Item 1. Business
Publix Super Markets, Inc. (the "Company") is based in Lakeland, Florida and was incorporated in Florida on December 27, 1921. The Company is in the business of operating retail food supermarkets in Florida, Georgia and South Carolina.
The Company's supermarkets sell groceries, produce, deli, bakery, meat, seafood, housewares and health and beauty care items. In addition, some stores have pharmacy, photo and floral departments.
The Company's lines of merchandise include a variety of nationally advertised and private label brands, as well as unbranded merchandise such as produce, meat and seafood. Private label items are produced in the Company's manufacturing facilities or are manufactured for the Company by outside suppliers.
The Company manufactures dairy, bakery and deli products. The Company's dairy plants are located in Lakeland and Deerfield Beach, Florida. The bakery and deli plants are located in Lakeland, Florida. The Company receives the food and non-food items it distributes from many sources throughout the United States. These products are generally available in sufficient quantities to enable the Company to adequately satisfy its customers. The Company believes that its sources of supply of these products and raw materials used in manufacturing are adequate for its needs and that it is not dependent upon a single or relatively few suppliers.
The Company operated 470 supermarkets at the end of 1994, compared with 425 at the beginning of the year. In 1994, 50 stores were opened, five stores were closed, and 18 stores were expanded or remodeled. The net increase in square footage was 2.4 million or 13.6% since 1993. The Company entered the Georgia market in 1991 and the South Carolina market in 1993. At the end of 1994, the Company had 427 stores located in Florida, 37 located in Georgia and six located in South Carolina.
As of year end, the Company had four stores under construction in South Carolina, 12 in Georgia and 16 in Florida. During 1994, the Company completed construction of a new general merchandise warehouse in Lakeland, Florida and partially completed construction on a new distribution facility in Lawrenceville, Georgia.
The Company is engaged in a highly competitive industry. Competition, based primarily on price, quality of goods and service, convenience and product mix, is with several national and regional chains, independent stores and mass merchandisers throughout its market areas. The Company anticipates continued competitor format innovation and location additions in 1995.
The influx of winter residents to Florida and increased purchases of food during the traditional Thanksgiving and Christmas holidays typically results in seasonal sales increases between November and April of each year.
The Company has experienced no significant changes in the kinds of products sold or in its methods of distribution since the beginning of the fiscal year.
The Company had approximately 90,000 employees at the end of 1994, compared with 82,000 at the beginning of the year. Of this total, approximately 58,000 at the end of 1994 and 53,000 at the end of 1993 were not full-time employees.
The Company's research and development expenses are insignificant.
Compliance by the Company with Federal, state and local environmental protection laws during 1994 had no material effect upon capital expenditures, earnings or the competitive position of the Company.
Item 2.
Item 2. Properties
At year end, the Company operated approximately 20.5 million square feet of retail space. The Company's stores vary in size. Current store prototypes range from 27,000 to 65,000 square feet. Stores are often located in strip shopping centers where the Company is the anchor tenant.
The majority of the Company's retail stores are leased. Substantially all of these leases will expire during the next 20 years. However, in the normal course of business, it is expected that the leases will be renewed or replaced by leases on other properties. At 38 locations both the building and land are owned and at 21 other locations the building is owned while the land is leased.
The Company supplies its retail stores from eight distribution centers located in Lakeland, Miami, Jacksonville, Sarasota, Orlando, Deerfield Beach and Boynton Beach, Florida, and Lawrenceville, Georgia.
With the exception of a portion of the Miami distribution facility, the Company's corporate offices, distribution facilities and manufacturing plants are owned with no outstanding debt.
All of the Company's properties are well maintained and in good operating condition, and suitable and adequate for operating its business.
Item 3.
Item 3. Legal Proceedings
A notice of charge was issued by the Equal Employment Opportunity Commission ("EEOC") on March 25, 1992, In the Matter of: Kemp v. Publix Super Markets, Inc., Charge No. ###-##-####, alleging that the Company had engaged in past violations and was engaged in continuing violations of Title VII of the Civil Rights Act, as amended, by discriminating against women with respect to job assignments and promotions because of their sex. As currently amended, the charge covers employment practices by the Company in the State of Florida as a whole.
On December 6, 1993, the EEOC gave notice it was expanding the scope of its investigation to include allegations of race discrimination. The EEOC has requested the Company to compile information and produce documents relating to these allegations. On October 13, 1994, the EEOC applied to the United States District Court, Southern District of Florida in Miami, for an order to show cause why an administrative subpoena issued by the EEOC to the Company should not be enforced (EEOC v. Publix Super Markets, Inc., Case No. 94-2119). The EEOC has agreed to substantial reductions in the information requested and further discussions as to additional reductions in the information requested are pending.
The Company denies the allegations of the charge and the subsequent attempted expansion of the charge. The EEOC has advised that the charge does not in any respect constitute a final finding of a violation, but that the EEOC has a statutory duty to conduct a full and impartial investigation for the purpose of determining whether the facts and circumstances afford the EEOC reasonable cause to believe that the Company's employment patterns and practices constitute discrimination on the basis of sex and race.
