UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 1, 2017
Commission File Number 0-00981
  IMAGE0A13.JPG
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
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 whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months.
Yes     X           No          
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer              Accelerated filer             Non-accelerated filer     X     
Smaller reporting company              Emerging growth company             
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.        
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes                   No     X  
The number of shares of the Registrant’s common stock outstanding as of April 14, 2017 was 766,995,000 .

 




PART I. FINANCIAL INFORMATION
Item 1.    Financial Statements
PUBLIX SUPER MARKETS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts are in thousands, except par value)
 
April 1, 2017
 
December 31, 2016
 
 
(Unaudited)
 
ASSETS
 
Current assets:
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
568,632

 
 
 
438,319

 
Short-term investments
 
1,597,903

 
 
 
1,591,740

 
Trade receivables
 
665,464

 
 
 
715,292

 
Merchandise inventories
 
1,735,861

 
 
 
1,722,392

 
Prepaid expenses
 
45,535

 
 
 
50,434

 
Total current assets
 
4,613,395

 
 
 
4,518,177

 
Long-term investments
 
5,461,917

 
 
 
5,146,878

 
Other noncurrent assets
 
541,957

 
 
 
434,280

 
Property, plant and equipment
 
12,187,185

 
 
 
11,981,632

 
Accumulated depreciation
 
(4,778,233
)
 
 
 
(4,694,509
)
 
Net property, plant and equipment
 
7,408,952

 
 
 
7,287,123

 
 
 
$
18,026,221

 
 
 
17,386,458

 
LIABILITIES AND EQUITY
 
Current liabilities:
 
 
 
 
 
 
 
Accounts payable
 
$
1,730,028

 
 
 
1,609,652

 
Accrued expenses:
 
 
 
 
 
 
 
Contributions to retirement plans
 
266,577

 
 
 
525,668

 
Self-insurance reserves
 
140,539

 
 
 
139,554

 
Salaries and wages
 
165,404

 
 
 
127,856

 
Other
 
329,056

 
 
 
414,197

 
Current portion of long-term debt
 
127,070

 
 
 
113,999

 
Federal and state income taxes
 
232,821

 
 
 
12,787

 
Total current liabilities
 
2,991,495

 
 
 
2,943,713

 
Deferred tax liabilities
 
417,286

 
 
 
396,484

 
Self-insurance reserves
 
217,408

 
 
 
216,125

 
Accrued postretirement benefit cost
 
102,779

 
 
 
102,540

 
Long-term debt
 
115,928

 
 
 
136,585

 
Other noncurrent liabilities
 
94,276

 
 
 
93,574

 
Total liabilities
 
3,939,172

 
 
 
3,889,021

 
Common stock related to Employee Stock Ownership Plan (ESOP)
 
3,484,220

 
 
 
3,068,097

 
Stockholders’ equity:
 
 
 
 
 
 
 
Common stock of $1 par value. Authorized 1,000,000 shares;
issued 770,415 shares in 2017 and 763,198 shares in 2016
 
770,415

 
 
 
763,198

 
Additional paid-in capital
 
3,139,647

 
 
 
2,849,947

 
Retained earnings
 
10,222,245

 
 
 
9,836,696

 
Treasury stock at cost, 2,820 shares in 2017
 
(115,343
)
 
 
 
—

 
Accumulated other comprehensive earnings
 
43,158

 
 
 
23,427

 
Common stock related to ESOP
 
(3,484,220
)
 
 
 
(3,068,097
)
 
Total stockholders’ equity
 
10,575,902

 
 
 
10,405,171

 
Noncontrolling interests
 
26,927

 
 
 
24,169

 
Total equity
 
14,087,049

 
 
 
13,497,437

 
 
 
$
18,026,221

 
 
 
17,386,458

 

See accompanying notes to condensed consolidated financial statements.     
1


PUBLIX SUPER MARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts are in thousands, except per share amounts)

 
 
Three Months Ended
 
 
April 1, 2017
 
March 26, 2016
 
 
(Unaudited)
 
Revenues:
 
 
 
 
 
 
 
Sales
 
$
8,685,145

 
 
 
8,722,190

 
Other operating income
 
67,801

 
 
 
68,371

 
Total revenues
 
8,752,946

 
 
 
8,790,561

 
Costs and expenses:
 
 
 
 
 
 
 
Cost of merchandise sold
 
6,256,904

 
 
 
6,271,124

 
Operating and administrative expenses
 
1,756,030

 
 
 
1,692,650

 
Total costs and expenses
 
8,012,934

 
 
 
7,963,774

 
Operating profit
 
740,012

 
 
 
826,787

 
Investment income
 
60,750

 
 
