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 31, 2005
( ) 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 0-00981
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.)
3300 Publix Corporate Parkway
Lakeland, Florida 33811
--------------------------------------- ---------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (863) 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 the Registrant is a well-known issuer, as defined in
Rule 405 of the Securities Act.
Yes X No
------ ------
Indicate by check mark if the Registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act.
Yes No 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
-------- -------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (___)
Indicate by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.
Large accelerated filer X Accelerated filer
------ ------
Non-accelerated filer
------
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act).
Yes No X
------ -------
The aggregate market value of the voting stock held by non-affiliates of the
Registrant was approximately $5,976,402,000 as of June 24, 2005, the last
trading day of the Registrant's most recently completed second fiscal quarter.
The number of shares of Registrant's common stock outstanding as of February 9,
2006 was 168,734,156.
DOCUMENTS INCORPORATED BY REFERENCE
Pages 2 through 12 of the Proxy Statement solicited for the 2006 Annual Meeting
of Stockholders to be held on April 18, 2006 are incorporated by reference in
Items 10, 11, 12, 13 and 14 of Part III hereof.
TABLE OF CONTENTS
Page
----
PART I
Item 1. Business 1
Item 1A. Risk Factors 2
Item 1B. Unresolved Staff Comments 4
Item 2. Properties 4
Item 3. Legal Proceedings 5
Item 4. Submission of Matters to a Vote of Security Holders 5
Executive Officers of the Company 6
PART II
Item 5. Market for the Registrant's Common Equity, Related
Stockholder Matters and Issuer Purchases of
Equity Securities 10
Item 6. Five Year Summary of Selected Financial Data 12
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 23
Management's Report on Internal Control over
Financial Reporting 24
Item 8. Financial Statements and Supplementary Data 25
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 50
Item 9A. Controls and Procedures 50
Item 9B. Other Information 50
PART III
Item 10. Directors and Executive Officers of the Registrant 51
Item 11. Executive Compensation 51
Item 12. Security Ownership of Certain Beneficial Owners
and Management 51
Item 13. Certain Relationships and Related Transactions 51
Item 14. Principal Accounting Fees and Services 51
PART IV
Item 15. Exhibits, Financial Statement Schedules 52
PART I
Item 1. Business
----------------
Publix Super Markets, Inc. and its wholly owned subsidiaries, hereinafter
collectively referred to as the "Company," are in the primary business of
operating retail food supermarkets in Florida, Georgia, South Carolina, Alabama
and Tennessee. The Company has no other significant lines of business or
industry segments.
Merchandising and manufacturing
-------------------------------
The Company's supermarkets sell grocery, dairy, produce, deli, bakery,
meat, seafood, housewares and health and beauty care items. Many supermarkets
also have pharmacy and floral departments. In addition, the Company has
agreements with commercial banks to operate in many of its supermarkets.
The Company's lines of merchandise include a variety of nationally
advertised and private label brands, as well as unbranded merchandise such as
produce, meat and seafood. These products are delivered through Company
distribution centers or directly from manufacturers and wholesalers. The Company
receives the food and non-food products 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 supplier or relatively
few suppliers. Private label items are produced in the Company's dairy, bakery
and deli manufacturing facilities or are manufactured for the Company by outside
suppliers.
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.
Store operations
----------------
The Company operated 875 supermarkets at the end of 2005, compared with 850
at the beginning of the year. In 2005, 36 supermarkets were opened, 11
supermarkets were closed and 48 supermarkets were remodeled. The net increase in
square footage was 1.1 million square feet or 2.8% since 2004. At the end of
2005, the Company had 641 supermarkets located in Florida, 161 in Georgia, 37 in
South Carolina, 25 in Alabama and 11 in Tennessee. Also, as of year end, the
Company had 10 supermarkets under construction in Florida, four in Georgia, two
in Alabama and one in Tennessee.
Competition
-----------
The Company is engaged in a highly competitive industry. Competition is
based primarily on price, quality of goods and service, convenience and product
mix. The Company's primary competition throughout its market areas is with
several national and regional supermarket chains, independent supermarkets,
supercenters, membership warehouse clubs, mass merchandisers, dollar stores,
drug stores, specialty food stores and convenience stores. The Company
anticipates continued competitor format innovation and location additions in
2006.
Working capital
---------------
The Company's working capital at the end of 2005 consisted of $2,047.8
million in current assets and $1,811.3 million in current liabilities. Normal
operating fluctuations in these balances can result in changes to cash flow from
operating activities presented in the consolidated statements of cash flows that
1
are not necessarily indicative of long-term operating trends. There are no
unusual industry practices or requirements relating to working capital items.
Seasonality
-----------
The influx of winter residents to Florida and increased purchases of food
during the traditional Thanksgiving, Christmas and Easter holidays typically
result in seasonal sales increases between November and April of each year.
Employees
---------
The Company had approximately 134,000 employees at the end of 2005,
compared with 128,000 at the end of 2004. Of this total, approximately 72,000 at
the end of 2005 and 69,000 at the end of 2004 were not full-time employees. The
Company considers its employee relations to be good.
Environmental matters
---------------------
Compliance by the Company with Federal, state and local environmental
protection laws during 2005 had no material effect upon capital expenditures,
results of operations or the competitive position of the Company.
Company information
-------------------
The Company makes available through its website, free of charge, its annual
report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K
and any amendments to those reports, as soon as reasonably practicable after
such material is electronically filed with the Securities and Exchange
Commission. The Company's website address is http://www.publix.com/stock.
---------------------------
Item 1A. Risk Factors
------------------------
In addition to the other information contained in this Form 10-K, the
following risk factors should be considered carefully in evaluating the
Company's business. The Company's financial condition and results of operations
could be materially adversely affected by any of these risks. Please note that
additional risks not presently known to the Company or that the Company
currently deems immaterial may also impair its operations.
Competition, low profit margins and other factors
-------------------------------------------------
The retail food industry is highly competitive and generally characterized
by low profit margins. The Company's competitors include national and regional
supermarket chains, independent supermarkets, supercenters, membership warehouse
clubs, mass merchandisers, dollar stores, drug stores, specialty food stores and
convenience stores. Competition is based primarily on price, quality of goods
and service, convenience and product mix. The Company believes it will face
increased competition in the future from all of these competitors and its
financial condition and results of operations could be impacted by the pricing,
purchasing, advertising or promotional decisions made by the competitors. In
addition, the Company's business could be adversely affected by other factors,
including severe weather conditions, unexpected increases in fuel or other
transportation related costs and volatility in food commodity prices. Any of
these factors could adversely affect the Company's financial condition and
results of operations.
Labor intensive business
------------------------
The retail food industry is labor intensive. In addition, the Company's
operations tend to be more labor intensive than some of its competitors due to
the additional customer service offered in its stores. Tight labor markets,
government mandated increases in the minimum wage or other benefits, an
increased proportion of full-time employees and increased costs of health care
2
and other benefits could result in an increase in labor costs, which could
adversely affect the Company's financial condition and results of operations.
New supermarket growth
----------------------
The Company's ability to open new supermarkets is dependent on identifying
and entering into leases on commercially reasonable terms for properties that
are suitable for its needs. If the Company fails to identify suitable sites and
enter into leases on a timely basis for any reason, including competition from
other companies seeking similar sites, the Company's growth may be impaired
because it may be unable to open new supermarkets as anticipated. Similarly, its
business may be harmed if it is unable to renew the leases on its existing
supermarkets on commercially reasonable terms.
Information technology
----------------------
The Company is increasingly dependent on information technology
applications to operate its business, enhance customer service, improve the
efficiency of its supply chain and increase employee efficiency. A failure to
timely integrate new information technology applications or upgrade existing
applications could have an adverse impact on the Company's financial condition
and results of operations. In addition, any disruptions in these applications
due to information security breakdowns, internal failures of technology or large
scale external interruptions in technology infrastructure, such as power,
telecommunications, or the internet, could also have an adverse impact on the
Company's financial condition and results of operations.
Product liability claims and adverse publicity
----------------------------------------------
The packaging, marketing, distribution and sale of food and drug products
purchased from others or manufactured by the Company entail an inherent risk of
product liability claims, product recall and the resulting adverse publicity.
Such products may contain contaminants that may be inadvertently redistributed
by the Company. These contaminants may, in certain cases, result in illness,
injury or death if processing at the consumer level does not eliminate the
contaminants. Even an inadvertent shipment of adulterated products is a
violation of law and may lead to a product recall and/or an increased risk of
exposure to product liability claims. There can be no assurance that such claims
will not be asserted against the Company or that the Company will not be
obligated to perform such a recall in the future. If a product liability claim
is successful, the Company's insurance may not be adequate to cover all
liabilities it may incur, and it may not be able to continue to maintain such
insurance or obtain comparable insurance at a reasonable cost, if at all. If the
Company does not have adequate insurance or contractual indemnification
available, product liability claims relating to defective products could have a
material adverse effect on the Company's ability to successfully market its
products and on the Company's financial condition and results of operations. In
addition, even if a product liability claim is not successful or is not fully
pursued, the adverse publicity surrounding any assertion that the Company's
products caused illness or injury could have a material adverse effect on the
Company's reputation with existing and potential customers and on the Company's
financial condition and results of operations.
Environmental liability
-----------------------
The Company is subject to Federal, state and local laws and regulations
that govern activities that may have adverse environmental effects and impose
liabilities for the costs of cleaning up and certain damages arising from sites
of past spills, disposals or other releases of hazardous materials. Under
applicable environmental laws, the Company may be responsible for the
remediation of environmental conditions and may be subject to associated
liabilities relating to its supermarkets and other facilities regardless of
whether the Company leases, subleases or owns the supermarkets or other
facilities and regardless of whether such environmental conditions were created
by the Company or a prior owner or tenant. The costs of investigation,
remediation or removal of environmental conditions may be substantial. There can
be no assurance that environmental conditions relating to prior, existing or
3
future sites will not harm the Company through, for instance, business
interruption, cost of remediation or adverse publicity.
Laws and regulations
--------------------
In addition to environmental laws and regulations, the Company is subject
to Federal, state and local laws and regulations relating to, among other
things, product safety, zoning, land use, work place safety, public health,
accessibility and restrictions on the sale of various products including
alcoholic beverages, tobacco and drugs. The Company is also subject to laws
governing its relationship with employees, including minimum wage requirements,
overtime, working conditions, disabled access and work permit requirements.
Compliance with, or changes in, these laws could adversely affect the Company's
financial condition and results of operations.
Legal proceedings
-----------------
The Company is a party in various legal claims and actions considered in
the normal course of business including labor and employment, personal injury,
intellectual property and other issues. Although not currently anticipated by
management, the results of pending or future proceedings could adversely affect
the Company's financial condition or results of operations.
Item 1B. Unresolved Staff Comments
-------------------------------------
None
Item 2. Properties
------------------
At year end, the Company operated approximately 40.0 million square feet of
supermarket space. The Company's supermarkets vary in size. Current supermarket
prototypes range from 28,000 to 61,000 square feet. Supermarkets are often
located in strip shopping centers where the Company is the anchor tenant.
The majority of the Company's supermarkets are leased. Substantially all of
these leases will expire during the next 20 years. However, in the normal course
of business, it is expected that the leases will be renewed or replaced by
leases on other properties. At 62 locations, both the building and land are
owned, and at 38 other locations, the building is owned while the land is
leased.
The Company supplies its supermarkets from eight distribution centers
located in Lakeland, Miami, Jacksonville, Sarasota, Orlando, Deerfield Beach and
Boynton Beach, Florida, and Lawrenceville, Georgia.
The Company operates six manufacturing facilities including three dairy
plants located in Lakeland and Deerfield Beach, Florida, and Lawrenceville,
Georgia, two bakery plants located in Lakeland, Florida and Atlanta, Georgia and
a deli plant located in Lakeland, Florida.
The Company's corporate offices, distribution facilities and manufacturing
plants are owned with no outstanding debt.
All of the Company's properties are well maintained and in good operating
condition and are suitable and adequate for operating its business.
