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 ~~September 30, 2017~~March 28, 2020

Commission File ~~Number 0-00981~~Number: 000-00981

PUBLIX SUPER MARKETS, INC.

(Exact name of Registrant as specified in its charter)



Florida		59-0324412
(State of incorporation)		(I.R.S. Employer Identification No.)

3300 Publix Corporate Parkway Lakeland, Florida		33811
(Address of principal executive offices)		(Zip ~~code)~~Code)

(863) 688-1188

(Registrant’s telephone number, including area ~~code:~~code)

Securities registered pursuant to Section 12(b) of the Act: ~~(863) 688-1188~~None

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 ~~October 13, 2017~~April 15, 2020 was ~~738,568,000.~~704,659,000.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

PUBLIX SUPER MARKETS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts are in thousands, except par value)

(Unaudited)


	September 30, 2017				December 31, 2016
		(Unaudited)						March 28, 2020				December 28, 2019
ASSETS	ASSETS							ASSETS
Current assets:
Cash and cash equivalents		$	670,695			438,319			$	1,618,875			763,382
Short-term investments		1,256,724				1,591,740			454,111				438,105
Trade receivables		647,332				715,292			834,391				737,093
Merchandise inventories		1,706,304				1,722,392
Inventories									1,618,908				1,913,310
Prepaid expenses		48,915				50,434			51,719				75,710
Total current assets		4,329,970				4,518,177			4,578,004				3,927,600
Long-term investments		5,243,817				5,146,878			7,919,444				7,988,280
Other noncurrent assets		562,896				434,280			444,916				441,938
Operating lease right-of-use assets									2,991,588				2,964,780
Property, plant and equipment		12,825,095				11,981,632			15,454,042				15,222,409
Accumulated depreciation		(4,992,734		)		(4,694,509	)		(6,185,677		)		(6,037,887	)
Net property, plant and equipment		7,832,361				7,287,123			9,268,365				9,184,522
		$	17,969,044			17,386,458			$	25,202,317			24,507,120
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY							LIABILITIES AND EQUITY
Current liabilities:
Accounts payable		$	1,778,927			1,609,652			$	2,502,165			1,984,761
Accrued expenses:
Contributions to retirement plans		444,509				525,668			292,624				581,699
Self-insurance reserves		142,825				139,554			151,804				149,082
Salaries and wages		253,615				127,856			228,871				148,662
Other		398,274				414,197			412,605				461,427
Current portion of long-term debt		65,417				113,999			53,659				39,692
Current portion of operating lease liabilities									337,270				335,391
Federal and state income taxes		162,361				12,787			223,073				—
Total current liabilities		3,245,928				2,943,713			4,202,071				3,700,714
Deferred tax liabilities		462,537				396,484
Deferred income taxes									535,610				682,484
Self-insurance reserves		214,546				216,125			226,995				226,727
Accrued postretirement benefit cost		102,884				102,540			120,092				120,015
Long-term debt		153,186				136,585			121,457				131,997
Operating lease liabilities									2,610,655				2,603,206
Other noncurrent liabilities		87,428				93,574			138,719				140,633
Total liabilities		4,266,509				3,889,021			7,955,599				7,605,776
Common stock related to Employee Stock Ownership Plan (ESOP)		3,122,163				3,068,097			3,703,244				3,259,230
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
Common stock of $1 par value. Authorized 1,000,000 shares; issued 711,636 shares in 2020 and 706,552 shares in 2019									711,636				706,552
Additional paid-in capital		3,139,647				2,849,947			4,005,969				3,758,066
Retained earnings		10,842,179				9,836,696			12,772,966				12,317,478
Treasury stock at cost; 30,247 shares in 2017		(1,158,839		)		—
Accumulated other comprehensive earnings		70,657				23,427
Treasury stock at cost, 4,589 shares in 2020									(224,393		)		—
Accumulated other comprehensive (losses) earnings									(57,205		)		81,289
Common stock related to ESOP		(3,122,163		)		(3,068,097	)		(3,703,244		)		(3,259,230	)
Total stockholders’ equity		10,541,896				10,405,171			13,505,729				13,604,155
Noncontrolling interests		38,476				24,169			37,745				37,959
Total equity		13,702,535				13,497,437			17,246,718				16,901,344
		$	17,969,044			17,386,458			$	25,202,317			24,507,120

PUBLIX SUPER MARKETS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Amounts are in thousands, except per share amounts)

(Unaudited)


		Three Months Ended
	September 30, 2017			September 24, 2016			Three Months Ended
		(Unaudited)				March 28, 2020				March 30, 2019
Revenues:
Sales		$	8,520,569		8,026,548		$	11,228,537			9,674,197
Other operating income		65,511			64,101		78,414				85,913
Total revenues		8,586,080			8,090,649		11,306,951				9,760,110
Costs and expenses:
Cost of merchandise sold		6,219,735			5,902,079		8,037,568				6,966,392
Operating and administrative expenses		1,731,551			1,652,933		2,117,772				1,937,143
Total costs and expenses		7,951,286			7,555,012		10,155,340				8,903,535
Operating profit		634,794			535,637		1,151,611				856,575
Investment income		38,430			29,000
Investment (loss) income							(330,845		)		367,187
Other nonoperating income, net		17,218			13,721		16,924				19,313
Earnings before income tax expense		690,442			578,358		837,690				1,243,075
Income tax expense		215,515			157,223		170,355				262,104
Net earnings		$	474,927		421,135		$	667,335			980,971
Weighted average shares outstanding		748,347			768,941		706,758				716,026
Basic and diluted earnings per share		$	0.63		0.55
Dividends paid per share		$	0.23		0.2225
Earnings per share							$	0.94			1.37

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(Amounts are in thousands)

Three Months Ended
September 30, 2017 September 24, 2016
(Unaudited)
Net earnings $ 474,927
421,135

Other comprehensive earnings:
Unrealized gain on available-for-sale (AFS) securities net of income taxes of $30,884 and $13,390 in 2017 and 2016, respectively 49,043
21,263

Reclassification adjustment for net realized gain on AFS securities net of income taxes of $(3,989) and $(2,346) in 2017 and 2016, respectively (6,334 ) (3,725 )
Comprehensive earnings $ 517,636
438,673

~~PUBLIX SUPER MARKETS, INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS~~