The EEOC's investigation of the charge remains at the stage of considering whether there is reasonable cause to believe the allegations of the charge. At this early stage, the likelihood of an adverse finding of the Company's liability and an estimate of the amount of any exposure for any such liability cannot be determined.
The Company is also a party in various other legal claims and actions considered in the normal course of business. Management believes that the ultimate disposition of these matters will not have a material effect on the Company's liquidity, results of operations or financial condition.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
None
EXECUTIVE OFFICERS OF THE COMPANY
The terms of all officers expire at the annual meeting of the Company in May 1995, with the exception of Edward H. Ruth whose retirement is effective March 31, 1995.
PART II
Item 5.
Item 5. Market for the Company's Common Stock and Related Stockholder Matters
(a) Market Information
Substantially all transactions of the Company's common stock have been among the Company, its employees, former employees, their families and various benefit plans established for the Company's employees. The market price of the Company's common stock is determined by the Board of Directors based upon appraisals prepared by an independent appraiser. The market price for 1994 was $11.00 per share until March 1, 1994, when the price increased to $12.25 per share. In the second quarter, the price increased to $13.00 per share. In the third quarter, the price remained unchanged at $13.00 per share and in the fourth quarter, the price increased to $13.75 per share. The market price for 1993 was $11.50 per share until March 17, 1993, when the price decreased to $11.25 per share. In the second quarter, the price increased to $11.50 per share. In the third quarter, the price was unchanged at $11.50 per share and in the fourth quarter, the price decreased to $11.00 per share.
(b) Approximate Number of Equity Security Holders
As of February 24, 1995, the approximate number of holders of record of the Company's common stock was 61,000.
(c) Dividends
The Company paid cash dividends of $.09 per share of common stock in 1994 and $.08 per share in 1993. Payment of dividends is within the discretion of the Company's Board of Directors and depends on, among other factors, earnings, capital requirements and the operating and financial condition of the Company. It is expected that comparable cash dividends will be paid in the future.
Item 6.
Item 6. Five Year Summary of Selected Financial Data
NOTE: Dollars are in thousands, except per share amounts. Fiscal year 1994 includes 53 weeks. All other years include 52 weeks.
* Restated to give retroactive effect for 5-for-1 stock split in July 1992.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Business Environment
As of December 31, 1994, the Company operated 470 retail grocery stores representing approximately 20.5 million square feet of retail space. Historically, the Company's primary competition has been from national and regional chains and smaller independents located throughout its market areas. The Company has continued to experience increased competition from mass merchandisers. The products offered by these retailers include many of the same items sold by the Company.
At the end of 1994, the Company had 427 stores located in Florida, 37 located in Georgia and six located in South Carolina. The Company opened its first store in Georgia during the fourth quarter of 1991 and opened its first store in South Carolina in the fourth quarter of 1993. The Company opened 23 stores in Florida, 22 stores in Georgia and five stores in South Carolina during 1994. The Company intends to continue to pursue vigorously new locations in Florida and other states.
Liquidity and Capital Resources
Operating activities continue to be the Company's primary source of liquidity. Net cash provided by operating activities was approximately $410.9 million in 1994, compared with $370.4 million in 1993 and $296.8 million in 1992. Working capital was approximately $160.0 million as of December 31, 1994, as compared with $137.2 million and $241.2 million as of December 25, 1993 and December 26, 1992, respectively. Cash and cash equivalents aggregated approximately $188.9 million as of December 31, 1994, as compared with $199.0 million and $293.5 million as of December 25, 1993 and December 26, 1992, respectively.
Capital expenditures totaled $374.2 million in 1994. These expenditures were primarily incurred in connection with the opening of 50 new stores and remodeling or expanding 18 stores which added 2.60 million square feet. Construction was completed on a new general merchandise warehouse in Lakeland, Florida, and significant expenditures were incurred in the continued construction of a new distribution center in Lawrenceville, Georgia. In addition, the Company closed five stores. Capital expenditures totaled $320.2 million in 1993. These expenditures were primarily incurred in connection with the opening of 29 new stores and remodeling or expanding 13 stores which added 1.63 million square feet. Significant expenditures were also incurred in expanding the Deerfield Beach, Florida facility, acquisition of a grocery warehouse in Orlando, Florida and construction of a new general merchandise warehouse in Lakeland, Florida and a new distribution center in Lawrenceville, Georgia. In addition, the Company closed four stores. Capital expenditures totaled $202.6 million in 1992. These expenditures were primarily incurred in connection with the opening of 20 new stores and remodeling or expanding 12 stores which added 1.14 million square feet. Significant expenditures were also incurred in expanding the Deerfield Beach, Florida facility. In addition, the Company acquired three stores and closed 12 stores.