4
Item 3. Legal Proceedings
-------------------------
The Company is a party in various legal claims and actions considered in
the normal course of business. In the opinion of management, the ultimate
resolution of these legal proceedings will not have a material adverse effect on
the Company's financial condition, results of operations or cash flows.
Item 4. Submission of Matters to a Vote of Security Holders
-----------------------------------------------------------
None
5
EXECUTIVE OFFICERS OF THE COMPANY
---------------------------------
Served as
Nature of Family Officer of
Relationship Company
Name Age Position Between Officers Since
---- --- -------- ---------------- -----
John A. Attaway, Jr. 47 Senior Vice President, 2000
General Counsel and
Secretary
Hoyt R. Barnett 62 Vice Chairman 1977
David E. Bornmann 48 Vice President 1998
David E. Bridges 56 Vice President 2000
Scott E. Brubaker 47 Vice President 2005
R. Scott Charlton 47 Senior Vice President 1992
William E. Crenshaw 55 President Cousin of 1990
Charles H. Jenkins, Jr.
G. Gino DiGrazia 43 Vice President 2002
and Controller
David S. Duncan 52 Vice President 1999
William V. Fauerbach 59 Vice President 1997
John R. Frazier 56 Vice President 1997
Linda S. Hall 46 Vice President 2002
M. Clayton Hollis, Jr. 49 Vice President 1994
John T. Hrabusa 50 Senior Vice President 2004
Mark R. Irby 50 Vice President 1989
Charles H. Jenkins, Jr. 62 Chief Executive Cousin of 1974
Officer William E. Crenshaw
Randall T. Jones, Sr. 43 Senior Vice President 2003
Linda S. Kane 40 Vice President and 2000
Assistant Secretary
Thomas M. McLaughlin 55 Vice President 1994
Sharon A. Miller 62 Assistant Secretary 1992
6
EXECUTIVE OFFICERS OF THE COMPANY
---------------------------------
Served as
Nature of Family Officer of
Relationship Company
Name Age Position Between Officers Since
---- --- -------- ---------------- -----
Robert H. Moore 63 Vice President 1994
Dale S. Myers 53 Vice President 2001
Alfred J. Ottolino 40 Vice President 2004
David P. Phillips 46 Chief Financial 1990
Officer and Treasurer
James H. Rhodes II 61 Vice President 1995
Richard J. Schuler II 50 Vice President 2000
Edward T. Shivers 66 Vice President 1985
Michael R. Smith 46 Vice President 2005
Sandra J. Woods 46 Vice President 2002
and Controller
Laurie S. Zeitlin 42 Senior Vice President 2006
and Chief Information
Officer
The terms of all officers expire in May 2006 or upon the election of their
successors.
7
Name Business Experience During Last Five Years
---- ------------------------------------------
John A. Attaway, Jr. General Counsel and Secretary of the Company to January
2005, Senior Vice President, General Counsel and
Secretary thereafter.
Hoyt R. Barnett Vice Chairman of the Company and Trustee of the
Employee Stock Ownership Plan.
David E. Bornmann Vice President of the Company.
David E. Bridges Vice President of the Company.
Scott E. Brubaker Regional Director of Retail Operations -
Lakeland Division of the Company to June 2004, Regional
Director of Retail Operations - Jacksonville Division to
July 2005, Vice President thereafter.
R. Scott Charlton Vice President of the Company to July 2005,
Senior Vice President thereafter.
William E. Crenshaw President of the Company.
G. Gino DiGrazia Director of Business Analysis and Reporting
to May 2002, Vice President and Controller thereafter.
David S. Duncan Vice President of the Company.
William V. Fauerbach Vice President of the Company.
John R. Frazier Vice President of the Company.
Linda S. Hall Director of Internal Audit to November 2002,
Vice President thereafter.
M. Clayton Hollis, Jr. Vice President of the Company.
John T. Hrabusa Vice President of Office Depot, Inc. to March 2004,
Vice President of the Company to January 2005,
Senior Vice President thereafter.
Mark R. Irby Vice President of the Company.
Charles H. Jenkins, Jr. Chairman of the Executive Committee and
Chief Operating Officer of the Company to
May 2001, Chief Executive Officer thereafter.
Randall T. Jones, Sr. Regional Director of Retail Operations -
Jacksonville Division of the Company to November 2003,
Vice President to July 2005, Senior Vice President
thereafter.
Linda S. Kane Director of Benefits Administration and Assistant
Secretary of the Company to May 2002, Vice President
and Assistant Secretary thereafter.
Thomas M. McLaughlin Vice President of the Company.
8
Name Business Experience During Last Five Years
---- ------------------------------------------
Sharon A. Miller Director of Administration and Assistant Secretary
of the Company to May 2003, Executive Director Publix
Super Markets Charities, Inc. and Assistant Secretary
thereafter.
Robert H. Moore Vice President of the Company.
Dale S. Myers Regional Director of Retail Operations - Lakeland
Division of the Company to July 2001,
Vice President thereafter.
Alfred J. Ottolino Vice President of Wakefern Food Corporation to
June 2003, Vice President of Winn-Dixie Stores, Inc.
from July 2003 to March 2004, Vice President of the
Company thereafter.
David P. Phillips Chief Financial Officer and Treasurer of the Company.
James H. Rhodes II Vice President of the Company.
Richard J. Schuler II Vice President of the Company.
Edward T. Shivers Vice President of the Company.
Michael R. Smith Director of Deli Manufacturing and Purchasing
Support of the Company to May 2001, Director of Deli and
Bakery Manufacturing to July 2004, Director of Fresh
Product Manufacturing to July 2005, Vice President
thereafter.
Sandra J. Woods Director of Corporate Accounting to May 2002, Vice
President and Controller thereafter.
Laurie S. Zeitlin Vice President of The Home Depot, Inc. to November 2003,
Senior Vice President and Chief Information Officer
of Kinko's, Inc. to February 2004, Senior Vice
President and Chief Information Officer of FedEx
Kinko's Office and Print Center, Inc. to January 2006,
Senior Vice President and Chief Information Officer of
the Company thereafter.
9
PART II
Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters
--------------------------------------------------------------------------------
and Issuer Purchases of Equity Securities
-----------------------------------------
(a) Market Information
------------------------
The Company's common stock is not traded on any public stock exchange.
Therefore, substantially all transactions of the Company's common stock
have been among the Company, its employees, former employees, their
families and the benefit plans established for the Company's employees.
The Company's common stock is made available for sale only to the
Company's current employees through the Company's Employee Stock Purchase
Plan (ESPP) and 401(k) Plan. In addition, common stock is made available
under the Employee Stock Ownership Plan (ESOP). Common stock is also made
available for sale to members of the Company's Board of Directors through
the Non-Employee Directors Stock Purchase Plan (Directors Plan). The
Company currently repurchases common stock subject to certain terms and
conditions. The ESPP, 401(k) Plan, ESOP and Directors Plan each contain
provisions prohibiting any transfer for value without the owner first
offering the common stock to the Company. The Company serves as the
registrar and stock transfer agent for its common stock.
Because there is no trading of the Company's common stock on a public
stock exchange, the market price of the Company's common stock is
determined by the Board of Directors based upon quarterly appraisals
prepared by an independent appraiser. The market prices for the Company's
common stock for 2005 and 2004 were as follows:
2005 2004
---- ----
January - February $58.50 46.50
March - April 64.00 51.50
May - July 66.50 52.25
August - October 72.75 58.50
November - December 77.25 58.50
(b) Approximate Number of Equity Security Holders
---------------------------------------------------
As of February 9, 2006, the approximate number of holders of the Company's
common stock was 95,000.
(c) Dividends
---------------
The Company paid an annual cash dividend of $.70 per share of common stock
in 2005 and $.45 per share in 2004. Payment of dividends is within the
discretion of the Company's Board of Directors and depends on, among other
factors, net earnings, capital requirements and the financial condition of
the Company. It is believed that comparable cash dividends will be paid in
the future.
10
(d) Purchases of Equity Securities by the Issuer
--------------------------------------------------
Issuer Purchases of Equity Securities
-------------------------------------
Shares of common stock repurchased by the Company during the three months
ended December 31, 2005 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)
------ --------- ----- ----------- -----------
September 25, 2005
through
October 29, 2005 232,285 $72.75 N/A N/A
October 30, 2005
through
November 26, 2005 605,200 77.17 N/A N/A
November 27, 2005
through
December 31, 2005 503,166 77.25 N/A N/A
--------- ------
Total 1,340,651 $76.43 N/A N/A
========= ======
(1) Common stock is made available for sale only to the Company's current
employees through the Company's ESPP and 401(k) Plan. In addition,
common stock is made available under the ESOP. Common stock is also
made available for sale to members of the Company's Board of Directors
through the Directors Plan. The Company currently repurchases common
stock subject to certain terms and conditions. The ESPP, 401(k) Plan,
ESOP and Directors Plan 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
December 31, 2005 required to be disclosed in the last two columns of
the table.
11
Item 6. Five Year Summary of Selected Financial Data
----------------------------------------------------
2005 2004 2003 2002 2001
---- ---- ---- ---- ----
Sales:
Sales $20,589,130 18,554,486 16,760,749 15,851,301 15,209,824
Percent increase 11.0% 10.7% 5.7% 4.2% 4.7%
Comparable store sales
percent increase
(decrease) 5.4% 5.7% 0.0% (0.7%) 3.9%
Earnings:
Gross profit $ 5,529,450 4,976,746 4,485,617 4,229,539 3,857,254
Earnings before income
tax expense $ 1,550,738 1,295,011 1,047,089 1,002,830 826,823
Net earnings $ 989,156 819,383 660,933 632,404 530,421
Net earnings as a
percent of sales 4.80% 4.42% 3.94% 3.99% 3.49%
Common stock:
Weighted average
shares outstanding 172,039,137 176,775,733 184,112,742 194,466,212 202,171,794
Basic and diluted
earnings per
common share,
based on weighted
average shares
outstanding $ 5.75 4.64 3.59 3.25 2.62
Cash dividends per
share $ .70 .45 .40 .33 .32
Financial data:
Capital expenditures $ 338,946 403,373 563,576 635,891 656,422
Working capital $ 236,488 221,583 209,941 127,870 49,328
Current ratio 1.13 1.13 1.15 1.10 1.04
Total assets $ 6,727,223 5,964,271 5,150,717 4,789,602 4,408,187
Stockholders' equity $ 4,205,774 3,585,716 3,169,310 3,008,068 2,762,551
Stores:
Number of supermarkets 875 850 801 741 684
Number of convenience
stores 5 5 4 4 2
NOTE: Amounts are in thousands, except shares outstanding, per share amounts
and number of stores. Fiscal year 2005 includes 53 weeks. All other
years include 52 weeks.
12
Item 7. Management's Discussion and Analysis of Financial Condition
-------------------------------------------------------------------
and Results of Operations
-------------------------
Overview
--------
The Company is primarily engaged in the retail food industry, operating
supermarkets, in Florida, Georgia, South Carolina, Alabama and Tennessee. The
Company has no other significant lines of business or industry segments. As of
December 31, 2005, the Company operated 875 supermarkets representing
approximately 40.0 million square feet of space.
In 2001, the Company began piloting a convenience store concept. As of
December 31, 2005, the Company operated five convenience stores.
In 2002, the Company acquired a minority interest in Crispers, a casual
dining restaurant chain based in Lakeland, Florida. In 2004, the Company
increased its ownership in Crispers to a majority position. As of December 31,
2005, Crispers operated 34 restaurants, all located in Florida.
In 2004, the Company began piloting a liquor store concept. The liquor
stores are located adjacent to the Company's supermarkets. As of December 31,
2005, the Company operated five liquor stores in Florida.
At the end of fiscal year 2005, the Company had 641 supermarkets located
in Florida, 161 in Georgia, 37 in South Carolina, 25 in Alabama and 11 in
Tennessee. The Company opened 22 supermarkets in Florida, five supermarkets in
Georgia, five supermarkets in Tennessee and four supermarkets in Alabama during
2005. The Company closed 11 supermarkets in 2005, including nine supermarkets
that were replaced by new supermarkets.