~~(Amounts are in thousands, except per share amounts)~~(Unaudited)

Nine Months Ended
September 30, 2017 September 24, 2016
(Unaudited)
Revenues:
Sales $ 25,620,710
24,873,954

Other operating income 201,143
197,793

Total revenues 25,821,853
25,071,747

Costs and expenses:
Cost of merchandise sold 18,592,991
18,054,675

Operating and administrative expenses 5,240,753
4,995,297

Total costs and expenses 23,833,744
23,049,972

Operating profit 1,988,109
2,021,775

Investment income 192,906
82,222

Other nonoperating income, net 49,745
39,737

Earnings before income tax expense 2,230,760
2,143,734

Income tax expense 705,490
662,523

Net earnings $ 1,525,270
1,481,211

Weighted average shares outstanding 759,284
770,695

Basic and diluted earnings per share $ 2.01
1.92

Dividends paid per share $ 0.6825
0.645



		Three Months Ended
	March 28, 2020				March 30, 2019
Net earnings		$	667,335			980,971
Other comprehensive earnings:
Unrealized (loss) gain on debt securities net of income taxes of $(46,904) and $20,292 in 2020 and 2019, respectively.		(137,583		)		59,521
Reclassification adjustment for net realized (gain) loss on debt securities net of income taxes of $(588) and $100 in 2020 and 2019, respectively.		(1,726		)		293
Adjustment to postretirement benefit obligation net of income taxes of $278 in 2020.		815				—
Comprehensive earnings		$	528,841			1,040,785

~~CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS~~

~~(Amounts are in thousands)~~

Nine Months Ended
September 30, 2017 September 24, 2016
(Unaudited)
Net earnings $ 1,525,270
1,481,211

Other comprehensive earnings:
Unrealized gain on AFS securities net of income taxes of $70,268 and $34,017 in 2017 and 2016, respectively 111,585
54,019

Reclassification adjustment for net realized gain on AFS securities net of income taxes of $(40,526) and $(5,007) in 2017 and 2016, respectively (64,355 ) (7,951 )
Comprehensive earnings $ 1,572,500
1,527,279

PUBLIX SUPER MARKETS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts are in thousands)

(Unaudited)


		Nine Months Ended
	September 30, 2017				September 24, 2016				Three Months Ended
		(Unaudited)						March 28, 2020				March 30, 2019
Cash flows from operating activities:
Cash received from customers		$	25,786,802			25,024,422			$	11,208,724			9,698,829
Cash paid to employees and suppliers		(22,593,366		)		(21,995,448	)		(8,951,051		)		(8,317,811	)
Income taxes paid		(478,456		)		(505,330	)
Income taxes (paid) refunded									(5,941		)		1,152
Self-insured claims paid		(270,036		)		(242,803	)		(94,811		)		(81,196	)
Dividends and interest received		185,542				175,698			63,598				47,433
Other operating cash receipts		197,277				193,482			77,018				84,794
Other operating cash payments		(14,748		)		(31,258	)		(5,032		)		(4,845	)
Net cash provided by operating activities		2,813,015				2,618,763			2,292,505				1,428,356
Cash flows from investing activities:
Payment for capital expenditures		(1,063,152		)		(1,110,516	)		(269,288		)		(254,836	)
Proceeds from sale of property, plant and equipment		4,460				4,300			1,186				2,196
Payment for investments		(2,353,947		)		(1,891,611	)		(924,827		)		(664,667	)
Proceeds from sale and maturity of investments		2,593,592				1,352,848			299,116				310,379
Net cash used in investing activities		(819,047		)		(1,644,979	)		(893,813		)		(606,928	)
Cash flows from financing activities:
Payment for acquisition of common stock		(1,438,628		)		(722,641	)		(442,509		)		(333,857	)
Proceeds from sale of common stock		215,424				252,803			109,348				113,196
Dividends paid		(519,787		)		(497,318	)		(211,847		)		(185,835	)
Repayment of long-term debt		(46,019		)		(40,831	)		(2,816		)		(2,263	)
Other, net		27,418				(13,412	)		4,625				209
Net cash used in financing activities		(1,761,592		)		(1,021,399	)		(543,199		)		(408,550	)
Net increase (decrease) in cash and cash equivalents		232,376				(47,615	)
Net increase in cash and cash equivalents									855,493				412,878
Cash and cash equivalents at beginning of period		438,319				352,176			763,382				599,264
Cash and cash equivalents at end of period		$	670,695			304,561			$	1,618,875			1,012,142

PUBLIX SUPER MARKETS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts are in thousands)

(Unaudited)


		Nine Months Ended
	September 30, 2017				September 24, 2016				Three Months Ended
		(Unaudited)						March 28, 2020				March 30, 2019
Reconciliation of net earnings to net cash provided by operating activities:
Net earnings		$	1,525,270			1,481,211			$	667,335			980,971
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		484,307				458,694			178,969				174,049
Increase in LIFO reserve		20,720				7,020
Increase in last-in, first out (LIFO) reserve									9,525			��	10,230
Retirement contributions paid or payable in common stock		280,571				278,335			98,651				101,071
Deferred income taxes		36,311				(10,889	)		(99,660		)		65,997
Loss on disposal and impairment of property, plant and equipment		1,991				2,756
Gain on AFS securities		(104,881		)		(12,958	)
Loss (gain) on disposal and impairment of property, plant and equipment									1,625				(1,146	)
Loss (gain) on investments									385,113				(325,171	)
Net amortization of investments		87,982				105,968			10,277				12,280
Changes in operating assets and liabilities providing (requiring) cash:
Trade receivables		67,952				90,128			(97,298		)		(12,718	)
Merchandise inventories		(4,632		)		70,809
Prepaid expenses and other noncurrent assets		(5,410		)		(18,999	)
Inventories									284,877				101,241
Other assets									(6,765		)		81,108
Accounts payable and accrued expenses		264,196				42,951			604,049				133,002
Self-insurance reserves		1,692				930
Federal and state income taxes		162,748				129,501			255,215				192,131
Other noncurrent liabilities		(5,802		)		(6,694	)
Other liabilities									592				(84,689	)
Total adjustments		1,287,745				1,137,552			1,625,170				447,385
Net cash provided by operating activities		$	2,813,015			2,618,763			$	2,292,505			1,428,356

PUBLIX SUPER MARKETS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Amounts are in thousands, except per share amounts)