The Company hopes to open as many as 59 stores in 1995. Although real estate development is unpredictable, the Company's 1995 new store growth represents a reasonable estimate of anticipated future growth. Capital expenditures for 1995, primarily made up of new store construction, the remodeling or expanding of several existing stores and the expansion and construction of distribution facilities, are expected to be approximately $400 million. This capital program is subject to continuing change and review. The 1995 capital expenditures are expected to be financed by internally generated funds and current liquid assets. In the normal course of operations, the Company replaces stores and closes unprofitable stores. The impact of future store closings is not expected to be material.
The Company is self-insured, up to certain limits, for health care, fleet liability, general liability and workers' compensation claims. Reserves are established to cover estimated liabilities for existing and anticipated claims based on actual experience including, where necessary, actuarial studies. The Company has insurance coverage for losses in excess of varying amounts. The provision for self-insured reserves was $89.6 million, $90.1 million and $78.7 million in fiscal 1994, 1993 and 1992, respectively. The Company does not believe its self-insurance program will have a material adverse impact on its future liquidity, financial condition or results of operations.
The Company has committed lines of credit for $100.0 million and one uncommitted line of credit for $25.0 million. These lines are reviewed annually by the banks. The interest rates for these lines are at or below the prime rate. No amounts were outstanding on the lines of credit as of December 31, 1994 or December 25, 1993.
Cash generated in excess of the amount needed for current operations and capital expenditures is invested in short-term and long-term investments. Short-term investments were approximately $77.2 million in 1994 compared with $59.8 million in 1993. Long-term investments, primarily comprised of tax exempt bonds and preferred stocks, were approximately $124.5 million in 1994 compared with $199.4 million in 1993. Management believes the Company's liquidity will continue to be strong.
The Company currently repurchases common stock at the stockholders' request in accordance with the terms of the Company's Employee Stock Purchase Plan. The Company expects to continue to repurchase its common stock, as offered by its stockholders from time to time, at its then currently appraised value. However, such purchases are not required and the Company retains the right to discontinue them at any time.
Results of Operations
The Company's fiscal year ends on the last Saturday in December. Fiscal year 1994 included 53 weeks and fiscal years 1993 and 1992 included 52 weeks.
Sales for fiscal 1994 were $8,664.8 million as compared with $7,472.7 million in fiscal 1993, a 16.0% increase. This reflects an increase of $171.9 million or 2.3% in sales from an additional week included in the 1994 fiscal year, $388.6 million or 5.2% in sales from stores that were open for all of both years (comparable stores) and sales of $631.6 million or 8.5% from the net impact of 50 new stores and five closed stores. Net new stores contributed an increase of 13.6% or approximately 2.4 million square feet in retail space.
Sales for fiscal 1993 were $7,472.7 million as compared with $6,664.3 million in fiscal 1992, a 12.1% increase. This reflects an increase of $426.5 million or 6.4% in sales from stores that were open for all of both years (comparable stores) and sales of $381.9 million or 5.7% from the net impact of 29 new stores and four closed stores. Net new stores contributed an increase of 9.0% or approximately 1.50 million square feet in retail space.
In 1992, the Company identified potential environmental problems relating to properties that are owned or leased. Other income, net includes $1.6 million in 1994, $1.5 million in 1993 and $8.0 million in 1992 which were accrued for estimated clean-up costs.
On August 24, 1992, Hurricane Andrew destroyed three of the Company's stores in south Florida. Several other stores sustained varying degrees of damage, but were operational within four weeks. The resulting property damage and business interruption losses were substantially covered by insurance and were immaterial to the Company's financial position and operations. During 1994, the Company recognized a $6.1 million gain on the settlement of claims for business interruption and property losses related to the extensive damage caused by Hurricane Andrew. This gain is recorded as a component of other income, net in the accompanying financial statements.
Cost of merchandise sold including store occupancy, warehousing and delivery expenses was approximately 77.5% of sales in 1994 as compared with 78.1% and 77.8% in 1993 and 1992, respectively. In 1994, cost of merchandise sold decreased as a percentage of sales due to buying and merchandising efficiencies. In 1993 and 1992, cost of merchandise sold increased as a percent of sales due to competitive pressures.
Operating and administrative expenses, as a percent of sales, were 19.1%, 19.1% and 19.3% in 1994, 1993 and 1992, respectively. In 1993, the Company's workers' compensation expense increased approximately $17.5 million or 89% as compared to 1992 due to increases in claim payments and estimated reserves for claim payments. The significant components of operating and administrative expenses are payroll costs, employee benefits and depreciation.
In August 1993, the "Omnibus Budget Reconciliation Act of 1993" became effective. The major provision of the new tax law affecting the Company was the increase in the maximum corporate income tax rate from 34% to 35%. This 1% increase in the tax rate was retroactive to January 1, 1993. Therefore, in accordance with Financial Accounting Standard No. 109, "Accounting for Income Taxes," the Company recognized an additional $3.5 million income tax expense during fiscal year 1993.
In recent years, the impact of inflation on the Company's food prices has been lower than the overall increase in the Consumer Price Index.