The Company's revenues are earned and cash is generated as merchandise is
sold to customers in the supermarkets. Income is earned by selling merchandise
at price levels that produce sales revenues in excess of cost of merchandise
sold and operating and administrative expenses. The Company has historically
been able to increase revenues and net earnings from year to year. Further, the
Company has historically been able to meet its cash requirements from internally
generated funds without the need to generate cash through debt financing. The
Company's year end cash balances are also significantly impacted by capital
expenditures, investment transactions and stock repurchases during the year.
The Company sells a variety of merchandise to generate revenues. This
merchandise includes grocery, dairy, produce, deli, bakery, meat, seafood,
housewares and health and beauty care items. Many of the Company's supermarkets
also have pharmacy and floral departments. Merchandise includes a mix of
nationally advertised and private label brands. The Company's private label
brand plays an increasingly important role in its merchandising strategy.
Operating Environment
---------------------
The Company is engaged in the highly competitive retail food industry.
Competition is based primarily on price, quality of goods and service,
convenience and product mix. In addition, the Company competes with other
retailers for prime retail site locations. The Company competes with retailers
as well as other labor market competitors in attracting and retaining quality
employees. The Company's primary competition throughout its market areas is with
several national and regional traditional supermarket chains, independent
supermarkets and specialty food stores, as well as non-traditional competition
such as supercenters, membership warehouse clubs, mass merchandisers, dollar
13
stores, drug stores and convenience stores. As a result of the highly
competitive environment, traditional supermarkets, including the Company, face
increasing business challenges. There has been a trend in recent years for
traditional supermarkets to lose market share to non-traditional competition.
The success of the Company, in particular its ability to retain its customers,
depends on its ability to meet the business challenges created by this
competitive environment.
In order to meet the competitive challenges facing the Company, management
continues to focus on the Company's core strategies, including customer service,
product quality, shopping environment, competitive pricing and convenient
locations. The Company has implemented several strategic business and technology
initiatives as part of the execution of these core strategies. The Company
believes these core strategies and related strategic initiatives differentiate
it from its competition and present opportunities for increased market share and
sustained financial growth.
Liquidity and Capital Resources
-------------------------------
Cash and cash equivalents and short-term and long-term investments totaled
approximately $2,029.1 million as of December 31, 2005, compared to $1,390.4
million and $674.6 million as of December 25, 2004 and December 27, 2003,
respectively.
Net cash provided by operating activities
-----------------------------------------
Net cash provided by operating activities was approximately $1,579.8
million for the year ended December 31, 2005, as compared with $1,643.2 million
and $1,303.7 million for the years ended December 25, 2004 and December 27,
2003, respectively. As a result of Hurricane Wilma that occurred during the
fourth quarter of 2005, discussed below, the Company received an extension on
its Federal income tax payment due December 15, 2005 to February 28, 2006. The
delay in this tax payment increased net cash provided by operating activities by
$95.0 million during the year ended December 31, 2005. During 2004, the Company
experienced an unprecedented four major hurricanes in six weeks. As a result,
the Company received an extension on its Federal income tax payments due
September 15, 2004 and December 15, 2004 until December 30, 2004. The delay in
these tax payments increased net cash provided by operating activities by $190.0
million during the year ended December 25, 2004 with the resulting decrease in
net cash provided by operating activities occurring during the year ended
December 31, 2005. 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
-------------------------------------
Net cash used in investing activities was approximately $1,031.6 million
for the year ended December 31, 2005, as compared with $950.3 million and $526.5
million for the years ended December 25, 2004 and December 27, 2003,
respectively. The primary use of net cash in investing activities was funding
capital expenditures and purchasing investments. During the year ended December
31, 2005, capital expenditures totaled approximately $338.9 million. These
expenditures were primarily incurred in connection with the opening of 25 net
new supermarkets (36 new supermarkets opened and 11 supermarkets closed) and
remodeling 48 supermarkets. Net new supermarkets added an additional 1.1 million
square feet in the year ended December 31, 2005, a 2.8% increase. Expenditures
were also incurred in the expansion of warehouses and new or enhanced
information technology applications. During the year ended December 25, 2004,
capital expenditures totaled approximately $403.4 million. These expenditures
were primarily incurred in connection with the opening of 49 net new
supermarkets (57 new supermarkets opened and eight supermarkets closed) and
remodeling or expanding 71 supermarkets. Net new supermarkets and expansions
added an additional 2.1 million square feet in the year ended December 25, 2004,
a 5.7% increase. Significant expenditures were also incurred in the expansion of
14
warehouses and new or enhanced information technology applications. During the
year ended December 27, 2003, capital expenditures totaled approximately $563.6
million. These expenditures were primarily incurred in connection with the
opening of 60 net new supermarkets (78 new supermarkets opened and 18
supermarkets closed) and remodeling or expanding 80 supermarkets. Net new
supermarkets and expansions added an additional 3.2 million square feet in the
year ended December 27, 2003, a 9.4% increase. Significant expenditures were
also incurred in the expansion of warehouses, office construction and new or
enhanced information technology applications.
Capital expenditure projection
------------------------------
In 2006, the Company plans to open approximately 40 supermarkets. Although
real estate development is unpredictable, the Company's 2006 new store growth
represents a reasonable estimate of anticipated future growth. Capital
expenditures for 2006, primarily consisting of new supermarkets, remodeling
certain existing supermarkets, new or enhanced information technology
applications and expansion of warehouses, are expected to be approximately
$475.0 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
-------------------------------------
Net cash used in financing activities was approximately $582.6 million for
the year ended December 31, 2005, as compared with $599.7 million and $707.6
million for the years ended December 25, 2004 and December 27, 2003,
respectively. The primary use of net cash in financing activities was funding
net common stock repurchases. The Company currently repurchases common stock at
the stockholders' request in accordance with the terms of the Company's Employee
Stock Purchase Plan, 401(k) Plan, Employee Stock Ownership Plan and Non-Employee
Directors Stock Purchase Plan. Net common stock repurchases totaled
approximately $460.5 million for the year ended December 31, 2005, as compared
with $518.8 million and $632.0 million for the years ended December 25, 2004 and
December 27, 2003, respectively. The amount of common stock offered to the
Company for repurchase is not within the control of the Company, but is at the
discretion of the stockholders. The Company expects to continue to repurchase
its common stock, as offered by its stockholders from time to time, at its then
currently appraised value for amounts similar to those in prior years. However,
such purchases are not required and the Company retains the right to discontinue
them at any time.
Dividends
---------
The Company paid an annual cash dividend on its common stock of $121.9
million or $.70 per share, $80.8 million or $.45 per share and $75.5 million or
$.40 per share in 2005, 2004 and 2003, respectively.
Cash requirements
-----------------
In 2006, the cash requirements for current operations, capital
expenditures and common stock repurchases are expected to be financed by
internally generated funds or liquid assets. 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.
15
Contractual Obligations
-----------------------
Following is a summary of contractual obligations as of December 31, 2005:
Payments Due by Period
----------------------
2007 - 2009 - There-
Total 2006 2008 2010 after
----- ---- ---- ---- -----
(Amounts are in thousands)
Contractual Obligations:
Operating leases (1) $4,102,959 336,122 646,640 604,554 2,515,643
Purchase obligations (2)(3)(4) 899,107 541,325 71,281 53,683 232,818
Other long-term liabilities:
Self-insurance reserves (5) 242,449 --- 91,491 44,214 106,744
Accrued postretirement
benefit cost (6) 68,088 2,684 6,121 7,154 52,129
Other noncurrent liabilities 24,484 --- 24,484 --- ---
---------- ------- -------- ------- ---------
Total $5,337,087 880,131 840,017 709,605 2,907,334
========== ======= ======= ======= =========
(1) For a more detailed description of the operating lease obligations, refer
to Note 9(a) Commitments and Contingencies - Operating Leases in the Notes
to Consolidated Financial Statements.
(2) Purchase obligations include agreements to purchase goods or services that
are enforceable and legally binding on the Company and that specify all
significant terms, including fixed or minimum quantities to be purchased,
fixed, minimum or variable price provisions and the approximate timing of
the transaction. Purchase obligations exclude agreements that are
cancelable within 30 days without penalty.
(3) As of December 31, 2005, the Company had $9.5 million outstanding in trade
letters of credit and $1.0 million outstanding in standby letters of
credit to support certain of these purchase obligations.
(4) Purchase obligations include $362.9 million in common area maintenance
commitments related to operating leases. The actual amounts to be paid are
variable and have been estimated based on current costs.
(5) As of December 31, 2005, the Company had $224.6 million outstanding in
standby letters of credit for the benefit of the Company's insurance
carriers to support this obligation.
(6) For a more detailed description of the postretirement benefit obligations,
refer to Note 5 Postretirement Benefits in the Notes to Consolidated
Financial Statements.
Off-Balance Sheet Arrangements
------------------------------
The Company is not a party to any off-balance sheet arrangements that
have, or are reasonably likely to have, a current or future effect on the
Company's financial condition, results of operations or cash flows.
16
Hurricane Impact - 2005
-----------------------
During the fourth quarter ended December 31, 2005, the Company was
impacted by Hurricane Wilma. The Company recorded the effect of this hurricane
in the fourth quarter of 2005.
Temporary supermarket closings occurred primarily in south Florida due to
weather conditions, evacuations of certain areas and damage to the Company's
supermarkets. Almost all affected supermarkets were reopened within 24 hours,
operating on generator power if normal power had not been restored. All were
reopened within nine days except one supermarket. This supermarket sustained
significant damage and remains closed. The Company is currently evaluating
whether to repair and reopen this supermarket.
The impact of Hurricane Wilma did not have a material adverse effect on
the Company's financial condition, results of operations or cash flows. The
Company estimated additional costs related to Hurricane Wilma included in cost
of merchandise sold were approximately $35.0 million. These costs were primarily
related to inventory losses due to extensive power outages and additional
distribution costs. The additional operating and administrative expenses related
to Hurricane Wilma were approximately $8.0 million. These expenses were
primarily related to incremental payroll, facility repairs and disposal fees for
inventory lost due to power outages. The Company estimated the profit on the
incremental sales resulting from customers stocking up and replenishing, as well
as sales of hurricane supplies, partially offset these losses.
The Company maintains property insurance coverage for hurricanes on a per
occurrence basis and is currently seeking partial recovery of its losses from
its insurance carrier. The Company's insurance coverage for this occurrence has
a deductible of approximately $31.0 million. The Company recorded an estimated
amount of insurance recovery in the fourth quarter of 2005.
Hurricane Impact - 2004
-----------------------
During the third quarter ended September 25, 2004, the Company experienced
an unprecedented four major hurricanes in six weeks. The Company recorded the
effect of these hurricanes, Charley, Frances, Ivan and Jeanne, in the third
quarter of 2004.
Temporary supermarket closings occurred throughout the Company due to
weather conditions and evacuations of certain areas. Almost all affected
supermarkets were reopened within 24 hours, operating on generator power if
normal power had not been restored. All supermarkets were reopened within five
days.
The impact of the four hurricanes on the Company did not have a material
adverse effect on the Company's financial condition, results of operations or
cash flows. The Company estimated additional costs related to the four
hurricanes included in cost of merchandise sold were approximately $58.0
million. These costs were primarily related to inventory losses due to power
outages and additional distribution costs. The additional operating and
administrative expenses related to the four hurricanes were approximately $5.0
million. These expenses were primarily related to facility repairs and disposal
fees for inventory lost due to power outages. The Company estimated the profit
on the incremental sales resulting from repeated cycles of customers stocking up
and replenishing, as well as sales of hurricane supplies, largely offset the
losses incurred by the Company. The losses incurred by the Company were below
the insurance policy deductible limits per occurrence, so there was no recovery
of the losses from insurance coverage.
17
Results of Operations
---------------------
The Company's fiscal year ends on the last Saturday in December. Fiscal
year 2005 included 53 weeks and fiscal years 2004 and 2003 included 52 weeks.
