10-Q 1 q12003.txt FORM 10-Q, QUARTER ENDED 3/29/2003 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended March 29, 2003 -------------- OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from ____________ to ______________ Commission File Number 0-981 ---------------------------- PUBLIX SUPER MARKETS, INC. ----------------------------------------------------- (Exact name of Registrant as specified in its charter) Florida 59-0324412 ------------------------------- ----------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 3300 Airport Road Lakeland, Florida 33811 --------------------------------------- --------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (863) 688-1188 -------------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No _______ -------- Indicate by check mark whether the Registrant is an accelerated filer. Yes X No _______ -------- The number of shares outstanding of the Registrant's common stock, $1.00 par value, as of April 30, 2003 was 186,752,925. Page 1 of 11 pages PART I. FINANCIAL INFORMATION Item 1. Financial Statements -----------------------------
PUBLIX SUPER MARKETS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts are in thousands, except share amounts) ASSETS March 29, 2003 December 28, 2002 -------------- ----------------- (Unaudited) Current Assets -------------- Cash and cash equivalents $ 343,246 207,523 Short-term investments 6,800 6,713 Trade receivables 200,017 188,077 Merchandise inventories 910,069 922,243 Deferred tax assets 65,337 57,383 Prepaid expenses 5,378 4,263 ---------- ---------- Total Current Assets 1,530,847 1,386,202 ---------- ---------- Long-term investments 388,537 377,616 Other noncurrent assets 1,134 950 Property, plant and equipment 4,840,653 4,697,650 Less accumulated depreciation (1,751,011) (1,672,816) ---------- ---------- Net property, plant and equipment 3,089,642 3,024,834 ---------- ---------- Total Assets $5,010,160 4,789,602 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities ------------------- Accounts payable $ 714,256 686,634 Accrued contribution to retirement plans 118,974 248,605 Accrued salaries and wages 82,411 63,906 Accrued self-insurance reserves 108,061 102,722 Federal and state income taxes 109,458 16,131 Other 257,026 172,186 ---------- ---------- Total Current Liabilities 1,390,186 1,290,184 ---------- ---------- Deferred tax liabilities, net 252,617 238,573 Self-insurance reserves 183,671 176,895 Accrued postretirement benefit cost 68,837 69,062 Other noncurrent liabilities 7,761 6,820 Stockholders' Equity -------------------- Common stock of $1 par value. Authorized 300,000,000 shares; issued 190,958,556 shares at March 29, 2003 and 189,167,769 shares at December 28, 2002 190,959 189,168 Additional paid-in capital 494,001 421,019 Reinvested earnings 2,508,713 2,397,634 ---------- ---------- 3,193,673 3,007,821 Less 2,306,620 treasury shares at March 29, 2003, at cost (88,652) --- Accumulated other comprehensive earnings 2,067 247 ---------- ---------- Total Stockholders' Equity 3,107,088 3,008,068 ---------- ---------- Total Liabilities and Stockholders' Equity $5,010,160 4,789,602 ========== ========== See accompanying notes to condensed consolidated financial statements.
-2-
PUBLIX SUPER MARKETS, INC. CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Amounts are in thousands, except per share and share amounts) Three Months Ended March 29, 2003 March 30, 2002 -------------- -------------- (Unaudited) Revenues -------- Sales $ 4,317,935 4,194,016 Other operating income 25,239 23,645 ------------ ----------- Total revenues 4,343,174 4,217,661 ------------ ----------- Costs and expenses ------------------ Cost of merchandise sold, including certain store occupancy, warehousing and delivery expenses 3,152,987 3,050,945 Operating and administrative expenses 903,297 865,509 ------------ ----------- Total costs and expenses 4,056,284 3,916,454 ------------ ----------- Operating profit 286,890 301,207 ------------ ----------- Investment income, net 5,192 6,144 Other income, net 6,012 4,724 ------------ ----------- Earnings before income tax expense 298,094 312,075 Income tax expense 110,986 116,906 ------------ ----------- Net earnings $ 187,108 195,169 ============ =========== Weighted average number of common shares outstanding 188,513,408 196,920,363 ============ =========== Basic and diluted earnings per common share based on weighted average shares outstanding $ .99 .99 ============ =========== Cash dividends paid per common share None None
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (Amounts are in thousands) Three Months Ended March 29, 2003 March 30, 2002 -------------- -------------- (Unaudited) Net earnings $ 187,108 195,169 Other comprehensive earnings Unrealized gain (loss) on investment securities available-for-sale, net of tax effect of $1,114 and ($763) in 2003 and 2002, respectively 1,775 (1,215) Reclassification adjustment for net realized loss on investment securities available-for-sale, net of tax effect of $29 and $156 in 2003 and 2002, respectively 45 249 ------------ ----------- Comprehensive earnings $ 188,928 194,203 ============ =========== See accompanying notes to condensed consolidated financial statements.