New Accounting Standard
The Company adopted Financial Accounting Standard No. 115, "Accounting for Certain Investments in Debt and Equity Securities," in the first quarter of 1994. This Standard requires the reporting of certain securities at fair value except for those securities which the Company has the positive intent and ability to hold to maturity.
The Company adopted the provisions of the new Standard for investments held as of, or acquired after, the beginning of fiscal 1994. The cumulative effect of adopting the Standard as of the beginning of fiscal 1994 is not material. In accordance with the Standard, prior period financial statements have not been restated to reflect the change in accounting principle.
Item 8.
Item 8. Financial Statements and Supplemental Data
The Company's financial statements, together with the independent auditors' report thereon, are included in the section following Part IV of this report.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
PART III
Item 10.
Item 10. Directors, Executive Officers, Promoters and Control Persons of the Registrant
Certain information concerning the directors of the Company is incorporated by reference to pages 2 through 5 of the Proxy Statement of the Company (1995 Proxy Statement) which the Company intends to file no later than 120 days after its fiscal year end. Certain information concerning the executive officers of the Company is set forth in Part I under the caption "Executive Officers of the Company."
Item 11.
Item 11. Executive Compensation
Information regarding executive compensation is incorporated by reference to pages 6 through 8 of the 1995 Proxy Statement.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of February 24, 1995, the information with respect to common stock ownership of all Directors, including some who are 5% or more beneficial owners, and all Officers and Directors as a group. Also, listed are others known by the Company to own beneficially 5% or more of the shares of the Company's common stock.
*Shares represent less than 1% of class. Note references are explained on the following page.
(1) As used in the table on the preceding page, "beneficial ownership" means the sole or shared voting or investment power with respect to the Company's common stock. Holdings of officers include shares allocated to their individual accounts in the Company's Employee Stock Ownership Plan, over which each officer exercises sole voting power and shared investment power. In accordance with the beneficial ownership regulations, the same shares of common stock may be included as beneficially owned by more than one individual or entity. The address for all beneficial owners is 1936 George Jenkins Boulevard, Lakeland, Florida 33801.
(2) Excludes shares of common stock beneficially owned by Carol Jenkins Barnett's husband, as to which Carol Jenkins Barnett disclaims beneficial ownership.
(3) Hoyt R. Barnett is Trustee of the Profit Sharing Plan which is the record owner of 23,278,750 shares of common stock over which he exercises sole voting and investment power. Total shares beneficially owned excludes shares of common stock owned by Hoyt R. Barnett's wife, as to which Hoyt R. Barnett disclaims beneficial ownership.
(4) Mark C. Hollis is Co-Trustee with Peoples Bank of Lakeland for 1,508,468 shares of common stock in two family trusts. The remaining shares are owned in a separate family trust over which Mark C. Hollis is Co-Trustee with his wife. As Co-Trustee, Mark C. Hollis has shared voting and investment power for these shares.
(5) Howard M. Jenkins is Voting Trustee of a Voting Trust Agreement (Agreement), effective May 30, 1987, established by him, his brother and two of his sisters. The Agreement, as amended, has a ten year term and covers 41,455,760 shares of common stock, of which 12,396,395 shares are beneficially owned by Howard M. Jenkins and 14,185,405 shares are beneficially owned by Nancy E. Jenkins. The remaining shares held under the Agreement are owned by various individuals who are not beneficial owners of 5% or more of the Company's common stock. As Trustee, Howard M. Jenkins has voting power for the shares represented by the Agreement unless the stockholders of a majority of the shares direct him to vote all shares in a specified manner. In addition, Howard M. Jenkins beneficially owns 571,427 shares of common stock which are either individually owned or owned as Trustee for three trusts over which he exercises sole voting and investment power.
(6) William H. Vass is Trustee of the Employee Stock Ownership Plan (ESOT) which is the record owner of 29,453,743 shares of common stock over which he has shared investment power. As Trustee, William H. Vass exercises sole voting power over 529,560 shares in the ESOT because such shares have not been allocated to participants' accounts. The ESOT participants, not William H. Vass, exercise sole voting power over all remaining shares in the ESOT.
(7) Includes 52,732,493 shares of common stock owned by the Profit Sharing Plan and ESOT.
(8) Includes 14,185,405 shares of common stock which are held in and subject to the Voting Trust Agreement, effective May 30, 1987, for which Howard M. Jenkins is Voting Trustee.
Item 13.
Item 13. Certain Relationships and Related Transactions
Information regarding certain relationships and related transactions is incorporated by reference to pages 2 through 5 and 8 of the 1995 Proxy Statement.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K
(a) Financial Statements and Schedule The financial statements and schedule listed in the accompanying Index to Financial Statements and Schedule are filed as part of this Annual Report on Form 10-K.
(b) Reports on Form 8-K The Company filed no reports on Form 8-K during the fourth quarter of the year ended December 31, 1994.