 
27,830

 
Other nonoperating income, net
 
14,255

 
 
 
11,688

 
Earnings before income tax expense
 
815,017

 
 
 
866,305

 
Income tax expense
 
259,746

 
 
 
284,416

 
Net earnings
 
$
555,271

 
 
 
581,889

 
Weighted average shares outstanding
 
764,695

 
 
 
770,776

 
Basic and diluted earnings per share
 
$
0.73

 
 
 
0.75

 
Dividends paid per share
 
$
0.2225

 
 
 
0.20

 


CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
(Amounts are in thousands)

 
 
Three Months Ended
 
 
April 1, 2017
 
March 26, 2016
 
 
(Unaudited)
 
Net earnings
 
$
555,271

 
 
 
581,889

 
Other comprehensive earnings:
 
 
 
 
 
 
 
Unrealized gain on available-for-sale (AFS) securities net of income taxes of $24,507 and $6,905 in 2017 and 2016, respectively
 
38,918

 
 
 
10,965

 
Reclassification adjustment for net realized gain on AFS securities net of income taxes of $(12,082) and $(2,201) in 2017 and 2016, respectively
 
(19,187
)
 
 
 
(3,495
)
 
Comprehensive earnings
 
$
575,002

 
 
 
589,359

 







See accompanying notes to condensed consolidated financial statements.     
2

PUBLIX SUPER MARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts are in thousands)

 
 
Three Months Ended
 
 
April 1, 2017
 
March 26, 2016
 
 
(Unaudited)
 
Cash flows from operating activities:
 
 
 
 
 
 
 
Cash received from customers
 
$
8,736,477

 
 
 
8,742,020

 
Cash paid to employees and suppliers
 
(7,604,800
)
 
 
 
(7,519,371
)
 
Income taxes paid
 
(9,576
)
 
 
 
(10,021
)
 
Self-insured claims paid
 
(82,262
)
 
 
 
(75,632
)
 
Dividends and interest received
 
59,759

 
 
 
55,727

 
Other operating cash receipts
 
66,493

 
 
 
66,912

 
Other operating cash payments
 
(4,565
)
 
 
 
(11,218
)
 
Net cash provided by operating activities
 
1,161,526

 
 
 
1,248,417

 
Cash flows from investing activities:
 
 
 
 
 
 
 
Payment for capital expenditures
 
(287,654
)
 
 
 
(336,682
)
 
Proceeds from sale of property, plant and equipment
 
536

 
 
 
2,589

 
Payment for investments
 
(861,677
)
 
 
 
(747,159
)
 
Proceeds from sale and maturity of investments
 
471,840

 
 
 
314,608

 
Net cash used in investing activities
 
(676,955
)
 
 
 
(766,644
)
 
Cash flows from financing activities:
 
 
 
 
 
 
 
Payment for acquisition of common stock
 
(287,451
)
 
 
 
(277,919
)
 
Proceeds from sale of common stock
 
107,743

 
 
 
110,485

 
Dividends paid
 
(169,722
)
 
 
 
(153,957
)
 
Repayment of long-term debt
 
(8,616
)
 
 
 
(18,797
)
 
Other, net
 
3,788

 
 
 
(84
)
 
Net cash used in financing activities
 
(354,258
)
 
 
 
(340,272
)
 
Net increase in cash and cash equivalents
 
130,313

 
 
 
141,501

 
Cash and cash equivalents at beginning of period
 
438,319

 
 
 
352,176

 
Cash and cash equivalents at end of period
 
$
568,632

 
 
 
493,677

 


See accompanying notes to condensed consolidated financial statements.     (Continued)
3

PUBLIX SUPER MARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts are in thousands)
 
 
 
Three Months Ended
 
 
April 1, 2017
 
March 26, 2016
 
 
(Unaudited)
 
Reconciliation of net earnings to net cash
provided by operating activities:
 
 
 
 
 
 
 
Net earnings
 
$
555,271

 
 
 
581,889

 
Adjustments to reconcile net earnings to net
cash provided by operating activities:
 
 
 
 
 
 
 
Depreciation and amortization
 
157,291

 
 
 
149,934

 
Increase in LIFO reserve
 
4,582

 
 
 
7,100

 
Retirement contributions paid or payable
in common stock
 
102,337

 
 
 
111,193

 
Deferred income taxes
 
8,377

 
 
 
4,930

 
Loss on disposal and impairment of property,
plant and equipment
 
1,780

 
 
 
635

 
Gain on AFS securities
 
(31,269
)
 
 
 
(5,696
)
 
Net amortization of investments
 
32,234

 
 
