10-Q 1 q12004.txt FORM 10-Q, QUARTER ENDED 3/27/2004 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 27, 2004 -------------- 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 (as defined in Rule 12b-2 of the Exchange Act). Yes X No _______ -------- The number of shares outstanding of the Registrant's common stock, $1.00 par value, as of April 30, 2004 was 179,278,596. Page 1 of 12 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 27, 2004 December 27, 2003 -------------- ----------------- (Unaudited) Current Assets -------------- Cash and cash equivalents $ 504,356 277,072 Short-term investments 16,592 16,661 Trade receivables 248,456 241,101 Merchandise inventories 985,629 981,456 Deferred tax assets 61,504 55,479 Prepaid expenses 15,455 9,778 ---------- ---------- Total Current Assets 1,831,992 1,581,547 ---------- ---------- Long-term investments 444,983 380,852 Other noncurrent assets 1,575 1,119 Property, plant and equipment 5,197,084 5,140,811 Less accumulated depreciation (2,021,561) (1,953,612) ---------- ---------- Net property, plant and equipment 3,175,523 3,187,199 ---------- ---------- Total Assets $5,454,073 5,150,717 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities ------------------- Accounts payable $ 736,256 724,228 Accrued contribution to retirement plans 118,830 244,848 Accrued salaries and wages 101,728 76,050 Accrued self-insurance reserves 136,696 123,462 Federal and state income taxes 124,168 12,508 Other 244,006 190,510 ---------- ---------- Total Current Liabilities 1,461,684 1,371,606 ---------- ---------- Deferred tax liabilities, net 291,362 284,458 Self-insurance reserves 210,191 202,737 Accrued postretirement benefit cost 67,808 67,960 Other noncurrent liabilities 60,065 54,646 Stockholders' Equity -------------------- Common stock of $1 par value. Authorized 300,000,000 shares; issued 180,929,954 shares at March 27, 2004 and 178,369,413 shares at December 27, 2003 180,930 178,369 Additional paid-in capital 630,981 494,154 Retained earnings 2,614,642 2,492,759 ---------- ---------- 3,426,553 3,165,282 Less 1,357,653 treasury shares at March 27, 2004, at cost (69,919) --- Accumulated other comprehensive earnings 6,329 4,028 ---------- ---------- Total Stockholders' Equity 3,362,963 3,169,310 ---------- ---------- Total Liabilities and Stockholders' Equity $5,454,073 5,150,717 ========== ========== See accompanying notes to condensed consolidated financial statements.
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PUBLIX SUPER MARKETS, INC. CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Amounts are in thousands, except per share and share amounts) Three Months Ended March 27, 2004 March 29, 2003 -------------- -------------- (Unaudited) Revenues -------- Sales $ 4,657,585 4,304,214 Other operating income 29,868 28,800 ------------ ----------- Total revenues 4,687,453 4,333,014 ------------ ----------- Costs and expenses ------------------ Cost of merchandise sold 3,398,894 3,137,916 Operating and administrative expenses 975,229 907,705 ------------ ----------- Total costs and expenses 4,374,123 4,045,621 ------------ ----------- Operating profit 313,330 287,393 ------------ ----------- Investment income, net 6,403 5,192 Other income, net 4,544 5,509 ------------ ----------- Earnings before income tax expense 324,277 298,094 Income tax expense 120,881 110,986 ------------ ----------- Net earnings $ 203,396 187,108 ============ =========== Weighted average number of common shares outstanding 178,662,333 188,513,408 ============ =========== Basic and diluted earnings per common share based on weighted average shares outstanding $ 1.14 .99 ============ =========== Cash dividends paid per common share none none
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (Amounts are in thousands) Three Months Ended March 27, 2004 March 29, 2003 -------------- -------------- (Unaudited) Net earnings $ 203,396 187,108 Other comprehensive earnings Unrealized gain on investment securities available-for-sale, net of tax effect of $1,486 and $1,114 in 2004 and 2003, respectively 2,365 1,775 Reclassification adjustment for net realized (gain) loss on investment securities available-for-sale, net of tax effect of ($41) and $29 in 2004 and 2003, respectively (64) 45 ------------ ----------- Comprehensive earnings $ 205,697 188,928 ============ =========== See accompanying notes to condensed consolidated financial statements.