(Unaudited)



	Common Stock		Additional Paid-in Capital	Retained Earnings		Common Stock (Acquired from) Sold to Stock- holders			Accumu- lated Other Compre- hensive Earnings (Losses)			Common Stock Related to ESOP		Total Stock- holders’ Equity
2020
Balances at December 28, 2019	$	706,552	3,758,066	12,317,478			—			81,289		(3,259,230	)	13,604,155
Comprehensive earnings	—		—	667,335			—			(138,494	)	—		528,841
Dividends, $0.30 per share	—		—	(211,847	)		—			—		—		(211,847	)
Contribution of 7,398 shares to retirement plan	4,977		242,724	—			114,054			—		—		361,755
Acquisition of 9,142 shares from stockholders	—		—	—			(442,509	)		—		—		(442,509	)
Sale of 2,239 shares to stockholders	107		5,179	—			104,062			—		—		109,348
Change for ESOP related shares	—		—	—			—			—		(444,014	)	(444,014	)
Balances at March 28, 2020	$	711,636	4,005,969	12,772,966			(224,393	)		(57,205	)	(3,703,244	)	13,505,729



2019
Balances at December 29, 2018	$	715,445	3,458,004	10,840,654		—		(55,762	)	(3,134,999	)	11,823,342
Comprehensive earnings	—		—	980,971		—		59,814		—		1,040,785
Dividends, $0.26 per share	—		—	(185,835	)	—		—		—		(185,835	)
Contribution of 8,587 shares to retirement plans	5,605		235,017	—		127,329		—		—		367,951
Acquisition of 7,802 shares from stockholders	—		—	—		(333,857	)	—		—		(333,857	)
Sale of 2,641 shares to stockholders	621		26,019	—		86,556		—		—		113,196
Change for ESOP related shares	—		—	—		—		—		(375,184	)	(375,184	)
Balances at March 30, 2019	$	721,671	3,719,040	11,635,790		(119,972	)	4,052		(3,510,183	)	12,450,398

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)~~(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 and the impact of the coronavirus pandemic, the results of operations for the three ~~and nine~~ months ended ~~September 30, 2017~~March 28, 2020 are not necessarily indicative of the results for the entire ~~2017~~2020 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~~28, 2019.

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.

~~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~~investments 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~~Investments included in this category are ~~primarily mutual funds, exchange~~equity securities (exchange traded funds and individual equity ~~securities.~~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~~Investments included in this category are primarily debt securities (tax exempt and taxable bonds)., including restricted investments in taxable bonds held as collateral.

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~~investments are currently included in this category.

Following is a summary of fair value measurements for ~~AFS securities~~investments as of ~~September 30, 2017~~March 28, 2020 and December ~~31, 2016~~28, 2019::

Fair
Value
Level 1 Level 2 Level 3
(Amounts are in thousands)
September 30, 2017 $ 6,500,541
2,266,877
4,233,664
—
December 31, 2016 6,738,618
1,286,625
5,451,993
—



	Fair Value		Level 1	Level 2	Level 3
	(Amounts are in thousands)
March 28, 2020	$	8,373,555	2,154,460	6,219,095	—
December 28, 2019	8,426,385		2,028,547	6,397,838	—

PUBLIX SUPER MARKETS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


~~(4)~~(3)	Investments


(a)	Debt Securities

In 2020, the Company adopted the Accounting Standards Update (ASU) requiring companies to recognize credit losses on debt securities in earnings as an allowance that is reevaluated each reporting period. The Company adopted the ASU on a prospective basis as of December 29, 2019. Prior to the adoption of the ASU, credit losses in which the Company did not expect to recover the cost of the debt security were recognized in earnings as an other-than-temporary impairment. The adoption of the ASU did not have an effect on the Company’s financial position, results of operations or cash flows.

Debt ~~and equity~~ securities are classified as ~~AFS~~available-for-sale and ~~are carried~~measured at fair value. The Company evaluates ~~whether AFS~~debt securities ~~are other-than-temporarily impaired (OTTI)~~on an individual security basis to determine if an unrealized loss is due to a credit loss or other factors, including interest rate fluctuations. The collectability of debt securities is evaluated based on criteria that include the extent to which the cost ~~exceeds market value, the duration~~(cost of the ~~market~~debt security adjusted for amortization of premium or accretion of discount) exceeds fair 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~~Credit losses on debt 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~~prior to any anticipated recovery are recognized in earnings ~~equals the estimated credit loss~~through an allowance. The allowance is measured as ~~measured by~~ the difference between the present value of expected cash flows and the ~~amortized~~ cost of the debt security, limited to the difference between the cost and the fair value of the debt security. Expected cash flows are discounted using the debt security’s effective interest rate. ~~An equity security is determined~~Subsequent changes to the allowance are recognized in earnings in the period of the change. Credit losses on debt securities the Company intends to sell or will be ~~OTTI if~~required to sell prior to any anticipated recovery are recognized in earnings and measured as the difference between the cost and the fair value of the debt security.

Other unrealized losses on debt securities the Company does not ~~expect~~intend to ~~recover the cost of the equity security. Declines~~sell and will not be required to sell prior to any anticipated recovery are reported in ~~the value of AFS securities determined to be temporary are reported~~other comprehensive earnings 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~~ Other unrealized losses on ~~AFS~~debt securities the Company intends to sell or will be required to sell prior to any anticipated recovery are ~~included~~recognized in ~~investment income. Interest income is accrued~~earnings and measured as ~~earned. Dividend income is recognized as income on~~ the ~~ex-dividend date~~difference between the cost and the fair value of the debt security.

Following is a summary of debt securities as of March 28, 2020 and December 28, 2019:



	Cost		Gross Unrealized Gains	Gross Unrealized Losses	Fair Value
	(Amounts are in thousands)
March 28, 2020
Tax exempt bonds	$	728,671	3,090	137	731,624
Taxable bonds	5,049,543		56,270	121,408	4,984,405
Restricted investments	170,134		7,473	—	177,607
	$	5,948,348	66,833	121,545	5,893,636
December 28, 2019
Tax exempt bonds	$	767,931	3,429	130	771,230
Taxable bonds	5,002,036		120,132	1,443	5,120,725
Restricted investments	169,983		10,101	—	180,084
	$	5,939,950	133,662	1,573	6,072,039

The ~~cost~~Company maintains restricted investments primarily for the benefit of ~~AFS securities sold is based on~~ the ~~first-in, first-out method.~~Company’s insurance carrier related to self-insurance reserves. These investments are held as collateral and not used for claim payments.