-3-
PUBLIX SUPER MARKETS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts are in thousands) Three Months Ended March 29, 2003 March 30, 2002 -------------- -------------- (Unaudited) Cash flows from operating activities ------------------------------------ Cash received from customers $ 4,338,680 4,193,415 Cash paid to employees and suppliers (3,765,777) (3,642,228) Dividends and interest received 5,599 6,872 Income taxes paid (12,712) (10,027) Payment for self-insured claims (49,465) (45,135) Other operating cash receipts 240 234 Other operating cash payments (1,869) (2,664) ------------ ---------- Net cash provided by operating activities 514,696 500,467 ------------ ---------- Cash flows from investing activities ------------------------------------ Payment for property, plant and equipment (153,272) (158,843) Proceeds from sale of property, plant and equipment 1,539 920 Payment for investment securities - available-for-sale (AFS) (66,468) (64,017) Proceeds from sale and maturity of investment securities - AFS 56,492 68,357 Net proceeds from (investment in) joint ventures and other investments 1,524 (4,927) Other, net (195) 11 ------------ ---------- Net cash used in investing activities (160,380) (158,499) ------------ ---------- Cash flows from financing activities ------------------------------------ Proceeds from sale of common stock 22,475 27,592 Payment for acquisition of common stock (240,937) (175,930) Other, net (131) (142) ------------ ---------- Net cash used in financing activities (218,593) (148,480) ------------ ---------- Net increase in cash and cash equivalents 135,723 193,488 ------------ ---------- Cash and cash equivalents at beginning of period 207,523 211,296 ------------ ---------- Cash and cash equivalents at end of period $ 343,246 404,784 ============ ========== See accompanying notes to condensed consolidated financial statements.
(Continued) -4-
PUBLIX SUPER MARKETS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (Amounts are in thousands) Three Months Ended March 29, 2003 March 30, 2002 -------------- -------------- (Unaudited) Reconciliation of net earnings to net cash provided by operating activities Net earnings $ 187,108 195,169 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 84,145 72,600 Retirement contributions payable in common stock 63,062 72,891 Deferred income taxes 4,947 (913) Loss on sale of property, plant and equipment 2,791 1,873 Loss on sale of investments 74 405 Self-insurance reserves in excess of current payments 12,115 11,022 Postretirement accruals (less than) current payments (225) (150) Increase (decrease) in advance purchase allowances 724 (1,680) Other, net 333 241 Change in cash from: Trade receivables (11,940) (28,824) Merchandise inventories 12,174 36,774 Prepaid expenses (1,115) (5,761) Accounts payable and accrued expenses 67,176 39,028 Federal and state income taxes 93,327 107,792 ---------- ------- Total adjustments 327,588 305,298 ---------- ------- Net cash provided by operating activities $ 514,696 500,467 ========== ======= See accompanying notes to condensed consolidated financial statements.
