiable at this time. The Company will continue to monitor business conditions with the aim of assessing and quantifying material adverse effects, if any, that result or may result from Year 2000 problems. The Company has a Plan to deal with Year 2000 problems and believes that it will be able to achieve substantial Year 2000 readiness with respect to the mission-critical systems that it controls. From a forward-looking perspective, however, the extent and magnitude of Year 2000 problems as they will affect the Company, both before and for some period after January 1, 2000, are difficult to predict or quantify. Given this difficulty, there can be no assurance that all of the Company's systems and all Outside Systems will be adequately remediated so that they are Year 2000 ready by January 1, 2000, or by some earlier date, so as not to create a material disruption to the Company's business. If, despite the Company's reasonable efforts under its Year 2000 Plan, there are mission-critical Year 2000 related failures that create substantial disruptions to the Company's business, the adverse impact on the Company's business could be material. 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," "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, stability of product costs, and issues arising from addressing Year 2000 IT and non-IT problems. 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 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 (1999 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 1999 Proxy Statement. Item 12. Security Ownership of Certain Beneficial Owners and Management The following table sets forth, as of March 2, 1999, 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 11,875,267 (2) 5.49 Hoyt R. Barnett 55,358,242 (3) 25.61 W. Edwin Crenshaw 627,680 * Mark C. Hollis 1,364,468 (4) * Charles H. Jenkins, Jr. 1,683,697 * Howard M. Jenkins 13,144,041 (5) 6.08 Tina P. Johnson 3,806,989 (6) 1.76 E. Vane McClurg 1,763,062 * William H. Vass 40,007 * All Officers and Directors as a group (31 individuals) 89,065,492 (7) 41.21 All Other Beneficial Owners: Publix Super Markets, Inc. Profit Sharing Plan and Trust 21,200,000 9.81 Publix Super Markets, Inc. Employee Stock Ownership Plan and Trust 32,814,662 15.18 Nancy E. Jenkins 14,703,305 6.80 *Shares represent less than 1% of class. Note references are explained on the following page. (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 1,235,985 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. Hoyt R. Barnett is also Trustee of the Employee Stock Ownership Plan (ESOT) which is the record owner of 32,814,662 shares of common stock over which he has shared investment power. As Trustee, Hoyt R. Barnett exercises sole voting power over 626,094 shares in the ESOT because such shares have not been allocated to participants' accounts. For ESOT shares allocated to participants' accounts, Hoyt R. Barnett will vote shares as instructed by participants. Additionally, Hoyt R. Barnett will vote ESOT shares for which no instruction is received. Total shares beneficially owned include 1,235,985 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 investment power over 2,262,706 shares of common stock which are held directly, sole voting and investment power over 162,603 shares which are held indirectly and shared voting and 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 3,751,391 shares of common stock over which she has sole voting and shared investment power. (7) Includes 57,766,053 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 1999 Proxy Statement. 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 26, 1998. (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. 10. Employment Agreement dated August 28, 1998, between William H. Vass and the Company, effective January 1, 1999. 21. Subsidiary of the Company. 27. Financial Data Schedule. 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 2, 1999 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 2, 1999 - --------------------------- Howard M. Jenkins Chairman of the Executive /s/ Charles H. Jenkins, Jr. Committee and Director March 2, 1999 - --------------------------- Charles H. Jenkins, Jr. /s/ W. Edwin Crenshaw President and Director March 2, 1999 - --------------------------- W. Edwin Crenshaw /s/ Hoyt R. Barnett Vice Chairman and Director March 2, 1999 - --------------------------- Hoyt R. Barnett Senior Vice President /s/ Tina P. Johnson and Director March 2, 1999 - --------------------------- Tina P. Johnson Vice President Finance and Treasurer (Principal Financial and /s/ David P. Phillips Accounting Officer) March 2, 1999 - --------------------------- David P. Phillips PUBLIX SUPER MARKETS, INC. Index to Consolidated Financial Statements and Schedule Independent Auditors' Report Consolidated Financial Statements: Consolidated Balance Sheets - December 26, 1998 and December 27, 1997 Consolidated Statements of Earnings - Years ended December 26, 1998, December 27, 1997 and December 28, 1996 Consolidated Statements of Comprehensive Earnings - Years ended December 26, 1998, December 27, 1997 and December 28, 1996 Consolidated Statements of Stockholders' Equity - Years ended December 26, 1998, December 27, 1997 and December 28, 1996 Consolidated Statements of Cash Flows - Years ended December 26, 1998, December 27, 1997 and December 28, 1996 Notes to Consolidated Financial Statements The following consolidated supporting schedule of the Company for the years ended December 26, 1998, December 27, 1997 and December 28, 1996 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 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 26, 1998 and December 27, 1997, and the results of its operations and its cash flows for each of the years in the three-year period ended December 26, 1998, 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 LLP Tampa, Florida February 24, 1999
PUBLIX SUPER MARKETS, INC. Consolidated Balance Sheets December 26, 1998 and December 27, 1997 Assets 1998 1997 ------ ---- ---- (Amounts are in thousands) Current assets: Cash and cash equivalents .................. $ 669,326 530,018 Short-term investments ..................... 2,042 46,847 Trade receivables (principally due from suppliers) .............................. 71,267 71,318 Merchandise inventories .................... 657,565 638,044 Deferred tax assets ........................ 53,578 66,402 Prepaid expenses ........................... 1,889 2,153 ----------- --------- Total current assets .................. 1,455,667 1,354,782 ----------- --------- Long-term investments ........................ 385,571 331,659 Other noncurrent assets ...................... 11,680 9,036 Property, plant and equipment: Land ....................................... 90,731 87,733 Buildings and improvements ................. 659,209 609,639 Furniture, fixtures and equipment .......... 1,815,852 1,688,425 Leasehold improvements ..................... 363,247 315,205 Construction in progress ................... 62,829 56,705 ----------- --------- 2,991,868 2,757,707 Less accumulated depreciation .............. 1,227,527 1,158,204 ----------- --------- Net property, plant and equipment ..... 1,764,341 1,599,503 ----------- --------- $ 3,617,259 3,294,980 =========== =========
See accompanying notes to consolidated financial statements.