PUBLIX SUPER MARKETS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~Following is a summary of AFS securities as of~~ ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016~~:

Amortized
Cost

Gross
Unrealized
Gains
Gross
Unrealized
Losses

Fair
Value
(Amounts are in thousands)
September 30, 2017
Tax exempt bonds $ 2,054,341
5,308
2,841
2,056,808
Taxable bonds 2,185,377
3,639
14,000
2,175,016
Restricted investments 164,548
463
—
165,011
Equity securities 1,971,825
134,123
2,242
2,103,706
$ 6,376,091
143,533
19,083
6,500,541
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 $11,179,000 and $109,815,000 for the three and nine months ended September 30, 2017, respectively. Realized losses on sales of AFS securities totaled $856,000 and $4,934,000 for the three and nine months ended September 30, 2017, respectively.

~~Realized gains on sales of AFS securities totaled $7,012,000 and $18,896,000 for the three and nine months ended September24, 2016, respectively. Realized losses on sales of AFS securities totaled $941,000 and $5,938,000 for the three and nine months ended September 24, 2016, respectively.~~

The ~~amortized~~ cost and fair value of ~~AFS~~debt securities by expected maturity as of ~~September 30, 2017~~March 28, 2020 and December ~~31, 2016~~28, 2019 are as follows:


	September 30, 2017			December 31, 2016		March 28, 2020			December 28, 2019
	Amortized Cost		Fair Value	Amortized Cost	Fair Value	Cost		Fair Value	Cost	Fair Value
	(Amounts are in thousands)					(Amounts are in thousands)
Due in one year or less	$	1,256,912	1,256,724	1,592,144	1,591,740	$	455,411	454,111	437,236	438,105
Due after one year through five years	2,583,254		2,577,163	3,218,371	3,187,739	3,990,481		3,943,648	3,836,333	3,900,904
Due after five years through ten years	389,425		387,386	680,641	656,162	1,497,558		1,490,730	1,661,143	1,727,594
Due after ten years	10,127		10,551	14,096	14,629	4,898		5,147	5,238	5,436
	4,239,718		4,231,824	5,505,252	5,450,270	$	5,948,348	5,893,636	5,939,950	6,072,039
Restricted investments	164,548		165,011	164,548	164,085
Equity securities	1,971,825		2,103,706	1,021,340	1,124,263
	$	6,376,091	6,500,541	6,691,140	6,738,618

The Company had no debt securities with credit losses as of March 28, 2020.

Following is a summary of debt securities with other unrealized losses by the time period impaired as of March 28, 2020 and December 28, 2019:



	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)
March 28, 2020
Tax exempt bonds	$	123,117		133	12,234		4	135,351		137
Taxable bonds	2,896,391			120,881	14,616		527	2,911,007		121,408
	$	3,019,508		121,014	26,850		531	3,046,358		121,545
December 28, 2019
Tax exempt bonds	$	48,462		11	99,976		119	148,438		130
Taxable bonds	573,315			888	197,641		555	770,956		1,443
	$	621,777		899	297,617		674	919,394		1,573

There are 203 debt securities contributing to the total unrealized losses of $121,545,000 as of March 28, 2020. Unrealized losses related to debt securities are primarily due to increases in yields for taxable bonds due to changes in demand. The Company continues to receive scheduled principal and interest payments on these debt securities.


(b)	Equity Securities

Equity securities are measured at fair value with net unrealized gains and losses from changes in the fair value recognized in earnings (fair value adjustment). The fair value of equity securities was $2,479,919,000 and $2,354,346,000 as of March 28, 2020 and December 28, 2019, respectively.

PUBLIX SUPER MARKETS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(c)	Investment Income (Loss)

Net realized gain on the sale of investments represents the difference between the cost and the proceeds from the sale of debt and equity securities. The net realized gain on the sale of investments excludes the net gain or loss on the sale of equity securities previously recognized through the fair value adjustment, which is presented separately in the following table.

Following is a summary of ~~temporarily impaired AFS securities by~~investment (loss) income for the ~~time period impaired as of~~ ~~September~~three months ended March 28, 2020 and March 30, ~~2017~~ ~~and~~ ~~December 31, 2016~~:2019:

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)
September 30, 2017
Tax exempt bonds $ 510,790
1,699
232,906
1,142
743,696
2,841

Taxable bonds 964,755
5,332
643,454
8,668
1,608,209
14,000

Equity securities 62,700
1,239
3,526
1,003
66,226
2,242

$ 1,538,245
8,270
879,886
10,813
2,418,131
19,083

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 282 AFS securities contributing to the total unrealized loss of $19,083,000 as of September 30, 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.



		Three Months Ended
	March 28, 2020				March 30, 2019
	(Amounts are in thousands)
Interest and dividend income		$	54,268			42,016
Net realized gain on sale of investments		2,314				4,211
		56,582				46,227
Fair value adjustment, due to net unrealized (loss) gain, on equity securities held at end of period		(387,427		)		314,348
Net loss on sale of equity securities previously recognized through fair value adjustment		—				6,612
		$	(330,845	)		367,187


~~(5)~~(4)	Consolidation of Joint Ventures and Long-Term Debt

From time to time, the Company enters into ~~Joint Ventures~~a joint venture (JV), in the legal form of a limited liability ~~companies,~~company, with certain real estate developers to partner in the development of a shopping ~~centers~~center 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 ~~September 30, 2017,~~March 28, 2020, the carrying amounts of the assets and liabilities of the consolidated JVs were ~~$143,312,000~~$158,811,000 and ~~$66,018,000,~~$83,035,000, respectively. As of December ~~31, 2016,~~28, 2019, the carrying amounts of the assets and liabilities of the consolidated JVs were ~~$102,254,000~~$154,659,000 and ~~$53,278,000,~~$78,472,000, 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~~2020 and ~~2016~~2019 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.