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PUBLIX SUPER MARKETS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts are in thousands) Three Months Ended March 27, 2004 March 29, 2003 -------------- -------------- (Unaudited) Cash flows from operating activities ------------------------------------ Cash received from customers $ 4,661,336 4,308,806 Cash paid to employees and suppliers (4,129,605) (3,755,617) Dividends and interest received 6,894 5,599 Income taxes paid (9,787) (12,712) Payment for self-insured claims (45,242) (49,465) Other operating cash receipts 21,673 19,954 Other operating cash payments (1,018) (1,869) ------------ ---------- Net cash provided by operating activities 504,251 514,696 ------------ ---------- Cash flows from investing activities ------------------------------------ Payment for property, plant and equipment (113,947) (153,272) Proceeds from sale of property, plant and equipment 27,713 1,539 Payment for investment securities - available-for-sale (AFS) (71,326) (66,468) Proceeds from sale and maturity of investment securities - AFS 9,524 56,492 Net proceeds from joint ventures and other investments 995 1,524 Other, net (467) (195) ------------ ---------- Net cash used in investing activities (147,508) (160,380) ------------ ---------- Cash flows from financing activities ------------------------------------ Proceeds from sale of common stock 24,234 22,475 Payment for acquisition of common stock (153,562) (240,937) Other, net (131) (131) ------------ ---------- Net cash used in financing activities (129,459) (218,593) ------------ ---------- Net increase in cash and cash equivalents 227,284 135,723 ------------ ---------- Cash and cash equivalents at beginning of period 277,072 207,523 ------------ ---------- Cash and cash equivalents at end of period $ 504,356 343,246 ============ ========== 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 27, 2004 March 29, 2003 -------------- -------------- (Unaudited) Reconciliation of net earnings to net cash provided by operating activities Net earnings $ 203,396 187,108 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 89,592 84,145 Retirement contributions payable in common stock 61,436 63,062 Deferred income taxes (566) 4,947 Loss on sale of property, plant and equipment 8,329 2,791 (Gain) loss on sale of investments (105) 74 Self-insurance reserves in excess of current payments 20,688 12,115 Postretirement accruals less than current payments (152) (225) Increase in advance purchase allowances 818 724 Other, net 596 333 Change in cash from: Trade receivables (7,355) (11,940) Merchandise inventories (4,173) 12,174 Prepaid expenses (5,677) (1,115) Accounts payable and accrued expenses 25,764 67,176 Federal and state income taxes 111,660 93,327 ---------- ------- Total adjustments 300,855 327,588 ---------- ------- Net cash provided by operating activities $ 504,251 514,696 ========== ======= 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 2003 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 27, 2004 are not necessarily indicative of the results for the entire 2004 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 2003 amounts have been reclassified to conform with the 2004 presentation. 5. In January 2003, the Financial Accounting Standards Board (FASB) issued Interpretation No. 46, "Consolidation of Variable Interest Entities, an interpretation of ARB No. 51" (FIN 46). FIN 46 addresses the consolidation of entities whose equity holders (a) have not provided sufficient equity at risk to allow the entity to finance its own activities or (b) do not possess certain characteristics of a controlling financial interest. FIN 46 requires the consolidation of these entities, known as variable interest entities (VIEs), by the primary beneficiary of the entity. The primary beneficiary is the entity, if any, that is subject to a majority of the risk of loss from the VIEs' activities, entitled to receive a majority of the VIEs' residual returns, or both. In December 2003, the FASB issued FIN 46(R), "Consolidation of Variable Interest Entities," which represents a revision to FIN 46. FIN 46(R) provided clarifications to FIN 46 and excluded certain entities from its scope. The requirements of FIN 46(R) for entities commonly referred to as special-purpose entities (SPEs) are effective for periods ending after December 15, 2003. The requirements for all other types of entities are effective for periods ending after March 15, 2004. The Company does not have any entities classified as VIEs or SPEs; therefore, the adoption of FIN 46(R) had no 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 $965.9 million at March 27, 2004, compared to $738.6 million at March 29, 2003. Net cash provided by operating activities was approximately $504.3 million for the three months ended March 27, 2004, as compared to $514.7 million for the three months ended March 29, 2003. 