PUBLIX SUPER MARKETS, INC. Consolidated Balance Sheets December 26, 1998 and December 27, 1997 Liabilities and Stockholders' Equity 1998 1997 ------------------------------------ ---- ---- (Amounts are in thousands, except share amounts) Current liabilities: Accounts payable ........................... $ 615,753 562,536 Accrued expenses: Salaries and wages ....................... 53,013 47,367 Contribution to retirement plans ......... 146,107 138,858 Self-insurance reserves .................. 61,413 57,415 Other .................................... 107,207 97,094 Nonrecurring charge ...................... 2,219 69,249 ----------- --------- Total accrued expenses ................ 369,959 409,983 ----------- --------- Federal and state income taxes ............. 2,570 15,583 ----------- --------- Total current liabilities ............. 988,282 988,102 Deferred tax liabilities, net ................ 123,821 114,807 Self-insurance reserves ...................... 98,956 90,068 Accrued postretirement benefit cost .......... 48,858 42,612 Other noncurrent liabilities ................. 29,710 40,092 ----------- --------- Total liabilities ..................... 1,289,627 1,275,681 ----------- --------- Stockholders' equity: Common stock of $1 par value. Authorized 300,000,000 shares; issued and outstanding 216,862,215 shares in 1998 and 217,419,178 shares in 1997 ........................... 216,862 217,419 Additional paid-in capital ................. 152,472 100,757 Reinvested earnings ........................ 1,958,459 1,696,659 ----------- --------- 2,327,793 2,014,835 Accumulated other comprehensive earnings ... (161) 4,464 ----------- --------- Total stockholders' equity ............ 2,327,632 2,019,299 Commitments and contingencies ----------- --------- $ 3,617,259 3,294,980 =========== =========
See accompanying notes to consolidated financial statements.
PUBLIX SUPER MARKETS, INC. Consolidated Statements of Earnings Years ended December 26, 1998, December 27, 1997 and December 28, 1996 1998 1997 1996 ---- ---- ---- (Amounts are in thousands, except per share amounts) Revenues: Sales ............................... $12,067,125 11,224,378 10,431,302 Other income, net ................... 123,311 114,507 94,667 ----------- ---------- ---------- Total revenues ................ 12,190,436 11,338,885 10,525,969 ----------- ---------- ---------- Costs and expenses: Cost of merchandise sold, including store occupancy, warehousing and delivery expenses ............ 9,131,418 8,550,260 8,006,503 Operating and administrative expenses ......................... 2,474,630 2,233,268 2,013,882 Nonrecurring charge .................. -- -- 89,000 ----------- ---------- ---------- Total costs and expenses ...... 11,606,048 10,783,528 10,109,385 ----------- ---------- ---------- Earnings before income tax expense ..... 584,388 555,357 416,584 Income tax expense ..................... 206,114 200,735 151,408 ----------- ---------- ---------- Net earnings ........................... $ 378,274 354,622 265,176 =========== ========== ========== Basic earnings per common share based on weighted average shares outstanding .. $ 1.74 1.62 1.20 =========== ========== ==========
PUBLIX SUPER MARKETS, INC. Consolidated Statements of Comprehensive Earnings Years ended December 26, 1998, December 27, 1997 and December 28, 1996 1998 1997 1996 ---- ---- ---- (Amounts are in thousands) Net earnings ........................... $ 378,274 354,622 265,176 Other comprehensive earnings Unrealized (loss) gain on investment securities available-for-sale, net of tax effect of ($5,683), $2,113 and $540 in 1998, 1997 and 1996, respectively ......................... (9,078) 3,376 862 Reclassification adjustment for net realized loss (gain) on investment securities available- for-sale, net of tax effect of $2,787, ($160) and $49 in 1998, 1997 and 1996, respectively .......... 4,453 (255) 77 ----------- ---------- ---------- Comprehensive earnings ................. $ 373,649 357,743 266,115 =========== ========== ==========
See accompanying notes to consolidated financial statements.
PUBLIX SUPER MARKETS, INC. Consolidated Statements of Stockholders' Equity Years ended December 26, 1998, December 27, 1997 and December 28, 1996 Common Stock acquired Accumulated Total Additional from other stock- Common paid-in Reinvested stock- comprehensive holders' stock capital earnings holders earnings equity ----- ------- -------- ------- -------- ------ (Amounts are in thousands, except per share and share amounts) Balances at December 30, 1995 .............. $ 225,746 85,280 1,303,287 -- 404 1,614,717 Comprehensive earnings for the year ........ -- -- 265,176 -- 939 266,115 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 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 Comprehensive earnings for the year ........ -- -- 354,622 -- 3,121 357,743 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 2,995,314 shares to stockholders ... 358 7,320 -- 57,663 -- 65,341 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 Comprehensive earnings for the year ........ -- -- 378,274 -- (4,625) 373,649 Cash dividends, $.20 per share ............. -- -- (43,752) -- -- (43,752) Contribution of 2,269,549 shares to retirement plans ......................... 738 31,780 -- 45,929 -- 78,447 6,298,211 shares acquired from stockholders -- -- -- (213,981) -- (213,981) Sale of 3,471,695 shares to stockholders ... 757 19,935 -- 93,278 -- 113,970 Retirement of 2,051,992 shares ............. (2,052) -- (72,722) 74,774 -- -- ----------- ----------- ----------- ----------- ----------- ----------- Balances at December 26, 1998 .............. $ 216,862 152,472 1,958,459 -- (161) 2,327,632 =========== =========== =========== =========== =========== ===========
See accompanying notes to consolidated financial statements.