~~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 ~~nine~~three months ended ~~September~~March 28, 2020 and March 30, ~~2017. The Company assumed loans totaling $63,971,000 during the nine months ended September 24, 2016.~~2019. Maturities of JV loans range from June 2020 through April 2027 and have variable interest rates based on a LIBOR index plus 175 to 250 basis points. Maturities of assumed shopping center loans range from ~~October 2017~~December 2020 through January 2027 and have fixed interest rates ranging from 3.7% to 7.5%.


~~(6)~~(5)	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 ~~$348,486,000~~$454,890,000 and ~~$425,514,000~~$287,328,000 as of ~~September 30, 2017~~March 28, 2020 and December ~~31, 2016,~~28, 2019, respectively. The cost of the shares held by the ESOP totaled ~~$2,773,677,000~~$3,248,354,000 and ~~$2,642,583,000~~$2,971,902,000 as of ~~September 30, 2017~~March 28, 2020 and December ~~31, 2016,~~28, 2019, 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 ~~$3,122,163,000~~$3,703,244,000 and ~~$3,068,097,000~~$3,259,230,000 as of ~~September 30, 2017~~March 28, 2020 and December ~~31, 2016,~~28, 2019, respectively. The fair value of the shares held by the ESOP totaled ~~$7,173,372,000~~$8,948,648,000 and ~~$8,356,659,000~~$8,585,189,000 as of ~~September 30, 2017~~March 28, 2020 and December ~~31, 2016,~~28, 2019, 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 September 30, 2017 and September 24, 2016 is as follows:~~

AFS Securities

Postretirement Benefits

Accumulated Other Comprehensive Earnings
(Amounts are in thousands)
2017
Balances at July 1, 2017 $ 33,639
(5,691 ) 27,948

Unrealized gain on AFS securities 49,043
—
49,043

Net realized gain on AFS securities reclassified to investment income (6,334 ) —
(6,334 )
Net other comprehensive earnings 42,709
—
42,709

Balances at September 30, 2017 $ 76,348
(5,691 ) 70,657

2016
Balances at June 25, 2016 $ 59,825
(5,027 ) 54,798

Unrealized gain on AFS securities 21,263
—
21,263

Net realized gain on AFS securities reclassified to investment income (3,725 ) —
(3,725 )
Net other comprehensive earnings 17,538
—
17,538

Balances at September 24, 2016 $ 77,363
(5,027 ) 72,336

109

PUBLIX SUPER MARKETS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(6)	Accumulated Other Comprehensive Earnings (Losses)

A reconciliation of the changes in accumulated other comprehensive earnings (losses) net of income taxes for the ~~nine~~three months ended ~~September~~March 28, 2020 and March 30, ~~2017 and September 24, 2016~~2019 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 111,585
—
111,585

Net realized gain on AFS securities reclassified to investment income (64,355 ) —
(64,355 )
Net other comprehensive earnings 47,230
—
47,230

Balances at September 30, 2017 $ 76,348
(5,691 ) 70,657

2016
Balances at December 26, 2015 $ 31,295
(5,027 ) 26,268

Unrealized gain on AFS securities 54,019
—
54,019

Net realized gain on AFS securities reclassified to investment income (7,951 ) —
(7,951 )
Net other comprehensive earnings 46,068
—
46,068

Balances at September 24, 2016 $ 77,363
(5,027 ) 72,336



	Investments				Postretirement Benefit			Accumulated Other Comprehensive Earnings (Losses)
		(Amounts are in thousands)
2020
Balances at December 28, 2019		$	98,506			(17,217	)		81,289
Unrealized loss on debt securities		(137,583		)		—			(137,583	)
Net realized gain on debt securities reclassified to investment income		(1,726		)		—			(1,726	)
Adjustment to postretirement benefit obligation		—				815			815
Net other comprehensive (losses) earnings		(139,309		)		815			(138,494	)
Balances at March 28, 2020		$	(40,803	)		(16,402	)		(57,205	)

2019
Balances at December 29, 2018		$	(49,033	)		(6,729	)		(55,762	)
Unrealized gain on debt securities		59,521				—			59,521
Net realized loss on debt securities reclassified to investment income		293				—			293
Net other comprehensive earnings		59,814				—			59,814
Balances at March 30, 2019		$	10,781			(6,729	)		4,052


~~(8)~~(7)	Subsequent Event

On ~~October 2, 2017,~~April 1, 2020, the Company declared a quarterly dividend on its common stock of ~~$0.23~~$0.32 per share or ~~$169,900,000,~~$225,500,000, payable ~~November~~May 1, ~~2017~~2020 to stockholders of record as of the close of business ~~October 13, 2017.~~April 15, 2020.

1110

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

The Company is engaged in the retail food industry and as of ~~September 30, 2017~~March 28, 2020 operated ~~1,154~~1,242 supermarkets in Florida, Georgia, Alabama, South Carolina, Tennessee, North Carolina and Virginia. For the ~~nine~~three months ended ~~September 30, 2017, 27~~March 28, 2020, five supermarkets were opened (including ~~four~~two replacement supermarkets) and ~~100~~39 supermarkets were remodeled. ~~Nine~~Two supermarkets were closed during the period. The ~~four~~ replacement supermarkets that opened during the ~~nine~~three months ended ~~September 30, 2017~~March 28, 2020 replaced ~~two supermarkets that~~one supermarket closed during the same period and ~~two supermarkets that~~one supermarket closed during a previous period. The remaining supermarket closed in ~~2016. The seven remaining supermarkets closed in 2017~~2020 will not be ~~replaced on site in subsequent periods.~~replaced. 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.

~~Hurricane~~Coronavirus Pandemic Impact

~~In September 2017,~~On March 13, 2020, the coronavirus pandemic was declared a national emergency. The coronavirus pandemic has resulted in national, state and local authorities mandating or recommending isolation measures for large portions of the population, including mandatory business closures. These measures, which were necessary to slow the spread of the virus and protect lives, have resulted in significant job losses and are expected to have serious adverse impacts on domestic and foreign economies for an unknown length of time. The effect of economic stabilization efforts, including government payments to affected citizens and industries, is uncertain.