-5- PUBLIX SUPER MARKETS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. The accompanying condensed consolidated financial statements included herein are unaudited; however, in the opinion of management, such information reflects all adjustments (consisting solely of normal recurring adjustments) which are necessary for the fair statement of results for the interim period. These condensed consolidated financial statements should be read in conjunction with the fiscal 2002 Form 10-K Annual Report of the Company. 2. Due to the seasonal nature of the Company's business, the results for the three months ended March 29, 2003 are not necessarily indicative of the results for the entire 2003 fiscal year. 3. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 4. Certain 2002 amounts have been reclassified to conform with the 2003 presentation. 5. In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 143, "Accounting for Asset Retirement Obligations," (SFAS 143) effective for fiscal years beginning after June 15, 2002. SFAS 143 addresses the financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS 143 requires the Company to record the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets. The Company would also record a corresponding asset which is depreciated over the life of the asset. Subsequent to the initial measurement of the asset retirement obligation, the obligation will be adjusted at the end of each period to reflect the passage of time and changes in the estimated future cash flows underlying the obligation. The adoption of SFAS 143 did not have a material effect on the Company's financial condition, results of operations or cash flows. 6. In July 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," (SFAS 146) effective for exit or disposal activities initiated after December 31, 2002. SFAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized at fair value when the liability is incurred rather than at the date of a commitment to an exit or disposal plan. The adoption of SFAS 146 did not have a material effect on the Company's financial condition, results of operations or cash flows. 7. In November 2002, the Emerging Issues Task Force (EITF) issued EITF Issue No. 02-16, "Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor," (EITF 02-16). EITF 02-16 provides guidance for the accounting for cash consideration given to a reseller from a vendor. The adoption of EITF No. 02-16 did not have a material effect on the Company's financial condition, results of operations or cash flows. -6- PUBLIX SUPER MARKETS, INC. Item 2. Management's Discussion and Analysis of Financial Condition and -------------------------------------------------------------------------------- Results of Operations --------------------- Liquidity and Capital Resources ------------------------------- Cash and cash equivalents and short-term and long-term investments totaled approximately $738.6 million at March 29, 2003, compared to $785.7 million at March 30, 2002. Net cash provided by operating activities was approximately $514.7 million for the three months ended March 29, 2003, as compared with $500.5 million for the three months ended March 30, 2002. Any net cash in excess of the amount needed for current operations is invested in short-term and long-term investments. Net cash used in investing activities was approximately $160.4 million for the three months ended March 29, 2003, as compared with $158.5 million for the three months ended March 30, 2002. The primary use of net cash in investing activities was funding capital expenditures. During the three months ended March 29, 2003, capital expenditures totaled approximately $153.3 million. These expenditures were primarily incurred in connection with the opening of 16 new supermarkets and remodeling or expanding ten supermarkets. In addition, the Company closed two supermarkets. The net impact of new and closed supermarkets (net new supermarkets) added an additional 0.7 million square feet in the three months ended March 29, 2003, a 2.1% increase. Significant expenditures were also incurred in the expansion of warehouses and new or enhanced information technology applications. During the three months ended March 30, 2002, capital expenditures totaled approximately $158.8 million. These expenditures were primarily incurred in connection with the opening of 16 new supermarkets and remodeling or expanding 26 supermarkets. In addition, the Company closed five supermarkets. Net new supermarkets added an additional .51 million square feet in the three months ended March 30, 2002, a 1.65% increase. Significant expenditures were also incurred in the expansion of warehouses, office construction and new or enhanced information technology applications. Capital expenditures for the remainder of 2003, primarily made up of new supermarkets, expansion of warehouses, remodeling and expanding of certain existing supermarkets and new or enhanced information technology applications, are expected to be approximately $446.7 million. This capital program is subject to continuing change and review. The remaining 2003 capital expenditures are expected to be financed by internally generated funds, liquid assets or the committed line of credit described below. In the normal course of operations, the Company replaces supermarkets and closes supermarkets that are not meeting performance expectations. The impact of future supermarket closings is not expected to be material. Net cash used in financing activities was approximately $218.6 million for the three months ended March 29, 2003, as compared with $148.5 million for the three months ended March 30, 2002. The primary use of net cash in financing activities was funding net common stock repurchases. The Company currently repurchases common stock at the stockholders' request in accordance with the terms of the Company's Employee Stock Purchase Plan. Net common stock repurchases totaled approximately $218.5 million for the three months ended March 29, 2003, as compared with $148.3 million for the three months ended March 30, 2002. 