PUBLIX SUPER MARKETS, INC. Consolidated Statements of Cash Flows Years ended December 26, 1998, December 27, 1997 and December 28, 1996 1998 1997 1996 ---- ---- ---- (Amounts are in thousands) Cash flows from operating activities: Cash received from customers ............ $ 12,153,967 11,291,118 10,482,420 Cash paid to employees and suppliers .... (11,218,411) (10,441,281) (9,589,610) Dividends and interest received ......... 55,056 42,437 28,816 Income taxes paid ....................... (194,385) (188,842) (170,412) Payment for self-insured claims ......... (123,481) (106,920) (103,286) Other operating cash receipts ........... 726 678 626 Other operating cash payments ........... (8,475) (7,982) (8,651) ------------ ----------- ----------- Net cash provided by operating activities .................... 664,997 589,208 639,903 ------------ ----------- ----------- Cash flows from investing activities: Payment for property, plant and equipment .............................. (357,754) (259,806) (226,752) Proceeds from sale of property, plant and equipment .......................... 7,562 7,778 11,072 Payment for investment securities - available-for-sale (AFS) ............... (193,707) (512,912) (453,334) Proceeds from sale and maturity of investment securities - AFS ............ 164,999 375,335 408,808 Other, net ............................. (2,895) (5,204) (2,349) ------------ ----------- ----------- Net cash used in investing activities (381,795) (394,809) (262,555) ------------ ----------- ----------- Cash flows from financing activities: Proceeds from sale of common stock ..... 113,970 65,341 41,568 Payment for acquisition of common stock (213,981) (153,886) (206,235) Dividends paid ......................... (43,752) (33,003) (29,184) Other, net ............................. (131) (238) (2,792) ------------ ----------- ----------- Net cash used in financing activities (143,894) (121,786) (196,643) ------------ ----------- ----------- Net increase in cash and cash equivalents . 139,308 72,613 180,705 Cash and cash equivalents at beginning of year ................................. 530,018 457,405 276,700 ------------ ----------- ----------- Cash and cash equivalents at end of year .. $ 669,326 530,018 457,405 ============ =========== ===========
See accompanying notes to consolidated financial statements. (Continued)
PUBLIX SUPER MARKETS, INC. Consolidated Statements of Cash Flows (Continued) 1998 1997 1996 ---- ---- ---- (Amounts are in thousands) Reconciliation of net earnings to net cash provided by operating activities Net earnings .............................. $ 378,274 354,622 265,176 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization ......... 181,020 168,613 158,454 Retirement contributions paid or payable in common stock ..................... 84,532 78,695 68,239 Deferred income taxes ................. 24,742 17,345 (38,721) Loss on sale of property, plant and equipment ........................... 4,877 3,674 242 Loss (gain) on sale of investments .... 7,240 (415) 126 Self-insurance reserves in excess of current payments .................... 12,886 9,897 18,709 Postretirement accruals in excess of current payments .................... 6,246 5,317 4,098 (Decrease) increase in advance purchase allowances .......................... (10,251) (10,690) 60,773 Other, net ............................ 4,540 2,121 967 Change in cash from: Trade receivables .................. 51 (10,097) (16,729) Merchandise inventories ............ (19,521) (67,790) (27,368) Prepaid expenses ................... 264 (814) 1,930 Accounts payable and accrued expenses 3,110 44,183 124,289 Federal and state income taxes ..... (13,013) (5,453) 19,718 ------------ ----------- ----------- Total adjustments .......... 286,723 234,586 374,727 ------------ ----------- ----------- Net cash provided by operating activities . $ 664,997 589,208 639,903 ============ =========== ===========
See accompanying notes to consolidated financial statements. PUBLIX SUPER MARKETS, INC. Notes to Consolidated Financial Statements December 26, 1998, December 27, 1997 and December 28, 1996 (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 1998, 1997 and 1996 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 ----------------- The Company accounts for long-lived assets in accordance with the provisions of 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. (Continued) PUBLIX SUPER MARKETS, INC. Notes to Consolidated Financial Statements (i) Comprehensive Income -------------------- The Company adopted Statement of Financial Accounting Standard No. 130, "Reporting Comprehensive Income," (SFAS 130) beginning with the quarter ended March 28, 1998. 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 has reclassified prior year financial statements to conform to the requirements of SFAS 130. (j) 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, there was no effect on the Company's financial statements from the adoption of SFAS 131. (k) Postretirement Benefits ----------------------- In February 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits," (SFAS 132) effective for fiscal years beginning after December 15, 1997. SFAS 132 revises employers' disclosures about pension and other postretirement benefit plans. SFAS 132 does not change the measurement or recognition of those plans. Therefore, the only effect from the adoption of SFAS 132 was in the notes to the Company's consolidated financial statements. (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 1996 and 1997 amounts have been reclassified to conform with the 1998 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 $108,096,000, $102,393,000 and $101,531,000 as of December 26, 1998, December 27, 1997 and December 28, 1996, respectively. Also, net earnings would have increased by approximately $2,799,000 or $.01 per share in 1998, $423,000 or less than $.01 per share in 1997 and $2,764,000 or $.01 per share in 1996. 2 (Continued) 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 26, 1998 and December 27, 1997 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 26, 1998 and December 27, 1997. 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 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 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 26, 1998 and December 27, 1997: Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value ---- ----- ------ ----- (Amounts are in thousands) 1998: Tax-free bonds .... $247,751 2,501 661 249,591 Taxable bonds ..... 9,252 65 1,009 8,308 Equity securities.. 130,872 3,868 5,026 129,714 -------- ----- ----- ------- $387,875 6,434 6,696 387,613 ======== ===== ===== ======= 1997: Tax-free bonds .... $231,517 1,185 775 231,927 Taxable bonds ..... 4,940 21 46 4,915 Equity securities.. 