 
35,566

 
Changes in operating assets and liabilities
providing (requiring) cash:
 
 
 
 
 
 
 
Trade receivables
 
49,885

 
 
 
(548
)
 
Merchandise inventories
 
(18,051
)
 
 
 
110,081

 
Prepaid expenses and other noncurrent assets
 
(9,494
)
 
 
 
(6,909
)
 
Accounts payable and accrued expenses
 
68,633

 
 
 
4,687

 
Self-insurance reserves
 
2,268

 
 
 
(154
)
 
Federal and state income taxes
 
236,741

 
 
 
257,125

 
Other noncurrent liabilities
 
941

 
 
 
(1,416
)
 
Total adjustments
 
606,255

 
 
 
666,528

 
Net cash provided by operating activities
 
$
1,161,526

 
 
 
1,248,417

 



See accompanying notes to condensed consolidated financial statements.         
4

PUBLIX SUPER MARKETS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



(1)
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of Publix Super Markets, Inc. and subsidiaries (the Company) have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and the rules and regulations of the Securities and Exchange Commission (SEC) for interim financial reporting. Accordingly, the accompanying statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, these statements include all adjustments that are of a normal and recurring nature necessary to present fairly the Company’s financial position and results of operations. Due to the seasonal nature of the Company’s business, the results of operations for the three months ended April 1, 2017 are not necessarily indicative of the results for the entire 2017 fiscal year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 .
The preparation of financial statements in conformity with GAAP 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.

(2)
Recently Issued Accounting Standards
In June 2016, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) requiring companies to change the methodology used to measure credit losses on financial instruments.  The ASU is effective for reporting periods beginning after December 15, 2019 with early adoption permitted only for reporting periods beginning after December 15, 2018.  The Company does not expect the adoption of the ASU to have a material effect on the Company’s financial condition or results of operations. The adoption of the ASU will have no effect on the Company’s cash flows.
In February 2016, the FASB issued an ASU on lease accounting. The ASU requires the lease rights and obligations arising from lease contracts, including existing and new arrangements, to be recognized as assets and liabilities on the balance sheet. The ASU is effective for reporting periods beginning after December 15, 2018 with early adoption permitted. While the Company is still evaluating the ASU, the Company expects the adoption of the ASU to have a material effect on the Company’s financial condition due to the recognition of the lease rights and obligations as assets and liabilities on the consolidated balance sheets. The Company does not expect the adoption of the ASU to have a material effect on the Company’s results of operations. The adoption of the ASU will have no effect on the Company’s cash flows.
In January 2016, the FASB issued an ASU requiring companies to measure equity securities at fair value with changes in fair value recognized in net earnings as opposed to other comprehensive earnings. The ASU is effective for reporting periods beginning after December 15, 2017. The adoption of the ASU will have an effect on the Company’s results of operations. The extent of the effect on results of operations will vary with the changes in the fair value of equity securities. The adoption of the ASU will have no effect on the Company’s financial condition or cash flows.
In November 2015, the FASB issued an ASU requiring companies to classify deferred tax assets and liabilities in the noncurrent section of the balance sheet. The ASU is effective for reporting periods beginning after December 15, 2016. The Company retrospectively adopted the ASU during the quarter ended April 1, 2017, and therefore reclassified $77,496,000 from current deferred tax assets to noncurrent deferred tax liabilities as of December 31, 2016 on the condensed consolidated balance sheet.
In May 2014, the FASB issued an ASU on the recognition of revenue from contracts with customers. The ASU requires additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. The ASU is effective for reporting periods beginning after December 15, 2017. The Company does not expect the adoption of the ASU to have a material effect on the Company’s financial condition, results of operations or cash flows.



5

PUBLIX SUPER MARKETS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



(3)
Fair Value of Financial Instruments
The fair value of certain of the Company’s financial instruments, including cash and cash equivalents, trade receivables and accounts payable, approximates their respective carrying amounts due to their short-term maturity.
The fair value of available-for-sale (AFS) securities is based on market prices using the following measurement categories:
Level 1 – Fair value is determined by using quoted prices in active markets for identical investments. AFS securities that are included in this category are primarily mutual funds, exchange traded funds and equity securities.
Level 2 – Fair value is determined by using other than quoted prices. By using observable inputs (for example, benchmark yields, interest rates, reported trades and broker dealer quotes), the fair value is determined through processes such as benchmark curves, benchmarking of like securities and matrix pricing of corporate, state and municipal bonds by using pricing of similar bonds based on coupons, ratings and maturities. AFS securities that are included in this category are primarily debt securities (tax exempt and taxable bonds).
Level 3 – Fair value is determined by using other than observable inputs. Fair value is determined by using the best information available in the circumstances and requires significant management judgment or estimation. No AFS securities are currently included in this category.
Following is a summary of fair value measurements for AFS securities as of April 1, 2017 and December 31, 2016 :
 