The Company has been classified as an essential business in all jurisdictions in which it operates and has remained open to serve the needs of its customers. It is a priority of the Company ~~was impacted by Hurricane Irma. Temporary supermarket closings occurred primarily~~to continue to serve its customers in ~~Florida due to weather conditions~~a way that protects the health and ~~evacuations~~safety of certain areas. Almost all affected supermarkets were reopened within two days following the passing of Hurricane Irma, operating on generator power if normal power had not been restored. All supermarkets were reopened within six days except one supermarket in Key West, Florida, which reopened the following week.

its employees and customers. The Company estimates that its sales for the three months ended March 28, 2020 increased ~~$250 million~~approximately $1 billion due to the impact of ~~Hurricane Irma.~~the coronavirus pandemic. The Company incurred additional payroll related, transportation and other costs ~~for inventory losses due~~ to ~~power outages, fuel for generators~~meet the significant sales demand and ~~facility repairs~~protect the health and ~~clean-up totaling an estimated $25 million.~~safety of its employees and customers. The ~~Company is self-insured for these losses. The Company estimates the~~ profit on the incremental sales resulting from ~~customers stocking up~~increased customer purchases of food and ~~replenishing, as well as sales of hurricane~~cleaning supplies more than offset the ~~losses~~additional costs incurred. The future impact of the coronavirus pandemic is uncertain and difficult to predict.

Results of Operations

Sales

Sales for the three months ended ~~September 30, 2017~~March 28, 2020 were ~~$8.5~~$11.2 billion as compared with ~~$8.0~~$9.7 billion for the three months ended ~~September 24, 2016,~~March 30, 2019, an increase of ~~$494.0~~$1,554.3 million or ~~6.2%~~16.1%. The increase in sales for the three months ended ~~September 30, 2017~~March 28, 2020 as compared with the three months ended ~~September 24, 2016~~March 30, 2019 was primarily due to ~~new supermarket sales and~~ the impact of ~~Hurricane Irma.~~the coronavirus pandemic. The Company estimates that its sales for the three months ended March 28, 2020 increased ~~$250million~~approximately $1 billion or ~~3.1%~~10.3% due to the ~~hurricane.~~impact of the coronavirus pandemic. Comparable store sales (supermarkets open for the same weeks in both periods, including replacement supermarkets) for the three months ended March 28, 2020 increased ~~4.3%~~14.4% primarily due to the ~~hurricane.~~impact of the coronavirus pandemic. 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.

Sales for the nine months ended September 30, 2017 were $25.6 billion as compared with $24.9 billion for the nine months ended September 24, 2016, an increase of $746.8 million or 3.0%. The increase in sales for the nine months ended September 30, 2017 as compared with the nine months ended September 24, 2016 was primarily due to new supermarket sales and the impact of Hurricane Irma. The Company estimates that its sales increased $250~~million or 1.0% due to the hurricane. Comparable store sales increased 1.2% primarily due to the hurricane.~~

Gross profit

Gross profit (sales less cost of merchandise sold) as a percentage of sales was ~~27.0%~~28.4% and ~~26.5%~~28.0% for the three months ended ~~September~~March 28, 2020 and March 30, ~~2017 and September 24, 2016,~~2019, respectively. The increase in gross profit as a percentage of sales for the three months ended ~~September 30, 2017~~March 28, 2020 as compared with the three months ended ~~September 24, 2016~~March 30, 2019 was primarily due to ~~volume driven efficiencies related to Hurricane Irma. Gross profit~~reduced shrink as a percentage of sales ~~was 27.4% for~~related to the ~~nine months ended September 30, 2017 and September 24, 2016.~~impact of the coronavirus pandemic.

Operating and administrative expenses

Operating and administrative expenses as a percentage of sales were ~~20.3%~~18.9% and ~~20.6%~~20.0% for the three months ended ~~September~~March 28, 2020 and March 30, ~~2017 and September 24, 2016,~~2019, respectively. The decrease in operating and administrative expenses as a percentage of sales for the three months ended ~~September 30, 2017~~March 28, 2020 as compared with the three months ended ~~September 24, 2016~~March 30, 2019 was primarily due to volume driven efficiencies related to ~~Hurricane Irma.~~ the impact of the coronavirus pandemic.

Operating ~~and administrative expenses~~profit

Operating profit as a percentage of sales ~~were 20.5%~~was 10.3% and ~~20.1%~~8.9% for the ~~nine~~three months ended ~~September~~March 28, 2020 and March 30, ~~2017 and September 24, 2016,~~2019, respectively. The increase in operating and administrative expenses as a percentage of sales for the nine months ended September 30, 2017 as compared with the nine months ended September 24, 2016 was primarily due to increases in payroll and facility costs as a percentage of sales.

~~Investment income~~

Investment income was $38.4 million and $29.0 million for the three months ended September 30, 2017 and September 24, 2016, respectively. The increase in investment income for the three months ended September 30, 2017 as compared with the three months ended September 24, 2016 was primarily due to increases in dividend income and realized gains on the sale of equity securities. Investment income was $192.9 million and $82.2 million for the nine months ended September 30, 2017 and September 24, 2016, respectively. The increase in investment income for the nine months ended September 30, 2017 as compared with the nine months ended September 24, 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 31.2% and 27.2% for the three months ended September 30, 2017 and September 24, 2016, respectively. The increase in the effective income tax rate for the three months ended September 30, 2017 as compared with the three months ended September 24, 2016 was primarily due to a decrease in investment related tax credits and the decreased impact of the permanent deductions due to the increase in earnings before income tax expense. The effective income tax rate was 31.6% and 30.9% for the nine months ended September 30, 2017 and September 24, 2016, respectively. The increase in the effective income tax rate for the nine months ended September 30, 2017 as compared with the nine months ended September 24, 2016 was primarily due to a decrease in investment related tax credits.

~~Net earnings~~

Net earnings were $474.9 million or $0.63 per share and $421.1 million or $0.55 per share for the three months ended September 30, 2017 and September 24, 2016, respectively. Net earnings as a percentage of sales were 5.6% and 5.2% for the three months ended September 30, 2017 and September 24, 2016, respectively. The increase in net earningsprofit as a percentage of sales for the three months ended ~~September 30, 2017~~March 28, 2020 as compared with the three months ended ~~September 24, 2016~~March 30, 2019 was primarily due to the increase in gross profit as a percentage of sales and the decrease in operating and administrative expenses as a percentage of sales.

Investment income (loss)

Investment loss for the three months ended March 28, 2020 was $330.8 million as compared with investment income for the three months ended March 30, 2019 of $367.2 million. Investment loss for the three months ended March 28, 2020 as compared with investment income for the three months ended March 30, 2019 was primarily due to net unrealized losses on equity securities in 2020 compared with net unrealized gains on equity securities in 2019. Excluding the impact of net unrealized losses on equity securities in 2020 and net unrealized gains on equity securities in 2019, investment income would have been $56.6 million and $46.2 million for the three months ended March 28, 2020 and March 30, 2019, respectively.