(c) Exhibits 3(a). Articles of Incorporation of the Company, together with all amendments thereto are incorporated by reference to the exhibits to the Annual Report of the Company on Form 10-K for the year ended December 25, 1993.
3(b). By-laws of the Company are incorporated by reference to the exhibits to the Annual Report of the Company on Form 10-K, as amended, for the year ended December 26, 1987.
9. Voting Trust Agreement dated September 12, 1986, between Howard M. Jenkins, Julia J. Fancelli, Nancy E. Jenkins and David F. Jenkins, is incorporated by reference to the exhibits to the Annual Report of the Company on Form 10-K for the year ended December 31, 1988.
Amendment to Voting Trust Agreement dated September 12, 1986, between Howard M. Jenkins, Julia J. Fancelli, Nancy E. Jenkins and David F. Jenkins, effective March 8, 1990, is incorporated by reference to the exhibits to the Annual Report of the Company on Form 10-K for the year ended December 30, 1989.
Amendment to Voting Trust Agreement dated September 12, 1986, between Howard M. Jenkins, Julia J. Fancelli, Nancy E. Jenkins and David F. Jenkins, effective June 14, 1991, is incorporated by reference to the exhibits to the Annual Report of the Company on Form 10-K for the year ended December 28, 1991.
Amendment to Voting Trust Agreement dated September 12, 1986, between Howard M. Jenkins, Julia J. Fancelli, Nancy E. Jenkins and David F. Jenkins, effective November 3, 1992, is incorporated by reference to the exhibits to the Annual Report of the Company on Form 10-K for the year ended December 26, 1992.
Amendment to Voting Trust Agreement dated September 12, 1986, between Howard M. Jenkins, Julia J. Fancelli, Nancy E. Jenkins and David F. Jenkins, effective February 26, 1993, is incorporated by reference to the exhibits to the Annual Report of the Company on Form 10-K for the year ended December 26, 1992.
Amendment to Voting Trust Agreement dated September 12, 1986, between Howard M. Jenkins, Julia J. Fancelli, Nancy E. Jenkins and David F. Jenkins, effective March 1, 1994.
18. Letter regarding change in accounting principle is incorporated by reference to the exhibits to the Annual Report of the Company on Form 10-K for the year ended December 26, 1992.
27. Financial Data Schedule for the year ended December 31, 1994 (for SEC use only).
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
PUBLIX SUPER MARKETS, INC.
March 14, 1995 By: /s/ S. Keith Billups -------------------------- S. Keith Billups Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.
PUBLIX SUPER MARKETS, INC.
Index to Financial Statements and Schedule
Independent Auditors' Report
Financial Statements:
Balance Sheets - December 31, 1994 and December 25, 1993
Statements of Earnings - Years ended December 31, 1994, December 25, 1993 and December 26, 1992
Statements of Stockholders' Equity - Years ended December 31, 1994, December 25, 1993 and December 26, 1992
Statements of Cash Flows - Years ended December 31, 1994, December 25, 1993 and December 26, 1992
Notes to Financial Statements
The following supporting schedule of Publix Super Markets, Inc. for the years ended December 31, 1994, December 25, 1993 and December 26, 1992 is submitted herewith:
Schedule: II - Valuation and Qualifying Accounts
All other schedules are omitted as the required information is inapplicable or the information is presented in the financial statements or related notes.
INDEPENDENT AUDITORS' REPORT
To The Stockholders Publix Super Markets, Inc.:
We have audited the financial statements of Publix Super Markets, Inc. as listed in the accompanying index. In connection with our audits of the financial statements, we also have audited the financial statement schedule as listed in the accompanying index. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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 financial statements referred to above present fairly, in all material respects, the financial position of Publix Super Markets, Inc. as of December 31, 1994, and December 25, 1993 and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 1994, in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
As discussed in note 1 of the notes to financial statements, the Company changed its methods of accounting for certain investments in debt and equity securities during 1994, postretirement benefits and income taxes during 1993 and, during 1992 changed its method of depreciation for all newly acquired fixed assets.
KPMG PEAT MARWICK LLP
Tampa, Florida February 28, 1995
PUBLIX SUPER MARKETS, INC.
Balance Sheets
December 31, 1994 and December 25, 1993
See accompanying notes to financial statements.
PUBLIX SUPER MARKETS, INC.
Balance Sheets
December 31, 1994 and December 25, 1993
See accompanying notes to financial statements.
PUBLIX SUPER MARKETS, INC.
Statements of Earnings
Years ended December 31, 1994, December 25, 1993 and December 26, 1992
See accompanying notes to financial statements.
PUBLIX SUPER MARKETS, INC.
Statements of Stockholders' Equity
Years ended December 31, 1994, December 25, 1993 and December 26, 1992
See accompanying notes to financial statements.
PUBLIX SUPER MARKETS, INC.
Statements of Cash Flows
Years ended December 31, 1994, December 25, 1993 and December 26, 1992
See accompanying notes to financial statements.
(Continued)
PUBLIX SUPER MARKETS, INC.