134,782 7,456 574 141,664 -------- ----- ------- ------- $371,239 8,662 1,395 378,506 ======== ===== ======= ======= 3 (Continued) PUBLIX SUPER MARKETS, INC. Notes to Consolidated Financial Statements For the fiscal years ended December 26, 1998 and December 27, 1997, the realized gains on sales of available-for-sale securities totaled $4,176,000 and $1,540,000, respectively, and the realized losses totaled $11,416,000 and $1,125,000, respectively. The amortized cost and estimated fair value of debt and marketable equity securities classified as available-for-sale as of December 26, 1998 and December 27, 1997, by expected maturity, are as follows: 1998 1997 -------------------- -------------------- Amortized Fair Amortized Fair Cost Value Cost Value ---- ----- ---- ----- (Amounts are in thousands) Due in one year or less .... $ 2,351 2,042 46,722 46,847 Due after one year through three years .............. 36,832 37,519 26,200 26,624 Due after three years ...... 217,820 218,338 163,535 163,371 -------- ------- ------- ------- 257,003 257,899 236,457 236,842 Equity securities .......... 130,872 129,714 134,782 141,664 -------- ------- ------- ------- $387,875 387,613 371,239 378,506 ======== ======= ======= ======= (5) Accumulated Other Comprehensive Earnings ---------------------------------------- Accumulated other comprehensive earnings consists of net unrealized gains (losses) on investment securities available-for-sale. Following is a summary of the change in the balance of accumulated other comprehensive earnings as of December 26, 1998 and December 27, 1997: 1998 1997 ---- ---- (Amounts are in thousands) Balance as of beginning of year..... $4,464 1,343 Current period change .............. (4,625) 3,121 ------ ----- Balance as of end of year ............. $ (161) 4,464 ====== ===== (6) 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. The Company funds the life insurance benefits on a pay-as-you-go basis. During 1998, 1997 and 1996, the Company made benefit payments to beneficiaries of retirees of approximately $1,361,000, $1,271,000 and $1,420,000, respectively. 4 (Continued) PUBLIX SUPER MARKETS, INC. Notes to Consolidated Financial Statements Net postretirement benefit cost consists of the following components: 1998 1997 1996 ---- ---- ---- (Amounts are in thousands) Service cost attributed to service during the year........................... $3,124 2,533 1,980 Interest cost on postretirement benefit obligation........................ 4,097 3,755 3,208 Net amortization............................ 386 300 330 ------ ----- ----- Net periodic postretirement benefit cost.... $7,607 6,588 5,518 ====== ===== ===== Following is a summary of the change in the accrued postretirement benefit cost as of December 26, 1998 and December 27, 1997: 1998 1997 ---- ---- (Amounts are in thousands) Accrued postretirement benefit cost as of beginning of year................................. $42,612 37,295 Service cost attributed to service during the year.. 3,124 2,533 Interest cost on postretirement benefit obligation.. 4,097 3,755 Net amortization.................................... 386 300 Payments to beneficiaries........................... (1,361) (1,271) ------- ------ Accrued postretirement benefit cost as of end of year....................................... $48,858 42,612 ======= ====== Following is a reconciliation of the amounts recognized in the Company's consolidated balance sheets as of December 26, 1998 and December 27, 1997: 1998 1997 ---- ---- (Amounts are in thousands) Accumulated postretirement benefit obligation: Retirees.......................................... $20,532 18,417 Fully eligible active plan participants........... 14,002 11,966 Other active plan participants.................... 27,403 23,634 ------- ------ Accumulated postretirement benefit obligation....... 61,937 54,017 Unrecognized net loss............................... (13,079) (11,405) ------- ------ Accrued postretirement benefit cost................. $48,858 42,612 ======= ====== 5 (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 accumulated postretirement benefit obligation: 1998 1997 1996 ---- ---- ---- Discount rate.......................... 7.00% 7.25% 7.75% Salary increase rate................... 4.00% 4.00% 4.00% The change in the discount rate from 7.25% to 7.00% in 1998 increased the accumulated postretirement benefit obligation by $552,000 and is expected to increase annual postretirement benefit costs by $38,000 beginning in 1999. The change in the discount rate from 7.75% to 7.25% in 1997 increased the accumulated postretirement benefit obligation by $4,438,000. (7) 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 $73,048,000 in 1998, $69,420,000 in 1997 and $49,010,000 in 1996. 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 $73,048,000 in 1998, $69,420,000 in 1997 and $60,818,000 in 1996. 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 1998, 1997 and 1996, 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 $11,484,000, $9,275,000 and $7,421,000 in 1998, 1997 and 1996, respectively. The Company intends to continue its retirement plans indefinitely; 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. The Company has announced its intention to merge the profit sharing plan into the ESOT, effective December 31, 1999. (8) 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. 6 (Continued) PUBLIX SUPER MARKETS, INC. Notes to Consolidated Financial Statements (9) Income Taxes ------------ The provision for income taxes consists of the following: Current Deferred Total ------- -------- ----- (Amounts are in thousands) 1998: Federal.............................. $154,384 21,128 175,512 State................................ 26,988 3,614 30,602 -------- ------ ------- $181,372 24,742 206,114 ======== ====== ======= 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 ======== ====== ======= The actual tax expense for 1998, 1997 and 1996 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: 1998 1997 1996 ---- ---- ---- (Amounts are in thousands) Computed "expected" tax expense........ $204,536 194,375 145,804 State income taxes (net of Federal income tax benefit).......... 19,892 19,108 14,309 Tax exempt interest.................... (11,663) (9,291) (7,066) Other, net............................. (6,651) (3,457) (1,639) -------- ------- ------- $206,114 200,735 151,408 ======== ======= ======= 7 (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 26, 1998 and December 27, 1997 are as follows: 1998 1997 ---- ---- (Amounts are in thousands) Deferred tax assets: Self-insurance reserves....................... $ 59,906 55,579 Nonrecurring charge........................... 856 26,728 Advance purchase allowances................... 25,347 19,481 Postretirement benefit cost................... 18,857 16,445 Retirement plan contributions................. 14,098 13,390 Inventory capitalization...................... 7,383 7,872 Other......................................... 12,876 10,152 -------- ------- Total deferred tax assets....................... $139,323 149,647 ======== ======= Deferred tax liabilities: Property, plant and equipment, principally due to depreciation.............. $208,123 197,875 Other......................................... 