Sales
-----
Sales for 2005 were $20.6 billion as compared with $18.6 billion in 2004,
an increase of $2,034.6 million or an 11.0% increase. Sales increased
approximately $387.5 million or 2.1% from an additional week in 2005,
approximately $645.2 million or 3.5% from net new supermarkets and approximately
$1,001.9 million or 5.4% from comparable store sales (supermarkets open for the
same weeks in both periods, including replacement supermarkets). The Company
estimates that sales for 2005 were positively impacted by approximately $73.0
million as a result of the hurricane the Company experienced during the fourth
quarter of 2005. If sales for 2005 and 2004 had not been positively impacted by
the hurricanes, the reported 5.4% increase in comparable store sales for 2005
would have been 6.1%.
Sales for 2004 were $18.6 billion as compared with $16.8 billion in 2003,
an increase of $1,793.7 million or a 10.7% increase. Sales increased
approximately $833.7 million or 5.0% from net new supermarkets and approximately
$960.0 million or 5.7% from comparable store sales. The Company estimates that
sales for 2004 were positively impacted by approximately $189.0 million as a
result of the unprecedented four major hurricanes the Company experienced during
2004. If sales for 2004 had not been positively impacted by the hurricanes, the
reported 5.7% increase in comparable store sales for 2004 would have been 4.6%.
Sales for 2003 were $16.8 billion as compared with $15.9 billion in 2002,
an increase of $909.4 million or a 5.7% increase. All of this increase was from
net new supermarkets since the beginning of 2002 as comparable store sales were
unchanged.
Gross profit
------------
Gross profit as a percentage of sales was approximately 26.9% in 2005 as
compared with 26.8% in 2004 and 2003, respectively. In 2005, gross profit
remained relatively unchanged compared to 2004 and 2003. During 2003, the
Company modified its calculation of cost of merchandise sold to improve the
comparability of the Company's gross profit to others in the retail food
industry.
Operating and administrative expenses
-------------------------------------
Operating and administrative expenses as a percentage of sales were
approximately 20.6%, 20.9% and 21.6% in 2005, 2004 and 2003, respectively. The
decrease in operating and administrative expenses as a percentage of sales
during 2005 was primarily due to the incremental sales from an additional week
and a decrease in workers' compensation, partially offset by increases in
certain facilities costs as a percentage of sales.
The decrease in operating and administrative expenses as a percentage of
sales during 2004 was due to the incremental sales from the hurricanes discussed
above and the closure of PublixDirect, LLC, ("PublixDirect") during 2003
discussed below. The hurricanes decreased operating and administrative expenses
as a percentage of sales in 2004 and the closure of PublixDirect increased
operating and administrative expenses as a percentage of sales in 2003. The
decrease in operating and administrative expenses as a percentage of sales
during 2004 was also due to decreases in payroll, workers' compensation and
repair and maintenance costs, which were partially offset by increases in health
care and certain facilities costs as a percentage of sales.
18
The operating and administrative expenses as a percentage of sales were
adjusted due to the modification of the cost of merchandise sold calculation
noted above.
Investment income, net
----------------------
Investment income, net was approximately $74.3 million, $35.3 million and
$21.9 million in 2005, 2004 and 2003, respectively. The increase in investment
income, net was primarily due to higher average balances of short-term and
long-term investments, as well as higher interest rates during 2005.
Income taxes
------------
The effective income tax rates were 36.2% in 2005, 36.7% in 2004 and 36.9%
in 2003. The effective income tax rates differ from the expected U.S. Federal
statutory rate of 35.0% in all years primarily due to the impact of state income
taxes, partially offset by the Federal benefit of state income taxes, tax exempt
interest and dividends paid to ESOP participants.
PublixDirect closure
--------------------
During the third quarter of 2003, the Company announced its decision to
close its online grocery shopping service operated under its wholly owned
subsidiary, PublixDirect. As a result of the decision to close PublixDirect
effective August 23, 2003, the Company recorded an expense of $30.0 million
during the third quarter of 2003. The expense recorded represented approximately
$17.0 million in asset impairments, $10.0 million in operating lease obligations
and $3.0 million in payroll obligations and other costs. The expense was
recognized in the Company's consolidated statements of earnings and is included
in operating and administrative expenses. The impact of the expense recorded on
net earnings was approximately $18.0 million or $.10 per share for the fiscal
year ended December 27, 2003.
Impact of inflation
-------------------
In recent years, the impact of inflation on the Company's product costs
has been lower than the overall increase in the Consumer Price Index.
Net earnings
------------
Net earnings were $989.2 million or $5.75 per share, $819.4 million or
$4.64 per share and $660.9 million or $3.59 per share for 2005, 2004 and 2003,
respectively.
19
Accounting Standards
--------------------
In November 2004, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard No. 151, "Inventory Costs," (SFAS
151) effective for fiscal years beginning after June 15, 2005. SFAS 151 amends
Accounting Research Bulletin No. 43, Chapter 4, "Inventory Pricing," to clarify
the accounting for abnormal amounts of idle facility expense, freight, handling
costs and wasted material. SFAS 151 requires that those items be recognized as
current period charges and requires that allocation of fixed production overhead
to the cost of conversion be based on the normal capacity of the production
facilities. The adoption of SFAS 151 is not expected to have a material effect
on the Company's financial condition, results of operations or cash flows.
In December 2004, the FASB issued a revision to Statement of Financial
Accounting Standard No. 123, "Share-Based Payment," (SFAS 123(R)) effective for
fiscal years beginning after June 15, 2005. SFAS 123(R) requires all stock-based
compensation awards to be recorded at fair value as an expense in the Company's
consolidated financial statements. The Company does not currently have any
stock-based employee compensation subject to SFAS 123(R). Therefore, the
adoption of SFAS 123(R) is not expected to have an effect on the Company's
financial condition, results of operations or cash flows.
In May 2005, the FASB issued Statement of Financial Accounting Standard
No. 154, "Accounting Changes and Error Corrections," (SFAS 154) effective for
accounting changes and corrections of errors made in fiscal years beginning
after December 15, 2005. SFAS 154 replaces APB Opinion 20 and SFAS 3. Among
other changes, SFAS 154 requires retrospective application to prior periods'
financial statements for changes in accounting principle, unless it is
impractical to determine either the period-specific effects or the cumulative
effect of the change. SFAS 154 also requires that a change in depreciation,
amortization, or depletion method for long-lived non-financial assets be
accounted for as a change in accounting estimate effected by a change in
accounting principle. The adoption of SFAS 154 will only affect the Company's
financial condition or results of operations if it has such changes or
corrections of errors in the future.
In June 2005, the Emerging Issues Task Force (EITF) issued EITF Issue No.
05-6, "Determining the Amortization Period for Leasehold Improvements Purchased
After Lease Inception or Acquired in a Business Combination," (EITF No. 05-6)
effective for periods beginning after June 29, 2005. EITF No. 05-6 requires that
leasehold improvements acquired in a business combination be amortized over the
shorter of the useful life of the assets or a term that includes required lease
periods and renewals deemed to be reasonably assured at the date of acquisition.
EITF No. 05-6 also requires that leasehold improvements that are placed in
service significantly after and not contemplated at or near the beginning of the
lease term shall be amortized over the shorter of the useful life of the assets
or a term that includes required lease periods and renewals that are deemed to
be reasonably assured at the date of acquisition. The adoption of EITF No. 05-6
did not have an effect on the Company's financial condition, results of
operations or cash flows.
In October 2005, the FASB issued FASB Staff Position No. FAS 13-1,
"Accounting for Rental Costs Incurred during a Construction Period," (FAS 13-1)
effective for periods beginning after December 15, 2005. FAS 13-1 requires
rental costs associated with operating leases that are incurred during a
construction period to be recognized as rental expense as opposed to being
capitalized. The Company currently expenses rental costs associated with
operating leases incurred during the construction period in accordance with FAS
13-1. Therefore, the adoption of FAS 13-1 will not have an effect on the
Company's financial condition, results of operations or cash flows.
20
Critical Accounting Policies
----------------------------
The Company's discussion and analysis of its financial condition and
results of operations are based upon the Company's consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States of America. The preparation of these
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The Company's significant
accounting policies are described in Note 1 of the Notes to Consolidated
Financial Statements. The Company believes the following critical accounting
policies reflect its more significant judgments and estimates used in the
preparation of its consolidated financial statements:
Inventories
-----------
Inventories are valued at the lower of cost or market. The cost for
substantially all of the Company's inventories was determined using the dollar
value last-in, first-out method. Under this method, inventory is stated at cost,
which is determined by applying a cost-to-retail ratio to each similar
merchandise category's ending retail value. The cost of remaining inventories
was determined using the first-in, first-out ("FIFO") method. The FIFO cost of
inventory approximates replacement or current cost. The Company also reduces
inventory for estimated losses related to shrink.
Investments
-----------
The Company reviews its investments for other-than-temporary impairments based
on criteria that include the extent to which cost exceeds market value, the
duration of the market decline and the financial health of and prospects for the
issuer. This review requires significant judgment. If market or issuer
conditions decline, the Company may incur future impairments.
Property, Plant and Equipment and Depreciation
----------------------------------------------
Assets are recorded at cost and are depreciated using the straight-line method
over their estimated useful lives or the terms of their leases, if shorter, as
follows: buildings and improvements are at 10 - 40 years, furniture, fixtures
and equipment are at 3 - 20 years and leasehold improvements are at 1 - 40
years. The Company considers lease renewals in the useful life of its leasehold
improvements when such renewals are reasonably assured.
Long-Lived Assets
-----------------
The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the net book value of an asset may not be
recoverable. The Company's judgments regarding the existence of impairment
indicators are based on market conditions and operational performance, such as
operating profit and cash flows. The variability of these factors depends on a
number of conditions, including uncertainty about future events; therefore, the
Company's accounting estimates may change from period to period. These factors
could cause the Company to conclude that impairment indicators exist and the
applicable impairment tests could result in a determination that the value of
long-lived assets is impaired, resulting in a write-down of the long-lived
assets.
Revenue Recognition
-------------------
Revenue is recognized at the point of sale for retail sales. Vendor coupons that
are reimbursed are accounted for as sales. Coupons and other sales incentives
offered by the Company that are not reimbursed are recorded as a reduction of
sales.
21
Cost of Merchandise Sold
------------------------
Cost of merchandise sold includes costs of inventory and costs related to
in-store production. Cost of merchandise sold also includes inbound freight
charges, purchasing and receiving costs, warehousing costs and other costs of
the Company's distribution network.
Vendor allowances and credits, including cooperative advertising fees, received
from a vendor in connection with the purchase or promotion of the vendor's
products, are recognized as a reduction of cost of merchandise sold as earned.
These allowances and credits are recognized as earned in accordance with the
underlying agreement with the vendor and completion of the earning process.
Short-term vendor agreements with advance payment provisions are recorded as a
current liability and are recognized over the appropriate period as earned
according to the underlying agreement. Long-term vendor agreements with advance
payment provisions are recorded as a noncurrent liability and are recognized
over the appropriate period as earned according to the underlying agreement.
Self-Insurance
--------------
Self-insurance reserves are established for health care, fleet liability,
general liability and workers' compensation claims. These reserves are
determined based on actual claims experience and an estimate of claims incurred
but not reported, including, where necessary, actuarial studies. Actuarial
projections of losses for general liability and workers' compensation are
subject to a high degree of variability. The causes of variability include, but
are not limited to, such factors as future inflation rates, future economic
conditions, litigation trends and benefit level changes. The Company has
insurance coverage for losses in excess of varying amounts.
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; results of programs to control or reduce
costs, improve buying practices and control shrink; results of programs to
increase sales, including private-label sales, improve perishable departments
and improve pricing and promotional efforts; changes in the general economy;
changes in consumer spending; changes in population, employment and job growth
in the Company's principal markets; 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, increases in operating costs including, but not
limited to, labor costs, credit card fees and utility costs, particularly
electric utility costs, ability to construct new supermarkets 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.
22
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
-------------------------------------------------------------------
The Company does not utilize financial instruments for trading or other
speculative purposes, nor does it utilize leveraged financial instruments. The
Company does not consider to be material the potential losses in future
earnings, fair values and cash flows from reasonably possible near-term changes
in interest rates.