Statements of Cash Flows (Continued)
See accompanying notes to financial statements.
PUBLIX SUPER MARKETS, INC.
Notes to Financial Statements
December 31, 1994, December 25, 1993 and December 26, 1992
(1) Summary of Significant Accounting Policies
(a) Definition of Fiscal Year The fiscal year ends on the last Saturday in December. Fiscal year 1994 includes 53 weeks. Fiscal years 1993 and 1992 include 52 weeks.
(b) Cash Equivalents The Company considers all liquid investments with maturities of three months or less to be cash equivalents.
(c) Investments At the beginning of fiscal year 1994, the Company adopted Financial Accounting Standard No. 115, "Accounting for Certain Investments in Debt and Equity Securities," for investments held as of, or acquired after, the beginning of fiscal 1994, without restating prior years' financial statements. The cumulative effect of adopting the Standard as of the beginning of fiscal 1994 is not material (note 8).
(d) Investment in Joint Ventures The Company has invested in joint ventures to develop shopping centers. The investment in these joint ventures is accounted for using the equity method.
(e) Inventories Inventories are valued at cost (principally the dollar value last-in, first-out method) including store inventories which are calculated by the retail method.
(f) Property, Plant and Equipment and Depreciation Maintenance and repairs are charged to expense as incurred. Expenditures for renewals and betterments are capitalized. The gain or loss on traded items is applied to the asset accounts or reflected in income for disposed items.
Prior to fiscal year 1992, depreciation was computed for financial statement purposes by the declining balance and straight-line methods. During 1992, the Company adopted the straight-line method of depreciation for all newly acquired fixed assets. Assets acquired before 1992 continue to be depreciated using prior years' depreciation methods. The change to the straight-line method of depreciation was made to conform to predominant industry practice. Use of the straight-line method of depreciation on assets placed in service in 1994, 1993 and 1992, as compared with accelerated methods, resulted in decreases in depreciation expense of approximately $37,035,000, $20,800,000 and $4,743,000, and increases in net earnings of approximately $19,316,000, $10,848,000, and $2,514,000 or $.08, $.05 and $.01 per share in 1994, 1993 and 1992, respectively.
(Continued)
PUBLIX SUPER MARKETS, INC.
Notes to Financial Statements
(g) Postretirement Benefits At the beginning of fiscal year 1993, the Company adopted Financial Accounting Standard No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," without restating prior years' financial statements. This Standard requires that an employer's obligation for postretirement benefits be fully accrued by the date the employees attain full eligibility to receive these benefits. The cumulative effect of the change in method of accounting for postretirement benefits has been reported in the 1993 statement of earnings (note 3).
(h) 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.
(i) Income Taxes At the beginning of fiscal year 1993, the Company adopted Financial Accounting Standard No. 109, "Accounting for Income Taxes," without restating prior years' financial statements. This Standard required a change from the deferred method of accounting for income taxes of APB Opinion 11 to the asset and liability method of accounting for income taxes. The cumulative effect of the change in method of accounting for income taxes has been reported in the 1993 statement of earnings (note 6).
(j) Reclassification Certain 1993 amounts have been reclassified to conform with the 1994 presentation.
(2) Merchandise Inventories
If the first-in, first-out method of valuing inventories had been used by the Company, inventories and current assets would have been higher than reported by approximately $90,276,000, $83,741,000 and $87,012,000 as of December 31, 1994, December 25, 1993 and December 26, 1992, respectively. Also, net earnings would have increased by approximately $3,408,000 or $.01 per share in 1994 and decreased $1,706,000 or less than $.01 per share in 1993 and decreased $1,547,000 or less than $.01 per share in 1992.
(3) Postretirement Benefits
The Company provides life insurance benefits for salaried and hourly full-time employees. Such employees retiring from the Company on or after attaining age 55 and having ten years of credited service are entitled to postretirement life insurance benefits. The Company funds the life insurance benefits on a pay-as-you-go basis. During 1994 and 1993, the Company made benefit payments to retirees of approximately $657,000 and $702,000, respectively.
As discussed in Note 1, the Company adopted Statement 106 at the beginning of fiscal year 1993. The accumulated postretirement benefit obligation accrued was $24,607,000. The cumulative effect of this accounting change decreased net earnings by approximately $15,347,000 in fiscal 1993.
2 (Continued)
PUBLIX SUPER MARKETS, INC.
Notes to Financial Statements
The accumulated postretirement benefit obligation as of December 31, 1994 was determined using an assumed discount rate of 8.25% and a salary increase rate of 4%. The accumulated postretirement benefit obligation as of December 25, 1993 was determined using an assumed discount rate of 7.25% and a salary increase rate of 4%. The change in the discount rate from 7.25% to 8.25% decreased the accumulated postretirement benefit obligation by $5,366,000 and is expected to decrease annual postretirement benefit costs by $505,000 beginning in 1995.