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. -7- On March 4, 2003, the Company declared a cash dividend on its common stock of $.40 per share or approximately $75.5 million, payable on June 2, 2003, to stockholders of record as of the close of business April 1, 2003. In December 2002, the Company renewed an agreement for a committed line of credit totaling $100 million. This 364-day line of credit facility is available to fund liquidity requirements if necessary. The interest rate is based on LIBOR or prime. There were no amounts outstanding on this line of credit as of March 29, 2003. Based on the Company's financial position, it is expected that short-term and long-term borrowings would be readily available to support the Company's liquidity requirements if needed. Results of Operations --------------------- Sales for the first quarter ended March 29, 2003, were $4.3 billion as compared with $4.2 billion in the same quarter in 2002, an increase of $123.9 million or a 3.0% increase. This reflects a decrease of $97.7 million or 2.3% in comparable store sales (supermarkets open for the same weeks in both periods, including replacement supermarkets) and an increase of $221.6 million or 5.3% from net new supermarkets since the beginning of the first quarter of 2002. Additionally, sales for the first quarter of 2003 were negatively affected by the late Easter holiday, which was in the first quarter of 2002. Cost of merchandise sold including certain store occupancy, warehousing and delivery expenses, as a percentage of sales, was approximately 73.0% and 72.7% for the three months ended March 29, 2003 and March 30, 2002, respectively. The increase in cost of merchandise sold, as a percentage of sales, was primarily driven by an increase in promotional activities. However, improvements in buying practices including centralized product procurement, category management and more efficient distribution channels partially offset the cost of the increased promotional activities. Operating and administrative expenses, as a percentage of sales, were approximately 20.9% and 20.6% for the three months ended March 29, 2003 and March 30, 2002, respectively. The increase in operating and administrative expenses, as a percentage of sales, was primarily due to increases in facilities costs and other expenses. These increases were partially offset by decreases in payroll and employee benefit costs. Net earnings were $187.1 million and $195.2 million or $.99 per share for the three months ended March 29, 2003 and March 30, 2002, respectively. -8- Cautionary Note Regarding Forward-Looking Statements ---------------------------------------------------- From time to time, certain information provided by the Company, including written or oral statements made by its representatives, may contain forward-looking information as defined in Section 21E of the Securities Exchange Act of 1934. Forward-looking information includes statements about the future performance of the Company, which is based on management's assumptions and beliefs in light of the information currently available to them. When used, the words "plan," "estimate," "project," "intend," "believe" and other similar expressions, as they relate to the Company, are intended to identify such forward-looking statements. These forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from those statements including, but not limited to: competitive practices and pricing in the food and drug industries generally and particularly in the Company's principal markets; changes in the general economy; changes in consumer spending; and other factors affecting the Company's business in or beyond the Company's control. These factors include changes in the rate of inflation, changes in state and Federal legislation or regulation, adverse determinations with respect to litigation or other claims, ability to recruit and retain employees, ability to construct new stores or complete remodels as rapidly as planned and stability of product costs. Other factors and assumptions not identified above could also cause the actual results to differ materially from those set forth in the forward-looking statements. The Company assumes no obligation to update publicly these forward-looking statements. Item 3. Quantitative and Qualitative Disclosures About Market Risk ------------------------------------------------------------------- The Company does not utilize financial instruments for trading or other speculative purposes, nor does it utilize leveraged financial instruments. The Company does not consider to be material the potential losses in future earnings, fair values and cash flows from reasonably possible near-term changes in interest rates. Item 4. Controls and Procedures -------------------------------- Within the 90 days prior to the date of this report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company's periodic SEC filings. There have been no significant changes in the Company's internal controls or in other factors which could significantly affect internal controls subsequent to the date the Company carried out its evaluation. -9- PUBLIX SUPER MARKETS, INC. PART II. OTHER INFORMATION Item 1. Legal Proceedings ---------------------------- As reported in the Company's Form 10-K for the year ended December 28, 2002, the Company is a party in various legal claims and actions considered in the normal course of business. In the opinion of management, the ultimate resolution of these legal proceedings will not have a material adverse effect on the Company's financial condition, results of operations or cash flows. Item 2. Changes in Securities -------------------------------- Not Applicable. Item 3. Defaults Upon Senior Securities ------------------------------------------ Not Applicable. Item 4. Submission of Matters to a Vote of Security Holders -------------------------------------------------------------- Not Applicable. Item 5. Other Information ---------------------------- Not Applicable. Item 6(a). Exhibits ------------------- 21. Subsidiaries of the Registrant. 99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 99.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Item 6(b). Reports on Form 8-K ------------------------------ The Company filed a report on Form 8-K dated May 2, 2003, pursuant to Item 9 ("Regulation FD Disclosure"), attaching the Company's press release dated May 1, 2003. -10- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed in its behalf by the undersigned thereunto duly authorized. PUBLIX SUPER MARKETS, INC. Date: May 6, 2003 /s/ John A. Attaway, Jr. ------------------------------------------ John A. Attaway, Jr., Secretary Date: May 6, 2003 /s/ David P. Phillips ------------------------------------------ David P. Phillips, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) -11- CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 Certification ------------- I, Charles H. Jenkins, Jr., certify that: 1. I have reviewed this quarterly report on Form 10-Q of Publix Super Markets, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 6, 2003 /s/ Charles H. Jenkins, Jr. --------------------------- Charles H. Jenkins, Jr. Chief Executive Officer CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 Certification ------------- I, David P. Phillips, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Publix Super Markets, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 6, 2003 /s/ David P. Phillips ----------------------- David P. Phillips Chief Financial Officer