23
Management's Report on Internal Control over Financial Reporting
----------------------------------------------------------------
Management of the Company is responsible for establishing and maintaining
adequate internal control over financial reporting (as defined in Rule 13a-15(f)
and Rule 15d-15(f) under the Securities Exchange Act of 1934). The Company's
internal control over financial reporting is designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally
accepted accounting principles. Because of inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may
deteriorate.
Management assessed the effectiveness of the Company's internal control
over financial reporting as of December 31, 2005. In making this assessment,
management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control - Integrated
Framework. Based on this assessment and these criteria, management believes that
the Company's internal control over financial reporting was effective as of
December 31, 2005.
The Company's independent registered public accounting firm, KPMG LLP, has
issued an audit report on management's assessment of the Company's internal
control over financial reporting, which is included herein on page 27.
24
Item 8. Financial Statements and Supplementary Data
---------------------------------------------------
Index to Consolidated Financial Statements and Schedule
Page
----
Reports of Independent Registered Public Accounting Firm 26
Consolidated Financial Statements:
Consolidated Balance Sheets - December 31, 2005 and December 25, 2004 28
Consolidated Statements of Earnings - Years ended December 31, 2005,
December 25, 2004 and December 27, 2003 30
Consolidated Statements of Comprehensive Earnings - Years ended
December 31, 2005, December 25, 2004 and December 27, 2003 31
Consolidated Statements of Stockholders' Equity - Years ended
December 31, 2005, December 25, 2004 and December 27, 2003 32
Consolidated Statements of Cash Flows - Years ended December 31, 2005,
December 25, 2004 and December 27, 2003 33
Notes to Consolidated Financial Statements 35
The following consolidated financial statement schedule of the Company
for the years ended December 31, 2005, December 25, 2004 and
December 27, 2003 is submitted herewith:
Schedule:
II - Valuation and Qualifying Accounts 49
All other schedules are omitted as the required information is inapplicable
or the information is presented in the financial statements or related notes.
25
Report of Independent Registered Public Accounting Firm
-------------------------------------------------------
The Board of Directors and Stockholders
Publix Super Markets, Inc.:
We have audited the accompanying consolidated balance sheets of Publix Super
Markets, Inc. and subsidiaries (the "Company") as of December 31, 2005 and
December 25, 2004, and the related consolidated statements of earnings,
comprehensive earnings, stockholders' equity and cash flows for each of the
years in the three-year period ended December 31, 2005. In connection with our
audits of the consolidated financial statements, we have also audited the
financial statement schedule 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 the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Publix Super
Markets, Inc. and subsidiaries as of December 31, 2005 and December 25, 2004,
and the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 2005, in conformity with U.S.
generally accepted accounting principles. Also in our opinion, the related
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the effectiveness of the Company's
internal control over financial reporting as of December 31, 2005, based on
criteria established in Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our
report dated February 28, 2006 expressed an unqualified opinion on management's
assessment of, and the effective operation of, internal control over financial
reporting.
KPMG LLP
February 28, 2006
Tampa, Florida
Certified Public Accountants
26
Report of Independent Registered Public Accounting Firm
-------------------------------------------------------
The Board of Directors and Stockholders
Publix Super Markets, Inc.:
We have audited management's assessment, included in the accompanying
Management's Report on Internal Control over Financial Reporting, that Publix
Super Markets, Inc. and subsidiaries maintained effective internal control over
financial reporting as of December 31, 2005, based on criteria established in
Internal Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The Company's management is
responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial
reporting. Our responsibility is to express an opinion on management's
assessment and an opinion on the effectiveness of the Company's internal control
over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, evaluating management's assessment, testing and evaluating
the design and operating effectiveness of internal control, and performing such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
In our opinion, management's assessment that Publix Super Markets, Inc. and
subsidiaries maintained effective internal control over financial reporting as
of December 31, 2005, is fairly stated, in all material respects, based on
criteria established in Internal Control - Integrated Framework issued by COSO.
Also, in our opinion, Publix Super Markets, Inc. and subsidiaries maintained, in
all material respects, effective internal control over financial reporting as of
December 31, 2005, based on criteria established in Internal Control -
Integrated Framework issued by COSO.
We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheets of
Publix Super Markets, Inc. and subsidiaries as of December 31, 2005 and December
25, 2004, and the related consolidated statements of earnings, comprehensive
earnings, stockholders' equity and cash flows for each of the years in the
three-year period ended December 31, 2005, and our report dated February 28,
2006 expressed an unqualified opinion on those consolidated financial
statements.
KPMG LLP
February 28, 2006
Tampa, Florida
Certified Public Accountants
27
PUBLIX SUPER MARKETS, INC.
Consolidated Balance Sheets
December 31, 2005 and
December 25, 2004
Assets 2005 2004
------ ---- ----
(Amounts are in thousands)
Current assets:
Cash and cash equivalents $ 335,969 370,288
Short-term investments 119,303 101,718
Trade receivables 354,950 289,455
Merchandise inventories 1,109,543 1,054,183
Deferred tax assets 85,475 71,934
Prepaid expenses 42,521 11,804
---------- ---------
Total current assets 2,047,761 1,899,382
---------- ---------
Long-term investments 1,573,795 918,443
Other noncurrent assets 57,786 46,784
Property, plant and equipment:
Land 162,642 159,023
Buildings and improvements 1,101,419 1,068,364
Furniture, fixtures and equipment 3,309,086 3,160,507
Leasehold improvements 960,005 912,689
Construction in progress 42,460 72,765
---------- ---------
5,575,612 5,373,348
Less accumulated depreciation 2,527,731 2,273,686
---------- ---------
Net property, plant and equipment 3,047,881 3,099,662
---------- ---------
$6,727,223 5,964,271
========== =========
See accompanying notes to consolidated financial statements.
28
Liabilities and Stockholders' Equity 2005 2004
------------------------------------ ---- ----
(Amounts are in thousands,
except par value and share amounts)
Current liabilities:
Accounts payable $ 913,521 762,655
Accrued expenses:
Contribution to retirement plans 349,805 290,136
Self-insurance reserves 119,339 115,010
Salaries and wages 98,629 90,069
Other 181,627 187,451
---------- ---------
Total accrued expenses 749,400 682,666
---------- ---------
Federal and state income taxes 148,352 232,478
---------- ---------
Total current liabilities 1,811,273 1,677,799
Deferred tax liabilities 283,979 313,073
Self-insurance reserves 242,449 240,821
Accrued postretirement benefit cost 68,088 68,101
Other noncurrent liabilities 115,660 78,761
---------- ---------
Total liabilities 2,521,449 2,378,555
---------- ---------
Stockholders' equity:
Common stock of $1 par value. Authorized
300,000,000 shares; issued and
outstanding 169,388,472 shares
in 2005 and 172,591,732 shares in 2004 169,388 172,592
Additional paid-in capital 818,226 630,983
Retained earnings 3,231,816 2,779,592
--------- ---------
4,219,430 3,583,167
Accumulated other comprehensive
earnings (losses) (13,656) 2,549
---------- ---------
Total stockholders' equity 4,205,774 3,585,716
---------- ---------
Commitments and contingencies --- ---
---------- ---------
$6,727,223 5,964,271
========== =========
29
PUBLIX SUPER MARKETS, INC.
Consolidated Statements of Earnings
Years ended December 31, 2005, December 25, 2004
and December 27, 2003
2005 2004 2003
---- ---- ----
(Amounts are in thousands, except shares
outstanding and per share amounts)
Revenues:
Sales $ 20,589,130 18,554,486 16,760,749
Other operating income 155,681 131,885 126,120
------------ ----------- -----------
Total revenues 20,744,811 18,686,371 16,886,869
------------ ----------- -----------
Costs and expenses:
Cost of merchandise sold 15,059,680 13,577,740 12,275,132
Operating and administrative
expenses 4,231,402 3,869,791 3,613,759
------------ ----------- -----------
Total costs and expenses 19,291,082 17,447,531 15,888,891
------------ ----------- -----------
Operating profit 1,453,729 1,238,840 997,978
------------ ----------- -----------
Investment income, net 74,293 35,311 21,926
Other income, net 22,716 20,860 27,185
------------ ----------- -----------
Earnings before income tax
expense 1,550,738 1,295,011 1,047,089
Income tax expense 561,582 475,628 386,156
------------ ----------- -----------
Net earnings $ 989,156 819,383 660,933
============ =========== ===========
Weighted average number of
common shares outstanding 172,039,137 176,775,733 184,112,742
============ =========== ===========
Basic and diluted earnings
per common share based on
weighted average shares
outstanding $ 5.75 4.64 3.59
============ =========== ===========
See accompanying notes to consolidated financial statements.
30
PUBLIX SUPER MARKETS, INC.
Consolidated Statements of Comprehensive Earnings
Years ended December 31, 2005, December 25, 2004
and December 27, 2003
2005 2004 2003
---- ---- ----
(Amounts are in thousands)
Net earnings $989,156 819,383 660,933
Other comprehensive earnings (losses)
Unrealized (loss) gain on investment
securities available-for-sale,
net of tax effect of ($8,484),
$419 and $3,174 in 2005, 2004
and 2003, respectively (13,510) 668 5,055
Reclassification adjustment for net
realized gain on investment
securities available-for-sale,
net of tax effect of ($1,692),
($1,348) and ($800) in 2005,
2004 and 2003, respectively (2,695) (2,147) (1,274)
-------- ------- -------
Comprehensive earnings $972,951 817,904 664,714
======== ======= =======
See accompanying notes to consolidated financial statements.
31
PUBLIX SUPER MARKETS, INC.
Consolidated Statements of Stockholders' Equity
Years ended December 31, 2005, December 25, 2004
and December 27, 2003
Common
Stock
(Acquired Accumulated Total
Additional From) Sold Other Stock-
Common Paid-in Retained to Stock- Comprehensive holders'
Stock Capital Earnings holders Earnings Equity
----- ------- -------- ------- -------- ------
(Amounts are in thousands, except per share and share amounts)
Balances at December 28, 2002 $189,168 421,019 2,397,634 --- 247 3,008,068
Comprehensive earnings for the year --- --- 660,933 --- 3,781 664,714
Cash dividends, $.40 per share --- --- (75,455) --- --- (75,455)
Contribution of 5,298,904 shares
to retirement plans 1,705 69,313 --- 132,990 --- 204,008
Acquired 17,631,828 shares
from stockholders --- --- --- (694,669) --- (694,669)
Sale of 1,534,568 shares to
stockholders 102 3,822 --- 58,720 --- 62,644
Retirement of 12,605,111 shares (12,606) --- (490,353) 502,959 --- ---
-------- ------- --------- -------- ------- ---------
Balances at December 27, 2003 178,369 494,154 2,492,759 --- 4,028 3,169,310
Comprehensive earnings (losses)
for the year --- --- 819,383 --- (1,479) 817,904
Cash dividends, $.45 per share --- --- (80,764) --- --- (80,764)
Contribution of 3,845,892 shares
to retirement plans 2,506 133,243 --- 62,314 --- 198,063
Acquired 11,079,191 shares
from stockholders --- --- --- (598,516) --- (598,516)
Sale of 1,455,618 shares to
stockholders 71 3,586 --- 76,062 --- 79,719
Retirement of 8,354,336 shares (8,354) --- (451,786) 460,140 --- ---
-------- ------- --------- -------- ------- ---------
Balances at December 25, 2004 172,592 630,983 2,779,592 --- 2,549 3,585,716
Comprehensive earnings (losses)
for the year --- --- 989,156 --- (16,205) 972,951
Cash dividends, $.70 per share --- --- (121,949) --- --- (121,949)
Contribution of 3,586,745 shares
to retirement plans 2,842 183,986 --- 42,724 --- 229,552
Acquired 8,689,051 shares
from stockholders --- --- --- (592,566) --- (592,566)
Sale of 1,899,046 shares to
stockholders 54 3,257 --- 128,759 --- 132,070
Retirement of 6,100,062 shares (6,100) --- (414,983) 421,083 --- ---
-------- ------- --------- -------- ------- ---------
Balances at December 31, 2005 $169,388 818,226 3,231,816 --- (13,656) 4,205,774
======== ======= ========= ======== ======= =========
See accompanying notes to consolidated financial statements.