(4) Common Stock Split
On May 12, 1992, the Company's stockholders approved an increase in the number of authorized shares of common stock from 60,000,000 shares to 300,000,000 shares to effect a 5-for-1 stock split. All data in the accompanying financial statements has been restated to give retroactive effect for the stock split.
(5) Retirement Plans
The Company has a trusteed, noncontributory profit sharing plan for the benefit of eligible employees. The amount of the Company's contribution to this plan is determined by the Board of Directors. The contribution cannot exceed 15% of compensation paid to participants. Contributions to this plan amounted to $44,564,000 in 1994, $33,976,000 in 1993 and $29,867,000 in 1992.
3 (Continued)
PUBLIX SUPER MARKETS, INC.
Notes to Financial Statements
The Company has an Employee Stock Ownership Trust (ESOT). Annual contributions to the ESOT are determined by the Board of Directors and can be made in Company stock or cash. In 1994, the Company contributed 2,000,000 shares of its common stock to the ESOT at an appraised value resulting in an expense to the Company of $27,500,000. In 1993, the Company contributed 2,000,000 shares of its common stock to the ESOT at an appraised value resulting in an expense to the Company of $22,000,000. In 1992, the Company contributed $21,200,000 in cash to the ESOT. During 1994, 1993 and 1992, the Board of Directors approved additional contributions to the ESOT of $22,257,000, $16,983,000 and $14,923,000, respectively. The additional contributions are made to the ESOT during the subsequent year.
Effective January 1, 1995, the Company implemented a 401(K) plan for the benefit of eligible employees. The 401(K) plan is a voluntary defined contribution plan. Eligible employees may contribute up to 6% of their annual compensation, subject to certain maximum contribution restrictions. The amount of the Company's contribution to this plan is determined by the Board of Directors.
The Company intends to continue the profit sharing plan, ESOT and 401(K) plan indefinitely; however, the right to modify, amend or terminate these plans has been reserved. In the event of termination, all amounts contributed under the plans must be paid to the participants or their beneficiaries.
(6) Income Taxes
As discussed in Note 1, the Company adopted Statement 109 at the beginning of fiscal year 1993. The cumulative effect of this accounting change resulted in a reduction of deferred Federal and state income taxes and an increase in net earnings of approximately $11,853,000.
The provision for income taxes consists of the following:
4 (Continued)
PUBLIX SUPER MARKETS, INC.
Notes to Financial Statements
Income tax expense amounted to $139,733,000 for 1994 (an effective rate of 36.9%), $104,898,000 for 1993 (an effective rate of 36.3%) and $87,222,000 for 1992 (an effective rate of 34.4%). The actual expense for 1994, 1993 and 1992 differs from the "expected" tax expense for those years (computed by applying the U.S. Federal corporate tax rate of 35% for 1994 and 1993 and 34% for 1992 to earnings before income taxes) as follows:
The "Omnibus Budget Reconciliation Act of 1993" included various rule changes and increased the maximum corporate income tax rate from 34% to 35%, effective January 1, 1993. The impact of the new tax law increased the Company's 1993 income tax expense by $3,484,000. This included $2,514,000 attributable to the new tax rate on current income and $970,000 resulting from an adjustment of deferred tax balances.
The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities as of December 31, 1994 and December 25, 1993 are as follows:
The Company expects the results of future operations to generate sufficient taxable income to allow utilization of deferred tax assets.
5 (Continued)
PUBLIX SUPER MARKETS, INC.
Notes to Financial Statements
(7) Fair Value of Financial Instruments
The following methods and assumptions were used by the Company in estimating the fair value of its financial instruments:
Cash and cash equivalents: The carrying amount for cash and cash equivalents approximates fair value.
Investment securities: The fair value for marketable debt and equity securities are based on quoted market prices.
Long-term debt, including current installments: The carrying amount for long-term debt approximates fair value based on current interest rates.
The carrying amount and fair value of the Company's financial instruments as of December 31, 1994 and December 25, 1993 are as follows:
(8) Investments
Management determines the appropriate classification of debt securities at the time of purchase and reevaluates such designation as of each balance sheet date. Debt securities are classified as held-to-maturity when the Company has the positive intent and ability to hold the securities to maturity. Held-to-maturity securities are stated at cost, adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in other income, net. The Company had no held-to-maturity securities as of December 31, 1994.
Beginning with the fourth quarter of 1994, the Company transferred $62,254,000 of securities from the held-to-maturity classification to the available-for-sale classification. This amount represented the amortized cost of the securities at the date of transfer. The fair value of these securities was $61,408,000 resulting in a net unrealized loss of $846,000. The change in classification was a result of a change in management's intent with respect to these securities. In order to have the flexibility to respond to changes in interest rates and to take advantage of changes in the availability of and the yield on alternative investments, management determined that the classification of these securities as available-for-sale was appropriate.
6 (Continued)
PUBLIX SUPER MARKETS, INC.