1,443 177 -------- ------- Total deferred tax liabilities.................. $209,566 198,052 ======== ======= The Company expects the results of future operations to generate sufficient taxable income to allow utilization of deferred tax assets. (10) 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 26, 1998, December 27, 1997 and December 28, 1996, is as follows: 1998 1997 1996 ---- ---- ---- (Amounts are in thousands) Minimum rentals.................... $167,536 154,727 135,273 Contingent rentals................. 10,259 9,835 9,892 Sublease rental income............. (6,189) (4,366) (3,572) -------- ------- ------- $171,606 160,196 141,593 ======== ======= ======= 8 (Continued) PUBLIX SUPER MARKETS, INC. Notes to Consolidated Financial Statements As of December 26, 1998, 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) 1999............... $ 167,236 5,835 161,401 2000............... 166,106 5,405 160,701 2001............... 165,075 4,633 160,442 2002............... 163,559 2,867 160,692 2003............... 161,316 705 160,611 Thereafter......... 1,502,357 1,203 1,501,154 ---------- ------ --------- $2,325,649 20,648 2,305,001 ========== ====== ========= 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 26, 1998 and are included in trade receivables. Rental income was approximately $8,655,000 in 1998, $9,622,000 in 1997 and $8,983,000 in 1996. The approximate amounts of minimum future rental payments to be received under operating leases are $7,275,000, $6,066,000, $4,265,000, $3,070,000 and $2,231,000 for the years 1999 through 2003, respectively, and $4,524,000 thereafter. (b) Environmental ------------- 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. (c) Litigation ---------- A purported class action was filed against the Company on April 3, 1997 in the Federal District court for the Middle District of Florida (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 sought, 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. 9 (Continued) PUBLIX SUPER MARKETS, INC. Notes to Consolidated Financial Statements On June 15, 1998, a Federal magistrate judge recommended certification as a class action of claims in the Middleton case relating only to Publix's retail stores in Florida and Georgia. Publix and the plaintiffs have both objected to the recommendation, with Publix asking that no class be certified and plaintiffs asking that the class be expanded. The plaintiffs have also moved to drop all claims for compensatory and punitive damages asserted in the lawsuit and, therefore, to withdraw their demand for a jury trial. 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. The plaintiffs have moved to certify a class of all female current, former and future Company employees and applicants in all of the Company's manufacturing plants and distribution centers with respect to certain claims. The plaintiffs seek, among other relief, declaratory and injunctive relief, back pay, front pay, benefits and other compensatory damages, and punitive damages. The parties have briefed issues relating to class certification and await the Court's ruling. On December 8, 1998, another purported class action was filed against the Company in the Court by Charlene Jones, individually and on behalf of other persons similarly situated (the "Jones case"). In her Complaint, the plaintiff alleges that the Company has violated and is currently violating Federal and state civil rights statutes by discriminating against female applicants for employment in the Company's manufacturing plants and distribution centers. The plaintiffs in the Jones and Dyer cases have asked the Court to combine the two cases. The Company denies the allegations of the plaintiffs in the Middleton, Dyer and Jones 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. 10
Schedule II PUBLIX SUPER MARKETS, INC. Valuation and Qualifying Accounts Years ended December 26, 1998, December 27, 1997 and December 28, 1996 (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 26, 1998 Reserves not deducted from assets: Self-insurance reserves: -Current............................... $ 57,415 127,479 123,481 61,413 -Noncurrent............................ 90,068 8,888 --- 98,956 -------- ------- ------- ------- $147,483 136,367 123,481 160,369 ======== ======= ======= ======= 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 ======== ======= ======= =======
EX-10 2 EMPLOYMENT AGREEMENT - WILLIAM H. VASS EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (referred to herein as the "Agreement") is made and entered into by and between WILLIAM H. VASS (referred to herein as "Vass"), and PUBLIX SUPER MARKETS, INC., a Florida corporation (referred to herein as "Publix"), with reference to the following facts: A. Publix and its subsidiaries operate retail supermarkets in Florida, Georgia, South Carolina and Alabama. B. For the past eighteen (18) years, Publix has employed Vass on terms and conditions, including compensation, satisfactory to both Publix and Vass. C. Most recently, Vass has served Publix as its Executive Vice President, as a member of its Executive Committee, and as a member of its Board of Directors. D. Effective January 1, 1999, Vass desires to reduce the number of hours devoted to his employment with Publix and Publix agrees to continue Vass' employment at a reduced number of hours provided that Vass executes this Agreement. E. As a result of his decision to reduce the number of hours devoted to his employment with Publix, Vass has agreed to execute this Agreement setting forth the terms of his continued employment with Publix and setting forth certain restrictive covenants. F. Vass agrees that the employment terms and restrictive covenants set forth herein are reasonable in light of his current position with Publix. IN CONSIDERATION OF the foregoing facts and of the mutual and reciprocal covenants, agreements and conditions set forth below to be performed and observed by the parties hereto, and of other good and valuable considerations passing between the parties hereto, the receipt and sufficiency of which are hereby acknowledged, Publix hereby continues the employment of Vass, and Vass hereby accepts the continuation of such employment by Publix, upon the terms and conditions set forth below: 1. PREAMBLES. Each of the parties to this Agreement acknowledges and confirms that the foregoing preambles to this Agreement are true and correct. 2. TERM. The term of employment under this Agreement shall commence, or shall be deemed to have commenced, on the 1st day of January, 1999, and shall continue unless and until terminated in accordance with any of the termination provisions set forth below. 3. DUTIES AND PERFORMANCE. So long as this Agreement shall continue in effect, Vass shall use his best efforts, skills and abilities to faithfully and satisfactorily perform such duties as are assigned to him by the CEO of Publix. In all events, Vass shall devote five hundred one (501) hours per year to his duties and responsibilities as an employee of Publix. Any additional hours beyond five hundred one (501) hours shall be at the mutual discretion of the parties. 