32
PUBLIX SUPER MARKETS, INC.
Consolidated Statements of Cash Flows
Years ended December 31, 2005, December 25, 2004
and December 27, 2003
2005 2004 2003
---- ---- ----
(Amounts are in thousands)
Cash flows from operating activities:
Cash received from customers $ 20,560,245 18,541,695 16,752,469
Cash paid to employees and suppliers (18,309,454) (16,611,646) (15,044,383)
Income taxes paid (678,167) (242,569) (344,364)
Payment for self-insured claims (200,477) (185,869) (179,424)
Dividends and interest received 73,708 33,230 20,900
Other operating cash receipts 142,185 117,416 108,072
Other operating cash payments (8,206) (9,079) (9,613)
------------ ---------- -----------
Net cash provided by operating
activities 1,579,834 1,643,178 1,303,657
------------ ---------- -----------
Cash flows from investing activities:
Payment for property, plant and
equipment (338,946) (403,373) (563,576)
Proceeds from sale of property,
plant and equipment 11,423 69,254 35,679
Proceeds from sale-leasebacks 4,860 25,961 8,098
Payment for investment securities -
available-for-sale (AFS) (1,090,077) (793,487) (340,499)
Proceeds from sale and maturity of
investment securities - AFS 393,933 159,811 327,485
Net proceeds from (payments to) joint
ventures and other investments 275 (7,244) 6,528
Other, net (13,045) (1,192) (212)
------------ ---------- -----------
Net cash used in investing
activities (1,031,577) (950,270) (526,497)
------------ ---------- -----------
Cash flows from financing activities:
Payment for acquisition of common
stock (592,566) (598,516) (694,669)
Proceeds from sale of common stock 132,070 79,719 62,644
Dividends paid (121,949) (80,764) (75,455)
Other (131) (131) (131)
------------ ---------- -----------
Net cash used in financing
activities (582,576) (599,692) (707,611)
------------ ---------- -----------
Net (decrease) increase in cash and
cash equivalents (34,319) 93,216 69,549
Cash and cash equivalents at beginning
of year 370,288 277,072 207,523
------------ ---------- -----------
Cash and cash equivalents at end
of year $ 335,969 370,288 277,072
============ ========== ===========
See accompanying notes to consolidated financial statements.
33
PUBLIX SUPER MARKETS, INC.
Consolidated Statements of Cash Flows
(Continued)
2005 2004 2003
---- ---- ----
(Amounts are in thousands)
Reconciliation of net earnings to
net cash provided by operating
activities
Net earnings $ 989,156 819,383 660,933
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 373,684 379,920 343,997
Retirement contributions paid
or payable in common stock 290,422 244,087 199,620
Deferred income taxes (32,459) 13,089 45,415
Loss on sale of property, plant
and equipment 7,663 13,582 21,578
Amortization of deferred income from
sale-leasebacks (5,213) (2,235) (483)
Gain on sale of investments (4,387) (3,495) (2,074)
Self-insurance reserves in excess
of current payments 5,957 29,632 46,582
Postretirement accruals (less than) in
excess of current payments (13) 141 (1,102)
(Decrease) increase in advance
purchase allowances (130) 119 (2,466)
Other, net 10,618 4,952 1,531
Change in cash from:
Trade receivables (65,495) (48,354) (53,024)
Merchandise inventories (55,360) (72,727) (59,213)
Prepaid expenses (30,717) (2,026) (5,515)
Accounts payable and
accrued expenses 180,234 47,140 111,501
Federal and state income taxes (84,126) 219,970 (3,623)
---------- --------- ---------
Total adjustments 590,678 823,795 642,724
---------- --------- ---------
Net cash provided by operating
activities $1,579,834 1,643,178 1,303,657
========== ========= =========
See accompanying notes to consolidated financial statements.
34
PUBLIX SUPER MARKETS, INC.
Notes to Consolidated Financial Statements
December 31, 2005, December 25, 2004
and December 27, 2003
(1) Summary of Significant Accounting Policies
------------------------------------------
(a) Business
--------
The Company is in the primary business of operating retail food
supermarkets in Florida, Georgia, South Carolina, Alabama and
Tennessee. The Company operates in a single industry segment.
(b) Principles of Consolidation
---------------------------
The consolidated financial statements include all entities over which
the Company has control, including its majority-owned subsidiaries.
The Company accounts for equity investments in companies over which it
has the ability to exercise significant influence, but does not hold a
controlling interest, under the equity method. All significant
intercompany balances and transactions are eliminated in
consolidation.
(c) Fiscal Year
-----------
The fiscal year ends on the last Saturday in December. Fiscal year
2005 includes 53 weeks. Fiscal years 2004 and 2003 include 52 weeks.
(d) Cash Equivalents
----------------
The Company considers all liquid investments with maturities of three
months or less to be cash equivalents.
(e) Trade Receivables
-----------------
Trade receivables primarily includes amounts due from vendor
allowances, debit and credit card sales and third party insurance
pharmacy billings.
(f) Inventories
-----------
Inventories are valued at the lower of cost or market. The cost for
approximately 86% of inventories was determined using the dollar value
last-in, first-out method as of December 31, 2005 and December 25,
2004. The cost of remaining inventories was determined using the
first-in, first-out ("FIFO") method. The FIFO cost of inventory
approximates replacement or current cost.
(g) Investments
-----------
The Company determines the appropriate classification of debt
securities at the time of purchase and reevaluates such designation as
of each balance sheet date. Debt securities are classified as
held-to-maturity when the Company has the positive intent and ability
to hold the securities to maturity. Held-to-maturity securities are
stated at cost, adjusted for amortization of premiums and accretion of
discounts to maturity. Such amortization and accretion is included in
investment income, net. The Company had no held-to-maturity securities
as of December 31, 2005 or December 25, 2004.
(Continued)
35
PUBLIX SUPER MARKETS, INC.
Notes to Consolidated Financial Statements
All of the Company's debt and marketable equity securities are
classified as available-for-sale. Available-for-sale securities are
carried at fair value, with the unrealized gains and losses, net of
tax, reported as other comprehensive earnings and included as a
separate component of stockholders' equity. The cost of debt
securities in this category is adjusted for amortization of premiums
and accretion of discounts to maturity. Such amortization and
accretion is included in investment income, net. The Company reviews
its investments for impairment based on criteria that include the
extent to which cost exceeds market value, the duration of the market
decline and the financial health of and prospects for the issuer.
Realized gains and losses and declines in value judged to be
other-than-temporary on available-for-sale securities are included in
investment income, net. The cost of securities sold is based on the
specific identification method.
Interest income is accrued as earned. Dividend income is recognized as
income on the ex-dividend date of the stock.
The Company also from time to time holds investments in joint
ventures, partnerships or other equity investments for which
evaluation of the existence and quantification of other-than-temporary
declines in value may be required. Realized gains and losses and
declines in value judged to be other-than-temporary on other
investments are included in investment income, net.
(h) Property, Plant and Equipment and Depreciation
----------------------------------------------
Assets are recorded at cost and are depreciated using the
straight-line method over their estimated useful lives or the terms of
their leases, if shorter, as follows:
Buildings and improvements 10 - 40 years
Furniture, fixtures and equipment 3 - 20 years
Leasehold improvements 1 - 40 years
Maintenance and repairs are charged to operating expenses as incurred.
Expenditures for renewals and betterments are capitalized. The gain or
loss realized on disposed assets or assets to be disposed of is
recorded in operating and administrative expenses in the consolidated
statements of earnings.
(i) Capitalized Computer Software Costs
-----------------------------------
The Company capitalizes certain costs incurred in connection with
developing or obtaining software for internal use. These costs are
capitalized and amortized over a three year life. The amounts
capitalized were approximately $10,176,000, $17,444,000 and
$22,351,000 for the fiscal years ended December 31, 2005, December 25,
2004 and December 27, 2003, respectively.
(j) Long-Lived Assets
-----------------
The Company reviews its long-lived assets for impairment whenever
events or changes in circumstances indicate that the net book value of
an asset may not be recoverable. Recoverability of assets to be held
and used is measured by a comparison of the net book value of an asset
to the future net undiscounted cash flows expected to be generated by
the
(Continued)
36
PUBLIX SUPER MARKETS, INC.
Notes to Consolidated Financial Statements
asset. An impairment loss would be recorded for the excess of the net
book value over the fair value of the asset impaired. The fair value
is estimated based on expected discounted future cash flows. Assets to
be disposed of are reported at the lower of the carrying amount or
fair value less cost to sell and are no longer depreciated.
(k) Self-Insurance
--------------
Self-insurance reserves are established for health care, fleet
liability, general liability and workers' compensation claims. These
reserves are determined based on actual experience including, where
necessary, actuarial studies. The Company has insurance coverage for
losses in excess of varying amounts.
(l) Comprehensive Earnings
----------------------
Comprehensive earnings includes net earnings and other comprehensive
earnings. Other comprehensive earnings includes revenues, expenses,
gains and losses that have been excluded from net earnings and
recorded directly to stockholders' equity. Included in other
comprehensive earnings for the Company are unrealized gains and losses
on available-for-sale securities, net of income taxes.
(m) Revenue Recognition
-------------------
Revenue is recognized at the point of sale for retail sales. Vendor
coupons that are reimbursed are accounted for as sales. Coupons and
other sales incentives offered by the Company that are not reimbursed
are recorded as a reduction of sales.
(n) Other Operating Income
----------------------
Other operating income includes income generated from other
activities, primarily lottery commissions, automated teller
transactions, commissions on licensee sales, check cashing fees,
circulation commissions, money transfer and money order fees, coupon
handling fees, in-store subleases and vending machine commissions.
(o) Cost of Merchandise Sold
------------------------
Cost of merchandise sold includes costs of inventory and costs related
to in-store production. Cost of merchandise sold also includes inbound
freight charges, purchasing and receiving costs, warehousing costs and
other costs of the Company's distribution network.
Vendor allowances and credits, including cooperative advertising fees,
received from a vendor in connection with the purchase or promotion of
the vendor's products, are recognized as a reduction of cost of
merchandise sold as earned. These allowances and credits are
recognized as earned in accordance with the underlying agreement with
the vendor and completion of the earning process. Short-term vendor
agreements with advance payment provisions are recorded as a current
liability and are recognized over the appropriate period as earned
according to the underlying agreement. Long-term vendor agreements
with advance payment provisions are recorded as a noncurrent liability
and are recognized over the appropriate period as earned according to
the underlying agreement.
(Continued)
37
PUBLIX SUPER MARKETS, INC.
Notes to Consolidated Financial Statements
(p) Advertising Costs
-----------------
Advertising costs are expensed as incurred and were approximately
$153,528,000, $140,668,000 and $125,209,000 for the fiscal years ended
December 31, 2005, December 25, 2004 and December 27, 2003,
respectively.
(q) Other Income, net
-----------------
Other income, net includes rent received from shopping center
operations, net of related expenses, and other miscellaneous
nonoperating income.
(r) Income Taxes
------------
Deferred tax assets and liabilities are established for temporary
differences between financial and tax reporting bases and are
subsequently adjusted to reflect changes in tax rates expected to be
in effect when the temporary differences reverse.
(s) Earnings Per Share
------------------
Basic and diluted earnings per common share are calculated by dividing
net earnings by the weighted average number of common shares
outstanding. Basic and diluted earnings per common share are the same
because the Company does not have options or other stock compensation
programs that would impact the calculation of diluted earnings per
share.
(t) Use of Estimates
----------------
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities as of the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(u) Reclassifications
-----------------
Certain 2004 and 2003 amounts have been reclassified to conform with
the 2005 presentation.
(2) Merchandise Inventories
-----------------------
If the first-in, first-out method of valuing inventories had been used by
the Company to value all inventories, inventories and current assets would
have been higher than reported by approximately $152,047,000, $141,808,000
and $127,989,000 as of December 31, 2005, December 25, 2004 and December
27, 2003, respectively.