Notes to Financial Statements
Debt securities not classified as held-to-maturity and marketable equity securities are classified as available-for-sale. Available-for-sale securities are carried at fair value, with the unrealized gains and losses, net of tax, reported as a separate component of stockholders' equity. The cost of debt securities in this category is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in other income, net. Realized gains and losses and declines in value judged to be other-than-temporary on available-for-sale securities are included in other income, net. The cost of securities sold is based on the specific identification method.
Following is a summary of available-for-sale securities as of December 31, 1994:
For the fiscal year ended December 31, 1994, the realized gains on sales of available-for-sale securities totaled $1,562,000 and the realized losses totaled $4,751,000. The adjustment for unrealized losses on available-for-sale securities, net of applicable income taxes, included as a separate component of stockholders' equity, totaled $1,980,000.
The amortized cost and estimated fair value of debt and marketable equity securities classified as available-for-sale as of December 31, 1994, by expected maturity, are as follows:
As of December 31, 1994, the Company classified its one investment in common stock as a trading security. This investment had a cost of $198,000 and a fair value of $87,000. The unrealized loss on this investment is included in the statement of earnings as a reduction of other income, net.
7 (Continued)
PUBLIX SUPER MARKETS, INC.
Notes to Financial Statements
(9) Commitments and Contingencies
(a) Operating Leases The Company conducts a major portion of its retail operations from leased store and shopping center premises generally under 20 year leases. Contingent rentals paid to lessors of certain store facilities are determined on the basis of a percentage of sales in excess of stipulated minimums plus, in certain cases, reimbursement of taxes and insurance.
Total rental expense, net of sublease rental income, for the years ended December 31, 1994, December 25, 1993 and December 26, 1992, is as follows:
As of December 31, 1994, future minimum lease payments for all noncancelable operating leases and related subleases are as follows:
The Company also owns shopping centers which are leased to tenants for minimum monthly rentals plus, in certain instances, contingent rentals. Contingent rentals received are determined on the basis of a percentage of sales in excess of stipulated minimums plus, in certain instances, taxes. Contingent rentals were estimated at December 31, 1994 and are included in trade receivables. Rental income was approximately $8,624,000 in 1994, $7,624,000 in 1993, and $7,034,000 in 1992. The approximate amounts of minimum future rental payments to be received under operating leases are $9,956,000, $8,528,000, $6,681,000, $4,928,000 and $3,315,000 for the years 1995 through 1999, respectively, and $10,598,000 thereafter.
8 (Continued)
PUBLIX SUPER MARKETS, INC.
Notes to Financial Statements
(b) Lines of Credit The Company has committed lines of credit for $100,000,000 and one uncommitted line of credit for $25,000,000 available for short-term borrowings, with interest rates at or below the prime rate. There were no amounts outstanding as of December 31, 1994 or December 25, 1993. The Company pays no fees related to these lines.
(c) Litigation A notice of charge was issued by the Equal Employment Opportunity Commission ("EEOC") on March 25, 1992, In the Matter of: Kemp v. Publix Super Markets, Inc., Charge No. ###-##-####, alleging that the Company had engaged in past violations and was engaged in continuing violations of Title VII of the Civil Rights Act, as amended, by discriminating against women with respect to job assignments and promotions because of their sex. As currently amended, the charge covers employment practices by the Company in the State of Florida as a whole.
On December 6, 1993, the EEOC gave notice it was expanding the scope of its investigation to include allegations of race discrimination. The EEOC has requested the Company to compile information and produce documents relating to these allegations. On October 13, 1994, the EEOC applied to the United States District Court, Southern District of Florida in Miami, for an order to show cause why an administrative subpoena issued by the EEOC to the Company should not be enforced (EEOC v. Publix Super Markets, Inc., Case No. 94-2119). The EEOC has agreed to substantial reductions in the information requested and further discussions as to additional reductions in the information requested are pending.
The Company denies the allegations of the charge and the subsequent attempted expansion of the charge. The EEOC has advised that the charge does not in any respect constitute a final finding of a violation, but that the EEOC has a statutory duty to conduct a full and impartial investigation for the purpose of determining whether the facts and circumstances afford the EEOC reasonable cause to believe that the Company's employment patterns and practices constitute discrimination on the basis of sex and race.
The EEOC's investigation of the charge remains at the stage of considering whether there is reasonable cause to believe the allegations of the charge. At this early stage, the likelihood of an adverse finding of the Company's liability and an estimate of the amount of any exposure for any such liability cannot be determined.
The Company is also a party in various legal claims and actions considered in the normal course of business. Management believes that the ultimate disposition of these matters will not have a material effect on the Company's liquidity, results of operations or financial condition.
Schedule II
PUBLIX SUPER MARKETS, INC.
Valuation and Qualifying Accounts
Years Ended December 31, 1994, December 25, 1993 and December 26, 1992 (Amounts in thousands)
PUBLIX SUPER MARKETS, INC.
Index to Exhibit
EXHIBIT 9 Amendment to Voting Trust Agreement
EXHIBIT 27 Financial Data Schedule for the year ended December 31, 1994. (for SEC use only)