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 $147.5 million for the three months ended March 27, 2004, as compared to $160.4 million for the three months ended March 29, 2003. The primary use of net cash in investing activities was funding capital expenditures. During the three months ended March 27, 2004, capital expenditures totaled approximately $113.9 million. These expenditures were primarily incurred in connection with the opening of 11 net new supermarkets (15 new supermarkets opened and four supermarkets closed) and remodeling or expanding 15 supermarkets. Net new supermarkets added an additional 0.5 million square feet in the three months ended March 27, 2004, a 1.3% increase. Significant expenditures were also incurred in the expansion of warehouses and new or enhanced information technology applications. 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 14 net new supermarkets (16 new supermarkets opened and two supermarkets closed) and remodeling or expanding ten 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. Capital expenditures for the remainder of 2004, primarily consisting of new supermarkets, remodeling and expanding certain existing supermarkets, expansion of warehouses and new or enhanced information technology applications, are expected to be approximately $386.1 million. This capital program is subject to continuing change and review. In the normal course of operations, the Company replaces supermarkets and closes supermarkets that are not meeting performance expectations. The impact of future supermarket closings is not expected to be material. Net cash used in financing activities was approximately $129.5 million for the three months ended March 27, 2004, as compared to $218.6 million for the three months ended March 29, 2003. 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, Non-Employee Directors Stock Purchase Plan, 401(k) Plan and Employee Stock Ownership Plan. Net common stock repurchases totaled approximately $129.3 million for the three months ended March 27, 2004, as compared to $218.5 million for the three months ended March 29, 2003. The amount of common stock offered to the Company for repurchase is not within the control of the Company, but is at the discretion of the stockholders. The Company expects to continue to repurchase its common stock, as offered by its stockholders from time to time, at its then currently appraised value for amounts similar to those in prior years. However, such repurchases are not required and the Company retains the right to discontinue them at any time. -7- On March 3, 2004, the Company declared an annual cash dividend on its common stock of $.45 per share or approximately $80.8 million, payable on June 1, 2004, to stockholders of record as of the close of business April 19, 2004. In December 2003, the Company renewed an agreement for a committed line of credit totaling $100 million. This 364-day line of credit facility is available to fund liquidity requirements if necessary. The interest rate is based on LIBOR or prime. There were no amounts outstanding on this line of credit as of March 27, 2004. The cash requirements for 2004 current operations, capital expenditures and common stock repurchases are expected to be financed by internally generated funds, liquid assets or the committed line of credit described above. Based on the Company's financial position, it is expected that short-term and long-term borrowings would be readily available to support the Company's liquidity requirements if needed. Results of Operations --------------------- Sales for the three months ended March 27, 2004, were $4.7 billion as compared to $4.3 billion for the three months ended March 29, 2003, an increase of $353.4 million or an 8.2% increase. This reflects an increase of approximately $222.2 million or 5.2% from net new supermarkets and an increase of approximately $131.2 million or 3% in comparable store sales (supermarkets open for the same weeks in both periods, including replacement supermarkets) since the beginning of the first quarter of 2003. Gross profit, as a percentage of sales, was approximately 27% and 27.1% for the three months ended March 27, 2004 and March 29, 2003, respectively. Gross profit for the three months ended March 27, 2004 remained relatively unchanged compared to the three months ended March 29, 2003. During 2003, the Company modified its calculation of cost of merchandise sold. The cost of merchandise sold calculation was modified to improve the comparability of the Company's gross profit to others in the food retailing