 
Fair
Value
 
Level 1
 
Level 2
 
Level 3
 
 
(Amounts are in thousands)
April 1, 2017
 
$
7,059,820

 
1,553,295

 
5,506,525

 
—

December 31, 2016
 
6,738,618

 
1,286,625

 
5,451,993

 
—


(4)
Investments
Debt and equity securities are classified as AFS and are carried at fair value. The Company evaluates whether AFS securities are other-than-temporarily impaired (OTTI) based on criteria that include the extent to which cost exceeds market value, the duration of the market value decline, the credit rating of the issuer or security, the failure of the issuer to make scheduled principal or interest payments and the financial health and prospects of the issuer or security.
Declines in the value of AFS securities determined to be OTTI are recognized in earnings and reported as OTTI losses. Debt securities with unrealized losses are considered OTTI if the Company intends to sell the debt security or if the Company will be required to sell the debt security prior to any anticipated recovery. If the Company determines that a debt security is OTTI under these circumstances, the impairment recognized in earnings is measured as the difference between the amortized cost and the current fair value. A debt security is also determined to be OTTI if the Company does not expect to recover the amortized cost of the debt security. However, in this circumstance, if the Company does not intend to sell the debt security and will not be required to sell the debt security, the impairment recognized in earnings equals the estimated credit loss as measured by the difference between the present value of expected cash flows and the amortized cost of the debt security. Expected cash flows are discounted using the debt security’s effective interest rate. An equity security is determined to be OTTI if the Company does not expect to recover the cost of the equity security. Declines in the value of AFS securities determined to be temporary are reported net of income taxes as other comprehensive losses and included as a component of stockholders’ equity.
Interest and dividend income, amortization of premiums, accretion of discounts and realized gains and losses on AFS securities are included in investment income. Interest income is accrued as earned. Dividend income is recognized as income on the ex-dividend date of the security. The cost of AFS securities sold is based on the first-in, first-out method.


6

PUBLIX SUPER MARKETS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



Following is a summary of AFS securities as of April 1, 2017 and December 31, 2016 :
 
 
Amortized
Cost
 
Gross
Unrealized
Gains
Gross
Unrealized
Losses
 
Fair
Value
 
 
(Amounts are in thousands)
April 1, 2017
 
 
 
 
 
 
 
 
 
 
 
Tax exempt bonds
 
$
2,919,378

 
 
4,964

 
 
9,748

 
 
2,914,594

Taxable bonds
 
2,616,734

 
 
1,530

 
 
28,113

 
 
2,590,151

Restricted investments
 
164,548

 
 
—

 
 
—

 
 
164,548

Equity securities
 
1,279,526

 
 
114,410

 
 
3,409

 
 
1,390,527

 
 
$
6,980,186

 
 
120,904

 
 
41,270

 
 
7,059,820

December 31, 2016
 
 
 
 
 
 
 
 
 
 
 
Tax exempt bonds
 
$
3,036,060

 
 
2,211

 
 
24,649

 
 
3,013,622

Taxable bonds
 
2,469,192

 
 
1,359

 
 
33,903

 
 
2,436,648

Restricted investments
 
164,548

 
 
—

 
 
463

 
 
164,085

Equity securities
 
1,021,340

 
 
110,879

 
 
7,956

 
 
1,124,263

 
 
$
6,691,140

 
 
114,449

 
 
66,971

 
 
6,738,618


Realized gains on sales of AFS securities totaled $34,622,000 for the three months ended April 1, 2017 . Realized losses on sales of AFS securities totaled $3,353,000 for the three months ended April 1, 2017 .
Realized gains on sales of AFS securities totaled $9,251,000 for the three months ended March 26, 2016 . Realized losses on sales of AFS securities totaled $3,555,000 for the three months ended March 26, 2016 .
The amortized cost and fair value of AFS securities by expected maturity as of April 1, 2017 and December 31, 2016 are as follows:
 
 
April 1, 2017
 
December 31, 2016
 
 
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
 
 
(Amounts are in thousands)
Due in one year or less
 
$
1,597,922

 
1,597,903

 
1,592,144

 
1,591,740

Due after one year through five years
 
3,133,550

 
3,117,869

 
3,218,371

 
3,187,739

Due after five years through ten years
 
792,266

 
776,095

 
680,641

 
656,162

Due after ten years
 
12,374

 
12,878

 
14,096

 
14,629

 
 