Income tax expense

The effective income tax rate was 20.3% and 21.1% for the three months ended March 28, 2020 and March 30, 2019, respectively. The decrease in the effective income tax rate for the three months ended March 28, 2020 as compared with the three months ended March 30, 2019 was primarily due to the impact of net unrealized losses on equity securities in 2020 compared with net unrealized gains on equity securities in 2019.

Net earnings

Net earnings were ~~$1,525.3~~$667.3 million or ~~$2.01~~$0.94 per share and ~~$1,481.2~~$981.0 million or ~~$1.92~~$1.37 per share for the ~~nine~~three months ended ~~September~~March 28, 2020 and March 30, ~~2017 and September 24, 2016,~~2019, respectively. Net earnings as a percentage of sales ~~was 6.0%~~were 5.9% and 10.1% for the ~~nine~~three months ended ~~September~~March 28, 2020 and March 30, ~~2017~~2019, respectively. The decrease in net earnings as a percentage of sales for the three months ended March 28, 2020 as compared with the three months ended March 30, 2019 was primarily due to the impact of net unrealized losses on equity securities in 2020 compared with net unrealized gains on equity securities in 2019.

Net earnings and ~~September 24, 2016.~~earnings per share for the three months ended March 28, 2020 and March 30, 2019 were impacted by net unrealized losses and gains on equity securities. Excluding the impact of net unrealized losses on equity securities in 2020 and net unrealized gains on equity securities in 2019, net earnings would have been $956.2 million or $1.35 per share and 8.5% as a percentage of sales for the three months ended March 28, 2020 and $741.7 million or $1.04 per share and 7.7% as a percentage of sales for the three months ended March 30, 2019. Excluding the impact of net unrealized losses on equity securities in 2020 and net unrealized gains on equity securities in 2019, the increase in net earnings as a percentage of sales for the three months ended March 28, 2020 as compared with the three months ended March 30, 2019 was primarily due to the impact of the coronavirus pandemic.

Non-GAAP Financial Measures

In addition to reporting financial results for the three months ended March 28, 2020 and March 30, 2019 in accordance with GAAP, the Company presents net earnings and earnings per share excluding the impact of equity securities being measured at fair value with net unrealized gains and losses from changes in the fair value recognized in earnings (fair value adjustment). These measures are not in accordance with, or an alternative to, GAAP. The Company excludes the impact of the fair value adjustment since it is primarily due to temporary equity market fluctuations that do not reflect the Company’s operations. The Company believes this information is useful in providing period-to-period comparisons of the results of operations. Following is a reconciliation of net earnings to net earnings excluding the impact of the fair value adjustment for the three months ended March 28, 2020 and March 30, 2019:



		Three Months Ended
	March 28, 2020				March 30, 2019
	(amounts are in millions, except per share amounts)
Net earnings		$	667.3			981.0
Fair value adjustment, due to net unrealized loss (gain), on equity securities held at end of period		387.4				(314.3	)
Net loss on sale of equity securities previously recognized through fair value adjustment		—				(6.6	)
Income tax (benefit) expense ⁽¹⁾		(98.5		)		81.6
Net earnings excluding impact of fair value adjustment		$	956.2			741.7
Weighted average shares outstanding		706.8				716.0
Earnings per share excluding impact of fair value adjustment		$	1.35			1.04


⁽¹⁾	Income tax (benefit) expense is based on the Company’s combined federal and state statutory income tax rates.

Liquidity and Capital Resources

Cash and cash equivalents, short-term investments and long-term investments totaled ~~$7,171.2~~$9,992.4 million as of ~~September 30, 2017,~~March 28, 2020, as compared with ~~$7,176.9~~$9,189.8 million as of December ~~31, 2016~~28, 2019 and ~~$7,355.1~~$8,328.7 million as of ~~September 24, 2016.~~March 30, 2019. The ~~decrease~~increase from the ~~third~~first quarter of ~~2016~~2019 to the ~~third~~first quarter of ~~2017~~2020 was primarily due to increased sales from the ~~increase~~coronavirus pandemic and the normal lag in ~~common stock repurchases, partially offset by~~payments for merchandise related to the ~~increase in cash generated by operations, including the extension of the September 15, 2017 federal income tax payment until January 31, 2018 due to Hurricane Irma.~~increased sales.

Net cash provided by operating activities

Net cash provided by operating activities was ~~$2,813.0~~$2,292.5 million and ~~$2,618.8~~$1,428.4 million for the ~~nine~~three months ended ~~September~~March 28, 2020 and March 30, ~~2017 and September 24, 2016,~~2019, respectively. The increase in net cash provided by operating activities for the ~~nine~~three months ended ~~September 30, 2017~~March 28, 2020 as compared with the ~~nine~~three months ended ~~September 24, 2016~~March 30, 2019 was primarily due to increased sales from the ~~net effect of timing differences~~coronavirus pandemic and the normal lag in payments for merchandise related to ~~operating assets and liabilities, including~~ the ~~extension of the federal income tax payment due to Hurricane Irma.~~increased sales.

Net cash used in investing activities

Net cash used in investing activities was ~~$819.0~~$893.8 million and ~~$1,645.0~~$606.9 million for the ~~nine~~three months ended ~~September~~March 28, 2020 and March 30, ~~2017 and September 24, 2016,~~2019, respectively. The primary use of net cash in investing activities for the ~~nine~~three months ended ~~September30, 2017~~March 28, 2020 was funding capital expenditures ~~partially offset by~~and net increases in investment ~~activities.~~securities. Capital expenditures for the ~~nine~~three months ended ~~September 30, 2017~~March 28, 2020 totaled ~~$1,063.2~~$269.3 million. These expenditures were incurred in connection with the opening of ~~27 new~~five supermarkets (including ~~four~~two replacement supermarkets) and the remodeling ~~100~~of 39 supermarkets. Expenditures were also incurred for new supermarkets and remodels in progress and new or enhanced information technology hardware and ~~applications and the acquisition of shopping centers with the Company as the anchor tenant.~~software. For the ~~nine~~three months ended ~~September 30, 2017,~~March 28, 2020, the payment for investments, net of the proceeds from the sale and maturity of investments, ~~net of the payment for such investments,~~ was ~~$239.6~~$625.7 million.