industry. Operating and administrative expenses, as a percentage of sales, were approximately 20.9% and 21.1% for the three months ended March 27, 2004 and March 29, 2003, respectively. The decrease in operating and administrative expenses during the three month period ended March 27, 2004 was primarily due to decreases in payroll and workers' compensation costs partially offset by increases in utilities and health insurance costs. The operating and administrative expenses, as a percentage of sales, for the prior three month period was adjusted due to the modification of the cost of merchandise sold calculation discussed above. Net earnings were $203.4 million or $1.14 per share and $187.1 million or $.99 per share for the three months ended March 27, 2004 and March 29, 2003, 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 -------------------------------- As of the end of the period covered by this quarterly report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company's periodic Securities and Exchange Commission filings. There have been no significant changes in the Company's internal control over financial reporting during the quarter ended March 27, 2004, that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting. -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 27, 2003, 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, Use of Proceeds and Issuer Purchases of Equity -------------------------------------------------------------------------------- Securities ---------- Shares of common stock repurchased by the Company during the three months ended March 27, 2004 were as follows: Total Number of Approximate Shares Dollar Value Purchased as of Shares Total Average Part of Publicly that May Yet Be Number of Price Announced Purchased Under Shares Paid per Plans or the Plans or Period Purchased Share Programs(1) Programs(1) ------ --------- ----- ----------- ----------- December 28, 2003 through January 31, 2004 527,230 $ 46.50 N/A N/A February 1, 2004 through February 28, 2004 857,773 46.50 N/A N/A February 29, 2004 through March 27, 2004 1,731,243 51.50 N/A N/A --------- ------- Total 3,116,246 $ 49.28 N/A N/A ========= ======= (1) Common stock is made available for sale only to the Company's current employees and members of its Board of Directors through the Company's Employee Stock Purchase Plan (ESPP), Non-Employee Directors Stock Purchase Plan (Directors Plan) and 401(k) Plan. In addition, common stock is made available under the Employee Stock Ownership Plan (ESOP). The Company currently repurchases common stock subject to certain terms and conditions. The ESPP, Directors Plan, 401(k) Plan and ESOP each contain provisions prohibiting any transfer for value without the owner first offering the common stock to the Company. The Company's common stock is not traded on any public stock exchange. The amount of common stock offered to the Company for repurchase is not within the control of the Company, but is at the discretion of the stockholders. The Company does not believe that these repurchases of its common stock are within the scope of a publicly announced plan or program (although the terms of the plans discussed above have been communicated to the participants). Thus, the Company does not believe that it has made any repurchases during the three months ended March 27, 2004 required to be disclosed in the last two columns of the table. -10- 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 ------------------- 10. Since the filing of the Company's Form 10-K for the year ended December 27, 2003, the Company has entered into an Indemnification Agreement with a new officer of the Company. The Indemnification Agreement is in the same form of Indemnification Agreement filed as an exhibit to the Company's Form 10-Q for the quarter ended March 31, 2001. Such subsequent indemnified officer is listed as follows: Alfred J. Ottolino 31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. -11- Item 6(b). Reports on Form 8-K ------------------------------ The Company filed a report on Form 8-K on March 5, 2004, pursuant to Item 12 ("Results of Operations and Financial Condition"), attaching the Company's press release dated March 1, 2004. The Company filed a report on Form 8-K on May 4, 2004, pursuant to Item 12 ("Results of Operations and Financial Condition"), attaching the Company's press release dated May 3, 2004. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PUBLIX SUPER MARKETS, INC. Date: May 4, 2004 /s/ John A. Attaway, Jr. ------------------------------------------ John A. Attaway, Jr., Secretary Date: May 4, 2004 /s/ David P. Phillips ------------------------------------------ David P. Phillips, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) -12-