5,536,112

 
5,504,745

 
5,505,252

 
5,450,270

Restricted investments
 
164,548

 
164,548

 
164,548

 
164,085

Equity securities
 
1,279,526

 
1,390,527

 
1,021,340

 
1,124,263

 
 
$
6,980,186

 
7,059,820

 
6,691,140

 
6,738,618



7

PUBLIX SUPER MARKETS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



Following is a summary of temporarily impaired AFS securities by the time period impaired as of April 1, 2017 and December 31, 2016 :
 
 
Less Than
12 Months
 
 
12 Months
or Longer
 
 
Total
 
 
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
 
(Amounts are in thousands)
 
April 1, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tax exempt bonds
 
$
1,304,761

 
 
8,696

 
 
23,986

 
 
1,052

 
 
1,328,747

 
 
9,748

 
Taxable bonds
 
2,041,367

 
 
27,645

 
 
51,806

 
 
468

 
 
2,093,173

 
 
28,113

 
Equity securities
 
163,598

 
 
1,613

 
 
4,054

 
 
1,796

 
 
167,652

 
 
3,409

 
 
 
$
3,509,726

 
 
37,954

 
 
79,846

 
 
3,316

 
 
3,589,572

 
 
41,270

 
December 31, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tax exempt bonds
 
$
2,360,143

 
 
24,416

 
 
6,099

 
 
233

 
 
2,366,242

 
 
24,649

 
Taxable bonds
 
1,921,367

 
 
33,354

 
 
51,769

 
 
549

 
 
1,973,136

 
 
33,903

 
Restricted investments
 
164,085

 
 
463

 
 
—

 
 
—

 
 
164,085

 
 
463

 
Equity securities
 
61,625

 
 
3,924

 
 
38,141

 
 
4,032

 
 
99,766

 
 
7,956

 
 
 
$
4,507,220

 
 
62,157

 
 
96,009

 
 
4,814

 
 
4,603,229

 
 
66,971

 
There are 441 AFS securities contributing to the total unrealized loss of $41,270,000 as of April 1, 2017 . Unrealized losses related to debt securities are primarily due to interest rate volatility impacting the market value of certain bonds. The Company continues to receive scheduled principal and interest payments on these debt securities. Unrealized losses related to equity securities are primarily due to temporary equity market fluctuations that are expected to recover.

(5)
Consolidation of Joint Ventures and Long-Term Debt
From time to time, the Company enters into Joint Ventures (JV), in the legal form of limited liability companies, with certain real estate developers to partner in the development of shopping centers with the Company as the anchor tenant. The Company consolidates certain of these JVs in which it has a controlling financial interest. The Company is considered to have a controlling financial interest in a JV when it has (1) the power to direct the activities of the JV that most significantly impact the JV’s economic performance and (2) the obligation to absorb losses or the right to receive benefits from the JV that could potentially be significant to such JV.
The Company evaluates a JV using specific criteria to determine whether the Company has a controlling financial interest and is the primary beneficiary of the JV. Factors considered in determining whether the Company is the primary beneficiary include risk and reward sharing, experience and financial condition of the other JV members, voting rights, involvement in routine capital and operating decisions and each member’s influence over the JV owned shopping center’s economic performance.
Generally, most major JV decision making is shared between all members. In particular, the use and sale of JV assets, business plans and budgets are generally required to be approved by all members. However, the Company, through its anchor tenant operating lease agreement, has the power to direct the activities that most significantly influence the economic performance of the JV owned shopping center. Additionally, through its member equity interest in the JV, the Company will receive a significant portion of the JV’s benefits or is obligated to absorb a significant portion of the JV’s losses.
As of April 1, 2017 , the carrying amounts of the assets and liabilities of the consolidated JVs were $109,412,000 and $53,485,000 , respectively. As of December 31, 2016 , the carrying amounts of the assets and liabilities of the consolidated JVs were $102,254,000 and $53,278,000 , respectively. The assets are owned by and the liabilities are obligations of the JVs, not the Company, except for a portion of the long-term debt of certain JVs guaranteed by the Company. The JVs are financed with capital contributions from the members, loans and/or the cash flows generated by the JV owned shopping centers once in operation. Total earnings attributable to noncontrolling interests for 2017 and 2016 were immaterial. The Company’s involvement with these JVs does not have a significant effect on the Company’s financial condition, results of operations or cash flows.


8

PUBLIX SUPER MARKETS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



The Company’s long-term debt results primarily from the consolidation of loans of certain JVs and loans assumed in connection with the acquisition of certain shopping centers with the Company as the anchor tenant. No loans were assumed during the three months ended April 1, 2017 and March 26, 2016 . Maturities of JV loans range from April 2017 through January 2021 and have variable interest rates based on a LIBOR index plus 175 to 250 basis points. Maturities of assumed shopping center loans range from May 2017 through January 2027 and have fixed interest rates ranging from 3.7% to 7.5% .
 