Net cash used in financing activities

Net cash used in financing activities was ~~$1,761.6~~$543.2 million and ~~$1,021.4~~$408.6 million for the ~~nine~~three months ended ~~September~~March 28, 2020 and March 30, ~~2017 and September 24, 2016,~~2019, respectively. The primary use of net cash in financing activities was funding net common stock repurchases and dividend payments. Net common stock repurchases totaled ~~$1,223.2~~$333.2 million and ~~$469.8~~$220.7 million for the ~~nine~~three months ended ~~September~~March 28, 2020 and March 30, ~~2017 and September 24, 2016,~~2019, respectively. The Company currently repurchases common stock at the stockholders’ request in accordance with the terms of the Company’s 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. 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 quarterly dividends on its common stock totaling ~~$0.6825~~$211.8 million or $0.30 per share and $185.8 million or ~~$519.8 million and $0.645~~$0.26 per share ~~or $497.3 million~~ during the ~~nine~~three months ended ~~September~~March 28, 2020 and March 30, ~~2017 and September 24, 2016,~~2019, respectively.

Capital expenditures projection

Capital expenditures for the remainder of ~~2017~~2020 are expected to be approximately ~~$400~~$1,300 million, primarily ~~consisting of~~related to new supermarkets, remodeling existing supermarkets, new or enhanced information technology hardware and ~~applications~~software 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~~2020, 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.

1413

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.~~1934 (Exchange Act). Forward-looking information includes statements about the future performance of the Company ~~which~~and is based on management’s assumptions and beliefs in light of the information currently available to ~~them.~~them, including as it relates to the coronavirus pandemic. When used, the words “plan,” “estimate,” “project,” “intend,” “expect,” ~~“believe”~~“believe,” “will” 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;~~economy, including the economic downturn associated with the coronavirus pandemic; changes in consumer spending; changes in population, employment and job growth in the Company’s principal markets; impacts of a public health crisis or other significant catastrophic event, such as the coronavirus pandemic; 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~~28, 2019.

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 ~~September 30, 2017~~March 28, 2020 that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting.

1514

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

As reported in the Company’s Form 10-K for the year ended December ~~31, 2016~~28, 2019, 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 Company has identified an additional risk factor to supplement the risk factors ~~from those~~ disclosed in the Company’s Form 10-K for the year ended December ~~31, 2016~~.28, 2019.

Unfavorable impacts of a public health crisis, specifically the coronavirus pandemic, on operations, customers, employees, suppliers and tenants could adversely affect the Company.

On March 13, 2020, the coronavirus pandemic was declared a national emergency. The coronavirus pandemic has resulted in national, state and local authorities mandating or recommending isolation measures for large portions of the population, including mandatory business closures. These measures, which were necessary to slow the spread of the virus and protect lives, have resulted in significant job losses and are expected to have serious adverse impacts on domestic and foreign economies for an unknown length of time. The effect of economic stabilization efforts, including government payments to affected citizens and industries, is uncertain.

The Company’s operations may be adversely impacted by the fear of exposure to or actual effects of the coronavirus. These impacts may include:

operating cost increases due to changes in customer demand, changes in supermarket processes or increased government regulation;

delays in the timing of remodels and opening new supermarkets;

reduced workforce due to illness, quarantine or government mandates impacting the Company's supermarket, distribution, manufacturing and support operations;

temporary supermarket closings or reduced hours of operation due to reduced workforce, enhanced cleaning processes, increased stocking or government mandates;

supply chain risks from goods produced in areas of significant coronavirus outbreak or disruption from suppliers due to financial or operational difficulties;

reduction in travel, tourism or consumer spending due to government recommendations or mandates, fear of exposure to the coronavirus or adverse economic conditions;

changes in customer demand from discretionary or higher priced products to lower priced products or

uncertainty as to future operations of tenants in Company owned shopping centers due to adverse economic conditions.

The future impact of the coronavirus pandemic is uncertain and difficult to predict and could adversely affect the Company’s financial condition and results of operations.

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 ~~September 30, 2017~~March 28, 2020 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⁾
July 2, 2017
through
August 5, 2017
12,975
$ 38.53
N/A N/A
August 6, 2017
through
September 2, 2017
7,114
36.05
N/A N/A
September 3, 2017
through
September 30, 2017
2,440
36.05
N/A N/A

Total
22,529
$ 37.48
N/A N/A

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⁾

December 29, 2019

through

February 1, 2020

1,553

47.10

N/A

February 2, 2020

through

February 29, 2020

981

47.10

N/A

March 1, 2020

through

March 28, 2020

6,608

48.90

N/A

Total

9,142

48.40

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 ~~September 30, 2017~~March 28, 2020 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

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 ~~September 30, 2017~~March 28, 2020 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, (v) Condensed Consolidated Statements of Stockholders’ Equity and ~~(v)~~(vi) Notes to Condensed Consolidated Financial Statements.

SIGNATURES

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




		PUBLIX SUPER MARKETS, INC.



Date:	~~November~~May 1, ~~2017~~2020	/s/ ~~John A. Attaway, Jr.~~Merriann M. Metz
		~~John A. Attaway, Jr.,~~Merriann M. Metz, Secretary



Date:	~~November~~May 1, ~~2017~~2020	/s/ David P. Phillips
		David P. Phillips, Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)



	AFS Securities				Postretirement Benefits			Accumulated Other Comprehensive Earnings
		(Amounts are in thousands)
2017
Balances at July 1, 2017		$	33,639			(5,691	)		27,948
Unrealized gain on AFS securities		49,043				—			49,043
Net realized gain on AFS securities reclassified to investment income		(6,334		)		—			(6,334	)
Net other comprehensive earnings		42,709				—			42,709
Balances at September 30, 2017		$	76,348			(5,691	)		70,657

2016
Balances at June 25, 2016		$	59,825			(5,027	)		54,798
Unrealized gain on AFS securities		21,263				—			21,263
Net realized gain on AFS securities reclassified to investment income		(3,725		)		—			(3,725	)
Net other comprehensive earnings		17,538				—			17,538
Balances at September 24, 2016		$	77,363			(5,027	)		72,336