(3) Fair Value of Financial Instruments
-----------------------------------
The following methods and assumptions were used by the Company in
estimating the fair value of its financial instruments:
(Continued)
38
PUBLIX SUPER MARKETS, INC.
Notes to Consolidated Financial Statements
Cash and cash equivalents: The carrying amount for cash and cash
equivalents approximates fair value.
Investment securities: The fair values for debt and marketable equity
securities are based on quoted market prices.
The carrying amount of the Company's other financial instruments as of
December 31, 2005 and December 25, 2004 approximated their respective fair
values.
All other investments are accounted for using the equity method. The
carrying amount of other investments approximates fair value.
(4) Investments
-----------
Following is a summary of investments as of December 31, 2005 and December
25, 2004:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
(Amounts are in thousands)
2005
----
Available-for-sale:
Tax exempt bonds $ 549,035 605 6,264 543,376
Taxable bonds 1,110,192 2,149 21,728 1,090,613
Equity securities 13,998 3,006 --- 17,004
---------- ------ ------ ---------
1,673,225 5,760 27,992 1,650,993
Other investments 42,105 --- --- 42,105
---------- ------ ------ ---------
$1,715,330 5,760 27,992 1,693,098
========== ====== ====== =========
2004
----
Available-for-sale:
Tax exempt bonds $ 408,393 1,222 2,539 407,076
Taxable bonds 533,903 1,925 4,241 531,587
Equity securities 41,124 7,856 74 48,906
---------- ------ ------ ---------
983,420 11,003 6,854 987,569
Other investments 32,592 --- --- 32,592
---------- ------ ------ ---------
$1,016,012 11,003 6,854 1,020,161
========== ====== ====== =========
The realized gains on sales of available-for-sale securities totaled
approximately $5,517,000, $5,462,000 and $4,544,000 for the fiscal years
ended December 31, 2005, December 25, 2004 and December 27, 2003,
respectively, and the realized losses totaled approximately $1,130,000,
$1,967,000 and $2,470,000, respectively.
The net realized gains (losses) on other investments totaled approximately
$1,280,000, $1,944,000 and ($176,000) for the fiscal years ended December
31, 2005, December 25, 2004 and December 27, 2003, respectively.
(Continued)
39
PUBLIX SUPER MARKETS, INC.
Notes to Consolidated Financial Statements
The amortized cost and estimated fair value of debt and marketable equity
securities classified as available-for-sale and other investments as of
December 31, 2005 and December 25, 2004, by expected maturity, are as
follows:
2005 2004
-------------------- --------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
---- ----- ---- -----
(Amounts are in thousands)
Due in one year or less $ 119,937 119,303 101,771 101,718
Due after one year through
five years 328,729 324,661 207,800 206,933
Due after five years through
ten years 75,403 73,878 65,896 65,786
Due after ten years 1,135,158 1,116,147 566,829 564,226
---------- --------- --------- ---------
1,659,227 1,633,989 942,296 938,663
Equity securities 13,998 17,004 41,124 48,906
Other investments 42,105 42,105 32,592 32,592
---------- --------- --------- ---------
$1,715,330 1,693,098 1,016,012 1,020,161
========== ========= ========= =========
Following is a summary of temporarily impaired investments as of December
31, 2005 and December 25, 2004:
Less Than 12 Months
12 Months or Longer Total
--------- --------- -----
Unreal- Unreal- Unreal-
Fair ized Fair ized Fair ized
Value Losses Value Losses Value Losses
----- ------ ----- ------ ----- ------
(Amounts are in thousands)
2005
----
Tax exempt bonds $294,980 2,333 196,053 3,931 491,033 6,264
Taxable bonds 623,392 13,185 232,159 8,543 855,551 21,728
-------- ------ ------- ------ --------- ------
Total temporarily
impaired
investments $918,372 15,518 428,212 12,474 1,346,584 27,992
======== ====== ======= ====== ========= ======
2004
----
Tax exempt bonds $286,815 1,722 25,696 817 312,511 2,539
Taxable bonds 294,955 2,994 48,097 1,247 343,052 4,241
Equity securities 3,798 17 126 57 3,924 74
-------- ------ ------- ------ --------- ------
Total temporarily
impaired
investments $585,568 4,733 73,919 2,121 659,487 6,854
======== ====== ======= ====== ========= ======
The Company believes the unrealized losses presented above are temporary.
To make this determination, management reviews the credit worthiness of
the issuers as well as underlying factors mitigating risk of loss of
principal or default of interest payments. There are 325 investment issues
contributing to the total unrealized loss of $27,992,000 as of December
31, 2005. The unrealized loss is driven by changes in interest rates
impacting the market value of the tax exempt and taxable
(Continued)
40
PUBLIX SUPER MARKETS, INC.
Notes to Consolidated Financial Statements
bonds owned by the Company. The Company continues to receive scheduled
principal and interest payments on these investments.
(5) Postretirement Benefits
-----------------------
The Company provides life insurance benefits for salaried and hourly
full-time employees. Such employees retiring from the Company on or after
attaining age 55 and having ten years of credited full-time service are
entitled to postretirement life insurance benefits.
Effective January 1, 2002, the Company amended the plan's eligibility
requirements. As of October 1, 2001, an employee must have had at least
five years of full-time service and the employee's age plus years of
credited service must have equaled 65 or greater to retain postretirement
life insurance benefits at retirement. In addition, the employee must be
at least age 55 with ten years of full-time service at retirement to
receive the benefit.
The Company made benefit payments to beneficiaries of retirees of
approximately $2,841,000, $2,140,000 and $2,255,000 during the fiscal
years ended December 31, 2005, December 25, 2004 and December 27, 2003,
respectively.
The following tables provide a reconciliation of the changes in the
benefit obligations and fair value of plan assets measured as of October
1, and a statement of the funded status as of December 31, 2005 and
December 25, 2004:
2005 2004
---- ----
(Amounts are in thousands)
Change in benefit obligation:
Benefit obligation as of beginning of year $ 80,174 72,702
Service cost 479 674
Interest cost 4,568 4,337
Actuarial loss 3,248 4,601
Benefit payments (2,841) (2,140)
--------- -------
Benefit obligation as of end of year $ 85,628 80,174
========= =======
Change in fair value of plan assets:
Fair value of plan assets as of beginning
of year $ --- ---
Employer contributions 2,841 2,140
Benefit payments (2,841) (2,140)
--------- -------
Fair value of plan assets as of end of year $ --- ---
========= =======
Funded status $ (85,628) (80,174)
Unrecognized actuarial loss 19,986 18,594
Unrecognized prior service cost (2,446) (6,521)
--------- -------
Accrued postretirement benefit cost $ (68,088) (68,101)
========= =======
(Continued)
41
PUBLIX SUPER MARKETS, INC.
Notes to Consolidated Financial Statements
Following are the actuarial assumptions that were used in the calculation
of the year end benefit obligation:
2005 2004 2003
---- ---- ----
Discount rate 5.50% 5.75% 6.00%
Rate of compensation increase 4.00% 4.00% 4.00%
Net periodic postretirement benefit cost consists of the following
components:
2005 2004 2003
---- ---- ----
(Amounts are in thousands)
Service cost $ 479 674 775
Interest cost 4,568 4,337 4,191
Amortization of prior service cost (4,075) (4,075) (4,075)
Recognized actuarial loss 1,856 1,345 262
------- ------ ------
Net periodic postretirement benefit cost $ 2,828 2,281 1,153
======= ====== ======
Actuarial losses are amortized over the average remaining service life of
active participants when the accumulation of such losses exceeds 10% of
the greater of the projected benefit obligation or the fair value of plan
assets.
Following are the actuarial assumptions that were used in the calculation
of the net periodic postretirement benefit cost:
2005 2004 2003
---- ---- ----
Discount rate 5.75% 6.00% 6.75%
Rate of compensation increase 4.00% 4.00% 4.00%
The following benefit payments, which reflect expected future service, as
appropriate, are expected to be paid:
Year
----
(Amounts are in thousands)
2006 $ 2,684
2007 2,933
2008 3,188
2009 3,448
2010 3,706
2011 through 2015 22,681
(Continued)
42
PUBLIX SUPER MARKETS, INC.
Notes to Consolidated Financial Statements
(6) Retirement Plans
----------------
The Company has a trusteed, noncontributory Employee Stock Ownership Plan
(ESOP) for the benefit of eligible employees. The amount of the Company's
discretionary contribution to the ESOP is determined annually by the Board
of Directors and can be made in Company common stock or cash. The expense
recorded for contributions to this plan was approximately $273,429,000,
$228,585,000 and $184,849,000 for the fiscal years ended December 31,
2005, December 25, 2004 and December 27, 2003, respectively.
The Company has a 401(k) plan for the benefit of eligible employees. The
401(k) plan is a voluntary defined contribution plan. Eligible employees
may contribute up to 10% of their eligible annual compensation, subject to
the maximum contribution limits established by Federal law. The Company
may make a discretionary annual matching contribution to eligible
participants of this plan as determined by the Board of Directors. During
2005, 2004 and 2003, the Board of Directors approved a match of 50% of
eligible contributions up to 3% of eligible wages, not to exceed a maximum
match of $750 per employee. The match, which is determined as of the last
day of the plan year and paid in the subsequent plan year, is in common
stock of the Company. The expense recorded for the Company's match to the
401(k) plan was approximately $16,993,000, $15,502,000 and $14,771,000 for
the fiscal years ended December 31, 2005, December 25, 2004 and December
27, 2003, respectively.
The Company intends to continue its retirement plans; however, the right
to modify, amend, terminate or merge these plans has been reserved. In the
event of termination, all amounts contributed under the plans must be paid
to the participants or their beneficiaries.
(7) Income Taxes
------------
Total income taxes for the years ended December 31, 2005, December 25,
2004 and December 27, 2003 were allocated as follows:
2005 2004 2003
---- ---- ----
(Amounts are in thousands)
Earnings $561,582 475,628 386,156
Other comprehensive earnings (10,176) (929) 2,374
-------- ------- -------
$551,406 474,699 388,530
======== ======= =======
(Continued)
43
PUBLIX SUPER MARKETS, INC.
Notes to Consolidated Financial Statements
The provision for income taxes consists of the following:
Current Deferred Total
------- -------- -----
(Amounts are in thousands)
2005
----
Federal $518,473 (27,920) 490,553
State 75,568 (4,539) 71,029
-------- ------- -------
$594,041 (32,459) 561,582
======== ======= =======
2004
----
Federal $400,202 13,899 414,101
State 62,337 (810) 61,527
-------- ------- -------
$462,539 13,089 475,628
======== ======= =======
2003
----
Federal $294,488 39,021 333,509
State 46,253 6,394 52,647
-------- ------- -------
$340,741 45,415 386,156
======== ======= =======
The actual tax expense for the fiscal years ended December 31, 2005,
December 25, 2004 and December 27, 2003 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:
2005 2004 2003
---- ---- ----
(Amounts are in thousands)
Computed "expected" tax expense $542,758 453,254 366,481
State income taxes (net of
Federal income tax benefit) 46,169 39,993 34,221
Other, net (27,345) (17,619) (14,546)
-------- ------- -------
$561,582 475,628 386,156
======== ======= =======
(Continued)
44
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 31, 2005 and December 25, 2004 are as follows:
2005 2004
---- ----
(Amounts are in thousands)
Deferred tax assets:
Self-insurance reserves $124,829 125,254
Retirement plan contributions 35,672 29,863
Postretirement benefit cost 26,267 26,272
Reserves not currently deductible 18,395 17,602
Advance purchase allowances 7,866 11,197
Inventory capitalization 6,748 6,526
Other 15,550 6,370
-------- -------
Total deferred tax assets $235,327 223,084
======== =======
Deferred tax liabilities:
Property, plant and equipment,
principally due to depreciation $425,971 454,134
Other 7,860 10,089
-------- -------
Total deferred tax liabilities $433,831 464,223
======== =======
The Company expects the results of future operations and the reversal of
deferred tax liabilities to generate sufficient taxable income to allow
utilization of deferred tax assets; therefore, no valuation allowance has
been recorded as of December 31, 2005 or December 25, 2004.