4. COMPENSATION. For all services to be performed by Vass as an employee of Publix, Publix agrees to pay and Vass agrees to accept an annual salary of $120,000.00 per year for five hundred one (501) hours of service. Service in excess of five hundred one (501) hours may entitle Vass to additional compensation in an amount mutually agreeable to Vass and Publix. Vass' annual salary shall be payable monthly. In addition, Vass shall be eligible to receive any incentive bonus as may be paid by Publix annually with the decision of whether to pay such incentive bonus and the amount thereof to be in the sole discretion of the Executive Committee of Publix. Such annual salary and any incentive bonus shall be reduced by all payroll deductions required by law. Vass acknowledges that he shall receive no compensation for continuing to serve as a member of the Board of Directors of Publix provided, however, that if Publix makes a decision to compensate members of the Board of Directors of Publix for their service on the Board, then Vass shall be similarly treated as other members of the Board of Directors of Publix. 5. TERMINATION. The following termination provisions shall be applicable with respect to Vass' employment by Publix under the terms of this Agreement: (a) In the event of Vass' death, this Agreement shall be automatically terminated, with the date of such termination being the date of Vass' death. (b) In the event of Vass' disability, this Agreement shall be automatically terminated, with the date of such termination being the date of Vass' disability. If, at the time Vass suffers a disability, Publix is providing Vass with disability income insurance coverage through a group policy then, for purposes hereof, Vass shall be deemed to have suffered a "disability" if the insurance company that issued the policy applicable to Vass makes a determination that Vass has suffered a total disability under the terms of such policy. On the other hand, if Vass is not, at the time Vass suffers a disability, provided with disability insurance coverage, then, for purposes hereof, Vass shall be deemed to have suffered a "disability" at such time as the Executive Committee of Publix, in its reasonable judgment, shall make a determination, based upon such medical and other evidence as the Executive Committee deems appropriate, that Vass is unable to perform all or substantially all of the duties assigned to Vass under this Agreement by reason of such disability. (c) Either Vass or Publix shall have the right, at any time, with or without cause, to terminate this Agreement upon not less than sixty (60) days advance notice to the other of the proposed date of termination. In the event of the termination of this Agreement under any of the provisionsof this paragraph, Publix shall only be obligated to pay to Vass (or to Vass' estate in the event of Vass' death or to Vass' guardian in the event of Vass' disability and if a guardian has been duly appointed for Vass) an amount equal to the net compensation earned by Vass up to the actual date of termination, to the extent not theretofore paid, together with any Restrictive Covenant Consideration that may be due and payable pursuant to the provisions of section 6(h). 6. RESTRICTIVE COVENANTS. (a) DEFINITIONS. As used in this section 6, the following terms shall have the following meanings: (i) PERSON. The term "Person" shall mean an individual, a partnership, a joint venture, a limited liability company, a corporation, a trust, an unincorporated organization or any other entity whatsoever. (ii) COMPETITOR. The term "Competitor" shall mean any Person engaged in the retail sale of food products, including supermarkets, specialty food stores, drug stores (e.g., Eckerds, Walgreens and the like) and general merchandise retailers (e.g., Wal-Mart, Kmart, Target and the like). (iii)BUSINESS. The term "Business" shall mean the retail supermarket business as conducted by Publix. (iv) RESTRICTED BUSINESS. The term "Restricted Business" shall mean the retail supermarket business, including, but not limited to (i) the business of actively operating retail supermarkets, and (ii) the business of acquiring retail supermarkets or the operators of retail supermarkets. (v) RESTRICTED TERRITORY. The term "Restricted Territory" shall mean Florida, Georgia, South Carolina, Alabama, or any other state in the United States where Publix may operate retail supermarkets during the Restrictive Period. Any activity involving efforts to acquire Publix shall be deemed to occur in the Restricted Territory. (vi) RESTRICTIVE PERIOD. The term "Restrictive Period" shall mean a period beginning on the Effective Date and ending on the later of (i) the sixth (6th) annual anniversary of the Effective Date or (ii) the first (1st) annual anniversary of a termination of Vass' employment under the terms of this Agreement. (vii)CONFIDENTIAL INFORMATION. The term "Confidential Information" shall mean any and all information with respect to the Business of a secret or confidential nature not generally available to the public including, without limitation, any and all information regarding the financial condition, assets and properties, sales, suppliers, customers, including information that reveals the specific application of management and improvement methodology at Publix, as well as the technology or know-how by which Publix's products, services, applications and methods of operation are developed, manufactured, conducted and operated, and the means and methods of marketing such products, services, applications and methods of operations; provided, however, the term "Confidential Information" shall not include any of the following information: (i) information which, on the date of the execution of this Agreement, is otherwise a part of the public domain or (ii) information which, at any time after the date of the execution of this Agreement, becomes a part of the public domain through no fault of Vass, but only after said later date. (viii) TRADE SECRETS. The term "Trade Secrets" shall mean such of the Confidential Information as shall constitute "trade secrets", as that term is defined in Section 688.002(4), Florida Statutes, as amended. (ix) CUSTOMER RELATIONSHIPS. The term "Customer Relationships" shall mean the relationships between the Business and customers of the Business developed and established over the years by Publix. (x) CUSTOMER GOODWILL. The term "Customer Goodwill" means the goodwill of the customers of the Business developed and established over the years that Publix has operated the Business. (xi) EFFECTIVE DATE. The term "Effective Date" shall mean January 1, 1999. (b) COVENANTS BY VASS. Vass covenants and agrees with Publix as follows (collectively referred to herein as the "Restrictive Covenants"): (i) During the entire Restrictive Period, Vass (except on behalf of Publix) shall not, either directly or indirectly, in any capacity whatsoever (including, without limitation, as a sole proprietor, general partner, limited partner, member of a limited liability company, joint venturer, shareholder (other than as a shareholder of a corporation listed on a public stock exchange), consultant, principal, agent, independent contractor, employee, officer, director, lender, or otherwise), become associated with a Competitor with operations in the Restricted Territory or engage in the Restricted Business within the Restricted Territory, or any part thereof. (ii) During the entire Restrictive Period, Vass shall not become involved in the teaching of any class, course, seminar or the like, which is for the primary benefit of employees, agents, contractors, officers or directors of a Competitor. (iii)During the entire Restrictive Period, Vass (except as otherwise authorized in writing by Publix) shall not divulge, disclose, reveal or communicate any of the Trade Secrets to any Person or any of the other Confidential Information to any Competitor; provided, that the restriction prohibiting the disclosure of Confidential Information to a Competitor shall not apply to a work of fiction sold to the general public. Furthermore, during the entire Restrictive Period, Vass shall not use, or attempt to use, within the Restricted Territory, any of the Trade Secrets (except as otherwise authorized in writing by Publix or except as required or allowed by law or civil process and procedure). (iv) Any activity of Vass which does not violate either of the above covenants when such activity is initiated, but subsequently violates either of the above covenants as a result of a change of circumstances shall not be deemed a violation of this Agreement until such change of circumstances makes such an activity a violation of this Agreement. (c) RIGHTS AND REMEDIES OF PUBLIX. Vass expressly acknowledges and confirms that any breach of any of the Restrictive Covenants by Vass shall be presumed to result in irreparable and continuing injury to Publix. Therefore, in the event of any breach by Vass of any of the Restrictive Covenants and after Publix has given Vass written notice of such breach and a ten (10) day opportunity to cure such breach, Vass acknowledges and confirms that Publix, in Publix's absolute and uncontrolled discretion, shall be entitled (without limiting any other available remedy, whether conferred by statute, common law or otherwise), by an appropriate action instituted in any Court of competent jurisdiction, to specific performance or injunctive relief, both temporary and permanent, without proof of actual monetary damages and without further proof of irreparable injury (referred to herein as the AEquitable Relief"). Furthermore, Vass acknowledges and confirms that if, in any such lawsuit instituted by Publix, Equitable Relief shall not be available to Publix for any reason whatsoever or the Court having jurisdiction of such lawsuit shall refuse to grant Equitable Relief for any reason whatsoever, then Publix shall be entitled to recover from Vass money damages, subject to the limitations of section 8(h) below. (d) LEGITIMATE BUSINESS INTERESTS. Vass acknowledges and confirms to Publix that Publix has, and will continue to have, "legitimate business interests" (as such term is used in Section 542.335, Florida Statutes, as amended) which justify and support the Restrictive Covenants in the form of, and by reason of: (i) The Trade Secrets; (ii) The Confidential Information other than Trade Secrets; (iii) The Customer Relationships; and (iv) The Customer Goodwill. (e) ADDITIONAL CONFIRMATIONS BY VASS. Vass further acknowledges and confirms to Publix that: (a) the Restrictive Covenants are reasonable limitations necessary to protect the value of the Business; (b) the Restrictive Covenants are reasonably limited with respect to the activities prohibited, the duration thereof, the geographical area thereof and the scope thereof; (c) the Restrictive Covenants do not unduly oppress or restrict the business future or the earning capacity of Vass; and (d) the purpose and the effect of the Restrictive Covenants are solely to protect Publix for a limited period of time. (f) RULES OF CONSTRUCTION. If any of the Restrictive Covenants, or any provision thereof, shall ever be determined by a Court of competent jurisdiction to be invalid, illegal or incapable of being enforced for any reason, then any such Restrictive Covenant, or any such provision thereof, shall be modified in such manner, including, without limitation, a reduction in the applicable time period or a reduction in the applicable geographical area, as shall be required in order to render such Restrictive Covenant, or such provision thereof, not invalid, illegal or incapable of being enforced. Furthermore, Vass acknowledges and confirms that the Restrictive Period (as defined above) shall be extended by any period of time during which Vass shall be in violation of any of the Restrictive Covenants. (g) TERMINATION OF THE RESTRICTIVE COVENANTS. The parties acknowledge and agree that the Restrictive Covenants set forth herein can be terminated upon the mutual written consent of both Publix and Vass. (h) RESTRICTIVE COVENANT CONSIDERATION. In addition to the compensation provided for in section 4 above, and in consideration of the Restrictive Covenants, upon a termination of Vass' employment under this Agreement pursuant to sections 5(b) and 5(c) above, Publix shall pay to Vass restrictive covenant consideration (the "Restrictive Covenant Consideration") in an amount calculated as follows: The initial amount of the Restrictive Covenant Consideration as of January 1, 1999 and through March 1, 1999, shall be $775,000.00. Commencing April 1, 1999, the amount of the Restrictive Covenant Consideration shall increase monthly with such increase to be effective on the first day of each and every month, to reflect the increase, if any, that occurred during the previous month in the Consumer Price Index for Urban Wage Earners and Clerical Workers ("CPI-W"), U. S. City Average (1984 = 100), published by the Bureau of Labor Statistics of the United States Department of Labor (the "Price Index"). The increase in the Restrictive Covenant Consideration shall be calculated by comparing a "Comparison Index" with a "Base Index" on the first day of each and every month (an "Adjustment Date") commencing on April 1, 1999. The "Base Index" shall be the Price Index for the month of January, 1999. The "Comparison Index" shall be the Price Index for the month occurring two months prior to the applicable Adjustment Date. Accordingly, the Restrictive Covenant Consideration during any month commencing on April 1, 1999 shall be equal to the product of $775,000.00 multiplied by a fraction, the numerator of which is the Comparison Index and the denominator of which is the Base Index; provided, however, that the Restrictive Covenant Consideration shall never be less than $775,000.00. If for any reason the Price Index ceases to be published, Publix and Vass shall