(6)
Retirement Plan
The Company has a trusteed, noncontributory Employee Stock Ownership Plan (ESOP) for the benefit of eligible employees. Since the Company’s common stock is not traded on an established securities market, the ESOP includes a put option for shares of the Company’s common stock distributed from the ESOP. Shares are distributed from the ESOP primarily to separated vested participants and certain eligible participants who elect to diversify their account balances. Under the Company’s administration of the ESOP’s put option, if the owners of distributed shares desire to sell their shares, the Company is required to purchase the shares at fair value for a specified time period after distribution of the shares from the ESOP. The fair value of distributed shares subject to the put option totaled $598,641,000 and $425,514,000 as of April 1, 2017 and December 31, 2016 , respectively. The cost of the shares held by the ESOP totaled $2,885,579,000 and $2,642,583,000 as of April 1, 2017 and December 31, 2016 , respectively. Due to the Company’s obligation under the put option, the distributed shares subject to the put option and the shares held by the ESOP are classified as temporary equity in the mezzanine section of the condensed consolidated balance sheets and totaled $3,484,220,000 and $3,068,097,000 as of April 1, 2017 and December 31, 2016 , respectively. The fair value of the shares held by the ESOP totaled $8,499,952,000 and $8,356,659,000 as of April 1, 2017 and December 31, 2016 , respectively.

(7)
Accumulated Other Comprehensive Earnings
A reconciliation of the changes in accumulated other comprehensive earnings net of income taxes for the three months ended April 1, 2017 and March 26, 2016 is as follows:
 
 
AFS Securities
 
Postretirement Benefits
 
Accumulated Other Comprehensive Earnings
 
 
 
(Amounts are in thousands)
 
2017
 
 
 
 
 
 
 
 
 
 
 
 
Balances at December 31, 2016
 
 
$
29,118

 
 
 
(5,691
)
 
 
 
23,427

 
Unrealized gain on AFS securities
 
 
38,918

 
 
 
—

 
 
 
38,918

 
Net realized gain on AFS securities reclassified to investment income
 
 
(19,187
)
 
 
 
—

 
 
 
(19,187
)
 
Net other comprehensive earnings
 
 
19,731

 
 
 
—

 
 
 
19,731

 
Balances at April 1, 2017
 
 
$
48,849

 
 
 
(5,691
)
 
 
 
43,158

 
 
 
 
 
 
 
 
 
 
 
 
 
 
2016
 
 
 
 
Balances at December 26, 2015
 
 
$
31,295

 
 
 
(5,027
)
 
 
 
26,268

 
Unrealized gain on AFS securities
 
 
10,965

 
 
 
—

 
 
 
10,965

 
Net realized gain on AFS securities reclassified to investment income
 
 
(3,495
)
 
 
 
—

 
 
 
(3,495
)
 
Net other comprehensive earnings
 
 
7,470

 
 
 
—

 
 
 
7,470

 
Balances at March 26, 2016
 
 
$
38,765

 
 
 
(5,027
)
 
 
 
33,738

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(8)
Subsequent Event
On April 3, 2017 , the Company declared a quarterly dividend of $0.23 per share or $176,400,000 , payable May 1, 2017 to stockholders of record as of the close of business April 14, 2017 .