(8) PublixDirect Closure
--------------------
During the third quarter of 2003, the Company announced its decision to
close its online grocery shopping service operated under its wholly owned
subsidiary, PublixDirect. As a result of the decision to close
PublixDirect effective August 23, 2003, the Company recorded an expense of
$30.0 million during the third quarter of 2003. The expense recorded
represented approximately $17.0 million in asset impairments, $10.0
million in operating lease obligations and $3.0 million in payroll
obligations and other costs. The expense was recognized in the Company's
consolidated statements of earnings and is included in operating and
administrative expenses. The impact of the expense recorded on net
earnings was approximately $18.0 million or $.10 per share for the fiscal
year ended December 27, 2003.
(Continued)
45
PUBLIX SUPER MARKETS, INC.
Notes to Consolidated Financial Statements
(9) Commitments and Contingencies
-----------------------------
(a) Operating Leases
----------------
The Company conducts a major portion of its retail operations from
leased premises. Initial terms of the leases are typically 20 years,
followed by renewal options at five year intervals and may include
rent escalation clauses. Contingent rentals include reimbursement of
insurance and maintenance and for certain premises, additional rentals
based on a percentage of sales in excess of stipulated minimums. The
reimbursement of insurance and maintenance is generally based on the
Company's prorata share using square footage. The Company recognizes
rent expense for operating leases with rent escalation clauses on a
straight-line basis over the applicable lease term. Additionally, the
Company has operating leases for certain transportation and other
equipment.
Total rental expense for the fiscal years ended December 31, 2005,
December 25, 2004 and December 27, 2003, is as follows:
2005 2004 2003
---- ---- ----
(Amounts are in thousands)
Minimum rentals $335,608 289,213 266,108
Contingent rentals 44,233 39,650 35,979
Sublease rental income (9,245) (8,461) (8,247)
-------- ------- -------
$370,596 320,402 293,840
======== ======= =======
As of December 31, 2005, 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)
2006 $ 336,122 (6,262) 329,860
2007 328,156 (4,148) 324,008
2008 318,484 (2,036) 316,448
2009 307,155 (1,423) 305,732
2010 297,399 (1,224) 296,175
Thereafter 2,515,643 (1,741) 2,513,902
---------- ------- ---------
$4,102,959 (16,834) 4,086,125
========== ======= =========
(Continued)
46
PUBLIX SUPER MARKETS, INC.
Notes to Consolidated Financial Statements
The Company also owns shopping centers which are leased to tenants for
minimum monthly rentals plus, in certain instances, contingent
rentals. Contingent rentals include reimbursement of insurance and
maintenance and in certain instances, additional rentals based on a
percentage of sales in excess of stipulated minimums. Contingent
rentals are included in trade receivables and were approximately
$583,000 and $1,604,000 as of December 31, 2005 and December 25, 2004,
respectively. Rental income was approximately $18,531,000, $17,321,000
and $18,802,000 for the fiscal years ended December 31, 2005, December
25, 2004 and December 27, 2003, respectively. The approximate amounts
of minimum future rental payments to be received under noncancelable
operating leases are $14,784,000, $12,525,000, $9,876,000, $7,245,000
and $4,657,000 for the years 2006 through 2010, respectively, and
$24,370,000 thereafter.
(b) Letters of Credit
-----------------
As of December 31, 2005, the Company had $9,500,000 outstanding in
trade letters of credit and $1,000,000 in standby letters of credit to
support certain purchase obligations. In addition, the Company had
$224,600,000 in standby letters of credit outstanding for the benefit
of the Company's insurance carriers related to self-insurance
reserves.
(c) Litigation
----------
The Company is a party in various legal claims and actions considered
in the normal course of business. In the opinion of management, the
ultimate resolution of these legal proceedings will not have a
material adverse effect on the Company's financial condition, results
of operations or cash flows.
(Continued)
47
PUBLIX SUPER MARKETS, INC.
Notes to Consolidated Financial Statements
(10) Quarterly Information (unaudited)
---------------------------------
Following is a summary of the quarterly results of operations for the
fiscal years ended December 31, 2005 and December 25, 2004. All quarters
have 13 weeks except the fourth quarter of 2005 which has 14 weeks.
Quarter Ended
---------------------------------------------------
March June September December
----- ---- --------- --------
(Amounts are in thousands, except per share amounts)
2005
----
Revenues $5,180,473 4,850,927 4,934,116 5,779,295
Costs and expenses $4,792,466 4,502,433 4,647,649 5,348,534
Net earnings $ 259,106 234,904 200,270 294,876
Basic and diluted
earnings per common
share, based on
weighted average
shares outstanding $ 1.50 1.35 1.17 1.74
2004
----
Revenues $4,682,820 4,527,748 4,662,731 4,813,072
Costs and expenses $4,369,490 4,221,165 4,391,943 4,464,933
Net earnings $ 203,396 199,409 183,711 232,867
Basic and diluted
earnings per common
share, based on
weighted average
shares outstanding $ 1.14 1.11 1.04 1.34
48
Schedule II
-----------
PUBLIX SUPER MARKETS, INC.
Valuation and Qualifying Accounts
Years ended December 31, 2005, December 25, 2004
and December 27, 2003
(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 31, 2005
Reserves not deducted from assets:
Self-insurance reserves:
-Current $115,010 204,806 200,477 119,339
-Noncurrent 240,821 1,628 --- 242,449
-------- ------- ------- -------
$355,831 206,434 200,477 361,788
======== ======= ======= =======
Year ended December 25, 2004
Reserves not deducted from assets:
Self-insurance reserves:
-Current $123,462 177,417 185,869 115,010
-Noncurrent 202,737 38,084 --- 240,821
-------- ------- ------- -------
$326,199 215,501 185,869 355,831
======== ======= ======= =======
Year ended December 27, 2003
Reserves not deducted from assets:
Self-insurance reserves:
-Current $102,722 200,164 179,424 123,462
-Noncurrent 176,895 25,842 --- 202,737
-------- ------- ------- -------
$279,617 226,006 179,424 326,199
======== ======= ======= =======
49
Item 9. Changes in and Disagreements with Accountants on Accounting and
--------------------------------------------------------------------------------
Financial Disclosure
--------------------
None
Item 9A. Controls and Procedures
---------------------------------
Disclosure Controls and Procedures
----------------------------------
As of the end of the period covered by this annual report, the Company
carried out an evaluation, under the supervision and with the participation of
the Company's management, including the Company's Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures pursuant to Exchange Act Rule
13a-15. Based upon that evaluation, the Chief Executive Officer and the Chief
Financial Officer concluded that the Company's disclosure controls and
procedures are effective in timely alerting them to material information
relating to the Company (including its consolidated subsidiaries) required to be
included in the Company's periodic Securities and Exchange Commission filings.
There have been no changes in the Company's internal control over financial
reporting identified in connection with the evaluation that occurred during the
quarter ended December 31, 2005, that have materially affected, or are
reasonably likely to materially affect, the internal control over financial
reporting.
Internal Control over Financial Reporting
-----------------------------------------
Management's report on the Company's internal control over financial
reporting is included on page 24 of this report. The independent registered
public accounting firm has issued their report, included herein on page 27, (1)
on management's assessment of the effectiveness of internal control over
financial reporting and (2) on the effectiveness of internal control over
financial reporting.
Item 9B. Other Information
---------------------------
None
50
PART III
Item 10. Directors and Executive Officers of the Registrant
------------------------------------------------------------
Certain information concerning the directors and executive officers of the
Company is incorporated by reference to pages 2 through 8 of the Proxy Statement
of the Company (2006 Proxy Statement) which the Company intends to file no later
than 120 days after its fiscal year end. Certain information concerning the
executive officers of the Company is set forth in Part I under the caption
"Executive Officers of the Company."
The Company has adopted a Code of Ethical Conduct for Financial Managers
that applies to the Company's principal executive officer, principal financial
officer, principal accounting officer or controller and all persons performing
similar functions. A copy of the Code of Ethical Conduct for Financial Managers
was filed as Exhibit 14 to the Annual Report of the Company on Form 10-K for the
year ended December 28, 2002.
Item 11. Executive Compensation
--------------------------------
Information regarding executive compensation is incorporated by reference
to page 5 and pages 8 through 11 of the 2006 Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management
------------------------------------------------------------------------
Information regarding security ownership is incorporated by reference to
pages 6 through 8 of the 2006 Proxy Statement.
Item 13. Certain Relationships and Related Transactions
--------------------------------------------------------
Information regarding certain relationships and related transactions is
incorporated by reference to pages 3 and 8 of the 2006 Proxy Statement.
Item 14. Principal Accounting Fees and Services
------------------------------------------------
Information regarding principal accounting fees and services is
incorporated by reference to page 12 of the 2006 Proxy Statement.
51
PART IV
Item 15. Exhibits, Financial Statement Schedules
-------------------------------------------------
(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) Exhibits
--------
3(a). Articles of Incorporation of the Company, together with all
amendments thereto, are incorporated by reference to the exhibits to
the Annual Report of the Company on Form 10-K for the year ended
December 25, 1993.
3(b). Amended and Restated By-laws of the Company are incorporated by
reference to the exhibits to the quarterly report of the Company on
Form 10-Q for the quarter ended June 29, 2002.
10. Indemnification Agreement, in the form attached as an exhibit to the
quarterly report of the Company on Form 10-Q for the quarter ended
March 31, 2001, between the Company and all of its directors and
officers as reported in the quarterly, annual and current reports of
the Company on Form 10-Q, Form 10-K and Form 8-K for the periods
ended March 31, 2001, June 30, 2001, September 29, 2001, June 29,
2002, December 28, 2002, September 27, 2003, December 27, 2003,
March 27, 2004, May 18, 2005, July 1, 2005 and January 30, 2006.
10.1 Non-Employee Directors Stock Purchase Plan Summary Plan Description,
as registered in the Form S-8 filed with the Securities and Exchange
Commission on June 21, 2001, is incorporated by reference to the
exhibits to the quarterly report of the Company on Form 10-Q for the
quarter ended June 30, 2001.
10.2 Incentive Bonus Plan is incorporated by reference to the exhibits to
the Annual Report of the Company on Form 10-K for the year ended
December 25, 2004.
14. Code of Ethical Conduct for Financial Managers is incorporated by
reference to the exhibits to the Annual Report of the Company on
Form 10-K for the year ended December 28, 2002.
21. Subsidiaries of the Registrant.
23. Consent of Independent Registered Public Accounting Firm.
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.
52
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PUBLIX SUPER MARKETS, INC.
March 16, 2006 By: /s/ John A. Attaway, Jr.
------------------------
John A. Attaway, Jr.
Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ Carol Jenkins Barnett Director March 16, 2006
------------------------------
Carol Jenkins Barnett
/s/ Hoyt R. Barnett Vice Chairman and Director March 16, 2006
------------------------------
Hoyt R. Barnett
/s/ Joan G. Buccino Director March 16, 2006
------------------------------
Joan G. Buccino
/s/ William E. Crenshaw President and Director March 16, 2006
------------------------------
William E. Crenshaw
/s/ Sherrill W. Hudson Director March 16, 2006
------------------------------
Sherrill W. Hudson
Chief Executive Officer and
Director
/s/ Charles H. Jenkins, Jr. (Principal Executive Officer) March 16, 2006
------------------------------
Charles H. Jenkins, Jr.
Chairman of the Board and
/s/ Howard M. Jenkins Director March 16, 2006
------------------------------
Howard M. Jenkins
/s/ E. Vane McClurg Director March 16, 2006
------------------------------
E. Vane McClurg
/s/ Kelly E. Norton Director March 16, 2006
------------------------------
Kelly E. Norton
/s/ Maria A. Sastre Director March 16, 2006
------------------------------
Maria A. Sastre
Chief Financial Officer and
Treasurer
(Principal Financial and
/s/ David P. Phillips Accounting Officer) March 16, 2006
------------------------------
David P. Phillips
53