use such equivalent Consumer Price Index as is then published by any successor governmental or such non-governmental agency as may then be publishing a reasonably equivalent Consumer Price Index. In either case, such Consumer Price Index shall be adjusted to the Price Index. If the basis upon which the Price Index is computed changes prior to any Adjustment Date, then a proper adjustment shall be made so that the results obtained are as nearly equivalent as possible to those which would have been obtained had such basis not changed. Notwithstanding anything contrary which may be contained herein, in no event shall the Restrictive Covenant Consideration be increased by more than .66% per month. The foregoing amount shall be paid in a lump sum upon any applicable termination, less any deductions required by law. 7. NOTICES. Any notice, request, demand, consent, approval, instruction or other communication required or permitted under this Agreement (collectively a "notice") shall be in writing and shall be sufficiently given if delivered in person, sent by telex or telecopier, sent by a reputable overnight courier service or sent by registered or certified mail, postage prepaid, as follows: If to Vass: William H. Vass 904 Fairlington Drive Lakeland, FL 33813 If to Publix: Publix Super Markets, Inc. Post Office Box 407 Lakeland, FL 33802-0407 Attention: Tina P. Johnson, Senior Vice President With copy to: John A. Attaway, Jr., Esquire Corporate Counsel Publix Super Markets, Inc. Post Office Box 407 Lakeland, FL 33802-0407 Any notice which is delivered personally in the manner provided herein shall be deemed to have been duly given to the party to whom it is directed upon actual receipt by such party (or by such party's agent for notices hereunder). Any notice which is addressed and mailed in the manner herein provided shall be presumed to have been duly given to the party to whom it is addressed at the close of business, local time of the recipient, on the fifth day after the date it is so placed in the mail. Any notice which is telexed or telecopied in the manner provided herein shall be presumed to have been duly given to the party to whom it is directed upon confirmation of such telex or telecopy. Any notice which is sent by a reputable overnight courier service in the manner provided herein shall be presumed to have been duly given to the party to which it is addressed at the close of business on the next day after the day it is deposited with such courier service. Any person wishing to change the person or address to whom notices are to be given may do so by complying with the foregoing notice provisions. 8. GENERAL PROVISIONS. (a) This Agreement embodies the entire agreement and understanding among the parties with respect to the subject matter hereof, expressly superseding all prior agreements and understandings, whether oral or written. (b) No change, modification or attempted waiver of any of the provisions of this Agreement shall be binding upon any party hereto unless reduced to writing and signed by or on behalf of all of the parties to this Agreement or their successors. (c) Any number of counterparts of this Agreement may be signed and delivered, each of which shall be considered an original and all of which, together, shall constitute one and the same instrument. (d) Whenever used in this Agreement, the singular number shall include the plural, the plural number shall include the singular, and the use of any gender shall include all genders where the context so permits. (e) Section and paragraph titles are used solely for convenience in this Agreement and shall not be used in interpreting or construing any provision of this Agreement. (f) This Agreement shall be governed by and construed in accordance with the laws of the State of Florida. (g) The waiver by any party to this Agreement of any breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement or of any future breach of the provision so waived. (h) In the event any litigation shall be instituted for the purpose of enforcing any of Publix's rights and remedies by reason of any breach of any of the Restrictive Covenants by Vass, the prevailing party or parties, as determined by the Court having jurisdiction thereof, shall be entitled to recover from the non-prevailing party or parties, in addition to all other relief, an amount equal to all costs and expenses incurred in connection with such litigation, including, without limitation, reasonable fees of attorneys, accountants and other experts at the pretrial level, the trial level and in connection with all appellate proceedings. However, if Vass is not the prevailing party, such recovery shall not exceed the amount of the Restrictive Covenant Consideration paid to Vass pursuant to section 6(h). Neither party can litigate any matter under this Agreement after the expiration of the first annual anniversary of the end of the Restrictive Period. (i) Vass and Publix each severally acknowledges and confirm that the proper, exclusive and convenient venue for any legal proceeding instituted in connection with this Agreement, and with respect to any rights and liabilities hereunder, shall be in Polk County, Florida, and Vass and Publix each waive any defense, whether asserted by motion, pleading or otherwise, that Polk County, Florida, is an improper or inconvenient venue, and each hereby consent to the personal jurisdiction of any Court of competent jurisdiction located in Polk County, Florida. IN WITNESS WHEREOF, Vass has executed this Agreement this 28th day of August, 1998. Signed in the presence of the following two witnesses: /s/Susan R. Ward /s/ William H. Vass - ------------------------- ------------------- (WITNESS SIGNATURE) William H. Vass PRINT NAME: Susan R. Ward /s/Blinda W. Payne (WITNESS SIGNATURE) PRINT NAME: Blinda W. Payne IN WITNESS WHEREOF, Publix has caused this Agreement to be executed by its undersigned officer duly authorized this 28th day of August, 1998. Signed in the presence of the PUBLIX SUPER MARKETS, INC. following two witnesses: /s/Tina P. Johnson By:/s/Howard M. Jenkins - ------------------ ------------------------- (WITNESS SIGNATURE) NAME: Howard M. Jenkins PRINT NAME: Tina P. Johnson TITLE: Chief Executive Officer /s/Sheri L. Dusse - ------------------- (WITNESS SIGNATURE) PRINT NAME: Sheri L. Dusse EX-21 3 SUBSIDIARY OF THE COMPANY EXHIBIT 21 PUBLIX SUPER MARKETS, INC. Subsidiary of the Company Publix Alabama, Inc. (incorporated in Alabama) EX-27 4 FDS --
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENT OF PUBLIX SUPER MARKETS, INC. FOR THE YEAR ENDED DECEMBER 26, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000081061 PUBLIX SUPER MARKETS, INC. 1,000 U.S. DOLLARS YEAR DEC-26-1998 DEC-28-1997 DEC-26-1998 1 669,326 2,042 71,267 0 657,565 1,455,667 2,991,868 1,227,527 3,617,259 998,282 0 0 0 216,862 2,110,770 3,617,259 12,067,125 12,190,436 9,131,418 11,606,048 0 0 0 584,388 206,114 378,274 0 0 0 378,274 1.74 1.74
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