9


Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
The Company is engaged in the retail food industry, operating supermarkets in Florida, Georgia, Alabama, South Carolina, Tennessee and North Carolina. The Company will expand its retail operations into Virginia later this year. As of April 1, 2017 , the Company operated 1,146 supermarkets. For the three months ended April 1, 2017 , 11 supermarkets were opened (including one replacement supermarket) and 32 supermarkets were remodeled. The replacement supermarket that opened during the three months ended April 1, 2017 replaced the one supermarket that closed during the same period. 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.
Results of Operations
Sales
Sales for the three months ended April 1, 2017 were $8.69 billion as compared with $8.72 billion for the three months ended March 26, 2016 , a decrease of $37.0 million or 0.4% . The decrease in sales for the three months ended April 1, 2017 as compared with the three months ended March 26, 2016 was primarily due to a 2.1% decrease in comparable store sales (supermarkets open for the same weeks in both periods, including replacement supermarkets). Sales for supermarkets that are replaced on site are classified as new supermarket sales since the replacement period for the supermarket is generally 9 to 12 months. The Company estimates that its sales for the three months ended March 26, 2016 were positively impacted by $100 million or 1.2% due to the effect of the Easter holiday being in the first quarter in 2016. In 2017, the effect of the Easter holiday will be in the second quarter. Comparable store sales for the three months ended April 1, 2017 decreased primarily due to the effect of the early Easter holiday in 2016 and the impact of new supermarkets located near existing supermarkets.
Gross profit
Gross profit (sales less cost of merchandise sold) as a percentage of sales was 28.0% and 28.1% for the three months ended April 1, 2017 and March 26, 2016 , respectively. Gross profit as a percentage of sales for the three months ended April 1, 2017 as compared with the three months ended March 26, 2016 remained relatively unchanged.
Operating and administrative expenses
Operating and administrative expenses as a percentage of sales were 20.2% and 19.4% for the three months ended April 1, 2017 and March 26, 2016 , respectively. The increase in operating and administrative expenses as a percentage of sales for the three months ended April 1, 2017 as compared with the three months ended March 26, 2016 was primarily due to increases in payroll and facility costs as a percentage of sales.
Investment income
Investment income was $60.8 million and $27.8 million for the three months ended April 1, 2017 and March 26, 2016 , respectively. The increase in investment income for the three months ended April 1, 2017 as compared with the three months ended March 26, 2016 was primarily due to an increase in realized gains on the sale of equity securities.
Income tax expense
The effective income tax rate was 31.9% and 32.8% for the three months ended April 1, 2017 and March 26, 2016 , respectively. The decrease in the effective income tax rate for the three months ended April 1, 2017 as compared with the three months ended March 26, 2016 was primarily due to the increased impact of the permanent deductions due to the decrease in earnings before income tax expense.
Net earnings
Net earnings were $555.3 million or $0.73 per share and $581.9 million or $0.75 per share for the three months ended April 1, 2017 and March 26, 2016 , respectively. Net earnings as a percentage of sales were 6.4% and 6.7% for the three months ended April 1, 2017 and March 26, 2016 , respectively. The decrease in net earnings as a percentage of sales for the three months ended April 1, 2017 as compared with the three months ended March 26, 2016 was primarily due to the increase in operating and administrative expenses as a percentage of sales.


10


Liquidity and Capital Resources
Cash and cash equivalents, short-term investments and long-term investments totaled $7,628.5 million as of April 1, 2017 , as compared with $7,176.9 million as of December 31, 2016 and $7,561.2 million as of March 26, 2016 . The increase from the first quarter of 2016 to the first quarter of 2017 was primarily due to the Company generating cash in excess of the amount needed for operations, capital expenditures, common stock repurchases and dividend payments.
Net cash provided by operating activities
Net cash provided by operating activities was $1,161.5 million and $1,248.4 million for the three months ended April 1, 2017 and March 26, 2016 , respectively. The decrease in net cash provided by operating activities for the three months ended April   1, 2017 as compared with the three months ended March 26, 2016 was primarily due to the decrease in net earnings and the net effect of timing differences related to operating assets and liabilities.
Net cash used in investing activities
Net cash used in investing activities was $677.0 million and $766.6 million for the three months ended April 1, 2017 and March 26, 2016 , respectively. The primary use of net cash in investing activities for the three months ended April 1, 2017 was funding capital expenditures and net increases in investment securities. Capital expenditures for the three months ended April 1, 2017 totaled $287.7 million . These expenditures were incurred in connection with the opening of 11 new supermarkets (including one replacement supermarket) and remodeling 32 supermarkets. Expenditures were also incurred for supermarkets and remodels in progress, new or enhanced information technology hardware and applications and the acquisition of shopping centers with the Company as the anchor tenant. For the three months ended April 1, 2017 , the payment for investments, net of the proceeds from the sale and maturity of such investments, was $389.8 million .
Net cash used in financing activities
Net cash used in financing activities was $354.3 million and $340.3 million for the three months ended April 1, 2017 and March 26, 2016 , respectively. The primary use of net cash in financing activities was funding net common stock repurchases and dividend payments. Net common stock repurchases totaled $179.7 million and $167.4 million for the three months ended April 1, 2017 and March 26, 2016 , respectively. The Company currently repurchases common stock at the stockholders’ request in accordance with the terms of the Employee Stock Purchase Plan (ESPP), Non-Employee Directors Stock Purchase Plan (Directors Plan), 401(k) Plan and ESOP. 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 current value for amounts similar to those in prior years. However, with the exception of certain shares distributed from the ESOP, such purchases are not required and the Company retains the right to discontinue them at any time.
Dividends
The Company paid dividends on its common stock of $0.2225 per share or $169.7 million and $0.20 per share or $154.0 million during the three months ended April 1, 2017 and March 26, 2016 , respectively.
Capital expenditures projection
Capital expenditures for the remainder of 2017 are expected to be approximately $1,560 million , primarily consisting of new supermarkets, remodeling existing supermarkets, new or enhanced information technology hardware and applications and the acquisition of shopping centers with the Company as the anchor tenant. The shopping center acquisitions are financed with internally generated funds and assumed debt, if prepayment penalties for the debt are determined to be significant. This capital program is subject to continuing change and review.
Cash requirements
In 2017 , the cash requirements for operations, capital expenditures, common stock repurchases and dividend payments 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 available to support the Company’s liquidity requirements, if needed.


11


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,” “expect,” “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, the following: competitive practices and pricing in the food and drug industries generally and particularly in the Company’s principal markets; results of programs to increase sales, including private label sales; results of programs to control or reduce costs; changes in buying, pricing and promotional practices; changes in shrink management; 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 within or beyond the Company’s control. These factors include changes in the rate of inflation, changes in federal, state and local laws and regulations, 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 rates, 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. Except as may be required by applicable law, the Company assumes no obligation to publicly update these forward-looking statements.
Item 3.        Quantitative and Qualitative Disclosures About Market Risk
The Company does not utilize financial instruments for trading or other speculative purposes, nor does it utilize leveraged financial instruments. There have been no material changes in the market risk factors from those disclosed in the Company’s Form 10-K for the year ended December 31, 2016 .
Item 4.    Controls and Procedures
As of the end of the period covered by this Quarterly Report on Form 10-Q, 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 this evaluation, the Chief Executive Officer and Chief Financial Officer each concluded that the Company’s disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that such information has been accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, in a manner that allows timely decisions regarding required disclosure. 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 April 1, 2017 that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting.



12


PART II. OTHER INFORMATION
Item 1.    Legal Proceedings
As reported in the Company’s Form 10-K for the year ended December 31, 2016 , the Company is subject from time to time to various lawsuits, claims and charges arising in the normal course of business. The Company believes its recorded reserves are adequate in light of the probable and estimable liabilities. The estimated amount of reasonably possible losses for lawsuits, claims and charges, individually and in the aggregate, is considered to be immaterial. 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 1A.    Risk Factors
There have been no material changes in the risk factors from those disclosed in the Company’s Form 10-K for the year ended December 31, 2016 .
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
Shares of common stock repurchased by the Company during the three months ended April 1, 2017 were as follows (amounts are in thousands, except per share amounts):
 
Period
 
Total Number of Shares Purchased
 
Average Price Paid per Share
 
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs   (1)
 
Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs   (1)
January 1, 2017
through
February 4, 2017
 
 
1,345

 
 
 
$
40.15

 
 
N/A
 
N/A
February 5, 2017
through
March 4, 2017
 
 
2,877

 
 
 
40.63

 
 
N/A
 
N/A
March 5, 2017
through
April 1, 2017
 
 
2,850

 
 
 
40.90

 
 
N/A
 
N/A
 
 
Total
 
 
7,072

 
 
 
$
40.65

 
 
N/A
 
N/A
(1)  
Common stock is made available for sale by the Company only to its current employees and members of its Board of Directors through the ESPP and Directors Plan and to participants of the 401(k) Plan. In addition, common stock is provided to employees through the ESOP. The Company currently repurchases common stock subject to certain terms and conditions. The ESPP, Directors Plan, 401(k) Plan and ESOP each contain provisions prohibiting any transfer for value without the owner first offering the common stock to the Company.
The Company’s common stock is not traded on an established securities market. 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 April 1, 2017 required to be disclosed in the last two columns of the table.
Item 3.    Defaults Upon Senior Securities
Not Applicable
Item 4.    Mine Safety Disclosures
Not Applicable


13



Item 5.    Other Information
Not Applicable
Item 6.    Exhibits
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.
101
The following financial information from the Quarterly Report on Form 10-Q for the quarter ended April 1, 2017 is formatted in Extensible Business Reporting Language: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Earnings, (iii) Condensed Consolidated Statements of Comprehensive Earnings, (iv) Condensed Consolidated Statements of Cash Flows and (v) Notes to Condensed Consolidated Financial Statements.



14


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 
 
 
 
 
 
 
PUBLIX SUPER MARKETS, INC.
 
 
 
 
 
 
 
 
 
 
 
Date:
May 1, 2017
 
/s/  John A. Attaway, Jr.
 
 
 
John A. Attaway, Jr., Secretary
 
 
 
 
 
 
 
 
 
 
 
Date:
May 1, 2017
 
/s/  David P. Phillips
 
 
 
David P. Phillips, Executive Vice President and Chief Financial Officer (Principal Financial and
Accounting Officer)



15